Hampton Roads Bankshares Inc. (HMPR)

Call me a stubborn Son of a Fool, but I haven't given up on analyzing the banking sector just yet. The two sectors where I have had the least amount of success are (a) biotech/healthcare and (b) banks. Sure, I had some major successes with my BAC and STI buys, but I bought those based on risk-reward principles and a belief that the government wasn't going to let them fail under any circumstances.

I've had some dismal failures, as well, with companies like Citizens Republic (CRBC) and Capitol Bancorp (CBC), so keep that in mind when you're thinking to yourself, "JAKILA THE HUN ENDORSES THIS, IT MUST BE A BUY!". I completely admit I don't know what the crap I'm doing when it comes to banks. All the banks are so leveraged, that it's really difficult for me to apply my usual criteria for analyzing stocks with any amount of success.

The main reason I green thumbed HMPR was because the massive plunge earlier this week. HMPR fell 25% after worse than expected earnings. However, my thought here is that if HMPR does not go bankrupt, it's probably worth more than $4. On the face of it, HMPR actually has less leverage than a lot of troubled banks; Liability/Value is 90.2%, which is high, but not unmanageable. They do have about $95 million in intangible assets, which potentially props that figure up some, though.

Net tangible assets are worth about $9 per share. If I increase their allowance for loan losses to 5% and discount another $80 million of their equity, I still come up with adjusted equity of about $5.50 - $6.00 per share, which is a bit higher than $4.

The good news is that HMPR has had a few profitable quarters recently and there have been some insider buys. Even if the last quarter was terrible, the market might be overreacting a tad. Steady-state average earnings per share could be around $0.20 per share. If all that held up, the stock could be worth maybe $8 (and remember, I took a very large provision for loan losses as a safety net).

HMPR recently announced their intent to raise more equity, which I like believe it or not! So long as they don't go bankrupt and get seized by the Feds, it's probably worth more than $4, so anything that helps keep them alive, I'm all for!

OK, so after I wrote all of that, I realize what I'm really saying here is that this pick is about 70% speculation and 30% analysis, but it's really difficult to get much better than that with these banks. Don't take this as an endorsement; I just want to learn more about the banking sector and I'll continue trying, even if it means occasional failure. There are a lot better (and safer) buys out there than this to be honest :)