Small Bank Newsletter

February 06

 

1. CITIZENS HOLDINGS (CIZ $23) is the holding company for The Citizens Bank of Philadelphia, which provides commercial and personal banking service in Mississippi. While this Bank was in our past newsletter many years ago, the stock has not moved up with all its growth the past 2 years, so we had to do a follow up on it. With 18 locations and almost 100 years old, we think it is time for them to sell. They have always focused on strong asset quality and with over 230 employees and growing, someone will pay up for a premium franchise like this. Earnings are always going up and so is the cash dividend, year after year. Management also pays themselves very fairly, and they own a ton of stock, so they will want to get paid someday sooner than later we think! They are many new businesses opening in their markets and we see this continuing for many years to come. Earnings will be out anyday, and again, they should be very solid. Management has many years of banking experience and they are committed to shareholder value. They have just over 5 million shares outstanding and pay a 3% + cash dividend. They have over $600 million in assets and they have very strong net interest margins at 4.69. Non-performing loans are very low and their book value is almost $13.00 a share. They take this as there number 1 priority. Look for earnings of $1.70+ per share in 2006 and a takeover price in the $30.00 area, for a 30% premium someday and growing over time. You get paid to wait on this one. Downside risk is low at around 10% in a big sell-off. Accumulate now under $23.50 and buy all you can under $23.00. Thinly traded, please buy slowly. Headquartered Philadelphia, MS.

 

FOLLOW UPS:

1. INTERVEST BANCSHARES (IBCA) record results again, earnings up 59% over 2004. Raising our sale point to $35.00 from $29.00. WOW!! Hold.
2. GB&T BANCSHARES (GBTB) earnings up 21.9% in the latest quarter, strong growth again across the board. They did announce another small merger, in a strong market, at a very high price (too high, we feel, 3.4 times book and 35 times earnings ! ), for a bank not even 3 years old, but the franchise is still worth $28 someday sooner than later. Hold.
3. POPULAR, INC (BPOP) solid earnings, no negative surprises. Insiders still buying. Hold.
4. WASHINGTON FEDERAL (WFSL) also reported solid earnings, hold. Now our # 3 holding. Hold and buy more on any dips under $22.00
5. ATLANTIC LIBERTY (ALFC) being bought by Flushing Financial for $24, a take under. Long-term holders wait for the deal to close, if not on margin, short-term winners hold, short-term losers sell now for taxes and move on.
6. FIRST CITIZENS BANCORP (FCBN) take the money from the bank for a big gain.
7. STATE BANCORP (STBC) while they are going through an earnings crunch period with an open lawsuit which should be put behind them this quarter, load up again now under $17.25 and buy a little more up to $17.50. Insiders are always buying and this premium Long Island, NY franchise is worth much more someday (maybe $26.00 a share). Again, you get paid to wait with the large cash dividend, and usually a stock dividend each year. While we haven't added to this position in years, someone has been selling lately, volume has been up. I think this is a good time to add again. Now one off our top ten holdings. Long Island, NY has one of the hottest real estate markets in the country the past 5 years!
8. VALLEY BANCORP (VLLY) has been moving up with a few private takeover deals announced in their market. We would take profits now over $36.75 and unload at least half, if not all, for a very nice long-term gain, almost fully valued, we feel. What a run. Earnings will be very good but the price already reflects this.
9. CAPITAL SOUTH BANCORP (CAPB) they did a secondary of 690,000 shares at $18.75 last month. It went under- water at first, now up 10%. This one is a strong buy under $20.00. Their book value is almost $13 a share and earnings growth is just coming on-line. They just opened a bunch of new branches the past 2 years, and strong earnings growth is ahead of them for many years. They also own 15% of a bank in MS, and management owns a ton of stock and they pay themselves fairly. Downside should be limited to the $18.00 area in a bad market. Worth $30 in a deal a few years out. Headquartered Birmingham, AL.

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