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PATHFINDER BANCORP INC PBHC
February 19, 2020 - 12:31pm EST by
blackstone
2020 2021
Price: 14.08 EPS 0 0
Shares Out. (in M): 5 P/E 0 0
Market Cap (in $M): 66 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT 0 0

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  • Community Bank
  • Discount to Tangible Book
  • Activists involved
  • Potential Acquisition Target
  • Thrift conversion
 

Description

Thesis

We have been decades-long investors in community banks and thrifts; specifically, participating in the mutual to stock ownership conversion process. There have been plenty of writeups through the years on mutual institutions and the playbook is fairly standard: mutual companies (oftentimes catalyzed by either the need for capital or, more cycnically, by insiders' desires to enrich themselves) decide to go public in either stages (first step conversion followed by a second step) or all at once. Once public, the companies are by definition over-capitalized and the smart management teams buyback stock at meaningful discounts to their as-converted tangible book value and then, three years from the anniversary of their conversion, are elligble to be acquired: lather, rinse, and repeat. Broncos727 has previously written up Pathfinder with a thesis quite to ours--in an industry facing growth challenges, yield curve compression, and regulatory burdens--the wave of m&a activity seems inexorable. Particularly, we might note, with currencies of the index members having appreciated while those of their non-index brethren having languished. As such, it makes sense to look at each vintage year, so to speak, of conversion candidates to see who might be likely to be acquired. He/she posted the table below with the 2014 class members. I have highlighted the 40% of names that were subsequently acquired: 

 

Price/ Tangible Book (%)

Price/ Earnings (x)

Tangible Equity/ Tangible Assets (%)

ROE

EGDW

01/17/2014

 154,044

 $15.91

 $10,626,257

 $20.29

78.42%

31.95

8.80%

2.45%

HWIS

04/24/2014

 140,502

 $11.21

 $10,079,920

 $13.65

82.13%

51.17

8.74%

1.61%

MBCQ

12/30/2014

 433,619

 $14.80

 $28,185,120

 $16.67

88.78%

N/A

23.30%

-1.36%

SUGR

04/09/2014

 95,461

 $13.12

 $11,240,166

 $14.36

91.34%

N/A

12.89%

0.54%

MELR

10/22/2014

 266,710

 $16.20

 $42,210,380

 $16.61

97.54%

41.02

16.23%

2.38%

PLRM

10/13/2014

 250,906

 $14.50

 $32,674,866

 $14.34

101.12%

37.43

12.88%

2.70%

ENFC

10/01/2014

 1,218,372

 $22.00

 $141,719,754

 $20.98

104.88%

20.95

11.12%

4.89%

CWAY

01/15/2014

 632,457

 $16.55

 $73,922,793

 $15.48

106.88%

21.88

10.94%

4.87%

PBHC

10/17/2014

 717,130

 $14.25

 $60,273,852

 $12.79

111.40%

15.65

7.59%

6.50%

CSBK

04/02/2014

 1,312,502

 $15.64

 $361,068,715

 $13.12

119.21%

80.98

23.08%

1.47%

WSBF

01/23/2014

 1,793,852

 $18.35

 $539,231,320

 $13.88

132.17%

24.28

22.76%

5.42%

BHBK

07/22/2014

 2,313,666

 $19.15

 $512,867,123

 $14.15

135.37%

71.13

16.45%

1.85%

ISBC

05/08/2014

 22,548,347

 $14.48

 $4,496,450,971

 $9.75

148.47%

25.57

13.48%

5.64%

SBCP

07/15/2014

 563,992

 $18.05

 $94,947,549

 $11.92

151.45%

N/A

11.32%

-1.96%

EBSB

07/29/2014

 4,173,130

 $18.90

 $1,015,194,430

 $10.86

174.02%

36.23

14.03%

4.69%

 

 

Predicting an acquisition is a tough way to make money and our thesis isn't predicated upon that, per se, but we certainly wouldn't be surprised should the company attract a suitor(s). Ultimately bank investing is about understanding regional and micro-regional motifs (and management incentives). We have spoken with competitors' management teams that have adjacent footprints to Pathfinder and it is clear that they view the institution as a nice-to-have asset. Pathfinder's equity raise in May of last year (to shore up capital levels given their growth) might suggest that nothing is imminent.

In the meantime there aren't that many institutions of this size that trade for less than book value and earn money while experiencing benign credit trends. 

Valuation

Tangible book value: $14.95

P/TBV:.94

P/TTM EPS: 17.5x

Net loan charge offs/avg loans: 9bps

NPL/Total loans: 67bps

Allowance for loan losses/NPL: 165%

 

Branch Footprint and salient market share statistics (from call report)

 

 

Selected Market

State:

County:

City:

Zip Code:

NEW YORK

OSWEGO

ALL

ALL
 

June 30, 2019

Outside of
Market

Inside of
Market

Institution Name

CERT

State
(Hqtrd)

Bank
Class

State/
Federal
Charter

No. of
Offices

Deposits
($000)

No. of
Offices

Deposits
($000)

Market
Share

Pathfinder Bank

57497

NY

NM

State

3

192,244

7

638,896

46.23%

Fulton Savings Bank

15966

NY

SB

State

2

50,317

4

201,893

14.61%

Community Bank, National Association

6989

NY

N

Federal

220

8,508,709

4

195,433

14.14%

NBT Bank, National Association

7230

NY

N

Federal

147

7,496,562

4

147,257

10.66%

KeyBank National Association

17534

OH

N

Federal

1,121

113,775,984

4

139,563

10.10%

JPMorgan Chase Bank, National Association

628

OH

N

Federal

5,023

1,311,160,839

1

58,161

4.21%

Woodforest National Bank

23220

TX

N

Federal

759

5,757,694

1

759

0.05%
                   

Number of Institutions in the Market: 7

TOTALS

7,275

1,446,942,349

25

1,381,962

100.00

 

 

Selected Market

State:

County:

City:

Zip Code:

NEW YORK

ONONDAGA

ALL

ALL
 

June 30, 2019

Outside of
Market

Inside of
Market

Institution Name

CERT

State
(Hqtrd)

Bank
Class

State/
Federal
Charter

No. of
Offices

Deposits
($000)

No. of
Offices

Deposits
($000)

Market
Share

Manufacturers and Traders Trust Company

588

NY

SM

State

761

88,684,465

27

3,111,616

29.04%

KeyBank National Association

17534

OH

N

Federal

1,104

111,591,570

21

2,323,977

21.69%

Bank of America, National Association

3510

NC

N

Federal

4,326

1,352,560,452

9

1,126,353

10.51%

JPMorgan Chase Bank, National Association

628

OH

N

Federal

5,013

1,310,094,374

11

1,124,626

10.49%

Solvay Bank

13297

NY

SM

State

0

0

10

804,364

7.51%

NBT Bank, National Association

7230

NY

N

Federal

139

7,179,645

12

464,174

4.33%

Geddes Federal Savings and Loan Association

30397

NY

SB

Federal

0

0

1

418,015

3.90%

Citizens Bank, National Association

57957

RI

N

Federal

1,101

124,914,661

4

331,650

3.09%

Berkshire Bank

23621

MA

NM

State

132

10,363,851

2

278,811

2.60%

Community Bank, National Association

6989

NY

N

Federal

220

8,425,792

4

278,350

2.60%

Pathfinder Bank

57497

NY

NM

State

7

638,896

3

192,244

1.79%

Seneca Savings

29496

NY

SB

Federal

0

0

3

153,050

1.43%

Fulton Savings Bank

15966

NY

SB

State

4

201,893

2

50,317

0.47%

The Lyons National Bank

7151

NY

N

Federal

14

996,853

1

36,572

0.34%

Tompkins Trust Company

609

NY

NM

State

13

1,503,445

1

22,215

0.21%
                   

Number of Institutions in the Market: 15

TOTALS

12,834

3,017,155,897

111

10,716,334

100.00

 

Insider activity

 

↑ No. Part Participants Net Sell (Shares) Net Buy (Shares) Close Price

12) 02/07/2020 1 Rusnak Walter 1,000 13.9812

13) 11/25/2019 1 Rusnak Walter 1,000 13.2650

14) 09/16/2019 1 Rusnak Walter 1,000 13.0000

15) 09/12/2019 1 Schneider Thomas W -885 13.0000

16) 09/04/2019 1 Rusnak Walter 1,000 12.8500

17) 09/03/2019 1 Schneider Thomas W -500 12.8500

18) 08/30/2019 1 Schneider Thomas W -715 13.1900

19) 08/28/2019 1 Schneider Thomas W -300 13.0000

20) 08/22/2019 1 Schneider Thomas W -300 13.2500

21) 08/01/2019 1 Rusnak Walter 2,000 13.9620

22) 07/31/2019 1 Phillips Daniel R 1,000 13.2800

23) 07/10/2019 1 BUTKOWSKI ROBERT G JR 4,600 14.3000

24) 05/23/2019 1 Schneider Thomas W 2,924 16.1500

25) 05/21/2019 1 Schneider Thomas W 1,076 15.2714

26) 05/16/2019 1 Schneider Thomas W 1,472 15.3000

27) 05/15/2019 1 Schneider Thomas W 8,528 15.0500

28) 05/13/2019 3 Tascarella Ronald, Dowd Ja 18,111 14.4000

29) 05/08/2019 9 Barclay William A, Rusnak W 85,417 13.8500

30) 03/12/2019 1 Joyce George P 1,000 14.1100

 

31) 03/06/2019 1 Joyce George P 1,000 14.0200

Insider and Institutional Ownership

 

                 

Name and Address of Beneficial Owners

    Amount
Beneficially
Owned		      Percentage
of Shares of
Common
Stock
Outstanding		  

Pathfinder Bank Employee Stock Ownership Plan Trust (1)

      440,204        10.1 % 

c/o Pentegra Services, Inc.

                  

2 Enterprise Drive, Suite 408

                  

Shelton, CT 06484

                  

Maltese Capital Holdings, LLC (2)

      427,010        9.8 % 

Maltese Capital Management, LLC

                  

Terry Maltese

                  

150 East 52nd Street, 30th Floor

                  

New York, New York 10022

                  

Minerva Advisors, LLC (3)

      245,570        5.6 % 

Minerva Group, LP

                  

Minerva GP, LP

                  

Minerva GP, Inc.

                  

David P. Cohen

                  

50 Monument Road, Suite 201

                  

Bala Cynwyd, PA 19004

                  

 

                  

 

                         

Name and Address of Beneficial Owners

    Amount of
Shares Owned
and Nature of
Beneficial
Ownership (1)		      Number of
Unexercised
Stock Options
which are
included in
Beneficial
Ownership (2)		      Percentage
of Shares of
Common
Stock
Outstanding		  

Directors, Nominees and Executive Officers (3)

                           

David A. Ayoub (4)

      29,061        13,508        0.67 % 

William A. Barclay (5)

      67,581        13,508        1.55 % 

Chris R. Burritt (6)

      41,067        5,272        0.94 % 

John P. Funiciello (7)

      32,780        13,508        0.75 % 

Adam C. Gagas (8)

      183,533        10,213        4.21 % 

George P. Joyce (9)

      131,066        11,772        3.00 % 

Melanie Littlejohn (10)

      6,678        5,272        0.15 % 

John F. Sharkey, III (11)

      31,619        10,213        0.72 % 

Lloyd “Buddy” Stemple (12)

      58,946        13,508        1.35 % 

Thomas W. Schneider (13)

      60,275        11,298        1.38 % 

James A. Dowd (14)

      48,485        13,015        1.11 % 

Ronald Tascarella (15)

      84,444        6,778        1.94 % 

Daniel R. Phillips (16)

      37,286        20,120        0.85 % 

Calvin L. Corridors (17)

      36,868        9,932        0.85 % 

Walter F. Rusnak (18)

      20,606        6,524        0.47 % 

All Directors and Executive Officers as a Group (15 persons)

      870,295        164,441        19.95 % 

Section 16 Filers

                           

William O’Brien

      20,089        9,932        0.46 % 

Lisa A. Kimball

      11,024        1,582        0.25 % 

Robert G. Butkowski

      18,486        1,582        0.42 % 

 

                           

Financials

 athfinder Bancorp, Inc.

Consolidated Statements of Income

(Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

For the nine months ended

 

(In thousands, except per share data)

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

8,817

 

 

$

7,213

 

 

$

24,614

 

 

$

20,949

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,770

 

 

 

1,348

 

 

 

5,224

 

 

 

3,647

 

Tax-exempt

 

 

11

 

 

 

143

 

 

 

170

 

 

 

608

 

Dividends

 

 

63

 

 

 

61

 

 

 

214

 

 

 

190

 

Federal funds sold and interest earning deposits

 

 

72

 

 

 

65

 

 

 

288

 

 

 

161

 

Total interest and dividend income

 

 

10,733

 

 

 

8,830

 

 

 

30,510

 

 

 

25,555

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

2,845

 

 

 

1,839

 

 

 

7,930

 

 

 

4,750

 

Interest on short-term borrowings

 

 

89

 

 

 

41

 

 

 

314

 

 

 

204

 

Interest on long-term borrowings

 

 

378

 

 

 

338

 

 

 

1,158

 

 

 

716

 

Interest on subordinated loans

 

 

216

 

 

 

216

 

 

 

650

 

 

 

629

 

Total interest expense

 

 

3,528

 

 

 

2,434

 

 

 

10,052

 

 

 

6,299

 

Net interest income

 

 

7,205

 

 

 

6,396

 

 

 

20,458

 

 

 

19,256

 

Provision for loan losses

 

 

600

 

 

 

291

 

 

 

1,354

 

 

 

1,201

 

Net interest income after provision for loan losses

 

 

6,605

 

 

 

6,105

 

 

 

19,104

 

 

 

18,055

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

399

 

 

 

291

 

 

 

1,029

 

 

 

838

 

Earnings and gain on bank owned life insurance

 

 

133

 

 

 

138

 

 

 

355

 

 

 

319

 

Loan servicing fees

 

 

57

 

 

 

25

 

 

 

144

 

 

 

108

 

Net gains (losses) on sales and redemptions of investment securities

 

 

121

 

 

 

(60

)

 

 

232

 

 

 

(189

)

Gains on marketable equity securities

 

 

4

 

 

 

-

 

 

 

61

 

 

 

26

 

Net gains on sales of loans and foreclosed real estate

 

 

38

 

 

 

8

 

 

 

43

 

 

 

24

 

Debit card interchange fees

 

 

166

 

 

 

141

 

 

 

497

 

 

 

432

 

Insurance agency revenue

 

 

170

 

 

 

174

 

 

 

631

 

 

 

639

 

Other charges, commissions & fees

 

 

198

 

 

 

223

 

 

 

606

 

 

 

662

 

Total noninterest income

 

 

1,286

 

 

 

940

 

 

 

3,598

 

 

 

2,859

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,275

 

 

 

3,191

 

 

 

10,379

 

 

 

9,381

 

Building and occupancy

 

 

699

 

 

 

601

 

 

 

1,986

 

 

 

1,689

 

Data processing

 

 

587

 

 

 

492

 

 

 

1,749

 

 

 

1,404

 

Professional and other services

 

 

352

 

 

 

359

 

 

 

1,068

 

 

 

1,095

 

Advertising

 

 

238

 

 

 

158

 

 

 

719

 

 

 

626

 

FDIC assessments

 

 

130

 

 

 

152

 

 

 

371

 

 

 

407

 

Audits and exams

 

 

104

 

 

 

104

 

 

 

304

 

 

 

314

 

Insurance agency expense

 

 

190

 

 

 

190

 

 

 

618

 

 

 

679

 

Community service activities

 

 

110

 

 

 

142

 

 

 

392

 

 

 

370

 

Foreclosed real estate expenses

 

 

28

 

 

 

19

 

 

 

324

 

 

 

93

 

Other expenses

 

 

569

 

 

 

504

 

 

 

1,622

 

 

 

1,440

 

Total noninterest expense

 

 

6,282

 

 

 

5,912

 

 

 

19,532

 

 

 

17,498

 

Income before income taxes

 

 

1,609

 

 

 

1,133

 

 

 

3,170

 

 

 

3,416

 

Provision for income taxes

 

 

324

 

 

 

157

 

 

 

750

 

 

 

505

 

Net income attributable to noncontrolling interest and

   Pathfinder Bancorp, Inc.

 

 

1,285

 

 

 

976

 

 

 

2,420

 

 

 

2,911

 

Net (loss) income attributable to noncontrolling interest

 

 

(10

)

 

 

(9

)

 

 

4

 

 

 

(23

)

Net income attributable to Pathfinder Bancorp Inc.

 

$

1,295

 

 

$

985

 

 

$

2,416

 

 

$

2,934

 

Convertible preferred stock dividends

 

 

70

 

 

 

-

 

 

 

139

 

 

 

-

 

Warrant dividends

 

 

7

 

 

 

-

 

 

 

15

 

 

 

-

 

Undistributed earnings allocated to participating securities

 

 

206

 

 

 

-

 

 

 

195

 

 

 

-

 

Net income available to common shareholders

 

$

1,012

 

 

$

985

 

 

$

2,067

 

 

$

2,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic

 

$

0.22

 

 

$

0.23

 

 

$

0.47

 

 

$

0.71

 

Earnings per common share - diluted

 

$

0.22

 

 

$

0.23

 

 

$

0.47

 

 

$

0.69

 

Dividends per common share

 

$

0.06

 

 

$

0.06

 

 

$

0.18

 

 

$

0.18

 

 Pathfinder Bancorp, Inc.

Consolidated Statements of Condition

(Unaudited) 

 

 

 

September 30,

 

 

December 31,

 

(In thousands, except share and per share data)

 

2019

 

 

2018

 

ASSETS:

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

19,849

 

 

$

9,610

 

Interest-earning deposits (including restricted balances of $0 and $3,993, respectively)

 

 

19,924

 

 

 

16,706

 

Total cash and cash equivalents

 

 

39,773

 

 

 

26,316

 

Available-for-sale securities, at fair value

 

 

120,002

 

 

 

177,664

 

Held-to-maturity securities, at amortized cost (fair value of $116,187 and $53,769, respectively)

 

 

114,349

 

 

 

53,908

 

Marketable equity securities, at fair value

 

 

514

 

 

 

453

 

Federal Home Loan Bank stock, at cost

 

 

4,210

 

 

 

5,937

 

Loans

 

 

725,900

 

 

 

620,270

 

Less: Allowance for loan losses

 

 

8,330

 

 

 

7,306

 

Loans receivable, net

 

 

717,570

 

 

 

612,964

 

Premises and equipment, net

 

 

22,411

 

 

 

20,623

 

Operating lease right-of-use assets

 

 

2,422

 

 

 

-

 

Accrued interest receivable

 

 

3,313

 

 

 

3,068

 

Foreclosed real estate

 

 

148

 

 

 

1,173

 

Intangible assets, net

 

 

153

 

 

 

165

 

Goodwill

 

 

4,536

 

 

 

4,536

 

Bank owned life insurance

 

 

17,296

 

 

 

16,941

 

Other assets

 

 

9,423

 

 

 

9,367

 

Total assets

 

$

1,056,120

 

 

$

933,115

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Interest-bearing

 

$

748,384

 

 

$

623,936

 

Noninterest-bearing

 

 

111,225

 

 

 

103,124

 

Total deposits

 

 

859,609

 

 

 

727,060

 

Short-term borrowings

 

 

18,238

 

 

 

39,000

 

Long-term borrowings

 

 

61,014

 

 

 

79,534

 

Subordinated loans

 

 

15,119

 

 

 

15,094

 

Accrued interest payable

 

 

468

 

 

 

304

 

Operating lease liabilities

 

 

2,681

 

 

 

-

 

Other liabilities

 

 

9,800

 

 

 

7,664

 

Total liabilities

 

 

966,929

 

 

 

868,656

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share; no liquidation preference; 10,000,000 and 0 shares

   authorized, respectively; 1,155,283 and 0 shares issued and outstanding, respectively

 

 

12

 

 

 

-

 

Common stock, par value $0.01; 25,000,000 authorized shares; 4,707,657 and 4,362,328

   shares issued and outstanding, respectively

 

 

47

 

 

 

44

 

Additional paid in capital

 

 

49,236

 

 

 

29,139

 

Retained earnings

 

 

43,332

 

 

 

42,114

 

Accumulated other comprehensive loss

 

 

(2,766

)

 

 

(6,042

)

Unearned ESOP

 

 

(899

)

 

 

(1,034

)

Total Pathfinder Bancorp, Inc. shareholders' equity

 

 

88,962

 

 

 

64,221

 

Noncontrolling interest

 

 

229

 

 

 

238

 

Total equity

 

 

89,191

 

 

 

64,459

 

Total liabilities and shareholders' equity

 

$

1,056,120

 

 

$

933,115

 

 

 

 
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

  • Bank gets acquired by a larger institution
  • Bank earns its way to a higher valuation
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