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Old 03-06-2011, 05:57 AM   #61
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Sure thing Jorge. I'll look at that right now. Not.
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Old 04-16-2011, 08:21 PM   #62
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No big news, but time for an update.

As expected, CPF opened the rights offering for the $20M in shares that they're handing out to existing shareholders. Before the 1:20 reverse share split, the bank was recapitalized by several large investors at 50 cents/share or, post-split, what's now $10/share. The $20M of new shares to existing shareholders is also being handed out at that $10 price to attempt to pacify those who've already lost millions while the new investors scooped up shares at 50 cents.

Central Pacific Financial Corp. Announces Commencement of $20 Million Common Stock Rights Offering

CPF had been stubbornly floating along at $20-$25 per share while all of this paperwork was being discussed, but now that it's in effect the share price has finally followed the news and dropped to $15. I guess people didn't see it coming what with all those SEC filings and other confusing stuff.

StarAdvertiser.com - Mobile Edition

We'll probably see a wave of short covering in the next couple weeks.

Despite the accurate forecasting, I'm glad that I didn't put any money into shares or shorting or options. This stock has been irrational for far longer than I would've been solvent. There's been talk of a return to profitability in 3Q, and the call options are priced way too low for what the bank's execs claim to be able to do. The options are pretty thinly traded, too. But the dumb money sloshing around in this one seems too scary to exploit.

The more time & effort I put into this type of in-depth research, the more I come back to index funds...
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Old 05-05-2011, 10:22 AM   #63
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CPF has been hammered down pretty hard by their stock dilution.

When they first completed the recapitalization their share price was above $25, even rising above $30 a couple times in Feb. However on 12 Apr they started the $20M rights offering for shareholders of record from 17 Feb: 1.3 shares at $10/share for every share they own. Those shares can be acquired through tomorrow. As stockholders have been exercising those rights, the stock's price has steadily shrunk to open this morning at $13.10. Note that before the reverse split this would have been 65 cents for a stock that used to trade at 40x-70x that price.

So I called the short. Whoopee. I'm not even sure that a brokerage could have obtained shares for the purpose. I doubt that Jim Chanos is riding this one down.

Ironically, as the share price has dropped by over 50% since Feb, the bank's making money. Last week they declared a profit of $4.6M (18 cents/share). They've slightly reduced their nonperforming assets and they're still keeping plenty in reserve. However they've significantly reduced their borrowing from the FHLB and they're in compliance with the FDIC consent decree for the first time since they "agreed" to it in 2009.

John Dean has stepped down from chairman, although he still retains President & CEO. Some other execs have moved around and I think that he's prepping his exit for the next year or two. He'd predicted profitability by 3Q11 and he has no other reasons to stick around.

There's no fundamental reason to own the stock. The bank still can't pay dividends until the FDIC says it's OK, and the consent decree essentially cripples their competitiveness by requiring higher ratios than other Hawaii banks. They still have a lot of bad loans on the book and they're shrinking back to the Hawaii market (out of California) against other banks that are already well entrenched.

Yet if I was shorting this stock, I'd be covering right now. The rights offering will expire tomorrow and let shareholder's irrational exuberance take over again. It's quite possible that the consent decree will be lifted in the next 3-6 months, as soon as the bank proves that these profits weren't a financial-manipulation fluke. Once that happens the board will quickly establish a token dividend and keep trying to make money. Of course the bank is still relatively weak and could still be taken down by a random disaster like a summer hurricane or another severe credit crunch. This is all speculative.

The VCs who recapitalized the bank agreed to a lockup until mid-August. Although they could start dumping their shares then, I'm not sure that they have any reason to move so quickly. It's possible that John Dean has enough influence to ask them to keep the shares until he's achieved his goals, and he has the credibility to motivate them to do that. The Treasury has no reason to sell their converted TARP common shares, either. In other words I don't see much reason for continued downward pressure on the stock price.

The options market, however, has lost faith. Dec $15 calls are bid at 75 cents and could probably be purchased at $1.25. It's difficult to tell because volume is almost zilch and any significant buying would drive the price up. However even a $1.50 price on that call would turn a simple profit if the stock rose above $16.50 by 17 Dec, and that's only $3.50 away from its current price... where it was trading a month ago, before the profit report.

So buying the call options presents a bet that the bank will keep earning money and persuade the FDIC to lift the consent decree before 17 Dec. The two-year anniversary of that consent decree is 9 Dec, one week before expiry. In the meantime a call holder would have seven months to wait for the share price to return back to the $20s, where it spent most of early 2011 and nearly all of 2010. They'd be free to trade the calls at any time (although the options market is very thin), and I think there'd be enough residual time value for the calls to rise above $2/share even as late as Sep.

Tempting. Yet I think I still have better places to put my money. I certainly have safer places offering proportionally more reward per unit of risk. The truth is that I have no idea what I'd do with the profits from something like this-- the analysis is its own reward.

But if any of you testosterone-poisoned moon-shooters are looking for a target, let me know what price you pay for those calls.
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Old 05-05-2011, 04:34 PM   #64
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But if any of you testosterone-poisoned moon-shooters are looking for a target, let me know what price you pay for those calls.
Nope still in the too hard column. I'll shot for easier things to analyze like the bottom of the Las Vegas real estate market, or evaluating the prospects of using helium balloons to float windmills up to higher wind speeds.
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Old 05-05-2011, 05:25 PM   #65
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Nope still in the too hard column. I'll shot for easier things to analyze like the bottom of the Las Vegas real estate market, or evaluating the prospects of using helium balloons to float windmills up to higher wind speeds.
Well, I bet this guy is looking for VC:

High-Flying Windmills Blow Away Their Ground-Based Cousins | Alternative Energy | DISCOVER Magazine

( It's actually pretty interesting)

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Old 05-05-2011, 08:54 PM   #66
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Nope still in the too hard column. I'll shot for easier things to analyze like the bottom of the Las Vegas real estate market, or evaluating the prospects of using helium balloons to float windmills up to higher wind speeds.
Yeah, this CPF introspection has me questioning the purpose for a whole lot of financial analysis that I've been spending my time on...
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Old 05-13-2011, 12:45 AM   #67
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Wow, the FDIC just lifted the consent decree. That was pretty snappy.
Central Pacific Bank Announces Lifting of Regulatory Consent Order

CPF now gets to play by the same banking rules as the banks who haven't been screwing up for the last four years.

The consent decree has been replaced by an MOU, but although the MOU was signed last week the terms don't seem to be available until CPF files a 10Q. I'm not sure why it's done that way.

The stock closed today (Thursday) at $13.28. I bet there's a bunch of short covering on Friday morning. It'll be interesting to see what happens to the prices of the call options, too.
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Old 05-13-2011, 09:31 AM   #68
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Yeah, this CPF introspection has me questioning the purpose for a whole lot of financial analysis that I've been spending my time on...
Yup - reading this thread over the months has made me scratch my head and run for simplicity - I think the nuclear engineering brain needs something complex to challenge it.....
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Old 05-13-2011, 11:17 AM   #69
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Ah, there's the 10Q.

http://www.snl.com/Cache/11193321.pd...9&FID=11193321
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In May 2011, the members of the Board of Directors of the bank entered into a Memorandum of Understanding ... which replaced the Consent Order ... The termination of the Consent Order was effective May 11, 2011. The Bank MOU continues a number of the same requirements previously required by the Consent Order... The Bank MOU lowers the minimum leverage capital ratio that the bank is required to maintain from 10% in the Consent Order to 8% and does not mandate a minimum total risk-based capital ratio.
Quote:
In 2009, our Board of Directors suspended the payment of all cash dividends on our common stock. Our ability to pay dividends with respect to common stock is subject to obtaining approval... and is restricted until our obligations under our trust preferred securities are brought current. Additionally, our ability to pay dividends depends on our ability to obtain dividends from our bank. In addition to obtaining approval from the FDIC and DFI, Hawaii law only permits Central Pacific Bank to pay dividends out of retained earnings. Given that the bank had an accumulated deficit of $478.1 million at March 31, 2011, the bank is prohibited from paying any dividends until this deficit is eliminated. Accordingly, we do not anticipate that the bank will be permitted to pay dividends for the foreseeable future.
Quote:

(b) By September 30, 2011, the Bank shall have reduced the assets (including loans and other real estate) classified "Substandard" or "Doubtful" on the bank ' s internal loan and problem asset reports... to not more than 65 percent of Tier 1 capital and allowance for loan and lease losses.
(c) By March 31, 2012, the Bank shall have reduced the assets classified "Substandard" or "Doubtful " on the bank's internal loan and problem asset reports... to not more than 50 percent of Tier 1 capital and allowance for loan and lease losses.
The markets have been open for a couple of hours, and the share price is just fluctuating a couple percent each way. No activity in the options, either. Hard to tell that anybody's paying attention.

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I think the nuclear engineering brain needs something complex to challenge it.....
Any brick wall will do!
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Old 05-22-2011, 07:45 AM   #70
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Nords,

I'm sure other members agreed that we appreciate your in-depth analysis of a stock. I wished someone would do other stocks as well you have done with CPF. However, if a life was perfect, I'll be FIRE'd fishing and drinking cold beer instead of working two jobs so I may have a chance of ER.
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Old 05-29-2011, 10:01 AM   #71
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I wished someone would do other stocks as well you have done with CPF.
I should disclose again that I don't actually have any money invested in CPF, either short or long.

The analysis is a lot more enjoyable when you don't have anything at risk...
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Old 05-29-2011, 02:27 PM   #72
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I should disclose again that I don't actually have any money invested in CPF, either short or long.

The analysis is a lot more enjoyable when you don't have anything at risk...
That's the reason no bias on you analysis. If you were holding and wanting dump you would give an opinion of being a good stock to invest while if you want to buy, you'll give negativity opinion of the stock. Much like MF writers where they buy but gives out negative opinion in their write up.
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Old 05-31-2011, 08:51 AM   #73
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I should disclose again that I don't actually have any money invested in CPF, either short or long.

The analysis is a lot more enjoyable when you don't have anything at risk...
And, as we all know, the market can stay irrational longer than most of us can stay solvent...
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Old 06-14-2011, 08:46 PM   #74
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Not much in the news, and not much happening with CPF's stock price or revenues, but they're registering all the shares they've recently issued.

http://www.snl.com/Cache/11323554.pd...9&FID=11323554

One interesting tidbit is that the lead investors have a one-year lockup:

Quote:
We issued a large number of Common Shares to the Investors in the Private Placement and to Treasury in the TARP Exchange. The Lead Investors have certain registration rights with respect to the Common Shares held by them following a one-year lock-up period provided in their respective Investment Agreements. The Additional Investors have certain registration rights with respect to the Common Shares purchased by them in the Private Placement until six months following the completion of the Private Placement and those shares are being registered on a registration statement of which this prospectus is a part.
If I understand this paragraph correctly, then Anchorage & Carlyle will be able to start selling as soon as this December. I can't imagine why they would, but that's a choice they don't have right now. The "additional investors" will be able to sell their shares in August. Anchorage & Carlyle paid $10/share for their capital injections, while the "additional investors" were allowed to pay $10/share to buy 1.3 shares for every share they already owned.

The stock's current price is $14.13/share... at least it may be that up until August.

I expected options prices to start edging up. Assuming that back in early May Dec $15 calls were bid at 75 cents and could probably be purchased at $1.25/share, today's bid-ask spread was $1.40-$2.35. But the last time any changed hands was at $2/share, and there's only 25 contracts open. Not exactly a lot of reward for a heckuva lot of risk, especially in such a dead thinly-traded market.

The S-1 has over 10 pages of "risk factors" starting on page 9. Interesting reading.
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Old 06-15-2011, 05:23 PM   #75
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Holy cow! I haven't felt this urge to buy since I loaded up on Washington Mutual a couple years ago. History repeats itself. I'm a victim of circumstance.
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Old 06-15-2011, 05:41 PM   #76
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And... down 12% on the news. I guess people didn't want to be caught holding $14 shares that somebody else only paid $10 for. Or perhaps they were swept up in the general hysteria of driving the Dow down another 175 points.

Motley Fool weighs in with surprisingly encouraging words:
Central Pacific Financial Shares Plunged: What You Need to Know (CPF)
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Old 06-19-2011, 12:53 AM   #77
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A little more spin control with the local newspaper, but I suspect that next week will continue to be rocky.

Central Pacific optimistic - Hawaii News - Staradvertiser.com
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Old 08-10-2011, 11:00 PM   #78
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CPF came out with a modest 2Q profit at the end of last month. Nothing especially noteworthy, although execs were patting themselves on the back for making progress on reducing their bad loans.

Although the recapitalization occurred at a conversion price of $10/share, the stock has been hovering around $13 for the last six months.

During that six months they've been slowly getting healthier, focusing on local business, and creeping ever closer to the day when they'll be free of all special restrictions & oversight. When that happens they'll be able to start paying dividends again.

I should note that this last week has hammered the stock down to a Wednesday 10 Aug close of $10.36, a drop of at least 20%. We mortals can get as many shares as we want for a price within 3.5% of what the Treasury and the big-time private-equity firms paid over six months ago.

No fundamentals have changed. The bank's numbers are not going to vaporize on market volatility.

I don't see margin interest rates going up anytime soon, either.

Talk me down again.
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Old 08-10-2011, 11:19 PM   #79
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We mortals can get as many shares as we want for a price within 3.5% of what the Treasury and the big-time private-equity firms paid over six months ago.

...

Talk me down again.
My only thought (and I have read this whole thread and appreciate your research and insight into the topic) is that yes, this stock is discounted right now... But so is (almost) everything!

If it wasn't (say, two weeks ago) in your target price range in comparison to the other equities you own or would think of purchasing, then why would its drop in price make it more valuable than something else you may have considered purchasing which likely also dropped a similar amount?
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Old 08-11-2011, 07:46 AM   #80
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I should note that this last week has hammered the stock down to a Wednesday 10 Aug close of $10.36, a drop of at least 20%. We mortals can get as many shares as we want for a price within 3.5% of what the Treasury and the big-time private-equity firms paid over six months ago.
I'm gonna buy at below $10.00 to show that Joe Public got the better buy than the Treasury and the big-time private-equity firms.
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