Category: Earnings

I have been watching the earnings releases this past week as I always suspected we would see write-offs increase–previous earnings were always highly suspect to me–i.e. too good to be true.

Now we are seeing some items come home to roost–not necessary threatening to their existence, but certainly meaningful.

A few of the smaller banks that have preferreds outstanding and have released earnings are below.

Midland States State Bancorp (MSBI) which has a 7.75% fixed rate reset perpetual preferred (MSBIP) outstanding reported a $55 million net loss. This banks has some really troubling loan portfolios and took sizable write-offs. Seems to me that with the sizable write-offs that the banker was not being totally upfront in previous reporting. Preferred shares are selling off this morning

Dime Community Bank (DCOM) announced earning which were in the green, BUT just barely at $22 million–virtually nothing for a $13 billion asset bank. The bank had charges for ‘repositioning’ their investment portfolio. Repositioning is now the term being used by all the banks that screwed up by holding low, low coupon investments which were massively hit in the interest rate runup. Many of these banks are selling the low coupons for losses and buying current market rate securities.

Customers Bancorp (CUBI) also remained in the green–with a net income of $23 million–again a tiny profit for a $22 billion in assets bank. CUBI has 2 fixed to floating preferreds outstanding which are paying coupons in the 9-10% area.

OceanFirst and Valley National also reported–and like most bankers earnings are not stellar–but their reports don’t set off alarms.

All of the bankers have their hands full in trying to navigate the current interest rate environment and sometimes rocky reports can create some bargains. (MBSIP) is off 75 cents this morning which may be ‘on sale’ depending on how you view prospects moving forward.

Giant CHS has announced earnings today for the 1st quarter of 2025 and as expected they came in somewhat soft. Net income was $244 million compared to $523 million in the year ago quarter.

While the ag sector came in softer than the year ago quarter the big soft fall came from the companies oil refining sector where the company had net income of just $20 million–$247 million less than a year ago.

I had written a few times on my low expectations on earnings for this quarter (and probably next) because of the difficult ag economy–and additionally because ag giant Cargill (privately owned) had reported on the softness in their business and they are in virtually every commodity in the world.

While the earnings were announced during market hours they had no affect whatsoever on their 5 outstanding preferred issues.

Earnings are here.

Well we have been getting earnings reports from the big banks, but I am most interested in the small bank reports. While I exited most of my small bank holdings (too early of course) I still have a couple holdings left and thus have an interest.

I’ll be looking for new allowances for loan losses and commentary on the commercial real estate segment from these banks–this would include any issues with multi family lending which seems to be a favorite of the small community and regional bankers.

It is likely we will see some commentary on the special assessments from the FDIC since all bankers are paying these because of previous bank failures and no doubt we will find out how their net interest income margins are holding up. I have some concerns that these banks have been kicking the can down the road on some bad loans–renegotiating etc ‘hoping’ for a miracle. We’ll see.

Most of the small banks will be reporting on the 23rd, 24th and 25th.

Large business development company (BDC) Prospect Capital (PSEC) is on deck to announce earnings for the quarter ending 6/30/2022 on Monday.

PSEC is an unloved BDC, but is large, with $7.5 billion in assets and had rescheduled their report release from the 24th to the 29th.

I am watching the company balance sheet for changes in net assets as I have noted some weakness in some other BDC’s in recent earnings releases primarily because of ‘unrealized’ and ‘realized’ losses which have contributed to reductions in net asset values. PSEC has marked up assets substantially in recent quarters and it will be interesting to see what they have done last quarter–BDC Buzz believes that PSEC uses pretty aggressive valuations when assigning values to Level 3 assets (values of assets which can not be directly observed–I like to call them ‘trust us’ assets).

PSEC has a 5.35% perpetual preferred outstanding (PSEC-A) as well as a 5.50% non exchange traded preferred.

BDC Buzz has an article on Prospect which was posted on 8/21/2022 which outlines the good, the bad and the ugly of this unloved BDC.

Giant agriculture cooperative CHS Inc. announced earnings today.

Earnings were way above last years quarter with net income of $219 million compared to last years quarter of a $38 million dollar loss. Finally (after years of marginal earnings in a business they had invested billions in) the investment in nitrogen production paid off with pretax income of $154 million from that business. 6 month net income was over $600 million compared to $31 million last year.

Of course CHS has 5 high yield preferred outstanding–all of which remain at high prices–they can be seen here.

The earnings release can be read here.

The 10Q is here.