Central Pacific Bank (trading symbol CPF)

[Nords]

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)

 

[Nords]

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

 

[Nords]

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.

 

[arebelspy]

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?

 

[Sandhog]

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.

 

[Nords]

Hard to believe it's been six months since the last update.

CPB has managed four straight quarters of profitability and dramatically raised their capital ratios. Tier 1 is up over 22%.

Central Pacific Financial Corp. Reports Fourth Consecutive Profitable Quarter

It's hypothetically possible that the MOU could be canceled within the next few months, and when that happens the bank could resume paying a dividend.

Today's share price is $13.64. That's 36% over what the Treasury took for its preferred TARP shares, and up over 30% from the August lows, but it still seems like too little reward for too much risk.

 

[Nords]

The stock price has been poking along at $13-$14 for the last couple months, but Friday it took a 4% dive below $13 on news that the Treasury is selling the last of their TARP shares.
Bailout of Central Pacific results in $60M loss - BusinessWeek
Central Pacific stock offering will net $36M for Treasury - Pacific Business News

The Treasury started with preferred, which they converted to common at $10/share. They're selling at $13.15/share. Coupled with earlier shares of TARP common stock, the Treasury has invested $135M in CPF and received back $72M.

So TARP kept the bank alive, and the bank's balance sheet looks a lot better today, and they're out from under the Treasury, but they're still not ready to pay a dividend. I wonder if they'll try to do that with the next quarterly report.

 

[Nords]

This thread is approaching its third anniversary. I've left it dangling for quite a while, but now it's finally ready to tie off.

CPB announced yesterday that the Fed has lifted their enforcement action:
Central Pacific in Hawaii Sheds Enforcement Action - American Banker Article

This means that the bank can start paying dividends again (if they want to), and can tweak their capital ratios to be more competitive. I'm sure they'll get phone calls from the FDIC or the Fed once in a while, but I think both institutions are ready to move on.

The bank is a shadow of its former self, but it's been recapitalized and management is a lot better. It's much more a local bank, and I don't think they'll be jumping back into big Mainland lending anytime soon. They've steadily cut bad loans while making a couple years of profits. The Treasury sold their TARP shares a year ago. Larry Rodriguez did his CFO part for the recapitalization and then turned over the reins. John Dean (a veteran of other bank rescues) has pretty much finished his job, too, and is slowly edging toward the exit. The share price has been crawling up along with the rest of the stock market and is around $15.65/share as I post this.

I don't know when John Dean will leave or when CPB will start paying dividends, but this could be an opportunity to buy the stock (or long-dated call options) in anticipation. It might even be a good opportunity. The bank is unlikely to screw it up by paying too much dividend, so the initial payment will be pretty small. However over the next 3-5 years they'll learn how to live with dividend payouts again, and maybe they'll be added to more indexes. But it took quite a few months for the Fed to follow the FDIC in lifting their enforcement action, and it could be a while longer before the bank feels comfortable paying a dividend. I don't have a feel for that timing but I seem to be consistently early.

Don't get me wrong-- I'm not a shareholder and I'm not even buying individual stocks these days. I've enjoyed following the analysis, but I don't have any reason to buy this stock. However CPB seems to have climbed back out of the cesspool that they dove into a few years ago, and this is a good point to secure the tracking party.

 

[dunkelblau]

I blundered into this one a few weeks after their reverse split. Looks like it bottomed at half my cost basis and has since recovered about half the drop. Here's its Texas ratio history through 3Q12--
Central Pacific Bank of Honolulu, HI | Investigative Reporting Workshop
Seems to be a slower share price recovery here compared to the other small banks that I bought into over the past couple of years. My guess is this one never reached the panic selling stage so its discount never got huge.

If you like to play high risk rebounds, one place to find candidates would be the problem banks listing on the Calculated Risk website. Be especially careful with thinly traded pink sheet names.

 

[chasesfish]

This has probably been posted before, but isn't BOH the "old" bank in Hawaii? I own their shares and am in banking and they look far more secure

 

[Nords]

One more stinger on this coda. Central Pacific Bank finally declared a dividend today:
Central Pacific Financial reports $14M Q2 profit, restores dividends - Pacific Business News

Eight cents/share on a ~$19 share price. Not much but their last dividend was 25 cents/share in April 2008... over five years ago.

I'm glad that I never invested at any stage during those years. I don't expect that I'll ever be investing here in the future, either.