Community National Bank
I added more to my position in Community Bancorp (CMTV) today at $12.00. Community Bancorp is now my 4th largest holding.
The continued downward pressure on the banking sector makes for a good opportunity to add more or initiate a position to regional banks with conservative businesses. Similar to the 2007-2008 financial crisis, the banking sector was hit hard mainly due to issues with the larger banks and their riskier activities. Many regional banks were taken down with them in the stock market, but the underlying businesses were sound. Similar to Community Bancorp, I made significant investments in Merchant’s Bank at the time, which traded at really low book values and had very limited exposure to the crisis.
During the COVID-19 crisis, Community Bancorp has been able to participate in the PPP loans to small businesses. Banks can make 5% for loans of not more than $350,000; 3% percent for loans of more than $350,000 and less than $2 million; and 1% for loans of at least $2 million.
It appears that Community Bancorp did a great job reaching out to clients to apply early and secure loans for clients in need Here is a quote from a recent Burlington Free Press Article on PPP loans in Vermont:
“Community National Bank has saved thousands of Vermonters from total economic catastrophe through this program,” Heilenbach said. “You’re talking about people’s livelihoods.”
The price jumped a bit after I bought to 12.45/share. At this price the price/book is .95. I consider anything under 1.5 a good deal. Earnings yield is 13.57% and dividend yield is 6.10%.
I’m sure that there is some risk of loss of book value due some loans, but it appears that the government is intent on minimizing through the PPP loans to small business, unemployment benefits, low interest rates and continued stimulus. They don’t seem willing to let people and small business lose their homes or businesses due to the virus. I think the current price more than compensates for any losses they may see.
I added more to my position in Community Bancorp (CMTV) today at $11.70. Community Bancorp is still my 3rd largest holding.
The continued downward pressure continues to make for a good opportunity to add more or initiate a position. Based on previous financials the valuation is great with price/book of .94 and an earnings yield of 14.67%.
I added more to my position in Community Bancorp (CMTV) on 3/27/2020 at $11.99. Community Bancorp is now my 3rd largest holding.
Why Community Bancorp?
The stock has fluctuated a lot most likely due to overall market pressures from the COVID-19 market pullback, market conditions for housing/small business, and most likely overall banking concerns over the lower interest rates. However, the company is very stable, has a good history of growth and is located in a market that has good loan growth potential.
Community Bancorp operates Community National Bank, which is a smaller local bank that doesn’t engage in risky financial business. Since Community Bancorp is local and it’s market is more local/small business, it should be less impacted by national issues. Also since the area in Vermont in general doesn’t have the large growth that other states have, it has less to fall from and therefore is less impacted by major economic collapses and recessions.
Also, the recent $2 trillion stimulus package should be funneling a decent amount of money to small businesses through banks link Community National Bank. This should drive more business and help build more bonds between the bank, local businesses and the community in general and will help the bank strengthen it’s business for the long term.
I also see the company being an acquisition target much like the Merchant’s Bank which I was invested for quite sometime. There are many similarities between Merchants and Community Bancorp. In fact, I would not be surprised if the same bank that bought Merchants (Community Bank System) decided to buy Community Bancorp too to expand more into their market area and also to end the confusion between the two brands here in Vermont.
Update on Valuation
Community Bancorp currently trades at a:
- PE of 7.14
- Price/Book of 0.99
- Dividend yield is 6.34%
One of the better dividend yields for the low risk nature of this business. It’s got a low book value (which I usually try to target less than 1.5 for bank companies) but with a less risk in my opinion and the dividend is a big good selling point.
I may add more if the stock price stays this low or goes back even lower as it has been lower than this recently but I missed getting it at the lower price.