2021 Vol 105 Issue 1

Hoosier Banker 45 Stock Analysis Review as of Nov. 30, 2020 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. 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. Indiana Statistics Click on the hand icon in HB Digital to access statistics through Nov. 30, Oct. 31 and Sept. 30, 2020, or visit: indiana.bank/bankthrift-stock-update The Size, Pricing and Profitability Reports for Indiana Banks and Thrifts as of Nov. 30, Oct. 31, and Sept. 30, 2020, are available by clicking on the icon on this page in HB Digital or by visiting the designated website location. These reports present the stock price changes for the 30 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. Overall, it appears that investors remain hopeful that the economy will be resilient as vaccines are approved and distributed, even as coronavirus cases spike. At this writing, there is still much economic uncertainty about the timing and amount of the next government stimulus package, and what investors can expect in the way of tax and other legislative changes. The balance of power in Washington, D.C., is to be determined by run-off elections for both of Georgia’s Senate seats on Jan. 5, 2021. Even then, investors will have to contend with legislative uncertainty, along with continuing domestic issues, international trade and military tensions. Over the last two months, bank indices have improved relative to broad indices, but continue to trail by a wide margin. While the NASDAQ and S&P 500 are up 36% and 12% year-to-date, the S&P 500 Bank and NASDAQ Bank indices are down 23% and 18% YTD, respectively. The median stock prices for Indiana’s NASDAQ and OTC/Pink banks are down 10% and 5% YTD, respectively. The median tangible book value and earnings multiples for the 11 NASDAQ banks headquartered in Indiana at Nov. 30, 2020, are 143% and 12.0, respectively, compared to 129% and 14.3 for the eight selected out-of-state banks with assets under $30 billion. By comparison, Indiana’s NASDAQ banks and the same out-of-state banks were trading at considerably higher median multiples at Dec. 31, 2019 (i.e. 181% of tangible book value and over 13 times earnings). In general, bank earnings have been negatively impacted by declining net interest margins (due to the protracted low interest rate environment) and significant loan loss provisions (due to asset quality concerns brought on by pandemic-induced business and employment interruptions). For the most part, third-quarter provisions for loan losses were considerably less than the extraordinary provisions in the first and second quarters of 2020. Fee income from mortgage loans and government sponsored loan programs have helped to offset these earnings headwinds. Many banks have seen 10% to 20% growth in deposits in 2020, largely due to extraordinary government stimulus and unemployment payments and cautious customers stockpiling cash in the face of economic uncertainty. It will be interesting to see when this “COVID bloat” dissipates, and the impact it may have on capital adequacy in the meantime. A number of banks are issuing subordinated debt to buttress capital, while other highly capitalized banks are considering stock buybacks. HB

RkJQdWJsaXNoZXIy MTg3NDExNQ==