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    Company Updates: Allied First Bank

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    Nate Tobik
    OBN - AFBA - Issue 33 (January 2021)

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Company Updates: Allied First Bank

    Uploaded by

    Nate Tobik
    3K views1 page
    OBN - AFBA - Issue 33 (January 2021)

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    OBN - AFBA - Issue 33 (January 2021)

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    OBN - AFBA - Issue 33 (January 2021)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    3K views1 page

    Company Updates: Allied First Bank

    Uploaded by

    Nate Tobik
    OBN - AFBA - Issue 33 (January 2021)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    THE ODDBALL STOCKS NEWSLETTER | 2

    Company Updates
    Allied First Bank
    This is a very small bank in Oswego, Illinois that guest writer Catahoula first mentioned in the
    Newsletter in Issue 26. At that time (August 2019), it was trading at $1 for a market capitalization of
    only $1.5 million. His thesis – in the usual punning style – was:

    Operating out of a single branch in the Chicago area and over the internet, AFBA is a pilot’s
    institution. They were grounded like the 737 Max a couple of years ago, with overdue TARP, consent
    order and losses. A capital raise repaid TARP, the regulators terminated their decree and the bank’s
    mortgage operations are doing well. You can now buy it for around a buck, but tangible book value is
    $3.51. Thirty percent of book makes sense if a bank issues a “Mayday” and is auguring in, but they
    were profitable for the quarters ending 12/31/18 and 3/31/19.

    It has worked out well (with shares now in the $4 range), but what is interesting is that the bank has
    earned quite a lot of income in the interim, and so even with a much higher share price it is still
    potentially undervalued here. Allied First only reports results to shareholders annually, but here is what
    we can glean from the call reports about how they did last year:

    Total shareholder equity (12/31/2019) $9,600,387


    Bank subsidiary income FY 2020 $5,762,000
    Estimated common shareholder equity (12/31/2020) $15,362,387

    Shares (March 4, 2019) including preferred if converted 1,911,892


    Book value per share $8.04

    The Bancorp has preferred stock outstanding that was issued under TARP, but from what we
    understand it is convertible and the conversion is in the money, so the share count to use is 1.9 million.
    That would place the bank at just over half of book value (although it would be helpful to have a more
    current figure for share count).

    As you can see in the figures above, Allied earned a gigantic $5.8 million on $9.6 million of starting
    shareholder equity. That came from $3.4 million of net interest income, $103 million of noninterest
    income, $70 million of salaries, various other expenses and gains on securities, which net out to a giant
    return on equity. The mortgage banking business for AFBA has been an absolute home run, although a
    pretty paltry share of the revenue is dropping down to shareholders, even though the income is very
    large as a percentage of shareholders' capital invested.

    Banks' 2020 results have been rolling in the past few weeks, and the standouts in various categories
    tend to capture our attention. The highest ROEs we have seen, which happen to trade at big discounts
    to TBV too, are Allied and CIB Marine (CIBH). The cheapest bank to TBV, and one of the most
    overcapitalized, is Bank of Utica. Another observation is that OTC banks with the same or even better
    ROE, capitalization, NPAs, demand deposits, and buyback history trade far cheaper to TBV than banks
    that are NASDAQ listed.

    Copyright Oddball Media, LLC 2021 ISSUE 33 (January 2021)

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