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Community Bank System Inc. Message Board

  • sambordulac sambordulac Jan 25, 2012 7:31 AM Flag

    CBU's printing money, point to pounder

    Looking closer, one can find the tangible book value is a bit bellow $11. So the offering price is about 2.5 times the tangible book. or, for the $50 million it'll raise, it only costs the bank $20 in tangible value in exchange. The remaining $30 million is tagged as potential superior return that the bank can generate. That, folks, is anything but certain. The question one has to ask is this, "How can an investor of the new issue be rewarded as only 40% of his money goes into tangible asset and the rest rests with the bank's ability to earn great returns worthy many times that 40%?"

    The bank did great through the rubble of the great recession and it's bringing in 1.9% pretax, pre-provision operating income on ending. I would venture that this 1.9 % maybe close to its potential and the rest of growth could only come in the form of expanding asset which requires additional capital. The benefit of which--new offering is about 5% additional shares--is only incremental.

    So, how is it able to earn the other 60% and more?

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    • Agree with you somewhat--has this move caused some dilution of our shares---30,800,000, shares outstanding,will CBU have to skip a few quarters of dividends in order to pay for the purchase---I do worry somewhat that CBU will become a problem in that the home town bank vision will someday disappear---time will tell---

      • 1 Reply to etouq_san
      • Community's move into our town with the same local folks who already work at the bank they bought is not even noticed by many.
        You do business with the people at the bank who you know and trust.
        Change all the staff around and people go to other banks in town where they know others who work there.
        Like you said---time will tell---if they keep the small,hometown,flavor that already exists at so many of the banks they are purchasing.
        I also think the sp will be moving up steadily now that the purchase has been done---jmo.

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