Valuation - at $0.92 it is trading at approx. 78.4% of book value based on common equity ($2.25m). The pending recap will completely overhaul these measurements.
"Under the plan, the company will exchange all of its five series of outstanding preferred stock, including the two series of cumulative preferred stock held by the U.S. Treasury Department as part of TARP, for new common stock with an aggregate value equal to 50% of the aggregate liquidation preference of the preferred stock.
The company will also exchange the accumulated dividends on the TARP preferred stock for new common stock with a value equal to 100% of the dividends. The Treasury in February agreed to exchange the series D and series E preferred stock for new common stock valued at a discount of 50% to the aggregate liquidation preference of $15 million for the preferred stock.
Broadway Financial will exchange a portion of its $5 million senior bank loan for common stock with an aggregate value equal to 100% of the face amount of the debt that is exchanged — estimated to be about $2.54 million, plus forgiveness of all interest accrued to the closing date on the entire loan. The company plans to execute a modified loan agreement for the remainder of the loan — about $2.46 million — with an extended maturity of over five years.
The recapitalization plan also includes the private placement of new common stock in the estimated amount of approximately $4.1 million of gross proceeds, including $200,000 that has already been invested by directors and officers.
In combination with the issuance of common stock in the exchange transactions, the investors in the recapitalization will own approximately 93% of the total number of shares outstanding after the closing of the recapitalization."
All of the current preferreds (totaling $17,489,000 by my calculation) will be exchanged for common at a 50% discount - so $8,744,500. Add the bank loan common exchange for $2.54m and the private placement of $4.1m.
and the current common of $2.25m and the new book value, all else being equal, becomes about $17,634,500 give or take. The exchange of all the preferreds will take the texas ratio down dramatically on it's own because they don't currently count towards tangible capital. Factor in the sale of all the single family non-performers and the reduction of overall non-performers to 6.4% as the CEO said from 16.04% without a hit to capital and the fact that the banking subsidiary is currently at 13.21 on the Tier 1 ratio and 8.88 leverage ratio. This bank has nowhere to go but up. It will be at least to $2.50 once the recap is formally announced.