36 JULY / AUGUST 2018 Stock Analysis Review as of May 31, 2018 The vast majority of Indiana banks and thrifts gained in share price as of May 31, compared to the last Indiana Bank & Thrift Stock Update report as of March 31, and are now in positive territory for the year. This improvement mirrors the year-to-date increases in most of the broad market and bank indices. The most impressive price movement was made by Merchants Bancorp, which is up 30 percent YTD, but still trades at just 10.9 times earnings. The stock, which was priced at $16 for the Oct. 31, 2017, initial public offering, was $25.51 as of May 31, and has recently traded over $29. MBIN announced its second Illinois acquisition on June 13. It will purchase FM Bancorp Inc. of Paxton, Illinois, a $114.6 million company, for $21.9 million in cash, which represents 145 percent of book value and 23.4 times earnings. German American Bancorp Inc. completed the acquisition of five former MainSource Bank branches in Columbus and Greensburg on May 19. GABC paid $7.4 million in deposit premium for $175 million in deposits, and also acquired $120 million in loans. It is rare for a branch transaction to provide a buyer with a 40 percent loan-to-deposit ratio, much less 69 percent, as in this case. The branch deal was required by regulators to resolve deposit concentration issues resulting from the MainSource/First Financial Bancorp merger, which was completed on April 1. In that transaction, MainSource shareholders were paid $1.04 billion in FFBC stock, which represents about 200 percent of book value and 21 times earnings. Just days after completing the branch acquisition, GABC continued its winning streak by announcing the acquisition of First Security Inc., based in Owensboro, Kentucky, on May 22. GABC will pay $105.1 million for the bank with $586 million in assets, representing 153.5 percent of book value and 36.1 times earnings. GABC will use its stock, which traded at 248 percent of tangible book value on May 31, to fund 70 percent of the purchase price. Wells Fargo announced the sale of 52 branches, including all 33 of its Indiana branches, to Flagstar Bank of Troy, Michigan, on June 5. Flagstar will pay a 7 percent premium on $2.3 billion in deposits and will acquire only $130 million in loans (i.e., a relatively low 6 percent loan-to-deposit ratio). It was reported that the average cost of deposits is only 0.04 percent. Flagstar intends to use the retail deposits to reduce its dependence on higher-cost Federal Home Loan Bank deposits and other wholesale funds, while also trying to reduce its focus on mortgage lending in favor of small business and middle-market commercial loans. The majority of Wells Fargo’s Indiana branches and a large percentage of deposit dollars are centered in the greater Fort Wayne area. Fort Wayne natives will remember these locations as Lincoln Bank branches before Norwest acquired them. HB Michael A. Renninger Principal Renninger & Associates LLC mrenninger@ renningerllc.com Renninger & Associates LLC is a Diamond Associate Member of the Indiana Bankers Association. Indiana Statistics To access the size, pricing and profitability report through May 31, click on the hand icon in HB Digital, or go to: indianabankers. org/bank-thrift-stock-update INDIANA BANK & THRIFT STOCK UPDATE
RkJQdWJsaXNoZXIy MTg3NDExNQ==