--The bank is pursuing an aggressive growth strategy. Even though capital ratio is strong at around 13%, in time it'll need all the capital it has. It can deploy the capital advantageously. This will take a couple of years.
--When someone makes a good offer the board has responsibility to consider. I'd say it's not interested in a sale but the currently low price makes it more difficult to say no.
It's easier to identify target and more profitable invest in them. UWHR may be ready to sell. I suspect the upside is limited to 25% from the current $4.40 price.
Trust service took in less in 1Q than before. Perhaps the correction of stock market did a number to it.
I suspect 2Q would be better.
T Bank, N. A. was listed #88 of the top 100 SBA lenders in the nation. All the more remarkable if one were to consider its small size.
Mortgage banking was pretty strong in 2Q so far. If CBCO can match its mortgage banking peers and grow its traditional banking (organically and through this First Avenue merger), we should see better results.
The wild cards are two.
--It may expense the merger related cost as they are incurred.
--it may need to increase provision due to larger portfolio loans.
The effect of recap at discount( to insiders) and that of large option awards (again, to insiders) aside, CWBB continued to crank out satisfactory numbers.
The weakness in deposit gathering persists.
CWBB is only 1/5 the size of WIBC yet it made nearly as much SBA loans. Amazing!
ROE was around 13% due to somewhat higher equity ratio (perhaps needed due to its SBA business).
Besides, loan growth required additional reserve which in turn penalized earnings.
Interest margin drifted lower in the past two years due largely to low interest rate environment.
The above factors may all change and allows it to earn 15% ROE.
Shares flatlined for two years, I don't see any hold back from this point on.
Five quarters later (from 4Q14 to 1Q16), asset grew $58 million, or 35%; Loans, $50 million, or 43%; deposits, $38 million, or 36%. After such rapid growth, t-1 is still 13.78%. which means the bank has room to grow further.
You can't knock the 36% growth in deposit but it clearly has trouble keeping up with loan growth. Bank resort to borrow heavily from FHLB, now $19.5 million. Not an ideal state.
More loans demands more provision which was partially responsible to weak earnings.
1Q16 showed much reduced earnings. Apparently SBA loan production slowed and it kept more loans in house since 4Q15. SBA loan production is historically volatile. We'll see what 2Q16 brings.
Low oil price encourages traveling. Which, in turn, encourages motel expansion. The loan type TMAK specialize in.
Head count now numbers 31. Overhead ratio came down. Perhaps due to expanded size.
They are about to run out of space, I think.
No surprise. Earnings was $0.523 million, down from $0.689 million in 4Q15, but beat the $0.494 million in 1Q15.
However, it did not come from shrinking interest income as I expected. Margin did compress but it was more than made up with bigger loan pool.
Loan grew by $9.446 million from 4Q15 but provision was only $49K. Again, it did not penalize earnings by much.
Non-payroll overhead did not go up as I expected either. Maybe the Bank capitalized all expenses related to the new headquarter.
Surprise, but it shouldn't be, With the return of Mr. Sisk we have now 22 people on payroll VS 21 in 4Q15. Payroll went up by $53 K in 1Q16. Maybe Mr. Sisk is paid nearly $200K per year?
True, earnings is down. But I am encouraged by the loan growth. Maybe Mr. Sisk is already making things happen?
To put in perspective, residential real estate loans originations numbered 6.5 million loans per year in the four years leading to the bust. We are now at about half of that. LION's mortgage concentration was a good strategy. It still is.
ALC experienced seasonally soft quarter. That usually rebound by 5% to 10% in the second quarter. No worry.
Overall, portfolio loans grew strongly for two quarters in a row. Though loan yield was somewhat soft.
Beside land, new office by Mountain Brook may cost $11 million inclusive of equipments in 1/4 of the 40,000 SF space. The rest are for rent.
The location is great. Access may be somewhat wanting. But there is no more land in the stretch. That's that.
All the heavy weight are now in the rented space nearby. It's in good mortgage market. Why not do mortgage banking? But then it is geared up for commercial lending, the people and all. Will be great if it can lever up in the next two years.
Loan portfolio is only half of its asset. Then asset can expand due to low financial leverage. Exciting things can happen.
A good quarter if we read between the line.
Earnings has been strong. No complains there.
Credit and OREO has been stuck in the mud.
This $5.5 million OREO on a condo development in Absecon is troubling. Absecon relies heavily on Atlantic City, and Atlantic City is dying.
Stock dividends is a gesture, nothing more.
Shares drifted upward since two years ago, now near its book value of $4.80.
The bank was shaping up but still underperforming. In today's market similar bank would fetch less.
Me think a sale is coming soon and someone is buying because of that.
FWIW you are welcome.
I am afraid the original subscribers will still lose big. $10 to $2, yikes!
The conversion and the reverse split is typically done simultaneously. Sometimes there is no split.
Ben Franklin Bank of Illinois (BFFI) ($11.25) was a good example. BFFI converted in early 2015 at roughly 3 legacy shares to one new share at $10 (subscription price) per share. I vaguely remember that book value was around $16 per share right after conversion. After some losses, book is now around $14.5. The losses kept a lid on share prices.
Another, Quarry City in west Missouri (QRRY) ($12.00) did a little better. Again, subscription price was $10 per share. Initial book value was around $17. QRRY is somewhat profitable. IMO the shares did not rise further because QRRY has only one branch and shares are very illiquid.
There are reasons to believe that HTWC will be more like QRRY.
As to merger partner, I don't have any idea.
The area is in long term decline, consolidation makes sense.
The larger and better known thrifts also convert from time to time but shares usually pop right away. NECB, WFD (2006) are examples.
In general, thrifts earn smaller interest spread and have little fee income. As a group, they are less profitable than , say, commercial banks. Even in better times, I suspect thrifts do not earning enough to justify holding at near book value. Today, I'd probably sell them at 80% of book value.
In spite of the potential of a turn around, I bought only a small position for that reason.
Hi, Mr. Thrifts,
Glad you are around or I'd be talking to myself.
From the numbers I'd agree with you, but "the board continues to review all strategic alternatives."
If we look at the loss trend (charge offs), the sizable troubled asset appears less of a concern.
The board understand the credit better than any outsiders and will probably do the second stage conversion "when the time is right".
(Yeah, they know they can flip it for 50% gain in two years.)
I place 95% probability on conversion, if not, a merger is possible. More likely, merger would take place after the conversion.
"Time is right"
if credit is all reserved for and if the insiders have their own financing ready. Once you see a large reserve, it's time. A large reserve is not a prerequisite.
With second stage conversion, bank sets a conversion price at, say, $2 per share. Immediately after the conversion, book value would be around $3.5 per share. What's more, allowance on deferred tax asset will most certainly be restated which may add $1 per share--$1.93 before dilution. We'll end up with an over-capitalized bank with $4.5 per share book value.
The unknown is the conversion price. At $2 per share we'd be fine, at $1 per share we'd end up with far less.
It's a general rule to buy in after the conversion. Converted at $1, my shares would be worth only $2 and traded at $1.2. However, many who bought in at $1 probably would be happy to flip it for a small gain like at $1.2. I can then add with confidence.
$2 or $1 are used to illustrate the changes in value. It's customary to set the price at $10 and have the existing share converted to a fraction of new share.