This bank has been in trouble since day one. With the continued losses they can either ride it down or merge out with someone who can run it right. I think this board will ride it down. Even if they got the bank profitable it would take 10 to 15 years to earn their loss to date. The sooner they find a take out the better it is for the shareholders
It is time for the board to find a buyer. They cannot pay a dividend until they have recaptured all of the money they have lost. This could take 10 years, or more. The shareholders deserve better.
Has anyone else thought about the timing of the stock repurchase? Six months after the officers and directors purchased the stock (11-22-06) they announced a repurchase program. I think under the terms of sale of stock they could not sell for 6 months. As the market for the stock has been poor those officers and directors would have had to take a loss to get out so they came up with a program to get themselves out.
The form 4's should be very interesting in June and July.
The comparison of Sonoma Valley and Temecula Valley comparison was made by an investment banker who handles bank mergers within the State of California. I thought SVB went too cheap so I called him. He said the value of a bank that has a heavy position in SBA lending is less than that of most banks because when a big bank buys the bank and puts BD officers on salary they move on to another bank so they can be paid on production.
I know very little about Florida banks (CFHI) but when I spoke with a friend who lives there he said many lenders were lending at high advance rates and many properties were being sold to out of area buyers on a no down basis. As the northerners defaulted the houses under construction dropped in value and in many cases the contractors, knowing there was no profit in completing the projects, just walked away.
Comparing one of the best banks in the nation located in California to one that was not paying attention located in Florida while they were making loans is ridicules. In reading some of the postings by Coast bank they say they are now evaluating 482 residential construction loans. TMCV has been doing this every month and they also have low advance rates. It also appears Coast Bank was not getting lien releases.
I know of no bank that sold for 8 times earnings. Perhaps you name a couple? Have you sold this stock short?
SDBanker Your thoughts?
There have no purchases or sales since December. In fact the one insider who had a monthly scheduled sale cancelled those sales. Unusually high purchases in November. This is a very long black out period unless there is something going on.
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.
With my return on the stock over 500% over the past 5 years and earnings going up each quarter I am not going to look at the presidents pay check.
In your posting you say there is no buyout in sight. Are you sure of this? There have been no insider trades since June.
As a former small banker the best bank location is next door to Citibank with Wells Fargo on the other side and Bank of America across the street.
and the reason that a stock that has been actively purchased and sold by officers and directors for the first 6 months and nothing for the past 4 months is ???????????
So far this year there were 46 insiders transactions. All were in June or before. 14 stock option transactions were made and some programed sales were also recorded. Since June there have been NO transactions. This has been a very long blackout period. I think they are either buying or selling. My money is on a sale.
Most of the construcion loans are made in Northern California. This is a good market. Perhaps you would feel better about this stock after listening to this.
I would become concerned if the insiders were selling and getting out, they are not. Their charge offs and problem credits are minimal
Has anyone noticed the insider transactions since May of this year?
No one buying or selling except for options or programed sales since May. This is a long blackout time for insiders who normally are active in the market. A sale of the bank would be a big payday for us.
As you look at the information they made 47 cents the last quarter and 42 the first quarter or 89 cents YTD. Just going on progression if they make say 4 cents more each of the last 2 quarters you would have 51 cents and 55 cents or 1.95 for 2006. That times a conservative 13.5 PE puts it at $26.32 in January 2007. At peer, 18 X PE, it goes to $35.00. I do not know why it is not trading closer to peer.
If the bank were in the process of sale they would want to exercise their options at the lowest price as the AMT is a killer. They must pay that tax on the difference between the option price and the current fair market price on the day of purchase. If they wait and the price goes to say $32.00 per share that is a bigget number.
Does anyone else think it is strange that insiders are exercising options? 108,000 shares or about 1% of the bank in the past 60 days. They must know that earnings are very good which will cause an increase in the stock price or a sale of the bank which will result in a heavy AMT.
It was interesting to read your comments on my posting. As a person who has served on 4 bank boards as a director, chaired 2 of them and the president and CEO of 2 of them I am more than just an investor.
The first bank where I served as presidnet did not pay me an average base or and there was no incentive program so I quit taking my SLO and CFO as well as my best staff members and we formed a new bank. I paid all of my officers less than market but they had an excellent incentive program. The board gave me the same deal. If I had a high base and a low incentive it may have not worked out as well as it did. Absurd? I think not. The bank I left had a steep decline in their stock value that never came up to the level it was at when we left. They saved salary dollars on my replacement but the bank sold out as they could not compete with us.
If you have a bank that is growing at 5 to 10 percent each year you can run understaffed or on a lower staff and get away with it. When you grow at 30% per year you hire when you find the right people that can create that growth rate and profitablity. Have you ever gone into a store to buy something and you cannot find anyone to wait on you as they are all too busy? Banking is no different. Untrue? Did you wait or did you leave?
Each of us looks at banks differently. I look at P/E ratios, growth, charge offs, past due loans, officer turnover, and various other things. I never look at the presidents wallet. You get what you pay for and if he make a buck in incentive for every 10 he makes for me I would happy to pay him twice what he is making. Think about it, would you not feel the same way?
How do others feel?
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?