tag:blogger.com,1999:blog-2149523431587168680.post6884888744373333776..comments2024-01-16T00:12:23.220-05:00Comments on Oddball Stocks: M&F Bancorp at 30% of TBV what's not to like? Nate Tobikhttp://www.blogger.com/profile/05660387777171986124noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-2149523431587168680.post-53793561630630713102017-06-01T12:14:01.990-04:002017-06-01T12:14:01.990-04:00Wow! It's very adorable. For both little and b...Wow! It's very adorable. For both little and big churches, <a href="https://www.church-loan.com/blog/church-financing" rel="nofollow">church financing in USA requirement</a> fulfilling facilities are available. <br />Anonymoushttps://www.blogger.com/profile/04003240809546181275noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-17927681021292470042015-09-16T02:49:13.230-04:002015-09-16T02:49:13.230-04:00still the cheapest bank on the planet? time for an...still the cheapest bank on the planet? time for an update?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-10229234321873164712014-04-25T06:20:47.943-04:002014-04-25T06:20:47.943-04:00Hi Nate,
I make a living investing in asset-value...Hi Nate,<br /><br />I make a living investing in asset-value small caps, mostly in the UK. I've been reading your blog for a couple of years and always enjoy your suggestions. Thank you.<br /><br />Don't be put off by the flack. Thinking and reasoning always upsets a minority who are poor at both. Anyone who develops expertise and an independent view is likely to be in the firing line - in inestment and other fields. It's a badge of achievement. Wear it proudly.CJohnnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-52590619777107445672014-04-24T17:29:06.119-04:002014-04-24T17:29:06.119-04:00http://www.loopnet.com/Listing/18147046/2634-Durha...http://www.loopnet.com/Listing/18147046/2634-Durham-Chapel-Hill-Blvd-Durham-NC/<br /><br />Indeed. They are renting out a portion of that large building on 15-501, which I would imagine is pretty valuable real estate since it is the only road that connects Durham and Chapel Hill. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-74071253959077609952014-04-17T11:50:44.124-04:002014-04-17T11:50:44.124-04:00I love your blog. This is a cool site and I wanted...I love your blog. This is a cool site and I wanted to post a little note to tell you, good job! Best wishes!!!Jan-Hein Streppelhttp://www.sallandstorage.nlnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-89385970969480212112014-04-14T08:18:57.757-04:002014-04-14T08:18:57.757-04:00Thomas,
This is a hidden secret of banks, usually...Thomas,<br /><br />This is a hidden secret of banks, usually their branches are valuable but held on the books at or close to nothing.<br /><br />I agree a $6m building isn't necessary, but it's almost their entire market cap! Buy a building in Chapel Hill and get a bank for free...<br /><br />NateNate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-33145247373774427082014-04-14T08:13:09.159-04:002014-04-14T08:13:09.159-04:00No strong view on M&F but thought I pass along...No strong view on M&F but thought I pass along some info on their unstated bank premises. I think you should add the difference to TBV. Also, 6M office building isn't exactly necessarily to operate the business. Anyway, just thought I pass this along.<br /><br />2705 CHAPEL HILL BLVD, Durham, NC 519,723<br />2634 CHAPEL HILL BLVD, Durham, NC 6,255,756<br />13 E HARGETT ST Raleigh, NC 1,074,890<br />101 Beatties Ford Road, Charlotte, NC 129,400<br />770 Martin Luther King Drive, Winston Salem, NC 626,500<br />100 South Murrow Blvd, Greensboro, NC 803,000<br />Market Value (Tax Assessed Value_Usually Low) 9,409<br />Current mark on Balance Sheet 7,227<br />Min Difference 2,182<br /><br />Best, ThomasAnonymoushttps://www.blogger.com/profile/16408101672077789317noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-1688590181418430172014-04-12T08:40:45.478-04:002014-04-12T08:40:45.478-04:00price, and price alone, is the ultimate determinan...price, and price alone, is the ultimate determinant of risk - Seth KlarmanAnonymoushttps://www.blogger.com/profile/16408101672077789317noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-85262909403433749812014-04-11T11:12:01.049-04:002014-04-11T11:12:01.049-04:00Thanks for the comments, I appreciate them.
I'...Thanks for the comments, I appreciate them.<br /><br />I'm not sure if churches are good or bad credits. I'd like to think they're good, but I'm not sure. In some ways they're flexible. A churches congregation has the ability to increase their giving which could bring a loan current if they hit a rough patch. <br /><br />On the TCE/equity point, I agree and disagree. I used TCE subtracting out preferred when discussing the value of the bank. But I think it's very appropriate to use full equity when looking at equity to assets. Your point is that shareholders margin of being wiped out is much slimmer, which is what I agree with. My counter point would be that the regulator is looking at their entire equity ratio, their tier one capital which includes preferreds. The regulator is going to step in and force a capital raise before shareholders are imperiled. If they're at 15% right now, and if that fell by half they're going to receive a consent order and be forced to correct their problems.<br /><br />But your final point is what rings true. This clearly isn't a perfect bank, it has problems and at 75% of TBV I would have passed, but its valuation is far too low. Ultimately valuation trumps most other things. I can overlook a lot of issues due to the price here. I'm hoping to have another post out early next week on this issue.<br /><br />Thanks for the great comment.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-42196689231820069022014-04-11T11:03:58.819-04:002014-04-11T11:03:58.819-04:00I think you're just seeing what happens with s...I think you're just seeing what happens with small stocks. Selling isn't rational at all, why would someone sell at $4 when the price was $5 a day before? I have no idea, but things like that should be viewed as opportunity.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-55512356655972438232014-04-11T11:03:16.658-04:002014-04-11T11:03:16.658-04:00Yes, I saw the insider purchases as I was research...Yes, I saw the insider purchases as I was research this. I debated on putting them in the post and decided against it. It's another factor that increases the validity of the investment thesis, but at 30% of TBV I thought it was cheap enough that I didn't need to pile on.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-11411963106146802392014-04-11T11:02:23.535-04:002014-04-11T11:02:23.535-04:00Henry,
Investors have all sorts of heuristics on ...Henry,<br /><br />Investors have all sorts of heuristics on what a bank is worth. I just posted a new post on how I view the intrinsic value of a bank. In short, I disagree with the 10% ROE required for BV, and it seems the market does as well.<br /><br />Thanks!Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-53720601482622962942014-04-11T11:01:27.213-04:002014-04-11T11:01:27.213-04:00I guess you could apply the same blanket statement...I guess you could apply the same blanket statement to all banks that had troubled loans in the crisis. Or really any company that hit a rough patch.<br /><br />My experience has been that no one knows the future, and in retrospect some decisions do look stupid and were. But there are other decisions that can end in bad outcomes that look perfectly acceptable at the time.<br /><br />I tend to give management the benefit of the doubt. There's also the second consideration that regulators are taking a closer look at loan books and some of the lending that was allowed in the past isn't allowed now.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-27917447781731970782014-04-11T10:59:48.253-04:002014-04-11T10:59:48.253-04:00Yes, this is an error, I was looking at the profit...Yes, this is an error, I was looking at the profit as reported to the Federal Reserve, not from their 10-K. Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-38308219716272256182014-04-09T16:59:58.048-04:002014-04-09T16:59:58.048-04:00I looked at this one a year ago and passed due to ...I looked at this one a year ago and passed due to the risk in the loan book. Almost half of their loans are to churches and just over 10% are residential firsts. Almost 20% of the church loans are considered impaired as of 12/31/13. It's not like one can reposses a church and turn around a sell it promptly and for a value near its cost. Demographically speaking, church attendance and revenue have both been flat to down in each of the past ten years. This is not a growing segment which only compounds the risks of these loans.<br /><br />You also need to segregate out the preferred when not only calculating TBV but also equity-to-assets. The common is $24.4mm and equity-to-assets is just 8.4% when backing out the preferred and the assets attributable to extinguishing the preferred. With over $26mm of impaired loans currently it doesn't take much to put the common in a very bad place.<br /><br />With 66% of their loans outstanding coming due within one year (80% for churches) -- similar to last year -- it indicates that the borrowers are living off of low-cost short-term financing which requires rolling it every year. If/when short-term rates rise, the borrower's interest burden will become materially greater and refinancing will become more challenging. Those 20% of church loans that are impaired will likely not fare well in that environment.<br /><br />All that said, there is a decent probability this thing makes investors money from here due to its valuation. But there is a lot of risk -- a lot more than you can find in similarly valued small banks. That's why I passed last year -- I found banks with just as low valuations that had higher quality loan books, capital, demographics, and management where the risk of total loss was much lower.<br /><br />Keep up the good work!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-48106285816726698182014-04-09T11:14:51.587-04:002014-04-09T11:14:51.587-04:00Man, extremely volatile the last two days. Up to ...Man, extremely volatile the last two days. Up to $5 yesterday, down to a little above $4 today. What's going on?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-54759577472295869562014-04-08T14:51:01.478-04:002014-04-08T14:51:01.478-04:00Thanks for sharing. Here is some related news, ins...Thanks for sharing. Here is some related news, insider recently bought 1000 shares. <br /><br />http://www.americanbankingnews.com/2014/03/27/insider-buying-mf-bancorp-director-acquires-1000-shares-of-stock-mfbp/dgforvaluenoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-52222207955969385902014-04-08T08:37:19.047-04:002014-04-08T08:37:19.047-04:00Thanks. Another great post!Thanks. Another great post!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-57917509117334331222014-04-08T01:51:40.383-04:002014-04-08T01:51:40.383-04:00MFBP looks like a nice recovery play. I think the ...MFBP looks like a nice recovery play. I think the huge discount to book represents a good margin of safety and i think I will buy some shares, if it settles down again. I own a similar bugger - CZBS, which operates roughly in the same area, I think, also very illiquid. Usually, I prefer well managed banks like LGHT or OVLY and I am willing to pay small premiums to tangible book if there is growth, decent profitability and a clean loan book.<br />There are many ways to skin the cat when it comes to community bank stocks.Clownbuckshttps://www.blogger.com/profile/10229774833219054115noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-37950944759434796552014-04-07T22:41:49.812-04:002014-04-07T22:41:49.812-04:00Wow, this is the first time I've seen such a c...Wow, this is the first time I've seen such a colorful annual report from such a micro-cap company! I recalled somewhere someone (probably Brooklyn Investor) saying a bank is worth book value if it earns 10% on equity. Quick look at Morningstar shows M&F earns around 1-2% return on equity. Maybe that's the reason for the low valuation?<br /><br />Anyways, good stuff as always Nate. Thanks for sharing your thoughts! Henryhttps://www.blogger.com/profile/07452313388704410334noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-56074699483936696912014-04-07T20:14:12.066-04:002014-04-07T20:14:12.066-04:00What do you think of the management that created t...What do you think of the management that created this NPL mess? Isn't there a high risk that the (same) management will repeat history by relaxing underwriting standards, especially considering everyone is searching for yield.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-67983762153548217972014-04-07T18:59:40.551-04:002014-04-07T18:59:40.551-04:00Thank you for your clarification.Thank you for your clarification.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-27819763350014673182014-04-07T17:01:18.218-04:002014-04-07T17:01:18.218-04:00The bank is barely profitable after the div for th...The bank is barely profitable after the div for the preferreds. The main question in my mind, will loans increase enough that profitability is better over the next few years? The bank is not currently earning its cost of capital, hence a discount. At 30% of TBV, the discount is too much. <br /><br />If profitability can increase, MFBP can re-rate to 100% of TBV (or higher). Otherwise it probably goes to 50-75%. Buying shares this cheap, your margin of safety is huge. Sometimes this is a patience game as MFBP could lie dormant for a year or two and then the re-rate can happen all in the span of a few weeks. <br /><br />Preferred is paying 2% div so MFBP probably wouldn't buy them back until the rate step-up. <br /><br />"Under the CPP, the Series A Preferred Stock carried a dividend rate of 5% for the first five years after issuance, after which the dividend rate increased to 9% until such time as the Series A Preferred Stock is repurchased or redeemed. Under the CDCI, the Series B Preferred Stock carries a dividend rate of 2% for eight years, after which time the dividend rate increases to 9% until the Series B Preferred Stock is repurchased or redeemed. The Company paid all of the dividends due on the Series A Preferred Stock up to the date of closing of the CDCI exchange on August 20, 2010, and is current in its payment of dividends on the Series B Preferred Stock."Joshhttps://www.blogger.com/profile/12028228587020987588noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-28533807827575870602014-04-07T16:48:21.449-04:002014-04-07T16:48:21.449-04:00Thanks Nate. Keep up the good work.Thanks Nate. Keep up the good work.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-63113607249974526272014-04-07T15:31:37.910-04:002014-04-07T15:31:37.910-04:00How did you determine that the company trades at 8...How did you determine that the company trades at 8x's earnings? Its seems like after you subtract for preferred stock, the earnings are minimal.Anonymousnoreply@blogger.com