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Colony Bankcorp Inc. Message Board

  • PutLovr PutLovr Apr 3, 2010 9:48 PM Flag

    Newcomer here

    I noticed managment buying in Barron's. Looked into this. The real issue (I'm considering buying) is whether the bank has fully and adequately reserved for possible loan losses--taken the big hit so that they don't have to keep bleeding with additional losses each quarter from now.

    On March 16 CBAN filed its 10K. They lost $20,549,000, primarily as a result of a $43,445,000 provision for loan losses, an increase from $12,938,000 in 2008 and $5,931,000 in 2007. In 2007 they made $8,547,000 or $1.19 per share. However, their income in 2009 was also reduced by $1,365,000 for preferred dividends.

    On March 30, 2010, CBAN issued 1,216,545 shares of common stock at $4.11 in a private placement at the average price for the prior 20 trading days. The shares were purchased by Directors of the bank

    This suggests to me that:

    1) the Directors were comfortable that the bank had properly reserved for bad loans and expected the bank to return to profitability.

    2) if the bank returned to 2007 levels of profitability they would earn $8,547,000 less $1,365,000 preferred dividends or $7,182,000

    3) in 2009 they had and average 7,213,000 shares outstanding

    4) after the private placement they would have 8,578,000 shares outstanding.

    5) If they returned to 2007 profitability, i.e. if there are is not need to make further extraordinary additions to the loan loss reserve, then this should translate into earnings of 83 cents per share.

    The stock closed at $5.90 on Thursday. That's up 43.5% from the price those insiders paid. They got a good deal it seems. I'm not sure if it makes sense to rush in because it will take some time to get some real results, but I'd certainly want to buy on any pullback to the $5 level.

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