I am probably one of the few on this board who spends his spare time digging through the financial services sector. Regional and community banks I find as interesting opportunities into a recovering economy.
This one will take some work. NIM is great at 4.56% and the stock is trading at a discount to Tangible Book Value of $11.84 which is also a big positive.
The primary challenge and first big red flag is the number of Construction and Development Loans on the books. Furthermore, I am finding minimal print dialogue regarding the strategy, plan, and collateral values of this very important segment. For instance, this is the worst segment of the lending market over the past 24 months; however, over the last three quarters this segment has grown with the bank.
From the September 10-K which is different from the call report figures attached:
"In addition, $514.8 million of the loan portfolio is concentrated in real estate construction loans, including raw land, land development, residential lots, speculative and presold residential construction and commercial construction loans (both owner-occupied and non-owner occupied). Of this amount, $215.3 million, or 41.8%, represents land and lot loans; $123.5 million, or 24%, represents land development loans; $86.7 million, or 16.8%, represents speculative and presold residential construction loans and $89.4 million, or 17.4%, is commercial construction. The Company’s real estate lending is conducted within its operating footprint in markets it understands and monitors."
It would not take much to wipe out $4 million+ in earnings with this portfolio. Enough to scare me away until the market recovers.