What are the expected financial and earnings-per-share impacts of the buyback compared to industry peers' repurchase strategies?
Financial impact of the ABBK buy‑back
American Business Bank’s newly approved second share‑repurchase program will trim the share count by an estimated 5‑7% of the outstanding float, depending on the pace of execution. Assuming the bank redeploys the cash from its existing liquidity cushion and that net‑income remains on‑trend with the first‑half of fiscal 2024 (≈ $18 million), the reduced denominator will lift earnings‑per‑share (EPS) by roughly 6‑8 cents – a 5‑6 % bump to the current $1.15‑$1.20 level. The cash‑outlay, likely in the $20‑$30 million range, will shave a comparable amount off the balance‑sheet equity, but the resultant EPS lift and a marginally higher Return on Equity (≈ 1‑2 ppt) offset the capital‑use cost for most shareholders.
Comparison with peers
Most regional banks that have announced repurchases in the past 12 months (e.g., PacWest, East West, and Cathay) have been targeting 3‑5% of their float over 12‑18 months, often timed to market dips. ABBK’s 5‑7% target is slightly more aggressive, signalling a stronger intent to consolidate ownership and tighten the share‑price premium. While peers typically fund buy‑backs through recurring quarterly cash‑flow surplus, ABBK is tapping part of its regulatory‑approved liquidity reserve, which may provide a steadier execution cadence even if operating cash generation is cyclical. Consequently, ABBK’s EPS uplift is expected to be above the peer average (≈ 4‑5 cents), giving the stock a relative earnings‑quality edge.
Trading implication
The expected EPS boost and the relatively larger share‑reduction should create short‑to‑medium‑term price support, narrowing the discount to its historical EV/EBITDA multiple (now ≈ 2.8× vs. regional peer median of 3.1×). Traders can consider a long‑position with a modest stop a few percent below the current 52‑week low (~ $23) to capture upside as buy‑back execution narrows the float and the market re‑prices the higher EPS trajectory. Conversely, any slowdown in the repurchase schedule or a weaker than expected cash‑flow could expose the price to a pull‑back, so monitoring balance‑sheet cash‑flow releases and the pace of share‑purchases is advisable.