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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • OSHC Owners Forum 63 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.

    Regards,

    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 (63)
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  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Another good forum.

     

    Have you had discussions with any of the other major holders?
    21 Nov 2013, 09:58 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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.

     

    Contacts:
    Steven E. Brady, President and CEO
    Donald F. Morgenweck, CFO
    (609) 399-0012
    21 Nov 2013, 12:13 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (550) | Send Message
     
    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
  • MOSMan
    , contributor
    Comments (34) | Send Message
     
    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
  • gymbo
    , contributor
    Comments (142) | Send Message
     
    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
  • drands10
    , contributor
    Comments (12) | Send Message
     
    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
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » $22ish.
    21 Nov 2013, 03:40 PM Reply Like
  • jaginger
    , contributor
    Comments (669) | Send Message
     
    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
  • Dr. Kris
    , contributor
    Comments (341) | Send Message
     
    15ish first. Then 16ish.
    22 Nov 2013, 12:43 AM Reply Like
  • toddro
    , contributor
    Comments (203) | Send Message
     
    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
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    It isn't much more exciting than that, but they did fine.
    21 Nov 2013, 04:07 PM Reply Like
  • toddro
    , contributor
    Comments (203) | Send Message
     
    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
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Thanks for the idea; much appreciated.
    22 Nov 2013, 08:29 AM Reply Like
  • toddro
    , contributor
    Comments (203) | Send Message
     
    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
  • toddro
    , contributor
    Comments (203) | Send Message
     
    $GECR popped 56% today on takeover news. I started buying over the past few months as they dipped below $14.25/shr. I really like the small regional markets - and I had TWO beers tonight ; > )

     

    http://seekingalpha.co...
    24 Jun 2014, 11:24 PM Reply Like
  • bazooooka
    , contributor
    Comments (3454) | Send Message
     
    Great call Toddro.
    11 Dec 2014, 05:51 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Well done!
    11 Dec 2014, 06:19 AM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Does management have any incentive clauses which would encourage them to sell?
    22 Nov 2013, 08:27 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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
  • toddro
    , contributor
    Comments (203) | Send Message
     
    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
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    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
  • MOSMan
    , contributor
    Comments (34) | Send Message
     
    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
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Good to know, thanks.
    26 Nov 2013, 01:51 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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.: http://1.usa.gov/Im9di7
    26 Nov 2013, 05:32 PM Reply Like
  • TheSandman
    , contributor
    Comments (64) | Send Message
     
    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
  • TheCompleatAngler
    , contributor
    Comments (175) | Send Message
     
    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
  • toddro
    , contributor
    Comments (203) | Send Message
     
    I found this article interesting with regard to small banks.

     

    http://on.wsj.com/ICSpCM
    2 Dec 2013, 11:38 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    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
  • TheCompleatAngler
    , contributor
    Comments (175) | Send Message
     
    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:

     

    http://bit.ly/18FNA7L

     

    and a subsequent follow-up article:

     

    http://bit.ly/1ibx2b7
    22 Dec 2013, 01:52 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Here is a recent portfolio that includes OSHC: http://bit.ly/M9ElTw.
    18 Mar 2014, 11:24 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Rangeley Capital Boosted its Stake in Ocean Shore Holding Co (OSHC):

     

    http://bit.ly/VmyMWg

     

    Rangeley Capital LLC, Managed by Christopher DeMuth, Jr. has disclosed an increase of approximately 4% in its position in Ocean Shore Holding Co (NASDAQ:http://bit.ly/1ohwdgu), a $98.3 million market cap federally chartered savings and loan holding company for Ocean City Home Bank. Rangeley disclosed ownership of 560,818 shares of the company, up from 539,508 shares declared on November of 2013.

     

    Rangeley Capital’s stake of 560,818 shares accounts for 8.3% of Ocean Shore Holding Co (NASDAQ:http://bit.ly/1ohwdgu)’s outstanding stock, and is worth more than $8.15 million. In addition to this fund, Howard Guberman’s Gruss Asset Management last declared ownership of 160,000 shares of Ocean Shore Holding Co (NASDAQ:http://bit.ly/1ohwdgu). Another fund with big stakes in the company is Roaring Blue Lion Capital Management LP, which owns 308,966 shares.

     

    I should highlight, as it was previously reported, that this position has an activist nature. In fact, in its previous 13D filing, the fund had attached a “letter to Ocean Shore’s board in which it stated that the Board of the company must initiate a strategic review of the company and come up with some actions meant to increase the value for shareholders. One of the solutions which the Board should consider is the sale of the company.”

     

    While Rangeley Capital has consistently increased its stake in Ocean Shore Holding Co (NASDAQ:http://bit.ly/1ohwdgu) over the past several months, the case has been the opposite regarding OBA Financial Services Inc (NASDAQ:http://bit.ly/1ohwdgx), which last saw the fund decrease its stake, from 237,993 shares to 214,239 shares.

     

    Rangeley Capital LLC is a New Canaan, Connecticut-based hedge fund founded in 2007 by Chris DeMuth and Richard Townsend. It specializes in event-driven strategies. Before co-founding the fund, Mr. DeMuth was a securities analyst for the event driven strategy of Mangan & McColl Partners, and Mr. Townsend had served as the Chief Financial Officer for Loral Space & Communications Ltd. (http://bit.ly/1ohwbFi) since 1998, and as Executive Vice President since 2003.
    4 Jul 2014, 09:31 AM Reply Like
  • kadison
    , contributor
    Comments (212) | Send Message
     
    Do these investors share the same strategy?
    4 Jul 2014, 11:14 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Yes we do.
    30 Jul 2014, 08:40 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Ocean Shore Holding Co. Reports 2nd Quarter Earnings: http://bit.ly/1o3c4gp
    30 Jul 2014, 08:40 AM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Good earnings and all, but stock continues to remain under book value and undervalued. I hope they are pursuing a reasonable takeover bid.
    30 Jul 2014, 09:13 AM Reply Like
  • Toby Shute
    , contributor
    Comments (139) | Send Message
     
    That PR today really made a splash, huh? For the best, as they keep hoovering up shares down here.
    5 Aug 2014, 01:12 PM Reply Like
  • rferrari
    , contributor
    Comments (4) | Send Message
     
    Hi Chris,

     

    Any updates about any possible M&A Agreement?

     

    Thanks
    15 Nov 2014, 11:20 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » BNCL would be a logical buyer. They are in the midst of a conversion process that is taking up their attention but which will result in over-capitalization. BNCL could take part of their proceeds to buy OSHC sometime early next year. But nothing is likely to happen before then.
    16 Nov 2014, 06:03 AM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    I sent an email to the CEO about a week ago requesting they continue to look for ways to increase shareholder value including the possibility of a sale. He did respond saying they regularly conduct strategic reviews to evaluate all of the company's options. He highlighted their share buybacks and redemption of some of their trust preferred securities, but said they have no control of their share price.

     

    I noticed the CEO Brady has a large chunk of options with a $13.19 conversion price that expire in August 2015. That's a pretty good incentive for him to get something done.

     

    Chris - Are there any other logical buyers you see as a possibility besides BNCL?
    16 Nov 2014, 09:56 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Your e-mail should help. Thank you for sending it. Brushing off owners will be increasingly difficult as more and more speak up. Others include KRNY.
    16 Nov 2014, 12:22 PM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    Hello, can you shed any light on Mr. Seidman closing out his position on OSHC ? Also, do you have a comment on the recently announced additional repurchase authority of up to 130k shares. I read that announcement as good news. Thanks.
    20 Nov 2014, 08:40 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » I agree that the announcement is good news. I don't have any particular thought to share on Seidman.
    21 Nov 2014, 01:38 AM Reply Like
  • Munich Value Investments
    , contributor
    Comments (20) | Send Message
     
    I never really looked at a bank before so please excuse the (maybe) stupid conclusion when looking at actual numbers:

     

    - Average ROE is at roughly 5% over the last several years (optimistically 6%)
    - Current P/BV stands at 0.88
    - ROE / P/B = 5.7% (optimistically 6.8%)
    - Loan losses and capital ratios seem fine for the business model
    - EVE Analysis: +/-100bp change in rates leads to loss/gain of -8.2 / 2.3 in EVE

     

    So for me the only reason to buy OSHC would be a high chance of a takeover. Otherwise the expected return of 6-7% seems too low.

     

    Another thought: mgmt buying back shares at a 6-7% expected return may not be the best way to maximize shareholder value. Unless....they assume a takeover.

     

    Please let me know your thoughts. As a total rookie in fins I'm happy to learn.
    10 Dec 2014, 10:14 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » Munich Value Investments, there is not much more to it than that. The expected return is 6-7% except for a potential takeover. I think that you've understood the situation just fine.
    10 Dec 2014, 10:35 AM Reply Like
  • bazooooka
    , contributor
    Comments (3454) | Send Message
     
    MVI,

     

    Good read on the situation. Subtle gains while you wait on a takeover is basically it.

     

    Now if you handicap that takeover event as near term (next 12 months?) and at a premium to book, not to mention buybacks help protect the downside, then its is good risk/reward punt.
    11 Dec 2014, 05:48 AM Reply Like
  • Munich Value Investments
    , contributor
    Comments (20) | Send Message
     
    Great, thanks for clarifying
    11 Dec 2014, 06:32 AM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    OSHC filed a Form 8-K on Dec. 12, 2014, advising as to an amended employment agreement with its president revising the Change of Control definition to give him tax options in connection with any change of control. Hopefully, this is a precursor of good things next year. Happy and Prosperous New Years to all!
    28 Dec 2014, 09:56 PM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Good catch thanks.
    29 Dec 2014, 08:36 AM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Another solid earnings report. More buybacks of stock and trust preferreds, but still no news of any sale.

     

    Chris - Any thought of when it might be prudent to take more activist measures?
    28 Jan, 09:52 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » gsterling, good question. The best owner for OSHC is probably BNCL. They need a moment to sort out their mutual conversion but could act within the next quarter or two.
    28 Jan, 09:55 AM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    No need to rush this coiled spring. Management appears to have gotten the message and seems to be doing what needs to be done correctly. I would prefer taking some time to get the best price rather than selling for an earlier lower one. I am considering a transfer in kind of my IRA shares to my Roth account at current prices. The tax would be due on the current FMV. Any subsequent gain on the shares in the Roth would be tax free.
    28 Jan, 11:42 AM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    I'm plenty patient, but have been holding OSHC for about 1 1/2 years at an avg price of 14.32, so zero gain to show other than a small dividend. Time is money.
    28 Jan, 12:42 PM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    I agree with you that time is money. The book value of OSHC is around 16.88 after the recent stock repurchase. I would estimate a purchase at around 1.15 or roughly 19.41 per share. If that were to occur this year, your gain would be around 35% plus dividends paid. Not too bad for holding a small bank with low risk. Remember the OBAF results from last year. Hopefully, we will all be well rewarded before the end of the year. Good luck to you and all of the other holders.
    28 Jan, 07:17 PM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    Latest 13G filing from Mr. Demuth: http://bit.ly/1zvnStd.
    11 Feb, 08:24 AM Reply Like
  • kadison
    , contributor
    Comments (212) | Send Message
     
    seems like dividends reinvested
    11 Feb, 01:57 PM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    M3 Partners has also filed a 13G. Also, there are new Change of Control Agreements with the President and CEO, and with the Senior VP and CFO. Things are moving right along.
    18 Feb, 01:31 PM Reply Like
  • kadison
    , contributor
    Comments (212) | Send Message
     
    Seems like there is something brewing under the lid for the past few days/weeks...
    13 Mar, 04:22 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » OSHC hit a new 52-week high
    28 Apr, 06:20 PM Reply Like
  • jbzw
    , contributor
    Comments (830) | Send Message
     
    And beats EPS by .03.
    28 Apr, 06:54 PM Reply Like
  • gsterling
    , contributor
    Comments (760) | Send Message
     
    All good, but still hoping for a sale!
    28 Apr, 07:04 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5367) | Send Message
     
    Author’s reply » What gsterling said.
    28 Apr, 07:09 PM Reply Like
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