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Dear Mr. Berko: If you think it鈥檚 a good idea, we鈥檇 like to invest $25,000 each in three regional banks for our self-managed retirement account. During the last 14 years we earned an average annual return of 8.2 percent. I think continued improvement in the economy warrants this purchase. We鈥檝e selected PNC, and I would like you to recommend two more.

We also have a modestly successful architectural practice. The high taxes here are killing us. We鈥檙e vacationing to Florida and thinking seriously about moving there. I鈥檝e been offered an equity position with a firm in your area and was hoping you might know of them.

C.P.

San Diego

Dear C.P.: Wow! That 8.2 percent is an impressive 14-year record.

The problem with most folks retiring to Florida from high-tax states is, when you vote as Floridians, you vote for the same politicians who raised your taxes in California, New Jersey, Illinois, etc. Stay there. There are so many of you here that vehicular traffic becomes assaultive, restaurant prices increase 20 percent, and wait times at retailers, theaters and even physician鈥檚 offices become intolerable. Your record numbers diminish our quality of life. Florida has 386 people per square mile. And many of us who are longtime Florida residents prefer you stay home. Or move to Texas, which has 98 residents per square mile and no income tax.

I recognize the name of the firm that you may join. It has a good reputation with clients in various cities and has been in business for longer than I can remember. An architect I know in Tampa tells me it鈥檚 a high-class firm with 鈥渆xceptionally good political connections.鈥� That鈥檚 important. Your visit to the Florida office will tell you if the job-fit warrants leaving the Left Coast.

There seems to be unusual optimism for the regional banks. The three most prominent reasons are:

1. Tax reform: Now that the new statutory rate has been lowered to 21 percent, the increased earnings potential will improve capital generation, encourage stock buybacks and grow dividends.
2. A strong economy: The GDP is growing nicely, unemployment is lower and higher wages plus benefits from tax reform have increased consumer confidence. Consequently, banks benefit from consumer spending and higher loan growth.
3. Changes in regulation: Under the Obama administration, banks fought a restrictive regulatory landscape. Regional banks were forced to hold enormous amounts of excessive capital. Excess capital can be leveraged or returned to shareholders, giving management more flexibility.

PNC Financial Services (PNC-$133), a $40 billion Pittsburgh bank, yields 3.1 percent and is a bank I鈥檇 care to own. Its 2,500 branches, 10,000 ATMs and 53,000 employees in the Midwest produced record revenue, earnings and dividend growth, a comfortable P/E plus a swell 1.38 percent net profit margin. This is a grand bank, though I鈥檓 dismayed by enormous insider selling of tens of thousands of shares this year.

I鈥檇 recommend Keycorp (KEY-$16.95), a $14 billion bank from Cleveland, with a generous 3.9 percent yield and a fine 10-year record of revenue, earnings and dividend growth. Trend Spotter and Sander O鈥橬eill have positive recommendations, while Value Line believes Keycorp could trade in the middle $30s by 2023. And you鈥檇 be earning a good dividend while waiting for that to happen.

Finally, I like Huntington Bancshares (HBAN-$13.45), an $11 billion bank homeported in Columbus, Ohio, and founded in 1866. Huntington Bancshares owns a fine 1.41 percent net profit margin, thanks to good management, and pays a generous 4 percent dividend that鈥檚 been raised in each of the last nine years 鈥� and may be raised repeatedly in the future, because revenues and earnings should continue to improve. The Street suggests that 1,000 branches and 16,000 employees could help the company鈥檚 stock trade in the $20s during the coming four years with nice dividends along the way.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at [email protected]. 漏 2019 Andrews McMeel Syndication