Economy:
CPI April 2023:
12 month Annual at 4.9% (lowest in 2 years)
12 month Annual core at 5.5%
"Shelter" inflation rose 8.1% over the past 12 months. The major component of that category is "Owner Equivalent Rent", a made up number that estimates what homeowners would pay to rent the house that they own. Owners equivalent rent of their primary residence has a a 24.051% weighting in the CPI calculation and higher as part of core inflation which excludes energy and food prices. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category - 2023 M04 Results
According to the FED's survey of senior bank loan officers, credit standards tightened again since the prior quarterly survey.
What Would the G.O.P. Plan Actually Do to the Budget? - The New York Times While the GOP budget plan passed in the House does not exempt defense spending, veteran benefits and border security from cuts, Speaker McCarthy has claimed that the GOP will not cut spending in those categories. If those categories are excluded, then the GOP plan would have to result in a 51% cut to all other categories of discretionary spending, including Education, Agriculture, the EPA, the Interior Department, and Transportation. Since republicans dominate in rural areas, maybe they need to inform their rural voters, who are major beneficiaries of programs that would be slashed.
Treasury Yield Curve May 2023:
The Bond Ghouls now have more confidence that the government will pay on time a maturing 2 month T Bill purchased last Friday but are starting to have doubts about the 1 month bill which is causing a spike in yield.
CME FedWatch Tool - CME Group- December 2023 FF Range Probabilities
Given the short T bill yields, the 1 year T Bill yield of 4.75% is IMO consistent with a .5% cut occurring in late 2023, something like a .25% cut in November and another .25% in December. For that to happen with inflation remaining at over a 4%, I would anticipate that the first quarter real GDP would need to be barely positive followed by two relatively small quarterly declines. So embedded in the FF range forecast is a probable technical garden variety recession IMO.
Current Atlanta FED 2nd quarter real GDP forecast: +2.7%
GDPNow - Federal Reserve Bank of Atlanta
The first BLS estimate of 1st quarter real GDP growth was 1.1%. Gross Domestic Product, First Quarter 2023 (Advance Estimate) | U.S. Bureau of Economic Analysis (BEA)
Unless there is a U.S. debt default, I view it as highly unlikely that the Fed will cut the FF rate prior to the November 2023 meeting. Assuming no debt default, it would be prudent to keep the existing range (5-5.25%) through the September FED meeting.
+++
Allocation Shifts Discussed in this Post:
Treasury Bills at Auction: $2,000 in principal amount
Corporate Bonds: $7,000 in principal amount
CDs: $7,000
Common Stocks: +$258.86
(consisting of $770.47 in purchases minus $511.61 in proceeds)
Weighted Average Dividend Yield = 8.6% (the goal is to add dividend paying common stocks each week with a weighted average yield in excess of 5%)
Bank Holding Company Equity Preferred (excludes 5 shares of CUBIPRE that has a variable rate coupon): +$602.99 (weighted average yield= 8.835%)
Exchange Traded First Mortgage Baby Bond: +$114.24 (yield at 5.33%)
2023 Net Outflow Common Stocks/Funds: -$32,387.39
++++
Orkla Dividend Withholding:
Norway withheld a 25% tax on my ORKLY ADR dividend payment.
I own 165 shares that are near breakeven.
Quote: Orkla ASA ADR (ORKLY)
As a U.S. citizen, I am entitled to no more than a 15% withholding tax but that treaty right has to be claimed by the broker at the source which Fidelity is not doing.
The ORKLY share price has so far responded favorably to the first quarter report. Q1-2023.pdf
 |
| Amounts in NOK Millions |
Norwegian Krone to US Dollar Exchange Rate Chart | Xe
++++
Putin and His Servile Orcs:
In his Victory Day speech, Putin claimed that its invasion of Ukraine was part of a war against Russia.
Russian forces lash out indiscriminately as Ukraine increases military pressure on frontline towns
Press Statement: Russian Strike Damages Project HOPE Warehouse in Ukraine | Project HOPE (5/8/23); Massive Russian Strike Interrupts Health & Humanitarian Aid Access in Ukraine | Project HOPE (12/30/22) Russians have repeatedly and deliberately attacked Project Hope humanitarian facilities in Ukraine. That is to be expected of them.
Wagner boss fumes that Russian brigade 'fled' from Bakhmut area A Russian, who is not totally brainwashed with Putin's nonsense, might ask themselves why the Russian army and the Wagner mercenaries have failed to capture Bakhmut, a small town in Ukraine, after launching a full scale attack on 8/1/22 and continuing the assault daily thereafter. Battle of Bakhmut - Wikipedia And now it looks like the Russians are about to lose the few acres that they manage to capture. Russia acknowledges retreat north of Bakhmut, Wagner boss calls it a 'rout' | Reuters; Video Ukrainian forces make major gain around Bakhmut - ABC News; Russian forces flee Bakhmut 'in bad order' as Putin's forces suffer in Ukraine | Daily Mail Online
Trump's nonsense has the same persuasive impact on roughly the same percentage of U.S. adults as Putin's crapola on Russians. At least the Russians have the excuse that accurate information is not readily available to them.
Putin and Trump share many personality characteristics.
+++
Trump and His Anti-Democracy Party:
RealClearPolitics - Election 2024 - General Election: Trump vs. Biden (The current average of polls has Trump leading by .7% in a 2024 rematch.)
It took the jury less than 3 hours to find Donald liable for sexual abuse and defamation in the Jean Carroll lawsuit. Trump liable in E. Jean Carroll case for sexual abuse, defamation-CBS News This would indicate that all members of the jury were 100% convinced that Trump was liable when they entered the jury room and most of their discussion would have been on damages.
Donald claimed that the verdict was a "DISGRACE" and a "CONTINUATION OF THE GREATEST WITCH HUNT OF ALL TIME".
In TrumpWorld, putting letters in all caps make the words even more true, but then, in that alternate reality, everything is upside down.
The jury verdict against Donald for sexual abuse will likely solidify his support among republicans.
Several republican Senators voiced their support, not for Ms. Carroll, but for their Dear Leader. ‘That Jury's A Joke’: GOP Senators Defend Donald Trump After Sexual Battery Verdict Senator Tommy Tuberville (R-AL) was so impressed by Trump's conduct that the verdict "makes me want to vote for him twice". Tuberville says Trump guilty verdict in E. Jean Carroll case ‘makes me want to vote for him twice’ - al.com
In a New Hampshire Town Hall televised by CNN, the republicans in attendance applauded and laughed when Trump called Carroll a "whack job".
Trump referred to 1/6 as "a beautiful day". If elected President, Donald would pardon "a large portion" of the insurrectionist since they have "love in their heart". The republicans in the audience applauded that remark. In TrumpWorld, only “a couple of them probably got out of control.”
Don the Authoritarian would not apologize for putting VP Pence in danger on January 6th. Trump believes that Pence had the power to reject the certified election results in 4 states won by Biden and to then direct the republican legislatures in those states to decide who won, which would have, in Trump's words, led to a different result. The republicans in the audience applauded that remark.
Trump repeatedly refused to answer a question whether he wanted Russia or Ukraine to win.
He advised his minions in Congress to cause a U.S. debt default, since he was not President, unless the democrats agreed to spending cuts. A default would only have a "psychological" impact according to Trump.
Donald asserted that he did not ask the Georgia Secretary of State to "find anything" even though he was caught on tape asking him to find votes. Trump CNN town hall: Key takeaways; Five Takeaways From Trump’s Unruly CNN Town Hall - The New York Times; See key moments from Donald Trump's CNN town hall; Trump Spews Attacks On E. Jean Carroll To Laughter From Audience At CNN Town Hall
Trump Says People Who Accept 2020 Election Results Are 'Very Stupid'
Joe Scarborough: CNN's Trump Town Hall as Chilling as Jan 6
FactChecking Trump's CNN Town Hall - FactCheck.org
There is not a qualitative difference between Donald's character and that of George Santos. George Santos (R-NY) charged with fraud, money laundering, more - CBS News; Here’s What George Santos Was Charged With - The New York Times; Indictment.pdf One of the charges is that Santos received unemployment benefits after claiming to be unemployed when he was actually employed and received regular paychecks into his bank account. If the facts stated in the indictment are accurate, it is impossible for me to see a defense to that charge and the others. Breaking down George Santos's charges, possible jail time for each crime - The Washington Post Santos characterized the indictment as a "witch hunt". Santos says he won't resign blasting fraud case as 'witch hunt'
WaPo: Feds probing potential wire fraud in Trump fundraising off election lies - YouTube
There was another mass shooting in Texas that killed 8 including 2 sisters who were elementary school students and another child. The gunman was armed with an assault rifle and was reportedly a neo-Nazi. What to know about Mauricio Garcia, the Texas mall massacre suspect killed by police; Allen, Texas mall shooter identified, may have had neo-Nazi beliefs - The Washington Post He was wearing a RWDS patch that stands for Right Wing Death Squad. Republicans recommended more prayer seeking God's intervention. Keith Self (R-TX) criticized for prayers comments after shooting in Allen, Texas - The Washington Post
My senator, Marsha Blackburn (R-TN), has come up with a republican solution for gun violence in schools. She is not advocating for more prayer, a solution advanced by other republican politicians. Blackburn wants to arm grandparents and disperse them throughout the school system. Sen. Marsha Blackburn Proposes Armed Grandparents Guarding Schools To Kayleigh McEnany Senator Blackburn was a 100% pure Trumpster long before Trump became the unchallengeable leader of the republican party.
+++
1. Corporate Bonds: $7,000 in principal amount
A. Bought 2 Essex L.P. 3.5% SU Maturing on 4/1/25 at a Total Cost of 96.575:
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Issuer: Operating subsidiary of Essex Property Trust Inc. (ESS) who guarantees the note:
ESS Earnings Report for the Q/E 3/31/23
2022 Annual Report (property list starts at page 23; debt listed starting at page F-39)
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/BBB+
YTM at Total Cost: 5.411%
Current Yield at TC = 3.624%
This purchase replaces the 2 ESS 3.25% SU bonds that matured on 5/1/23:
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Both my current yield and YTM for the 4/1/25 SU purchase exceed the current yield and YTM of the matured bond.
Last SU Bond Offerings:
May 2021: $300M of 2.55% SU Maturing in 2031
February 2021: $450M of 1.7% SU Maturing in 2028
B. Bought 2 Quest Diagnostics 4.25% SU Maturing on 4/1/24 at a Total Cost of 99.26:
Issuer: Quest Diagnostics Inc. (DGX)
DGX Analyst Estimates | MarketWatch
SEC Filed 2023 1st Quarter Earnings Report
I no longer have a position in the common shares.
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa2/BBB+
YTM at Total Cost: 5.089%
Current Yield at TC: 4.28%
C. Bought 1 Ventas 3.75% SU Maturing on 5/1/24 at a Total Cost of 98.357:
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Issuer: Operating entity for the REIT Ventas Inc. (VTR) who guarantees the notes.
2022 Annual Report (debt listed at page 103)
FINRA Page: Bond Detail (prospectus not linked)
Credit Ratings: Baa1/BBB+
YTM at Total Cost: 5.503%
Current Yield at TC = 3.81%
I now own 5 bonds.
Last Bond Offering (8/21): $500M 2.5% SU Maturing in 2031
D. Bought 2 Truist 3.75% SU Maturing on 12/6/23 at a Total Cost of 98.888:
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Issuer: Truist Financial Corp. (TFC)
TFC Analyst Estimates | MarketWatch
TFC SEC Filed Earnings Press Release for the Q/E 3/31/23
Finra Page: Bond Detail
Credit Ratings: A3/A-
YTM at Total Cost: 5.798%
Current Yield at TC = 3.792%
I now own 4 bonds. The prior purchase was on 4/28/23 at a 99.073 TC.
2. Small Ball Buys - Bank Holding Company Preferred Stocks:
These securities are currently viewed as high risk for the reasons previously discussed.
To summarize briefly, if the FDIC seizes the operating bank owned by a bank holding company, both the common and preferred stocks issued by the holding company will become worthless. Possibly, the shares could be sold in the Grey Market near $1 before they are cancelled in a BK. So the downside risk is a near zero price. Of the 3 midsize banks failures so far this year, two of the bank holdings companies had issued preferred stocks which are now near worthless and likely to become totally so soon enough. {E.G. the SVB Financial equity preferred, which formerly owned Silicon Valley Bank, has been delisted from the major exchange and is currently trading in the dark Grey Market at less than $1, SVB Financial Group Preferred Series A (SIVPQ)}
A. Bought 5 CUBIPRE at $18.5:
Quote: Customers Bancorp Inc. Non-Cumulative Preferred Series E Stock
Cost: $92.5
Security: Fixed-to-Floating Rate Equity Preferred Stock
Issuer: Customers Bancorp Inc. (CUBI), a bank holding company.
CUBI Analyst Estimates | MarketWatch
Common Stock Dividend and the Stopper Clause:
CUBI is not currently paying a common stock dividend.
Under a Stopper Clause, the only remaining legal impediment preventing the elimination of a preferred stock dividend would be using cash to buy back stock.
Eliminating the preferred stock would not be a viable business option, however, since it would spook uninsured depositors and make it more difficult to raise equity capital through preferred stock offerings in the future. The benefit for the preferred stock owner is that more capital is being retained to pay the preferred dividend and to grow the business.
This security was originally issued in 2016 and paid a 6.45% fixed coupon to, but excluding, 6/15/21.
The coupon then transitioned to a 5.14% spread to the 3 month Libor rate, resetting for every quarterly dividend payment.
Libor will no longer a quoted rate after 6/30/23, but a synthetic Libor may be used until 3/31/24. Leaving LIBOR: A Landmark Transition Even if the synthetic Libor rate is used in calculating the CUBIPRE dividend, the alternative rate setting procedure in the prospectus would have to be followed after 3/31/24, which involves getting an average rate for 3 month interbank deposits in at least $1M denomination in London or, if not available, loans to European banks for 3 months from 3 major U.S. banks as described below:
Par Value: $25
CUBI has declared the next quarterly dividend payment which will be $0.63929075 per share. Customers Bancorp, Inc. Declares Quarterly Cash Dividend on Its Series E and Series F Preferred Stock If I annualized that rate to $2.56 per share, rounded up, the yield at the $25 par value would be 10.24% indicating that the benchmark 3 month rate was about 5.1% on the computation date for the next quarterly dividend.
The yield at my $18.5 total cost per share, using an annualized $2.56 per share dividend, would be about 13.84%. The actual yield will vary with the upcoming reset coupons.
B. Restarted CCNEP - Bought 5 at $22.2; 5 at $20.75; 5 at $18.75; 5 at $18.4:
Quote: CNB Financial Corp. 7.125% Preferred Series A Stock
Cost: $400.5
Issuer: CNB Financial Corp. (CCNE)
CCNE Analyst Estimates | MarketWatch
I recently restarted a small ball position in the common stock. Item # 2.D. Restarted CCNE - Bought 10 at $17.95 (4/22/23 Post) I discussed the 2023 first quarter report in that post. SEC Filing
Last Discussed: Item # 5.A. Eliminated CCNEP - Sold 10 at $26 (1/16/23 Post)
Par Value: $25
Coupon: 7.125%
Maturity: Potentially Perpetual
Issuer Optional Call: On or after 9/1/25 at par value + accrued and unpaid dividends.
Dividends: Paid quarterly, qualified and non-cumulative.
Annual Dividend Per Share: $1.78, rounded down.
Average cost per share: $20.02 (20 shares)
Yield at AC : 8.9%
Next Ex Dividend: 5/17/23
Stopper Clause: Standard
C. Started FULTP - Bought 5 at $15.09; 5 at $14.64:
Quote: Fulton Financial Corp. Preferred Series A
Cost: $148.67
Issuer: Fulton Financial Corp. (FULT)- A Bank Holding Company
FULT Analyst Estimates | MarketWatch
I own a few shares of the common stock. A common stock dividend is being paid.
Last Earnings Report (Q/E 3/31/23). SEC Filing
E.P.S. $.39, down from $.47 in the 2022 4th quarter and up from $.38 in the 2022 first quarter.
NIM: 3.53%, up from 2.31% in the 2022 1st Q.
Charge off ratio: .27%
NPL Ratio: .8%, down from .87%
Coverage Ratio: 167%
Deposits: $20.574+B vs. $21.027+B as of 12/31/22
Preferred Stock Prospectus
Coupon: 5.125%
Annual Dividend per share: $1.28, rounded down
Par Value: $25
Dividends: Paid Quarterly, qualified and non-cumulative
Last Ex Dividend: 3/30/23
Average cost per share: $14.87 (10 shares)
Yield at $14.87: 8.62%
Optional Call: On or after 1/15/2026
Stopper Clause: Standard
D. Added to WBSPRG - Bought 3 at $17.94:
Quote: Webster Financial Corp. 6.5% Preferred A Stock
Cost: $53.82
Issuer: Webster Financial Corp. (WBS)
WBS does pay a common stock dividend.
Last Earnings Report (Q/E 3/31/23): SEC Filing
E.P.S.: $1.24
Non-GAAP E.P.S. = $1.49
"First quarter 2023 results include $56.6 million pre-tax ($42.3 million after tax), or $0.251 per diluted share, of charges related to the merger with Sterling Bancorp on January 31, 2022 ("the merger") and balance sheet repositioning. Excluding these charges, adjusted earnings per diluted share would have been $1.491 for the quarter ended March 31, 2023."
NIM: 3.66%
Coverage Ratio: 331.82% (allowance for credit loss to nonperforming loans)
NPL Ratio: .36%
Charge off ratio: .2%
Tangible book value per share: $29.47
I have a small ball position in the common stock (10 shares with a $25.54 AC per share).
I am not impressed with interest rate risk management in the WBS owned security portfolio.
Deposits:
2022 Annual Report (Investment security information discussed at pages 44-45; 86-89. Based on the information contained therein, my grade for investment rate risk management is a "C")
Last WBSPRG Discussion: Item # 1.J. Added to WBSPRG - Bought 2 at $19.05 (4/1/2023 Post)
Par Value: $25
Coupon: 6.5% paid on the $25 par value
Average cost per share: $20.59 (10 shares)
Yield at AC = 7.89%
Yield at $17.94:
Dividends: Paid Quarterly, qualified and non-cumulative.
Annual Dividend per share: $1.625
Stopper Clause: Standard
Issuer Optional Call: On or after 10/15/22.
This preferred stock was originally issued by Sterling Bancorp which was acquired by WBS. The Sterling preferred stock was converted into WBS preferred shares. SEC Filing
3. Small Ball Buys - Common Stocks:
Bank Mismanagement of Interest Rate Risk:
While I am adding to my regional bank stock allocation, the dollar amounts are small and consistent with a murky 2023 environment for this sector. The consensus opinion, reflected in the stock price charts, is that regional banks will soon experience meaningful increases in nonperforming loans and charge offs.
Investors are increasing their focus on unrealized losses in bank investment portfolios, the percentage of deposits that are uninsured, deposit flows, and NIM contraction due to interest liabilities rising more rapidly in yield than loan and investment yields.
Generally, bank management of interest rate risk in their owned securities portfolios was borderline idiotic.
Little or no effort was made to reduce duration in 2021 when inflation was surging. Weightings in 10+ year long duration securities remained elevated with minimal allocations to short term maturities.
The expectation, reflected in the risk management, was that deposit rates would remain near zero for an extended period, and bank borrowing cost through the FHLB system or other means would remain low.
The risk mismanagement was aggravated by excessive reliance on owning mortgage backed securities, whose duration will increase when interest rates are rising since fewer mortgages are paid off and have negative convexity where price decreases are larger than price increases when interest rates change by equal amounts. Risks and Returns of Mortgage-Backed Securities (MBS); Convexity in Bond | Definition, Formula, & Calculation The yield advantage over owning treasuries was not worth that risk IMO and that determination should have been made in 2021.
The impression that I have is that the people making decisions on interest rate risk management are not among the brightest bulbs. Dim witted may not be an unfair description.
Berkshire's Buffett Shows Bank CEOs How to Avoid a Banking Crisis | Barron's
Warren Buffett says American banks could face more turbulence ahead, but deposits are safe
Vanguard has a mortgage back bond ETF. Vanguard Mortgage-Backed Securities ETF (VMBS) The 30 day SEC yield was 3.15% as of 3/5/23. The 3 year annual average total return (dividends reinvested) was -3.39% as of 5/5/23, which earned the ETF a 4 star rating in this category. The 10 year average annual total return was positive at +.93%. VMBS – Performance – Vanguard Mortgage-Backed Secs ETF | Morningstar
SPDR S&P Regional Banking ETF (KRE) Interactive Stock Chart - Yahoo Finance KRE was near $65 in late January 2023 and closed last Friday at $36.37. Through 5/12, the KRE YTD total return is -37.57%. Given my natural contrarian nature, that makes the sector more appealing to me, though further declines are of course possible.
A. Restarted LXP - Bought 10 at $9.56- Schwab Taxable Account:
Last Round-Trip This Account:
Quote: Lexington Industrial Trust (LXP)
Cost: $95.98
Management: Internal
As of 3/31/23, LXP's real estate portfolio consisted of 109 warehouse/distribution and 6 other properties. The properties are primarily net leased.
2022 Annual Report (debt discussed starting at page 84)
Debt: Of the $1.488B in long term debt as of 12/31/22, $400M is in a 2.375% SU maturing in 10/2031 and another $400M 2.7% SU maturing in 9/2030. So locking in those low rates for several years is a positive.
There is a $198+M 4.4% SU maturing in June 2024.
The variable rate debt, priced at a small spread to SOFR, then consisted of a $298.959M term loan and was at $299.084M as of 3/31/22. .
15 Largest Tenants as of 12/31/22:
 |
| Page 38 Annual Report |
Properties in Development as of 3/31/23:
 |
| P.11, 10-Q/Dollars in Thousands |
Website: LXP Industrial Trust - Preeminent single-tenant U.S. industrial REIT
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Last Discussed: Item # 1.D. Eliminated LXP - Sold 20+ at $11.57 (2/13/23 Post) I discussed the 2022 third quarter report in that post. SEC Filed Earnings Press Release I noted in that post that my consider to restart price was less than $10.
Dividend: Quarterly at $.125 per share ($.50 annually), slashed from $.177 in 2019 to $.1077 and then raised to $.12 effective for the 2022 first quarter payment. The $.12 rate was recently raised to $.125 effective for the 2023 first quarter payment. The current penny rate of $.125 is 29.38% below the pre-slash dividend.
LXP Industrial Trust (LXP) Dividend History | Seeking Alpha
Dividend History: Poor. I have lost my subdued enthusiasm for this stock after the dividend cut.
Yield at $9.56: 5.23%
Last Ex Dividend: 3/30/23
FFO per share = $.17, up from $.16 in the 2022 first quarter
Net Income to FFO Calculation:
I am not impressed with the historical AFFO per share numbers which have declined some over the past 5 years. The AFFO per share in the 2018 1st quarter was reported at $.25, SEC Filing at page 12 While I did not try to understand all of the reasons for the decline, I would attribute most of the decline, more of a guess, to the sale of office properties that started in 2018 and the ongoing transition to an industrial REIT which is an overall positive given the current issues with office properties. LXP Industrial Trust - Lexington Realty Trust Announces Disposition of 21 Office Assets for $726 Million to Joint Venture (9/4/18) Lexington Realty Trust Focuses on Single-Tenant Industrial Assets | Nareit
Until LXP is able to consistently increase AFFO per share, I would not anticipate much improvement in the share price or the dividend.
Dispositions: "During the three months ended March 31, 2023 and 2022, the Company disposed of its interests in various properties for an aggregate gross disposition price of $
LXP Realized Gains to Date: $1,957.89
Some Sell Discussions: I eliminated my position in response to the dividend slash mentioned above. Item # 1.B. Eliminated LXP - Sold 155+ at $9.46 (6/26/19 Post)(profit snapshot = $6.37); Item # 1.B. Sold 108+ LXP at $9.45-Used Commission Free Trade (2/6/19 Post)(profit snapshot = $79.9); Item # 1.C. Sold 137+ LXP at $9.08 and 53 at $9.06 In 2 Separate Roth IRA Accounts (9/12/18 Post)(profit snapshots = $914.11); Sold 100 LXP in Fidelity Roth IRA at $11.15 (1/6/17 comment- profit of $271.9 referenced with no snapshot); Item # 1 Sold 150 LXP in Vanguard Roth IRA-Update For Equity REIT Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha (profit snapshot = $80.19); Item # 2 Sold 250 LXP on Ex-Dividend Date in Two Taxable Accounts-Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshot = $224.65); Item # 1. Sold 54 LXP at $11.44 Vanguard Roth IRA (1/27/15 Post)(profit snapshot = $64.4); Item # 1 Sold 101+ LXP at $10.65 (10/28/14)(profit snapshot = $51.76)
Current Common Stock Position : 10 shares
Strategic Review: The shares received a boost when the Board announced that it was examining strategic alternatives. LXP Industrial stock climbs after launching review of strategic alternatives (NYSE:LXP) | Seeking Alpha (2/8/22) That effort was suspended in April 2022. LXP Industrial Trust Suspends Strategic Alternatives Process (4/8/22) The stock price was at $14.88 the day prior to the announcement and closed at $12.78 on 4/8/22.
Since LXP was under pressure from a stock owner, Land & Buildings, in 2021, this brief strategic review process may have been just to fend off making any management or board changes. Lexington Realty Trust Sends Letter to Shareholders (10/6/21) Over the long term, I expect LXP to be acquired by a larger REIT.
Bond Ownership: I own 3 LXP 4.4% SU bonds maturing on 6/15/24 which are generally lightly traded with large bid/ask spreads. FINRA Bond Detail (currently rated Baa2/BBB-). Some of those bonds were repurchased in a 2020 tender offer. LXP Industrial Trust - Lexington Realty Trust Announces Expiration and Final Results of Cash Tender Offers for up to $300.0 Million Combined Aggregate Principal Amount of its 4.25% Senior Notes due 2023 and 4.40% Senior Notes due 2024 (9/14/2020)
Mortgage debt was at $69.288M as of 3/31/23. That is a low number given the property valuations and relevant to the owner of senior unsecured debt.
Last Bond Offering (August 2021): $400M 2.375% SU Maturing in 2021, Prospectus
B. Added 5 HTBK at $6.9:
Quote: Heritage Commerce Corp.
52 week price range: $6.69 to $14.87
Cost: $34.5
Locations-Heritage Bank of Commerce
Investment Category: Regional Bank Basket Strategy
Last Discussed: Item # 2.A. Added 5 HTBK at $7.92 (4/22/23 Post)
Average cost per share: $9.25 (65 shares)
Dividend: Quarterly at $.13 per share ($.52 annually)
Yield at New AC : 5.62%
Last Ex Dividend: 5/10/23 (owned all as of)
5 year chart:
Last Earnings Report (Q/E 3/31/23): SEC Filing
Comparisons are to the 2022 first quarter.
E.P.S. $.31, up from $.21
"Profits increased 47% over the first quarter a year ago supported by strong year-over-year growth in net interest income and noninterest income, higher net interest margin and improved efficiency ratio."
NIM: 4.09%, up from 3.05%
Efficiency Ratio: 48.83%
NPL Ratio: .07%
NPA Ratio: .04%
Coverage ratio: 2,100.04%
ROA: 1.47%, up from .96%
ROTE: 16.71%, up from 12.47%
Tangible Book Value per share: $7.70, up from $6.96
Total Capital Ratio (operating bank): 14.7%, up from 13.9%
Loan to Deposit Ratio: 73.39%
"Total deposits increased by $54.9 million from the linked quarter to $4.445 billion at March 31, 2023."
"Noninterest-bearing demand deposits decreased ($267.6) million, or (15%), to $1.469 billion at March 31, 2023 from December 31, 2022, primarily due to clients moving noninterest-bearing deposits to the Bank’s interest-bearing and ICS deposits."
Liquidity information:
Owned Securities: Overall a positive compared to other banks that I follow.
Weighted average maturity: 4.82 years.
C. Restarted PFC - Bought 5 at $14.95:
Quote: Premier Financial Corp.
Cost: $74.75
PFC "is the holding company for Premier Bank and First Insurance Group. Premier Bank, headquartered in Youngstown, Ohio, operates 75 branches and 10 loan offices in Ohio, Michigan, Indiana, Pennsylvania and West Virginia (West Virginia office operates as Home Savings Bank."
52 Week Range: $13.77-$30.8 (high hit on 11/15/22)
Historical Prices & Data - Yahoo Finance
Investment Category: Regional Bank Basket Strategy
Last Discussed: Item # 3.K. Eliminated PFC - Sold 10 at $22.22 (1/1/21 Post)(profit snapshot = $45.94)-Item 1.I. Bought 5 at $18.2; 5 at $17.65 (11/13/20 Post)
Dividend: Quarterly at $.31 per share ($1.24 annually), last raised from $.30 effective for the 2023 first quarter payment.
Yield at $14.95: 8.29%
Last Ex Dividend: 5/4/23 (owned as of)
Rationale: The recent significant price drop made this stock slightly more appealing as an income investment and lowered the P/E to mid-single digits. The 2023 current consensus E.P.S. estimate is $2.44 as of 5/5/23, down from $2.96 in 2022. Using the $2.44 estimate for 2023, which may proved to be too high, the P/E at $14.95 is 6.12 with a 8.29% dividend yield.
My caution is due to what I view as an unsatisfactory first quarter report and the conditions that are currently negatively impacting regional banks. I have not had to wait long before buying a regional bank stock at a lower price. The negativity among Stock Jocks is about as bad, or worse depending on the stock, as in March 2020. The pandemic closing low for the S&P 500 was 2,237.4 on March 23, 2020, hitting intraday 2,191.86. PFC closed at $12.41 that day.
Last Earnings Report (Q/E 3/31/23):
Comparisons are to the 2022 1st quarter.
E.P.S. = $.51, down from $.73
Explanation for Part of the Decline:
First quarter 2023 results include the impact of the following items: i) equity investment losses of $1.4 million pre-tax or $0.03 per diluted share after-tax; ii) a negative mortgage pipeline hedge adjustment of $1.5 million pre-tax or $0.03 per diluted share after-tax; iii) a commercial loan charge-off related to an annual appraisal update of $1.5 million pre-tax or $0.03 per diluted share after-tax; and iv) timing-related expenses, including payroll taxes and benefits on annual incentive payouts, of $1.5 million pre-tax or $0.03 per diluted share after-tax. Excluding the impact of these items, first quarter 2023 earnings would be $0.63 per diluted share. Separately, expense savings planned for the remainder of the year represent an estimated $3.0 million pre-tax per quarter."
I am ignoring those adjustments to GAAP since they are related to conducting routine banking operations. Loans go bad and have to be charged off. Some bank security investments and hedges go bad and are sold for losses.
E.P.S. would have pressured to the downside, compared to the 2022 first quarter, due to the NIM deline.
NIM: 2.9%, down from 3.44%
Efficiency Ratio: 60.9%, up from 54.6% (going the wrong way)
NPA Ratio: .41%
Charge off Ratio:
ROTE: 13.02%
Tangible Book Value per share: $16.21
"Total non-brokered deposits at March 31, 2023, were $6.62 billion, compared with $6.76 billion at December 31, 2022, and $6.32 billion at March 31, 2022. At March 31, 2023, customer deposits increased $301.9 million on a year-over-year basis, or 5%. Brokered deposits were $154.9 million at March 31, 2023, compared to $143.7 million at December 31, 2022 and none at March 31, 2022."
"Uninsured deposits at March 31, 2023 were 32.3% of total deposits, or 19.6% adjusting for collateralized deposits, other uninsured deposits and internal company accounts. Total quantifiable liquidity sources totaled $2.45 billion, or 183.2% of adjusted uninsured deposits"
Cash and owned securities:
 |
| In Thousands |
D. Added to OPBK - Bought 5 at $8.25:
Quote: OP Bancorp
Cost: $41.25
52 week price range: $7.65-$13
OPBK Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Last Discussed: Item # 1.F. Added to OPBK - Bought 5 at $8.9; 5 at $8.65 (4/8/23 Post)
Average cost per share: $10.26 (120 shares)
Dividend: Quarterly at $.12 per share, last raised from $.10 effective for the 2022 third quarter payment.
OP Bancorp (OPBK) Dividend History | Seeking Alpha
Yield at New AC per share: 4.68%
Last Ex Dividend: 5/10/23 (owned 120 as of)
Last Earnings Report (Q/E 3/31/23): SEC Filing
Comparisons are to the 2022 first quarter.
Net income: $7.5M, down from $8.2M
E.P.S. = $.48, down from $.53
NIM: 3.56%, down from 4.12%
The margin squeeze was due to substantial increases in deposit rates compared to the 2022 first quarter.
Efficiency Ratio: 53.67%
NPL Ratio: .26%, up from .20%
Charge off Ratio: .02%
Coverage Ratio: 478%
ROE: 16.82%
Average Deposits: $1.8676+B, up from 1.57+B and up from $1.8367+B in the 2022 4th quarter.
E. Added 5 WTBA at $16.2:
Quote: West Bancorp Inc. (WTBA)
Cost: $81
52 week price range: $15.04-$26.26
Investment Category: Regional Bank Basket Strategy
WTBA Analyst Estimates | MarketWatch (1 analyst)
Average cost per share: $15.69 (20 shares)
Dividend: Quarterly at $.25 per share, last raised from $.24 effective for the 2022 first quarter payment.
West Bancorporation (WTBA) Dividend History-Nasdaq
Yield at New AC : 6.37%
Last Ex Dividend: 5/9/23 (owned all as of)
Last Earnings Report (Q/E 3/31/23):
Comparisons are to the 2022 first quarter.
E.P.S. at $.47, down from $.78
Consensus Estimate at $.43 per Schwab
NIM: 2.23%, down from 2.85%
"The rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in interest income from loan repricing and loan originations." WTBA is one of many regional banks that have struggled with the rapid FF increases.
Efficiency Ratio: 55.34%
NPA Ratio: .01%
ROE: 14.77%, down from 20.96%
Loan-to-deposit ratio: 98.49%
Total Capital Ratio: 13.16% (operating bank)
Deposits as of 3/31/23: $2.798+B, down from $2.88+B as of 12/31/22
Owned Securities: My interest rate risk management grade is "C".
 |
| P. 12 |
WTBA Realized Gains to Date: $1,307.87
Largest Gain: Item # 3.A. Sold 100 WTBA at $23.12-Used Commission Free Trade (4/29/17 Post)(profit snapshot = $1,146.24)-Bought 100 WTBA at $11.67 (6/29/13 Post)
F. Added to FHN - Bought 5 at $9.51:
Quote: First Horizon Corp. (FHN)
Cost: $47.55
52 week price range: $8.99-$24.92
FHN Analyst Estimates | MarketWatch (As of 5/12/23, the average 2023 E.P.S. estimate was at $1.84.)
Investment Category: Regional Bank Basket Strategy
The FHN share price received a major boost after Toronto Dominion (TD) offered to acquire it. TD to Expand in the Southeastern U.S. with Acquisition of First Horizon Since the share price had come close to $25 per share offer price, I elected to eliminate my position.
The decline to my $9.51 purchase price resulted from an announcement that TD and FHN had mutually agreed to call off the merger due to regulatory delay issues. TD Bank and First Horizon Mutually Agree to Terminate Merger Agreement - May 4, 2023; TD Bank-First Horizon meltdown has traders scrambling for protection | Financial Post TD agreed to pay $200M in cash to FHN plus a $25M reimbursement for costs.
Last Sell Discussions: Item # 1. Eliminated FHN - Sold 5 at $24.38; 20+ at $24.47; and 47+ at $24.38 (11/15/22 Post)(profit snapshot = $1,071.04); Item # 1. Pared FHN in Fidelity Account - Sold 450 at $24.33 (11/1/22 Post)(profit snapshot = $1,261.77); Item # 5.K. Pared FHN in Fidelity Taxable Account - Sold 26+ at $24.02 and Item # 5.L. Pared FHN in Schwab Account - Sold 10 at $24.15 (10/25/22 Post)(profit snapshots = $107)
I had previously placed about a $15 to $17 fair value price range for FHN as a standalone company. That assessment was based in part on the trading range before the merger announcement and partly on what I viewed as a reasonable P/E multiple discounted by a poor dividend history. Item # 2.G. Restarted FHN - Bought 5 at $16.72; 5 at $15.9; 5 at $14.71 (3/19/23) I discussed the 2022 4th quarter report in that post. SEC Filed Earnings Press Release I also discussed FHN's deposits and investment securities in tha post.
My range is lower now given where comparable regional bank stocks are currently trading and the heightened levels of risks associated with this sector due to the three recent mid-sized bank failures. Given that uncertainty, my FV range is now $12 to $14 and that assumes no more than a mild two negative real GDP quarters within the next year and no deposit runs that significantly destabilize the bank.
Average cost per share: $14.21 (20 shares)
Dividend: Quarterly at $.15 per share, last raised from $.14 effective for the 2020 first quarter. The dividend was slashed to $.01 from $.20 in 2011 first quarter.
First Horizon Corporation (FHN) Dividend History | Seeking Alpha
Dividend History: Poor.
I am not anticipating a dividend increase prior to 2025.
The reasons are the current turmoil in the regional bank sector, the bank's unrealized losses on its security positions, rising costs of deposits and debt refinancing costs, and the existence of almost $500M in convertible preferred stock, with a $25 conversion price, that was sold to TD.
With the merger falling through, the preferred dividend is apparently tied to the common stock penny rate. (see SEC Filing, "Holders of Series G Preferred Stock shall not be entitled to receive any dividends in respect of such shares; provided that in the event that the Merger Agreement is terminated in accordance with its terms but a Conversion Event has not yet occurred, if the Board of Directors or any duly authorized committee thereof authorizes and declares a dividend on the Corporation’s Common Stock (a “Common Dividend”), the Board of Directors or such committee shall declare and authorize an equivalent dividend on any Series G Preferred Stock then outstanding"
I am interpreting that provision to require a Series G dividend at the common penny rate applied to the number of common shares that would be owned if the conversion right was exercised, which I calculate at 4,000 shares of common for each 1 Series G preferred stock with 5,574.136 shares issued to TD. So why increase the dividend on that busted convertible?
Yield at $14.21 AC = 4.22%
Next Ex Dividend: 6/15/23
Last Earnings Report (Q/E 3/30/23) SEC Filing
Comparisons are to the 2022 first quarter.
Net income of $243M
GAAP E.P.S. = $.43
Non-GAAP E.P.S. $.45, up from $.38
The non-GAAP earnings exclude expenses related to the TD merger and integration expenses of a previous FHN acquisition.
NIM: 3.87%, up from 2.37%
Efficiency ratio: 55.65%, adjusted to 52.95%
NPL Ratio: .72%, up from .6%
Charge off ratio: .11%
Coverage ratio: 189%
Adjusted ROTE = 18.6%, up from 14.07%
Tangible Book value per share: $10.89, up from $10.46
Average deposits of $62.2 billion decreased $2.7 billion, or 4%, driven by a $2.7 billion decrease in DDA and other noninterest-bearing deposits. Total deposit costs of 111 basis points increased 42 basis points.
Loan-to-Deposit Ratio at 93.33%. That could be troubling when and if there is a deposit run.
Interest Earning Assets vs. Liabilities:
G. Started EGBN - Bought 5 at $18.87; 1 at $17.61; 1 at $16.98:
Quote: Eagle Bancorp Inc. (EGBN)
Cost: $128.92
52 week price range: $16.82 - $51.96
These are my first ever purchases.
EGBN is the holding company for Eagle Bank, headquartered in Bethesda, Maryland. Eagle Bank has 15 branches in suburban Maryland, D.C. and Northern Virginia.
Cost: $111.94
EGBN Analyst Estimates | MarketWatch
3 Year Financial Data:
 |
| Page 44, Annual Report |
Average cost per share: $18.42 (7 shares)
Dividend: Quarterly at $.45 per share ($1.8 annually)
Yield at AC: 9.77%
Last Ex Dividend Date: 4/4/23
Last Earnings Report (Q/E 3/31/23): SEC Filing
I started small based on the significant E.P.S. decline in the 2023 1st quarter report, meaningful deposit flight in the quarter, higher bank borrowing and deposit costs, and the high level of uninsured deposits.
The primary reasons for starting a position are the dividend yield; low TTM P/E; excellent Charge off, NPA and NPL ratios; a good efficiency ratio; and a substantial discount to tangible book value per share.
Comparisons are to the 2022 1st quarter.
Net Income: $24.2M, down from $45.7M
E.P.S. = $.78, down from $1.42
NIM: 2.77%, up from 2.65% but down from 3.14% in the 2022 4th quarter.
Efficiency Ratio: 51.6%
NPA Ratio: .08%, down form .23%
NPL Ratio: .09%, down from .33%
Charge off ratio: .05%
Tangible Book Value per share: $36.67
Uninsured Deposits: 42.9% of the total
Cost of funds: 2.5%, up from 1.59% in the 2022 4th quarter and .26% in the 2022 first quarter.
"The funding mix changed as deposits at quarter-end were $7.5 billion, down $1.2 billion from the prior quarter-end. Short-term borrowings were $2.1 billion, up $1.1 billion from the prior quarter-end."
"Aggregate borrowing capacity at quarter-end was $1.7 billion, which consists of $689 million of additional aggregate capacity to borrow from the Federal Home Loan Bank of Atlanta ("FHLB") and Bank Term Funding Program ("BTFP") on assets that have been pledged, and unencumbered securities totaling approximately $1.0 billion available for pledging to the FHLB or the BTFP."
I noticed that Eagle Bank recently used Fidelity to offer CDs, with various maturity terms and yields at over 5%. Small banks can quickly mitigate uninsured deposit withdrawals by offering competitive CD rates through brokers.
This earnings report was released on 4/19/23 after the close. The stock closed at $31.5 on 4/19 and at $25.36 the next day. The close on 3/1/23 was at $43.16. The current 52 week high is $51.96 hit intraday on 8/18/22.
Investment Securities:
Noninterest bearing deposits: $2.2477+B or 30.12% of the total. (page 22)
Compared to other banks that I follow, the duration is much shorter with large amounts due within 1 year:
H. Added to OCSL - Bought 2 at $18.08:
Quote: Oaktree Specialty Lending Corp. (OCSL) - Externally Managed BDC
Cost: $36.15
Last Discussed: Item # 1.C. Added 5 OCSL at $18.53(4/1/23 Post)
Average cost per share: $19.33 (22 shares)
Dividend: Quarterly at $.55 per share ($2.2 annually)
Oaktree Specialty Lending Corporation (OCSL) Dividend History | Seeking Alpha
Yield at AC = 11.38%
Next Ex Dividend: 6/14/23
Last Earnings Report (Q/E 3/31/23): SEC Filed Press Release and SEC Filed Slide Presentation
Adjusted NII per share: $.62
Consensus estimate at $.623 per Fidelity.
Net Asset Value per share: $19.66
"As of March 31, 2023, there were two investments on non-accrual status, which represented 2.5% and 2.4% of the debt portfolio at cost and fair value, respectively. Both of these investments were placed on non-accrual during the quarter following what we believe to be isolated events, and the Company expects to resolve each situation in the near-term."
Weighted average yield on debt investments = 11.9%
Number of portfolio companies: 165
% Floating: 88%
10-Q for the Q/E 3/31/23 (summary of investments starts at page 6)
I. Added to HIW - Bought 1 at $22.04; 1 at $21.32; 3 at $21.25; 5 at $20.7:
Cost: $210.61
52 week price range: $19.45 - $40.41
Properties are located in the southeast.
 |
| As of 12/31/22 |
 |
| As of 3/31/23 |
Top 20 Tenants:
 |
| As of 3/31/23 |
Website: Highwoods
Last Discussed: Item # 1.A. Added to HIW - Bought 1 at $22.38; 1 at $21.74; 2 at $21.56; 1 at $21; 1 at $20.66; 1 at $19.86 (3/25/23 Post) I discussed the 2022 4th quarter report in that post.
Last Sell Discussion: Item # 1.I. Eliminated HIW - Sold 7 at $47.22 (2/3/22 Post)
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Average cost per share: $25.72 (35+ shares)
Dividend: Quarterly at $.50 per share
Yield at AC per share: 7.78%
Next Ex Dividend: 5/19/23
Last Earnings Report (Q/E 3/31/23): HIW-Announces-First-Quarter-2023-Results.pdf and Highwoods-Q1-2023-Supplemental-Operating-Statistics.pdf
FFO per share: $.98, down from $1.03
FFO (available to common): $105.714M
Occupancy: 89.6%
2023 Outlook: FFO per share $3.68-$3.82
I could not find a CAD number. Some information that would allow a calculation is provided.
Straight Line Rent Revenue (non-cash): $8.748M (-)
Share Based compensation: $4.545M (+)
Amortization of debt issuance costs: $1.161M (+)
Amortization of lease incentives: $.714M (+)
"Non-incremental revenue generating capital expenditures incurred" = $28.921M (-)
If I made those adjustments to FFO, the number would be reduced from $105.714 to $74.435M which exceeds the total common quarterly dividend paid during the quarter of $53.8M.
J. Added to NTB - Bought 1 at $23.4:
Quote: Bank of Butterfield Ltd. (NTB)
NTB Analyst Estimates | MarketWatch (as of 5/12, the 2023 average E.P.S. estimate was at $4.78)
NTB SEC Filings (foreign company forms)
2022 Annual Report (2022 diluted E.P.S. at $4.29)
Investor Relations: Butterfield Group
Investment Category: Regional Bank Basket Strategy
Average cost per share: $24.15 (19 shares)
Dividend: Quarterly at $.44 per share ($1.76 annually)
Yield at AC = 7.29%
Last Ex Dividend: 5/5/23 (owned all as of)
Last Earnings Report (Q/E 3/31/23): SEC Filed Press Release
Net income of $62.2M or $1.24 per share, up from $.89 in the 2022 first quarter
NIM: 2.88%, up from 2.03% in the 2022 first quarter
Efficiency Ratio: 56%
NPL Ratio: 1.1%
NPA Ratio: .6%
Coverage ratio: .5%
ROTE: 30.5%
Tangible Book Value per share: $17,32
Investment Securities and Deposits:
Sell Discussions: Item # 3.E. Pared NTB-Sold Highest Cost 10 Shares in Fidelity Account at $32.5 (12/5/2020 Post); Item # 1.J. Pared NTB-Sold 2 at $35 (2/6/21 Post)
K. Added to TFC - Bought 1 at $26.33:
Quote: Truist Financial Corp. (TFC)
Cost: $26.33
52 week price range: $25.56-$52.22
This super regional bank holding company was formerly known as BB&T and traded under the BBT symbol.
TFC Analyst Estimates | MarketWatch (As of 5/12/23, the average 2023 E.P.S. estimate was at $4.38)
Investment Category: Regional Bank Basket Strategy
Last Discussed: Item # 3.J. Pared TFC- Sold 2 at $48.4 - Highest Cost Lot (12/19/20 Post)
Last Buy Discussion: Item # 2.B. Restarted TFC Bought 2 at $30.87; 1 at $28,85; 1 at $28.53; 1 at $27.45; 2 at $26.8 (5/30/20 Post)
Average cost per share: $27.46 (6 shares)
Dividend: Quarterly at $.52 per share ($2.08 annually), last raised from $.48 effective for the 2022 third quarter payment.
Truist Financial Corporation (TFC) Dividend History | Seeking Alpha
Yield at New AC = 7.57%
Last Ex Dividend: 5/11/23 (owned all as of)
5 year chart: Price near 2022 March pandemic low.
Last Earnings Report (Q/E 3/31/23):
SEC Filed Press Release and Supplemental
Net Income = $1.41B or $1.04 per share
Non-GAAP E.P.S. = $1.08, excludes merger related and restructuring charges.
NIM: 3.17%, up from 2.76% in the 2022 first quarter
Adjusted efficiency ratio: 56.8%
NPA Ratio: .36%
Charge off ratio: .37%
ROTC: 24.1%
Average Deposits: $408+B, down from $413+B in th 2022 4th quarter
Sell Discussions:
Item # 1. A. Sold 71+ BBT at $50.72 (7/25/18 Post)(profit snapshot = $1,330.82)
Item # 1. A. Sold Highest Cost 50 BBT Shares at $55.45 (2/8/18 Post)(profit snapshot = $1,061.02)
Item # 3.A. Sold Highest Cost 50 BBT Shares at $47.24 (3/28/17 Post)(profit snapshot = $568.45)
Realized Gains TFC/BBT to Date: $3,012.75
L. Added to SBRA - Bought 1 at $11.28:
Quote: Sabra Healthcare REIT Inc. (SBRA)
"As of March 31, 2023, Sabra’s investment portfolio included 396 real estate properties held for investment (consisting of (i) 258 Skilled Nursing/Transitional Care facilities, (ii) 47 senior housing communities (“Senior Housing - Leased”), (iii) 59 senior housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing - Managed”), (iv) 17 Behavioral Health facilities and (v) 15 Specialty Hospitals and Other facilities), 13 investments in loans receivable (consisting of two mortgage loans and 11 other loans), six preferred equity investments and three investments in unconsolidated joint ventures. As of March 31, 2023, Sabra’s real estate properties held for investment included 39,264 beds/units, spread across the United States and Canada."
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Average cost per share: $15.03 (79+ shares)
Dividend: Quarterly at $.30 per share, cut from $.45 effective for the 2020 second quarter. Nursing home REITs were severely impacted by the pandemic.
Sabra Health Care REIT, Inc. (SBRA) Dividend History | Seeking Alpha
Yield $15.03 AC: 7.98%
Yield at $11.28: 10.64%
Last Ex Dividend: 5/15/23 (owned all as of)
Last Earnings Report (Q/E 3/31/23):
SEC Filed Press Release and Supplemental
AFFO Per share: $.33
Total Revenues: $161.324M
Net Income to AFFO Calculation:
"As of March 31, 2023, we had approximately $954.0 million of liquidity, consisting of unrestricted cash and cash equivalents of $33.5 million and available borrowings of $920.4 million under our revolving credit facility. As of March 31, 2023, we also had $500.0 million available under the ATM program."
4. Small Ball Buy - First Mortgage Exchange Traded Bond:
A. Added to EAI - Bought 5 at $22.85-Fidelity Taxable Account:
Entergy Arkansas is an operating subsidiary of the Entergy Corp. (ETR) utility holding company
The ETR SEC filings will include results from its operating subsidiaries.
ETR 10-Q for the Q/E 3/31/23 (Entergy Arkansas quarterly results at page 80)
Investment Category: Income Generation with First Mortgage Baby Bond, part of the Exchange Traded Bond category.
I own this security in several accounts. Ownership acts as a pacifier for the Old Geezer.
Maximum Position All Accounts: 300 shares
Last Discussed: Item # 3.A. Added to EAI in Schwab Taxable Account - Bought 2 at $20.23 (1/10/23 Post); Item # 7.H. Added to EAI in Vanguard Taxable Account - Bought 5 at $20.82 (11/15/22 Post)
First Mortgage Lien on substantially all assets.
Par Value: $25
Maturity: 9/1/66
Issuer Optional Redemption: On or after 9/1/2021 at par value + accrued and unpaid interest.
Quarterly interest payments.
Trades Flat.
Credit Ratings: A/A2
Average cost per share this account: $23.38 (50 shares)
Yield at AC = 5.21%
Next Ex Interest Date: 5/30/23
I am not concerned about credit risk. Even without the first mortgage lien, I would not be concerned about this electric utility paying interest.
The concern is interest rate risk given the potentially long maturity.
5. Small Ball Sales:
Proceeds: $511.61
I am continuing to eliminate stocks and stock funds which do not pay dividends or have very low yields.
I am placing even more emphasis on current income generation.
A. Eliminated IMGN - Sold 10 at $13.47:
Quote: Immunogen Inc. (IMGN)
Website: ImmunoGen | Target a Better Now | ADC Technology-Focused Cancer Treatment
Our Pipeline | ImmunoGen for ADC Technology-focused Cancer Treatment
IMGN Analyst Estimates | MarketWatch (as of 5/12/23, the 2023 consensus E.P.S. was at -$.53 and at -$.22 in 2024, with the company turning profitable in 2025 with a consensus E.P.S. estimate at $.34)
Profit Snapshot: +$77.51
Investment Category: Blackjack Hand, part of the Lottery Ticket Basket Strategy.
I won the blackjack hand.
A common problem among clinical stage biotech companies is that capital is devoured for an extended period that requires a constant stream of dilutive share offerings.
As of 3/31/23, IMGN had 258.848M shares outstanding up from 98.068M as of 12/31/17.
Debt will generally increase in preparation for a commercial launch which is the case with IMGN.
For a clinical stage drug company moving into its first commercial launch, there will be a substantial increase in employee and other costs as well.
Another common problem is that capital is frequently raised by selling the right to receive royalties. The capital is then burned to further a clinical stage compound. IMGN sold its right to receive royalties for KADCYLA, and that money is now gone:
Last Discussed: Item # 1.E. Restarted LOTTO IMGN - Bought 5 at $5.95; 5 at $5.49 (10/1/21 Post)
The shares popped on 5/3/23 in response to a positive Phase 3 trial for IMGN's ovarian cancer drug. ELAHERE® Demonstrates Overall Survival Benefit in the Phase 3 MIRASOL Trial in Patients with FRα-Positive Platinum-Resistant Ovarian Cancer
The shares closed at $5.2 on 5/2/23 and at $12.26 the next day with volume going from 9.2+M to 105.7+M shares.
In response, IMGN sold 26M shares, plus the standard greenshoe, at a public offering price of $12.5. Prospectus
Last Loss Report (Q/E 3/31/23): SEC Filing Press Release
Net loss of $41.014M or $.16 per share.
"Generated $29.5 million in ELAHERE® (mirvetuximab soravtansine-gynx) net sales for the quarter ended March 31, 2023, the first full quarter of launch following approval in November of 2022"
"ELAHERE is indicated for the treatment of adult patients with folate receptor-alpha (FRα) positive, platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have received one to three prior systemic treatment regimens. Select patients for therapy based on an FDA-approved test."
The FDA gave marketing approval in November 2022 subject to a confirmatory trial. As a result of the results referenced above, IMGN plans to file for regular approval soon.
"ImmunoGen had $201.2 million in cash and cash equivalents as of March 31, 2023, compared with $275.1 million as of December 31, 2022. Cash used in operations was $73.7 million for the first three months of 2023 compared with cash used in operations of $41.4 million for the same period in 2022. Capital expenditures were $0.2 million and $0.3 for the first three months of 2023 and 2022, respectively. Earlier this month, the Company entered into a term loan credit facility for up to $175 million with entities managed by Pharmakon and drew the initial tranche of $75 million upon execution of the facility."
Prior Trades: Item # 2.H. Eliminated IMGN Again-Sold 15 at $10.5 (3/16/21 Post)(profit snapshot = $71.75); Item # 3 Sold 50 IMGN at $9.58 (2/12/2018 Post)(profit snapshot = $383.48); Item # 3.C. Sold 100 IMGN at $3.55 (3/8/17 Post)(profit snapshot = $77.48)
IMGN Realized Gains to Date: $610.22
B. Eliminated IHI - Sold 2+ at $56.02:
Quote: iShares U.S. Medical Devices ETF Overview
Sponsor's website: iShares U.S. Medical Devices ETF | IHI
Expense Ratio: .39%
Profit Snapshot: +$6.13
10 Ten Holdings as of 5/11/23:
Of those stocks, I have a small ball position in MDT.
Dividends: Quarterly at a variable rate
Last 4 Dividends: $.25 per share
Yield at $56.2 using $.25: .44%
Sponsor Calculation of TTM P/E = 36.39
IHI-Morningstar (currently rated 5 stars)
Annual Average 5 year total return through 5/12/23: +11.47%
A comparable mutual fund is the Fidelity® Select Medical Tech and Devcs Fund Stock Price | Morningstar, which had a 5 year average total return of 11.12%.
C. Eliminated FIDU - Sold 5 at $52.22:
Quote: Fidelity MSCI Industrials Index ETF Overview
Profit Snapshot: +$26
Last Discussed: Item # 5.G. Pared FIDU - Sold 1 at $51.77 (12/6/22 Post)
Dividends: Quarterly at a variable rate
Last 4 Dividends: $.77 per share
Yield at $52.22 using $.77: 1.47%
6. CDs - FDIC Insured:
A. Bought 2 Eaglebank 5.1% CDs Maturing on 11/23/23:
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Interest paid monthly.
I discussed starting a small ball position in the common stock in Item #3.G. above.
B. Bought 2 Wells Fargo 5% CDs Maturing on 11/12/24:
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Interest paid monthly.
C. Bought 2 Associated Bank 5.1% CDs Maturing on 8/22/23:
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Issuer: Operating bank for the bank holding company Associated Banc-Corp. (ASB)
Interest paid at maturity.
D. Bought 1 Cathay Bank 5.15% CD Maturing on 11/20/23:
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Issuer: Operating Bank of the bank holding company Cathay General Bancorp (CATY)
I have a small ball position in the common stock.
7. Treasury Bill Auctions:
A. Bought 2 Treasury Bills at 5/10/23 Auction:
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Matures on 9/12/23
119 Day Bill
Interest = $33.06
Investment Rate: 5.169%
8. Cash Flow Fidelity Account 5/15/23:
Principal Amount Maturing by Month:
Remaining May 2023: $32,000
June: $60,000
July: $51,000
Reinvestment of those proceeds will generate about $3,000 more in annual income than their current coupons.
The Northern States Power bond that matures on 5/15 is a $1,000 par value first mortgage bond.
The Public Service of Colorado and Public Service E&G interest payment are from mortgage bonds issued by electric utilities.
The bank CD interest payments are made monthly. Two of the SU bonds pay monthly.
Disclaimer: I am not a financial advisor, but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sale of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals, and situational risks. I can only make that kind of assessment for myself and my family members.
