Small Bank Newsletter

February 2005

 

• FIRST CITIZENS BANCORPORATION (FCBN $525-$540) founded in 1964, it is the fifth largest commercial Bank in South Carolina, with over $4.5 billion assets, $3.8 billion in deposits, and $3.1 billion in loans. Loan growth is strong at 8% and asset quality is the best with very strong loan reserves at around 2%. They are similar to First Citizens Bank (FCNCA), with one of the lowest market valuations for a Bank of this size; let-alone a “South Carolina Bank”. The stock has not gone anywhere for th e past year, even though they made around $40.00 a share in 2004. It’s 10% cheaper than a year ago and with a P/E of 13, we would buy it now, aggressively. Again, management owns a lot of stock and the high share price of $525.00 turns off many people, not us. They pay a nice $ .35 a share cash dividend each quarter which will go up and the stock trades plenty, so you can put plenty of money to work and make 10% a year + till they sell-out. If they do, you could make 100%+ on your money from these levels. If the stock splits, you would also make 15%+ that day, we feel. The market has turned south, and has had a tough start for many high flying banks and most high flying stocks the first few weeks of 2005. We continue to love these type of investments in cheaply valued banks, where you can put a lot of money to work, that have very little downside risk (2-4%) and good upside (10%-20%). While not the 50% -100%+ we have been making for the past 5 years, it is still a great return. They have a book value of almost $400.00 a share, so at 1.3 times book, it is half of its’ true value in a sale at current levels. They have 863,000 shares outstanding and a market cap of $449 million. Accumulate now under $540.00 and buy all yo u can under $520.00. Headquartered in Columbia, South Carolina. Trades plenty, buy slowly.

FOLLOW UPS:

• CAROLINA BANK HOLDINGS (CLBH) earnings were a blowout at $0.21 a share. Up 40%. Hold. Wow!
• KFED BANCORP (KFED) announced a 4% stock buyback for its Recognition and Retention Plan or 227,470.00 This will be hard to complete, we feel, even with other MHC breaking down a little this year, without pushing the price over $15.00 a share. They are a fast growing Bank in a great, great market. Look for a 5% buyback plan to be announced by the bank in addition to this, in March 2005. Buy more under $14, if it comes in.
• WHITNEY HOLDINGS (WTNY) the bank is buying back 4.2% of its stock and continues to be very volatile. Buy more under $42.20 and all you can under $41.00. Great Bank at a fair price.
• GB&T BANCORP (GBTB) with the recent pullback to the $23.50 area, we would buy more of this very heavily and sell-over $25.50 for a trade. If they get taken while you are holding it, look for $28.00+ Downside very low at 5%. Earnings will be very strong.
• INTERVEST BANCSHARES CORP: they should have solid numbers out this week. Hold and buy more under $18.60. Worth $25+ a share in 2 years or sooner for a 19%+ return each year. Looks like there is stock for sale at these levels. Buy it.

Two new issues out over the past few weeks, Slavie Federal Saving Bank (SFBI) and Georgetown Bancorp (GTWN), both small institutions that are under their $10.00 offering price. Is this the end to 10%-30% pops??

We don’t think so and would buy GTWN under $10.00 aggressively for the long-term and SFBI under $9.30 for the long-term. Both trade plenty everyday.

Independence Community Bank (ICBC) was downgraded by Keefe this week and Lehman Brothers put ICBC out as, “Overweight”, also this week.

Doesn’t look like a deal is coming, but we would buy the stock aggressively under $37.50 for the long-run. Simply a great franchise, making lots of money and “who knows” with their good stock price, maybe they will buy some-one else, which has worked well for them.

We would let any &ls quo;Shorts” ride, WIBC, cover around $12 (post-split). VNBC also broke much lower, but we would cover if you have any “shorts” left on this one now, around $28.50- $29.75.

 

As always, you may call me with any questions on any stock. This is a free service to our subscribers.

To contact Douglas Hughes via email - dhughes33@charter.net

Personal Account Management: Bank Stock Portfolios.1.25%-1.75% FEE. $1,000,000 Minimum. Douglas Hughes Hughes Investment Management. 1-888-814-7575.

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Douglas Hughes -- Small Bank Newsletter, Hughes Investment Management , can and does take positions, in stocks it recommends.All material Copyright© 1995-2003 by Douglas Hughes. Reproduction of this publication in whole or in part is strictly forbidden.

 

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