Thursday, October 21, 2010

Added: PJS at 24.72, 50 TRST @ 5.48/RNST HCBK/SOLD: 100 FSBK @ 10.1, 50 PG at 63.33, 100 BTF at 15.56

The preceding table consists of stocks currently in the regional bank basket. After selling a number of names, I was finally able to take a snapshot of it. Modification Regional Bank Strategy For stocks with multiple trades, I just use the average cost of the owned shares as the "price paid" and use the date of the last purchase as the trade date. The dividend yield shown is at the closing market price for yesterday, not at my cost. The table only includes unrealized gains and losses. I am keeping track of the realized gains in another post: Item # 2010 Realized Gains Regional Bank Stock (close to +$2500 this year). I am not keeping track of the dividends paid and how those payments impact my overall return, though I have made a deliberate effort to pick a number of the better yielding regional banks for this basket. I am not keeping track of reinvested dividends in this table, and are currently reinvesting dividends in a number of them. I do track stock dividends. A 2% stock dividend was recently paid by HFBC, and I received earlier in the year a 5% stock dividend from VLY. My last post of this table was back in June: Added 50 EBTC at 10.33.

I previously mentioned that one of my equity preferred stocks, ORHPRA, was called by the issuer at its $25 par value, and I received the proceeds from that redemption yesterday. This one had a 8.125% coupon.

It should come as no surprise that Christine O'Donnell does not believe in separation of church and state. WSJ Her ignorance knows no bounds.

1. Added 50 shares of TrustCo Bank Corp NY (TRST) at 5.48 on Tuesday (Regional Bank Stocks basket strategy)(see Disclaimer): The 1 analyst that provides earnings estimates predicted an E.P.S. of 8 cents for the 3rd quarter. TRST reported net income of 8.4 million or $.109 per share. SEC Filed Press Release As of 9/30, the total risk adjusted capital ratio was 13.76%; the efficiency ratio was 49.06% (the lower the better); NPLs to total loans was at 2.15%; the net interest margin was 3.42%; NPAs to total assets was a respectable 1.44, and the coverage ratio was at 80% (i.e. allowances for loan losses divided by total NPLs). I do not like to see a number below 50 on the coverage ratio in the current economic environment, and am much more comfortable with a ratio over 100%. I am okay with 80% and a relatively low NPLs to total loans.

The dividend is covered by earnings. The current rate is $.066 per quarter, which was raised 5% last August. SEC Filed Press Release Assuming that rate continues, the yield at a total cost of $5.48 is around 4.82%.

This bank has 133 branches: Trustco Bank: Branch/ATM Locator - Home A recent article discussing this bank can be found at Seeking Alpha. This last purchase brings me up to 220 shares, excluding reinvested dividends.

2. Renasant (RNST)(own regional bank basket strategy): I recently sold my highest cost shares of RNST at 14.91 and kept my lowest cost shares bought at 13.70. Renasant reported GAAP net income of 19.551 million or 81 cents, but that number includes a pre-tax gain of 42.2 million connected with the FDIC assisted acquisition of assets from a North Georgia bank. I found it annoying that the company did not break out the earnings before that accounting gain. The consensus estimate was for 19 cents, which most likely did not include the acquisition gain. The StreetInsider says the E.P.S. number was 18 cents without the extraordinary item, but I did not attempt to verity that number.

The net interest margin fell to 2.81% from 3.15% in the prior quarter. NPLs to total loans stood at 2.93%, and the allowance for loan losses as a percentage on NPLs was 68.8%. The capital ratios remain above well capitalized levels, with the total risk-based capital ratio at 14.8%.

3. Hudson City (HCBK)(own regional bank basket): Hudson City Bancorp reported net income of 124.6 million, down from 135.1 million in the 3rd quarter of 2009. Third quarter E.P.S. was 25 cents, down from 27 cents earned in the 2009 linked quarter. The estimate was 26 cents. As of 9/30/2010, Hudson's efficiency ratio was an excellent at 20.27%; the net interest margin was disconcertingly low at 1.97%; NPLs to total loans was a tad above my comfort level at 2.64%; NPAs to total assets was at 1.45%; the allowance for loan losses to NPLs continued at a potentially problematic 25.83%; tangible book value per share was $11.08; and the capital ratios remain good with the total capital risk-based ratio at 22.42%.

The President of HCBK explained Hudson's current problem as follows: "The continued low interest rate environment further negatively impacted our net interest margin in the third quarter. We believe that these historically-low market interest rates coupled with the expected second round of quantitative easing by the Federal Reserve Board will continue to place pressure on our net interest margin for the remainder of 2010. Asset growth in this environment is just not prudent."

The consensus earnings estimates for 2010 and 2011 are $1.1 and $1.11, or no earnings growth in the current rate environment. Hudson may very well be a 2012 story, assuming the Fed has ended its Jihad before then.

4. Bought 50 of the TC PJS at 24.72 in the Roth IRA (see disclaimer): Needless to say, the options for an income investor have been fluctuating lately between bleak and dismal as the Fed's Jihad against savers continues deeper into its third year. As a result, I am revisiting trust certificates previously sold.

I made an excellent buy of PJS during the Dark Period at $7.2. Bought PJS at $7.2 I sold those shares, along with shares bought at less than $18, after the issuer made a tender offer at this TC's $25 par value: Sold ALL PJS at 24.65 and 24.75 So, in my continuing effort to , I bought some of the shares back in the Roth IRA at 24.72 on Wednesday. This TC just went ex interest for its semi-annual payment in late September. PJS Stock Quote

I have explained this TC's history in another post. The underlying bond in PJS is a senior bond, originally issued by the title insurance company First American. I believe that that this bond is currently an obligation of CoreLogic Inc, (CLGX), which was part of First American before the title insurance operations. The operations that became CoreLogic were separated with CLGX becoming the successor corporation to the old First American and the title insurance company becoming a separate corporation traded under the First American Financial name, and the symbol (FAF) of the old First American that originally issue the bond. (see discussion at Item # 3 TC PJS).

Both the TC and the underlying bond have the same coupon of 7.55% and mature in 2028. (prospectus: The underlying bond was rated investment grade prior to the separation and is currently rated B1 by Moody's and B+ by S & P, which are a junk ratings. I would not hazard a guess about what would happen in the event CLGX defaulted on the bond and some enterprising lawyers attempted to tag FAF with the payment obligation. The underlying bond is infrequently traded as shown in the data at FINRA.

I am still reading Michael Lewis' new book The Big Short: Inside the Doomsday Machine. I just finished the part of the book that summarized the incompetence of the ratings agencies, and how their stupidity was gamed by the Masters of Disaster at the investment banks, particularly Goldman Sachs.

5. Sold 100 FSBK at $10.1 (Regional Bank Stocks' basket strategy) (See Disclaimer): I have been paring the stocks in my regional bank stock basket after the basket went over 50 names. That was just too many to follow.Modification Regional Bank Strategy I did not realize until yesterday that First South Bancorp had reported earnings last Wednesday. I mentioned in an earlier post discussing this bank's dividend cut that I would look at the earning report and then decide whether to keep it. I was underwhelmed by the bank's 3rd quarter report. The bank reported a decline in earnings to 10 cents from 18 cents in the 3rd quarter of 2009: SEC Filed Press Release. This transaction was close to break-even. Added 50 FSBK at 9.81 Bought 50 FSBK at 10.15

6. Sold 50 PG at 63.33 (see Disclaimer): For reasons that are not entirely clear to any staff member here at HQ, our Head Trader, the OG, has been selling stock into rallies. Perhaps, as the LB just mused, the OG is suffering another anxiety attack, bringing the total for the year now to 1,234,302. Or given the OG's feeble understanding of the the Stock Stud's Vix Asset Allocation Model, the OG is still playing the swing trade in the Unstable Vix Pattern, where stock positions are pared when the VIX moves below 20 and purchases are made when there is a spike over 30. Whatever the reason, and the OG is rarely in a state of reasoning, sort of like Sarah in that regard, LB had no choice but to request that Headknocker relieve the OG of the Head Trader's duties while there are still stock positions left and then to restore the Stock Stud to its rightful place.

Why was PG sold near the close? There is no reason other than the OG is at the helm. The shares were bought at 59.81 in September.

7. Sold 100 of the CEF BTF at $15.56 (see Disclaimer): Why was BTF sold, ditto Item # 6 above. LB does not like this stock CEF anyway since it views the expense ratio as too high. These shares were bought at 13.65 last March.

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