I bought 500 shares of Citizens Bancshares Corporation (CZBS) at $2.50 per share today as an investment. I’ve been watching this small cap banking institution for years and couldn’t pass up on what I think is currently a screaming deal on it’s stock price.
Citizens Bancshares Corporation operates as the holding company for Citizens Trust Bank, which serves its customers through seven full-service financial centers throughout metropolitan Atlanta, Georgia, one full-service financial center in Columbus, Georgia, one full-service financial center in Birmingham, Alabama, and another in Eutaw, Alabama.
My basis for watching, and then buying, CZBS stems from my original post a year ago about this sector, and includes many of the same reasons I’ve previously written about concerning other similar positions (UWHR, CARE). It’s a well-run company, fundamentally sound, and provides valuable services to it’s communities. They realize that the success of their business depends upon the success of the communities they serve.
Citizens Bancshares will easily weather this financial crisis. They’ve been in business for 85 years, survived the last fifty years of recessions, and even made it through the Great Depression. They know how to survive and even prosper during tough economic times. As a matter of fact, CZBS is doing tremendously well compared to many of it’s peers.
While many other banks having been posting record losses during this financial meltdown, CZBS is still turning decent profits. According to it’s third quarter earnings announcement:
ATLANTA, November 11, 2008/PRNewswire-FirstCall/ — Citizens Bancshares Corporation (OTC Bulletin Board: CZBS) (the “Company”), the parent company of Citizens Trust Bank (“CTB”), today announced its third quarter earnings for the period ending September 30, 2008 of $0.29 per diluted share compared to $0.32 per diluted share for the same period in 2007. Net earnings for the third quarter decreased by $50,000 to $618,000 compared to $668,000 a year earlier and are in line with management’s expectations given the current operating environment. Earnings per diluted share for the nine month period were $0.56 compared to $0.90 per diluted share for the same period in 2007.
Yes, that’s $0.56 per share! While down from last year’s earnings, I still consider that pretty damn good for any bank right now, and even more incredible for a stock trading at only $2.50 per share.
So, now that CZBS is trading at less than one-fourth of it’s book value, carries twice as much cash as it’s stock price, and earns almost one-third of it’s stock price in one year, I though it just too good of a deal to pass up.
Comments 7
Looks like I’m not the only one who thinks to “buy when the buying’s good”.
Citizens Trust Bank Announces Purchase Agreement for a Full Service Branch in Lithonia, Georgia
Posted 11 Dec 2008 at 9:54 am ¶I’ve owned CZBS from $10 a share. At current prices, I think it is both
1) a bargain (cheap cheap).
2) completely unpredictable (doing poorly, non-performing loans are high, capital ratios are suffering).
I have only a small portion of my assets invested in this one. The other bank I own is CZFS, a small Pennsylvanian bank which has low non-performing loans, and is benefiting from rate cuts, and turning in record profits.
I would like to pick up one more small bank stock, but there are simply too many to research effectively, and no screener really helps in this sector.
I am definitely enjoying all this volatility. It will bring opportunities to people like us.
Posted 18 Dec 2008 at 5:59 am ¶Hi Parker..
I would like to pick up one more small bank stock, but there are simply too many to research effectively, and no screener really helps in this sector.
Yep, it can be a full time job keeping up with all of the regional banks, and some professionals make their living doing just that. It’s also almost impossible to try to effectively evaluate the small private banks too.
Here’s a strategy that I use to screen and evaluate the small banks that catch my interest:
First, I screen the Regional Banks sectors using Yahoo! Finance, searching for low price and acceptable fundamentals (P/E, P/S, ROI, Debt/Equity, etc.)
If I find something interesting, I’ll screen it again at Morningstar, Reuters, and maybe a few other sites to see if the screens jibe. I’ll also visit various forums to see what others are saying about the company. I’ll then visit the company website and read what they have to say there.
If I find something that really piques my interest, the first place I go to fully evaluate a company is the SEC, EDGAR Company Search and search for their filings by ticker symbol.
The 10Ks and 10Qs should give you all you need to know about company finances, and will also give you a good gauge about it’s history, future plans, corporate politics, and company culture. Other filings will tell you who’s buying, selling, or if any other interesting stuff is going on.
After you’ve read a few of these over time and learned the lingo, you’ll be able to tell if a company is in business to profitably serve it’s community or if it’s in business to enrich insiders at the expense of shareholders.
If I think I find a good company, invest in it, and the stock price drops, I can always fall back to blaming the SEC staff for my failings.
(Just a little sarcastic Chris Cox humor)
Actually, if a company passes my SEC screen I’ll research more into the area they serve and evaluate it against it’s competitors. Usually, these small banks aren’t going to be good growth candidates. They’ll likely remain within their market cap and continue to serve their individual communities.
What I look for is good business choices and the potential for remaining profitable, the potential for growth in the area it serves, chances for merger/arbitrage opportunity, or whether it’s stock price makes it a cigar butt opportunity.
What do you do?
Posted 18 Dec 2008 at 11:13 am ¶Looks like CZBS is taking TARP funds now.
http://www.sec.gov/Archives/edgar/data/813640/000110465909000568/a09-2478_18k.htm
Given the fairly poor shape the company seems to be in, this may actually be good news. The terms aren’t exorbitant, anyway. What do you think?
When looking for a small bank investment candidate, I screen for price based metrics such as P/E, P/B, and dividend yield.
But then I have to start slogging thru SEC filings to really find out anything about the bank. I’m looking for a bank that is both cheap and doing well. I much prefer this to a bank that is really cheap and doing poorly.
Some specific things I look for:
1) good capital ratios
2) low non-performing loan ratios
3) the bank is benefiting from all the interest rate cuts
All of this is in SEC reports, but I’m pretty picky, so it takes a looong time to find what I want this way.
Another thing I’d like is for the bank to operate in an area where house prices don’t seem excessively overpriced. This also takes some legwork to guesstimate.
For now I’m just holding my CZFS (which fits my requirements nicely) and my CZBS (which does not fit my requirements, but which I’m unwilling to sell at such a ridiculous price).
Posted 06 Jan 2009 at 7:48 pm ¶Yeah.. I noticed the filing myself. It seems as though everyone is jumping on TARP funding now.
CZBS discussed using TARP funding in the last 10Q, alerting shareholders beforehand, and now decided to participate.
After reading more about TARP funding, it seems like a great deal for banks. 5% interest it very reasonable, and banks have five years to pay it off. If not paid off by then, it jumps to 9%, which is exorbitant.
UWHR also took a TARP bailout, but without any notice to shareholders. Taking TARP funding doesn’t bother me, it’s not alerting shareholders that’s disconcerting.
I was also concerned about the issue of warrants, but that’s also very reasonable. CZBS didn’t have to issue any warrants and UWHR only had to give up 500 shares, which is like a drop in the bucket.
If you ask me, I can’t see why any bank wouldn’t participate, unless they were in great shape, or had something to hide.
I’m curious why you think CZBS is in fairly poor shape?
The bank is more than well-capitalized. Yes, non-performing assets doubled and income fell significantly from last year, but they still managed to earn $0.29/share this past quarter and $0.56/share for the three quarters, which is better than many of it’s competitors. I don’t believe they are at great risk for failure.
Can you be more specific?
I took a quick look at CZFS and see that they are doing pretty well. They’re also more than well-capitalized. But, it doesn’t look cheap. While priced near it’s 52-week low at $19.50, it’s still not trading very far from it’s peak of $25.00.
Posted 06 Jan 2009 at 11:01 pm ¶CZBS looks a bit shaky.
As of 9-30-08, they reported their non-performing assets to total assets at 4.9%.
This sounds like a fairly small number until you consider the leveraged nature of the banking industry.
CZBS’s total assets are 335 million, which is about 11% greater than their total liabilities of 302 million.
An 11% decline in their assets would completely wipe out the company’s equity, reducing book value to zero.
We already know that 4.9% of assets are non-performing, and that this number has been increasing.
Suppose their non-performing loan ratio continues to increase. Or suppose they have to write down a few percent of their assets. They could be in real trouble.
Now, it looks to me like all of this risk and then some is already priced into the stock, but I definitely consider CZBS more of a speculation than an investment.
Posted 07 Jan 2009 at 8:46 am ¶Sounds reasonable, thanks for the input. It looks like taking the TARP money was probably a good idea for them.
Posted 07 Jan 2009 at 10:32 am ¶Trackbacks & Pingbacks 1
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