Author: Tim McPartland

I worry–sometimes way too much about things that never come to pass–in this case the regional and community bankers. I have mentioned this numerous times – in spite of decent earnings from most of the bankers there are ‘surprises’ waiting out there. I guess the New York Community Bank (NYCB) situation was one of them–but there are more of them to come. This is one of those situations that one can’t find out where the issues are, but know they are out there. Anyway I decided to exit my last little bits of banker securities–then I can wait and see if something develops that hammers banker issues lower creating true bargains.

So I sold the last tranche of my Bridgewater Bancshares 5.875% preferred (BWBBP) at $ 19.10 – about a 20% gain which includes a dividend or two. I also sold small positions in Customers Bancorp–the 6% fixed to floating rate preferred issue (CUBI-F) and the 5.375% baby bond (CUBB). The Customers Bancorp holdings were sold at essentially a breakeven–I collected the coupon along the way–no capital gains.

So once again today we have little economic news to drive markets, although I always like to see 1st time unemployment claims. We also have Wholesale Inventories released–not likely to move markets. The 10 year treasury is still trading in the 4.14% area where it will likely remain until next week when we get market moving data–the consumer price index (CPI) and the producer price index (PPI). Whether rates get shoved above 4.2% or below 3.8% no one knows–maybe rates stay in this range out until May which would suit me fine.

$25/share preferreds and baby bonds continue with little movement—up a little and down a little. We have grown accustomed to daily capital gains–those days are gone until we see Fed Funds rate cuts and then only if long term rates follow short rates lower.

Looks like a quiet equity day with futures +/- .1%. Let’s get to going and see if markets move more than I think they will.

Below are press releases from companys with preferred stock and/or baby bonds outstanding–or just news of a general interest.

TEN Ltd. Declares Dividend on its Series E Cumulative Perpetual Preferred Shares

U-Haul Holding Company Reports Third Quarter Fiscal 2024 Financial Results

TOP Ships Inc. Announces Vessel Refinancings and Full Redemption of Series F Perpetual Preferred Shares Held by Related Party

Brookfield Asset Management Announces Strong Fourth Quarter Results and 19% Dividend Increase

Medallion Financial Corp. to Report 2023 Fourth Quarter and Full-Year Results on Tuesday, February 20, 2024

Costamare Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2023

TPG RE Finance Trust, Inc. Announces Fourth Quarter and Full Year 2023 Earnings Release and Conference Call Dates

Annaly Capital Management, Inc. Reports 4th Quarter 2023 Results

Terreno Realty Corporation Declares Quarterly Dividend and Files Annual 2023 Financial Statements

Ares Capital Corporation Announces December 31, 2023 Financial Results and Declares First Quarter 2024 Dividend of $0.48 Per Share

Rithm Capital Corp. Announces Fourth Quarter and Full Year 2023 Results

NiSource to Release Financial Results and Host Conference Call on February 21

Once again the 6.375% preferred shares of New York Community Bank (NYCB-A) are being crushed – trading around $14.65/share right now. Of course the dividends are non-cumulative which always leads to investors being concerned with any potential dividend suspension.

We also have the ghosts of Silicon Valley Bank etc which puts an inordinate amount of fear into investors–don’t want to go to zero. I don’t think this will happen, but deposits can move quickly–one never knows what will happen.

For whatever reason I decided to try to check out AmTrust Financial (private) a bit last night. As most of you know AmTrust is an insurance company that went private in late 2018 and then delisted their preferreds and baby bonds. All shares are now traded on the OTC markets. Dividends have been paid on the delisted securities consistently for the last 5 years and they just announced preferred dividends on Monday.

AmTrust management has always been viewed as a bit on the ‘shady’ side (Zyskind and Karfunkel), but what little data I can find on their financials seems to indicate they are doing quite well and AM Best (the insurance company ratings agency) has them at A- (excellent).

I am guessing we have some holders of these preferreds and baby bonds on this website and I am considering taking a tiny position in the baby bonds–current yield is around 12%–at $15.50/share it might present adequate risk reward for just a tiny position. Just a thought.

The 10 year treasury closed at 4.09% yesterday and today is trading at 4.12%–it seems like we will remain in this area for the time being. There simply has been no economic news recently to move rates too much and Fed yakkers have been out in force backing Fed chair Powell in his comments that rate cuts are NOT inevitable in March. Plenty of data is yet to come which may change the rate cut scenario. The balance of this week has no meaningful economic releases–next week we get the consumer price index (CPI) and the producer price index (PPI)–potential fireworks.

Equity markets are kind of quiet this morning–I expect that just like interest rates they are awaiting news. The movement in share prices thus far this week are very company specific as we continue to get earnings releases.

I continue to sit on my hands–maybe I taste the AmTrust Financial baby bonds–I’ll dig around a bit more on them–we’ll see.

Now that we have maybe pushed out reductions in the Fed Funds rate until at least May (well who knows for sure?) it seems that we will have some delayed pressure to move share prices up on baby bonds and preferreds. Seems to me that at this time with interest rates some elevated into the 4.16% area we will have some difficulty moving share prices higher for income issues.

My money markets funds are showing a current yield in the 5.3% area while eTrade has CDs as high as 5.25% for 9 month and 1 year issues–5.15% for the 3 month. Of course folks can always find rates a bit higher in various places. These rates need to move some lower to get more movement into alternative investments (i.e. preferreds and baby bonds). With the Fed Funds rate in the 5.38-5.50% area there is no reason to think we will see lower (or much lower) money market or CD rates.

So the bottom line is that capital gains of any magnitude are on ‘hold’ for now (except special circumstances)- we need competing investments to move to lower yields to force folks to go out ‘yield hunting’ in preferreds and baby bonds.