Monday, October 28, 2013

Update for the Lottery Ticket and Regional Bank Basket Strategies/Sold 308 TRST at $6.64/Added 50 NPBC at $9.85/Sold: 40 EDG at $11.88 & 40 FOE at $9.61 and Bought 50 VSB at $5.17-LT Basket/CIDM, FCE/A, GST, BANC, UNB, BDGE, AMNB, FNB, TRST, WASH, CCNE, FISI, MBVT, WTBA

The Lottery Ticket and Regional Bank Basket strategies are updated on the last Monday of each month. The following two tables will have closing prices from the previous Friday. 

Friday 10/25/13 Closing Prices:
S & P 500 1,759.77
DJIA: 15,570.28
Russell 2000: 1,118.34

1. Update of Lottery Ticket Basket Strategy

The Lottery Ticket Basket Strategy uses a deep contrarian value strategy, appropriately characterized as catching a "falling knife". A common criteria for the stocks contained in this basket is a smashed stock price at the time of purchase and an ugly looking chart. Any technical analyst would most likely have a sell rating on the stock.

Selections are made primarily on statistical criteria including price to book, price to sales, forward P/E, cash per share and/or free cash flow. I spend anywhere from thirty minutes to an hour researching a potential purchase prior to purchase.

For many selections, I may be pessimistic about the firm's future, but not as pessimistic as the market. I will also occasionally see a ray of light at the end of a dark tunnel. Since I expect failures, which are inevitable and unavoidable in this kind of approach, I limit my exposure to $300 per stock plus any prior trading profits. 

After experiencing some success with this strategy, I now have a requirement that my total investment in all LT holdings can not exceed my total realized gains for this basket strategy. My total exposure is currently under $6,000.

The name of the strategy aptly describes the risk. It is somewhat analogous in many cases to playing a hand of blackjack for the purchase amount knowing that the card count favors the house. It is a form of entertainment and an alternative to a casino visit. Based on the results to date, this strategy is far more likely to produce positive results even with the LB's skill at the tables. The primary purpose of the LT strategy is to entertain Right Brain, let it swing for the fences with up to $300, and keep the Nit Wit from interfering with Left Brain's management of Headknocker's portfolio.

In addition to the transactions discussed below, I also sold 40 GGAL since my last update: Sold LT GGAL at $9.6

I also took a total loss on Velti:

2013 Velti 30 Shares -236.95
That is my first LT total loss. This strategy will inevitably breed more. Given the small amount of money devoted to each stock, I will not sell just because there is a sharp decline. I have had several stocks generate 50%+ gains after being down more than 50%.

Snapshots of realized gains can be found at the end of the Gateway Post on this topic: Stocks, Bonds & Politics: Lottery Ticket Strategy: New Gateway Post

Net Realized Gains: $13,246.95

Click to Enlarge:

LT Basket as of 10/25/13

My largest unrealized gains, greater than 30%, include the following (snapshots 10/25/13):

STKL +80.23%
I am surprised by STKL's performance. Bought 50 STKL at $5.85 (12/31/12 Post)

FCE/A 73.07%
A recent development that sparked a rally in FCE/A shares is discussed below.

GST 64.16%
GST was a recent add. Bought 100 GST at $2.68 (7/29/13 Post)

ING +42.36%
FCF +42.37%
First Commonwealth (FCF) beat expectations by 5 cents, reporting third quarter net income of $15.9M or $.16 per share, up from $.09 in the 2012 third quarter.

AMOT 41.17%
Allied Motion Technologies completed its acquisition of Globe Motors.

CPST +33.44%

A. Sold 40 EDG at $11.88 (see Disclaimer):

Snapshot of Trade:

2013 Sold 40 EDG at $11.88
Snapshot of Profit:

2013 Sold 40 EDG $$168.09

Edgen Group agreed to be acquired by Sumitomo Corporation for $12 per share in cash.

This caused a pop in the share price on 10/1/13: EDG: $11.89 +4.29 (+56.45%)

For virtually the entire period of my share ownership, I had an unrealized loss. One benefit of the LT strategy, given my personality, is that I really do not care about unrealized losses given the minuscule positions. Consequently, I have held several losing positions without creating any anxiety and many of those have turned into big percentage gainers.

B. Gastar Exploration (GST): Gastar Exploration announced that it would close the sale of its East Texas properties to Cubic Energy on 10/2. Gastar will receive $39.2M in proceeds in addition to the $4.7 held in escrow. This transaction had been repeatedly declared due to Cubic's financing difficulties.

Gastar Exploration received the proceeds on 10/2.

C. SOLD 40 FOE at $9.61 (see Disclaimer):

Snapshot of Trade:

2013 Sold FOE 40 Shares at $9.61

Snapshot of Profit:
2013 FOE 40 Shares +$115.69
Lottery Ticket Purchase: 40 FOE at $6.32 (January 2012)

D. Forest City: I last discussed Forest City in my August update: Item # 5 in LT Update FCE/A. I discussed the NYC Atlantic Yards project and the likelihood that Forest would seek a partner for that development.

On 10/11/13, Forest announced that it had signed a memorandum of understanding to form a joint venture for Atlantic Yards. The proposed joint venture party is the Greenland Group based in Shanghai, the largest real estate company based in China and ranked 359th in Fortune's list of Top 500 global enterprises.

I view a memorandum of understanding to be a basic outline for the negotiation of a complex contract. It is not a binding contract. The Memorandum of Understanding provides for Greenland to acquire 70% of the project, excluding the existing Barclays Center and the first housing tower including infrastructure, a platform and housing units. The agreement would cover both phase 1 and phase 2 of the Atlantic Yards project, a 22 acre residential and commercial real estate project in Brooklyn.

Due to prior profits, I was permit under the LT rules to go over $300 when making my last investment. The $300 limit is increased by the amount of prior trading profits: Item # 1 Recent Lottery Ticket Transactions: Bought 30 HUN @ 9.91 and 30 FCE/A at $11.58 (January 2012)

This announcement did cause a pop in the stock. On 10/10/13, the closing price was $18.54 and the stock rose $1.01 per share to close at $19.55 on 10/11.  FCE-A Historical Prices

Last Friday's Close: FCE-A $20.5

E. Bought 50 VSB at $5.17 (see Disclaimer):

Snapshot of Trade:

VantageSouth Bancshares (VSB) is a holding company headquartered in Raleigh, N.C. and offers banking services through VantageSouth Bank.

VSB has 46 branches located in the middle and eastern sections of N.C. Vantage South > Locations

Vantagesouth Bancshares Key Developments Page at Reuters

Raymond James identified this bank as one better positioned than many to withstand mortgage banking pressures.

This is a LOTTO purchase and is not deemed ready yet for the regional bank basket strategy.

No dividends are currently being paid, which nullifies consideration for inclusion in the regional bank basket.

A major negative is that the bank still has government preferred stock on its balance sheet and acquired more of that stock as a result of a 2012 merger. After the two banks combined (Crescent Financial and ECB Bancorp), the outstanding government preferred stock is currently $42.849M (pages 29-30 2013.6.30 - 10-Q

That preferred stock will need to be redeemed soon. The coupon will soon go from 5% to 9%. The bank is apparently taking steps to raise capital without issuing additional shares.

In August, VSB sold privately $38M of 7.625% subordinated notes maturing in 2023. 8-K

I noticed a preliminary VSB filing at the SEC for 2M shares of a fixed to floating rate preferred stock with a $25 par value. FORM S-1/A

The E.P.S. estimate, made by only one analyst, is for $.22 in 2013 and $.4 in in 2014. If the 2014 estimate proves prescient, then the current price is about right in my opinion. At $5.17, the forward P/E is 12.925. The price has some room to run in 2014 provided the bank is on track to beat that estimate; and there would be even more upside when and if the market expects similar earnings growth in 2014-2015 as in 2013-2014.

I noted some improvements in important financial metrics in the 2013 second quarter:

2013 2nd Quarter vs. 2012 2nd Quarter:
Q2 2013 Press Release

Net Income: $2.995M/ ($29,000)
E.P.S.: .$07 / .00 (after preferred stock dividends)
Operating Items ex items: $2.8M / ($422,000)
Net Interest Margin: 4.67%/ 4.33% (excellent)
Efficiency Ration: 92.89%/ 82.89% (way to high)
NPL Ratio: 1.14%/2.58% (okay and moving in the right direction)
NPA Ratio: 1.33%/2.41% (")
Net Charge Offs to Total Loans Annualized: .18% / .35% (good)
ROA .75%/.13% (moving in right direction, below average)
ROE: 6.27% (poor)
Tangible Book Value Per Share: $3.36
Total Risk Based Capital Ratio: 11.11%
Tangible Common Equity to Tangible Assets: 7.83%

Closing Price Last Friday: VSB: $5.14 +0.01

G. Cinedigm (CIDM): On 10/18/13, CIDM rose 15.69% to close at $1.77 per share after announcing the acquisition of Gaiam Home-Video Unit for $51.5M subject to working capital adjustments. Bloomberg That will be a huge acquisition for such a small company. Cinedigm to Acquire Gaiam, Inc.’s Entertainment Unit, a Multi-Platform Content Licensor and Distributor The price is approximately 3.3 times 2013 estimated EBITDA.

After this acquisition is completed, CIDM will become the largest aggregator and distributor of independent content and the fourth largest distributor of non-theatrical DVD's and Blue-Ray discs in the U.S. Annual retail sales are estimated to exceed $320M.

To partially finance this acquisition, Cinedigm sold $7,904,340 shares at $1.43 with an over-allotment option of up to an additional 1,185,000 shares. The remaining financing will come from a new $55M senior credit facility,  a subordinated loan facility of up to $5M, and an additional $3M of restricted CIDM common stock.

The acquisition was closed last Monday. Cinedigm Announces Closing of GVE Acquisition

Bought 100 CIDM at $1.55; Added 100 CIDM at $1.38

Closing Price Last Friday: CIDM: $1.81 -0.07 (-3.72%)

H. Par Technology (PAR): I am almost back to break-even on this LOTTO after the stock declined from $5.5 (10/12) to $3.85 (5/13). PAR Interactive Chart

The catalyst for the spurt was the announcement of a indefinite delivery/indefinite quantity contract, valued up to $85M, with the defense department. PAR Technology Awarded $85 Million U.S. Army Defense Contract

Earnings have not been inspiring since my purchase. (e.g. 10-Q for Q/E 6/30/13-$57,000 in net income on revenues of $59.516M or $.02 from continuing operations and (.01) from discontinued operations)

Bought 50 PAR at $5.44 as LT

Closing Price Last Friday: PAR: $5.48 +0.04 (+0.74%)

I. Symmetricom (SYMM): I had sold my 50 shares back in September 2012.  Sold 50 SYMM-LT at $6.66 By happenstance I decided to place a bid to repurchase the shares on 10/21 at the limit price of $4.75. The order was not filled, though the shares did trade as low as $4.76. On the next day, Microsemi announced that it would require SYMM at $7.18 in cash.  SEC Filed Press Release

2. Update for Regional Bank Basket Strategy

This strategy is explained in my Gateway Post on this topic:

I am not tracking reinvested dividends in the following table. The dividend yield showed in this table is calculated by Yahoo Finance based on last Friday's close. My dividend yield for each position will be different based on my total cost numbers. In most cases, with FNFG and VLY being notable exceptions, my dividend yield will be higher.

The unrealized gains per holding do not include reinvested dividends.

Over the life of this basket strategy, I anticipate that the dividends will provide 40% to 50% of the total return. I am generally keeping my total exposure between $40,000 to $50,000.

Regional banks fell in response to the FED's decision to continue asset purchases at $85B per month.

As noted in prior posts, it was my opinion that the recent rally in this stock sector was based on an anticipated expansion of net interest margin as the FED gradually reduced and then eliminated its asset buying. With intermediate and longer term rates gradually returning to normalized levels, banks could lend at higher rates and consequently earn more due to the net interest margin increase, particularly when ZIRP continues after intermediate and long term rates reset at higher levels. It was anticipated that there would be a couple of years when banks would continue paying their depositors almost nothing while being able to charge more for many types of loans.

Since my last update, I liquidated my position in LBAI and pared the position in FISI.  Sold 50 of 150+ FISI at $21.26; Sold 100 LBAI at $11.04

As noted below (Item #  I), I trimmed my exposure to TRST.

As a result of profit taking over the past several months, I am currently below my minimum $40,000 out-of-pocket investment threshold for this basket. I am not comfortable with valuations in this sector.

Realized Gains to Date: $15,039.49
Dividends 2010-2012 (updated yearly): $4,690.79

Click to Enlarge:

Regional Bank Basket as of 10/25/13
The largest unrealized dollar gain is in 141+ FMER shares:

FMER Unrealized Gain +$1,222.76
The largest percentage unrealized gain is in 50 shares of WASH:

WASH + 122.29%
A. Bridge Bancorp (BDGE): Bridge Bancorp announced that it will acquire FNBNY Bancorp and its wholly owned subsidiary First National Bank of New York for 244,110 BDGE shares subject to certain adjustments. Those adjustments include an increase to the extent principal is recovered on $6.3M in identified problem loans for two years after closing and decreased if recoveries of $.4M of certain insurance claim is not received by closing. FNBNY operates 3 full service banking centers in Nassau and Suffolk counties. This acquisition will extend BDGE's footprint into Nassau county. BDGE anticipates that the transaction will be accretive to earnings by 6%-8%, exclusive of approximately $2.2M in estimated merger and conversion costs, and assuming the estimated synergies "are fully phased in".  BDGE and a third party advisor estimated  FNBNY'S "gross credit impairments of $14 million or 14% of FBNY's loan portfolio". Needless to say, that is very high and an unfavorable number.

After the close on 10/1/13, Bridge Bancorp announced a public offering of  its common stock with a 15% over-allotment option. Bridge Bancorp priced the offering at $20.75 and was able to sell initially 1,675,000 shares. With the over allotment shares, Bridge Bancorp ultimately sold 1,926,250 shares at $20.75 raising approximately $37.5M in net proceeds.

The reason for he offering was stated to "in part to provide additional capital to Bridge Bancorp to support its acquisition of FNBNY . . ." That left me confused since the acquisition of  FNBNY was to be in BDGE's stock with a down the road cash payment of up to $6.3M depending on the recoveries for identified problem loans. As noted in a recent post, the capital ratios are fine, with the total capital ratio at 13.7% as of 6/30/13: Bridge Bancorp, Inc. Reports Second Quarter 2013 Results I can only speculate on the real reason for raising this much capital, which would include another possible acquisition that will need cash to close or the repurchase of its outstanding trust preferred security. The coupon on that TP is 8.5% with a principal amount at $16M. It may be redeemed at par after 9/30/14. 10-Q for 2013 2nd Quarter at pp. 32

The bank has 26 branches located in Suffolk County, New York (map at page 5 The geographic area would be known as the middle and eastern sections of Long Island. I noted earlier that the bank has just about exhausted their expansion opportunities in that area and any additional branch expansion in that area may not be worth the cost. As shown in that map, FNBNY has two branches in Nassau county so BDGE is moving into western Long Island, which is a natural extension to its existing geographic footprint.

I last discussed Bridge in an August post: Added 50 BDGE at $20.76. I currently also own the following shares: BOUGHT 50 BDGE AT $18Bought Back 50 BDGE at $19.65 I have been reinvesting the dividend. My average total cost on a 163+ shares is $19.69.

I have sold some shares when the price went over $23. Sold 50 BDGE at $23.5Sold 50 BDGE at $23.01.

Last Friday, Bridge Bancorp reported core net income of $3.4M or $.37 per share which was in line with estimates.

Net Interest Margin: 3.21%
Operating Efficiency Ratio: 61.86%
NPA Ratio: .25%
NPL Ratio: .46%
Coverage Ratio: 361.84%
Core ROA: .77%
Core ROE: 10.69%

Sandler O'Nell upgraded BDGE to buy on 10/14. The firm raised its price target to $26 from $25.

Guggenheim initiated coverage back in August with a buy rating and a $25 price target.

Closing Price Last Friday: BDGE: $23.42 -0.44 (-1.84%)

B. Added 50 NPBC at $9.85 (see Disclaimer):  National Penn Bancshares (NPBC) is a regional bank headquartered in Boyertown, PA. National Penn Bancshares, Inc. - Investor Relations As of 6/30/13, NPBC had 120 branches.

This purchase is an average down from my recent buy. Item # 2 Added 100 NPBC at $10.68 (8/17/13). I have nothing to add to that post.

Snapshot of Trade:

2013 NPBC Added 50 at $9.85
I originally bought NPBC as a Lotto and then elevated this bank to the regional bank basket strategy which allows me to invest more money.

After this last purchase, National Penn Bancshares reported third quarter net income of $24.6M or $.17 per share. The consensus estimate was for $.17. The consensus E.P.S. forecast for 2013 is $.71.

Net Interest Margin: 3.49%
Efficiency Ratio: 58.16%
ROA: 1.17%
ROE: 8.78%
ROTE: 11.55%
Tangible Book Value Per Share: $5.94
Charge Offs Annualized to Total Loans: .38%
NPL Ratio: 1.04%
Coverage Ratio: 183.9%
Total Capital Ratio: 16.89%
Tangible Common Equity to Tangible Assets: 10.61%
Total # of Branches: 120
Quarterly Dividend: 10 cents per share

Q3 2013 Results - Earnings Call Transcript - Seeking Alpha

Closing Price Last Friday: NPBC: $10.46 -0.04 (-0.38%)

C. Banc of California (BANC): Zacks upped BANC to a strong buy noting recent "strong" results and an "expected" earnings growth rate of 15%.

I currently own the following securities:

150 BANCL (senior bond): Added 100 BANCL at $25.1/Bought Roth IRA: 50 BANCL at $25.20
50 BANCP (Equity Preferred stock): Bought 50 BANCP at $25.19
50 BANC (common stock): Bought 50 BANC at $11.3 February 2013

Closing Price Last Friday: BANC: $14.18 -0.14 (-0.98%)

D. Union Bankshares (UNB): For the 3rd quarter, UNB reported net income of $2.1M or $.47 per share, up from $.44 in the 2012 third quarter. The Board declared a $.01 increase in the quarterly dividend to $.26 per share. SEC Filed Press Release: 3rd qtr 2013 earnings & div

UNB is a small bank based in Vermont: Profile Page at Reuters

I did not anticipate an increase in the dividend until 2015.

I currently own 50 shares:

I have also flipped 50 shares: Bought 50 UNB at $19.45 January 2013

At a total cost of $19.45 per share, the new dividend rate will result in about a 5.35% yield.

Item # 1 Sold 50 UNB at $19.5 July 2011- Item # 9 Bought 50 UNB at $18

Closing Price Last Friday: UNB: $21.90 -0.03 (-0.14%)

E. Huntington Bankshares: HBAN reported net income of $178M or $.20 per share, three cents better than the consensus estimate, and up 1 cent from the year ago quarter. Huntington Bancshares Incorporated Reports Net Income of $178 Million, or $0.20 Per Common Share, for the 2013 Third Quarter, Up 6% from the Year-Ago Quarter and Up 18% from the Prior Quarter

Net Interest Margin: 3.34%
Efficiency Ratio: 60.6%
NPA Ratio: .88%
Allowance for Credit Losses to NPLs: 220%
Return on Tangible Equity: 14.1%
Tangible Common Equity to Tangible Assets: 9.02%
Total Risk Based Capital Ratio: 14.67%

HBAN was first purchased as a LT and then promoted to the regional bank basket. Bought 30 HBAN @ 7.25 as LTAdded 30 HBAN as LT at $4.8Added 40 HBAN at $7.04

Closing Price Last Friday: HBAN: $8.93 -0.01 (-0.17%)

F. American National Bankshares: For the third quarter, AMNB reported net income of $4.2M or $.54 per diluted share, up from $.46 in the 2012 third quarter. American National Bankshares Inc. Reports Third Quarter 2013 Earnings

The consensus E.P.S. was for $.47 originating from just 2 analysts. AMNB Analyst Estimates

Net Interest Margin: 4.06%
Efficiency Ratio: 57.43%
NPA Ratio: .67%
Charge Offs: 0%
ROA: 1.3%
Return on Average Tangible Assets: 14.9%
Tangible Equity to Tangible Assets: 9.62%
Tangible Book Value Per Share: $15.63
Book Value Per Share: $21.03

AMNB was a recent add to the regional bank basket: Item # 4 Bought 50 AMNB at $21.16 (September 2013)

Closing Price Last Friday: AMNB: $23.25 0.00 (0.00%)

G. FNB: For the 3rd quarter, F.N.B. Corporation reported net income of $31.6M or $.22 per share, up from $30.7M in the year ago quarter. The E.P.S. number beat the consensus estimate by $.01.

Net Interest Margin: 3.64%
Efficiency Ratio: 59.72%
ROA: .99% (return on assets)
ROTA: 1.1% (return on tangible assets)
ROE: 8.5% (return on equity)
ROTE: 19.01% (return on tangible equity)
NPL Ratio: .94%
NPA Ratio: .93%
Coverage Ratio: 127.37%
Charge-Offs annualized: .25%
Total Risk Based Capital Ratio: 12.2%
Tangible Equity to Tangible Assets: 6.11% (low by my standards)

After profitable trades, I ended up with my lowest cost shares using FIFO accounting: Item # 5 Added 50 FNB at $7.8 (July 2010).

I thereafter added a 50 share lot: Bought 50 FNB at $11.25 (June 2013)

The consensus E.P.S. estimate for 2014 is $.9. FNB Analyst Estimates At a $12.5 price, the forward P/E using that estimate would be 13.89. At a $13.5 price, the forward P/E would be 15.

I could not find historical dividend information at FNB's website which is rare. I did find the information at

In the 2009 first quarter, the quarterly dividend was slashed by 50% to $.12 per share and has remained at that level until now.

Even though the dividend yield is good, the payout ratio is about 55% suggesting that there will be no dividend raise either this year or next year. A lack of dividend growth is a major negative, especially when the bank slashed the dividend to the current rate and has failed to nudge the dividend up since slashing it.

I am not likely to sell the shares bought at $7.8. The dividend yield at a total cost of $7.8 per share is about 6.15%. Hopefully, FNB will start to raise the dividend again in 2015 and the dividend yield at my constant cost number would start to go up.

I may sell the 50 shares bought last June at $11.25 when the forward P/E hits 15 or higher.

Closing Price Last Friday: FNB: $13.02 +0.04 (+0.31%)

H. Trustco (TRST): TrustCo reported third quarter net income of $10.3M, up 5.1% from the $9.8M for the 2012 third quarter.

2013 Third Quarter/2012 Third Quarter
E.P.S.: $.109/ $.104
Net Interest Margin: 3.12% / 3.21%
Efficiency Ratio: 51.15% / 49.99%
NPL Ratio: 1.47% / 1.92%
NPA Ratio: 1.16% / 1.36%
Coverage Ratio: 1.1 / .9
ROA: .91% / .89%
ROE: 11.64% / 10.97%
Dividend Payout Ratio: 60.38/ 63.13
Tangible Equity to Tangible Assets: 7.94% / 8.27%
Tangible Book Value Per Share: $3.76/ $3.81

Average loans increased 8.3% Y-O-Y.

Closing Price 10/22/13 (day of earnings release): TRST: $6.61 0.00 (0.00%)

Closing Price last Friday, 10/25/13: TRST: $6.76 -0.08 (-1.17%)

I. Sold 308+ Trustco at $6.644 (see Disclaimer): After reviewing the TRST earnings report, I decided to cut my position almost in half by selling all shares held in a satellite taxable account.

Snapshot of Trade:

Email Confirmation
Snapshot of Profit:

2013 TRST 308+ Shares +$238.38 (LT $223.27/ST $15.11)
Added 70 TRST at $5.9 (February 2010); Bought 50 TRST at $5.45 (August 2010); Added 50 TRST @ $5.48 (October 2010);  Added 100 TRST at $5.94 (February 2011)

I still own 365+ shares in the main taxable account where I quit reinvesting the dividends last April. Over 15 shares have been purchased with reinvested dividends which I am not tracking in the regional bank basket tables. When shares purchased with dividends are sold, however, I do include the gains/losses from those transactions in the net realized gain or loss. Posts discussing the remaining share purchases. Bought 50 TRST at $6.3 (December 2009)Bought 50 TRST at $4.01 (August 2011); ADDED 50 TRST at $5.1 (June 2012); Added 150 TRST at $5.17 (January 2013) I purchase was apparently not discussed in the blog. I bought 50 shares in the main taxable account at $5.65 in May 2011:

For the remaining shares, the total cost per share, including shares bought with reinvested dividends, currently stands at $5.34.

 J.  Washington Trust (WASH)Washington Trust reported third quarter net income of $10M or $.59 per share, up from $8.9M or $.54 per share in the year ago quarter. The consensus estimate was for $.57.

Net Interest Margin: 2.29%
Nonaccrual Loans to Total Loans: .83%
ROA: 1.29%
ROE: 12.82%
ROTE: 16.13%
Tangible Equity to Tangible Assets: 8.47%
Total Risk Based Capitol Ratio: 13.44%

Total deposits rose were up $220.2M or 9.9% in the last twelve months.

I currently own 50 shares, part of a 100 share lot bought at $15.26.

Bought 100 WASH at $15.26 (January 2010)-Sold 50 of 100 WASH @ $22.44 (January 2011)

The stock reacted positively to this report:

Closing Price 10/22/13: WASH: $34.75 +1.46 (+4.39%)

Closing Price Last Friday 10/25/13: WASH: $34.10 -0.31 (-0.90%)

K. Community Bank Systems (CBU): CBU reported third quarter E.P.S. of $.54. The consensus estimate was for $.52 per share.

2013 Third Quarter vs. 2012 Third Quarter:
Community Bank System Reports Record Third Quarter Earnings
Net Income: $21.989M / $18.367M
Diluted E.P.S.:  $.54 / $.46
Net Interest Margin: 3.94% / 3.79%
Efficiency Ratio: 58.6% / 56.5%
ROA: 1.22% / .98%
ROE: 10.26% / 8.12%
ROTE: 17.57% / 13.27%
NPL Ratio: .54% / .74%
NPA Ratio: .33% / .37%
Coverage Ratio: 215% / 167%
Charge Offs (annualized) to Total Loans: .17% / .21%
Tangible Equity to Tangible Assets: 7.38% / 7.54%
Tier 1 Leverage Ratio: 9.39% / 8.32%

Earnings Call Transcript - Seeking Alpha

I currently own 50 shares. Bought 50 CBU @ $23.18 (October 2010)

Closing Price Last Friday: CBU: $36.78 +0.26 (+0.71%)

L. CNB Financial (CCNE): After CCNE reported better than expected earnings after merger related expenses, RBC Capital reiterated its outperform rating and $30 price target, opining that CCNE was one of the best micro cap stocks for growth opportunities and current income. That target seems really high to me. Excluding merger related expenses and securities gains, pre-tax net income rose to $7.1M from $6.3M in the 2012 third quarter.

CNB Financial closed its acquisition of FC Banc on 10/15. The total consideration paid was approximately $41.6M, of which $8M was in cash and the remainder in CNB stock. FC Banc was the holding company for Farmers Citizen Bank which had 8 branch locations.

SEC Filed Press Release
(earnings impacted by merger related expenses)
Net Interest Margin: 3.38%
Charge Offs: -.34%
ROA: 1.03%
ROE: 14.45%
NPA Ratio: .79%
Total Risk Based Capital Ratio: 14.96%
Tangible Common Equity to Tangible Assets: 6.56%

Bought 50 CCNE at $11.06 (June 2010)

The RBC Capital report, which I do not have access, apparently had a positive impact on CCNE"s price:

Closing Price 10/23/13: CCNE: $19.28 +1.13 (+6.23%)

Closing Price Last Friday 10/25/13: CCNE: $20.13 -0.07 (-0.35%)

M. Financial Institutions (FISI): Financial Institutions reported third quarter net income of $5.8M or $.42 per share. The consensus estimate was for $.45. Only two analysts contributed to that consensus. FISI Analyst Estimates The quarter was hurt by provisioning costs of $2.77M, up from $1.193M in the 2013 second quarter and $1.764M in the 2012 third quarter.

2013 Third Quarter:

Net Income Available to Common Shareholders: $5.799M
E.P.S. : $.42
Payout Ratio: 45.24%
Net Interest Margin: 3.62%
Efficiency Ratio: 56.95%
NPL Ratio: .58%
Coverage Ratio: 258% (up from 227% as of 6/30/13)
ROA: .88%
ROE:  10.05%
ROTE: 12.88%

The 2012 third quarter had some unusual expense items including branch acquisition expenses and the CEO retirement expense, and the results are not comparable for those reasons.

I recently pared my position. Sold 50 of 150+ FISI at $21.26 The stock popped in late September after Sterne Agee initiated coverage with a buy rating and a $24 price target. Last Thursday, that firm downgraded FISI to neutral while keeping its $24 price target.

I was not enthusiastic about this report, but the market had a different opinion:

Closing Price 10/24/13: FISI: $23.35 +0.94 (+4.19%)

I own 50 shares recently bought in a satellite taxable account, where I am reinvesting the dividend, and 50 shares in the main taxable account where I have received dividend payments in cash.

Main Taxable Account: Item # 2 Bought 50 FISI at $15.55 (April 2012)

Satellite Taxable: Added 50 FISI at $18.8 (September 2013)

Closing Price Last Friday: FISI: $23.91 +0.56 (+2.40%)

N. Merchant's Bancshares (MBVT): Merchants Bancshares reported net income of $3.67M or $.58 per share for the third quarter. The consensus estimate was for $.64. Only two analysts contributed to that consensus. MBVT Analyst Estimates

Net Interest Margin: 3.14% (down from 3.29% 9/30/12)
Efficiency Ratio: 59.63%
NPL Ratio: .23%
NPA Ratio: .16%
Coverage Ratio: 455%
ROA: .88%
ROE: 12.89%
Total Risk Based Capital Ratio: 16.13%

The bank increased its provision for credit losses by $400,000 compared to $250,000 in the year ago quarter. Interest income and fees for loans and income on investments fell Y-O-Y. Total dividend and interest income was reported at $13.384M in the 2013 third quarter compared with $14.229M in the 2012 third quarter. Net income declined to $3.674M from $4.005M in the year ago quarter.

While I am impressed with the NPL and NPA ratios, I do not view this report favorably. I am not sufficiently negative to sell my shares yet.

Item # 5 Bought 50 MBVT at $26.25

Closing Price Last Friday: MBVT: $30.45 -0.06 (-0.20%)

O. West Bancorporation (WTBA): West Bancorporation reported third quarter net income of $4.36M or $.27 per share, up from $.22 in the 2012 third quarter. The consensus estimate was for $.26.

Net Interest Margin: 3.49%
ROA: 1.19%
ROE: 14.41%
Texas Ratio: 12.46%
NPL Ratio: .92%
Charge Offs Annualized to Average Loans Outstanding: .09%
Coverage Ratio: 116.38%
Tangible Common Equity to Tangible Assets: 8.24%
Total Capital Ratio (Consolidated): 14.08%


WTBA was a recent addition to this basket strategy:  Bought 100 WTBA at $11.67 (6/29/13 Post)

Closing Price Last Friday: WTBA: $14.16 +0.09 (+0.64%)

P. WBCO: I no longer own WBCO. The stock popped to over $17 after this announcement: Heritage Financial Corporation and Washington Banking Company to Merge WBCO shareholders will receive .89 shares of HFWA plus $2.75 in cash for each WBCO share.

Sold 151+ WBCO at $15  

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