24 MAY / JUNE 2018 INDIANA BANK & THRIFT STOCK UPDATE Michael A. Renninger Principal Renninger & Associates LLC mrenninger@ renningerllc.com Renninger & Associates LLC is a Diamond Associate Member of the Indiana Bankers Association. Article author Stock Analysis Review as of March 31, 2018 Bank executives and board members are continually seeking concise market information about how their banks compare and contrast with their competitors. This column reprises a former Indiana Bank & Thrift Stock Update magazine feature, adding a digital twist by providing the bulk of statistics online. To access detailed statistics regarding institution size, pricing, profitability and other characteristics, click on the icon below right on this page in HB Digital, or visit the designated website location. This edition focuses on the 34 banks and thrifts in Indiana that are traded on NASDAQ or on the OTC/ Pink Sheets. Regarding banks, it is instructive to consider the asset size, stock trading characteristics and profitability of Indiana’s 11 NASDAQ-traded banks, compared to the 15 banks traded on the OTC/Pink Sheets. Selected median data points are as follows: NASDAQ OTC/PINK Asset Size $3.393M $443M Stock Price Change (2 Years) 54% 41% Stock Price Change (1 Year) 10% 9% Stock Price Change (Q1 YTD) (3%) 0% Price/Tangible Book Value 202% 118% Price/LTM Earnings 19.5X 14.7X Avg Daily Volume (3 months) 51,221 242 Return on Average Assets 1.17% 0.87% Loan/Deposit Ratio 94% 88% Efficiency Ratio 59% 65% The improvement in bank and thrift stock pricing is readily tracked to the 2016 presidential election. The market quickly reacted to the expectation of lower taxes, reduced regulation, higher interest rates and a generally improving economy. As expectations evolved into reality, stock prices moved higher, until the recent wave of geopolitical and market risks weighed on first-quarter 2018 sentiment. The median NASDAQ-traded bank is considerably larger, trades at a significant premium in higher volume, and has greater profitability, due in part to operating at a higher loan-to-deposit ratio with more efficiency, when compared to OTC/Pink Sheet banks. The logical takeaway is that the investing public tends to favor banks with large geographic reach and/or market penetration that can achieve greater profitability through economies of scale. Shifting focus to thrifts in Indiana, the pending sale of United Community Bank (Lawrenceburg, IN) to Civista Bancshares Inc. (Sandusky, Ohio) will leave First Capital Inc. (Corydon, IN) as the only remaining NASDAQ-traded thrift in the state. There are six thrifts that currently trade on the OTC/Pink Sheets, and about another half dozen that formerly were thrifts, which have converted to bank charters in recent years. Thrifts tend to be somewhat less profitable than their bank peers, partly due to smaller asset sizes and lower efficiency ratios. While first-quarter earnings announcements are not available as of this writing, most Indiana financial institutions are expected to experience a strong first quarter and an even stronger year in 2018. This, of course, includes privately held banks and thrifts that remain an important part of the Indiana financial institution landscape. Leaders of these organizations have been expressing a cautious optimism about the future of community banking. Clearly, however, when a bank or thrift decides it is time to consider sale, the tendency is to gravitate toward offers from organizations that can pay an attractive purchase price with a desirably priced and liquid stock. HB Indiana Statistics To access statistics through March 31, 2018, click on the hand icon in HB Digital, or go to: indianabankers.org/indianabank-thrift-stock-update.
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