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| CONTACT: MARK J. GRESCOVICH, PRESIDENT & CEO LLOYD W. BAKER, CFO (509) 527-3636 NEWS RELEASE |
Banner Corporation Announces Earnings of $2.2 Million in Second Quarter
Walla Walla, WA – July 20, 2011 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income of $2.2 million in the second quarter ended June 30, 2011, compared to a net loss of $7.8 million in the immediately preceding quarter and a net loss of $4.9 million in the second quarter a year ago. In the first six months of the year, Banner reported a net loss of $5.6 million compared to a net loss of $6.5 million in the first six months of 2010.
“Banner’s return to profitability in the second quarter provided further evidence of the successful execution of our strategies and priorities to strengthen the franchise through our super community bank model,” said Mark J. Grescovich, President and Chief Executive Officer. “The resulting margin expansion and increased net interest income, as well as increased deposit and payment processing fees, supported strong revenue generation during the quarter and first half of the year. Additionally, Banner’s credit quality metrics continued to improve during the second quarter, with non-performing loans, real estate owned and total non-performing asset levels all decreasing at June 30, 2011 compared to the prior quarter end, leading to reduced credit costs for the current quarter and six months year-to-date.”
Banner’s second quarter 2011 results included a net gain of $1.9 million ($1.9 million after tax, or $0.12 earnings 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 of $256,000 ($256,000 after tax, or $0.02 earnings per share) in the first quarter of 2011 and a net loss of $821,000 ($525,000 after tax, or $0.15 earnings per share) in the second quarter a year ago.
In the second quarter of 2011, Banner paid a $1.6 million dividend on the $124 million of senior preferred stock it issued to the U.S. Treasury under the Capital Purchase Program. In addition, Banner accrued $425,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net income to common shareholders was $0.01 per share for the quarter ended June 30, 2011, compared to a net loss to common shareholders of $0.61 per share in the first quarter of 2011 and a net loss to common shareholders of $1.97 per share for the second quarter a year ago.
Credit Quality
“Charge-offs and delinquencies as well as real estate owned expenses and valuation adjustments continued to be concentrated in loans for the construction of single-family homes and residential land development projects,” said Grescovich. “Our exposure to one-to-four family residential construction and land development loans has continued to decline and at the end of June had been reduced to just 8.2% of total loans outstanding. Although this percentage is slightly below our long-term target range under improved market conditions, we do expect the land development portion of our portfolio to continue to decline over the near term.
“While credit costs remained stubbornly high and well above our long-term expectations, reflecting the persistent weak economic environment and additional declines in property values, they were significantly reduced from recent quarters and compared to a year ago as we continued to make meaningful progress at reducing problem assets. Although the economic environment remains challenging, our capital and reserve levels are substantial and our coverage ratio relative to non-performing loans continued to increase. We will remain diligent in our efforts to reduce credit costs in future periods as we further reduce non-performing assets.”
Banner recorded an $8.0 million provision for loan losses in the second quarter of 2011, compared to $17.0 million in the preceding quarter and $16.0 million in the second quarter of 2010. The allowance for loan losses at June 30, 2011 totaled $92.0 million, representing 2.78% of total loans outstanding and 80% of non-performing loans. Non-performing loans decreased to $115.2 million at June 30, 2011, compared to $131.7 million in the immediately preceding quarter and $177.9 million a year earlier.
Banner’s real estate owned and repossessed assets decreased to $71.3 million at June 30, 2011, compared to $95.0 million three months earlier and $101.7 million a year earlier. Net charge-offs in the second quarter of 2011 totaled $13.6 million, or 0.41% of average loans outstanding, compared to $16.8 million, or 0.50% of average loans outstanding for the first quarter of 2011 and $16.2 million, or 0.44% of average loans outstanding for the second quarter a year ago. For the first six months of 2011, net charge offs totaled $30.4 million, compared to $29.8 million in the first six months of 2010. Non-performing assets decreased to $188.4 million at June 30, 2011, compared to $228.6 million in the preceding quarter and $283.1 million a year ago. At June 30, 2011, Banner’s non-performing assets were 4.48% of total assets, compared to 5.32% at the end of the preceding quarter and 6.02% a year ago.
BANR - Second Quarter 2011 Results
July 20, 2011
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One-to-four family residential construction, land and land development loans were $269.6 million, or 8.2% of the total loan portfolio at June 30, 2011, compared to $411.1 million, or 11.3% of the total loan portfolio a year earlier. The geographic distribution of these residential construction, land and land development loans was approximately $81.3 million, or 30%, in the greater Puget Sound market, $119.1 million, or 44%, in the greater Portland, Oregon market and $9.2 million, or 4%, in the greater Boise, Idaho market as of June 30, 2011. The remaining $60.0 million, or 22%, was distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.
Non-performing residential construction, land and land development loans and related real estate owned were $94.0 million, or 50% of non-performing assets at June 30, 2011. The geographic distribution of non-performing construction, land and land development loans and related real estate owned included approximately $41.6 million, or 44%, in the greater Puget Sound market, $37.3 million, or 40%, in the greater Portland market and $6.6 million, or 7%, in the greater Boise market, with the remaining $8.5 million, or 9%, distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.
Income Statement Review
“The realignment of our delivery platforms and execution of our sales teams as well as further maturing of our expanded branch system and a targeted marketing campaign have allowed Banner Bank to add customer relationships and grow core deposits. That growth has enabled us to significantly reduce our cost of funds during the first six months of this year through changes in our deposit mix and pricing strategies and has supported increased deposit fees despite the adverse impact of regulatory changes on overdraft revenues. The reduced cost of funds coupled with changes in our asset mix made it possible for us to improve our net interest margin by 15 basis points compared to the immediately preceding quarter and to increase it by 44 basis points compared to the second quarter a year ago, despite continued downward pressure on asset yields,” said Grescovich. Banner’s net interest margin was 4.09% for the second quarter of 2011, compared to 3.94% in the preceding quarter and 3.65% in the second quarter a year ago. For the first six months of 2011, Banner’s net interest margin was 4.01%, a 39 basis point improvement compared to 3.62% for the first six months of 2010.
Funding costs for the second quarter of 2011 decreased eight basis points compared to the previous quarter and 68 basis points from the second quarter a year ago. Deposit costs decreased by nine basis points compared to the preceding quarter and 74 basis points compared to the second quarter a year earlier. Asset yields increased seven basis points compared to the prior quarter, largely as a result of reductions in low yielding interest-earning cash balances and nonaccruing loans, but decreased 26 basis points from the second quarter a year ago. Loan yields declined two basis points compared to the preceding quarter and decreased eight basis points from the second quarter a year ago. Nonaccruing loans reduced the margin by approximately 23 basis points in the second quarter of 2011 compared to approximately 27 basis points in the preceding quarter and approximately 34 basis points in the second quarter of 2010.
Net interest income, before the provision for loan losses, was $41.2 million in the second quarter of 2011, compared to $40.1 million in the preceding quarter and $38.9 million in the second quarter a year ago. For the first six months of 2011, net interest income, before the provision for loan losses, increased 5% to $81.3 million, compared to $77.1 million for the first six months of 2010. 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 $48.5 million in the second quarter of 2011, compared to $47.0 million in the first quarter of 2011 and $45.9 million for the second quarter a year ago. Year-to-date, revenues from core operations increased 5% to $95.6 million, compared to $91.1 million in the same period a year earlier. “The continued growth in core deposits and reduced funding costs over the past year and resulting improvement in net interest margin led to a solid increase in our revenues from core operations compared to the same quarter and six-month period a year earlier,” said Grescovich.
Total other operating income, which includes the changes in the valuation of financial instruments and OTTI adjustments, was $9.3 million in the second quarter of 2011 compared to $7.2 million in the preceding quarter and $6.2 million in the second quarter a year ago. For the first six months of the year, total other operating income was $16.5 million, compared to $13.9 million for the first six months of 2010. There were no OTTI charges during the current quarter, the preceding quarter or the second quarter a year ago; however, OTTI charges during the first quarter of 2010 were $1.2 million. Total other operating income from core operations* (other operating income excluding fair value and OTTI adjustments) for the current quarter was $7.3 million, compared to $7.0 million for the preceding quarter and $7.0 million for the second quarter a year ago. For the first six months of 2011, total other operating income from core operations* was $14.3 million compared to $14.1 million for the first six months of 2010.
Deposit fees and other service charges were $5.7 million in the second quarter of 2011 compared to $5.3 million in the preceding quarter and $5.6 million in the second quarter a year ago. Income from mortgage banking operations decreased to $855,000 in the second quarter, compared to $962,000 in the immediately preceding quarter and $817,000 in the second quarter of 2010.
“Operating expenses were increased during the quarter compared to the preceding quarter and the same quarter a year ago, largely due to higher costs associated with the real estate owned portfolio, particularly valuation adjustments,” said Grescovich. “Aside from these real estate owned costs, our operating expenses were little changed from recent quarters as increased compensation and payment
BANR - Second Quarter 2011 Results
July 20, 2011
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processing costs were partially offset by lower deposit insurance expense and professional services fees. While we are working diligently to control operating expenses, we expect collection expenses and costs associated with real estate owned to remain elevated in the near term. However, these credit costs will reduce over time as further problem asset resolution occurs.”
Total other operating expenses, or non-interest expenses, were $40.3 million in the second quarter of 2011, compared to $38.1 million in the preceding quarter and $38.0 million in the second quarter a year ago. For the first six months of 2011, total other operating expenses were $78.4 million compared to $73.4 million for the first six months of 2010.
*Earnings information excluding fair value and OTTI adjustments (alternately referred to as total other operating income from core operations 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.
Balance Sheet Review
“Although loan demand was modest for the quarter as both businesses and consumers remained cautious in their use of leverage, the aggressive calling efforts of our bankers are resulting in a stronger pipeline of new relationships and lending opportunities for Banner,” said Grescovich. “Nonetheless, as expected, our loan totals declined modestly again this quarter, as we continued to intentionally reduce our construction and land development loans as well as non-performing loans.”
Net loans were $3.21 billion at June 30, 2011, compared to $3.23 billion at March 31, 2011 and $3.54 billion a year ago. At June 30, 2011, one-to-four family construction loans totaled $140.7 million, a decrease of $10.3 million for the quarter and a decrease of $42.3 million over the past year. One-to-four family construction loans have now been reduced by $514.3 million from their peak quarter-end balance of $655.0 million at June 30, 2007. Similarly, total construction, land and land development loans have declined by $879.9 million from their peak quarter-end balance of $1.24 billion at June 30, 2007.
Total assets were $4.21 billion at June 30, 2011, compared to $4.30 billion at the end of the preceding quarter and $4.70 billion a year ago. Deposits totaled $3.47 billion at June 30, 2011, compared to $3.54 billion at the end of the preceding quarter and $3.84 billion a year ago. Non-interest-bearing accounts totaled $645.8 million at June 30, 2011, compared to $622.8 million at the end of the preceding quarter and $548.3 million a year ago, a year-over-year increase of 18%. At June 30, 2011, interest-bearing transaction and savings accounts were $1.42 billion, compared to $1.46 billion at the end of the preceding quarter and $1.40 billion a year ago.
“We are encouraged by the success we are having in adding non-interest-bearing and other transaction and savings accounts, which is allowing us to reduce our reliance on higher cost certificates of deposit as well as providing additional opportunities to earn deposit fees,” said Grescovich. “This strategy continues to help improve our cost of funds and has led to our net interest margin expansion and revenue growth. Lower rates on renewed and retained certificates of deposit and interest-bearing transaction and savings accounts also contributed to the decline in the cost of deposits.”
At June 30, 2011, total stockholders’ equity was $511.0 million, including $119.9 million attributable to preferred stock, and common stockholders’ equity was $ 391.2 million, or $23.52 per share. During 2010, Banner completed a common stock offering, issuing a total of 85,639,000 shares in the offering, resulting in net proceeds of approximately $161.6 million. In May 2011, Banner announced a 1-for-7 reverse stock split, which took effect on June 1, 2011. Every seven shares of Banner’s pre-split common shares were automatically consolidated into one post-split share. Taking the reverse stock split into account, Banner had 16.7 million shares outstanding at June 30, 2011, compared to 14.7 million shares outstanding a year ago. Tangible common stockholders’ equity, which excludes preferred stock and other intangibles, was $383.7 million at June 30, 2011, or 9.14% of tangible assets, compared to $377.3 million, or 8.79% of tangible assets at March 31, 2011 and $425.9 million, or 9.08% of tangible assets a year ago. Tangible book value per common share was $23.07 at June 30, 2011.
Augmented by the stock offering and continued sales under its Dividend Reinvestment and Direct Stock Purchase and Sale Plan (DRIP), 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 used a significant portion of the net proceeds from the offering to strengthen Banner Bank’s regulatory capital ratios while retaining the balance for general working capital purposes, including additional capital investments in its subsidiary banks if appropriate. Through June 30, 2011, Banner Corporation had invested $110.0 million of the net proceeds as additional paid-in common equity in Banner Bank, although no additional equity investment was made during the current year. Banner Corporation’s Tier 1 leverage capital to average assets ratio improved to 12.90% and its total capital to risk-weighted assets ratio increased to 17.29% at June 30, 2011. Banner Bank’s Tier 1 leverage ratio also improved to 11.37% at June 30, 2011, which is in excess of the 10% minimum level targeted in its Memorandum of Understanding with the Federal Deposit Insurance Corporation (FDIC) and the Washington State Department of Financial Institutions (Washington DFI).
BANR - Second Quarter 2011 Results
July 20, 2011
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Conference Call
Banner will host a conference call on Thursday, July 21, 2011, at 8:00 a.m. PDT, to discuss its second quarter results. The conference call can be accessed live by telephone at (480) 629-9835 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 4453037.
About the Company
Banner Corporation is a $4.21 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 and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses; 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, loan and 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 FDIC, the Washington DFI 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; 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 and liabilities, which estimates may prove to be incorrect and result in significant changes in valuations; 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; our ability to manage loan delinquency rates; 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; the economic impact of 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, 2010. 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 2011 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 2011 Results
July 20, 2011
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RESULTS OF OPERATIONS | | Quarters Ended | | | Six Months Ended | |
| (in thousands except shares and per share data) | | Jun 30, 2011 | | | Mar 31, 2011 | | | Jun 30, 2010 | | | Jun 30, 2011 | | | Jun 30, 2010 | |
| INTEREST INCOME: | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 46,846 | | | $ | 46,755 | | | $ | 52,473 | | | $ | 93,601 | | | $ | 105,232 | |
| Mortgage-backed securities | | | 859 | | | | 875 | | | | 1,045 | | | | 1,734 | | | | 2,171 | |
| Securities and cash equivalents | | | 2,183 | | | | 2,033 | | | | 2,116 | | | | 4,216 | | | | 4,201 | |
| | | | 49,888 | | | | 49,663 | | | | 55,634 | | | | 99,551 | | | | 111,604 | |
| | | | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 7,014 | | | | 7,812 | | | | 14,700 | | | | 14,826 | | | | 30,498 | |
| Federal Home Loan Bank advances | | | 64 | | | | 178 | | | | 320 | | | | 242 | | | | 681 | |
| Other borrowings | | | 568 | | | | 579 | | | | 626 | | | | 1,147 | | | | 1,260 | |
| Junior subordinated debentures | | | 1,041 | | | | 1,038 | | | | 1,047 | | | | 2,079 | | | | 2,074 | |
| | | | 8,687 | | | | 9,607 | | | | 16,693 | | | | 18,294 | | | | 34,513 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income before provision for loan losses | | | 41,201 | | | | 40,056 | | | | 38,941 | | | | 81,257 | | | | 77,091 | |
| | | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | | 8,000 | | | | 17,000 | | | | 16,000 | | | | 25,000 | | | | 30,000 | |
| Net interest income | | | 33,201 | | | | 23,056 | | | | 22,941 | | | | 56,257 | | | | 47,091 | |
| | | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING INCOME: | | | | | | | | | | | | | | | | | | | | |
| Deposit fees and other service charges | | | 5,693 | | | | 5,279 | | | | 5,632 | | | | 10,972 | | | | 10,792 | |
| Mortgage banking operations | | | 855 | | | | 962 | | | | 817 | | | | 1,817 | | | | 1,765 | |
| Loan servicing fees | | | 397 | | | | 256 | | | | 315 | | | | 653 | | | | 628 | |
| Miscellaneous | | | 369 | | | | 493 | | | | 243 | | | | 862 | | | | 869 | |
| | | | 7,314 | | | | 6,990 | | | | 7,007 | | | | 14,304 | | | | 14,054 | |
| Other-than-temporary impairment losses | | | - - | | | | - - | | | | - - | | | | - - | | | | (1,231 | ) |
| Net change in valuation of financial instruments carried at fair value | | | 1,939 | | | | 256 | | | | (821 | ) | | | 2,195 | | | | 1,087 | |
| Total other operating income | | | 9,253 | | | | 7,246 | | | | 6,186 | | | | 16,499 | | | | 13,910 | |
| | | | | | | | | | | | | | | | | | | | | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Salary and employee benefits | | | 18,288 | | | | 17,255 | | | | 16,793 | | | | 35,543 | | | | 33,352 | |
| Less capitalized loan origination costs | | | (1,948 | ) | | | (1,720 | ) | | | (1,740 | ) | | | (3,668 | ) | | | (3,345 | ) |
| Occupancy and equipment | | | 5,436 | | | | 5,394 | | | | 5,581 | | | | 10,830 | | | | 11,185 | |
| Information / computer data services | | | 1,521 | | | | 1,567 | | | | 1,594 | | | | 3,088 | | | | 3,100 | |
| Payment and card processing services | | | 1,939 | | | | 1,647 | | | | 1,683 | | | | 3,586 | | | | 3,107 | |
| Professional services | | | 1,185 | | | | 1,672 | | | | 1,874 | | | | 2,857 | | | | 3,161 | |
| Advertising and marketing | | | 1,903 | | | | 1,740 | | | | 1,742 | | | | 3,643 | | | | 3,692 | |
| Deposit insurance | | | 1,389 | | | | 1,969 | | | | 2,209 | | | | 3,358 | | | | 4,341 | |
| State/municipal business and use taxes | | | 544 | | | | 494 | | | | 533 | | | | 1,038 | | | | 1,013 | |
| Real estate operations | | | 6,568 | | | | 4,631 | | | | 4,166 | | | | 11,199 | | | | 7,224 | |
| Amortization of core deposit intangibles | | | 570 | | | | 597 | | | | 615 | | | | 1,167 | | | | 1,259 | |
| Miscellaneous | | | 2,860 | | | | 2,898 | | | | 2,974 | | | | 5,758 | | | | 5,350 | |
| Total other operating expense | | | 40,255 | | | | 38,144 | | | | 38,024 | | | | 78,399 | | | | 73,439 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income (loss) before provision for (benefit from) income taxes | | | 2,199 | | | | (7,842 | ) | | | (8,897 | ) | | | (5,643 | ) | | | (12,438 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| PROVISION FOR (BENEFIT FROM ) INCOME TAXES | | | - - | | | | - - | | | | (3,951 | ) | | | - - | | | | (5,975 | ) |
| NET INCOME (LOSS) | | | 2,199 | | | | (7,842 | ) | | | (4,946 | ) | | | (5,643 | ) | | | (6,463 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION: | | | | | | | | | | | | | | | | | | | | |
| Preferred stock dividend | | | 1,550 | | | | 1,550 | | | | 1,550 | | | | 3,100 | | | | 3,100 | |
| Preferred stock discount accretion | | | 425 | | | | 426 | | | | 399 | | | | 851 | | | | 797 | |
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | | $ | 224 | | | $ | (9,818 | ) | | $ | (6,895 | ) | | $ | (9,594 | ) | | $ | (10,360 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) per share available to common shareholder | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.01 | | | $ | (0.61 | ) | | $ | (1.97 | ) | | $ | (0.58 | ) | | $ | (3.11 | ) |
| Diluted | | $ | 0.01 | | | $ | (0.61 | ) | | $ | (1.97 | ) | | $ | (0.58 | ) | | $ | (3.11 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Cumulative dividends declared per common share | | $ | 0.01 | | | $ | 0.07 | | | $ | 0.07 | | | $ | 0.08 | | | $ | 0.14 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 16,535,082 | | | | 16,008,467 | | | | 3,493,194 | | | | 16,404,079 | | | | 3,328,346 | |
| Diluted | | | 16,535,082 | | | | 16,008,467 | | | | 3,493,194 | | | | 16,404,079 | | | | 3,328,346 | |
| | | | | | | | | | | | | | | | | | | | | |
| Common shares issued in connection with exercise of stock options or DRIP | | | 227,534 | | | | 241,653 | | | | 193,370 | | | | 506,474 | | | | 416,450 | |
| | | | | | | | | | | | | | | | | | | | | |
BANR - Second Quarter 2011 Results
July 20, 2011
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| FINANCIAL CONDITION | | | | | | | | | | |
| (in thousands except shares and per share data) | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Dec 31, 2010 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| ASSETS | | | | | | | | | | |
| Cash and due from banks | | | $ | 48,246 | $ | 44,381 | $ | 67,322 | $ | 39,756 |
| Federal funds and interest-bearing deposits | | | 168,198 | | 271,924 | | 369,864 | | 321,896 |
| Securities - at fair value | | | | 89,374 | | 90,881 | | 105,381 | | 95,379 |
| Securities - available for sale | | | | 287,255 | | 240,968 | | 140,342 | | 200,227 |
| Securities - held to maturity | | | | 76,596 | | 75,114 | | 73,632 | | 72,087 |
| Federal Home Loan Bank stock | | | 37,371 | | 37,371 | | 37,371 | | 37,371 |
| | | | | | | | | | | | |
| Loans receivable: | | | | | | | | | | |
| | Held for sale | | | | 1,907 | | 1,493 | | 4,819 | | 3,492 |
| | Held for portfolio | | | | 3,304,760 | | 3,324,587 | | 3,626,685 | | 3,399,625 |
| | Allowance for loan losses | | | | (92,000) | | (97,632) | | (95,508) | | (97,401) |
| | | | | | 3,214,667 | | 3,228,448 | | 3,535,996 | | 3,305,716 |
| | | | | | | | | | | | |
| Accrued interest receivable | | | | 15,907 | | 16,503 | | 16,930 | | 15,927 |
| Real estate owned held for sale, net | | | 71,205 | | 94,945 | | 101,485 | | 100,872 |
| Property and equipment, net | | | | 93,532 | | 94,743 | | 99,536 | | 96,502 |
| Other intangibles, net | | | | 7,442 | | 8,011 | | 9,811 | | 8,609 |
| Bank-owned life insurance | | | | 57,578 | | 57,123 | | 55,477 | | 56,653 |
| Other assets | | | | 38,696 | | 39,291 | | 88,459 | | 55,087 |
| | | | | $ | 4,206,067 | $ | 4,299,703 | $ | 4,701,606 | $ | 4,406,082 |
| | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | |
| | | | | | | | | | | | |
| Deposits: | | | | | | | | | | |
| | Non-interest-bearing | | | $ | 645,778 | $ | 622,759 | $ | 548,251 | $ | 600,457 |
| | Interest-bearing transaction and savings accounts | | | 1,422,290 | | 1,459,895 | | 1,403,231 | | 1,433,248 |
| | Interest-bearing certificates | | | 1,398,332 | | 1,457,994 | | 1,887,513 | | 1,557,493 |
| | | | | | 3,466,400 | | 3,540,648 | | 3,838,995 | | 3,591,198 |
| | | | | | | | | | | | |
| Advances from Federal Home Loan Bank at fair value | | | 10,572 | | 10,567 | | 47,003 | | 43,523 |
| Customer repurchase agreements and other borrowings | | | 136,285 | | 159,902 | | 172,737 | | 175,813 |
| | | | | | | | | | | | |
| Junior subordinated debentures at fair value | | | 47,986 | | 48,395 | | 49,808 | | 48,425 |
| | | | | | | | | | | | |
| Accrued expenses and other liabilities | | | 19,115 | | 20,958 | | 25,440 | | 21,048 |
| Deferred compensation | | | | 14,683 | | 14,489 | | 13,665 | | 14,603 |
| | | | | | 3,695,041 | | 3,794,959 | | 4,147,648 | | 3,894,610 |
| | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | |
| | | | | | | | | | | | |
| Preferred stock - Series A | | | | 119,851 | | 119,426 | | 118,204 | | 119,000 |
| Common stock | | | | 517,782 | | 513,950 | | 490,119 | | 509,457 |
| Retained earnings (accumulated deficit) | | | (126,268) | | (126,318) | | (53,768) | | (115,348) |
| Other components of stockholders' equity | | | (339) | | (2,314) | | (597) | | (1,637) |
| | | | | | 511,026 | | 504,744 | | 553,958 | | 511,472 |
| | | | | $ | 4,206,067 | $ | 4,299,703 | $ | 4,701,606 | $ | 4,406,082 |
| | | | | | | | | | | | |
| Common Shares Issued: | | | | | | | | | | |
| Shares outstanding at end of period | | | 16,668,694 | | 16,443,720 | | 14,707,820 | | 16,164,781 |
| | Less unearned ESOP shares at end of period | | | 34,340 | | 34,340 | | 34,340 | | 34,340 |
| Shares outstanding at end of period excluding unearned ESOP shares | | 16,634,354 | | 16,409,380 | | 14,673,480 | | 16,130,441 |
| | | | | | | | | | | | |
Common stockholders' equity per share (1) | | $ | 23.52 | $ | 23.48 | $ | 29.70 | $ | 24.33 |
Common stockholders' tangible equity per share (1) (2) | | $ | 23.07 | $ | 22.99 | $ | 29.03 | $ | 23.80 |
| | | | | | | | | | | | |
| Tangible common stockholders' equity to tangible assets | | | 9.14% | | 8.79% | | 9.08% | | 8.73% |
| Consolidated Tier 1 leverage capital ratio | | | 12.90% | | 12.50% | | 13.02% | | 12.24% |
| | | | | | | | | | | | |
| (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 2011 Results
July 20, 2011
Page 7
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Dec 31, 2010 | | |
| LOANS (including loans held for sale): | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | |
| | Owner occupied | | | $ | 507,751 | $ | 521,823 | $ | 503,796 | $ | 515,093 | | |
| | Investment properties | | | | 582,569 | | 564,337 | | 553,689 | | 550,610 | | |
| Multifamily real estate | | | | 147,951 | | 147,569 | | 149,980 | | 134,634 | | |
| Commercial construction | | | | 35,790 | | 26,580 | | 84,379 | | 62,707 | | |
| Multifamily construction | | | | 20,552 | | 19,694 | | 56,573 | | 27,394 | | |
| One- to four-family construction | | | | 140,669 | | 151,015 | | 182,928 | | 153,383 | | |
| Land and land development | | | | | | | | | | | | |
| | Residential | | | | 128,920 | | 147,913 | | 228,156 | | 167,764 | | |
| | Commercial | | | | 29,347 | | 30,539 | | 29,410 | | 32,386 | | |
| Commercial business | | | | 566,243 | | 577,128 | | 635,130 | | 585,457 | | |
| Agricultural business including secured by farmland | | | 208,485 | | 188,756 | | 208,815 | | 204,968 | | |
| One- to four-family real estate | | | | 658,216 | | 665,396 | | 702,420 | | 682,924 | | |
| Consumer | | | | 97,396 | | 104,129 | | 103,065 | | 99,761 | | |
| Consumer secured by one- to four-family real estate | | | 182,778 | | 181,201 | | 193,163 | | 186,036 | | |
| | | Total loans outstanding | | | $ | 3,306,667 | $ | 3,326,080 | $ | 3,631,504 | $ | 3,403,117 | | |
| | | | | | | | | | | | | | | |
| Restructured loans performing under their restructured terms | $ | 55,652 | $ | 60,968 | $ | 43,899 | $ | 60,115 | | |
| | | | | | | | | | | | | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 11,560 | $ | 16,587 | $ | 26,050 | $ | 28,847 | | |
| | | | | | | | | | | | | | | |
| Total delinquent loans (including loans on non-accrual) | $ | 126,805 | $ | 148,285 | $ | 203,992 | $ | 180,336 | | |
| | | | | | | | | | | | | | | |
| Total delinquent loans / Total loans outstanding | | | 3.83% | | 4.46% | | 5.62% | | 5.30% | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | | |
| | | June 30, 2011 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| | | | | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | |
| | Owner occupied | | | $ | 383,576 | $ | 69,389 | $ | 51,458 | $ | 3,328 | $ | 507,751 |
| | Investment properties | | | | 436,279 | | 99,304 | | 41,016 | | 5,970 | | 582,569 |
| Multifamily real estate | | | | 120,552 | | 17,187 | | 9,749 | | 463 | | 147,951 |
| Commercial construction | | | | 23,267 | | 822 | | 11,701 | | - - | | 35,790 |
| Multifamily construction | | | | 12,514 | | 8,038 | | - - | | - - | | 20,552 |
| One- to four-family construction | | | | 71,494 | | 66,430 | | 2,745 | | - - | | 140,669 |
| Land and land development | | | | | | | | | | | | |
| | Residential | | | | 67,575 | | 50,719 | | 10,626 | | - - | | 128,920 |
| | Commercial | | | | 25,286 | | 949 | | 3,112 | | - - | | 29,347 |
| Commercial business | | | | 382,517 | | 109,068 | | 61,155 | | 13,503 | | 566,243 |
| Agricultural business including secured by farmland | | | 110,836 | | 40,842 | | 56,784 | | 23 | | 208,485 |
| One- to four-family real estate | | | | 416,713 | | 211,703 | | 27,488 | | 2,312 | | 658,216 |
| Consumer | | | | 69,094 | | 22,734 | | 5,568 | | - - | | 97,396 |
| Consumer secured by one- to four-family real estate | | | 125,771 | | 44,070 | | 12,439 | | 498 | | 182,778 |
| | | Total loans outstanding | | | $ | 2,245,474 | $ | 741,255 | $ | 293,841 | $ | 26,097 | $ | 3,306,667 |
| | | | | | | | | | | | | | | |
| | | Percent of total loans | | | | 67.9% | | 22.4% | | 8.9% | | 0.8% | | 100.0% |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT | | | | | | | | | | |
| | | June 30, 2011 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| | | | | | | | | | | | | | | |
| Residential | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 32,439 | $ | 28,568 | $ | 3,823 | $ | - - | $ | 64,830 |
| | Improved lots | | | | 22,026 | | 16,592 | | 923 | | - - | | 39,541 |
| | Unimproved land | | | | 13,110 | | 5,559 | | 5,880 | | - - | | 24,549 |
| | | Total residential land and development | | $ | 67,575 | $ | 50,719 | $ | 10,626 | $ | - - | $ | 128,920 |
| Commercial & industrial | | | | | | | | | | | | |
| | Acquisition & development | | | $ | 3,873 | $ | - - | $ | 510 | $ | - - | $ | 4,383 |
| | Improved land | | | | 8,865 | | - - | | 200 | | - - | | 9,065 |
| | Unimproved land | | | | 12,548 | | 949 | | 2,402 | | - - | | 15,899 |
| | | Total commercial land and development | | $ | 25,286 | $ | 949 | $ | 3,112 | $ | - - | $ | 29,347 |
BANR - Second Quarter 2011 Results
July 20, 2011
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | Quarters Ended | | | | Six Months | Ended |
| CHANGE IN THE | | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Jun 30, 2011 | | Jun 30, 2010 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 97,632 | $ | 97,401 | $ | 95,733 | $ | 97,401 | $ | 95,269 |
| | | | | | | | | | | | | | | |
| Provision | | | | 8,000 | | 17,000 | | 16,000 | | 25,000 | | 30,000 |
| | | | | | | | | | | | | | | |
| Recoveries of loans previously charged off: | | | | | | | | | | |
| | | Commercial real estate | | | | 15 | | - - | | - - | | 15 | | - - |
| | | Multifamily real estate | | | | - - | | - - | | - - | | - - | | - - |
| | | Construction and land | | | | 716 | | 35 | | 235 | | 751 | | 622 |
| | | One- to four-family real estate | | | 29 | | 52 | | 71 | | 81 | | 71 |
| | | Commercial business | | | | 76 | | 81 | | 595 | | 157 | | 1,885 |
| | | Agricultural business, including secured by farmland | | �� 5 | | - - | | - - | | 5 | | - - |
| | | Consumer | | | | 84 | | 78 | | 69 | | 162 | | 128 |
| | | | | | | 925 | | 246 | | 970 | | 1,171 | | 2,706 |
| Loans charged off: | | | | | | | | | | | | |
| | | Commercial real estate | | | | (1,871) | | (989) | | - - | | (2,860) | | (92) |
| | | Multifamily real estate | | | | (244) | | (427) | | - - | | (671) | | - - |
| | | Construction and land | | | | (6,077) | | (10,537) | | (12,255) | | (16,614) | | (19,979) |
| | | One- to four-family real estate | | | (1,894) | | (2,209) | | (2,128) | | (4,103) | | (4,243) |
| | | Commercial business | | | | (3,993) | | (2,368) | | (1,447) | | (6,361) | | (6,231) |
| | | Agricultural business, including secured by farmland | | (166) | | (123) | | (986) | | (289) | | (988) |
| | | Consumer | | | | (312) | | (362) | | (379) | | (674) | | (934) |
| | | | | | | (14,557) | | (17,015) | | (17,195) | | (31,572) | | (32,467) |
| | | Net charge-offs | | | | (13,632) | | (16,769) | | (16,225) | | (30,401) | | (29,761) |
| Balance, end of period | | | $ | 92,000 | $ | 97,632 | $ | 95,508 | $ | 92,000 | $ | 95,508 |
| | | | | | | | | | | | | | | |
| Net charge-offs / Average loans outstanding | | 0.41% | | 0.50% | | 0.44% | | 0.91% | | 0.80% |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| ALLOCATION OF | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Dec 31, 2010 | | |
| Specific or allocated loss allowance | | | | | | | | | | | |
| | Commercial real estate | | | $ | 13,087 | $ | 11,871 | $ | 7,042 | $ | 11,779 | | |
| | Multifamily real estate | | | | 5,404 | | 6,055 | | 2,364 | | 3,963 | | |
| | Construction and land | | | | 25,976 | | 30,346 | | 45,601 | | 33,121 | | |
| | Commercial business | | | | 19,912 | | 22,054 | | 23,905 | | 24,545 | | |
| | Agricultural business, including secured by farmland | | 1,409 | | 1,441 | | 679 | | 1,846 | | |
| | One- to four-family real estate | | | 8,254 | | 8,149 | | 3,530 | | 5,829 | | |
| | Consumer | | | | 1,445 | | 1,452 | | 1,890 | | 1,794 | | |
| | | Total allocated | | | | 75,487 | | 81,368 | | 85,011 | | 82,877 | | |
| | | | | | | | | | | | | | | |
| | Estimated allowance for undisbursed commitments | | 1,001 | | 1,158 | | 909 | | 1,426 | | |
| | Unallocated | | | | 15,512 | | 15,106 | | 9,588 | | 13,098 | | |
| | | Total allowance for loan losses | | $ | 92,000 | $ | 97,632 | $ | 95,508 | $ | 97,401 | | |
| | | | | | | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | 2.78% | | 2.94% | | 2.63% | | 2.86% | | |
| | | | | | | | | | | | | | | |
| Allowance for loan losses / Non-performing loans | | 80% | | 74% | | 54% | | 64% | | |
BANR - Second Quarter 2011 Results
July 20, 2011
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Dec 31, 2010 | | |
| | | | | | | | | | | | | | | | |
| NON-PERFORMING ASSETS | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Loans on non-accrual status | | | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | |
| | | | Commercial | | | $ | 22,421 | $ | 23,443 | $ | 9,433 | $ | 24,727 | | |
| | | | Multifamily | | | | 1,560 | | 1,361 | | 363 | | 1,889 | | |
| | | | Construction and land | | | | 53,529 | | 67,163 | | 110,931 | | 75,734 | | |
| | | | One- to four-family | | | | 15,435 | | 16,571 | | 19,878 | | 16,869 | | |
| | Commercial business | | | | 15,264 | | 15,904 | | 23,474 | | 21,100 | | |
| | Agricultural business, including secured by farmland | | 1,342 | | 1,984 | | 7,556 | | 5,853 | | |
| | Consumer | | | | 4,400 | | 4,655 | | 3,588 | | 2,332 | | |
| | | | | | | | 113,951 | | 131,081 | | 175,223 | | 148,504 | | |
| | | | | | | | | | | | | | | | |
| Loans more than 90 days delinquent, still on accrual | | | | | | | | | | |
| | Secured by real estate: | | | | | | | | | | | | |
| | | | Commercial | | | | - - | | - - | | 1,137 | | - - | | |
| | | | Multifamily | | | | - - | | - - | | - - | | - - | | |
| | | | Construction and land | | | | - - | | - - | | 692 | | - - | | |
| | | | One- to four-family | | | | 622 | | 561 | | 772 | | 2,955 | | |
| | Commercial business | | | | 1 | | 14 | | - - | | - - | | |
| | Agricultural business, including secured by farmland | | 545 | | - - | | - - | | - - | | |
| | Consumer | | | | 126 | | 42 | | 118 | | 30 | | |
| | | | | | | | 1,294 | | 617 | | 2,719 | | 2,985 | | |
| Total non-performing loans | | | | 115,245 | | 131,698 | | 177,942 | | 151,489 | | |
| Securities on non-accrual | | | | 1,896 | | 1,904 | | 3,500 | | 1,896 | | |
| Real estate owned (REO) and repossessed assets | | | 71,265 | | 94,969 | | 101,701 | | 100,945 | | |
| | | | Total non-performing assets | | $ | 188,406 | $ | 228,571 | $ | 283,143 | $ | 254,330 | | |
| | | | | | | | | | | | | | | | |
| Total non-performing assets / Total assets | | | 4.48% | | 5.32% | | 6.02% | | 5.77% | | |
| | | | | | | | | | | | | | | | |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | | | | |
| | NON-PERFORMING ASSETS AT | | | | | | | | | | | |
| | | | June 30, 2011 | | | | Washington | | Oregon | | Idaho | | Other | | Total |
| Secured by real estate: | | | | | | | | | | | | |
| | Commercial | | | $ | 17,852 | $ | 477 | $ | 4,092 | $ | - - | $ | 22,421 |
| | Multifamily | | | | 1,560 | | - - | | - - | | - - | | 1,560 |
| | Construction and land | | | | | | | | | | | | |
| | | One- to four-family construction | | | 6,486 | | 3,082 | | 641 | | - - | | 10,209 |
| | | Commercial construction | | | | 1,510 | | - - | | - - | | - - | | 1,510 |
| | | Multifamily construction | | | | - - | | 648 | | - - | | - - | | 648 |
| | | Residential land acquisition & development | | | 18,374 | | 6,207 | | 1,470 | | - - | | 26,051 |
| | | Residential land improved lots | | | 2,744 | | 3,705 | | 131 | | - - | | 6,580 |
| | | Residential land unimproved | | | 2,739 | | 916 | | 2,428 | | - - | | 6,083 |
| | | Commercial land acquisition & development | | - - | | - - | | - - | | - - | | - - |
| | | Commercial land improved | | | 1,954 | | - - | | - - | | - - | | 1,954 |
| | | Commercial land unimproved | | | 494 | | - - | | - - | | - - | | 494 |
| | | | Total construction and land | | | 34,301 | | 14,558 | | 4,670 | | - - | | 53,529 |
| | One- to four-family | | | | 12,059 | | 2,766 | | 1,232 | | - - | | 16,057 |
| Commercial business | | | | 14,265 | | 76 | | 775 | | 149 | | 15,265 |
| Agricultural business, including secured by farmland | | 1,290 | | - - | | 597 | | - - | | 1,887 |
| Consumer | | | | 2,205 | | 1,851 | | 470 | | - - | | 4,526 |
| Total non-performing loans | | | | 83,532 | | 19,728 | | 11,836 | | 149 | | 115,245 |
| Securities on non-accrual | | | | - - | | - - | | 500 | | 1,396 | | 1,896 |
| Real estate owned (REO) and repossessed assets | | | 31,457 | | 32,827 | | 6,981 | | - - | | 71,265 |
| | | | Total non-performing assets | | $ | 114,989 | $ | 52,555 | $ | 19,317 | $ | 1,545 | $ | 188,406 |
BANR - Second Quarter 2011 Results
July 20, 2011
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | | | | Quarters Ended | | Six Months Ended | | |
| | | | | | | | | | | | | | |
| REAL ESTATE OWNED | | | | Jun 30, 2011 | | Jun 30, 2010 | | Jun 30, 2011 | | Jun 30, 2010 | | |
| | | | | | | | | | | | | | |
| Balance, beginning of period | | | $ | 94,945 | $ | 95,074 | $ | 100,872 | $ | 77,743 | | |
| | Additions from loan foreclosures | | | 11,918 | | 17,885 | | 26,834 | | 45,212 | | |
| | Additions from capitalized costs | | | 1,532 | | 380 | | 3,147 | | 1,516 | | |
| | Dispositions of REO | | | | (32,437) | | (10,532) | | (51,331) | | (20,411) | | |
| | Gain (loss) on sale of REO | | | 58 | | (498) | | (479) | | (1,235) | | |
| | Valuation adjustments in the period | | | (4,811) | | (824) | | (7,838) | | (1,340) | | |
| Balance, end of period | | | $ | 71,205 | $ | 101,485 | $ | 71,205 | $ | 101,485 | | |
| | | | | | | | | | | | | | |
| | | | | | Quarters Ended |
| | | | | | | | | | | | | | |
| REAL ESTATE OWNED- FIVE COMPARATIVE QUARTERS | | Jun 30, 2011 | | Mar 31, 2011 | | Dec 31, 2010 | | Sep 30, 2010 | | Jun 30, 2010 |
| | | | | | | | | | | | | | |
| Balance, beginning of period | | | $ | 94,945 | $ | 100,872 | $ | 107,159 | $ | 101,485 | $ | 95,074 |
| | Additions from loan foreclosures | | | 11,918 | | 14,916 | | 16,855 | | 25,694 | | 17,885 |
| | Additions from capitalized costs | | | 1,532 | | 1,615 | | 1,650 | | 841 | | 380 |
| | Dispositions of REO | | | | (32,437) | | (18,894) | | (19,095) | | (12,145) | | (10,532) |
| | Gain (loss) on sale of REO | | | 58 | | (537) | | (524) | | (133) | | (498) |
| | Valuation adjustments in the period | | | (4,811) | | (3,027) | | (5,173) | | (8,583) | | (824) |
| Balance, end of period | | | $ | 71,205 | $ | 94,945 | $ | 100,872 | $ | 107,159 | $ | 101,485 |
| | | | | | | | | | | | | | |
| REAL ESTATE OWNED- BY TYPE AND STATE | | | Washington | | Oregon | | Idaho | | Total | | |
| | | | | | | | | | | | | | |
| Commercial real estate | | | $ | 1,533 | $ | 13 | $ | 477 | $ | 2,023 | | |
| One- to four-family construction | | | 472 | | 3,646 | | - - | | 4,118 | | |
| Land development- commercial | | | 3,876 | | 4,065 | | 200 | | 8,141 | | |
| Land development- residential | | | 18,787 | | 18,763 | | 3,400 | | 40,950 | | |
| Agricultural land | | | | - - | | 256 | | 850 | | 1,106 | | |
| One- to four-family real estate | | | 6,729 | | 6,084 | | 2,054 | | 14,867 | | |
| Total | | | $ | 31,397 | $ | 32,827 | $ | 6,981 | $ | 71,205 | | |
BANR - Second Quarter 2011 Results
July 20, 2011
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | | |
| | | | | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | Dec 31, 2010 |
| | DEPOSIT COMPOSITION | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Non-interest-bearing | | | $ | 645,778 | $ | 622,759 | $ | 548,251 | $ | 600,457 |
| | Interest-bearing checking | | | | 356,321 | | 361,430 | | 368,418 | | 357,702 |
| | Regular savings accounts | | | | 631,688 | | 648,520 | | 593,591 | | 616,512 |
| | Money market accounts | | | | 434,281 | | 449,945 | | 441,222 | | 459,034 |
| | | Interest-bearing transaction & savings accounts | | | 1,422,290 | | 1,459,895 | | 1,403,231 | | 1,433,248 |
| | Interest-bearing certificates | | | | 1,398,332 | | 1,457,994 | | 1,887,513 | | 1,557,493 |
| | | | | | | | | | | | | |
| | | Total deposits | | | $ | 3,466,400 | $ | 3,540,648 | $ | 3,838,995 | $ | 3,591,198 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | INCLUDED IN TOTAL DEPOSITS | | | | | | | | | |
| | | | | | | | | | | | | |
| | Public transaction accounts | | | $ | 72,181 | $ | 62,873 | $ | 85,292 | $ | 64,482 |
| | Public interest-bearing certificates | | | 69,219 | | 67,527 | | 81,668 | | 81,809 |
| | | Total public deposits | | | $ | 141,400 | $ | 130,400 | $ | 166,960 | $ | 146,291 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Total brokered deposits | | | $ | 73,161 | $ | 92,940 | $ | 145,571 | $ | 102,984 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | INCLUDED IN OTHER BORROWINGS | | | | | | | | | |
| | Customer repurchase agreements / "Sweep accounts" | $ | 85,822 | $ | 109,227 | $ | 122,755 | $ | 125,140 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | |
| | | June 30, 2011 | | | | Washington | | Oregon | | Idaho | | Total |
| | | | | | | | | | | | | |
| | | | | | $ | 2,646,712 | $ | 591,519 | $ | 228,169 | $ | 3,466,400 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | Minimum for Capital Adequacy |
| REGULATORY CAPITAL RATIOS AT | | | Actual | | or "Well Capitalized" |
| | | June 30, 2011 | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | |
| Banner Corporation-consolidated | | | | | | | | | |
| | | Total capital to risk-weighted assets | | $ | 591,709 | | 17.29% | $ | 273,802 | | 8.00% |
| | | Tier 1 capital to risk-weighted assets | | | 548,320 | | 16.02% | | 136,901 | | 4.00% |
| | | Tier 1 leverage capital to average assets | | | 548,320 | | 12.90% | | 169,964 | | 4.00% |
| | | | | | | | | | | | | |
| Banner Bank | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 497,052 | | 15.32% | | 324,376 | | 10.00% |
| | | Tier 1 capital to risk-weighted assets | | | 455,902 | | 14.05% | | 194,626 | | 6.00% |
| | | Tier 1 leverage capital to average assets | | | 455,902 | | 11.37% | | 200,486 | | 5.00% |
| | | | | | | | | | | | | |
| Islanders Bank | | | | | | | | | | |
| | | Total capital to risk-weighted assets | | | 30,226 | | 14.93% | | 20,243 | | 10.00% |
| | | Tier 1 capital to risk-weighted assets | | | 27,695 | | 13.68% | | 12,146 | | 6.00% |
| | | Tier 1 leverage capital to average assets | | | 27,695 | | 11.78% | | 11,756 | | 5.00% |
BANR - Second Quarter 2011 Results
July 20, 2011
Page 12
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | |
| | | | | | Quarters Ended | | | Six Months Ended |
| | | | | | | | | | | | | | | |
| OPERATING PERFORMANCE | | | Jun 30, 2011 | | Mar 31, 2011 | | Jun 30, 2010 | | | Jun 30, 2011 | | Jun 30, 2010 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Average loans | | | $ | 3,333,102 | $ | 3,349,978 | $ | 3,677,140 | | $ | 3,341,487 | $ | 3,701,552 |
| Average securities | | | | 511,273 | | 465,017 | | 391,067 | | | 488,233 | | 392,826 |
| Average interest earning cash | | | | 196,211 | | 308,575 | | 216,576 | | | 252,094 | | 194,188 |
| Average non-interest-earning assets | | | 215,494 | | 233,365 | | 268,864 | | | 224,414 | | 262,193 |
| | Total average assets | | | $ | 4,256,080 | $ | 4,356,935 | $ | 4,553,647 | | $ | 4,306,228 | $ | 4,550,759 |
| | | | | | | | | | | | | | | |
| Average deposits | | | $ | 3,504,884 | $ | 3,561,020 | $ | 3,830,659 | | $ | 3,532,796 | $ | 3,815,798 |
| Average borrowings | | | | 283,178 | | 322,261 | | 349,997 | | | 302,612 | | 361,578 |
| Average non-interest-bearing liabilities | | | (41,253) | | (39,755) | | (38,527) | | | (40,508) | | (37,498) |
| | Total average liabilities | | | | 3,746,809 | | 3,843,526 | | 4,142,129 | | | 3,794,900 | | 4,139,878 |
| | | | | | | | | | | | | | | |
| Total average stockholders' equity | | | 509,271 | | 513,409 | | 411,518 | | | 511,328 | | 410,881 |
| | Total average liabilities and equity | | $ | 4,256,080 | $ | 4,356,935 | $ | 4,553,647 | | $ | 4,306,228 | $ | 4,550,759 |
| | | | | | | | | | | | | | | |
| Interest rate yield on loans | | | | 5.64% | | 5.66% | | 5.72% | | | 5.65% | | 5.73% |
| Interest rate yield on securities | | | 2.31% | | 2.38% | | 3.11% | | | 2.34% | | 3.16% |
| Interest rate yield on cash | | | | 0.20% | | 0.23% | | 0.23% | | | 0.22% | | 0.23% |
| | Interest rate yield on interest-earning assets | | | 4.95% | | 4.88% | | 5.21% | | | 4.92% | | 5.25% |
| | | | | | | | | | | | | | | |
| Interest rate expense on deposits | | | 0.80% | | 0.89% | | 1.54% | | | 0.85% | | 1.61% |
| Interest rate expense on borrowings | | | 2.37% | | 2.26% | | 2.28% | | | 2.31% | | 2.24% |
| | Interest rate expense on interest-bearing liabilities | | | 0.92% | | 1.00% | | 1.60% | | | 0.96% | | 1.67% |
| | | | | | | | | | | | | | | |
| Interest rate spread | | | | 4.03% | | 3.88% | | 3.61% | | | 3.96% | | 3.58% |
| | | | | | | | | | | | | | | |
| Net interest margin | | | | 4.09% | | 3.94% | | 3.65% | | | 4.01% | | 3.62% |
| | | | | | | | | | | | | | | |
| Other operating income / Average assets | | | 0.87% | | 0.67% | | 0.54% | | | 0.77% | | 0.62% |
| | | | | | | | | | | | | | | |
| Other operating income EXCLUDING change in valuation of | | | | | | | | | | | |
| | financial instruments carried at fair value / Average assets (1) | | 0.69% | | 0.65% | | 0.62% | | | 0.67% | | 0.57% |
| | | | | | | | | | | | | | | |
| Other operating expense / Average assets | | | 3.79% | | 3.55% | | 3.35% | | | 3.67% | | 3.25% |
| | | | | | | | | | | | | | | |
| Efficiency ratio (other operating expense / revenue) | | | 79.79% | | 80.64% | | 84.26% | | | 80.20% | | 80.70% |
| | | | | | | | | | | | | | | |
| Return (Loss) on average assets | | | 0.21% | | (0.73%) | | (0.44%) | | | (0.26%) | | (0.29%) |
| | | | | | | | | | | | | | | |
| Return (Loss) on average equity | | | 1.73% | | (6.19%) | | (4.82%) | | | (2.23%) | | (3.17%) |
| | | | | | | | | | | | | | | |
Return (Loss) on average tangible equity (2) | | | 1.76% | | (6.30%) | | (4.94%) | | | (2.26%) | | (3.25%) |
| | | | | | | | | | | | | | | |
| Average equity / Average assets | | | 11.97% | | 11.78% | | 9.04% | | | 11.87% | | 9.03% |
| | | | | | | | | | | | | | | |
| (1) | - Earnings information excluding the fair value adjustments and goodwill impairment charge (alternately referred to as operating | | | | |
| | income (loss) from core operations and expenses from core operations) represent non-GAAP (Generally Accepted | | | | | |
| | Accounting Principles) financial measures. | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| (2) | - Average tangible equity excludes goodwill, core deposit and other intangibles. | | | | | | | | | |
Transmitted on GlobeNewswire on Wednesday, July 20, 2011, at 1:00 p.m. PDT.
