Small Bank Newsletter

August 2003

 

• CNB BANCORP, INC (CNBI $26- 26.50) City National Bank and Trust Company now has seven locations in upstate New York and six other ATM locations with Total assets near $400 million. Deposits over $300 million and total loans, while down in the latest period, are almost $200 million. They are building a new location in Saratoga Springs and will take down the old branch once it is completed. The cash dividend and their earnings seem to always go up, with a current yield around 2.5%. The allowance for loan losses as a percentage of loans, was 1.66% at 12/31/2002, very strong, with non-performing loans low at $1.9 million (most of which is one $1.4 million commercial loan.) Like most upstate NY banks, asset quality has slipped over the past year but it is still quite good. The Bank continues to buy back stock even at higher prices than these over the past few years, showing they are committed to the shareholders. They have a 5% buyback plan in place now. Started in 1887, is it time for them to sell?? We think so. With many of their peers trading at close to 3 times book in less attractive markets than they are in, someone should want them for 2.25 times + book value (maybe even 2.5 times book.)
  
  CNB Bank should fetch close to the same price of Rome Bancorp. We do feel that Rome is currently over valued, hence a price of $36- 38 would be more than fair in a deal for CNB. Net interest margins have been dropping down to 3.88% and a P/E of only 12.5, not 40 like Rome and many of its peers. Simply a fairly priced Bank stock, that trades plenty, and pays a nice cash dividend in a currently over-priced bank stock market. Accumulate under $27 and buy all you can under $25.5. Their book value is almost $17.50 a share and they have they have 2.4 million shares outstanding. Downside should be limited to around $24 a share if asset quality fell apart in this hot market.
  
  Located Gloversville, NY.

FOLLOW UPS:

• 1. MYSTIC FINANCIAL (MYST) declared a 5% stock dividend payable August 15,2003. Hold.
• 2. ALLIANCE BANCORP (ANE) being taken over by New Haven Savings Bank, which is not yet public. Should net a price of around $30 a share. Sell.
• 3. OLD LINE BANK (OLBK) earnings up 48% in the latest quarter and still no non-performing loans. The stock has moved up sharply but we would continue to hold it.
• 4. ITLA CAPITIAL (ITLA) has moved up to our $44-45 target. We are out for a fast trade for new comers and also out for all long-term people. Fully valued.
• 5. CAROLINA BANK HOLDINGS (CLBH) double digit growth across the board, earnings up nicely and they just broke ground on a new office in Asheboro, NC. Hold.
• 6. INTERVEST BANCSHARES CORP (IBCA) earnings way up again to $0.45 a share in the latest quarter, loans up 18%, assets up 9% and book value up to $12.23 a share. Buy more up to $12.5 a share. The numbers are just too good.
• 7. HARLEYSVILLE SAVINGS BANK (HARL) raised their cash dividend by 12.5% to $0.18 and assets grew 9.3% to $658 million. Asset quality is still the best. Hold.
• 8. RIVERVIEW BANCORP, INC.(RVSB) closed the acquisition of Today's Bancorp and earnings up 40% in the latest quarter. Margins going up. Hold.
• 9. MIDSOUTH BANK (MSL) paying a 10% stock dividend on August 29t h, 2003. Time to short again over $27. Only worth $25 in a deal and trading over that price is crazy. We feel they are not for sale anyway. This bank market is still very hot, but all margined accounts please be hedged, as we enter a Bubble market on several issues.

 

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