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Umpqua Holdings Corporation Message Board

  • jonwest88 jonwest88 Jan 26, 2008 12:27 PM Flag

    Buy outs, dividends, and value

    ". I wouldn't want to short this stock, although I also don't expect it will go up like a rocket.

    If history is any guide, by spring/summer, banking will begin to consolidate, which is another catalyst in favor of UMPQ. Since "creative financial instruments" will remain suspect, the stronger banks will be looking to acquire "growth" by purchasing small, regional institutions. UMPQ is an excellent target, particularly since most of its footprint is in OR/WA. "

    I am long UMPQ, avg cost = 13.74. I did not buy any on Tues as I had been waiting for a dip to 11 to add after earnings. I did add on Thurs am with a stop limit so as not to buy at the opening pop. I bought based on action in other banks and fed policy.

    After reading the earnings report and notes from other owners who reported on the conference call on the MFSA site, I am slightly cautious on the capital ratios. Davis came across positive and focused. He see opportunity and will be going after commercial loans and refis.

    The tangible book value is 7.3 or 7.6 a share. Take out value of UMPQ would be ?? $15, $16?

    Umpqua needs to straighten out its North Bay California exposure. This is the area where they are not making money and its costing the other divisions.

    If a large bank were to buy UMPQ they would be buying a bank with a different corporate culture. Imagine Hewlett Packard buying Apple, or
    Wal Mart buying Whole Foods Market?

    I think the current dividend is safe. $14.4 a share price seems about right, and one collects the 5 % dividend. In a few years, we will see if Davis' strategy continues to generate more sales. This bank is customer service oriented par none. Under his reign he has bought a lot of banks.

    There will not be any stock buy backs for a while.

    A bank ceo and bank analyst on the MFSA site ( not employed by MFSA) said it would be better to cut the dividend and buy back stock at this point.

    Bank officers and directors sometimes get it real wrong, as they did in 1990, when many bought shares on the open market for their personal accounts, only to see that within 6 months to one year 25 to 50 % losses. The stocks of
    Chase Manhattan, Manufacturer's Hanover, CitiBank, or CitiCorp, were already down by 30 to 40%.

    I think that UMPQ repurchased 4 million of the 5 million shares issued to buy North Bay to prevent dilution. They did not know in April and June or July when they spent over $100 million for stock between 21.5 and 24 that they would have been better taking dilution and keeping the real money on the books. If they would have done this their tangible equity would have closer to $9 even with the add'l 4 million shares outstanding.

    They would have been stronger and not have had to borrow from the Fed either -- it's on their current balance sheet and up considerably from the last quarter. The cash setting aside to cover non performing loans is now from borrowed fed money.

    At $9 tangilble equity with 50 million extra on the books, after non performing loans in limbo and no fed funds loan, if the stock is at 14.5 today, at 1.9 tangible equity it would be worth at least 17.5, share.

    If one factors in the extra cash and less debt owed, it would be worth maybe $18 to 19?

    The stock would have a PE of about 15, and div yield of 4% at 19 a share.

    It will take some time to sock away another 100 million in cash!

    Jon

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    • You are a breath of fresh air. An individual who has
      researched his subject before he pontificates. Well done.

    • "
      "I think the current dividend is safe. $14.4 a share price seems about right, and one collects the 5 % dividend. In a few years, we will see if Davis' strategy continues to generate more sales. This bank is customer service oriented par none. Under his reign he has bought a lot of banks.

      There will not be any stock buy backs for a while.

      I think that UMPQ repurchased 4 million of the 5 million shares issued to buy North Bay to prevent dilution. They did not know in April and June or July when they spent over $100 million for stock between 21.5 and 24 that they would have been better taking dilution and keeping the real money on the books. If they would have done this their tangible equity would have closer to $9 even with the add'l 4 million shares outstanding. "

      Having time to review their balance sheet, I see a drop in deposits, and increased borrowing from the fed -- in the past quarter it jumped from Sept, and there were no fed borrowings last year.
      Rallying from 13 to 16 and a fair target of 15 I think its a good time to take profits.

      • 1 Reply to jonwest88
      • Hello Jon, that's one approach, but I tend to disagree. If you require the investment and gain from UMPQ to purchase another equity in which you are supremely confident of appreciation superior to UMPQ, or wish to purchase real property, then perhaps you are correct; it could be a time to take two dollar per share profits.

        On the other hand, investing has it's risks and I believe the risk of capital to gain only two or three dollars per share is too great to justify the original investment. Then, after you have paid the highest level of federal and perhaps state income taxes (because of your short term gain) where do you invest your remaining relatively minor profits that are superior to UMPQ?

        Imo, one's investment risk is worth, at minimum, two times the share value upon sale. Continually looking for another colt to mature into a horse is a fruitless endeavor in most markets. That is, unless, you have someone in the stable with prior knowledge, and that's not something normally found at the legal ticket window. Holding a valued, profitable equity over five or ten years is boring but usually the most profitable approach when compounded dividends are re-invested. But, hey, what do I know ?

        Thank you, Jon, for your UMPQ post. Good wishes for profitable investing .
        pvbud

    • Knowledgeable, informative post; not common on this Board.
      pvbud

 
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