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Banks and S&L Conversions
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Kaiser Federal Kaiser Federal (KFFG) Current Price: $13.62 Market Cap: $130M Tangible Book Value: $15.63 (trading at 87% of book) KFFG is based in California, centered around the Los Angelas area. The company has a loan book that is evenly exposed to single family (1-4) and to multi-family residential They are affliated with a health care provider called Kaiser Permanente. Their deposit base is for the most part connected to the Kaiser Permanente world. To get an idea of how leveraged they are to this one institution, they have 80% of their banking machine in Kaiser Permanente facilities and 27% of their deposit base is current employees of Kaiser Permanente. KFFG was a mutual holding company until November 2010 when they completed their second step offering. The second step raised $63.8M, or almost half their current market cap. With the second step conversion complete, they had $9.63 of cash on their balance sheet as of the end of Q4. The bank has done a good job of growing their deposits. Loan growth has been non-existent as would be expected in the crappy economy we've had. Part of the thesis here is that with the increased deposits and second step cash they can grow their loan book as the economy picks up steam: If you ex-out loan loss provisions and one time gains and losses to investment they are showing strong EPS growth: - their nonperforming assets are high as you would expect from a California company So the basic story here is another bank, a recently converted mututal holding company with lots of cash, trading below book value, with a growing deposit base, growing earnings, and with current earnings potential of over $1/share, so valued at about 13.5x earnings. They also pay a dividend of about 1.5%. |
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