Exhibit 99.1
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| Contact: D. Michael Jones, President and CEO Lloyd W. Baker, CFO (509) 527-3636 News Release |
Banner Corporation Announces Third Quarter Results
Walla Walla, WA – October 20, 2009 - Banner Corporation (NASDAQ GMS: BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $6.4 million for the third quarter ended September 30, 2009, compared to a net loss of $991,000 for the third quarter of 2008. The current quarter’s results include a $25.0 million provision for loan losses and a $4.6 million net gain from the valuation of financial instruments carried at fair value. For the nine-month period ended September 30, 2009, Banner reported a net loss of $32.2 million compared to a net loss of $49.5 million for the nine months ended September 30, 2008. The nine month results for 2008 included a $50.0 million goodwill impairment charge.
In the fourth quarter a year ago, 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 September 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 to common shareholders was $8.4 million, or $0.44 per diluted share, for the third quarter, compared to a net loss of $991,000, or $0.06 per diluted share, for the third quarter a year ago. Year-to-date, the net loss to common shareholders was $38.0 million, or $2.11 per diluted share, compared to a net loss of $49.5 million, or $3.09 per diluted share for the first nine months of 2008.
“Similar to recent quarters, our provision for loan losses during the third quarter reflects continued 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. “However, while there is still much work to be accomplished, we are encouraged by the further reduction in our exposure to residential construction loans during the quarter and the slowdown in the surfacing of new problem assets. By contrast to construction and development loans, 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.”
“Retail deposit growth was a highlight again in the third quarter as we continued to replace public and brokered funds with attractively priced core deposits which will continue to strengthen our commercial banking franchise,” Jones continued. “Also notable in the quarter was strong mortgage banking revenues as exceptionally low interest rates resulted in continued refinancing opportunities for many of our customers, and lower home prices and first-time buyer incentives led to solid purchase financing activities. Continuing its earlier success, our Great Northwest Home Rush promotion contributed to additional home sales. Through the date of this announcement our builders have accepted purchase offers on 361 of the 617 homes listed under this program, with 289 of those sales having closed through September 30, 2009.”
Credit Quality
“In addition to the weakness in the residential construction market, property values exhibited further declines, particularly for land and developed building lots, resulting in additional charge-offs and impairment reserves,” said Jones. “As a result, our provision for loan losses for the quarter ended September 30, 2009, while significantly less than in the immediately preceding quarter, 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 as well as recent regulatory examination results. Unfortunately, with respect to land and lot loans, those appraisals generally reflect a very limited number of sales which frequently involve distressed transactions and assume in many cases that market recoveries will be protracted, resulting in disappointingly low and uncertain valuation estimates which required further loss provisioning. We remain hopeful that the final resolution of many of these loans will reflect better than currently recognized values and we are confident that we have the capital and human resources necessary to manage the collection of problem assets in the current economic environment.”
Banner recorded a $25.0 million provision for loan losses in the third quarter, compared to $45.0 million in the preceding quarter and $8.0 million in the third quarter of 2008. For the first nine months of the year, the provision for loan losses was $92.0 million compared to $29.5 million for the first nine months of 2008. The allowance for loan losses at September 30, 2009 was $95.2 million, representing 2.44% of total loans outstanding. Non-performing loans totaled $243.3 million at September 30, 2009, compared to $225.1 million in the preceding quarter and $119.4 million at September 30, 2008. In addition, Banner’s real estate owned and repossessed assets totaled $53.8 million at September 30, 2009, compared to $57.2 million three months earlier and $10.2 million at September 30, 2008. Banner’s net charge-offs in the quarter ended September 30, 2009 totaled $20.5 million, or 0.53% of average loans outstanding and year-to-date net charge-offs were $72.0 million, or 1.83% of average loans outstanding.
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BANR-Third Quarter 2009 Results
October 20, 2009
Page 2
At September 30, 2009, the geographic distribution of our construction and land development loans, including residential and commercial properties, is approximately 33% in the greater Puget Sound market, 37% in the greater Portland, Oregon market, and 8% in the greater Boise, Idaho market, with the remaining 22% 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 16% of the total loan portfolio and 73% of non-performing assets. The geographic distribution of non-performing construction, land and land development loans and real estate owned included approximately $110 million, or 44%, in the Puget Sound region, $84 million, or 34%, in the greater Portland market area and $27 million, or 11%, in the greater Boise market area.
Income Statement Review
Banner’s net interest margin was 3.30% for the third quarter, compared to 3.24% in the preceding quarter and 3.45% for the third quarter a year ago. Funding costs decreased 18 basis points compared to the previous quarter and decreased 67 basis points from the same quarter a year earlier, while asset yields decreased eight basis points from the prior linked quarter and 82 basis points from the third quarter a year ago, all reflecting the much lower interest rate environment. For the first nine months of 2009, the net interest margin was 3.27% compared to 3.52% for the first nine months of 2008.
“Funding costs continued to decline, which allowed our net interest margin to expand modestly despite the drag on earnings from the still high level of non-performing assets,” said Jones. Non-accruing loans reduced the margin by approximately 42 basis points in this year’s third quarter compared to approximately 45 basis points in the immediately preceding quarter of 2009 and approximately 24 basis points in the third quarter of 2008.
For the third quarter of 2009, net interest income before the provision for loan losses was $36.4 million, compared to $34.9 million in the preceding quarter and $37.6 million in the third quarter a year ago. In the first nine months of 2009, net interest income before the provision for loan losses was $106.2 million compared to $112.0 million in the first nine months 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 $45.2 million in the third quarter of 2009, compared to $43.9 million in the second quarter of 2009 and $45.7 million for the third quarter a year ago. Revenues from core operations for the first nine months of 2009 were $131.9 million, compared to $135.4 million for the same period of 2008.
Banner’s results for the quarter included a net gain of $4.6 million ($3.0 million after tax), compared to a net loss of $6.1 million ($3.9 million after tax) in the third quarter a year ago, 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, including pooled 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 $13.4 million in the third quarter, compared to $20.0 million in the preceding quarter and $2.0 million for the same quarter a year ago. For the first nine months of 2009, total other operating income was $38.1 million, compared to $18.9 million in the same period in 2008. Total other operating income from core operations* (excluding fair value adjustments) for the current quarter was $8.8 million, compared to $8.9 million in the preceding quarter and $8.1 million for the same quarter a year ago. For the first nine months of 2009, total other operating income from core operations increased 9% to $25.6 million, compared to $23.4 million in the first nine months of 2008. Income from deposit fees and other service charges increased to $5.7 million in the third quarter of 2009, compared to $5.4 million for the preceding quarter; however, reflecting the reduction in customer transaction volumes in the current economic environment, fees were slightly less than the $5.8 million recorded in the third quarter a year ago despite growth in the number of accounts. Income from mortgage banking operations decreased to $2.1 million in the third quarter compared to $2.9 million in the preceding quarter, but was up substantially from the $1.5 million recorded in the third quarter a year ago.
“The soft economy continued to adversely affect our payment processing business compared to a year ago 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 continuing improvement in activity compared to the very low levels we experienced earlier this year,” 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 first two quarters of the year, the high level of refinancing activity again resulted in accelerated termination of mortgage servicing rights as reflected in the impairment of loan servicing revenues in the third quarter. Amortization and write-off of mortgage servicing rights totaled $415,000 for the third quarter of 2009, compared to $912,000 and $559,000, respectively, in the first and second quarters of this year and $176,000 in the third quarter a year ago.”
“We had another good quarter of managing controllable operating expenses; however, collection and legal costs, including charges related to acquired real estate, remained high,” said Jones. “Compensation, occupancy and other manageable operating expenses have shown steady reductions over the past twelve months as we have made significant progress in improving our core operating efficiency.
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BANR-Third Quarter 2009 Results
October 20, 2009
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Unfortunately, compared to a year ago FDIC insurance expense has increased substantially and offset much of this improvement. FDIC insurance charges were $2.2 million and $7.8 million, respectively, for the quarter and nine months ended September 30, 2009, compared to $701,000 and $1.7 million, respectively, for the quarter and nine months ended September 30, 2008. In addition, expenses associated with acquired real estate increased to $2.8 million for the quarter and $5.2 million for the nine months ended September 30, 2009, compared to $758,000 and $1.6 million, respectively, for the same quarter and nine-month period a year earlier. We anticipate collection costs and FDIC insurance premiums will continue to be above historical levels for a number of future quarters.”
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 $36.6 million in the third quarter, compared to $36.9 million in the preceding quarter and $34.0 million in the third quarter a year ago. For the first nine months of the year, other operating expenses from core operations were $107.3 million compared to $102.9 million in the first nine months of 2008. Operating expenses from core operations as a percentage of average assets was 3.17% in the third quarter of 2009, compared to 3.27% in the preceding quarter and 2.91% in the third 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 and year-to-date’s results. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
Balance Sheet Review
Net loans were $3.80 billion at September 30, 2009, compared to $3.94 billion a year earlier. Total assets were $4.79 billion at September 30, 2009, compared to $4.65 billion a year earlier.
“In the third quarter of 2009, commercial and multifamily real estate loan balances increased by $19.6 million while commercial business loans were essentially unchanged compared to the prior quarter end. In addition, agricultural loans experienced an expected seasonal increase of $10.3 million and one-to-four family residential loans increased by $23.4 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 $205 million reduction in our portfolio of one-to-four family construction loans over the past twelve months, including a $60.0 million decrease in the most recent quarter. As a result, at September 30, 2009 our one-to-four family construction loans totaled $277 million, a decline of $378 million from their peak quarter-end balance of $655 million at June 30, 2007.
Total deposits were $3.86 billion at September 30, 2009, compared to $3.75 billion at the end of the preceding quarter and $3.79 billion a year ago. Non-interest-bearing accounts increased by nearly $39 million during the quarter to $546 million at September 30, 2009, compared to $508 million at June 30, 2009 and $522 million a year ago. Interest-bearing accounts increased by $73 million in the third quarter of 2009 and at quarter end exceeded the year earlier balances by $45 million despite the substantial decrease in public funds and brokered deposits.
“Our retail deposit franchise had another strong quarter and we have now more than replaced all of the public funds and brokered deposits that we have chosen to run off,” said Jones. “Over the past twelve months, we have allowed $253 million in public funds 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. In addition, although brokered deposits have never been an important component of our funding, we have reduced brokered deposits by $58 million over the same twelve-month period. We are pleased that we were able to produce this retail deposit growth while also significantly reducing our overall cost of deposits, including another 20 basis point decrease during the third quarter. This strong retail deposit growth, especially in the third quarter, has allowed us to steadily build our short-term liquidity, a key operating goal, and lower our loan-to-deposits ratio towards our long-term goal of 95%.”
“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,” said Jones. Banner Corporation’s Tier 1 leverage capital to average assets ratio was 9.66% and its total capital to risk-weighted assets ratio was 12.54% at September 30, 2009.
Tangible stockholders’ equity at September 30, 2009 was $395.2 million, including $117.0 million attributable to preferred stock, compared to $301.4 million a year ago. Tangible common stockholders’ equity was $278.2 million at September 30, 2009, or 5.82% of tangible assets, compared to $301.4 million, or 6.60% of tangible assets a year earlier. Tangible book value per common share was $14.13 at quarter-end, compared to $18.01 a year earlier. At September 30, 2009, Banner had 19.7 million shares outstanding, while it had 16.7 million shares outstanding a year ago.
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BANR-Third Quarter 2009 Results
October 20, 2009
Page 4
“A frequently asked question about us is the date of our bank regulatory examinations. A regularly scheduled regulatory examination of Banner Bank, our lead bank, was conducted in the late third quarter of 2009. We have not yet received a written report of that examination but have had the normal field examiner exit conference and have incorporated the financial-related results of that conference in our third quarter financial results,” concluded Jones.
Conference Call
Banner will host a conference call on Wednesday, October 21, 2009, at 8:00 a.m. PDT, to discuss third quarter 2009 results. The conference call can be accessed live by telephone at 480-629-9723 using access code 4171247 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 4171247.
About the Company
Banner Corporation is a $4.8 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; our ability to pay dividends; 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.
BANR-Third Quarter 2009 Results
October 20, 2009
Page 5
| RESULTS OF OPERATIONS | | | Quarters Ended | | | Nine Months Ended | |
| (in thousands except shares and per share data) | | | Sep 30, 2009 | | Jun 30, 2009 | | Sep 30, 2008 | | Sep 30, 2009 | | Sep 30, 2008 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| INTEREST INCOME: | | | | | | | | | | | | | | | | | |
| | Loans receivable | | | $ | 56,175 | | $ | 55,500 | | $ | 64,181 | | $ | 168,022 | | $ | 196,348 | |
| | Mortgage-backed securities | | | 1,422 | | | 1,569 | | | 1,040 | | | 4,792 | | | 3,280 | |
| | Securities and cash equivalents | | | 1,976 | | | 2,089 | | | 2,786 | | | 6,248 | | | 8,374 | |
| | | | | | | 59,573 | | | 59,158 | | | 68,007 | | | 179,062 | | | 208,002 | |
| | | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | | |
| | Deposits | | | | 20,818 | | | 21,638 | | | 26,818 | | | 65,548 | | | 84,446 | |
| | Federal Home Loan Bank advances | | | 630 | | | 675 | | | 1,160 | | | 2,025 | | | 4,310 | |
| | Other borrowings | | | | 655 | | | 671 | | | 734 | | | 1,553 | | | 1,874 | |
| | Junior subordinated debentures | | | 1,118 | | | 1,249 | | | 1,669 | | | 3,700 | | | 5,399 | |
| | | | | | | 23,221 | | | 24,233 | | | 30,381 | | | 72,826 | | | 96,029 | |
| | Net interest income before provision for loan losses | | | 36,352 | | | 34,925 | | | 37,626 | | | 106,236 | | | 111,973 | |
| | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | | 25,000 | | | 45,000 | | | 8,000 | | | 92,000 | | | 29,500 | |
| | Net interest income (loss) | | | 11,352 | | | (10,075 | ) | | 29,626 | | | 14,236 | | | 82,473 | |
| | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING INCOME: | | | | | | | | | | | | | | | | |
| | Deposit fees and other service charges | | | 5,705 | | | 5,408 | | | 5,770 | | | 16,049 | | | 16,277 | |
| | Mortgage banking operations | | | 2,065 | | | 2,860 | | | 1,500 | | | 7,640 | | | 4,694 | |
| | Loan servicing fees | | | | 282 | | | 248 | | | 536 | | | 260 | | | 1,485 | |
| | Miscellaneous | | | | 768 | | | 412 | | | 286 | | | 1,700 | | | 980 | |
| | | | | | | 8,820 | | | 8,928 | | | 8,092 | | | 25,649 | | | 23,436 | |
| | Increase (Decrease) in valuation of financial instruments carried at fair value | 4,633 | | | 11,049 | | | (6,056 | ) | | 12,429 | | | (4,584 | ) |
| | Total other operating income | | | 13,453 | | | 19,977 | | | 2,036 | | | 38,078 | | | 18,852 | |
| | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | | | | | | | |
| | Salary and employee benefits | | | 17,379 | | | 17,528 | | | 18,241 | | | 52,508 | | | 57,623 | |
| | Less capitalized loan origination costs | | | (2,060 | ) | | (2,834 | ) | | (2,040 | ) | | (7,010 | ) | | (7,009 | ) |
| | Occupancy and equipment | | | 5,715 | | | 5,928 | | | 5,956 | | | 17,697 | | | 17,813 | |
| | Information / computer data services | | | 1,551 | | | 1,599 | | | 1,560 | | | 4,684 | | | 5,389 | |
| | Payment and card processing services | | | 1,778 | | | 1,555 | | | 1,913 | | | 4,786 | | | 5,212 | |
| | Professional services | | | | 1,456 | | | 1,183 | | | 1,117 | | | 3,833 | | | 3,203 | |
| | Advertising and marketing | | | 1,899 | | | 2,207 | | | 1,572 | | | 5,938 | | | 4,667 | |
| | Deposit insurance | | | | 2,219 | | | 4,102 | | | 701 | | | 7,818 | | | 1,661 | |
| | State/municipal business and use taxes | | | 558 | | | 532 | | | 572 | | | 1,630 | | | 1,712 | |
| | Real estate operations | | | | 2,799 | | | 1,805 | | | 758 | | | 5,227 | | | 1,592 | |
| | Miscellaneous | | | | 3,335 | | | 3,286 | | | 3,650 | | | 10,202 | | | 11,067 | |
| | | | | | | 36,629 | | | 36,891 | | | 34,000 | | | 107,313 | | | 102,930 | |
| | Goodwill write-off | | | | - - | | | -- | | | - - | | | - - | | | 50,000 | |
| | Total other operating expense | | | 36,629 | | | 36,891 | | | 34,000 | | | 107,313 | | | 152,930 | |
| | Income (Loss) before provision (benefit) for income taxes | | | (11,824 | ) | | (26,989 | ) | | (2,338 | ) | | (54,999 | ) | | (51,605 | ) |
| | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR (BENEFIT FROM ) INCOME TAXES | | | (5,376 | ) | | (10,478 | ) | | (1,347 | ) | | (22,777 | ) | | (2,143 | ) |
| NET INCOME (LOSS) | | | $ | (6,448 | ) | $ | (16,511 | ) | $ | (991 | ) | $ | (32,222 | ) | $ | (49,462 | ) |
| | | | | | | | | | | | | | | | | | | | |
| PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION | | | | | | | | | | | | | | | |
| | Preferred stock dividend | | | | 1,550 | | | 1,550 | | | - - | | | 4,650 | | | - - | |
| | Preferred stock discount accretion | | | 373 | | | 373 | | | - - | | | 1,119 | | | - - | |
| | | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (8,371 | ) | $ | (18,434 | ) | $ | (991 | ) | $ | (37,991 | ) | $ | (49,462 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Earnings (Loss) per share available to common shareholder | | | | | | | | | | | | | | | | |
| | | Basic | | | $ | (0.44 | ) | $ | (1.04 | ) | $ | (0.06 | ) | $ | (2.11 | ) | $ | (3.09 | ) |
| | | Diluted | | | $ | (0.44 | ) | $ | (1.04 | ) | $ | (0.06 | ) | $ | (2.11 | ) | $ | (3.09 | ) |
| Cumulative dividends declared per common share | | $ | 0.01 | | $ | 0.01 | | $ | 0.05 | | $ | 0.03 | | $ | 0.45 | |
| | | | | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | | | | | | | | | |
| | | Basic | | | | 19,022,522 | | | 17,746,051 | | | 16,402,607 | | | 17,982,945 | | | 16,025,403 | |
| | | Diluted | | | | 19,022,522 | | | 17,746,051 | | | 16,402,607 | | | 17,982,945 | | | 16,025,403 | |
| Common shares repurchased during the period | | | - - | | | -- | | | - - | | | - - | | | 613,903 | |
| Common shares issued in connection with exercise of stock options or DRIP | 1,507,485 | | | 780,906 | | | 675,186 | | | 2,781,905 | | | 653,036 | |
| | | | | | | | | | | | | | | | | | | | |
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BANR-Third Quarter 2009 Results
October 20, 2009
Page 6
| FINANCIAL CONDITION | | | | | | | | | | | | |
| (in thousands except shares and per share data) | | Sep 30, 2009 | | | Jun 30, 2009 | | | Sep 30, 2008 | | | Dec 31, 2008 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 60,531 | | | $ | 67,339 | | | $ | 80,508 | | | $ | 89,964 | |
| Federal funds and interest-bearing deposits | | | 270,623 | | | | 16,919 | | | | 403 | | | | 12,786 | |
| Securities - at fair value | | | 167,944 | | | | 167,476 | | | | 239,009 | | | | 203,902 | |
| Securities - available for sale | | | 74,527 | | | | 50,980 | | | | - - | | | | 53,272 | |
| Securities - held to maturity | | | 76,630 | | | | 77,321 | | | | 55,389 | | | | 59,794 | |
| Federal Home Loan Bank stock | | | 37,371 | | | | 37,371 | | | | 37,371 | | | | 37,371 | |
| Loans receivable: | | | | | | | | | | | | | | | | |
| | Held for sale | | | 4,781 | | | | 8,377 | | | | 6,085 | | | | 7,413 | |
| | Held for portfolio | | | 3,891,413 | | | | 3,904,704 | | | | 3,993,094 | | | | 3,953,995 | |
| | Allowance for loan losses | | | (95,183 | ) | | | (90,694 | ) | | | (58,846 | ) | | | (75,197 | ) |
| | | | | 3,801,011 | | | | 3,822,387 | | | | 3,940,333 | | | | 3,886,211 | |
| | | | | | | | | | | | | | | | | | |
| Accrued interest receivable | | | 20,912 | | | | 18,892 | | | | 22,799 | | | | 21,219 | |
| Real estate owned held for sale, net | | | 53,576 | | | | 56,967 | | | | 10,147 | | | | 21,782 | |
| Property and equipment, net | | | 104,469 | | | | 103,709 | | | | 97,958 | | | | 97,647 | |
| Goodwill and other intangibles, net | | | 11,718 | | | | 12,365 | | | | 85,513 | | | | 13,716 | |
| Bank-owned life insurance | | | 54,037 | | | | 53,341 | | | | 52,500 | | | | 52,680 | |
| Other assets | | | 54,659 | | | | 47,475 | | | | 28,329 | | | | 34,024 | |
| | | | $ | 4,788,008 | | | $ | 4,532,542 | | | $ | 4,650,259 | | | $ | 4,584,368 | |
| | | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | |
| | Non-interest-bearing | | $ | 546,956 | | | $ | 508,284 | | | $ | 521,927 | | | $ | 509,105 | |
| | Interest-bearing transaction and savings accounts | | | 1,305,546 | | | | 1,131,093 | | | | 1,086,621 | | | | 1,137,878 | |
| | Interest-bearing certificates | | | 2,008,673 | | | | 2,110,466 | | | | 2,182,318 | | | | 2,131,867 | |
| | | | | 3,861,175 | | | | 3,749,843 | | | | 3,790,866 | | | | 3,778,850 | |
| | | | | | | | | | | | | | | | | | |
| Advances from Federal Home Loan Bank at fair value | | | 255,806 | | | �� | 115,946 | | | | 209,243 | | | | 111,415 | |
| Customer repurchase agreements and other borrowings | | | 174,770 | | | | 158,249 | | | | 104,496 | | | | 145,230 | |
| Junior subordinated debentures at fair value | | | 47,859 | | | | 49,563 | | | | 101,358 | | | | 61,776 | |
| | | | | | | | | | | | | | | | | | |
| Accrued expenses and other liabilities | | | 28,715 | | | | 36,652 | | | | 44,486 | | | | 40,600 | |
| Deferred compensation | | | 12,960 | | | | 12,815 | | | | 12,880 | | | | 13,149 | |
| | | | | 4,381,285 | | | | 4,123,068 | | | | 4,263,329 | | | | 4,151,020 | |
| | | | | | | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | |
| Preferred stock - Series A | | | 117,034 | | | | 116,661 | | | | - - | | | | 115,915 | |
| Common stock | | | 327,385 | | | | 322,582 | | | | 306,741 | | | | 316,740 | |
| Retained earnings (accumulated deficit) | | | (36,402 | ) | | | (27,826 | ) | | | 82,377 | | | | 2,150 | |
| Other components of stockholders' equity | | | (1,294 | ) | | | (1,943 | ) | | | (2,188 | ) | | | (1,457 | ) |
| | | | | 406,723 | | | | 409,474 | | | | 386,930 | | | | 433,348 | |
| | | | $ | 4,788,008 | | | $ | 4,532,542 | | | $ | 4,650,259 | | | $ | 4,584,368 | |
| | | | | | | | | | | | | | | | | | |
| Common Shares Issued: | | | | | | | | | | | | | | | | |
| Shares outstanding at end of period | | | 19,933,943 | | | | 18,426,458 | | | | 16,980,468 | | | | 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 | | | 19,693,562 | | | | 18,186,077 | | | | 16,740,087 | | | | 16,911,657 | |
| | | | | | | | | | | | | | | | | | |
Common stockholders' equity per share (1) | | $ | 14.72 | | | $ | 16.10 | | | $ | 23.11 | | | $ | 18.77 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 14.13 | | | $ | 15.42 | | | $ | 18.01 | | | $ | 17.96 | |
| Tangible common stockholders' equity to tangible assets | | | 5.82 | % | | | 6.20 | % | | | 6.60 | % | | | 6.64 | % |
| Consolidated Tier 1 leverage capital ratio | | | 9.66 | % | | | 9.90 | % | | | 8.86 | % | | | 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. | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
(more)
BANR-Third Quarter 2009 Results
October 20, 2009
Page 7
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | Sep 30, 2009 | | Jun 30, 2009 | | Sep 30, 2008 | | Dec 31, 2008 | | |
| LOANS (including loans held for sale): | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | |
| | Owner occupied | | | $ | 481,698 | $ | 476,922 | $ | 448,972 | $ | 459,446 | | |
| | Investment properties | | | | 585,206 | | 572,999 | | 564,947 | | 554,263 | | |
| Multifamily real estate | | | | 152,832 | | 150,168 | | 141,787 | | 151,274 | | |
| Commercial construction | | | | 83,937 | | 90,762 | | 113,342 | | 104,495 | | |
| Multifamily construction | | | | 62,614 | | 56,968 | | 22,236 | | 33,661 | | |
| One- to four-family construction | | | | 277,419 | | 337,368 | | 482,443 | | 420,673 | | |
| Land and land development | | | | | | | | | | | | |
| | Residential | | | | 346,308 | | 359,994 | | 417,041 | | 424,002 | | |
| | Commercial | | | | 47,182 | | 43,703 | | 64,480 | | 62,128 | | |
| Commercial business | | | | 678,187 | | 678,273 | | 694,688 | | 679,867 | | |
| Agricultural business including secured by farmland | | | 225,603 | | 215,339 | | 213,753 | | 204,142 | | |
| One- to four-family real estate | | | | 676,928 | | 653,513 | | 561,043 | | 599,169 | | |
| Consumer | | | | 278,280 | | 277,072 | | 274,447 | | 268,288 | | |
| | | | | | | | | | | | | | | |
| | | Total loans outstanding | | | $ | 3,896,194 | $ | 3,913,081 | $ | 3,999,179 | $ | 3,961,408 | | |
| | | | | | | | | | | | | | | |
| Restructured loans performing under their restructured terms | $ | 55,161 | $ | 55,031 | $ | 15,514 | $ | 23,635 | | |
| | | | | | | | | | | | | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 21,243 | $ | 34,038 | $ | 18,587 | $ | 61,124 | | |
| | | | | | | | | | | | | | | |
| Total delinquent loans (including loans on non-accrual) | $ | 264,531 | $ | 259,107 | $ | 137,953 | $ | 248,469 | | |
| | | | | | | | | | | | | | | |
| Total delinquent loans / Total loans outstanding | | | 6.79% | | 6.62% | | 3.45% | | 6.27% | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | |
| | | September 30, 2009 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| | | | | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | |
| | Owner occupied | | | $ | 380,170 | $ | 59,793 | $ | 41,735 | $ | - - | $ | 481,698 |
| | Investment properties | | | | 423,431 | | 107,090 | | 44,243 | | 10,442 | | 585,206 |
| Multifamily real estate | | | | 127,882 | | 12,823 | | 8,800 | | 3,327 | | 152,832 |
| Commercial construction | | | | 62,827 | | 13,390 | | 7,720 | | - - | | 83,937 |
| Multifamily construction | | | | 33,837 | | 28,777 | | - - | | - - | | 62,614 |
| One- to four-family construction | | | | 133,319 | | 129,552 | | 14,548 | | - - | | 277,419 |
| Land and land development | | | | | | | | | | | | |
| | Residential | | | | 170,345 | | 132,624 | | 43,339 | | - - | | 346,308 |
| | Commercial | | | | 30,400 | | 12,127 | | 4,655 | | - - | | 47,182 |
| Commercial business | | | | 483,451 | | 94,828 | | 74,621 | | 25,287 | | 678,187 |
| Agricultural business including secured by farmland | | | 105,119 | | 55,488 | | 64,963 | | 33 | | 225,603 |
| One- to four-family real estate | | | | 470,912 | | 169,564 | | 33,205 | | 3,247 | | 676,928 |
| Consumer | | | | 196,305 | | 64,056 | | 17,418 | | 501 | | 278,280 |
| | | Total loans outstanding | | | $ | 2,617,998 | $ | 880,112 | $ | 355,247 | $ | 42,837 | $ | 3,896,194 |
| | | | | | | | | | | | | | | |
| | | Percent of total loans | | | | 67.2% | | 22.6% | | 9.1% | | 1.1% | | 100.0% |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT | | | | | | | | | | |
| | | September 30, 2009 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| | | | | | | | | | | | | | | |
| Residential | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 93,883 | $ | 91,781 | $ | 20,236 | $ | - - | $ | 205,900 |
| | Improved lots | | | | 53,187 | | 33,431 | | 2,754 | | - - | | 89,372 |
| | Unimproved land | | | | 23,275 | | 7,412 | | 20,349 | | - - | | 51,036 |
| | | Total residential land and development | | $ | 170,345 | $ | 132,624 | $ | 43,339 | $ | - - | $ | 346,308 |
| Commercial & industrial | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 8,975 | $ | - - | $ | 200 | $ | - - | $ | 9,175 |
| | Improved land | | | | 9,906 | | 10,643 | | - - | | - - | | 20,549 |
| | Unimproved land | | | | 11,519 | | 1,484 | | 4,455 | | - - | | 17,458 |
| | | Total commercial land and development | | $ | 30,400 | $ | 12,127 | $ | 4,655 | $ | - - | $ | 47,182 |
| | | | | | | | | | | | | | | |
(more)
BANR-Third Quarter 2009 Results
October 20, 2009
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarters Ended | | | Nine Months Ended | |
| CHANGE IN THE | | Sep 30, 2009 | | | Jun 30, 2009 | | | Sep 30, 2008 | | | Sep 30, 2009 | | | Sep 30, 2008 | |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 90,694 | | | $ | 79,724 | | | $ | 58,570 | | | $ | 75,197 | | | $ | 45,827 | |
| | | | | | | | | | | | | | | | | | | | | |
| Provision | | | 25,000 | | | | 45,000 | | | | 8,000 | | | | 92,000 | | | | 29,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Recoveries of loans previously charged off: | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | - - | | | | - - | | | | 1,530 | | | | - - | | | | 1,530 | |
| Multifamily real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Construction and land | | | 299 | | | | 266 | | | | 39 | | | | 617 | | | | 48 | |
| One- to four-family real estate | | | 21 | | | | 89 | | | | 4 | | | | 112 | | | | 44 | |
| Commercial business | | | 120 | | | | 249 | | | | 130 | | | | 439 | | | | 390 | |
| Agricultural business, including secured by farmland | | | 6 | | | | 22 | | | | 610 | | | | 28 | | | | 618 | |
| Consumer | | | 152 | | | | 32 | | | | 44 | | | | 215 | | | | 126 | |
| | | | 598 | | | | 658 | | | | 2,357 | | | | 1,411 | | | | 2,756 | |
| Loans charged-off: | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | (7 | ) |
| Multifamily real estate | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Construction and land | | | (16,614 | ) | | | (27,290 | ) | | | (7,567 | ) | | | (56,321 | ) | | | (13,616 | ) |
| One- to four-family real estate | | | (856 | ) | | | (1,181 | ) | | | (220 | ) | | | (3,128 | ) | | | (411 | ) |
| Commercial business | | | (3,060 | ) | | | (2,438 | ) | | | (1,889 | ) | | | (9,292 | ) | | | (4,439 | ) |
| Agricultural business, including secured by farmland | | | - - | | | | (3,186 | ) | | | (60 | ) | | | (3,186 | ) | | | (60 | ) |
| Consumer | | | (579 | ) | | | (593 | ) | | | (345 | ) | | | (1,498 | ) | | | (704 | ) |
| | | | (21,109 | ) | | | (34,688 | ) | | | (10,081 | ) | | | (73,425 | ) | | | (19,237 | ) |
| Net charge-offs | | | (20,511 | ) | | | (34,030 | ) | | | (7,724 | ) | | | (72,014 | ) | | | (16,481 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, end of period | | $ | 95,183 | | | $ | 90,694 | | | $ | 58,846 | | | $ | 95,183 | | | $ | 58,846 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs / Average loans outstanding | | | 0.53 | % | | | 0.87 | % | | | 0.19 | % | | | 1.83 | % | | | 0.42 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| ALLOCATION OF | | | | | | | | | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | Sep 30, 2009 | | | Jun 30, 2009 | | | Sep 30, 2008 | | | Dec 31, 2008 | | | | | |
| Specific or allocated loss allowance | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | $ | 7,580 | | | $ | 5,333 | | | $ | 2,789 | | | $ | 4,199 | | | | | |
| Multifamily real estate | | | 89 | | | | 83 | | | | 103 | | | | 87 | | | | | |
| Construction and land | | | 49,829 | | | | 55,585 | | | | 21,932 | | | | 38,253 | | | | | |
| One- to four-family real estate | | | 2,304 | | | | 1,333 | | | | 511 | | | | 752 | | | | | |
| Commercial business | | | 20,906 | | | | 19,474 | | | | 23,085 | | | | 16,533 | | | | | |
| Agricultural business, including secured by farmland | | | 1,540 | | | | 1,323 | | | | 1,097 | | | | 530 | | | | | |
| Consumer | | | 1,758 | | | | 1,540 | | | | 2,935 | | | | 1,730 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allocated | | | 84,006 | | | | 84,671 | | | | 52,452 | | | | 62,084 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Estimated allowance for undisbursed commitments | | | 2,202 | | | | 1,976 | | | | 1,060 | | | | 1,108 | | | | | |
| Unallocated | | | 8,975 | | | | 4,047 | | | | 5,334 | | | | 12,005 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allowance for loan losses | | $ | 95,183 | | | $ | 90,694 | | | $ | 58,846 | | | $ | 75,197 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | | 2.44 | % | | | 2.32 | % | | | 1.47 | % | | | 1.90 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | |
(more)
BANR-Third Quarter 2009 Results
October 20, 2009
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | Sep 30, 2009 | | Jun 30, 2009 | | Sep 30, 2008 | | Dec 31, 2008 | | |
| | | | | | | | | | | | | | | | |
| NON-PERFORMING ASSETS | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Loans on non-accrual status | | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | |
| | | | Commercial | | | $ | 8,073 | $ | 7,244 | $ | 6,368 | $ | 12,879 | | |
| | | | Multifamily | | | | - - | | - - | | - - | | - - | | |
| | | | Construction and land | | | | 193,281 | | 180,989 | | 98,108 | | 154,823 | | |
| | | | One- to four-family | | | | 18,107 | | 15,167 | | 6,583 | | 8,649 | | |
| | Commercial business | | | | 15,070 | | 12,339 | | 6,905 | | 8,617 | | |
| | Agricultural business, including secured by farmland | | 5,868 | | 7,478 | | 265 | | 1,880 | | |
| | Consumer | | | | - - | | 227 | | 427 | | 130 | | |
| | | | | | | | 240,399 | | 223,444 | | 118,656 | | 186,978 | | |
| | | | | | | | | | | | | | | | |
| Loans more than 90 days delinquent, still on accrual | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | |
| | | | Commercial | | | | - - | | - - | | - - | | - - | | |
| | | | Multifamily | | | | - - | | - - | | - - | | - - | | |
| | | | Construction and land | | | | 2,090 | | 603 | | - - | | - - | | |
| | | | One- to four-family | | | | 690 | | 624 | | 635 | | 124 | | |
| | Commercial business | | | | - - | | 209 | | - - | | - - | | |
| | Agricultural business, including secured by farmland | | - - | | - - | | - - | | - - | | |
| | Consumer | | | | 109 | | 189 | | 75 | | 243 | | |
| | | | | | | | 2,889 | | 1,625 | | 710 | | 367 | | |
| Total non-performing loans | | | 243,288 | | 225,069 | | 119,366 | | 187,345 | | |
| Securities on non-accrual at fair value | | | 1,236 | | - - | | - - | | - - | | |
| Real estate owned (REO) / Repossessed assets | | | 53,765 | | 57,197 | | 10,153 | | 21,886 | | |
| | | | Total non-performing assets | | $ | 298,289 | $ | 282,266 | $ | 129,519 | $ | 209,231 | | |
| | | | | | | | | | | | | | | | |
| Total non-performing assets / Total assets | | | 6.23% | | 6.23% | | 2.79% | | 4.56% | | |
| | | | | | | | | | | | | | | | |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | | | | |
| | NON-PERFORMING ASSETS AT | | | | | | | | | | | |
| | | | September 30, 2009 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| Secured by real estate: | | | | | | | | | | | | |
| | Commercial | | | $ | 7,136 | $ | 787 | $ | 150 | $ | - - | $ | 8,073 |
| | Multifamily | | | | - - | | - - | | - - | | - - | | - - |
| | Construction and land | | | | | | | | | | | | |
| | | One- to four-family construction | | | 29,562 | | 29,816 | | 9,186 | | - - | | 68,564 |
| | | Residential land acquisition & development | | | 31,480 | | 36,222 | | 10,097 | | - - | | 77,799 |
| | | Residential land improved lots | | | 12,068 | | 6,549 | | 1,423 | | - - | | 20,040 |
| | | Residential land unimproved | | | 9,188 | | 421 | | 2,221 | | - - | | 11,830 |
| | | Commercial land acquisition & development | | - - | | - - | | - - | | - - | | - - |
| | | Commercial land improved | | | - - | | 10,656 | | - - | | - - | | 10,656 |
| | | Commercial land unimproved | | | 4,382 | | - - | | 2,100 | | - - | | 6,482 |
| | | | Total construction and land | | | 86,680 | | 83,664 | | 25,027 | | - - | | 195,371 |
| | One- to four-family | | | | 9,750 | | 3,055 | | 4,816 | | 1,176 | | 18,797 |
| Commercial business | | | | 13,000 | | 631 | | 1,439 | | - - | | 15,070 |
| Agricultural business, including secured by farmland | | - - | | 253 | | 5,615 | | - - | | 5,868 |
| Consumer | | | | 109 | | - - | | - - | | - - | | 109 |
| Total non-performing loans | | | 116,675 | | 88,390 | | 37,047 | | 1,176 | | 243,288 |
| Securities on non-accrual | | | | - - | | - - | | - - | | 1,236 | | 1,236 |
| Real estate owned (REO) and repossessed assets | | 40,312 | | 9,025 | | 4,428 | | - - | | 53,765 |
| | | | Total non-performing assets at end of the period | $ | 156,987 | $ | 97,415 | $ | 41,475 | $ | 2,412 | $ | 298,289 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(more)
BANR-Third Quarter 2009 Results
October 20, 2009
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | | |
| | | | | | | Sep 30, 2009 | | Jun 30, 2009 | | Sep 30, 2008 | | Dec 31, 2008 |
| | BREAKDOWN OF DEPOSITS | | | | | | | | | |
| | | | | | | | | | | | | |
| | Non-interest-bearing | | | $ | 546,956 | $ | 508,284 | $ | 521,927 | $ | 509,105 |
| | | | | | | | | | | | | |
| | Interest-bearing checking | | | | 329,820 | | 312,024 | | 373,496 | | 378,952 |
| | Regular savings accounts | | | | 521,663 | | 499,447 | | 519,285 | | 474,885 |
| | Money market accounts | | | | 454,063 | | 319,622 | | 193,840 | | 284,041 |
| | | | | | | | | | | | | |
| | | Interest-bearing transaction & savings accounts | | | 1,305,546 | | 1,131,093 | | 1,086,621 | | 1,137,878 |
| | | | | | | | | | | | | |
| | Interest-bearing certificates | | | | 2,008,673 | | 2,110,466 | | 2,182,318 | | 2,131,867 |
| | | | | | | | | | | | | |
| | | Total deposits | | | $ | 3,861,175 | $ | 3,749,843 | $ | 3,790,866 | $ | 3,778,850 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | INCLUDED IN TOTAL DEPOSITS | | | | | | | | | |
| | | | | | | | | | | | | |
| | Public transaction accounts | | | $ | 44,645 | $ | 48,644 | $ | 100,776 | $ | 117,402 |
| | Public interest-bearing certificates | | | 98,906 | | 134,213 | | 295,432 | | 221,915 |
| | | | | | | | | | | | | |
| | | Total public deposits | | | $ | 143,551 | $ | 182,857 | $ | 396,208 | $ | 339,317 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Total brokered deposits | | | $ | 186,087 | $ | 247,514 | $ | 243,723 | $ | 268,458 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | INCLUDED IN OTHER BORROWINGS | | | | | | | | | |
| | Customer repurchase agreements / "Sweep accounts" | $ | 124,795 | $ | 108,277 | $ | 103,496 | $ | 145,230 |
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| | GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | |
| | | September 30, 2009 | | | | Washington | | Oregon | | Idaho | | Total |
| | | | | | | | | | | | | |
| | | | | | $ | 2,998,259 | $ | 599,166 | $ | 263,750 | $ | 3,861,175 |
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| | | | | | | | | | | | | |
| | | | | | | | | | | Minimum for Capital Adequacy |
| REGULATORY CAPITAL RATIOS AT | | | | Actual | | or "Well Capitalized" |
| | | September 30, 2009 | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | |
| Banner Corporation-consolidated | | | | | | | | | |
| | | Total capital to risk-weighted assets | | $ | 491,587 | | 12.54% | $ | 313,651 | | 8.00% |
| | | Tier 1 capital to risk-weighted assets | | | 442,009 | | 11.27% | | 156,826 | | 4.00% |
| | | Tier 1 leverage capital to average assets | | | 442,009 | | 9.66% | | 183,122 | | 4.00% |
| | | | | | | | | | | | | |
| Banner Bank | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 449,907 | | 12.02% | | 374,243 | | 10.00% |
| | | Tier 1 capital to risk-weighted assets | | | 402,549 | | 10.76% | | 224,546 | | 6.00% |
| | | Tier 1 leverage capital to average assets | | | 402,549 | | 9.18% | | 219,310 | | 5.00% |
| | | | | | | | | | | | | |
| Islanders Bank | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 25,899 | | 12.93% | | 20,028 | | 10.00% |
| | | Tier 1 capital to risk-weighted assets | | | 24,259 | | 12.11% | | 12,017 | | 6.00% |
| | | Tier 1 leverage capital to average assets | | | 24,259 | | 11.31% | | 10,727 | | 5.00% |
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(more)
BANR-Third Quarter 2009 Results
October 20, 2009
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | | | |
| | | | Quarters Ended | | | Nine Months Ended | |
| | | | | | | | | | | | | | | | | |
| OPERATING PERFORMANCE | | Sep 30, 2009 | | | Jun 30, 2009 | | | Sep 30, 2008 | | | Sep 30, 2009 | | | Sep 30, 2008 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Average loans | | $ | 3,905,763 | | | $ | 3,925,196 | | | $ | 4,001,999 | | | $ | 3,924,487 | | | $ | 3,917,155 | |
| Average securities and deposits | | | 461,360 | | | | 394,244 | | | | 342,153 | | | | 419,924 | | | | 330,474 | |
| Average non-interest-earning assets | | | 219,780 | | | | 199,981 | | | | 296,572 | | | | 204,414 | | | | 334,733 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Total average assets | | $ | 4,586,903 | | | $ | 4,519,421 | | | $ | 4,640,724 | | | $ | 4,548,825 | | | $ | 4,582,362 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Average deposits | | $ | 3,821,065 | | | $ | 3,679,653 | | | $ | 3,810,718 | | | $ | 3,731,782 | | | $ | 3,712,530 | |
| Average borrowings | | | 377,976 | | | | 429,708 | | | | 415,517 | | | | 408,111 | | | | 415,453 | |
| Average non-interest-bearing liabilities | | | (25,527 | ) | | | (18,421 | ) | | | 25,506 | | | | (17,357 | ) | | | 31,967 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Total average liabilities | | | 4,173,514 | | | | 4,090,940 | | | | 4,251,741 | | | | 4,122,536 | | | | 4,159,950 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total average stockholders' equity | | | 413,389 | | | | 428,481 | | | | 388,983 | | | | 426,289 | | | | 422,412 | |
| | | | | | | | | | | | | | | | | | | | | |
| | Total average liabilities and equity | | $ | 4,586,903 | | | $ | 4,519,421 | | | $ | 4,640,724 | | | $ | 4,548,825 | | | $ | 4,582,362 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate yield on loans | | | 5.71 | % | | | 5.67 | % | | | 6.38 | % | | | 5.72 | % | | | 6.70 | % |
| Interest rate yield on securities and deposits | | | 2.92 | % | | | 3.72 | % | | | 4.45 | % | | | 3.52 | % | | | 4.71 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | Interest rate yield on interest-earning assets | | | 5.41 | % | | | 5.49 | % | | | 6.23 | % | | | 5.51 | % | | | 6.54 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate expense on deposits | | | 2.16 | % | | | 2.36 | % | | | 2.80 | % | | | 2.35 | % | | | 3.04 | % |
| Interest rate expense on borrowings | | | 2.52 | % | | | 2.42 | % | | | 3.41 | % | | | 2.38 | % | | | 3.72 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | Interest rate expense on interest-bearing liabilities | | | 2.19 | % | | | 2.37 | % | | | 2.86 | % | | | 2.35 | % | | | 3.11 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | 3.22 | % | | | 3.12 | % | | | 3.37 | % | | | 3.16 | % | | | 3.43 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 3.30 | % | | | 3.24 | % | | | 3.45 | % | | | 3.27 | % | | | 3.52 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating income / Average assets | | | 1.16 | % | | | 1.77 | % | | | 0.17 | % | | | 1.12 | % | | | 0.55 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating income (loss) EXCLUDING change in valuation of | | | | | | | | | | | | | | | | | | | | |
| | financial instruments carried at fair value / Average assets (1) | | 0.76 | % | | | 0.79 | % | | | 0.69 | % | | | 0.75 | % | | | 0.68 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Other operating expense / Average assets | | | 3.17 | % | | | 3.27 | % | | | 2.91 | % | | | 3.15 | % | | | 4.46 | % |
| | | | | | | | | | | | | | | | | | | | | | |
Other operating expense EXCLUDING goodwill write-off / Average assets (1) | 3.17 | % | | | 3.27 | % | | | 2.91 | % | | | 3.15 | % | | | 3.00 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Efficiency ratio (other operating expense / revenue) | | | 73.54 | % | | | 67.19 | % | | | 85.72 | % | | | 74.36 | % | | | 116.90 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| Return (Loss) on average assets | | | (0.56 | %) | | | (1.47 | %) | | | (0.08 | %) | | | (0.95 | %) | | | (1.44 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
| Return (Loss) on average equity | | | (6.19 | %) | | | (15.46 | %) | | | (1.01 | %) | | | (10.11 | %) | | | (15.64 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
Return (Loss) on average tangible equity (2) | | | (6.37 | %) | | | (15.93 | %) | | | (1.30 | %) | | | (10.42 | %) | | | (21.82 | %) |
| | | | | | | | | | | | | | | | | | | | | | |
| Average equity / Average assets | | | 9.01 | % | | | 9.48 | % | | | 8.38 | % | | | 9.37 | % | | | 9.22 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| (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. | | | | | | | | | | | | | | | | | | | | |
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| (2) | - Average tangible equity excludes goodwill, core deposit and other intangibles. | | | | | | | | | | | | | | | | | |
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