Ride the Activist Coat Tails to Big Profits in Small Banks

Last week we talked about riding the coat tails of bank stock activists to earn out sized profits in the stock market. A study released by analyst as Sterne Agee as well as the practical experience of investors in the sector tell us that the presence of an activist in a small regional or community bank often leads to stock buybacks, higher dividends and often an outright sale of the bank at a premium price. Last week we saw the filing of 13F forms with the Securities and Exchange Commission so we can see exactly what the bank stocks specialist activists were buying in the third quarter of the year. Joseph Stilwell has been of the more successful activist investor in the sector over the past two decades. His new bank stock purchases in the third quarter of the year were: River Valley Bancorp (RIVR) is a 16 branch bank operating in southeastern Indiana and northern Kentucky with about $500 million in assets. The shares trade at 1.04 times book value and the equity to assets ratio is 9.03. Nonperforming assets at the bank are currently 2.56% of total assets Peoples Financial Corporation of Biloxi, Mississippi has 18 branches and $749 million in assets. The bank has two large problem loans that are causing problems and non-performing assets are 5.93% of total assets. The equity to assets ratio is 13.14 and the shares trade at 63% of book value. Clifton Bancorp (CSBK) of Clifton New Jersey has 16 offices with $1.1 billion of assets. Nonperforming assets are just .39% and thanks to the second step conversion offering earlier this year the equity to assets ratio is over 20. The stock currently trades at 90% of book value. Stewardship Financial (SSFN) of Midland Park New Jersey has 13 branches and $671 million of total assets. Nonperforming assets are just .97% of total assets and the equity to assets ratio is currently 9.36. The stock is trading at 50% of book value. Lawrence Siedman is also a New Jersey based bank stock investor with more than two decades experience as an activist investor. His new bank stock purchases in the quarter were: Sunshine Bancorp (SBCP) is based in Plant City, Florida and has 5 branches with $222 million in total assets. The bank completed its mutual conversion IPO earlier this year and has an equity to assets ratio of nonperforming assets is 2.61% of total assets and the stock trades at less than 85% of tangible book value post offering. Blue Hills Bancorp (BHBK) of Boston, Ma also completed its conversion for a mutual thrift to stock ownership this year and the equity to asset ratio is 23.6. The bank has 9 branches and $1.6 billion in assets. Nonperforming assets are just .27% of total assets as of the end of the third quarter. The shares trade at 96% of book value. Malvern Bancorp (MLVF) is based in Paoli, Pa and has 7 branches with $553 million in assets. The equity to assets ratio is 11.9 and non-performing assets are just .82% of total assets. The shares currently trade at 94% of book value. PL Capital has been of the more successful bank stock activists of the past decade. The principles so the fund have backgrounds in banking and audit and are adept of spotting undervalued bank stocks and they are not afraid to take an activist approach when they spot an opportunity. The firm had two new purchases in the third quarter: Independent Bancorp (IBCP) of Ionia Michigan has 74 offices with $2.2 billion of assets. The bank has an equity to assets ratio of 11.44 and non-performing assets are just 1.21% of total assets. The stock currently trades at 1.1 times book value. Citizens Financial Group (CFG) had its IPO earlier this year after being spun out by Royal bank of Scotland. The bank has 1240 branches with more than $133 billion in total assets. The equity ot assets ratio s14.6 and nonperforming assets are only .75% of total assets. The stock trades at book value at the current price. History tells out that investing in bank stocks with a strong activist presence can lead to market beating returns. Riding the coattails of three of three leading bank stock activists could help investors to earn high returns over the next several years.