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Average returns on sturmdrang's ratings:

Rating Avg. Return Annualized Key:
- : rated buy, stock went down
+ : rated sell, stock went up
+/- : rated hold
+ : rated buy, stock went up
- : rated sell, stock went down
buy -28.57%(over an avg. of 3983.60 days) -2.62%
hold +89.34%(over an avg. of 6388.00 days) +5.10%
sell +121.35%(over an avg. of 6688.00 days) +6.62%


Jump to rating for: BKMU   FFSX   MCBF   PULB   SOBI  

NOTE: areas highlighted in blue indicate that this user is sharing the highlighted information with their private group ONLY
-- BKMU --
BKMU Jun. 27 2004, 11:07 AM ET by sturmdrang (view profile) rating: Buy
BKMU performance:
Price near date of rating (06/28/2004): 11.00
Recent price (02/01/2018): 10.40
Price change: -0.60
Dividends collected: 2.855

Gain/Loss over 6326 days: +2.26 +20.50% Annualized Gain/Loss: +1.18%
BKMU's Profitability in a Rising Interest Rate Environment

The following is an evaluation of the impact of rising interest rates on BKMU Bank Mutual's profitability (figures are as of Dec 31, 2003) using interest-rate sensitivity criteria, discussed in the June 2004 SNL Thriftinvestor issue.

1) Investment securities: The higher the percentage of investment securities to total assets, the greater the risk from an increase in interest rates (liability sensitive).
- BKMU has 33.8% investment securities to total assets at year-end 2003, up from 21.7% at year-end 2002.
- Conclusion: BKMU shows a high amount of liability sensitivity in this category.

2) 1-4 family loans: Since these loans are often fixed, the higher the percentage of these loans to total loans, the greater the liability sensitivity.
- 46.3% of BKMU's total loans are in this category, the largest other types are: Consumer loan fixed equity: 14.9%, Commercial real estate: 12.2%, Multifamily: 7.2%, Construction: 7.1%, others: 12.3%
- BKMU states in its 2003 proxy: "Currently, we sell all of our 30 year fixed rate mortgage loan originations and some of our 20 and 15 year fixed rate mortgage loan originations in the secondary mortgage market."
- Conclusion: BKMU exhibits a moderate amount of liability sensitivity risk in the 1-4 family loans category.

3) Commercial and industrial loans: Since these loan types generally have adjustable rates and are of shorter duration, they are asset sensitive in a rising interest rate environment.
- BKMU states that it is increasingly focusing on this loan category. However, at year-end 2003 they had only about 26.5% in this category.
- Conclusion: BKMU's portfolio of commercial and industrial loans could help to improve earnings modestly in a rising interest rate.

4) Mortgage servicing rights: Since mortgages are less likely to be paid off by borrowers in a rising interest rate environment, MSR values should tend to rise, i.e., they should provide an asset sensitivity benefit.
- Conclusion: With only $ 4.7 million of MSRs at year-end 2003 and given its $3.1 billion size, even a large percentage increase in the value of its MSRs will make little difference to BKMU.

5) Non-interest bearing deposits: Obviously, deposits which do not re-price ever when interest rates rise are asset sensitive.
- Although BKMU has 42.2% of its deposits in checking and savings accounts, only 5.4% are in non-interest bearing accounts.
- Conclusion: BKMU will not benefit greatly from rising interest rates in this category.

6) Tangible equity: The higher the tangible equity percentage to tangible assets (or earning assets), the greater the asset sensitivity.
- Conclusion: With $ 731 million in equity (23.5%) and only $52.6 million in goodwill, BKMU is well positioned to benefit from rising interest rates in this category.

7) Net interest margin trends: This is viewed historically, i.e., how has the bank's net interest margins reacted to changing interest rate environments.
- BKMU shows a Net interest margins as follows:
1999: 2.4%
2000: 2.8%
2001: 2.7%
2002: 2.9%
2003: 2.6%

- It appears that BKMU profited slightly due to falling interest rates the past several years and that Net interest margins of, say, 2.4% (1999 level) could be expected for 2004.
- Conclusion: using Net interest margins as an indicator, BKMU's portfolio is liability sensitive.

8) Non-interest income: as we know, non-interest income is directly neither asset nor liability sensitive. Significant levels of non-interest income allow a bank to show income no matter what interest rates are doing.
- Of the $19.6 million in non-interest income in 2003, $7.0 million was due to Gain on sales of securities and loans.
- Conclusion: Expect BKMU's non-interest income to decline for 2004.


Summary comments: The greatest risk posed by rising interest rates to BKMU's earnings (and equity) is its Investment Security/ MBS portfolio. To reduce interest rate risk, BKMU needs to continue to grow its own loan portfolio and "unpark" its temporary investments in these mortgage-related securities. A positive aspect, compared to other thrifts with significant MBS positions (e.g., CFFN), is that BKMU did not borrow funds to buy MBS's, rather it used its high level of capital, raised in the second step offering, to purchase them.

Depending on how significant the interest rate increases are, BKMU may or may not sail through the shoals unscathed. On the other hand, with its 110% to 120% MV/ BV ratio, the fear of interest rate hikes should not be a reason to avoid owning these attractively priced shares of the 4th largest financial institution in Wisconsin. I rate BKMU a Buy.

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-- FFSX --
FFSX Apr. 26 2003, 03:11 AM ET by sturmdrang (view profile) rating: Buy
FFSX performance:
Price near date of rating (04/28/2003): 17.05
Recent price (02/18/2010): 0.08
Price change: -16.97
Dividends collected: 1.96

Gain/Loss over 6754 days: -15.01 -88.04% Annualized Gain/Loss: -4.76%
Has FFSX turned the corner?

FFSX is a savings bank based in Sioux City, Iowa with 15 offices in northwest and central Iowa.
An overview of FFSX at 3/31/2003:
Assets: $ 635 million
Deposits: $ 452 million
FHLB Advances: $104 million
Stockholders' Equity: $ 71 million
Note: Goodwill, which arose from acquiring another Iowa savings bank at the second-stage conversion, is $18 million.

Book value, including the Goodwill, is $ 18.03 per share (3/03) vs. $16.79 (3/02). Stockholders' equity to assets is: 11.2% (3/03) vs. 10.9% (3/02). Stock price as of 4/25/03 is $16.97, having jumped from $15.50 since the earnings announcement earlier this week.

At best, since its second-stage conversion in April 1999, the market has viewed FFSX as a "tarnished hubcap" with its less than favorable efficiency ratio, low ROAA and ROE, etc. However, there are some signs that this bank is turning around.

A comparison of the 9 month period ending March 2003 to the 9 month period ending March 2002 shows improvements in key statistics:
Efficiency ratio: 63% vs. 65%
ROAA: 8.4% vs. 5.5%
ROE: 0.9% vs. 0.6%
Net interest rate spread: 3.25% vs. 2.62%

(Results for FY3Q03 vs. FY3Q02 are more impressive).

Reasons to buy:
1) The bank appears to be on the road to profitability.
2) With a MV to BV of 94% for a $ 635 millions assets bank, it is not overpriced (but consider the goodwill).
3) The Sioux City/ "Dutch" counties and Des Moines/ Newton/ Grinnell areas are relatively stable, with continued growth in the Des Moines area.
- There should be few issues with retail customers walking away from their mortgages and bills.
4) The bank's repurchase program has 184,000 shares remaining of 3.9 million, or ca. 5%.
- This will give support to downdrafts in the stock price, if not lift it to a higher level.
5) J. Gendell owns 400,000 and J. Halis owns 150,000 shares, or 10% and 3.8%.
- This likely increases management's attention to perform.

Rating: In view of the 10% spike this week, FFSX is rated only a Buy.
Consider buying on any weakness, hold for the mid-term.

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-- MCBF --
MCBF Mar. 8 2003, 09:52 AM ET
Rating changed on
Jan. 24 2006, 06:37 AM ET
by sturmdrang (view profile) rating: Buy
MCBF performance:
Price near date of rating (03/10/2003): 11.92
Price near end of rating (01/24/2006): 11.83
Price change: -0.09
Dividends collected: 0.56

Gain/Loss over 1053 days: +0.47 +3.94% Annualized Gain/Loss: +1.37%
MCBF is a Buy for the following reasons:
1) Management/ BOD purchased 4.7% of the shares at the IPO.
2) ESOP owns/ will own 8% of the shares according to the offering circular.
Points 1) and 2) suggest that management and employees will think as owners in addition to acting as employees.
3) From 1997 to 2000 some of the bank's key statistics were good to excellent (ROA, ROE, efficiency ratio).
- Exactly why the key performance indicators fell in 2001/ 2002 is unclear. My suspicion is that they were cleaning up the bank prior to going public and that we will see favorable key performance statistics again.
4) At $12 per share, the MV/BV is ca. 76%.
5) Equity to Assets Percentage is: 18.5% so there should be funds available for stock buybacks.
6) Jeff Halis own 1.0% of the shares - he has shown that he knows S&Ls!

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MCBF Jan. 24 2006, 06:37 AM ET by sturmdrang (view profile) rating: Buy
MCBF performance:
Price near date of rating (01/24/2006): 11.83
Recent price (03/31/2015): 3.02
Price change: -8.81
Dividends collected: 1.14

Gain/Loss over 5749 days: -7.67 -64.84% Annualized Gain/Loss: -4.12%
Pros:
1) Turned a generally solid profit for 2005 of $0.50 per share, after
posting a loss for 2004.
2) Previous CEO, who was held responsible for loss and expensive takeover
of another bank, was ousted in 2004.
3) Bank has $270 million in assets and stock sells for about 105% of TBV
at $11.50.
- Bank should be worth, say, 140% TBV in a sale.
4) Standard conversion took place 3 1/2 years ago and can be sold.
5) Sandler O'Neill analyst, Avi Barak, had it on his list for the SNL Dartboard
challenge for 2005. (It declined 11.5% and he came in number 10 of 15 contestants!)

Cons:
1) Monarch Community is located in rural southern Michigan. Market
location will influence takeout price, should it occur.
2) General asset quality is likely still sub-standard.
3) Illiquid.

I own this stock.

---------------------------------------------------------------------------------------------------------------
MCBF is a Buy for the following reasons:
1) Management/ BOD purchased 4.7% of the shares at the IPO.
2) ESOP owns/ will own 8% of the shares according to the offering circular.
Points 1) and 2) suggest that management and employees will think as owners in addition to acting as employees.
3) From 1997 to 2000 some of the bank's key statistics were good to excellent (ROA, ROE, efficiency ratio).
- Exactly why the key performance indicators fell in 2001/ 2002 is unclear. My suspicion is that they were cleaning up the bank prior to going public and that we will see favorable key performance statistics again.
4) At $12 per share, the MV/BV is ca. 76%.
5) Equity to Assets Percentage is: 18.5% so there should be funds available for stock buybacks.
6) Jeff Halis own 1.0% of the shares - he has shown that he knows S&Ls!

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-- PULB --
PULB Jul. 1 2003, 2:35 PM ET by sturmdrang (view profile) rating: Sell
PULB performance:
Price near date of rating (07/01/2003): 9.32
Recent price (04/29/2016): 16.17
Price change: +6.85
Dividends collected: 4.46

Gain/Loss over 6688 days: +11.31 +121.35% Annualized Gain/Loss: +6.62%
PULB - Pulaski Savings, St. Louis
The stock of this $430 million savings institution has been on a roll, rising from $21.50 to a current $27.80 in just the last three months. Its key operating statistics are favorable:
ROE:......14.7%
ROAA:.. 1.4%
Efficiency Ratio:...56%
Assets per Office:... $86 million

Mortgage loan originations were over $1 billion in 2002 with resulting non-interest income to operating revenue of 43%. This, of course, begs the question of what happens when mortgage volume dries up.

With a P/E of nearly 16 and a current market valuation of 222% of book value, this fine savings bank, like many other thrifts, carries too rich a price. Although Stifel, Nichols rates it a Hold, I place it in the Sell category.

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-- SOBI --
SOBI Mar. 20 2004, 03:36 AM ET
Rating changed on
Apr. 26 2004, 1:18 PM ET
by sturmdrang (view profile) rating: Buy
SOBI performance:
Price near date of rating (03/22/2004): 6.74
Price near end of rating (04/26/2004): 5.77

Gain/Loss over 36 days: -0.97 -14.39% Annualized Gain/Loss: -145.90%
SOBI - Sobieski Bancorp. South Bend, Indiana
This $111 million thrift has had its share of problems, primarily caused by a former executive's lending practices in 2002. Losses in the past 2 1/2 years are $7.5 mil and the latest loss of $ 3.7 mil (7-12 2003) has resulted in an undercapitalized situation. In February the stock fell sharply from $12 to its current $6.80, after the most recent loss and the OTS' cease and desist order were announced.

The exam questions: is there value in Sobieski and can shareholders prosper by holding SOBI? Some considerations:
1) MV to BV: 83.4 %
2) Efficiency Ratio: 191%!!!
3) Funding: $71.4 mil customer deposits; $33.5 mil FHLB advances
4) Number of offices: 3
5) Location: South Bend is a relatively properous midwestern city, home to Notre Dame University. A commuter train travels to Chicago.
6) Deferred tax valuation reservation: Its tax NOL carryforwards were determined to be overvalued causing a $1.1 million valuation reserve to be established. This step was necessary because the return to profitability and use of the NOLs was considered less likely than more likely.
- If SOBI returns to profitability, however, this reserve could be reversed.
7) Management: A new president was installed in Dec 2002.
8) Regulatory supervision: Due to its undercapitalization, caused by the loan losses, OTS placed a cease and desist order on SOBI in February. Dividend payments have ceased.

As someone once said, the problem with cockroaches is that, if you see 3 or 4, there are normally many more hidden away. The insect exterminators have been in SOBI for a time and, given its small size, they should have located most of the problem loans and practices by now. A further signficant charge-off would surprise me, although this does not mean that the bank can return to profitability. A likely strategy would be to clean up the bank and then put it on the market. The first step is well underway.

Recommendation: The bank is undercapitalized - not bankrupt - and is under regulatory supervision. A beat-up $200 mil bank, SFBI, not far from South Bend, was sold in the spring of 2003 for 122% MV to BV. A similar price might be possible for SOBI. For patient investors, SOBI could be a BUY.

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SOBI Apr. 26 2004, 1:18 PM ET by sturmdrang (view profile) rating: Hold
SOBI performance:
Price near date of rating (04/26/2004): 5.77
Recent price (07/30/2013): 0.47
Price change: -5.30
Dividends collected: 10.455

Gain/Loss over 6388 days: +5.16 +89.34% Annualized Gain/Loss: +5.10%
Update as of April 26, 2003:

Due to pending sale of its "good bank" assets/ liabilities to MFBC and the retention of its "bad bank" assets/ liabilities in SOBI and until more details are known about the "bad bank's" remaining net assets, rating is changed to "hold".



SOBI - Sobieski Bancorp. South Bend, Indiana
This $111 million thrift has had its share of problems, primarily caused by a former executive's lending practices in 2002. Losses in the past 2 1/2 years are $7.5 mil and the latest loss of $ 3.7 mil (7-12 2003) has resulted in an undercapitalized situation. In February the stock fell sharply from $12 to its current $6.80, after the most recent loss and the OTS' cease and desist order were announced.

The exam questions: is there value in Sobieski and can shareholders prosper by holding SOBI? Some considerations:
1) MV to BV: 83.4 %
2) Efficiency Ratio: 191%!!!
3) Funding: $71.4 mil customer deposits; $33.5 mil FHLB advances
4) Number of offices: 3
5) Location: South Bend is a relatively properous midwestern city, home to Notre Dame University. A commuter train travels to Chicago.
6) Deferred tax valuation reservation: Its tax NOL carryforwards were determined to be overvalued causing a $1.1 million valuation reserve to be established. This step was necessary because the return to profitability and use of the NOLs was considered less likely than more likely.
- If SOBI returns to profitability, however, this reserve could be reversed.
7) Management: A new president was installed in Dec 2002.
8) Regulatory supervision: Due to its undercapitalization, caused by the loan losses, OTS placed a cease and desist order on SOBI in February. Dividend payments have ceased.

As someone once said, the problem with cockroaches is that, if you see 3 or 4, there are normally many more hidden away. The insect exterminators have been in SOBI for a time and, given its small size, they should have located most of the problem loans and practices by now. A further signficant charge-off would surprise me, although this does not mean that the bank can return to profitability. A likely strategy would be to clean up the bank and then put it on the market. The first step is well underway.

Recommendation: The bank is undercapitalized - not bankrupt - and is under regulatory supervision. A beat-up $200 mil bank, SFBI, not far from South Bend, was sold in the spring of 2003 for 122% MV to BV. A similar price might be possible for SOBI. For patient investors, SOBI could be a BUY.

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