Can I ask how you know it is pre-2008 loans? Not saying you are wrong or that I have any idea what is going on; just curious.
Was looking at a presentation they made last year where it shows CRE loans by year. It looks like they went right on lending even after the financial crisis (see slide 16). I sure would have thought they would have slowed down in 2008/2009 time frame.
Slide 18 is interesting too. There they show LTV ratios and in general things look pretty good but I didn't like the nearly $200 million with LTV ratios of greater than 90% Its a small percentage of their overal portfolio but I'm kind of baffled over the fact that there are any in that range.
$100 million in new equity seems like too much to me but maybe they need it. That DTA will come back on the books in 2012 unless there are other hidden problems. Not sure if it is particularly relevant but just to point out; that DTA is the result of the fact that they cannot deduct the loan reserves on their tax returns.
Who knows. Morningstar says it is a buy at $3.50 but I hope that Yoo is just being overly conservative on the charge-offs. I would certainly buy at $4 if the company made that available but it isn't like I'm going to put up $100 million.
Guess I will hold back for awhile and see what happens before taking a larger position. Morningstar says $3.50 is a good entry point but it seems too low to me.
coh, Most new loans do not go bad immediately, although, I suppose anything in California is possible.
Somewhere in the loan mix is a loan(pre-2008) secured by a golf course and clubhouse. The loan went into default and the Bank was in the process of foreclosure and taking possession. This is an example of poor loan underwriting. Think about it--who is going to maintain the golf course and if you don't spend the money it is a PR nightmare with the surrounding homeowners and of course the local government. I am a believer in the roach theory--when you see one there is probably more.
My conspiracy theory points to Yoo taking excessive write downs so the insiders gets to scoop up the shares on the cheap VS secondary issuing. It makes future comparison so much easier too. Hope I am wrong or the integrity of the board is in suspect.
Note that the $38 million need not to be written off at this time, if at all, but that drpped the tangible from above $5 to below $4 per share. Now the share would be depressed because of it, my consolation is that the book is really $5+ and we get to buy it below that with one huge draw back--dilution.
This invalidated my original thesis that valued the company with the assumption of no dilution, and made the losses on my earlier purchase permanent.
If the new share were floated at $3.75 or below, and heavily, I might as well switch to Nara at 1.2 time book. It has not flexed its muscle yet.
Once again, I underestimated the credit cost and its effect on weaker banks, also the will of the insiders to drive the share prices down for their own gain. History may not repeat, it will rhyme. Again, hope I am wrong.
I would have tended to agree that little dilution was likely. I still think that if the pick up enough equity to cover for that DTA they are making a big mistake.
One thing I do think unlikely is a sweetheart deal that isn't offered to all shareholders. If they do a below market deal strictly for insiders that could bring lawsuits in my opinion. It also isn't consistent with how I've seen smaller non-public banks handle follow-on offerings. Might be good to keep some cash available if that becomes the case.