Banker Heartland Financial (HTLF) has completed its merger with UMB Financial (UMBF).
This preferred converts to floating rate on 7/15/2025 at the 5 year treasury (now 4.26%) plus a spread of 6.675% meaning at todays rate the coupon would move to almost 11%.
UMB is a $50 billion asset banker and Heartland was about $18 billion—so now we have almost a $70 billion banker.
I am in the process of converting spreadsheets etc to reflect UMB.
This might be a good hiding spot at around 7% for a couple quarters–now trading at $25.25. In fact I just took a small position in the issue.
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Moody’s confirms rating on UMBFP @ Baa3 if I read correctly – https://www.moodys.com/research/Moodys-Ratings-confirms-UMB-Financials-ratings-issuer-rating-at-Baa1-Rating-Action–PR_502061
“New York, February 06, 2025 — Moody’s Ratings (Moody’s) confirmed the ratings of UMB Financial Corporation and its bank subsidiary, UMB Bank, N.A. (collectively referred to as “UMB”) following the close of UMB’s all-stock acquisition of Heartland Financial USA, Inc. This rating action concludes the review for downgrade initiated on 30 April 2024, when the acquisition was first announced. We also changed the outlooks on the long-term bank deposits of UMB Bank, N.A., and long-term issuer ratings of UMB Bank, N.A. and UMB Financial Corporation to negative from ratings under review.
We confirmed UMB Financial Corporation’s long-term local currency issuer rating and subordinate debt rating at Baa1, local currency Senior Unsecured Shelf and Subordinate Shelf at (P)Baa1, Preferred Shelf and Preferred Shelf Non-cumulative at (P)Baa2 and (P)Baa3, respectively. We also confirmed UMB Bank, N.A.’s long-term local currency issuer rating at Baa1, long-term bank deposits rating at A1, long-term local and foreign currency Counterparty Risk Ratings at A3, long- term and short-term Counterparty Risk Assessments at A2(cr)/P-1(cr), respectively and standalone Baseline Credit Assessment (BCA) and Adjusted BCA at a3.”
Tim,
At 25.25 my formula in google sheets calculates a stripped yield of 6.96%, but a YTC of only 5.65%.
I adjusted my calculation for the way the div actually accrues – pay date to pay date rather than ex-date to ex-date. Even without that adjustment, I get YTC = 6.31%
Given the good odds they’ll call it, YTC appears the more likely return than current yield.
mbg-
At 25.25 I get 5.7% YTC from today to the call date.
Me too, rocks. When I adjust my calculation for the ACTUAL accrual period (pay date to pay date, rather than ex-date to ex-date), I get 5.65% YTC.
When I said, “Even without that adjustment, I get YTC = 6.31%”, it was only to point out that that’s still less then the ~7% current yield that Tim thought he gets out of holding it until the call date. But the real YTC is 5.7% (5.65%).
Oh it’s not what Tim thinks he gets, it is what he gets by way of current yield… 6.96% to be exact… Trouble is on something like this that’s most likely going to be gone in the short term but trades above par, you have to take into account the loss of principal that’s going to happen… That’s why YTC is more important to focus on than current yield on this and similar issues with high probability of call within a short period of time… And of course if it doesn’t get called, you win even better than if what you expected to happen doesn’t. It’s always great to win even more if you’re wrong about what you expect. And in this case, you win big if you’re wrong because this one will then be outstanding for another 5 years…
the day it started trading I got it to fill at 25.15 … I really like these as substitutes for cds and if I had all the intel from you guys I’d buy bigger positions. woot woot umb home town bank for the win.
Converts to 11% in July of 2025. I think its beyond safe to say you can kiss this one Goodbye in July. No way they are going to pay that kind of rate in this low environment.