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Albina Community Bancorp Message Board

  • sambordulac sambordulac Jan 4, 2013 8:10 AM Flag

    neither safe, nor cheap

    The questions are whether it's safe or cheap.
    The answer are it's neither safe or cheap.

    It's not safe because equity is negative $1 million even before taking out the $2.4 million preferred. Without that, equity would be negative $3.5 million.

    Even a broke bank can have value if it is earning good returns. Even though ACBC showed some "earnings" but stripping out the $0.456 million non-recurring investment credit, it essentially broke even.
    True, the bank lost a chunk of loans that maybe replaced and that should restore some profitability, the bigger problem, negative equity, can not be solved without cash infusion. In that regard, who's going to pump fresh money into a low return enterprise? Worse, his initial investment would be soaked up by the $3.5 million deficit up front. I don't see a way out.

    It also owes $6.2 million subordinate debt. Only with that money and the preferred that the subsidiary bank is able to maintain a meager $6 million bank level equity thus avoiding FDIC take over. Certainly regulators already been issuing warning or consent orders. But they are stuck too. Seems not enough ground to shut it down unless it resume the losses which doesn't look like the case.

    It'll be interesting to watch how it gets out of this mess, but only for academic reason.

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    • Maybe but if they can make it (which they are now at least making a profit it seems...correct me if Im wrong) and thats a big if they even go back up to 7 or 10 dollars think of the potential upside, of course thats just my opinion.

      • 2 Replies to canada_maple_leaf
      • Porfits always a possibility, but until that happens...The reported earnings was due only to one time item and nothing supports that it can earn anything any time soon.

        As I postulated earlier, it can't attract new investor therefor not able to restore balance sheet.

        Even if a new investor can be found, dilution to existing shareholder would be in the magnitude of ten to one. No, not for me.

      • If the bank can consistently earn something, there is value.

        Suppose it can consistently earn $1 million per year, the value of the bank could be $10 million, thus justify for someone pumping fresh capital and keep it going.

        Looking from the standpoint of this new investor, he'd like to be able to make something beyond the $3.5 million the bank would absorb up front. Suppose he brings in $5 million to keep the bank going. Even if he takes 99% of the ownership as a condition--which leaves the existing common share holders with practically nothing--he'll still would be earning a very low return.

        To make it work for him, he'll need to be able to turn the ship around and make it adequately profitable. So, yes, it's possible, but the required deep pocket and management expertise makes it less likely.

        Nothing impossible though.

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