Commercial Bancgroup, Inc. (CBK) stock intrinsic value fair value estimate & owner earnings analysis

Commercial Bancgroup is the holding company for Commercial Bank, a community bank founded in 1976 in Harrogate, Tennessee. At June 30, 2026 it had about $2.4 billion of assets, $1.9 billion of loans and $1.87 billion of deposits, gathered through offices in East Tennessee, southeast Kentucky and the Gastonia/Charlotte area of North Carolina. The stock only began trading after an October 2025 IPO, so the company has published just two years of audited results as a public company (2024 and 2025). Both were unusually good years for banks: loan losses were close to zero and the bank's margin was near its best level in two decades. Valuing the bank on those two years alone would treat a high point as normal. A longer record than the stock suggests. The bank itself has filed quarterly financial reports with federal bank regulators for decades, and those reports run from 2006 to mid-2026, through the 2008-2012 financial crisis. They show a bank that earned about 1.4% on its assets in 2006-2007, fell to under 0.1% in 2009, lost $15.0 million in 2011 when net loan losses reached 1.39% of loans, and did not earn normally again until 2014. It did not fail: bank equity fell from $86.6 million to $72.5 million in 2011 and then rebuilt. Over those 20 years net loan losses averaged 0.29% of loans a year, ten times the 0.03% of 2025. Return on assets, adjusted for the 2018 corporate tax cut, had a median of about 1.2%; since 2022 it has run at 1.6% to 1.8%. These figures are for the bank alone, so they exclude the holding company and, before 2024, the separately chartered Alliance Bank & Trust. We use this record to decide what a normal year looks like and to build the bad case from what actually happened to this bank, not from guesswork. How we measure earnings. We start from the cash the bank's operations produced, strip out short-term swings in receivables and payables, and charge equity pay and branch and equipment spending as real costs. That gave $31.6 million in 2024 and $36.1 million in 2025. Restated to today's 13.7 million diluted shares, and adding back the interest no longer paid on a $21.5 million holding-company loan repaid with IPO money, that is about $2.40 and $2.71 per share. The first half of 2026 is running at roughly $2.90 a year (net income of $0.70 and $0.74 per share in the first two quarters), helped by cheaper funding: interest expense was $17.6 million against $22.2 million a year earlier, after costly brokered deposits were run off. Amortization of acquired deposit relationships (about $1.5 million a year) is an accounting write-down of past purchases and is not treated as a cost. One adjustment matters a great deal for a bank. This cash measure never charges for loans that go bad, because a write-off shrinks the loan book rather than the cash flow, and 2024-2025 losses were tiny anyway. Bad loans are a bank's most important cost, so in every case we charge a stated level of losses. In the base case that is the bank's own 20-year average of 0.29% of loans: about $5.6 million a year before tax, or $0.32 per share after tax. Base case: earnings before loan losses of $2.80 per share, between the restated 2025 figure and the 2026 pace (two strong quarters justify moving above 2025, but not all the way to a peak-margin run rate), less normal loan losses, gives about $2.50 per share. That equals a 1.44% return on assets, below the 1.6-1.8% of recent years and above the bank's longer-run 1.2-1.3%. Our earnings measure rose about 11% per share in 2025; our starting point is only about 5% above 2025 once normal losses are charged, and no further growth is assumed. We give no credit for loan growth. Most of the bank's growth over 20 years came from five whole-bank acquisitions since 2008, most recently control of Alliance Bank & Trust's parent in June 2023. Each was a one-off bet, while organic growth has followed the local economies, including three years of shrinking in 2011-2013. Earnings are held flat for ten years and beyond, because the deposit franchise, built over 50 years and including $398 million of non-interest-bearing deposits (21.9% of the total), has already carried the bank through one severe downturn. Value: about $41.67 per share. Bear case: the bank's 2009-2013 experience repeats, starting now, on today's loan book. Net losses run 0.44%, 0.97%, 1.39%, 1.34% and 0.35% of loans over five years, about $86 million before tax and $67 million ($4.88 per share) after tax in total. The recession that causes those losses also brings lower interest rates; the bank's own model shows a 2-percentage-point drop would cut net interest income by about 6.8%, roughly $0.33 per share a year. Earnings fall to about $1.00 per share in the two worst years. Afterwards the bank is about 8% smaller, as its loans shrank by 8% in 2010-2013, and earns about $1.98 per share after normal losses. There are specific reasons to take this seriously: commercial real estate loans excluding owner-occupied property were 322% of total risk-based capital at the end of 2025, above the 300% level regulators watch and up from 304% a year earlier; that portfolio grew 60.5% over three years; and hotel and motel loans have at times exceeded the bank's own limit of 50% of capital, so new lodging loans are now limited to existing clients. Because today's earnings before loan losses are much larger relative to the loan book than in 2011, the bank stays profitable in every year of this case and its $303 million of equity absorbs the losses without issuing new shares. Value: about $30.96 per share. Bull case: the first-half 2026 pace continues, about $2.92 per share before loan losses. Short-term rates are near 3.9% and the bank's model shows it earns more when rates are higher. Loan losses stay at the 2014-2025 average of 0.065% of loans ($0.07 per share), giving $2.85 per share held flat. No growth, acquisitions or further margin gains are assumed. Value: about $47.50 per share. Debt. For a bank, deposits, Federal Home Loan Bank advances ($60.6 million at fixed rates of 0.69% to 5.33%) and short-term borrowings are the raw material of the business, and their interest is already deducted from the earnings above. So in each case the business value is also what shareholders own, with nothing further subtracted: bear $30.96, base $41.67, bull $47.50. At the end of 2025 the holding company had $41.1 million of cash against $18.0 million of its own debt: a $12.5 million note to PBD Holdings at 3.75% due September 2026 and $5.6 million of trust preferred securities that were prepaid in early 2026. We do not add the roughly $23 million ($1.70 per share) of net cash; we treat it as a cushion against the real estate concentration. Ownership. Robertson Holding Co. owns about 16.9% of the shares and Unified Shares about 8.5%. Two Robertson family members serve as directors. Acting together, they could strongly influence shareholder votes. What changed since our last review. All three values are lower: base $41.67 against $50.14, bear $30.96 against $38.44, bull $47.50 against $56.23. There are three reasons. First, we now charge a normal level of loan losses every year, taken from the bank's 20-year regulatory record, instead of the near-zero losses of 2024-2025. Second, we no longer credit 2% to 3.5% annual loan growth, because the bank's growth has come mainly from acquisitions and its local economies rather than from a steady, repeatable process. Third, the bear case now uses the bank's actual 2009-2013 losses (about 4.5% of loans in total) instead of two years at 0.75%. Partly offsetting this, the base case no longer holds back earnings to fund growth, and the longer record shows the bank came through its worst downturn intact. What would make this wrong: real estate or hotel losses worse than 2009-2013, since the concentration today is above the regulatory guideline; regulators requiring new capital; deposit costs rising again; or a sharp fall in interest rates. On the upside, today's margin could simply persist for many years. Margin-of-safety price: about $25 per share. That is roughly 10 times normal earnings and about 1.2 times tangible book value (about $21 per share). From $25, if the shares reach the base value within about four years, normal earnings of about $2.50 a year plus the rise in value imply roughly 20% a year in the base case. The bear case implies a positive return, about 10% a year over four years. We set the price below the bear value because only two public years exist, both favourable, and the longer history comes from the bank's regulatory reports rather than audited holding-company statements.