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Banner Corporation Message Board

  • senior6analyst senior6analyst Mar 18, 2010 10:57 AM Flag

    Banner's Earnings Potential?

    Given past questions, I am sharing my rough method for estimating Banner's potential earnings as we emerge from the real estate crisis of 2008/2009. in prior years Banner was generally able to earn a ROA of close to 1%, not unusual for a well run, large regional community bank. To be conservative, I used an 0.8% ROA. For $5 billion of assets that would translate into approximately $40 million of annual earnings in the intermediate time frame, or, almost $2 per share. If they issued more shares, I presume that it would be for an acquisition in a FDIC bank fire sale. In that case, I guessed that their assets would be closer to $6 billion and their outstanding shares would increase by about 12 million shares. Hence, using an 0.8% ROA, the recovered earnings potential could translate into EPS of about $1.40. So, IMHO, Banner might produce EPS of around $1.50+, depending on what their strategy is for growth, capital and acquisitions. Given my assumptions and Banner's history, you can see why I have been accumulating a large position in their stock. If they achieve these expectations and you apply a reasonable P/E of 10x-12x, the upside for the stock could possibly be $15 per share, or, more. During more normal times, their stock traded as high as $40. Hence, I concluded, using my assumptions, that the downside was limited and the upside extremely large. Do your own due diligence. I could be wrong, but these are the assumptions that led to my conclusions. This is one stock that I am not trading. I am holding it.

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