Megabanks nearly ruined the U.S. financial system in 2008. What short memories we have. Today the heads of those institutions that were dubbed “too big to fail” are pressuring their congressional allies to dilute the reforms that were enacted (albeit weaker than reformers sought). As investors, we reject the notion that companies have to be global heavyweights to be attractive investments, and we also favor companies, either with our impact investments or publicly owned companies, that care about the communities where they do business.
In banking, some might consider community banks to be an anachronism in today’s complex, fast-changing world. We disagree. We think well-managed community banks can be good for both shareholders and their communities.
Century Bancorp was founded in 1969 by Marshall Sloane and is headquartered in Medford, Massachusetts. It has $3.8 billion in assets and 27 offices in 19 cities and towns in the Boston area. The bank is controlled by the Sloane family, with Marshall the chairman, son Barry the CEO, and daughter Linda Sloane Kay an executive vice president.
Here at Clean Yield, we invest for the long term, with “patient capital,” as some would put it. Century is managed in the same manner, unlike so many firms that are managed to satisfy quarterly earnings pressure from Wall Street analysts and many big institutional investors.
Century has developed a niche serving non-profit institutions in the Boston area and municipalities throughout Massachusetts. The Bank has prudent lending standards, outstanding credit quality and safety, and consistent results. Unlike many banks that suffered large losses during the housing bust and financial crisis of 2008, Century remained solidly profitable. In fact, earnings per share rose 30% from 2007 to 2009. Century also has produced steady growth in tangible book value (shareholders’ equity) per share—a measure that we emphasis for banks–over the past decade.
Furthermore, Century is rated A for quality by Standard & Poor’s, the only Massachusetts regional bank to be rated that high. In 2014 it was recognized as one of only 35 “Bank and Thrift Sm-All Stars” by financial services firm Sandler O’Neil & Partners. In 2013, it was one of four New England banks that were “bastions of growth” according to financial firm KBW. Also in 2013, it was among the “100 Best Performing” Massachusetts companies by The Boston Globe.
On the social/community side, in 2013 Chairman Marshall Sloane and his wife were recognized for their philanthropic contributions supporting social service organizations, non-profit health care providers, and educational foundations throughout the community. In 2010, the firm was recognized by 2020 Women on Boards. Overall, however, Century Bank’s sustainability disclosure is minimal and needs to improve greatly .
We think that in an overpriced stock market generally, Century is an excellent value with comparatively low risk.
Revenues: $100.6 million
Market Capitalization: $139 million
Earnings Per Share (EPS):
2015 est. $4.15
2016 est. $4.40
Projected 3-5 Year Annual Earnings Growth: 6%
Dividend Yield: 1.3%
Stock 52-week Low-High: $33.19-40.50
Tags: Century Bank, Community banks