SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Value Investing
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Paul Senior who wrote (24975)10/12/2006 12:36:06 AM
From: Spekulatius  Read Replies (5) of 78732
 
Community bank - EPIK, FNLC, CPBK -

Announcing my 3rd buy today CPBK - a community bank in SC. Somewhat mediocre rentability but also pretty decent loan and asset growth over the years. Stock buyback and dividends are positives as well. Demographics in this part of SC are not that great however.

Thinly trading does not bother me much, indeed I see it as an opportunity to get in at a bargain price ( I did buy at the low today). Dead money does not bother me much either as long as i believe the intrinsic value of the stock has increased (Deposit and loan growth, book value and earnings increases etc.) - it just means the stock is a better value now than it was before. I do prefer to buy in coastal areas as i believe that strong real estate and income growth is key for prospering banks (note that CPBK is an exception from the rule).

I am a bit more partial on the efficiency ratio and to a lesser degree ROA. Why? Because an inefficiently run banks with an other wise intact franchise are prime takeover targets. Smaller banks tend to have efficiency ratios in the 60-65% range while bigger banks run below 50%. This means that buy taking over a small bank with let's say a PE of 12 (or PE of 15 after paying a 25% premium) is a good deal if they can get the efficiency ratio back to less than 50% (equivalent to a 30% earnings increase).

So i think because of the slower growth but still good profitability small community banks with an intact franchise and trading at a decent valuation are a prime acquisition target, which should provide a floor to those stocks.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News