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Chris DeMuth Jr.
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  • OSHC Owners Forum 29 comments
    Nov 21, 2013 9:39 AM | about stocks: OSHC

    Dear Board of Directors:

    I am writing to urge the Board of Directors to undertake a strategic review. This would be a board-level decision. Our hope and expectation is that the board will make the right decision on behalf of Ocean Shore's owners.

    Rangeley Capital Partners, LP, the investment partnership that I manage, owns 539,508 shares of the outstanding common stock of Ocean Shore Holding Co., representing approximately 7.7% of the Company's outstanding shares. We have been owners of Ocean Shore since the company fully converted from a mutual in 2009. I want to congratulate the Board on the successful completion of the conversion and the expiration of the three year moratorium on corporate actions. Over the past several years, this process has created significant value for all shareholders in the Company.

    The current Board of Directors also has important duties to Ocean Shore owners. Looking ahead, since the moratorium on corporate actions has expired and Ocean Shore is in a strong position regarding its loan portfolio and overcapitalization, we believe it is an ideal time to undertake a strategic review of potential avenues to maximize value for Ocean Shore's owners.

    To maximize value, the Board of Directors should consider the possibility of a sale. Ocean Shore continues to trade close to tangible book value, a lower multiple than its peers. Even using conservative price estimates, a strategic buyer would likely pay a substantial premium to acquire the company today.

    It is in the interest of all shareholders for the Board of Directors to consider options that may be available to unlock substantial value for shareholders. As such, a strategic review would be in the best interests of the company and its stock holders and would likely receive a positive reaction from the capital markets.

    I would be happy to discuss our views on any of the options available to the bank.


    Chris DeMuth Jr.

    Disclosure: I am long OSHC.

    Additional disclosure: Chris DeMuth Jr is a portfolio manager at Rangeley Capital, a partnership that invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our partners, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

    Stocks: OSHC
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Comments (29)
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  • Another good forum.


    Have you had discussions with any of the other major holders?
    21 Nov 2013, 09:58 AM Reply Like
  • Author’s reply » We have not formed a group, do not plan on doing so, and would disclose it as necessary if we change our minds.


    That being said, it would probably be reasonable to assume that we have had general discussions with other major holders on a variety of topics including our investments in banks and thrifts.
    21 Nov 2013, 10:02 AM Reply Like
  • Author’s reply » November 20, 2013, Ocean City, NJ. Ocean Shore Holding Co. (Nasdaq: OSHC) today announced that the Company’s board of directors has approved the repurchase of up to 210,000 shares of the Company’s outstanding common stock, which is approximately 3% of outstanding shares. Purchases will be conducted solely through a Rule 10b5-1 repurchase plan with Sandler O’Neill & Partners, L.P. Purchases will be based upon the parameters of the Rule 10b5-1 repurchase plan.


    The Rule 10b5-1 repurchase plan allows the Company to repurchase its shares during periods when it would normally not be active in the market due to its internal trading blackout period.


    Ocean Shore Holding Co. is the parent company of Ocean City Home Bank. Ocean City Home Bank is headquartered in Ocean City, New Jersey with eleven other branches in southeastern New Jersey. The Bank is a full service community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses within its market area.


    Steven E. Brady, President and CEO
    Donald F. Morgenweck, CFO
    (609) 399-0012
    21 Nov 2013, 12:13 PM Reply Like
  • The main branch of OSHC is just a few blocks from where my family spends its summer vacations, and only steps from the awesome Bennie's Bakery.


    Can employees at the main office be assured of staying in the same spot after a sale? Might be tough to give up that perk!
    21 Nov 2013, 01:10 PM Reply Like
  • Bennie's Bakery?? I remember an Italian Bakery that seemed to do decent in downtown OC, but it's been a few years. Are they one and the same?
    21 Nov 2013, 09:49 PM Reply Like
  • Chris: Another forum added. These have been great to date. Thank you for innovating like this on SA! Perhaps it will create a new sub-sector at SA (editor, NB...). Further, I'm a big fan of the self-policing that your forums have engendered to minimize the snarkiness and improve the content. Well done!
    21 Nov 2013, 02:18 PM Reply Like
  • Chris - love your work across the board on this site (as I no doubt believe you hear every day!).


    Not much value add from me on this one - however what do you view as a fair value for OSHC?


    Thanks for the time and effort !
    21 Nov 2013, 03:38 PM Reply Like
  • Author’s reply » $22ish.
    21 Nov 2013, 03:40 PM Reply Like
  • You're at $22 on $OSHC?


    For some reason I was thinking you had $OBAF at $22 and $OSHC are $18-19. My bad.
    21 Nov 2013, 06:02 PM Reply Like
  • 15ish first. Then 16ish.
    22 Nov 2013, 12:43 AM Reply Like
  • I bought over the summer below $14. Haven't even had time to review Q3 other than to read "in line". Thanks.
    21 Nov 2013, 04:00 PM Reply Like
  • It isn't much more exciting than that, but they did fine.
    21 Nov 2013, 04:07 PM Reply Like
  • Another small bank I have been considering is $GECR. Trades below tangible book, low p/e, low p/b, low debt ratio, 1.24% yield. Negatives - half the market cap of $OSHC and thinly traded on OTC. Don't want to veer off-topic, but some of their numbers remind me of $OSHC.
    22 Nov 2013, 08:23 AM Reply Like
  • Author’s reply » Thanks for the idea; much appreciated.
    22 Nov 2013, 08:29 AM Reply Like
  • I am still kind of "kicking the tires" but if you were to see anything, I would love to know what you think.
    22 Nov 2013, 09:52 AM Reply Like
  • Does management have any incentive clauses which would encourage them to sell?
    22 Nov 2013, 08:27 AM Reply Like
  • Author’s reply » An open question to the forum:


    At what price per share should OSHC sell to a strategic acquirer?
    25 Nov 2013, 07:24 AM Reply Like
  • I see other similar institutions trading upwards of 1.4xTBV all the way up to 2.2. Considering, I think your eval of $22 is very fair and lands in the lower end of the multiple range. Other companies selling at a discount to their TBV have p/e ratios that are highly unattractive or negative earnings, unlike $OSHC.


    FWIW, using a similar multiple on $GECR brings it well over $20 when it is trading at ~ $14 with over 1/3 share value represented by cash - but I don't see the catalyst there...


    I consider myself a minnow swimming in fast water here, and always prepared to have my tail-end handed to me on a stick - all considered part of the learning process…. Cheers,
    25 Nov 2013, 11:05 AM Reply Like
  • I think around 1.5X is a little more realistic than 2X, but I agree low 20's is very achievable. With such a large buyback in place compared to the average daily trading volume it's hard to see much if any downside to the stock price at this point (as long as they commit to the buyback). I've upped my position recently and place on buying more.
    25 Nov 2013, 11:19 AM Reply Like
  • My guess is that someone will offer $18.50 to $19.00 (depending on the amount of shares repurchased) but management may not be receptive.
    26 Nov 2013, 01:36 PM Reply Like
  • Author’s reply » An offer of $18.50 to $19.00 would be the basis for a conversation. We had a productive conversation with OSHC's chairman and their CEO yesterday. We will be spending a lot of our time and energy on this investment over the course of the next year.
    26 Nov 2013, 01:39 PM Reply Like
  • Good to know, thanks.
    26 Nov 2013, 01:51 PM Reply Like
  • Author’s reply » On November 26, 2013, Ocean Shore Holding Co. (the “Company”) responded to the letter received on November 20, 2013 from Chris DeMuth, Jr., manager of Rangeley Capital Partners, LP.:
    26 Nov 2013, 05:32 PM Reply Like
  • Fascinating. It's like Hollywood.... except it's real!


    MANY THANKS for this insight into the world of finance that is not always accessible to those of us who would wish to learn about its complexities.
    26 Nov 2013, 10:37 PM Reply Like
  • The portfolio of KRE now trades at a 1.4x multiple to book value. Is there any reason why holders of OSHC should expect less than a premium to that multiple in the event of a sale? A mid-size regional bank I formerly owned shares in was acquired early this year, and the prospectus mentioned that peer group transactions had been done at multiples of 1.75x book value unless BV is growing at a rate that makes a sale less attractive.


    Large holders, like Rangeley, are in a bind when it comes to investing in small banks because a sale of the company is the only good exit strategy, and every year that passes by without a sale reduces annualized ROI.
    27 Nov 2013, 12:07 PM Reply Like
  • I found this article interesting with regard to small banks.

    2 Dec 2013, 11:38 PM Reply Like
  • Author’s reply » New Rules, a weak Economy and low interest rates would be easier to deal with if they become part of a larger bank.
    3 Dec 2013, 06:26 AM Reply Like
  • OSHC holders be aware that the Volcker Rule, as it currently stands, would force OSHC to divest the two pooled trust preferred CDO in its securities portfolio by July 21, 2015. The WSJ published an article several days ago about the havoc this aspect of the Volker Rule is creating for regional banks:



    and a subsequent follow-up article:

    22 Dec 2013, 01:52 AM Reply Like
  • Author’s reply » Here is a recent portfolio that includes OSHC:
    18 Mar, 11:24 AM Reply Like
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