CCBD red flags

--Community Central Bank is a regional bank headquartered in Michigan. As of Q1 2009, its asses in the book was $556 mil; its operating income was usually below $50 mil since 2007; its EPS has been negative since Q4 2008 --It is major business is commercial real estates. As of March 2009, CRE loans was $291 bil, ~75% of its loan portfolio and > 50% of it asset. --The company's reserve for problem loans was serioues behind its peers. As of March 2009, regionals banks' allowance for loans over non accrusal loans was ~50%. The measure for CCBD was below 25%. --CCBD has not written off enough its CRE loans compared to its peers. The delinquency rate of its CRE loans was trending upward from 5.4% as of the end of 2007 to 8.4% as of March 2009, somehow above the average deliquent measure of the industry, which rose from 2.7% to 6.4% in the same period. Yet its charge off rate for CRE loans rose from 0.1% as of Q4 2007 to less than 1% in Q1 2009 except in Q4 2008(2.5%). Whereas, the industry has generallyed wrote off 0.4% to 1.33% in the same period. --another snag of CCBD is that the company have been using the decline in liability (corp debentures) to cushion the loss in main business. As market hit bottom in Q1 2009, credit market has been improving. This benefit will not take hold and might even backfire if the value of its liability soars. --Given the deterioating outlook for CRE loans, I suggests investors steer clear of the company. Liquidity --The company will face refinancing risk. By the end of 2009, $34 mill corporate bonds need to be redeemed. By 2010, another $23 mil corp bonds will be due. In addition, by 2010, $39 mil FHLB advance will be due as well. CCBD has $19 mil cash and cash equivalents securities. Its average net cash flow in the past few years has been close to zero, barely above $20 mil in any quarter. Finance --CCBD finances from FHLB, public market, and deposits. The QoQ increase in deposits, especially non interest bearing deposits, was $10 mil. --NIM margin has improved 8% from 2.09% in Q1 2008 to 2.17% in Q1 2009