Stock Alert for Wainwright Bank &Trust Co. (WAIN)

Wainwright Bank & Trust Company(Nasdaq: WAIN)  is a banking company principally engaged in the business of attracting deposits from the general public and private customers, originating residential and commercial real estate mortgages, commercial and consumer loans, investing in securities and providing investment management services. The Company’s wholly owned subsidiary, Heritage Capital Management Inc., conducts investment management business.

The Company was founded in 1987 and is headquartered in Boston, Massachusetts.

Share Statistics (29-Jun-10)			FY 2007	FY 2008	% Chg	Q4 2008	Q4 2009	% Chg
Symbol	WAIN	Revenue, $Mn	58.01M	29.16M	49.7%	n/a	8.27M	n/a
Current price	$18.67	Gross marg.	n/a	n/a	n/a	n/a	n/a	n/a
52wk Range:	$18.90-5.70	Oper. margin	48.6%	93.8%	93.0%	n/a	n/a	n/a
Avg Vol (3m):	4,738	Net margin	10.4%	11.5%	-5.3%	n/a	21.5%	n/a
Market Cap.	136.41M
Shares Outst.	7.3M	EPS, $	0.71	0.40	43.7%	0.15	0.17	13.3%

Source: Reuters.com, SEC Filings.

Financial Summary

WAIN reported consolidated net income of $2,109,000 for the quarter ended March 31, 2010, and basic earnings per share of $.28 ($.25 per diluted share). This compares to consolidated net income of $1,560,000 and basic earnings per share of $.17 ($.16 per diluted share) for the quarter ended March 31, 2009. Net income increased $549,000, or 35%, over the first quarter of 2009. Fully diluted earnings per common share increased 56% having been further enhanced by the repayment in full of the Series D Preferred Stock to the U. S. Treasury in the fourth quarter of 2009. The increase in net income for the three months ending March 31, 2010, is primarily due to a $651,000 increase in net interest income and a $594,000 increase in noninterest income. Due to the record increase in earnings the WAIN’s book value per common share and tangible net worth increased to $8.99 and $8.92 at March 31, 2010, respectively.

The average balance of core deposit products increased $55 million, or 13%, to $471 million in the three months ending March 31, 2010, compared to March 31, 2009. NOW, demand deposit, and savings products increased $29 million, $15 million and $13 million, respectively, which offsets the decline of $2 million in money market accounts. This increase in core deposits was partially offset by a decline of $45 million in higher cost certificates of deposit. In addition, WAIN has benefited from the maturities of higher cost, long term Federal Home Loan Bank advances resulting in a net repayment of $16 million. WAIN’s average interest-earning assets decreased $33 million, or 3%, to $982 million from $1.01 billion for the three months ending March 31, 2010, and 2009, respectively. In addition to a $17 million decline in net federal funds and money market average balances, WAIN’s average outstanding loan balances declined $19 million, or 2%, to $808 million in the first three months of 2010 when compared to the same period in 2009. Residential real estate loans increased $27 million, or 7%, during the period partially offset by a decline of $17 million in commercial loans. As a result of the soft economy, WAIN has continued to reduce its exposure in the commercial construction segment of the loan portfolio, which has decreased $31 million.

Net interest income was $8.4 million for the three months ended March 31, 2010, compared to $7.7 million for the same period of 2009, an increase of $651,000, or 8%. WAIN’s net interest margin climbed to 3.46% from 3.09% in the three months ending March 31, 2010, compared to the same three month period in 2009. Furthermore, at 3.46% for the three months ended March 31, 2010, the net interest margin increased 12 basis points, up from 3.34% for the three months ending December 31, 2009. The primary reason for the increase in net interest income is the decline in the cost of interest-bearing liabilities, which decreased 54 basis points to 1.87% for the three months ending March 31, 2010, compared to 2009, resulting in a decline in interest expense of $1.3 million. Partially offsetting the benefit from reduced funding costs was the decline in interest and dividend income. The decrease of $19 million in the loan portfolio described above contributed to the decrease in interest income. Similarly, the current low rate environment contributed to reduced interest and dividend income earned on its securities portfolio.

The provision for credit losses was $200,000 and $500,000 for the three months ended March 31, 2010, and 2009, respectively. A provision is made based on management’s assessment of the adequacy of the allowance for credit losses after considering historical experience, current economic conditions, changes in the composition of the loan portfolio, and the level of non-accrual and other non-performing loans. The reserve for credit losses was $10.2 million, $10.3 million and $9.1 million representing 1.27%, 1.26% and 1.11% of total loans at March 31, 2010, December 31, 2009 and March 31, 2009, respectively. WAIN had net charge-offs of $308,000 and $125,000 in the three months ended March 31, 2010, and 2009, respectively. Nonaccrual loans amounted to $6.5 million, $3.5 million and $1.7 million at March 31, 2010, December 31, 2009 and March 31, 2009, respectively. The nonaccrual loans as of March 31, 2010, included ten residential mortgages that total $2.6 million, of which four represent modified mortgages where the borrower is current on payments and three that are in the process of foreclosure. The remaining nonaccrual loans include six commercial relationships. The largest is a $3.3 million commercial real estate loan that is adequately collateralized based on a recent appraisal. At March 31, 2010, loans 30 days or more past due represented 1.21% of the total loan portfolio, a decrease from 1.25% at December 31, 2009.

Total noninterest income was $2.0 million and $1.4 million for the three months ended March 31, 2010, and 2009, respectively, an increase of $594,000, or 41%. The variance between the two quarters is due primarily to one-time fees paid upon the payoff of commercial real estate loans and mortgage banking income as residential mortgage rates remained low in the first quarter of 2010 and the volume of both refinance and purchase activity within WAIN’s residential mortgage loan products remained high. Service charge increases in various products as well as the volume increase in debit card usage led to a $41,000 increase in deposit service charges. These increases were offset by declines in investment management fees of $22,000. In addition, the Bank recorded $352,000 in net gains on securities in the three months ending March 31, 2010, compared to a gain of $367,000 in the same period of 2009. In addition, there were no other-than-temporary impairment losses during the three months ended March 31, 2010 compared with $90,000 in 2009.

Total operating expenses were $7.4 million and $6.8 million for each of the three months ending March 31, 2010, and 2009, respectively. Total operating expenses were $7.4 million for the three months ended December 31, 2009. Salaries and employee benefits increased $489,000, a result of normal merit increases, commission pay, and increased medical costs and other employee benefits. Occupancy and equipment costs increased $157,000. WAIN saw normal increases in rent and absorbed the loss of a tenant in its headquarters building. This was partially offset by a decrease in depreciation on leasehold improvements and furniture and equipment. WAIN absorbed a $51,000 increase in assessment fees due to increased FDIC insurance premiums as a result of the increase in deposits. Professional fees decreased $72,000 primarily due to a decline in consulting, legal and audit and accounting fees. Advertising and marketing costs decreased $108,000 as a result of promotional costs for various product specials in the prior period.

Financial Strength (29-Jun-2010)	Company	Industry	Sector	S&P 500
Quick Ratio (MRQ)	–	0.00	3.73	0.81
Current Ratio (MRQ)	–	0.00	6.75	0.96
Long-Term Debt to Equity(MRQ)	–	74.61	91.77	133.77
Total Debt to Equity (MRQ)	–	248.99	227.62	199.68

Source: Reuters.com, SEC Filings.

Analyst Consensus

No recommendation data available.

Source: www.ft.com

No consensus analysis data available.

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=WAIN.W

Investment Highlights

Today WAIN announced it will receive $19.00 per share in cash to be acquired by Eastern Bank Corp. The merger will combine two banks focused on serving their communities, while providing enhanced convenience for customers of both organizations. The combined organization will have more than 90 retail banking offices serving people and businesses across eastern Massachusetts, including 22 offices in the Boston metro area. At March 31, 2010, Eastern Bank Corporation’s consolidated assets were approximately $6.6 billion and WAIN had assets of ~$1.0 bln. At March 31, 2010, WAIN and Eastern Bank were both considered well-capitalized under applicable regulatory capital guidelines, and Eastern Bank will be well-capitalized under such standards upon completion of the transaction.

WAIN has provided financing in the form of a construction and term debt facility to an energy conservation company that serves New England.

GreenBridge Energy Consortium, based in Pennsylvania, will receive financing from Wainwright Bank to help nonprofit organizations benefit from clean energy generation without the risks of ownership or maintenance.

The credit facility provides the equivalent debt to complete an estimated 2 megawatts of projects which will produce enough electricity to power more than 250 Massachusetts homes per year and is estimated to yield air quality benefits and annual greenhouse gas reductions equal to taking over 300 cars off the road or planting more than 700 trees, according to a statement.

GreenBridge Energy’s program is designed especially for nonprofits, which are not eligible for the federal incentives for solar energy systems under the American Recovery and Reinvestment Tax Act of 2009.

GreenBridge Energy’s first project was completed in March at the Boys & Girls Club of Lawrence. The company is also working on a “green” roof for the gymnasium at The Governor’s Academy in Byfield.

Source: https://www.wainwrightbank.com/html/personal/index.html

Technical Analysis

Source: http://stockcharts.com

Friday, WAIN closed above its 13-day moving average. This is generally considered to be an indication of a bullish trend.

WAIN’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, WAIN is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for WAIN currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above zero, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Jun-29-2010	symbol	Share, $	$ Mn	2010	2011	2010	2011
Century Bancorp Inc.	CNBKA	21.87	120.95M	10.35	n/a	1.87	n/a
Merchants Bancshares Inc.	MBVT	22.18	136.54M	10.15	n/a	2.16	n/a
Enterprise Bancorp. Inc.	EBTC	10.40	95.78M	9.42	n/a	1.67	n/a
Regional Banks Median			117.75M	9.97	n/a	1.90	n/a
Wainwright Bank & Trust Co.	WAIN	18.67	136.41	25.60	n/a	1.72	n/a

Source: Thomson Financial

Insider Trading Activity

NET SHARES PURCHASE ACTIVITY Inside Purchases – Last 6 Months
	Shares	Transaction
Purchases	n/a	n/a
Sales	n/a	n/a
Net Shares Purchased (Sold)	n/a	n/a
Total Insider Shares Held	n/a	n/a
% Net Shares Purchased (Sold)	n/a	n/a

Net Institutional Purchases — Prior Qtr to Latest Qtr
	Shares
Net Shares Purchased (Sold)	n/a
% Change in Institutional Shares Held	n/a

Source: Yahoo Finance

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