4 community banks under $10

They got construction lending under control and survived the great credit crunch.

By TheStreet Staff Jul 25, 2013 12:51PM

thestreet logocopyright John Foxx, Stockbyte, Getty ImagesBy Richard Suttmeier

 

Between mid-2006 and the end of 2008, I wrote many pieces that warned investors to avoid community banks. This followed my prediction that many community banks would fall like dominoes in the failure process conducted by the FDIC.


In the December 2008 article I wrote for Equities magazine, I profiled 12 community banks that I thought would fail before the Great Credit Crunch came to an end. Seven failed, four survived and one is no longer publicly traded.

four banks table 1

In 2008, the FDIC closed only 25 banks via the failure procedures. In 2009, the floodgates of failure opened with 140 bank failures. The peak year was 2010, with 157 failures. Today the total for the Great Credit Crunch is 481 bank failures, on the way to my predicted 500.

Here is a copy of the table I used for that December 2008 article:

2008 table of banks 

These community banks were on my endangered species list because they had strong sell or sell ratings according to ValuEngine, and because they had a Construction and Development Loan to Risk Based Capital ratio above 100%, which was the regulatory guideline.


Here are my buy-and-trade profiles for the four survivors:

four banks table 2

Reading the Table

OV / UN Valued -- The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating -- A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%) -- Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return -- Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: This is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A-Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: This is the price at which to enter a GTC Limit Order to sell on strength.


Boston Private Bank & Trust (BPFH) ($11.10 vs. $9.72 in Dec. 2008) set a multi-year high at $11.49 on July 18 and traded as low as $2.07 in February 2009. Today the bank's exposure to C&D loans is down to just 25.5%, with a healthy 66.7% CRE loan to loan-commitment pipeline ratio. To accomplish this, the bank reduced assets to $6.01 billion from $6.89 billion.

The stock slumped on Tuesday after announcing that an affiliate of The Carlyle Group agreed to sell 3,831,022 shares of stock in an at-the-market offering. The bank reported quarterly results on July 17 and missed EPS estimates by 1 cent, earning 18 cents per share. My monthly value level is $10.17 with a semiannual risky level at $11.63.


Bank of the Cascades (CACB) ($6.53 vs. $8.85 in Dec. 2008) set a multi-year high at $7.18 on Feb. 5, 2013. In November 2011, this bank traded as low as $3.50. Today the bank's exposure to C&D loans is down to just 28.5%, with a healthy 58.1% CRE loan to loan-commitment pipeline ratio. To accomplish this, the bank reduced assets to $1.33 billion from $2.44 billion.


The bank reports its quarterly results on August 13 and is expected to earn 8 cents a share. My annual value level is $5.59 with a weekly pivot at $6.35 and a monthly risky level at $7.29.


Huntington National Bank (HBAN) ($8.46 vs. $9.33 in Dec. 2008) set a multi-year high at $8.66 on July 8 and traded as low as $1.00 in February 2009. Today the bank's exposure to C&D loans is down to just 22.5% with a healthy 58.4% CRE loan to loan-commitment ratio. This bank accomplished this and increased assets to $55.86 billion from $54.84 billion.


The bank reported quarterly results on July 18 and beat EPS estimates by 1 cent, earning 17 cents a share. My monthly value level is $7.96, with a semiannual pivot at $8.41. This reflects that a bigger bank has a better chance of surviving than the smaller banks.


Macatawa Bank (MCBC) ($5.48 vs. $9.13 in December 2008) set a multi-year high at $6.10 on March 15 and traded as low as $1.10 in June 2010. Today the bank's exposure to C&D loans is down to 56.0% with a healthy 63.8% CRE loan to loan-commitment pipeline ratio. To accomplish this, the bank reduced assets to $1.50 billion from $2.11 billion.


The bank will report quarterly results Thursday, July 25, and is expected to earn 8 cents a share. My quarterly value level is $4.64 with a weekly pivot at $5.18 and a monthly risky level at $6.24.


What happened to the other eight community banks?


Horizon Financial was closed by the FDIC in the bank-failure process on January 8, 2010.


First Community Bank was closed by the FDIC in the bank-failure process on January 28, 2011.


Cadence Band is no longer publicly traded.


Colonial Bank was closed by the FDIC in the bank-failure process on August 14, 2009.


Bank of Florida was closed by the FDIC in the bank-failure process on May 28, 2010.


Premier West Bank was closed by the FDIC in the bank-failure process on October 15, 2010.


Amcore Bank was closed by the FDIC in the bank-failure process on April 23, 2010.


Midwest Bank & Trust was closed by the FDIC in the bank failure process on May 14, 2010.


At the time of publication the author held no positions in any of the stocks mentioned.

 

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