VirtualInvestorConferences.com held their first OTC Markets Virtual Investor Conference today. Virtual Investor Conferences is like the name implies, a virtual conference where senior executives representing a handful of companies present information about their companies to retail investors. Today’s conference focused on banks traded on the OTC Markets. There were a number of excellent presentations but a few were of particular interest.
First Resource Bank (OTCMKTS: FRSB)
First Resource Bank is located in the affluent area of Chester County Pennsylvania. They employ a “hybrid community bank” model where they have a combination of physical bank branches and online presence.
One of the interesting discoveries while watching the First Resource Bank presentation is that in terms of community banking the location of the bank itself is a large determinant of the overall potential success of the bank. In the world of community banking, an affluent area may raise the bank to greater levels of prosperity. Beyond location, First Resource Bank appears to have a number of things going for it:
- Over $100 million in deposits
- The beginnings of a franchise model with clean, consistent branding within each bank branch
- Hybrid Community Bank model that adopts technology without losing the personal touch
- Outperforming peer group in terms of several metrics to include loan/asset ratio, net interest, overhead expense controls, and overall stock performance
- Consistent income and profitability growth over time
Another interesting aspect of this presentation was the extension of a larger investment opportunity for investors with significant resources and interest in this company.
California Bank of Commerce (OTCMKTS:CABC)
The California Bank of Commerce is a San Francisco Bay Area business bank that focuses on middle market companies. I really found the California Bank of Commerce presentation to be unique in a number of areas:
- Focus on business with over 50% of their accounts being business related, apparently most of the banks that call themselves business banks only have a small percentage of business accounts
- In addition to core banking activities, there was a highlight of their internal strength of IT related activities, which enables the bank to be agile, take advantage of growth activities, and protect their assets
- Planned expansion through production, non-branch offices (approximately 95% of their deposits arrive electronically)
- A majority of their customers arrive through referral by professionals such as CPAs and attorneys
The California Bank of Commerce appears to have a unique mix within their banking strategy and capability. I am fascinated by the IT focus as well as their ability to grow consistently through professional referrals.
The Freedom Bank of Virginia (OTCMKTS: FDVA)
Similar to First Resource Bank, The Freedom Bank of Virginia has enjoyed successful growth in part due to their location within affluent markets of Fairfax, Vienna, and Reston Virginia. The Freedom Bank of Virginia highlighted four reasons why they are different which I believe correspond as to why they may be an interesting investment opportunity. The four reasons are as originally provided within their presentation as follows:
- Reason 1 – Bank leverages director experience to serve government contracting community. Excellent source of low cost funding and floating rate loans. FBV Capital provides unique fee income opportunity through business brokerage services.
- Reason 2 – Experienced staff with following in local medical community profitably deploys excess government contracting deposits in historically safe medical loans.
- Reason 3 – Bank handles general banking in the wealthiest county in the U.S. – Fairfax County, Virginia. Fairfax is contiguous to the highest per capita income county in the country – Loudoun County.
- Reason 4 – Recent Hiring of Richard Hutchison and key team members from Virginia Heritage Mortgage will allow expanding mortgage division to internally generate capital to help fund the growth of the bank.
Similar to the California Bank of Commerce, The Freedom Bank of Virginia appears to have a unique recipe which may further fuel their existing growth. One of the key elements that stood out to me was a symbiotic relationship between incoming deposits from stable government contractors and borrowing from doctors and dentists within the medical industry. The medical industry borrowing was presented as a fraction of the overall contracting deposits but appear to be the formula to their present level of success.
Another interesting point that stood out during the presentation was the additional of new talent (Reason 4). I recall a comment that one new team member was able to bring in the same amount of revenue in half the time of existing member capability. This appears to be a company that is hiring smart and not afraid to add top talent to their team and disturb the status quo.
Suncrest Bank (OTCMKTS: SBKK)
Last but not least is Suncrest Bank. My opinion of Suncrest Bank is that it may be flying under the radar at the moment and could be an undiscovered gem. One of the things that the presenter did very well is to leave the audience with a takeaway as to why Suncrest Stock is worth of investment. Here is a recap from their final takeaway slide “Top Four Reasons to Own SBKK Stock:”
- Premier Management Team With Equity – Organic growth with completion of over 50 acquisitions, sales & de novo branch start-ups. Management & board hold significant equity through personal investment.
- Profitable Bank With Clean Balance Sheet – 14 consecutive quarters of profitability, simple capital structure, <$100K in charge-offs, diversified and high yielding portfolio (~5.5%).
- Attractive Market for Community Banking – Less big bank competition, many consider Central Valley markets non-core (e.g., recent closures of Citi and Chase). Niche differentiation – SBKK is one of only nine agri-banks in California (represents <0.5% of all the agri-banks in the US) despite CA contributing over 12% of US agriculture GDP.
- Positioned for Business Expansion – Completed $13.5 million capital raise in April 2015. Significant upside in the stock. Trading sub-BV LTM but recently trending up with announcement of capital raise and new hires.
Suncrest may be in that sweet spot of a market niche where they are bigger than the smaller competitors (and therefore can acquire them) but too small to be taken serious by the established market leaders. The focus on agri-business may be of long term benefit as well. During a recent Fidelity presentation agri-business was one of the hot areas to watch, with a focus on financing California agriculture, Suncrest may be operating in the right place at the right time.
Overall this appears to be an interesting batch of companies that I was previous unaware. I look forward to learning more as I begin to analyze each in greater depth.
Image Credit: VirtualInvestorConferences.com