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  • Signature Bank: An Obvious Financial Short [View article]
    Ictus, I would check Etrade again. It is an easy borrow at the lowest rate (millions of shares are available). Either etrade made a mistake or their stock loan is terrible.
    Sep 28 06:12 PM | Likes Like |Link to Comment
  • A Violent Correction Could Be Coming for Hampton Roads Bankshares [View article]
    Kraven, thanks for you comment but I respectfully disagree with your "misinformation" comment. We can argue semantics, but HMPR "failed to perform or pay" (aka default dictionary.reference.c...). I found it ironic that a few months after the bank's management complained about the compensation restrictions of TARP they "failed to perform or pay." As I mentioned in my article, I did a screen of US banks w/ greater than $75 mm market cap (so over 325 banks). I think my characterizations were correct. For example, HMPR was the most expensive on a price to tangible basis (PRSP was #2 at 3.7x), fourth worst for NPAs to tangible capital plus reserves and fifth worst for NPAs to assets.
    Jun 28 04:24 PM | Likes Like |Link to Comment
  • A Violent Correction Could Be Coming for Hampton Roads Bankshares [View article]
    This article was submitted the week of June 17th. Apparently it got misfiled in editorial (why it took so long to publish).
    Jun 27 11:14 AM | Likes Like |Link to Comment
  • National Financial Partners: Finally, a No-Brainer to Buy [View article]
    Was asked our calculation of Enterprise Value and pro-forma capital structure. After the refinance, we estimate the company has $58 million cash, $125 million of bank debt and the $125 million convert plus $405 million market cap = EV of just under $600 million. We exclude the benefit for the substantial free cash generation over the next few quarters.
    Aug 25 11:48 AM | Likes Like |Link to Comment
  • Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
    It recently came to our attention that a class action lawsuit has been filed against CHCO for their “unfair” assessment of overdraft fees. The lawsuit highlights some of the aggressive practices that we profiled in this article. We believe this adds additional near-term risk to CHCO’s stock price.
    www.dailymail.com/Busi...
    Jul 12 09:32 AM | Likes Like |Link to Comment
  • Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
    Greedcanbgood, thanks for your feedback. A couple of comments: 1) APRs are relevant because they have been successfully used by consumer advocates, regulators and legislatures to drive awareness of abusive practices. In addition, CHCO will most likely always have a balance of overdraft, so the APR should approximate the yield on these “loans” 2) Order checking is irrelevant if a bank approves ALL transactions. In this case “high-low” drives significantly higher fees with no benefit to the consumer. 3) CHCO does disclose losses on overdraft. According to their 10-k, their net charge-offs for overdraft in 2009 were less than 3% of service revenues. Payday loss rates are 5 to 10 times this amount. In Table 2, a 92% margin assumption is used for service fees. With only 3% going to losses, that margin assumption seems very reasonable.
    Jun 22 11:09 AM | 1 Like Like |Link to Comment
  • Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
    Second, Tom Brown at bankstocks.com is a very vocal bull on bank stocks. Even he is “skeptical” about banks ability to offset the reduction of overdraft fees. He stated that banks “aren’t sure how to respond to changes to Regulation E” and “most banks will experience a meaningful revenue reduction as a result…They expressed a surprisingly high (to me, anyway) level of confidence that they’ll be able to offset the negative impact with still-undreamt-up changes and new products. I’m skeptical.”
    bankstocks.com/Article...
    Jun 22 09:00 AM | Likes Like |Link to Comment
  • Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
    We had two other items we wanted to highlight. First, we found plenty of lawsuits against CHCO for their overdraft practices. The below example appears to the exact customer Congress is seeking to protect:
    "SJ is 71 year old woman who lives alone and whose sole source of income is Social Security benefits of $565 a month. She has a checking account with City National Bank. Her account has a bounce protection plan with something called a sustained overdraft fee, in which the bank imposes a $5 per calendar day fee for every day an account is in overdraft. SJ forgot to record a check in her check register. The next check she wrote was for $124, but she had a balance of only $88.21. For an overdraft of $35.79, the bank charged a $30 NSF fee and, the next day, started charging her $5 a day for each day the account remained in negative balance. SJ did not find out about the overdraft until 11 days later when a letter arrived from the bank. SJ immediately deposited enough cash to cover the overdraft and fees. For a $35.79 loan of less than 2 weeks, the bank assessed bounce protection charges for $75, which was one-eight of SJ’s monthly income. SJ does not even recall receiving the notice that the bank allegedly sent stating it would begin imposing a $5 per day overdraft fee"
    www.consumerlaw.org/is...
    Jun 22 08:59 AM | Likes Like |Link to Comment
  • Houston American Energy Corp. Set Up for Collapse [View article]
    We find HUSA’s first quarter earnings highly disappointing. We continue to be surprised that these results and this “story” support a $350 million market cap that trades at over 100 times current annualized earnings. We continue to believe this is a highly speculative investment, especially given management’s history. We continue to recommend that investors avoid HUSA until they can provide tangible evidence of drilling success in Colombia (possibility in 2011 or 2012). We hope to be back with more (that we have recently picked up).
    May 7 05:17 PM | 2 Likes Like |Link to Comment
  • PCBC: Large Downside Remains as Shareholders Left With Little [View article]
    Not all bank stocks are rational right now. For example, STSA is offering shares at $0.20 per share. If the offering fails, the shares could go to zero (after it fails). If it succeeds, we believe the shares will not trade much above book value (our guess is that book value would be $0.22 to $0.25). But the stock is at $0.80 today. The shares of PCBC are going to be highly volatile from here. The price on the stock is highly dependent on the assumed price of the stock after the rights offering. If a buyer believes the shares trade well above book value, there is inherent value in the rights offering (the ability to buy shares at $0.20 per share).
    May 5 12:33 PM | Likes Like |Link to Comment
  • PCBC: Large Downside Remains as Shareholders Left With Little [View article]
    On the blog, someone asked us if we overlooked the value of the rights. Here was our answer:
    Did not overlook: "By our math, should the stock trade at a $990 million market cap after the capital plan, exercising the maximum rights still produces substantial losses (greater than 45% by our estimate)." always possible it trades below $0.29 also (we messed up book value calc and should be $0.26). There will be 3.3 billion shares issued at $0.20. At $0.29, 99% of shares issued would be trading with a 45% gain
    Apr 30 05:10 PM | Likes Like |Link to Comment
  • PCBC: Large Downside Remains as Shareholders Left With Little [View article]
    Did not overlook: "By our math, should the stock trade at a $990 million market cap after the capital plan, exercising the maximum rights still produces substantial losses (greater than 45% by our estimate)." always possible it trades below $0.29 also (we messed up book value calc and should be $0.26). There will be 3.3 billion shares issued at $0.20. At $0.29, 99% of shares issued would be trading with a 45% gain.
    Apr 30 09:15 AM | Likes Like |Link to Comment
  • PCBC: Large Downside Remains as Shareholders Left With Little [View article]
    One follow-up, we may have been overly conservative on our book value calculation. We assumed PCBC would recognize zero taxes on its gains, but this is an aggressive assumption given the change in control. Applying a 37% tax rate, our pro forma book value drops to $0.26 per share.
    Apr 30 08:39 AM | Likes Like |Link to Comment
  • Pacific Capital: A Violent Correction Could Be Coming [View article]
    One final comment on STSA, which highlights some of the irrational trading in bank stocks (that we see at PCBC). According to STSA’s release, Thomas H. Lee will own 19.9% of STSA on a fully converted basis or 842 million shares. This means that if the capital raise is successful, Thomas H. Lee believes there will be 4.2 BILION shares (842/19.9%) after the recap. STSA is current trading with a pro forma market cap of $5 BILLION and greater than 4 times pro forma book value (by our calculation)! We feel terrible for retail investors currently invested in names like STSA and PCBC, which we believe are in position to lose substantial sums of money.
    Apr 27 11:26 AM | Likes Like |Link to Comment
  • Pacific Capital: A Violent Correction Could Be Coming [View article]
    If STSA is unsuccessful, it potentially (or more likely) fails. Again, we believe massive dilution is a best case scenario for PCBC shares.
    Apr 27 09:44 AM | Likes Like |Link to Comment
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