M&F Bancorp, Inc (MFBP)

Note: this is a departure from the banks that I have profiled, to date, on this blog. M&F Bancorp has significant challenges to address, and as recently as year-end 2017 there could have been an argument whether or not MFBP was a going concern (MFBP’s equity position decline nearly 50% from FY 2015 to FY 2017). I do not view an investment in MFBP to be a core holding. Additionally, due to the size of the MFBP and its distressed valuation, this is a company WITH A TINY $5 MILLION MARKET CAPITALIZATION. It is illiquid.

M&F Bancorp, Inc. is the bank holding company of Mechanics and Farmers Bank. Founded in 1907, M&F Bank is North Carolina’s oldest African American-owned bank and the second oldest in the nation. Over the last century, M&F Bank has grown into the 9th largest minority-owned financial institution in the United States, upholding the community values on which the bank was founded. The Bank has seven branches in NC: two in Durham, two in Raleigh, and one each in Charlotte, Greensboro and Winston-Salem. Mechanics and Farmers Bank remains committed to providing bank services to a historically overlooked and underbanked community in the markets where it does business.

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First Community Corporation (FCCO)

First Community Corporation (Nasdaq: FCCO) is the holding company for First Community Bank, a local community bank based in the midlands of South Carolina. First Community Bank operates with 20 full-service banking offices located in the Midlands, Upstate and Aiken areas of South Carolina and the Augusta region of Georgia. The bank is also in the process of opening its twenty-first location in Evans, Georgia this summer. First Community Bank opened its doors for business in 1995 and management, led by Mike Crapps since its founding, has grown the bank to a $1 Billion asset institution with a branch network concentrated in three attractive southeastern markets.

FCCO Map

Shares of FCCO are attractively priced to initiate a long position in a bank with an attractive branch footprint, premier deposit franchise, strong capital positions, and standalone growth and profitability potential. Shares of FCCO are currently trading at a trailing P/E multiple of 12x and a P/TBV ratio of 135%. Both the EPS-based and TBV-based valuations 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. Key driver of current discount versus peers appears to be the impending deletion from the Russell 2000 Index as shares are trading at a 25% TBV discount and 35% EPS discount to its peer group.

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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)”

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.

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QNB Corp (QNBC)

GBI Note: format on this post is a little different from prior posts. I’m trying to find the appropriate blend of blog post and research report. Any/all feedback welcome.

QNB Corp. (OTC Pink: QNBC) is a bank holding company headquartered in Quakertown, Pennsylvania. QNB Corp. Through its wholly owned subsidiary, QNB Bank has been serving Upper Bucks, Northern Montgomery and Southern Lehigh Counties in Pennsylvania since 1877. QNB has been helmed by seven presidents over its 142-year history, a impressive feat and one of many examples of the stability and consistency QNBC has delivered to its shareholders over the years.

QNBC

Shares of QNBC are currently trading at a trailing P/E multiple of 11x and a P/TBV ratio of 125%. Both the EPS-based and TBV-based valuations 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. Likely key drivers of the current discount versus peer banks appears to be the OTC Pink listing status of QNBC’s shares as well as management’s stated desire to remain a standalone, independent franchise.

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Eastern Michigan Financial Corporation (EFIN)

Liquidity/size disclaimer (sorry): this name is illiquid, boring, and unlikely to fit anything but a retail position size. But I like the bank so I’m going to write it up.

Eastern Michigan Financial Corporation (EFIN) is based out of Croswell, MI and its bank subsidiary Eastern Michigan Bank currently operates nine banking offices and a loan production center, primarily in the Sanilac and St. Clair County, Michigan communities (northeast of Detroit).  Originally chartered as the State Bank of Croswell in 1895, Eastern Michigan Bank continues to service the region with a broad range of deposit services as well as loans for commercial and consumer purposes. Shares of EFIN currently provide a nice entry point to invest alongside a capable management team operating a highly-capitalized bank positioned to deliver attractive compounded ROE to its shareholders.

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Tri City Bankshares (TRCY)

Alright, another bank idea to close out the week. If I do many more banks like ENB Financial and the following franchise, I may have to launch a “Ron Popeil Strategy” on this site.

I’ll put the disclaimer upfront: this name is illiquid, boring, and unlikely to fit anything but a retail position size. And I like it.

Back in 1955, small businessman David Ulrich’s loan application was turned down by a local lender. To remedy the issue, Mr. Ulrich decided to start his own bank and spent the next eight years raising capital in in order to establish Tri City National Bank in 1963. As it stands today, Tri City Bankshares (TRCY) of Oak Creek, WI still operates as Tri City National Bank and services Southeast Wisconsin with a 33 branch network.

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