Using CompleteBankData To Find Growing Cheap Banks

Before I started to use CompleteBankData’s software, I had a difficult time finding a cheap bank growing at an attractive rate. After I started to use CompleteBankData, finding cheap growing banks became second nature. In fact, one of my favorite screeners on CompleteBankData is the Growing Cheap Bank screener which screens for banks trading below 1.5x TBV with >5% 1 year and 3 year loan growth with 3% or less NPA/Assets.

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In this article, I would like to take a quick look at three cheap growing banks found using one of CompleteBankData’s screeners.

Friendly Hills Bank (FHLB)

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Source: Company Website

Friendly Hills Bank is a two branch bank located in Los Angeles, California. The bank is not only cheap on a TBV basis, but also on a market cap basis; Friendly Hills has a low-ball market cap of $11.83 million.

In the past year the company peaked at ~$9.00/share and is now sitting at a 52 week low of ~$6.00/share. Despite the -33% drop in market value, the company has a crystal clean loan book, net interest income and net income growth, and a growing balance sheet.

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In addition to the positive underlying business value, the company has a P/TBV of 80.10 and a net interest margin of 3.66%. Holding the bank back is a low return on equity of 2.58% and a high efficiency ratio of 86.61%.

If the bank starts to improve its costs structure, continues to grow its top and bottom-lines and further improves its balance sheet, the bank may revert back to book value. In the mean-time, with the recent touchdown to the 52 week low, the bank looks enticing on a P/TBV basis combined with decent growth perspectives.

Sound Banking Company (SNBN)

Sound Banking Company is an extremely tiny three branch bank located in Carteret, North Carolina.

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Source: Company Website

The bank is trading for 81.46 P/TBV and has a P/E ratio of 11.01. Furthermore, the company has an 8.62% efficiency ratio and a net interest margin of 4.31%.

Sound Banking Company has continued to grow its net interest income since 2011 at a 7.53% annualized rate and has further seen its net income grow at a 17.67% annualized rate. The company hasn’t taken on risky loans either and is currently valued as a low risk investment according to CompleteBankData.

Finally, Sound Banking Company continues to grow its total assets, net loans and equity capital at an attractive rate for a small unheard of community bank.

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With an average ten day volume of 188 shares traded, the company certainly isn’t for the investor packing a punch. However, an investor managing a small sum of money may be interested in this illiquid cheap growing bank.

Ojai Community Bank (OJCB)

Ojai Community Bank is a three branch bank located in Ventura, California. The bank has a P/TBV of 64.34, a P/E of 10.16 and a return on equity of 6.42%. In addition, the bank is rocking a solid 4.22% net interest margin and has a lower end efficiency ratio of 69.95%.

In the past year the company has grown its net interest income at a 31.66% rate, with a four year annualized CAGR growth rate of 13.47%. In light of the attractive top line growth, the company continues to funnel money to its bottom-line. For an example, in the past year, net income grew at a 128.86% rate. Furthermore, in the past four years, the bottom-line has grown at an annualized CAGR rate of 19.83%.

The company isn’t just an income play either. From 1Q15 to 1Q16, the equity capital has grown at a 23.55% rate and total assets, in the same period, grew at a 23.29% rate. Even more interesting, at the end of the most recent quarter, the bank had zero loans past due over 30 days. This is a strong suggestion that the company pays attention to proper credit management.

Ojai Community Bank is a great example of a fast growing cheap community bank. Given the absolute low market cap and lower-end liquidity, the company will most likely continue to fly over the heads of most investors. However, an investor focused on small community banks should definitely put Ojai Community Bank on their watch-list.

Conclusion

Before I started using CompleteBankData, it was hard for me to generate investing ideas in the community banking space. However, after I started using the software, generating ideas became second nature. Even more interesting, Growing Cheap Banks isn’t the only screener a researcher can use. In fact, there are eight other screeners including Banks Buying Back Stock, 3 Year Loan Growth and Shrinking Undercapitalized Banks.

Researching companies can be very time consuming. Furthermore, finding companies to research can also be quite the opportunity cost. With CompleteBankData, not only have I cut my research time literally in half, but I have also cut my idea generation by more than 2/3rds. CompleteBankData is a powerful tool and a must have in the arsenal of a bank investor.

Nick Bodnar

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