FBR Sees Banner Corp. Worth $50/Share, Says Earnings Growth Potential Is Solid

In a report published Wednesday, FBR analyst Paul J. Miller initiated coverage of Banner Corporation BANR with a Market Perform rating and $50 price target. The analyst believes that the stock is fairly valued, following the acquisition of AmericanWest Bancorporation AWBCQ, which has doubled Banner's asset base. "Although this merger promises to be transformative and should provide longer-term shareholder benefits, we believe that investors understand the current positive catalysts and that regulatory overhangs related to the merger approval and the likely intermediate-term cross into the $10 billion asset class could keep the shares range-bound during the next year," Miller stated. The company appears well positioned for near-term organic growth, with the management expecting robust originations in the core lending businesses. The analyst also expects the company to witness solid CRE-based growth, especially due to the liquidity offered by the high quality deposits associated with the AmericanWest deal. This momentum is likely to gather pace further in 2016, with the integration of operations, following the closure of the acquisition, which is expected in 3Q15. According to the FBR report, "Because Banner will most likely cross the $10 billion asset threshold in 2016, the company is expected to face increased compliance costs and the loss of certain fees as a result of compliance with the Durbin Amendment." However, the deal is expected to close as scheduled. The analyst also sees strong earnings growth potential for Banner of more that 20 percent in 2016, driven by the AmericanWest deal. "Banner represents one of the better earnings growth stories in our coverage universe," Miller added.