Thursday, November 15, 2012

Dearborn Bancorp DEAR

This Michigan based Bank holding company Dearborn Bancorp, Inc. (DEAR) on the Nasdaq offers a range of financial products and services mostly to commercial small and mid sized business. They just purchased Fidelity Financial Corporation in Michigan for $70.5 million in cash and will be taking their name. It was interesting to see how management is very candid in the annual report about how their name has limited them in their success so this new name and acquisition if all goes well should be a great achievement for the company which just reached total assets of $1 billion after the purchase. They have grown extremely fast to get there opening in 94' with $7 mil.

I was really impressed with managements discussion and honesty. I was curious about them not paying a cash dividend and they addressed that by saying they are still in a growth mode. They have payed stock dividends. They missed earnings guidance which I see as no big deal considering they can keep up the growth long-term. Earnings growth over the last 5 years has been at 25%. The stock has been hated over the last year now trading at around $15 a share a three year low. Some companies only say they are shareholder oriented but Dearborn means it. Management has just said shares are undervalued and are buying back up to 400,000 of the Company's common shares.

John Demmer, the Company's chairman, announced the Board's action. He added, "Given our Company's unusually strong capital position and the conditions in the market for the stock of all Michigan banking organizations, our board determined that this stock repurchase plan may be a prudent use of our ample resources that serves the best interests of all of our shareholders."

There are big risks for the company like competition, economic weakness in Southeast Michigan and a flat yield curve.

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