Tri-County Financial Group, Inc. (TYFG) stock intrinsic value fair value estimate & owner earnings analysis

Tri-County Financial Group is the holding company for First State Bank, founded in 1940 and headquartered in Mendota, Illinois. The bank has 19 branch offices in 18 communities, primarily in north central Illinois, and about $1.6 billion in assets. It makes commercial, real estate and agricultural loans funded mainly by local deposits ($1.30 billion at year-end 2025). Two subsidiaries add fee income: First State Mortgage, which sells home loans (gains on loan sales were $10.9 million in 2025) and whose profits, per the company, swing with mortgage rates, and First State Insurance, an agency serving north central Illinois. How we measure earnings. We start from cash flow from operations, remove swings in working capital (for this bank, mainly the timing of mortgage loans originated and sold, plus receivables and payables), deduct stock compensation, and deduct the part of capital spending needed to keep the business running. On that basis owner earnings were $6.18 per share in 2025 and $3.77 in 2024. The 2024 figure was held down by higher spending on branch premises and equipment and was helped by a credit-loss recovery; 2025 earnings per share under standard accounting were $5.67 versus $4.28. As a cross-check, net income plus non-cash charges less maintenance capital spending reconciles to our figure within 1%. Only two years of annual data are available, so we anchor on their midpoint, $4.97 per share, rather than the stronger 2025 result. In the first half of 2026 earnings per share were $3.53 versus $2.52 a year earlier, which is consistent with, and does not change, that level. Growth check. Owner earnings grew about 64% in 2025, but that reflects the weak 2024 base, so we do not extrapolate it. The base case assumes no growth from the anchor level. Base case ($83 per share). Owner earnings stay at about $4.97 per share indefinitely and are valued at a 6% discount rate. We credit no growth: loans grew about 3% in 2025, but we have only a single year of history in the filings, and a bank must retain capital to grow, so we do not count it. We also count no gain from new markets, more branches or mortgage volume. Bear case ($56 per share). Owner earnings fall to about $3.38 per share and stay there. That is the 2024 level less the benefit of that year's $1.3 million credit-loss recovery (about $0.39 per share after tax). The main named risk is credit: the bank holds $169.8 million of agricultural real estate loans (12.9% of loans) and commercial real estate loans, non-performing loans were $5.7 million (0.43% of loans) and 30-89 day delinquencies were $6.1 million at year-end 2025, against an allowance of $15.0 million. Mortgage gains that depend on interest rates are a second exposure. Bull case ($130 per share). Owner earnings hold at the 2025 level of $6.18, which the first half of 2026 supports, and grow 3% a year for ten years (matching the 3% loan growth of 2025), then stay flat. What would make this wrong. Weaker farm or commercial real estate credit, lower mortgage profits, or higher deposit costs would push toward the bear case. Sustained loan growth funded from retained earnings would push toward the bull case. Book value was about $66 per share at year-end 2025 ($157.8 million of equity across 2.375 million shares), and the base case values the business at about 1.25 times that, in line with a bank earning roughly a 9% return on equity. Margin-of-safety price ($50). Community banks are stable but exposed to credit cycles, so the margin-of-safety price sits below even the bear case, roughly 40% under the base value.