I am at a loss to understand why this bank that has a consistant record of growth and profit has taken a slide over the past 6 months. Great profits, no significant loan problems and the stock drops with no buyers. You would think they would would be buying at this price. Their peers are trading at 18 times PE and they trade at 13? Can anyone out there expain this?
I looked at last quarter's numbers and the annual report. This bank has some great metrics but, at the same time, there is some VERY odd things on the balance sheet and the CEO's pay is WAY out of line given the size and scope of this bank.
I was wondering why they don't put the NIM in their quarterly releases. After looking at the annual report, I still don't know why. It's over 6% which is phenomenal. As a matter of fact, it is so good, I'm wondering if it is somehow inflated by off-balance sheet (derivatives) items. Could find none listed. They must be getting fanatastic spread pricing on their comm'l loans --- given the large amount of over 100K CD's they have. Still very odd that they are not promoting NIM.
The vast majority of loans are CRE and construction. With the coming slow down in CA, I've got to believe this is what is putting a damper on the stock.
Expenses are also very high given the size and scope of this bank. 60% efficiency ratio is way too high given an eight branch $1 billion bank. Somebody is not watching the store properly.
Three balance sheet items that really are odd. 1) The IO SBA strip. What the hell is a small bank like this doing with this type of structured product? 2) The bank-owned life insurance product (BOLI). This product was a game many banks used in the 90s to boosted earnings. It was an accrual -- not cash flow. I thought either the FASB or SEC shut down this product down for the purpose of bank earnings. 3) No investment securities. Why?
You can't argue with their growth but this bank has some very odd income numbers & balance sheet items.
This bank has had the highest appreciation of any bank stock in the state of California for the past 10 years. We, as shareholders, have made a lot of money I am glad the president is being well taken care of. If he wasn�t he would open another bank across the street and we would have a shell. Another way of looking at it is that if you had an employee that you agreed to pay one dollar for every tem he made you would you want to put a cap on his bonus?
While the majority of the loans are commercial real estate they are also SBA and are occupied by the borrower or his/her business. They also have low advance rates. Their residential construction loans are at about a 60% advance rate. Charge offs are well under peer.
The efficiency ratio must be higher than normal as their growth rate has been about 30% per year. You cannot grow a high performing bank with an understaffed bank. The officer staff that is hired has generally been the management team of a bank that has recently sold out to a larger bank. This has contributed to this incredible growth.
The BOLI came about a couple of years ago when the president gave up part of his option and bonus program for this retirement program. It looks to me he packed his parachute and when he bails out and sells the bank it should sell at about 20 to 23 times P/E or $31.00 to $35.00 per share. While this would make us all a lot of money where could we find a replacement invest that would perform this well?
For the past 6 months, this stock has been selling between $20.50 and $23.00 with nominal volume. With the bank's book value at about $7.00, this seems like a typical sell range (3x's book) and really shouldn't be much higher than this. Last quarter's strong performance report hardly registered a "blip" as to stock price. Someone on this board once stated that TMCV is still a bit of a newbie to the NASDAQ, and may not be on a lot of trader/investors radar screens. There might be some truth to that.
Note that this is an SBA-heavy bank, and in a rising interest rate environment, the 7(a) lending program is less attractive to prospective borrower's (variable rates).
Management has stated that the bank is actually doing a lot of conventional lending through their SBA division these days in order to maintain volume. Some of these loans they broker out to participant lenders for a premium, while others they keep on their books, in hopes of selling them off once they are seasoned. Thus, the big gain in assets (now nearly $1 billion if I am correct).
This bank has experienced rampant growth, but with this growth, new levels of management, employees, systems, etc. must be acquired in order to keep pace. Additional overhead and expense has been heavy over the course of the last 12 months.
But with CMNB now part of the First Community family of banks, TMCV becomes the "golden child" of the SD/Riverside County corridor. I'm adding to my position at these levels as I'm very bullish on the future of this bank.