Exhibit 99.1
 | | Contact: Mark J. Grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 News Release |
Banner Corporation Reports Net Income of $11.8 Million, or $0.60 Per Diluted Share, in Second Quarter;
Highlighted by Additional Client Acquisition, Increased Revenues and Further Improved Credit Quality
Walla Walla, WA - July 24, 2013 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income available to common shareholders of $11.8 million, or $0.60 per diluted share, in the second quarter of 2013, compared to $11.6 million, or $0.60 per diluted share in the preceding quarter and $23.4 million, or $1.27 per diluted share, in the second quarter a year ago. For the six months ended June 30, 2013, Banner reported net income available to common shareholders of $23.3 million, or $1.20 per diluted share, compared to $30.6 million, or $1.69 per diluted share in 2012. Banner's results for the quarter ended June 30, 2012 included a $31.8 million tax benefit as a result of the reversal of its deferred tax asset valuation allowance, which was partially offset by a net loss of $19.1 million for fair value adjustments.
“We are pleased with our second quarter and year-to-date performance and the continued successful execution of our strategies and priorities to deliver sustainable profitability to Banner,” said Mark J. Grescovich, President and Chief Executive Officer. “Our strong client acquisition, increased revenues from core operations and further improvement in asset quality clearly demonstrate that our strategic plan and initiatives are working. As a result, this marks the fifteenth consecutive quarter that Banner has achieved a year-over-year increase in revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding gain on the sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments) when compared to the same period a year earlier. This solid revenue generation is particularly rewarding in light of the persistently slow economic growth and exceptionally low interest rate environment. Our financial metrics and solid market share gains provide strong evidence that our super community bank business model is effective. The entire Banner team should take pride in the fact that their dedicated efforts and hard work are producing very positive results for our clients, our communities and our shareholders.”
Second Quarter 2013 Highlights (compared to second quarter 2012 except as noted)
| • | Net income was $11.8 million, or $0.60 per diluted share. |
| • | Return on average assets was 1.11%. |
| • | Revenues from core operations* increased to $53.1 million, compared to $52.3 million for the second quarter a year ago. |
| • | Commercial and agricultural business loans increased 5% compared to the preceding quarter and 8% compared to a year ago. |
| • | Net interest margin was 4.20%, compared to 4.16% in the preceding quarter and 4.31% in the second quarter a year ago. |
| • | Deposit fees and other service charges increased 5% to $6.6 million. |
| • | Revenues from mortgage banking increased 31% to $3.6 million. |
| • | Non-performing assets decreased to $32.9 million, or 0.78% of total assets, at June 30, 2013, a 27% decrease compared to three months earlier and a 55% decrease compared to a year earlier. |
| • | Non-performing loans decreased to $26.1 million at June 30, 2013, a 22% decrease compared to three months earlier and a 45% decrease compared to a year earlier. |
| • | The ratio of tangible common equity to tangible assets increased to 12.22% at June 30, 2013.* |
| • | Banner declared a regular quarterly cash dividend of $0.12 per share. |
*Earnings information excluding gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments (alternately referred to as other operating income from core operations or revenues from core operations) and the ratio of tangible common equity (which excludes other intangible assets and preferred stock) to tangible assets 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 Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented.
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Income Statement Review
“The continued strength in our net interest margin reflects important reductions in deposit and other funding costs, as well as a significant reduction in the adverse effect of non-performing assets and favorable changes in the mix of our earning assets,” said Grescovich. “However, the continuing impact of exceptionally low market interest rates is clearly evident in declining asset yields compared to the second quarter a year ago.” Banner's net interest margin was 4.20% in the second quarter of 2013, compared to 4.16% in the preceding quarter and 4.31% in the second quarter a year ago. For the first six months of 2013, the net interest margin was 4.18% compared to 4.23% for the first six months of 2012.
Deposit costs decreased by two basis points in the second quarter compared to the preceding quarter and 19 basis points compared to the second quarter a year ago. Total funding costs for the second quarter of 2013 decreased three basis points compared to the preceding quarter and were also 19 basis points lower than the second quarter a year ago. Asset yields increased one basis point compared to the preceding quarter and decreased 28 basis points from the second quarter a year ago. Loan yields decreased by just one basis point compared to the preceding quarter but were 31 basis points lower than the second quarter a year ago. Net collections on nonaccrual loans added two basis points to the margin in the second quarter of 2013, while nonaccrual loans reduced the margin by approximately four basis points in the preceding quarter and approximately eight basis points in the second quarter of 2012.
Second quarter net interest income, before the provision for loan losses, was $42.2 million, compared to $41.0 million in the preceding quarter and $42.7 million in the second quarter a year ago. For the first six months of 2013, net interest income, before the provision for loan losses, was $83.2 million compared to $84.2 million for the same period in 2012. Modest growth in average earning assets for the quarter and six-months ended June 30, 2013 generally offset the decreases in the respective net interest margins compared to the same periods a year earlier.
Increased home purchase transactions, as well as continuing homeowner refinance activity, contributed to revenues from mortgage banking activities, which increased to $3.6 million compared to $2.8 million in the preceding quarter and $2.7 million in the second quarter of 2012. Banner's 2013 second quarter revenues from mortgage banking activities were augmented by $600,000 as a result of a partial reversal of a valuation allowance for previously recorded impairment charges related to its mortgage servicing rights. In the first six months of 2013, revenues from mortgage banking operations was $6.4 million compared to $5.2 million in the first six months of 2012.
Deposit fees and other service charges were $6.6 million in the second quarter of 2013, compared to $6.3 million in both the preceding quarter and the second quarter a year ago. In the first six months of the year, deposit fees increased 6% to $12.9 million compared to $12.2 million in the first six months of 2012. The increases in deposit fees and service charges continue to reflect additional growth in customer accounts as a result of successful client acquisition initiatives. Revenues from core operations* were $53.1 million in the second quarter compared to $50.9 million in the first quarter of 2013 and $52.3 million in the second quarter a year ago. In the first six months of the year, Banner's revenues from core operations were $104.0 million compared to $102.7 million in the first six months of 2012.
Banner's second quarter 2013 results included a gain on the sale of securities of $12,000, as well as a $255,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value. In the preceding quarter, Banner recorded a $1.0 million gain on the sale of securities and a net loss of $1.3 million for fair value adjustments. During the second quarter of 2012, Banner reversed most of its deferred tax asset valuation allowance, reflecting Banner's return to profitability and its expectation of sustainable profitability in future periods. This expectation also led to a significant adjustment of the fair value estimate during the second quarter of 2012 for the junior subordinated debentures issued by the Company. The substantial changes to both of these significant accounting estimates were directly linked to Banner's improved performance and profitability. As a result, in the second quarter of 2012 Banner recorded a net loss of $19.1 million for fair value adjustments and a $29,000 gain on securities sales.
Total other operating income, which includes the gain on sale of securities, OTTI recovery and changes in the valuation of financial instruments, was $10.6 million in the second quarter of 2013, compared to $10.0 million in the first quarter of 2013. In the second quarter a year ago there was a total other operating loss of $9.5 million. Year-to-date total other operating income was $20.6 million compared to $1.1 million in the first six months of 2012. Other operating income from core operations* (total other operating income, excluding gain on the sale of securities, fair value and OTTI adjustments) was $10.9 million for the second quarter of 2013, compared to $9.9 million for the preceding quarter and $9.5 million for the second quarter a year ago. In the first six months of 2013, other operating income from core operations* was $20.8 million compared to $18.5 million in the first six months of 2012.
“Operating expenses declined in the second quarter compared to the second quarter a year ago, primarily due to lower costs associated with loan collections and the real estate owned portfolio, as well as a decrease in FDIC deposit insurance charges,” said Grescovich. Total other operating expenses (non-interest expenses) were $35.5 million in the second quarter of 2013, compared to $35.7 million in the second quarter of 2012. In the first quarter of 2013, total other operating expenses were $34.1 million. For the
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first six months of 2013, total other operating expenses declined 5% to $69.6 million compared to $73.6 million in the first six months of 2012. The decrease was largely a result of decreased costs related to real estate owned, professional services, and deposit insurance, which more than offset increases in compensation and other expenses.
For the second quarter ended June 30, 2013, Banner recorded $5.7 million in state and federal income tax expense for an effective tax rate of approximately 32.5%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits. For the quarter ended June 30, 2012, Banner had a net benefit from income taxes as a result of the reversal of most of the valuation allowance for its deferred tax assets (DTA) at that date. The balance of the DTA valuation allowance was eliminated during the final two quarters of 2012 which resulted in a substantially reduced provision for income taxes in the third and fourth quarters of 2012.
Credit Quality
“All of Banner's key credit quality metrics have improved significantly over the last year, including further progress during the second quarter of 2013, while our reserve levels have remained substantial, providing additional benefit in the current quarter's earnings,” said Grescovich. As a result of substantial reserves already in place representing 2.34% of total loans outstanding, as well as declining net charge-offs, Banner did not record a provision for loan losses in either the first or second quarter of 2013. This compares to a $4.0 million provision in the second quarter a year ago and $9.0 million for the first six months of 2012. The allowance for loan losses at June 30, 2013 was $76.9 million, representing 294% of non-performing loans. Non-performing loans decreased by 22% to $26.1 million at June 30, 2013, compared to $33.4 million three months earlier, and decreased 45% when compared to $47.4 million a year earlier.
Real estate owned and repossessed assets decreased 40% to $6.8 million at June 30, 2013, compared to $11.5 million three months earlier, and decreased 74% when compared to $25.8 million a year ago. Net charge-offs in the second quarter of 2013 totaled $275,000, or 0.01% of average loans outstanding, compared to $363,000, or 0.01% of average loans outstanding in the first quarter of 2013 and $5.3 million, or 0.16% of average loans outstanding in the second quarter a year ago.
At June 30, 2013, Banner's non-performing assets were 0.78% of total assets, compared to 1.06% at March 31, 2013 and 1.73% a year ago. Non-performing assets decreased 27% to $32.9 million at June 30, 2013, compared to $44.9 million at March 31, 2013 and decreased 55% compared to $73.2 million a year ago.
Balance Sheet Review
“Total loans outstanding increased during the second quarter,” said Grescovich, “although credit line utilizations remained low and businesses and consumers continued to maintain a cautious approach to spending and borrowing. However, we are encouraged by the growth we achieved in targeted loan categories as well as the potential in our loan origination pipelines. As a result, we remain optimistic about capturing additional market share going forward. The increases in construction and development loan balances and significant velocity in that portion of the loan portfolio have had a very positive effect on our net interest margin in recent quarters.”
Net loans increased to $3.21 billion at June 30, 2013 compared to $3.16 billion at March 31, 2013, and $3.13 billion a year ago. Commercial real estate and multifamily real estate loans totaled $1.23 billion at June 30, 2013 and March 31, 2013 compared to $1.22 billion a year ago. Commercial and agricultural business loans were $873.8 million at June 30, 2013, a 5% increase from $829.7 million three months earlier and an increase of 8% compared to $811.8 million a year ago. Total construction and development loans increased 7% during the quarter to $353.7 million at June 30, 2013 compared to $331.7 million at March 31, 2013, and increased 20% compared to $293.9 million a year earlier.
The aggregate total of securities and interest-bearing deposits declined to $696.1 million at June 30, 2013 compared to $729.2 million at March 31, 2013 and $729.3 million at June 30, 2012. The change in the mix of interest-bearing deposits and securities holdings compared to a year ago reflects a modest extension of the expected duration of our securities holdings designed to increase the yield relative to federal funds and interest-bearing deposits. The securities purchased in recent periods were primarily intermediate-term U.S. Government Agency notes and mortgage-backed securities and, to a lesser extent, intermediate-term taxable and tax-exempt municipal securities. The average effective duration of Banner's securities portfolio was approximately 3.8 years at June 30, 2013.
Total deposits were $3.46 billion at June 30, 2013, compared to $3.52 billion three months earlier and $3.43 billion a year ago. Following a normal seasonal pattern, non-interest-bearing account balances declined slightly to $958.7 million at June 30, 2013, compared to $962.2 million at March 31, 2013, but increased 19% compared to $804.6 million a year ago. Interest-bearing transaction and savings accounts totaled $1.56 billion at June 30, 2013, compared to $1.58 billion at March 31, 2013 and $1.45 billion a year ago, while certificates of deposit further decreased to $944.1 million at June 30, 2013, compared to $982.9 million at March 31, 2013 and $1.17 billion a year earlier. Non-certificate core deposits represented 73% of total deposits at the end of the second quarter, compared to 66% of total deposits a year earlier.
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“Our super community bank strategy that involves lowering our funding costs by reducing our reliance on high-priced certificates of deposit, adding new client relationships, and improving our core funding position is consistently producing positive results and enhancing our deposit franchise,” said Grescovich. “As a result, Banner's cost of deposits declined another two basis points to 0.29% for the quarter ended June 30, 2013 compared to 0.31% for the quarter ended March 31, 2013, and declined 19 basis points from 0.48% for the quarter ended June 30, 2012.”
Total assets were $4.24 billion at June 30, 2013, the same as at March 31, 2013 and $4.22 billion a year ago. At June 30, 2013, total common stockholders' equity was $520.3 million, or $26.66 per share. Banner had 19.6 million shares of common stock outstanding at quarter end, compared to 18.8 million shares of common stock outstanding a year ago. The number of shares increased primarily as a result of common stock issued through Banner's Dividend Reinvestment and Direct Stock Purchase and Sale Plan during July and August of 2012. At June 30, 2013, tangible common stockholders' equity, which excludes other intangible assets, was $517.1 million, or 12.22% of tangible assets, compared to $512.3 million, or 12.10% of tangible assets, at March 31, 2013 and $460.3 million, or 10.92% of tangible assets, a year ago. Banner's tangible book value per share increased to $26.49 at June 30, 2013, compared to $24.52 per share a year ago.
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 13.26% and its total capital to risk-weighted assets ratio was 16.99% at June 30, 2013.
Conference Call
Banner will host a conference call on Thursday, July 25, 2013, at 8:00 a.m. PDT, to discuss its second quarter results. The conference call can be accessed live by telephone at (480) 629-9818 to participate in the call. To listen to the call on-line, go to the Company's website at www.bannerbank.com. A replay will be available for one week at (303) 590-3030, using access code 4626349.
About the Company
Banner Corporation is a $4.24 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” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Company's financial condition, liquidity, 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 from the results anticipated or implied by our forward-looking statements 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 and require us to materially increase our reserves; 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 Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions 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, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; 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 including changes related to Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; 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 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
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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; and other risks detailed in Banner Corporation's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012. 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 whether as a result of new information, future events or otherwise. These risks could cause our actual results for 2013 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.
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| RESULTS OF OPERATIONS | | Quarters Ended | | Six Months Ended |
| (in thousands except shares and per share data) | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Jun 30, 2013 | | Jun 30, 2012 |
| INTEREST INCOME: | | | | | | | | | | |
| Loans receivable | | $ | 42,292 | | | $ | 41,489 | | | $ | 44,473 | | | $ | 83,781 | | | $ | 88,824 | |
| Mortgage-backed securities | | 1,394 | | | 1,172 | | | 995 | | | 2,566 | | | 1,922 | |
| Securities and cash equivalents | | 1,885 | | | 1,847 | | | 2,230 | | | 3,733 | | | 4,513 | |
| | | 45,571 | | | 44,508 | | | 47,698 | | | 90,080 | | | 95,259 | |
| INTEREST EXPENSE: | | | | | | | | | | |
| Deposits | | 2,490 | | | 2,719 | | | 4,035 | | | 5,210 | | | 8,483 | |
| Federal Home Loan Bank advances | | 40 | | | 24 | | | 64 | | | 64 | | | 127 | |
| Other borrowings | | 51 | | | 56 | | | 74 | | | 107 | | | 623 | |
| Junior subordinated debentures | | 742 | | | 741 | | | 802 | | | 1,482 | | | 1,814 | |
| | | 3,323 | | | 3,540 | | | 4,975 | | | 6,863 | | | 11,047 | |
| Net interest income before provision for loan losses | | 42,248 | | | 40,968 | | | 42,723 | | | 83,217 | | | 84,212 | |
| PROVISION FOR LOAN LOSSES | | — | | | — | | | 4,000 | | | — | | | 9,000 | |
| Net interest income | | 42,248 | | | 40,968 | | | 38,723 | | | 83,217 | | | 75,212 | |
| OTHER OPERATING INCOME: | | | | | | | | | | |
| Deposit fees and other service charges | | 6,628 | | | 6,301 | | | 6,283 | | | 12,928 | | | 12,152 | |
| Mortgage banking operations | | 3,574 | | | 2,838 | | | 2,736 | | | 6,412 | | | 5,211 | |
| Miscellaneous | | 664 | | | 790 | | | 514 | | | 1,455 | | | 1,093 | |
| | | 10,866 | | | 9,929 | | | 9,533 | | | 20,795 | | | 18,456 | |
| Gain on sale of securities | | 12 | | | 1,006 | | | 29 | | | 1,018 | | | 29 | |
| Other-than-temporary impairment recovery | | — | | | 409 | | | — | | | 409 | | | — | |
| Net change in valuation of financial instruments carried at fair value | | (255 | ) | | (1,347 | ) | | (19,059 | ) | | (1,601 | ) | | (17,374 | ) |
| Total other operating income | | 10,623 | | | 9,997 | | | (9,497 | ) | | 20,621 | | | 1,111 | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | |
| Salary and employee benefits | | 21,224 | | | 20,729 | | | 19,390 | | | 41,953 | | | 38,900 | |
| Less capitalized loan origination costs | | (3,070 | ) | | (2,871 | ) | | (2,747 | ) | | (5,941 | ) | | (4,997 | ) |
| Occupancy and equipment | | 5,415 | | | 5,329 | | | 5,204 | | | 10,744 | | | 10,681 | |
| Information / computer data services | | 1,923 | | | 1,720 | | | 1,746 | | | 3,643 | | | 3,261 | |
| Payment and card processing services | | 2,449 | | | 2,305 | | | 2,116 | | | 4,753 | | | 4,006 | |
| Professional services | | 820 | | | 905 | | | 1,224 | | | 1,726 | | | 2,568 | |
| Advertising and marketing | | 1,798 | | | 1,499 | | | 1,650 | | | 3,297 | | | 3,716 | |
| Deposit insurance | | 617 | | | 645 | | | 816 | | | 1,263 | | | 2,179 | |
| State/municipal business and use taxes | | 538 | | | 464 | | | 565 | | | 1,003 | | | 1,133 | |
| Real estate operations | | (195 | ) | | (251 | ) | | 1,969 | | | (446 | ) | | 4,567 | |
| Amortization of core deposit intangibles | | 477 | | | 505 | | | 523 | | | 982 | | | 1,075 | |
| Miscellaneous | | 3,461 | | | 3,120 | | | 3,210 | | | 6,580 | | | 6,490 | |
| Total other operating expense | | 35,457 | | | 34,099 | | | 35,666 | | | 69,557 | | | 73,579 | |
| Income before provision for (benefit from) income taxes | | 17,414 | | | 16,866 | | | (6,440 | ) | | 34,281 | | | 2,744 | |
| PROVISION (BENEFIT) FOR INCOME TAXES | | 5,661 | | | 5,284 | | | (31,830 | ) | | 10,945 | | | (31,830 | ) |
| NET INCOME | | 11,753 | | | 11,582 | | | 25,390 | | | 23,336 | | | 34,574 | |
| PREFERRED STOCK DIVIDEND AND ADJUSTMENTS: | | | | | | | | | | |
| Preferred stock dividend | | — | | | — | | | 1,550 | | | — | | | 3,100 | |
| Preferred stock discount accretion | | — | | | — | | | 454 | | | — | | | 908 | |
| Gain on repurchase and retirement of preferred stock | | — | | | — | | | — | | | — | | | — | |
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | | $ | 11,753 | | | $ | 11,582 | | | $ | 23,386 | | | $ | 23,336 | | | $ | 30,566 | |
| Earnings per share available to common shareholders: | | | | | | | | | | |
| Basic | | $ | 0.61 | | | $ | 0.60 | | | $ | 1.27 | | | $ | 1.21 | | | $ | 1.69 | |
| Diluted | | $ | 0.60 | | | $ | 0.60 | | | $ | 1.27 | | | $ | 1.20 | | | $ | 1.69 | |
| Cumulative dividends declared per common share | | $ | 0.12 | | | $ | 0.12 | | | $ | 0.01 | | | $ | 0.24 | | | $ | 0.02 | |
| Weighted average common shares outstanding: | | | | | | | | | | |
| Basic | | 19,333,470 | | | 19,312,824 | | | 18,404,680 | | | 19,323,204 | | | 18,051,636 | |
| Diluted | | 19,397,171 | | | 19,367,213 | | | 18,444,276 | | | 19,385,389 | | | 18,085,801 | |
| Common shares issued via restricted stock grants, DRIP and stock purchases (net) | | 92,133 | | | 7,518 | | | 777,051 | | | 99,651 | | | 1,251,347 | |
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| FINANCIAL CONDITION | | | | | | | | |
| (in thousands except shares and per share data) | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Dec 31, 2012 |
| ASSETS | | | | | | | | |
| Cash and due from banks | | $ | 54,368 | | | $ | 59,414 | | | $ | 56,640 | | | $ | 66,370 | |
| Federal funds and interest-bearing deposits | | 67,080 | | | 96,300 | | | 132,536 | | | 114,928 | |
| Securities - at fair value | | 65,524 | | | 67,761 | | | 77,368 | | | 71,232 | |
| Securities - available for sale | | 469,137 | | | 476,683 | | | 436,130 | | | 472,920 | |
| Securities - held to maturity | | 94,336 | | | 88,408 | | | 83,312 | | | 86,452 | |
| Federal Home Loan Bank stock | | 36,040 | | | 36,373 | | | 37,371 | | | 36,705 | |
| Loans receivable: | | | | | | | | |
| Held for sale | | 6,393 | | | 5,384 | | | 6,752 | | | 11,920 | |
| Held for portfolio | | 3,283,808 | | | 3,234,937 | | | 3,205,505 | | | 3,223,794 | |
| Allowance for loan losses | | (76,853 | ) | | (77,128 | ) | | (80,221 | ) | | (77,491 | ) |
| | | 3,213,348 | | | 3,163,193 | | | 3,132,036 | | | 3,158,223 | |
| Accrued interest receivable | | 14,648 | | | 15,235 | | | 14,656 | | | 13,930 | |
| Real estate owned held for sale, net | | 6,714 | | | 11,160 | | | 25,816 | | | 15,778 | |
| Property and equipment, net | | 87,896 | | | 88,414 | | | 90,228 | | | 89,117 | |
| Other intangibles, net | | 3,247 | | | 3,724 | | | 5,252 | | | 4,230 | |
| Bank-owned life insurance | | 60,894 | | | 60,425 | | | 59,800 | | | 59,891 | |
| Other assets | | 63,058 | | | 70,536 | | | 70,282 | | | 75,788 | |
| | | $ | 4,236,290 | | | $ | 4,237,626 | | | $ | 4,221,427 | | | $ | 4,265,564 | |
| LIABILITIES | | | | | | | | |
| Deposits: | | | | | | | | |
| Non-interest-bearing | | $ | 958,674 | | | $ | 962,156 | | | $ | 804,562 | | | $ | 981,240 | |
| Interest-bearing transaction and savings accounts | | 1,557,513 | | | 1,575,525 | | | 1,449,890 | | | 1,547,271 | |
| Interest-bearing certificates | | 944,137 | | | 982,903 | | | 1,171,297 | | | 1,029,293 | |
| | | 3,460,324 | | | 3,520,584 | | | 3,425,749 | | | 3,557,804 | |
| Advances from Federal Home Loan Bank at fair value | | 54,262 | | | 278 | | | 10,423 | | | 10,304 | |
| Customer repurchase agreements | | 90,779 | | | 88,446 | | | 90,030 | | | 76,633 | |
| Junior subordinated debentures at fair value | | 73,471 | | | 73,220 | | | 70,553 | | | 73,063 | |
| Accrued expenses and other liabilities | | 22,010 | | | 24,157 | | | 23,564 | | | 26,389 | |
| Deferred compensation | | 15,111 | | | 14,879 | | | 13,916 | | | 14,452 | |
| | | 3,715,957 | | | 3,721,564 | | | 3,634,235 | | | 3,758,645 | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
| Preferred stock - Series A | | — | | | — | | | 121,610 | | | — | |
| Common stock | | 568,408 | | | 568,116 | | | 554,866 | | | 567,907 | |
| Retained earnings (accumulated deficit) | | (42,440 | ) | | (51,851 | ) | | (89,266 | ) | | (61,102 | ) |
| Other components of stockholders' equity | | (5,635 | ) | | (203 | ) | | (18 | ) | | 114 | |
| | | 520,333 | | | 516,062 | | | 587,192 | | | 506,919 | |
| | | $ | 4,236,290 | | | $ | 4,237,626 | | | $ | 4,221,427 | | | $ | 4,265,564 | |
| Common Shares Issued: | | | | | | | | |
| Shares outstanding at end of period | | 19,553,189 | | | 19,462,483 | | | 18,804,819 | | | 19,454,965 | |
| 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 | | 19,518,849 | | | 19,428,143 | | | 18,770,479 | | | 19,420,625 | |
Common stockholders' equity per share (1) | | $ | 26.66 | | | $ | 26.56 | | | $ | 24.80 | | | $ | 26.10 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 26.49 | | | $ | 26.37 | | | $ | 24.52 | | | $ | 25.88 | |
Common stockholders' tangible equity to tangible assets (2) | | 12.22 | % | | 12.10 | % | | 10.92 | % | | 11.80 | % |
| Consolidated Tier 1 leverage capital ratio | | 13.26 | % | | 13.28 | % | | 15.07 | % | | 12.74 | % |
| (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) | Common stockholders' tangible equity excludes preferred stock and other intangibles. Tangible assets excludes other intangible assets. These ratios represent non-GAAP financial measures. |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 8
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | |
| (dollars in thousands) | | | | | | | | |
| | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Dec 31, 2012 |
| LOANS (including loans held for sale): | | | | | | | | |
| Commercial real estate: | | | | | | | | |
| Owner occupied | | $ | 500,812 | | | $ | 497,442 | | | $ | 477,621 | | | $ | 489,581 | |
| Investment properties | | 595,896 | | | 602,761 | | | 613,965 | | | 583,641 | |
| Multifamily real estate | | 137,027 | | | 134,290 | | | 130,319 | | | 137,504 | |
| Commercial construction | | 25,629 | | | 34,762 | | | 23,808 | | | 30,229 | |
| Multifamily construction | | 39,787 | | | 34,147 | | | 18,132 | | | 22,581 | |
| One- to four-family construction | | 191,003 | | | 171,876 | | | 157,301 | | | 160,815 | |
| Land and land development: | | | | | | | | |
| Residential | | 86,037 | | | 78,446 | | | 83,185 | | | 77,010 | |
| Commercial | | 11,228 | | | 12,477 | | | 11,451 | | | 13,982 | |
| Commercial business | | 639,840 | | | 619,478 | | | 600,046 | | | 618,049 | |
| Agricultural business including secured by farmland | | 233,967 | | | 210,225 | | | 211,705 | | | 230,031 | |
| One- to four-family real estate | | 552,698 | | | 566,730 | | | 607,489 | | | 581,670 | |
| Consumer: | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 163,339 | | | 165,305 | | | 173,731 | | | 170,123 | |
| Consumer-other | | 112,938 | | | 112,382 | | | 103,504 | | | 120,498 | |
| Total loans outstanding | | $ | 3,290,201 | | | $ | 3,240,321 | | | $ | 3,212,257 | | | $ | 3,235,714 | |
| Restructured loans performing under their restructured terms | | $ | 51,732 | | | $ | 54,611 | | | $ | 58,010 | | | $ | 57,462 | |
| Loans 30 - 89 days past due and on accrual | | $ | 5,902 | | | $ | 6,984 | | | $ | 5,504 | | | $ | 11,685 | |
| Total delinquent loans (including loans on non-accrual) | | $ | 32,002 | | | $ | 40,390 | | | $ | 52,866 | | | $ | 45,300 | |
| Total delinquent loans / Total loans outstanding | | 0.97 | % | | 1.25 | % | | 1.65 | % | | 1.40 | % |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | |
| June 30, 2013 | | Washington | | Oregon | | Idaho | | Other | | Total |
| Commercial real estate: | | | | | | | | | | |
| Owner occupied | | $ | 381,289 | | | $ | 56,671 | | | $ | 56,678 | | | $ | 6,174 | | | $ | 500,812 | |
| Investment properties | | 463,804 | | | 82,395 | | | 46,497 | | | 3,200 | | | 595,896 | |
| Multifamily real estate | | 110,477 | | | 16,917 | | | 9,402 | | | 231 | | | 137,027 | |
| Commercial construction | | 17,184 | | | 3,686 | | | 589 | | | 4,170 | | | 25,629 | |
| Multifamily construction | | 13,868 | | | 25,919 | | | — | | | — | | | 39,787 | |
| One- to four-family construction | | 104,686 | | | 83,559 | | | 2,758 | | | — | | | 191,003 | |
| Land and land development: | | | | | | | | | | |
| Residential | | 57,834 | | | 26,750 | | | 1,453 | | | — | | | 86,037 | |
| Commercial | | 6,351 | | | 3,015 | | | 1,862 | | | — | | | 11,228 | |
| Commercial business | | 406,876 | | | 76,532 | | | 61,731 | | | 94,701 | | | 639,840 | |
| Agricultural business including secured by farmland | | 116,785 | | | 51,205 | | | 65,977 | | | — | | | 233,967 | |
| One- to four-family real estate | | 349,302 | | | 177,641 | | | 23,727 | | | 2,028 | | | 552,698 | |
| Consumer: | | | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 108,818 | | | 41,718 | | | 12,157 | | | 646 | | | 163,339 | |
| Consumer-other | | 76,106 | | | 31,482 | | | 5,335 | | | 15 | | | 112,938 | |
| Total loans outstanding | | $ | 2,213,380 | | | $ | 677,490 | | | $ | 288,166 | | | $ | 111,165 | | | $ | 3,290,201 | |
| Percent of total loans | | 67.3 | % | | 20.6 | % | | 8.7 | % | | 3.4 | % | | 100.0 | % |
| DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT | | | | | | | | |
| June 30, 2013 | | Washington | | Oregon | | Idaho | | Other | | Total |
| Residential: | | | | | | | | | | |
| Acquisition & development | | $ | 16,447 | | | $ | 9,987 | | | $ | 1,258 | | | — | | | $ | 27,692 | |
| Improved lots | | 32,960 | | | 16,313 | | | 195 | | | — | | | 49,468 | |
| Unimproved land | | 8,427 | | | 450 | | | — | | | — | | | 8,877 | |
| Total residential land and development | | $ | 57,834 | | | $ | 26,750 | | | $ | 1,453 | | | — | | | $ | 86,037 | |
| Commercial & industrial: | | | | | | | | | | |
| Acquisition & development | | $ | — | | | — | | | $ | 481 | | | — | | | $ | 481 | |
| Improved land | | 3,549 | | | 135 | | | 529 | | | — | | | 4,213 | |
| Unimproved land | | 2,802 | | | 2,880 | | | 852 | | | — | | | 6,534 | |
| Total commercial land and development | | $ | 6,351 | | | $ | 3,015 | | | $ | 1,862 | | | — | | | $ | 11,228 | |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | Quarters Ended | | Six Months Ended |
| CHANGE IN THE | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Jun 30, 2013 | | Jun 30, 2012 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | |
| Balance, beginning of period | | $ | 77,128 | | | $ | 77,491 | | | $ | 81,544 | | | $ | 77,491 | | | $ | 82,912 | |
| Provision | | — | | | — | | | 4,000 | | | — | | | 9,000 | |
| Recoveries of loans previously charged off: | | | | | | | | | | |
| Commercial real estate | | 378 | | | 1,586 | | | 18 | | | 1,964 | | | 632 | |
| Multifamily real estate | | — | | | — | | | — | | | — | | | — | |
| Construction and land | | 337 | | | 101 | | | 1,050 | | | 438 | | | 1,420 | |
| One- to four-family real estate | | 3 | | | 116 | | | 374 | | | 119 | | | 379 | |
| Commercial business | | 666 | | | 386 | | | 639 | | | 1,052 | | | 875 | |
| Agricultural business, including secured by farmland | | 310 | | | 37 | | | 15 | | | 347 | | | 15 | |
| Consumer | | 117 | | | 102 | | | 195 | | | 219 | | | 331 | |
| | | 1,811 | | | 2,328 | | | 2,291 | | | 4,139 | | | 3,652 | |
| Loans charged off: | | | | | | | | | | |
| Commercial real estate | | (418 | ) | | (348 | ) | | (1,259 | ) | | (766 | ) | | (2,582 | ) |
| Multifamily real estate | | — | | | — | | | — | | | — | | | — | |
| Construction and land | | (419 | ) | | (435 | ) | | (1,703 | ) | | (854 | ) | | (4,627 | ) |
| One- to four-family real estate | | (402 | ) | | (651 | ) | | (1,906 | ) | | (1,053 | ) | | (2,872 | ) |
| Commercial business | | (398 | ) | | (929 | ) | | (2,297 | ) | | (1,327 | ) | | (3,704 | ) |
| Agricultural business, including secured by farmland | | — | | | — | | | — | | | — | | | (275 | ) |
| Consumer | | (449 | ) | | (328 | ) | | (449 | ) | | (777 | ) | | (1,283 | ) |
| | | (2,086 | ) | | (2,691 | ) | | (7,614 | ) | | (4,777 | ) | | (15,343 | ) |
| Net charge-offs | | (275 | ) | | (363 | ) | | (5,323 | ) | | (638 | ) | | (11,691 | ) |
| Balance, end of period | | $ | 76,853 | | | $ | 77,128 | | | $ | 80,221 | | | $ | 76,853 | | | $ | 80,221 | |
| Net charge-offs / Average loans outstanding | | 0.01 | % | | 0.01 | % | | 0.16 | % | | 0.02 | % | | 0.36 | % |
| ALLOCATION OF | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | June 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Dec 31, 2012 |
| Specific or allocated loss allowance: | | | | | | | | |
| Commercial real estate | | $ | 14,898 | | | $ | 14,776 | | | $ | 16,834 | | | $ | 15,322 | |
| Multifamily real estate | | 4,973 | | | 5,075 | | | 5,108 | | | 4,506 | |
| Construction and land | | 16,625 | | | 15,214 | | | 16,974 | | | 14,991 | |
| One- to four-family real estate | | 14,974 | | | 15,930 | | | 14,213 | | | 16,475 | |
| Commercial business | | 10,806 | | | 10,011 | | | 12,352 | | | 9,957 | |
| Agricultural business, including secured by farmland | | 3,805 | | | 2,282 | | | 1,294 | | | 2,295 | |
| Consumer | | 1,011 | | | 1,238 | | | 1,365 | | | 1,348 | |
| Total allocated | | 67,092 | | | 64,526 | | | 68,140 | | | 64,894 | |
| Estimated allowance for undisbursed commitments | | 665 | | | 631 | | | 639 | | | 758 | |
| Unallocated | | 9,096 | | | 11,971 | | | 11,442 | | | 11,839 | |
| Total allowance for loan losses | | $ | 76,853 | | | $ | 77,128 | | | $ | 80,221 | | | $ | 77,491 | |
| Allowance for loan losses / Total loans outstanding | | 2.34 | % | | 2.38 | % | | 2.50 | % | | 2.39 | % |
| Allowance for loan losses / Non-performing loans | | 294 | % | | 231 | % | | 169 | % | | 225 | % |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | |
| (dollars in thousands) | | | | | | | |
| | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Dec 31, 2012 |
| NON-PERFORMING ASSETS | | | | | | | |
| Loans on non-accrual status: | | | | | | | |
| Secured by real estate: | | | | | | | |
| Commercial | $ | 4,810 | | | $ | 6,726 | | | $ | 7,580 | | | $ | 6,579 | |
| Multifamily | 335 | | | 339 | | | — | | | — | |
| Construction and land | 2,775 | | | 3,729 | | | 8,939 | | | 3,673 | |
| One- to four-family | 11,465 | | | 12,875 | | | 16,170 | | | 12,964 | |
| Commercial business | 2,819 | | | 4,370 | | | 8,600 | | | 4,750 | |
| Agricultural business, including secured by farmland | — | | | — | | | 1,010 | | | — | |
| Consumer | 1,938 | | | 3,078 | | | 2,882 | | | 3,395 | |
| | 24,142 | | | 31,117 | | | 45,181 | | | 31,361 | |
| Loans more than 90 days delinquent, still on accrual: | | | | | | | |
| Secured by real estate: | | | | | | | |
| Commercial | — | | | — | | | — | | | — | |
| Multifamily | — | | | — | | | — | | | — | |
| Construction and land | — | | | — | | | — | | | — | |
| One- to four-family | 1,897 | | | 2,243 | | | 2,142 | | | 2,877 | |
| Commercial business | 4 | | | — | | | — | | | — | |
| Agricultural business, including secured by farmland | — | | | — | | | — | | | — | |
| Consumer | 58 | | | 46 | | | 39 | | | 152 | |
| | 1,959 | | | 2,289 | | | 2,181 | | | 3,029 | |
| Total non-performing loans | 26,101 | | | 33,406 | | | 47,362 | | | 34,390 | |
| Real estate owned (REO) and repossessed assets | 6,832 | | | 11,458 | | | 25,830 | | | 15,853 | |
| Total non-performing assets | $ | 32,933 | | | $ | 44,864 | | | $ | 73,192 | | | $ | 50,243 | |
| Total non-performing assets / Total assets | 0.78 | % | | 1.06 | % | | 1.73 | % | | 1.18 | % |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | |
| NON-PERFORMING ASSETS AT | | | | | | | |
| June 30, 2013 | Washington | | Oregon | | Idaho | | Total |
| Secured by real estate: | | | | | | | |
| Commercial | $ | 4,759 | | | $ | — | | | $ | 51 | | | $ | 4,810 | |
| Multifamily | — | | | — | | | 335 | | | 335 | |
| Construction and land: | | | | | | | |
| One- to four-family construction | 1,049 | | | 349 | | | 366 | | | 1,764 | |
| Residential land acquisition & development | — | | | 876 | | | — | | | 876 | |
| Residential land improved lots | — | | | 22 | | | — | | | 22 | |
| Residential land unimproved | 113 | | | — | | | — | | | 113 | |
| Commercial land improved | — | | | — | | | — | | | — | |
| Commercial land unimproved | — | | | — | | | — | | | — | |
| Total construction and land | 1,162 | | | 1,247 | | | 366 | | | 2,775 | |
| One- to four-family | 9,003 | | | 2,353 | | | 2,006 | | | 13,362 | |
| Commercial business | 2,756 | | | 67 | | | — | | | 2,823 | |
| Agricultural business, including secured by farmland | — | | | — | | | — | | | — | |
| Consumer | 1,454 | | | 390 | | | 152 | | | 1,996 | |
| Total non-performing loans | 19,134 | | | 4,057 | | | 2,910 | | | 26,101 | |
| Real estate owned (REO) and repossessed assets | 2,659 | | | 3,904 | | | 269 | | | 6,832 | |
| Total non-performing assets at end of the period | $ | 21,793 | | | $ | 7,961 | | | $ | 3,179 | | | $ | 32,933 | |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | |
| (dollars in thousands) | | | |
| | Quarters Ended | | Six Months Ended |
| REAL ESTATE OWNED | Jun 30, 2013 | | Jun 30, 2012 | | Jun 30, 2013 | | Jun 30, 2012 |
| Balance, beginning of period | $ | 11,160 | | | $ | 27,723 | | | $ | 15,778 | | | $ | 42,965 | |
| Additions from loan foreclosures | 418 | | | 6,885 | | | 1,504 | | | 8,486 | |
| Additions from capitalized costs | — | | | 7 | | | 47 | | | 134 | |
| Proceeds from dispositions of REO | (5,305 | ) | | (7,798 | ) | | (11,788 | ) | | (23,239 | ) |
| Gain on sale of REO | 667 | | | 567 | | | 1,472 | | | 667 | |
| Valuation adjustments in the period | (226 | ) | | (1,568 | ) | | (299 | ) | | (3,197 | ) |
| Balance, end of period | $ | 6,714 | | | $ | 25,816 | | | $ | 6,714 | | | $ | 25,816 | |
| REAL ESTATE OWNED- BY TYPE AND STATE | | | | | | | |
| June 30, 2013 | Washington | | Oregon | | Idaho | | Total |
| Commercial real estate | $ | — | | | $ | — | | | $ | 199 | | | $ | 199 | |
| One- to four-family construction | — | | | — | | | — | | | — | |
| Land development- commercial | — | | | — | | | — | | | — | |
| Land development- residential | 1,339 | | | 2,979 | | | 70 | | | 4,388 | |
| Agricultural land | — | | | — | | | — | | | — | |
| One- to four-family real estate | 1,203 | | | 924 | | | — | | | 2,127 | |
| Total | $ | 2,542 | | | $ | 3,903 | | | $ | 269 | | | $ | 6,714 | |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 12
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | |
| (dollars in thousands) | | | | | | | | |
| | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | |
| | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Dec 31, 2012 |
| DEPOSIT COMPOSITION | | | | | | | | |
| Non-interest-bearing | | $ | 958,674 | | | $ | 962,156 | | | $ | 804,562 | | | $ | 981,240 | |
| Interest-bearing checking | | 399,302 | | | 400,598 | | | 379,742 | | | 410,316 | |
| Regular savings accounts | | 751,475 | | | 759,866 | | | 664,736 | | | 727,957 | |
| Money market accounts | | 406,736 | | | 415,061 | | | 405,412 | | | 408,998 | |
| Interest-bearing transaction & savings accounts | | 1,557,513 | | | 1,575,525 | | | 1,449,890 | | | 1,547,271 | |
| Interest-bearing certificates | | 944,137 | | | 982,903 | | | 1,171,297 | | | 1,029,293 | |
| Total deposits | | $ | 3,460,324 | | | $ | 3,520,584 | | | $ | 3,425,749 | | | $ | 3,557,804 | |
| | | | | | | | | |
| INCLUDED IN TOTAL DEPOSITS | | | | | | | | |
| Public transaction accounts | | $ | 78,589 | | | $ | 73,273 | | | $ | 73,507 | | | $ | 79,955 | |
| Public interest-bearing certificates | | 51,759 | | | 53,552 | | | 62,743 | | | 60,518 | |
| Total public deposits | | $ | 130,348 | | | $ | 126,825 | | | $ | 136,250 | | | $ | 140,473 | |
| Total brokered deposits | | $ | 7,152 | | | $ | 15,709 | | | $ | 23,521 | | | $ | 15,702 | |
| | | | | | | | | |
| OTHER BORROWINGS | | | | | | | | |
| Customer repurchase agreements / "Sweep accounts" | | $ | 90,779 | | | $ | 88,446 | | | $ | 90,030 | | | $ | 76,633 | |
| GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | |
| June 30, 2013 | | Washington | | Oregon | | Idaho | | Total |
| | | $ | 2,616,808 | | | $ | 604,341 | | | $ | 239,175 | | | $ | 3,460,324 | |
| | | | | | | Minimum for Capital Adequacy | |
| REGULATORY CAPITAL RATIOS AT | | Actual | | | or "Well Capitalized" | |
| June 30, 2013 | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | |
| Banner Corporation-consolidated: | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 603,187 | | | 16.99 | % | | $ | 283,951 | | | 8.00 | % |
| Tier 1 capital to risk-weighted assets | | 558,418 | | | 15.73 | % | | 141,975 | | | 4.00 | % |
| Tier 1 leverage capital to average assets | | 558,418 | | | 13.26 | % | | 168,509 | | | 4.00 | % |
| | | | | | | | | |
| Banner Bank: | | | | | | | | |
| Total capital to risk-weighted assets | | 539,948 | | | 16.02 | % | | 337,121 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 497,415 | | | 14.75 | % | | 202,272 | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | 497,415 | | | 12.46 | % | | 199,676 | | | 5.00 | % |
| | | | | | | | | |
| Islanders Bank: | | | | | | | | |
| Total capital to risk-weighted assets | | 33,913 | | | 18.52 | % | | 18,315 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 31,616 | | | 17.26 | % | | 10,989 | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | 31,616 | | | 13.88 | % | | 11,392 | | | 5.00 | % |
BANR - Second Quarter 2013 Results
July 24, 2013
Page 13
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | |
| | | Quarters Ended | | Six Months Ended |
| OPERATING PERFORMANCE | | Jun 30, 2013 | | Mar 31, 2013 | | Jun 30, 2012 | | Jun 30, 2013 | | Jun 30, 2012 |
| Average loans | | $ | 3,250,808 | | | $ | 3,215,228 | | | $ | 3,232,204 | | | $ | 3,233,116 | | | $ | 3,241,485 | |
| Average securities | | 718,948 | | | 673,298 | | | 636,097 | | | 696,249 | | | 648,368 | |
| Average interest earning cash | | 68,130 | | | 107,950 | | | 122,846 | | | 87,930 | | | 117,191 | |
| Average non-interest-earning assets | | 212,661 | | | 219,211 | | | 174,566 | | | 215,006 | | | 179,613 | |
| Total average assets | | $ | 4,250,547 | | | $ | 4,215,687 | | | $ | 4,165,713 | | | $ | 4,232,301 | | | $ | 4,186,657 | |
| Average deposits | | $ | 3,489,625 | | | $ | 3,501,972 | | | $ | 3,410,249 | | | $ | 3,495,764 | | | $ | 3,415,661 | |
| Average borrowings | | 249,692 | | | 210,462 | | | 230,517 | | | 230,185 | | | 255,478 | |
Average non-interest-bearing other liabilities (1) | | (12,390 | ) | | (11,558 | ) | | (37,694 | ) | | (12,888 | ) | | (37,196 | ) |
| Total average liabilities | | 3,726,927 | | | 3,700,876 | | | 3,603,072 | | | 3,713,061 | | | 3,633,943 | |
| Total average stockholders' equity | | 523,620 | | | 514,811 | | | 562,641 | | | 519,240 | | | 552,714 | |
| Total average liabilities and equity | | $ | 4,250,547 | | | $ | 4,215,687 | | | $ | 4,165,713 | | | $ | 4,232,301 | | | $ | 4,186,657 | |
| Interest rate yield on loans | | 5.22 | % | | 5.23 | % | | 5.53 | % | | 5.23 | % | | 5.51 | % |
| Interest rate yield on securities | | 1.80 | % | | 1.78 | % | | 1.99 | % | | 1.79 | % | | 1.95 | % |
| Interest rate yield on cash | | 0.27 | % | | 0.25 | % | | 0.25 | % | | 0.26 | % | | 0.24 | % |
| Interest rate yield on interest-earning assets | | 4.53 | % | | 4.52 | % | | 4.81 | % | | 4.52 | % | | 4.78 | % |
| Interest rate expense on deposits | | 0.29 | % | | 0.31 | % | | 0.48 | % | | 0.30 | % | | 0.50 | % |
| Interest rate expense on borrowings | | 1.34 | % | | 1.58 | % | | 1.64 | % | | 1.45 | % | | 2.02 | % |
| Interest rate expense on interest-bearing liabilities | | 0.36 | % | | 0.39 | % | | 0.55 | % | | 0.37 | % | | 0.61 | % |
| Interest rate spread | | 4.17 | % | | 4.13 | % | | 4.26 | % | | 4.15 | % | | 4.17 | % |
| Net interest margin | | 4.20 | % | | 4.16 | % | | 4.31 | % | | 4.18 | % | | 4.23 | % |
| Other operating income / Average assets | | 1.00 | % | | 0.96 | % | | (0.92 | )% | | 0.98 | % | | 0.05 | % |
| Other operating income EXCLUDING fair value | | | | | | | | | | |
adjustments / Average assets (2) | | 1.03 | % | | 1.05 | % | | 0.92 | % | | 1.04 | % | | 0.89 | % |
| Other operating expense / Average assets | | 3.35 | % | | 3.28 | % | | 3.44 | % | | 3.31 | % | | 3.53 | % |
| Efficiency ratio (other operating expense / revenue) | | 67.06 | % | | 66.91 | % | | 107.34 | % | | 66.99 | % | | 86.24 | % |
Efficiency ratio EXCLUDING fair value adjustments(2) | | 66.74 | % | | 65.70 | % | | 68.21 | % | | 66.23 | % | | 71.65 | % |
| Return on average assets | | 1.11 | % | | 1.11 | % | | 2.45 | % | | 1.11 | % | | 1.66 | % |
| Return on average equity | | 9.00 | % | | 9.12 | % | | 18.15 | % | | 9.06 | % | | 12.58 | % |
Return on average tangible equity (3) | | 9.06 | % | | 9.20 | % | | 18.33 | % | | 9.13 | % | | 12.71 | % |
| Average equity / Average assets | | 12.32 | % | | 12.21 | % | | 13.51 | % | | 12.27 | % | | 13.20 | % |
| (1) | Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures. |
| (2) | Earnings information excluding fair value adjustments (alternately referred to as other operating income from core operations or revenues from core operations) represent non-GAAP financial measures. |
| (3) | Average tangible equity excludes other intangibles and represents a non-GAAP financial measure. |
