Banking’s Top Five Total Return to Shareholders: 2021 Edition
Here is this year’s list:
Here we are again. The first crypto currency bank to crack the Top 5 has landed the top position two years running, delivering a 1,257% 5-year total return. You read that right. Silvergate had $150 million in total revenue over the past twelve months, and has a market capitalization of $4.7 billion, or 31.4x revenues. It’s five-year compound annual growth rate (“CAGR”) in earnings per share was a very strong 27.2% (actually 5.75 years starting full-year 2016 ending LTM 9/30/21). It’s Price/LTM EPS is 57x. Investors must be expecting much faster earnings growth to earn the valuation this bank currently enjoys. Average digital currency customer deposits were $11.2 billion at September 30, 2021. Silvergate also facilitates payments between crypto exchanges via its Silvergate Exchange Network, or SEN. It’s current performance for the LTM ended September 30, 2021 was a 0.78% ROA and 10.04% ROE, which doesn’t merit the valuation, so growth and greater profitability must be what investors see. Here is Silvergate CEO Alan Lane after third quarter earnings announcement on CNBC. Give Silvergate credit, they picked a niche and are executing on it to the delight of investors. Crypto is blazing hot!
MetroCity Bankshares, Inc., and it’s banking subsidiary Metro City Bank are headquartered in Atlanta. The bank was founded in 2006 and operates 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. Quite the geographic expanse, but not uncommon for ethnic banks. What is unique is, after reviewing the management team and board, there are people of Korean, Malaysian, Indian, and Chinese descent in leadership positions. At least that is what I can tell from the bios. The bank has grown over $1 billion in assets over the last twelve months, from $1.7 billion at September 30, 2020 to $2.8 billion at September 30, 2021. This was fueled mainly with loan growth. No acquisitions during this period. MCBS, with a market cap of $705 million, and LTM revenues (net interest income plus fee income) of $125.5 million, trades at 5.6x revenues. And it had an eye popping LTM ROA of 2.49% and ROE of 21.3%. We see these numbers from heavy SBA or, more recently, heavy residential mortgage producers. And for sure, MCBS is both, but it looks like they have been booking their residential mortgages, showing no YTD gain on sale from their residential mortgage loan production. Given that residential mortgages make up 73% of their loan portfolio, and their yield on loans was 5.16%, it makes me think they do a significant volume of non-conforming loans. But still, they have delivered a five-year total return of 439%! Well done!
Triumph Bancorp, and it’s subsidiary TBK Bank, SSB were founded in Dallas, Texas in 1981 and provides commercial and consumer banking products focused on meeting client needs in Texas, Colorado, Kansas, New Mexico, Iowa and Illinois. Triumph also serves a national client base with carrier payment solutions through TriumphPay, invoice factoring through Advance Business Capital LLC d/b/a Triumph Business Capital, insurance through Triumph Insurance Group, Inc. and equipment lending and asset based lending through Triumph Commercial Finance. Phew! Needless to say, they have diverse revenue streams and geographies, which produced a LTM net interest margin of 6.35%, driving an ROA/ROE of 1.98% / 15.42%. Profit numbers were aided by an allowance recapture. You would think such a margin would come with higher non-performing assets to total assets but no, as NPAs/Assets were 30 basis points at September 30th. The bank has nearly doubled in size in the past five years, aided by three whole-bank and one multi-branch acquisition. But during that span they delivered a 375% total return to shareholders. Wow!
After being conspicuously absent from prior JFB Top Fives, LOB makes it’s second showing in a row. It has been an industry darling due to its dedication to technology experimentation. It was the brain child for the nCino platform, which it formed in 2012 and spun off in 2014. Live Oak was founded in 2007 to provide business loans, primarily Small Business Administration (SBA) guaranteed loans, to select industries, like dentists and veterinarians. Live Oak is now the largest SBA 7(a) lender in the United States. They opened in 2007! But it goes beyond traditional banking. Subsidiaries, in addition to the bank, include: Live Oak Private Wealth, LLC, a registered investment advisor; Canapi Advisors, LLC that provides investment advisory services to new funds focused on providing venture capital to new and emerging fintechs; Live Oak Ventures, Inc. that invests in businesses that align with the company’s focus on fintech; Government Loan Solutions, Inc., a management and technology consulting firm that engages in the settlement accounting, and securitization process for SBA and USDA guaranteed loans; and, get this, Live Oak Grove, LLC, which is their on-site restaurant for employees in Wilmington, North Carolina. It’s five year total return: 371%! Well done!
#5. SVB Financial Group (Nasdaq: SIVB)
SVB Financial Group, formerly Silicon Valley Financial Group is the parent company of Silicon Valley Bank, long considered a go-to bank for startups. At $191 billion in total assets, SVB remains the largest financial institution to ever break into the Top 5 Total Return to Shareholders. It’s going to be difficult to describe what they do in summary. But here I go. They are a diversified financial services company that operates through four segments: Global Commercial Bank, which provides traditional banking services plus some not so traditional like mezzanine lending, acquisition, finance, and corporate working capital facilities, foreign exchange, export/import and standby letters of credit, vineyard development loans, and on and on I could go. SVB Private Bank segment offers traditional private banking and wealth services. The SVB Capital segment provides venture capital investment services that manage funds on behalf of third party limited partner investors. SVB Leerink segment engages in capital markets activities, M&A, and investment banking services. SVB operates through 30 offices in the USA, Canada, UK, Israel, Germany, Denmark, India, Hong Kong, and China. It was founded in 1983. It’s largest acquisition in the last five years was Boston Private Holdings, but it has been active in its other segments, including the acquisition of Leerink. It has a LTM ROA of 1.50%, and an ROE of 19.91%. Even at it’s relatively large size and battling the law of large numbers, SVB remains known for it’s niche in the venture capital and founders space. It’s not easy to fight “general bank”, but they seem to be doing it. And delivered a 296% five-year total return! Nice!
Note: I make no investment recommendations in my blog. Please do not claim to invest in any security based on what you read here. You should make your own decisions in that regard. FINRA makes people take a test to ensure they know what they are doing before recommending securities. I’m sure that strategy works well.