Using Veritas to Construct the "Per…

29-04-2017 Hits:84640 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:79104 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:78949 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:83437 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80001 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:82308 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:53284 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:81315 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:81315 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:81125 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:86979 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:84994 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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I received this message the other day through the messaging system in my site:

"I read your article from early Sept about the next four banks likely to fail. I writing to let you know we filed our thrid quarter call report but more importantly, we are filing our earnings release today, It should be out there within the hour. I know your article was based on call report data and you can't base your analysis on other factors that you don't have, but I think the title of your article was a stetch and way too provacative. It probably helps sell your services but is a great diservice to those struggling daily to clean up the mess. I hope after your read the new informtion you'll write an article closer to reality and retract anything you may have said that isn't likely. Thanks, Very Interested Party, United Security Banchares "UBFO""

I removed his identity since he contacted me privately and didn't expressly communicate he wanted his opinion published. He is far from a disinterested party though, and is referring to an article that I wrote on the Doo Doo banks in September, "More Doo Doo Banks Available to the Public". For those of you who do not know, I used this term to coin the list of banks that I predicted may hit the fan in the spring of 2008 - "see 32 banks in deep doo-doo". If one peruses the list of the Who's Who in Doo Doo, one can see that it appears that I had a valid point as many of those banks collapsed or had to be rescued. In re-reading the article, I don't think the title of the article was a stretch at all, nor too provocative, considering the path of previous banks with similar metrics have taken. In addition, I never said these banks were likely to fail. They are in trouble, though. I understand his point, but I do not agree with it. I am sure if he viewed this from outside the bank as compared to inside, he would consider his bank's numbers to be precarious as well. 

Now, let it be known that I am a disinterested party here. I simply scanned the numbers for a list of  banks that appear to have significant credit issues. I also do not have a position in this company, long or short, thus I feel I am more likely to be objective than the person who wrote the note above. Ironically, the bank who was to be the subject of the forensic analysis turned out to be one of the healthiest of the bunch (still unhealthy, but relatively healthier than many in the group it was presented with), thus at this time we have postponed moving forward with it.

Alas, to be fair I did have the guys go over the latest numbers as per this reader's request and this is what we concluded:

As of the most recent quarter, the company came into profits of $0.7 mn in 3Q09 against a loss of $1.3 mn in 3Q08 primarily because of reduced provisioning  for loan losses . Provision for loan losses were 0.4 mn in 3Q09 against 6.4 mn in 3Q08. The bank’s net interest income declined 3.6% (y-o-y), non-interest income declined 36% (y-o-y) and non-interest expense increased 31% (y-o-y). Below is a trend matrix for the various credit ratios.

Credit ratios

4Q08

1Q09

2Q09

3Q09

 

     

 

Gross charge-off rate (annualized)

2.4%

1.9%

1.1%

1.4%

Net charge-off rate (annualized)

2.4%

1.8%

1.0%

1.4%

Provisioning rate (annualized)

1.7%

1.0%

5.0%

0.3%

 

     

 

NPL as % of total loans

8.24%

9.71%

10.25%

10.35%

Other real estate owned as % of total loans

5.49%

5.37%

6.76%

6.53%

NPA as % of total loans

13.73%

15.08%

17.01%

16.88%

 

     

 

90 days past due as % of total loans

0.15%

0.11%

0.00%

0.12%

30 days past due as % of total loans

0.52%

0.87%

1.06%

1.37%

 

     

 

Allowance for credit losses as % total loans

2.4%

2.2%

2.9%

2.7%

 

     

 

Texas ratio

96.0%

104.6%

116.6%

111.3%

 

Following are our key observations –

  1. In 3Q09, the provisioning rate reduced to 0.3% of total loans from 5.0% in 2Q09 while the gross charge off rate increased to 1.4% from 1.1% in 2Q09. Consequently, the allowance for credit losses shrunk to 2.7% of total loans from 2.9%
  2. While the allowance for credit losses declined owing to lower provisioning, the  non accrual loans, 90 days past due loans and 30 days past due loans all continued to increase. Non accrual loans increased to 10.35% from 10.25% while the 90 days past due loans increased from 0% to 0.12%. The 30 days past due loans saw the maximum jump reaching 1.37% of total loans from 1.06%. The excess of NPLs over allowance increased to 7.64% of the total loans from 7.36%
  3. Although the non performing assets declined from 17.01% of total loans to 16.88%, the decline was owing to decline in other real estate assets which were disposed off by the company, largely at a loss. Management cites the sale of property worth $9.5 million at loss of 4.8% in 3Q09. The Management also says that post 3Q09, the bank will sell 21.6 mn of properties at a loss of 1.7%. In 3Q09, the Bank’s write downs on foreclosed properties and expenses on foreclosed properties increased by 0.8 mn and 0.9 mn, respectively. This is actually a very interesting trend to note. The banks get these properties at significant discount to market retail, yet somehow still take a loss upon liquidation. This goes to show how low property values can actually drop.
  4. While the credit metrics continued to deteriorate, the improvement in Texas ratio is primarily because of an increase in tangible equity coming from the reduction in unrealized losses on investment securities and reduction in intangibles.

I am not sure why the interested party quoted above feels I should post a retraction based upon the metrics above, unless the sole reason is because he is an interested party. From what I can discern, the accounting provisions for losses were reduced in the face of an increasing trend of credit quality deterioration. If he came from an accounting background, it is possible that he feels the reduction in provisions is a reason to rejoice. While that may be a plus from an accounting earnings perspective, it is counter-intuitive and apparently in error from an economic or prudent owner/investor perspective - at least in my opinion. If I am somehow reading this wrong, I welcome any and all to point it out to me and if valid I will gladly post it publicly on my blog.

I do believe I am a fair arbiter of value and am not out here with an agenda.