$2.34
$10.64
bear $2.34
base $6.61
bull $10.64
margin of safety $4.00
market price* $16.88
Fifth District Bancorp is the holding company for Fifth District Savings Bank, a federally chartered savings bank based in New Orleans with a main office and six branches in Orleans, Jefferson and St. Tammany Parishes. Its business is simple: it takes deposits, about 61% of them certificates of deposit, and lends mainly through fixed-rate home mortgages on one-to-four-family homes, which it keeps on its own books. It is small, with about $532 million of assets, $393 million of deposits and no borrowings. It became a public company in July 2024, when it converted from mutual (depositor-owned) to stock form and sold 5.46 million shares at $10. The key fact is that the bank has far more capital than it needs and earns very little on it. Shareholders' equity is about $129 million, roughly 24% of assets. The bank's own leverage ratio was 21.1% at December 31, 2025, against a 5% well-capitalized minimum. Its costs are high for its size, with noninterest expense running about $13.5-14 million a year against roughly $15 million of net interest income, so the return on that equity is only about 1%. How we measured earnings: we started from operating cash flow and removed working-capital swings, then treated stock awards and the employee stock ownership plan as real costs. We also deducted the capital spending needed to keep the branches running. Because this is a bank, interest paid to depositors counts as an operating cost and no debt is subtracted. Neither full year since the conversion is clean. 2024 lost money because of conversion-year items, mainly a $1.3 million gift (largely stock) to the new Fifth District Community Foundation and a $1.1 million loss from selling securities. 2025 showed a $4.1 million profit, but most of it was a $3.5 million gain on life-insurance proceeds after the death of the former CEO, partly offset by a death benefit paid to his beneficiaries. Leaving those out, the business now produces about $1.2 million a year for owners, or about $0.25 per share. The two most recent quarters back this up, with net income of about $385,000 in each. Net interest income rose 19% in the first half of 2026 from a year earlier. That rise comes from older low-rate mortgages paying down and being replaced at higher yields, plus deposit costs drifting lower. It is already reflected in the $1.2 million starting level. Year-one check: owner earnings went from a loss of $1.5 million in 2024 to a profit of $0.9 million in 2025, a swing from loss to profit rather than a growth rate that can be extended. The base case assumes 0% growth in year one. The surplus capital: we value the earnings stream at a 6% discount rate. On its own, that stream gives little credit for the surplus equity, because inside the bank the surplus earns only about 4% before tax. A dollar of surplus capital is worth its full dollar to shareholders only when it is paid out. There is a real constraint on payouts: like every converted savings bank, Fifth District carries a liquidation account for its pre-conversion depositors. We estimate it at about $78 million, which was equity before the offering, and the bank cannot pay out capital that would take it below that level. We therefore estimate the capital that could realistically be returned at about $45 million: bank capital above the liquidation account plus free cash at the holding company. The mechanism is already working. The board authorized a buyback of 555,947 shares (10%) in August 2025, and shares outstanding fell from 5.56 million to 5.24 million by June 30, 2026, with about $2.9 million spent in 2025. Bear case, about $2.34 per share: the company keeps its surplus capital and returns only the rest of the current buyback authorization, about $3.2 million. Operating costs keep rising as they have, with salaries and benefits up 14% in 2025 and occupancy up 11.5%. Lower short-term rates cut the yield on its roughly $19 million of cash and $99 million of securities; the yield on cash already fell from 5.0% to 3.9% in 2025. Owner earnings slip from $1.0 million to about $0.55 million by year four and stay there. The business is worth about $10 million plus about $1.4 million from the remaining buyback, roughly $11.4 million in total. There are no borrowings to subtract, so the bank can comfortably carry this case. Base case, about $6.61 per share: earnings hold at about $1.2 million a year, with continued repricing of the mortgage book offsetting cost growth. That is worth about $20 million. Buybacks continue at roughly the pace already shown, about $3.5 million a year for ten years, returning about $35 million of the roughly $45 million that could be paid out. That adds about $12 million of value compared with leaving the capital inside the bank, for a total of about $32 million. Bull case, about $10.64 per share: the bank keeps replacing older mortgages yielding about 4.5% with new loans at current rates, as it did in 2025, when the loan yield rose from 4.16% to 4.47%. Owner earnings reach about $2.2 million by year four and then level off as the old book is used up, which is worth about $35 million. All of the roughly $45 million of capital that could be paid out is returned over eight years, adding about $16.5 million, for a total of about $52 million. What we did not count: the bank's accounting equity is about $25 per share outstanding, far above all three values. The gap is the price of earning roughly 1% on that equity. Converted savings banks are often sold to larger banks a few years after converting, usually at prices close to their equity. Selling Fifth District would close the gap. No sale has been proposed, and regulations generally restrict a takeover in the first three years after conversion, which ends in July 2027. A sale would change these values sharply, but it is a possibility, not a business driver we can point to today, so none of the cases includes it. A further step-up in lending margins beyond the bull case, and growth in commercial lending, are also left out. Neither has a track record yet. Accounting judgements and open items: the amount of the 2025 death benefit is not separately disclosed. We estimated it from the jump in second-quarter 2025 expenses. The liquidation account balance is also not disclosed, so we estimated it from pre-conversion equity. At year-end 2025 the loans' fair value was about $47 million below their book value, because of the low fixed rates. That was mostly offset by a deposit fair value about $40 million below face. We did not apply these marks separately, since the low loan yields are already in the earnings we valued. What would make this wrong: a sale of the bank or a large special distribution would make these values far too low. Faster growth in operating costs, or a drop in deposits that forces the bank to pay up for funding, would make the base case too high.