OBA Finacial was established in 1861. Then not much happened until it announced plans to convert to a publicly traded thrift at the end of 2009. Investors were able to buy shares for $10 each at a cost of 59% of book value. After the conversion, there was a three year moratorium during which the thrift was not allowed to sell to a larger financial institution. After the end of the moratorium, shares had traded up from $10 to $18. We published our view that the company was worth around $22 to a buyer and advocated a sale of the company in writing to OBA's board of directors:
OBA Financial Services as it is currently operating has taken on the costs and risks of being a public company without leveraging the benefits. While the stock price has appreciated from 60% of tangible book value to 100% of book value today, its valuation level remains significantly below that of its larger competitors. We do not think it is in the best interest of its stockholders to operate at this suboptimal size. The best solution for OBAF's owners would probably be to consolidate into a larger institution.The current Board of Directors has important duties to OBA Financial's owners. Since the moratorium on corporate actions has expired almost one year ago, OBA Financial's management has taken no substantive actions to move the company to the next level of valuation it deserves. As a significant owner of OBAF, I am asking the Board of Directors to seriously evaluate the shareholder value that is currently being forgone in an effort to stay independent as an undersized local bank. Even using conservative price estimates, a strategic buyer would likely pay a substantial premium to today's stock price.
Earlier this year, FNB acquired OBAF for a stock deal valued around $23.56 per share. We were in regular communication with OBA's board and management, ultimately supporting the transaction:
I am writing to express my support of the definitive merger agreement made between F.N.B. Corporation (NYSE: FNB) and OBA Financial Services (NASDAQ: OBAF). I would like to commend the Board of Directors of OBAF as I believe this transaction is in the best interest of shareholders of both companies as well as the customers of OBA Bank. This transaction will create the scale necessary for this institution to compete, grow and better serve customers in Maryland going forward.As a function of my support of this transaction my current intention is to vote in favor of the merger.
The deal was successfully completed earlier this month. While we supported the deal for OBA, we did not hold onto our FNB shares as they are neither fundamental bargains nor likely to be the target of an acquisition in the foreseeable future. Now, onto the next one. These institutions can and often do sell after the third year and the holdouts are almost always sellers by the end of the fifth. There are worse places for conservative investors to put their money.