Small Bank Annual Report Season
We get a lot of small bank annual reports in the mail at Credit Bubble Stocks. Two came in today so let's just do a kind of deeper read of the annual reports and think about their businesses and valuations.
First up is Dacotah Banks, Inc. (DBIN) which came in today.
- At $32 per share the market capitalization is $358 million, which is 1.3x the book value of $274 million.
- Bank earned $17.5 million for a P/E of 20 times. Return on equity was 6.5% in 2017 and 9.1% in 2016.
- Only $233 million of debt securities. Of these, only $25.3 million have more than five years to maturity. This is much more conservative than we have seen at a lot of other banks. Also, of the $1.9 billion of loans only $230 million has a maturity or next repricing of greater than five years.
- Loans for agricultural purposes comprised approximately 46% of total loans. A similar amount are commercial and commercial real estate loans. Not much consumer or residential lending.
- They have $47 million of premises and equipment. But, they have 32 locations across the Dakotas and rural western Minnesota. So the total book value per store is only $1.5 million.
- They have $1.9 billion of loans and $2.1 billion of deposits. So, another way to look at the locations is that each one is responsible for about $60 million worth of loan and deposit business.
- Interest expense in 2017 was $10.4 million on $2.1 billion of liabilities. That's a funding cost of only 50 basis points! Interest received on loans was $94 million, which is a 4.9% coupon. The result is a net interest margin that's been steady around 4% the past four years.
- They have some impressive non-interest income as well. For example, $4.8 million of insurance commissions.
- They paid $735,000 to the FDIC in 2017 on the $2.1 billion of deposits. Andy Redleaf says that "mispriced deposit insurance" is one of the main reasons why a man should own a bank.
- From their proxy statement, their bylaws provide for cumulative voting, which is cool. They also included the minutes of the previous year's annual meeting, which you never see. However, no disclosure in the proxy of who the largest shareholders are or how much management/directors own.
- At $9.85 per share the market capitalization is $25 million, which is 0.89x the book value of $28.4 million. Notice that this one is a tenth the size of Dacotah.
- Bank lost $116,000 in 2017 vs making $109,000 in 2016. So no net income over previous two years.
- This is a mutual conversion: "WCF Bancorp, is a Iowa-chartered corporation organized in 2016 to be the successor to Webster City Federal Bancorp (the Old Bancorp), a federal corporation, upon completion of the secondstep conversion of WCF Financial, M.H.C. (the MHC) from a mutual holding company to a stock holding company form of organization. The MHC was the former mutual holding company for the Old Bancorp prior to the completion of the second-step conversion. Upon consummation of the second-step conversion, the MHC and the Old Bancorp ceased to exist. The second-step conversion was completed on July 13, 2016 at which time the Company sold 2,139,231 shares of its common stock (including 171,138 shares purchased by WCF Financial Bank's (the Bank) employee stock ownership plan) at $8.00 per share for gross proceeds of $17.1 million. Expenses related to the stock offering totaled $1.7 million and were netted against proceeds. As a part of the second-step conversion, each of the outstanding shares of common stock of Old Bancorp held by persons other than the MHC converted into 0.8115 shares of Company common stock with cash paid in lieu of fractional shares. As a result, a total of 2,561,542 shares were issued in the second-step conversion."
- A fund called Firefly Value Partners in New York owns 8%. The ESOP owns 6.7%. Directors and management own less than 1%!
- Interest expense on $88 million of deposits was 68 basis points.
- The loan portfolio is 81% 1-4 family residential.
- The securities portfolio is $43 million, which is 1.5 times their equity. Of this, about $17 million is more than five year maturity.
3 comments:
CBS,
How can one sign up to receive similar small bank ARs if not already a shareholder? Is there an aggregation service?
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