Tag: Regional Banks

Accounting for uncertainty: How local banks and CPAs partner to deliver results | Long Island Business News
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In Brief:
- Rising rates and real estate risks have pressured regional banks
- Fed rate cuts could renew investor interest in community lenders
- CPAs play a key role in connecting businesses with flexible financing
- Case studies show local banks winning clients from larger institutions
- Collaboration helps businesses secure favorable terms and reduce risk
While worrisome economic forecasts sow doubts among investors and the Federal Reserve steps in to reverse its course of hiking interest rates, banks draw upon accounting firms for their expertise in advising clients. It’s a relationship that leverages valuable information about clients’ finances to help steer them toward optimal solutions for their businesses. However, regional bank leaders suggest that when seeking financing from a bank, size matters.

During periods of high interest rates, big banks tend to draw a larger share of investment than smaller local banks. “Community and regional banks have been harder hit by the rising rate environment keeping investors on the sidelines,” says John Buran, CEO of Flushing Bank. “In addition, concerns over commercial real estate exposure in community and regional banks have caused investors to be wary of the category, keeping those banks undervalued.”

Data shows that in the near term, larger banks may be better-equipped to handle the current economic climate. According to a recent Deloitte outlook, regional banks are “possibly facing the brunt of potential loan losses” from concentrated exposure to the distressed commercial real estate sector. Compared to banks with assets of more than $250 billion, mid-size and regional banks (with assets between $10 billion to $100 billion) have almost four times the amount of commercial real estate loans as a percentage of risk-based capital.

Fortunately, the tide is turning for regional banks, and a wave of investment capital could be on the horizon, especially if the Federal Reserve continues to lower rates. “The reduced rates by the Fed makes improved earnings more likely,” Buran says, “making renewed investment in the community and regional banking space attractive.”

Even though analysts have expressed concerns over midsize and regional banks’ balance sheets, Buran touts the advantages of working with local banks that are often glossed-over by industry reports. “Community banks tend to have a more streamlined credit approval process that allows them to be more timely in their responses to customers,” he notes. “They tend also to be more flexible with terms, rates, and conditions in their offers to respond to customer needs.”

Besides offering banks access to clients, CPAs help facilitate transactions by communicating the strategic benefits of working with regional banks.

“Accounting and advisory firms work with us to explain the advantages of various options to the client,” says Buran. “We engage with the professional firms to provide their clients with various rate options such as floating or fixed rates. We also offer swaps that help customers lock into rates long term with no volatility.”

This engagement with accountants has already faciltated Flushing Bank to peel away a client from a larger bank. “We recently were referred by a CPA firm to a client who is a specialty flooring contractor that needed to replace their current bank,” Buran says. “Their bank was recently taken over by a much larger financial institution and the contracting company felt they were no longer serviced appropriately. We were able to take over the full relationship by providing cash management, deposit accounts and an owner-occupied mortgage.”

For businesses that are expanding significantly, eyeing a merger or an acquisition or considering any other major transactions, accounting firms can offer crucial help in organizing financial strategies that are most beneficial to clients, given their comprehensive understanding of the client’s own business and the banking products offered during times of fluctuating interest.

“During periods of rate volatility, we actively engage with banks through both group meetings and individual one-on-one interactions,” says James Aspromonti, managing director at CBIZ in Melville. “These discussions provide an open forum to exchange real-time insights on market trends, lending practices and credit risk perspectives. This collaborative engagement ensures that we can better advise our clients and keep them informed about current market dynamics and the outlook from key banking partners.”

Putting this collaboration into practice has facilitated owners to minimize risk exposure and choose financing agreements that promote optimal flexibility. “We recently assisted a small business client who was considering the acquisition of another company,” Aspromonti explains. “Our role involved working closely with the client, the target company and their bank to determine the optimal amount and structure for the necessary financing. This collaboration was instrumental in evaluating different financing options, negotiating favorable terms, and ensuring that the agreements were both practical and aligned with the client’s long-term goals.”

The outcome was successful for all involved, Aspromonti says. “By coordinating efforts among all parties, we helped our client make a well-informed decision and secured a payment structure that supported their growth while managing financial risk.”

Recalling a time when banking flexibility afforded a client the help they needed, Buran describes a situation wherein a borrower who owned a shopping center underwent significant struggles during the pandemic, losing several tenants and extending temporary assistance to those that remained. The borrower and their CPA firm outlined a plan that included leasing and capital improvements in an effort to re-tenant the center.

“The cash flow projections demonstrated the recovery of past rents, the viability of the owners’ leasing plans and a return to stabilized cash flow,” Buran says. “Based upon the analysis, the bank was comfortable executing an action plan that enabled the borrower to execute their plan over a three-year period. Today the center is 100% occupied with tenants paying as agreed.”

The impact of the bank’s adaptability is still apparent. “The borrower continues to be successful in making loan payments as per their agreement with the bank.”
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LIBN Staff

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September 25, 2025
Regional FIs deploy tech to remain competitive | Bank Automation News

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Regional banks are deploying technology to keep up with client demand and compete with major financial institutions. The $62 billion Valley Bank joins other financial institutions, including the $18 billion Alliant Credit Union, $40 billion EverBank and $170 billion Navy Federal Credit Union, in investing in tech stacks to keep up with digital demands from […]

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Vaidik Trivedi

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August 22, 2024
Texas Capital sees mortgage woes amid long-term overhaul

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In its fourth quarter, Texas Capital’s strategy hit a roadblock, as investment banking and trading income and mortgage loans sank. However, the company is still aiming high for its 2025 goals.
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Texas Capital Bancshares is braced for “inconsistent” revenues in the near term as its mortgage finance business takes a hit, but annual results from 2023 show the bank’s progress as it executes a massive, four-year strategic overhaul.

The Dallas-based bank had a rougher-than-expected end to last year, in part driven by a $751 million quarterly drop in mortgage finance loans. The sputtering in the business was tied to “predictable seasonality,” as fourth quarters are often weaker for home-buying, but the bottom isn’t in sight. Texas Capital expects next quarter to be “amongst the toughest the industry has seen in the last 15 years,” said CFO Matt Scurlock on the company’s fourth-quarter earnings call Thursday.

Net interest income at the bank fell nearly $18 million in the quarter to $214.7 million, which Jefferies analysts wrote “disappointed slightly,” and Scurlock attributed almost entirely to the mortgage finance slump, which has impacted rates across the country. However, CEO Rob Holmes said despite the blip, the bank’s mortgage strategy is aligned with long-term goals of deepening relationships with target clients.

“The firm has been and remains committed to banking the mortgage finance industry as it weathers what is the most challenging operating environment in the last 15 years,” Holmes said on the bank’s earnings call. “Over the previous 18 to 24 months, we have refocused client selection and improved the service model as we look not to expand market share, but to instead deepen relationships to improve relevance with the right clients.”

Cross-selling is working, he said: of clients that started with just a warehouse line of credit Holmes said that all of them now have some treasury relationship with the bank, and nearly half have an account open with a broker-dealer at the bank. The company’s stock rose 2.43%, to $63.12 per share, on Thursday.

Texas Capital wasn’t able to make up the revenue lost in its mortgage business either, with a fourth quarter of flat commercial loans, stagnant or lower fee income and a fall in investment banking and trading income.

Holmes launched a massive transformation of Texas Capital when he took the helm in 2021, coming off a three-decade career at JPMorgan Chase. The $28.4 billion-asset bank’s metamorphosis included recalibrating its target commercial client base, launching an investment bank, adding wealth management and treasury products, and investing in infrastructure and front-end staffing.

As part of the master blueprint, Holmes set ambitious goals with a 2025 deadline, including a return on assets of greater than 1.1% and return on tangible common equity of over 12.5%, which a post-earnings note from Jefferies analysts said, “will require dramatic improvement in the next year,” since the bank saw those metrics at .47% and 4.4%, respectively, in the fourth quarter.

Still, Holmes said the bank has the products, tech and talent in place to meet its objectives. While there’s fine-tuning to do, Holmes said now that the more-dramatic parts of Texas Capital’s evolution are done, it’s basically a “brand new bank.”

“It’s 100% execution now, that’s what’s so exciting about where we are in the transformation,” Holmes said. “The risk of the build is done. We have a core competency now of taking efficiencies and improving client journeys. We have data-as-a-service. We feel really good about the tech platform and the run-the-bank versus change-the-bank composition of the spend.”

Some of the pieces of the strategy, though in their early stages, are beginning to prove longer-term value. Texas Capital’s investment banking and trading business, which was nearly non-existent before 18 months ago, increased annual income by 146%, to $86.2 million, even though quarterly income fell more than 60%.

The bank deemed its investment bank an “area of focus,” along with assets under management, treasury product fees and wealth management and trust fees, which altogether grew 64% from the previous year. In 2023, investment banking and trading generated 8% of the bank’s total revenue, and the goal is to have the unit bring in 10% of total revenue in 2025.

“When we launched the strategy, we acknowledged that results generated by the newly formed investment bank would not be linear, and that it would take several years to mature the business with a solid base of consistent and repeatable revenues,” Holmes said. “Despite broad-based early success, we expect revenue trends to be inconsistent in the near-term – the same as all firms – as we work to translate early momentum into a sustainable contributor to future earnings.”

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Catherine Leffert

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January 18, 2024
As capital regulations loom, M&T continues pause on share buybacks

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Despite some criticism, M&T in Buffalo is continuing its cautious capital strategy, extending a pause on share buybacks until economic conditions strengthen, CFO Daryl Bible said Wednesday.,
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Concerns over a cooling economy and potential uptick in charge-offs prompted M&T Bank in Buffalo to extend the hold on share buybacks it announced earlier this year to keep more capital on hand, Chief Financial Officer Daryl Bible said Wednesday on a conference call.

While Bible, the former Truist Financial CFO who joined M&T in December, acknowledged the $209.1 billion-asset M&T is holding excess capital, an unpredictable economy paired with the desire to meet clients’ credit demands requires a more guarded approach to share buybacks, he said. “I think we’re just trying to be cautious,” Bible said. “When the economy gets a little bit more comfortable, we will consider repurchases there.”

Bible’s comments come as the financial services industry gears up to fight proposed regulations linked to the Basel III regulatory framework that bankers fear could result in increased capital requirements on banks with at least $100 billion in assets.

When Bible discussed the buyback pause in July, following completion of its Federal Reserve stress test, M&T was reporting a common-equity-tier-1 capital ratio of 10.59%. At Sept. 30, the same ratio had crept up to 10.94%.

“The capital isn’t going anywhere,” Bible said. “We just want to continue to make sure that we’re strong and can grow and serve our customers right now.”

Fitch Ratings reaffirmed its “A” rating on M&T’s debt securities last week, due in large part to expectations that the company would continue to hold capital at similar levels. The buyback pause “increases capital resiliency under a severely adverse economic scenario and is a key support of today’s rating affirmation,” Fitch stated in an Oct. 12 press release.

The strategy is not without critics. Brent Erensel, an analyst who covers M&T for Portales Partners in New York, said on the conference call that the bank would need to generate double-digit returns on new loans to equal the impact of buybacks. “So, the question I guess is at what point will the corporate-finance math drive you to resume buybacks,” Erensel said.

M&T reported third-quarter earnings totaling $690 million Wednesday, up 6.6% year-over-year. Average deposits increased 2% on a linked-quarter basis to $162.7 billion, though heightened competition drove funding costs higher, leading to a 12-basis-point linked-contraction in the net interest margin from the prior-quarter result. M&T’s net interest margin stood at 3.79% on Sept. 30.

Growing deposits remains a top priority, but making additional headway will likely prove challenging as Bible predicted “continued intense competition for deposits in the face of industry-wide outflows.”

Third-quarter credit quality numbers were solid for M&T. Net charge-offs of $96 million amounted to an annualized 29 basis points of average total loans, down sharply from the 38 basis points the company reported in its second-quarter results. M&T reported a third-quarter provision for credit losses of $150 million. That was in line with the June 30 level despite improved credit-quality metrics — nonaccrual loans declined along with net charge-offs. Bible cited “softness” in commercial real estate valuations, as well as a “gut feeling” charge-offs would jump in the fourth quarter for the decision to continue stockpiling reserves. Taking a provision well in excess of net charge-offs boosted M&T’s allowance for credit losses to $2.1 billion, or 1.55% of total loans, an amount Bible termed adequate.

“We feel really on top of” what’s going on,” Bible said. “I think we are actively looking at any credit that could have any issues whatsoever.” M&T, however, is likely to disclose that criticized assets reached the mid-to-high-single digits in the third quarter 10-Q report it expects to file with the Securities and Exchange Commission “in the next few weeks,” Bible said.

That finding “takes some of the shine off the better than expected charge-off and non-accrual” numbers M&T reported, Autonomous Research Analyst Brian Foran wrote Wednesday in a research note.

Amid growing worries industry-wide about charge-offs, M&T recently moved to expand its risk management and commercial underwriting toolbox, agreeing to begin using OakNorth’s credit intelligence technology. M&T joins a growing list of U.S. banks that have turned to the London-based fintech. OakNorth’s client list includes the $557 billion-asset PNC Financial Services Group in Pittsburgh, the $207.3 billion-asset Fifth Third Bancorp in Cincinnati and the $48 billion-asset Old National Bancorp in Evansville, Indiana.

London-based Fintech OakNorth recently added M&T to its list of clients. Rishi Khosla, CEO of OakNorth said its pipeline of potential U.S. clients remains strong.
Alex Rumford

OakNorth also operates a bank that has lent approximately $12 billion to British businesses during its eight years in business with charge-offs in the 12 to 14 basis-points range, CEO and cofounder Rishi Khosla said in an interview.

According to Khosla, OakNorth’s credit intelligence software is designed to provide lenders with a forward look at the financial prospects of borrowers with annual revenues of $3 million to $4 million and above. It’s a function that could grow in importance if the economy continues slowing. “Clearly the economic environment is not a straight line,” Khosla said. “There’s a significant amount of headwinds…The cost of borowing is much higher than it was 18 months ago.”

OakNorth’s pipeline of potential U.S. clients is still strong, Khosla said, giving him hopes the company will be able to soon announce additional new partners. “The strongest feedback we’re receiving is do [clients] continue renewing and do they continue wanting to embed what we’re doing within their processes,” Khosla said. “We’re winning on those accounts.”

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John Reosti

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October 18, 2023
Why the Fed’s next decisions on rates could lead to a wave of commercial-debt defaults

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Getting staff back to the office is only part of the battle.

Regional banks that went big lending on office properties also face a ticking time bomb of maturing debt that they helped create, particularly if the Federal Reserve holds its policy rate near the current 22-year high well into next year.

“The area of greatest concerns for banks is office space,” says Tom Collins, senior partner focused on regional banks and credit unions at consulting firm firm West Monroe. Should rates stay high, “borrowers are going to face a tough decision of whether they refinance or default,” he said.

The fight to bring more staff back to half-empty office buildings comes as an estimated $1 trillion wall of commercial real-estate loans is set to mature through 2024. While tenants haven’t shied away from signing up to pay top rents at trophy buildings, the same can’t be said for the rows of lower-rung properties lining financial districts in big cities.

See: Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

The Fed embarks on a two-day policy meeting on Tuesday, with expectations running high for rates to stay steady, giving more time to study the impact of earlier rate increases.

The central bank’s rate hikes have further complicated matters for landlords, and fresh debt for office buildings no longer looks cheap nor abundant. Regional banks also have been piling back on lending after Silicon Valley Bank and Signature Bank collapsed in March and as deposits fled for yield elsewhere.

Related: FDIC kicks off $33 billion sale of seized assets from Signature Bank

Loan volumes from Wall Street similarly have been anemic. This year it has produced slightly more than $10 billion in “conduit,” or multi-borrower, commercial mortgage-backed securities deals through the end of August, the least since 2008, according to Goldman Sachs. Coupons, a proxy for mortgage rates, have climbed above 7%, the highest since the early 2000s.

“I don’t think this is a wash out here,” Collins said of the threat of more regional bank failures, but he does anticipate pain for lenders heavily exposed to lower quality class B and C office buildings in urban areas.

Banks can help mitigate the wall of debt coming due by stepping up the pace of loan modifications to help borrowers keep properties, but Collins said he also anticipates lenders will need to increase loan sales, write downs and mergers or acquisitions.

“There is no doubt there will be private equity and other investors that will be interested in buying some of these loans, taking them off the balance sheets of banks,” Collins said.

“The obvious question there is at what discount?” he said, adding, “I think investors will wait until things get more dire to try to get a better deal.”

Another offset to banks’ office exposure has been the relatively stable performance of hotels, industrial and other property types. But Collins said that if rates stay high and the economy falters, those sectors are likely to face challenges as well.

The 10-year Treasury yield,
BX:TMUBMUSD10Y
a benchmark lending rate for the commercial real estate industry, was near 4.32% on Monday, hovering around a 16-year high ahead of the Fed meeting, while the policy-sensitive 2-year Treasury rate
BX:TMUBMUSD02Y
was near 5.06%. Stocks
SPX

DJIA
were edging higher.

Office distress intensified in August, with the special servicing rate of loans in bond deals hitting 7.72%, compared with a 6.67% rate for all property types, according to Trepp, which tracks the commercial mortgage-backed securities market. A year ago, the rate of problem office loans was 3.18%.

“If I was an investor, I would be patient around this, because values are only going to come down, I would imagine,” Collins said.

Check out: Powell could still hammer U.S. stocks on Wednesday even if the Fed doesn’t hike interest rates

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September 18, 2023
U.S. banks and regional lenders slide across the board as S&P is latest to downgrade ratings

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U.S. banks and regional banks fell across the board on Tuesday, after S&P Global Ratings downgraded five smaller players after a review of risk related to funding, liquidity and asset quality with a focus on office commercial real estate.

Adding to the gloom, Republic First Bancorp. Inc.’s stock
FRBK,
-41.90%
tanked by 39%, after Nasdaq told the company that its stock would be delisted on Wednesday, after it failed to file its annual report in time.

S&P’s move comes just days after Fitch Ratings analyst Christopher Wolfe reduced his operating environment score for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector.

And Moody’s Investors Service just two weeks ago upset investors when it downgraded some lenders and said it was reviewing ratings on bigger banks, including Bank of New York Mellon
BK,
-1.71%,
State Street
STT,
-1.59%
and Northern Trust
NTRS,
-1.73%.

For more, see: Bank asset quality, weaker profits spark Moody’s reviews and downgrades as it weighs potential 2024 recession

The S&P 500 Financials Sector has fallen for seven consecutive days, and is on pace for its longest losing streak since April 7, 2022, when it also fell for seven straight trading days.

Individual bank names are also performing poorly, with Goldman Sachs Group Inc.
GS,
-0.94%
and Citigroup Inc.
C,
-1.68%
down for 10 of the past 11 days and Charles Schwab Corp.
SCHW,
-4.84%
down 11 straight days.

Goldman alone has fallen for seven straight days for a total loss of 6.3%. It’s the longest losing streak since Feb. 28, 2020, when it also fell for seven straight days as the pandemic was taking hold.

The KBW Nasdaq Regional Banking Index
KBWR
is down for 11 straight days. and the KBW Nasdaq Bank Index
BKX
is down for seven straight days.

S&P downgraded Associated Banc. Corp.
ASB,
-4.20%,
Comerica Inc.
CMA,
-3.82%,
KeyCorp
KEY,
-3.58%,
UMB Financial Corp.
UMBF,
-2.42%
% and Valley National Bancorp.
VLY,
-4.19%
by one notch and said the outlook on all five is stable.

Read also: More challenges await U.S. banks but analysts think the worst may be over for the year

The rating agency affirmed ratings on Zions Bancorp
ZION,
-4.17%
and maintained a negative outlook, meaning it could downgrade them again in the near-term. And it affirmed ratings and a stable outlook on Synovus Financial Corp.
SNV,
-3.37%
and Truist Financial Corp.
TFC,
-1.36%

“We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ,” S&P said in a statement.

“For instance, some that have seen greater deterioration in funding—-as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits—-may also have below-peer profitability, high unrealized losses on their assets, or meaningful exposure to CRE.”

The steep rise in interest rates orchestrated by the Federal Reserve over the past year has raised deposit costs as banks are now competing for savers seeking higher returns and that’s forced some to pay up on deposits and discourage their clients from heading to other institutions and instruments.

The sector has been skittish this year following the collapse of Silicon Valley Bank and other lenders that led to a run on deposits at a number of regional lenders.

However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks.

The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months.

S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.

KeyCorp. and Comerica both fell more than 3% on the news. Of the two, KeyCorp. has more outstanding debt and its 10-year bonds widened by about 5 to 10 basis points, according to data solutions provider BondCliq Media Services.

As the following chart shows, the bonds have seen better selling on Wednesday with buyers emerging around midmorning.

KeyBank net customer flow (intraday). Source: BondCliQ Media Services

The next chart shows customer flow over the last 10 days.

Most active KeyBank issues with net customer flow (last 10 days). Source: BondCliQ Media Services

The next chart shows the outstanding debt of the downgraded banks, with KeyCorp. clearly the leader with almost $16 billion of bonds.

Outstanding S&P downgraded banks debt USD by maturity bucket. Source: BondCliQ Media Services

Don’t miss: Capital One confirms roughly $900 million sale of office loans as property sector wobbles

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August 22, 2023

Banc of California is expected to keep leading regional banks higher as PacWest deal ignites sector

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Banc of California Inc.’s proposed agreement to acquire PacWest Bancorp. helped send regional-bank stocks considerably higher on Wednesday. But even after a two-day increase of 12% for its shares, the acquiring bank remains the favorite name among analysts covering regional players in the U.S.

The merger agreement was announced after the market close on Tuesday, but the rumor mill had already sent Banc of California’s
BANC,
+0.62%
stock up by 11% that day. Then on Wednesday, shares of PacWest Bancorp
PACW,
+26.92%
shot up 27% to $9.76, which was above the estimated takeout value of $9.60 a share when the deal was announced. The merger deal, if approved by both banks’ shareholders, will also include a $400 million investment from Warburg Pincus LLC and Centerbridge Partners L.P.

A screen of regional banks by rating and stock-price target is below.

Deal coverage:

With PacWest closing above the initial per-share deal valuation, it is fair to wonder whether or not its shareholders will vote to approve the agreement. In a note to clients on Wednesday, Wedbush analyst David Chiaverini called Banc of California’s offer “fair, but not overwhelmingly attractive,” and wrote that PacWest was “a likely seller before the mini banking crisis occurred in March.”

While Chiaverini went on to predict the deal’s approval by PacWest’s shareholders, he added that he “wouldn’t be surprised if there were some dissent among a minority of shareholders [which could] possibly open the door to the potential emergence of a third-party bid.”

More broadly, Odeon Capital analyst Dick Bove wrote to clients on Wednesday that the merger deal, along with increasing involvement of private-equity firms in lending businesses, the expected enhancement of regulatory capital requirements for banks and other factors could lead to more consolidation among smaller banks.

He went on to write that we might be entering a period for the banking industry similar to the 1990s, “when rules were being changed and acquisitions were rampant,” which “created new investment opportunities.”

The SPDR S&P Regional Banking exchange-traded fund
KRE,
+4.74%
rose 5% on Wednesday but was still down 17% for 2023, while the SPDR S&P 500 ETF Trust
SPY,
+0.02%
was up 19%, both excluding dividends.

KRE holds 139 stocks, with 98 covered by at least five analysts working for brokerage firms polled by FactSet. Out of those 98 banks, 45 have majority “buy” ratings among the analysts. Among those 45, here are the 10 with the most upside potential over the next 12 months, implied by consensus price targets:

Bank	Ticker	City	Total assets ($mil)	July 26 price change	Share buy ratings	July 26 closing price	Consensus price target	Implied 12-month upside potential
Banc of California Inc.	BANC, +0.62%	Santa Ana, Calif.	$9,370	1%	71%	$14.71	$18.58	26%
Enterprise Financial Services Corp.	EFSC, +1.83%	Clayton, Mo.	$13,871	2%	80%	$41.75	$49.25	18%
First Merchants Corp.	FRME, +3.52%	Muncie, Ind.	$17,968	4%	100%	$32.38	$37.33	15%
Amerant Bancorp Inc. Class A	AMTB, +3.47%	Coral Gables, Fla.	$9,520	3%	60%	$20.26	$23.30	15%
Old Second Bancorp Inc.	OSBC, +3.39%	Aurora, Ill.	$5,884	3%	100%	$16.15	$18.50	15%
F.N.B. Corp.	FNB, +2.87%	Pittsburgh	$44,778	3%	75%	$12.91	$14.50	12%
Columbia Banking System Inc.	COLB, +3.95%	Tacoma, Wash.	$53,592	4%	55%	$22.63	$25.32	12%
Wintrust Financial Corp.	WTFC, +3.43%	Rosemont, Ill.	$54,286	3%	92%	$86.05	$95.33	11%
Synovus Financial Corp.	SNV, +6.01%	Columbus, Ga.	$60,656	6%	75%	$34.06	$37.73	11%
Home BancShares Inc.	HOMB, +4.56%	Conway, Ark.	$22,126	5%	57%	$24.09	$26.67	11%
Source: FactSet

Click on the tickers for more about each bank.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Any stock screen can only be a starting point when considering whether or not to invest. If you see any stocks of interest here, you should do your own research to form your own opinion.

Don’t miss: How you can profit in the stock market from an incredible financial-services trend over the next 20 years

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July 26, 2023

PacWest stock rockets nearly 40% after Banc of California confirms plan to buy troubled bank

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PacWest Bancorp’s stock jumped more than 38% in after-hours trading Tuesday after the company said it had agreed to be acquired by Banc of California Inc. in an all-stock merger backed by two private-equity firms. The merger comes as PacWest looks to put a rocky period behind it.

Under the terms of the merger agreement, PacWest
PACW,
-27.04%
stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock. Based on closing prices on Tuesday, the deal values PacWest at $9.60 a share, a premium over its closing price of $7.67 a share on Tuesday.

Warburg Pincus and Centerbridge will provide $400 million in equity.

PacWest stockholders will own 47% of the outstanding shares of the combined company, while the private-equity investors will own 19% and Banc of California shareholders will have 34%.

PacWest said that it is the company being acquired and that it will change its name to Banc of California. PacWest said it will be the “accounting acquirer,” with fair-value accounting applied to Banc of California’s balance sheet at closing.

Banc of California CEO Jared Wolff will retain the same role at the combined company.

The combined company will repay about $13 billion in wholesale borrowings to be funded by the sale of assets, “which are fully marked as a result of the transaction, and excess cash,” the companies said.

The merged company is currently projecting about $36.1 billion in assets, $25.3 billion in total loans, $30.5 billion in total deposits and more than 70 branches in California.

John Eggemeyer, the independent lead director at PacWest, will be chair of the board of the combined company following the merger.

The board of directors of the combined company will consist of 12 directors: eight from the existing Banc of California board, three from the existing PacWest board and one from the pair of private-equity firms led by Warburg Pincus.

Citing sources close to the deal, the Wall Street Journal had reported earlier that a tie-up was imminent.

In regular trading Tuesday, PacWest’s stock ended 27% down; trading was halted for volatility following the report of the deal.

Banc of California’s stock rose 11% but was later halted for news pending as well. The stock rose more than 9% in after-hours trading on Tuesday.

At last check, PacWest’s market capitalization was about $1.2 billion, while Banc of California’s was about $764 million. Combined, the business would be worth about $2 billion.

PacWest’s big share-price move on Tuesday marks the latest in a volatile few months for the Beverly Hills, Calif., bank, which was founded in 1999.

Investors had speculated that the bank could be the next to fail after Silicon Valley Bank and Signature Bank failed in March and First Republic Bank was taken over by JPMorgan.

Also on Tuesday, PacWest said it lost $207.4 million, or $1.75 a share, in its second quarter, as it got a hit from items related to loan sales and restructuring of its lending unit Civic. The loss contrasts with earnings of $122 million, or $1.02 a share, in the year-ago period.

Analysts polled by FactSet expected the bank to report a loss of 58 cents a share in the quarter.

PacWest disclosed in recent months that it was exploring strategic alternatives while it sold off parts of its business to raise cash to strengthen its balance sheet. It sold a loan portfolio to Ares Management Corp.
ARES,
+0.92%
in a move to generate $2 billion.

Also read: PacWest sells loan portfolio to Ares Management in deal that generates $2 billion ‘to improve liquidity’

It also sold a portfolio of loans to Kennedy-Wilson Holdings Inc.
KW,
-1.70%,
which then sold part of the portfolio to Canada’s Fairfax Financial Holdings Ltd.
FFH,
+1.07%.

Also read: PacWest sparks regional-bank rally after unveiling plan to sell loans worth $2.6 billion

In May, PacWest sold its real-estate lending portfolio to Roc360.

Also in May, PacWest’s stock dropped more than 20% after it said it had lost 9.5% of its deposits amid market volatility.

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July 25, 2023
PacWest’s stock jumps 5% premarket on news bank to sell real estate loans worth $2.6 billion

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PacWest Bancorp.’s stock jumped 3% premarket Monday, after the bank announced asset sales that would allow it to focus on its core community banking business.

The regional bank
PACW,
-1.88%
said it has entered an agreement to sell a portfolio of 74 real estate construction loans with a principal balance of about $2.6 billion to a unit of real-estate investment company Kennedy Wilson Holdings.

“Kennedy Wilson or its designees will also assume all remaining future funding obligations under the acquired loans of approximately $2.7 billion,” PacWest said in a regulatory filing.

The bank has also agreed to sell an additional six real estate construction loans to Kennedy Wilson with a principal balance of about $363 million.

The sale of the loans is subject to Kennedy Wilson’s satisfactory due diligence. The company will place $20 million into a third-party escrow account that will be refundable.

The deal is expected to close in several tranches in the second and third quarters. “There can be no assurance that the transaction will be completed in part or at all,” said the filing.

See also: FDIC set to levy big banks to pay for $15.8 billion bailout of Silicon Valley, Signature Banks

PacWest shares are down 75% in the year to date, after being caught up in the regional-bank stock rout that followed the collapse of Silicon Valley Bank in March.

The bank said it lost 9.5% of deposits during the week ending May 5 amid market volatility following JPMorgan’s
JPM,
-0.23%
rescue of First Republic Bank.

See: Here’s why people are still worried about regional banks and commercial real estate

Other regional banks were also rising premarket. Western Alliance Bancorp. was up 0.4% and KeyCorp. was up 1.7%.

The S&P 500
SPX,
-0.14%
has gained 9% in the year to date.

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May 22, 2023
PacWest powers regional-bank rally, easing some of the pain

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A Pacific Western Bank branch in Encino, California, US, on Saturday, April 22, 2023. PacWest Bancorp is scheduled to release earnings figures on April 25.
Morgan Lieberman/Bloomberg

(Bloomberg) –PacWest Bancorp led a rebound across U.S. regional banking stocks after a bruising week of losses, amid signals that some of the selling has been overdone.

PacWest’s shares soared as much as 96% in U.S. trading Friday, their biggest intraday gain ever, amid multiple trading pauses for volatility, while Western Alliance Bancorp rose as much as 59%. Charles Schwab, whose massive banking unit has been a source of investor concern, added 6.1% after an update showed outflows slowed for a third month. Other lenders that had been caught in the downdraft regained some lost ground, too, with Zions Bancorp up almost 23% and Comerica as much as 18%.

Turmoil has engulfed regional banks since early March amid concern that big unrealized losses on bond investments might push some of them to the brink, and four did collapse. Investors have also focused on banks’ high exposure to real estate lending and sinking deposits as customers sought out higher-yielding alternatives.

The government’s seizure and sale of First Republic Bank earlier this week and a report that PacWest was exploring strategic options revived market nervousness on Thursday, sending peers tumbling. The rout spread to bigger lenders, with the KBW Bank Index down 11% this week through Thursday. The benchmark added as much as 4.8% Friday, with KBW’s index of regional lenders up 5.1%.

While some investors including hedge fund billionaire Bill Ackman have cautioned that there could be more pain to come, others said the plunge has gone too far. “The tension between poor market sentiment and strong liquidity at regional banks is difficult to reconcile as investors take a draconian view of banks’ capital and operating models,” Bloomberg Intelligence analyst Herman Chan said.

The end-of-the week rally may be causing some pain for short-sellers seeking profits from a continued regional-bank downturn. Wells Fargo banking analysts led by Mike Mayo pointed to a variety of triggers for a short-covering rally, including possible actions by the government such as increased guarantees for deposits and temporary limits on selling short.

‘Government Concern’

“Short selling can aid liquidity, price discovery and checks and balances on capital markets, especially given a tendency for a bullish bias,” Mayo wrote in a note to clients. “However, in the current situation with regional banks, it seems that the government concern is that the extent of the comments in the market are driving more of the outcome than would be normal.”

In a Friday morning note upgrading Western Alliance, Comerica and Zions to overweight, JPMorgan analyst Steven Alexopoulos said that the selloff had fed on itself. “With sentiment this negative, in our view it won’t take much to see a significant intermediate-term favorable re-rating of regional bank stocks,” he wrote.

Wedbush, meanwhile, dropped Western Alliance from its list of best ideas across equity research after less than three weeks, albeit with some ambivalence. In pulling the stock from the list in a note Friday, the securities firm pointed to “investment price discipline” for the change, while still rating the shares outperform. “I didn’t want WAL to come off the list but our internal rules mandated the removal,” analyst David Chiaverini said by email.

PacWest shares dropped 51% on Thursday in its worst one-day loss on record, after the Beverly Hills-based lender confirmed it’s in talks with several potential investors. Western Alliance slumped 38%, paring an earlier drop after denying a report that it’s exploring strategic options.

The pessimism became so indiscriminate that Pacific West Bancorp, a small lender based outside Portland, Oregon, felt impelled to issue a statement to remind everyone that it’s “a separate entity with no affiliation” to the similarly named PacWest.

While it’s risky to buy into such plunges — “catching a falling knife” in Wall Street parlance — analysts at Hovde Group said a market bottom might be at hand.

“The knife being caught presently could at least be dull,” the firm wrote in a note to investors. “Given our view there is nothing new fundamentally occurring with bank system deposits (other than the already known movement from lower-cost sources), we believe investors could be handsomely rewarded.”

In what could come as a relief for smaller lenders, Bloomberg News reported Thursday that the Federal Deposit Insurance Corp. is poised to exempt them from kicking in extra money to replenish the deposit insurance fund. Those with less than $10 billion in assets wouldn’t have to pay, the report said.

FDIC Replenishment

The FDIC is planning to release as soon as next week a highly anticipated proposal for refilling the fund, which was partly depleted by the failures of Silicon Valley Bank and Signature Bank, people familiar with the matter said.

Equity trades betting against regional lenders have netted about $7 billion in paper profits so far this year, according to research by S3 Partners. But possible policy remediation may bring an end to those crowded shorts, some experts said.

“While it’s hard to see a catalyst to turn around the regional banks right now, it is a very popular and very crowded short which might be due for a squeeze at some point,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.

In a bid to calm antsy investors, PacWest this week said that core deposits have risen since March and it “has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.” Insured deposits rose to 75%, the firm said.

Western Alliance said that it hasn’t seen unusual deposit flows following First Republic’s collapse. Insured deposits represent over 74% of its total, the company said.

–With assistance from Joanna Ossinger, Ishika Mookerjee and Michael J. Moore.

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May 5, 2023
PacWest Stock Surges 82%, Regional Banks Recover After Selloff

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May 5, 2023
Dow gains 450 points as U.S. stocks recover after 4 days of losses

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U.S. stocks recovered some ground on Friday, after four days of losses, as shares of regional banks rebounded and the main indexes received a boost from a strong April jobs and Apple’s better-than-forecast earnings.

What’s happening

On Thursday, the Dow Jones Industrial Average fell 287 points, or 0.86%, to 33,128. It remains on track for a 1.5% weekly drop.

What’s driving markets

In…

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May 5, 2023
PacWest and Other Regional Bank Stocks Fall Further
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https://www.barrons.com/articles/regional-bank-stocks-fall-jpmorgan-first-republic-pacwest-86c038aa
Updated May 3, 2023 5:54 am ET / Original May 3, 2023 4:56 am ET

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May 3, 2023
PacWest stock surges 15% as bank says deposits have been building in recent weeks

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Shares of PacWest Bancorp were shooting 15% higher in Tuesday’s aftermarket trading after the regional bank disclosed a rise in deposits in recent weeks.

PacWest PACW said alongside its first-quarter earnings report that total deposits rose to $28.2 billion as of March 31 from $27.1 billion when the company provided a March 20 investor update. The company saw deposit balances grow by an additional $700 million or so as of April 24.

The…

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April 25, 2023
Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance

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Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance

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April 21, 2023

10 dividend stocks yielding at least 4.5% that are rated ‘buy’ by most analysts

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During a period of high interest rates, it might be more difficult to impress investors with dividend stocks. But the stocks can have an important advantage over the long term. The dividend payouts can increase over the years, helping to push share prices higher over time.

When considering stocks for dividend income, yield shouldn’t be the only thing you consider. If a stock’s price has tumbled because investors are worried about the company’s business prospects, the dividend yield might be very high. A double-digit yield might mean investors expect to see a cut to the dividend soon.

There are many ways to look at companies’ expected ability to maintain or raise their dividend payouts. But one can also take a simple approach to begin researching stock choices.

At the moment, you can get a bank CD with a yield of close to 5% pretty easily. Here’s a look at current yields for CDs and U.S. Treasury securities and an approach for laddering them not only to protect your cash but to hedge against interest-rate risk.

For investors who would rather aim for long-term growth to go along with dividend income, or take a relatively conservative approach to growth while reinvesting dividends, a screen of stocks in the S&P 500
SPX,
+0.33%
produces only 10 stocks with dividend yields of 4.5% or higher with majority “buy” or equivalent ratings among analysts polled by FactSet. Here they are, sorted by dividend yield:

Company	Ticker	Dividend Yield	Expected payout increase through 2025	Share “buy” ratings	April 16 price	Consensus price target	implied 12-month upside potential
Comerica Inc.	CMA, +4.00%	6.56%	10%	58%	$43.30	$60.53	40%
Citizens Financial Group Inc.	CFG, +4.19%	5.77%	12%	74%	$29.10	$39.29	35%
Healthpeak Properties Inc.	PEAK, +2.33%	5.71%	9%	60%	$21.01	$27.69	32%
Hasbro Inc.	HAS, +1.28%	5.34%	8%	69%	$52.40	$69.27	32%
Philip Morris International Inc.	PM, +0.46%	5.11%	11%	67%	$99.48	$113.56	14%
Realty Income Corp.	O, +1.30%	5.04%	7%	56%	$60.77	$70.00	15%
Fifth Third Bancorp	FITB, +3.33%	4.99%	3%	72%	$26.44	$34.55	31%
VICI Properties Inc.	VICI, +1.58%	4.82%	12%	95%	$32.35	$37.73	17%
Organon & Co.	OGN, +1.01%	4.71%	5%	55%	$23.80	$31.89	34%
Iron Mountain Inc.	IRM, +0.82%	4.69%	15%	78%	$52.76	$56.00	6%
Source: FactSet

Click on the ticker for more about each company.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The dividend yields for this group of 10 companies are based on current annual regular payout rates, with all paying quarterly except for Realty Income Corp.
O,
+1.30%,
which pays monthly.

These two oil and natural gas producers would have passed the above screen based on their most recent dividend payments and analysts’ sentiment, however, they pay a combined fixed-plus-variable dividend every quarter, with the fixed portion relatively low:

Shares of Pioneer Natural Resources Co.
PXD,
-0.77%
closed at $230 on April 14. Among analysts polled by FactSet, 59% rate the stock a “buy” or the equivalent, and the consensus price target is $257.42. The company pays a fixed quarterly dividend of $1.10 a share, which would make for a dividend yield of only 1.91%. However, the most recent variable quarterly dividend was $4.48 a share, for a combined quarterly dividend of $5.58, which would translate to an annualized dividend yield of 9.70%. The consensus estimate for dividends in 2025 is $4.63 — the analysts are only estimating the fixed portion of the dividend. Pioneer has held preliminary merger discussions with Exxon Corp.
XOM,
-1.16%,
according to a Wall Street Journal report.
Devon Energy Corp.’s
DVN,
-0.72%
stock closed at $55.70 on April 14. The shares are rated “buy” or the equivalent by 55% of analysts and the consensus price target is $67.66. The fixed portion of Devon’s quarterly dividend is 20 cents a share, for an annualized dividend yield of 1.44%. The variable portion of the most recent quarterly dividend was 69 cents a share. The total payout of 89 cents would make for an annual dividend yield of 6.39%. Analysts expect the fixed portion of annual dividends to total $3.61 in 2025, according to FactSet.

Don’t miss: Buffett is buying in Japan. This overseas value-stock fund is also making bets there. Is it a good way to diversify?

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April 17, 2023

Jamie Dimon discourages use of term credit crunch on call with analysts

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“‘It’s not like a credit crunch.’”

— Jamie Dimon

While it will be more expensive for banks to deploy capital this year, talk of a possible credit crunch tied to higher interest rates remains overblown, JPMorgan Chase & Co. CEO Jamie Dimon said Friday.

Although Dimon acknowledged that more challenging lending conditions are already being seen in the real-estate sector, he said bank credit overall will continue to flow despite concerns about a credit crunch voiced by Chicago Fed President Austan Goolsbee on Friday.

“Obviously, there’s going to be a little bit of tightening, and most of that will be around certain real-estate things,” Dimon said, according to a transcript of JPMorgan’s first-quarter earnings call with analysts. “You’ve heard it from real-estate investors already, so I just look at that as a kind of thumb on the scale. It just [means] the fast conditions will be a little bit tighter, [which] increases the odds of a recession. That’s what that is. It’s not like a credit crunch.”

In real estate, banks have been hit both by a drop in mortgage demand due to higher interest rates as well as a looming wall of debt from office properties affected by slack demand for space. For its part, JPMorgan said Friday that its office-sector exposure is less than 10% of its portfolio and is focused in dense urban markets.

Also read: JPMorgan Chase stock moves positive for the year after it blasts past earnings and revenue estimates

On the call, analyst John McDonald of Autonomous Research asked, “There’s a narrative out there that the industry could see a credit crunch. Banks are going to stop lending, and even [Federal Reserve Chair] Jay Powell mentioned that as a risk.”

Dimon responded: “Yeah, I wouldn’t use the word ‘credit crunch’ if I were you.”

Dimon was also asked about the regulatory landscape for banks after the collapse of Silicon Valley Bank and Signature Bank in March.

“Look, we’re hoping that everyone just takes a deep breath and looks at what happened and the breadth and depth of regulations already in place,” Dimon said. “Obviously, when something happens like this you should adjust, think about it.”

Down the road, Dimon said, he could see potential limitations on held-to-maturity assets and perhaps more total loss-absorbing capacity for certain banks, as well as more scrutiny around interest-rate exposure.

“It doesn’t have to be a revamp of the whole system — just recalibrating things the right way,” Dimon said. “The outcome you should want is very strong community and regional banks. And certain [drastic] actions … could actually make them weaker. So that’s all it is.”

JPMorgan is also expecting to absorb higher capital requirements under the so-called Basel IV international banking measures, as well as an assessment to banks of the costs of the collapse of Silicon Valley Bank and Signature Bank by the Federal Deposit Insurance Corp., he said.

Also read: JPMorgan Chase CEO Jamie Dimon says looser rules did not cause recent bank failures

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April 14, 2023
‘This is a risk confronting all banks,’ ex-FDIC chief Sheila Bair tells MarketWatch

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Regional banks shouldn’t be the only source of worry for potential fallout from the Federal Reserve’s rapid pace of interest-rate hikes in the past year, said a former top banking regulator.

“I don’t see regional banks as having any particular problem,” said Sheila Bair, who ran the Federal Deposit Insurance Corp. from 2006 to 2011, in an interview with MarketWatch on Thursday. “We need to be mindful of all unmarked securities at banks — small, medium and large.”

Bair called the hyperfocus on regional banks and interest-rate risks “counter productive” in the wake of the collapse earlier in March of Silicon Valley Bank and Signature Bank
SBNY,
-22.87%
of New York.

“This is a risk confronting all banks,” she said. “All examiners need to be on alert for how interest-rate risk is being managed. If there is a run, they will need to sell these securities. Those are the kinds of things all-size banks, and all examiners should be worried about.”

A run on deposits at Silicon Valley Bank snowballed after it disclosed a $1.8 billion loss on a sudden sale of $21 billion worth of high-quality, rate-sensitive mortgage and Treasury securities. It was the biggest U.S. bank failure since Washington Mutual’s collapse in 2008.

The FDIC estimated that U.S. banks had some $620 billion of unrealized losses from securities on their books as of the end of 2022, including longer-duration Treasurys and mortgage securities that have become worth less than their face value.

“Unrealized losses on securities have meaningfully reduced the reported equity capital of the banking industry,” FDIC Chairman Martin Gruenberg said on March 6, in a speech at the Institute of International Bankers.

Days after that gathering, Silicon Valley Bank and Signature Bank both collapsed, prompting regulators to roll out a new emergency bank funding program to help head off any liquidity strains at other U.S. lenders. Regulators also backstopped all deposits at the two failed lenders.

Bair earlier this month argued that if U.S. banking authorities see systemic risks they should go to Congress and ask for a backstop against uninsured deposits, beyond the standard $250,000 cap per depositor, at a single bank. Specifically, she wants zero-interest accounts, or those used for payroll and other operational expenses, to be fully covered, as was the case for a few years in the wake of the global financial crisis to stop runs on community banks.

Treasury Secretary Janet Yellen said Wednesday that blanket deposit insurance protection isn’t something her department is considering, but added that the appropriate level of protection could be debated in the future.

Fed Chairman Jerome Powell on Wednesday said the U.S. banking system “is sound and resilient, with strong capital and liquidity,” after hiking rates by another 25 basis points to a range of 4.75% to 5%, up from almost zero a year ago.

See: Fed hikes interest rates again, pencils in just one more rate rise this year

Bair has been calling for a pause on Fed rate hikes since December. She said that instead of raising rates by another 25 basis points on Wednesday, Fed Chair Powell should have hit pause and said the central bank needs time to assess.

“If we have a financial crisis, we won’t have a soft landing,” Bair said. “We have to avoid that at all costs.”

Read: Bank failures like SVB are a reminder that ‘risk-free’ assets can still wreck portfolios

Stocks closed modestly higher Thursday in choppy trade, with the Dow Jones Industrial Average
DJIA,
+0.23%
up 0.2% and S&P 500 index
SPX,
+0.30%
advancing 0.3%, while the Nasdaq Composite Index
COMP,
+1.01%
gained 1%.

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March 23, 2023
What’s Going on With First Republic Bank?

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First Republic Bank shares have been hit hard over the past week following the failures of two large U.S. regional banks,
Silicon Valley Bank and Signature Bank. On Thursday, shares of the bank and many other financial firms rallied after the biggest banks in the U.S. swooped in to rescue the San Francisco lender. Under the plan, 11 banks including JPMorgan Chase & Co. placed $30 billion in deposits at First Republic, using their own funds, confirming an earlier report by The Wall Street Journal.

But Friday, shares of First Republic dropped anew, sinking more than 30% and leaving analysts to wonder whether it has a future as a stand-alone bank.

What's News

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March 18, 2023
First Republic gets $30 billion in deposits from 11 major U.S. banks, but stock resumes slide as it suspends dividend

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Bank of America BAC, Citigroup C, JPMorgan Chase JPM and Wells Fargo WFC said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank FRC as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.

However, First Republic stock fell 14.7% in after-hours trading after the bank said it would suspend its dividend to conserve cash. The bank last paid a quarterly dividend of 27 cents a share on Feb. 9 to shareholders of record as of Jan. 26.

It…

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March 16, 2023

Tag: Regional Banks

In Brief:

‘Government Concern’

FDIC Replenishment

What’s happening

What’s driving markets

What's News