+ Watch PB
on My Watchlist
A financial holding company for Prosperity Bank, which provides a line of financial products and services to small and medium-sized businesses and consumers.
I'm very excited to add this texas bank PRSP to my list of regional bank shorts. I found this because the insiders just sold 3.3M in stock. Before I tear this bank to shreads let me give you a key fact. This is a $1.5B market cap bank. Remember that as we review the size enormous size of their:Goodwill - $800MMultiple to tangible book = 4.5xConstruction Loans $600M (360M in land)vs. Market cap of 1.5BThis bank trades at 4.3x tangible book value at a time when most banks are lucky to trade at 2x to 2.5xPRSP has $830M in goodwill (likely related to overpaying for previous acquisitions) Further the bank has over 600M in construction loans. They have nearly $360M loaned out on land deals of one form or another. Remember this is only a $1.5B bank At June 30, 2008, construction loans totaled $658.669 million, consisting of approximately $225 million of single family residence construction; $130 million of land development; $135 million of raw land; $100 million of lot loans; and $69 million of commercial construction and other construction loans.
Nice writeup.I always check the $ gains on the otc webpage and it is almost always regional banks in the past couple weeks, but I'm too lazy to do any research on them. I can imagine what their balance sheets look like though.
Dex....I didn't get a chance to look at the balance sheet ....since I presumed they would be a CAPS pick only - I did today because found they were Optionable. I agree with almost everything you said - and one thing which I think got you to the stock - Heavy insider selling. This foretells of really bad things to come. However, PRSP has a good performing book till now. Which means they may have done a decent job of underwriting the loans. Thus I would not turn this into a whale hunt.Given the environment - a little blip in their asset quality will probably cause a slide - but till now there's nothing - and remember its been about a year on this crisis.THEY WILL SURVIVE - I am pretty sure.
Anchak - you are right PRSP is a decent bank. I am short the stock - but the bank is fine.The stock is probably overvalued. In a crazy market like 2008 I like a few easy longs and shorts... ones that are just plainly undervalued longs or overvalued shorts. PRSP falls into the latter category. I'm not predicting gloom and doom - but rather that there is no upside to the stock at $33. If I get lucky the Houston market will join the rest of the US in recession (not likely). If everything goes PRSP's way then the stock trades in the low $30's indefinitely. If the regional bank crisis has one more leg down PRSP will get swept up in the sell off just like everyone else and more importantly the comparable / relative valuation will be even more overvalued... why pay 4.25x book for a good bank when you can buy another "GOOD" bank for 1.5x book
Just read an article on Morningstar about this bank. It puts them in a really good light. http://news.morningstar.com/articlenet/article.aspx?id=322198
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