SBFG - State Bank Financial Group (fka "Rurban Financial")

[DTEJD1997]

Hey all:

 

Anybody else follow SBFG?  This company used to be known as "Rurban Financial".

 

This is a small community bank based in NW Ohio.  They had a near death experience in the financial meltdown but have since made a comeback and are doing reasonably well.  In fact, I would argue that they are getting close to being back to good shape.  Not there yet, but getting close...

 

The stock has backed off lately.  There are several factors that might make this a compelling investment:

 

A). Selling at a discount to book value both tangible and GAAP book value

B). Selling at a P/E ratio of less than 7

C). Company started a dividend and then raised it.  I suspect it will again be raised in the upcoming 12 months.

D). Heavy insider purchasing.  NO SALES

E). Actual "cash" earnings are actually higher than reported earnings due to amortization of goodwill.  This amounts to about $.06/share per year.

F). Earnings have been improving nicely and are likely to continue, albeit at a slower rate.

G). Increasing loan quality & retained earnings will allow company to grow in the future.

H). Capital levels are now solid and are improving every quarter, even with the dividend.

 

So I am somewhat surprised that this stock has gotten down to around $7/share.  I will be the first to admit that being a small community bank should result in it trading at a discount...

 

Should it be trading for only 7 growing earnings?  And below both measures of book value?  They are making about 10% ROE per year.  That will probably get somewhat better in the near future.

 

I would argue, NO.  I think SBFG could be easily trading for $11/share in a year or so.

 

Any thoughts?

[LC]

I have their annual sitting in my "to-read" pile...now I have no excuse not to read it!

[Guest wellmont]

unless your community bank is being bought it will just float around bobbing up and down. I follow a lot of them. they don't do much unless there is a corporate action. there are plenty of cheap small banks. this one has plenty of company. :)

[Kraven]

Hey all:

 

Anybody else follow SBFG?  This company used to be known as "Rurban Financial".

 

This is a small community bank based in NW Ohio.  They had a near death experience in the financial meltdown but have since made a comeback and are doing reasonably well.  In fact, I would argue that they are getting close to being back to good shape.  Not there yet, but getting close...

 

The stock has backed off lately.  There are several factors that might make this a compelling investment:

 

A). Selling at a discount to book value both tangible and GAAP book value

B). Selling at a P/E ratio of less than 7

C). Company started a dividend and then raised it.  I suspect it will again be raised in the upcoming 12 months.

D). Heavy insider purchasing.  NO SALES

E). Actual "cash" earnings are actually higher than reported earnings due to amortization of goodwill.  This amounts to about $.06/share per year.

F). Earnings have been improving nicely and are likely to continue, albeit at a slower rate.

G). Increasing loan quality & retained earnings will allow company to grow in the future.

H). Capital levels are now solid and are improving every quarter, even with the dividend.

 

So I am somewhat surprised that this stock has gotten down to around $7/share.  I will be the first to admit that being a small community bank should result in it trading at a discount...

 

Should it be trading for only 7 growing earnings?  And below both measures of book value?  They are making about 10% ROE per year.  That will probably get somewhat better in the near future.

 

I would argue, NO.  I think SBFG could be easily trading for $11/share in a year or so.

 

Any thoughts?

 

I do.  Great little bank.  I used to own them and did well with them, but sold (too early as usual).  I don't disagree with any of your numbers and information, but to me when I think about their business and make some adjustments it's not as cheap to me as it might seem.  I tend to be very conservative with my bank valuations, but I wouldn't be a buyer here.  I am sure to my detriment!  I'd love to own it again though if the opportunity arose.