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:
Tangible book value per share:   
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month ROA:
Trailing 12-month ROE:

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.


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