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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