According to US equity investor Gregory Vousvounis in his article published at SeekingAlpha.com, smaller banks like First Defiance Financial would be getting acquisition offers to consolidate with other banks or financial institutions. Vousvounis does not have any stock owned or has plans to acquire in First Defiance in the next 72 hours, according to his profile on the US stock analysis market website.
Vousvounis believed that contributing factors such as the rising regulatory costs and a saturated banking market will be forcing banks to merge or get acquired by larger banks. Moreover, Vousvounis said small banks like First Defiance are purchased at a significantly higher book value.
"After the housing crisis of 2009, thrifts and community banks have been under-followed and considered "toxic" due to their great exposure to mortgages and real estate loans. Another contributing factor that explains the existence of an opportunity like this is FDEF's small market cap and its meager average trading volume of 24,400 shares ($600K of turnover) which keeps most institutional investors away. Finally, small community banks are largely avoided by growth looking investors since they generate modest returns on capital." Vousvounis said.
FDEF is a savings and loan holding company trading under the ticket symbol "FDEF" on NASDAQ Stock Exchange. The company operates a small regional bank, which is the the First Federal Bank of the Midwest.
Vousvounis said although First Defiance may had been priced at 90% of its book value at USD240 million and that it may only generate modest returns on investment, the company could easily fetch an acquisition price of up to 250% and that it deserved at least 115% of its standalone book value.
"This is because it is doing business in very small markets where it has a longer presence than most of its rivals and thus is one of the incumbents that the communities trust. This makes it an excellent acquisition target for any of the bigger banks mentioned above that may want to increase its presence in northwestern Ohio," Vousvounis said.
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