Selling Mom's Shares of Small Town Bank

[jimmygu3]

I just realized that my 79 year-old mother has about 15% of her portfolio invested in a small bank that is heavily involved in real estate lending. I looked up their latest SEC filing and found, not surprisingly, that non-performing loans skyrocketed from .5% of loans in Jan 07, to 4% of loans nine months later.

This is an investment my father made decades ago and it has performed very well and paid excellent dividends as the bank has grown, but I feel it is definitely time to get out. My mother is too old to be exposed to this kind of risk. It is not publicly traded, so you literally have to call a list of people to see if any of them want to buy. The stock traded at $13.50 all through '07 and early '08, but recent trades have been at $12 or $11, according to the bank's representative. I suppose we will have to take what the market will bear.

Just thought I'd post the info to see if anybody else saw something different in the report than I do, or has any other advice to offer. I'm guessing most around here feel that owning stock in a small bank is not a good idea right now regardless. Thanks.

Jimmy

[GRG55]

Re: Selling Mom's Shares of Small Town Bank

I just realized that my 79 year-old mother has about 15% of her portfolio invested in a small bank that is heavily involved in real estate lending. I looked up their latest SEC filing and found, not surprisingly, that non-performing loans skyrocketed from .5% of loans in Jan 07, to 4% of loans nine months later.

This is an investment my father made decades ago and it has performed very well and paid excellent dividends as the bank has grown, but I feel it is definitely time to get out. My mother is too old to be exposed to this kind of risk. It is not publicly traded, so you literally have to call a list of people to see if any of them want to buy. The stock traded at $13.50 all through '07 and early '08, but recent trades have been at $12 or $11, according to the bank's representative. I suppose we will have to take what the market will bear.

Just thought I'd post the info to see if anybody else saw something different in the report than I do, or has any other advice to offer. I'm guessing most around here feel that owning stock in a small bank is not a good idea right now regardless. Thanks.

Jimmy

She doesn't live in Bedford Falls or Potterville does she? ;)

[jimmygu3]

Re: Selling Mom's Shares of Small Town Bank

She doesn't live in Bedford Falls or Potterville does she? ;)

The wealthiest man in town has offered to pay her $.50 on the dollar- cash!

As long as you brought up one of my favorite movies, I have to vent about that one scene.



So we are to believe that George saved up $2000 (about $25-30k CPI-adjusted) and was going to blow it all on his honeymoon. It must have been between 1930 and 1932, when most of the bank runs happened. Most likely it would have been 1930, as the bank run was a surprise and he had been prepared to spend shitloads of money frivolously. Either way it was post-stock market crash and he should have known better.

So people have the choice of selling to Potter for 50% or holding on to their shares and only withdrawing what they need. But this jerk Tom demands $242 (about $3600 CPI-adj), and old mossback George gives it to him as a loan! I would have told Tom to kiss my ass. Potter's only offering you $121. How about you take $100 cash and you still have a $142 balance. Worst case, the Building & Loan fails and you miss out on $21. Best case you're up 100% over the Potter deal.

But I'm no George Bailey.

[Jim Nickerson]

Re: Selling Mom's Shares of Small Town Bank

I just realized that my 79 year-old mother has about 15% of her portfolio invested in a small bank that is heavily involved in real estate lending. I looked up their latest SEC filing and found, not surprisingly, that non-performing loans skyrocketed from .5% of loans in Jan 07, to 4% of loans nine months later.

This is an investment my father made decades ago and it has performed very well and paid excellent dividends as the bank has grown, but I feel it is definitely time to get out. My mother is too old to be exposed to this kind of risk. It is not publicly traded, so you literally have to call a list of people to see if any of them want to buy. The stock traded at $13.50 all through '07 and early '08, but recent trades have been at $12 or $11, according to the bank's representative. I suppose we will have to take what the market will bear.

Just thought I'd post the info to see if anybody else saw something different in the report than I do, or has any other advice to offer. I'm guessing most around here feel that owning stock in a small bank is not a good idea right now regardless. Thanks.

Jimmy

You noted below that someone offered $.50 on the bonar, is that the real deal or were you referencing what a wonderful life?

How much worse off would she be if she lost 15% of her assets? I'd ask myself will it hurt severely if the whole amount were lost? Do you think this small bank will fail?

Things may get worse, but at some point they may also get better--hopefully, and I am not a person that hopes a lot.

[GRG55]

Re: Selling Mom's Shares of Small Town Bank

But I'm no George Bailey.

I'm not either, but that didn't stop me from having a crush on Donna Reed...
Nice to find another fan of that movie.

[jimmygu3]

Re: Selling Mom's Shares of Small Town Bank

You noted below that someone offered $.50 on the bonar, is that the real deal or were you referencing what a wonderful life?

How much worse off would she be if she lost 15% of her assets? I'd ask myself will it hurt severely if the whole amount were lost? Do you think this small bank will fail?

Things may get worse, but at some point they may also get better--hopefully, and I am not a person that hopes a lot.

Thanks for the input. The 50 cents thing was a reference to the movie. I just don't think an octogenarian on fixed income needs to be so exposed to such a potentially volatile sector. I know there's no way I would decide to get her into an investment like this right now, so why hold on to it? It has grown from a small part of a middle-aged person's portfolio to a good sized portion of an old person's portfolio, as the sector itself has become much riskier. It no longer fits her needs.

[BiscayneSunrise]

Re: Selling Mom's Shares of Small Town Bank

I know there's no way I would decide to get her into an investment like this right now, so why hold on to it? It has grown from a small part of a middle-aged person's portfolio to a good sized portion of an old person's portfolio, as the sector itself has become much riskier. It no longer fits her needs.[/QUOTE]

True enough jimmy, 15% of one's portfolio in any single company is too much unless you are on a hair trigger to sell. There are an awful lot of people out there holding on to the stalwart "widows and orphans" stocks thinking they are safe but in reality have turned into the most speculative stocks of all. Ironic.