Regional Bank ETFs Are About To Get Hit By A Tidal Wave Of Commercial Loan Failures

wave“The Congressional Oversight Panel released its monthly oversight report yesterday and the findings are not all that optimistic for regional banks. The report specifically noted that, “Community banks, unlike the largest Wall Street banks, face the greatest risk of insolvency due to mounting commercial real estate loan losses.” The findings may not come as a complete shock, but they do serve as a reminder that despite a recovery in the stock prices of these banks, stormy weather may still lie ahead,” Billy Fisher Reports From Stock Traders Daily.

Fisher goes on to say, “Although ETFs such as the SPDR KBW Regional Banking ETF (NYSE: KRE) and the iShares Dow Jones U.S. Regional Banks Fund (NYSE: IAT) suffered significant losses in 2007, 2008 and 2009, they have mounted major rallies from their low points experienced in March of last year. These ETFs have actually been among the top performing non-inverse ETFs in 2010. They have risen 4.9% and 5.0%, respectively, year-to-date. At the present, approximately 80% of all ETFs tracked by Morningstar are in the red so far this year.”

The story at Prosperity may not be the norm going forward however. Elizabeth Warren, a law professor at Harvard University who heads the TARP oversight panel, told The Wall Street Journal, “The banks that are on the front lines of small-business lending are about to get hit by a tidal wave of commercial-loan failures.”

Regional banks such as Regions Financial (NYSE: RF) that have acknowledged significant exposure to commercial real estate are readying themselves for any potential adversity that may arise in the coming quarters. Regions is a good example of a company that has been proactive in continuing to build its reserve for non-performing loans even though its commercial real estate exposure may have already seen its worst times,” Fisher Reports.

“The Congressional Oversight Panel’s report notes that nearly 3,000 small financial institutions in the U.S. have exposure to commercial real estate that could jeopardize their overall financial health if these loans go sour. The government’s oversight of regional banks will likely become the subject of a brighter spotlight now that it has become official that the U.S. taxpayers’ $2.3 billion TARP stake in CIT Group (NYSE: CIT) has been officially wiped out. The Congressional Oversight Panel’s report underscores the risk of investing in the regional banking sector. It also opens up the door of opportunity for traders to sort the good banks from the bad,” Fisher Reports.

See The Full Story: HERE

Here are some details on the SPDR KBW Regional Banking ETF (KRE) and the iShares Dow Jones U.S. Regional Banks Fund (IAT) including the regional bank holdings within the ETF’s below.

The investment (KRE) seeks to replicate the total return performance, before expenses, of the KBW Regional Banking index. The fund uses a passive management strategy designed to track the total return performance of the KBW Regional Banking index. The index is a float adjusted modified-market capitalization weighted index of geographically diverse companies representing mortgage banks, loan processors, marketing and service institutions listed on U.S. stock markets. The fund is nondiversified.

SPDR KBW Regional Banking ETF (KRE) Components and weightings as of 1/20/10

   
Ticker Symbol: KRE    
Holdings: As Of 01/20/2010  
Name Weight Ticker Sector
Cvb Finl Corp 2.79 (CVBF) Financials
Fulton Finl Corp Pa 2.74 (FULT) Financials
Mb Financial Inc New 2.63 (MBFI) Financials
Svb Finl Group 2.57 (SIVB) Financials
Boston Private Finl Hldgs I 2.55 (BPFH) Financials
Firstmerit Corp 2.55 (FMER) Financials
Bank Hawaii Corp 2.5 (BOH) Financials
Pacwest Bancorp Del 2.47 (PACW) Financials
Webster Finl Corp Conn 2.47 (WBS) Financials
Synovus Finl Corp 2.44 (SNV) Financials
Whitney Hldg Corp 2.39 (WTNY) Financials
Fnb Corp Pa 2.32 (FNB) Financials
Valley Natl Bancorp 2.29 (VLY) Financials
City Natl Corp 2.29 (CYN) Financials
Old Natl Bancorp Ind 2.28 (ONB) Financials
Umpqua Hldgs Corp 2.25 (UMPQ) Financials
Signature Bk New York N Y 2.24 (SBNY) Financials
Pinnacle Finl Partners Inc 2.17 (PNFP) Financials
Columbia Bkg Sys Inc 2.1 (COLB) Financials
Trustmark Corp 2.07 (TRMK) Financials
Prosperity Bancshares Inc 2.03 (PRSP) Financials
First Midwest Bancorp Del 2 (FMBI) Financials
Wintrust Financial Corp 1.99 (WTFC) Financials
First Finl Bancorp Oh 1.97 (FFBC) Financials
East West Bancorp Inc 1.96 (EWBC) Financials
Provident Finl Svcs Inc 1.95 (PFS) Financials
Community Bk Sys Inc 1.92 (CBU) Financials
Bancorpsouth Inc 1.91 (BXS) Financials
Iberiabank Corp 1.9 (IBKC) Financials
Texas Capital Bancshares In 1.89 (TCBI) Financials
Bok Finl Corp 1.88 (BOKF) Financials
Hancock Hldg Co 1.84 (HBHC) Financials
Westamerica Bancorporation 1.82 (WABC) Financials
Associated Banc Corp 1.79 (ASBC) Financials
National Penn Bancshares In 1.78 (NPBC) Financials
Cathay General Bancorp 1.76 (CATY) Financials
Wilmington Trust Corp 1.74 (WL) Financials
City Hldg Co 1.73 (CHCO) Financials
Brookline Bancorp Inc Del 1.72 (BRKL) Financials
Tcf Finl Corp 1.68 (TCB) Financials
Susquehanna Bancshares Inc 1.67 (SUSQ) Financials
First Horizon Natl Corp 1.66 (FHN) Financials
United Bankshares Inc West 1.64 (UBSI) Financials
Hudson City Bancorp 1.58 (HCBK) Financials
Umb Finl Corp 1.56 (UMBF) Financials
Glacier Bancorp Inc New 1.52 (GBCI) Financials
S & T Bancorp Inc 1.45 (STBA) Financials
Sterling Bancshares Inc 1.29 (SBIB) Financials
First Comwlth Finl Corp Pa 1.19 (FCF) Financials
Privatebancorp Inc 1.06 (PVTB) Financials
State Str Instl Liquid Resvs 0.1   Unassigned
U.S. Dollar -0.05 CASH Unassigned

The investment (IAT) seeks results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Regional Banks Index. The fund generally invests at least 90% of assets in securities of the underlying index and depositary receipts representing securities of the underlying index. It may invest the remainder of assets in securities not included in the underlying index but which BGFA believes will help the fund track underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. It is nondiversified.

Holdings Detail as of 2/11/2010 (Holdings subject to change)

Symbol Name % Net
Assets
Market
Value ($)
Identifier* Market Sector Exchange
Rate
(USB) US BANCORP 18.98 $23,427,963 XNYS Banks 1.00
(PNC) PNC FINANCIAL SERVICES GROUP 10.02 $12,371,363 XNYS Banks 1.00
(BBT) BB&T CORPORATION 7.83 $9,667,133 XNYS Banks 1.00
(NTRS) NORTHERN TRUST CORP 5.14 $6,338,259 XNGS Banks 1.00
(STI) SUNTRUST BANKS INC 4.74 $5,849,566 XNYS Banks 1.00
(FITB) FIFTH THIRD BANCORP 3.99 $4,924,376 XNGS Banks 1.00
(RF) REGIONS FINANCIAL CORP 3.20 $3,954,337 XNYS Banks 1.00
(NYB) NEW YORK COMMUNITY BANCORP 2.76 $3,402,004 XNYS Banks 1.00
(HCBK) HUDSON CITY BANCORP INC 2.67 $3,297,541 XNGS Banks 1.00
(KEY) KEYCORP 2.55 $3,148,253 XNYS Banks 1.00
(PBCT) PEOPLE’S UNITED FINANCIAL 2.28 $2,811,208 XNGS Banks 1.00
(CMA) COMERICA INC 2.24 $2,760,416 XNYS Banks 1.00
(MTB) M&T BANK CORP 2.18 $2,692,846 XNYS Banks 1.00
(HBAN) HUNTINGTON BANCSHARES INC 1.42 $1,749,140 XNGS Banks 1.00
(MI) MARSHALL&ILSLEY CORP 1.36 $1,680,928 XNYS Banks 1.00
(CFR) CULLEN/FROST BANKERS INC 1.24 $1,524,594 XNYS Banks 1.00
(FHN) FIRST HORIZON NATIONAL CORP 1.20 $1,484,304 XNYS Banks 1.00
(CBSH) COMMERCE BANCSHARES INC 1.11 $1,373,379 XNGS Banks 1.00
(ZION) ZIONS BANCORPORATION 1.06 $1,310,057 XNGS Banks 1.00
(FNFG) FIRST NIAGARA FINANCIAL GRP 1.05 $1,297,053 XNGS Banks 1.00
(WFSL) WASHINGTON FEDERAL INC 0.91 $1,120,628 XNGS Banks 1.00
(ASBC) ASSOCIATED BANC-CORP 0.90 $1,109,734 XNGS Banks 1.00
(BOH) BANK OF HAWAII CORP 0.87 $1,076,211 XNYS Banks 1.00
(CYN) CITY NATIONAL CORP 0.84 $1,031,618 XNYS Banks 1.00
(VLY) VALLEY NATIONAL BANCORP 0.82 $1,010,884 XNYS Banks 1.00
(PRSP) PROSPERITY BANCSHARES INC 0.78 $961,356 XNGS Banks 1.00
(FMER) FIRSTMERIT CORP 0.74 $907,764 XNGS Banks 1.00
(BXS) BANCORPSOUTH INC 0.73 $896,235 XNYS Banks 1.00
(TCB) TCF FINANCIAL CORP 0.71 $880,782 XNYS Banks 1.00
(SIVB) SVB FINANCIAL GROUP 0.69 $854,727 XNGS Banks 1.00
(FULT) FULTON FINANCIAL CORP 0.67 $829,090 XNGS Banks 1.00
(WABC) WESTAMERICA BANCORPORATION 0.65 $804,801 XNGS Banks 1.00
(EWBC) EAST WEST BANCORP INC 0.58 $720,206 XNGS Banks 1.00
(CSE) CAPITALSOURCE INC 0.54 $667,434 XNYS Banks 1.00
(HBHC) HANCOCK HOLDING CO 0.54 $666,778 XNGS Banks 1.00
(UMBF) UMB FINANCIAL CORP 0.53 $660,051 XNGS Banks 1.00
(TRMK) TRUSTMARK CORP 0.52 $644,091 XNGS Banks 1.00
(TFSL) TFS FINANCIAL CORP 0.50 $622,398 XNGS Banks 1.00
(BPOP) POPULAR INC 0.50 $620,321 XNGS Banks 1.00
(NAL) NEWALLIANCE BANCSHARES INC 0.49 $601,940 XNYS Banks 1.00
(AF) ASTORIA FINANCIAL CORP 0.48 $590,037 XNYS Banks 1.00
(WTNY) WHITNEY HOLDING CORP 0.48 $588,756 XNGS Banks 1.00
(SNV) SYNOVUS FINANCIAL CORP 0.47 $576,262 XNYS Banks 1.00
(WBS) WEBSTER FINANCIAL CORP 0.46 $568,671 XNYS Banks 1.00
(IBOC) INTERNATIONAL BANCSHARES CRP 0.45 $557,954 XNGS Banks 1.00
(FFIN) FIRST FINL BANKSHARES INC 0.44 $548,579 XNGS Banks 1.00
(BOKF) BOK FINANCIAL CORPORATION 0.44 $543,434 XNGS Banks 1.00
(UMPQ) UMPQUA HOLDINGS CORP 0.44 $541,948 XNGS Banks 1.00
(UBSI) UNITED BANKSHARES INC 0.43 $530,487 XNGS Banks 1.00
(ONB) OLD NATL BANCORP/IN 0.41 $506,995 XNYS Banks 1.00
(MBFI) MB FINANCIAL INC 0.40 $494,188 XNGS Banks 1.00
(PVTB) PRIVATEBANCORP INC 0.39 $476,758 XNGS Banks 1.00
(WL) WILMINGTON TRUST CORP 0.37 $462,244 XNYS Banks 1.00
(FMBI) FIRST MIDWEST BANCORP INC/IL 0.36 $442,791 XNGS Banks 1.00
(GBCI) GLACIER BANCORP INC 0.36 $441,939 XNGS Banks 1.00
(FNB) FNB CORP 0.33 $411,005 XNYS Banks 1.00
(NPBC) NATL PENN BCSHS INC 0.33 $408,635 XNGS Banks 1.00
(WTFC) WINTRUST FINANCIAL CORP 0.32 $398,260 XNGS Banks 1.00
(CFFN) CAPITOL FEDERAL FINANCIAL 0.30 $373,905 XNGS Banks 1.00
(SUSQ) SUSQUEHANNA BANCSHARES INC 0.28 $346,891 XNGS Banks 1.00
(PRK) PARK NATIONAL CORP 0.26 $315,533 XASE Banks 1.00
(CATY) CATHAY GENERAL BANCORP 0.25 $307,261 XNGS Banks 1.00
(PFS) PROVIDENT FINANCIAL SERVICES 0.24 $301,940 XNYS Banks 1.00
(PACW) PACWEST BANCORP 0.21 $260,578 XNGS Banks 1.00
(TRST) TRUSTCO BANK CORP NY 0.18 $224,658 XNGS Banks 1.00
(SBIB) STERLING BANCSHARES INC/TX 0.17 $214,645 XNGS Banks 1.00
BLACKROCK FDS III 0.06 $67,947
Chart for iShares Dow Jones US Regional Banks (IAT)
 
 

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