26 SEPTEMBER / OCTOBER 2019 Michael A. Renninger Principal Renninger & Associates LLC mrenninger@ renningerllc.com Renninger & Associates LLC is a Diamond Associate Member of the Indiana Bankers Association. Securities offered through Ausdal Financial Partners Inc. Member FINRA/SIPC. 5187 Utica Ridge Road, Davenport IA 52807 563-326-2064. Renninger & Associates and Ausdal Financial Partners Inc. are separately owned and operated. Stock Analysis Review as of July 31, 2019 INDIANA BANK & THRIFT STOCK UPDATE The Size, Pricing and Profitability Reports for Indiana Banks and Thrifts as of July 31, June 30 and May 31 are available by clicking on the hand icon on the facing page or by visiting the designated website location. These Reports present the stock price changes for the 33 Indiana banks and thrifts that are traded on the NASDAQ and Over-The-Counter markets over the prior two years, one year and year-to-date, in addition to pricing and performance metrics. Selected banks headquartered outside Indiana, four broad market indices and five bank and thrift indices are also tracked. The year-to-date bank and thrift indices increased an average of 18.32% as of July 31, closely approximating the average 19.11% change in the year-to-date broad market indices. This is in stark contrast to the one-year and two-year time horizons, where the bank and thrift indices continue to significantly underperform the broad market indices. The median for Indiana’s NASDAQ-traded bank stock prices has increased 14.43% year-to-date, and Indiana’s OTC bank stocks increased just 1.2%. By comparison, the median for selected banks headquartered outside Indiana increased 18.94% yearto-date. Indiana’s OTC banks stocks, however, have outperformed Indiana’s NASDAQ-traded banks and selected banks headquartered outside Indiana over the one-year and two-year time horizons. As of July 31, the median price multiples for Indiana’s NASDAQ-traded bank stocks were 176% of tangible book value and 13.1 times earnings, which approximates the medians for the seven similarly sized out-of-state banks tracked with Indiana operations (i.e. 181% of tangible book value and 13.7 times earnings), but better than the seven large out-of-state banks tracked with Indiana operations (i.e. 154% of tangible book value and 10.9 times earnings). In contrast, Indiana’s OTC bank stocks were trading at 112% of tangible book value and 11.4 times earnings. Over the last two months, most previously announced mergers and acquisitions involving Indiana banks and thrifts have been or will soon be completed. Since South Bend-based Teachers Credit Union ($3.2 billion in assets) announced the acquisition of New Bancorp of New Buffalo, MI ($120 million in assets), two additional credit unions have announced the purchase of Indiana banks: • Fort Wayne-based 3Rivers Federal Credit Union ($1.1 billion in assets) announced the acquisition of West End Indiana Bancshares of Richmond ($299 million in assets) on Aug. 2; • Indianapolis-based Indiana Members Credit Union ($2 billion in assets) announced the acquisition of Commerce Bank of Evansville ($196 million in assets) on Aug. 13. The concept of credit unions buying banks is a relatively new phenomenon, despite the fact that the first transaction of this type occurred in 2011 when Griffith Savings Bank (Griffith, IN) sold to United Federal Credit Union (St. Joseph, MI) due to unique circumstances. As of this writing, there have been five Midwest bank sale announcements to credit unions since May, and five Florida bank sale announcements and one Arizona bank sale announcement to credit unions so far this year. Credit union acquisitions of banks are structured as asset acquisition and deposit assumption transactions, with cash representing 100% of the consideration. As such, the selling bank (assuming it is a C corporation) recognizes a gain on sale of assets and pays income taxes accordingly. Selling shareholders then pay income taxes on the net proceeds based on their tax basis. Credit unions’ exemption from federal income taxes and their mutual status (i.e. they do not pay dividends) enable them to pay prices that compensate for this double level of taxation. Indiana is home to 11 credit unions with assets over
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