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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.

first cheap

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)

scond cheap

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.

third cheap

fourth cheap

fifth cheap

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.

sixth cheap

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.

seventh cheap

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.


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

Oxford Bank: Undervalued On An Absolute And Relative Basis

I have met a lot of investors who focus on highly speculative companies in far of regions of the world, where a local ‘edge’ does not exist. If you have a significant amount of experience, and actually have an edge handing speculative start-ups, well, hats off to you. My investment style is a little different. I like boring companies, with predictable cash-flows and a clear undervaluation.

Small community banks fit my investment style almost to a tee. They are boring, not many investors care about them and they fly off the radar of most Wall Street professionals. Additionally, sometimes you can find interesting investments right in your backyard.


Oxford Bank (OXBC) is a nine branch bank located in the thumb of Michigan. The bank has been around for over a hundred years, with current locations in Oakland, Lapeer (my current hometown) and Genesse Counties. Moreover, the bank is the oldest commercial bank in Oakland County.

Back in 2009, the bank hired a turnaround specialist, James Best, to keep the struggling community bank on its feet. Since James Best was hired, he has turned the bank into a profitable company, grown the loan book, and increased book value by more than a multiple of two.

With the recent hiring of David Lamb as the new CEO, the bank is now back on two feet and ready to grow.

If the bank continues to perform well, shareholder value may be realized. I suggest you watch the 2015 annual meeting shown below, for the informational ‘local’ edge.

Recent Achievements

The year of 2015 was a type of inflection point for Oxford Bank. They effectively went from flat asset growth, to a 21.46% increase in total assets. Furthermore, by the time 1Q16 rolled around, total assets increased an additional 3.20%, QoQ.

In 2015 pre-tax earnings per share increased 75% YOY from $0.77/share to $1.35/share. In context, pre-tax earnings are used given the company realized a $6 million deferred tax asset recovery in 2014, which would skew EPS to $6.11/share.

For almost a decade, the company has deferred spending to save the bank. However, in 2015, the company invested back into the bank and finally stepped into the technological age of mobile banking. In 2016, the company plans on investing in Interactive Teller Machines, which will not only make the bank more productive on the labor side, but will allow their Personal Bankers to focus on customers.

The company also plans to rapidly grow going forward, given the M&A environment. Management stated the following in 2015’s annual letter, which somewhat alludes that the company may make some bolt-on acquisitions…

“Your Board and executive leadership team intend to aggressively grow the Corporation while the opportunity created by continued mergers in the banking industry exists.”

If acquisitions are not up the company’s sleeve, the bank’s other strategy is to grow and develop valuable employees. Specifically, the company has honed in on their recruiting efforts to bring high quality managers and leaders to their team.

From 2014-2015, net loan and lease growth grew 16.58%. Additionally, in 1Q16, net loans grew a strong 5.43%, QoQ. However, when looking at CompleteBankData’s software, we can see that the loan growth came almost wholly from the construction and commercial real estate side of the equation.

oxbc quaterl

On a ten year scale, 1-4 family loans has continued to lose more and more foothold in the market.

oxbc second

If family loans don’t pick up the slack and if commercial real estate tapers off, total loans may start to see a reduction, pressurizing the stock price. Although, if you have read the 2015 shareholder letter, then you can contest that management has specifically stated that they are focusing on commercial/industrial companies. Management simply states that with commercial and industrial companies, it is much easier to build a long-term relationship with a borrower, than with investment real-estate focused borrowers.

Oxford Bank’s non-current loans to loans, bottomed out in 2009 at 9.22%.

oxbc third

By 4Q15, they hit a low of 0.36%, with a slight rise in 1Q16 to 0.49%. The reason for the increase QOQ is due to an uptick in family residential noncurrent loans. Investors should continue to monitor this metric going forward. Despite the QoQ rise in noncurrent loans, the rapid reduction in noncurrent loans over the past five to six years is a positive sign and shows that the bank is in turnaround mode.


The most attractive aspect about Oxford Bank is the discount to P/TBV.

oxbc fourth

The company is also undervalued on a relative basis…

oxbc fifth

However, the reason the discount to P/TBV exists is due to a lower quality operating structure Oxford Bank has to its peers.

oxbc sixth

It could be argued that Oxford Bank is more attractive than its peers on a risk/reward standpoint. First, the market has not revalued the company from worse case to a more normalized scenario. Secondly, sometimes the largest gain an investor can realize transpires from when a company goes from the negative sentiment to normal; not from good to better.

If Oxford Bank can continue to improve metrics going forward, there is real potential the company may trade with its peers in the next 2-3 years. Although, if the company doesn’t continue to improve, and most importantly, cut non-interest expenses, Oxford Bank may lag its peers going forward.


Oxford Bank is a bank that I have seen in my backyard my whole life. The mid-Michigan market is not the greatest in terms of economic growth. However, if the company can continue to grow assets, lower non-performing loans and eventually increase profitability metrics, the discount to P/TBV makes for a compelling case. On the flipside, if the company continues to raise equity, sees additional increases in non-performing loans and doesn’t lower non-interest expenses, the company may lag its peers going forward. Oxford Bank is a tough nut to crack, but the bank should definitely go on your watch list as cheap banks in turnaround mode.

Note: The bank is literally a few miles drive from my home. I plan on reaching out to management going forward. If any investors are interested in more due diligence feel free to message me.

Nick Bodnar

Central Federal Corporation: A Cheap Bank In Turnaround Mode Not Recognized By The Market

Central Federal Corporation (CFBK) is a savings and loan holding company, with four branches, located in the state of Ohio. Central Federal Corporation is an extremely cheap bank, transitioning through a turnaround, with attractive growth metrics.

A Turnaround the Street has Overlooked

In 2011, Central Federal was issued a Cease and Desist order. The effect of the order was to put significant constraints on the bank forcing them to reduce their level of their classified and criticized assets, achieve growth for specific operating metrics for their specific business plan, comply with restrictions on brokered deposits, lending prohibitions and injunctions on dividends and repurchases.

In late 2012, the company sold 15.0 million shares of common stock at $1.50/share, resulting in gross proceeds of $22.5 million. The company proceeded to use $13.5 million to improve its capital ratios, support future growth expansion, and bring the company in compliance with the capital ratios set by the Cease and Desist order. Furthermore, the company used the rest of the proceeds from the equity raise to redeem its TARP obligations.

Moving forward to January 23rd, 2014, the company was released from their Cease and Desist order due to an improved capital position. However, the bank was required to maintain a minimum Tier 1 Leverage Capital Ratio of 8% and a Total Risk-based Capital to Risk-Weighted Asset ratio of 12%. These capital requirements were lifted on December 23rd, 2015.

Finally on May 15th, 2014, the FRB announced the termination of the Holding Company Order. However, following the termination, the company was required to follow certain requirements and restrictions such as not to pay or declare dividends, purchase or redeem stock, increase or guarantee debt and provide written notice to the FRB with respect to changes in directors or senior executives. These commitments remained in place until January 8th, 2016.

Given that the company has made it through these regulatory hardships, the business as a whole has more legroom to grow. Without regulators breathing down the company’s neck, the company can focus on loan growth, margin performance and the creation of shareholder value. What is most interesting, since the precipitous drop in 2012 is that the market has left the shares for dead.

big charts

The recent regulatory turnaround coupled with an effectively ‘dead stock price’, suggests that the Street or even the majority of bank investors, are completely unaware that Central Federal Corporation is in existence. This provides the astute investor a unique opportunity to take advantage of a hidden bank in turnaround mode.

Earnings Improvements Transitioning to Shareholder Value Unlocking

With the released prior regulatory constraints, the company can now focus on growth and expansion. An example of growth is Central Federal’s net interest income growing 12.28% from 2014 to 2015. In addition to interest income growth, total assets increased 11.28% YOY. Furthermore, book value grew to $1.64/share in 2015.

An increase in capital and the strengthening of the balance sheet will provide the company with much needed headroom for continued growth. In light of the strengthened up balance sheet, the company has continued to reduce their non-current loans to loans on all fronts…

non current loans to loans

To provide shareholder value, on May of 2016, the company announced a stock repurchase plan, where the company has the option to buy back 3% of the common stock in the next six months. With 16,024,210 shares fully diluted, the company has the ability to repurchase 480,726 shares, helping to engineer bottom-line expansion.

Central Federal has also continued to improve their capital ratios…

capital ratios

Source: SEC Presentation

If the company continues to perform well, we should gradually see the capital ratios improve.

Finally, in the mrq, the company’s net income increased 26% from $251K to $316K.

net income q1

Source: SEC Presentation

The first quarter of 2016 also showed a 6 bps credit quality improvement, a 9% net interest income increase and an 86% increase in income before taxes. Moreover, expenses remained relatively flat, translating into incremental efficiency ratio improvements.

Comps Suggest Undervaluation

Central Federal now has adequate capital to support forward looking growth, a significant amount of opportunities to improve margin performance and cost of funds and is continuing to improve their credit quality.

Despite these positive implications, Central Federal still lags behind its peers on a P/TBV basis.


Source: Created By Nicholas Bodnar

As the company continues to improve its financial metrics, grow its asset base and return value to shareholders, the market will eventually recognize the company’s discount to TBV.

2013 to 2016 comparsion

Source: Created By Nicholas Bodnar

Ask yourself, how has a company that has dramatically improved over the years not been recognized by the broad market or even see any appreciation in the share price? Has the market left this company for dead?


Central Federal is a unique community bank that the broad market has forgotten about. Year over year and quarter over quarter, the company continues to improve its financial position; with no recognition from the market. Investors should expect a decrease in net income for FY 2016 due to a reversal of a deferred tax valuation that occurred in 4Q15. However, if the company continues to have conservative underwriting practices, focuses on loan growth and gives back to shareholders, value may be its own catalyst.

Nick Bodnar

First Bank: A Rapidly Growing Community Bank Selling Below Book

First Bank (FRBA) started operating on the cusp of 2007 in Williamstown, New Jersey. The company now has ten offices in two different states and in seven different counties.

Twenty Fifteen: Loan and Deposit Growth Weighted by Marginal Net Interest Income Performance

In 2015 loans grew by $142 million and total assets reached a peak of $856 million.

Total Assets Growth

Source: 2015 Annual Report

The company also completed a $22 million Tier 2 subordinated debt offering, and subsequently, opened a new regional office in Bucks County, Pennsylvania. Furthermore, the company continues to expand their market presence into Hunterdon County, New Jersey. An expansion in Hunterdon County will not only grow the company’s market share, but help to fuel additional YOY growth.

Total loan and deposit growth

Source: 2015 Annual Report

First Bank continues to grow its loans and deposits. For an example, in 2014, total deposits were $596 million. By the end of 2015, deposits grew 24% to $739 million. However, despite excellent deposit growth, competitive pressures pushed up the cost of interest-bearing deposits from 0.88% to 0.99% YOY. In addition, the $22 million raised in subordinated debt compressed the bank’s net interest margin, by adding an additional $1.1m to their funding cost. Until the bank puts that $22 million to work, the net interest margin will continue to see compression. Net interest margin fell 48 bps to 3.27% YOY.

As loan growth continued in 2015, the company’s asset quality saw noteworthy improvements.

non current loans historical

First Bank’s ratio of reserves to non-performing loans increased from 85.8% to an astounding 203.4% in 2015. Likewise, net charge offs to average loans declined from a low 0.22% in 2014, to an even lower 0.14% in 2015. Higher profitability will not ensue in the short-term from an improving asset base, however, in the long-run, lower expenses should transpire.

Given that First Bank is rapidly growing, one would expect expenses to skyrocket. On the contrary, if you take out severance and branch closing costs, First Bank’s quarterly recurring non-interest expense was $4.4 million, $4.3 million, $4.3 million and $4.3 million in Q1-Q4 of 2015. Non-interest expense was controlled by consolidating a North Region bank office, holding headcount steady, reducing administrative staff and adding revenue producing staff.

In spite of growing asset and improving asset quality, net income fell YOY from $5.8 million to $3.9 million. Management was expecting the bottom-line to be lower in 2015, due to the bargain purchase gain on Heritage Community Bank in 2014, and from the subordinated debt expense in 2015; however, management wanted to do much better than the actual results.

Investors should take note that net income was mainly down from one-time expenses/gains. In light of the net income downturn, the company continues to rapidly grow, the asset quality is improving and management is intent on getting the company noticed.

In regards to management’s intention on getting investor attention, the following statement from Patrick Ryan, CEO, shows managements mid to long-term objective…

“Essentially, we’re left asking ourselves the same question many small businesses across the country are asking: “How do I get noticed?” Our plan to get noticed in 2016 is straightforward – deliver excellent profit growth and reach the $1 billion assets threshold. Right or wrong, it seems many investors in the community bank space really don’t pay attention until you’re $1 billion or larger. Well, we’re almost there. Our focus on growth and enhanced profitability is our attempt to make sure we are well positioned once we’re finally getting noticed.”

1Q16: Bottom-line Improvements, Strong Loan Growth and Still Trading Below Book

In Q1 of 2016, First Bank reported net income of $1.4 million compared to $686 thousand in 4Q15. The reason for the net income improvement QOQ was from higher net interest income, driven by stronger loan growth and further improvements in non-interest expenses. Despite the improvements QOQ, net income was lower YOY from $1.7 million in 1Q15.

The remarkable aspect about First Bank is that the majority of the street has not recognized the company’s continual improvements. With a current share price of $6.85/share, a book value of $7.42 and TBV of $7.39/share, there is opportunity to be had for the investor focused on growing cheap banks. Even more interesting, book value increased 5% YOY.

Loan growth continued to show improvements as well. In 1Q16, loan growth increased by $68 million. This is a noteworthy feat given the record loan growth of $81 million in the previous quarter. Going forward, loan growth should taper off in the near quarters.

Finally, the company continues to improve their overall asset quality. Non-performing assets were 0.63% of total assets compared to 0.64% of total assets in the previous quarter. Furthermore, loans past due fell from $11.3 million in December 31st, 2015 to $4.2 million in March 31st, 2016. Continual asset improvements will lead to long-term profitability gains.


First Bank is an excellent example of a growing bank flying over the heads of Wall Street professionals. The company isn’t your typical pink sheet bank either. With a recent up-listing to the NASDAQ and managements goal of hitting the $1 billion mark, further investor attention should emerge.

In my opinion, First Bank is an attractive bank selling for a decent price.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Nick Bodnar

Timberland Bancorp: Rapid Bottom-Line Expansion Makes For A Compelling Case

Timberland Bancorp (TSBK) is a 22 branch bank located in the state of Washington. The bank is a small community oriented bank focusing on real estate mortgage loans and commercial lending.

Location map

Source: Company Homepage

Turnaround Based on Rapid Bottom-Line Expansion

There is a lot to like about Timberland Bancorp. First, the company is your classic turnaround story. In 2008, the company was part of the Troubled Asset Relief Program (TARP). In the program, the company received $16.64 million from the US Treasury Department. Subsequently, the company sold 16,641 shares of Fixed Rate Cumulative Perpetual Preferred Stock and related warrants to purchase 370,899 shares of the company’s common stock at $6.73/share.

In the year of 2012, the Treasury Department sold the preferred units to other investors, relieving the TARP restrictions on Timberland Bancorp. Furthermore, the warrants were sold to private investors as (there is still a 5% dilution/warrant overhang present).

Then in 2013, the company purchased and retired 4,576 shares of the preferred stock; below liquidation value. Later in 2013, the company redeemed the remaining 12,065 shares of its preferred units. The company is now banking/cash-flowing ~$832,000 that it does not go directly to preferred holders.

Secondly, the company is experiencing rapid bottom-line expansion. From 2011-2014, Timberland Bancorp’s bottom-line has increased from $1,171 million to $6,062 million. This is a remarkable 50.83% annualized return. Even better, in the FY of 2015, the company pulled in $9,206 in net income; a 51.8% increase YOY. Finally, 2Q16, the bottom-line jumped up 62% YOY.

Michael R. Sand, the CEO of Timberland Bancorp stated the following in regards to record breaking Q2 results…

“The financial results of the first half of our current fiscal year compare very favorably to the results posted last year for the comparable period with our ROA up 40%, our ROE up 43% and our efficiency ratio improving to 64.21% from 75.78%.  Net interest margin increased during the first half of our current fiscal year to 3.96% from 3.78% for the comparable period one year prior.  With steady balance sheet growth and significant and ongoing improvements in asset quality, we are continuing to produce and retain earnings while paying appropriate dividends to increase value for our shareholders.”   

An expanding bottom-line doesn’t derive itself from risky loan practices either. In fact, since 2009, non-current loans to loans have fallen from a high 7.51% to a low 0.85%.

With a rapidly expanding bottom-line and asset quality turnaround, the company initiated their first dividend in 2014. The dividend has continued to increase as well. In 2014 they paid $0.16/share. By 2015, the company was paying $0.24/share. With the recent increase in the quarterly to $0.08/share, the company should (ceteris paribus) pay a $0.32/share dividend in FY 2016.

Timberland Bancorp also has an attractive repurchase program to unlock shareholder value as well. For an example, in the first six months of 2016, Timberland Bancorp has bought back 66,000 shares at $820,000 (~$12.42/share). Furthermore, the company can still buy back 221,893 shares under its existing plan.

buy back yield

Using CompleteBankData’s software, we can see that Timberland Bancorp has a buyback yield of 1.41%.

If the stock price continues to trend upward, the buyback program is not warranted. However, at the current price, a buyback makes sense.

Timberland Bancorp also performs better than the majority of its peers.


A decreasing efficiency ratio, an increasing ROE and ROA, an expanding bottom-line and better performance statistics than the majority of its peers, makes Timberland Bancorp an interesting security to follow.

If the company continues to increase their profitability metrics, while continuing to focus on shareholder value, Timberland Bancorp could be a great community bank investment. In addition, the absolute small market cap, coupled with the somewhat, ‘hidden stock’, let’s Timberland Bancorp fly way off the radar of the Street.


With a rapidly growing bottom-line and a management team focused on the creation of shareholder valued (dividends and repurchases), there is a lot to like about this bank. As the bank continues to outperform, value will slowly be recognized. Furthermore, the relative comparison and increasing asset base suggests that Timberland Bancorp will continue to grow, subsequently expanding their bottom-line. In my opinion, I find Timberland Bancorp to be a very interesting community bank that will be put on my watch-list.


Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Nick Bodnar

River Valley Community Bank- Growing Bank Selling For A Quality Price

River Valley Community Bank (RVVY) is a two branch bank located in California. Despite the non-public nature of the company, River Valley Community Bank continues to break new records. With asset and deposit growth, net income growth and trading near book value, River Valley Community Bank should be on the radar of any investor interested in small hidden banks.

Record Breaking Year(s)

Twenty-fifteen was a record breaking year for River Valley Community Bank. In 4Q15, net income increased to $508,070 a 54.3% increase YOY. Furthermore, FY net income increased 55.8% to $1,729,848 from $1,111,000 YOY. Also, in Q2, their Grass Valley Branch had its first profitable quarter ever. Profitability has continued to sustain thereon forth.

The year 2015 wasn’t just a record breaking for income growth either. Total assets increased 12.4% to $237,472,669 and total deposits increased 12.6% to $213,232,980. Furthermore, deposit market share grew to a 10% record in the Yuba/Sutter market, an increase from 8.8% YOY.

Deposit marketshare stats for the Yuba/Sutter market are shown below:

Screen Shot 2016-05-31 at 4.18.09 PM

Management appears to be shareholder friendly. In 4Q15 they enacted a five-for-four common stock split. This move has potential to increase the company’s visibility, liquidity and accessibility for their stock. Further shareholder friendliness can be seen from their $0.35/share special dividend announcement in 2Q15. John Jelavich, the CEO stated the following…

“We are very pleased to be in the position to return capital to our shareholders with the special cash dividend announced today. Our continued profitability has positioned us with substantial capital and this dividend, in addition to the one we paid in 2012 represents over $1.1 million we will have returned to our shareholders.”

Twenty-fifteen wasn’t an anomaly either. In 1Q16, net interest income increased 23.5% YOY and 2.1% QOQ. In addition to net interest income growth, total assets increased 9.7% to $246mm. Finally, net interest margin increased to 3.07% from 2.78% YOY. In a low interest rate environment, growth in NIM is a good suggestion of the competence of management and growth of the California market.

1Q16 report

Source: 1Q16 Report

In light of the 5.16% increase in book value per share, ROE and ROA took a heavy hit. The reason for the rampant decline was due to a $480,000 provision for loan losses. The borrower of this monetary amount closed its business in 1Q16, thus reporting insolvency. The loan is deemed as secure, but the collection still remains uncertain.

The great thing about using CompleteBankData’s software is that accessibility of asset quality is at your fingertips.

Screen Shot 2016-05-31 at 4.20.45 PM

Source: CompleteBankData RVVY Asset Quality

The historical data on asset quality, shows that the recent $480,000 loan provision was an anomaly and should not be recurring. Jelavich stated the following in regards to the loan loss…

“Our first quarter results reflect continued growth achieved by the Bank. Total assets and deposits achieved record levels, and our top line interest income also achieved a record quarterly high for the Bank.” Jelavich continued, “Unfortunately, we experienced a loan loss of $480,000 at the end of the quarter; and while our decision to charge off the loan effectively puts this behind us, we will continue to pursue full recovery.” Jelavich concluded, “The fact that we were able to absorb this loan loss and still generate $247,600 in after tax net income for the quarter speaks to the earnings strength we have established. The credit quality of the Bank’s loan and investment portfolios remains strong, with no nonperforming assets and only $166,000 of classified loans as of quarter-end.”

River Valley Community Bank has also been awarded top ratings for its financial strength for over 30 consecutive quarters. Top ratings have been awarded by BauerFinancial, Inc. and BauerFinancial, Inc. has awarded River Valley Community Bank Five-Star Superior rating for its 31 consecutive quarters financial strength. Additionally, has earned an A+ rating for the past 32 consecutive quarters.

Furthermore CompleteBankData’s risk model has deemed the bank to be a “Moderate Risk” institution.  Banks are ranked from “Low Risk” to “Severe Risk” with “Moderate Risk” being the second safest level of classification.  Investors and depositors can rest assured that River Valley Community Bank is on firm footing.

These strong historical financial ratings show the company’s financial and loan portfolio strength before, during and after the Great Recession.


River Valley Community Bank is a quality bank selling for a decent price. RVVY has shown investors that it can growth deposits and increase its bottom-line without taking on risky loans. Furthermore, the low amount of non-performing loans during the Great Recession shows management’s quality and competence as a whole.

If the trend in income and asset growth continues, the book value of the company should further increase. Finally, management’s intent on getting River Valley Community Bank more investor visibility may severe as a catalyst this hidden bank needs. In short, River Valley Community Bank is a great example of a small, quality, community bank growing under the nose of the investment community.


Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Nick Bodnar

CIB Marine Bancshares: growth obscured by overhead

CIB Marine Bancshares (CIBH) is a small town branch bank located in Illinois, Wisconsin and Indiana. In the face of a low interest rate environment, the company has continued to grow their assets, reverted to profitability, and is trading significantly below book. Finally, with the recent up-listing to the OTCQB and discount to book, we believe that CIBH could make for a decent acquisition target and/or mean reversion to book value.

Screen Shot 2016-05-25 at 1.18.15 PM

Assets growing with the bulk in Loans

CIB Marine Bancshares continues to grow their assets quarterly. What’s even better is that the bulk of their asset growth comes directly from an increase in loans or leases.

Screen Shot 2016-05-25 at 1.18.38 PM

Backing up the story a bit, in the year of 2009, CIB Marine Bancshares hit an inflection point, in which total assets continued to fall from a high of $696,018m in 2009, to a low of $454,468m in 2013. In further context, net loans and leases fell from a high of $457,607 in 2009 to a low of $306,337 in 2012.

Moving forward, despite the historical low asset and loan portfolio, 2012-2013 was an inflection point in it of itself. Since the bottomed out low, total assets and net loans and leases have grown by 11.98% and 13.57% annualized, respectively.

Using our data at CompleteBankData, we can easily look at the historical loan summary, to determine where the bank’s growth is coming from.

Screen Shot 2016-05-25 at 1.19.01 PM

From the picture above, we can see that a large portion of their loan growth is from 1-4 family loans. From 2012-2015, 1-4 family loans has increased at an annualized rate of 28.96%. This above average growth in 1-4 family loans suggests that the economic environment for the average middle class family is improving in the Illinois area.

A further suggestion that the economic environment is improving is when we take a look at their commercial real estate loan portfolio. From 2013-2015, their commercial real estate loan portfolio has grown at an annualized 13.44% rate.

As the economic environment they operate in continues to improve, CIB Marine Bancshares should directly benefit from consumer lending growth. In addition, banks looking to easily grow their assets in a recovering economic environment may look into the market in which CIBH operates, or look at how CIB Marine Bancshares operates differently from peers.

Profitability is anything to ‘Pound the Table’ about

While it’s great that CIB Marine Bancshares has been growing their asset base and loan portfolio at an above average rate the banks current profitability situation may be what is holding the bank back from trading at book value.

The company has an unimpressive ROE and ROA ratios of 0.48% and 0.05%, respectively. Furthermore, CIB Marine Bancshares’ expense structure isn’t optimized, which has pushed their efficiency ratio to 98.20%.

When comparing the company to its local peers, we can see that they have some of the lowest profitability ratios in their operating area.

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Despite their absolute and relative low profitability ratios, the company has a respectable loan portfolio and has continued to de-risk itself in the past few years.

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Given the company’s growing asset base, non-risky loan portfolio and sub-par profitability ratios, it’s possible that the company could make for a great acquisition target. In addition with a P/B ratio of 0.17x, a P/TBV ratio of .81 and the majority of their expenses classified as non-interest expense, a company focused on four-wall cost control could easily revert CIB Marine Bancshares back into a better state of profitability.


According to CompleteBankData, CIB Marine Bancshares is a cheap and growing bank. The bank trades for 81% of tangible common equity has a growing asset base and sub-par profitability ratios (weighted down by an overly burdened cost structure), another bank focused on profitability could swoop in, cut costs, grow their asset base and make a great return.

In short, we believe that CIB Marine Bancshares is a compelling investment case, which should get more investor visibility from the recent OTCQB up-listing. Finally, their undervaluation to their book value should grab the attention from an acquiring bank.

-Nick Bodnar (Analyst)

Penns Woods offers an attractive yield plus growth

What constitutes a good bank investment?  Is a good investment one that’s purchased as part of a merger, or one that’s cheap and appreciates to fair value?  Either of these could work, but there’s a third route, a slightly undervalued bank with an attractive dividend yield that’s growing.

In the current environment banks are divided into two groups, those banks that are growing and those that are complaining about the lack of growth.  The growing banks are purchasing the complaining banks.  Shareholders can benefit from both sides of the aisle.  If a shareholder purchases shares of a complaining bank at enough of a discount they realize a gain when it’s sold.  But shareholders can realize a gain on a growing bank by purchasing shares then sitting back and doing nothing else.

Penns Woods Bancorp is a bank holding company that has two banking subsidiaries, The Jersey Shore State Bank, and Luzerne Bank.  The subsidiaries are shown below:

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Jersey Shore State Bank is the larger of the two subsidiaries with almost $1b in assets, $700m in loans and sizable earnings.

Jersey Shore State Bank has 14 branches spread across Lycoming, Clinton, Montour, and Centre counties.  Luzerne Bank has eight branches in Luzerne county.  Contrary to the name, Jersey Shore State Bank doesn’t have any branches in New Jersey, or near the Jersey Shore.  Rather the bank’s geographic footprint is centered around the tiny town of Jersey Shore, PA, located near Wilkes-Barre.

The area where the bank operates isn’t a high growth area, it’s a rural area with ties to the coal mining industry.

The following is an overview of the bank’s performance since Q2 2013:

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There are a few items of note.  The first is that the bank hasn’t grown much over the past few years.  The bank has grown over the past 10 years, Jersey Shore Bank grew their assets from $593m in 2003 to $893m at the end of 2014.  Luzerne Bank grew their assets from $182m in 2003 to $344m at the end of 2014.

The majority of the bank’s loans are residential with a small amount of commercial and even smaller amount of construction lending.  The bank’s lending is supported by a stable deposit base of mostly retail deposits held in money market or savings accounts.  In a higher rate environment savings account deposits are not ideal, but when the bank is paying .4% for their all-in funding costs it’s not bad.

The bank isn’t dealing with any troubled assets, and never really experienced any asset issues from the crisis either.  Non-current loans to loans hasn’t risen above 2% since 2003.

Penn Woods Bancorp is a well run bank, and this shows in a few of their operating metrics.  They have a return on assets above 1% as well as a return on equity above 10%.  Their efficiency ratio is 66% as of the last quarter, which is slightly below average for a bank their size.

Simply put this is a well run community bank doing what it does best, taking community deposits and re-lending them back into the community.

For investors the question is “what’s the bank worth?”  The follow picture shows the bank’s valuation model from the Bloomberg version of CompleteBankData (APPS BANKS <GO>).

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Based on the average of the three models the bank is slightly undervalued.  They could be worth $45 and they trade at $41.  That doesn’t leave much room for appreciation.  But I feel that misses out on some of the value the stock has.  The bank pays a generous dividend and currently yields 4.48%.  Investors receive an immediate 4.48% return plus the ~6% growth from the bank reinvesting their earnings (minus their dividend) back into the business.  Add in a small gap between the current price and value, and together these things could add up to a 10%+ return for investors willing to buy and hold the bank.


Ohana Pacific Bank (OHPB)

One of my favorite ways to find a new banks is using the graphic valuation overview tool in the Bloomberg edition of CompleteBankData (accessible on your Terminal via APPS BANKS<GO>). The reason I like this overview is because it shows all of the traded banks in the US compared to one other graphically.  I’ve included a screenshot below showing a portion of the ROE vs P/B graph.  On the left axis is the ROE and the bottom axis is P/B ratio.  The goal is to find banks that are trading for or below book value with above average returns on equity.  The orange dot is representative of Ohana Pacific Bank (OHPB).


Ohana Pacific Bank is a small bank located in Honolulu, Hawaii.  The bank was founded in 2007, which wasn’t ideal timing for a de novo bank.  The bank ended 2007 with $64m in assets which they’ve grown to their current $112m.  The bank primarily serves the Korean community in Hawaii.

While the bank’s assets have almost doubled the bank’s equity has only grown by about 50%.  Most of this is related to their lack of income for the first four years of operation.  The graph below shows net interest income in red and net income in blue.  The graph is a great example of how asset scale matters in banking.  While net interest income has been growing since the start of the bank the bank generated losses as they struggled to overcome fixed costs with a small asset base.


The bank’s loan book is in good shape.  At the end of the first quarter only .16% of their loans were non-current.  The bank is over-reserved with a 907% loan loss reserve to non-current loans.  What’s even more encouraging is their non-current loans have been declining.

The bank is over-capitalized with a 12% leverage ratio and 17.7% Tier 1 ratio.  They have no debt or FHLB advances or preferred stock.  Equity stood at $15.1m, well above their market cap of $7.8m.

The negatives for Ohana Pacific Bank is that they still have a high efficiency ratio due to their small asset base.  While the bank has done well growing assets they need to put more of them to work.  The limiting factor is the amount of deposits and capital the bank has to work with.  They could loan out an additional $7-10m, which might generate an extra $50k in earnings or so.

To really grow the bank needs to significantly increase assets, cut costs to boost profitability or be acquired.

The following picture shows what the bank might be worth under different valuation scenarios:



The bank is worth the most of they were to simply trade in line with peers.  Often a bank doesn’t trade with peers because the shares are too illiquid, the bank has credit quality problems, or the bank has a visibility issue.  Trading at a similar multiple as peers would result in a value of $15.23 per share.

In the case of Ohana Pacific Bank my belief is the reason the bank doesn’t trade in line with peers is because shares are illiquid, the market cap is small and the bank provides no information to investors.  Financials are available on as well as in spartan press releases the bank issues at irregular intervals to the local paper.

If the bank were to be acquired and the acquiring bank were to save 35% shares could be worth $12.91 compared to the most recent price of $5.60.

The bank is small, but they’re profitable and have a quality loan book.  At a minimum they should trade for at least $10.80, book value.  The largest negative against Ohana Pacific Bank is the bank rarely trades and it could be difficult to acquire a position.

Disclosure: No position

Is this credit quality chart concerning?

A metric we watch closely is a bank’s non-performing assets.  These are assets that are late, have ceased paying, or are already in foreclosure.  A bank with 3% of non-performing assets (NPA) or less is considered ideal.  But it’s not the absolute level that matters as much as the trend.  A bank with a high level of NPA’s that is trending downward might be better than a bank with low NPA’s trending upward.

The chart below shows the number of banks with increasing NPA trends.  Does this chart concern you at all?

npa trend

The number of banks with an increasing NPA trend increased from less than 10 most quarters to 117 at the end of 2014.  The data isn’t fully in for Q1 2015 yet, but our guess is the chart is going to continue to spike higher.

The question is whether this is a warning sign of cracks in the economy or something more benign?