I guess my list of stocks to buy in a crash can go back on the bulletin board for now. All is right and well with the world and we will go back to business as usual. I hope I am wrong about that, as this is a nice list of stocks I want to buy at lower prices, but despite all the madness we never really got close to that point.
My new favorite comment this week is the market is volatile but it is not cheap. I had hoped to stroll arm in arm with Hetty Green down to pick off the carnage of Wall Street, but I guess that date will be postponed for a while more.
Now that we are back to business as usual, I broke out my list of recent thrift conversions to see where we might be able to get some cash to work in that incredibly profitable subsector of the stock market. It is for patient investors only, as these situations take years, not minutes or days, to work out, but they usually provide enormous long-term profits for those willing to hold the shares long enough. The conversion offering provides these little banks enormous amounts of capital that can eventually be used for dividends, stock buybacks and even acquisitions. Many of them end up being taken over by a larger bank once the initial three-year change of control prohibition expires.
The three deals done this year all still look very attractive to me. Kearny Financial (KRNY) completed its second step conversion earlier this year, raising $720 million. The Fairfield, N.J.-based bank has 43 branches with about $4.2 billion in assets. It has plenty of capital on hand as the equity to asset ratio is now 18.52, well above the industry average. The loan portfolio is sparkling clean as nonperforming assets are just 0.53% of total assets. The bank just announced it was initiating a cash dividend of $0.08 per share a year, and I expect that to grow fairly rapidly in the years ahead. The stock is trading at just 87% of book value and is a solid buy for long-term bank stock investors. There are plenty of value and bank stock specialists who agree, as Michael Price, Arbiter Partners, Lawrence Seidman and FJ Capital are all shareholders of the bank.
Beneficial Bancorp (BNCL) completed its second step conversion offering back in January, raising $503 million. The bank has 57 offices and $47 billion of assets in the very crowded and competitive Philadelphia market. The equity to asset ratio is 18.4 so it has plenty of capital to grow the bank and reward shareholders in the future. The bank pulled back a little bit recently and you can currently buy the stock for just 88% of book value. The loan portfolio is solid, with nonperforming assets of just 0.31%.Beneficial also has an impressive shareholder list that includes Wellington, EJF Capital, Patriot Financial and Arbiter.
I am still a big fan of First Northwest Bancorp (FNWB) as well. The bank is located in Port Angeles, Wash., along the Canadian border and has 10 branches with $897 million in total assets. Post-conversion, the equity to asset ratio is 14.57 and nonperforming assets are just 0.74% of total assets. The bank is still cheap as the shares trade at just 82% of book value right now. As is the case with the first two banks, you have really good company as a shareholder. FJ Capital, Michael Price, Arbiter, Joseph Stilwell and EJF Capital all own shares.
I was hopeful the stock market would fall faster and further than the Orioles' playoff chances in the last month. While we got some interesting gyrations and fluctuations, the market never really got cheap. There was no big, broad pool of safe and cheap stocks created, so we are back to business as usual.
Thrift conversions are not exciting in the short term. In fact, they are quite the opposite. Most of them I track are flat to up a little in the past month. They are not being whipped around by short-term traders of ETFs and index funds. They are not usually talked about on the day traders' TV networks. What they are is a solid choice for investors with a long time frame in search of outsized gains over time. Thrift conversions have been a very boring way to earn very exciting long-term profits.