Showing posts with label STI. Show all posts
Showing posts with label STI. Show all posts

Southeastern Bank Financial, Augusta, GA (SBFC)

The Case of a Juicy Bank Stock in the Peachtree State


If I were limited to owning stock in just one bank in this country, I'd probably put my money into Augusta, Georgia's Southeastern Bank Financial.

It's really rare to find a bank doing this well trading this cheaply. It could easily fetch twice book value in a sale, but given the bank's rate of earnings growth and return on equity, I see no reason why SBFC's stellar team shouldn't keep running the bank themselves. At the end of the day, it's reasonable to expect that owners of SBFC stock will wake up sometime in the next 10 years with shares trading at a multiple of today's price.

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

Prospective Buyers
By acquiring SBFC's 12 branches and $1.4B in deposits, any of these deposit-hungry banks could expect to scale regional operations manyfold:

First Citizens Bancorp, Columbia, SC (FCNCA) has seven nearby branches holding collectively less than $300M in deposits.
SunTrust Banks, Atlanta, GA (STI) has four local branches with $165M in deposits. 
Toronto Dominion Bank, Toronto, Canada (TD) has just two branches in the area and $88M in deposits.
Financial Snapshot
(as of 3/31/2012)

Total assets:
$1.6B
Tangible book value per share:
$18
NPAs to assets:
2.9%
Price to book:
70%
Market cap:
$85M
Dividend yield:
0%
Trailing 12-month return on assets:
0.8%
Trailing 12-month return on equity:
10.7%
Luminaries
Robert W. Pollard, Jr., Chairman
Daniel Blanton, President and CEO
Ronald Thigpen, Executive VP and COO
Gold Stars
Four traits about Southeastern Bank Financial that I find especially peachy include:
  • Top Five Performance.  According to an SNL Article, for the one-year period ending September 30, 2011 only three banks in the entire US grew their tangible book value by a greater percentage than SBFC. In fact, since the start of the Great Recession in 2007, SBFC's book value rose over 20% while most of our nation's banks saw their book value dive.
  • High Insider Ownership. Insiders own over 30% and have been steady buyers in the open market over the years. The largest individual shareholders include Founder Pollard, Sr. (15.2%), Current Chairman Pollard, Jr., (8.7%), and Current President and CEO Blanton (8%).
  • Superior Asset Quality. SBFC's NPAs are a manageable 2.9% of assets and never got to be more than 3.2%, well below national averages. Reserves are a healthy 69% of non-performing loans. (In my experience, bank regulators like to see reserves above 30%.)
  • Good Old-Fashioned Self-Reliance. While other banks were taking TARP funding from the government (that is, from taxpayers), Southeastern Bank Financial raised $12M from friends and family.
      Sources
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      Carter Bank & Trust, Martinsville, VA (CARE)

      A Case of Gray Hairs Proving Their Worth in 123 Bank Branches


      I wonder how this little gem of a bank has gone so long undiscovered by investors? Only two institutions own shares in Carter Bank & Trust (and less than 1/2 of 1% at that). And no brokerage firm appears to have written anything about it, despite six fine years of earnings when the rest of the industry was mired in the Great Recession. Trading at only 62% of book value and 6.8 times earnings, CARE clearly offers investors a Worthy opportunity.

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

      Prospective Buyers
      CARE would present an easy in-market transaction for any of the following acquisition-hungry banks:

      BB&T Corporation, Winston-Salem, NC (BBT)
      First Citizens BancShares, Raleigh, NC (FCNCA)
      SunTrust Banks, Atlanta, GA (STI)
      Financial Snapshot
      (as of 3/31/2012)

      Total assets:
      $4.3B
      Tangible book value per share:
      $9.99
      NPAs to assets:
      2.5%
      Price to book:
      82%
      Market cap:
      $216M
      Dividend yield:
      4.9%
      Trailing 12-month return on assets:
      0.8%
      Trailing 12-month return on equity:
      9.5%
      Luminaries
      Worth Harris Carter, Jr., Founder, Chairman, and President
      Jane Davis, Senior VP and CFO
      Gold Stars
      Combined with Carter Bank & Trust's low price to book value and low price to earnings, five Key Performance Indicators (KPIs) give me tremendous confidence in the bank's ability to deliver outsized returns for investors:
      1. No annual losses during the Great Recession
      2. Strong return on assets of .8%, just shy of the Industry Gold Standard target of 1% before the Great Recession, in a current economic environment where negative returns have not been uncommon
      3. Stellar return on tangible common equity of 14.8%, versus industry trends closer to 7%
      4. Consistent growth in both deposits and core deposits
      5. Healthy and growing insider ownership, currently over 28% of the stock, a whopping 7.5M shares (Since January 1st, there have already been 14 open market purchases of stock by directors at prices ranging from $8.00 to $8.80 per share)
      Kudos to an experienced team for showing the banking industry how it's done. Mr. Carter, at 74, has built a bank worthy of his name, and shows no signs of slowing down. His board doesn't have a single director under the age of 70. Clearly many of nation's bankers could learn a thing or two from these graybeards.
        Sources
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