August: Crime Scene Investigation: the CCB and GBFH plunges
6 Questions with FFBB CEO Miller, IBKR understands deposit tech, Slide's (SLDE) slippery slope, Skyline's (SLBK) marshmallow test.
In today’s 5 Points:
Why are these two banks both up 77% over the past year (Alpine (ALPI.B) & Chesapeake (CPKF))?
Let Interactive Brokers be your guide to investing in banks. The way forward is technology to create sticky deposits, however you have to do it. Nobody is better than IBKR. EGBN gets it.
Crime Scene Investigates: Coastal (CCB) and GBank (GBFH): High-reward verticals require high execution, otherwise the multiple evaporates. Management has not delivered in either situation. 2-3 quarters of execution are necessary to get the market back to looking at 2027 earnings potential. A look at the nuance.
“But the wind won’t blow, you really shouldn’t go” - Slide (SLDE) is a Florida insurer facing challenges in both pricing power and policy runoff. A lack of hurricanes accelerates the problem. Insiders are selling into a buyback.
Skyline Bancshares (SLBK)’s Marshmallow test. Shares can rip, or not, depending on a simple management decision.
An interview with FFB Bancorp (FFBB) CEO Steve Miller.
FFB used to be a top performer in the sector. However after a consent order, shares have not regained their 2024 highs. 2Q showed signs of renewed progress and I asked CEO Miller about uplist, credit, regulatory, and revenue growth opportunities.
Next month: a Bank7 mea culpa, and the outlook for activist targets Cashmere Valley (CSHX) and United (UBAB).
Administrative item: I’m making the annual subscription the same price vs the monthly, to dis-incentivize the annual to avoid having to reimburse folks if 5 Points moves into the heavens. I don’t plan to stop the note just now, but it’s “proper risk management”.
Brief notes:
Tightening liquidity: In 2022 we wondered how higher rates would affect banks. In March 2023 we got our clear answer.
In 2026 we wonder how private credit / BDC will spill into banking. CCB is an initial answer. I’m not going to declare Friday the 13th on Banking as a Service but keep an eye on some less-established banks. The sector not only needs solvent partners, but securitization & loan sale markets must be open. VBNK, FINW among others would do well to have a firm capital foundation.
Island Time: After multiple visits it’s becoming clearer that Puerto Rico is the best banking market in the country for straightforward small business and private banking.
A series of small banks will likely launch in San Juan in coming years due to a unique mismatch of private banking demand (high and growing) vs supply (low and stable).
For example it appears impossible to get a HELOC on the island without exceptional effort, and straightforward recourse development projects are coming in at Prime + 2 with 2 points. Not bad!
I’ll be sharing ways to capitalize.
1) Why are these two banks up 77% over the past year?
Alpine Banks of Colorado (ALPI.B) & Chesapeake Financial (CPKF) on the east coast.
Granted, both have enjoyed fine earnings trends, but these moves require imagination. Both banks are Russell 2000 candidates with an uplist. So I called them each and asked about that. They said no, it’s a waste of money.
Is it really a waste of money? If you run a bank, and you insist on trading on an exchange (the OTC) where:
Most brokerage platforms prohibit buying your shares
No ETF can buy your shares
Most mutual funds cannot buy your shares
Nobody can use your shares as collateral
…then your stock gets a discounted multiple. If you get a discounted multiple you become takeover target for Nasdaq banks with better currency. Then, you have to rebuff those acquirers with non-fiduciary thinking, like rebuffing 40% premium discussions.
The only way you avoid a discount is if the market makes an indiscriminate rush into OTC stocks that could uplist, which is where we are today.
I don’t think the market has made my 5-minute phone call.
Owners could do well if the next 12 months offered 5% in these stocks, much less another 77.
2) Let Interactive Brokers be your guide to investing in banks.
This is really a story about using technology to gather deposits. That’s what creates much of the value in banking in 2026.
About a year ago I suggested to readers that Interactive Brokers was really more of a bank than a brokerage.
IBKR is not regulated like a bank, but it has a bank’s income statement. You can see below that net interest income is bigger than non-interest income:
Of course, you don’t get a deposit at Interactive Brokers. You are making a loan to IBKR and they are paying you about 3% for that loan. And they are lending it back out at a bit over 4%, spending almost nothing in the middle.
Interactive is a bank running a 23% efficiency ratio, generating a lot of ancillary fees for trades and stock loan.
Banks can do something like this as well. They can custody assets like IBKR does (Axos is trying this and of course the largest banks do it). They can give you the fanciest system for moving money around to maximize yield - PNC among others works with Trocata to do this. They can do cross border payments, tax-efficient trusts, fintech banking etc.
And they can toss out shiny products every few months like Hood, SoFi, and soon X Money, to keep gamblers at the table.
Just figure out something.
As an example, new Eagle Bank (EGBN) CEO Curley saw his stock falling in a straight line the other morning, from $27 to $24, and then he said this:
But I will tell you, I'm going to wake up every morning with a keen focus on low-cost granular deposits. I think that is the most accretive thing any CEO can do, is what's our funding profile look like? What does our deposits look like? What are the costs of those deposits? How are they cross-sold into our customers? And are we generating treasury management fees? So I don't know what businesses I'm going to build yet, but I'm confident that I'm going to find something and that business is going to be focused on deposits and the lower the cost those deposits are the better.
EGBN finished the day above $28.
So IBKR doesn’t even offer deposit insurance, but trades 31x forward earnings and 7x book value. They are the OGs for sticky deposit gathering and any bank thinking even remotely like them has a ticket to ride.
