Nothing will happen on the TARP for some time. Even if Gillioz did pay off and they had $3.5MM more in cash, the hinderance to them being able to pay off TARP is capitalization. GFED needs to get to equity/assets of 8% or more before they begin to think about TARP, right now they are around 7.6%. They can do this through earnings or by shrinking the balance sheet while maintaining the same owner equity. Since loan demand is weak I believe they will shrink the balance sheet while at the same time earnings will be assisting them in improving their equity/assets.
The big drivers of earnings will be net interest margin (NIM) improvement and loan loss provision improvement. Their NIM for 2010 was 2.60%, while most of their peers were in the 3.5-4% range. GFED for Q1 was 3.07% on the NIM, which leads me to believe they should at least get a 3.2% NIM for 2011. So if they improve NIM by 0.60% over 2010, that will generate approximately $3MM in additional income, or $1.15/share. Also with asset quality in their loan portfolio improving they should be able to reduce loan loss provisions by $1-1.5MM, $0.38-0.55/share. It is hard for me to imagine a scenario where they earn less than $1/share for 2011, with potential to get to $1.50/share.
TARP will be taken care of in due time. There is a new small business lending alternative to TARP that alot of the TARP recipients are going after. It in effect gives the bank the opportunity to reduce the cost of TARP to as low as 1%, provided they hit certain lending targets to small business. This program also gives the TARP recipient several more years of cushion before the rate jumps to the 9% that TARP does after 5 years.
I think the outcome of the Gillioz forclosure could potentially be a big help on the TARP loan. If GFED does forclose and auction the Gillioz, or the loan is paid off, that would amount to more than 20% of their TARP loan. I don't know the implications of getting that money would be loss provisions, but it would have to help. 3.5 million would be more than 10% of the non-performing, so maybe they could pull 400k and put it towards TARP.
I could be incorrect, but it looks to me like the payoff on the Gillioz could cover about 1/4 of TARP. I think the Gillioz bankruptcy hearing begins next week.
It's no where near its potential. It's trading less than 1/2 its book. Eventually the loan loss provisions will be gone, and the stock historically trades way above book. This is still a no brainer at these levels imo. The only thing that could hold it back in my opinion is how they handle TARP. If they do a common share offering at lets say $8 thats 2.12 million shares added to the O/S.
Exactly, so you deduct 53 million equity by tarp of 17million is about 36 million in shareholder equity divided by 2.6 million shares = book around $13.80...but of course if you take the exact numbers itll be around $13.25 which is what management states...
No. Because it is preferred stock which is part of stockholder equity. You could think of it as a security sold under agreement to repurchase, a liability, for a common stock evaluation though, because that is essentially what it is.
It absolutely is...that's why you have to deduct it out when finding shareholder equity to get to a true book. It looks like the company has actually done this so their book value looks accurate.
Lets hope so with regard to TARP.
work, OT-sam on another board brought up NJCB as a small recent start up in NJ. You may know it in your travels with FCCY and CPBC. Sam and I like small start ups, for a small portion of ones portfolio. Any info would be helpful. Rob