Central Pacific Bank (trading symbol CPF)

[Nords]

Kalihi Product

John Dean, is that you?

I'm always amazed at what inspires a new member's first post...

 

[Kalihi Product]

I am not John Dean

Yes, this is my first post ever to a blog. And yes, the prior comments did motivate me to make a posting.

I think that CPB serves a niche in my community. And, I think that having the choice of 3rd (or 4th if you count ASB) bank is good for Hawaii for all of us.

I also believe in fixing things that are broken.

As such, I hope that CPB gets back on its feet.

 

[Purron]

Yes, this is my first post ever to a blog. And yes, the prior comments did motivate me to make a posting.

I think that CPB serves a niche in my community. And, I think that having the choice of 3rd (or 4th if you count ASB) bank is good for Hawaii for all of us.

I also believe in fixing things that are broken.

As such, I hope that CPB gets back on its feet.

Clearly, CPB has served your community for many years. However, the biggest concern of the FDIC is protecting the insurance fund. 2010 is likely to have the largest number of bank failures in many years. This poses a thread to the entire financial services industry.

While I understand your desire to keep this bank alive to provide service to the community and a healthy amount of competition, the sad reality is I don't think these will be primary factors in the decision.

The biggest factor should be, and perhaps is, the chance this bank will rebuild capital and return to profitability. Another major factor in this case is the interest Senator Inouye has in this bank. He's an investor, was involved in the formation of the bank, and has used his power on Capitol Hill to get government support and call off the "FDIC hounds".

There are struggling community banks in my area that aren't so lucky to have a friend on the Hill. It will be interesting to see how this all unfolds.

 

[Texas Proud]

It seems like the FDIC is in the process of trying to close as many smaller banks as they can.... if a bank does not get to 12% equity it has a chance of being closed in the future...

Don't know what this bank has right now.... but I bet it will be on the short list to be closed if the dems lose congress...

 

[survivor1998]

Thanks. Since they're already on the hook with the consent decree, looks like FDIC could let this drag on indefinitely unless CPB does something to piss them off.


It's my understanding that Honobob is no longer able to post to this board. But he's stalking HawaiiThreads.com and posting to... the real estate threads. He's well-behaved (so far) but it'll be interesting to see if he's really turned over a new leaf or if it's just deja vu all over again.


I think they just have to make people (and possibly an index fund or two) feel good about them. A reverse stock split, a profitable quarter... hope... but you're right that the company is going to be crippled until they get the FDIC off their backs. I see no fundamental reason for the stock to leave its $2-$3 share price until they restore profits & dividends, which could take another year or two.

Looks like John Dean has already decided to hit the road shows:
Bank's chief will go on tour to raise cash - Hawaii Business - Staradvertiser.com

I think a recap investment by a VC or a private equity fund is exactly the type of "hope" he's selling.

Another issue, that I'm still trying to sort out for another thread-starter, is just how much more money I need to chase. I certainly don't need the risk, and I don't have any spending plans for prospective cap gains. There's way more curiosity here than commitment.

CPF seems to be a speculative stock at this point. It would be a high risk to buy it. According to the S & P Report and looking at their fundamentals: They are down to $1.47 per share; Their losses have increased 120% so far in 2010 in comparison to 2009. Profit margin is a -219% Earnings per share is -236% If you would have invested $10K five yrs ago - the value of your money would be $ 464.00. However, their 2nd Quarterly report is due July 30th. Losses increasing for 2010 = many more foreclosed homes that they are not advertising. They don't want to flood the market so they auction a few at a time which avoids "fear" and keeps the values up for the banks and RE agents.

 

[Nords]

CPF seems to be a speculative stock at this point. It would be a high risk to buy it. According to the S & P Report and looking at their fundamentals: They are down to $1.47 per share; Their losses have increased 120% so far in 2010 in comparison to 2009. Profit margin is a -219% Earnings per share is -236% If you would have invested $10K five yrs ago - the value of your money would be $ 464.00. However, their 2nd Quarterly report is due July 30th. Losses increasing for 2010 = many more foreclosed homes that they are not advertising. They don't want to flood the market so they auction a few at a time which avoids "fear" and keeps the values up for the banks and RE agents.

I think it's difficult to use trailing numbers to analyze a potential turnaround stock.

I also don't think they have a huge foreclosure inventory, especially not compared to the rest of the Hawaii banks. Most of CPB's financial mess occurred with Mainland developers, not local Hawaii homeowners.

 

[Kalihi Product]

We will soon find out

I think it's difficult to use trailing numbers to analyze a potential turnaround stock.

I also don't think they have a huge foreclosure inventory, especially not compared to the rest of the Hawaii banks. Most of CPB's financial mess occurred with Mainland developers, not local Hawaii homeowners.

I am sure most of the foreclosure inventory was aggressvely written down coming into this reporting season. The numbers were too huge. I think the foreclosure portfolio was bled dry. Goodwill was also written down in the 1st qtr of 2010.

So da guy needs to recap the bank...... makes sense to writedown as much as possible (did not happen on your watch, so do it), to try to set up "return to profitablity" scenario which will attract private equity money. Is it going to be this quarter? Next quarter? Even if they show a "profit," it could say just 10 buck. Could be years before show anything significant.

This my best guess scenario as to what CPB is trying to do. Pure spec. Nice movie story? CPB is announcing earnings on Friday. We will see.

 

[Nords]

Intriguing market behavior today.

The 2Q results come out Friday before the market open (Central Pacific Financial Corp. Announces Second Quarter 2010 Earnings Release and Conference Call). No other press releases or news items have hit the media.

Today (Tuesday) CPF traded up a whopping 16 cents (+10%) on significantly higher volume. Of course that's only about a million bucks of total trading activity.

Not only did the shares trade higher, but their Dec10 $2.50 call options have come back to life. After being dead for months, with bids at 10 cents and the last trade at 15 cents, today someone bought 30 contracts at 20 cents. Granted that's only $600 bucks, and the stock would have to shoot up to over $2.70/share to be worth the exercise, but someone must be planning to flip a few calls.

I think the whispers are starting to leak out. Should be interesting to see what everyone's getting so excited about.

 

[Purron]

Oh, do keep us posted Nords. This is fastinating - well to me anyway 'cause I'm just nerdy that way.

 

[Nords]

Oh, do keep us posted Nords. This is fastinating - well to me anyway 'cause I'm just nerdy that way.

I like watching train wrecks too!

 

[Nords]

Up another 11 cents on Wednesday, a total of 18% in two trading days...

 

[Nords]

Thursday's trading actually brought the shares back down to $1.65, so now I'm beginning to doubt that word leaked out on Mon/Tue/Wed. Interesting example of hope (at the beginning of the week) triumphing over reality. The share volume was certainly high enough to make a tech analyst happy.

Central Pacific Financial Corp. Reports Second Quarter 2010 Results

CPF's 2Q results can be summarized as "sucks less than before". Of course they're running out of things to write off (goodwill) and they're still stuck with $467M in non-performing loans. This is nearly double last year's bad news but it looks like this number peaked last quarter, so perhaps the worst is behind them. Tier1 and total capital ratios improved by a few decimal points. While the patient still needs a huge transfusion, at least the arterial hemorrhaging has subsided.

Other "good news" is that CPB appears to be extracting itself from the CA real estate market. Non-performing construction/development loans there have been getting sold off for some time and the bank now has more bad loans in Hawaii than in CA. Of course they've been "getting rid" of these loans by selling them for pennies on the dollar or completely writing them off, so it's another pyrrhic victory.

It looks like the combination of "losing less" and "improving ratios" (however slight) is a step in the right direction that would at least persuade the FDIC not to take over the bank. Of course their competitiveness is still crippled by the consent decree and the $130M of TARP money. I think it'd be extremely difficult to persuade investors to chip in $200M to recapitalize the bank when $130M would immediately go back to the federal govt. Any economic shock, let alone the lowest interest rates in 40 years, could still knock them off the perch. I suspect that there'll be at least one or two steps backward over the next year.

CPF is doing a conference call at 1 PM ET (two hours after this post). There doesn't seem to be any strong market reaction to their quarterly numbers, and it's hard to imagine that a phone call will change that.

I can't see any fundamental reason to invest until the consent decree is cleared and the TARP money is getting paid back. Call options don't seem to make much sense with a minimum $2.50 strike. I'm even ambivalent about preferred shares.

 

[Kalihi Product]

I listened to the conference call and read about CPB in Saturday's paper. So Dean is going to wait to the end of this year or next to recapitalize. Too much skepticilsm and probably too much dilution if he does it now.

The bank has positive cash flow and needs to improve their operating numbers for the 3rd quarter. If they do, we may see some fireworks.

 

[Nords]

I listened to the conference call and read about CPB in Saturday's paper. So Dean is going to wait to the end of this year or next to recapitalize. Too much skepticilsm and probably too much dilution if he does it now.

F'gosh sakes, the guy's a partner in a venture capital firm (Startup Capital Ventures - Our Team) and I think he knows that his only job is fundraising. He was pretty clear back in May that he was going on a rainmaker's road show, but I think he's been told by his audiences that there'll no VC money until the TARP's off their balance sheet. He may be "waiting" for quite a while.

Cash flow is always appreciated but as ClifP has pointed out, I think the consent decree is crippling their competitiveness. Getting rid of that will evoke a nice aerial display, but they're probably obligated to at least start complying with it before they can jawbone the FDIC about getting rid of it.

I still can't figure out whether Dean took this job out of genius or hubris. He probably figures it's an irresistible challenge and he has nothing to lose, but the fact that he has nothing at risk makes me question his commitment. Buying 500,000 shares on the open market from his personal funds would certainly make a fundraiser's statement.

 

[Kalihi Product]

Interesting comment. I think it takes a combination of genious or hubris to do this jon. You can see Dean's game plan slowly unwinding. It is going to take good timing, patience and luck to get pull it off.

Don't know if his only job is fund raising. He seems to have a lot of experience with banks.

 

[Nords]

No apparent significant changes in CPF's financial position, although their name is showing up in a few West-Coast lawsuits with developers and real-estate investors. The stock closed today at $1.49/share. CPF options are almost dead-- very few trades in the last few months and no call contracts offered past December.

However John Dean has persuaded Larry Rodriguez, another local financial legend, to come out of retirement to take the CFO reins:
http://pacific.bizjournals.com/pacific/stories/2010/09/20/editorial2.html?b=1284955200^3964051

In this situation it seems to be more about why some prefer to never retire (http://www.early-retirement.org/forums/f28/wsj-why-rich-people-never-retire-52305.html). However a team of all-stars is in place, ready to work their magic as soon as they recapitalize the bank and get out from under the consent decree.

I suspect that the stock will rise 10-20% in the next few months as they get ready to report quarterly numbers. Maybe it'll rise again next year when the annual report approaches. But it may also just incite waves of selling on the news as long-term shareholders give up.

This seems to be a classic case of a turnaround situation with great potential. The only issue is assessing the execution risk and estimating the time it'll take to work it out...

 

[FreeAtLast]

I bought Bank of Hawaii BOH earlier this year. The stock ran up 10% in a few days ,I decided to sell as my gain was over $500.

 

[Nords]

Heh-- Carlyle might be sniffing around.

FT.com print article

The Carlyle Group is said to have emerged as a leading private equity firm interested in investing in Central Pacific Financial (NYSE:CPF), two industry sources told dealReporter. [...]
Carlyle’s interest alone is not enough to seal a deal because Central Pacific needs several investors for regulatory and tax reasons, sources said. [...]
A recapitalization deal has “lots of moving parts,” said a source briefed on the Central Pacific talks, who added that several private equity firms are considering investing in the bank. Estimates for how much capital the bank needs to raise range from USD 200m to USD 500m, the source said.
A spokesperson for Central Pacific said he was unable to comment ahead of the institution’s 3Q10 earnings release on 1 November. A spokesperson for Washington DC-based Carlyle declined to comment.

 

[Nords]

CPF reported 3Q results on Tuesday. The moment the press release came out the stock gapped down from $1.50/share to $1.20 but has since recovered to $1.45.

Central Pacific Financial Corp. Reports Third Quarter 2010 Results

The good news is that they lost "only" $72.5M, or $2.46/share, compared to last year's loss of $183M, or $6.38/share. Unfortunately last quarter they had lost only $16M ($0.60/share) so the quarterly trend is discouraging. The fine print also noted that last year they'd taken $111M of the $183M in one-time charges, so there's really been no progress except to sell off bad loans and to shrink the deposit base.

Disturbingly:

The Company's Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios were 7.23%, 8.57%, and 4.39%, respectively, compared to 9.08%, 10.41%, and 6.07%, respectively, at June 30, 2010. The declines in the Company's capital ratios are largely the result of the previously mentioned increase in the allowance for loan and lease losses.

This happened while CPF is under an FDIC consent decree to raise those first two numbers to at least 10% and 12%. They are not moving in that direction and have not yet reached compliance since the decree was signed last December-- over 10 months. However they've just about finished selling off their California real estate developer's loans.

Also disturbingly:
Bank loses money, but for good reasons | Pacific Business News

John C. Dean, who was brought in last March as executive chairman to turn things around at Hawaii’s fourth-largest bank, said earnings are going to “bounce around” as the bank works to improve its position.
“We certainly have a plan in place to get to profitability next year,” he told PBN. “We looked at it as a very good quarter in the sense of continuing to improve the overall quality of the assets.”
So, while the bank lost more than expected last quarter, it was for good reasons, one analyst noted.

But perhaps salvation is at hand, although you can't tell from the share price:

The Company also announced that it has been working with a private equity investor and believes it is close to agreeing with the investor on the material terms for an investment of approximately $98 million of a contemplated $325 million capital raise and is in the process of seeking to finalize an agreement for such an investment by the end of the week. The Company is also in negotiations with another private equity investor for an investment of a similar amount. [Investor] conditions are expected to include, among others, investments by additional investors for the balance of the $325 million capital raise, exchange of the [$135M of] TARP preferred stock for common stock on terms agreeable to the investors and agreed upon by the U.S. Department of Treasury, regulatory approvals,... and other conditions. The $98 million investment would represent 24.9% of the common equity interests of the Company (assuming the exchange of the TARP preferred stock on terms consistent with such agreement). The company also plans to conduct a $20 million share rights offering after the closing of the capital raise that will allow existing shareholders or their transferees to purchase common shares at the same purchase price as the other investors.

I'm not a highly-paid banking exec myself, let alone an experienced Silicon Valley VC with several bank rescues under my belt, so I'm not sure how to spin this. But it seems to me that the time to have arranged that $325M news would have been BEFORE the 3Q press release. This report appears to be the semantic equivalent of "We've been losing the game every one of the last three quarters but we're going to make it up before the final whistle!" or at least "Well, we don't have any good news here, so let's talk about what might happen next month!" If I was [-]Carlyle[/-] the fabled private equity investor, I'd be looking at the 3Q numbers and planning to really cram these guys down for my money. But presumably John Dean is happy with the terms he's about to be force-fed, because he's probably looking nervously over his shoulder to see if the FDIC is lurking there with the Grim Reaper.

Presumably I could have bought shares on the news ($1.20) and earned 20% in two days for my fortitude. But while the "right people" may be in place, I'm not seeing the numbers. I think the only thing holding back the FDIC is the challenge of [-]Senator Inouye[/-] "too big to pawn off on Bank of Hawaii".

But hey, it's not all grim news:
Central Pacific Bank Named SBA Lender of the Year | Hawaii Reporter

 

[Nords]

Looks like the private-equity investors are pulling it together after all:
Central Pacific Financial Plans to Raise $325 Million in New Capital

CPF, parent company of Central Pacific Bank (CPB) announced today that it has entered into definitive agreements with The Carlyle Group and Anchorage Capital Group, L.L.C. (collectively, the "Lead Investors") pursuant to which each Lead Investor agreed to invest approximately $98 million in common stock of the Company. This investment is part of an expected aggregate $325 million capital raise by the Company from institutional and other investors ("Investors"). The investment and related transactions, which were unanimously approved by the Company's Board of Directors, are subject to the remaining $130 million of capital being raised, regulatory approvals and other conditions. The Company also plans to conduct a $20 million rights offering after the closing of the capital raise that will allow current shareholders or their transferees to purchase shares of common stock at the same purchase price per share as the Investors.

Each of The Carlyle Group and funds managed by Anchorage Capital Group, L.L.C. will own 24.9% of the common stock of the Company prior to giving effect to the rights offering. The shares of common stock will be purchased at $0.75 per share for an aggregate price of $195 million. Each Lead Investor shall be entitled to one Board seat on each of the Company and Bank boards of directors.
[...]
Closing of each of the Lead Investor's investment is conditioned on, among other things, receipt of requisite regulatory approvals and the Company's receipt of approval from the NYSE to issue the common stock in the capital raise in reliance on the shareholder approval exception set forth in Section 312.05 of the NYSE listed company manual (or, in the event that the NYSE does not provide such approval, receipt of shareholder approval of the issuance of common stock in the capital raise). In addition, the closing of each Lead Investor's investment is conditioned upon the Company raising the remaining $130 million from other investors and exchanging its TARP preferred stock for common stock and amending its TARP warrant on specified terms. Prior to closing, the Company also intends to undertake a one-for-twenty reverse stock split, which was previously approved by shareholders at the company's annual meeting held on May 24, 2010.

Closing of the capital raise is expected in the first quarter of 2011. CPF's current management team is expected to remain in place.

The press release came out after the markets closed, and CPF's stock closed today (Thursday) at $1.48/share. (I can't tell if CPF trades aftermarket.) As I understand this press release, the private equity firms think it's really worth 75 cents/share. However every share purchased between now and the closing of this capital raise entitles a shareholder to purchase some portion of a $20M pool of 75-cent shares. 26.7M more shares won't cover the existing shareholders very much when there are already 30,364,680 shares outstanding, but it's effectively a 7-for-8 warrant with a 75-cent strike.

I wonder what share price CPF will open at tomorrow...

Oh, and this isn't a done deal yet. They still have to cover another $130M worth of capital, which will probably mean at least two more investors since they're limited to $98M/25% ownership. Surely Carlyle and Anchorage can rope in a couple more.

There's still the matter of $130M of TARP shares, upon which CPF has been forbidden by FDIC consent decree to pay dividends. Somehow they have to persuade the FDIC to turn those preferred shares into common and then allow the company to restart dividends. Since various investors are ponying up $325M for the privilege, I guess the FDIC will decide that it beats the heck out of putting a bigger burden on its insurance fund.

But $325M injection or not, there's still nothing preventing the FDIC from taking over the bank on any Friday night.

I'm not sure by what analytical process the current shareholders have been valuing CPF st $1.20-$1.50/share, especially for a company that lost over $2/share last quarter and has a book value of -$1.63 (that's a negative number). This rudimentary calculation would appear to make CPF's closing share price of $1.48 a triumph of emotional hope over rational assessment. The interesting question is what CPF's share price will gravitate back toward after spiking down toward 75 cents.

Hypothetically on Friday morning someone with more cojones than cortex could stock up on cheap shares and wait for the price to drift back up...

Fearful? or greedy?

 

[DblDoc]

Hypothetically on Friday morning someone with more cojones than cortex could stock up on cheap shares and wait for the price to drift back up...

Or Friday evening the FDIC shows up with some Canadian bankers in tow...

DD

 

[Nords]

Not much new to report.

No new news on the private equity fundraising, which is still contingent on the federal govt agreeing to convert their TARP shares to common. Maybe even to the govt this might be perceived as a dumb idea. They'd hypothetically get some additional warrants at 75 cents but I don't know how the FDIC would treat that on the Monday morning after a Friday-night takeover.

CPB hired a "chief administrative officer" from Startup Capital Ventures, which is the same VC fund John Dean came from. One by one he seems to be stripping the SCV bench and throwing them into the game.

Then there's the short interest:
Investment Research - Zacks.com

Central Pacific Financial (NYSE:CPF) has a short interest ratio of 24.4 based on average daily volume of 160,000 shares and 3.9 million shares short. That equates to 12.9% of the 30.4 million shares outstanding.

I'm not sure what benefit a short sees to holding on to $1.40 shares in the hope that they'll cave to 75 cents. At this volume, it seems like they're setting themselves up for one hellacious short squeeze.

 

[Nords]

Looks like the Treasury's playing ball, and the price is dropping:
http://www.snl.com/irweblinkx/file.aspx?IID=100213&FID=10519449

Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank (CPB), today announced that the U.S. Treasury agreed to exchange the Treasury's TARP preferred stock, having an aggregate liquidation preference of $135 million, plus accrued and unpaid dividends, for CPF common stock valued at approximately 37.5% of the sum of the original par amount of the TARP preferred stock plus accrued and unpaid dividends. The number of shares of CPF common stock to be issued in the exchange is based on a price of the lesser of $0.50 per share and the lowest price per share issued in CPF's recapitalization plan. The Treasury's consent to an exchange on the terms described above is subject to the execution of a definitive exchange agreement and certain other terms and conditions.

CPF previously reported that the conditions of the definitive agreements it entered into with two lead investors on November 4, 2010, included the exchange of TARP preferred stock for common stock at a value of 25% of the aggregate liquidation preference of the TARP preferred stock and 100% of the amount of accrued and unpaid dividends and a price of $0.75 per share. Based on the terms of the TARP exchange agreed to by the Treasury, CPF amended the agreements with its two lead investors to reduce the purchase price of common stock from $0.75 per share to $0.50 per share, resulting in an investment amount of approximately $98.6 million by each investor.

"We are pleased to have accomplished a key component of our company's capital raising initiative," said John C. Dean, Executive Chairman of CPF and CPB. "We believe that moving forward with new capital is in the best interest of all of our shareholders, employees, and customers."

The closing of the recapitalization transaction is subject to raising the remaining $127.8 million of the $325.0 million capital raising plan, the exchange of the TARP preferred stock, regulatory approvals, and other conditions.

 

[Nords]

Looks like they've found the money:
Central Pacific Financial Corp.'s Private Placement is Fully Subscribed

Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank (CPB), today announced that it has completed another critical step in its recapitalization transaction as investors have agreed to purchase CPF common stock totaling approximately $127.8 million in its private placement through a combination of commitments and signed subscription agreements. This amount includes investments by certain directors and officers of the company and, together with the $98.6 million to be purchased by each of an affiliate of The Carlyle Group and an affiliate of Anchorage Capital Group, L.L.C., CPF's two lead investors, will provide a total of $325.0 million that CPF is seeking as part of its capital raising plan. CPF announced previously that the U.S. Treasury has agreed to the terms of the exchange of the TARP preferred stock subject to certain terms and conditions and the execution of a definitive exchange agreement.

It's hard to tell who "certain directors and officers" may be, but John Dean is general partner of Startup Capital Ventures and a couple of his newer CPB staff members have also worked at CPB. Maybe the 8K has to provide more detail or we'll end up waiting for the final filing documents.

Note that the conversion price of the recapitalization investors has gone down to 50 cents a share. Meanwhile the stock's trading price has gone from ~$1.40/share before the news to $1.52 before the holiday. I still don't get it.

 

[Nords]

Again, I'm not invested in this stock and I don't even think it's worth the call options, but I'm genuinely confused by the behavior of the share price.

Before the recapitalization announcement hit the streets, the stock price was languishing around $1.40/share. I didn't think that price made much sense while CPF was running around planning to recapitalize at 75 cents a share, and it made even less sense for 50 cents/share.

In the month after the recapitalization announcement, the stock price took off and peaked at about $2.50/share, then sagged back down to $1.80. I suspect a good bit of this was short covering, but we won't know for sure until the January short ratios are out. It's possible that some of this was short-term technical trading, too, for a piece of that 75% price swing. I'm pretty sure it wasn't based on any changes in fundamental valuations.

But this announcement came out yesterday, of course after the market close:
Central Pacific Financial Corp. Plans for Reverse Stock Split and Announces Preliminary Record Date for Rights Offering

As previously announced and as part of the recapitalization, the Company intends to conduct a rights offering after the closing of the private placement and the exchange that will allow current shareholders or their transferees to purchase up to $20 million of common stock at the same purchase price per share as paid by the investors in the private placement. The record date for the rights offering, which will be after the effectiveness of the reverse stock split, will be the business day prior to the closing of the private placement and the exchange. Because closing depends upon the timing of satisfaction of all remaining closing conditions, the exact date cannot be determined at this time. As a result, the Company will issue a press release with the applicable record date, expiration date and subscription ratio when that information is known, as well as the date on which the Company expects the certificates evidencing the rights to be mailed.

That might be another reason for the demand to own shares in a crippled bank. As I understand it, people who are shareholders before this (unknown) record date will be able to purchase some (unknown) allotment of shares for 50 cents. So hypothetically a new investor might be willing to pay $1.80/share in the hopes of being able to pay an additional 50 cents/share for a cost basis of $1.15/share which they could then sell at... $1.80/share? For a quick 50% profit. If I was the bank then I'd put some sort of lockup on those shares to prevent just this sort of flipping.

Or maybe not. If the bank is selling bunches of shares to private equity and converting the U.S. govt's TARP shares to common at 50 cents, then why would the share price stay so high? Shouldn't it go down to something like, oh, I dunno, 50 cents?!?

Let me point out that the bank's savior, John Dean, has rescued banks several times before. His last one was Silicon Valley Bank in the 1990s, and that situation might not bear any resemblance to this one. I just don't know if this latest recapitalization was one of his earlier rescue methods. Dean is also a general partner of Startup Capital Ventures, a VC with plenty of funds and friendly investors to tap for the last bits & pieces of this recap. IIRC he's also brought 2-3 SCV partners/employees onto the CPB payroll to help with this rescue.

Soon after this recapitalization closes, I expect the FDIC and other banking authorities to say "Oh, good, all better!" and cancel their consent decree. CPB will eventually start paying a dividend again, and the federal govt will gradually sell off its TARP common stock. Once this sequence of events begins, I expect that the share price will take off again-- completely uncoupled from the reality of revenues (let alone profits) but certainly quite profitable for those who are rushing in where angels fear to tread.

Has anyone seen this situation before? What am I missing?