|
| Contact: D. Michael Jones, CEO Mark J. Grescovich, President Lloyd W. Baker, CFO (509) 527-3636 News Release |
Banner Corporation Announces Second Quarter Results
Walla Walla, WA – July 21, 2010 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $4.9 million in the second quarter ended June 30, 2010, compared to a net loss of $1.5 million in the immediately preceding quarter and a net loss of $16.5 million in the second quarter a year ago.
“Our second quarter was highlighted by a successful capital raise and a continued reduction in our deposit costs which contributed to net interest margin expansion for the fourth consecutive quarter,” said D. Michael Jones, Chief Executive Officer. “We are making a concerted effort to reduce the overall cost of the deposit portfolio, and with our improved liquidity position we are able to let higher cost funding, primarily certificates of deposit and wholesale funds, run off. Our deposit mix improvement reflects continuing growth in customer relationships as a result of the determined efforts of our staff and the further maturing of the expanded branch network we have built over the past five years. Despite the current difficult economic environment, we are optimistic that the strength of this deposit franchise and our improved capital position will provide the foundation for better operating results in future periods.”
In the second quarter, Banner paid a $1.6 million dividend on the $124 million of senior preferred stock it issued to the U.S. Treasury in the fourth quarter of 2008 in connection with its participation in the Treasury’s Capital Purchase Program. In addition, Banner accrued $399,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net loss to common shareholders was $6.9 million, or $0.28 per share, for the second quarter of 2010, compared to a net loss to common shareholders of $3.5 million, or $0.16 per share, in the first quarter of 2010 and a net loss to common shareholders of $18.4 million, or $1.04 per share, for the second quarter a year ago.
For the first six months of 2010, Banner reported a net loss of $6.5 million compared to a net loss of $25.8 million for the first six months of 2009. For the most recent six month period, the net loss to common shareholders was $0.44 per share, compared to a net loss of $1.70 per share for the first six months of 2009.
Common Stock Offering
On June 30, 2010, Banner announced the completion of its offering of 75,000,000 shares of its common stock and the sale of an additional 3,500,000 shares pursuant to the partial exercise of the underwriters’ over-allotment option, at a price to the public of $2.00 per share. On July 2, 2010, Banner announced the completion of the capital raise as the underwriters had exercised their over-allotment option for an additional 7,139,000 shares, at a price to the public of $2.00 per share. Together with the 78,500,000 shares the Company issued on June 30, 2010 (including 3,500,000 shares issued pursuant to the underwriters’ initial exercise of their over-allotment option), Banner issued a total of 85,639,000 shares in the offering, resulting in net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses, of approximately $161.6 million.
Banner intends to use a significant portion of the net proceeds from the offering to strengthen Banner Bank’s regulatory capital ratios and to support managed growth. To that end, at June 30, 2010, the Company had invested $50 million as additional paid-in common equity in Banner Bank. The Company expects to use the remaining net proceeds for general working capital purposes, including additional capital investments in its subsidiary banks if appropriate.
Income Statement Review
“Continued reductions in our cost of funds through changes in our deposit mix and reduced pricing pressures over the past year resulted in further expansion of our net interest margin during the second quarter of 2010 to 3.65%, an increase of four basis points compared to the immediately preceding quarter and an increase of 41 basis points compared to the same quarter a year ago,” said Jones. “While loan yields have been relatively stable for a number of quarters now, overall asset yields have declined slightly primarily as a result of the growth of our on-balance-sheet liquidity which is currently invested in short term instruments that pay very low interest rates.” Banner’s net interest margin was 3.65% for the second quarter, compared to 3.61% in the preceding quarter and 3.24% in the second quarter a year ago. For the first six months of 2010, Banner’s net interest margin was 3.62%, a 37 basis point improvement compared to the first six months of 2009.
For the second quarter of 2010, funding costs decreased 13 basis points compared to the previous quarter and 77 basis points from the second quarter a year ago. Deposit costs decreased by 15 basis points compared to the preceding quarter and 82 basis points compared to the second quarter a year earlier. Asset yields decreased eight basis points from the prior linked quarter and 28 basis points from the second quarter a year ago. Loan yields declined by two basis points compared to the preceding quarter, but increased
(more)
BANR – Second Quarter 2010 Results
July 21, 2010
Page 2
by five basis points from the second quarter a year ago. Non-accruing loans reduced the margin by approximately 34 basis points in the second quarter of 2010 compared to approximately 34 basis points in the preceding quarter and approximately 45 basis points in the second quarter of 2009.
Net interest income before the provision for loan losses was $38.9 million in the second quarter of 2010, compared to $38.2 million in the preceding quarter and $34.9 million in the second quarter a year ago. In the first half of 2010, net interest income before the provision for loan losses increased 10% to $77.1 million, compared to $69.9 million in the first half of 2009. Revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value and other-than-temporary impairment (OTTI) adjustments) were $45.9 million in the second quarter of 2010, compared to $45.2 million in the first quarter of 2010 and $43.9 million for the second quarter a year ago. Revenues from core operations for the first half of 2010 increased 5% to $91.1 million, compared to $86.7 million in the first half of 2009.
Second quarter 2010 results included a net loss of $821,000 ($525,000 after tax, or $0.02 loss per share) for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, compared to a net gain (net of OTTI charges) of $677,000 ($433,000 after tax, or $0.02 earnings per share) in the first quarter of 2010 and a net gain (net of OTTI charges) of $11.0 million ($7.0 million after tax, or $0.62 earnings per share) in the second quarter a year ago. There were no OTTI charges in the second quarter of 2010, compared to $1.2 million in the first quarter of 2010 and $162,000 in the second quarter of 2009.
Total other operating income, which includes the changes in the valuation of financial instruments noted above, was $6.2 million, or $0.25 per share, in the second quarter of 2010, compared to $7.7 million, or $0.35 per share, in the preceding quarter and $20.0 million, or $1.13 per share, for the second quarter a year ago. For the first half of 2010, total other operating income was $13.9 million, compared to $24.6 million in the first half of 2009. Total other operating income from core operations* (excluding fair value and OTTI adjustments) for the current quarter was $7.0 million, unchanged from the preceding quarter, and was $8.9 million for the second quarter a year ago. For the first half of 2010, total other operating income from core operations was $14.0 million, compared to $16.8 million in the first half of 2009. Income from deposit fees and other service charges improved modestly to $5.6 million in the second quarter compared to $5.2 million in the preceding quarter and $5.4 million in the second quarter a year ago. Income from mortgage banking operations decreased to $817,000 in the second quarter compared to $948,000 in the preceding quarter and $2.9 million for the second quarter a year ago.
“Our payment processing business continues to be adversely affected by the soft economy, as activity for cardholders and merchants remained lower than in periods before 2009,” said Jones. “However, we are encouraged by the improvement in deposit fees and other service charges compared to the preceding quarter, which in addition to reflecting account growth may be a sign of improving economic conditions.” By contrast, mortgage banking revenues continued to decline, reflecting decreased mortgage loan production despite the current very low level of mortgage interest rates.
“We have made progress in improving our core operating efficiency as compensation, occupancy and other manageable operating expenses have been reduced over the past year,” said Jones. “Unfortunately, collection and legal costs, including charges related to acquired real estate, continue to remain high. We expect collection expenses and costs associated with real estate to remain elevated for a number of future quarters as we work down our inventory of non-performing assets.”
Total other operating expenses, or non-interest expenses, were $38.0 million in the second quarter of 2010, compared to $35.4 million in the preceding quarter and $36.9 million in the second quarter a year ago. For the first half of the year, other operating expenses were $73.4 million compared to $70.7 million in the first half of 2009. Largely as the result of the increase in REO and collection costs, operating expenses as a percentage of average assets increased to 3.35% in the second quarter of 2010, compared to 3.16% in the preceding quarter and 3.27% in the second quarter a year ago.
*Earnings information excluding fair value adjustments (alternately referred to as total other operating income from core operation or revenues 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.
Credit Quality
“The credit costs associated with this difficult economic environment have been a persistent challenge throughout the past several quarters and continue to drag on profitability,” said Jones. “The $16 million provision for loan losses in the second quarter of the year, while less than in the second quarter a year ago, remains high, reflecting still significant levels of non-performing loans and net charge-offs. Charge-offs and delinquencies continue to be concentrated in loans for the construction of single-family homes and residential land development projects. However, our exposure to single-family home construction and development loans has continued to decline and at June 30, 2010 was 11% of total loans outstanding. Our reserve levels are substantial and both our impairment analysis and charge-off actions reflect current appraisals and valuation estimates. We remain hopeful that credit costs will moderate during the remainder of 2010 and in 2011.”
(more)
BANR – Second Quarter 2010 Results
July 21, 2010
Page 3
Banner recorded a $16.0 million provision for loan losses in the second quarter, compared to $14.0 million in the preceding quarter and $45.0 million in the second quarter a year ago. For the first six months of 2010, the provision for loan losses was $30.0 million, compared to $67.0 million for the first six months of 2009. The allowance for loan losses at June 30, 2010 totaled $95.5 million, representing 2.63% of total loans outstanding and 54% of non-performing loans. Non-performing loans totaled $177.2 million at June 30, 2010, compared to $196.0 million in the preceding quarter and $225.1 million at June 30, 2009. Banner’s real estate owned and repossessed assets totaled $101.7 million at June 30, 2010, compared to $95.2 million three months earlier and $57.2 million a year ago. Net charge-offs in the quarter totaled $16.2 million, or 0.44% of average loans outstanding, compared to $13.5 million, or 0.36% of average loans outstanding for the first quarter of 2010 and $34.0 million, or 0.87% of average loans outstanding for the second quarter of last year. Non-performing assets totaled $282.4 million at June 30, 2010, compared to $294.2 million in the preceding quarter and $282.3 million at June 30, 2009. At the end of June, Banner’s non-performing assets were 6.01% of total assets, compared to 6.42% at the end of the preceding quarter and 6.23% a year ago.
The geographic distribution of construction, land and land development loans, including residential and commercial properties, was approximately $194 million, or 33%, in the greater Puget Sound market, $208 million, or 36%, in the greater Portland, Oregon market and $39 million, or 7%, in the greater Boise, Idaho market as of June 30, 2010. The remaining $140 million, or 24%, was distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank. The geographic distribution of non-performing construction, land and land development loans and related real estate owned included approximately $83 million, or 46%, in the greater Puget Sound market, $64 million, or 35%, in the greater Portland market and $14 million, or 8%, in the greater Boise market, with the remaining $20 million, or 11%, distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.
One-to-four family residential construction, lot and land loans were $411 million, or 11% of the total loan portfolio at June 30, 2010. Non-performing residential construction, lot and land loans and related real estate owned were $155 million, or 55% of non-performing assets at June 30, 2010.
Balance Sheet Review
“As we have substantially reduced our construction and land development loans over the past year, our total loan balances declined relative to a year ago; however, we did have encouraging growth in commercial and agricultural business loans during the quarter,” said Jones. “At the end of June, our one-to-four family construction loans totaled $183 million, a $154 million reduction over the past year, including a $31 million decrease in the most recent quarter. Our one-to-four family construction loans have now declined by $472 million from their peak quarter-end balance of $655 million at June 30, 2007. Similarly, total construction, land and land development loans have declined by $654 million from their peak quarter-end balance of $1.24 billion, also at June 30, 2007.” Net loans were $3.54 billion at June 30, 2010, compared to $3.59 billion three months earlier and $3.82 billion at June 30, 2009.
Total assets were $4.70 billion at June 30, 2010, compared to $4.58 billion at the end of the preceding quarter and $4.53 billion a year ago. Deposits totaled $3.84 billion at June 30, 2010, compared to $3.85 billion at the end of the preceding quarter and $3.75 billion a year ago. Non-interest-bearing accounts were $548.3 million at June 30, 2010, compared to $549.3 million at the end of the preceding quarter and $508.3 million a year ago, a year-over-year increase of 8%. At June 30, 2010, interest-bearing transaction and savings accounts were $1.4 billion, which was unchanged from three months earlier but a $272.1 million increase compared to $1.1 billion a year ago, a year-over-year increase of 24%.
“Banner’s retail deposit franchise had another solid quarter and has allowed us to steadily build our short-term liquidity and lower our loans-to-deposits ratio, which was 95% at June 30, 2010,” said Jones. “In addition, this substantial core deposit growth has led to our improved net interest margin and increased deposit fee revenue.”
Augmented by the recent stock offering, 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. Banner Corporation’s Tier 1 leverage capital to average assets ratio was 13.02% and its total capital to risk-weighted assets ratio was 17.12% at June 30, 2010. Importantly, reflecting the $50 million down-streamed capital investment, Banner Bank’s Tier 1 leverage ratio increased to 10.77% at June 30, 2010.
Tangible stockholders’ equity at June 30, 2010 was $544.1 million, including $118.2 million attributable to preferred stock, compared to $397.1 million a year ago. Tangible book value per common share was $4.15 at quarter-end. At June 30, 2010, Banner had 102.7 million shares outstanding, compared to 18.2 million shares outstanding a year ago. Tangible common stockholders’ equity was $425.9 million at June 30, 2010, or 9.08% of tangible assets, compared to $278.5 million, or 6.09% of tangible assets at March 31, 2010 and $280.4 million, or 6.20% of tangible assets at June 30, 2009.
(more)
BANR – Second Quarter 2010 Results
July 21, 2010
Page 4
Conference Call
Banner will host a conference call on Thursday, July 22, 2010, at 8:00 a.m. PDT, to discuss second quarter 2010 results. The conference call can be accessed live by telephone at 480-629-9772 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 4326727.
About the Company
Banner Corporation is a $4.7 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 and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and of 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, institute a formal or informal enforcement action against us or any of the Banks which could require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions; the requirements and restrictions that have been imposed upon Banner and Banner Bank under the memoranda of understanding with the Federal Reserve Bank of San Francisco (in the case of Banner) and the FDIC and the Washington DFI (in the case of Banner Bank) and the possibility that Banner and Banner Bank will be unable to fully comply with the memoranda of understanding, which could result in the imposition of additional requirements or restrictions; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect or result in significant declines in valuation; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; the failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may 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; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and preferred stock and interest or principal payments on our junior subordinated debentures; 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 including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; future legislative changes in the United States Department of Treasury Troubled Asset Relief Program Capital Purchase Program; 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 year ended December 31, 2009. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2010 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect our operating and stock price performance.
BANR – Second Quarter 2010 Results
July 21, 2010
Page 5
| RESULTS OF OPERATIONS | | | Quarters Ended | | | Six Months Ended | |
| (in thousands except shares and per share data) | | | Jun 30, 2010 | | | Mar 31, 2010 | | | Jun 30, 2009 | | | Jun 30, 2010 | | | Jun 30, 2009 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| INTEREST INCOME: | | | | | | | | | | | | | | | | | |
| | Loans receivable | | | $ | 52,473 | | $ | 52,759 | | $ | 55,500 | | $ | 105,232 | | $ | 111,847 | |
| | Mortgage-backed securities | | | 1,045 | | | 1,126 | | | 1,569 | | | 2,171 | | | 3,370 | |
| | Securities and cash equivalents | | | 2,116 | | | 2,085 | | | 2,089 | | | 4,201 | | | 4,272 | |
| | | | | | | 55,634 | | | 55,970 | | | 59,158 | | | 111,604 | | | 119,489 | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | | |
| | Deposits | | | | 14,700 | | | 15,798 | | | 21,638 | | | 30,498 | | | 44,730 | |
| | Federal Home Loan Bank advances | | | 320 | | | 361 | | | 675 | | | 681 | | | 1,395 | |
| | Other borrowings | | | | 626 | | | 634 | | | 671 | | | 1,260 | | | 898 | |
| | Junior subordinated debentures | | | 1,047 | | | 1,027 | | | 1,249 | | | 2,074 | | | 2,582 | |
| | | | | | | 16,693 | | | 17,820 | | | 24,233 | | | 34,513 | | | 49,605 | |
| | Net interest income before provision for loan losses | | | 38,941 | | | 38,150 | | | 34,925 | | | 77,091 | | | 69,884 | |
| PROVISION FOR LOAN LOSSES | | | 16,000 | | | 14,000 | | | 45,000 | | | 30,000 | | | 67,000 | |
| | Net interest income | | | | 22,941 | | | 24,150 | | | (10,075 | ) | | 47,091 | | | 2,884 | |
| OTHER OPERATING INCOME: | | | | | | | | | | | | | | | | |
| | Deposit fees and other service charges | | | 5,632 | | | 5,160 | | | 5,408 | | | 10,792 | | | 10,344 | |
| | Mortgage banking operations | | | 817 | | | 948 | | | 2,860 | | | 1,765 | | | 5,575 | |
| | Loan servicing fees | | | | 315 | | | 313 | | | 248 | | | 628 | | | (22 | ) |
| | Miscellaneous | | | | 243 | | | 626 | | | 412 | | | 869 | | | 932 | |
| | | | | | | 7,007 | | | 7,047 | | | 8,928 | | | 14,054 | | | 16,829 | |
| | Other-than-temporary impairment losses | | | - - | | | (1,231 | ) | | (162 | ) | | (1,231 | ) | | (162 | ) |
| | Net change in valuation of financial instruments carried at fair value | | (821 | ) | | 1,908 | | | 11,211 | | | 1,087 | | | 7,958 | |
| | Total other operating income | | | 6,186 | | | 7,724 | | | 19,977 | | | 13,910 | | | 24,625 | |
| | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | | | | | | | |
| | Salary and employee benefits | | | 16,793 | | | 16,559 | | | 17,528 | | | 33,352 | | | 35,129 | |
| | Less capitalized loan origination costs | | | (1,740 | ) | | (1,605 | ) | | (2,834 | ) | | (3,345 | ) | | (4,950 | ) |
| | Occupancy and equipment | | | 5,581 | | | 5,604 | | | 5,928 | | | 11,185 | | | 11,982 | |
| | Information / computer data services | | | 1,594 | | | 1,506 | | | 1,599 | | | 3,100 | | | 3,133 | |
| | Payment and card processing services | | | 1,683 | | | 1,424 | | | 1,555 | | | 3,107 | | | 3,008 | |
| | Professional services | | | | 1,874 | | | 1,287 | | | 1,183 | | | 3,161 | | | 2,377 | |
| | Advertising and marketing | | | 1,742 | | | 1,950 | | | 2,207 | | | 3,692 | | | 4,039 | |
| | Deposit insurance | | | | 2,209 | | | 2,132 | | | 4,102 | | | 4,341 | | | 5,599 | |
| | State/municipal business and use taxes | | | 533 | | | 480 | | | 532 | | | 1,013 | | | 1,072 | |
| | Real estate operations | | | | 4,166 | | | 3,058 | | | 1,805 | | | 7,224 | | | 2,428 | |
| | Amortization of core deposit intangibles | | | 615 | | | 644 | | | 661 | | | 1,259 | | | 1,351 | |
| | Miscellaneous | | | | 2,974 | | | 2,376 | | | 2,625 | | | 5,350 | | | 5,516 | |
| | Total other operating expense | | | 38,024 | | | 35,415 | | | 36,891 | | | 73,439 | | | 70,684 | |
| | Income (loss) before provision for (benefit from) income taxes | | | (8,897 | ) | | (3,541 | ) | | (26,989 | ) | | (12,438 | ) | | (43,175 | ) |
| PROVISION FOR (BENEFIT FROM ) INCOME TAXES | | | (3,951 | ) | | (2,024 | ) | | (10,478 | ) | | (5,975 | ) | | (17,401 | ) |
| NET INCOME (LOSS) | | | | (4,946 | ) | | (1,517 | ) | | (16,511 | ) | | (6,463 | ) | | (25,774 | ) |
| PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION: | | | | | | | | | | | | | | | |
| | Preferred stock dividend | | | | 1,550 | | | 1,550 | | | 1,550 | | | 3,100 | | | 3,100 | |
| | Preferred stock discount accretion | | | 399 | | | 398 | | | 373 | | | 797 | | | 746 | |
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (6,895 | ) | $ | (3,465 | ) | $ | (18,434 | ) | $ | (10,360 | ) | $ | (29,620 | ) |
| Earnings (loss) per share available to common shareholder | | | | | | | | | | | | | | | | |
| | | Basic | | | $ | (0.28 | ) | $ | (0.16 | ) | $ | (1.04 | ) | $ | (0.44 | ) | $ | (1.70 | ) |
| | | Diluted | | | $ | (0.28 | ) | $ | (0.16 | ) | $ | (1.04 | ) | $ | (0.44 | ) | $ | (1.70 | ) |
| Cumulative dividends declared per common share | | $ | 0.01 | | $ | 0.01 | | $ | 0.01 | | $ | 0.02 | | $ | 0.02 | |
| Weighted average common shares outstanding | | | | | | | | | | | | | | | | |
| | | Basic | | | | 24,452,356 | | | 22,131,671 | | | 17,746,051 | | | 23,298,424 | | | 17,454,542 | |
| | | Diluted | | | | 24,452,356 | | | 22,131,671 | | | 17,746,051 | | | 23,298,424 | | | 17,454,542 | |
| Common shares issued in connection with exercise of stock options or DRIP | 1,353,589 | | | 1,561,559 | | | 780,906 | | | 2,915,148 | | | 1,274,420 | |
| | | | | | | | | | | | | | | | | | | | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 6
| FINANCIAL CONDITION | | | | | | | | | | | |
| (in thousands except shares and per share data) | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Dec 31, 2009 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | |
| Cash and due from banks | | | $ | 67,322 | $ | 41,123 | $ | 81,559 | $ | 78,364 | |
| Federal funds and interest-bearing deposits | | | 369,864 | | 236,629 | | 2,699 | | 244,641 | |
| Securities - at fair value | | | | 105,381 | | 138,659 | | 167,476 | | 147,151 | |
| Securities - available for sale | | | | 140,342 | | 96,718 | | 50,980 | | 95,667 | |
| Securities - held to maturity | | | | 73,632 | | 73,555 | | 77,321 | | 74,834 | |
| Federal Home Loan Bank stock | | | 37,371 | | 37,371 | | 37,371 | | 37,371 | |
| | | | | | | | | | | | | |
| Loans receivable: | | | | | | | | | | | |
| | Held for sale | | | | 4,819 | | 4,398 | | 8,377 | | 4,497 | |
| | Held for portfolio | | | | 3,626,685 | | 3,684,459 | | 3,904,704 | | 3,785,624 | |
| | Allowance for loan losses | | | | (95,508 | ) | (95,733) | | (90,694 | ) | (95,269 | ) |
| | | | | | 3,535,996 | | 3,593,124 | | 3,822,387 | | 3,694,852 | |
| | | | | | | | | | | | | |
| Accrued interest receivable | | | | 16,930 | | 18,501 | | 18,892 | | 18,998 | |
| Real estate owned held for sale, net | | | 101,485 | | 95,074 | | 56,967 | | 77,743 | |
| Property and equipment, net | | | | 99,536 | | 101,541 | | 103,709 | | 103,542 | |
| Other intangibles, net | | | | 9,811 | | 10,426 | | 12,365 | | 11,070 | |
| Bank-owned life insurance | | | | 55,477 | | 55,125 | | 53,341 | | 54,596 | |
| Other assets | | | | 88,459 | | 83,865 | | 47,475 | | 83,392 | |
| | | | | $ | 4,701,606 | $ | 4,581,711 | $ | 4,532,542 | $ | 4,722,221 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | |
| | Non-interest-bearing | | | $ | 548,251 | $ | 549,291 | $ | 508,284 | $ | 582,480 | |
| | Interest-bearing transaction and savings accounts | | | 1,403,231 | | 1,404,301 | | 1,131,093 | | 1,341,145 | |
| | Interest-bearing certificates | | | 1,887,513 | | 1,896,186 | | 2,110,466 | | 1,941,925 | |
| | | | | | 3,838,995 | | 3,849,778 | | 3,749,843 | | 3,865,550 | |
| | | | | | | | | | | | | |
| Advances from Federal Home Loan Bank at fair value | | | 47,003 | | 62,108 | | 115,946 | | 189,779 | |
| Customer repurchase agreements and other borrowings | | | 172,737 | | 177,244 | | 158,249 | | 176,842 | |
| Junior subordinated debentures at fair value | | | 49,808 | | 48,147 | | 49,563 | | 47,694 | |
| | | | | | | | | | | | | |
| Accrued expenses and other liabilities | | | 25,440 | | 24,049 | | 36,652 | | 24,020 | |
| Deferred compensation | | | | 13,665 | | 13,661 | | 12,815 | | 13,208 | |
| | | | | | 4,147,648 | | 4,174,987 | | 4,123,068 | | 4,317,093 | |
| | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | |
| Preferred stock - Series A | | | | 118,204 | | 117,805 | | 116,661 | | 117,407 | |
| Common stock | | | | 490,119 | | 335,877 | | 322,582 | | 331,538 | |
| Retained earnings (accumulated deficit) | | | (53,768 | ) | (45,775) | | (27,826 | ) | (42,077 | ) |
| Other components of stockholders' equity | | | (597 | ) | (1,183) | | (1,943 | ) | (1,740 | ) |
| | | | | | 553,958 | | 406,724 | | 409,474 | | 405,128 | |
| | | | | $ | 4,701,606 | $ | 4,581,711 | $ | 4,532,542 | $ | 4,722,221 | |
| | | | | | | | | | | | | |
| Common Shares Issued: | | | | | | | | | | | |
| Shares outstanding at end of period | | | 102,954,738 | | 23,101,149 | | 18,426,458 | | 21,539,590 | |
| | 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 | | 102,714,357 | | 22,860,768 | | 18,186,077 | | 21,299,209 | |
Common stockholders' equity per share (1) | | $ | 4.24 | $ | 12.64 | $ | 16.10 | $ | 13.51 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 4.15 | $ | 12.18 | $ | 15.42 | $ | 12.99 | |
| | | | | | | | | | | | | |
| Tangible common stockholders' equity to tangible assets | | 9.08% | | 6.09% | | 6.20% | | 5.87% | |
| Consolidated Tier 1 leverage capital ratio | | | 13.02% | | 9.76% | | 9.90% | | 9.62% | |
| | | | | | | | | | | | | |
| (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 2010 Results
July 21, 2010
Page 7
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | |
| | | | | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Dec 31, 2009 | | | |
| LOANS (including loans held for sale): | | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | | |
| | Owner occupied | | | $ | 503,796 | $ | 515,542 | $ | 475,749 | $ | 509,464 | | | |
| | Investment properties | | | | 553,689 | | 557,134 | | 574,172 | | 573,495 | | | |
| Multifamily real estate | | | | 149,980 | | 147,659 | | 150,168 | | 153,497 | | | |
| Commercial construction | | | | 84,379 | | 83,879 | | 90,762 | | 80,236 | | | |
| Multifamily construction | | | | 56,573 | | 61,924 | | 56,968 | | 57,422 | | | |
| One- to four-family construction | | | | 182,928 | | 213,438 | | 337,368 | | 239,135 | | | |
| Land and land development | | | | | | | | | | | | | |
| | Residential | | | | 228,156 | | 256,607 | | 371,247 | | 284,331 | | | |
| | Commercial | | | | 29,410 | | 48,194 | | 32,450 | | 43,743 | | | |
| Commercial business | | | | 635,130 | | 616,396 | | 678,273 | | 637,823 | | | |
| Agricultural business including secured by farmland | | | 208,815 | | 187,207 | | 215,339 | | 205,307 | | | |
| One- to four-family real estate | | | | 702,420 | | 697,565 | | 653,513 | | 703,277 | | | |
| Consumer | | | | 103,065 | | 109,092 | | 91,173 | | 110,937 | | | |
| Consumer secured by one- to four-family real estate | | 193,163 | | 194,220 | | 185,899 | | 191,454 | | | |
| | | Total loans outstanding | | | $ | 3,631,504 | $ | 3,688,857 | $ | 3,913,081 | $ | 3,790,121 | | | |
| Restructured loans performing under their restructured terms | $ | 43,899 | $ | 45,471 | $ | 55,031 | $ | 43,683 | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 25,853 | $ | 51,328 | $ | 34,038 | $ | 34,156 | | | |
| Total delinquent loans (including loans on non-accrual) | $ | 203,097 | $ | 247,338 | $ | 259,107 | $ | 248,006 | | | |
| Total delinquent loans / Total loans outstanding | | | 5.59% | | 6.71% | | 6.62% | | 6.54% | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | | |
| | | June 30, 2010 | | | | Washington | | Oregon | | Idaho | | Other | | Total | |
| | | | | | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | | |
| | Owner occupied | | | $ | 390,085 | $ | 64,642 | $ | 45,491 | $ | 3,578 | $ | 503,796 | |
| | Investment properties | | | | 397,813 | | 107,790 | | 41,669 | | 6,417 | | 553,689 | |
| Multifamily real estate | | | | 123,707 | | 12,177 | | 9,580 | | 4,516 | | 149,980 | |
| Commercial construction | | | | 61,202 | | 11,689 | | 11,488 | | - - | | 84,379 | |
| Multifamily construction | | | | 28,324 | | 28,249 | | - - | | - - | | 56,573 | |
| One- to four-family construction | | | | 87,895 | | 84,796 | | 10,237 | | - - | | 182,928 | |
| Land and land development | | | | | | | | | | | | | |
| | Residential | | | | 119,268 | | 86,619 | | 22,269 | | - - | | 228,156 | |
| | Commercial | | | | 25,807 | | 1,144 | | 2,459 | | - - | | 29,410 | |
| Commercial business | | | | 447,545 | | 97,569 | | 71,344 | | 18,672 | | 635,130 | |
| Agricultural business including secured by farmland | | | 112,674 | | 39,266 | | 56,875 | | - - | | 208,815 | |
| One- to four-family real estate | | | | 458,681 | | 213,069 | | 28,241 | | 2,429 | | 702,420 | |
| Consumer | | | | 74,522 | | 22,860 | | 5,683 | | - - | | 103,065 | |
| Consumer secured by one- to four-family real estate | | 136,559 | | 41,598 | | 14,506 | | 500 | | 193,163 | |
| | | Total loans outstanding | | | $ | 2,464,082 | $ | 811,468 | $ | 319,842 | $ | 36,112 | $ | 3,631,504 | |
| | | Percent of total loans | | | | 67.9% | | 22.3% | | 8.8% | | 1.0% | | 100.0% | |
| | | | | | �� | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT | | | | | | | | | | | |
| | | June 30, 2010 | | | | Washington | | Oregon | | Idaho | | Other | | Total | |
| | | | | | | | | | | | | | | | |
| Residential | | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 53,196 | $ | 52,154 | $ | 6,219 | $ | - - | $ | 111,569 | |
| | Improved lots | | | | 43,863 | | 27,027 | | 1,568 | | - - | | 72,458 | |
| | Unimproved land | | | | 22,209 | | 7,438 | | 14,482 | | - - | | 44,129 | |
| | | Total residential land and development | | $ | 119,268 | $ | 86,619 | $ | 22,269 | $ | - - | $ | 228,156 | |
| Commercial & industrial | | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 5,896 | $ | - - | $ | 559 | $ | - - | $ | 6,455 | |
| | Improved land | | | | 8,857 | | - - | | - - | | - - | | 8,857 | |
| | Unimproved land | | | | 11,054 | | 1,144 | | 1,900 | | - - | | 14,098 | |
| | | Total commercial land and development | | $ | 25,807 | $ | 1,144 | $ | 2,459 | $ | - - | $ | 29,410 | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | Quarters Ended | | | | Six Months Ended | |
| CHANGE IN THE | | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Jun 30, 2010 | | Jun 30, 2009 | |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 95,733 | $ | 95,269 | $ | 79,724 | $ | 95,269 | $ | 75,197 | |
| | | | | | | | | | | | | | | | |
| Provision | | | | 16,000 | | 14,000 | | 45,000 | | 30,000 | | 67,000 | |
| | | | | | | | | | | | | | | | |
| Recoveries of loans previously charged off: | | | | | | | | | | | |
| | | Commercial real estate | | | | - - | | - - | | - - | | - - | | - - | |
| | | Multifamily real estate | | | | - - | | - - | | - - | | - - | | - - | |
| | | Construction and land | | | | 235 | | 387 | | 266 | | 622 | | 318 | |
| | | One- to four-family real estate | | | 71 | | - - | | 89 | | 71 | | 91 | |
| | | Commercial business | | | | 595 | | 1,290 | | 249 | | 1,885 | | 319 | |
| | | Agricultural business, including secured by farmland | | - - | | - - | | 22 | | - - | | 22 | |
| | | Consumer | | | | 69 | | 59 | | 32 | | 128 | | 63 | |
| | | | | | | 970 | | 1,736 | | 658 | | 2,706 | | 813 | |
| Loans charged off: | | | | | | | | | | | | | |
| | | Commercial real estate | | | | - - | | (92 | ) | - - | | (92 | ) | - - | |
| | | Multifamily real estate | | | | - - | | - - | | - - | | - - | | - - | |
| | | Construction and land | | | | (12,255 | ) | (7,724 | ) | (25,767 | ) | (19,979 | ) | (38,184 | ) |
| | | One- to four-family real estate | | | (2,128 | ) | (2,115 | ) | (2,704 | ) | (4,243 | ) | (3,795 | ) |
| | | Commercial business | | | | (1,447 | ) | (4,784 | ) | (2,438 | ) | (6,231 | ) | (6,232 | ) |
| | | Agricultural business, including secured by farmland | | (986 | ) | (2 | ) | (3,186 | ) | (988 | ) | (3,186 | ) |
| | | Consumer | | | | (379 | ) | (555 | ) | (593 | ) | (934 | ) | (919 | ) |
| | | | | | | (17,195 | ) | (15,272 | ) | (34,688 | ) | (32,467 | ) | (52,316 | ) |
| | | Net charge-offs | | | | (16,225 | ) | (13,536 | ) | (34,030 | ) | (29,761 | ) | (51,503 | ) |
| | | | | | | | | | | | | | | | |
| Balance, end of period | | | $ | 95,508 | $ | 95,733 | $ | 90,694 | $ | 95,508 | $ | 90,694 | |
| | | | | | | | | | | | | | | | |
| Net charge-offs / Average loans outstanding | 0.44% | | 0.36% | | 0.87% | | 0.80% | | 1.31% | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| ALLOCATION OF | | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Dec 31, 2009 | | | |
| Specific or allocated loss allowance | | | | | | | | | | | | |
| | Commercial real estate | | | $ | 7,044 | $ | 8,279 | $ | 5,333 | $ | 8,278 | | | |
| | Multifamily real estate | | | | 4,993 | | 2,072 | | 83 | | 90 | | | |
| | Construction and land | | | | 42,972 | | 44,078 | | 55,585 | | 45,209 | | | |
| | One- to four-family real estate | | | 3,530 | | 3,093 | | 1,333 | | 2,912 | | | |
| | Commercial business | | | | 23,907 | | 24,530 | | 19,474 | | 22,054 | | | |
| | Agricultural business, including secured by farmland | | 679 | | 949 | | 1,323 | | 919 | | | |
| | Consumer | | | | 1,895 | | 1,898 | | 1,540 | | 1,809 | | | |
| | | Total allocated | | | | 85,020 | | 84,899 | | 84,671 | | 81,271 | | | |
| | | | | | | | | | | | | | | | |
| | Estimated allowance for undisbursed commitments | | 909 | | 1,161 | | 1,976 | | 1,594 | | | |
| | Unallocated | | | | 9,579 | | 9,673 | | 4,047 | | 12,404 | | | |
| | | Total allowance for loan losses | | $ | 95,508 | $ | 95,733 | $ | 90,694 | $ | 95,269 | | | |
| | | | | | | | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | 2.63% | | 2.60% | | 2.32% | | 2.51% | | | |
| | | | | | | | | | | | | | | | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Dec 31, 2009 | | | |
| NON-PERFORMING ASSETS | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Loans on non-accrual status | | | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | | |
| | | | Commercial | | | $ | 8,815 | $ | 6,801 | $ | 7,244 | $ | 7,300 | | | |
| | | | Multifamily | | | | 363 | | 373 | | - - | | 383 | | | |
| | | | Construction and land | | | 110,931 | | 138,245 | | 180,989 | | 159,264 | | | |
| | | | One- to four-family | | | | 19,878 | | 19,777 | | 15,167 | | 14,614 | | | |
| | Commercial business | | | | 23,474 | | 19,353 | | 10,508 | | 21,640 | | | |
| | Agricultural business, including secured by farmland | | 7,556 | | 8,013 | | 7,478 | | 6,277 | | | |
| | Consumer | | | | 3,508 | | 3,387 | | 2,058 | | 3,923 | | | |
| | | | | | | | 174,525 | | 195,949 | | 223,444 | | 213,401 | | | |
| | | | | | | | | | | | | | | | | |
| Loans more than 90 days delinquent, still on accrual | | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | | |
| | | | Commercial | | | | 1,137 | | - - | | - - | | - - | | | |
| | | | Multifamily | | | | - - | | - - | | - - | | - - | | | |
| | | | Construction and land | | | 692 | | - - | | 603 | | - - | | | |
| | | | One- to four-family | | | | 772 | | - - | | 624 | | 358 | | | |
| | Commercial business | | | | - - | | - - | | 209 | | - - | | | |
| | Agricultural business, including secured by farmland | | - - | | - - | | - - | | - - | | | |
| | Consumer | | | | 118 | | 61 | | 189 | | 91 | | | |
| | | | | | | | 2,719 | | 61 | | 1,625 | | 449 | | | |
| Total non-performing loans | | | | 177,244 | | 196,010 | | 225,069 | | 213,850 | | | |
| Securities on non-accrual | | | | 3,500 | | 3,000 | | - - | | 4,232 | | | |
| Real estate owned (REO) and repossessed assets | | 101,701 | | 95,167 | | 57,197 | | 77,802 | | | |
| | | | Total non-performing assets | | $ | 282,445 | $ | 294,177 | $ | 282,266 | $ | 295,884 | | | |
| | | | | | | | | | | | | | | | | |
| Total non-performing assets / Total assets | | | 6.01% | | 6.42% | | 6.23% | | 6.27% | | | |
| | | | | | | | | | | | | | | | | |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | | | | | |
| | NON-PERFORMING ASSETS AT | | | | | | | | | | | | |
| | | | June 30, 2010 | | | | Washington | | Oregon | | Idaho | | Other | | Total | |
| Secured by real estate: | | | | | | | | | | | | | |
| | Commercial | | | $ | 8,870 | $ | 744 | $ | 338 | $ | - - | $ | 9,952 | |
| | Multifamily | | | | 363 | | - - | | - - | | - - | | 363 | |
| | Construction and land | | | | | | | | | | | | | |
| | | One- to four-family construction | | | 10,966 | | 6,978 | | 5,568 | | - - | | 23,512 | |
| | | Commercial construction | | | 1,551 | | - - | | - - | | - - | | 1,551 | |
| | | Multifamily construction | | | 9,280 | | - - | | - - | | - - | | 9,280 | |
| | | Residential land acquisition & development | | 30,076 | | 16,765 | | 898 | | - - | | 47,739 | |
| | | Residential land improved lots | | | 3,771 | | 9,610 | | 317 | | - - | | 13,698 | |
| | | Residential land unimproved | | | 10,644 | | 348 | | 321 | | - - | | 11,313 | |
| | | Commercial land acquisition & development | | - - | | - - | | - - | | - - | | - - | |
| | | Commercial land improved | | | 454 | | - - | | - - | | - - | | 454 | |
| | | Commercial land unimproved | | | 4,076 | | - - | | - - | | - - | | 4,076 | |
| | | | Total construction and land | | | 70,818 | | 33,701 | | 7,104 | | - - | | 111,623 | |
| | One- to four-family | | | | 13,068 | | 7,582 | | - - | | - - | | 20,650 | |
| Commercial business | | | | 14,117 | | 4,424 | | 958 | | 3,975 | | 23,474 | |
| Agricultural business, including secured by farmland | | 1,775 | | 569 | | 5,212 | | - - | | 7,556 | |
| Consumer | | | | 3,342 | | 42 | | 242 | | - - | | 3,626 | |
| Total non-performing loans | | | | 112,353 | | 47,062 | | 13,854 | | 3,975 | | 177,244 | |
| Securities on non-accrual | | | | 3,250 | | - - | | 250 | | - - | | 3,500 | |
| Real estate owned (REO) and repossessed assets | | 45,199 | | 40,277 | | 16,225 | | - - | | 101,701 | |
| | | | Total non-performing assets at end of the period | $ | 160,802 | $ | 87,339 | $ | 30,329 | $ | 3,975 | $ | 282,445 | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | Quarters Ended | | Six Months Ended | | | |
| | | | | | | | | | | | | | | |
| REAL ESTATE OWNED | | | | Jun 30, 2010 | | Jun 30, 2009 | | Jun 30, 2010 | | Jun 30, 2009 | | | |
| | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 95,074 | $ | 38,951 | $ | 77,743 | $ | 21,782 | | | |
| | Additions for loan foreclosures | | | 17,966 | | 32,863 | | 45,293 | | 52,038 | | | |
| | Additions from capitalized costs | | | 380 | | 1,624 | | 1,516 | | 2,663 | | | |
| | Dispositions of REO | | | | (10,451 | ) | (16,112 | ) | (20,366 | ) | (19,206 | ) | | |
| | Gain (loss) on sale of REO | | | (660 | ) | (296 | ) | (1,361 | ) | (197 | ) | | |
| | Valuation adjustments in the period | | | (824 | ) | (63 | ) | (1,340 | ) | (113 | ) | | |
| Balance, end of period | | | $ | 101,485 | $ | 56,967 | $ | 101,485 | $ | 56,967 | | | |
| | | | | | | | | | | | | | | |
| | | | | | Quarters Ended | |
| | | | | | | | | | | | | | | |
| REAL ESTATE OWNED- FIVE COMPARATIVE QUARTERS | | Jun 30, 2010 | | Mar 31, 2010 | | Dec 31, 2009 | | Sep 30, 2009 | | Jun 30, 2009 | |
| | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 95,074 | $ | 77,743 | $ | 53,576 | $ | 56,967 | $ | 38,951 | |
| | Additions for loan foreclosures | | | 17,966 | | 27,327 | | 39,802 | | 10,013 | | 32,863 | |
| | Additions from capitalized costs | | | 380 | | 1,136 | | 1,712 | | 1,689 | | 1,624 | |
| | Dispositions of REO | | | | (10,451 | ) | (9,915 | ) | (10,064 | ) | (13,439 | ) | (16,112 | ) |
| | Transfers to property and equipment | | | - - | | - - | | (7,030 | ) | - - | | - - | |
| | Gain (loss) on sale of REO | | | (660 | ) | (701 | ) | (189 | ) | (188 | ) | (296 | ) |
| | Valuation adjustments in the period | | | (824 | ) | (516 | ) | (64 | ) | (1,466 | ) | (63 | ) |
| Balance, end of period | | | $ | 101,485 | $ | 95,074 | $ | 77,743 | $ | 53,576 | $ | 56,967 | |
| | | | | | | | | | | | | | | |
| REAL ESTATE OWNED- BY TYPE AND STATE | | | Washington | | Oregon | | Idaho | | Total | | | |
| | | | | | | | | | | | | | | |
| Commercial real estate | | | $ | 8,349 | $ | - - | $ | - - | $ | 8,349 | | | |
| One- to four-family construction | | | 891 | | 1,190 | | - - | | 2,081 | | | |
| Land development- commercial | | | 3,430 | | 6,656 | | 485 | | 10,571 | | | |
| Land development- residential | | | 22,681 | | 24,579 | | 9,731 | | 56,991 | | | |
| Agricultural land | | | | 329 | | - - | | 2,236 | | 2,565 | | | |
| One- to four-family real estate | | | 9,354 | | 7,801 | | 3,773 | | 20,928 | | | |
| Total | | | $ | 45,034 | $ | 40,226 | $ | 16,225 | $ | 101,485 | | | |
| | | | | | | | | | | | | | | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | | | |
| | | | | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Dec 31, 2009 | |
| | DEPOSIT COMPOSITION | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Non-interest-bearing | | | $ | 548,251 | $ | 549,291 | $ | 508,284 | $ | 582,480 | |
| | Interest-bearing checking | | | | 368,418 | | 366,786 | | 312,024 | | 360,256 | |
| | Regular savings accounts | | | | 593,591 | | 577,704 | | 499,447 | | 538,765 | |
| | Money market accounts | | | | 441,222 | | 459,811 | | 319,622 | | 442,124 | |
| | | Interest-bearing transaction & savings accounts | | | 1,403,231 | | 1,404,301 | | 1,131,093 | | 1,341,145 | |
| | Interest-bearing certificates | | | | 1,887,513 | | 1,896,186 | | 2,110,466 | | 1,941,925 | |
| | | Total deposits | | | $ | 3,838,995 | $ | 3,849,778 | $ | 3,749,843 | $ | 3,865,550 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | INCLUDED IN TOTAL DEPOSITS | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Public transaction accounts | | | $ | 85,292 | $ | 80,942 | $ | 48,644 | $ | 78,202 | |
| | Public interest-bearing certificates | | | 81,668 | | 82,362 | | 134,213 | | 88,186 | |
| | | Total public deposits | | | $ | 166,960 | $ | 163,304 | $ | 182,857 | $ | 166,388 | |
| | | | | | | | | | | | | | |
| | Total brokered deposits | | | $ | 145,571 | $ | 150,577 | $ | 249,619 | $ | 165,016 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | INCLUDED IN OTHER BORROWINGS | | | | | | | | | | |
| | Customer repurchase agreements / "Sweep accounts" | $ | 122,755 | $ | 126,954 | $ | 108,277 | $ | 124,330 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | | |
| | | June 30, 2010 | | | | Washington | | Oregon | | Idaho | | Total | |
| | | | | | | | | | | | | | |
| | | | | | $ | 2,943,408 | $ | 615,790 | $ | 279,797 | $ | 3,838,995 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | Minimum for Capital Adequacy | |
| REGULATORY CAPITAL RATIOS AT | | | | Actual | | or "Well Capitalized" | |
| | | June 30, 2010 | | | | Amount | | Ratio | | Amount | | Ratio | |
| | | | | | | | | | | | | | |
| Banner Corporation-consolidated | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | $ | 639,089 | | 17.12% | $ | 298,716 | | 8.00% | |
| | | Tier 1 capital to risk-weighted assets | | | 591,812 | | 15.85% | | 149,358 | | 4.00% | |
| | | Tier 1 leverage capital to average assets | | | 591,812 | | 13.02% | | 181,816 | | 4.00% | |
| | | | | | | | | | | | | | |
| Banner Bank | | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 512,933 | | 14.44% | | 355,137 | | 10.00% | |
| | | Tier 1 capital to risk-weighted assets | | | 467,936 | | 13.18% | | 213,082 | | 6.00% | |
| | | Tier 1 leverage capital to average assets | | | 467,936 | | 10.77% | | 217,307 | | 5.00% | |
| | | | | | | | | | | | | | |
| Islanders Bank | | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 28,046 | | 13.68% | | 20,497 | | 10.00% | |
| | | Tier 1 capital to risk-weighted assets | | | 25,942 | | 12.66% | | 12,298 | | 6.00% | |
| | | Tier 1 leverage capital to average assets | | | 25,942 | | 11.94% | | 10,861 | | 5.00% | |
| | | | | | | | | | | | | | |
BANR – Second Quarter 2010 Results
July 21, 2010
Page 12
| | ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | |
| | (rates / ratios annualized) | | | | | | | | | | | | | |
| | | | | | | Quarters Ended | | Six Months Ended | |
| | | | | | | | | | | | | | | | |
| | OPERATING PERFORMANCE | | | Jun 30, 2010 | | Mar 31, 2010 | | Jun 30, 2009 | | Jun 30, 2010 | | Jun 30, 2009 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Average loans | | | $ | 3,677,140 | $ | 3,726,243 | $ | 3,925,196 | $ | 3,701,552 | $ | 3,934,002 | |
| | Average securities and deposits | | | 607,643 | | 563,562 | | 394,244 | | 587,014 | | 398,856 | |
| | Average non-interest-earning assets | | | 268,864 | | 258,060 | | 199,981 | | 262,193 | | 196,604 | |
| | | Total average assets | | | $ | 4,553,647 | $ | 4,547,865 | $ | 4,519,421 | $ | 4,550,759 | $ | 4,529,462 | |
| | | | | | | | | | | | | | | | |
| | Average deposits | | | $ | 3,830,659 | $ | 3,800,888 | $ | 3,679,653 | $ | 3,815,798 | $ | 3,686,455 | |
| | Average borrowings | | | | 349,997 | | 373,192 | | 429,708 | | 361,578 | | 423,359 | |
| | Average non-interest-bearing liabilities | | | (38,527 | ) | (36,459 | ) | (18,421 | ) | (37,498 | ) | (13,201 | ) |
| | | Total average liabilities | | | | 4,142,129 | | 4,137,621 | | 4,090,940 | | 4,139,878 | | 4,096,613 | |
| | | | | | | | | | | | | | | | |
| | Total average stockholders' equity | | | 411,518 | | 410,244 | | 428,481 | | 410,881 | | 432,849 | |
| | | Total average liabilities and equity | | $ | 4,553,647 | $ | 4,547,865 | $ | 4,519,421 | $ | 4,550,759 | $ | 4,529,462 | |
| | | | | | | | | | | | | | | | |
| | Interest rate yield on loans | | | | 5.72% | | 5.74% | | 5.67% | | 5.73% | | 5.73% | |
| | Interest rate yield on securities and deposits | | | 2.09% | | 2.31% | | 3.72% | | 2.19% | | 3.86% | |
| | | Interest rate yield on interest-earning assets | | | 5.21% | | 5.29% | | 5.49% | | 5.25% | | 5.56% | |
| | | | | | | | | | | | | | | | |
| | Interest rate expense on deposits | | | 1.54% | | 1.69% | | 2.36% | | 1.61% | | 2.45% | |
| | Interest rate expense on borrowings | | | 2.28% | | 2.20% | | 2.42% | | 2.24% | | 2.32% | |
| | | Interest rate expense on interest-bearing liabilities | | | 1.60% | | 1.73% | | 2.37% | | 1.67% | | 2.43% | |
| | Interest rate spread | | | | 3.61% | | 3.56% | | 3.12% | | 3.58% | | 3.13% | |
| | Net interest margin | | | | 3.65% | | 3.61% | | 3.24% | | 3.62% | | 3.25% | |
| | | | | | | | | | | | | | | | |
| | Other operating income / Average assets | | | 0.54% | | 0.69% | | 1.77% | | 0.62% | | 1.10% | |
| | | | | | | | | | | | | | | | |
| | Other operating income (loss) EXCLUDING change in valuation of | | | | | | | | | | | |
| | | financial instruments carried at fair value / Average assets (1) | | 0.62% | | 0.52% | | 0.78% | | 0.57% | | 0.74% | |
| | | | | | | | | | | | | | | | |
| | Other operating expense / Average assets | | | 3.35% | | 3.16% | | 3.27% | | 3.25% | | 3.15% | |
| | | | | | | | | | | | | | | | |
| | Efficiency ratio (other operating expense / revenue) | | | 84.26% | | 77.20% | | 67.19% | | 80.70% | | 74.79% | |
| | | | | | | | | | | | | | | | |
| | Return (Loss) on average assets | | | (0.44%) | | (0.14%) | | (1.47%) | | (0.29%) | | (1.15%) | |
| | | | | | | | | | | | | | | | |
| | Return (Loss) on average equity | | | (4.82%) | | (1.50%) | | (15.46%) | | (3.17%) | | (12.01%) | |
| | | | | | | | | | | | | | | | |
| | Return (Loss) on average tangible equity (2) | | | (4.94%) | | (1.54%) | | (15.93%) | | (3.25%) | | (12.38%) | |
| | | | | | | | | | | | | | | | |
| | Average equity / Average assets | | | 9.04% | | 9.02% | | 9.48% | | 9.03% | | 9.56% | |
| | | | | | | | | | | | | | | | |
| | (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. | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(more)
