Some ideas

[Guest HarryLong]

 

The Best Banks in America

 

http://seekingalpha.com/instablog/365592-harry-long/184033-the-best-banks-in-america

 

 

 

Being a banker or a bank investor in America in the last half decade has been a hellish experience for many. However, the banks I have compiled below have not only remained profitable throughout the past few years, but in many cases, have also grown tremendously.

 

Analyzing banks is notoriously frustrating. As an exercise, I try to keep an up to date list of the best performing banks in the United States, ranked by earnings stability and growth, but even the most meticulous methods are often frustrated by the fact that the earning results of banks are notoriously volatile, especially in the current competitive environment.

 

Banks which I used to rank as top notch have sometimes had earnings decreases in subsequent quarters. Although many of the banks I list below will continue to prosper, undoubtedly, some will stumble, even though they may possess top-notch historical performance. Such is the life of the banking analyst! I have often found that, when investing in banks, more money is made and kept by reacting to results as they unfold (and often beating a hasty retreat when numbers are untoward), rather than in trying to anticipate earnings.

 

With that being said, I think compiling a list of banks with stable results and healthy growth is an excellent exercise, so long as the real emphasis is in pruning the list going forward.

 

The Best Banks in America

 

TYBT.ob

PRSP

FFIN

PFIS.ob

HIFS

CNBKA (trading below book)

CAC

THFF

NWFL

PKBK (trading below book)

 

 

Honorable Mention (Usually stable earnings results with lower historical growth than the "Best Banks" group. However, I monitor these names for a pickup in earnings growth.)

 

ALNC

CFNB

GABC

FFBC

BMRC

NKSH

 

 

Disclosure: I am long TYBT.OB, PRSP, FFIN, THFF, NWFL.

 

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Short Idea: WHX

 

 

 

http://seekingalpha.com/instablog/365592-harry-long/184027-short-idea-whx

 

 

 

 

 

WHX is a classic negative carry short idea based on the notion that WHX is mispriced due to people reaching for yield, retirees who are unsophisticated and want dividends, quant funds searching for higher dividend yields, etc. I give a special thank you to Citron Research for first bringing this idea to the market's attention.

 

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[bold, underlining, italics my own, from 10-K page 7]

 

 

 

 

General

 

 

 

Whiting USA Trust I is a statutory trust formed in October 2007 under the Delaware Statutory Trust Act, pursuant to a trust agreement (the “Trust agreement”) among Whiting Oil and Gas as trustor, The Bank of New York Trust Company, N.A., as Trustee (subsequently renamed The Bank of New York Mellon Trust Company, N.A., and hereinafter referred to as “Trustee”), and Wilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”). The initial capitalization of the Trust estate was funded by Whiting in November 2007. The Trust maintains its offices at the office of the Trustee, at 919 Congress Avenue, Austin, Texas 78701. The telephone number of the Trustee is  1-800-852-1422  .

 

 

 

The Trust makes copies of its reports under the Exchange Act available at www.businesswire.com/cnn/whx.htm. The Trust’s filings under the Exchange Act are also available electronically from the website maintained by the Securities and Exchange Commission (“SEC”) at http://www.sec.gov. In addition, the Trust will provide electronic and paper copies of its recent filings free of charge upon request to the Trustee.

 

 

 

As of December 31, 2007, the Trust had no assets other than a de minimus cash balance from the initial capitalization and had conducted no operations other than organizational activities. In April 2008, the Trust issued 13,863,889 units of beneficial interest in the Trust (“Trust units”) to Whiting in exchange for the conveyance of a term net profits interest (“NPI”) by Whiting Oil and Gas. The NPI represents the right for the Trust to receive 90% of the net proceeds from Whiting’s interests in certain existing oil, natural gas and natural gas liquid producing properties which we refer to as “the underlying properties”. The underlying properties are located in the Rocky Mountains, Mid-Continent, Permian Basin and Gulf Coast regions. The underlying properties include interests in 3,077 gross (373.1 net) producing oil and gas wells. Immediately after the conveyance, Whiting completed an initial public offering of Trust units selling 11,677,500 such units. Whiting retained ownership of 2,186,389 Trust units, or 15.8% of the total Trust units issued and outstanding.

 

 

 

The NPI will terminate when 9.11 MMBOE have been produced and sold from the underlying properties (which amount is the equivalent of 8.20 MMBOE in respect of the Trust’s right to receive 90% of the net proceeds from such reserves pursuant to the NPI), and the Trust will soon thereafter wind up its affairs and terminate. As of December 31, 2010, on a cumulative accrual basis 3.90 MMBOE of the Trust’s total 8.20 MMBOE have been produced and sold and a cumulative 0.02 MMBOE have been divested. Further detail on the reserves is provided herein under the section titled “Properties-Description of the Underlying Properties — Reserves”, and such reserve information is based upon a reserve report prepared by independent reserve engineers Cawley, Gillespie & Associates, Inc. for the underlying properties at December 31, 2010, which we refer to as the “reserve report.” According to the reserve report, the portion of the 9.11 MMBOE (8.20 MMBOE at the 90% NPI) reserve quantities attributable to the NPI not yet produced or sold as divestitures at December 31, 2010 is projected to be produced from the underlying properties by November 30, 2015, and the reserve report is based on the assumptions included therein. See “Risk Factors” in Item 1A of this Annual Report on Form 10-K for additional discussion. Production from the underlying properties for the year ended December 31, 2010, was approximately 60% oil and approximately 40% natural gas.

 

[bold, underlining, italics my own, from 10-K page 7]

 

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[bold, underlining, italics my own from 10-k, page 21]

 

Financial returns to purchasers of Trust units will vary in part based on how quickly 9.11 MMBOE are produced and sold from the underlying properties, and it is not known when that will occur.

 

The NPI will terminate at the time when 9.11 MMBOE have been produced and sold from the underlying properties (which amount is the equivalent of 8.20 MMBOE in respect of the Trust’s right to receive 90% of the net proceeds from such reserves pursuant to the NPI). The reserve report prepared by the Trust’s independent petroleum engineer dated as of December 31, 2010 (the “reserve report”) projects that 9.11 MMBOE will have been produced and sold from the underlying properties by November 30, 2015. However, the exact rate of production cannot be predicted with certainty and such amount may be produced before or after the date projected by the reserve report. If production attributable to the underlying properties is slower than estimated, then financial returns to Trust unitholders will be lower assuming constant prices because cash distributions attributable to such production will occur at a later date.

 

[bold, underlining, italics my own from 10-k, page 21]

 

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Disclosure: I am short WHX.

 

 

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Short Idea: GNI

 

 

 

http://seekingalpha.com/instablog/365592-harry-long/184026-short-idea-gni

 

 

 

GNI is a classic negative carry short based on the notion that GNI is mispriced due to people reaching for yield, retirees who are unsophisticated and want dividends, quant funds searching for higher dividend yields, etc. I give a special thank you to Citron Research for first bringing this situation to the market's attention.

 

Disclosure: I've been trying to short GNI, but can't find any shares to borrow. I will keep trying.

 

[from the 10-K, page 1, bolding, italics, underlining my own]

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Item 1.    BUSINESS

 

 

 

The Registrant (“Trust” or “we” or “our” or “GNIOP”) owns interests in fee, both mineral and nonmineral lands, on the Mesabi Iron Range in northeastern Minnesota. The Registrant is a conventional nonvoting trust organized under the laws of the State of Michigan pursuant to a Trust Agreement dated December 7, 1906. Because the Trust properties and offices are all located in Minnesota, the Trust and matters affecting the Trust are under the jurisdiction of the Ramsey County District Court in Saint Paul, Minnesota. Income is primarily derived from royalties on iron ore minerals (taconite) mined by our lessees from these properties and minimum royalties. The Registrant is presently involved primarily with the leasing and care of these properties. There have been no significant changes in these functions since the beginning of the fiscal year.

 

 

 

The terms of the Great Northern Iron Ore Properties Trust Agreement, created December 7, 1906, state that the Trust shall continue for twenty years after the death of the last survivor of eighteen persons named in the Trust Agreement. The last survivor of these eighteen persons died on April 6, 1995. Accordingly, the Trust terminates twenty years from April 6, 1995, that being April 6, 2015.

 

 

 

At the end of the Trust on April 6, 2015, the certificates of beneficial interest (shares) in the Trust will cease to trade on the New York Stock Exchange and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the Trust. Upon termination, the Trust is obligated to distribute ratably to these certificate holders the net monies remaining in the hands of the Trustees (after paying and providing for all expenses and obligations of the Trust), plus the balance in the Principal Charges account (this account is explained in the Trust’s Annual Report sent to all certificate holders every year). All other Trust property (most notably the Trust’s mineral properties and the active leases) must be conveyed and transferred to the reversioner (currently Glacier Park Company, a wholly owned subsidiary of ConocoPhillips Company) under the terms of the Trust Agreement.

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[from the 10-K, page 1, bolding, italics, underlining my own]

 

 

 

Disclosure: I may initiate a short position in GNI over the next 72 hours.

 

Stocks: GNI

 

 

[beerbaron]

You might take a look at SBSI, especially how well they have managed both side of their balance sheet. These guys breed risk management and experience. They have been in the top 10% on the investment side for a while too...

 

Banks are good investments but I'm not sure much growth will come out in the next few years. Demand for loan just does not seem to pick-up which would point to deflation in the future.

 

BeerBaron

[bookie71]

don't forget FBAK

[zippy1]

Harry,

 

        Good to see you back.  Your ideas are always interesting and thought provoking. 

 

          Zippy.

[Kraven]

Harry, a good list of ideas.  Thanks for posting it.  I am familiar with some of the bank names you mentioned.  Many are quality banks, but I don't see really any that are cheap.  That being said, I will note that I'm not sure why PKBK is on the list.  I had only taken a very quick look at it before.  NPAs about 7% of assets.  Texas Ratio almost 100%.  Not sure how that fits with one of the best banks in America.  

[PlanMaestro]

Harry,

 

No hard feelings? In general, I am not sure what you meant with BEST banks and considering the opportunities out there they do not look particularly cheap either.I did not get to your second list, but the first ones do not have particularly good profitability ratios (ROE, ROA, PTPP/Equity, PTPP/Assets, all time high ROE) that are considered a measure of "quality" for banks. If it is about credit ratios, there is at least one bank that is very compromised in that list (PKBK). There are a couple with good deposits growth (ie: PFIS, HIFS, CNBKA) but with that kind of profile there are big banks that look better not to mention SME banks.