Corus Bankshares, Inc. (CORS)

Since my score already gone to the gutter ......Here's on Corus 3rd time around ....and I may not be lucky.

However, lets do the math from a CAPS perspective if CORS goes to $5 from here......I take -50 points......However 6 months down the road .............when it comes down $2-1.5...... Not only would I be positive , with every dip my Score would gallop.

Here's my original pitch on CORS
I am liking Corus more and more ......everybody is after Downey. I picked them on 5/16 - just had some 7 CAPS points. They have held well thru this - stock just down 10%. Some insider buying showing up.

They have huge potential that way - they almost doubled their NPAs in 1 quarter from Dec 2007 to Mar 2008. They are touching double digits in NPA as % of assets - $500 MM in total ( +125 MM in TDRs - some of those will redefault also)
Their portfolio is exclusively Construction and Condo - ($6 BN) and about $4 BN in Florida and California.

LLR is about $87 MM.Their default hits are going to be much more severe.

If NPAs top out around $900MM-$1BN: and 40-50% default rate with write-off around 60-70% : they are looking at
$250-$300 MM in losses. Thats about 3x times their current LLR and 50% of capital.

If they want to maintain their Capital ratios - they will need about $500MM at least.


ORIGINAL PITCH
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Whoa!

I don't know where to start .....I am almost speechless. I was looking at them with piqued interest as to why a bank from Illinois with Low Leverage (1: 6) and only Level 1 exposure of $3 BN would be hit so hard by the street : <50% Book , only 3.7 times earnings. The only thing initially was that they already hold about 2% of assets as Loss reserves - was higher compared to some other regionals.

THEN IT STARTS 10% in NPA....well , well , well
Well just read the 10Q after that ..page after page of exposure to Construction, Land Development, : Condos
They have 4.1 BN expsoure to Condos, mostly in Construction. I dont get it - their loan portfolio is about $5 BN!!!!!!!
They have committments on the Condo market to do about $7 BN
Exposure: $1.67 BN in Miami.....$1.2 BN in Souther California. Does this stop somewhere - ..as florida builder will say!
Loss Reserves are about $100 MM....against NPAs of about $500 M... they are one of the very few banks who have show Troubled Restructured Debt ( This isnt necessarily bad....they are trying to work-it-out with the customer....) ...with them it could be a sign of desperation and buying time ....$125 MM.

I think they have enough ammunition to eat away their $700MM equity, like a Sunday stroll, if they wanted.


So go Corus with Chorus!


Reply: anchak 6/20/08 12:35 PMReply | Report this post
I had a discourse with Michael(Everydayinvestor) on this one and looked a little carefully. Michael believes they are not a straightforward short. Simultaneously I was also looking at their 10Q disclosures and they are saying that a big portion of their NPAs are coming from 3 different relationships and they are working closely with them - I have to say its a double-edged sword here. They already have a $125 MM TDR( Non-performing Debt-Restructure) - I think 1 deal. So they are showing the ability to work things out - dont discount this - this is the only way to meander thru this quagmire. However, all said and done - concentrated exposure cuts both ways - as I said - if a few of their deals go the other way - there is enough trend here - their NPAs are in a steroidal growth mode - and thus if 1 or 2 falter they are looking at some monstrous charges.

I would wait for their Q2 earnings - before jumping in. I think OK for CAPS