Using Veritas to Construct the "Per…

29-04-2017 Hits:88389 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:82112 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:81992 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:86492 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:82935 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:85066 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:56163 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:84390 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:84105 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:83972 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:90434 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:88006 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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In the initial revamp of the Doo Doo 32 bank list, our shortlisted banks were selected based on deteriorating fundamentals, and the idea at the time of screening was to review their solvency position, as we had screened the banks by applying filters similar to recently failed banks list.

Although widely accepted, computing adjusted P/B using the formula (tangible book + loan reserves - tax assets - fair value adjustment) could underestimate the multiple if a bank has high NPA (non-performing assets)'s vis-a-vis loan loss reserves.  If we want to add loan loss reserves to tangible book, we must deduct NPA as well. As a result, from a valuation point of view, conventional P/ TCE (tangible common equity) is more relevant.

Alternatively, we have computed banks' adjusted capital by adding back reserves and deducting NPA's to TCE. Based on this United Security Bancshares and Capitol Bancorp are clearly underwater.  After adjusting for DTA (deferred tax asset)'s First United is also underwater. However, adjustment for DTA's should preferably be done in the case of probable collapse wherein DTAs are not expected to be usable by an ongoing concern.

The Texas ratio (First United has relatively better Texas ratio than others, the metric drops only after adjusting for DTA but still fares better than United Security Bancshares and Capitol Bancorp which are clearly the worst of lot in terms of solvency) in conjunction with other indicators including Eyles test and Cushion ratio (all 3 ratios take into consideration allowances, TCE, NPA) point out that Taylor, United Security Bancshares, First United and Capitol Bancorp all have a greater share of problems. However, low market cap , low share price and  low liquidity could result in limited trading opportunity and thus prevent opportunity for taking advantage from their deteriorating fundamentals. The higher priced subscription only bank, who is the subject of our next forensic analysis and has a market cap of $1.3 bn and share price of about $15 also has potential problems (Texas ratio of 74% and Eyles test of 58%) that could entail a trading opportunity that benefits from deteriorating fundamentals.

The Texas ratio of 210% for First United Bank computed in the subscriber discussions is not comparable to Texas ratio of 88.5% for Taylor and other banks since it is after a haircut of 20% PPE (property, plant and equipment). The table below shows Texas ratio for all 6 banks (both after and before DTA) on a more comparable basis.  

(Pls note: We have updated the table below to reflect NPA's from latest 10-Q. All other data pertaining to banks is sourced from First Call while market data is sourced from Bloomberg)

 

FIRST UTD CORP

TAYLOR CAPITAL

UNITED SECURI/CA

See Subscription download

CAP BANCORP LTD

Price (September 1, 2009)

10.97

6.74

5.27

17.61

14.36

4.12

Market cap (in mn)

67.2

74.7

64.6

58.2

1264.4

72.2

P/B

0.94x

0.66x

0.86x

0.79x

0.91x

0.22x

P/Tangible BV

1.14x

0.66x

0.99x

1.37x

1.11x

0.29x

             

Adjusted Capital (TCE + Loan Loss Reserves - NPA's)

23,181

33,945

(23,658)

14,242

623,930

(4,298)

Adjusted Capital (TCE + Loan Loss Reserves - NPA's - DTA)

(9,877)

28,145

(34,224)

14,242

623,930

(93,598)

             

Loan Loss coverage YTD

2.36

0.69

0.55

4.43

3.15

-0.27

Texas ratio (NPA + 90 days past due / TCE + Allowances)

64.9%

86.4%

129.6%

77.0%

74.1%

103.8%

Texas ratio (NPA + 90 days past due / TCE + Allowances- DTA)

118.5%

88.5%

149.3%

77.0%

74.1%

137.5%

             

Eyles Test

55,138

216,923

60,587

28,458

821,391

303,643

Shortfall from current reserve for loan loss

40,781

83,996

44,745

22,298

659,696

189,428

Eyles Test (Shortfall as % of tangible shareholders' equity )

69.4%

74.0%

69.8%

52.7%

58.0%

75.8%

             

Cushion (Reserve less NPL+90 days due)

-56.4%

-50.1%

-62.9%

-37.5%

-54.4%

-60.1%

             

Adjusted leverage

27.5x

40.0x

11.4x

29.0x

10.4x

22.6x

             

NPA / Equity

79.4%

187.2%

161.6%

87.0%

59.3%

147.4%

NPA / Total Loans

4.1%

6.7%

18.9%

4.8%

6.7%

8.0%

             

NPL and 90 days due/ Equity

80.8%

167.2%

87.6%

52.1%

68.6%

105.8%

NPL and 90 days due/ Total Loans

4.2%

6.0%

10.2%

2.9%

7.8%

5.8%

             

NPL and 90 days due and 30 days due/ Equity

99.0%

181.6%

96.6%

86.9%

na

na

NPL and 90 days due and 30 days due/ Total Loans

5.1%

6.5%

11.3%

4.8%

na

na