Here’s an interesting idea I came across on Barron’s. After I read Klarman’s Margin of Safety and re-reading some of Peter Lynch’s old books, I did a recent search for thrift conversions, and there are still a few occurring. Kearny converted earlier this year, and is already up quite a bit. However, there is probably still a lot further to go – the Equity to Assets ratio is above 25, and non-performing assets are below 1%, meaning the bank could take a ton more leverage on and boost earnings. Ultimately that will lead to a higher price to book more in line with peers (currently 1.1, peers are 1.5).

An issue with regional banks in general is knowing the regional environment. This one is mostly in New York/New Jersey area. I’m not aware of major dynamics either way (bullish or bearish) that will affect the financial sector. If stocks in general take a bath, or the fallout in bonds wreaks havoc on Wall Street, there could be implications for Kearny. Furthermore, The bank has a team that is working on getting more commercial lending done, so they are going to be taking on quite a bit more risk, but of course that will come with higher earnings in the meantime.

Disclosure: I own no KRNY, may buy shares in the reasonable future.