Steuben Trust Corporation (SBHO)

Note: this name is illiquid, boring, and unlikely to accommodate an institutional buyer base. But I like the bank, shares are cheap, and I want to write it up.

Another entry to my “Ron Popeil Bank Basket”: Steuben Trust Corporation (OTC Pink: SBHO) the holding company for Steuben Trust Company, a New York State chartered community bank. Steuben Trust Company, organized in 1902, has a long history of servicing its customer base in western New York and delivering strong performance to its shareholders. Since 2000, SBHO management has delivered an average 0.98% ROA and 10.9% ROE, and the Bank appears well positioned to continue to deliver a similar return profile to its shareholders over the next cycle(s).

SPGMI Map - Steuben Trust Branch MapShares of SBHO are currently trading at a trailing P/E multiple of 9.3x and a P/TBV ratio of 108%. Both the EPS-based and TBV-based valuations are outright attractive levels to take an ownership stake in a banking franchise with a proven track record of delivering double-digit returns on equity over a full credit cycle. Continue reading “Steuben Trust Corporation (SBHO)”

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Enterprise Bancorp, Inc (EBTC)

Enterprise Bancorp, Inc. (Nasdaq: EBTC) is a bank holding company headquartered in Lowell, Massachusetts. Its bank subsidiary, Enterprise Bank & Trust Company, operates 24 full-service branch banking offices located in the communities Northwest of Boston. Since its founding 30 years ago, Enterprise Bank has achieved strong, high-quality, and consistent growth and success, expanding from a single office in Lowell to twenty-four branches in nineteen communities. On a consolidated basis, Enterprise crossed $3.0 billion in total assets in Q1 2019 and approximately $3.9 billion in assets under management. EBTC has been profitable every quarter since 1990.

EBTC Map

Shares of EBTC are currently trading at a trailing P/E multiple of 12x and a P/TBV ratio of 135%, both valuation metrics are shy of a peer group average of 13.5x P/E and ~185% P/TBV. Both the EPS-based and TBV-based valuations on EBTC shares are attractive levels to take an ownership stake in a banking franchise that is strategically and operationally positioned to deliver double-digit returns on equity over a full credit cycle.

While EBTC’s credit metrics are slightly softer than the peer group (1.0% NPAs vs. 0.64% peer average), I do not believe the NPA disparity warrants a ~35% discount to its peer group’s P/TBV valuation. Nor do I view the lack of sell-side coverage/research to be a warrant a discount to peers; if anything, management’s apprehension to kowtow to quarterly hurdles/models should reinforce a long-term investor’s conviction in the bank’s leadership.

Continue reading “Enterprise Bancorp, Inc (EBTC)”