Pink Sheets

This bank in Worcester, Mass (website) doesn't seem as good as some of these other banks, but it's certainly doing well. I'm concerned about the overall return on assets.

Comparing CNB to Bank of the James (BOJF) when it was about the same point in its lifecycle:

• Net interest margin: 3.60% vs 4.86%
• Yield on earning assets: 5.58% vs 6.70%
• ROA: 0.32% vs 1.18%
• ROE: 4.48% vs 14.14%
• Assets per employee (millions of dollars): $4.15 vs $2.67
• Core capital ratio: 7.54% vs 8.64%
• Total risk-based capital ratio: 10.41% vs 11.23%
• Net income: 0.32% vs 1.21%
• Past due and non-accrual assets: 0.22% vs 0.49%
• Loan loss allowance: 1.02% vs 1.03%
  
• Total deposits: 79.12% vs 91.59%
• Other borrowed funds: 13.47% vs 0%
• Equity: 6.96% vs 8.23%

So here we have a bank which is more leveraged, has more assets per employee, and lots of other reasons to be performing better than BOJF, but is lagging far behind. I wonder how much it has to do with the 13.47% of assets which are other borrowed funds rather than low interest paying deposits? CNB has a lot more real estate loans and this is in a bubble zone as far as I'm concerned. CNB is not going to grow out of this; they are getting close to the ideal leverage point.

The bank earned about $166,000 in Q1-05. This will probably improve to about $200,000 per quarter or about $800,000 per year. If we assume a P/E of 15, it's worth $12 million total. With 2.183 million shares, it might be worth about $5.50 a share, except that I don't like the potential real estate exposure and lousy operating results. These make it worth at most $4 a share. Given that shares are trading for $12.50, I think this can be ruled out.

UPDATE Dec 30, 2006: I stumbled back into this going through the letter "C" in new pink sheets companies. The ticker changed to CFNA and the stock price hasn't changed much at all in two years. Bid/Ask is $12.70 and $13.65.