Five interesting things that Hodges Capital research analysts discovered this week...

#1 PROBLEM BANKS: The FDIC published its Quarterly Banking Profile for the first quarter of 2024, and the problem bank list increased by 11 banks representing $15.8 billion in assets.  The total now stands at 63 potential problem banks, representing total assets of $82.1 billion. The report notes that asset quality metrics remain generally favorable, except for material deterioration in credit cards and commercial real estate portfolios.  Industry noncurrent loans remain below pre-pandemic levels, but noncurrent, non-owner-occupied commercial real estate loans are at the highest since the fourth quarter of 2013. The deterioration is primarily driven by office portfolios at the largest banks.

#2 JUST WHAT THE DOCTOR ORDERED: After years of slowly gaining market share, Dr Pepper inched ahead of Pepsi as the number two soda brand in the country in 2023, according to market share data from Beverage Digest, a trade publication. Coke is the leader by a comfortable margin, capturing 19.2% of the soda market in the United States by volume. Dr Pepper and Pepsi had 8.3%, with Dr Pepper technically ahead. Founded in 1885 in Waco, Texas, Dr Pepper preceded Coca-Cola and Pepsi. According to CNN, Dr Pepper established a small but devoted following in the American South, while Coke and Pepsi battled it out in the 20th century.

#3 UNREALIZED LOSSES: Stateside depository institutions raked in $64.2 billion of first-quarter net income, the Federal Deposit Insurance Corporation found in its May 29 Quarterly Banking Profile, up 79.5% from the final three months of 2023 and back within range of its Covid-era baseline of roughly $60 billion to $80 billion. Yet torrents of red ink meanwhile continue to flow across industry balance sheets, as unrealized losses on available-for-sale and held-to-maturity assets – which are marked to market and carried at amortized cost, respectively – registered at a combined $517 billion during the first quarter. That is up $39 billion sequentially and marks the ninth consecutive period of "unusually high unrealized losses" since the Federal Reserve began its belated, aggressive tightening cycle in mid-2022.

#4 DINING OUT: Despite some evidence that the backbone of the American economy, the mighty consumer, could be starting to crack under the weight of inflation, the nation's restaurant industry remains on track for a record year, according to Chartr. Last week, data from the National Restaurant Association revealed that America's restaurants — from fine dining to fast food — are set to haul in a total of $1.1 trillion this year, the highest figure on record. America has been dining out more and more, and it's showing no intention of stopping. Indeed, data from the USDA reveals that 53% of household food expenditure is now spent on food away from home, up from 41% in 1997. That steady shift of about ~12% is associated with many facets of modern life. The rise of convenience consumption, two-earner households, "foodie" culture, higher incomes, and cheaper and more available fast food have all played their part in America becoming a country that cooks less and eats out more.

#5 HIDDEN COST OF OWNERSHIP: In a market where median home prices have climbed above $400,000 nationally, the average annual cost of owning and maintaining a single-family home in the U.S. is 26 percent higher compared to four years ago, according to Bankrate's new Hidden Costs of Homeownership Study. Single-family homeowners in pricey states like California, Hawaii, and New Jersey now pay more than $25,000 per year in ownership and maintenance costs. Bankrate factored in the average cost of property taxes, homeowners’ insurance, energy bills, and 2% of the median sales price of single-family homes to account for maintenance and repair costs. Bankrate found that the tab adds up to $18,118 a year for a typical single-family home (valued at $436,291, according to Redfin) in all 50 states. Nationally, that is an additional $1,510 per month on top of a mortgage payment.

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