Basswood Capital Management LLC reduced its exposure to more than half of its top 20 holdings in the fourth quarter of 2022.

The New York-based hedge fund manager cut its positions in 11 of its 20-largest holdings in the last three months of 2022, according to its latest Form 13F filing. The company's total common stock holdings were valued at $1.34 billion as of Dec. 31, 2022, down 0.1% from a quarter earlier.

This article is part of a series on large institutional investors active in the U.S. financial sector. All institutional investment managers active in the U.S. with over $100 million in investments in Form 13F securities must file quarterly statements detailing their positions.

Top holdings

Basswood took particular aim at Comerica Inc., cutting its position in the bank by 27.8% in the quarter. The Dallas-based bank slipped seven spots to become Basswood's 16th largest common stock holding by market value.

Webster Financial Corp. lost its second-place spot in Basswood's top holdings, as the hedge fund manager reduced the count of its shares in the company by 26.8%. Basswood's Webster Financial shares were valued at $53.3 million at the end of the fourth quarter of 2022.

Dime Community Bancshares Inc. maintained its spot as Basswood's top holding despite the hedge fund cutting its holdings in the bank by 14.7%.

Basswood increased its exposure in six companies out of its top 20 holdings during the quarter. The largest increase in shares held was in Synovus Financial Corp., as Basswood upped its holdings in the company by 20.7%. The position had a market value of $19.5 million as of Dec. 31, 2022.

Big bank moves

Basswood trimmed its position in JPMorgan Chase & Co. by 4.4% during the quarter, but the banking giant still moved up to the second spot in the holdings list. The hedge fund manager's total holdings in JPMorgan were valued at $63.0 million at the end of 2022.

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Wells Fargo & Co. fell out of Basswood's top five holdings as the hedge fund reduced its share count in the bank by 19.1%, resulting in a position valued at $40.1 million as of Dec. 31, 2022.

Basswood bought 10 new stakes worth $69.9 million in the fourth quarter of 2022, of which six were banking companies. The hedge fund's $12.7 million stake in Stellar Bancorp Inc. was the largest new investment in the banking sector during the period.

Stellar Bancorp came into existence following a merger of equals between Allegiance Bancshares and CBTX Inc., which was completed on Sept. 30, 2022. The hedge fund manager held 134,081 shares of CBTX and zero shares of Allegiance Bancshares at Sept. 30, 2022.

Basswood's new stake in First American Financial Corp. was its largest during the quarter, valued at $16.4 million.

Merger-driven exits

Basswood exited seven positions valued at more than $1 million during the quarter. Of those seven positions, three were in the companies that were involved in mergers.

Columbia Banking System Inc., in which Basswood Capital held a 343,943-share stake as of Sept. 30, 2022, agreed to a merger with Umpqua Holdings Corp. that is expected to close Feb. 28.

At the end of the third quarter of 2022, Basswood held 289,874 shares of Flagstar Bancorp Inc., which was acquired by New York Community Bancorp Inc. on Dec. 1, 2022.

Basswood's largest exit during the quarter came as it off-loaded all of its holdings in Fidelity National Information Services Inc., which had been valued at $10.2 million.

The firm also exited a stake worth a total of $3.9 million in eight special purpose acquisition companies including INSU Acquisition Corp. III, Austerlitz Acquisition Corporation II, Gores Holdings VII Inc., JOFF Fintech Acquisition Corp., Austerlitz Acquisition Corporation I, CF Acquisition Corp. IV, Atlas Crest Investment Corp. II and Fortress Value Acquisition Corp. III. Except for CF Acquisition Corp., all were delisted during the fourth quarter of 2022.