Dirt Cheap Banka-Precise Market Analysis
60 posts
$BCBP Q2 call report out. Company reports Monday. Put an update put on the stock. You know where to find it.
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I don’t invest in community banks off the 10-K. Anyone can read a 10-K. I invest off the branch. Specifically, I drive to the smallest branch in the smallest town and I go inside for the free cookies, which are always there, always stale, always in a little basket by the pens on the chains. And while I’m there, I talk to Ethel.
Ethel is 65. Ethel has worked at this bank since 1987. Ethel has seen three CEOs and outlasted two of them. Ethel does not know she is the single greatest source of alternative data in American finance, and I will never tell her, because that would change the relationship.
I compliment her cardigan. I ask about her grandkids by name, because I remembered them from last quarter. And somewhere between the cookie and the lollipop she gives me for a child I do not have, Ethel says something like “oh, we’ve been real busy since the folks from the bank in the next county started coming around.” And there it is. The merger. Six months before the 8-K. Delivered by a woman who thinks she’s just making conversation.
The analysts are building DCF models. I am building a relationship with Ethel. They have Bloomberg terminals. I have the fact that Ethel told me the regional VP came in wearing a suit last Tuesday, and nobody at this branch wears a suit unless something is being sold.
My wife asks why I smell like a bank lobby. I tell her I’m doing research. She doesn’t understand that the edge was never in the filings. The edge is a cookie and a cardigan and a woman named Ethel who deserves better than the CEO who’s about to sell her branch out from under her. I’ll make money on it. Ethel gets a coffee mug at the retirement party. This is the market. This is how it actually works.
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I used to have an account with a national bank
They told me to stop coming in to their branch
“Use our online banking app instead!”
No thanks
Can’t look into the beautiful blue eyes of an online banking app and ask her to dinner while she glances at your massive bank account balance
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This is a really interesting bank I just wrote up. Super undervalued. Borrowed money to take out 30% of the shares. Trading at 68 cents on the dollar. Growing. Great little niche market. I haven’t seen anyone write this one up yet.
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My wife left me the same week I found a community bank trading at 60% of tangible book with zero analyst coverage. She said I never noticed anything. Ma’am, I noticed a 4% deposit franchise in rural Ohio that nobody on Earth is looking at.
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Great analysis here. Seems like a layup to me. Also a pretty good analyst. Criminally under followed.
Munger Disciple@youngermunger7
Fellow investors: $NFBK and $CLBK look like highly asymmetric bets. Northfield Bank (NFBK) and Columbia Financial (CLBK) are New Jersey-based community banks that provide traditional banking services to local consumers and businesses. In the next few days, CLBK is set to close on its acquisition of NFBK. CLBK will fund the acquisition with proceeds from a ‘second-step’ IPO. CLBK is already partially public. It will now become fully public. The market today values both companies as little more than merger arbs. NFBK remains anchored to its takeout price ($14.50/sh at the midpoint), while CLBK, adjusting for the stock split, trades essentially in line. What that misses is that both NFBK and CLBK offer investors the opportunity to purchase pre-IPO shares of the combined company at an extraordinarily low valuation — one that is difficult to reconcile with the quality, scale, and earnings power of the business. On a pro forma basis, CLBK will be a ~$20bn in assets institution earning solid returns (1.1% ROA / 10.5% ROE) on a very high quality loan book (0.1% NCOs/Loans). The market today is offering us that for less than the company’s liquidation price — roughly 0.9x of TBV. For context, few banks of CLBK’s size have traded at such a valuation in the past two decades. Peers reached that level only in 2011 amid the Great Financial Crisis and 2023 amid SVB bankruptcy. Today, even worse-performing regional peers such as OCFC trade at 1.0x. Banks with similar profitability metrics trade at 1.4x to 1.8x, roughly +90% higher than today’s valuation. See below for a comps sheet. CLBK sticks out like a sore thumb. You can also make a strong case that the combined company should trade at a healthy premium to peers. The loan book has been among the cleanest in the peer group for well over a decade. Earnings growth should also well outpace peers as excess IPO capital is deployed into loans and share repurchases. And at roughly $20 billion in assets, the combined bank will be 40% larger than peers, bringing greater scale, operating leverage, and trading liquidity. All of that suggests a premium, not a discount. Why are these stocks trading here? One, it’s the complexity. This is a second-step IPO plus transformational M&A wrapped into one — not easy to analyze. Two, investors screening for banks are still looking at pre-deal metrics. After acquisition-related cost saves, the bank will comp more closely to peers at nearly double the valuation. Three, management and bankers need to set a valuation that incentivizes participation in the offering. Four, merger arb funds likely anchor to the proposed takeout price, overlooking the underlying economics of the business. Finally, the market still seems to ascribe CLBK a minority discount. That made sense with a 27% float and MHC structure, but the discount goes away entirely post-IPO. In short, the market seems to be looking backward when it should be looking forward. And what if the shares do nothing? Management will continue buying back stock. At a healthy discount to TBV, repurchases will be accretive to book, further exposing the valuation gap. Also important, unlike in many other conversions, IPO proceeds will not sit idly by on the balance sheet depressing ROE, as the company intends to allocate some of the proceeds immediately to the acquisition. Management projects +50% EPS accretion, putting pro forma valuation at ~10x 2027 EPS. Peers trade at similar or higher multiples despite having far less excess capital to drive EPS expansion. Altogether, NFBK and CLBK seem very asymmetric. I think we will look back and scratch our heads on why they’re trading here. P.S. This is somewhat complex. Feel free to reach out with questions. Disclosure: Long CLBK/NFBK. Not financial advice. Do your own due diligence. @dirtcheapbanks @alluvialcapital @PhilTimyan @thebankzhar @leevalueroach @blondesnmoney
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How will this affect the community banks I own at 0.7x book value?
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Drove 8 hours to the middle of nowhere to meet with a community bank I wanted to invest in
Barely ever releases financials
OTC-listed
Almost no info available about them anywhere online
If I show up in person, I can learn more about this company that any outsider knows
Showed up and within 5 minutes realized that all of the financials I had were completely wrong because the bank president gave his 22-year old nephew with a marketing degree an accounting job and put him in charge of the books
Entire day wasted
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Just curled up on the couch with warm milk and a good book—weekend coziness hit different ，
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Small steps big wins Dedicate 15 mins daily to new English words, grammar, or speaking practice—consistency beats cramming! Your language progress starts today. #EnglishLearning #SkillUp，
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Just had the most electrifying live show—band’s energy was unmatched, every note hit perfect! Worth every second, can’t wait for their next tour.
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Never too late to pick a new hobby! Try doodling 10 mins daily – it’s fun, reduces stress, and you might surprise yourself with your hidden creativity!，
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Just shared my secret snack stash with the office! Crispy matcha rice cakes and creamy mango gummy bites = absolute mood lifters
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Ending another day with office lights still on – coffee’s cold but tasks done, ready to crash soon.
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[Turned an old denim jacket into a cute tote bag this weekend—zero waste, all style! #Upcycle]，
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Just wrapped the most immersive murder mystery experience—the plot twists had me on the edge of my seat, and the group banter made the 3-hour game fly by! 10/10 would solve another case ♂
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