Notes
Banner Corporation (BANR) operates as the holding company primarily for Banner Bank that provides commercial banking services to individuals, businesses, and public sector entities in the United States. It offers various deposits products, including demand checking accounts, negotiable order of withdrawal accounts, money market deposit accounts, regular savings accounts, certificates of deposit, cash management services, and retirement savings plans. The company also offers commercial business and commercial real estate loans, agricultural business loans, construction and land development loans, one to four-family residential loans, and consumer loans. In addition, it engages in mortgage banking operations primarily through the origination and sale of one to four-family residential loans. As of March 31, 2008, Banner Bank operated 81 branch offices and 12 loan production offices in 28 counties in Washington, Oregon, and Idaho. Banner Corporation, through its other subsidiary, Islanders Bank, also operated three locations in San Juan County, Washington.Good article on investing in banks:
http://online.wsj.com/article/SB121700939198285307.html
12JUL08 - $8
From the Quarterly Report (as of March 2008)Mortgage-backed securities were 2% of interest-bearing assets, and provided 3% of net interest income (for the quarter).
Annual results:
Earnings per common share: 0.24
Cumulative dividends declared per common share: 0.20
" Stock Repurchase and Option Exercise Activity: On July 26, 2007, our Board of Directors authorized the purchase of up to 750,000 shares of our outstanding common stock over the next twelve months. As of March 31, 2008, we had repurchased 663,600 shares of stock under this program. During the quarter ended March 31, 2008, we repurchased 605,800 shares of our common stock under this program at an average price of $23.19 per share.
" We offer a wide range of loan products to meet the demands of our customers; however, we do not now and have not previously engaged in any sub-prime lending programs. Historically, our lending activities have been primarily directed toward the origination of real estate and commercial loans. Real estate lending activities have been significantly focused on residential construction and first mortgages on owner occupied, one- to four-family residential properties; however, over the past year our origination of construction and land development loans has declined materially. Our total construction and land development loan originations in 2007 were approximately 35% lower than in the previous year, and this trend continued as construction and land development loan originations in the first quarter of 2008 were approximately 60% lower than in the first quarter of 2007. Our lending activities have also included the origination of multifamily and commercial real estate loans. Our commercial business lending has been directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agri-business borrowers operating in our primary market areas.
Return on average assets 0.34%
Return on average equity 3.49%
Average equity / average assets 9.82%
Average interest-earning assets / interest-bearing liabilities 103.13%
Non-interest income/average assets 0.73%
Non-interest (other operating) expenses / average assets 3.01%
Efficiency ratio
[non-interest (other operating) expenses / revenues] 74.00%
" Non-Performing Assets : Non-performing assets increased to $62 million, or 1.36% of total assets, at March 31, 2008, compared to $14 million, or 0.39% of total assets, at March 31, 2007. With the exception of residential construction and land development loans, non performing loans and assets generally reflect unique operating difficulties for individual borrowers rather than weakness in the overall economy of the Pacific Northwest. However, slower sales and excess inventory in certain housing markets have been clear contributing factors to the increase in delinquencies for construction and land development loans, which represent approximately 82% of our non-performing assets. While we have not engaged in any sub-prime lending programs and have not been directly impacted by the asset quality issues emanating from that market segment, we do have heightened concerns relative to home values, housing markets and construction lending as a result of the problems associated with sub-prime and other non-traditional mortgage lending programs, as well as increasing levels of builder and developer delinquencies and lender foreclosures. As a result, we are currently exercising extra monitoring vigilance with respect to our asset quality and for the quarter ended March 31, 2008 we significantly increased our allowance for loan losses. Aside from residential construction and land development lending, to date we have not detected any meaningful deterioration in the performance or quality of any other segments of our loan portfolio. We believe our level of non-performing loans and assets, while increased, is manageable, the underlying asset values remain sufficient to minimize principal losses and our reserves are satisfactory.
From Yahoo:
Market Cap (intraday): 128.14M
Trailing P/E: 3.81
Forward P/E (fye 31-Dec-09): 5.77
PEG Ratio (5 yr expected): 0.72
Price/Sales (ttm): 0.69
Price/Book (mrq): 0.29
The price to tangible book ratio is about 0.4. Net assets to total assets is around 0.10 (acceptable).
The dividend is $0.80 a year, although earnings this year are only expected to be 0.94, so maybe a cut is likely. There are five analysts.
Thoughts: You're paying less than $0.50 for $1 of hard assets. That's a pretty good cushion. The bank hasn't been involved in the really risky subprime residential market. It has focussed on residential owner-occupied construction, which is in big decline. The commerical agriculture business is probably a sounder sector right now. It has a postive forward PE. It can be a good investment even with a large margin of error. Non-performing assets (NPA) increased four-fold to 1.4% of total assets. Assume the NPA's are worthless and they increase four-fold again next year, to 5%. Also assume it breaks even next year (despite the positive forward PE). That reduces net tangible assets by 70% next year, to $90M. So, in this worst-case scenario, it has a forward ratio of price-to-tangible-assets of under 1.5.
On the other hand, how reliable are earnings estimates, and the forward PE's based on them? Here's a grouchy article on the topic:
http://seekingalpha.com/article/85864-earnings-season-fundamentally-flawed
23JAN09 - $4.97
Banner hit a 5-year low today. See my notes on 5-year mean-reversion.In late November, Banner sold $124 million in preferred stock to the US Treasury. Around the same time, one director bought some shares at $8.57.
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