Showing posts with label CITZ. Show all posts
Showing posts with label CITZ. Show all posts

UPDATE: CFS Bancorp, Munster, IN (CITZ)

What a difference a year can make! I am happy to report that the CFS Bancorp of today presents a far prettier picture than when I reviewed it last May.

After 14 years of feeding the insatiable Prisby family at the expense of its own health and prospects, the bank has healed remarkably under the care of more ethical managers. So much so that it has attracted a fine suitor and will soon be merging with First Merchants Corporation of Muncie, IN (FRME).

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

Prospective Buyers
One year after our May 2012 review of the bank, CITZ surprised us by agreeing to be bought by First Merchants Corporation, Muncie, IN (FRME), a prospective buyer we hadn't anticipated.
Financial Snapshot
(as of 6/30/2013)


MAR 2012
JUN 2013
Total assets:
$1.170B
$1.131B
Tangible book value per share:
$9.66
$10.21
NPAs to assets:
6.3%
6.01%
Price to book:
56%
124.4%
Market cap:
$57.8M
$128.8M
Dividend yield:
0.7%
0.3%
Trailing 12-month return on assets:
-0.9%
0.37%
Trailing 12-month return on equity: 
-0.3%
3.78%  



The Crew
Robert Ross, Chairman
Daryl Pomranke, President, CEO, COO
Jerry Weberling, Executive VP, CFO
The Skinny
No doubt, I owe a few people a big shout out and "Thank You" on behalf of all CITZ shareholders. Congratulations are due to two folks, in particular.

Thank you, Daryl! The bank under Daryl Pomranke's leadership is no longer the anorexic, poorly performing, nepotist institution it was under Prisby family management. Pomranke deserves credit for:
  • Decreasing NPAs from $65.7M to $56.1M in the quarter preceding the merger announcement (a 15% improvement)
    • Increasing profitability from next to nothing to a respectable $1.5M per quarter
    • Transforming company culture from a dysfunctional family-centric mindset to one more appropriate for a public company 

    Thank you, John! Clearly, CFS Bancorp's future got brighter the minute shareholders elected John Palmer of PL Capital to the CFS Bancorp board. Palmer deserves acknowledgment for:
    • Shining a spotlight on Thomas Prisby's abuse of his Office, as Chairman and CEO of a public company   
    • Advocating on behalf of both the bank and its shareholders, as needed for fiscal recovery 
    • Standing firm, despite Prisby's best efforts to thwart responsible leadership and due process 

    No thanks to you, Prisby clan! Who knows what CFS Bancorp could have been on its own, had you respected your fiduciary responsibilities and not treated it as your personal piggy bank?
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      CFS Bancorp, Munster, IN (CITZ)

      A Case of Feeding One Family Well in Munster, Indiana


      Given CFS Bancorp's dangerously thinning equity—fallen from $258M to $103M in the 14 years since the bank came public—can it really hope to do any better than be rescued by a sale? 

      After years of feeding prior management at the expense of stakeholders, and constantly buying stock back at multiples of today's price, this anorexic bank has run out of room to do anything else. Someone, please, bring in the cheese and put an end to the starvation!
      Disclosure: As of this posting, I own shares of CITZ and may subsequently either dispose of them or purchase more.

      Prospective Buyers
      BMO Financial Group, Toronto, Canada (BMO)
      Fifth Third Bancorp, Cincinnati, OH (FITB)
      First Midwest Bancorp, Itasca, IL (FMBI)
      Horizon Bancorp, Michigan City, IN (HBNC)
      Financial Snapshot
      (as of 3/31/2012)

      Total assets:
      $1.170B
      Tangible book value per share:
      $9.66
      NPAs to assets:
      6.3%
      Price to book:
      56%
      Market cap:
      $57.8M
      Dividend yield:
      0.7%
      Trailing 12-month return on assets:
      - 0.9%
      Trailing 12-month return on equity:
      - 0.3%
      The Cast
      Robert Ross, Chairman
      Daryl Pomranke, President, CEO, COO
      Jerry Weberling, Executive VP, CFO
      Red Flags
      CITZ hasn't delivered an adequate return on assets or equity since going public in 1998, achieving at best the meager "high" of 5.7% return on equity in 2007, a year when they were loading up on risky real estate loans that would later come back to haunt them.

      While they've declined from their peak of $86M at year end 2010, CFS Bancorp's NPAs are still a hefty $65.7M, a high 10.1% of loans and REO, and up $1M from last quarter, in spite of $1.7M in chargeoffs.

      CFS Bancorp's loan loss reserve is just $11.7M, a paltry 15.9% of NPAs. In contrast, Horizon's reserves to NPAs are 88%, Fifth Third's are 55%, and First Midwest's are 48%.

      Since their mutual conversion in the summer of 1998, CITZ shareholders' equity has declined from $258M to $103M.

      Prior management cost shareholders an estimated $127M, when Chairman Tom Prisby fired his brother, President James Prisby, with a $1M severance. Why? For suggesting it was in the bank's best interest to sell to Bank Financial (BFIN) in 2004, when book value was $13 and a premium to book of 25% or more was predictable.

      Former Chairman Tom Prisby, resigned in December 2011, only after receiving $1.2M severance, negotiating a nice severance for his daughter, and paying his son nearly $1M to "decorate" bank branches.
      Sources
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