Enterprise Financial Services Group, Allison Park, PA (EFSG)

A Case of an Enterprising Enterprise

Enterprise Bank is true to its name in ways that make EFSG one of the top "feel-good" stocks in my portfolio.

Unlike other banks I have seen, Enterprise is structured and staffed to be a true, full-service partner for the most enterprising members of its community — including startup businesses and businesses in distress, which most banks consider too risky to serve.

I anticipate that within three years, EFSG will have a book value of $30 per share, be earning $2.25 per share, and be paying an 80 cent dividend. To me, those numbers easily support a $22.50 stock price, more than double today's $10.30.

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

Prospective Buyers	Enterprise Financial Services Group has designed a truly unique, niche business outside of the focus of the average bank, so it's hard to imagine it being very attractive to acquisitive neighbors. I don't think bigger banks would appreciate what's most valuable about it.
Financial Snapshot †Estimates based on 06/30/2017 Call Report and 9/2016 Annual Report	Total assets: $268M† Tangible book value per share:    $25.92† NPAs to assets: 6.7% Price to book: 39%† Market cap: $9.1M Dividend yield: 0% Trailing 12-month ROA: 0.65%† Trailing 12-month ROE: 7.43%† TARP: $0M* *Redeemed $4M 08/25/2011 into $5M SBLF
The Crew	Charles H. Leyh, Chairman, President and CEO Bradley J. Ryniawec, Senior VP, Assistant Treasurer and CFO Douglas W. Lockard,  Vice Chairman
The Skinny	The main reason EFSG is at the top of my "feel good" list is this: Where other banks have wealth management groups to help those who already have a surplus of money to make even more, Enterprise has a business consulting practice, insurance services group, and even a real estate subsidiary to help small and struggling business customers with everything from bookkeeping and website design to property management. I'm more bullish on Enterprise than my friend Nate Tobik, who has also written about Enterprise. (See "Is this bank a quadruple or a zero?" for example.) My logic for having faith in EFSG as an investment is pretty well expressed by these excerpts from the bank's recently released 2016 Annual Report: "This last fiscal year has seen pretax earnings improve approximately 40% over the prior year." "Growth continues to occur." "Legal collection and OREO holding costs continue to drop." "[Our] plan will include resuming dividend payments"
Sources	Enterprise Bank website 2016 Annual Report SNL Financial Confidential interviews with shareholders and analysts

Bremen Bancorp, St. Louis, MO (BBIM)

A Case of a Sour Note in a Sad Tale

Like Grimm's Bremen Town Musicians, Bremen Bancorp has clearly outlived its usefulness. If only it would be as wise, and leave the work to fitter hands, too! If this farm can get a premium to book value in a sale, then Shareholders should be able to reap a reasonable harvest and double their money once the animals have gone. Is it too much to hope that Fruend will pick up his instruments and titles and retire happily elsewhere like the original Bremen Town Musicians?

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

Prospective Buyers	Enterprise Financial Services, Clayton, MO (EFSG) Pulaski Financial Corp, St. Louis, MO (PULB) Southern Bancshares, St. Louis, MO (private)
Financial Snapshot †as of as of 09/30/2014	Total assets: $203M† Tangible book value per share: $95.90† NPAs to assets: 4.06%† Price to book: 52% Market cap: $6.4M Dividend yield: 0% Trailing 12-month return on assets: - 4%† Trailing 12-month return on equity: - 45.7%†
Scoundrels	Carl J. Fruend, Chairman, President, CEO Charles W. Nobe, Treasurer O. William Wing, Senior Vice President
Red Flags	Notes I find particularly SOUR in this band's song: Marketing Bremen Bank as the "safest bank" around when it's down to 6.5% tangible common equity to assets is sharply off-key. Fumbling with 4% NPAs this far into the Recovery shows this band can't keep the beat. Dissipating 45% of shareholder equity over a five-year period is enough to cause bitter break-up of any band. Things I find a bit SAD in this band's tale:   Observing a nearly 150-year old institution outlive its usefulness for shear want of taking care of itself is sad. Picturing the other members of the Bremen Bank band having to work under a leader who feels compelled to hoard the three most important titles and roles in the company is sad. Considering the low note on which it will leave 68-year old Carl Fruend's professional legacy if he chooses not to face the music is sad.
Sources	Bremen Bank website 2014 Proxy Statement SNL Financial Confidential interviews with shareholders