Tweet
($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
You may be saying, “Come on $$$MR. MARKET$$$, you’re not going to show us another bank stock, are you?”. My answer to that would simply be, “You got a problem with money?”.
There never has been a better time for bank stocks. After a big year in 2021 bank stocks could continue to outperform in 2022. The combination of a recovering U.S. economy and the potential for Federal Reserve interest rate hikes sooner than expected could set up bank stocks for outsize earnings growth in the next couple of years. Loan growth is accelerating both sooner and at a faster rate than ANAL-ysts had projected, while expectations around rising rates have been pulled forward. This is a recipe for outsized profits. There’s no better place to go bank mining than around the nation’s capital.
Today I bought shares in Capital Bancorp Inc (CBNK) at 27.19 I will sell it in 4 to 6 weeks at 31.41. Here’s why I like CBNK:
Now this chart may not look like a straight line to the moon, but if you look at the MACD and where it’s been going since Christmas, you can see that Santa is delivering the goods. In the last 12 months, the stock is up 84% in comparison to the S&P 500 which has climbed only 22%. The trailing PE of 9.6 makes this stock an incredible value and the forward dividend yield of 0.7% is just a cherry on top.
Capital Bancorp Inc. is a registered bank holding company for Capital Bank N.A. Headquartered in Rockville, Maryland. Capital Bank is a Maryland chartered commercial bank that offers commercial and consumer banking services to clients in the Washington D.C. metropolitan area, alongside two nation-wide lending brands; Capital Bank Home Loans, a mortgage division that lends in all 50 states, and OpenSky a credit card division that offers and services credit cards across all states.
Capital Bank focuses on merging digitally based products with personalized services. This enables their commercial sales teams, mortgage loan officers and OpenSky customer care associates to deliver a meaningful customer experience customized by the nature of the relationship, whether it be a credit card, a home loan, or a commercial customer with complicated lending and treasury needs. Today they are more than $2 billion in assets and have experienced consistent double-digit year-over-year growth.
Capital Bancorp has been named to the Piper Sandler Bank & Thrift Sm-All Stars for the third consecutive year, being recognized in the Class of 2021. The Sm-All Stars identifies the top performing small-cap banks and thrifts in the country, with a mission to uncover “the next crop of stellar mid-cap banks before they are discovered by the rest of the world.” Among the criteria needed to earn this distinction are market cap below $2.5B, a demonstrated ability to clear hurdles related to growth, profitability, credit quality, and capital strength, and the ability to out-perform in four key metrics. This is a big deal for a small bank. Over 40% of the company stock is owned by management and the board members. That is a LOT of confidence in what they are doing.
No surprise that CBNK won this award. Their yearly growth profile has been remarkable:
Operating in the metro DC area has been a bonanza for this bank. 70% of their new mortgages come from the MD/DC/VA area. Three of the counties that the bank serves are in the top 25 in the US for Median Household income. The median household income growth has been above national averages as has the population growth.
43% of CNBK’s Deposit accounts are non interest bearing accounts. It is literally free money for the bank. Their organic growth has consistently exceeded community banking peers. They have proprietary technology facilitating the acquisition of middle-market customers. They have also jumped into strategic fintech partnerships driving niche deposit growth.
The bank has their branded digital OpenSky® (non brick and mortar) mobile app enabling cost effective customer acquisition and servicing. The net interest margin from Opensky is double that of the standard banking process. From this they obtain proprietary data, credit scoring (BScore), and algorithms improving customer retention with their unsecured credit initiative. More data means safer loans. They have implemented social media marketing programs that efficiently access a diverse nationwide customer base. 81% of applications for credit cards are submitted on mobile devices using adaptive digital platform.
Their QuickClose digital mortgage platform reduces costs to the bank and their customers. CBNK’s asset growth has outpaced their peers by 180%.
CEO Ed Barry is “the man”. He’s been with the company for 10 years. Prior to joining Capital Bank, Mr. Barry held senior positions at Capital One Bank, Bank of America, and E&Y/Capgemini where he held a variety of roles primarily focusing on marketing, data, analytics and strategy. He was recognized in 2017 as E&Y’s Entrepreneur of the Year, Mid-Atlantic Region.
All of this flash and sparkle would be meaningless unless there was some steak in the sizzle. So what about earnings?
Last October, Capital Bancorp, Inc. reported net income of $11.2 million, or $0.79 per diluted share, for the third quarter of 2021. By comparison, net income was $8.4 million, or $0.61 per diluted share, for the third quarter of 2020. Return on average assets ("ROAA") was 2.13% for the third quarter of 2021, compared to 1.89% for the same period in 2020. Return on average equity ("ROAE") was 23.87% for the third quarter of 2021, compared to 23.28% for the same period in 2020.
Expanded Net Interest Margin - The net interest margin was 6.27% for the three months ended September 30, 2021, which is an increase of 126 basis points compared to 5.01% for the same three month period last year and an increase quarter over quarter of 80 basis points, from 5.47%, for the three months ended June 30, 2021. The margin improvement quarter over quarter was driven by an increase in average loans outstanding, improving loan yields, and management's concentrated effort to lower funding costs.
Accelerating Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $156.2 million to $1.3 billion at September 30, 2021 compared to September 30, 2020. The year over year growth was mainly due to a 34.7 percent increase in commercial real estate loans of $129.6 million, a 6.2 percent increase in commercial and industrial loans of $8.4 million, and a 10.4 percent increase in construction real estate loans of $23.6 million.
Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 39.7 percent compared to September 30, 2020. The $236.9 million year over year increase was primarily due to an increase in commercial demand deposits reflecting management's ongoing strategic initiative to improve the deposit franchise.
OpenSky®
Strong Revenue Growth - OpenSky® revenue grew by 80.6 percent to $23.2 million for the quarter ended September 30, 2021 from the same period in 2020 and by 23.2 percent from the linked-quarter despite the linked-quarter decline in open accounts. Continued Growth in OpenSky® Loans and Deposits - OpenSky® loan balances, net, increased by $51.9 million to $135.0 million compared to $83.1 million in the third quarter of 2020 and from $121.4 million, or 11.2 percent, on a linked quarter basis. Corresponding deposit balances increased 37.2 percent or $65.7 million from $176.7 million at September 30, 2020 to $242.4 million at September 30, 2021. Strong growth in loans, deposits, and related-revenue appears to indicate that consumer behaviors may be returning to historical trends.
CBNK should be reporting earnings very soon, but I have no problem buying this stock in front of earnings. Why? Check out the earnings surprises over ANAL-yst predictions over the last 4 quarters: 24.60%, 16.10%, 41.70% , 31.70%. What is insane is that ANAL-yst estimates for December 2021 earnings are $0.68/share while the December 2020 earnings were $0.71/share. Of course they are going to beat these number handily. They will probably do over 90 cents per share. On top of that, the PE multiple will probably increase to 12. There is no way you can keep this stock price down with all of these factors.
The bosses are walking around like Ric Flair saying “Wooooooooo”. Check them out:
“Capital Bancorp’s diversified business model continued to outperform in the third quarter,” said Steven Schwartz, Chairman of the Board of the Company. “The Bank’s results highlight the success of ongoing strategic investments in technology and people that have positioned the Bank for continued profitable growth.”
"The third quarter’s record results were driven by strong growth in the Commercial Bank and OpenSky® which more than made up for the anticipated slowdown of our mortgage business," said Ed Barry, CEO of the Company. "Regional economic activity and strategic hires contributed to 15.8 percent annualized portfolio loan growth quarter over linked-quarter on a consolidated basis. OpenSky® remains an engine of growth as we engage with customers to provide additional value-added services. OpenSky® annualized quarterly loan growth of 44.3 percent marked a return to historical trends. Customer attrition, which resulted in a modest decline in open accounts for the quarter, remains well-below historical levels.”
Why rob banks when you can get more cash much more easily by just buying their stocks? Fill up the bag! I am HUGE!
$$$MR. MARKET$$$
You may be saying, “Come on $$$MR. MARKET$$$, you’re not going to show us another bank stock, are you?”. My answer to that would simply be, “You got a problem with money?”.
There never has been a better time for bank stocks. After a big year in 2021 bank stocks could continue to outperform in 2022. The combination of a recovering U.S. economy and the potential for Federal Reserve interest rate hikes sooner than expected could set up bank stocks for outsize earnings growth in the next couple of years. Loan growth is accelerating both sooner and at a faster rate than ANAL-ysts had projected, while expectations around rising rates have been pulled forward. This is a recipe for outsized profits. There’s no better place to go bank mining than around the nation’s capital.
Today I bought shares in Capital Bancorp Inc (CBNK) at 27.19 I will sell it in 4 to 6 weeks at 31.41. Here’s why I like CBNK:
Now this chart may not look like a straight line to the moon, but if you look at the MACD and where it’s been going since Christmas, you can see that Santa is delivering the goods. In the last 12 months, the stock is up 84% in comparison to the S&P 500 which has climbed only 22%. The trailing PE of 9.6 makes this stock an incredible value and the forward dividend yield of 0.7% is just a cherry on top.
Capital Bancorp Inc. is a registered bank holding company for Capital Bank N.A. Headquartered in Rockville, Maryland. Capital Bank is a Maryland chartered commercial bank that offers commercial and consumer banking services to clients in the Washington D.C. metropolitan area, alongside two nation-wide lending brands; Capital Bank Home Loans, a mortgage division that lends in all 50 states, and OpenSky a credit card division that offers and services credit cards across all states.
Capital Bank focuses on merging digitally based products with personalized services. This enables their commercial sales teams, mortgage loan officers and OpenSky customer care associates to deliver a meaningful customer experience customized by the nature of the relationship, whether it be a credit card, a home loan, or a commercial customer with complicated lending and treasury needs. Today they are more than $2 billion in assets and have experienced consistent double-digit year-over-year growth.
Capital Bancorp has been named to the Piper Sandler Bank & Thrift Sm-All Stars for the third consecutive year, being recognized in the Class of 2021. The Sm-All Stars identifies the top performing small-cap banks and thrifts in the country, with a mission to uncover “the next crop of stellar mid-cap banks before they are discovered by the rest of the world.” Among the criteria needed to earn this distinction are market cap below $2.5B, a demonstrated ability to clear hurdles related to growth, profitability, credit quality, and capital strength, and the ability to out-perform in four key metrics. This is a big deal for a small bank. Over 40% of the company stock is owned by management and the board members. That is a LOT of confidence in what they are doing.
No surprise that CBNK won this award. Their yearly growth profile has been remarkable:
- Assets up 15%
- Loans up 5%
- Deposits up 15%
Operating in the metro DC area has been a bonanza for this bank. 70% of their new mortgages come from the MD/DC/VA area. Three of the counties that the bank serves are in the top 25 in the US for Median Household income. The median household income growth has been above national averages as has the population growth.
43% of CNBK’s Deposit accounts are non interest bearing accounts. It is literally free money for the bank. Their organic growth has consistently exceeded community banking peers. They have proprietary technology facilitating the acquisition of middle-market customers. They have also jumped into strategic fintech partnerships driving niche deposit growth.
The bank has their branded digital OpenSky® (non brick and mortar) mobile app enabling cost effective customer acquisition and servicing. The net interest margin from Opensky is double that of the standard banking process. From this they obtain proprietary data, credit scoring (BScore), and algorithms improving customer retention with their unsecured credit initiative. More data means safer loans. They have implemented social media marketing programs that efficiently access a diverse nationwide customer base. 81% of applications for credit cards are submitted on mobile devices using adaptive digital platform.
Their QuickClose digital mortgage platform reduces costs to the bank and their customers. CBNK’s asset growth has outpaced their peers by 180%.
CEO Ed Barry is “the man”. He’s been with the company for 10 years. Prior to joining Capital Bank, Mr. Barry held senior positions at Capital One Bank, Bank of America, and E&Y/Capgemini where he held a variety of roles primarily focusing on marketing, data, analytics and strategy. He was recognized in 2017 as E&Y’s Entrepreneur of the Year, Mid-Atlantic Region.
All of this flash and sparkle would be meaningless unless there was some steak in the sizzle. So what about earnings?
Last October, Capital Bancorp, Inc. reported net income of $11.2 million, or $0.79 per diluted share, for the third quarter of 2021. By comparison, net income was $8.4 million, or $0.61 per diluted share, for the third quarter of 2020. Return on average assets ("ROAA") was 2.13% for the third quarter of 2021, compared to 1.89% for the same period in 2020. Return on average equity ("ROAE") was 23.87% for the third quarter of 2021, compared to 23.28% for the same period in 2020.
Expanded Net Interest Margin - The net interest margin was 6.27% for the three months ended September 30, 2021, which is an increase of 126 basis points compared to 5.01% for the same three month period last year and an increase quarter over quarter of 80 basis points, from 5.47%, for the three months ended June 30, 2021. The margin improvement quarter over quarter was driven by an increase in average loans outstanding, improving loan yields, and management's concentrated effort to lower funding costs.
Accelerating Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $156.2 million to $1.3 billion at September 30, 2021 compared to September 30, 2020. The year over year growth was mainly due to a 34.7 percent increase in commercial real estate loans of $129.6 million, a 6.2 percent increase in commercial and industrial loans of $8.4 million, and a 10.4 percent increase in construction real estate loans of $23.6 million.
Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 39.7 percent compared to September 30, 2020. The $236.9 million year over year increase was primarily due to an increase in commercial demand deposits reflecting management's ongoing strategic initiative to improve the deposit franchise.
OpenSky®
Strong Revenue Growth - OpenSky® revenue grew by 80.6 percent to $23.2 million for the quarter ended September 30, 2021 from the same period in 2020 and by 23.2 percent from the linked-quarter despite the linked-quarter decline in open accounts. Continued Growth in OpenSky® Loans and Deposits - OpenSky® loan balances, net, increased by $51.9 million to $135.0 million compared to $83.1 million in the third quarter of 2020 and from $121.4 million, or 11.2 percent, on a linked quarter basis. Corresponding deposit balances increased 37.2 percent or $65.7 million from $176.7 million at September 30, 2020 to $242.4 million at September 30, 2021. Strong growth in loans, deposits, and related-revenue appears to indicate that consumer behaviors may be returning to historical trends.
CBNK should be reporting earnings very soon, but I have no problem buying this stock in front of earnings. Why? Check out the earnings surprises over ANAL-yst predictions over the last 4 quarters: 24.60%, 16.10%, 41.70% , 31.70%. What is insane is that ANAL-yst estimates for December 2021 earnings are $0.68/share while the December 2020 earnings were $0.71/share. Of course they are going to beat these number handily. They will probably do over 90 cents per share. On top of that, the PE multiple will probably increase to 12. There is no way you can keep this stock price down with all of these factors.
The bosses are walking around like Ric Flair saying “Wooooooooo”. Check them out:
“Capital Bancorp’s diversified business model continued to outperform in the third quarter,” said Steven Schwartz, Chairman of the Board of the Company. “The Bank’s results highlight the success of ongoing strategic investments in technology and people that have positioned the Bank for continued profitable growth.”
"The third quarter’s record results were driven by strong growth in the Commercial Bank and OpenSky® which more than made up for the anticipated slowdown of our mortgage business," said Ed Barry, CEO of the Company. "Regional economic activity and strategic hires contributed to 15.8 percent annualized portfolio loan growth quarter over linked-quarter on a consolidated basis. OpenSky® remains an engine of growth as we engage with customers to provide additional value-added services. OpenSky® annualized quarterly loan growth of 44.3 percent marked a return to historical trends. Customer attrition, which resulted in a modest decline in open accounts for the quarter, remains well-below historical levels.”
Why rob banks when you can get more cash much more easily by just buying their stocks? Fill up the bag! I am HUGE!
$$$MR. MARKET$$$
Comment