Small Bank Newsletter

April 06

 

1. ITLA CAPITAL (ITLA $46) operates as the holding company for Imperial Capital Bank that provides commercial banking services. They operate 7 retail branch locations and 25 loan production offices, in the Western United States, the Southeast, the New York City area, and New England. The company was founded in 1973 and is headquartered in San Diego, California. They have bought back over 3.3 million shares over the past ten years as of 12/31/05 or about $90 million worth of stock. These are real earnings. While we touched on this one briefly in last month’s letter, we have even more good news to share, so we had to give it a full write –up. They have finished up their last 5% re-purchase plan and had announced they are starting another 5% repurchase plan. They also announced their first EVER cash dividends of $0.15 a quarter that will surely go up. This should allow another group of mutual funds to now invest in this Bank thus driving up the price, especially with the bank buying much more stock at these low levels. At these prices, it is certainly accretive to earnings, while it will hurt book a little, earnings growth is what we are after in today’s world. With the Bank announcing this cash dividend, it shows that they are confident about future business and with all their excess capital; they think this is a prudent move. We agree. Already some of the smartest names in the Mutual Fund area are in this stock. This move should add a few more good names. The franchise will earn almost $5.00 a share this year and they have had excellent asset quality for the past 10 years! Accumulate now under $47.00 before the Bank gets it and all you can under $45.00. They have only 5.7 million shares outstanding and dropping. Look for a trade on this one to the low fifty’s this year or low sixty’s longer-term (2-3 years) or in a takeout. This one trades plenty, so buy it now. Downside should be limited to 7%-10% in a bad sell-off, with their buyback in place and excess capital to buy back more shares if it did drop significantly.

 

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Douglas Hughe s -- Small Bank Newsletter, Hughes Investment Management , can and does take positions, in stocks it recommends.All material Copyright© 1995-2006 by Douglas Hughes. Reproduction of this publication in whole or in part is strictly forbidden.

 

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