Endeavor Bancorp's 2% Stock Dividend Signals Confidence in Growth Trajectory

Endeavor Bancorp (OTCQX: EDVR), the parent company of Endeavor Bank, has announced a 2% stock dividend to shareholders of record as of May 9, 2025. The dividend, which will be distributed on May 22, 2025, aims to boost liquidity by increasing the number of shares available in the market. Shareholders will receive 2 additional shares for every 100 shares owned, with fractional shares settled in cash based on the stock’s fair value on the record date. This move underscores management’s confidence in the bank’s financial health and strategic direction.

Financial Foundations of the Dividend Decision

The dividend announcement follows a strong first quarter for Endeavor Bancorp, marked by robust growth across key metrics:
- Net income rose to $1.36 million ($0.32 diluted EPS) in Q1 2025, a 26% increase from $1.08 million in Q4 2024 and a 235% jump from $0.407 million in Q1 2024.
- Loan growth surged 34.9% year-over-year to $597.8 million, driven by demand from Southern California businesses.
- Deposits expanded 27.2% annually to $626.2 million, with a 4.2% quarterly increase, bolstering the bank’s funding base.
- The net interest margin widened to 4.12% in Q1 2025, up 15 basis points from the prior quarter, reflecting improved asset yields and cost management.

The bank’s efficiency ratio also improved to 67.6% in Q1 2025, down from 79.9% a year earlier, as operational efficiencies from a 30% headcount increase in 2024 began to materialize.

Strategic Rationale: Liquidity and Shareholder Engagement

The stock dividend directly addresses a key strategic goal: enhancing liquidity in the OTCQX-traded stock. By increasing the number of shares outstanding, the bank aims to improve trading activity, particularly after many shareholders transferred holdings to brokerage accounts. This could attract broader investor interest and reduce bid-ask spreads.

Management emphasized the dividend’s alignment with broader initiatives, including:
- Capital strength: A Tier 1 leverage ratio of 10.57% (well above regulatory minimums) and a tangible book value per share of $13.49, up 6.7% year-over-year.
- Risk management: Non-performing loans remain minimal at 0.40% of the portfolio, with no net charge-offs in Q1 2025.

Operational Strengths and Regional Focus

Endeavor Bank’s Five-Star "Superior" rating from Bauer Financial and an A rating from DepositAccounts.com reflect its conservative lending practices and strong capitalization. The bank focuses on Southern California businesses, offering tailored solutions through its consultative banking model. With branches in San Diego, Carlsbad, La Mesa, and the LA/Inland Empire, the bank is well-positioned to capitalize on regional economic growth.

Risks and Considerations

While the dividend signals optimism, risks persist:
- Economic uncertainty: Southern California’s real estate market and wildfire-prone areas could impact loan performance.
- Regulatory challenges: Rising interest rates and deposit competition may pressure margins.
- Liquidity management: The stock dividend increases shares outstanding by ~2%, which could dilute short-term EPS but may improve long-term trading dynamics.

Conclusion: A Strategic Move Supported by Solid Fundamentals

Endeavor Bancorp’s stock dividend is a strategic liquidity-enhancing step underpinned by its strong financial performance and prudent risk management. With net income up 26% quarter-over-quarter, a 34.9% YoY loan growth, and an improved efficiency ratio, the bank demonstrates the financial flexibility to reward shareholders while maintaining capital buffers.

The dividend’s timing also aligns with its goal to attract more investors to the OTCQX-listed stock, potentially boosting liquidity and visibility. While risks like economic headwinds and regulatory changes remain, Endeavor’s solid ratings, regional focus, and operational improvements position it to navigate challenges while continuing its growth trajectory.

Investors should monitor Q2 2025 results for further signs of momentum, including deposit growth trends and net interest margin sustainability. For now, the dividend announcement reinforces management’s confidence—and provides a compelling case for long-term shareholders.