Equity/assets at 13.2% as of Q2 2023.
AOCI is now $9.9 mn, wiping out about 12% of TBV. And rates have only risen since the end of June.
The interest rate spread is tiny at 1.68% in Q2 2023, compared to 3.04% in Q2 2022. So they’ve been absolutely hammered here.
The weighted average cost of deposits is 2.09%, and further rises here will crimp profitability quickly. The bank is already paying well below market, for example, 2.25% on savings accounts and an average of 2.3% on time deposits. In contrast, borrowings cost 4.62% in the latest quarter. Time deposits are just 23% of total deposits, but the bank has had to borrow (at relatively high rates) to fund its loans. To be clear here, the cost of these borrowings is higher than the average rate for any of the bank’s interest-earning asset types, with the exception of its FHLB stock, which is de minimis anyway.
In total, interest-earning assets are 137% of interest-earning liabilities. So liabilities are already strained.
No non-performing assets. Good. But it can only get worse from here.
I have TBV at $72.8 mn, while market cap is at $36.2 mn, for a P/TBV of 49.7%. Cheap in absolute terms, not counting its situation.
It looks like the market is pricing in continued high rates, and any capital flight from the bank could quickly weaken its profitability or put it on much worse footing. The bank is paying quite low rates on deposits now, and may have to ratchet those up if prevailing rates remain as high as they are. Even CD rates are relatively low, compared to the cost of borrowing at 4.62% in the latest quarter, meaning the bank will probably have to roll them at much higher rates. Even if prevailing rates come back down to “normal,” it looks like the bank will need them to fall still further to keep its relatively low-cost deposit base in place. Lower rates will help buoy the bond portfolio as well. Like many other banks right now, this one needs rates to come back down. It’s not an enviable position to be in.
And for the moment, the bank does not have other typical thrift positives that may buoy the stock such as buybacks and the potential for an acquisition, since it completed its second step just in January.