Banks that get acquired often result in a nice premium for shareholders of those financial entities. While it can be somewhat difficult to determine when exactly a bank will rise to the point where it becomes an ideal acquisition target, one banking sector that seems to get acquired at a very high rate are mutual savings banks. These banks date back to the early 1800s and are distinct because they are owned by their depositors. 

There are less than 500 of these banks left, and many are private, but a few take the plunge and issue an IPO each year. Once they go public, there is typically a three-year waiting period applied by regulators before they are allowed to be acquired. Investment bankers will tell you that 60% to 80% of these banks get acquired within three to five years of going public. So most are really being snatched up as soon as they are available.

As a result, it behooves a savvy investor to look at which will soon be eligible for acquisition and perhaps take advantage by buying in before the offer is made.

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If one of these mutual savings banks has used the public funds it raised and has grown tremendously with solid performance, it may not be a target. But if the bank doesn't have a lot of growth, has a record of poor performance, and/or the management and board of directors are getting old, major shareholders in the bank will likely be looking to exit the business and cash-out by selling.

Using these guidelines, here are four mutual savings banks that recently became eligible for acquisition (or will be soon) and are potential targets.

1. PCSB Financial: A municipal deposits specialist

PCSB Financial (NASDAQ:PCSB) stock began trading on April 21, 2017, making it eligible for acquisition very soon. Based in Brewster, New York, the bank (which only accepts government deposits) has seen decent growth, increasing total assets from $1.42 billion in the second quarter of 2017 to $1.64 billion at the end of 2019, about 15% growth. All of the members on its board except one are over 60, and its president and CEO is 66. With lackluster profitability metrics, the bank could be attractive for an acquirer interested in entering the municipal deposit business.

2. Randolph Bancorp: Ready for a transformation

Randolph Bancorp (NASDAQ:RNDB) stock began trading on July 1, 2016, so it has been eligible since last year. Although the bank has grown assets from about $490 million to $631 million since going public, some of those assets were acquired when the bank went public. Randolph did not turn a profit in 2017 and 2018, but started to make a turnaround in 2019, not only turning a profit but also rebranding its subsidiary bank.

Additionally, the bank has an old board and recently hired veteran bank executive Bill Parent as the CEO. The hiring of Parent is significant because he has experience transforming and selling community banks. He took his last employer, Blue Hills Bank (a small bank focused on home mortgages), and diversified its business lines and grew assets significantly before selling the bank in one of the largest community bank deals in Massachusetts in recent years. I would be surprised if he doesn't do something similar at Randolph.

3. Eagle Financial: A good choice amid falling rates

Eagle Financial Bancorp (OTC:EFBI) stock began trading on July 21, 2017, so it has a few more months before it's eligible for acquisition. Based in Cincinnati, the bank has grown total assets from $129 million to $142 million since going public at the end of 2019. All of its directors but one are over the age of 60 and its president and CEO are 65.

Its performance has not been great, either, with a return on assets of 0.58% and a return on equity of 3.82% at the end of 2019. With lots of interest-bearing deposits and a decent amount of long-term, fixed-rate home loans, it could be an attractive bank in the current falling-rate environment.

4. HV Bancorp: Unlikely, but still a possibility

HV Bancorp (NASDAQ:HVBC) stock began trading on Jan. 13, 2017, meaning this Pennsylvania-based mutual savings bank is eligible for acquisition. Out of this group of four, it strikes me as the least likely to sell. For one, since going public, it has grown assets organically from $212 million to $351 million, or roughly 65%. The entire board and its president and CEO are under the age of 60. That said, it is hard to operate independently in today's banking environment when you are under $1 billion in assets, making an acquisition always a possibility.