Banner Obscure

Banner Bank (said to be the oldest savings and loan in Washington state) has its Point Roberts branch office in an office inside our grocery store, the International Market. And Banner Bank also has a little TARP money, but they are less forthcoming than Sterling was about what they’re doing with it and indeed what and how they’re doing more generally. I was surprised at how accessible the Sterling press release was, and then surprised again at how difficult it was to understand the Banner Bank press release; as if they'd discovered a new way to talk. For example, what is a 'loan loss provision’? Is that a loss on a non-performing loan? Or is Banner providing something? Sterling, by contrast, says, ‘here’s what we lost on our non-performing assets.’

Not only obscure, but also unavailable. This morning, the Banner executives had a telephone conference with investors and the public, just as Sterling had the day previously. Sterling posted a transcript of that conference call that anyone could read on their website; Banner wouldn’t let you listen to their teleconference unless you registered (and registering required you to have a business, a title, and various other bona fides). And the replay is available to registrees only briefly; and there is no transcript. [UPDATE: the transcript is available here, thanks to Seeking Alpha.]

In any case, here’s Banner’s story in the TARP adventure. They got $124 million from the U.S. Treasury. In exchange, they issued 124 million shares of Banner preferred stock to the Treasury. This preferred stock will pay 5% for 5 years and, if Banner hasn’t paid the treasury back for these shares within 5 years, the interest rate will rise to 9%. Also, there’s a warrant for the Treasury to purchase 1.7 million shares of Banner common stock at $10.89/share any time in the next ten years. Of course, if Banner goes bust, that warrant won’t be of much use. Indeed, if Banner's stock doesn't rise by about 300%, it won't be of much use.

And what has Banner done with their $124 million? Don’t you worry your little head about that. They’ll be using it to ‘enhance [their] capacity…to support communities…and…expanded lending activities.’ (Probably no redecorating at the International Market.) They’ll also be paying a dividend on common stock shares of 5 cents per share. The issue of executive bonuses was not mentioned. Maybe in the phone conference I couldn’t get to.

Overall, they’re announcing a net loss of $128.5 million for 2008, including $62.4 million in loan losses. Their share price has gone from $27.19 to $4.84 over the past year. Yesterday’s market close, just before Banner issued their 2008 earnings report, was $5.69. Today, the stock lost another third of its value closing at $3.78, so one has to conclude that investors were not heartened by yesterday’s report. The trade volume today was almost a million shares, whereas the average daily volume is 170,000 shares. But then, there were buyers as well as sellers, so somebody still thinks it’s a good deal.

[Note: in the course of gathering us this information, I had occasion to read many pages of the actual legislation that authorizes the TARP program . As a former English teacher, I feel obliged to point out that the word ‘includable’ is used many times and is consistently misspelled in the bill. The U.S. Congress, it appears, prefers to think of things being ‘includible.' Does their computer not have a spelling program?]