 | | | | Contact: D. Michael Jones, President and CEO Lloyd W. Baker, CFO (509) 527-3636 News Release |
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Banner Corporation Announces Second Quarter Results
Walla Walla, WA – July 29, 2009 - Banner Corporation (NASDAQ GMS: BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $16.5 million for the second quarter ended June 30, 2009, compared to a net loss of $52.3 million for the second quarter of 2008. The current quarter’s results include a $45.0 million provision for loan losses and a $2.1 million special assessment from the FDIC. The current quarter’s results also include an $11.0 million net gain from the valuation of financial instruments carried at fair value.
“Similar to recent quarters, our significant provision for loan losses during the quarter reflects material levels of non-performing loans and net charge-offs, particularly for loans for the construction of one-to-four family homes and for acquisition and development of land for residential properties,” said D. Michael Jones, President and CEO. “While certain segments showed modest improvement, housing markets generally remained weak in many of our service areas, resulting in further deterioration in property values and the need to provide for additional loan losses. By contrast, the non-housing related segments of our loan portfolio have continued to perform as expected with only normal levels of credit problems given the serious economic slowdown. In addition, continued pressure on our net interest margin and substantial increases in FDIC insurance charges had a further negative impact on our operating results.”
For the first six months of 2009, Banner reported a net loss of $25.8 million compared to a net loss of $48.5 million for the first six months of 2008. The second quarter and year-to-date 2008 results included a $50.0 million goodwill impairment charge.
In the fourth quarter of 2008, Banner issued $124 million of senior preferred stock to the U.S. Treasury as a participant in the Treasury’s Capital Purchase Program. In the quarter ended June 30, 2009, Banner paid a $1.6 million dividend on this preferred stock and accrued $373,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net loss available to common shareholders was $18.4 million, or $1.04 per diluted share, for the second quarter, compared to a net loss of $52.3 million, or $3.31 per diluted share, for the quarter ended June 30, 2008. For the six months ended June 30, 2009, the net loss available to common shareholders was $29.6 million, or $1.70 per diluted share, compared to a net loss of $48.5 million, or $3.06 per diluted share for the first six months of 2008.
“A continuing highlight of the quarter was our Great Northwest Home Rush promotion, which we began initially in the Portland market and expanded to the Puget Sound region and to other markets where we have financed new home construction. Through this program, we have partnered with our builders to deliver customers excellent prices on new homes and equally attractive home loan rates,” said Jones. “As we noted at the end of the first quarter, this promotion has been encouraging and is contributing to a meaningful reduction in our exposure to residential construction loans. Through the date of this announcement our builders have accepted purchase offers on 299 of the 617 homes listed under this program, with 173 of those sales having closed through June 30, 2009.”
Again notable in the second quarter of 2009 was very strong mortgage banking activity and revenues as exceptionally low interest rates resulted in significant refinancing opportunities for many of our customers, and lower home prices and first-time buyer incentives have resulted in improving home sales activity and purchase financing.
Credit Quality
“Reflecting continuing weakness in the housing market in many of our primary service areas, non-performing assets remained high, primarily centered in our construction and land development loan portfolios,” said Jones. “In addition, property values exhibited further declines, particularly for land and developed building lots, resulting in increased charge-offs and impairment reserves. As a result, our provision for loan losses this quarter was significantly larger than in the immediately preceding quarter and the same quarter a year ago and was in excess of our normal expectations. Although property values have declined, sales of finished homes have improved, our reserve levels are substantial, and both our impairment analysis and charge-off actions reflect current appraisals and valuation estimates. Unfortunately, with respect to land and lot loans, those appraisals generally reflect a very limited number of sales which frequently involve distressed transactions, assume in many cases that market recoveries will be protracted and resulted in disappointingly low and uncertain valuation estimates which required increased provisioning. We are hopeful that the final resolution of many of these loans will reflect better than currently recognized values.”
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Banner added $45.0 million to its provision for loan losses in the second quarter, compared to $22.0 million in the preceding quarter and $15.0 million in the second quarter of 2008. For the first six months of the year, Banner added $67.0 million to its provision for loan losses compared to $21.5 million for the first six months of 2008. The allowance for loan losses at June 30, 2009 was $90.7 million, representing 2.32% of total loans outstanding. Non-performing loans totaled $225.1 million at June 30, 2009, compared to $224.1 million in the preceding quarter and $89.9 million at June 30, 2008. In addition, Banner’s real estate owned and repossessed assets totaled $57.2 million at the end of June 2009, compared to $39.1 million three months earlier and $11.4 million at June 30, 2008. Banner’s net charge-offs in the quarter ended June 30, 2009 totaled $34.0 million, or 0.87% of average loans and year-to-date net charge-offs were $51.5 million, or 1.31% of average loans.
At June 30, 2009, the geographic distribution of our construction and land development loans, including residential and commercial properties, is approximately 32% in the greater Puget Sound market, 40% in the greater Portland, Oregon market, and 9% in the greater Boise, Idaho market, with the remaining 19% distributed in various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank. One-to-four family residential construction and related lot and land loans represent 18% of the total loan portfolio and 77% of non-performing assets. The geographic distribution of non-performing construction, land and land development loans and real estate owned included approximately $106 million, or 44%, in the Puget Sound region, $90 million, or 38%, in the greater Portland market area and $26 million, or 11%, in the greater Boise market area.
Income Statement Review
Banner’s net interest margin was 3.24% for the second quarter of 2009, compared to 3.26% in the preceding quarter and 3.50% for the second quarter of 2008. Funding costs decreased 13 basis points compared to the previous quarter and decreased 65 basis points from the same quarter a year earlier, while asset yields decreased 14 basis points from the prior linked quarter and 95 basis points from the second quarter a year ago, all reflecting the much lower interest rate environment. For the first half of 2009, the net interest margin was 3.25% compared to 3.57% for the first half of 2008.
“Funding costs improved as expected, which helped to maintain our net interest margin at a nearly unchanged level compared to the two previous quarters, despite higher levels of non-performing assets,” said Jones. Non-accruing loans reduced the margin by approximately 45 basis points in this year’s second quarter compared to approximately 38 basis points in the first quarter of 2009 and approximately 16 basis points in the second quarter of 2008.
For the second quarter of 2009, net interest income before the provision for loan losses was $34.9 million, compared to $35.0 million in the preceding quarter and $37.1 million in the second quarter a year ago. In the first half of 2009, net interest income before the provision for loan losses was $69.9 million, compared to $74.5 million in the first half of 2008. Revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value adjustments) were $43.9 million in the second quarter of 2009, compared to $42.9 million in the first quarter of 2009 and $45.0 million for the second quarter a year ago. Revenues from core operations for the first half of 2009 were $86.7 million, compared to $89.7 million in the first half of 2008.
Banner’s results for the second quarter of 2009 included a net gain of $11.0 million ($7.0 million after tax), compared to a net gain of $649,000 ($415,000 after tax) in the second quarter of 2008, for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value in accordance with the adoption of Statement of Financial Accounting Standards (SFAS) Nos. 157 and 159. The fair value adjustments in the current quarter predominantly reflect changes in the valuation of trust preferred securities and junior subordinated debentures, both owned and issued by the Company.
Total other operating income, which includes the changes in the valuation of financial instruments noted above, was $20.0 million in the second quarter, compared to $4.7 million in the preceding quarter and $8.6 million for the same quarter a year ago. For the first half of 2009, total other operating income was $24.6 million, compared to $16.7 million in the first half of 2008. Total other operating income from core operations* (excluding fair value adjustments) for the current quarter was $8.9 million, compared to $7.9 million in the preceding quarter and $7.9 million for the same quarter a year ago. For the first half of 2009, total other operating income from core operations increased 11% to $16.8 million, compared to $15.2 million in the first half of 2008. Income from deposit fees and other service charges increased to $5.4 million in the second quarter of 2009, compared to $4.9 million for the preceding quarter; however, reflecting the reduction in customer transaction volumes in the current economic environment, fees were slightly less than the $5.5 million recorded in the second quarter a year ago despite growth in the number of accounts. Income from mortgage banking operations increased to $2.9 million in the second quarter of 2009 compared to $2.7 million in the preceding quarter and $1.6 million in the same quarter a year ago.
“The soft economy continued to adversely affect our payment processing business this quarter as activity levels for deposit customers, cardholders and merchants remained subdued; however, we are pleased with the year-over-year growth in our customer base and encouraged by the increase in activity compared to the very low levels we experienced in the previous quarter,” said Jones. “We are also pleased that our mortgage banking revenues remained strong and substantially above the levels reported a year ago. Although not as significant as in the previous quarter, the high level of refinancing activity again resulted in accelerated termination of mortgage
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servicing rights as reflected in the impairment of loan servicing revenues in the quarter just ended. Amortization and write-off of mortgage servicing rights totaled $559,000 for the quarter ended June 30, 2009, compared to $912,000 in the preceding quarter and $533,000 in the second quarter a year ago.”
“Manageable operating expenses were generally well controlled in the second quarter, reflecting continuing efforts to improve our processes and efficiency, although collection and legal costs, including charges related to acquired real estate, remained high,” said Jones. “However, FDIC insurance expense increased substantially as a result of increased regular assessment rates for the current quarter as well as a one-time special assessment levied on all banks at quarter end. FDIC insurance charges were $4.1 million for the second quarter of 2009 compared to $1.5 million for the preceding quarter and $633,000 for the second quarter of 2008. Although we anticipate collection costs and FDIC insurance premiums will continue to be above historical levels for a number of future quarters, we expect continued expense discipline will be exhibited in our ongoing operating results.”
Total other operating expenses from core operations* (non-interest expenses excluding the goodwill write-off that occurred during the quarter ended June 30, 2008) were $36.9 million in the second quarter of 2009, compared to $33.8 million in the preceding quarter and $35.2 million in the same quarter a year ago. For the first half of the year, other operating expenses from core operations were $70.7 million compared to $68.9 million in the first half of 2008. Operating expenses from core operations as a percentage of average assets was 3.27% in the second quarter of 2009, compared to 3.02% in the previous quarter and 3.08% in the second quarter a year ago.
*Earnings information excluding the goodwill impairment charge and fair value adjustments (alternately referred to as total other operating income from core operations, total other operating expenses from core operations, revenues from core operations, or operating expenses from core operations) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company’s core operations reflected in the current quarter’s results. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
Balance Sheet Review
Net loans were $3.82 billion at June 30, 2009, compared to $3.91 billion a year earlier. Total assets were $4.53 billion at June 30, 2009, compared to $4.64 billion a year earlier.
“In the second quarter of 2009, commercial and multifamily real estate loan balances increased by $14 million and commercial business loans increased by $28 million. In addition, agricultural loans experienced an expected seasonal increase of $17 million and one-to-four family residential loans increased by $10 million,” said Jones. “However, the continued reductions in construction and land development loans resulted in a modest decrease in total loan balances compared to the prior quarter end. Although still slower than historical levels, home sales have improved, contributing to a $203 million reduction in our portfolio of one-to-four family construction loans over the past twelve months, including a $28 million decrease in the most recent quarter. As a result, at June 30, 2009 our one-to-four family construction loans totaled $337 million, a decline of $317 million from their peak quarter-end balance of $655 million at June 30, 2007.
Total deposits were $3.75 billion at June 30, 2009, compared to $3.63 billion at the end of the previous quarter and $3.76 billion a year earlier. Non-interest-bearing accounts of $508 million were unchanged for the quarter, but up nearly 7% compared to a year earlier. Interest-bearing accounts increased by $123 million for the second quarter of 2009, but declined by $38 million compared to a year earlier. “Our retail deposit franchise produced good results for the quarter as we were able to effectively replace the public funds and brokered deposits that we have chosen to de-emphasize this year,” said Jones. “For the first six months of the year we have allowed $156 million in public funds, including $72 million of interest-bearing transaction accounts, to run off as the new higher collateralization requirements and the shared risk exposure under the Washington and Oregon State requirements have made retaining those deposits less desirable than in the past. Brokered deposits declined by $21 million during the first six months of 2009. We are pleased that we were able to produce this retail deposit growth while also reducing our overall cost of deposits by 18 basis points during the quarter.”
On November 21, 2008, Banner received $124 million from the U.S. Treasury Department as a part of the Treasury’s Capital Purchase Program. This funding marked Banner’s successful completion of the sale of $124 million in senior preferred stock, with a related warrant to purchase up to $18.6 million in common stock, to the U.S. Treasury. The warrant provides the Treasury the option to purchase up to 1,707,989 shares of Banner Corporation common stock at a price of $10.89 per share at any time during the next ten years.
"Despite the challenging operating environment, Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as 'well-capitalized' under applicable regulatory standards," concluded Jones. Banner Corporation's Tier 1 leverage capital to average assets ratio was 9.90% and its total capital to risk-weighted assets was 12.49% at June 30, 2009.
Tangible stockholders’ equity at June 30, 2009 was $397.1 million, including $116.6 million attributable to preferred stock, compared to $295.2 million at June 30, 2008. Tangible common stockholders’ equity was $280.4 million at June 30, 2009, or 6.20% of tangible assets, compared to $295.2 million, or 6.49% of tangible assets a year earlier. Tangible book value per common share was $15.42 at
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July 29, 2009
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quarter-end, compared to $18.38 a year earlier. At June 30, 2009, Banner had 18.2 million shares outstanding, while it had 16.1 million shares outstanding a year ago.
Conference Call
Banner will host a conference call on Thursday, July 30, 2009, at 8:00 a.m. PDT, to discuss second quarter 2009 results. The conference call can be accessed live by telephone at 480-629-9770 using access code 4095680 to participate in the call. To listen to the call online, go to the Company’s website at
www.bannerbank.com. A replay will be available for a week at (303) 590-3030, using access code 4095680.
About the Company
Banner Corporation is a $4.5 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
This press release contains statements that the Company believes are “forward-looking statements.” These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; fluctuations in agricultural commodity prices, crop yields and weather conditions; our ability to control operating costs and expenses; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in Banner’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
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| RESULTS OF OPERATIONS | | | | | Quarters Ended | | | | | | Six Months | |
| (in thousands except shares and per share data) | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Jun 30, 2009 | | | Jun 30, 2008 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| INTEREST INCOME: | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 55,500 | | | $ | 56,347 | | | $ | 64,174 | | | $ | 111,847 | | | $ | 132,300 | |
| Mortgage-backed securities | | | 1,569 | | | | 1,801 | | | | 1,087 | | | | 3,370 | | | | 2,240 | |
| Securities and cash equivalents | | | 2,089 | | | | 2,183 | | | | 2,861 | | | | 4,272 | | | | 5,588 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 59,158 | | | | 60,331 | | | | 68,122 | | | | 119,489 | | | | 140,128 | |
| | | | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 21,638 | | | | 23,092 | | | | 27,565 | | | | 44,730 | | | | 57,628 | |
| Federal Home Loan Bank advances | | | 675 | | | | 720 | | | | 1,301 | | | | 1,395 | | | | 3,150 | |
| Other borrowings | | | 671 | | | | 227 | | | | 530 | | | | 898 | | | | 1,140 | |
| Junior subordinated debentures | | | 1,249 | | | | 1,333 | | | | 1,666 | | | | 2,582 | | | | 3,730 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 24,233 | | | | 25,372 | | | | 31,062 | | | | 49,605 | | | | 65,648 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income before provision for loan losses | | | 34,925 | | | | 34,959 | | | | 37,060 | | | | 69,884 | | | | 74,480 | |
| | | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | | 45,000 | | | | 22,000 | | | | 15,000 | | | | 67,000 | | | | 21,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income (loss) | | | (10,075 | ) | | | 12,959 | | | | 22,060 | | | | 2,884 | | | | 52,980 | |
| | | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING INCOME: | | | | | | | | | | | | | | | | | | | | |
| Deposit fees and other service charges | | | 5,408 | | | | 4,936 | | | | 5,494 | | | | 10,344 | | | | 10,507 | |
| Mortgage banking operations | | | 2,860 | | | | 2,715 | | | | 1,579 | | | | 5,575 | | | | 3,194 | |
| Loan servicing fees | | | 248 | | | | (270 | ) | | | 467 | | | | (22 | ) | | | 816 | |
| Miscellaneous | | | 412 | | | | 520 | | | | 363 | | | | 932 | | | | 694 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 8,928 | | | | 7,901 | | | | 7,903 | | | | 16,829 | | | | 15,211 | |
| Increase (Decrease) in valuation of financial instruments carried at fair value | | | 11,049 | | | | (3,253 | ) | | | 649 | | | | 7,796 | | | | 1,472 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total other operating income | | | 19,977 | | | | 4,648 | | | | 8,552 | | | | 24,625 | | | | 16,683 | |
| | | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Salary and employee benefits | | | 17,528 | | | | 17,601 | | | | 19,744 | | | | 35,129 | | | | 39,382 | |
| Less capitalized loan origination costs | | | (2,834 | ) | | | (2,116 | ) | | | (2,728 | ) | | | (4,950 | ) | | | (4,969 | ) |
| Occupancy and equipment | | | 5,928 | | | | 6,054 | | | | 5,989 | | | | 11,982 | | | | 11,857 | |
| Information / computer data services | | | 1,599 | | | | 1,534 | | | | 1,840 | | | | 3,133 | | | | 3,829 | |
| Payment and card processing services | | | 1,555 | | | | 1,453 | | | | 1,768 | | | | 3,008 | | | | 3,299 | |
| Professional services | | | 1,183 | | | | 1,194 | | | | 1,331 | | | | 2,377 | | | | 2,086 | |
| Advertising and marketing | | | 2,207 | | | | 1,832 | | | | 1,677 | | | | 4,039 | | | | 3,095 | |
| Deposit insurance | | | 4,102 | | | | 1,497 | | | | 633 | | | | 5,599 | | | | 960 | |
| State/municipal business and use taxes | | | 532 | | | | 540 | | | | 576 | | | | 1,072 | | | | 1,140 | |
| Real estate operations | | | 1,805 | | | | 623 | | | | 678 | | | | 2,428 | | | | 834 | |
| Miscellaneous | | | 3,286 | | | | 3,581 | | | | 3,714 | | | | 6,867 | | | | 7,417 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 36,891 | | | | 33,793 | | | | 35,222 | | | | 70,684 | | | | 68,930 | |
| Goodwill write-off | | | - - | | | | - - | | | | 50,000 | | | | - - | | | | 50,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total other operating expense | | | 36,891 | | | | 33,793 | | | | 85,222 | | | | 70,684 | | | | 118,930 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income (Loss) before provision (benefit) for income taxes | | | (26,989 | ) | | | (16,186 | ) | | | (54,610 | ) | | | (43,175 | ) | | | (49,267 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR (BENEFIT FROM ) INCOME TAXES | | | (10,478 | ) | | | (6,923 | ) | | | (2,305 | ) | | | (17,401 | ) | | | (796 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | | $ | (16,511 | ) | | $ | (9,263 | ) | | $ | (52,305 | ) | | $ | (25,774 | ) | | $ | (48,471 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION | | | | | | | | | | | | | | | | | | | | |
| Preferred stock dividend | | | 1,550 | | | | 1,550 | | | | - - | | | | 3,100 | | | | - - | |
| Preferred stock discount accretion | | | 373 | | | | 373 | | | | - - | | | | 746 | | | | - - | |
| | | | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | | $ | (18,434 | ) | | $ | (11,186 | ) | | $ | (52,305 | ) | | $ | (29,620 | ) | | $ | (48,471 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Earnings (Loss) per share available to common shareholder | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | (1.04 | ) | | $ | (0.65 | ) | | $ | (3.31 | ) | | $ | (1.70 | ) | | $ | (3.06 | ) |
| Diluted | | $ | (1.04 | ) | | $ | (0.65 | ) | | $ | (3.31 | ) | | $ | (1.70 | ) | | $ | (3.06 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Cumulative dividends declared per common share | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.20 | | | $ | 0.02 | | | $ | 0.40 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 17,746,051 | | | | 17,159,793 | | | | 15,821,934 | | | | 17,454,542 | | | | 15,834,728 | |
| Diluted | | | 17,746,051 | | | | 17,159,793 | | | | 15,821,934 | | | | 17,454,542 | | | | 15,834,728 | |
| | | | | | | | | | | | | | | | | | | | | |
| Common shares repurchased during the period | | | - - | | | | - - | | | | - - | | | | - - | | | | 613,903 | |
| Common shares issued in connection with exercise of stock options or DRIP | | | 780,906 | | | | 493,514 | | | | 401,645 | | | | 1,274,420 | | | | 653,036 | |
BANR - Second Quarter 2009 Results
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| FINANCIAL CONDITION | | �� | | | | | | | | | | |
| (in thousands except shares and per share data) | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Dec 31, 2008 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 67,339 | | | $ | 72,811 | | | $ | 91,953 | | | $ | 89,964 | |
| Federal funds and interest-bearing deposits | | | 16,919 | | | | 2,699 | | | | 430 | | | | 12,786 | |
| Securities - at fair value | | | 167,476 | | | | 161,963 | | | | 238,670 | | | | 203,902 | |
| Securities - available for sale | | | 50,980 | | | | 66,963 | | | | - - | | | | 53,272 | |
| Securities - held to maturity | | | 77,321 | | | | 67,401 | | | | 55,612 | | | | 59,794 | |
| Federal Home Loan Bank stock | | | 37,371 | | | | 37,371 | | | | 37,371 | | | | 37,371 | |
| | | | | | | | | | | | | | | | | | |
| Loans receivable: | | | | | | | | | | | | | | | | |
| | Held for sale | | | 8,377 | | | | 11,071 | | | | 6,817 | | | | 7,413 | |
| | Held for portfolio | | | 3,904,704 | | | | 3,904,476 | | | | 3,966,482 | | | | 3,953,995 | |
| | Allowance for loan losses | | | (90,694 | ) | | | (79,724 | ) | | | (58,570 | ) | | | (75,197 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | 3,822,387 | | | | 3,835,823 | | | | 3,914,729 | | | | 3,886,211 | |
| | | | | | | | | | | | | | | | | | |
| Accrued interest receivable | | | 18,892 | | | | 20,821 | | | | 22,890 | | | | 21,219 | |
| Real estate owned held for sale, net | | | 56,967 | | | | 38,951 | | | | 11,390 | | | | 21,782 | |
| Property and equipment, net | | | 103,709 | | | | 97,847 | | | | 97,928 | | | | 97,647 | |
| Goodwill and other intangibles, net | | | 12,365 | | | | 13,026 | | | | 86,205 | | | | 13,716 | |
| Bank-owned life insurance | | | 53,341 | | | | 53,163 | | | | 52,213 | | | | 52,680 | |
| Other assets | | | 47,475 | | | | 41,285 | | | | 26,953 | | | | 34,024 | |
| | | | | | | | | | | | | | | | | | |
| | | | $ | 4,532,542 | | | $ | 4,510,124 | | | $ | 4,636,344 | | | $ | 4,584,368 | |
| | | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | |
| | Non-interest-bearing | | $ | 508,284 | | | $ | 508,593 | | | $ | 477,144 | | | $ | 509,105 | |
| | Interest-bearing transaction and savings accounts | | | 1,131,093 | | | | 1,099,837 | | | | 1,216,217 | | | | 1,137,878 | |
| | Interest-bearing certificates | | | 2,110,466 | | | | 2,019,074 | | | | 2,063,392 | | | | 2,131,867 | |
| | | | | | | | | | | | | | | | | | |
| | | | | 3,749,843 | | | | 3,627,504 | | | | 3,756,753 | | | | 3,778,850 | |
| | | | | | | | | | | | | | | | | | |
| Advances from Federal Home Loan Bank at fair value | | | 115,946 | | | | 172,102 | | | | 182,496 | | | | 111,415 | |
| Customer repurchase agreements and other borrowings | | | 158,249 | | | | 181,194 | | | | 164,192 | | | | 145,230 | |
| Junior subordinated debentures at fair value | | | 49,563 | | | | 53,819 | | | | 101,358 | | | | 61,776 | |
| | | | | | | | | | | | | | | | | | |
| Accrued expenses and other liabilities | | | 36,652 | | | | 37,759 | | | | 37,438 | | | | 40,600 | |
| Deferred compensation | | | 12,815 | | | | 13,203 | | | | 12,694 | | | | 13,149 | |
| | | | | | | | | | | | | | | | | | |
| | | | | 4,123,068 | | | | 4,085,581 | | | | 4,254,931 | | | | 4,151,020 | |
| | | | | | | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Preferred stock -Series A | | | 116,661 | | | | 116,288 | | | | - - | | | | 115,915 | |
| Common stock | | | 322,582 | | | | 318,628 | | | | 299,425 | | | | 316,740 | |
| Retained earnings ( accumulated deficit ) | | | (27,826 | ) | | | (9,210 | ) | | | 84,204 | | | | 2,150 | |
| Other components of stockholders' equity | | | (1,943 | ) | | | (1,163 | ) | | | (2,216 | ) | | | (1,457 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | 409,474 | | | | 424,543 | | | | 381,413 | | | | 433,348 | |
| | | | | | | | | | | | | | | | | | |
| | | | $ | 4,532,542 | | | $ | 4,510,124 | | | $ | 4,636,344 | | | $ | 4,584,368 | |
| | | | | | | | | | | | | | | | | | |
| Common Shares Issued: | | | | | | | | | | | | | | | | |
| Shares outstanding at end of period | | | 18,426,458 | | | | 17,645,552 | | | | 16,305,282 | | | | 17,152,038 | |
| | Less unearned ESOP shares at end of period | | | 240,381 | | | | 240,381 | | | | 240,381 | | | | 240,381 | |
| | | | | | | | | | | | | | | | | | |
| Shares outstanding at end of period excluding unearned ESOP shares | | | 18,186,077 | | | | 17,405,171 | | | | 16,064,901 | | | | 16,911,657 | |
| | | | | | | | | | | | | | | | | | |
Common stockholders' equity per share (1) | | $ | 16.10 | | | $ | 17.71 | | | $ | 23.74 | | | $ | 18.77 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 15.42 | | | $ | 16.96 | | | $ | 18.38 | | | $ | 17.96 | |
| | | | | | | | | | | | | | | | | | |
| Tangible common stockholders' equity to tangible assets | | | 6.20 | % | | | 6.56 | % | | | 6.49 | % | | | 6.64 | % |
| Consolidated Tier 1 leverage capital ratio | | | 9.90 | % | | | 10.27 | % | | | 8.80 | % | | | 10.32 | % |
| | | | | | | | | | | | | | | | | | |
| (1) | - Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares | | | | | |
| | outstanding and excludes unallocated shares in the ESOP. | | | | | | | | | | | | | | | | |
| (2) | - Tangible common equity excludes preferred stock, goodwill, core deposit and other intangibles. | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
BANR - Second Quarter 2009 Results
July 29, 2009
Page 7
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Dec 31, 2008 | | | | |
| LOANS (including loans held for sale): | | | | | | | | | | | | | | | |
| Commercial real estate | | $ | 1,049,921 | | | $ | 1,036,285 | | | $ | 983,732 | | | $ | 1,013,709 | | | | |
| Multifamily real estate | | | 150,168 | | | | 149,442 | | | | 145,016 | | | | 151,274 | | | | |
| Commercial construction | | | 90,762 | | | | 103,643 | | | | 103,009 | | | | 104,495 | | | | |
| Multifamily construction | | | 56,968 | | | | 46,568 | | | | 17,681 | | | | 33,661 | | | | |
| One- to four-family construction | | | 337,368 | | | | 365,421 | | | | 540,718 | | | | 420,673 | | | | |
| Land and land development | | | 403,697 | | | | 446,128 | | | | 494,944 | | | | 486,130 | | | | |
| Commercial business | | | 678,273 | | | | 650,123 | | | | 709,109 | | | | 679,867 | | | | |
| Agricultural business including secured by farmland | | | 215,339 | | | | 197,972 | | | | 212,397 | | | | 204,142 | | | | |
| One- to four-family real estate | | | 653,513 | | | | 643,705 | | | | 511,611 | | | | 599,169 | | | | |
| Consumer | | | 277,072 | | | | 276,260 | | | | 255,082 | | | | 268,288 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total loans outstanding | | $ | 3,913,081 | | | $ | 3,915,547 | | | $ | 3,973,299 | | | $ | 3,961,408 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Restructured loans performing under their restructured terms | | $ | 55,031 | | | $ | 27,550 | | | $ | 7,771 | | | $ | 23,635 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 34,038 | | | $ | 111,683 | | | $ | 22,659 | | | $ | 61,124 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total delinquent loans (including loans on non - accrual) | | $ | 259,107 | | | $ | 335,780 | | | $ | 112,577 | | | $ | 248,469 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total delinquent loans / Total loans outstanding | | | 6.62 | % | | | 8.58 | % | | | 2.83 | % | | | 6.27 | % | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | | | | | | | | | | |
| June 30, 2009 | | Washington | | | Oregon | | | Idaho | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | $ | 785,186 | | | $ | 172,632 | | | $ | 81,478 | | | $ | 10,625 | | | $ | 1,049,921 | |
| Multifamily real estate | | | 125,599 | | | | 12,405 | | | | 8,813 | | | | 3,351 | | | | 150,168 | |
| Commercial construction | | | 65,357 | | | | 15,171 | | | | 10,234 | | | | - - | | | | 90,762 | |
| Multifamily construction | | | 31,431 | | | | 25,537 | | | | - - | | | | - - | | | | 56,968 | |
| One- to four-family construction | | | 166,637 | | | | 151,704 | | | | 19,027 | | | | - - | | | | 337,368 | |
| Land and land development | | | 195,192 | | | | 155,902 | | | | 52,603 | | | | - - | | | | 403,697 | |
| Commercial business | | | 496,605 | | | | 93,752 | | | | 70,818 | | | | 17,098 | | | | 678,273 | |
| Agricultural business including secured by farmland | | | 101,717 | | | | 48,807 | | | | 64,815 | | | | - - | | | | 215,339 | |
| One- to four-family real estate | | | 486,614 | | | | 131,853 | | | | 31,766 | | | | 3,280 | | | | 653,513 | |
| Consumer | | | 197,377 | | | | 61,659 | | | | 17,535 | | | | 501 | | | | 277,072 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total loans outstanding | | $ | 2,651,715 | | | $ | 869,422 | | | $ | 357,089 | | | $ | 34,855 | | | $ | 3,913,081 | |
| | | | | | | | | | | | | | | | | | | | | |
| Percent of total loans | | | 67.8 | % | | | 22.2 | % | | | 9.1 | % | | | 0.9 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT | | | | | | | | | | | | | | | | | | | | |
| June 30, 2009 | | Washington | | | Oregon | | | Idaho | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
| Residential | | | | | | | | | | | | | | | | | | | | |
| Acquisition & development | | $ | 94,895 | | | $ | 112,263 | | | $ | 22,088 | | | $ | - - | | | $ | 229,246 | |
| Improved lots | | | 48,448 | | | | 30,581 | | | | 4,107 | | | | - - | | | | 83,136 | |
| Unimproved land | | | 25,523 | | | | 10,988 | | | | 21,167 | | | | - - | | | | 57,678 | |
| Commercial & industrial | | | | | | | | | | | | | | | | | | | | |
| Acquisition & development | | | 4,013 | | | | - - | | | | 197 | | | | - - | | | | 4,210 | |
| Improved land | | | 11,366 | | | | 587 | | | | 398 | | | | - - | | | | 12,351 | |
| Unimproved land | | | 10,947 | | | | 1,483 | | | | 4,646 | | | | - - | | | | 17,076 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total land & land development loans outstanding | | $ | 195,192 | | | $ | 155,902 | | | $ | 52,603 | | | $ | - - | | | $ | 403,697 | |
| | | | | | | | | | | | | | | | | | | | | |
BANR - Second Quarter 2009 Results
July 29, 2009
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarters Ended | | | Six Months Ended | |
| CHANGE IN THE | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Jun 30, 2009 | | | Jun 30, 2008 | |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 79,724 | | | $ | 75,197 | | | $ | 50,446 | | | $ | 75,197 | | | $ | 45,827 | |
| | | | | | | | | | | | | | | | | | | | | |
| Provision | | | 45,000 | | | | 22,000 | | | | 15,000 | | | | 67,000 | | | | 21,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Recoveries of loans previously charged off: | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Multifamily real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Construction and land | | | 266 | | | | 52 | | | �� | 9 | | | | 318 | | | | 9 | |
| One- to four-family real estate | | | 89 | | | | 2 | | | | 40 | | | | 91 | | | | 40 | |
| Commercial business | | | 249 | | | | 70 | | | | 174 | | | | 319 | | | | 260 | |
| Agricultural business, including secured by farmland | | | 22 | | | | - - | | | | 5 | | | | 22 | | | | 8 | |
| Consumer | | | 32 | | | | 31 | | | | 27 | | | | 63 | | | | 82 | |
| | | | 658 | | | | 155 | | | | 255 | | | | 813 | | | | 399 | |
| Loans charged-off: | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | - - | | | | - - | | | | (7 | ) | | | - - | | | | (7 | ) |
| Multifamily real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Construction and land | | | (27,290 | ) | | | (12,417 | ) | | | (5,081 | ) | | | (39,707 | | | | (6,049 | ) |
| One- to four-family real estate | | | (1,181 | ) | | | (1,091 | ) | | | (119 | ) | | | (2,272 | | | | (191 | ) |
| Commercial business | | | (2,438 | ) | | | (3,794 | ) | | | (1,770 | ) | | | (6,232 | | | | (2,550 | ) |
| Agricultural business, including secured by farmland | | | (3,186 | ) | | | - - | | | | - - | | | | (3,186 | | | | - - | |
| Consumer | | | (593 | ) | | | (326 | ) | | | (154 | ) | | | (919 | | | | (359 | ) |
| | | | (34,688 | ) | | | (17,628 | ) | | | (7,131 | ) | | | (52,316 | | | | (9,156 | ) |
| Net charge-offs | | | (34,030 | ) | | | (17,473 | ) | | | (6,876 | ) | | | (51,503 | | | | (8,757 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, end of period | | $ | 90,694 | | | $ | 79,724 | | | $ | 58,570 | | | $ | 90,694 | | | $ | 58,570 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs / Average loans outstanding | | | 0.87 | % | | | 0.44 | % | | | 0.18 | % | | | 1.31 | | | | 0.23 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| ALLOCATION OF | | | | | | | | | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Dec 31, 2008 | | | | | |
| Specific or allocated loss allowance | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | $ | 5,333 | | | $ | 4,972 | | | $ | 4,518 | | | $ | 4,199 | | | | | |
| Multifamily real estate | | | 83 | | | | 84 | | | | 524 | | | | 87 | | | | | |
| Construction and land | | | 55,585 | | | | 46,297 | | | | 19,991 | | | | 38,253 | | | | | |
| One- to four-family real estate | | | 1,333 | | | | 814 | | | | 2,322 | | | | 752 | | | | | |
| Commercial business | | | 19,474 | | | | 18,186 | | | | 21,494 | | | | 16,533 | | | | | |
| Agricultural business, including secured by farmland | | | 1,323 | | | | 587 | | | | 1,634 | | | | 530 | | | | | |
| Consumer | | | 1,540 | | | | 1,682 | | | | 2,583 | | | | 1,730 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allocated | | | 84,671 | | | | 72,622 | | | | 53,066 | | | | 62,084 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Estimated allowance for undisbursed commitments | | | 1,976 | | | | 1,358 | | | | 543 | | | | 1,108 | | | | | |
| Unallocated | | | 4,047 | | | | 5,744 | | | | 4,961 | | | | 12,005 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allowance for loan losses | | $ | 90,694 | | | $ | 79,724 | | | $ | 58,570 | | | $ | 75,197 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | | 2.32 | % | | | 2.04 | % | | | 1.47 | % | | | 1.90 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
BANR - Second Quarter 2009 Results
July 29, 2009
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Dec 31, 2008 | | | | |
| | | | | | | | | | | | | | | | |
| NON-PERFORMING ASSETS | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Loans on non-accrual status | | | | | | | | | | | | | | | |
| Secured by real estate: | | | | | | | | | | | | | | | |
| Commercial | | $ | 7,244 | | | $ | 15,180 | | | $ | 5,907 | | | $ | 12,879 | | | | |
| Multifamily | | | - - | | | | 968 | | | | - - | | | | - - | | | | |
| Construction and land | | | 180,989 | | | | 175,794 | | | | 70,340 | | | | 154,823 | | | | |
| One- to four-family | | | 15,167 | | | | 21,900 | | | | 5,526 | | | | 8,649 | | | | |
| Commercial business | | | 10,508 | | | | 7,500 | | | | 6,875 | | | | 8,617 | | | | |
| Agricultural business, including secured by farmland | | | 7,478 | | | | 2,176 | | | | 265 | | | | 1,880 | | | | |
| Consumer | | | 2,058 | | | | 275 | | | | - - | | | | 130 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | 223,444 | | | | 223,793 | | | | 88,913 | | | | 186,978 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Loans more than 90 days delinquent, still on accrual | | | | | | | | | | | | | | | | | | | |
| Secured by real estate: | | | | | | | | | | | | | | | | | | | |
| Commercial | | | - - | | | | - - | | | | - - | | | | - - | | | | |
| Multifamily | | | - - | | | | - - | | | | - - | | | | - - | | | | |
| Construction and land | | | 603 | | | | - - | | | | - - | | | | - - | | | | |
| One- to four-family | | | 624 | | | | 161 | | | | 889 | | | | 124 | | | | |
| Commercial business | | | 209 | | | | - - | | | | - - | | | | - - | | | | |
| Agricultural business, including secured by farmland | | | - - | | | | - - | | | | - - | | | | - - | | | | |
| Consumer | | | 189 | | | | 143 | | | | 116 | | | | 243 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | 1,625 | | | | 304 | | | | 1,005 | | | | 367 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total non-performing loans | | | 225,069 | | | | 224,097 | | | | 89,918 | | | | 187,345 | | | | |
| Securities on non - accrual at fair value | | | - - | | | | 160 | | | | - - | | | | - - | | | | |
| Real estate owned (REO) / Repossessed assets | | | 57,197 | | | | 39,109 | | | | 11,397 | | | | 21,886 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total non-performing assets | | $ | 282,266 | | | $ | 263,366 | | | $ | 101,315 | | | $ | 209,231 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Total non-performing assets / Total assets | | | 6.23 | % | | | 5.84 | % | | | 2.19 | % | | | 4.56 | % | | | |
| | | | | | | | | | | | | | | | | | | | |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | | | | | | | | | | | | | |
| NON-PERFORMING ASSETS AT | | | | | | | | | | | | | | | | | | | |
| June 30, 2009 | | Washington | | | Oregon | | | Idaho | | | Other | | | Total | |
| Secured by real estate: | | | | | | | | | | | | | | | | | | | |
| Commercial | | $ | 6,611 | | | $ | 483 | | | $ | 150 | | | $ | - - | | | $ | 7,244 | |
| Multifamily | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Construction and land | | | | | | | | | | | | | | | | | | | | |
| One- to four-family construction | | | 33,652 | | | | 30,181 | | | | 10,732 | | | | - - | | | | 74,565 | |
| Residential land acquisition & development | | | 31,951 | | | | 31,365 | | | | 8,633 | | | | - - | | | | 71,949 | |
| Residential land improved lots | | | 7,636 | | | | 6,238 | | | | 1,894 | | | | - - | | | | 15,768 | |
| Residential land unimproved | | | 11,711 | | | | 180 | | | | 2,253 | | | | - - | | | | 14,144 | |
| Commercial land acquisition & development | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Commercial land improved | | | - - | | | | 591 | | | | - - | | | | - - | | | | 591 | |
| Commercial land unimproved | | | 4,382 | | | | - - | | | | 193 | | | | - - | | | | 4,575 | |
| Total construction and land | | | 89,332 | | | | 68,555 | | | | 23,705 | | | | - - | | | | 181,592 | |
| One- to four-family | | | 8,202 | | | | 2,006 | | | | 5,557 | | | | 26 | | | | 15,791 | |
| Commercial business | | | 9,731 | | | | 456 | | | | 530 | | | | - - | | | | 10,717 | |
| Agricultural business, including secured by farmland | | | 694 | | | | 378 | | | | 6,406 | | | | - - | | | | 7,478 | |
| Consumer | | | 1,522 | | | | 448 | | | | 184 | | | | 93 | | | | 2,247 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total non-performing loans | | | 116,092 | | | | 72,326 | | | | 36,532 | | | | 119 | | | | 225,069 | |
| Securities on non - accrual | | | - - | | | | - - | | | | - - | | | | - - | | | | 0 | |
| Real estate owned (REO) and repossessed assets | | | 38,354 | | | | 15,131 | | | | 2,833 | | | | 879 | | | | 57,197 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total non-performing assets at end of the period | | $ | 154,446 | | | $ | 87,457 | | | $ | 39,365 | | | $ | 998 | | | $ | 282,266 | |
BANR - Second Quarter 2009 Results
July 29, 2009
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| BREAKDOWN OF DEPOSITS | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Dec 31, 2008 | |
| | | | | | | | | | | | | |
| Non-interest-bearing | | $ | 508,284 | | | $ | 508,593 | | | $ | 477,144 | | | $ | 509,105 | |
| | | | | | | | | | | | | | | | | |
| Interest-bearing checking | | | 312,024 | | | | 307,741 | | | | 411,571 | | | | 378,952 | |
| Regular savings accounts | | | 499,447 | | | | 490,239 | | | | 580,482 | | | | 474,885 | |
| Money market accounts | | | 319,622 | | | | 301,857 | | | | 224,164 | | | | 284,041 | |
| | | | | | | | | | | | | | | | | |
| Interest-bearing transaction & savings accounts | | | 1,131,093 | | | | 1,099,837 | | | | 1,216,217 | | | | 1,137,878 | |
| | | | | | | | | | | | | | | | | |
| Interest-bearing certificates | | | 2,110,466 | | | | 2,019,074 | | | | 2,063,392 | | | | 2,131,867 | |
| | | | | | | | | | | | | | | | | |
| Total deposits | | $ | 3,749,843 | | | $ | 3,627,504 | | | $ | 3,756,753 | | | $ | 3,778,850 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| INCLUDED IN OTHER BORROWINGS | | | | | | | | | | | | | | | | |
| Customer repurchase agreements / "Sweep accounts" | | $ | 108,277 | | | $ | 131,224 | | | $ | 91,192 | | | $ | 145,230 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | | | | | | | | | |
| June 30, 2009 | | Washington | | | Oregon | | | Idaho | | | Total | |
| | | | | | | | | | | | | | | | | |
| | | $ | 2,941,140 | | | $ | 566,065 | | | $ | 242,638 | | | $ | 3,749,843 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Minimum for Capital Adequacy | |
| REGULATORY CAPITAL RATIOS AT | | | Actual | | | or "Well Capitalized" | |
| June 30, 2009 | | Amount | | | Ratio | | | Amount | | | Ratio | |
| | | | | | | | | | | | | | | | | |
| Banner Corporation-consolidated | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 497,049 | | | | 12.49 | % | | $ | 318,332 | | | | 8.00 | % |
| Tier 1 capital to risk-weighted assets | | | 446,804 | | | | 11.23 | % | | | 159,166 | | | | 4.00 | % |
| Tier 1 leverage capital to average assets | | | 446,804 | | | | 9.90 | % | | | 180,436 | | | | 4.00 | % |
| | | | | | | | | | | | | | | | | |
| Banner Bank | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | | 465,484 | | | | 12.19 | % | | | 382,002 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 417,222 | | | | 10.92 | % | | | 229,201 | | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | | 417,222 | | | | 9.63 | % | | | 216,703 | | | | 5.00 | % |
| | | | | | | | | | | | | | | | | |
| Islanders Bank | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | | 25,209 | | | | 13.60 | % | | | 18,542 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 23,726 | | | | 12.80 | % | | | 11,125 | | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | | 23,726 | | | | 11.59 | % | | | 10,240 | | | | 5.00 | % |
| | | | | | | | | | | | | | | | | |
BANR - Second Quarter 2009 Results
July 29, 2009
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | | | |
| | | | Quarters Ended | | | Six Months Ended | |
| | | | | | | | | | | | | | | | | |
| OPERATING PERFORMANCE | | Jun 30, 2009 | | | Mar 31, 2009 | | | Jun 30, 2008 | | | Jun 30, 2009 | | | Jun 30, 2008 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Average loans | | $ | 3,925,196 | | | $ | 3,942,917 | | | $ | 3,917,563 | | | $ | 3,934,002 | | | $ | 3,874,277 | |
| Average securities and deposits | | | 394,244 | | | | 403,514 | | | | 336,662 | | | | 398,856 | | | | 324,605 | |
| Average non-interest-earning assets | | | 199,981 | | | | 193,188 | | | | 352,639 | | | | 196,604 | | | | 354,960 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Total average assets | | $ | 4,519,421 | | | $ | 4,539,619 | | | $ | 4,606,864 | | | $ | 4,529,462 | | | $ | 4,553,842 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Average deposits | | $ | 3,679,653 | | | $ | 3,693,345 | | | $ | 3,719,748 | | | $ | 3,686,455 | | | $ | 3,662,934 | |
| Average borrowings | | | 429,708 | | | | 416,927 | | | | 419,280 | | | | 423,359 | | | | 415,421 | |
| Average non-interest-bearing liabilities | | | (18,421 | ) | | | (7,922 | ) | | | 31,475 | | | | (13,201 | ) | | | 36,130 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Total average liabilities | | | 4,090,940 | | | | 4,102,350 | | | | 4,170,503 | | | | 4,096,613 | | | | 4,114,485 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total average stockholders' equity | | | 428,481 | | | | 437,269 | | | | 436,361 | | | | 432,849 | | | | 439,357 | |
| | | | | | | | | | | | | | | | | | | | | |
| | Total average liabilities and equity | | $ | 4,519,421 | | | $ | 4,539,619 | | | $ | 4,606,864 | | | $ | 4,529,462 | | | $ | 4,553,842 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate yield on loans | | | 5.67 | % | | | 5.80 | % | | | 6.59 | % | | | 5.73 | % | | | 6.87 | % |
| Interest rate yield on securities and deposits | | | 3.72 | % | | | 4.00 | % | | | 4.72 | % | | | 3.86 | % | | | 4.85 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | Interest rate yield on interest-earning assets | | | 5.49 | % | | | 5.63 | % | | | 6.44 | % | | | 5.56 | % | | | 6.71 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate expense on deposits | | | 2.36 | % | | | 2.54 | % | | | 2.98 | % | | | 2.45 | % | | | 3.16 | % |
| Interest rate expense on borrowings | | | 2.42 | % | | | 2.22 | % | | | 3.35 | % | | | 2.32 | % | | | 3.88 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | Interest rate expense on interest-bearing liabilities | | | 2.37 | % | | | 2.50 | % | | | 3.02 | % | | | 2.43 | % | | | 3.24 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | 3.12 | % | | | 3.13 | % | | | 3.42 | % | | | 3.13 | % | | | 3.47 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 3.24 | % | | | 3.26 | % | | | 3.50 | % | | | 3.25 | % | | | 3.57 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating income / Average assets | | | 1.77 | % | | | 0.42 | % | | | 0.75 | % | | | 1.10 | % | | | 0.74 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating income (loss) EXCLUDING change in valuation of | | | | | | | | | | | | | | | | | | | | |
| | financial instruments carried at fair value / Average assets (1) | | | 0.79 | % | | | 0.71 | % | | | 0.69 | % | | | 0.75 | % | | | 0.67 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating expense / Average assets | | | 3.27 | % | | | 3.02 | % | | | 7.44 | % | | | 3.15 | % | | | 5.25 | % |
| | | | | | | | �� | | | | | | | | | | | | | | |
Other operating expense EXCLUDING goodwill write-off / Average assets (1) | | | 3.27 | % | | | 3.02 | % | | | 3.08 | % | | | 3.15 | % | | | 3.04 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Efficiency ratio (other operating expense / revenue) | | | 67.19 | % | | | 85.32 | % | | | 186.84 | % | | | 74.79 | % | | | 130.46 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Return (Loss) on average assets | | | (1.47 | %) | | | (0.83 | %) | | | (4.57 | %) | | | (1.15 | %) | | | (2.14 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
| Return (Loss) on average equity | | | (15.46 | %) | | | (8.59 | %) | | | (48.21 | %) | | | (12.01 | %) | | | (22.19 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
Return (Loss) on average tangible equity (2) | | | (15.93 | %) | | | (8.86 | %) | | | (70.04 | %) | | | (12.38 | %) | | | (32.20 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
| Average equity / Average assets | | | 9.48 | % | | | 9.63 | % | | | 9.47 | % | | | 9.56 | % | | | 9.65 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| (1) | - Earnings information excluding the fair value adjustments and goodwill impairment charge (alternately referred to as operating | | | | | | | | | |
| | income (loss) from core operations and expenses from core operations) represent non-GAAP (Generally Accepted | | | | | | | | | |
| | Accounting Principles) financial measures. | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| (2) | - Average tangible equity excludes goodwill, core deposit and other intangibles. | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Transmitted on Globe Newswire on Wednesday, July 29, 2009, at 1:00 p.m. PDT.
