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Local bank stock
Old 08-04-2015, 06:42 PM   #1
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Local bank stock

So I recently posted about my fathers untimely death. I will be receiving approximately 110k in a local bank stock. My brother offered to buy it if anyone doesn't want it.

I know not to make any sudden decisions based on the advice previously given. However at some point in the near future I will have to decide to sell or keep the stock and it would be easier to divide at time of distribution of inheritance. So I need to learn what I can about the stock and the local bank.

I don't want to give the name of bank as I live in such a small area. Could someone just give me directions of where to start looking and the right questions to ask?


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Old 08-04-2015, 07:10 PM   #2
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1st question, is the stock listed on any exchange? Is this a privately held stock like that of a private company?

If the latter, are you even allowed to sell it without consent of the company?

Without giving the name (assuming you wish to stay that way), what general information can you give about the bank and stock?

are they FDIC insured? if so, are they on an FDIC watch list?
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Old 08-04-2015, 07:21 PM   #3
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So the stock is not on a public exchange. And I am not sure about the sale process. I will know more tomorrow. I do know that my brother will take my share of the stock in exchange for cash equivalent.

The bank is FDIC insured. I went to their website. I have pulled some reports. Not sure about the watch list.

Honestly, not even sure what to look for on the FDIC site though.

Any guidance would be appreciated.


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Old 08-04-2015, 07:31 PM   #4
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My first question is whether this small bank is in the process of being merged or sold to a larger bank? Is it a well run and profitable bank? And are they getting larger--buying other banks?

There's been some really serious money made in years past with individual bankers buying up a series of small banks, packaging them together and selling them to "the big boys" to control a region of a state.

I've got a buddy that's made an absolute fortune as the second largest stockholder of a 150 location regional bank that started as a small, aggressive well run bank.

I also did business with an older gentleman that had a wonderful, progressive 10 branch bank chain. (His secret to wealth was not getting married until age 65.) He brought in a couple of hot shot mortgage bankers 10 years ago and the bank went down with the Titanic. The CEO died of old age, and the bank was taken over by the FDIC. Things can happen fast.

The bank stock in question can be a complicated issue. There are many questions to get answered.
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Old 08-04-2015, 08:02 PM   #5
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The bank has four local branches. Started in 1994. My dad bought in at the opening. The bank has done a nice job at growth.

Not sure about a buyout. That has always been the talk. My dad always said he expected a buyout by a larger bank. That said, this is all I know. My dad thought highly of the bank and his attorney does too. But I don't have any facts to base that opinion on.


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Old 08-04-2015, 08:15 PM   #6
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I would want to know what recent exchanges have been and at what prices. The bank may be able to provide that or a local broker might be able to give you intelligence on how it should be priced.

One place to start would be with the bank's audited financial statements. Read them and look at profits in relation to equity over the last number of years (ROE) and growth in profits. Also, if you know some local folks on the bank's board of directors, they might be able to give you some insights as to the bank's operations and prospects.
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Old 08-05-2015, 08:31 AM   #7
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What percentage of your portfolio would this be. If too high I would sell.
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Old 08-05-2015, 08:59 AM   #8
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So I am set to inherit approximately 850k. Which makes the bank stock about 13%. I also have my own holdings in retirement accounts around 150k- mainly index funds. I also own three pieces of property. So not huge in the grand scheme but still important. I am heavy in real estate and if I sell the bank stock I will likely put money in index funds.


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Old 08-05-2015, 10:27 AM   #9
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I think you will have lots on your plate to invest the inheritance without trying to become an expert on a specific bank. Stick to the knitting. Invest in what you already know. If your brother becomes rich, wish him all the best!
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Old 08-05-2015, 11:15 AM   #10
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A source I use to look at the stability of a bank is
Bankrate.com Safe & Sound (tm): Bankrate free rating system for banks, thrifts, credit unions

This won't tell you whether it is a good investment or not, but will tell you about stability
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Old 08-05-2015, 06:26 PM   #11
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Quote:
Originally Posted by kcowan View Post
I think you will have lots on your plate to invest the inheritance without trying to become an expert on a specific bank. Stick to the knitting. Invest in what you already know. If your brother becomes rich, wish him all the best!
Totally agree with kcowan. Personally, I would never, ever invest 13% of a large sum of money in one stock, even if I had studied the stock and company extensively (which you haven't). I'm not saying the stock won't appreciate in value from here (it might).......but do you really want one more thing to worry about right now? I'd sell the stock (make sure you know the tax implications first), and invest the money in a Vanguard index fund (or something very similar, that you know and have confidence in). That will allow you to sleep at night, while you work your way through the settlement of your father's estate. After all this is done, you can take a look at your whole portfolio and adjust things if necessary to suit your goals and your risk tolerance.
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Old 08-05-2015, 06:55 PM   #12
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I don't think the FDIC publishes their troubled bank list. But the factors they use to rank banks are common knowledge and published in various papers.

You can check some basic capitalization ratios here: UNOFFICIAL Troubled Bank List as of 03/31/2013 .

I think the actual filings the bank has to make are publicly available somewhere. These go into much more detail.

Edit: I just noticed the list link is a few years old. Nevertheless, you should be able to find out the financial ratios from public filings.
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Old 08-06-2015, 07:06 AM   #13
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So I am set to inherit approximately 850k. Which makes the bank stock about 13%. I also have my own holdings in retirement accounts around 150k- mainly index funds. I also own three pieces of property. So not huge in the grand scheme but still important. I am heavy in real estate and if I sell the bank stock I will likely put money in index funds.


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OK so it isn't a huge position. Not a big deal either way. I have 2 big Canadian bank positions bigger than this. They have been wonderful investments but this doesn't mean anything to you. I would probably sell on price strength over the next 1-2 years. US banks will likely do quite well over the next few years as interest rates increase and the U.S. economy expands. Obviously a small local bank may not follow the big macro trends though. Good problem to have.
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Local bank stock
Old 08-06-2015, 07:16 AM   #14
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Local bank stock

Thanks to everyone. Kcowan's statement resonates with me. I met with attorney yesterday but we never got into bank stock. Other discussions.

When the time comes likely 6-12 months from now I will likely take my brothers offer. I think the stock is fine but I sleep better investing in what I understand.

Not that I sleep well at all these days...

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