Greer Bancshares, Inc, Greer, SC (GRBS)

The Case of a Greedy Grip on Greer

Grrrrrr! The guys at Greer Bancshares have me growling.

Even if they stopped their money grubbing today and all else goes well, I have trouble seeing how the market price of GRBS could reach much over $15 — not a terrible return, but also not optimal, especially considering the risks involved. In a sale, GRBS shares could garner $17, more than 40% above today's stock price.

I agree with C Don Wall, a former Director and Greer's largest shareholder: the Board has a fiduciary responsibility to loosen its grip on the bank and let shareholders sell it if they wish.

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

Prospective Buyers

BNC Bancorp, High Point, NC (BNCN)
First Citizens BancShares, Inc, Raleigh, NC (FCNCA)
United Community Banks, Inc, Blairsville, GA (UCBI)

Financial Snapshot
as of 6/30/2016
Total assets:$378M
Tangible book value per share:$10.89
NPAs to assets:1.7%
Price to book:105%
Market cap:$28M
Dividend yield:1.7%
Trailing 12-month return on assets:0.74%
Trailing 12-month return on equity:11.3%
*Redeemed $10M 7/23/2014


Gary M. Griffin, Chairman
J Richard Medlock Jr, Secretary, President, and CEO

Red Flags

The Greed. These greedy guys (and gals)...
  • paid shareholders a paltry $248,669 in dividends over the past eight years (2007-2015) while they stuffed 8x that into their own pockets, reporting $2,007,693 in Board fees
  • have been paying themselves 10% interest for deferred Directors compensation (right up until last year), 20x the 0.5% rate they pay customers for 1-year CDs 
  • recently cut their deferred compensation interest rate by half, but it's still 10x the rate they pay their customers 
[No wonder that a full third of Greer's directors don't even own an amount of stock equal to a year's worth of board fees!]

The Grip. These same greedy guys are...
  • misusing an outdated requirement that 70% of the Board agree to a change of control, when the norm is 50%*
  • refusing to hand over corporate records shareholders have requested to inspect, in open defiance of their obligations under South Carolina law
  • persisting on a self-serving path of independence at the expense of the bank's core shareholder base
*Until this is changed, that aforementioned third of the Board that owns next to no GRBS stock can effectively block the interests of shareholders who own 99% of it.

Other Gripes. While their hands are busy grabbing profits and maintaining their grip on the bank, these guys are dropping the ball:
  • From 2011 to 2015 both loans and deposits declined. (Deposits have meagerly improved over the past few months.)
  • Instead of taking in deposits and lending them out, Greer is borrowing money from the FHLB and taking on debt to invest in the bond market — a risky wager given that interest rates are at record lows. (A 2% interest rate increase could wipe out more than half of the bank's equity.)
  • The bank's efficiency ratio increased from 69.9% in 2011 to 72.5% in 2015, in a game where the target is a healthy 60% or less.
- - - - - - - - - - - - - - 
My Gratitude to fellow shareholders C Don Wall, Dennis Hennett, and Paula Lawrence — who launched a proxy fight last year — for their shareholder advocacy and stand for right behavior.


  • Confidential interviews with shareholders and analysts

CCF Holding Co, Jonesboro, GA (CCFH)

A Case of Southern Revival

The Heritage Bank resurrection story warms my heart. Of the 12 banks that were headquartered in Georgia's Clayton and Henry Counties in 2008, Heritage is the only one that survived the Great Recession.

The Heritage Bank franchise lost a huge percentage of its equity at the time, but clearly it did not lose faith! Since then, asset quality, growth, and scarcity value have all risen to such a glorious degree that I can see CCFH stock trading at 150% of book value within the next two years. And if the bank's board decides to sell, the stock could deliver twice book.

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

Prospective Buyers

Wrapping Heritage Bank into its fold would fill a real need for any one of these organizations that suffer from lack of marketshare in the area:

Ameris Bancorp, Moultrie, GA (ABCB)
State Bank Financial, Atlanta, GA (STBZ)
United Community Banks, Inc, Blairsville, GA (UCBI)

Financial Snapshot
as of 06/30/2016
Total assets:$415M
Tangible book value per share:$1.08†*
NPAs to assets:2%
Price to book:88%*
Market cap:$37M*
Dividend yield:0%
Trailing 12-month return on assets:5.6%†**
Trailing 12-month return on equity:64.2%
*Tangible book value per share, price to book, and market cap adjusted for exercise of warrants and conversion of preferred shares.
**ROE and ROA numbers are misleading due to the bank's DTA recapture.


David Turner, Chairman
Leonard Moreland, President and CEO
Katherine Zovlonsky, Senior VP and COO

Gold Stars

The Heritage Bank resurrection story in a nutshell:

NPAs to Loans
Over 24%
Texas Ratio
20% and falling
Net Loans
* YE 2012, 2013


  • Confidential interviews with shareholders and analysts

UPDATE: Northern California National Bank, Chico, CA (NCNB)

In the two and a half years since I first reviewed Northern California National Bank in the Timyan Bank Alert™, assets are up 45%, book value has grown by 21%, loans have grown by 33%, deposits by 40%, a dividend has been instituted, NPAs have remained negligible and the value of the franchise has grown by $10 per share in my estimation.

And since the stock is only up 20% since then, NCNB is an even better bargain for bank investors today. It's conceivable that an acquirer could and would pay $28 per share to own this beautiful one-branch bank.

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

Prospective Buyers
Banner Corp, Walla Walla, WA (BANR)*
TriCo Bancshares, Chico, CA (TCBK)
Umpqua Holdings, Portland, OR (UMPQ)

* I had listed SKBHC here in my original post, but Banner Corp has since acquired it. Banner's lone Chico branch has a paltry $9M in deposits, so I'd say BANR should either buy NCNB or leave Chico to bankers that care more about it.
Financial Snapshot
(as of 06/30/2016)

Total assets:
Tangible book value per share:
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month return on assets:
Trailing 12-month return on equity:
John Lucchesi, former Chairman, President, and CEO (deceased)
Stephen Gonsalves, Chairman
Todd Lewis, President, CEO, and CFO
Gold Stars
I am sad to report that since I first reviewed Northern California National Bank in the Timyan Bank Alert™, its Founder has died. I had hoped to trek out West to meet him and to acknowledge him personally. Banking needs more folks like John Lucchesi! And life really is short.

John Lucchesi is one of my favorite bankers of all time. He grew up in Chico, went to Chico State University and returned to his hometown after a 25-year career with Bank of America that took him to Asia. Back in Chico, Lucchesi ran North State National Bank until he sold it to Tri Counties Bank in 2002. 

Apparently, Lucchesi was one of those ambitious guys who just couldn't retire, so in 2006, at the young age of 67, he started Northern California National. When other banks were reeling from bad loans in the Great Recession, Northern California National was growing without loan problems due to Lucchesi's careful stewardship. 

Lucchesi's Northern California National is a case study in how to build a great community bank from the ground up. Today, months after he left us, it may be the sturdiest bank in Chico and a highly coveted franchise.

I know this updated blog post is a small tribute, unworthy of the man and his end-of-life's work.  I had hoped to at least be able to shake his hand...

    • Confidential interviews with shareholders

    Southern Banc Co. Inc., Gadsden, AL (SRNN)

    One Bank Stock I Hesitate to Recommend

    I own stock in Southern Banc Co, but if you don't, consider yourself lucky! The Little brothers have really run it into the ground over the past 15 years. And although it's true that value can generally be salvaged out of almost any wreck in a sale, I don't see these guys letting go of the bank until there's next to nothing left of value in it.

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

    Prospective Buyers

    Southern Banc's deposits could really help one of these three nearby community banks compete with Big Banks in the area:

    Exchange Bank of Alabama, Altoona, AL (private)
    First Bancshares of Stevenson, Stevenson, AL (private)
    Peoples Bank of Alabama, Cullman, AL (private)

    Financial Snapshot
    as of 03/31/2016
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    - 0.18%
    Trailing 12-month return on equity:
    - 1.30%


    Gates B. Little, Chairman, President, and CEO
    Jim Little III, Director
    Thomas F. Dowling III, Director

    Red Flags

    Since going public in 1995, SRNN has suffered a 3% decline in assets and incurred roughly $1.8M in losses. I've heard of a lost decade, but these scoundrels are working on their third!

    Considering Southern Banc Co in the context of its peers may help to illustrate the extent of its fall into disrepair.

    • The Southern Bank Company has four branches: Its two biggest — in Gadsden and Center — hold a mere $28M and $31M in deposits, respectively. 
    • Six other banks in Gadsden are bigger, including two solid, and growing, community banks: River Bank & Trust and Exchange Bank of Alabama. The Gadsden branch of River Bank & Trust has $90M in deposits. The two branches of Exchange Bank of Alabama in Gadsden hold $95M between them.
    • Since 2010, deposits at the Gadsden branch of Southern Banc Co have shrunk by 15%, while River Bank & Trust grew its deposits there by 35%, and Exchange Bank of Alabama grew its by 11%.

    As a shareholder, I would like to see Southern Banc Co sold. Given that its been in the Little family since it was founded in 1936 and is run by brothers who are still a long way from retirement age, I doubt it will be.


    • Confidential interviews with shareholders and analysts

    S.B.C.P. Bancorp, Cross Plains, WI (SBBI)

    A Case of an SBFC Lookalike?

    Way back in June 2012, I said that if I could own just one bank stock, SBFC was it. Since then SBFC shares have nearly tripled in value. (See The Case of a Juicy Bank Stock in the Peachtree State.)

    Fast forward to today, I feel the same way about SBBI. If I'm right in perceiving the similarities, its book value will be above $80 in three years, SBBI will trade over $100 per share — (triple today's bargain price) — and investors will be sitting pretty.

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

    Prospective Buyers

    Although the State Bank of Cross Plains is unlikely to sell (and I'm more than happy to hang onto its stock), I suspect these suitors would agree it's a beauty.

    Associated Banc-Corp, Green Bay, WI (ASB)
    Bank of Montreal, Toronto, Canada (BMO)
    Old National Bancorp, Evansville, IN (ONB)

    Financial Snapshot
    as of 12/31/2015
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:


    Charles L. Saeman, Chairman and CEO
    James L. Tubbs, Bank CEO and President
    Mark DeBiasio, Executive VP, CFO, and Treasurer

    Gold Stars

    The similarities between SBFC in 2012 and SBBI today are remarkable:
    • Both trade at a big discount to book value, although SBBI's discount today is even bigger than SBFC's was then.
    • Both showed self reliance by raising needed capital through their boards, families, and friends.
    • Both have astute, capable management teams with serious skin in the game in terms of insider ownership.
    • Like SBFC then, SBBI now is largely done cleaning up asset quality, and trades at barely a third of the price it did just a few years prior.

    The differences make SBBI today an even more appealing stock pick than SBFC was then:
    • SBBI has a dominant share in more towns. It's #1 in five great Wisconsin communities, whereas SBFC was dominant only in Augusta, GA.
    • SBBI trades at a lower multiple of book value than SBFC did then, making it a cheaper buy with more upside.
    • SBBI's CEO is much younger than SBFC's was at the time, which suggests less risk of turnover.

    So, I can imagine making money on this stock for another 20 years!

    Assuming even modest growth from here, say 7% a year, we could see SBBI's book value grow from today's $64 to $240 before Tubbs reaches retirement age.*

    Presuming SBBI trades at twice book by then, again, not unreasonable for a high performer, I could be holding a stock worth $500 per share.

    *His grandfather worked at the bank for 66 years. His 86-year-young dad still works at nearby Bank of Sun Prairie, and owns over 10% of SBBI. If Tubbs is a Tubbs, he'll be running the State Bank of Cross Plains for at least another 20 years.

    Too far out for your investment horizon?

    If SBBI keeps looking like SBFC, book value will reach $100 in just three to four years and the stock should trade at 150% of book — quadruple today's price.


    • Confidential interviews with management and shareholders