Jeff Rulis, Senior Vice President, Senior Research Analyst

Institutional Research, D.A. Davidson & Co.
Banner Corporation (BANR-NASDAQ) (parent company)
Banner Bank (the bank) & Islanders Bank (the bank)

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March 9, 2012 Issue

The Most Powerful Name In Corporate News and Information


Having Turned Profitable, Banner Corporation is Well on Their Way to Credit Recovery

Company Profile:

About Davidson Companies:

Employee-owned Davidson Companies has offices in 17 states and provides a range of financial services and products to clients nationwide. Founded 76 years ago, the company is headquartered in Montana. Davidson Companies’ subsidiaries hold roughly $29 billion in client assets under management.

Davidson Companies’ largest subsidiary, D.A. Davidson & Co., is the largest full-service investment firm based in the Northwest, and provides a suite of financial advice and services to individual investors and their families, as well as to businesses, nonprofit organizations and institutional investors. Davidson Companies also operates Davidson Investment Advisors, a professional asset management firm; Davidson Trust Co., a trust and wealth management company; and Davidson Fixed Income Management, a registered investment adviser providing fixed income advisory services, mostly to governments and nonprofit institutions.

Jeff Rulis
Senior Vice President, Senior Research Analyst

Institutional Research
D.A. Davidson & Co.

Jeff Rulis provides research coverage in the financial services industry, with a focus on regional community banks. Based in Portland, Oregon, his analysis benefits from on-the-ground knowledge and proximity to companies predominantly in the Pacific Northwest.


He is commonly quoted in various national, regional and trade publications, including American Banker and SNL Financial. Jeff was named among the "The Best Brokerage Analysts" as a top stock-picking analyst based on overall return in the commercial banks industry, as determined by Starmine and Forbes Magazine.


Rulis joined D.A. Davidson & Co. in July 2000. He holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Oregon.

Pacific Northwest Banks

Jeff Rulis
Senior Vice President, Senior Research Analyst

Institutional Research
D.A. Davidson & Co.

Banner Corporation (BANR-NASDAQ) (parent company)
Banner Bank (the bank)
Islanders Bank (the bank)
10 South First Avenue
Walla Walla, WA 99362
Phone: 509-527-3636


Interview conducted by: Bud Wayne, Editorial Executive, CEOCFO Magazine, Published – March 9, 2012

Mr. Rulis, would you give us a brief overview of your work with DA Davidson, and introduce us to one of the companies that you cover, namely Banner Corporation?

Mr. Rulis: I am a research analyst with D.A. Davidson and have been with the company for a little over a decade. I primarily cover community banks in the Pacific Northwest and the surrounding area, which officially is a group of nearly twenty publicly traded names. That is the backdrop of the coverage list I focus on and Banner Corporation is one stock in that group. I have covered Banner off and on for pretty much that entire time. It was under primary coverage of other analysts previously, but I have been the primary analyst on Banner for nearly the last four years now.


CEOCFO: Banner has been through a transition for the last two to four years with a different CEO coming in and having to do a turnaround; what is your impression on how this has gone for them?

Mr. Rulis: I think it has gone about as good as it could have. Certainly the bank was facing some pretty stiff challenges in terms of credit quality issues and the general pressures of this economic cycle. These pressures bled out some of the equity at the bank to cover loan losses and similar to some other banking institutions, the franchise appeared to be facing a dramatic capital event or perhaps even failure. Banner, through some heavy challenges, was able to secure capital in the open market. Since then, job number-one has been reducing credit problems while preserving capital and the company has turned the corner operationally.


CEOCFO: Can you tell us what your rating is for Banner Corporation and why you have given that rating?

Mr. Rulis: I rate the stock a “Buy” which equates to what we perceive to be a significant upside opportunity - for our metrics this is a 15% or greater total return within a twelve to eighteen month timeframe. My thesis on Banner lies in my belief that the company will continue on the path to credit recovery. The bank has now turned profitable and, in my view, the market undervalues the franchise as it stands today. In other words, I think there is a trading discount on the actual value that exists and the potential going forward. The opposing view may be that there could be more losses to come for the bank that are potentially value destroying. I think potential future losses will be more than offset by profitability, and believe this is an opportunity to own the shares at a discount given the trends of credit improvement. There are other operational improvements that have taken place that have been masked by the credit figures, but these improvements will help the bank nonetheless down the road. The operational improvements, while more minor in relative scope to the mountain of credit costs, can be found in the company’s margin improvement and general growth and quality of their deposit franchise.


CEOCFO: In closing, would you comment on the job Banner Corporation CEO, Mark J. Grescovich is doing?

Mr. Rulis: Banner Corporation CEO, Mark J. Grescovich has done a phenomenal job in setting the focus of the franchise on job number-one and that was the credit quality clean-up. We have seen some recapitalizations where the focus is somewhat mixed or they are chasing too many directives. Mark was successful in the fact that he stuck with preserving the new capital and reducing the credit risk at the franchise. A few other recapitalizations may have veered off course after seeing a little bit of credit improvement, let themselves be lured by acquisition opportunities or other distractions. Mark understood the depth of the struggle here and that single-handed approach of cleaning up credit first and let everything else be a secondary or longer term issue served the company well. Banner has set themselves up to attack other opportunities down the road. The key to Banner’s recovery story, and Mark’s effectiveness, has been a resistance to be pulled in other directions beyond improving credit.


Banner Bank has entered into a loan agreement with Davidson Companies, the parent of D.A. Davidson & Co., pursuant to which Banner Bank agreed to provide a $20 million credit facility to Davidson Companies that may be drawn upon.


D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. Jeff Rulis, the research analyst principally responsible for the preparation of this report, will receive compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson & Co.’s analysts are not directly compensated for involvement in specific investment banking transactions. 


Any reproduction or further distribution of this article without the express written consent of is prohibited.


Banner Corporation CEO, Mark J. Grescovich has done a phenomenal job in setting the focus of the franchise on job number-one and that was the credit quality clean-up. - Jeff Rulis does not purchase or make
recommendation on stocks based on the interviews published.