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Some analysts believe the time is ripe for second-step conversions by mutual holding companies. Still, some bankers believe the floodgates will remain closed until regulators decide to let MHCs pay a special dividend before converting.
April 17 -
Beneficial Mutual Bancorp Inc. of Philadelphia has agreed to acquire SE Financial Corp.
December 6 -
Investors Bancorp doesn't plan to stop with its deal for Brooklyn Federal. The Short Hills, N.J., mutual thrift would like to do "one or two more" before converting to an all-stock company.
August 17
The board of Roma Financial in Robbinsville, N.J., could be pondering the company's willingness to remain independent after enduring a difficult third quarter.
The $1.9 billion-asset mutual holding company earned $345,000 in the quarter, compared with $2.1 million a year earlier. The swoon caps a tumultuous several months for Roma that included a dividend cut, a written agreement with the Office of the Comptroller of the Currency and news that the chief executive will step down late next year.
The written agreement likely puts any plans for a second-step conversion on ice for now and, in that case, Roma should start looking to sell itself, analysts say.
"We don't believe that Roma will be a second-step candidate until it can work out from underneath the written agreement," Frank Schiraldi, an analyst at Sandler O'Neill, wrote in a Tuesday note to clients. "We continue to believe an attractive alternative … would be to seek to partner up with a larger MHC."
Schiraldi said in an interview Tuesday that he began viewing Roma as a likely acquisition candidate in late June when it reduced its dividend, a function of new Federal Reserve Board rules for mutual holding companies. He said the likelihood of a sale increased with the OCC order.
"I think it would be a pretty good option for them," Schiraldi said. "I noted it on the dividend suspension, but it came to the forefront with the agreement."
The push for Roma to sell underscores the idea that companies that are struggling might find a better future with someone else.
Roma did not return a call for comment. Despite its struggles, the company's quarterly results included some trends that acquirers find attractive. Loan balances grew by nearly 3% from the second quarter, and core deposits grew by 1.5%. Roma's net interest margin compressed by only 2 basis points; Schiraldi wrote in his research note that he believes Roma can maintain a relatively stable margin.
Mutual holding companies can only sell to mutuals or mutual holding companies. Such companies are predominately located in the Northeast and several are open to acquisitions.
"There are five or six names that are big enough to get a deal for Roma done," Schiraldi said.
The $4.8 billion-asset Beneficial Mutual Bancorp and the $11.5 billion-asset Investors Bancorp would be leading contenders, said Theodore Kovaleff, an analyst at Horwitz & Associates. Both are big enough to absorb the thrift and have ample capital, he said.
Beneficial, in Philadelphia, and Investors, in Short Hills, N.J., also have
Investors has also
Beneficial executives declined to discuss Roma; Cummings was not immediately available for comment.
Credit issues could still deter a would-be acquirer from pursuing Roma, Kovaleff said. The company's nonperforming assets grew nearly 38% in the third quarter from a quarter earlier, to $55 million.Kovaleff said a deal could be structured like Investors' acquisition of Brooklyn Federal Bancorp, which was announced in August 2011. That deal included a third party that agreed to buy Brooklyn's $208 million pool of commercial real estate in conjunction with the company's sale.
Even if Roma's management and board plan to remain independent, Kovaleff, who owns stock in several mutual holding companies but not Roma, said the company should explore a bulk sale of its troubled assets.
"I don't understand why they haven't bitten the bullet instead of taking little steps at a time," Kovaleff said. "They should do one big clean-up to take care of it."
