TF FINANCIAL CORP THRD
January 17, 2014 - 9:31am EST by
blackstone
2014 2015
Price: 28.74 EPS $0.00 $0.00
Shares Out. (in M): 3 P/E 0.0x 0.0x
Market Cap (in $M): 91 P/FCF 0.0x 0.0x
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0.0x 0.0x

Sign up for free guest access to view investment idea with a 45 days delay.

  • Potential Acquisition Target
  • Regional Bank

Description

Description (from the company’s website):

TF Financial Corporation is the savings and loan holding company of 3rd Fed Bank (the Bank). The Bank is a state chartered stock savings bank that offers a variety of financial services to the communities it serves. The Bank operates 18 branch offices in Bucks and Philadelphia counties, Pennsylvania and in Burlington, Mercer and Ocean counties, New Jersey. The Bank attracts deposits from the general public and uses such deposits, together with borrowings and other funds to originate or purchase loans secured by first mortgages on owner-occupied, one- to four-family residences in its market area. The Bank also originates commercial real estate and non-real estate secured loans, construction and consumer loans. To a lesser extent, the Bank also invests in mortgage-backed and investment securities.

 

The specific branch footprint is as follows: five in Bucks County, PA, six in Philadelphia County, PA, four in Burlington County, NJ, two in Mercer County, NJ, and one in Ocean County, NJ.

Recent Acquisition:

Historically the company was solely a Pennsylvania based bank but last year acquired the stock of publicly traded Roebling Financial for cash and stock on quite attractive terms. The last publicly filed data on Roebling showed total assets of 156mm, deposits of 133mm, equity of roughly 17mm, and relatively benign credit with NPLs at 2.4%. For this, TF paid 14.5mm. The CEO of TF, Kent Lufkin, was a past President of Roebling which lends some comfort that they understood the geography and culture fairly well before the acquisition.

Thesis:

There’s nothing too proprietary here. TF is a clean bank with a desirable footprint, trading at a discount to what its franchise is worth to numerous larger institutions who have shown a desire to gain share in the region. In addition, despite the challenging environment for making money, TF is reasonably profitable and thus the current earnings multiple is palatable. Management and the board are older, have a significant amount of skin in the game and have, in aggregate, been increasing their stakes in recent months. Predicting a deal is a fool’s errand but in the absence of one, we are content to own this franchise at a quite undemanding multiple.

 

 

Valuation and Statistics:

P/B: 97%

P/tangible book: 102%

Tier 1 risk-based capital ratio: 16.4%

NPLs/total loans: 1.07%

Allowance for loan losses/NPLs: 97%

 

Recent  Financials:

 

 

At

 

 

 

September 30, 2013

 

 

December 31, 2012

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,004

 

 

$

31,137

 

Investment securities

 

 

 

 

 

 

 

 

Available for sale

 

 

129,074

 

 

 

102,284

 

Held to maturity (fair value of $1,719 and $2,271 as of

     September 30, 2013 and December 31, 2012, respectively)

 

 

1,540

 

 

 

1,965

 

Loans receivable, held for sale

 

 

691

 

 

 

706

 

Loans receivable, net of allowance of $6,691 and $6,922 at

     September 30, 2013 and December 31, 2012, respectively

 

 

622,330

 

 

 

526,720

 

Federal Home Loan Bank ("FHLB") stock — at cost

 

 

3,425

 

 

 

5,431

 

Accrued interest receivable

 

 

2,669

 

 

 

2,460

 

Premises and equipment, net

 

 

8,657

 

 

 

6,108

 

Goodwill

 

 

4,324

 

 

 

4,324

 

Core deposit intangible

 

 

528

 

 

 

 

Bank owned life insurance

 

 

18,451

 

 

 

19,109

 

Other assets

 

 

10,641

 

 

 

11,592

 

TOTAL ASSETS

 

$

833,334

 

 

$

711,836

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

$

681,825

 

 

$

560,315

 

Advances from the FHLB

 

 

50,990

 

 

 

60,656

 

Advances from borrowers for taxes and insurance

 

 

2,344

 

 

 

2,880

 

Accrued interest payable

 

 

729

 

 

 

817

 

Other liabilities

 

 

4,635

 

 

 

4,223

 

Total liabilities

 

 

740,523

 

 

 

628,891

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, no par value; 2,000,000 shares authorized at

     September 30, 2013 and December 31, 2012, none issued

 

 

 

 

 

 

Common stock, $0.10 par value; 10,000,000 shares authorized,

     5,290,000 shares issued, 3,147,902 and 2,838,493 shares

     outstanding at September 30, 2013 and December 31, 2012,

     respectively, net of shares in treasury of 2,142,098 and

     2,451,507, respectively.

 

 

529

 

 

 

529

 

Additional paid-in capital

 

 

56,072

 

 

 

54,328

 

Unearned ESOP shares

 

 

(877

)

 

 

(970

)

Treasury stock — at cost

 

 

(44,530

)

 

 

(50,896

)

Retained earnings

 

 

83,394

 

 

 

78,984

 

Accumulated other comprehensive (loss) income

 

 

(1,777

)

 

 

970

 

Total stockholders’ equity

 

 

92,811

 

 

 

82,945

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

833,334

 

 

$

711,836

 

 

 

 

 

 

 

 

3Q13

 

 

3Q12

 

 

9mo13

 

 

9mo12

 

 

 

(in thousands, except per share data)

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

6,947

 

 

$

6,436

 

 

$

18,976

 

 

$

18,864

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully taxable

 

 

540

 

 

 

544

 

 

 

1,264

 

 

 

1,840

 

Exempt from federal taxes

 

 

411

 

 

 

415

 

 

 

1,241

 

 

 

1,280

 

Interest-bearing deposits and other

 

 

5

 

 

 

 

 

 

23

 

 

 

2

 

TOTAL INTEREST INCOME

 

 

7,903

 

 

 

7,395

 

 

 

21,504

 

 

 

21,986

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

799

 

 

 

803

 

 

 

2,242

 

 

 

2,795

 

Borrowings

 

 

219

 

 

 

338

 

 

 

693

 

 

 

1,094

 

TOTAL INTEREST EXPENSE

 

 

1,018

 

 

 

1,141

 

 

 

2,935

 

 

 

3,889

 

NET INTEREST INCOME

 

 

6,885

 

 

 

6,254

 

 

 

18,569

 

 

 

18,097

 

Provision for loan losses

 

 

 

 

 

750

 

 

 

839

 

 

 

1,750

 

NET INTEREST INCOME AFTER PROVISION

     FOR LOAN LOSSES

 

 

6,885

 

 

 

5,504

 

 

 

17,730

 

 

 

16,347

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service fees, charges and other operating income

 

 

592

 

 

 

380

 

 

 

1,769

 

 

 

1,237

 

Earnings on bank owned life insurance

 

 

136

 

 

 

152

 

 

 

416

 

 

 

456

 

Bank owned life insurance death benefit proceeds

 

 

 

 

 

 

 

 

934

 

 

 

 

Gain on sale of loans

 

 

104

 

 

 

382

 

 

 

635

 

 

 

920

 

Gain on disposition of premises and equipment

 

 

 

 

 

 

 

 

420

 

 

 

277

 

Gain on acquisition

 

 

1,214

 

 

 

 

 

 

1,214

 

 

 

 

TOTAL NONINTEREST INCOME

 

 

2,046

 

 

 

914

 

 

 

5,388

 

 

 

2,890

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

3,125

 

 

 

2,651

 

 

 

8,784

 

 

 

8,222

 

Occupancy and equipment

 

 

867

 

 

 

686

 

 

 

2,273

 

 

 

2,068

 

Federal deposit insurance premiums

 

 

188

 

 

 

146

 

 

 

430

 

 

 

447

 

Merger-related costs

 

 

2

 

 

 

 

 

 

617

 

 

 

 

Professional fees

 

 

311

 

 

 

349

 

 

 

829

 

 

 

874

 

Marketing and advertising

 

 

132

 

 

 

76

 

 

 

303

 

 

 

267

 

Foreclosed real estate expense

 

 

114

 

 

 

78

 

 

 

573

 

 

 

705

 

Core deposit intangible

 

 

25

 

 

 

 

 

 

25

 

 

 

 

Other operating

 

 

2,018

 

 

 

480

 

 

 

3,110

 

 

 

1,588

 

TOTAL NONINTEREST EXPENSE

 

 

6,782

 

 

 

4,466

 

 

 

16,944

 

 

 

14,171

 

INCOME BEFORE INCOME TAXES

 

 

2,149

 

 

 

1,952

 

 

 

6,174

 

 

 

5,066

 

Income tax expense

 

 

183

 

 

 

479

 

 

 

1,185

 

 

 

1,189

 

NET INCOME

 

$

1,966

 

 

$

1,473

 

 

$

4,989

 

 

$

3,877

 

Earnings per share—basic

 

$

0.64

 

 

$

0.54

 

 

$

1.75

 

 

$

1.42

 

Earnings per share—diluted

 

$

0.64

 

 

$

0.54

 

 

$

1.75

 

 

$

1.42

 

Dividends paid per share

 

$

0.10

 

 

$

0.05

 

 

$

0.20

 

 

$

0.15

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,052

 

 

 

2,729

 

 

 

2,846

 

 

 

2,724

 

Diluted

 

 

3,055

 

 

 

2,732

 

 

 

2,847

 

 

 

2,727

 

 

Insider Ownership (latest proxy):

 

Security Ownership of Certain Beneficial Owners

 

Amount and Nature of Beneficial Ownership

 

Percent of Shares of Common Stock Outstanding

 

 

 

 

 

Thomson Horstmann & Bryant, Inc.

 

292,665(1)

 

10.31%

501 Merritt 7

 

 

 

 

Norwalk, Connecticut  06851

 

 

 

 

 

 

 

 

 

Dimensional Fund Advisors, LP

 

184,797(2)

 

6.51%

Palisades West, Building One, 6300 Bee Cave Road

 

 

 

 

Austin, Texas  78746

 

 

 

 

 

 

 

 

 

Lawrence B. Seidman

 

154,768(3)

 

5.45%

100 Misty Lane 1st Floor

 

 

 

 

Parsippany, New Jersey  07054

 

 

 

 

 

 

 

 

 

Joseph Stilwell

 

147,394(4)

 

5.19%

111 Broadway, 12th Floor

 

 

 

 

New York, New York  10006

 

 

 

 

 

 

 

 

 

Third Federal Savings Bank

 

286,648(5)

 

10.09%

Employee Stock Ownership Plan ("ESOP")

 

 

 

 

3 Penns Trail

 

 

 

 

Newtown, Pennsylvania  18940

 

 

 

 

 

 

 

 

 

All directors and executive officers as a group

 

533,548(6)

 

18.46%

(11 persons)

 

 

 

 

 

Insider Activity:

ROBERT N DUSEK,C.O.B.,BUYS 1,055 ON 9/30/13 OF THRD

ROBERT N DUSEK,C.O.B.,BUYS 100 ON 9/25/13 OF THRD

ROBERT N DUSEK,C.O.B.,BUYS 240 ON 9/19/13 OF THRD

DENNIS POLLACK,Director,BUYS 197 ON 9/12/13 OF THRD

ALBERT M TANTALA,Director,BUYS 747 ON 8/15/13 OF THRD

ROBERT N DUSEK,C.O.B.,BUYS 1,070 FROM 7/30/13-8/1/13 OF THRD

While in the aggregate these amounts aren’t significant, we believe the purchases are meaningful given the ages of the parties involved and the fact that they are already significant holders of the stock.

*Comparable Transaction Analysis (from BCSB deal proxy):

Acquiror                        Target                            Annc Date                       Deal Value                P/B                P/TBV             Core Dep Premium

 

WesBanco                Fidelity Bancorp                   7/19/12                        72.9mm                      1.57             1.67              5.5%

 

 

FNB                            Parkvale Financial              6/15/11                        163mm                       1.38            1.98              5.2%

 

 

Susquehanna              Abington Bancorp              1/26/11                        273.8mm                     1.24             1.24              9.1%                

 

 

Norwood                    North Penn Bancorp           12/14/10                     27.4mm                       1.25             1.25              6.4%

    

 

*please note that the deal list is a bit stale and that multiples in the space have only increased since 2012 

 

Miscellaneous:

  • Adding to our comfort with the investment is the presence of Dennis Pollack on the board of directors. He is the personally appointed representative of Lawrence Seidman, a leading thrift activist. While we have no reason to believe that this management team needs policing, we view the activist presence as a risk mitigant.

 

  • TF is approaching its 20th anniversary as a stock institution which qualifies it as the Betty White of thrift conversions

 

  • A man by the name of John Stranford had run the institution for over a decade and was on the board of directors until 2012. He passed away in May of last year and his estate owns approximately 4.5% of the outstanding shares. In so far as he had deep relationships with other board members, the likelihood of an eventual deal is increased.

 

I do not hold a position of employment, directorship, or consultancy with the issuer.
Neither I nor others I advise hold a material investment in the issuer's securities.

Catalyst

 
    sort by    
      Back to top