Street Smart
Analyst goes fishing for tiny Keys bank
By KATHLEEN GALLAGHER
of the Journal Sentinel staff
Sunday, November 30, 2003
Investment: TIB Financial Corp., Key Largo, Fla., is a holding company for TIB Bank of the Keys, which conducts a mostly commercial banking business with offices throughout the Keys, in south Miami and Dade County, and in Lee and Collier counties near Naples, Fla. Web site: www.tibbank.com.
Analyst: Jon C. Bruss, managing director, chief executive officer and portfolio manager at Fortress Partners Capital Management Ltd., Hartland, and portfolio manager for the firm’s hedge fund, Foundation Financial Partners.
TIB is a tiny bank holding company that isn’t on Wall Street analysts’ radar screen, but Bruss says it is reasonably priced for its growth prospects, has solid market share and is expanding geographically.
“I think the longer-term prospects for this institution are not reflected in its earnings,” he said.
“They’ve done a great job of building intrinsic value, and they’re well-positioned for the growth I anticipate in their market.”
The acquisitions of major Florida-based bank holding companies have paved the way for start-up institutions like TIB to “pick the bones” of the acquirers, Bruss said. That’s helped TIB lock up the local market and achieve a nearly 25% share of all bank deposits in the Keys, he said.
TIB’s Internet banking product also has what Bruss calls “incredible” penetration of 35% of the bank’s commercial and retail accounts.
“It’s that kind of market strategy that really excites me and makes me want to hold on to this stock even though it’s no longer a deep value play,” he said.
Bruss expects TIB to continue expanding its branch network in the Miami and Naples areas, and eventually to move its headquarters to Naples.
“There’s a natural affinity between the Keys and southwest Florida, a lot of vacationing and shopping that goes on between them among native Floridians — TIB is capturing that, plus the business of new Floridians,” he said.
Unlike Bruss, most investors in this stock likely won’t consider the fact that TIB holds its annual meeting during tarpon and bone fish season a plus. But he says they’ll likely be impressed that management owns about 15% of the company, it has a clean balance sheet and good asset quality, and there are very few institutional buyers of the stock.
“My guess is when institutions step up to the plate, there’ll be attractive price appreciation,” Bruss said.
It would be hard not to view tiny TIB as an acquisition candidate, but Bruss says he doesn’t think the bank will be taken over any time soon.
“TIB, at this point, is probably just under the radar screen for most prospective acquirers — and that’s just fine because they’re in the process of building their franchise and doing a great job of making it attractive, not only to shareholders but to an acquirer,” he said.
Bruss says he thinks the biggest risk associated with this stock is the possibility the bank could falter in its strategy of expanding by starting new branch offices. “It’s still a risk, especially as they move into new markets, but they’ve proved over the last 20 years they can do that,” he said.
There’s also a risk TIB’s asset quality could decline, but Bruss says Edward V. Lett, TIB’s president and chief executive officer, and the member of his team supervising expansion in southwest Florida, came from larger banks with strong credit cultures.
Bruss says this stock is best for patient investors who aren’t seeking rapid price appreciation and are willing to be paid for waiting with a dividend the company has regularly increased.
Bruss began buying TIB shares in the second quarter of 2000 and has an average cost of $12.625. He has full positions but would still buy for new accounts. Bruss would buy these shares up to $22 and says this stock could go as high as $30 a share in the next two to three years.
Kathleen Gallagher’s Sunday Street Smart column examines one stock through the eyes of a professional investor, revealing how market pros make investment decisions. Neither Gallagher nor the Journal Sentinel recommends specific investments or endorses the recommendations of those interviewed for this column.
Contact Kathleen Gallagher at (414) 223-5460 or [email protected].
Ticker/Exchange: TIBB, Nasdaq
Nov. 28 price: $19.44
52-week range: $13.44 to $19.45
Dividend yield: 2.3
Equity to assets: 6.19%
Return on equity (nine months ending 9/30): 13%
Total shares outstanding: 4.6 million
*Earnings per share (2003): $1.10
*Earnings per share (2004): $1.20
P/E ratio (2003): 17.7
P/E ratio (2004): 16.2
*Analysts’ estimates for year ending Dec. 31.
