I was doing my usual skimming through SEC filings earlier this week when I saw, to my surprise, that PL Capital has already filed its 13f report for the second quarter. This is one of the earliest filings I have ever seen from the investors I track, and it was a little bit like an early Christmas.
I have made a nice pile of cash by tracking the buying activities of the bank-stock activist-investing firm over the past several years, and I expect to make a lot more in the future. The principles of the firm, Richard Lashley and John Palmer, have over 60 years' experience in the banking industry and have been activists in the sector since 1996. Tracking their buying and selling is just good business.
The firm was a buyer of four banks, and a seller of seven, in the quarter. While most of the selling looks to be merger-related, there were a couple of sales that raised some questions for me. The firm was a seller of Coastway Bancorp (CWAY) , reducing its position by 27%. PL Capital also sold out of its stake in First Northwest Bancorp (FNWB) in the quarter. I own both of these and have them on my list of stocks that can be bought right now. I am not sure why the firm was a seller, but I will be sitting down with the latest filings and reading over the upcoming report from both to see if I am missing anything. I don't think I am, but it never hurts to double check.
On the buyside, the firm made a small addition to its stake in Peoples Bancorp (PEBO) . The bank is based in Marietta, Ohio and does business in Ohio, West Virginia, and Kentucky. It reported earnings this week, and the firm is doing very well. The bank earned $0.43 for the third quarter, compared to just $0.22 in the 2015 comparable period. Nonperforming assets are just 1.1% of total assets, so the bank is in pretty good shape. The shares are a little rich for me -- at 1.5x tangible book -- but PL Capital increased its stake by a minuscule amount in the third quarter.
PL also made a little addition to its position in Old Point Financial (OPOF) . The activist fund owns over 6% of the Hampton, Virginia-based bank, and has a representative on the board right now. When it announced that it was withdrawing its proxy fight with CEO Robert Shuford and the Board, Richard Lashley said, "We appreciate Old Point's approach and the collaborative solutions agreed to by all parties. We look forward to working together with Rob and his team towards our mutual goal of maximizing long-term value for all Old Point stockholders." I suspect the collaborative solution he has in mind is a sale of the bank. With the stock at 1.08x tangible book value and the average takeover multiple at 1.3x right now, there would appear to be plenty of upside left in the stock.
PL Capital also continued to be a buyer of both the PNC Financial (PNC) and Capital One (COF) warrants. I am particularly interested in the Capital One warrants, and they are on my buy-in-a-selloff list. The warrants expire in November of 2018 and have a strike price of $42.043. With Capital One trading at around $75, the warrants are currently priced at $33.54, so you are not paying much time premium for the two years. Capital One currently trades at 1.08x tangible book value. Should the stock trade closer to 1.5x book, which similar-sized institutions fetch right now, the stock could be worth as much as $105 --making the warrants worth over $60.
Since the end of the quarter, PL Capital has filed another 13D on Banc of California (BANC) . It had sold enough stock to fall below the 5% level earlier this year, but it has been buying -- and now owns a total of 6.7% of the bank. Bank of California has come under attack by a short seller who has claimed the bank has ties to known criminals. The stock has fallen by 40% in the last quarter, as the bank suffer what PL Capital called a "crisis of confidence and credibility." It also said that while the firm did not think that the bank was a criminal enterprise, as the anonymous blogger accused, it does believe that drastic changes in corporate governance are needed. PL once again requested a meeting with the Board, a request that has been continually ignored in the past.
Finding a filing this early was a pleasant surprise in advance of the 13f season, which doesn't usually start for another week or so.
long fnwb cway