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Business Overview
› Founded in 1956
› Headquartered in Riverside, California
› 5th largest deposit market share in Riverside County.
› $1.5 Billion in assets, $971.4 million in deposits
› Community Savings and Loan bank
Products and Offerings
› Community Banking– Single-Family Mortgages– Multi-Family Mortgages– Commercial Real Estate Mortgages– Commercial and Consumer Loans
› Mortgage Banking
- Origination for sale of Single-Family Mortgages
› Volume of loan origination has gone up last 3 years.
Loans held for investment analysis
Market/Location
› 15 banking offices in Riverside County
› Inland Empire
› 18 mortgage offices in California
Operations
Loans Originated, Sold, and Purchased ($thousand)
Revenue
Savings and Loans
› Struggling Industry.
› Expected to see an annual growth percentage of -1.8%– Regulation– Commercial Banks– Still seeing impact of housing collapse– Low interest rates
Prime Rates
› Current Prime Rate is 3.25% (record low)– Available to most credit worthy customers
› “Operation Twist” will keep rates low till 2015
› Growth will come
Housing Price Index
› Captures trends in the national housing market
› Peaked in 2006
› Growth is forecasted until 2018
Local Economy
› Riverside hurt by housing collapse– 3.1% drop in average wages– Housing prices fell 55%
› Currently fastest growing recovery– Housing prices increased 10.9%– Housing inventory down 32.3%– 65% decrease in foreclosures – 8 months of home sale improvement– 10.5% unemployment – Still poor compared to national economy
Comparable
› PACW -35%
› PPBI -35%
› BOFI -15%
› HMST -15%
› SMPL -0%
Valuation
Beta
› Regressions came out to around 0.44 – High standard deviation
› Used Hamada to get 0.96– Closer to industry beta– More reasonable
Excess Return
› Used Excess Return Model– Pin-pointing debt is difficult in banks– Does not use WACC– Depreciation and Amortization– Capital Expenditure
– Only take into account equity– Trust Book Value (financials more likely to be at market
value)
Valuation
Final Valuation
QUESTIONS?
Recommendation
› Buy for Svigal and Tall Fir portfolios
