Tuesday, December 8, 2009

Bought 50 OCFC at 10.4/Bought Another 100 EMO at 25.21/Zions & NYB

The RB wants to disassociate itself from the trades made yesterday by the LB. In fact, it is impossible for the RB to distinguish the trades made by the Old Geezer and the LB, maybe others can ascertain a distinction by their respective degrees of boorishness. How is Headknocker going to buy Canada with these kind of trades, or that tropical island, or even a new Ford Focus, the RB added in total amazement at what happens when it is sent to woodshed for doing its thing. Maybe if the OG and the LB put their heads together, work really hard in 2010, HK will be able to buy a new dishwasher with the bounty generated by these kind of purchases:

1. Bought 50 OCFC at 10.4 Yesterday (see Disclaimer): The name of this bank is OceanFirst, based in Toms River, New Jersey. The current dividend yield is about 7.7% at a total cost of $10.4. It is a small bank with a total market capitalization of around 185 million. The bank recently raised funds with the intention of repaying the government by selling 5.556 million shares, plus an over-allotment for 833,400 shares which was exercised, for $9 per share. Press Release As of 9/30/09, the company made the following statement about its capital ratios in its 10-q:

"At September 30, 2009, the Bank exceeded all of its regulatory capital requirements with tangible capital of $178.7 million, or 9.4% of total adjusted assets, which is above the required level of $28.4 million or 1.5%; core capital of $178.7 million or 9.4% of total adjusted assets, which is above the required level of $75.7 million, or 4.0% and risk-based capital of $188.7 million, or 14.4% of risk-weighted assets, which is above the required level of $104.6 million or 8.0%. The Bank is considered a “well-capitalized” institution under the OTS’ Prompt Corrective Action Regulations.

At September 30, 2009, the Company maintained tangible equity of $166.2 million, for a tangible equity to assets ratio of 8.9%, and tangible common equity of $128.8 million, for a tangible common equity to assets ratio of 6.9%." (page 18, Form 10-Q)


OceanFirst earned .34 during the 3rd quarter of 2009 compared to .32 in the 3rd quarter of 2008.

OceanFirst is in the process of acquiring a smaller bank in its geographic area called Central Jersey Bancorp. Press Release Central Jersey is headquartered in Ocean Township, NJ and this is a map of their branch locations: Central Jersey Bank - Hours & Locations

Oceanfirst started its existence as a state chartered building and loan association in 1902 and became a Federally chartered mutual savings bank in 1989. Currently, most of the branches are located in Ocean County, New Jersey with a few in Monmouth County. The bank says at page 2 of its annual report that this area of NJ is among the fastest growing population centers in that state and "has a significant number of retired residents who have traditionally provided with a stable source of deposit funds."Form 10-K

While I am not familiar with the bank's history in any detail, I suspect that much of the price decline shown in the chart since 2005 may be connected with the bank's acquisition in 2000 of Columbia Home Loans, a mortgage banking company that originated, sold and serviced a "full" product line of mortgages. In this context, "full" would include subprime and Alt-A mortgages. Oceanfirst ended all origination activity by Columbia in September 2007. The most recent comment on the after effects of that problem is discussed at pages to of the recently filed 10-Q at page 16 and in the 2008 annual report at page 5: Form 10-K

The current consensus forecast of just 3 analysts is for E.P.S. of a $1.15 in 2009 and $1.14 in 2010. OCFC: Analyst Estimates At least the bank is earning money. The five year P.E.G. is estimated at .89 and price to book is at 1.46. OCFC: Key Statistics

The bank is listed along with several other stocks in this article from Investopedia.

I am placing this 50 shares in my category 2 for Regional Bank Stocks.

2. Added 100 of EMO at $25.21 (See Disclaimer): These shares were bought in the Roth. The other 100 shares recently bought were placed in the taxable account. EMO is an exchange traded first mortgage bond issued by Entergy Mississippi, an electric utility operating in Mississippi and a subsidiary of Entergy (ETR). I discussed this bond in a prior post: Bought 100 EMO at $25.28/Bought 50 PNY at $22.94/Sold 100 GJS This bond pays interest quarterly and just went ex interest a few days ago.

Since I prefer to own bonds in my retirement account, I may at some point sell the 100 shares of EMO in the taxable account and keep the shares bought yesterday in the Roth IRA. The simple reason for that preference is that interest payments are taxed at the highest marginal tax rates. I receive no benefit in a retirement account from securities that pay distributions taxed at the lower 15% rate applicable to qualified dividends and long term capital gains. If I am paid a qualified dividend in a retirement account, and then draw that money out after I turn 59 1/2, it will be taxed as ordinary income at my then highest marginal rate. I will be at a higher marginal rate in ten or fifteen years than now. Also, I tend to be more conservative in a retirement account, with no need to shoot for the moon or to be aggressive.

3. Zions (own equity preferred issues and TP only): I have been concerned about Zions since I made my first purchase in one of its securities a few months ago. Bought 100 ZBPRA at $7.8 It is best to gather and evaluate information that may presage a need to exit a position. Some concerns about the viability of this bank was assuaged in Cramer's interview of Zions' Chairman, CEO, and President last night on Mad Money. CNBC.com Maybe, however, this guy Harris H. Simmons needs a few less titles or maybe he needs no titles at all. After all, Simmons had all of those titles during the real estate bubble (Harris Simmons: Executive Profile & Biography) when Zions made disastrous loans in the Nevada and Arizona markets, and the common stock price went from 88 in 2007 to 9 in March 2009. Just a thought.

4. New York Community Bank (NYB)(owned): For NYB, I quickly hit my maximum commitment of $2000 for the Regional Bank Stocks' strategy. I mentioned that NYB will acquire the assets of the failed bank AmTrustBank with the assistance of the FDIC. { Free Writing Prospectus New York Community Bancorp, Inc. Acquires the Deposits and Certain Assets of AmTrust Bank & Item # 8 NYB } The stock jumped on that news. NYB was able to raise additional capital by selling 60 million shares at $13: New York Community Bancorp, Preliminary Prospectus Supplement The regional bank strategy started to be implemented in early March, based on what happened after the last near death experience of banks back in 1990-1991, which I remember vividly, and the long secular bull market in banking stocks that evolved thereafter which lasted until the current bear market. It is the same strategy that Cramer discusses in his new book. The first buys were banks like Webster Financial in March and EWBC in April : Buy of 50 WBS: Lottery Ticket Buy of 50 EWBC as Lottery Ticket/ The strategy is explained in more detail in several posts from last June & July: (item # 2: Lottery Ticket Webster Financial; item #6: Paul Wilmott & The Need for Nerd Therapy and presaged in several earlier posts from January CRASH IN BANK STOCKS and particularly this post from February 2009: Financials: 3 Strikes and Your Out-Financials?/BAC/ Parallels to 1990-1991? } The question mark after "Parallels to 1990-1991?" indicated that I did not have a high level of confidence in that parallel then, and consequently limited the purchases at first to Lottery Tickets until recently.


I left a comment this morning to a Seeking Alpha post discussing the GSPRA equity preferred floater which was also a subject of a recent post from last Friday commenting on Richard Lehmann's recommendation of the same security. See Item # 7 NYB/Added to CEFs IGR & SWZ/Bought Stock: NAL & WL/Bought ETF FVL/ Bought bond FCY

It looks like stocks are going to continue taking direction from the dollar's movements. While I think that is just silly, I did read a justification for it by Liz Ann Sonders in Kiplinger's magazine received yesterday at pages 35 to 36. She is on the cover. I know what I would be doing this morning if one U.S. dollar could buy €1.5, as opposed to €1 buying $1.5.

I was also interested to read Henry Kaufman's views: CNBC He was influential in the early 1980s.

Another article on why the stronger dollar concerns some investors can be found at CNBC



4 comments:

  1. TI: Thanks for the discussion on OCFC. I had never heard of it and am just perusing the 10-k that you linked to. Always find your blog informative and a good read.

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  2. LUTHER: I am not taking significant positions in these small bank stocks. I am trying to select those with good dividends and capital ratios. In the last analysis when it comes to a bank, an individual investor really does not what dangers may be lurking somewhere in the balance sheet. I mentioned the foray into mortgage lending with the Columbia Home Loans' acquisition to highlight one of those possible concerns. While OCFC shut Columbia down in 2007 as I mentioned, and the after effects do not appear to be a major problem now, it is nonetheless hard to know for certain or to even have a strong belief one way or the other. That is why I limited my purchase to 50 shares. If I do not really know the answer to an important question, and no one outside the bank may know, I become very cautious.

    I am also buying these higher yielding bank stocks in a new taxable account at a bank where I had an online savings account. Several CDs that were paying over 4% matured, and I decided to take a few more chances with the money at that location rather than renewing now at the current low rates.

    I also added the electric utility ETFS, XLU and DBU in that account seeking more income.

    Still, I am at close to 30% cash which is where I have been since the end of 2007, and that is why I am starting to take a few more chances now, with the money market funds paying nil or close to it, my new treasury securities at the treasury direct account paying not much, and CDs rolling over at around 2% for 1 year. So Uncle Ben is forcing this Old Geezer to take more risks.

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  3. TI: Risk understood and I've read your blog long enough to know you don't overexpose yourself to any one asset (be it debt instrument or equity).
    I too, am looking for some income production beyond the 0-1.5% being paid by money markets or savings accounts. Lo' and behold, you're not alone! ;-)
    Your blog has opened my eyes to new ideas (e.g. European hybrids, TCs, etc.).
    This one may be too risky for you and right now is probably too rich, but if Hilltop Holdings Preferred A (NYSE:HTHPRA) comes back to ~$24,it may be worth a nibble. Yields 8.5% (at ~24) and has virtually all (88%) of its assets (~$900M) in cash invested only in US Govt guaranteed insured accounts and short-term govt bonds.
    Thanks-

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  4. Lurther: I have some very modest familiarity with Hilltop Holdings. I am aware of its cash stash after it sold the manufactured home communities. I will need to check into it more. I don't think that it is a REIT anymore and owns just one small business of selling fire and home insurance to mobile home owners primarily in Texas. It suffered from some in unwise investments in 2008 on its cash stash and the insurance operation paid out more in claims than premiums paid due to storm damage. A lot depends on how they will invest the cash. I believe the Chairman is a billionaire by the name of Gerald Ford and some other entrepreneur types are associated with the company (HTH). So, at some point for me, it may be of more interest as a common stock selection, but not until I know what they intend to do with their cash.

    I checked the most recent 10-q and saw at page 31 that HTH sold some of those securities earlier in the year at a 41.9 million dollar loss. http://www.sec.gov/Archives/
    edgar/data/1265131/000104746909009727/
    a2195263z10-q.htm I will need to look at it more, but I suspect that it will need to fall some in price for me too, before I would consider a small nibble. But it does look like they have become a lot more conservative recently in investing the cash as shown on pages 41-43 of that 10-Q.

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