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Banner Corporation Message Board

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  • franciswool franciswool Mar 20, 2010 4:04 PM Flag

    Banner Management-New Equity?

    FDIC assisted takeovers are a way to heavily leverage: bank gets assets and deposits at a low price and the FDIC helps shoulder any losses. Not necessarily dilutive as long as there is good strategic growth. fwiw jimho dyodd

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    • Francis, my personal opinion is that your assumptions are not necessarily true. The bank regulators are back to requiring minimum levels of capital adequacy. Hence, a bank like Banner cannot acquire a bank without issuing additional equity. The EPS of the current core bank will probably be higher than an expanded bank unless the equity is issued at a reasonable P/E for projected normalized EPS. So, if Banner can earn nearly $2 per share in the intermediate future as I project, then they would actually drop future EPS by issuing stock at ~$5 per share or less. Do the math. You may be using a rearview mirror to look at the future. Unlimited leverage went out with the financial collapse. The banks with excess equity, like Umpqua and WSFL, are the ones that can make a return on a FDIC freebie because they have the spare equity to leverage. I believe Banner's best strategy is just to stay on course and return to normal. The upside is enormous IMHO. Do you own due diligence. I believe that issuing stock at these prices would just damage shareholders' value.

 
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