I know this bank well and read through the message boards and decided to post the following for what its worth.
The reason the stock is going up is that it might go into the Russell 3000 this year and its is super illiquid. Cut off for the index is around 240 million. It did the same thing last year and didn't make it and was then sold off.
Bank has done well in a banking nirvana in Southern California for last handful of years. Its balance sheet and loan comp. is frightening, worse than VNBC, both of which are time bombs waiting to blow. As construction loans payoff, bank has to continually replace them. Construction has virtually been shut down in SC, and the bank will ultimately shrink. And with a slowdown in construciton fees, its margin will inevitably be crushed, as the fees are amortized into the net interest margin. Not to mention credit issues are inevitable.
Ultimately, however, the bank will be sold, but at what price is the question. It has been shopped by all the regional brokerages and no takeovers for the last 2 years. Trades at a ridiculous tangible book and buyers are scared to death of the lending practices and hyper growth of the previous couple of years. But people have been paying ridiculous prices to get into California, and Steve definitely built this bank to ultimately sell it, but why would he anytime soon with that pay package.
In summary. Root for the Russell inclusion. But remember its risky. Funds can pummell this stock the day before inclusion on the short side to keep it out with only several thousand shares and then see it tick down $4 when it misses.
Buyers beware. For fun, call the bank or read the 10-K and look at the spec res. and commercial real estate loan portfolios.
Quite a "doom and gloom" theory you have for this bank. I like to believe that I know the players and history of this bank quite well, and I don't predict nearly as much foreboding as you seem to for the future prospects of this institution. You do bring up some very salient points in your argument, but allow me to at least provide you with my opinions and insight:
1) There is no question that there is a concentration of construction lending with this bank. That type of lending has been the foundation of this institutionm and it's thrived on it during the good times ('99 to '05). But TVB joins the ranks of over 60% of all Southern California commercial lenders in this arena. And I don't think that all of these banks are ready to throw in the towel quite yet. What TVB has done (that other lenders can't/don't/won't) is better diversify their portfolio in terms of loan types as well as geographic reach. Their spec construction lending risk is being mitigated more and more with other types of lending products. And as "bancinvestor" stated, their portfolio is surprisingly clean and their historical losses have been remarkably low. That says a lot about their credit culture and market recognition abilities.
2) If I'm correct, the bank's book value is approx. $9.00. It's selling now at just over 2.5x it's book. IMHO, it's right about where it should be based on portfolio risk, fundamentals and historical earnings. No question that Steve is going to sell this entire franchise off to some Super-Regional Bank or maybe a Mid-West or East Coast player at some point in the future. I don't think he's ready to do that just yet, but I do believe that initial posturing is beginning. I give it 2-3 years, and I'm guessing that the sale price will be in the $26 to $28 range.
3) I agree with you that many SoCal banks are feeling the "squeeze" with the recent downfall in the real estate markets; primarily the spec residential market. It will affect some of these bank's earnings and loan loss reserves. The extent of these affects will vary by institution, depending upon their product mix, portfolio risk, interest margins, etc. I believe that TVB may incur a slight fade in earnings due to some of their concentrations, but this bank - and it's portfolio - is resiliant and will weather this brief market compression better than most of its peer banks.
4) As to liquidity, the bank has historically operated on a high Loan/Deposit ratio. Like you, I have had my concerns as to this issue. However, TVB has always been able to bring dollars into the bank when needed and have more than sufficient outside resources to cover any liquidity shortfalls that they may incur.
I certainly agree with you as to the current environment facing many Southern California banks. The residential real estate market has softened (some areas more than others) and it's going to have an affect on commercial lenders throughout the area. But I feel good about TVB and where it's going. I'm holding long and strong. Good luck to you.
Your posting presents a bleak future. It is as if there is a for sale sign out in front and no takers. I doubt this is the case. Sonoma Valley Bank had a similar business model and as I recall they got about 18 times price earning on their recent sale to Sterling Savings Bank. TMCV is now selling at less than 13 times. I think that US Bank and Zions would also be very interested. I am sure there are others. As to the point you make that he will not sell because of his pay package he is the largest shareholder of the bank with a position of about $14,000,000. He would also have his severence package which is standard of 2 years salary as well as a BOLI program. At age 67 I think he realizes that he cannot do this forever. The loan portfolio is clean. In fact his total losses since the bank opened has only been $3,000,000 which is low for a bank of their size and growth rate. The advance rates are low and no losses should be taken there. The advance rates are also low on the SBA guaranteed portfolios. While there is a risk of not being able to replace these loans after payoffs they can reduce their cost of funds by eliminating higher cost CD's and other borrowings. As most good SBA people work on commission those costs would also be reduced. The reason the stock is rising is that it is undervalued.