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Embassy Bancorp, Inc. Message Board

  • workallday997 workallday997 Apr 4, 2013 12:28 PM Flag

    SNFCA - Unusual Play

    Anyone here look at SNFCA? Look at their Refi business did for 2012, 16.5 million in earnings there...Sam do you think the earnings are sustainable? They did $1.65 EPS for 2012 and trading less than $8. Give me your thoughts.

    Sentiment: Buy

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    • Hi, Mr. Work,

      I did not spend enough time to really understand its businesses.

      I think the company is very well run. To its credit, it seized the refinancing boom and made tons of money. But not unlike CLBH, or ANCX, its mortgage profitability was helped by the extremely favorable resell spread in 4Q12. This, I surmise, is largely over, and it won't be a soft landing.
      (If the characteristics of Mortgage operation for HUD is any different from that of Fannie or Freddie, I am not aware of it.)

      I am unable to place a value on non-mortgage business but one time book is usually close for insurers.
      Burial insurance has no growth and may even be in decline. Funeral, as I understand it, is no growth either.
      Growth through acquisition works only if it can buy funeral chains on the cheap. Otherwise, we can look up the crash of Service Corp. some twenty years ago. The company cleverly integrated the various products and services, and enjoy some advantage over providers of single product/service.

      I don't like the two-class shares. While it works wonders on the way up, it also makes it impossible to replace a bad manager who also controls the company.

      These are just my impression and it is sufficient to steer me away.


      • 1 Reply to sambordulac
      • Thanks for your comments, but it's stating to look really cheap at $7 as its trading at cash value...

        Are you saying that their insurance side can't maintain the same earnings? $16.5 million was in mortgage earnings...but lets just say they break even on the cemetary and earn 4 million in life insurance...that's still .37EPS for the year alone. Then you are saying that the mortgage side has no value? they can't even earn $3-$4million in a stabilized environment?

        also I don't think it's just refi stuff only..." To that end, we believe that our percentage of purchase related transactions is approximately 57%, which puts us in the top decile with regards to our peer groups and indicates a more stable origination platform. Our percentage of business now related to retail stands at 70% with 30% wholesale related. Despite the industry wide volume decrease in 2012, we believe we gained market share during the year. While there remains considerable uncertainty in the mortgage and housing markets, we believe our results show positive adaptation to circumstances and significant accomplishment. "

        Also, Our acquisition strategy and internal growth has resulted in a better than 10% growth in insurance related assets that need to be deployed in appropriate income producing investments. At year end, we had over $40,000,000 in cash or equivalents. As those investments are achieved, profitability should improve.

        So the stock is trading below book and still has a bright future even without exorbitant mortgage income as long as it can maintain some decent earnings. It's really tempting at $7, I just don't want to miss something....

11.350.00(0.00%)Oct 27 12:25 PMEDT