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Banner (BANR) Announces New Buyback Plan: Is it Worth a Look?

·4 min read

Banner Corporation BANR has authorized the repurchase of up to 1,757,781 shares i.e. 5% of its common stock. The repurchases can be made in the open market and the extent as well as the timing of the repurchases will likely depend upon market conditions and other corporate considerations.

The company’s president and CEO, Mark J. Grescovich, stated, “We believe having the option to repurchase shares offers an effective capital management tool for building long-term shareholder value.”

In March 2019, Banner renewed its share buyback authorization to repurchase up to 1,757,637 shares, which expired in March 2020. Post that, the company did not announce any fresh repurchase authorizations due to the uncertainty caused by the pandemic.

In addition to share repurchases, the company pays regular quarterly dividends. The last quarterly dividend of 41 cents per share was paid out on Nov 12, 2020, to shareholders of record as of Nov 3. Also, in the fourth quarter of 2019, Banner announced a special dividend of $1.00 per share, which was paid out in January 2020.

Thus, supported by efficient capital deployment activities, the company is expected to continue to enhance shareholder value.

While Banner stock looks like an attractive investment option based on its efficient capital deployments, let’s see whether it is worthwhile to consider the stock right now. A deeper research into its fundamentals will likely help us understand the risks and rewards.

If we look at the company’s organic growth trajectory, its revenues have witnessed a compound annual growth rate (CAGR) of 16.6% over the past five years (2015-2019). The uptrend in revenues is expected to continue in the near term as reflected by the company’s projected sales growth rate of 5.9% for 2020.

Moreover, Banner’s return on equity (ROE) currently stands at 7.38%, which is above the industry average of 7.30%. This shows that it is more efficient than peers in utilizing shareholders’ funds.

Also, over the past three-five years, the company has witnessed earnings growth of 11.8%, higher than the industry average of 10.6%. While its earnings are projected to decline 29% in 2020, the trend will likely reverse post that. In 2021, earnings are projected to grow 9.1%.

Further, the company currently has a debt/equity ratio of 0.32, which is below the industry average of 0.51. This reflects that it has a lesser debt burden compared with peers and that it will be financially stable even in adverse economic conditions.

Notably, over the past 60 days, the Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 12.3%. This shows that analysts are optimistic regarding its earnings growth potential. Hence, Banner currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking at its price performance, shares of the company have gained 22.8% over the past six months compared with the industry’s rally of 23.3%.

New Share Buyback Plans by Other Finance Companies

In September 2020, Ameriprise Financial AMP announced an additional share buyback plan to repurchase shares worth $2.5 billion through Sep 30, 2022.

Home Bancorp HBCP and HarborOne Bancorp HONE also announced new share repurchase authorizations. Home Bancorp’s board of directors approved the repurchase of up to 444,000 shares of the company’s common stock. HarborOne Bancorp’s board of directors adopted a share repurchase program, which authorized the buyback of up to 2.92 million shares.

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