Summary: ON SALE
Score: 19/20
MOS: 55%
Share Price: $29
Sticker Price: $68
Is Reliant Bankcorp stock a good buy?
Reliant Bankcorp is a small US-based bank located in Brentwood, TN. The bank was founded in 2006, went public in 2015, and has about 300 employees in 22 locations.
Banking is a common and in many cases a competitive business model around the world. Most of us are familiar with some of the top global players including JPMorgan Chase, Bank of China, HSBC, Citigroup, Wells Fargo, BNP Paribas, and Barclays.
The question is, what makes Reliant so special?
Reliant is classified as a Community Bank. Community banks are depositories or lending institutions that primarily serve individuals and businesses in a small geographic area. In this circumstance, Reliant serves Tennessee. Community banks tend to place a strong emphasis on personal relationships. One big benefit with community banks is it’s typically easier to obtain a business loan than it is with large institutions. Community banks can be known to take a little more risk to invest in small businesses, especially businesses that serve the same community as the bank itself. This creates a mutually beneficial network effect, especially if the loans produce fruitful ventures.
Similar to large banks, Reliant offers a lot of the same services including Personal Banking (Banking, Lending, Credit Cards, and Investments), Business Banking (Banking, Lending, Investments, and Treasury Management), and Home Loans.
Here are some key differentiators between Reliant and its large institution counterparts.
- Reliant offers a $0 monthly service fee whereas the national average is between $10 and $20.
- Reliant offers a non-network ATM fee of $0 whereas the national average is between $3.82 and $4.88.
Although most of us can probably accept the monthly service fees, I think we can all agree on the annoying situation of going to a non-network ATM, only to see a fee of $4.00 show up on the screen. If you’re like me, your immediate reaction is the muttering of dialogue such as “You’ve got to be kidding me” followed by the reluctant press of the “accept charge” button.
Reliant has decided to waive these fees and focus its attention on providing excellent lending services. In fact, this press release on 5/24/2021 states that Reliant has been recognized as one of the top-performing community banks in the US by Raymond James and S&P Global Market Intelligence. The metrics this is based on include profitability, operational efficiency, and growth rate.
Here is what else the news has to say.
This article from Yahoo Finance states why you shouldn’t bet against Reliant Bankcorp as the EPS estimates have consistently increased.
This article from Business Wire states that Reliant Bankcorp will start offering a dividend of $.12 per share on 5/20/2021. As quoted by the CEO, DeVan Ard, “The increase in our cash dividend highlights our strong operating results over the past year. Our first quarter was highlighted by solid earnings, an improved net interest margin, and superior credit quality.”
This article from Simply Wall St states positivity with insider trading. When insiders are buying more shares, it shows strong conviction the business will continue to grow.
You may be curious about the language “insider trading” above. There are two types of insider trading. One of which is legal and the other is illegal.
Legal Insider Trading: If you are a corporate director, officer, or major shareholder for a public company and you wish to buy or sell shares of that company, you must disclose your trade to the SEC (Securities and Exchanges Commission) in advance of the trade.
Illegal Insider Trading: If you are a corporate director, officer, or major shareholder for a public company and you buy or sell shares and don’t report to the SEC, this is classified as insider trading. Also, if you are a corporate director, officer, or major shareholder for a public company and if you share non-public information with someone outside the company, and they profit from the transaction, both you and the person you disclosed the information to can be fined up to $5M and sentenced up to 20 years in prison.
Here is how Reliant stacks up against other small community banks.
RBNC (Reliant Bankcorp)
Score: 19/20
MOS: 55%
Summary: On Sale
Revenue: $129M
KFFB (Kentucky First Federal Bankcorp)
Score: 0/20
MOS: 0%
Summary: Overpriced
Revenue: $9M
UNTY (Unity Bankcorp)
Score: 15/20
MOS: 43%
Summary: Watch
Revenue: $76M
Based on my homework, there are a lot of small private banks but on the public side, Unity Bankcorp looks like the only competition.
Now let’s take a look at the 4 M’s.
MOS (Margin of Safety): Tykr shows the financials of Reliant are very strong. A 19/20 is very hard to achieve. When you take a closer look within Tykr the ROIC is 5/6, the Equity Growth Rate is 3/3, the EPS Growth Rate is 3/3, and the Sales Growth Rate is 3/3.
Meaning: Will small community banks like Reliant be around in 10 years? Most likely yes. The real question will be the potential for a merger or acquisition. In other words, if Reliant keeps its momentum, it may be acquired. As investors, your shares may sell and you’ll collect your profits (or losses depending on your cost basis) or the shares from the acquired company will be converted into shares from the acquiring company.
Moat: There are a lot of banks around the world. This isn’t a unique business model. It appears as though Reliant Bankcorp has a strong community footprint in Tennessee but where can they go from here? They will either expand to other states or become acquired if they keep growing. Both options are a win for investors.
Management: DeVan Ard has served as CEO of Reliant for 16 years. He began his career with AmSouth Bank in 1981 and served in various roles before joining Reliant. He’s served on the board of directors for Adventure Science Center, Boy Scouts of America, and Middle Tennessee Council. With 40 years of experience in banking, Ard has proven he knows what he’s doing when it comes to leading a community bank.
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Revenue (Found on the Income Statement)
2017: $40M
2018: $63M
2019: $67M
2020: $129M
Revenue increased significantly in 2020.
Net Income (Found on the Income Statement)
2017: $7M
2018: $14M
2019: $16M
2020: $31M
Net Income also increased significantly in 2020.
EPS (Found on the Income Statement)
2017: .89
2018: 1.24
2019: 1.44
2020: 2.79
EPS also increased significantly in 2020.
Free Cash Flow (Found on the Cash Flow Statement)
2017: -$21M
2018: $37M
2019: -$5M
2020: -$77M
Free Cash Flow more than doubled in 2020. This is a healthy sign.
Total Assets (Found on the Balance Sheet)
2017: $1.1B
2018: $1.7B
2019: $1.8B
2020: $3B
Total Assets have increased significantly in 2020.
Total Liabilities (Found on the Balance Sheet)
2017: $984M
2018: $1.5B
2019: $1.6B
2020: $2.7B
Total Liabilities have increased which is okay.
Total Debt (Found on the Balance Sheet)
2017: $316M
2018: $365M
2019: $341M
2020: $84M
Total Debt has decreased significantly which is a good sign.
Total Equity (Found on the Balance Sheet)
2017: $140M
2018: $208M
2019: $223M
2020: $321M
Total Equity has increased consistently which is a good sign.
With a score of 19/20 and a MOS of 55%, the financials are strong. When you look at the meaning, we have a good idea that community banks like Reliant will be around in 10 years. The question remains if they will expand outside Tennessee or become acquired. When you look at the moat, we understand there are a lot of community banks but Reliant is the strongest player in the Tennessee community. When it comes to management, DeVan Ard is doing a fine job running this business.
—
The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.