Wednesday, December 3, 2014

Regional Bank Basket as of 12/2/14

This strategy is explained in my Gateway Post on this topic:

Snapshots of realized gains and losses can be found at the end of that post.

This basket will be updated randomly, usually within 1 to 2 months after the last update. 

The dividend yield showed in this table is calculated by Yahoo Finance based on yesterday's closing prices. My dividend yield for each position will be different based on my total cost numbers. In most cases, with FNFG and VLY being notable exceptions, my dividend yield will be higher.

Dividend Yields 5% or higher: Based on Total Cost
NYCB: 8.44%
WASH: 8.34%
UBSI: 7.66%
FNLC: 5.38%
CBU: 5.15%
TRST: 5.1%
CCNE: 5.%

I am not tracking reinvested dividends in the following table. The unrealized gains per holding do not include reinvested dividends.

Over the life of this basket strategy, I anticipate that the dividends will provide 40% to 50% of the total return. I am generally keeping my total exposure between $40,000 to $50,000.

After a number of adds, I am now over my minimum $40,000 allocation after a bout of profit taking last year.

In 2013, my dividend total from this basket totaled $1,932,93, up from $1,896.25 in 2012 and $1,660.57 in 2011.  

Regional bank stocks are basically churning in price this year as interest rates started to go back down. One of the regional bank ETFs, KRE, closed at $40.61 on 12/31/13 and at KRE: 38.93 +1.02 (+2.69%) today, but has closed as low as $36.84 this year (2/3/14). SPDR S&P Regional Banking ETF ETF Chart

I have nibbled at this ETF: Bought Taxable Accounts: 50 KRE at $39.55 (9/20/14 Post)

The abnormally low rates benefited banks some when deposit yields were repriced down, but even 5 year bank CDs taken out in 2008 at higher rates have now matured, and the positive impact of that repricing is no longer present to any meaningful degree. 

Instead, the decline in rates for loans simply compresses net interest margin. When rates were rising last year, regional bank stocks were in an uptrend based on the common belief that higher intermediate and long rates would be a net positive for them, particularly when short terms were likely to remain near zero through mid-2015 and then rise slowly and modestly in 2016-2017. The rate spike starting last May impacted intermediate and long term rates. Short term rates remained anchored by ZIRP. 

I have used the downdraft in prices this year to add positions to my basket after selling into last year's strength.

Since the last update, I have eliminated Susquehanna Bancshares: 

Susquehanna accepted an acquisition offer from BB&T

I pared my position in First Financial Bancorp (FFBC): Pared Highest Cost Shares by Selling 55 FFBC at $17.31 (11/1/14 Post) 

The yields shown in the table below are calculated by Yahoo Finance based on today's closing prices rather than at my total cost per share. 

Net Realized Gains 2010 to Date: $17,244.25  (snapshots are in the Gateway Post) 
Dividends Received 2010 through 2013=$6,623.72

In my next update I will have the dividend figure for 2014. 

Click to Enlarge:

Regional Bank Basket as of 12/2/14
Comparison Data From the St. Louis Fed:
Assets at Banks whose ALLL exceeds their Nonperforming Loans (I prefer a coverage ratio of  over 100% at the time of my initial purchase)(ALLL=Allowance for loan losses)

New Capital Rules From the FDIC to Implement Basel III Capital Rules: 

There were two dividend increases since the last update: 

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