5-Year Anniversary Portfolio Performance Assessment

Happy Anniversary, Timyan Bank Alert!

It's hard to believe five years have passed since I launched the Timyan Bank Alert.  The publication serves a wide range of purposes in my life: it helps me hone my art, make money, help others make money, and connect personally with those of you who share my passion for community banks. And I really like how it establishes an historical record of the stories behind these bank stocks.

If you had invested $100 in each stock when I reviewed it here, your $4300 investment would be worth $9159 today. If you only invested in HCBP, I apologize...

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Disclosure: As of this posting, I own shares of all the bank stocks reviewed in the Timyan Bank Alert that still exist (or the stocks of their acquiring banks) and 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.

The average running return rate for the Timyan Bank Alert portfolio so far is 113%. Over the past five years, I've reviewed 43 bank stocks. Four have undeperformed against the market. (The first two stocks I reviewed turned out to be the least auspicious.) HCBP essentially lost everything when it was seized by the FDIC CDBK merged into Parkway, is currently down 8%, but still looks promising to me CNAF is running "flat" at 1% BKUT is up an un-thrilling 7% Nineteen have doubled their value or better, as shown in the table below. FMFC and SBFC increased 5-fold, but are now in acquiring company stock CITZ and CWBC quadrupled, CITZ via acquisition and CWBC on its own BHWB, CPBO, and CMTB have tripled, BHWB on its own My "median" performer gained 89% — BBIM, which was acquired for cash.

1st Review	Symbol	Return	Price Then	Price Now*
07/09/12	FMFC	425%	$5.05	$26.50
06/20/12	SBFC	423%	$12.60	$65.95
05/30/12	CITZ	381%	$5.45	$26.24
05/11/12	CWBC	360%	$2.23	$10.25
10/04/12	BHWB	259%	$6.75	$24.25
03/30/14	CPBO	237%	$8.45	$28.47
08/21/14	CMTB	207%	$7.27	$22.35
05/07/13	CBIN	188%	$13.00	$37.47
04/12/14	BBBI	159%	$6.38	$16.50
07/07/12	PSBQ	146%	$25.50	$62.75
05/04/12	HBNC	132%	$11.29	$26.21
08/08/12	FRAF	123%	$13.60	$30.35
05/21/13	EMYB	111%	$6.65	$14.00
09/26/16	GRBS	108%	$11.40	$23.69
06/04/12	CARE	107%	$8.25	$17.11
01/07/13	FIBP	105%	$13.60	$27.85
09/23/12	BXS	104%	$15.00	$30.60
06/24/12	HFBC	102%	$7.07	$14.26
02/27/13	LOGN	100%	$21.00	$41.95
06/30/13	HARI	94%	$7.20	$14.00
07/11/14	BANC	93%	$10.76	$20.75
12/30/14	BBIM	89%	$49.75	$93.93
11/13/13	MFGI	86%	$32.25	$60.00
07/03/14	CABC	80%	$10.80	$19.40
03/02/14	NCNB	76%	$9.25	$16.25
07/13/13	NWYF	73%	$15.80	$27.40
06/01/15	EXSR	73%	$84.00	$145.00
09/17/12	MFNC	71%	$7.84	$13.41
08/26/16	CCFH	67%	$1.05	$1.75
04/25/15	SLRK	54%	$4.80	$7.40
09/02/15	PFBX	52%	$9.75	$14.80
01/19/15	FGBI	45%	$17.09	$24.74
02/06/14	NWBN	43%	$4.02	$5.75
02/27/16	SBBI	41%	$41.00	$58.00
01/11/17	BAOB	38%	$3.11	$4.30
01/15/14	ASRV	33%	$3.05	$4.05
08/30/12	NECB	23%	$6.73	$8.27
07/03/16	SRNN	21%	$9.80	$11.85
04/06/17	BRBW	14%	$7.25	$8.25
05/29/14	BKUT	7%	$4.37	$4.67
11/18/14	CNAF	1%	$20.70	$21.00
04/30/12	CDBK	-8%	$14.5	$13.39
04/26/12	HCBP	-100%	$3.50	$0.01

* April 2017 price, where the stock exists, or its value in acquiring stock

UPDATE: Merchants Financial Group, Winona, MN (MFGI)

My assessment of MFGI hasn't changed much in the three and a half years since my first Timyan Bank Alert™ review of Merchants Financial Group (November 2013): it still looks to me like "all Merchants Bank Management needs is to be left alone to keep doing what they do."

This community bank stock has largely performed as I had expected — the price has nearly doubled from 2013's $32.50, and stated book value has reached $55. Therefore, I'm updating my expectations: over the next three years, I anticipate that book value will approach $70, and MFGI will trade above $100.

In other words, Merchants Financial stock is still a "winner" in my book.

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

Prospective Buyers	As in 2013, I'd prefer to see Merchants Bank remain independent. Strongly positioned within the footprints of these banks though, it certainly has attractive options. Associated Bank, Green Bay, WI (ASB) Bank of Montreal, Toronto, Canada (BMO) Bremer Financial, Saint Paul, MN (private)
Financial Snapshot †as of 12/31/2016	Total assets: $1.6B† Tangible book value per share: $46.04† NPAs to assets: 1.2%† Price to book: 108% Market cap: $162M Dividend yield: 1.9% Trailing 12-month return on assets: 0.9%† Trailing 12-month return on equity: 9.8%
Luminaries	Scott Biesanz, Chairman Greg Evans, President and CEO Susan M. Savat, Senior VP and CFO
Gold Stars	Let me count the ways I still love this bank! Excellent value. At 11.4x earnings, and 108% of book value, MFGI is still exceptionally cheap, especially when you consider that the bank ranks in the top quartile of US banks in both ROA and ROE. Healthy insider ownership. The ESOP together with officers and directors still hold about 23% of the stock. and local Fastenal Founders Slaggie and Kierlin own another 16%. Conservative bankers. Thanks to the sound underwriting practices of Merchants Bank loan officers, NPAs are a low 1.2% of loans. Since my last review, it has also occurred to me that Merchants Financial Group has another winning card it could play: With its market cap of $161M, were MFGI to list on Nasdaq, it would be eligible for inclusion in the Russell 2000 Index. Given its thin trading and float, the stock could then exceed my expectations pretty fast.
Sources	Merchants Bank website 2016 Annual Report SNL Financial Interviews with management

Brunswick Bancorp, New Brunswick, NJ (BRBW)

A Case of Appeal to Family Interest

There's no indication that the scoundrels at Brunswick Bancorp care about their shareholders, but maybe we can appeal to their greed.

Given that Chairman and CEO Roman Gumina owns 27%, his mother 5.5%, and other Guminas 4.2% or more, the family has two great options for making out good without further shareholder shake down:

1. Were the Guminas to sell the bank outright, they would increase the value of their own holdings by $10M. Outside investors would score a similar amount.
   
2. Alternatively, the Gumina family could use a quarter of the bank's excess capital to buy stock back from those of us who want out, make Brunswick Bank & Trust even more of a family operation, and still increase the value of their holdings by $10M.

In any event, if you don't own BRBW, consider yourself lucky! Even at 58% of book value, the stock only "looks" cheap.

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

Prospective Buyers	The $88M in deposits in Brunswick's Livingston Ave branch might be appealing to area institutions, but I doubt any buyer would be interested in the 5 out of 6 other branches struggling to manage less than $10M each. Amboy Bancorp, Old Bridge, NJ (private) Magyar Bancorp, New Brunswick, NJ (MGYR) Provident Financial Services, Iselin, NJ (PFS)
Financial Snapshot †as of 12/31/2016	Total assets: $180M† Tangible book value per share: $12.14† NPAs to assets: 6.5%† Price to book: 59% Market cap: $21.7M Dividend yield: 0% Trailing 12-month return on assets: 0.38%† Trailing 12-month return on equity: 1.85%†
Scoundrels	Roman Gumina, Chairman and CEO Nicholas A. Frungillo, Jr., President Louis Foulke, CFO, Secretary and Treasurer
Red Flags	Ask around and you'll hear all sorts of unsettling rumors about the Gumina family — real gangster stuff, complete with death threats and people suddenly going "dark" after daring to voice their concerns. In the interest of self-preservation, I'll step around all that here. Performance at Brunswick Bank & Trust hasn't improved in decades. In 1989, under the-now-deceased Carmen Gumina's watch, the bank earned $1.1M. It hasn't come close since. NPAs were 10% as recently as Year End 2012, and are still high at 6.5%. Meanwhile, current Chairman and CEO Roman Gumina has been "rewarding" himself pretty handsomely: Over the past seven years, Brunswick Bancorp has suffered a cumulative loss of $501K while Roman skimmed off $2,266,000. In 2010, the bank lost $1.2M and NPAs reached 12%, but that didn't stop Roman from taking a $96K bonus on top of his $310K base pay. Even as the bank started reporting income — net of $283K, $406K, and $677K in 2014, 2015, and 2016, respectively — Roman's $310K a year salary is beyond what you'd call "commensurate with performance."  In spite of his high compensation and the bank's screaming need for stronger management, Gumina doesn't appear to consider his responsibilities or pay grade worthy of full-time attention. 10 Other Entities in which Roman Gumina Owns a Controlling Interest  Aaron Road Associates Cardal Associates Cranbury Station LLC Applegarth Associates Carmine Investments Brunswick Management LLC Englishtown Realty LLC Mullica Hill Management Mantec Associates Franklinville Plaza Management Associates LLC
Sources	Brunswick Bank & Trust website Richard Boywitt vs Brunswick Bancorp lawsuit SNL Financial Confidential interviews with shareholders and analysts