Oxford Bank Corp, Oxford, MI (OXBC)

Another Case of Book-ish and 10x


If you read my October review of Central Federal Corp, you heard that I've been seeing a number of well-run banks where investors can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling their money in three or four years.

Oxford Bank Corp is just one of these. It hasn't been particularly well-run historically, but the side story of its top shareholders has me excited for the next chapter.

In three years, I see OXBC's book value approaching $30 per share, earnings $3.50, and trading price $40.


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


Prospective Buyers

I can name eight banks that would find Oxford Bank's leading market share in several Michigan cities appealing. Here are the three I believe can most afford to book a deal.

Independent Bank Corp, Grand Rapids, MI (IBCP)
Horizon Bancorp, Michigan City, IN (HBNC)
Waterford Bancorp, Toledo, OH (private)

Financial Snapshot
as of 06/30/2019

Total assets:
$461M
Tangible book value per share:   
$18.91
NPAs to assets:
0.50%
Price to book:
1.08%
Market cap:
$47.2M
Dividend yield:
0%
Trailing 12-month ROA:
0.96%
Trailing 12-month ROE:
10.69%

The Crew

Karen Mersino, Chairman
David P. Lamb, President and CEO
Richard K. Thompson, Director, largest shareholder

The Skinny

There are a few scoundrels in the Oxford Bank Corp story, but Director Richard Thompson's history in bank stocks investing and governance gives me hope for a happy ending.

The Oxford Bank Corp Story

In recent chapters, OXBC insiders have crossed some lines.

December 2014 - Oxford Bank Corp is accused of self-dealing after selling shares mostly to its own directors at a depressed price of $8 per share when OXBC book value per share was $18. Chairman Mersino alone bought a quarter of the shares sold.

December 2015 - The bank expanded its self-dealing sale of OXBC stock to include friends, again at the depressed price of $8 per share, again excluding other shareholders.

March 2018 - Oxford entered into a Cease and Desist Order for BSA violations. The Order stated that Oxford Bank Corp was to immediately notify OXBC shareholders. The bank did not. Clearly, its board has little regard for the law.

June 2019 - The bank entered a Consent Order for violation of Consumer Protection and Compliance, which again required OXBC to notify shareholders. In the bank's August quarterly earnings press release, which typically includes management's commentary and would have been the right and expected place and time for this notification, there is an oddly blank page.

To date, Oxford Bank Corp Management has ignored all inquiries from me and other OXBC shareholders about these matters.

In the next chapter, OXBC shareholders should put the heat on Oxford's Board. Technically, Oxford Bank Corp has another chance to notify shareholders of its Consumer Protection and Compliance violations. Let's see if they tell us in their "notice or proxy statement preceding the Bank's next shareholder meeting" (scheduled for May 2020), as the Consent Order requires.

The Thompson - Clemente Side Story

The tale of OXBC's two largest shareholders of gives me hope for the future of the stock.

In 2015, Richard Thompson was one of the lucky friends invited to buy OXBC. He bought 201,000 shares in that $8/share deal, took a board seat, and picked up another another 118,000 shares in the open market. Today, Thompson has a 14% stake in OXBC and is the bank's largest shareholder. At current OXBC trading levels, his stake is worth $6.5M.

Thompson and OXBC's second largest shareholder, Robert Clemente, have been governing businesses together for over 25 years. In 1993, 26-year old Thompson served on the board of Secom, where Clemente was Chairman and Thompson's father was the largest shareholder. Together, Thompson and Clemente own 25% of OXBC. (The next largest insider, Chairman Mersino, owns a mere 2%).

Thankfully, OXBC is neither the first nor only bank stock in the pair's portfolio. Thompson and Clemente also own 18% of First National Bank in nearby Howell (FNHM), where Clemente has a board seat. The two also have a combined 39% stake in nearby Clarkston Financial Corporation (CKFC), on whose board Thompson serves. The pair's involvement with Clarkston pre-dates their relationship with OXBC by at least three years.

This past June, Thompson and his fellow Directors at Clarkston, agreed to sell their bank to Waterford Bancorp for 189% of book value. That merger is in progress. Applying the same 189% valuation to Oxford Bank Corp would yield a sale price of $35.70 per share, increasing the value of Thompson’s stake in OXBC to $11.4M.

Clearly, OXBC's largest shareholders are professional businessmen, directors, and investors with a thorough understanding of their area banking marketplace. I believe it safe to assume they are profit motivated advocates of good governance. In the final chapter, they will be the heroes of the Oxford Bank Story.


Sources

Central Federal Corp, Worthington, OH (CFBK)

A Case of Book-ish and 10x


This is a fun time to be a bank stock investor! So many really nice banks are trading at compelling values that it’s hard to choose which one to feature first.

For example, I'm seeing a number of well-run banks where you can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling your money in three or four years.

CFBank is just one of these. CFBK is trading cheaply at 7.8x rapidly-growing earnings. In three years, earnings could be $2.50, book value could be $16, and CFBK could trade at $24.

It's smart to hold a few low-stress stocks like this that just compound earnings and don't require babysitting, no?


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


Prospective Buyers

CFBank's leading market share in four towns would be especially attractive for these acquisitive neighbors.

Farmers National Banc Corp, Canfield, OH (FMNB)
LCNB Corp, Lebanon, OH (LCNB)
Peoples Bancorp, Marietta, OH (PEBO)

Financial Snapshot
as of 06/30/2019

Total assets:
$721M
Tangible book value per share:   
$11.39
NPAs to assets:
0.75%
Price to book:
1.07%
Market cap:
$54.7M
Dividend yield:
0%
Trailing 12-month ROA:
1.0%
Trailing 12-month ROE:
13.9%

The Crew

Robert E. Hoeweler, Chairman
Timothy T. O'Dell, President and CEO
Edward W. Cochran, Director, largest shareholder

The Skinny

These four characteristics inform my assessment that Central Federal Corp is well run and in a good position to grow:

1. Location, location! CFBank's branches are located in Ohio's top four metropolitan areas: Akron, Cincinnati, Cleveland, and Columbus.

2. Sizable branches. Between them, CFBank's Fairlawn and Worthington branches hold over $500 million in deposits. On average, deposits in the bank's other four branches exceed $37 million. (It takes about $15 million in deposits for a bank branch to break even.)

3. Effective CEO. Before Tim O'Dell arrived on the scene, CFBank was a sh*tty little thrift. O'Dell attracted good lenders, reduced problem loans, and exponentially increased both the size and profitability of the bank.

4. Invested Board. Collectively, the Central Federal Corp board owns 19% of CFBK stock, and every director is invested (which isn't always the case).

Sources

LETTER: Pacific Enterprise Bancorp, Irvine, CA (PEBN)

There's no review of Pacific Enterprise Bancorp in Timyan Bank Alert.

But since other investors seemed to appreciate my sharing last month's letter to Peoples Financial Corp, I figured I could let you "in" on this aspect of my work more often.

Pacific Enterprise is a good bank that can sell for 50% higher than its last trade price, and I hope it does!

Below is a letter I am sending to the Chairman of Pacific Enterprise Bancorp.

See also
Pacific Enterprise Bank website
Q2 2019 Quarterly Report


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


My Letter to Pacific Enterprise Bancorp

Dennis H. Guida Jr. Chairman
Pacific Enterprise Bancorp
17748 Sky Park Circle
Suite 100
Irvine, CA 92614

Dear Mr. Guida,

I own 2% of Pacific Enterprise Bancorp. Thank you for your fine stewardship of the bank. Thanks to your team, too, for their fine execution of the business plan. Since its founding in 2007, Pacific Enterprise has had a fine run.

I was happy to hear you tried to sell the bank last year, but found your unrealistic expectations for what you'd get in a sale disappointing. Your board should know that you have shareholders, including me, who would prefer you sell Pacific Enterprise to the highest bidder, instead of holding out for a magical number.

Please share this letter with the board.

Respectfully,

Philip J. Timyan
PEBN Shareholder

LETTER: To Peoples Financial Corp, Biloxi, MS (PFBX)

Time step up the heat on Swetman.

It's not just the July weather that has me hot and bothered. Since my February 28, 2019 update on Peoples Financial Corp, new information has come to light revealing a serious lapse at the Board level and an urgent need to clean house at The People’s Bank.

Hence, I have decided to take a more proactive approach on behalf of all shareholders invested in PFBX.

Below is a letter I am sending to the Independent Directors of The People's Bank. If you are a shareholder who agrees with my assessment, I encourage you to send your own letter, too.

Letters may be emailed to gbatia@thepeoples.com


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


My Letter to Peoples Financial Corp

To the “Independent” Directors of Peoples Financial Corp

  • T. Dan Magruder, Vice Chairman
  • E. A. "Drew" Allen
  • Rex E. Kelly
  • Jeffrey H. O'Keefe Sr.
  • George J. Sliman III

Howard and Lameuse Avenues
Biloxi, MS 39533


Dear Directors,

I am a long-term shareholder in Peoples Financial. I own more shares than any director not named Swetman.

It has been painful to witness the abysmal performance of the bank.

You owe shareholders the fiduciary duty to explore a merger. Your results will not justify a stock price anywhere near what you could obtain in a sale in any of our lifetimes. If you want Peoples to remain independent, you should pass the hat in the community, pay the outside shareholders a fair price, and go private.

Given recent prices paid for your neighbors, Charter Bank and First Florida Bank, and in spite of your lousy 0.06% ROA and 0.4% ROE, I believe you could garner as much as $30 per share in a sale, due to the cost savings an acquirer could achieve.

The recent SunHerald article highlighting loans The Peoples Bank made to crooked lawyers demonstrates the Board’s complete lack of control and failure to oversee inept management. And this is only what the reporter was able to find out. What other improper loans are there that we don’t know about? Further, what malfeasance did you commit to incur the June settlement payout of $200,000?

Since April 3, 1996 (the first date for which I can find a trade in PFBX stock), the value of PFBX — including dividends reinvested — has DECLINED by 8%. In contrast, the S&P has advanced by almost 600%. All on your and Chevis Swetman’s watch. In my opinion, the Board should fire Swetman for cause. What other publicly held bank CEO has made nefarious loans like this, spent 40 years destroying shareholder value, and still has a job? As “Independent" Directors, you are personally liable for your failure to properly govern Peoples Financial.

In conclusion, you have not earned the right to maintain control of this bank, and you are not abiding by your own corporate Code of Conduct. Please exercise your fiduciary duties to shareholders and sell The Peoples Bank to the highest bidder before any more value is dissipated.

Respectfully,

Philip J. Timyan
PFBX Shareholder

Merchants & Marine Bancorp, Inc, Pascagoula, MS (MNMB)

A Case of an Undervalued Vessel


Merchants & Marine Bank has been sailing way under the radar and is way undervalued.

MNMB wasn't even listed until January 2015. It doesn’t look like the bank has any institutional shareholders. Its largest reported shareholder — Director Paul Moore — owns a mere 2.8%.

If M&M Bank would use its earnings and excess capital to buy back shares, the stock could easily reach book value of $80, earnings of $7, and trading value of $100 by 2022.

Alternatively, given neighboring Charter Bank’s recent sale for 140% of book value, Merchants & Marine Bancorp could and probably should sell the ship now for $80 per share.


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


Prospective Buyers

M&M Bank’s 33% marketshare in Pascagoula presents an attractive acquisition opportunity for these better performing peers.

First Bancshares, Hattisburg, MS (FBMS)
Home BancShares, Conway, AR (HOMB)
Bancorp South Bank, Tupelo, MS (BSX)

Financial Snapshot
as of 03/31/2019

Total assets:
$593M
Tangible book value per share:   
$51.27
NPAs to assets:
1.3%
Price to book:
74%
Market cap:
$52.5M
Dividend yield:
3.0%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
5.5%

The Crew

L. Royce Cumbest, Chairman and CEO
Clayton Legear, President and COO
Paul Moore, Director, largest inside shareholder

The Skinny

As far as marine vessels go, M&M’s ship has proven to be sturdy. 

The bank has stayed afloat, held its deposit cargo intact, weathered some storms, and carried a fair share of passenger-customers since it was founded almost 90 years ago.

As far as mercantilism goes, however, M&M Bank hasn’t produced profit levels consistent with its name or industry for at least the past ten years.

Back in 2011, Merchants & Marine Bancorp tried to grow by expanding its fleet. They spent $3M to acquire $55M in assets held by Heritage First Bank.  Sounded great! Except eight years later, the combined entity is only $8M in assets larger.

That’s some hole in the deck to let $47M leak out, don’t you think? I’ll never understand why companies like M&M Bank go pay full price for a ship that’s in no way needed to deliver their goods, when spending the same amount to increase ownership of their own ship would produce far greater returns and plug holes like this.

Stranger still, Merchants & Marine insiders seem to be missing the opportunity right before their eyes. Of the top seven of the bank’s officers, five own zero shares. Eight directors out of eleven own less than 1%. Two own zero shares. One owns just 50 shares ($1950 worth).

Attention on deck: MNMB is undervalued. You're sailing under the radar. Look at the horizon! We need you to adjust course now.

Sources

Ohana Pacific Bank, Honolulu, HI (OHPB)

A Case of Asian-American Assets


Immigrants have been getting a particularly bad rap lately, so I feel compelled to highlight cases like Ohana Pacific Bank, where immigrant ingenuity, effort, capital and investment lend value to our communities— in this case, quite literally, in the form of a lending institution.

Ohana's stock is also valuable. Happily, it's undervalued by the market. Investors paid $10 per share when the bank was founded thirteen years ago. Today, you can buy it for $7.65.

Give Ohana Pacific three years and we could see book value approaching $12, earnings over $1 per share, and OHPB trading at $15.


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


Prospective Buyers

Although Ohana Pacific is not for sale and earns enough to remain independent, acquiring it would help one of these banks compete better against First Hawaii (FHB) and Bank of Hawaii (BOH), which combined, control 67% of the Honolulu market.

First Foundation, Inc, Irvine, CA (FFWM)
Orient Bancorporation, San Francisco, CA (private)
Territorial Bancorp, Honolulu, HI (TBNK)

Financial Snapshot
as of 03/31/2019

Total assets:
$162M
Tangible book value per share:   
$8.78
NPAs to assets:
0.1%
Price to book:
86.8%
Market cap:
$15.8M
Dividend yield:
0%
Trailing 12-month ROA:
0.95%
Trailing 12-month ROE:
8.22%

The Crew

Donald Kang, Chairman
James Chungwoo Hong, President and CEO
Nicole Byun, Executive VP, Chief Credit Officer

The Skinny

Honolulu's Asian Americans, especially Korean Americans, have been putting serious money and talent to work in this bank.

Ohana Pacific was founded by Korean Americans who invested $15M to capitalize the bank in 2006.

Korean-American immigrant business owner Donald Kim remained the bank's largest shareholder until his death in 2018.

In 2006, Kim invested $500,000 of his own capital to help launch the bank.

When Ohana Pacific needed additional capital in 2010, Kim and his company (Amkor A&E, Inc) invested an additional $1.6M.

The majority of Honolulu's 400,000 some residents are Asian Americans (54%), and given Ohana Pacific's focus on serving the Korean American market, it's safe to say a majority of the bank's assets are from our Asian American compatriots.

Ohana Pacific has $136M in loans outstanding today—money Asian Americans have put to work in the Honolulu economy.

As you can imagine, I've seen a lot of bank boards. Every director on the board of Ohana Pacific Bank has impressive business credentials, and the high standards to which they apparently hold each other are really remarkable.*

*As evidenced by their recent removal of Ronald Moon. He may have been a State Supreme Court Judge, but that didn't prevent the board from holding him to account as a bank director.

Sources

First Commerce Bank, Lakewood, NJ (CMRB)

A Case of Growing Too Fast


Rapid growth, rising NPAs, and deposit quality have had me wincing about First Commerce Bank for a few years now.

Fortunately, management has let up on the gas and begun tending to the bank's wounds. I’m swayed by CMRB's cheap price, the level to which its board is vested, and its prospects for sale given the competitive landscape in New Jersey.

If First Commerce Bank addresses asset quality, it could sell for $8.50 within a year and deliver a 50% return over today's price.


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


Prospective Buyers

Any of these larger, area banks could easily pick up First Commerce Bank and proceed to grow safely.

ConnectOne Bank, Englewood Cliffs, NJ (CNOB)
Columbia Financial, Fairlawn, NJ (CLBK)
Lakeland Bancorp, Oak Ridge, NJ (LBAI)

Financial Snapshot
as of 12/31/2018

Total assets:
$962M
Tangible book value per share:   
$5.81
NPAs to assets:
3.96%
Price to book:
97%
Market cap:
$126M
Dividend yield:
0%
Trailing 12-month ROA:
1.31%
Trailing 12-month ROE:
10.25%

The Crew

Abraham S Opatut, Chairman
Donald Mindiak, President and CEO
Abraham M Penzer, Director, largest shareholder

The Skinny

First Commerce Bank pursued a course of dramatic growth after it was recapitalized in 2010.
  • Branches grew from one to 10. (1000%)
  • Assets grew from $67 million to $962 million. (1436%)
  • Deposits grew from $60.9 million to $824 million. (1353%)
  • Loans outstanding grew from $50.4 million to $753 million. (1491%)

Not surprisingly, pursuing growth at this speed resulted in a few scrapes.
  • Over the past decade, NPAs at First Commerce Bank have grown ten-fold, from a very low 0.7% ($3.8 million) in 2010 to 3.95% ($38.2 million) today.
  • The steady increase in the bank's profitability hit a wall in 2016, and has been declining since then.
  • The value of CMRB stock has dropped by 28% from a high of $7.75 in 2018 to today's price of $5.61.
  • It's arguable the bank sacrificed deposit quality for quantity in its haste to grow — 35% of First Commerce Bank deposits are jumbo CDs, and only 12% non-interest bearing.

Still, I have confidence in both First Commerce Bank and CMRB stock.
  • The clock is running out, but the bank is still on track with the ten-year plan Chairman Abe Opatut and former CEO Herb Schneider laid out when they invested their own millions and took the helm back in 2010. 
  • Of all the banks I have reviewed here, First Commerce Bank has my favorite board of directors. As a group, the 15 directors own 25% of the bank — a stake that's worth nearly $32 million today. They take no pay, and no outside director owns less than $1,000,000 of CMRB shares.
  • In short, I believe the board remains wholly aligned and behind the plan to grow First Commerce Bank for sale. I anticipate they will do so as soon as the scrapes heal up. 

Sources

UPDATE: Parkway Acquisition Corp, Floyd, VA (PKKW)

When I first reviewed Parkway Acquisition Corp in July 2017, I was hoping they'd reach their own projected earnings of $1.01 per share and get the stock trading at $14 by year end 2018.

Instead, Parkway paid $14.1 million in stock to incorporate the assets of Great State Bank of Wilkesboro, NC into Skyline National Bank. They missed their projections, and CEO Alan Funk retired shortly after the acquisition.

Happily, Parkway is still A Case of Better Than Before. PKKW has outperformed the BKX Index by 10% over the past two years. If Parkway's progress pattern holds through 2020, PKKW should earn over $1.30, have a book value over $14, and trade over $15.


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


Prospective Buyers

Skyline National Bank has the same prospects for sale as it did in 2017.

First Citizens BancShares, Raleigh, NC (FCNCA)
National Bankshares, Blacksburg, VA (NKSH)
Union Bankshares, Richmond, VA (UBSH)

Financial Snapshot
as of 12/31/2018

Total assets:
$680M
Tangible book value per share:   
$11.03
NPAs to assets:
1.7%
Price to book:
90%
Market cap:
$68.3M
Dividend yield:
2.2%
Trailing 12-month ROA:
0.8%
Trailing 12-month ROE:
7.0%

The Crew

Thomas M. Jackson, Jr., Chairman
Blake M. Edwards Jr., President and CEO
Laurie J. Vaught, Executive VP and CFO

The Skinny

It's too soon to say whether Parkway's acquisition of Great State Bancorp has added to the value of the combined franchise, but I'm still bullish on this stock.

I see two new reasons to have high hopes for PKKW:
  • The bank recently authorized a buyback which should make book value and earnings accrete even faster. 
  • Skyline National Bank could attract some strong talent and customers disrupted by the upcoming BB&T/SunTrust merger.
As in 2017, I don't expect miracles from this latest acquisition.
  • Floyd County is a low-growth market that has struggled to attract business, which is why 8 out of the 20 branches Parkway now owns are smaller today than they were in 2013.
  • With 206 employees, Skyline National Bank now has $3.3M in assets per employee, but neighboring National Bankshares — which has $5.4M in assets per employee — is still doing more with less.
  • Five Directors from Cardinal's board are still on Parkway's board, including third generation Director Dr. Condruff, under whose watch Cardinal's Bank of Floyd was grossly mismanaged.
    Why I'm not worried the sky's going to fall for investors:
    • At 90% of book value, PKKW is cheap, and there aren't many $700M banks with relatively clean asset quality left that are trading this low.
    • Skyline National Bank is the only bank in four towns and enjoys over 50% market share in two other towns.
    • If the bank underperforms, I believe shareholders will hold management to its 2016 Investor Presentation promise that it would either perform or sell.

      Sources

      • Confidential interviews with shareholders and analysts

      UPDATE: Peoples Financial Corp, Biloxi, MS (PFBX)

      I no longer have reservations about calling management of The Peoples Bank "scoundrels." 

      When I reviewed Peoples Financial Corp back in 2015, Chairman and CEO Chevis Swetman had some handy excuses — Hurricane Katrina, the BP oil spill. But what's the excuse for being a bloated, non-performing bank to this day?

      Clearly, Swetman's not going to do the work it takes to turn The Peoples Bank around. The only folks sweating in this scenario are shareholders. And the only way out of this hot mess is for Swetman to do the right thing and sell this bank.


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


      Prospective Buyers

      Peoples Financial Corp has the same prospects for selling The Peoples Bank that it had when I reviewed it three years ago.

      Bancorp South, Tupelo, MS (BXS)
      First Bancshares, Hattisburg, MS (FBMS)
      Iberiabank, Lafayette, LA (IBKC)

      Financial Snapshot
      as of 12/31/2018

      Total assets:
      $617M
      Tangible book value per share:   
      $17.59
      NPAs to assets:
      3.0%
      Price to book:
      66%
      Market cap:
      $57.6M
      Dividend yield:
      0.17%
      Trailing 12-month ROA:
      0.1%
      Trailing 12-month ROE:
      0.7%

      Scoundrels

      Chevis B Swetman, Chairman, President, and CEO
      A Wes Fulmer, Executive VP and Chief Credit Officer
      Laurie A Wood, Senior VP and CFO

      Red Flags

      Want me to explain how bad this bank is? No sweat!
      • Swetman's 92% efficiency ratio is in the bottom 5% of all US banks
      • His 3% NPAs to assets ratio is in the bottom 5%, too
      • Loans at The Peoples Bank are down 24% in the last five years
      • Book value per share has declined by $1 in spite of stock buybacks at 70%
      • PFBX shareholders have seen the value of their holdings drop by $110M since 2000
      Meanwhile...
      • Among the people who suffered this 70% decline in the value of their holdings since 2000 are the clients of Peoples' Trust Department, who collectively own 5% of PFBX
      Enough already. In three years, Swetman has barely budged. He's now 69. The bank's not working and neither is he. Every stakeholder in PFBX and the bank's geographic area will be better served by new operators who will put some muscle into The Peoples Bank.

      Sources

      Highlands Bankshares, Abingdon, VA (HLND)

      A Case of Time's Up


      My shot clock expired for Highlands Bankshares.

      This team has failed to perform under the auspicious conditions of the most recent banking cycle, so I don't see them improving enough to justify remaining independent.

      If Highlands Union Bank steps up its game, HLND could earn 60 cents per share, have a book value of $7, and trade at $10 in three years. If the team sells sooner, they should be able to get close to that now and spare us the wasted time.


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


      Prospective Buyers

      Three banks have a small presence in HLND’s markets that would grow to a meaningful size with the acquisition of Highlands Union Bank.

      Carter Bank & Trust, Martinsville, VA (CARE)
      First Citizens BancShares, Raleigh, NC (FCNCA)
      United Community Banks, Blairsville, GA (UCBI)

      Since mergers of equals are sporty now, I should add: an MOE between Highlands Bankshares and New Peoples Bankshares (NWPP) could cut costs and produce an even more attractive $1.3 billion bank earning a decent return.

      Financial Snapshot
      as of 12/31/2018

      Total assets:
      $592M
      Tangible book value per share:   
      $6.02
      NPAs to assets:
      2.9%
      Price to book:
      95.5%
      Market cap:
      $47.4M
      Dividend yield:
      0%
      Trailing 12-month ROA:
      0.6%
      Trailing 12-month ROE:
      6.6%

      The Crew

      Robert W Moser Jr, Chairman
      Timothy K Schools, President and CEO
      Samuel L Neese Jr, Director, Consultant, and Former CEO

      The Skinny

      Highlands Union Bank has had ample time to perform.

      It's been nearly five years since Highlands Bankshares raised capital to shore up its balance sheet and grow.

      TNH Financial Fund alone put up $8.7M for that purpose, and holds a 24.4% stake. Their representative serves on the bank's board and waives his board fees.

      As of today, the bank's assets are down, loans and deposits have barely moved, and profitability remains inadequate.

      In fact, deposits in Highlands' home town of Abingdon are $30M lower than before the recap, while neighboring First Bank & Trust's have grown by $40M.

      Highlands Bankshares' ROE in the 6% range and ROA in the 0.6% range are simply not enough to justify giving this team a new shot clock.

      Typically, funds like TNH Financial are looking for a liquidity event within five years, so I have to presume I'm not alone in thinking along these lines.

      Sources

      A Stock Pick for (Almost) Every State

      A Stock Pick for (Almost) Every State


      2019 is a year to break the mold.  Deliver and obtain more value per effort and minute. So I'm giving myself "literary license" to step out of my review-one-bank-stock-at-a-time format.

      This month, I took inventory of my current community bank stock holdings "by State" to let others "in" on my portfolio and research a bit more.

      If you've been following me, you know I believe America and Americans would be well served to invest in our community banks. Hopefully this exercise will help everyday investors across the country to see opportunities close to home.


      Disclosure: As of this posting, I own shares of all the bank stocks reviewed in the Timyan Bank Alert except $TBBK, $CDAB, $MELR, $CESO and $PUB, and I may subsequently either dispose of them or purchase more. For full disclosure, please note, I personally own many other bank stocks that are not represented in the Timyan Bank Alert portfolio or record.

      Timyan's Top Community Bank Stock Pick(s) Per State as of January 2019

      Some of these I have reviewed previously. Just click the stock symbol to access its most recent Timyan Bank Alert review.

      State
      Stock
      Why It’s My Favorite in The State
      Yield
      P/B
      P/E
      AK
      DENI
      Denali Bancorporation — stock is cheap and directors own over 20%.
      5.7%
      104%
      12x
      AL
      United Bancorporation of Alabama – has high returns, low price and does good in local Opportunity Zones.
      0.7%
      117%
      6x
      AR
      OZK
      Bank of the Ozarks — stock is cheap from being overly punished by the market for two bad loans.
      3.3%
      93%
      8x
      AZ
      MPHX
      MetroPhoenix Bank — not great, but the only one I own since State Bank $SBAZ got too expensive.
      0%
      128%
      15x
      CA
      Northern California National — stock in Chico's hometown bank is undervalued, earns good money, and has high takeover appeal.
      1%
      125%
      12x
      CO
      Solera National – Marty May expertly runs this one-branch bank and it’s fair to assume Chairman Michael Quagliano will want a return on his investment in 22% of the stock.
      0%
      110%
      15x
      CT
      BWFG
      Bankwell Financial Group — Larry Seidman is the largest investor and he makes things happen for shareholders.
      1.7%
      129%
      13x
      DE
      TBBK
      Bancorp, Inc — I don’t own this or any other Delaware-based bank, but board members Shiv Govinden and John Eggemeyer are savvy bank directors.
      0%
      121%
      8x
      FL
      FCIT
      First Citrus Bank — I love the team Jack Barrett has put together in Tampa and especially love recent results:1.3% ROA and 15% ROE.
      0%
      132%
      11x
      GA
      CCF Holding Co — my largest holding. I love Leonard Moreland’s turnaround, have high hopes for the amalgamation of the two Heritage Banks and Providence Bank, and trust largest shareholder and Chairman, Ken Lehman.
      0%
      110%
      15x
      HI
      OHPB
      Ohana Pacific Bank in Honolulu — it’s ugly, but cheap. I’m hoping they sell to someone who knows what they’re doing.
      0%
      87%
      13x
      IA
      MOFG
      MidWestOne Financial — it’s selling nearly 30% below their last stock offering. I hope they’ll either get their returns in line with peers or sell the bank.
      3%
      89%
      9x
      ID
      CDAB
      Couer d’Alene Bancorp — earnings like these plus a slight discount to book make it hard to resist this tiny gem.
      2.7%
      98%
      12x
      IL
      RYFL
      Royal Financial — DISCLOSURE: I own 9.99% and have been a director since 2011, but I like Royal’s footprint in the backyards of serial acquirers FMBI and WTFC.
      0%
      105%
      9x
      IN
      MFSF
      MutualFirst Financial — attractive takeover target owned by two activist investors, PL Capital and Ancora Advisors.
      2.93%
      121%
      10x
      KS
      BVBC
      Blue Valley Ban Corp — a tad pricey, but very valuable branch network near Kansas City, with an ace director, Tony Scavuzzo of Castle Creek.

      SOLD 01/16/2019
      0%
      142%
      9x
      KY
      KFFB
      Kentucky First Federal — returns are inadequate, so I hope they one day do a full conversion and sell three years later.

      *Price to book would be 60% under full conversion scenario
      5.8%
      111%*
      20x
      LA
      CTUY
      Century Next Financial Corp — it’s undervalued and the perfect acquisition candidate for First Guaranty Bancshares.
      3%
      107%
      11x
      MA
      MELR
      Melrose Bancorp — only buy this if you believe activist investors Seidman and Maltese will be successful in pressing for a sale.
      3%
      105%
      28x
      MD
      Delmar Bancorp — earnings are improving rapidly and Chairman Ken Lehman is heavily invested in turning a profit on his 41% ownership.
      1.4%
      112%
      9x
      ME
      KTHN
      Katahdin Bankshares — it’s cheap and has a branch network that should be appealing to acquirers.
      2.6%
      96%
      9x
      MI
      EFIN
      Eastern Michigan Financial of Crosswell — Michigan has many great publicly traded community banks, but this 127 year old has the cheapest stock.
      2.94%
      82%
      9x
      MN
      Merchants Financial Group of Winona — my hands down favorite for the State, big enough for the Russell Index and trades for a fraction of its true value.
      2.1%
      107%
      10x
      MO
      LBCP
      Kansas City’s Liberty Bancorp — I’ve owned it since its conversion in 2005, because it has stayed too cheap to sell.
      1.1%
      115%
      9x
      MS
      CIZN
      Citizens of Arkadelphia — nice dividend, but Citizens never earns enough to justify its independence. 
      4.7%
      125%
      14x
      MT
      EBMT
      Eagle Bancorp — pickings are slim for cheap bank stocks in Montana. This is it. 
      2%
      107%
      13x
      NC
      UWHR
      Uwharrie Capital — if this one sells, it’ll pay off. If not, I’ll be stuck holding a cheap bank stock with crummy returns.
      0%
      103%
      20x
      ND
      BNCC
      BNCCORP — could more than double if sold, and many activists and unhappy shareholders are pushing for just that.
      0%
      101%
      13x
      NE
      FINN
      First National of Nebraska — an undervalued, high performing, 150 year old family run bank.
      0%
      109%
      10x
      NH
      Northway Financial — expertly run by the energetic Bill Woodward for the past 43 years.
      2.4%
      102%
      12x
      NJ
      PKBK
      Parke Bancorp — started in a trailer by one of my favorite bankers, Vito Pantilione. Now it has $1.3B in assets in seven branches making it the envy of acquisitive banks in the area.
      3%
      135%
      11x
      NM
      None
      Unfortunately, there are no community bank stocks in New Mexico that I want to own.
      -
      -
      -
      NV
      None
      Sadly, there are no publicly traded community banks headquartered in Nevada.
      -
      -
      -
      NY
      GLDT
      Gold Coast Bancorp in Islandia — a valuable franchise, 22% management owned, but it doesn’t earn enough to remain independent. I’m hoping it sells.
      0%
      93%
      25x
      OH
      CBKM
      Consumers Bancorp in Minerva — steady insider purchases at higher prices are a clue that this stock will soon be worth more.
      3%
      108%
      9x
      OK
      CESO
      Central Service Corp — a nice 100-year old institution to own a stake in, if you can find shares near a $30 bid price.
      0%
      46%
      8x
      OR
      CLAT
      Clatsop Community Bank — cheap for a reason. It’s ten years old and still doesn’t make enough money to be independent. Original shareholders are still under water. Needs to sell!
      2.1%
      94%
      19x
      PA
      First Resource Bank, Chester County PA — I'm not alone in rating it the best bank in the wealthiest county in the state (PRN Newswire 10/30/2018)
      0%
      100%
      11x
      PA
      Embassy Bank — David Lobach built it from scratch, it's been a wonderful stock for ten years, and I expect it to keep performing.
      1.2%
      130%
      10x
      PA
      Franklin Financial Services — instituted a share buyback and is listing on NASDAQ. I anticipate the stock will be added to the Russell Index in June.
      3.4%
      123%
      10x
      RI
      WASH
      Washington Trust Bancorp — a bit pricey, but the only community bank headquartered in Rhode Island. 
      3.6%
      212%
      13x
      SC
      SFDL
      Security Federal — Chairman Timothy Simmons' 22% ownership stake gives me confidence this bank's value will keep growing.
      1.3%
      107%
      13x
      SD
      GWB
      Great Western — has done a great job building this bank organically and via acquisition.
      2.9%
      109%
      11x
      TN
      IBTN
      Nashville’s Inscorp — it’s the cheapest thing in a great market, but I wish they would improve their deposit mix.
      1.2%
      117%
      12x
      TX
      CADE
      Cadence — the stock has been punished too much for its purchase of State Bank of Georgia.
      3.3%
      107%
      9x
      UT
      PUB
      Peoples Utah Bancorp — Utah's one and only publicly traded community bank, but it is a beauty! I just wish it were cheaper...
      1.5%
      204%
      14x
      VA
      MNSB
      MainStreet Bancshares — this bank is in a great market, growing, and likely to sell sooner or later.
      0%
      126%
      11x
      VT
      MDVT
      Middlebury National Corp — going strong for 188 years and holds 60% of the deposits in its home town.
      2.7%
      96%
      11x
      WA
      PPBB
      Peoples Bancorp — a valuable franchise with superior returns and good prospects for selling.
      0%
      145%
      10x
      WI
      S.B.C.P Bancorp —  it's in a great market and run by a great banker, Jim Tubbs.
      2%
      103%
      8x
      WV
      PTBS
      Potomac Bancshares — good things usually happen for shareholders in Mike Voinovich's deals and he just raised capital here. 
      2%
      121%
      13x
      WY
      CRZY
      How could I not pick Crazy Woman Creek Bancorp? Especially with Joe Helmer on their board.
      1.9%
      85%
      12x