Luther Burbank Corp, San Rafael, CA (LBC)

A good buy in California


Think you can't afford anything of value in California?

LBC is trading at the 4th lowest price to tangible book value of any US bank with assets over $1B. Investors buying LBC today get a 10% discount from last year's IPO price.

In three years, LBC shareholders could be holding a stock that's earning over $1/share, has a book value near $13/share, and is trading for $15/share.

I don't mind an ROI of 55% in three years, do you?


Disclosure: As of this posting, I own shares of LBC and may subsequently either dispose of them or purchase more.


Prospective Buyers

I don't believe the Trione family will be selling Luther Burbank Savings, but were they to do so, I suspect these two would be the most logical acquirers:

PacWest Bancorp, Beverly Hills, CA (PACW)
Western Alliance Bancorp, Phoenix, AZ (WAL)

Financial Snapshot
as of 09/30/2018

Total assets:
$6.7B
Tangible book value per share:   
$10.05
NPAs to assets:
0.1%
Price to book:
95.7%
Market cap:
$547M
Dividend yield:
2.4%
Trailing 12-month ROA:
0.9%
Trailing 12-month ROE:
10.2%

The Crew

Victor S Trione, Chairman
John G Biggs, President and CEO
Laura Tarantino, Executive VP and CFO

The Skinny

The Trione family founded Luther Burbank Savings 35 years ago with $2M.

On average, these bankers compounded their equity by 18% per year for 35 years.

By the time LBC went public in 2017, the bank's equity had grown to $576M.

Three directors and nine officers bought shares in Luther Burbank's IPO.

One director and three officers continue buying LBC in the open market, which tells me they expect the price to go up.

Excluding its first two quarters in de novo year 1983, Luther Burbank has never had an unprofitable quarter.

Cheers to the Triones for cultivating such a valuable property.

🍷

PS for Biggs:

The one thing that would make me feel better about this enterprise is if you were to use some of the $8.3M you got in total compensation since 2016 to buy than $60K worth of stock.


Sources

1 comment :

  1. Given the heavy loan/deposit dynamic underlying/driving the earnings, does the NIM compression YTD concern you here? 100% residential lender in competitive CA has yields on the loan book < 3.75% (+23bps YTD) while competitive deposit landscape (and fact LBC's deposit book is 98% interest-bearing) has cost of funds +34bps YTD to 1.47%. Just hard to wrap head around going long a bank with a NIM barely above 2.00% at this point in the cycle (and its looking like LBC's NIM compression has not put in a bottom yet).

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