Exhibit 99.1
 |  | Contact: Mark J. Grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 |
Banner Corporation Earns $11.7 Million, or $0.60 Per Diluted Share, in Third Quarter;
Quarter Highlighted by Strong Revenues and Deposit Growth and Increased Dividend
Walla Walla, WA - October 23, 2013 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income available to common shareholders in the third quarter of 2013 of $11.7 million, or $0.60 per diluted share, compared to $11.8 million, or $0.60 per diluted share in the preceding quarter and $15.2 million, or $0.79 per diluted share, in the third quarter a year ago. For the first nine months of 2013, Banner reported net income available to common shareholders of $35.0 million, or $1.80 per diluted share, compared to $45.8 million, or $2.48 per diluted share in the first nine months of 2012. Banner’s results for the first nine months of 2012 were significantly augmented by a $29.4 million net tax benefit as a result of the reversal of its deferred tax asset valuation allowance, which was partially offset by a $16.9 million net loss for fair value adjustments.
“Banner’s third quarter results highlight another quarter of successful execution of our strategies to deliver sustainable profitability for our shareholders,” said Mark J. Grescovich, President and Chief Executive Officer. “Our third quarter results also reflect the difficult operating environment presented by continued very low market interest rates and slow economic growth, which resulted in a decline in the net interest margin, modest loan demand and reduced mortgage banking revenues. Nevertheless, our client acquisition strategies again resulted in strong core deposit growth and, coupled with further improvements in asset quality, demonstrate that our strategic plan is on track. Banner’s solid financial metrics and market share gains provide strong evidence that our super community bank business model is effectively building franchise and shareholder value.”
Third Quarter 2013 Highlights (compared to third quarter 2012 except as noted)
| • | Net income was $11.7 million, or $0.60 per diluted share. |
| • | Return on average assets was 1.09%. |
| • | Return on average equity was 8.78%. |
| • | Revenues from core operations* remained strong at $52.4 million, compared to $53.1 in the preceding quarter and $54.3 million in the third quarter a year ago. |
| • | Net interest margin was 4.09%, compared to 4.20% in the preceding quarter and 4.22% in the third quarter a year ago. |
| • | Core deposits increased 10% and represent 75% of total deposits. |
| • | Deposit fees and other service charges increased 5% to $7.0 million. |
| • | Non-performing assets decreased to $29.8 million, or 0.70% of total assets, at September 30, 2013, a 10% decrease compared to three months earlier and a 50% decrease compared to a year earlier. |
| • | The ratio of tangible common equity to tangible assets increased to 12.32% at September 30, 2013.* |
| • | Banner increased its regular quarterly cash dividend by 25% to $0.15 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.
Income Statement Review
“We have been able to maintain a strong net interest margin in recent quarters as a result of reductions in our cost of funds and changes in our asset mix,” said Grescovich, “however, the continuing pressure on asset yields was clearly evident in the most recent quarter.” Banner's net interest margin was 4.09% in the third quarter of 2013, compared to 4.20% in the preceding quarter and 4.22% in the third quarter a year ago. For the first nine months of 2013, the net interest margin was 4.15% compared to 4.20% for the first nine months of 2012.
Both deposit costs and total cost of funds decreased by three basis points in the third quarter compared to the preceding quarter and 15 basis points compared to the third quarter a year ago. Earning asset yields decreased 13 basis points compared to the preceding
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quarter and decreased 26 basis points from the third quarter a year ago. Loan yields decreased by 16 basis points compared to the preceding quarter and were 39 basis points lower than the third quarter a year ago. Net collections on nonaccrual loans added one basis point to the margin in the third quarter of 2013. Net collections on nonaccrual loans added two basis points to the margin in the preceding quarter, while the net effect from nonaccrual loans and the collection of previously unrecognized interest increased the margin by approximately four basis points in the third quarter a year ago.
Banner’s third quarter net interest income, before the provision for loan losses, was $41.9 million, compared to $42.2 million in the preceding quarter and $42.7 million in the third quarter a year ago. For the first nine months of 2013, net interest income, before the provision for loan losses, was $125.1 million compared to $126.1 million for the same period in 2012. Modest growth in average earning assets for the quarter and year-to-date periods ended September 30, 2013, generally offset the decreases in net interest margin compared to the same periods a year earlier.
Mortgage banking activities declined during the quarter as homeowner refinance activity and home purchase transactions moderated from the robust pace of the past few quarters. Mortgage banking operations contributed $2.6 million to third quarter revenues compared to $3.6 million in the preceding quarter and $3.8 million in the third quarter of 2012. In the quarter ended September 30, 2013, mortgage banking revenues were augmented by $400,000 as a result of a partial reversal of a valuation allowance for previously recorded impairment charges related to mortgage servicing rights. This followed a similar partial reversal of $600,000 in the preceding quarter ended June 30, 2013. In the first nine months of 2013, revenues from mortgage banking operations were $9.0 million compared to $9.8 million in the first nine months of 2012.
Deposit fees and other service charges increased to $7.0 million in the third quarter of 2013, compared to $6.6 million in the preceding quarter and $6.7 million the third quarter a year ago. In the first nine months of the year, deposit fees increased 6% to $19.9 million compared to $18.8 million in the first nine months of 2012. The increases in deposit fees and service charges continue to reflect additional client acquisition and growth in the number of deposit accounts as a result of successful marketing initiatives. Revenues from core operations* were $52.4 million in the third quarter compared to $53.1 million in the second quarter of 2013 and $54.3 million in the third quarter a year ago. In the first nine months of the year, Banner's revenues from core operations were $156.4 million compared to $157.0 million in the first nine months of 2012.
Banner's third quarter 2013 results included a small gain on the sale of securities as well as a $352,000 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 $12,000 gain on the sale of securities and a net loss of $255,000 for fair value adjustments. In the third quarter a year ago, Banner recorded a $19,000 gain on the sale of securities, a net gain of $473,000 for fair value adjustments and a charge of $409,000 related to other-than-temporary impairment (OTTI) adjustments for certain equity securities issued by government sponsored entities that was subsequently recovered during the first quarter of this year upon the sale of those securities. Banner's results for the nine months ended September 30, 2013 included a net charge of $1.9 million for fair value adjustments compared to a net charge of $16.9 million in the first nine months of 2012. The net charge in the prior year nine month period primarily reflected a change of $21.2 million in the estimated fair value of Banner's junior subordinated debentures, which was partially offset by increases in the estimated value of similar trust preferred securities owned by the Company.
Total other operating income was $10.1 million in the third quarter of 2013, compared to $10.6 million in the second quarter of 2013 and $11.7 million in the third quarter a year ago, including the gain on sale of securities, OTTI recovery and changes in the valuation of financial instruments. Year-to-date total other operating income was $30.8 million compared to $13.6 million in the first nine 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 $10.5 million for the third quarter of 2013, compared to $10.9 million for the preceding quarter and $11.6 million for the third quarter a year ago. In the first nine months of 2013, other operating income from core operations* was $31.3 million compared to $30.9 million in the first nine months of 2012.
Total other operating expenses (non-interest expenses) were $34.5 million in the third quarter of 2013, compared to $35.5 million in the preceding quarter and $33.4 million in the third quarter of 2012. In the first nine months of 2013, total other operating expenses declined 3% to $104.0 million compared to $106.9 million in the first nine months of 2012. The decrease for the nine month period was largely a result of net gains on sales of real estate owned (REO) properties as well as decreased costs related to REO, professional services, advertising and deposit insurance, which more than offset increases in compensation and other expenses.
For the third quarter ended September 30, 2013, Banner recorded $5.9 million in state and federal income tax expense for an effective tax rate of approximately 33.5%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits. Banner’s provision for income taxes for the third quarter of 2012 was $2.4 million, an amount that was reduced by $4.0 million as a result of the reversal of a portion of a valuation allowance related to its deferred tax assets.
Credit Quality
“All of Banner's key credit quality metrics continued to improve significantly compared to the quarter and year ago levels, while reserve levels remain substantial, providing additional benefit in the current quarter's earnings,” said Grescovich. As a result of
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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 for the third quarter of 2013 or for the first nine months of 2013. This compares to a $3.0 million provision in the third quarter a year ago and $12.0 million for the first nine months of 2012. The allowance for loan losses was $76.7 million at quarter-end, representing 308% of non-performing loans. Non-performing loans decreased by 5% to $24.9 million at September 30, 2013, compared to $26.1 million at June 30, 2013, and decreased 36% when compared to $38.7 million a year earlier.
REO and repossessed assets decreased 28% to $4.9 million at September 30, 2013, compared to $6.8 million at June 30, 2013, and decreased 76% when compared to $20.4 million a year ago. Net charge-offs in the third quarter of 2013 totaled $196,000, or 0.01% of average loans outstanding, compared to $275,000, or 0.01% of average loans outstanding in the second quarter of 2013 and $4.4 million, or 0.14% of average loans outstanding in the third quarter a year ago.
Banner's non-performing assets were 0.70% of total assets at September 30, 2013, compared to 0.78% at June 30, 2013 and 1.38% a year ago. Non-performing assets decreased 10% to $29.8 million at September 30, 2013, compared to $32.9 million at June 30, 2013 and decreased 50% compared to $59.1 million a year ago.
Balance Sheet Review
“Total loans outstanding increased 2% year-over-year and the average balance of loans outstanding also increased by 2% compared to the same period a year ago,” said Grescovich. “The average balance of loans for the current quarter was also increased by more than 1% compared to the immediately preceding quarter; however, despite solid loan production, at September 30, 2013 the balance of loans was slightly less than at June 30, 2013, as we had a number of significant construction and development loans pay off near the end of the third quarter. In addition, we experienced a further reduction in residential mortgage loans as a result of refinancing activity and the beginning of a normal seasonal decline in agricultural loan balances. Although business clients and consumers continue to maintain a cautious approach to spending and borrowing, we remain encouraged by the activity in targeted loan categories, as well as the potential in our loan origination pipelines.”
Net loans were $3.20 billion at September 30, 2013 compared to $3.21 billion at June 30, 2013, and $3.13 billion a year ago. Commercial real estate and multifamily real estate loans totaled $1.26 billion at September 30, 2013 compared to $1.23 million at June 30, 2013 and $1.22 billion a year ago. Commercial and agricultural business loans were $858.8 million at September 30, 2013, compared to $873.8 million three months earlier and increased 4% compared to $822.7 million a year ago. Total construction and development loans were $333.6 million at September 30, 2013 compared to $353.7 million at June 30, 2013, and increased 11% compared to $300.8 million a year earlier.
The aggregate total of securities and interest-bearing deposits increased to $744.5 million at September 30, 2013, compared to $696.1 million at June 30, 2013, and $764.4 million a year ago. The increase in interest-bearing deposits and securities holdings compared to the preceding quarter reflects the strong deposit growth during the current quarter, as well as the loan payoffs late in the quarter. The average effective duration of Banner's securities portfolio was approximately 3.4 years at September 30, 2013, nearly unchanged from June 30, 2013..
Total deposits were $3.54 billion at September 30, 2013, compared to $3.46 billion at June 30, 2013 and $3.49 billion a year ago. Non-interest-bearing account balances increased 10% to $1.05 billion at September 30, 2013, compared to $958.7 million at June 30, 2013, and increased 14% compared to $919.0 million a year ago. Interest-bearing transaction and savings accounts increased 2% to $1.58 billion at September 30, 2013, compared to $1.56 billion at June 30, 2013 and increased 7% compared to $1.48 billion a year ago. Certificates of deposit further decreased to $900.0 million at September 30, 2013, compared to $944.1 million at June 30, 2013 and $1.09 billion a year earlier. Non-certificate core deposits represented 75% of total deposits at the end of the third quarter, compared to 69% of total deposits a year earlier.
“Banner’s super community bank strategy that involves lowering our funding costs, 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 three basis points to 0.26% for the quarter ended September 30, 2013 compared to 0.29% for the quarter ended June 30, 2013, and declined 15 basis points from 0.41% for the quarter ended September 30, 2012.”
Total assets increased to $4.28 billion at September 30, 2013, compared to $4.24 billion at June 30, 2013 and $4.27 billion a year ago. At September 30, 2013, total common stockholders' equity was $529.9 million, or $27.17 per share compared to $493.9 million or $25.43 per share at September 30, 2012. Banner had 19.5 million shares of common stock outstanding at September 30, 2013 compared to 19.4 million shares one year earlier. At September 30, 2013, tangible common stockholders' equity, which excludes other intangible assets, was $527.1 million, or 12.32% of tangible assets, compared to $517.1 million, or 12.22% of tangible assets, at June 30, 2013 and $489.1 million, or 11.47% of tangible assets, a year ago. Banner's tangible book value per share increased to $27.02 at September 30, 2013, compared to $25.19 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 13.63% and its total capital to risk-weighted assets ratio was 17.41% at September 30, 2013.
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Conference Call
Banner will host a conference call on Thursday, October 24, 2013, at 8:00 a.m. PDT, to discuss its second quarter results. The conference call can be accessed live by telephone at (480) 629-9645 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 4641430.
About the Company
Banner Corporation is a $4.28 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 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 | | Nine Months Ended |
| (in thousands except shares and per share data) | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Sep 30, 2013 | | Sep 30, 2012 |
| INTEREST INCOME: | | | | | | | | | | |
| Loans receivable | | $ | 41,953 | | | $ | 42,292 | | | $ | 43,953 | | | $ | 125,734 | | | $ | 131,981 | |
| Mortgage-backed securities | | 1,281 | | | 1,394 | | | 1,089 | | | 3,847 | | | 3,011 | |
| Securities and cash equivalents | | 1,803 | | | 1,885 | | | 2,132 | | | 5,535 | | | 6,645 | |
| | | 45,037 | | | 45,571 | | | 47,174 | | | 135,116 | | | 141,637 | |
| INTEREST EXPENSE: | | | | | | | | | | |
| Deposits | | 2,330 | | | 2,490 | | | 3,536 | | | 7,539 | | | 12,019 | |
| Federal Home Loan Bank advances | | 28 | | | 40 | | | 64 | | | 92 | | | 191 | |
| Other borrowings | | 44 | | | 51 | | | 71 | | | 151 | | | 694 | |
| Junior subordinated debentures | | 742 | | | 742 | | | 805 | | | 2,225 | | | 2,619 | |
| | | 3,144 | | | 3,323 | | | 4,476 | | | 10,007 | | | 15,523 | |
| Net interest income before provision for loan losses | | 41,893 | | | 42,248 | | | 42,698 | | | 125,109 | | | 126,114 | |
| PROVISION FOR LOAN LOSSES | | — | | | — | | | 3,000 | | | — | | | 12,000 | |
| Net interest income | | 41,893 | | | 42,248 | | | 39,698 | | | 125,109 | | | 114,114 | |
| OTHER OPERATING INCOME: | | | | | | | | | | |
| Deposit fees and other service charges | | 6,982 | | | 6,628 | | | 6,681 | | | 19,911 | | | 18,833 | |
| Mortgage banking operations | | 2,590 | | | 3,574 | | | 3,774 | | | 9,002 | | | 9,838 | |
| Miscellaneous | | 920 | | | 664 | | | 1,146 | | | 2,375 | | | 2,182 | |
| | | 10,492 | | | 10,866 | | | 11,601 | | | 31,288 | | | 30,853 | |
| Gain on sale of securities | | 2 | | | 12 | | | 19 | | | 1,020 | | | 48 | |
| Other-than-temporary impairment recovery (loss) | | — | | | — | | | (409 | ) | | 409 | | | (409 | ) |
| Net change in valuation of financial instruments carried at fair value | | (352 | ) | | (255 | ) | | 473 | | | (1,954 | ) | | (16,901 | ) |
| Total other operating income | | 10,142 | | | 10,623 | | | 11,684 | | | 30,763 | | | 13,591 | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | |
| Salary and employee benefits | | 21,244 | | | 21,224 | | | 19,614 | | | 63,197 | | | 58,514 | |
| Less capitalized loan origination costs | | (2,915 | ) | | (3,070 | ) | | (2,655 | ) | | (8,856 | ) | | (7,652 | ) |
| Occupancy and equipment | | 5,317 | | | 5,415 | | | 5,811 | | | 16,061 | | | 16,492 | |
| Information / computer data services | | 1,710 | | | 1,923 | | | 1,807 | | | 5,353 | | | 5,068 | |
| Payment and card processing services | | 2,530 | | | 2,449 | | | 2,335 | | | 7,284 | | | 6,341 | |
| Professional services | | 1,074 | | | 820 | | | 993 | | | 2,799 | | | 3,561 | |
| Advertising and marketing | | 1,556 | | | 1,798 | | | 1,897 | | | 4,853 | | | 5,613 | |
| Deposit insurance | | 564 | | | 617 | | | 791 | | | 1,826 | | | 2,970 | |
| State/municipal business and use taxes | | 461 | | | 538 | | | 582 | | | 1,463 | | | 1,715 | |
| Real estate operations | | (601 | ) | | (195 | ) | | (1,304 | ) | | (1,047 | ) | | 3,263 | |
| Amortization of core deposit intangibles | | 471 | | | 477 | | | 508 | | | 1,453 | | | 1,583 | |
| Miscellaneous | | 3,079 | | | 3,461 | | | 2,976 | | | 9,660 | | | 9,466 | |
| Total other operating expense | | 34,490 | | | 35,457 | | | 33,355 | | | 104,046 | | | 106,934 | |
| Income before provision for (benefit from) income taxes | | 17,545 | | | 17,414 | | | 18,027 | | | 51,826 | | | 20,771 | |
| PROVISION (BENEFIT) FOR INCOME TAXES | | 5,880 | | | 5,661 | | | 2,407 | | | 16,825 | | | (29,423 | ) |
| NET INCOME | | 11,665 | | | 11,753 | | | 15,620 | | | 35,001 | | | 50,194 | |
| PREFERRED STOCK DIVIDEND AND ADJUSTMENTS: | | | | | | | | | | |
| Preferred stock dividend | | — | | | — | | | 1,227 | | | — | | | 4,327 | |
| Preferred stock discount accretion | | — | | | — | | | 1,216 | | | — | | | 2,124 | |
| Gain on repurchase and retirement of preferred stock | | — | | | — | | | (2,070 | ) | | — | | | (2,070 | ) |
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | | $ | 11,665 | | | $ | 11,753 | | | $ | 15,247 | | | $ | 35,001 | | | $ | 45,813 | |
| Earnings per share available to common shareholders: | | | | | | | | | | |
| Basic | | $ | 0.60 | | | $ | 0.61 | | | $ | 0.80 | | | $ | 1.81 | | | $ | 2.49 | |
| Diluted | | $ | 0.60 | | | $ | 0.60 | | | $ | 0.79 | | | $ | 1.80 | | | $ | 2.48 | |
| Cumulative dividends declared per common share | | $ | 0.15 | | | $ | 0.12 | | | $ | 0.01 | | | $ | 0.39 | | | $ | 0.03 | |
| Weighted average common shares outstanding: | | | | | | | | | | |
| Basic | | 19,338,564 | | | 19,333,470 | | | 19,172,296 | | | 19,347,502 | | | 18,427,916 | |
| Diluted | | 19,397,329 | | | 19,397,171 | | | 19,285,373 | | | 19,402,659 | | | 18,488,577 | |
| Common shares issued via restricted stock grants (net), DRIP and stock purchases | (10,139 | ) | | 90,706 | | | 650,060 | | | 88,085 | | | 1,901,407 | |
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| FINANCIAL CONDITION | | | | | | | | |
| (in thousands except shares and per share data) | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Dec 31, 2012 |
| ASSETS | | | | | | | | |
| Cash and due from banks | | $ | 69,340 | | | $ | 54,368 | | | $ | 60,505 | | | $ | 66,370 | |
| Federal funds and interest-bearing deposits | | 106,625 | | | 67,080 | | | 143,251 | | | 114,928 | |
| Securities - at fair value | | 63,887 | | | 65,524 | | | 72,593 | | | 71,232 | |
| Securities - available for sale | | 477,407 | | | 469,137 | | | 459,958 | | | 472,920 | |
| Securities - held to maturity | | 96,545 | | | 94,336 | | | 88,626 | | | 86,452 | |
| Federal Home Loan Bank stock | | 35,708 | | | 36,040 | | | 37,038 | | | 36,705 | |
| Loans receivable: | | | | | | | | |
| Held for sale | | 8,394 | | | 6,393 | | | 6,898 | | | 11,920 | |
| Held for portfolio | | 3,267,042 | | | 3,283,808 | | | 3,206,625 | | | 3,223,794 | |
| Allowance for loan losses | | (76,657 | ) | | (76,853 | ) | | (78,783 | ) | | (77,491 | ) |
| | | 3,198,779 | | | 3,213,348 | | | 3,134,740 | | | 3,158,223 | |
| Accrued interest receivable | | 15,164 | | | 14,648 | | | 16,118 | | | 13,930 | |
| Real estate owned held for sale, net | | 4,818 | | | 6,714 | | | 20,356 | | | 15,778 | |
| Property and equipment, net | | 89,092 | | | 87,896 | | | 89,202 | | | 89,117 | |
| Other intangibles, net | | 2,937 | | | 3,247 | | | 4,740 | | | 4,230 | |
| Bank-owned life insurance | | 61,442 | | | 60,894 | | | 60,395 | | | 59,891 | |
| Other assets | | 60,809 | | | 63,058 | | | 81,142 | | | 75,788 | |
| | | $ | 4,282,553 | | | $ | 4,236,290 | | | $ | 4,268,664 | | | $ | 4,265,564 | |
| LIABILITIES | | | | | | | | |
| Deposits: | | | | | | | | |
| Non-interest-bearing | | $ | 1,051,831 | | | $ | 958,674 | | | $ | 918,962 | | | $ | 981,240 | |
| Interest-bearing transaction and savings accounts | | 1,583,430 | | | 1,557,513 | | | 1,480,234 | | | 1,547,271 | |
| Interest-bearing certificates | | 900,024 | | | 944,137 | | | 1,087,176 | | | 1,029,293 | |
| | | 3,535,285 | | | 3,460,324 | | | 3,486,372 | | | 3,557,804 | |
| Advances from Federal Home Loan Bank at fair value | | 20,258 | | | 54,262 | | | 10,367 | | | 10,304 | |
| Customer repurchase agreements | | 82,909 | | | 90,779 | | | 82,275 | | | 76,633 | |
| Junior subordinated debentures at fair value | | 73,637 | | | 73,471 | | | 73,071 | | | 73,063 | |
| Accrued expenses and other liabilities | | 24,830 | | | 22,010 | | | 36,109 | | | 26,389 | |
| Deferred compensation | | 15,642 | | | 15,111 | | | 14,375 | | | 14,452 | |
| | | 3,752,561 | | | 3,715,957 | | | 3,702,569 | | | 3,758,645 | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
| Preferred stock - Series A | | — | | | — | | | 72,242 | | | — | |
| Common stock | | 568,535 | | | 568,408 | | | 567,659 | | | 567,907 | |
| Retained earnings (accumulated deficit) | | (33,701 | ) | | (42,440 | ) | | (74,212 | ) | | (61,102 | ) |
| Other components of stockholders' equity | | (4,842 | ) | | (5,635 | ) | | 406 | | | 114 | |
| | | 529,992 | | | 520,333 | | | 566,095 | | | 506,919 | |
| | | $ | 4,282,553 | | | $ | 4,236,290 | | | $ | 4,268,664 | | | $ | 4,265,564 | |
| Common Shares Issued: | | | | | | | | |
| Shares outstanding at end of period | | 19,543,050 | | | 19,553,189 | | | 19,454,879 | | | 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 | | 19,508,710 | | | 19,518,849 | | | 19,420,539 | | | 19,420,625 | |
Common stockholders' equity per share (1) | | $ | 27.17 | | | $ | 26.66 | | | $ | 25.43 | | | $ | 26.10 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 27.02 | | | $ | 26.49 | | | $ | 25.19 | | | $ | 25.88 | |
Common stockholders' tangible equity to tangible assets (2) | | 12.32 | % | | 12.22 | % | | 11.47 | % | | 11.80 | % |
| Consolidated Tier 1 leverage capital ratio | | 13.63 | % | | 13.26 | % | | 14.29 | % | | 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 - Third Quarter 2013 Results
October 23, 2013
Page 7
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | |
| (dollars in thousands) | | | | | | | | |
| | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Dec 31, 2012 |
| LOANS (including loans held for sale): | | | | | | | | |
| Commercial real estate: | | | | | | | | |
| Owner occupied | | $ | 508,341 | | | $ | 500,812 | | | $ | 477,871 | | | $ | 489,581 | |
| Investment properties | | 613,757 | | | 595,896 | | | 604,265 | | | 583,641 | |
| Multifamily real estate | | 133,770 | | | 137,027 | | | 138,716 | | | 137,504 | |
| Commercial construction | | 18,730 | | | 25,629 | | | 28,598 | | | 30,229 | |
| Multifamily construction | | 33,888 | | | 39,787 | | | 14,502 | | | 22,581 | |
| One- to four-family construction | | 194,187 | | | 191,003 | | | 163,521 | | | 160,815 | |
| Land and land development: | | | | | | | | |
| Residential | | 75,576 | | | 86,037 | | | 79,932 | | | 77,010 | |
| Commercial | | 11,231 | | | 11,228 | | | 14,242 | | | 13,982 | |
| Commercial business | | 635,658 | | | 639,840 | | | 603,606 | | | 618,049 | |
| Agricultural business including secured by farmland | | 223,187 | | | 233,967 | | | 219,084 | | | 230,031 | |
| One- to four-family real estate | | 543,263 | | | 552,698 | | | 594,413 | | | 581,670 | |
| Consumer: | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 170,019 | | | 163,339 | | | 103,393 | | | 170,123 | |
| Consumer-other | | 113,829 | | | 112,938 | | | 171,380 | | | 120,498 | |
| Total loans outstanding | | $ | 3,275,436 | | | $ | 3,290,201 | | | $ | 3,213,523 | | | $ | 3,235,714 | |
| Restructured loans performing under their restructured terms | | $ | 51,310 | | | $ | 51,732 | | | $ | 62,438 | | | $ | 57,462 | |
| Loans 30 - 89 days past due and on accrual | | $ | 9,313 | | | $ | 5,902 | | | $ | 7,739 | | | $ | 11,685 | |
| Total delinquent loans (including loans on non-accrual) | | $ | 27,804 | | | $ | 32,002 | | | $ | 46,450 | | | $ | 45,300 | |
| Total delinquent loans / Total loans outstanding | | 0.85 | % | | 0.97 | % | | 1.45 | % | | 1.40 | % |
| GEOGRAPHIC CONCENTRATION OF LOANS AT | | | | | | | | | | |
| September 30, 2013 | | Washington | | Oregon | | Idaho | | Other | | Total |
| Commercial real estate: | | | | | | | | | | |
| Owner occupied | | $ | 384,706 | | | $ | 58,468 | | | $ | 59,077 | | | $ | 6,090 | | | $ | 508,341 | |
| Investment properties | | 467,161 | | | 90,518 | | | 50,464 | | | 5,614 | | | 613,757 | |
| Multifamily real estate | | 107,744 | | | 15,998 | | | 9,828 | | | 200 | | | 133,770 | |
| Commercial construction | | 9,918 | | | 3,942 | | | 377 | | | 4,493 | | | 18,730 | |
| Multifamily construction | | 22,141 | | | 11,747 | | | — | | | — | | | 33,888 | |
| One- to four-family construction | | 108,011 | | | 84,749 | | | 1,427 | | | — | | | 194,187 | |
| Land and land development: | | | | | | | | | | |
| Residential | | 45,281 | | | 28,973 | | | 1,322 | | | — | | | 75,576 | |
| Commercial | | 5,915 | | | 3,379 | | | 1,937 | | | — | | | 11,231 | |
| Commercial business | | 392,741 | | | 76,314 | | | 62,428 | | | 104,175 | | | 635,658 | |
| Agricultural business including secured by farmland | | 111,795 | | | 52,670 | | | 58,722 | | | — | | | 223,187 | |
| One- to four-family real estate | | 337,369 | | | 180,047 | | | 23,846 | | | 2,001 | | | 543,263 | |
| Consumer: | | | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 112,130 | | | 44,049 | | | 13,195 | | | 645 | | | 170,019 | |
| Consumer-other | | 75,307 | | | 32,942 | | | 5,565 | | | 15 | | | 113,829 | |
| Total loans outstanding | | $ | 2,180,219 | | | $ | 683,796 | | | $ | 288,188 | | | $ | 123,233 | | | $ | 3,275,436 | |
| Percent of total loans | | 66.6 | % | | 20.9 | % | | 8.8 | % | | 3.7 | % | | 100.0 | % |
BANR - Third Quarter 2013 Results
October 23, 2013
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | Quarters Ended | | Nine Months Ended |
| CHANGE IN THE | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Sep 30, 2013 | | Sep 30, 2012 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | |
| Balance, beginning of period | | $ | 76,853 | | | $ | 77,128 | | | $ | 80,221 | | | $ | 77,491 | | | $ | 82,912 | |
| | | | | | | | | | | | | | | | |
| Provision | | — | | | — | | | 3,000 | | | — | | | 12,000 | |
| | | | | | | | | | | |
| Recoveries of loans previously charged off: | | | | | | | | | | |
| Commercial real estate | | 331 | | | 378 | | | 130 | | | 2,295 | | | 762 | |
| Construction and land | | 507 | | | 337 | | | 35 | | | 945 | | | 1,455 | |
| One- to four-family real estate | | 19 | | | 3 | | | 34 | | | 138 | | | 412 | |
| Commercial business | | 339 | | | 666 | | | 154 | | | 1,391 | | | 1,030 | |
| Agricultural business, including secured by farmland | | 265 | | | 310 | | | 30 | | | 612 | | | 45 | |
| Consumer | | 68 | | | 117 | | | 91 | | | 287 | | | 422 | |
| | | 1,529 | | | 1,811 | | | 474 | | | 5,668 | | | 4,126 | |
| Loans charged off: | | | | | | | | | | |
| Commercial real estate | | (850 | ) | | (418 | ) | | (924 | ) | | (1,616 | ) | | (3,507 | ) |
| Construction and land | | — | | | (419 | ) | | (617 | ) | | (854 | ) | | (5,244 | ) |
| One- to four-family real estate | | (207 | ) | | (402 | ) | | (709 | ) | | (1,260 | ) | | (3,580 | ) |
| Commercial business | | (246 | ) | | (398 | ) | | (1,687 | ) | | (1,573 | ) | | (5,391 | ) |
| Agricultural business, including secured by farmland | | (248 | ) | | — | | | (26 | ) | | (248 | ) | | (301 | ) |
| Consumer | | (174 | ) | | (449 | ) | | (949 | ) | | (951 | ) | | (2,232 | ) |
| | | (1,725 | ) | | (2,086 | ) | | (4,912 | ) | | (6,502 | ) | | (20,255 | ) |
| Net charge-offs | | (196 | ) | | (275 | ) | | (4,438 | ) | | (834 | ) | | (16,129 | ) |
| Balance, end of period | | $ | 76,657 | | | $ | 76,853 | | | $ | 78,783 | | | $ | 76,657 | | | $ | 78,783 | |
| | | | | | | | | | | | | | | | |
| Net charge-offs / Average loans outstanding | | 0.01 | % | | 0.01 | % | | 0.14 | % | | 0.03 | % | | 0.50 | % |
| ALLOCATION OF | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Dec 31, 2012 |
| Specific or allocated loss allowance: | | | | | | | | |
| Commercial real estate | | $ | 15,618 | | | $ | 14,898 | | | $ | 15,777 | | | $ | 15,322 | |
| Multifamily real estate | | 5,283 | | | 4,973 | | | 4,741 | | | 4,506 | |
| Construction and land | | 16,672 | | | 16,625 | | | 15,764 | | | 14,991 | |
| One- to four-family real estate | | 13,187 | | | 14,974 | | | 16,152 | | | 16,475 | |
| Commercial business | | 10,676 | | | 10,806 | | | 10,701 | | | 9,957 | |
| Agricultural business, including secured by farmland | | 3,411 | | | 3,805 | | | 2,342 | | | 2,295 | |
| Consumer | | 948 | | | 1,011 | | | 1,321 | | | 1,348 | |
| Total allocated | | 65,795 | | | 67,092 | | | 66,798 | | | 64,894 | |
| | | | | | | | | | | | | |
| Estimated allowance for undisbursed commitments | | 717 | | | 665 | | | 932 | | | 758 | |
| Unallocated | | 10,145 | | | 9,096 | | | 11,053 | | | 11,839 | |
| Total allowance for loan losses | | $ | 76,657 | | | $ | 76,853 | | | $ | 78,783 | | | $ | 77,491 | |
| | | | | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | 2.34 | % | | 2.34 | % | | 2.45 | % | | 2.39 | % |
| | | | | | | | | | | | | |
| Allowance for loan losses / Non-performing loans | | 308 | % | | 294 | % | | 204 | % | | 225 | % |
BANR - Third Quarter 2013 Results
October 23, 2013
Page 9
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | |
| (dollars in thousands) | | | | | | | |
| | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Dec 31, 2012 |
| NON-PERFORMING ASSETS | | | | | | | |
| Loans on non-accrual status: | | | | | | | |
| Secured by real estate: | | | | | | | |
| Commercial | $ | 4,762 | | | $ | 4,810 | | | $ | 5,574 | | | $ | 6,579 | |
| Multifamily | 333 | | | 335 | | | — | | | — | |
| Construction and land | 1,660 | | | 2,775 | | | 7,450 | | | 3,673 | |
| One- to four-family | 10,717 | | | 11,465 | | | 14,234 | | | 12,964 | |
| Commercial business | 963 | | | 2,819 | | | 6,159 | | | 4,750 | |
| Agricultural business, including secured by farmland | — | | | — | | | 645 | | | — | |
| Consumer | 1,634 | | | 1,938 | | | 2,571 | | | 3,395 | |
| | 20,069 | | | 24,142 | | | 36,633 | | | 31,361 | |
| Loans more than 90 days delinquent, still on accrual: | | | | | | | |
| Secured by real estate: | | | | | | | |
| Multifamily | 1,701 | | | — | | | — | | | — | |
| Construction and land | 242 | | | — | | | — | | | — | |
| One- to four-family | 2,774 | | | 1,897 | | | 2,037 | | | 2,877 | |
| Commercial business | 24 | | | 4 | | | 15 | | | — | |
| Consumer | 52 | | | 58 | | | 26 | | | 152 | |
| | 4,793 | | | 1,959 | | | 2,078 | | | 3,029 | |
| Total non-performing loans | 24,862 | | | 26,101 | | | 38,711 | | | 34,390 | |
| Real estate owned (REO) and repossessed assets | 4,937 | | | 6,832 | | | 20,356 | | | 15,853 | |
| | | | | | | | | | | | | | | | |
| Total non-performing assets | $ | 29,799 | | | $ | 32,933 | | | $ | 59,067 | | | $ | 50,243 | |
| | | | | | | | | | | | |
| Total non-performing assets / Total assets | 0.70 | % | | 0.78 | % | | 1.38 | % | | 1.18 | % |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | |
| NON-PERFORMING ASSETS AT | | | | | | | |
| September 30, 2013 | Washington | | Oregon | | Idaho | | Total |
| Secured by real estate: | | | | | | | |
| Commercial | $ | 4,713 | | | $ | — | | | $ | 49 | | | $ | 4,762 | |
| Multifamily | 1,701 | | | — | | | 333 | | | 2,034 | |
| Construction and land: | | | | | | | |
| One- to four-family construction | 198 | | | 349 | | | 363 | | | 910 | |
| Residential land acquisition & development | — | | | 750 | | | — | | | 750 | |
| Residential land unimproved | 242 | | | — | | | — | | | 242 | |
| Total construction and land | 440 | | | 1,099 | | | 363 | | | 1,902 | |
| One- to four-family | 9,980 | | | 2,720 | | | 791 | | | 13,491 | |
| Commercial business | 923 | | | 64 | | | — | | | 987 | |
| Consumer | 1,471 | | | 47 | | | 168 | | | 1,686 | |
| Total non-performing loans | 19,228 | | | 3,930 | | | 1,704 | | | 24,862 | |
| Real estate owned (REO) and repossessed assets | 2,495 | | | 2,174 | | | 268 | | | 4,937 | |
| | | | | | | | | | | | | | | | |
| Total non-performing assets at end of the period | $ | 21,723 | | | $ | 6,104 | | | $ | 1,972 | | | $ | 29,799 | |
BANR - Third Quarter 2013 Results
October 23, 2013
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | |
| (dollars in thousands) | | | |
| | Quarters Ended | | Nine Months Ended |
| REAL ESTATE OWNED | Sep 30, 2013 | | Sep 30, 2012 | | Sep 30, 2013 | | Sep 30, 2012 |
| Balance, beginning of period | $ | 6,714 | | | $ | 25,816 | | | $ | 15,778 | | | $ | 42,965 | |
| Additions from loan foreclosures | 963 | | | 3,111 | | | 2,467 | | | 11,598 | |
| Additions from capitalized costs | 297 | | | 97 | | | 344 | | | 231 | |
| Proceeds from dispositions of REO | (3,970 | ) | | (10,368 | ) | | (15,758 | ) | | (33,608 | ) |
| Gain on sale of REO | 1,005 | | | 2,955 | | | 2,477 | | | 3,621 | |
| Valuation adjustments in the period | (191 | ) | | (1,255 | ) | | (490 | ) | | (4,451 | ) |
| | | | | | | | | | | | | | | | |
| Balance, end of period | $ | 4,818 | | | $ | 20,356 | | | $ | 4,818 | | | $ | 20,356 | |
| REAL ESTATE OWNED- BY TYPE AND STATE | | | | | | | |
| September 30, 2013 | Washington | | Oregon | | Idaho | | Total |
| Commercial real estate | $ | — | | | $ | — | | | $ | 199 | | | $ | 199 | |
| Land development- residential | 1,179 | | | 1,819 | | | 69 | | | 3,067 | |
| One- to four-family real estate | 1,197 | | | 355 | | | — | | | 1,552 | |
| | | | | | | | | | | | | | | | |
| Total | $ | 2,376 | | | $ | 2,174 | | | $ | 268 | | | $ | 4,818 | |
BANR - Third Quarter 2013 Results
October 23, 2013
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | |
| (dollars in thousands) | | | | | | | | |
| | | | | | | | | |
| DEPOSITS & OTHER BORROWINGS | | | | | | | | |
| | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Dec 31, 2012 |
| DEPOSIT COMPOSITION | | | | | | | | |
| Non-interest-bearing | | $ | 1,051,831 | | | $ | 958,674 | | | $ | 918,962 | | | $ | 981,240 | |
| | | | | | | | | | | | | |
| Interest-bearing checking | | 399,343 | | | 399,302 | | | 379,650 | | | 410,316 | |
| Regular savings accounts | | 775,260 | | | 751,475 | | | 689,322 | | | 727,957 | |
| Money market accounts | | 408,827 | | | 406,736 | | | 411,262 | | | 408,998 | |
| Interest-bearing transaction & savings accounts | | 1,583,430 | | | 1,557,513 | | | 1,480,234 | | | 1,547,271 | |
| Interest-bearing certificates | | 900,024 | | | 944,137 | | | 1,087,176 | | | 1,029,293 | |
| Total deposits | | $ | 3,535,285 | | | $ | 3,460,324 | | | $ | 3,486,372 | | | $ | 3,557,804 | |
| | | | | | | | | |
| INCLUDED IN TOTAL DEPOSITS | | | | | | | | |
| Public non-interest-bearing accounts | | $ | 20,630 | | | $ | 22,160 | | | $ | 28,194 | | | $ | 22,081 | |
| Public interest-bearing transaction & savings accounts | | 49,840 | | | 56,429 | | | 44,213 | | | 57,874 | |
| Public interest-bearing certificates | | 51,562 | | | 51,759 | | | 61,628 | | | 60,518 | |
| Total public deposits | | $ | 122,032 | | | $ | 130,348 | | | $ | 134,035 | | | $ | 140,473 | |
| | | | | | | | | | | | | | | | | |
| Total brokered deposits | | $ | 4,531 | | | $ | 7,152 | | | $ | 21,403 | | | $ | 15,702 | |
| | | | | | | | | |
| OTHER BORROWINGS | | | | | | | | |
| Customer repurchase agreements / "Sweep accounts" | | $ | 82,909 | | | $ | 90,779 | | | $ | 82,275 | | | $ | 76,633 | |
| GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | | | | | | | | |
| September 30, 2013 | | Washington | | Oregon | | Idaho | | Total |
| | | $ | 2,679,104 | | | $ | 610,205 | | | $ | 245,976 | | | $ | 3,535,285 | |
| | | 75.8 | % | | 17.3 | % | | 6.9 | % | | 100.0 | % |
| | | | | | | Minimum for Capital Adequacy | |
| REGULATORY CAPITAL RATIOS AT | | Actual | | | or "Well Capitalized" | |
| September 30, 2013 | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | |
| Banner Corporation-consolidated: | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 621,581 | | | 17.41 | % | | $ | 285,573 | | | 8.00 | % |
| Tier 1 capital to risk-weighted assets | | 576,565 | | | 16.15 | % | | 142,787 | | | 4.00 | % |
| Tier 1 leverage capital to average assets | | 576,565 | | | 13.63 | % | | 169,237 | | | 4.00 | % |
| | | | | | | | | |
| Banner Bank: | | | | | | | | |
| Total capital to risk-weighted assets | | 549,662 | | | 16.22 | % | | 338,942 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 506,907 | | | 14.96 | % | | 203,365 | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | 506,907 | | | 12.70 | % | | 199,639 | | | 5.00 | % |
| | | | | | | | | |
| Islanders Bank: | | | | | | | | |
| Total capital to risk-weighted assets | | 34,293 | | | 18.85 | % | | 18,190 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 32,012 | | | 17.60 | % | | 10,914 | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | 32,012 | | | 13.36 | % | | 1,185 | | | 5.00 | % |
BANR - Third Quarter 2013 Results
October 23, 2013
Page 12
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | |
| | | Quarters Ended | | Nine Months Ended |
| OPERATING PERFORMANCE | | Sep 30, 2013 | | Jun 30, 2013 | | Sep 30, 2012 | | Sep 30, 2013 | | Sep 30, 2012 |
| | | | | | | | | | | | | | | | | | | | | |
| Average loans | | $ | 3,291,950 | | | $ | 3,250,808 | | | $ | 3,211,133 | | | $ | 3,252,943 | | | $ | 3,231,294 | |
| Average securities | | 689,257 | | | 718,948 | | | 673,156 | | | 693,892 | | | 656,691 | |
| Average interest earning cash | | 79,607 | | | 68,130 | | | 142,437 | | | 85,125 | | | 125,668 | |
| Average non-interest-earning assets | | 190,621 | | | 212,661 | | | 210,660 | | | 206,789 | | | 189,992 | |
| Total average assets | | $ | 4,251,435 | | | $ | 4,250,547 | | | $ | 4,237,386 | | | $ | 4,238,749 | | | $ | 4,203,645 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average deposits | | $ | 3,496,194 | | | $ | 3,489,625 | | | $ | 3,452,393 | | | $ | 3,495,909 | | | $ | 3,427,995 | |
| Average borrowings | | 241,006 | | | 249,692 | | | 219,687 | | | 233,831 | | | 243,460 | |
Average non-interest-bearing other liabilities (1) | | (13,016 | ) | | (12,390 | ) | | (14,710 | ) | | (12,931 | ) | | (29,691 | ) |
| | | | | | | | | | | | | | | | |
| Total average liabilities | | 3,724,184 | | | 3,726,927 | | | 3,657,370 | | | 3,716,809 | | | 3,641,764 | |
| | | | | | | | | | | | | | | | |
| Total average stockholders' equity | | 527,251 | | | 523,620 | | | 580,016 | | | 521,940 | | | 561,881 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total average liabilities and equity | | $ | 4,251,435 | | | $ | 4,250,547 | | | $ | 4,237,386 | | | $ | 4,238,749 | | | $ | 4,203,645 | |
| | | | | | | | | | | | | | | | |
| Interest rate yield on loans | | 5.06 | % | | 5.22 | % | | 5.45 | % | | 5.17 | % | | 5.46 | % |
| Interest rate yield on securities | | 1.75 | % | | 1.80 | % | | 1.85 | % | | 1.78 | % | | 1.92 | % |
| Interest rate yield on cash | | 0.22 | % | | 0.27 | % | | 0.23 | % | | 0.25 | % | | 0.24 | % |
| Interest rate yield on interest-earning assets | | 4.40 | % | | 4.53 | % | | 4.66 | % | | 4.48 | % | | 4.71 | % |
| | | | | | | | | | | | | | | | |
| Interest rate expense on deposits | | 0.26 | % | | 0.29 | % | | 0.41 | % | | 0.29 | % | | 0.47 | % |
| Interest rate expense on borrowings | | 1.34 | % | | 1.34 | % | | 1.70 | % | | 1.41 | % | | 1.92 | % |
| Interest rate expense on interest-bearing liabilities | | 0.33 | % | | 0.36 | % | | 0.48 | % | | 0.36 | % | | 0.56 | % |
| | | | | | | | | | | | | | | | |
| Interest rate spread | | 4.07 | % | | 4.17 | % | | 4.18 | % | | 4.12 | % | | 4.15 | % |
| | | | | | | | | | | | | | | | |
| Net interest margin | | 4.09 | % | | 4.20 | % | | 4.22 | % | | 4.15 | % | | 4.20 | % |
| | | | | | | | | | | | | | | | |
| Other operating income / Average assets | | 0.95 | % | | 1.00 | % | | 1.10 | % | | 0.97 | % | | 0.43 | % |
| | | | | | | | | | | |
| Other operating income EXCLUDING fair value | | | | | | | | | | |
adjustments / Average assets (2) | | 0.98 | % | | 1.03 | % | | 1.09 | % | | 1.02 | % | | 0.98 | % |
| | | | | | | | | | | | | | | | |
| Other operating expense / Average assets | | 3.22 | % | | 3.35 | % | | 3.13 | % | | 3.28 | % | | 3.40 | % |
| Efficiency ratio (other operating expense / revenue) | | 66.28 | % | | 67.06 | % | | 61.33 | % | | 66.75 | % | | 76.54 | % |
Efficiency ratio EXCLUDING fair value adjustments(2) | | 65.84 | % | | 66.74 | % | | 61.41 | % | | 66.10 | % | | 68.10 | % |
| Return on average assets | | 1.09 | % | | 1.11 | % | | 1.47 | % | | 1.10 | % | | 1.59 | % |
| Return on average equity | | 8.78 | % | | 9.00 | % | | 10.71 | % | | 8.97 | % | | 11.93 | % |
Return on average tangible equity (3) | | 8.83 | % | | 9.06 | % | | 10.81 | % | | 9.03 | % | | 12.05 | % |
| Average equity / Average assets | | 12.40 | % | | 12.32 | % | | 13.69 | % | | 12.31 | % | | 13.37 | % |
| (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. |
