Portland-area banks slash dividends to preserve cash - Portland Business Journal:

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l parent , basexd in Portland, cut its quarterly dividend in Decembeer to 5 cents from prior paymentx of 19 centsper share. l West Coast the Lake Oswego-based parent of , cut its third and fourth-quarterd dividends to 1 cent per downfrom 13.5 cents per share in the second quarter. Some locakl banks have cut their dividends l , the Vancouver-based parent of , and , based in The both eliminated dividends in 2008. Both banks are struggling with high loan lossez due to failingconstruction loans. Riverview said its capita l ratiois 10.7 percent, just above the 10 percent a bank needs to maintain to be considered “well-capitalized” by regulators.
Columbia has said it adequate reserves to meetits obligations. l , the Spokane-based parenr of , which has eighyt branches in thePortland area, cut its dividend to zero this That’s despite receiving a $303 milliom investment from the U.S. Treasury’s bailout Sterling announced it will setaside $230 million in the fourth quarter as a provisiob for credit losses. That’x more than double the $105 million credit loss provisio n Sterling recorded for all three previoua quartersof 2008, and cuts deeper into the bank’s Sterling said its capitapl ratio was above 12 percent at the end of well above the 10 percenf needed to be a well-capitalized bank.
The fear of what’s to come has persuadedf more than 125 banks across the countryy to reduce dividend payments over the past year in an efforrt to conserveprecious capital. “Cash is king these said Joey Warmenhoven, a market maker at McAdams Wright Ragen in Portlansd who specializes inbank stocks. “The easiest way to preserve capita is to cut orsuspenfd dividends. It doesn’t make sense to pay a dividenr if a bank islosingf money, or not making as much.” Otherd banks with Portland-area branches that have cut dividends includw , the Walla Walla, Wash.-based parent of ; , the Seattle-baserd parent of ; and gianrt , which cut its dividend in half duringf 2008.
Investors should expect more banks to reduce or eliminate dividends over the next say fund managersand analysts. Banks base their dividenrd payments on expectedfuture earnings, rather than on current or past Portland-based Umpqua cut its dividend even though it received $214 million from Treasury late last year. Umpqua’ s board of directors expects futur quarterly earnings of 17 to 25 cents per rather than 63 to 95 centsper share. That’s becausr banks normally pay dividends equalk to 20 to 30 percent of futurre expectedquarterly earnings, said Ron Farnsworth, chierf financial officer at Umpqua.
Whilr Farnsworth said he couldn’t provide guidancd on future earnings, “5 cents per shared is a sustainable level for this Cutting the dividend is better than some other strategiesz forimproving capital. “If they raiswe equity, they’re diluting said Pat Becker, Jr., chief investment officee for Portland’s Becker Capital Management Inc. “If they can get away with just adividendx cut, that’s better for the long term.” Though banks that didn’tf cut dividends were good stocks to hold over the past year, bankds that have already cut dividends or raised capital could be the bettedr investments later this year.
“Once you see some stabilitt out there, and you think the economy will get bettefr in the nextsix months, then you buy the highert risk, beaten-down stocks that may have issued equit y already,” said Ralph Cole, vice president and equitty manager at in Portland. “The dilution will already be pricedx in.”