Exhibit 99.1
 |  | Contact: Mark J. grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 |
| | | |
Banner Corporation Earns $12.2 Million, or $0.63 Per Diluted Share, in Fourth Quarter 2014
and $54.6 Million, or $2.82 Per Diluted Share in 2014;
Fourth Quarter Highlighted by Announced Acquisition of AmericanWest Bank
Walla Walla, WA - January 21, 2015 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income in the fourth quarter of 2014 was $12.2 million, or $0.63 per diluted share, compared to $11.6 million, or $0.60 per diluted share, for the fourth quarter a year ago. In the preceding quarter, net income was $14.8 million, or $0.76 per diluted share. The current quarter results were impacted by $2.8 million of acquisition-related expenses which, net of taxes, reduced net income by $0.09 per diluted share. For the year ended December 31, 2014, net income increased 17% to $54.6 million, or $2.82 per diluted share, compared to $46.6 million, or $2.40 per diluted share, in 2013.
“2014 has been an exceptional year for Banner, as we focused on our strategic objectives. During the year we produced strong revenue growth, with a solid net interest margin and increased non-interest income, maintained a moderate risk profile and appropriately deployed our capital with the acquisition of six branches in southwest Oregon and the announcement of two mergers: the pending acquisition by Banner of Siuslaw Bank in western Oregon and AmericanWest Bank of Spokane, Washington. We believe these achievements, taken together, will result in a transformational year for Banner in 2015,” said Mark J. Grescovich, President and Chief Executive Officer. “With these strategic combinations we will have the opportunity to deploy our super community bank model throughout a strengthened presence in Washington, Oregon and Idaho, and enter into attractive growth markets in California and Utah. In addition to being a good geographic fit, we anticipate these acquisitions will generate considerable operating synergies. We also expect these mergers to provide significant benefits to our expanded group of clients, communities, shareholders, and employees.”
Completion of the pending mergers will create a super community bank with approximately $9.7 billion in assets, $6.8 billion in loans, $8.0 billion in deposits, and 190 branches across five western states. The combined company will benefit from a diversified geography with significant growth opportunities, including nine of the top 20 western Metropolitan Statistical Areas by population, and will have an expanded balance sheet with superior asset quality, solid core deposit funding and a substantial capital base.
Fourth Quarter 2014 Highlights (compared to fourth quarter 2013, except as noted)
| • | Net income was $12.2 million, or $0.63 per diluted share, compared to $11.6 million, or $0.60 per diluted share in the fourth quarter of 2013. |
| • | Annualized return on average assets was 1.02%. |
| • | Annualized return on average equity was 8.33%. |
| • | Revenues from core operations* increased 14% to $58.9 million, compared to $51.6 million in the fourth quarter a year ago. |
| • | Net interest margin was 4.08% for the current quarter, compared to 4.07% in the third quarter of 2014 and 4.01% in the fourth quarter a year ago. |
| • | Core deposits increased 14% and represent 80% of total deposits at December 31, 2014. |
| • | Deposit fees and other service charges increased 25% to $8.3 million. |
| • | Total loans increased $27.1 million to $3.83 billion during the quarter and increased 12% compared to a year ago. |
| • | Non-performing assets decreased 15% compared to the prior quarter to $20.2 million, or 0.43% of total assets, at December 31, 2014, and declined 30% from a year earlier. |
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| • | Common stockholders' tangible equity per share* increased to $29.70 at December 31, 2014, compared to $29.16 in the preceding quarter and $27.50 in the fourth quarter a year ago. |
| • | The ratio of tangible common stockholders' equity to tangible assets* remained strong at 12.31% at December 31, 2014. |
*Revenues from core operations and other operating income from core operations (both of which exclude acquisition bargain purchase gain, proposed acquisition termination fee, gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments), other operating expense from core operations (which excludes acquisition related costs) and references to tangible common stockholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude other intangible 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. See also Non-GAAP Financial Measures reconciliation tables on the final page of this press release.
Income Statement Review
Banner’s fourth quarter net interest income, before the provision for loan losses, was $46.7 million, compared to $47.1 million in the preceding quarter and increased 12% compared to $41.6 million in the fourth quarter a year ago largely reflecting balance sheet growth. For the year ended December 31, 2014, net interest income increased 8% to $179.9 million, compared to $166.7 million in 2013.
“Banner’s solid fourth quarter net interest margin was a result of our improved earning asset mix, modestly higher yields on cash and securities and reduced cost of deposits, which generally offset the continuing downward pressure on loan yields,” said Grescovich. Banner's net interest margin was 4.08% for the fourth quarter of 2014, compared to 4.07% in the preceding quarter and 4.01% in the fourth quarter a year ago. For the year, Banner’s net interest margin was 4.07% compared to 4.11% a year earlier.
Earning asset yields were unchanged compared to the preceding quarter and increased one basis point from the fourth quarter a year ago. Loan yields decreased by one basis point compared to the preceding quarter and were 12 basis points lower than the fourth quarter a year ago. Deposit costs decreased by one basis point in the fourth quarter compared to the preceding quarter and decreased by six basis points compared to the fourth quarter a year ago. The total cost of funds remained unchanged in the fourth quarter compared to the preceding quarter and declined six basis points compared to the fourth quarter a year ago. For the year ended December 31, 2014, Banner's cost of funds declined eight basis points compared to the prior year.
“Banner’s mortgage banking activities further improved during the fourth quarter of 2014, reflecting a strong home purchase market and our increased market presence. While the mortgage refinance market is slower than the elevated pace seen in certain prior periods, our originations for home purchases have continued to increase in recent periods reflecting our increased investment in this business line," said Grescovich. Mortgage banking operations contributed $3.0 million to fourth quarter revenues compared to $2.8 million in the preceding quarter and $2.2 million the fourth quarter of 2013. For the full year 2014, mortgage banking operations contributed $10.2 million to revenues, compared to $11.2 million in 2013.
Deposit fees and other service charges were $8.3 million in the fourth quarter of 2014, the same as in the preceding quarter and a 25% increase compared to $6.7 million in the fourth quarter a year ago. These increases reflect growth in the number of deposit accounts, increased transaction activity and Banner’s decision to change its debit card relationship to MasterCard®. For all of 2014, deposit fees and other service charges increased 15% to $30.6 million, compared to $26.6 million in 2013.
Revenues from core operations* (revenues excluding the acquisition bargain purchase gain in 2014 and proposed acquisition termination fee in 2013, net gain on the sale of securities, other-than-temporary impairment recovery and net change in valuation of financial instruments) were $58.9 million in the fourth quarter compared to $59.0 million in the preceding quarter and $51.6 million in the fourth quarter of 2013. For the year 2014, revenues from core operations* increased 8% to $223.6 million, compared to $208.0 million in 2013. Total revenues were $58.6 million and $234.1 million for the quarter and year ended
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December 31, 2014, respectively, compared to $54.2 million and $210.1 million for the quarter and year ended December 31, 2013, respectively.
Banner’s fourth quarter 2014 results included a $287,000 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's results included a $1.5 million net gain for fair value adjustments; and in the fourth quarter of 2013, Banner recorded a net loss of $324,000 for fair value adjustments.
Total other operating income, which includes the changes in the valuation of financial instruments, was $11.9 million in the fourth quarter of 2014, compared to $13.4 million in the third quarter of 2014 and $12.6 million in the fourth quarter a year ago. For the year, total other operating income increased 25% to $54.3 million compared to $43.3 million in 2013. Other operating income from core operations,* which excludes the gain on sale of securities, net changes in the valuation of financial instruments and the acquisition related bargain gain and termination fee, was $12.2 million for the fourth quarter of 2014, compared to $11.9 million for the preceding quarter and $9.9 million for the fourth quarter a year ago. For the year 2014, other operating income from core operations* increased 6% to $43.8 million compared to $41.2 million in 2013.
Banner’s total other operating expenses (non-interest expenses) were $41.2 million in the fourth quarter of 2014, compared to $38.5 million in the preceding quarter and $36.9 million in the fourth quarter of 2013. For the year, Banner’s operating expenses were $153.7 million compared to $141.0 million in 2013. The increase in operating expenses during the current quarter and the year was largely attributable to acquisition-related costs and incremental costs associated with operating the acquired branches, as well as generally increased compensation expenses. Acquisition-related expenses were $2.8 million in the current quarter and $4.3 million for the year ended December 31, 2014. Acquisition-related expenses were $550,000 in the fourth quarter of 2013 and for the year ended December 31, 2013.
For the fourth quarter of 2014, Banner recorded $5.1 million in state and federal income tax expense for an effective tax rate of 29.5%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits, as well as adjustments related to the filing of amended state income tax returns which reduced the current quarter and year-to-date tax expense by approximately $300,000. As a result, for the year ended December 31, 2014 Banner recorded $25.7 million in state and federal income tax expense for an effective tax rate of 32.0% compared to 32.6% for the year ended December 31, 2013.
Credit Quality
“Banner’s fourth quarter credit quality metrics, again, clearly reflect our moderate risk profile. Our non-performing assets declined 15% compared to the third quarter of 2014, and 30% compared to a year ago,” said Grescovich. “Additionally, our reserve levels remain substantial, and no provision for loan losses was required during the fourth quarter or the year despite continued loan growth.”
Banner's allowance for loan losses was $75.9 million at December 31, 2014, or 1.98% of total loans outstanding and 454% of non-performing loans. Banner had net recoveries of $1.6 million in the fourth quarter of 2014, compared to net recoveries of $21,000 in the third quarter, and net charge-offs of $1.7 million in the fourth quarter a year ago. Banner did not record a provision for loan losses for the fourth quarter of 2014 or for either the preceding or year-ago quarter.
Non-performing loans were $16.7 million at December 31, 2014, a 15% decrease compared to $19.8 million at September 30, 2014 and a 32% decrease compared to $24.8 million at December 31, 2013. REO and repossessed assets decreased to $3.4 million at December 31, 2014, compared to $4.0 million at September 30, 2014 and $4.2 million a year ago.
Banner's non-performing assets decreased to 0.43% of total assets at December 31, 2014, compared to 0.50% at September 30, 2014 and 0.66% a year ago. Non-performing assets declined 15% to $20.2 million at December 31, 2014, compared to $23.8 million at September 30, 2014, and decreased 30% compared to $28.9 million a year ago.
Balance Sheet Review
“Loan production remains strong, and we continue to see significant potential for growth in our loan origination pipelines,” added Grescovich. Net loans were $3.76 billion at December 31, 2014, compared to $3.73 billion at September 30, 2014, and $3.34 billion a year ago. Commercial real estate and multifamily real estate loans decreased slightly to $1.57 billion at December 31, 2014, compared to $1.58 billion at September 30, 2014, but increased 18% compared to $1.33 billion a year ago. Commercial and
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agricultural business loans declined slightly to $962.5 million at December 31, 2014, compared to $968.1 million three months earlier, but increased 6% compared to $910.5 million a year ago. Total construction and land and land development loans increased 8% to $411.0 million at December 31, 2014, compared to $381.5 million at September 30, 2014, and increased 17% compared to $351.3 million a year earlier.
Total assets decreased slightly to $4.72 billion at December 31, 2014, compared to $4.76 billion at September 30, 2014 but increased 8% compared to $4.39 billion a year ago. The total of securities and interest-bearing deposits held at other banks was $637.5 million at December 31, 2014, compared to $700.6 million at September 30, 2014 and $702.9 million a year ago. The average effective duration of Banner's securities portfolio was approximately 3.1 years at December 31, 2014.
Banner’s total deposits decreased slightly to $3.90 billion at December 31, 2014, compared to $3.99 billion at September 30, 2014 but increased 8% compared to $3.62 billion a year ago. Non-interest-bearing account balances were $1.30 billion at December 31, 2014, which was nearly unchanged from three months earlier and increased 16% compared to $1.12 billion a year ago. Interest-bearing transaction and savings accounts were $1.83 billion at December 31, 2014, which also was nearly unchanged from three months earlier and increased 12% compared to $1.63 billion a year ago. Certificates of deposit decreased 10% to $770.5 million at December 31, 2014, compared to $853.0 million at September 30, 2014, and decreased 12% compared to $872.7 million a year earlier. Brokered deposits totaled $4.8 million at December 31, 2014 compared to $41.2 million at September 30, 2014 and $4.3 million a year ago.
“We further reduced our funding costs by remixing our deposits away from higher-priced certificates of deposit, adding new client relationships and improving our core funding position, and as a result total core deposits increased by 14% compared to the same quarter a year ago,” said Grescovich.
Banner’s core deposits represented 80% of total deposits at December 31, 2014, compared to 76% of total deposits a year earlier. The cost of deposits declined one basis point to 0.18% for the quarter ended December 31, 2014, compared to 0.19% for the quarter ended September 30, 2014, and declined six basis points from 0.24% for the quarter ended December 31, 2013.
At December 31, 2014, total common stockholders' equity was $584.1 million, or $29.84 per share, compared to $574.1 million at September 30, 2014, and to $539.0 million a year ago. Banner had 19.6 million shares of common stock outstanding at year end, compared to 19.5 million shares one year earlier. At year end, tangible common stockholders' equity*, which excludes other intangible assets, was $581.3 million, or 12.31% of tangible assets*, compared to $570.7 million, or 12.00% of tangible assets, at September 30, 2014, and $536.5 million, or 12.23% of tangible assets, a year ago. Banner's tangible book value per share* increased by 8% to $29.70 at December 31, 2014, compared to $27.50 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 13.42% and its total capital to risk-weighted assets ratio was 16.81% at December 31, 2014.
Conference Call
Banner will host a conference call on Thursday, January 22, 2015, at 8:00 a.m. PST, to discuss its fourth quarter and year end results. To listen to the call on-line, go to the Company's website at www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one month at (877) 344-7529 using access code 10057528, or at www.bannerbank.com.
About the Company
Banner Corporation is a $4.72 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.
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Forward-Looking Statements
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements. Statements about the expected timing, completion and effects of the proposed merger and all other statements in this release other than historical facts constitute forward-looking statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the proposed mergers of Banner Bank and Siuslaw Bank and of Banner Bank and AmericanWest Bank (“AmericanWest”) might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the requisite shareholder and regulatory approvals for the transactions might not be obtained; (3) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (4) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (10) the ability to access cost-effective funding; (11) changes in financial markets; (12) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (13) the costs, effects and outcomes of litigation; (14) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (15) changes in accounting principles, policies or guidelines; (16) future acquisitions by Banner or AmericanWest of other depository institutions or lines of business; (17) Banner’s pending acquisition of Siuslaw Financial Group, Inc. or AmericanWest’s pending acquisition of Greater Sacramento Bancorp may fail to be consummated; and (18) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors.
Banner does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made except where expressly required by law.
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Additional Information
This communication is being made in respect of the proposed merger transactions involving Banner Corporation ("Banner"), Siuslaw Financial Group, Inc. and Starbuck Bancshares, Inc. ("Starbuck"), the parent company of AmericanWest Bank. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities. Banner has filed a proxy statement on Schedule 14A with the SEC in connection with the proposed transaction to acquire Starbuck, which after becoming effective will be sent to the Banner shareholders. Shareholders are advised to read the proxy statement when it becomes available because it will contain important information about Banner, Starbuck, and the proposed transaction. Banner also plans to file other documents with the SEC regarding the proposed transaction with Starbuck and the pending proposed merger transaction with Siuslaw Financial Group, Inc. When filed, these documents relating to the proposed transactions can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing Banner’s website at http://www.bannerbank.com/AboutUs/InvestorRelations/SecuritiesandExchangeCommission(SEC)Filings/Pages/default.aspx. Alternatively, these documents, when available, can be obtained free of charge from Banner upon written request to Banner Corporation, Attn: Investor Relations, 10 South First Avenue, Walla Walla, Washington 99362 or by calling (509) 527-3636.
Banner Corporation and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Banner shareholders in connection with the proposed transaction with Starbuck. Information about these participants may be found in the definitive proxy statement of Banner relating to its 2014 Annual Meeting of Stockholders filed with the SEC by Banner on March 24, 2014. The definitive proxy statement can be obtained free of charge from the sources indicated above. Additional information regarding the interests of such participants will be included in the proxy statement and other relevant documents regarding the proposed merger transaction filed with the SEC when they become available, copies of which may also be obtained free of charge from the sources indicated above.
Banner has filed a registration statement on Form S-4 with the SEC in connection with the merger transaction with Siuslaw Financial Group, Inc. The registration statement includes a proxy statement of Siuslaw that also constitutes a prospectus of Banner, which will be sent to the shareholders of Siuslaw. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN, OR WILL CONTAIN, IMPORTANT INFORMATION ABOUT BANNER, SIUSLAW AND THE PROPOSED TRANSACTION. This document and other documents relating to the merger can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing Banner’s website at:
http://www.bannerbank.com/AboutUs/InvestorRelations/SecuritiesandExchangeCommission(SEC)Filings/Pages/default.aspx
or by accessing Siuslaw’s website at http://www.siuslawbank.com/Investor-Relations.aspx.
Alternatively, these documents can be obtained free of charge from Banner upon written request to Banner Corporation, Attn: Investor Relations, 10 South First Avenue, Walla Walla, Washington 99362 or by calling (509) 527-3636, or from Siuslaw, upon written request to Siuslaw Financial Group, Inc., Attn: Investor Relations, P.O. Box 280, Florence, Oregon 97439 or by calling (541) 997-3486.
Banner Corporation and Siuslaw Financial Group, Inc., and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Siuslaw shareholders in connection with the merger. Information about the directors and executive officers of Siuslaw and the interests of these participants may be obtained by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available.
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| | Quarters Ended | | Twelve Months Ended |
| (in thousands except shares and per share data) | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 | | Dec 31, 2014 | | Dec 31, 2013 |
| INTEREST INCOME: | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 46,102 | | | $ | 46,496 | | | $ | 41,470 | | | $ | 177,541 | | | $ | 167,204 | |
| Mortgage-backed securities | | 1,403 | | | 1,459 | | | 1,321 | | | 5,779 | | | 5,168 | |
| Securities and cash equivalents | | 1,746 | | | 1,809 | | | 1,804 | | | 7,341 | | | 7,340 | |
| | | 49,251 | | | 49,764 | | | 44,595 | | | 190,661 | | | 179,712 | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | |
| Deposits | | 1,801 | | | 1,903 | | | 2,198 | | | 7,578 | | | 9,737 | |
| Federal Home Loan Bank advances | | 16 | | | 20 | | | 7 | | | 125 | | | 99 | |
| Other borrowings | | 40 | | | 43 | | | 41 | | | 172 | | | 192 | |
| Junior subordinated debentures | | 734 | | | 734 | | | 742 | | | 2,914 | | | 2,968 | |
| | | 2,591 | | | 2,700 | | | 2,988 | | | 10,789 | | | 12,996 | |
| Net interest income before provision for loan losses | | 46,660 | | | 47,064 | | | 41,607 | | | 179,872 | | | 166,716 | |
| PROVISION FOR LOAN LOSSES | | — | | | — | | | — | | | — | | | — | |
| Net interest income | | 46,660 | | | 47,064 | | | 41,607 | | | 179,872 | | | 166,716 | |
| OTHER OPERATING INCOME: | | | | | | | | | | | | | | | |
| Deposit fees and other service charges | | 8,317 | | | 8,289 | | | 6,670 | | | 30,553 | | | 26,581 | |
| Mortgage banking operations | | 2,966 | | | 2,842 | | | 2,168 | | | 10,249 | | | 11,170 | |
| Miscellaneous | | 916 | | | 761 | | | 1,110 | | | 2,957 | | | 3,484 | |
| | | 12,199 | | | 11,892 | | | 9,948 | | | 43,759 | | | 41,235 | |
| Net gain on sale of securities | | 1 | | | 6 | | | 2 | | | 42 | | | 1,022 | |
| Other-than-temporary impairment recovery | | — | | | — | | | — | | | — | | | 409 | |
| Net change in valuation of financial instruments carried at fair value | | (287 | ) | | 1,452 | | | (324 | ) | | 1,374 | | | (2,278 | ) |
| Proposed acquisition termination fee | | — | | | — | | | 2,954 | | | — | | | 2,954 | |
| Acquisition bargain purchase gain | | — | | | — | | | — | | | 9,079 | | | — | |
| Total other operating income | | 11,913 | | | 13,350 | | | 12,580 | | | 54,254 | | | 43,342 | |
| OTHER OPERATING EXPENSE: | | | | | | | | | | | | | | | |
| Salary and employee benefits | | 23,321 | | | 22,971 | | | 21,191 | | | 89,778 | | | 84,388 | |
| Less capitalized loan origination costs | | (3,050 | ) | | (3,204 | ) | | (2,371 | ) | | (11,730 | ) | | (11,227 | ) |
| Occupancy and equipment | | 5,689 | | | 5,819 | | | 5,362 | | | 22,743 | | | 21,423 | |
| Information / computer data services | | 2,147 | | | 2,131 | | | 1,956 | | | 8,131 | | | 7,309 | |
| Payment and card processing services | | 2,998 | | | 3,201 | | | 2,586 | | | 11,460 | | | 9,870 | |
| Professional services | | 863 | | | 784 | | | 1,531 | | | 3,753 | | | 4,331 | |
| Advertising and marketing | | 1,387 | | | 2,454 | | | 2,033 | | | 6,266 | | | 6,885 | |
| Deposit insurance | | 595 | | | 607 | | | 502 | | | 2,415 | | | 2,329 | |
| State/municipal business and use taxes | | 415 | | | 475 | | | 478 | | | 1,437 | | | 1,941 | |
| Real estate operations | | (187 | ) | | (190 | ) | | 357 | | | (446 | ) | | (689 | ) |
| Amortization of core deposit intangibles | | 531 | | | 531 | | | 488 | | | 1,990 | | | 1,941 | |
| Miscellaneous | | 3,735 | | | 3,410 | | | 2,266 | | | 13,619 | | | 11,924 | |
| | | 38,444 | | | 38,989 | | | 36,379 | | | 149,416 | | | 140,425 | |
| Acquisition related costs | | 2,785 | | | (494 | ) | | 550 | | | 4,325 | | | 550 | |
| Total other operating expense | | 41,229 | | | 38,495 | | | 36,929 | | | 153,741 | | | 140,975 | |
| Income before provision for income taxes | | 17,344 | | | 21,919 | | | 17,258 | | | 80,385 | | | 69,083 | |
| PROVISION FOR INCOME TAXES | | 5,118 | | | 7,076 | | | 5,704 | | | 25,738 | | | 22,528 | |
| NET INCOME | | $ | 12,226 | | | $ | 14,843 | | | $ | 11,554 | | | $ | 54,647 | | | $ | 46,555 | |
| Earnings per share available to common shareholders: | | | | | | | | | | | | | | | |
| Basic | | $ | 0.63 | | | $ | 0.77 | | | $ | 0.60 | | | $ | 2.82 | | | $ | 2.40 | |
| Diluted | | $ | 0.63 | | | $ | 0.76 | | | $ | 0.60 | | | $ | 2.82 | | | $ | 2.40 | |
| Cumulative dividends declared per common share | | $ | 0.18 | | | $ | 0.18 | | | $ | 0.15 | | | $ | 0.72 | | | $ | 0.54 | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | |
| Basic | | 19,374,228 | | | 19,372,740 | | | 19,344,174 | | | 19,359,409 | | | 19,361,411 | |
| Diluted | | 19,441,712 | | | 19,419,344 | | | 19,398,213 | | | 19,402,656 | | | 19,397,360 | |
| Change in common shares outstanding | | 43 | | | 2,801 | | | 719 | | | 27,779 | | | 88,804 | |
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| | | | | | | | | |
| (in thousands except shares and per share data) | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| ASSETS | | | | | | | | | |
| Cash and due from banks | | $ | 71,077 | | | $ | 69,023 | | | $ | 69,711 | |
| Federal funds and interest-bearing deposits | | 54,995 | | | 82,702 | | | 67,638 | |
| Securities - trading | | 40,258 | | | 51,076 | | | 62,472 | |
| Securities - available for sale | | 411,021 | | | 433,745 | | | 470,280 | |
| Securities - held to maturity | | 131,258 | | | 133,069 | | | 102,513 | |
| Federal Home Loan Bank stock | | 27,036 | | | 29,106 | | | 35,390 | |
| Loans receivable: | | | | | | | | | |
| Held for sale | | 2,786 | | | 6,949 | | | 2,734 | |
| Held for portfolio | | 3,831,034 | | | 3,799,746 | | | 3,415,711 | |
| Allowance for loan losses | | (75,907 | ) | | (74,331 | ) | | (74,258 | ) |
| | | 3,757,913 | | | 3,732,364 | | | 3,344,187 | |
| Accrued interest receivable | | 15,279 | | | 17,062 | | | 13,996 | |
| Real estate owned held for sale, net | | 3,352 | | | 3,928 | | | 4,044 | |
| Property and equipment, net | | 91,185 | | | 91,291 | | | 90,267 | |
| Other intangibles, net | | 2,831 | | | 3,362 | | | 2,449 | |
| Bank-owned life insurance | | 63,759 | | | 63,293 | | | 61,945 | |
| Other assets | | 53,935 | | | 49,368 | | | 64,006 | |
| | | $ | 4,723,899 | | | $ | 4,759,389 | | | $ | 4,388,898 | |
| LIABILITIES | | | | | | | | | |
| Deposits: | | | | | | | | | |
| Non-interest-bearing | | $ | 1,298,866 | | | $ | 1,304,720 | | | $ | 1,115,346 | |
| Interest-bearing transaction and savings accounts | | 1,829,568 | | | 1,833,404 | | | 1,629,885 | |
| Interest-bearing certificates | | 770,516 | | | 852,994 | | | 872,695 | |
| | | 3,898,950 | | | 3,991,118 | | | 3,617,926 | |
| Advances from Federal Home Loan Bank at fair value | | 32,250 | | | 250 | | | 27,250 | |
| Customer repurchase agreements | | 77,185 | | | 67,605 | | | 83,056 | |
| Junior subordinated debentures at fair value | | 78,001 | | | 77,624 | | | 73,928 | |
| Accrued expenses and other liabilities | | 36,600 | | | 32,375 | | | 31,324 | |
| Deferred compensation | | 16,807 | | | 16,359 | | | 16,442 | |
| | | 4,139,793 | | | 4,185,331 | | | 3,849,926 | |
| STOCKHOLDERS' EQUITY | | | | | | | | | |
| Common stock | | 568,882 | | | 568,255 | | | 569,028 | |
| Retained earnings (accumulated deficit) | | 15,482 | | | 6,780 | | | (25,073 | ) |
| Other components of stockholders' equity | | (258 | ) | | (977 | ) | | (4,983 | ) |
| | | 584,106 | | | 574,058 | | | 538,972 | |
| | | $ | 4,723,899 | | | $ | 4,759,389 | | | $ | 4,388,898 | |
| Common Shares Issued: | | | | | | | | | |
| Shares outstanding at end of period | | 19,571,548 | | | 19,571,505 | | | 19,543,769 | |
| Less unearned ESOP shares at end of period | | — | | | — | | | 34,340 | |
| Shares outstanding at end of period excluding unearned ESOP shares | | 19,571,548 | | | 19,571,505 | | | 19,509,429 | |
Common stockholders' equity per share (1) | | $ | 29.84 | | | $ | 29.33 | | | $ | 27.63 | |
Common stockholders' tangible equity per share (1) (2) | | $ | 29.70 | | | $ | 29.16 | | | $ | 27.50 | |
Common stockholders' tangible equity to tangible assets (2) | | 12.31 | % | | 12.00 | % | | 12.23 | % |
| Consolidated Tier 1 leverage capital ratio | | 13.42 | % | | 13.14 | % | | 13.64 | % |
| (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 other intangibles. Tangible assets exclude other intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final page of the press release tables. |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 9
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | |
| | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| LOANS (including loans held for sale): | | | | | | | | | |
| Commercial real estate: | | | | | | | | | |
| Owner occupied | | $ | 546,783 | | | $ | 546,333 | | | $ | 502,601 | |
| Investment properties | | 856,942 | | | 854,284 | | | 692,457 | |
| Multifamily real estate | | 167,524 | | | 183,944 | | | 137,153 | |
| Commercial construction | | 17,337 | | | 18,606 | | | 12,168 | |
| Multifamily construction | | 60,193 | | | 48,606 | | | 52,081 | |
| One- to four-family construction | | 219,889 | | | 214,141 | | | 200,864 | |
| Land and land development: | | | | | | | | | |
| Residential | | 102,435 | | | 89,649 | | | 75,695 | |
| Commercial | | 11,152 | | | 10,505 | | | 10,450 | |
| Commercial business | | 723,964 | | | 728,088 | | | 682,169 | |
| Agricultural business including secured by farmland | | 238,499 | | | 240,048 | | | 228,291 | |
| One- to four-family real estate | | 539,894 | | | 527,271 | | | 529,494 | |
| Consumer: | | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 222,205 | | | 215,385 | | | 173,188 | |
| Consumer-other | | 127,003 | | | 129,835 | | | 121,834 | |
| Total loans outstanding | | $ | 3,833,820 | | | $ | 3,806,695 | | | $ | 3,418,445 | |
| | | | | | | | | | | | | |
| Restructured loans performing under their restructured terms | | $ | 29,154 | | | $ | 30,387 | | | $ | 47,428 | |
| | | | | | | | | | | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 8,387 | | | $ | 6,925 | | | $ | 8,784 | |
| | | | | | | | | | | | | |
| Total delinquent loans (including loans on non-accrual) | | $ | 25,124 | | | $ | 26,703 | | | $ | 22,010 | |
| | | | | | | | | | |
| Total delinquent loans / Total loans outstanding | | 0.66 | % | | 0.70 | % | | 0.64 | % |
| GEOGRAPHIC CONCENTRATION | | | | | | | | | | | | | | | |
| OF LOANS AT DECEMBER 31, 2014 | | Washington | | Oregon | | Idaho | | Other | | Total |
| Commercial real estate: | | | | | | | | | | | | | | | |
| Owner occupied | | $ | 383,950 | | | $ | 86,937 | | | $ | 56,348 | | | $ | 19,548 | | | $ | 546,783 | |
| Investment properties | | 523,806 | | | 124,604 | | | 60,053 | | | 148,479 | | | 856,942 | |
| Multifamily real estate | | 116,793 | | | 35,527 | | | 14,759 | | | 445 | | | 167,524 | |
| Commercial construction | | 15,599 | | | — | | | 1,738 | | | — | | | 17,337 | |
| Multifamily construction | | 50,931 | | | 8,850 | | | 412 | | | — | | | 60,193 | |
| One- to four-family construction | | 129,499 | | | 88,468 | | | 1,922 | | | — | | | 219,889 | |
| Land and land development: | | | | | | | | | | | | | | | |
| Residential | | 56,675 | | | 44,707 | | | 1,053 | | | — | | | 102,435 | |
| Commercial | | 5,781 | | | 2,529 | | | 2,842 | | | — | | | 11,152 | |
| Commercial business | | 397,103 | | | 125,235 | | | 85,580 | | | 116,046 | | | 723,964 | |
| Agricultural business including secured by farmland | | 119,617 | | | 69,843 | | | 48,997 | | | 42 | | | 238,499 | |
| One- to four-family real estate | | 341,944 | | | 172,974 | | | 24,223 | | | 753 | | | 539,894 | |
| Consumer: | | | | | | | | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 136,888 | | | 69,172 | | | 14,984 | | | 1,161 | | | 222,205 | |
| Consumer-other | | 79,520 | | | 40,803 | | | 6,243 | | | 437 | | | 127,003 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total loans outstanding | | $ | 2,358,106 | | | $ | 869,649 | | | $ | 319,154 | | | $ | 286,911 | | | $ | 3,833,820 | |
| | | | | | | | | | | | | | | | |
| Percent of total loans | | 61.5 | % | | 22.7 | % | | 8.3 | % | | 7.5 | % | | 100.0 | % |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 10
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| | | Quarters Ended | | Twelve Months Ended |
| CHANGE IN THE | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 | | Dec 31, 2014 | | Dec 31, 2013 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 74,331 | | | $ | 74,310 | | | $ | 75,925 | | | $ | 74,258 | | | $ | 76,759 | |
| Provision | | — | | | — | | | — | | | — | | | — | |
| Recoveries of loans previously charged off: | | | | | | | | | | | | | | | |
| Commercial real estate | | 843 | | | 94 | | | 72 | | | 1,507 | | | 2,367 | |
| Construction and land | | 988 | | | 84 | | | 1,330 | | | 1,776 | | | 2,275 | |
| One- to four-family real estate | | 83 | | | 143 | | | 7 | | | 618 | | | 145 | |
| Commercial business | | 153 | | | 256 | | | 282 | | | 988 | | | 1,673 | |
| Agricultural business, including secured by farmland | | 328 | | | 587 | | | 85 | | | 1,576 | | | 697 | |
| Consumer | | 135 | | | 53 | | | 53 | | | 528 | | | 340 | |
| | | 2,530 | | | 1,217 | | | 1,829 | | | 6,993 | | | 7,497 | |
| Loans charged off: | | | | | | | | | | | | | | | |
| Commercial real estate | | — | | | — | | | (953 | ) | | (1,239 | ) | | (2,569 | ) |
| Multifamily real estate | | — | | | (20 | ) | | — | | | (20 | ) | | — | |
| Construction and land | | — | | | — | | | (967 | ) | | (207 | ) | | (1,821 | ) |
| One- to four-family real estate | | (253 | ) | | (239 | ) | | (879 | ) | | (885 | ) | | (2,139 | ) |
| Commercial business | | (263 | ) | | (83 | ) | | (209 | ) | | (1,344 | ) | | (1,782 | ) |
| Agricultural business, including secured by farmland | | (54 | ) | | (125 | ) | | — | | | (179 | ) | | (248 | ) |
| Consumer | | (384 | ) | | (729 | ) | | (488 | ) | | (1,470 | ) | | (1,439 | ) |
| | | (954 | ) | | (1,196 | ) | | (3,496 | ) | | (5,344 | ) | | (9,998 | ) |
| Net (charge-offs) recoveries | | 1,576 | | | 21 | | | (1,667 | ) | | 1,649 | | | (2,501 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, end of period | | $ | 75,907 | | | $ | 74,331 | | | $ | 74,258 | | | $ | 75,907 | | | $ | 74,258 | |
| | | | | | | | | | | | | | | | |
| Net (charge-offs) recoveries / Average loans outstanding | | 0.041 | % | | 0.001 | % | | (0.050 | )% | | 0.045 | % | | (0.076 | )% |
| ALLOCATION OF | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| Specific or allocated loss allowance: | | | | | | | | | |
| Commercial real estate | | $ | 18,784 | | | $ | 19,505 | | | $ | 16,759 | |
| Multifamily real estate | | 4,562 | | | 4,892 | | | 5,306 | |
| Construction and land | | 23,545 | | | 20,779 | | | 17,640 | |
| One- to four-family real estate | | 8,447 | | | 9,136 | | | 11,486 | |
| Commercial business | | 12,043 | | | 12,677 | | | 11,773 | |
| Agricultural business, including secured by farmland | | 2,821 | | | 2,947 | | | 2,841 | |
| Consumer | | 483 | | | 675 | | | 1,335 | |
| Total allocated | | 70,685 | | | 70,611 | | | 67,140 | |
| Unallocated | | 5,222 | | | 3,720 | | | 7,118 | |
| Total allowance for loan losses | | $ | 75,907 | | | $ | 74,331 | | | $ | 74,258 | |
| | | | | | | | | | |
| Allowance for loan losses / Total loans outstanding | | 1.98 | % | | 1.95 | % | | 2.17 | % |
| | | | | | | | | | |
| Allowance for loan losses / Non-performing loans | | 454 | % | | 376 | % | | 300 | % |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 11
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | |
| | | Dec 31, 2014 | | | Sep 30, 2014 | | | Dec 31, 2013 | |
| NON-PERFORMING ASSETS | | | | | | | | | |
| Loans on non-accrual status: | | | | | | | | | |
| Secured by real estate: | | | | | | | | | |
| Commercial | | $ | 1,132 | | | $ | 2,701 | | | $ | 6,287 | |
| Multifamily | | | — | | | | 397 | | | | — | |
| Construction and land | | | 1,275 | | | | 1,285 | | | | 1,193 | |
| One- to four-family | | | 8,834 | | | | 8,615 | | | | 12,532 | |
| Commercial business | | | 537 | | | | 1,037 | | | | 723 | |
| Agricultural business, including secured by farmland | | | 1,597 | | | | 229 | | | | — | |
| Consumer | | | 1,187 | | | | 1,138 | | | | 1,173 | |
| | | | 14,562 | | | | 15,402 | | | | 21,908 | |
| Loans more than 90 days delinquent, still on accrual: | | | | | | | | | | | | |
| Secured by real estate: | | | | | | | | | | | | |
| Commercial | | | — | | | | 993 | | | | — | |
| One- to four-family | | | 2,095 | | | | 2,777 | | | | 2,611 | |
| Commercial business | | | — | | | | 301 | | | | — | |
| Agricultural business, including secured by farmland | | | — | | | | — | | | | 105 | |
| Consumer | | | 79 | | | | 306 | | | | 144 | |
| | | | 2,174 | | | | 4,377 | | | | 2,860 | |
| Total non-performing loans | | | 16,736 | | | | 19,779 | | | | 24,768 | |
| Real estate owned (REO) | | | 3,352 | | | | 3,928 | | | | 4,044 | |
| Other repossessed assets | | | 76 | | | | 69 | | | | 115 | |
| | | | | | | | | | | | | |
| Total non-performing assets | | $ | 20,164 | | | $ | 23,776 | | | $ | 28,927 | |
| | | | | | | | | | | | | |
| Total non-performing assets / Total assets | | | 0.43 | % | | | 0.50 | % | | | 0.66 | % |
| DETAIL & GEOGRAPHIC CONCENTRATION OF | | | | | | | | | | | | |
| NON-PERFORMING ASSETS AT DECEMBER 31, 2014 | | Washington | | | Oregon | | | Idaho | | | Total | |
| Secured by real estate: | | | | | | | | | | | | |
| Commercial | | $ | 1,095 | | | $ | — | | | $ | 36 | | | $ | 1,131 | |
| Construction and land: | | | | | | | | | | | | | | | | |
| Residential land acquisition & development | | | — | | | | 750 | | | | — | | | | 750 | |
| Residential land improved lots | | | — | | | | 525 | | | | — | | | | 525 | |
| Total construction and land | | | — | | | | 1,275 | | | | — | | | | 1,275 | |
| One- to four-family | | | 8,888 | | | | 1,506 | | | | 535 | | | | 10,929 | |
| Commercial business | | | 500 | | | | 37 | | | | — | | | | 537 | |
| Agricultural business, including secured by farmland | | | 604 | | | | 993 | | | | — | | | | 1,597 | |
| Consumer | | | 1,015 | | | | 46 | | | | 206 | | | | 1,267 | |
| Total non-performing loans | | | 12,102 | | | | 3,857 | | | | 777 | | | | 16,736 | |
| Real estate owned (REO) | | | 1,693 | | | | 1,626 | | | | 33 | | | | 3,352 | |
| Other repossessed assets | | | 76 | | | | — | | | | — | | | | 76 | |
| Total non-performing assets at end of the period | | $ | 13,871 | | | $ | 5,483 | | | $ | 810 | | | $ | 20,164 | |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 12
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | Quarters Ended | | Twelve Months Ended |
| REAL ESTATE OWNED | | Dec 31, 2014 | | Dec 31, 2013 | | Dec 31, 2014 | | Dec 31, 2013 |
| Balance, beginning of period | | $ | 3,928 | | | $ | 4,818 | | | $ | 4,044 | | | $ | 15,778 | |
| Additions from loan foreclosures | | 427 | | | 700 | | | 3,264 | | | 3,166 | |
| Additions from capitalized costs | | (5 | ) | | 4 | | | 30 | | | 348 | |
| Proceeds from dispositions of REO | | (1,291 | ) | | (1,186 | ) | | (4,923 | ) | | (16,944 | ) |
| Gain on sale of REO | | 293 | | | 3 | | | 973 | | | 2,481 | |
| Valuation adjustments in the period | | — | | | (295 | ) | | (36 | ) | | (785 | ) |
| Balance, end of period | | $ | 3,352 | | | $ | 4,044 | | | $ | 3,352 | | | $ | 4,044 | |
| | | | | | | | | | | | | |
| DEPOSIT COMPOSITION | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| Non-interest-bearing | | $ | 1,298,866 | | | $ | 1,304,720 | | | $ | 1,115,346 | |
| Interest-bearing checking | | 439,480 | | | 429,876 | | | 422,910 | |
| Regular savings accounts | | 901,142 | | | 899,868 | | | 798,764 | |
| Money market accounts | | 488,946 | | | 503,660 | | | 408,211 | |
| Interest-bearing transaction & savings accounts | | 1,829,568 | | | 1,833,404 | | | 1,629,885 | |
| Interest-bearing certificates | | 770,516 | | | 852,994 | | | 872,695 | |
| Total deposits | | $ | 3,898,950 | | | $ | 3,991,118 | | | $ | 3,617,926 | |
| GEOGRAPHIC CONCENTRATION | | | | | | | | | | | | |
| OF DEPOSITS AT DECEMBER 31, 2014 | | Washington | | Oregon | | Idaho | | Total |
| Total deposits | | $ | 2,789,542 | | | $ | 865,937 | | | $ | 243,471 | | | $ | 3,898,950 | |
| Percent of total deposits | | 71.6 | % | | 22.2 | % | | 6.2 | % | | 100.0 | % |
| INCLUDED IN TOTAL DEPOSITS | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| Public non-interest-bearing accounts | | $ | 39,381 | | | $ | 34,535 | | | $ | 21,699 | |
| Public interest-bearing transaction & savings accounts | | 63,473 | | | 64,984 | | | 65,822 | |
| Public interest-bearing certificates | | 35,346 | | | 48,508 | | | 51,465 | |
| Total public deposits | | $ | 138,200 | | | $ | 148,027 | | | $ | 138,986 | |
| Total brokered deposits | | $ | 4,799 | | | $ | 41,249 | | | $ | 4,291 | |
| OTHER BORROWINGS | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 |
| Customer repurchase agreements / "Sweep accounts" | | $ | 77,185 | | | $ | 67,605 | | | $ | 83,056 | |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 13
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | Actual | | | Minimum for Capital Adequacy or "Well Capitalized" | |
| REGULATORY CAPITAL RATIOS AT DECEMBER 31, 2014 | | Amount | | | Ratio | | | Amount | | | Ratio | |
| Banner Corporation-consolidated: | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 685,065 | | | | 16.81 | % | | $ | 326,071 | | | | 8.00 | % |
| Tier 1 capital to risk-weighted assets | | | 633,799 | | | | 15.55 | % | | | 163,036 | | | | 4.00 | % |
| Tier 1 leverage capital to average assets | | | 633,799 | | | | 13.42 | % | | | 188,885 | | | | 4.00 | % |
| Banner Bank: | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | | 605,618 | | | | 15.52 | % | | | 390,274 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 556,518 | | | | 14.26 | % | | | 234,165 | | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | | 556,518 | | | | 12.42 | % | | | 224,130 | | | | 5.00 | % |
| Islanders Bank: | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | | 36,590 | | | | 19.92 | % | | | 18,367 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 34,332 | | | | 18.69 | % | | | 11,020 | | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | | 34,332 | | | | 13.68 | % | | | 12,550 | | | | 5.00 | % |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 14
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | | | |
| | | Quarters Ended | | Twelve Months Ended |
| OPERATING PERFORMANCE | | Dec 31, 2014 | | Sep 30, 2014 | | Dec 31, 2013 | | Dec 31, 2014 | | Dec 31, 2013 |
| Average loans | | $ | 3,813,606 | | | $ | 3,834,007 | | | $ | 3,343,494 | | | $ | 3,679,264 | | | $ | 3,275,767 | |
| Average securities | | 643,665 | | | 666,362 | | | 686,845 | | | 671,634 | | | 692,117 | |
| Average interest earning cash | | 76,082 | | | 85,090 | | | 85,335 | | | 68,696 | | | 85,178 | |
| Average non-interest-earning assets | | 212,071 | | | 213,045 | | | 196,034 | | | 205,378 | | | 204,077 | |
| Total average assets | | $ | 4,745,424 | | | $ | 4,798,504 | | | $ | 4,311,708 | | | $ | 4,624,972 | | | $ | 4,257,139 | |
| Average deposits | | $ | 3,942,903 | | | $ | 3,995,451 | | | $ | 3,573,607 | | | $ | 3,815,979 | | | $ | 3,515,493 | |
| Average borrowings | | 218,170 | | | 228,724 | | | 209,155 | | | 246,963 | | | 227,612 | |
Average non-interest-bearing other liabilities (1) | | 2,034 | | | 2,026 | | | (9,117 | ) | | (1,992 | ) | | (11,970 | ) |
| Total average liabilities | | 4,163,107 | | | 4,226,201 | | | 3,773,645 | | | 4,060,950 | | | 3,731,135 | |
| Total average stockholders' equity | | 582,317 | | | 572,303 | | | 538,063 | | | 564,022 | | | 526,004 | |
| Total average liabilities and equity | | $ | 4,745,424 | | | $ | 4,798,504 | | | $ | 4,311,708 | | | $ | 4,624,972 | | | $ | 4,257,139 | |
| Interest rate yield on loans | | 4.80 | % | | 4.81 | % | | 4.92 | % | | 4.83 | % | | 5.10 | % |
| Interest rate yield on securities | | 1.91 | % | | 1.91 | % | | 1.77 | % | | 1.92 | % | | 1.78 | % |
| Interest rate yield on cash | | 0.29 | % | | 0.28 | % | | 0.26 | % | | 0.30 | % | | 0.25 | % |
| Interest rate yield on interest-earning assets | | 4.31 | % | | 4.31 | % | | 4.30 | % | | 4.31 | % | | 4.43 | % |
| Interest rate expense on deposits | | 0.18 | % | | 0.19 | % | | 0.24 | % | | 0.20 | % | | 0.28 | % |
| Interest rate expense on borrowings | | 1.44 | % | | 1.38 | % | | 1.50 | % | | 1.30 | % | | 1.43 | % |
| Interest rate expense on interest-bearing liabilities | | 0.25 | % | | 0.25 | % | | 0.31 | % | | 0.27 | % | | 0.35 | % |
| Interest rate spread | | 4.06 | % | | 4.06 | % | | 3.99 | % | | 4.04 | % | | 4.08 | % |
| Net interest margin | | 4.08 | % | | 4.07 | % | | 4.01 | % | | 4.07 | % | | 4.11 | % |
| Other operating income / Average assets | | 1.00 | % | | 1.10 | % | | 1.16 | % | | 1.17 | % | | 1.02 | % |
Core operating income / Average assets (2) | | 1.02 | % | | 0.98 | % | | 0.92 | % | | 0.95 | % | | 0.97 | % |
| Other operating expense / Average assets | | 3.45 | % | | 3.18 | % | | 3.40 | % | | 3.32 | % | | 3.31 | % |
| Efficiency ratio (other operating expense / revenue) | | 70.39 | % | | 63.72 | % | | 68.15 | % | | 65.67 | % | | 67.11 | % |
Efficiency ratio (core other operating expense / core operating revenue)(2) | | 65.32 | % | | 66.13 | % | | 70.56 | % | | 66.81 | % | | 67.53 | % |
| Return on average assets | | 1.02 | % | | 1.23 | % | | 1.06 | % | | 1.18 | % | | 1.09 | % |
| Return on average equity | | 8.33 | % | | 10.29 | % | | 8.52 | % | | 9.69 | % | | 8.85 | % |
Return on average tangible equity (3) | | 8.37 | % | | 10.36 | % | | 8.56 | % | | 9.74 | % | | 8.91 | % |
| Average equity / Average assets | | 12.27 | % | | 11.93 | % | | 12.48 | % | | 12.20 | % | | 12.36 | % |
| (1) | Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures. |
| (2) | Core operating income (or core operating revenue) excludes net gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments and, an acquisition bargain purchase gain in the current year and proposed acquisition termination fee in the prior year.. Core other operating expense excludes acquisition related costs. These represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final page of these press release tables. |
| (3) | Average tangible equity excludes other intangible assets and represents a non-GAAP financial measure. See also Non-GAAP Financial Measures reconciliation tables on the final page of these press release tables. |
BANR - Fourth Quarter 2014 Results
January 21, 2015
Page 15
ADDITIONAL FINANCIAL INFORMATION |
| (in thousands except shares and per share data) |
| |
| * Non-GAAP Financial Measures (unaudited) |
| In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP 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. |
| |
| REVENUE FROM CORE OPERATIONS | | Quarters Ended | | | Twelve Months Ended | |
| | | Dec 31, 2014 | | | Sep 30, 2014 | | | Dec 31, 2013 | | | Dec 31, 2014 | | | Dec 31, 2013 | |
| Net interest income before provision for loan losses | | $ | 46,660 | | | $ | 47,064 | | | $ | 41,607 | | | $ | 179,872 | | | $ | 166,716 | |
| Total other operating income | | | 11,913 | | | | 13,350 | | | | 12,580 | | | | 54,254 | | | | 43,342 | |
| Total GAAP revenue | | | 58,573 | | | | 60,414 | | | | 54,187 | | | | 234,126 | | | | 210,058 | |
| Exclude net gain on sale of securities | | | (1 | ) | | | (6 | ) | | | (2 | ) | | | (42 | ) | | | (1,022 | ) |
| Exclude other-than-temporary-impairment recovery | | | — | | | | — | | | | — | | | | — | | | | (409 | ) |
| Exclude change in valuation of financial instruments carried at fair value | | | 287 | | | | (1,452 | ) | | | 324 | | | | (1,374 | ) | | | 2,278 | |
| Exclude proposed acquisition termination fee | | | — | | | | — | | | | (2,954 | ) | | | — | | | | (2,954 | ) |
| Exclude acquisition bargain purchase gain | | | — | | | | — | | | | — | | | | (9,079 | ) | | | — | |
| Revenue from core operations (non-GAAP) | | $ | 58,859 | | | $ | 58,956 | | | $ | 51,555 | | | $ | 223,631 | | | $ | 207,951 | |
| OTHER OPERATING INCOME/EXPENSE FROM CORE OPERATIONS | | Quarters Ended | | | Twelve Months Ended | |
| | | Dec 31, 2014 | | | Sep 30, 2014 | | | Dec 31, 2013 | | | Dec 31, 2014 | | | Dec 31, 2013 | |
| Total other operating income (GAAP) | | $ | 11,913 | | | $ | 13,350 | | | $ | 12,580 | | | $ | 54,254 | | | $ | 43,342 | |
| Exclude net gain on sale of securities | | | (1 | ) | | | (6 | ) | | | (2 | ) | | | (42 | ) | | | (1,022 | ) |
| Exclude other-than-temporary-impairment recovery | | | — | | | | — | | | | — | | | | — | | | | (409 | ) |
| Exclude change in valuation of financial instruments carried at fair value | | | 287 | | | | (1,452 | ) | | | 324 | | | | (1,374 | ) | | | 2,278 | |
| Exclude proposed acquisition termination fee | | | — | | | | — | | | | (2,954 | ) | | | — | | | | (2,954 | ) |
| Exclude acquisition bargain purchase gain | | | — | | | | — | | | | — | | | | (9,079 | ) | | | — | |
| Other operating income from core operations (non-GAAP) | | $ | 12,199 | | | $ | 11,892 | | | $ | 9,948 | | | $ | 43,759 | | | $ | 41,235 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total other operating expense (GAAP) | | $ | 41,229 | | | $ | 38,495 | | | $ | 36,929 | | | $ | 153,741 | | | $ | 140,975 | |
| Exclude acquisition related costs | | | (2,785 | ) | | | 494 | | | | (550 | ) | | | (4,325 | ) | | | (550 | ) |
| Other operating expense from core operations (non-GAAP) | | $ | 38,444 | | | $ | 38,989 | | | $ | 36,379 | | | $ | 149,416 | | | $ | 140,425 | |
| TANGIBLE COMMON STOCKHOLDERS' EQUITY TO TANGIBLE ASSETS | | Dec 31, 2014 | | | Sep 30, 2014 | | | Dec 31, 2013 | |
| Stockholders' equity (GAAP) | | $ | 584,106 | | | $ | 574,058 | | | $ | 538,972 | |
| Exclude other intangible assets, net | | | 2,831 | | | | 3,362 | | | | 2,449 | |
| Tangible common stockholders' equity (non-GAAP) | | $ | 581,275 | | | $ | 570,696 | | | $ | 536,523 | |
| | | | | | | | | | | | | |
| Total assets (GAAP) | | $ | 4,723,899 | | | $ | 4,759,389 | | | $ | 4,388,898 | |
| Exclude other intangible assets, net | | | 2,831 | | | | 3,362 | | | | 2,449 | |
| Total tangible assets (non-GAAP) | | $ | 4,721,068 | | | $ | 4,756,027 | | | $ | 4,386,449 | |
| Tangible common stockholders' equity to tangible assets (non-GAAP) | | | 12.31 | % | | | 12.00 | % | | | 12.23 | % |
| | | | | | | | | | | | | |
| TANGIBLE COMMON STOCKHOLDERS' EQUITY PER SHARE | | | | | | | | | | | | |
| Tangible common stockholders' equity | | $ | 581,275 | | | $ | 570,696 | | | $ | 536,523 | |
| Common shares outstanding at end of period | | | 19,571,548 | | | | 19,571,505 | | | | 19,509,429 | |
| Common shareholders' equity (book value) per share (GAAP) | | $ | 29.83 | | | $ | 29.33 | | | $ | 27.63 | |
| Tangible common stockholders' equity (tangible book value) per share (non-GAAP) | | $ | 29.70 | | | $ | 29.16 | | | $ | 27.50 | |
Transmitted on Globe Newswire on January 21, 2015 at 1:00 p.m. PST.
