Ballinvarosig Investors Posted April 7, 2011 Share Posted April 7, 2011 Most recent annual report is here, there appears to be a lot of promise with this one. Using a five year average to weed out the turds. Return on assets - 1.9% Return on equity - 21% Net interest rate margin - 5% Efficiency ratio - 43% The dividend currently stands at 2.75%, is easily covered by earnings and has increased every time in the last 20 years. The bad debt situation appears to have plateaued, as real estate owned and loss provisions are levelling out. It ain't cheap (15x free cash flow) - but it is quality. Thoughts on this, or similar alternatives? Anyone who mentions Wells Fargo will be sent to the back of the classrom ;D Link to comment Share on other sites More sharing options...
bsned2 Posted September 2, 2014 Share Posted September 2, 2014 As a newbie, I am going through all the old investment ideas and trying to learn. A lot of the early ones have no replies, like this one. This turned out to be a bad investment. I wonder if anybody wants to give me a SOTP guess as to why? (I'm going to go through some of their 10K's to see if I can figure it out.) Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted September 2, 2014 Share Posted September 2, 2014 Without digging too deep, they are a region bank headquartered in California (so you can assume Cali and the adjacent states would represent their exposure). They only had ~1.75% loan loss reserve (this is money already set aside to offset losses - otherwise current earnings must pay off the losses (from write-offs) in the current period). non-performing loans were 0.75% of assets at the time (a small gap between LLR and NPL given this was year-end 2010). My guess would be: - New banking regulations have made operating expenses at mid-size region banks increase while large and small banks are seeing a decrease - LLR likely decreased as NPL increased over 2011 - 2013. This would require re-capitalizing the LLR fund which comes out of current period earnings. - Deposits retreated between 2009 to 2010 (common for regional banks - terrible timing considering they are recapitalizing!!). Deposits couldn't have decreased at a worse time as the bank is re-capitalizing at that point to decrease leverage. You are increasing your liability yield, decreasing your asset yield, and decreasing your % of income-generating assets (from NPL increase). - Possible dilution but I don't feel like checking. Was this a TARP bank? You not only need to consider the geographic location of a bank's loan book but the type of loans as well. Credit is dried up and there is not appetite for high risk loans in 2010. WestAmerica Bancorp had ~50% of their loan book in commercial RE or construction loans! Construction loans ended up being worth pennies on the dollar for most banks and commercial RE got hit the hardest and took the longest to recover. Their County Bank purchase in 2009 from the FDIC is likely the only reason they have remained flat. The best capitalized banks in 2009/2010 have had the worst returns (regulated the good to oblivion). Just my two cents Link to comment Share on other sites More sharing options...
Guest wellmont Posted September 2, 2014 Share Posted September 2, 2014 it wasn't cheap when it was recommended. Link to comment Share on other sites More sharing options...
Junto Posted September 3, 2014 Share Posted September 3, 2014 it wasn't cheap when it was recommended. +1 don't over analyze Link to comment Share on other sites More sharing options...
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