Cullman Bancorp, Cullman, AL (CULL)
A Case of a Bank Going Dark
Unless one of my readers knows something more positive about what the leaders at Cullman Bancorp are up to that I don’t — and is willing to share it with the rest of us, I think it’s safe to say, we investors aren’t going to find the switch that needs to be flipped to power CULL back up.
Cullman’s leadership is keeping investors in the dark for reason. For that reason, I declare CULL a stock to avoid if you can, and to sell if you can’t.
Disclosure: As of this posting, I own shares of CULL and may subsequently either dispose of them or purchase more.
Prospective Buyers
This is neither here nor there, because Cullman Bancorp is not about to let anyone take a shot at it, but there at least four area players that would do a better job of managing and growing Cullman's assets.
Peoples Bank of Alabama, Cullman, AL (private)
SouthPoint Bancshares, Birmingham, AL (SOUB)
Traditions Bank, Cullman, AL (private)
United Community Bank, Blairsville, GA (UCB)
Financial Snapshot
Scoundrels
John A. Riley III, Chairman, President, and CEO
T'aira Ugarkovich, COO and borrower
Paul Bussman, Director for 31 years
Red Flags
Cullman Bancorp and Cullman Savings Bank have issues!
Compensation Issues
Gross overcompensation of leadership teams is a major red flag in any enterprise.
CEO John Riley III runs a rinky dink bank that's performing at the bottom among its peers, but he landed on Capital IQ’s 2023 list as the third most highly compensated CEO of any publicly traded bank in the US with assets under $1B.
In 2023, Cullman's top three executives took home $2.3M while reporting a mere $3.9M in earnings and driving the price of their stock down by 9%. For point of reference, that's nearly twice the compensation the top three executives at William Penn — a bank twice the size of Cullman – took home after increasing their stock price by 7%.
Given Cullman's recent efficiency ratios in the over 70% range, Cullman Savings Bank will not be able to improve its 5%-and-below returns on equity as too much of the bank’s profit margin goes to executive salaries and board fees.
Insider Dealing Issues
Insider dealing is a major red flag in any organization.
Cullman insiders are borrowing money from the bank at a fraction of the rate that they're charging their customers.
Mortgage rates nationally run around 6% for most Americans.
In stark contrast, insiders like Cullman's COO Ugarkovich -- who borrowed $636K to finance her home — received the funds at a special Riley's Friends and Family Rate of 1.75%. CEO Riley loaned himself even more, $895K, but somewhat *respectably* charged himself the same friendly rate of 1.75%.
Capital Management Issues
This shouldn't need to be said, but capital management issues are a major red flag in any financial institution.
Smart bank management teams with excess capital like Cullman enjoys, aggressively repurchase shares when they're trading at a significant discount to book value as a way to increase value.
CULL is trading at 66% of book value today and at a discount to the $10/share price sold to investors in the IPO three years ago, yet as of the bank's last filed 10Q in March, Management had only repurchased 35,593 shares that quarter (0.4% of the shares available for repurchase).
Transparency Issues
Transparency issues are a major red flag for investors in any management team and company.
Cullman is actively pursuing the freedom to operate with as little transparency as it can legally get away with.
Until July 18, 2024, Cullman Bancorp was SEC registered as required by FDIC conversion rules. (A bank is required to be registered for 3 years after conversion.)
Since then, the bank has "gone dark." Cullman did not release the customary quarterly 2024 10-Qs investors rely upon to ascertain a bank's performance.
Going forward, CULL shareholders should understand, the bank is no longer required to disclose even simple matters such as stock ownership amongst management and directors, executive salaries and board stipends, or insider loans and interest rates.
Control Issues
As a general rule, it's wise to avoid relationships with control freaks who do everything they can to limit your knowledge, influence, and well-being.
Cullman Bancorp has aggressively and intentionally decimated what is effectively every bank stock holder's last leverage over banks abusing the privilege of shareholder capital.
Since Maryland Proxy Rules now prevail over Cullman Bancorp’s operations instead of SEC Rules, Cullman Bancorp can now forever prevent shareholder proposals from being properly disclosed and voted on by fellow shareholders at the bank's Annual Meetings.
Simply put: Cullman Bancorp is not in a right relationship to its shareholders and has put itself in a position of such power over us, we’re completely at their mercy. The only sane response in such a relationship is to run.
Sources
Bank
Articles
Other
Confidential interviews with shareholders and analysts
Couple of tidbits. Banks do have to file an annual ownership form (FR Y-6) with the Federal Reserve Bank (FRB) that it reports to. For Cullman, that is the FRB of Atlanta:
https://www.atlantafed.org/banking-and-payments/reporting/fry6
Cullman did register with otcmarkets.com and posted its 3rd Qtr 2024 financials (only 2 pages - one for balance sheet and one for income statement) under the Company Profile:
https://www.otcmarkets.com/otcapi/company/financial-report/414570/content
Big question is whether the bank will continue updating or maintain a history.
In reading this, I was immediately reminded of the cartoon character Foghorn Leghorn and his frequent line of "Go away, boy, you bother me!"
Sooo... why on earth do you own shares?