Out of total assets of $20.1bn, ASBC has $10.2bn in real estate
related loans plus $2.2bn in home equity loans and $1.5bn in mortgage related securities (issued by FNM and other govt agencies). The Bank has a modest BBB+ rating and a market Cap which is 1.5x book value.
ASBC has continuing exposure from the thrift it acquired in 2004 where the Bank now retains a subordinate position to the FHLB in the credit risk on the underlying residential mortgage loans it sold to the FHLB. At 30 Sept 2007 this maximum exposure stood at $1.6bn but fortunately there have been negligible historical losses to date.
Tangible equity levels at 6.25%-6.30% are lower than they have been after the recent share buyback and Hudson acquisition. ASBC will be challenged to retain its capital position in the face of expected (although likely to be modest) losses and may need to raise capital.
Given the above ASBC is overpriced and its share price should decline closer to its book value of $18.00.
$25.11 (06/11/08)
