This article is the fourth of a series of deep dives into promising mutual savings conversions. I wrote a quick overview of mutual savings conversions and listed out some interesting names in previous articles.
Today’s mutual savings bank is run by a local, veteran commercial banker. He sold his previous bank at 1.27x TBV in 2018 after growing it for two decades and seems to be going for seconds.
The bank is growing rapidly and still has significant excess capital to deploy. At this rate, it could be quite profitable soon.
If you’d like to add a little bit of spice to your mutual savings portfolio, this one may be for you. It was for me.
The Business
Hoyne Bancorp (HYNE) is the stock holding company for Hoyne Savings Bank, an Illinois-chartered savings bank based in Chicago. The bank completed its mutual-to-stock conversion just 9 months ago and raised enough cash to almost double its equity.
It has been busy putting that extra capital to grow.
The loan portfolio has been growing at a 10% annual rate since the conversion. Growth has been driven by the commercial loan portfolio, and half of loans are construction or commercial real estate (CRE) loans.
Normally, I’d be nervous about a bank growing rapidly in commercial real estate. And to be frank, I am still somewhat nervous here.
However, I am reassured by the combination of deep local expertise and strong alignment of interests with shareholders.
CEO Walter Healy has been a commercial banker in the Chicago area since 1988, including a two-decade tenure at Community Bank of Oak Park River Forest. There he was a founding member and EVP. He was later promoted to CEO and led the bank through the 2008-2010 financial crisis and to its ultimate sale in 2018.
In other words, CEO Healy has spent close to 40 years successfully lending money to companies in a narrow geographical area. He’s seen booms and busts and steered small banks through it all.
I can only imagine the sort of local knowledge and relationships that kind of experience helps one develop.
At the same time, he and his team have also been buying stock hand over fist in the open market. Almost $1M since the conversion took place. Management owns 11% of the company.
The Value
HYNE is trading at 0.80x its tangible book value at the time of this writing.
This means we’d expect a larger bank to pay at least 20% more than the current $16.22 share price to acquire the bank today.
Furthermore, the roughly $160M in non-interest-bearing deposits and current growth trajectory mean the bank would probably fetch a higher multiple.
The Catalyst
The M&A window is 27 months away, but the buyback window is only 3 months away. The bank has over $100M — almost the entire market cap — in cash and liquid securities available for buybacks.
FJ Capital, a mutual savings specialist bank, owns 3.2% of the shares. I don’t think management will need any encouraging, but it is always good to have an activist fund involved to make sure the buybacks get going.
The Risks
The far-and-away number one risk is the large and growing construction and commercial real estate portfolio. This is a notoriously cyclical sector that could get ugly quickly.
Without a boots-on-the-ground investigation, it isn’t possible to get a sense for any concentration across loan types (e.g. retail, industrial, office space), neighborhoods, individual counterparties, etc. The same goes for general loan requirements and covenants. (e.g., requiring a level of contracted occupancy to qualify for CRE loans).
We would be trusting management’s track record and incentive alignment as a sign that lending will be responsible, despite the current fast growth.
It also may be a good time to invest in commercial real estate in Chicago. The post-COVID shift to hybrid work caused many projects and loans to fail and some properties are available at fire sale prices. A discerning local investor — or banker — may find exceptional opportunities in this environment.
The Verdict
I have owned HYNE since Q1 2026. My plan is to hold my position until I get into long-term gains tax territory in Q2 2027 and then exit.
I expect buybacks will start as soon as they are allowed in December 2026. This will probably push the share price closer to 1.0x TBV by then.
I may exit sooner if I see signs of credit deterioration or if I find something much more compelling between now and then. I am always on the hunt for quality compounders like Shin Maint.
As usual, if I do find something interesting, my subscribers will be the first to know.
In the meantime, happy hunting!
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