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Mission Bancorp: Consistent Growth Continues To Reward Shares

Mar. 09, 2018 11:11 AM ETMission Bancorp (MSBC)
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  • MSBC has seen significant growth in earnings and assets since a 2013 acquisition.
  • Asset quality is high but a sudden uptick in nonperforming loans may signal higher provision expenses are ahead.
  • There are some concerns, but the bank is positioned well for rising rates and is modestly priced considering past performance and a low-cost deposit base.

Mission Bancorp (OTCPK:MSBC) is a small but fast-growing bank headquartered in Bakersfield, California. Like a lot of other micro-cap banks, the company doesn’t get a lot of attention, but that hasn’t stopped shares from realizing significant gains over the past few years.

Due to new tax legislation, this year’s earnings were hit with a one-time charge to the deferred tax asset in the amount of $772 thousand. With this expense reported, earnings increased by 20.6% to $6.1 million, and without it, adjusted earnings advanced 35.9% to $6.9 million. For those not familiar with bank financials, it’s not uncommon to find earnings up 10-15% but 20-35% is on another level.

Here is a look at the company’s earnings profile:

2017 - $6.1 million or $3.65 per share (adjusted earnings per share were approximately $4.11).

2016 - $5.1 million or $3.05.

2015 - $3.7 million or $2.49.

2014 - $3.06 million or $2.06.

Looking to become a larger player in southern California, these impressive results were jump-started in 2013 with the acquisition of Mojave Desert Bank - a purchase that helped the company grow assets that year by 38% to $417 million. Since then, though, it’s been all about organically adding small banking relationships with businesses in the area. A strategy that’s been consistently applied and one that helped increase total assets by 13.8% in 2017 to $635.4 million.

2013 was an abnormal year because of the merger but since then, the portfolio has grown between 10-20% a year, pushing loans from below 50% of total assets to 73.7%. Traditional retail loans have never been a really large part of the bank’s portfolio, and in the past two years, they have contributed even less, with major preference given to nonowner-occupied commercial real estate (from 10% in 2009 to ~25% of portfolio) and farmland (from 8% in 2013 to 16%) loans.

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