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Small Bank Newsletter
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June 2003
MYSTIC FINANCIAL INC (MYST $19) is the financial holding
company for Medford Co-operative Bank and Mystic Financial Capital
Trust. They serve the communities of Medford, Malden, Everett, Stoneham,
Arlington, Winchester, Somerville, Melrose, Lexington and Bedford,
Massachusetts. Total assets up to $417 million, loans up to $253
million and deposits up to $326 million at 3/3/1/2003. The Bank was
started in 1886 and they just reported earnings of $0.38 a share,
up from $0.30, a very nice increase. Deposits were up 22% in the
latest year with the success of the Bedford branch that opened in
June 2002. Net interest margins are solid at 2.93%, down from 3.20%
in the same period prior. Non-performing assets are low at 0.17%
and book value up to $18.54. The cash dividend continues to go up
and while it's only a 2% yield, it will be 3% by the end of this
year, we feel. The Bank continues to buyback their stock with only
1.4 million shares outstanding and for being one of Massachusetts
fastest growing Bank's, the price times book value should reach 1.5
times. Currently, in this market, it is just over book - a steal
compared to its peers.
Once earnings continue to come thru, look
for $25 a share within 2-3 years and $30+ if a deal were to occur
in the next few years.
Insiders own a ton of stock, over 35%, and while we don't think they are for
sale, the cheap valuation and great asset quality are just too compelling to
not be invested in this one. Accumulate now under $19.5 and buy all you can
under $18. Downside should be limited to around the $17-18 area if this sector
were to correct hard. The st
ock trades plenty, but like many small banks in
this market, once the volume dries up, an explosion to the up side is possible
on this one. This is what is happening on many, many small banks in this crazy
market. Do not chase it.
Located Medford, MA.
FOLLOW UPS:
1. WINTON FINANCIAL CORP (WFI) announced a new 5% stock repurchase
program. Hold.
2. TOWN & COUNTRY BANCORP (TCBS) earnings were up
37% over last year, adjusted for the 20% stock dividend paid
at the end of March. Hold. The cash dividend was also up 40%
over the prior year.
3. CNB HOLDINGS INC (CHGD) latest earnings for the period
ended 3/31/2003 were $0.12 a share, up from $0.05, very nice.
Loans up 32%, non-performing loans down. Book value up to $8.49
a share. Hold.
4. PENNFED FINANCIAL (PFSB) completed their 5% buyback
program and announced a new 5% program on 5/15/03. Hold.
5. CITIZENS HOLDING COMPANY (CIZ) They earned $0.31 a
share in the latest quarter, with 7% deposit growth, 7% loan
growth and an 60% increase in loan loss reserves. Net interest
margins holding strong at 4.48%. Hold. They will sell in a few
years for at least a 30% premium from today's prices.
6. NORWOOD FINANCIAL CORP (NWFL) announced a 2 for 1 stock
dividend. Hold.
7. HEARTLAND BANCSHARES (HRTB) they reported net income
of $0.03 in the latest quarter. The best news was that non-performing
loans are dropping and seem to be under control. Buy more under
$8.5 only.
8. MASSBANK CORP (MASB) reported earnings of $0.42 a share
in the latest quarter, down from $0.55 in the same period prior.
Hold and buy more under $29 only.
Earnings will be tough for the rest of this year, but still a cheap valuation.
9. FIRST CITIZENS BANCSHARES (FCNCA) reported earnings
of $1.75 in the latest period down from $2.37 in the same period
prior. Again, earnings will be tough for the rest of the year
but still a very cheap valuation to it's peers. Hold.
10. ACCESS ANYTIME BANCORP INC (AABC) reported earnings
of $0.19 a share in the latest quarter and Non-interest expense
were up sharply due to the new locations. Hold.
11. ROSLYN BANCORP (RSLN) they might be looking to sell
for around $24 a share. If you are a risk taker buy a little
under $18.5 only and a lot under $17 and pray for a deal this
year.
12. TEXAS UNITED BANCSHARES (TXUI) announced earnings
of $0.41 a share, a little light due to a one time charge of
$817,000 for impairment in fair value in their mortgage rights
portfolio. They also sold their trust department, which will
save them money each year. Strong growth across the board. Also,
they almost doubled their loan losses reserves from the same
period prior due to their strong loan growth. By more up to $20.
13. AF FINANCIAL GROUP (ASFE) deposits up 9%, loans up
8% and earnings will really start to come in by next year. If
they do a second step, look for a $10 run. If they sell, look
for a $15+ move up. Hold.
We are in a bubble in many small bank stocks. Such as CCNE, USBI,
ROME, and CFFI but they can go higher. Hedge funds, we feel, are
trying to play the only sector that has worked for the past 3-4 years.
We would unload any small banks trading over 2.5 times book and all
sell some of them short if you have a large portfolio and are heavily
margined in this sector. Asset quality could still be a very big
problem for many commercial banks over the next few years. Residential
lenders don't have this problem yet, due to the bubble in some areas
in residential real estate such as Long Isand, NY and Bergen County
NJ. Margins are getting squeezed at some banks, which should create
more deals for this year, we hope. Bottom line is tread very carefully
in this market.
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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.
The Small Bank Newsletter is published 12 times a year. (To
Subscribe: 1-888-814-7575).
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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