Who Has "It"?
What Is "It"?
When done right with appropriate risk controls, SBA lending can deliver the type of financial performance generated by OP Bancorp and Santa Cruz County Bank. Investors, however, did not reward OP Bancorp with superior trading multiples, as they traded at 69% of tangible book value and 7x earnings. Santa Cruz traded at 112% of tangible book and 8x earnings. Comparatively, all Measured Banks traded at 89% of tangible book and 9x earnings at this writing.
Why the disparity? Hard to say. Possibly, the significant portion of SBA revenues for OP, or it has an ethnic focus and the performance of some ethnic banks during recessionary periods worry investors. Santa Cruz operates in the Silicon Valley, perhaps receiving stronger valuations based on geography. I should note that OP identifies itself as a faith-based financial institution that tithes 10% of its pre-tax profit to charitable causes. Something I wrote about recently although I omitted OP as doing this. My apologies. I consider this corporate generosity to be the natural evolution of capitalism.
The message from the analysis of the Measured Banks as compared to Boenning's three attributes that investors should look for is that each bank should be evaluated based on its own merits. And each banker, in studying the attributes of other banks that are most valued by investors ought to analyze strategies of top performing banks that generate above average growth prospects, maintain strong capital positions, and have a superior deposit franchise.
Because, pandemic or not, these are the attributes that will add value to your financial institution for the benefit of your constituencies over the long-term.