Jeffersonville Bancorp: Secure Dividend Amid Low Interest Rates

Analysis by Fred Campbell, M.S.F.
There are several reasons I like community banks; for one, you can usually find a good yield that is two to three times what a CD currently pays. Last month I highlighted Bank of Utica (OTCPK: BKUTK) which has a 3% yield. Although there hasn't been much movement in the stock price, I feel I have an indefinite 3% CD in BKUTK that I can cash out at almost any time. Another reason is that there are so many smaller banks that you can catch some solid ones that are not followed by Wall Street analysts. This is rare in other industries and gives investors a chance to be one of the first to get into a good situation. Finally there is the chance for capital gains as the bank grows or as acquisitions occur.
There are also negatives to smaller bank stocks. They tend to be thinly traded so their price can be pushed up or down by one or two large transactions and their price can be pummeled by unforeseen events such as embezzlement. A third negative is that some of the stocks have such small visibility that their stock rarely moves; this is not altogether bad because it then becomes the above mentioned indefinite CD but many investors don't have that patience.
I've explained my rationale for community bank investing. What do I look for when choosing a bank stock? I have several criteria:
1. A special situation that one rarely finds (see BKUTK)
2. Local knowledge of the bank (I grew up in Athens, TN so I own AFCB)
3. How long... Read more