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I spoke with Andrew Walker of Yet Another Value Podcast about why thrifts remain an interesting place to find value in the market, how activists are a key catalyst in this niche and key things to watch for when you're looking at small demutualized banks.

We've already seen a few thrift buyouts this year, including First Financial Northwest, which was highlighted on this blog.

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Stock repurchases at a discount to tangible book value at a thrift conversion? It's one of the top signs a management team can show you that it's looking out for shareholders' best interests. Buybacks are an even better sign when execs make them of their own free will and don't have an activist investor starting a campaign if they're not seeing any action.

And that's what we have at FFBW (NASDAQ:FFBW), a recently converted Milwaukee-area thrift that's executing one of the fastest buybacks I've ever seen. Even with mediocre returns on equity, this massively overcapitalized bank could return investors around 50% over the next 12 to 18 months, with a reasonable chance of being acquired toward the end of that period.

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Prudential Bancorp (NASDAQ:PBIP) is a one-time thrift conversion that has been completely forgotten by the market, yet it’s repurchasing stock and has noted activist investors with significant stakes. In a buyout scenario – which is typical of most thrift conversions – the stock could be worth 50% (and maybe 60%) more than it’s currently fetching in the market, and it can be sold at any time.

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