In a final look at bank stock activists, I want to mention a firm that has established a significant presence in the space since its founding in 1995.
The principals at PL Capital started their careers as auditors, consultants and advisors to the industry as well as traders and investors in bank stocks. When they look at individual banks, they have a unique way of thinking about what the problems and solutions are to unlock shareholder value, and they are not shy about speaking to management. Their approach to bank stock investing has produced stellar results ever since the company’s inception.
Unlike a lot of hedge funds, PL Capital has been very generous about sharing information and ideas. I caught up with Curtis Thompson, a principal at the firm, for a few minutes last week and he had a couple of investment ideas.
Thompson says the firm likes Bank Financial (BFIN) right now. The bank is in the lucrative Chicago market that has seen a lot of consolidation in the past year. The bank has 20 branches in fairly desirable locations and must be on the target list of anyone looking to expand into Chicago.
He also pointed out that the approaching completion of Roma Financial (ROMA) and Investors Bancorp (ISBC) has some interesting implications for bank stock investors. Both are mutual holding companies, and the newly formed bank is expected to complete the process and do a second-step conversion offering. That will be a fairly large deal, much larger than most second-step offerings, as the combined banks should be somewhere around $3 billion in market cap. There will be larger investment banks involved, complete with road shows and institutional meetings to promote the deal. The attention could well cause a revaluation of the mutual holding company and converted thrift sector of the banking market.
PL Capital has not filed any 13Ds in a couple of months, but earlier this year it disclosed a 5.99% position in shares of First Advantage Bancorp (FABK). The Clarksville, Tenn.-based bank has seven branches and trades at about 75% of book value. PL Capital also filed a 13D announcing 8% ownership of Mutual First Financial (MFSF) over the summer. The bank has 31 branches and is based in Muncie, Ind. — an area that has seen substantial consolidation in the past few years.
Bank activists are seeing a great deal of success right now, which should improve as the consolidation trend continues to emerge and strengthen in the industry. All three of PL Capital’s investors should be filing updated 13F reports in the near future, and it will be informative to see what else they have been buying of late.
As of this writing, Tim Melvin was long all of the securities mentioned here.