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AMFI
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| AMFI |
Apr. 25 2008, 12:28 PM ET |
by martinroad (view profile) |
rating: Buy |
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BARI
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| BARI |
May. 25 2007, 11:42 AM ET |
by martinroad (view profile) |
rating: Strong Buy |
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| BARI performance: |
Price near date of rating (05/25/2007): 37.15
Recent price (12/30/2011): 39.70
Price change: +2.55
Dividends collected: 3.11
Gain/Loss over 6175 days: +5.66 +15.24%
Annualized Gain/Loss: +0.90%
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At the current price of $36.50/share, BARI is trading at 170% of tangible book, 21.1x 2007 estimated earnings of $1.73, and about an 8.5% premium to core deposits.
Bancorp Rhode Island (BARI) has declined in value by 15.8% in the last month (it closed at $36.16 on 5/24/07 vs. $43.34 on 4/27/07). Most of the sell-off is related to BARI management prevailing in its recent proxy contest. As a result, some of the fast money that jumped in prior to the vote, expecting PL Capital would be elected to the board with 2 seats, is probably rushing to sell shares.
PL made the point they needed to make, even though they didn't win the proxy battle. In fact, I actually think BARI might be more likely to sell within the next year as a result. BARI had a staggered board consisting of 15 members. Each year, 5 members come up for re-election. Had PL won 2 of the 15 seats, the board room would have been an uncomfortable/hostile place with 2 board members wanting to sell the organization and 13 very opposed to it, led by the Chairman Malcolm Chase and the CEO Merrill Sherman -- both of them would have been hard to force into selling...they would have gone down fighting -- as I don't see either of them as people would want to appear as if they lost a battle in front of the Providence business community.
The scenario going into next year -- if management and the board decides to sell, it will be on his/her own terms. If they don't sell, they could face another proxy contest. Further, in early 2008, it is Merrill Sherman and Malcolm Chase who are up for re-election. Knowing that either or both could be voted off the board, I think BARI will consider selling sometime around the end of 2007 or early 2008.
What is the organization worth if they sell? There would be a bidding war as there are a number of banks that want into Rhode Island. BARI has scarcity value -- the only other bank of size is Washington Trust (WASH). I estimate there are probably 5+ bidders that have highly valued currencies which could pay $52+/share for BARI. Further, if a mutual from MA or a large credit union in MA were to convert and buy BARI in a merger conversion, if BARI holders were to get pre-IPO stock, the ultimate value could be higher.
Hopefully all of the large holders buy more stock. Further, maybe a few new investors will show up by next year. MFP Investors LLC (Michael Price) indicated the purchase of 50,000 shares in the first quarter of 2007 -- I'd be surprised if he stopped with that small of a position, given the amount of money he manages.
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CFHI
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| CFHI |
May. 17 2007, 12:11 PM ET
Rating changed on
Aug. 3 2007, 10:16 AM ET |
by martinroad (view profile) |
rating: Buy |
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| CFHI performance: |
Price near date of rating (05/17/2007): 3.85
Price near end of rating (08/03/2007): 2.28
Gain/Loss over 78 days: -1.57 -40.78%
Annualized Gain/Loss: -190.83%
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[ Comments shared with private group only ]
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| CFHI |
Aug. 3 2007, 10:16 AM ET |
by martinroad (view profile) |
rating: Sell |
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| CFHI performance: |
Price near date of rating (08/03/2007): 2.28
Recent price (12/07/2007): 2.10
Gain/Loss over 6105 days: -0.18 -7.89%
Annualized Gain/Loss: -0.47%
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[ Comments shared with private group only ]
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CHFN
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| CHFN |
Aug. 3 2007, 10:19 AM ET |
by martinroad (view profile) |
rating: Sell |
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DNBK
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| DNBK |
Apr. 25 2008, 12:21 PM ET |
by martinroad (view profile) |
rating: Buy |
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EBSB
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| EBSB |
Apr. 29 2008, 01:12 AM ET |
by martinroad (view profile) |
rating: Buy |
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FFBH
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| FFBH |
Apr. 25 2008, 12:26 PM ET |
by martinroad (view profile) |
rating: Sell |
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| FFBH performance: |
Price near date of rating (04/25/2008): 12.45
Recent price (06/02/2014): 7.76
Price change: -4.69
Dividends collected: 0.51
Gain/Loss over 5839 days: -4.18 -33.57%
Annualized Gain/Loss: -2.10%
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First Federal Bancshares of Arkansas (FFBH) -- $12.85 -- 84% of stated TBV -- $62.5 million market cap – 5.5% NPAs & 90+ Days/Assets
Last month I traveled to northwest Arkansas (Fayetteville & Bentonville) to assess the real estate situation. Bentonville is the home of Wal Mart and an area I would have thought would be doing fine (since Wal Mart seems to being doing fine). However, even though employment is fine and the economy has only slowed slightly, the residential real estate situation is a disaster. I’ve spent a fair amount of time assessing residential real estate in areas such as Florida, the Inland Empire, Las Vegas, Phoenix, Chicago’s Western Suburbs, etc. and would say that northwest Arkansas ranks up near top with excess supply related to land, land development, lots, and vertical construction of homes. So, even with Wal Mart doing well, in my opinion most of Northwest Arkansas is going to have a major problems with real estate. In my travels, it wasn’t uncommon in areas such as Fayetteville to see entire streets that had been developed with spec homes, 90% of them not sold/not occupied. The land/lot situation is really crazy…just way too many lots. Lots that were selling for $40,000+/lot are now on the market for sale in bulk at $10,000/lot and there are plenty available at that price. The severity of losses related to these is going to be huge.
Prior to my trip, I attempted to setup a meeting with First Federal Bancshares (wasn’t sure if it would be a long or a short…but thought there could be an opportunity one way or the other if I got my hands around the real estate situation). Nobody from the company returned my call. The day I arrived, I was going to leave a message for the CEO and called at 6:30 AM figuring that would be a good time to get his voicemail. He actually picked up and I introduced myself and told him about my visit to the area….he said they don’t meet with people like me and he hung up.
FFBH is interesting in that they have about 1/3rd of their loan portfolio in construction/land/lots. Further, they have 5.5% NPAs & 90 days+ past due/assets, while only having 1.03% reserves/loans. They are well capitalized with $74 million of tangible equity (8.9% tangible equity/assets). However, after seeing what is going on with the residential real estate market there, especially on the land/lot side of things, I question whether FFBH will have enough capital to survive this downturn. FFBH currently has $31.8 million of nonperforming loans, $11.2 million in OREO, and about $3 million of 90 day+ past due. In their 10-K (a quarter old now) they provided a good breakdown of loans by category and even listed some of the larger loans that are still performing in the land development portfolio (providing origination date, maturity date, commitment, funded amount, accrued interest, number of lots, status, and county). They have a few fairly large loans that mature in from April - June 2008. One project with 9- lots was on hold and was 45% funded at 12/31/08…I can’t imagine that is going be a good situation. Another with 137 lots that was fully funded was complete…but after visiting that area I can’t imagine many developers are going to get out of lots at anywhere near their cost. The third situation was set to mature in April 2008 and was on hold, and the borrower informed the bank of their intention to move the loan to another institution for a better rate – I sure would like to know the name of that other institution.
Construction loans are another area I think FFBH will have more problems. They typically made with a max LTV of 80% on an as-completed basis (I interpret this at 100% of the cost). At 12/31/07 the bank had loans out on 195 spec homes totaling $40.9 million of exposure. It wouldn’t surprise me to see them have some problems in that portfolio as well. There are just too many home for sale and they aren’t moving.
To FFBH’s credit, according to the 10-K, they have slowed and/or stopped making a lot of these loans. That being said, I think they are going to be dealing with these problems for a while.
There is very little short interest with only 31,579 shares being short (0.7% of the outstanding) as of 3/31/08. The stock is really illiquid (only trades about 2,000 shares per day). There are a couple of large institutional holders, Dimensional owns 372,996 shares (7.7%) and First Manhattan owns 343,384 shares (7.1%) they hadn’t started selling as of their 3/31/08 filing. Dimensional is a quant fund and probably won’t sell unless the place blows up. First Manhattan is usually smarter, but I’ve seen them stick around some banks way too long.
Although it is at 84% of stated book, I think FFBH will have severe losses related to a decent portion of their portfolio. In 1Q08, FFBH earned $0.22/share, but that included a $1.2 million ($0.16/share after tax) non-recurring item related to a death benefit claim on a life insurance policy.
It is my view that credit issues will start eating into FFBH’s capital over the next year and that tangible book value per share will decline significantly. On the short side, I have been trying to attempt to find stocks I think have a good chance of failing or needing more capital. I think FFBH fits this category.
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KFED
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| KFED |
Jun. 18 2007, 4:44 PM ET
Rating changed on
Apr. 24 2008, 6:56 PM ET |
by martinroad (view profile) |
rating: Strong Buy |
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| KFED performance: |
Price near date of rating (06/18/2007): 15.65
Price near end of rating (04/24/2008): 11.46
Price change: -4.19
Dividends collected: 0.31
Gain/Loss over 311 days: -3.88 -24.79%
Annualized Gain/Loss: -29.09%
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As all of the MHC's have sold off recently, I think KFED ($15.65 closing price today) has been oversold. Currently, KFED, located in California (mostly southern), has $800 million in assets and 10.9% tangible equity/assets. If one assumes an eventual second step, the following are the valuations based on various offering price/book multiples in the second step offering:
100% of TBV = exchange ratio of 1.4, currently trading at 107% of fully converted book, would have 22% tangible equity/assets after offering.
110% of TBV = exchange ratio of 1.85, currently trading at 92% of fully converted book, would have 25% tangible equity/assets after offering.
A bonus to owning KFED now, is that it most likely gets added to the Russell 2000 on the close on Friday, June 22, 2007 (based on my estimates of what market cap
s as of 5/31/07 are to be included in the Russell 2000). Therefore, there is going to be demand to buy about 300k shares+ of stock by the index funds.
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| KFED |
Apr. 24 2008, 6:56 PM ET |
by martinroad (view profile) |
rating: Hold |
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| KFED performance: |
Price near date of rating (04/24/2008): 11.46
Recent price (11/18/2010): 7.52
Price change: -3.94
Dividends collected: 1.1
Gain/Loss over 5840 days: -2.84 -24.78%
Annualized Gain/Loss: -1.55%
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As all of the MHC's have sold off recently, I think KFED ($15.65 closing price today) has been oversold. Currently, KFED, located in California (mostly southern), has $800 million in assets and 10.9% tangible equity/assets. If one assumes an eventual second step, the following are the valuations based on various offering price/book multiples in the second step offering:
100% of TBV = exchange ratio of 1.4, currently trading at 107% of fully converted book, would have 22% tangible equity/assets after offering.
110% of TBV = exchange ratio of 1.85, currently trading at 92% of fully converted book, would have 25% tangible equity/assets after offering.
A bonus to owning KFED now, is that it most likely gets added to the Russell 2000 on the close on Friday, June 22, 2007 (based on my estimates of what market cap
s as of 5/31/07 are to be included in the Russell 2000). Therefore, there is going to be demand to buy about 300k shares+ of stock by the index funds.
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TSFG
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| TSFG |
Apr. 24 2008, 6:57 PM ET |
by martinroad (view profile) |
rating: Buy |
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VPFG
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| VPFG |
Apr. 27 2007, 10:57 AM ET
Rating changed on
Jul. 18 2007, 3:08 PM ET |
by martinroad (view profile) |
rating: Sell |
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| VPFG performance: |
Price near date of rating (04/27/2007): 13.06
Price near end of rating (07/18/2007): 11.18
Price change: -1.88
Dividends collected: 0.03571
Gain/Loss over 82 days: -1.84 -14.12%
Annualized Gain/Loss: -62.85%
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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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| VPFG |
Jul. 18 2007, 3:08 PM ET |
by martinroad (view profile) |
rating: Hold |
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| VPFG performance: |
Price near date of rating (07/18/2007): 11.18
Recent price (12/31/2014): 23.85
Price change: +12.67
Dividends collected: 1.99425
Gain/Loss over 6121 days: +14.66 +131.17%
Annualized Gain/Loss: +7.82%
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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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WAUW
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| WAUW |
May. 10 2007, 3:40 PM ET |
by martinroad (view profile) |
rating: Sell |
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| WAUW performance: |
Price near date of rating (05/10/2007): 17.40
Recent price (08/01/2008): 11.17
Gain/Loss over 6190 days: -6.23 -35.80%
Annualized Gain/Loss: -2.11%
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WAUW is trading at $17.50 which is 85% of fully converted book if one assumes a second step offering at 105% of fully converted book.
Although WAUW has $1.6 billion in assets (of which $1.3 billion are loans), if it fully converted, they would have about 32.5% tangible equity/assets.
It is my view that although WAUW has management that will utilize the MHC structure correctly and will second step at some point, the stock has gotten ahead of itself and should be trading lower. Not many people understand the fundamentals of the company. Here are a few that I will point out.
Good:
1) CEO is investor friendly
2) Branch network is above average
Bad:
1) NIM is in a horrible trend 2.27% in 1Q07
2) Yield on loans is poor at 6.25% on average
3) Cost of interest bearing liabilities is high at 4.35% (and moving higher)
4) Loans/Deposits high at 135%
5) Major components of Loan Portfolio: 48% 1-4 family; 35% multifamily; 12% Construction
6) Deposit base is not good with 84% of deposits being CDs
7) Asset quality trend is horrible, with Non Performing loans increasing to $42.1 million at 3/31/07 as compared to $28.8 at 12/31/06, $21.8 million at 9/30/06, $15.5 million at 6/30/06.
8) Non performing assets/total assets are 2.6%, up from 1.79% at 12/31/06, 1.33% at 9/30/06, and 0.98% at 6/30/06.
9) Reserves/Loans 0.52%
10) If WAUW did a second step today, they would have over 32% capital, and they don't have the deposits to fund additional asset growth, so they would have to use wholesale funding.
It is my view that WAUW will be worth more than $17.50 at some point, but in between now and then, I think it will trade down to $15 or lower, the company will buyback stock down there -- which will be accretive to eventual fully converted book. WAUW is going to be a very long term investment (like TFSL). It should be trading at 70%-75% of fully converted book ($14.41-$15.44).
There is a fairly aggressive buyer at around $17.50, so you can sell or short a fair amount at that level.
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