At $15.57, VPFG is getting closer to reasonable value. I wouldn't buy it yet, but would cover a short position. The best scenario longterm for VPFG is that it trades flat to down and they buyback a lot at a discount to fully converted book. They wouldn't be able to get an offering off right now at 115% of TBV, but might be able to in a year or two. If they use that as an eventual assumption, the current price is about 80% of fully converted book, not a bad level for them to start buying back stock...which will make it worth more on an eventual second.
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ViewPoint the current price of $18.42, VPFG has gotten ahead of itself. Although I it was one of my largest holdings and management is shareholder friendly, it is my view that the near-term upside (1 year) is limited.
Viewpoint operates in a great market area, but has a less than attractive balance sheet: 38% of loans are auto, 9% of loans are home equity
Further, 19% of VPFG's loans are commercial real estate, up from 4% just two years ago (they do a lot of 10 year fixed rate loans). I haven't seen many banks grow a portfolio that fast in the past without some eventual credit problems.
The deposit base is decent, but a lot of non-interest income is related to NSF fees...which aren't as attractive as other revenue sources to most potential buyers (assuming that VPFG eventually 2nd steps and then sells 3 years later).
With a stock that is trading at 95% of fully converted book (assuming an eventual second step in which shares are offered to depositors at 115% of TBV), buybacks still make sense, but are nowhere as accretive as some former MHCs buybacks were (BRKL, HCBK, CSBC, SYNF, ABNJ, etc. all bought back a significant amount of stock at less than 75% of fully converted book). Further, if VPFG were to 2nd step, the would have about 30% equity/assets.
Following the conversion, when the stock was in the $15-$16 range, it was my view that VPFG would be worth $23-$24 per share in 2-3 years. However, my valuation assumed that VPFG would be able to buyback stock in the $16 range. Therefore, based on where it is trading today, my 2-3 year value drops to $20-$21/share. The only way it goes higher, is if the stock drops between now and then and they are able to buyback lower (could happen after 1 year is up and investors take advantage of long term tax gains -- of if asset quality turns south given the auto exposure and rapidly growing CRE portfolio -- a lot of the CRE is in Houston, which is outside VPFG's branch network which is in north Dallas).
Looking out six months, it is my view that VPFG is either dead money or comes down in price from where it is now.
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