Purchase: SBSI, Banking in Texas

It has been a busy few weeks for me.  I haven’t been able to do as much investing as I wanted.  A combination of being busy with the house, enjoying the nice weather and making up hours from a vacation that lasted too long (from works perspective).    However, I have had time to keep up with all the M&A action that has been going on.   One that struck me as particularly interesting was SBSI purchase of OMNI American.

OMNI American Bank is a small bank that is located in Fort Worth, Texas.  They have fourteen branches located throughout Fort Worth and its suburbs.  They have no presence within about 30 miles of Dallas.  They have about 1.4 billion in assets and had an EPS of .57 cents over the last few months.  SBSI agreed to buy them for ~.45 shares and 13 dollars per share of Omni.    Being that this is already a done deal,  I am not worried about whether or not they overpaid for the bank.  I personally don’t believe they did.

I look at SBSI and one aspect that I do not like about the bank is were most of its branches are located.  They are located in smaller towns with a token presence in Fort Worth and Austin, with two SBSI branches in town or in a suburb.  Cities like Dallas and Houston do not have any.  I have wanted SBSI to increase it’s footprint in at least one of the fast growing metro areas in Texas.  According the the census, four of the top 10 metro areas with the largest population growth were in TX.   These cities were Houston, Austin, Dallas and Fort Worth in that order.   It makes sense to expand in these areas from a banking perspective.

Texas has done very well in recent years.  Some large companies have been moving activity from other states to TX.  Chevron (moving personnel), Occidental Petroleum (LA to Houston) and Toyota come to mind.  The housing market did not collapse like it did in AZ or CA.  There was a rather modest fall from the peak of the housing bubble to the trough.   As we speak, the housing market is going gang busters in the Dallas Area and construction is booming.  As I walk around the area there are help signs practically everywhere I go.  Anecdotal evidence for sure, but sometimes that is good information.

In light of this move by SBSI, I re-evaluted my thesis and asked the question.  Does the purchase of SBSI add to the growth potential of this bank?  After reading, looking at macro factors and considering SBSI management track record, I chose to purchase additional shares of this company.   I placed a limit order yesterday, but did not have my order filled even though the price of SBSI hit my price! Frustrating for sure and it lead to me missing out on the ex-dividend date of today.

No worries though.  Today I purchased 42 shares of SBSI for a cost basis of 25.99 (including commission).  This will round out my position of SBSI to a little over 100 shares and add 35.28 to my yearly income.  After the 5% increase for SBSI recently and this new purchase my forward dividend income has now…

Broke 4k in forward dividends!

This is a great accomplishment and at this point I feel like my snowball with move forward without adding any additional outside funds.  However, I have no planes to not continue saving as much as I can.

Disclaimer: Long SBSI

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4 Responses to Purchase: SBSI, Banking in Texas

  1. DivHut says:

    Wow, this is a gem worth looking at. Nice dividend growth history, low payout ratio, generous yield and low PE. Who says there are no values plays these days in the market! Thanks for bringing this stock some attention.

    • ILG says:

      Yep! Plus they have a history of good management. I am happy that the bank recently sold off!

  2. CI says:

    Nice one! I actually placed a limit order for some new SBSI shares this past Monday, but it didn’t trigger. I put in a new order today hoping to catch it just a little bit lower. It has been bouncing around quite a bit as of late, we’ll see.

    We’re on the same page!

    • ILG says:

      Yeah, I am not sure why it seems to be going up 1-2% one day and then down the same amount the next. I am happy I got to take advantage of it and that you did as well!