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The Q2-09 div is used for yield calculations, but not all Q2 divs have been declared CATY, CYN, UCBH & WTNY have lowered their Q2-09 divs - RF reduced their Q3-09 div and PCBC has eliminated their div Negative EPS estimates will crash this javascript. The lowest EPS estimate that I use is $0.10. So the Div/EPS ratios are inaccurate for banks with negative EPS estimates [CNB, EWBC, FHN, PCBC, RF, UCBH, ZION]. Using the Forecaster Model In 2006, geography was destiny - and the metrics were misleading. It was a winning strategy to 'avoid' California and Oregon and 'buy' Texas and Oklahoma. The stocks that the analyst liked did not out-'total return' the stocks the analysts did not like. The low yielders failed to out-return the high yielders. Nor was buying the high P/E stocks or high Price/Book stocks a winning strategy. In a sector where the dividend payout ratio varies from 21% to 80%, it is not a surprise that the dividend discount model fails to be predictive. This sector sells at a fairly consistent P/E ratios despite wide variations in CAGRs. That is not logical. And the CAGRs also fail to be predictive of the stocks with high price to book ratios. That is not logical. I am not giving up hope that this sector can be forecasted. But my readers should be pessimestic about the predictions in the forecaster spreadsheet until it shows more signs of some success. This is the link to the 2006 stats for this sector, showing the projections based on 2006 begining of the year stats - along with the 2006 returns in the 'forecasting' spreadsheet which is the last of five spreadsheet posted - or roughly in the middle of the long page. This is the link to the 2007 stats page. Three Banks Suspend Their TARP Dividends Enrich & Zuckerman, WSJ 6-22 At least three small, cash-strapped banks have stopped paying the U.S. government dividends that they owe because they got $315.4 million in capital infusions under the Troubled Asset Relief Program. Pacific Capital Bancorp got $180.6 million from the Treasury Department in November, has since posted net losses of $49.7 million. Pacific Capital said Monday that it suspended dividend payments on its common and preferred stock as part of a wider effort to save about $8 million per quarter. A bank spokeswoman confirmed that the U.S.'s preferred shares are included in the dividend freeze. Seacoast Banking of Florida and Midwest Banc Holdings of Illinois, have also halted their TARP-related dividends, citing the banking industry's turmoil and a desire to fortify their balance sheets. So far, the Treasury Department has collected about $4.5 billion in dividends from TARP recipients. Pacific Capital, Seacoast and Midwest, which got their TARP money in December, were set to pay the government a total of $16 million a year in dividends. None of the banks mentioned TARP in news releases announcing suspension of the payments, but representatives confirmed Monday that the dividends had been stopped at least temporarily. Gerard Cassidy, a banking analyst at RBC Capital Markets, said he was surprised that some TARP recipients "already are in such difficult financial situation" that they are no longer making dividend payments. "It goes to show you that the due diligence performed by the Treasury was not sufficient." More on PCBC Singh & Dilip, Reuters 5-29 Pacific Capital Bancorp is expected to return to profitability in Q1-10, but the California-based lender will continue to feel the pinch of its residential construction portfolio. "The results from the core bank may continue to show signs of stress similar to lot of other California banks," Keefe Bruyette & Woods analyst Julianna Balicka told Reuters. The biggest drag on earnings will be provision expense, said Balicka, who expects the company to earn 44 cents a share for the first quarter, significantly below the average analysts' estimate of 57 cents polled by Reuters. PCBC has been posting losses for last three quarters, taking a hit from its core banking operations, which analysts believe will continue to weigh on first-quarter results. However, analysts expect the company's core banking unit to make a sequentially smaller provision for loan losses in the first quarter. Balicka expects core banking to record a provision of $58 million, below the unit's fourth-quarter provision of $69.8 million. Like all of California, the central coast of California is also facing some big challenges, and problem assets have obviously risen, Sandler O' Neill analyst Aaron James Deer said. "My expectation is that the bank's going to be working as closely as it can with its customers to help see them through the downturn so that the bank and its customers can march healthy from the recession," Deer said. California has been one of the worst hit from the housing downturn, and banks with heavy exposure in the region have been struggling to remain profitable amidst declining real-estate prices and soaring defaults. The state has seen at least three bank failures since January. Pacific Capital's refund anticipation loan and refunds transfer business are expected to do well and help the company return to profitability. Analysts also do not rule out a cut in the company's current dividend payout of 11 cents a share. "Given the economic and credit challenges, many banks have made deep cuts to their dividends, sometimes to a penny or just suspending it altogether, and we could see Pacific Capital take similar steps, simply as a precautionary, capital-preservation effort," analyst Deer said in an e-mail to Reuters. Non-performing assets are expected to be $230 million, according to Deer. Total non-performing assets were $241.5 million at December 31, 2008. The weakening California economy will pressurize the bank's net interest margins, due to lost income from non-performing loans and lack of loan demand, which would limit the company's ability to grow its top line, analyst Balicka said. Analyst Deer, however, expects some margin relief at the bank over the course of the year as deposits price downwards. Both analysts also ruled out an immediate capital raise at the bank in the near term. The company has received about $188 million from the U.S. Treasury Department under the capital purchase program, and analysts think that should provide it with enough capital cushion. Stench of Toxic Assets Lingers David Wessel, WSJ 6-11 Eight months ago, in the worst moments of the Great Panic of '08, then-Treasury Secretary Henry Paulson persuaded Congress to provide $700 billion for what he said was the crucial task of buying lousy real-estate loans and securities, the "toxic assets," from the nation's banks. Four months ago, Treasury Secretary Timothy Geithner proposed to leverage some of that money with private money to buy as much as $1 trillion in what he delicately dubbed "legacy assets" from the banks to repair their balance sheets and get them lending again. With banks raising capital, is there still a need for a government-orchestrated effort to get toxic assets off bank books? The government has yet to buy any of these assets. Instead, it bought about $200 billion worth of shares in the banks, and this week it allowed 10 big banks to repay $68.3 billion of that taxpayer money. The key: Big banks have raised about $65 billion in private capital in the past several weeks, an accomplishment that seemed unimaginable just a few months ago. So is it no longer necessary for the government to get toxic assets off banks' books to get credit flowing again? Is bolstering banks' capital a substitute for ridding them of smelly loans and securities? We're about to find out. Until this historic episode, the internationally accepted recipe for fixing a banking crisis had three ingredients: take bad assets off bank books, temporarily guarantee their debts and deposits, recapitalize the banks. The notion was that removing toxic assets usually was necessary before a bank could attract new capital or a buyer and get on with the business of making loans. Banks need capital to absorb losses when borrowers don't repay their loans. If a bank's capital cushion is large enough, it can absorb all the losses it faces and remain solvent. (Say a bank is carrying a loan at 80 cents on the dollar, but it's really worth 50 cents. Investors don't want to lend that bank money or, if they do, they charge a lot. That makes it hard for the bank to lend readily. With a fat enough capital cushion, the bank's solvency is assured even if it has to mark the loan down to 50 cents.) The very stressful stress tests conducted by the regulators were intended to calibrate how much capital the big banks needed in a terrible, though not worst-case, economy. Arithmetically, if banks raise enough capital, then there's no need for the government to buy the toxic assets. And we all live happily ever after. Perhaps. But ridding toxic assets accomplishes two other things. First, it removes any doubt about looming undisclosed losses. As long as toxic assets remain on bank books, there's uncertainty about whether they've been marked down enough to reflect reality. If they're gone, it doesn't matter. Second, it removes a huge distraction for management, which may be prerequisite to focusing on making new loans, the objective of all these efforts. Michael Bleier, a banking lawyer at Reed Smith in Pittsburgh who spent 14 years as general counsel at Mellon Bank, says this is a big deal. In 1988, Mellon created a "bad bank" to hold and sell $1.4 billion worth of bad real-estate and energy loans that were then worth 47 cents on the dollar. "One of the key reasons we did this was that management's time and attention was being taken up with questions like: What are you going to do with this stuff?" Mr. Bleier said. "By not getting rid of the assets, management attention is somewhat diverted." The bad bank was a success at its sole mission: It sold the assets and closed its doors in 1995. And the good bank, Mellon, was healthy enough to be making acquisitions in late 1989 (and was later acquired by Bank of New York.) Mr. Geithner's Public Private Investment Program to buy toxic loans is going nowhere; the PPIP to buy securities may yet materialize. If markets and banks deem all this no longer necessary because the financial system has pulled back from the abyss and banks have raised more capital than expected, that's good. That's not the only possible explanation. Bankers always will be reluctant to sell if they have to mark down loans; they'd rather wait and hope for better times. But the Treasury offered investors a sweet deal here -- and found few takers amid much anxiety about whether participating would subject investors to congressional scrutiny and limits on executive pay. If the lack of appetite for these deals instead reflects Wall Street worries about the political risk of doing business with the U.S. government, that's not so good. At a Senate hearing this week, Mr. Geithner said lack of interest in toxic-asset sales reflects elements of both explanations. And he isn't ready to abandon the effort. If the economy takes a bad turn, or attitudes toward banks change -- particularly toward banks that weren't deemed healthy enough to give back taxpayer capital -- a mechanism for removing toxic assets may yet prove essential to reaching a happy ending. Ratings & Dividend Changes - June On 6-22 PCBC announced that it has deferred regularly scheduled interest payments on its outstanding $69.4 million of junior subordinated notes relating to its trust preferred securities. PCBC also suspended the payment of cash dividends on its outstanding common stock and preferred stock. On 6-04 CFR was downgraded at RBC to Sector Perform from Outperform based on current valuation and trading near proposed price target. Maintained price target of $50. On 6-09 BMO Capital Markets Upgraded FNB from Underperform to Market Perform. On 6-10 Soleil Initiated coverage of HBHC at Hold. On 6-12 Keefe Bruyette Upgraded FNB from Market Perform to Outperform. On 6-18 Keefe Bruyette Upgraded PCBC from Underperform [to which it was downgraded on 5-05-09] to Market Perform. On 6-25 B. Riley Upgraded FNB from Neutral to Buy. On 6-25 Sterne Agee Upgraded WTNY from Neutral to Buy. On 6-16 UMPQ declared a dividend of $0.05/share payable on July 15, 2009 to shareholders of record as of June 30, 2009. On 6-24 GBCI declared a dividend of $0.13/share payable on July 16, 2009, to owners of record on July 7, 2009. On 6-09 Fitch Ratings downgraded its rating on struggling lender Colonial BancGroup (CNB) deeper into junk status after its banking unit agreed to a cease-and-desist order with regulators. The order requires the bank to increase capital levels and reduce problem assets, among other things. Because of the order, the likelihood of Colonial BancGroup executing a $300 million pending infusion from a consortium of investors may be "negatively impacted," Fitch said in a statement. Colonial is awaiting federal approval for the capital infusion from private lenders. Fitch downgraded Colonial's long-term issuer rating by one notch to CCC, seven steps below investment grade, from B-minus. On 6-10 FNB announced the pricing of an underwritten public offering of 21.0 million shares of its common stock at a price of $5.50 per share. FNB intends to use the net proceeds from the offering, which are expected to be approximately $109.3 million (without giving effect to the exercise of the underwriters' over-allotment option), for general corporate purposes and the possible repurchase of the $100 million of preferred shares plus the warrant issued in connection therewith held by the U.S. Treasury. On 6-04 RBC Capital Mkts Initiated coverage on FHN at Outperform and Downgraded UCBH from Outperform to Sector Perform. On 6-09 RBC Capital Mkts Downgraded CFR from Outperform to Sector Perform. On 6-09 BMO Capital Markets Upgraded FNB from Underperform to Market Perform. On 6-10 Soleil Initiated coverage on HBHC at Hold. On 6-12 Keefe Bruyette Upgraded FNB from Market Perform to Outperform. On 6-16 Sterne Agee Initiated coverage on FNB at Buy. On 6-18 B. Riley & Co Upgraded EWBC from Sell to Neutral. On 6-24 B. Riley & Co Upgraded HBHC from Sell to Neutral. On 6-25 B. Riley & Co Upgraded FNB from Neutral to Buy. On 6-25 Sterne Agee Upgraded WTNY from Neutral to Buy. Ratings & Dividend Changes - May On 5-01 Stifel Nicolaus Downgraded WABC from Hold to Sell. On 5-05 Keefe Bruyette Downgraded CATY from Market Perform to Underperform. On 5-06 B. Riley Downgraded EWBC from Neutral to Sell. On 5-18 Keefe Bruyette Upgraded CFR and PRSP from Underperform to Market Perform. On 5-21 Credit Suisse Initiated coverage of BOH at Outperform. On 5-21 Credit Suisse Initiated coverage of FHN at Outperform. On 5-21 Credit Suisse Initiated coverage of ZION at Underperform. On 5-15 HBHC declared a dividend of $0.24/share payable June 15, 2009, to shareholders of record as of June 5, 2009. On 5-20 FNB declared a dividend of $0.12/share payable on June 15, 2009, to shareholders of record as of the close of business on June 1, 2009. On 5-20 WTNY declared a dividend of $.01/share payable on July 1, 2009 to shareholders of record as of June 15, 2009. Home Page Factoids Previous Update |