I've managed to avoid buying individual stocks for over two years. Talk me down.
CPB is a Hawaii bank that's overextended itself on real estate. They've been getting hammered by their California real-estate developer's loans and home mortgages. Their capital ratios are too low, they haven't been able to sell off their toxic waste, no one wants to deposit more money with them. They haven't been able to raise capital by selling shares. They've already told the SEC that they're not going to be able to comply with a FDIC consen letter, and now instead of boosting their capital ratios they're considering "selling assets" to reduce their size from ~$5B to ~$3.5B. In the last three years their stock has dropped from over $30/share to under $1, since recovering to just under $2.
The bank's current structure was formed in late 2004 by a combination of two smaller local banks. The acquisition was somewhat controversial and unfriendly but the two eventually merged on polite terms. The acquired bank's CEO became non-exec chairman and the acquiring bank's CEO proceeded to expand into more aggressive mortgages and CA real estate. Clint Arnoldus also became a local legend by making the bank's mascot a dog with the tag line "Fiercely loyal". Arnoldus pretty much ran the bank over a cliff but I believe that local sentiment will keep shareholders and account owners from bolting. Arnoldus "retired" in 2008, as the wheels were beginning to come off, and the chairman took over as CEO. The chairman/CEO, the bank's first Hawaii-born CEO, has been presiding over the disaster.
Yesterday the board replaced that CEO with John Dean, a legendary local venture-capital investor. He has three bank turnarounds to his credit, including Silicon Valley Bank. He's taking the job at $1/year, and will no doubt announce shortly that he's bought a huge chunk of CPB stock. It's also quite possible that he'll seek additional capital from local investors, either through angel-investment clubs or venture-capital firms. It's not even unthinkable that he'll tap someone to make a Buffett-like investment for preferred stock.
Bad stuff can still happen (and probably will) but this bank is Hawaii's third-largest (for now) and other local banks have managed successful turnarounds. There are strong connections among the bank's execs, directors, and local VCs. I think that most of the people in the industry actually want the bank to succeed. But I don't know if local sentiment will impress the SEC, the FDIC, or the Fed.
I could buy shares on faith that the right people are finally running the show, but I'd rather make a more informed decision. I'm actually trying to find a quantitative reason not to invest, even though I can see that this bank might manage to turn its share price 10x in five years. For my own personal peace of mind, I need to figure out if this is a value stock or a value trap.
I know enough to read the bank's last few quarterly/annual reports and SEC filings. I think I can track down the FDIC letter's requirements.
What other websites or databases do I want to examine? What numbers or issues will be particularly critical for this turnaround?
Here are links to the news and one link to history:
Central Pacific Bank will reduce assets - Pacific Business News (Honolulu):
Central Pacific Bank changes leadership, adopts new plan... - Hawaii News Now - KGMB and KHNL Home
StarBulletin.com - Mobile Edition
StarBulletin.com - Mobile Edition
Migita named new CEO of Central Pacific Bank | starbulletin.com | Business | /2008/07/31/
Please keep in mind that I'm not trying to drum up Internet buzz for this stock. I'd rather examine a failing company and look for flaws in its turnaround efforts... otherwise I'll be a sucker in these situations for the rest of my life.
CPB is a Hawaii bank that's overextended itself on real estate. They've been getting hammered by their California real-estate developer's loans and home mortgages. Their capital ratios are too low, they haven't been able to sell off their toxic waste, no one wants to deposit more money with them. They haven't been able to raise capital by selling shares. They've already told the SEC that they're not going to be able to comply with a FDIC consen letter, and now instead of boosting their capital ratios they're considering "selling assets" to reduce their size from ~$5B to ~$3.5B. In the last three years their stock has dropped from over $30/share to under $1, since recovering to just under $2.
The bank's current structure was formed in late 2004 by a combination of two smaller local banks. The acquisition was somewhat controversial and unfriendly but the two eventually merged on polite terms. The acquired bank's CEO became non-exec chairman and the acquiring bank's CEO proceeded to expand into more aggressive mortgages and CA real estate. Clint Arnoldus also became a local legend by making the bank's mascot a dog with the tag line "Fiercely loyal". Arnoldus pretty much ran the bank over a cliff but I believe that local sentiment will keep shareholders and account owners from bolting. Arnoldus "retired" in 2008, as the wheels were beginning to come off, and the chairman took over as CEO. The chairman/CEO, the bank's first Hawaii-born CEO, has been presiding over the disaster.
Yesterday the board replaced that CEO with John Dean, a legendary local venture-capital investor. He has three bank turnarounds to his credit, including Silicon Valley Bank. He's taking the job at $1/year, and will no doubt announce shortly that he's bought a huge chunk of CPB stock. It's also quite possible that he'll seek additional capital from local investors, either through angel-investment clubs or venture-capital firms. It's not even unthinkable that he'll tap someone to make a Buffett-like investment for preferred stock.
Bad stuff can still happen (and probably will) but this bank is Hawaii's third-largest (for now) and other local banks have managed successful turnarounds. There are strong connections among the bank's execs, directors, and local VCs. I think that most of the people in the industry actually want the bank to succeed. But I don't know if local sentiment will impress the SEC, the FDIC, or the Fed.
I could buy shares on faith that the right people are finally running the show, but I'd rather make a more informed decision. I'm actually trying to find a quantitative reason not to invest, even though I can see that this bank might manage to turn its share price 10x in five years. For my own personal peace of mind, I need to figure out if this is a value stock or a value trap.
I know enough to read the bank's last few quarterly/annual reports and SEC filings. I think I can track down the FDIC letter's requirements.
What other websites or databases do I want to examine? What numbers or issues will be particularly critical for this turnaround?
Here are links to the news and one link to history:
Central Pacific Bank will reduce assets - Pacific Business News (Honolulu):
Central Pacific Bank changes leadership, adopts new plan... - Hawaii News Now - KGMB and KHNL Home
StarBulletin.com - Mobile Edition
StarBulletin.com - Mobile Edition
Migita named new CEO of Central Pacific Bank | starbulletin.com | Business | /2008/07/31/
Please keep in mind that I'm not trying to drum up Internet buzz for this stock. I'd rather examine a failing company and look for flaws in its turnaround efforts... otherwise I'll be a sucker in these situations for the rest of my life.