Thrift Conversion Roundup - January 2023
A bit of news, links and other interesting thrift stuff
Greetings and welcome to another edition of Conversion Confidential! 2022 was a rough year for many investors, myself included. I believe this is the second year in a row now where I’ve wished my portfolio had more exposure to thrift conversions. That may be what they call a sign!
Past conversions that I have covered over the past year or so and have been more complimentary of (and long at various times…not investment recommendations) held up respectably well. Perhaps this is just the “goldilocks period” where higher interest rates drive net interest margins and bank profitability across the board before credit issues crop up. Regardless, I’d say select thrifts did a decent job of maintaining their roles as defensive positions so far.
Conversion News & Notes
Last month, I wrote up First Seacoast's second-step conversion. This past Thursday, FSEA announced that they closed their conversion. The subscription offering, with the help of a community syndicated offering occurred at the minimum of the offering range, or 2,805,000 shares priced at $10/share. First Seacoast Bancorp, Inc.’s common stock began trading on the NASDAQ Friday and finished up 3.5% on the day.
In addition, we got word that Baltimore based BV Financial (BayVanguard Bank) adopted plans to undertake its second-step conversion! This is good news for what SNL reports has been an otherwise slow period for thrift conversions.
The MHC currently owns ~86.6% of the company. Eligible account holders as of the close of business on December 31, 2021 will have first priority in the conversion. The proposed transaction is expected to close in the 3Q of 2023. In due time, you can expect my standard write-up giving an analysis of the bank and the conversion transaction.
The ABCs of Investing…Always. Be. Curious.
One of my major misses in 2022 was failing to realize the compelling investment opportunity presented by the Emergency Capital Investment Program (ECIP). What’s worse is that it was right under my nose! When I wrote up Ponce Financial Group back in February of 2022, I came across, and even made a reference to the ECIP funds. Unfortunately, that’s where my curiosity ended. Instead of looking further into something I didn’t recognize, I just wrote it off as a bit of additional complexity which I don’t like in banks. Turns out those funds were in large amounts on incredibly cheap and generous terms. I even received a comment on the same post from reader “Planman” pointing out there was something intriguing going on. Thanks for trying to help me identify an opportunity to make some money Planman, but I was too dense to pursue it with a second look! Fast forward nearly a year and the ECIP investment play has been covered well by a select few, notably @Dirtcheapstocks on Twitter as well as Tim Eriksen starting with his 3Q22 letter. Spoiler alert: these stocks have done quite well!
Because these investors “pulled on the string” and dug in further when they saw something that raised an eyebrow, they have made fantastic returns while I simply overlooked it. Talk about sucking your thumb! I should note it is also possible the ECIP opportunity is not yet over, but that is for readers to determine. Always be curious my friends.
Where the Thrifts Are
Some of you have asked where the existing mutual banks that could potentially convert in the future are located. Based on the FDIC list (note: this file is dated as of 12/31/2020) I created the below visualization in Tableau Public. As you can see, I’m not very talented with Tableau yet, but I’m somewhat pleased with the result. Anyway, for those who have asked, here is your answer geographically. The graphic on the bottom shows by state the number of mutual banks as well as the partial, first-step conversions which are labeled MHCs.
Okay folks, that’s it for this issue of Conversion Confidential. Please leave a comment if anything is on your mind. Thanks for reading!
I don't know who you are, but your knowledge in this conversion arena is severely lacking. FSEA did not have an IPO "pop" of 14% yesterday. More like 3.5% or 35 cents on a ten dollar share. The old shares were seriously underwater in the $9 range, and each old share is exchanged for 0.83 new shares. So your old shares are worth 0.83 times 10.35 or less than $9... pretty bad for shares they charged $10 for in 2019. Your blog has seriously misinformation in it!
More of a general question, do you know how many conversions occurred in 2022, 2021, 2020? Or if you don't have that information, is there a source for such information? Thanks much!