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I am a professional by day and an amateur investor by night. I have been investing since I was a teen and continue to thoroughly enjoy every minute of it!
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  • Regional Banks: No Logic To Recent Sell Off

    This is just a short blurb about the recent sell off in the regional banks over the past 5 day trading session.

    According to, the following regional stocks have declined in the range of 4-10% over the past 5 days of trading:

    SunTrust - $STI

    Key Bank - $KEY

    Fifth Third Bank - $FITB

    M& T Bank - $MTB

    Regions Financial - $RF

    Huntington Bancshares - $HBAN

    BB&T - $BBT

    PNC Bank - $PNC

    First Horizon National - $FHN

    Comerica Bank - $CMA

    This is typical of the stock market. When there is "fear" in the markets and/or a correction of certain industries is in order, the entire market is sometimes corrected. This is illogical. Nothing has changed about these regional banks. In fact their earnings are growing, their loans and deposits are growing, and their share buybacks and dividends are increasing. This is all without interest rates rising. Furthermore, several of the above regionals are trading below their book value.

    Therefore, although I view these corrections as being illogical, I also think that they make a great opportunity to buy into the above regionals or add to your positions.

    It makes sense to buy into fear most of the time. You don't go to Bestbuy looking to buy a 60" TV at regular price, you look for a sale. The market's fear is a wonderful thing as long as you have the capital to invest and the patience to "ride the storm".

    Disclosure: The author is long RF, FNFG, HTBI, HBAN, GNW.

    Oct 15 9:27 PM | Link | Comment!
  • HomeTrust Bancshares ($HTBI): A Solid Addition To Your Growth Portfolio

    I have been searching for a company to add to my portfolio for future growth that is trading below book value. As you can imagine, this is quite difficult to come by given the fact that the market is reaching all time highs. With that being said, there are always great values out there, you just have to look beyond the mainstream (ie. Google, Apple, Facebook, Twitter, etc.)

    I have been delving into bank stocks lately for a couple of reasons. First, financials are still trading at low multiples compared to the rest of the market with some banks still trading below book. Second, I would like to be ahead of the crowds when the Fed decides to increase interest rates.

    I discovered several small thrifts that have converted into bank holding companies and gone public to use their IPO proceeds to make acquisitions thereby expanding their businesses.

    I came across one bank in particular that I would like to share. The bank is HomeTrust Bancshares ("HomeTrust") or $HTBI.

    HomeTrust started as a thrift and morphed into a private partnership between the following bank divisions:

    1905 - Shelby Savings Bank;

    1909 - Home Savings Bank;

    1912 - Cherryville Federal Bank;

    1926 - HomeTrust Bank;

    1929 - Industrial Federal Bank;

    1935 - Tryon Federal Bank; and

    2007 - Rutherford County Bank.

    HomeTrust went public as a holding company on July 11, 2012, which generated $211.6M in proceeds.

    Since its IPO, HomeTrust has made the following 4 primary acquisitions/mergers by year:

    July 2013 - Bank Greenville Financial Corporation - $114M in assets;

    May 2014 - Jefferson Bancshares - $494M in assets;

    July 2014 - Bank of Commerce - $123M in assets; and

    November 2014 (pending) - 10 branches from Bank of America - $504M in deposits.

    Although the above acquisitions are small compared to larger banks, this is quite a feat for a bank that was merely a county bank before its IPO.

    Following the purchase of the 10 Bank of America branches, HomeTrust will have 43 branches. The majority of the branches are in North Carolina and Tennessee, with some clusters in South Carolina and Virginia. In addition, it will have $2.8B in assets, $2.2B in deposits, and $1.6B in loans.

    What makes HomeTrust intriguing?

    1. Although HomeTrust does not currently pay a dividend, it has been buying back shares as a steady pace with a share repurchase program of up to 14% of the shares outstanding. Shareholders should be pleased since HomeTrust's stock currently trades at $14.80 which is about 80% of its book value. HomeTrust's price-to-book is quite low compared with the industry average.

    2. HomeTrust has a low float and currently has approximately 20.5M shares outstanding which could make it an acquisition target.

    3. HomeTrust has a very attractive balance sheet with approximately $200M in cash or about $9.80 in cash per share, and with approximately $50M in debt. Its operating cash flow is about $23M.

    4. It appears that management has no reservation about telling Wall Street that it intends to grow both organically and through acquisitions. Given its cash flow and cash on hand, it could continue to make reasonable acquisitions without having to dilute shareholders by issuing more shares.

    5. It has one of the largest deposit bases in the Carolinas which will result in higher interest income once interest rates rise.

    There are obviously some (potential) negative issues with HomeTrust including its current lack of dividend. Many institutional investors will not even consider purchasing shares unless there is a dividend, Furthermore, there is the potential that management will focus too much on growth through acquisitions vs. organic growth. Acquisitions are costly and risky as they could result in overpayment. Investors like to see organic growth as it is a sign of a healthy business.

    In conclusion, if your looking to add a company to your portfolio and are looking for growth at a good value, HTBI could be for you.

    Disclosure: I currently have no position in HTBI but intend to take a position shortly.

    Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in HTBI over the next 72 hours.

    Sep 21 12:59 AM | Link | Comment!
  • $FNFG - First Niagara Financial Group - Why The Analysts Are Wrong And Why FNFG Is A Great Long Term Value Investment

    First Niagara Financial Group ($FNFG) is a regional bank that operates over 400 branches in New York, Pennsylvania and New England. The bank has approximately $39B in assets and about $27B in deposits. The bank provides several different services including but not limited to personal banking, lending, planning, wealth management and insurance.

    So what makes FNFG special, if at all? What makes it stand out from the other regional banks, if anything?

    The answer is quite simple. FNFG did what very few banks did during the last recession. They went on a spending spree. They made 5 separate acquisitions which vastly increased, among other things, the size of their deposits and number of branches.

    1. In September 2007, they purchased Great Lakes Bankcorp and gained 16 branches, $900M in assets and $650M in deposits.

    2. In April 2009, they purchased 57 branches from National City and gained $4.2B in deposits.

    3. In April 2010, they purchased Harleysville National and gained 83 branches, $5B in assets and $4B in deposits.

    4. In August 2010, they purchased New Alliance Bank and gained 88 branches, $8.7B in assets and $5.1B in deposits.

    5. In July 2011, they purchased 195 from HSBC and gained $15B in deposits.

    FNFG subsequently divested some branches due to antitrust concerns. In addition, FNFG's dividend, which was much higher than the industry standard, was halved to support the acquisitions made.

    The above acquisitions increased FNFG's market share in New York and Pennsylvania, and expanded FNFG into the New England States. FNFG became a top 25 bank in the US by assets within a short time period.

    Wall street analysts criticized FNFG, in particular their CEO at the time, for spending recklessly (buying too much, too fast).

    I agree that FNFG was taking a risk by expanding at the time given the financial climate but I also believe that it was a smart strategy. When other banks were shedding assets to keep solvent and/or pay down their TARP funds, FNFG was purchasing assets at only a fraction of their value. Simply put, they were buying assets on sale. Call me crazy but there is a reason why we run to the store during the holidays to snap up items "on sale", because we know the same items typically sell for much higher prices.

    I applaud FNFG for making the moves they made during the downturn. I believe that they have done a service to their long term shareholders. With that being said, it is arguable that they may have expanded a little too quickly and diluted shareholders in the short term.

    Following FNFG's "shopping spree", shareholders and analysts criticized management for expanding too fast when it should have been increasing earnings through cutting costs. FNFG's stock suffered as a result and the CEO was replaced.

    At this point Wall street expected the company to join the rest of the regionals and begin slashing expenses. Instead FNFG did something which I argue should make the bank stand out in a positive way. FNFG told Wall street that they would be spending $200-250M over the next few years to improve their technology infrastructure. On this news the stock plummeted from about $10.50/share to about $8.50/share where its been trading ever since.

    FNFG's stock is currently trading at about $8.50 to $9.00 per share which is about 0.65 to .70 of its book value. This compares with most regional banks which are trading above their book values. At this multiple, FNFG's dividend is about 3.80%.

    So how does FNFG spending $200-250M to improve their technology infrastructure help FNFG?

    When a bank improves its technology by instituting company-wide improvements it typically results in improved efficiencies and increases sales by providing employees with more cross-selling opportunities.

    I once worked for a bank that was taken over by a larger bank. Following the merger, the combined bank consolidated several branches located in close proximity to each other to save costs. Following this they instituted new technology platforms company-wide, both at the retail and non-retail levels. I was at the retail level selling investments, lending and insurance products. Once the employees learned and adopted the new systems there was an immediate difference. Customer service improved as the customer banking experience became much more efficient. On the sales side, the new systems assisted employees with finding cross selling opportunities which is one of the various ways to increase branch revenues. Rather than sell 1 product to a customer, the program or system will recognize various products and opportunities that are suitable for the customer which could result in selling 3 products to that same client.

    I realize that $200-250M is not a nominal. It is enormous, however, this should be viewed as an investment rather than as an expense. That is the problem with Wall street analysts. They think short term, this is why they change their ratings/opinions so frequently. FNFG is no longer a small bank in NY/Penn. It is now a mid to large regional bank and therefore requires improvements to its infrastructure in order to compete at a higher level. The investments FNFG is making today is a necessity given the fact that the bank now has over 400 active branches.

    In conclusion, I view FNFG as a great long term value play. For those looking for a long term investment that pays a decent dividend, this company is for you for reasons mentioned above. FNFG could also be a takeover target by one of its US competitors or by a Canadian bank which have saturated their markets. Some Canadian banks, TD, BMO and Royal Bank, have been consistently acquiring banks in the US to grow their book. Lastly, given its large deposit base, FNFG is sure to benefit from rising interest rates.

    Disclosure: The author is long FNFG.

    Sep 12 9:05 PM | Link | Comment!
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    Oct 15, 2014
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