Exhibit 99.1
 |  | Contact: Mark J. grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 |
| | | News Release |
Banner Corporation Earns $17.8 Million, or $0.52 per Diluted Share, in the First Quarter of 2016;
First Quarter Highlighted by Net Interest Margin Expansion
Walla Walla, WA - April 25, 2016 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported strong earnings growth propelled by growth from recent acquisitions, organic loan and core deposit growth and net interest margin expansion. Net income in the first quarter of 2016 increased to $17.8 million, or $0.52 per diluted share, compared to $6.9 million, or $0.20 per diluted share, in the preceding quarter and $12.1 million, or $0.61 per diluted share, in the first quarter a year ago. The current quarter results were impacted by $6.8 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.13 per diluted share, and the preceding quarter results were impacted by $18.4 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.37 per diluted share.
“Banner’s first quarter performance continued to reflect the success of our client acquisition strategies, which helped us realize strong operating results and increased our net interest margin,” stated Mark J. Grescovich, President and Chief Executive Officer. “We are continuing to benefit from the acquisition and integration of AmericanWest Bank, including the successful completion of our core system conversion during the recent quarter. Although there remains work to be done to fully realize the expected operating synergies, we have made solid progress on integration and can clearly observe the positive contributions from this merger in our first quarter results. This strategic combination is allowing us to deploy our super community bank model through a strengthened presence in Washington, Oregon and Idaho, as well as expanded opportunities in attractive growth markets in California and Utah.”
At March 31, 2016, Banner Corporation had $9.75 billion in assets, $7.11 billion in net loans and $8.03 billion in deposits. It operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population. As Banner Bank deploys its super community bank business model across five western states, the combined bank is benefiting from its increased scale and diversified geographic footprint with important economic drivers and significant growth opportunities.
First Quarter 2016 Highlights
| • | Net income increased 47% to $17.8 million, compared to $12.1 million in the first quarter of 2015. |
| • | Acquisition-related expenses were $6.8 million which, net of tax benefit, reduced net income by $0.13 per diluted share for the quarter ended March 31, 2016. |
| • | Revenues from core operations* increased 86% to $111.0 million, compared to $59.7 million in the first quarter a year ago. |
| • | Net interest margin expanded to 4.13% for the current quarter, compared to 4.05% in the fourth quarter of 2015 and 4.09% a year ago. |
| • | Excluding acquisition accounting adjustments, the contractual net interest margin increased to 4.01% compared to 3.89% in the preceding quarter. |
| • | Deposit fees and other service charges were $11.8 million, compared to $13.2 million in the preceding quarter and $8.1 million a year ago. |
| • | Revenues from mortgage banking operations were $5.6 million, including $725,000 related to sale of multifamily loans, compared to $4.5 million in the preceding quarter and $4.1 million a year ago. |
| • | Net loans increased by $3.08 billion, or 76% year-over-year. |
| • | Total deposits increased 86% to $8.03 billion compared to a year ago. |
| • | Core deposits increased by $3.20 billion, or 90%, year-over-year. |
| • | Core deposits represented 84% of total deposits at March 31, 2016. |
| • | Quarterly dividend to shareholders increased 17% to $0.21 per share. |
| • | Common stockholders' tangible equity per share* increased to $30.38 at March 31, 2016, compared to $29.64 at the preceding quarter end and $29.75 a year ago. |
| • | The ratio of tangible common stockholders' equity to tangible assets* remained strong at 10.98% at March 31, 2016. |
BANR - First Quarter 2016 Results
April 25, 2016
Page 2
*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest 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 goodwill and 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 last three pages of this press release.
Acquisition of AmericanWest Bank
Effective October 1, 2015, Banner completed the acquisition of Starbuck Bancshares, Inc. ("Starbuck") and its wholly owned subsidiary AmericanWest Bank. The merger was accounted for using the acquisition method of accounting. Accordingly, the acquired assets (including identifiable intangible assets) and assumed liabilities of Starbuck were recognized at their respective estimated fair values as of the merger date. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date. The acquisition accounting is subject to adjustment within a post-closing measurement period. During the first quarter of 2016, post-closing adjustments reduced goodwill by $2.9 million.
In addition to the acquisition of AmericanWest Bank, the acquisition of Siuslaw Financial Group and its wholly-owned subsidiary Siuslaw Bank ("Siuslaw") on March 6, 2015 had a significant impact on the current and historical operating results of Banner. For additional details regarding these acquisitions and merger related expenses, see the tables under Business Combinations on pages 12 and 13 of this press release.
Income Statement Review
Banner’s first quarter net interest income, before the provision for loan losses, decreased slightly to $91.0 million, compared to $92.1 million in the preceding quarter, as a result of significant sales of multifamily loans acquired through the AmericanWest merger as well as expected seasonal factors, including the shorter quarter, and a $1.0 million reduction in the contribution from acquisition accounting. Nonetheless, the first quarter 2016 net interest income increased 96% compared to $46.5 million in the first quarter a year ago, largely reflecting the acquisitions of AmericanWest Bank and Siuslaw and continued client acquisition.
“Our net interest margin expanded eight basis points compared to the preceding quarter and four basis points compared to a year ago, importantly as a result of increased contractual yields for both loans and investment securities, reflecting changes in the mix of assets and the increase in short-term market interest rates,” said Grescovich. “By contrast, the accretion impact of acquisition accounting on the net interest margin declined by four basis points compared to the preceding quarter.” Net interest margin is enhanced by the amortization of acquisition accounting discounts on purchased loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense. Banner's net interest margin was 4.13% for the first quarter of 2016, which included eight basis points as a result of accretion from acquisition accounting loan discounts, two basis points from the amortization of deposit premiums and two basis points as a result of the impact of the net loan acquisition discounts on average earning assets from both the AmericanWest Bank and Siuslaw acquisitions, compared to a net interest margin of 4.05% in the preceding quarter and 4.09% in the first quarter a year ago. Excluding the effects of acquisition accounting, the contractual net interest margin increased to 4.01% compared to 3.89% in the preceding quarter although, primarily as a result of the acquisition of AmericanWest Bank, the contractual net interest margin decreased slightly compared to 4.07% in the first quarter a year ago reflecting a proportionately larger portfolio of investment securities.
Average interest-earning asset yields increased eight basis points to 4.32% compared to 4.24% for the preceding quarter and increased one basis point from 4.31% for the first quarter a year ago. Loan yields increased six basis points compared to the preceding quarter and decreased two basis points from the first quarter a year ago. The accretion of discounts and related balance sheet impact on the loans acquired through the acquisitions added 12 basis points to reported loan yields for the quarter. Deposit costs remained unchanged compared to the preceding quarter and decreased three basis points compared to the first quarter a year ago. Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by two basis points in the first quarter 2016. The total cost of funds remained unchanged at 0.20% during the first quarter compared to the preceding quarter and declined four basis points compared to 0.24% for the first quarter a year ago.
BANR- First Quarter 2016 Results
April 25, 2016
Page 3
“Home purchase activity remains robust in our markets, and revenues from mortgage banking were strong, reflecting Banner’s increased market presence and our investment in this business line,” said Grescovich. “In addition, our multifamily origination unit that was acquired in the merger with AmericanWest Bank produced $725,000 of gains on the sale of loans that were originated subsequent to the acquisition date.” Mortgage banking revenues increased 26% to $5.6 million in the first quarter compared to $4.5 million in the preceding quarter and increased 37% compared to $4.1 million in the first quarter of 2015. Home purchase activity accounted for 61% of first quarter one- to four-family mortgage banking loan originations.
Deposit fees and other service charges contributed $11.8 million of first quarter revenues, compared to $13.2 million in the preceding quarter and increased 45% compared to $8.1 million in the first quarter a year ago. The decline compared to the preceding quarter reflects normal seasonal patterns as well as one-time fee waivers in connection with the systems conversion.
Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) were $111.0 million in the first quarter ended March 31, 2016, compared to $112.0 million in the preceding quarter and increased 86% compared to $59.7 million in the first quarter of 2015. Total revenues were $111.0 million for the quarter ended March 31, 2016, compared to $110.5 million in the preceding quarter and $60.2 million in the first quarter a year ago.
Banner’s first quarter 2016 results included a $29,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, as well as a $21,000 net gain on the sale of securities. In the preceding quarter, results included a $1.5 million net loss for fair value adjustments, as well as a $3,000 net loss on the sale of securities and in the first quarter a year ago results included a $1.1 million net gain for fair value adjustments, as well as a $510,000 loss on the sale of securities.
Banner’s total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.0 million in the first quarter of 2016, compared to $18.4 million in the fourth quarter of 2015 and $13.7 million in the first quarter a year ago. Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $19.9 million for the first quarter of 2016, which was unchanged compared to the preceding quarter. Non-interest income from core operations* was $13.2 million for the first quarter a year ago.
Total non-interest expenses were $84.0 million in the first quarter of 2016, compared to $100.3 million in the preceding quarter and $41.9 million in the first quarter of 2015. The year-over-year increase in non-interest expenses was largely attributable to acquisition-related expenses and incremental costs associated with operating the 98 branches acquired in the AmericanWest Bank merger on October 1, 2015 and the ten Siuslaw branches acquired in March 2015, as well as generally increased compensation, occupancy and payment and card processing services reflecting increased transaction volume. There were $6.8 million in acquisition-related expenses in the current quarter compared to $18.4 million in the preceding quarter and $1.6 million in the first quarter a year ago.
For the first quarter of 2016, Banner recorded $9.2 million in state and federal income tax expense for an effective tax rate of 34.1%, which reflects normal statutory tax rates increased by the effect of certain non-deductible merger expenses and reduced by the effect of tax-exempt income and certain tax credits.
Balance Sheet Review
Largely as a result of the AmericanWest Bank acquisition but also reflecting organic growth, total assets increased by 87% to $9.75 billion at March 31, 2016, compared to $5.21 billion a year ago. Total assets were $9.80 billion at December 31, 2015. The total of securities and interest-bearing deposits held at other banks was $1.59 billion at March 31, 2016, compared to $1.54 billion at December 31, 2015 and $782.4 million a year ago. Compared to a year earlier, the increase in the securities portfolio is primarily a result of positions held by AmericanWest at the time of the merger. The average effective duration of Banner's securities portfolio was approximately 2.9 years at March 31, 2016.
“Net loans increased by $3.08 billion, or 76%, year-over-year due to the AmericanWest Bank acquisition and strong organic growth. Net loans decreased compared to the preceding quarter end, largely as a result of the sale of $139.1 million of multifamily loans and expected seasonal reductions in agricultural loans. Nevertheless, loan production remained solid, as did the regional economy, and we continue to see significant potential for growth in our loan origination pipelines,” said Grescovich.
Net loans increased 76% to $7.11 billion at March 31, 2016, compared to $4.03 billion a year ago. Net loans were $7.24 billion at December 31, 2015. Reflecting the recent loan sales, commercial real estate and multifamily real estate loans decreased 4% to $3.44 billion at March 31, 2016, compared to $3.57 billion at December 31, 2015, but increased 94% compared to $1.77 billion a year ago. Commercial business loans increased 1% to $1.22 billion at March 31, 2016, compared to $1.21 billion three months earlier and increased 58% compared to $776.6 million a year ago. Agricultural business loans decreased 10% to $340.4 million at March 31, 2016, compared to $376.5 million three months earlier but increased 63% compared to $208.6 million a year ago. Total construction, land and land development loans increased 10% to $632.1 million at March 31, 2016, compared to $574.4 million at December 31, 2015, and increased 47% compared to $431.0 million a year earlier.
BANR- First Quarter 2016 Results
April 25, 2016
Page 4
Banner’s total deposits were $8.03 billion at March 31, 2016, a slight decline compared to $8.06 billion at December 31, 2015 but an increase of 86% compared to $4.32 billion a year ago. In connection with certain product changes during the first quarter, Banner converted approximately $420 million of former AmericanWest Bank interest-bearing deposits to non-interest-bearing deposits. As a result of the product changes, non-interest-bearing account balances increased 16% to $3.04 billion at March 31, 2016, compared to $2.62 billion three months earlier and reflecting the acquisition and organic account growth increased 102% compared to $1.50 billion a year ago. Also as a result of the product changes, interest-bearing transaction and savings accounts decreased 9% to $3.71 billion at March 31, 2016, compared to $4.08 billion three months earlier but increased 82% compared to $2.04 billion a year ago. Certificates of deposit decreased 5% to $1.29 billion at March 31, 2016, compared to $1.35 billion at December 31, 2015, but increased 66% compared to $778.0 million a year earlier. Brokered deposits totaled $135.6 million at March 31, 2016, compared to $162.9 million at December 31, 2015 and $4.8 million a year ago.
Core deposits represented 84% of total deposits at March 31, 2016, compared to 82% of total deposits a year earlier. The cost of deposits was 0.15% for the quarter ended March 31, 2016, the same as in the preceding quarter, and declined three basis points from 0.18% for the quarter ended March 31, 2015.
At March 31, 2016, total common stockholders' equity was $1.32 billion, or $38.58 per share, compared to $1.30 billion at December 31, 2015 and $651.3 million a year ago. The year-over-year increase was mostly due to 13.23 million shares of voting common and non-voting common stock issued on October 1, 2015 in connection with the AmericanWest Bank acquisition, which were valued at $47.67 per share and increased stockholders’ equity by $630.7 million. At March 31, 2016, tangible common stockholders' equity*, which excludes goodwill and other intangible assets, was $1.04 billion, or 10.98% of tangible assets*, compared to $1.01 billion, or 10.67% of tangible assets, at December 31, 2015, and $624.1 million, or 12.04% of tangible assets, a year ago. Banner's tangible book value per share* increased to $30.38 at March 31, 2016, compared to $29.75 per share a year ago.
Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards. At March 31, 2016, Banner Corporation's common equity Tier 1 capital ratio was 11.93%, its Tier 1 leverage capital to average assets ratio was 11.28% and its total capital to risk-weighted assets ratio was 13.58%.
Credit Quality
“Our credit quality metrics continue to reflect our moderate risk profile and our reserve levels remain strong. As a result, no provision for loan losses was required again during the current quarter,” said Grescovich. “However, as we continue to accrete the acquisition accounting discounts for the loans acquired through last year’s acquisitions and experience further growth in the loan portfolio, we expect to increase the allowance for loan losses through renewed loan loss provisioning at some point before year-end 2016.”
In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value and as a result no allowance for loan and lease losses is recorded for acquired loans at the acquisition date. Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw.
The allowance for loan losses was $78.2 million at March 31, 2016, or 1.09% of total loans outstanding and 501% of non-performing loans compared to $75.4 million at March 31, 2015, or 1.83% of total loans outstanding and 305% of non-performing loans. Banner had net recoveries of $189,000 in the first quarter compared to net recoveries of $688,000 in the fourth quarter of 2015 and net charge-offs of $542,000 in the first quarter a year ago. If the allowance for loan losses and loans were grossed up for the remaining loan discount the adjusted allowance for loan losses to adjusted loans would have been 1.67% as of March 31, 2016. Non-performing loans were $15.6 million at March 31, 2016, compared to $15.2 million at December 31, 2015, and $24.7 million a year ago. Real estate owned and other repossessed assets decreased to $7.2 million at March 31, 2016, compared to $11.6 million at December 31, 2015, but increased compared to $4.9 million a year ago, primarily due to additional real estate owned acquired in the mergers.
Banner's non-performing assets were 0.24% of total assets at March 31, 2016, compared to 0.28% at December 31, 2015 and 0.57% a year ago. Non-performing assets were $23.0 million at March 31, 2016, compared to $27.1 million at December 31, 2015 and $29.7 million a year ago. In addition to non-performing assets, purchased credit-impaired loans decreased to $53.3 million at March 31, 2016 compared to $58.6 million at December 31, 2015 and increased from $5.7 million a year ago.
Conference Call
Banner will host a conference call on Tuesday, April 26, 2016, at 8:00 a.m. PDT, to discuss its first quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one week at (877) 344-7529 using access code 10093182, or at www.bannerbank.com.
BANR- First Quarter 2016 Results
April 25, 2016
Page 5
About the Company
On October 1, 2015, Banner Corporation completed the acquisition of AmericanWest Bank which was merged into Banner Bank, a transformational merger that brought together two financially strong, well-respected institutions and created a leading Western bank. Banner Corporation is now a $9.7 billion bank holding company operating two commercial banks in five Western states through a network of branches offering 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.
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 and based only on information then actually known to Banner. Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These 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 and could negatively affect Banner's operating and stock price performance.
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 merger of Banner Bank and Siuslaw Bank and the merger of Banner Bank and AmericanWest Bank 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 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; (3) 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; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) the ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (12) the costs, effects and outcomes of litigation; (13) 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; (14) changes in accounting principles, policies or guidelines; (15) future acquisitions by Banner of other depository institutions or lines of business; (16) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
BANR- First Quarter 2016 Results
April 25, 2016
Page 6
| | Quarters Ended |
| (in thousands except shares and per share data) | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| | | | | | | |
| INTEREST INCOME: | | | | | | |
| Loans receivable | | $ | 86,958 | | | $ | 88,100 | | | $ | 46,365 | |
| Mortgage-backed securities | | 5,390 | | | 5,440 | | | 1,027 | |
| Securities and cash equivalents | | 2,953 | | | 2,955 | | | 1,677 | |
| | | 95,301 | | | 96,495 | | | 49,069 | |
| INTEREST EXPENSE: | | | | | | |
| Deposits | | 2,946 | | | 3,146 | | | 1,733 | |
| Federal Home Loan Bank advances | | 279 | | | 287 | | | 17 | |
| Other borrowings | | 75 | | | 73 | | | 43 | |
| Junior subordinated debentures | | 958 | | | 890 | | | 740 | |
| | | 4,258 | | | 4,396 | | | 2,533 | |
| Net interest income before provision for loan losses | | 91,043 | | | 92,099 | | | 46,536 | |
| PROVISION FOR LOAN LOSSES | | — | | | — | | | — | |
| Net interest income | | 91,043 | | | 92,099 | | | 46,536 | |
| NON-INTEREST INCOME: | | | | | | |
| Deposit fees and other service charges | | 11,818 | | | 13,172 | | | 8,126 | |
| Mortgage banking operations | | 5,643 | | | 4,482 | | | 4,109 | |
| Bank owned life insurance | | 1,185 | | | 1,056 | | | 438 | |
| Miscellaneous | | 1,263 | | | 1,196 | | | 483 | |
| | | 19,909 | | | 19,906 | | | 13,156 | |
| Net gain (loss) on sale of securities | | 21 | | | (3 | ) | | (510 | ) |
| Net change in valuation of financial instruments carried at fair value | | 29 | | | (1,547 | ) | | 1,050 | |
| Total non-interest income | | 19,959 | | | 18,356 | | | 13,696 | |
| NON-INTEREST EXPENSE: | | | | | | |
| Salary and employee benefits | | 46,564 | | | 49,225 | | | 24,287 | |
| Less capitalized loan origination costs | | (4,250 | ) | | (4,007 | ) | | (2,838 | ) |
| Occupancy and equipment | | 10,388 | | | 11,533 | | | 6,006 | |
| Information / computer data services | | 4,920 | | | 5,365 | | | 2,253 | |
| Payment and card processing services | | 4,785 | | | 5,504 | | | 3,016 | |
| Professional services | | 2,614 | | | 2,341 | | | 814 | |
| Advertising and marketing | | 1,734 | | | 1,882 | | | 1,610 | |
| Deposit insurance | | 1,338 | | | 1,284 | | | 567 | |
| State/municipal business and use taxes | | 838 | | | 505 | | | 453 | |
| Real estate operations | | 397 | | | 207 | | | 24 | |
| Amortization of core deposit intangibles | | 1,808 | | | 1,896 | | | 616 | |
| Miscellaneous | | 6,085 | | | 6,150 | | | 3,458 | |
| | | 77,221 | | | 81,885 | | | 40,266 | |
| Acquisition related costs | | 6,813 | | | 18,369 | | | 1,648 | |
| Total non-interest expense | | 84,034 | | | 100,254 | | | 41,914 | |
| Income before provision for income taxes | | 26,968 | | | 10,201 | | | 18,318 | |
| PROVISION FOR INCOME TAXES | | 9,194 | | | 3,308 | | | 6,184 | |
| NET INCOME | | $ | 17,774 | | | $ | 6,893 | | | $ | 12,134 | |
| | | | | | | |
| Earnings per share available to common shareholders: | | | | | | |
| Basic | | $ | 0.52 | | | $ | 0.20 | | | $ | 0.61 | |
| Diluted | | $ | 0.52 | | | $ | 0.20 | | | $ | 0.61 | |
| Cumulative dividends declared per common share | | $ | 0.21 | | | $ | 0.18 | | | $ | 0.18 | |
| | | | | | | |
| Weighted average common shares outstanding: | | | | | | |
| Basic | | 34,023,800 | | | 33,842,350 | | | 19,760,645 | |
| Diluted | | 34,103,727 | | | 33,934,426 | | | 19,845,019 | |
| | | | | | | | | | |
| Increase (decrease) in common shares outstanding | | (20,804 | ) | | 13,279,955 | | | 1,405,093 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 7
| | | | | | | | Percentage Change |
| (in thousands except shares and per share data) | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 | | Prior Qtr | | Prior Yr Qtr |
| | | | | | | | | | | |
| ASSETS | | | | | | | | | | |
| Cash and due from banks | | $ | 153,706 | | | $ | 117,657 | | | $ | 83,401 | | | 30.6 | % | | 84.3 | % |
| Interest-bearing deposits | | 106,864 | | | 144,260 | | | 215,114 | | | (25.9 | ) % | | (50.3 | ) % |
| Total cash and cash equivalents | | 260,570 | | | 261,917 | | | 298,515 | | | (0.5 | ) % | | (12.7 | ) % |
| Securities - trading | | 33,994 | | | 34,134 | | | 38,074 | | | (0.4 | ) % | | (10.7 | ) % |
| Securities - available for sale | | 1,199,279 | | | 1,138,573 | | | 395,607 | | | 5.3 | % | | 203.1 | % |
| Securities - held to maturity | | 246,320 | | | 220,666 | | | 133,649 | | | 11.6 | % | | 84.3 | % |
| Federal Home Loan Bank stock | | 13,347 | | | 16,057 | | | 25,544 | | | (16.9 | ) % | | (47.7 | ) % |
| Loans held for sale | | 47,523 | | | 44,712 | | | 9,419 | | | 6.3 | % | | 404.5 | % |
| Loans receivable | | 7,185,999 | | | 7,314,504 | | | 4,105,399 | | | (1.8 | ) % | | 75.0 | % |
| Allowance for loan losses | | (78,197 | ) | | (78,008 | ) | | (75,365 | ) | | 0.2 | % | | 3.8 | % |
| Net loans | | 7,107,802 | | | 7,236,496 | | | 4,030,034 | | | (1.8 | ) % | | 76.4 | % |
| Accrued interest receivable | | 30,674 | | | 29,627 | | | 16,873 | | | 3.5 | % | | 81.8 | % |
| Real estate owned held for sale, net | | 7,207 | | | 11,627 | | | 4,922 | | | (38.0 | ) % | | 46.4 | % |
| Property and equipment, net | | 168,807 | | | 167,604 | | | 98,728 | | | 0.7 | % | | 71.0 | % |
| Goodwill | | 244,811 | | | 247,738 | | | 21,148 | | | (1.2 | ) % | | nm | |
| Other intangibles, net | | 35,598 | | | 37,472 | | | 6,110 | | | (5.0 | ) % | | 482.6 | % |
| Bank-owned life insurance | | 156,928 | | | 156,865 | | | 71,290 | | | — | % | | 120.1 | % |
| Other assets | | 192,734 | | | 192,810 | | | 61,459 | | | — | % | | 213.6 | % |
| Total assets | | $ | 9,745,594 | | | $ | 9,796,298 | | | $ | 5,211,372 | | | (0.5 | ) % | | 87.0 | % |
| | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | |
| Deposits: | | | | | | | | | | |
| Non-interest-bearing | | $ | 3,036,330 | | | $ | 2,619,618 | | | $ | 1,504,768 | | | 15.9 | % | | 101.8 | % |
| Interest-bearing transaction and savings accounts | | 3,705,658 | | | 4,081,580 | | | 2,036,600 | | | (9.2 | ) % | | 82.0 | % |
| Interest-bearing certificates | | 1,287,873 | | | 1,353,870 | | | 778,049 | | | (4.9 | ) % | | 65.5 | % |
| Total deposits | | 8,029,861 | | | 8,055,068 | | | 4,319,417 | | | (0.3 | ) % | | 85.9 | % |
| Advances from Federal Home Loan Bank at fair value | | 75,400 | | | 133,381 | | | 250 | | | (43.5 | ) % | | nm |
| Customer repurchase agreements and other borrowings | | 106,132 | | | 98,325 | | | 97,020 | | | 7.9 | % | | 9.4 | % |
| Junior subordinated debentures at fair value | | 92,879 | | | 92,480 | | | 84,326 | | | 0.4 | % | | 10.1 | % |
| Accrued expenses and other liabilities | | 81,485 | | | 76,511 | | | 38,164 | | | 6.5 | % | | 113.5 | % |
| Deferred compensation | | 39,682 | | | 40,474 | | | 20,882 | | | (2.0 | ) % | | 90.0 | % |
| Total liabilities | | 8,425,439 | | | 8,496,239 | | | 4,560,059 | | | (0.8 | ) % | | 84.8 | % |
| | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | |
| Common stock | | 1,262,050 | | | 1,261,174 | | | 627,553 | | | 0.1 | % | | 101.1 | % |
| Retained earnings | | 50,230 | | | 39,615 | | | 22,623 | | | 26.8 | % | | 122.0 | % |
| Other components of shareholders' equity | | 7,875 | | | (730 | ) | | 1,137 | | | nm | | 592.6 | % |
| Total shareholders' equity | | 1,320,155 | | | 1,300,059 | | | 651,313 | | | 1.5 | % | | 102.7 | % |
| Total liabilities and shareholders' equity | | $ | 9,745,594 | | | $ | 9,796,298 | | | $ | 5,211,372 | | | (0.5 | ) % | | 87.0 | % |
| | | | | | | | | | | |
| Common Shares Issued: | | | | | | | | | | |
| Shares outstanding at end of period | | 34,221,451 | | | 34,242,255 | | | 20,976,641 | | | | | |
Common shareholders' equity per share (1) | | $ | 38.58 | | | $ | 37.97 | | | $ | 31.05 | | | | | |
Common shareholders' tangible equity per share (1) (2) | | $ | 30.38 | | | $ | 29.64 | | | $ | 29.75 | | | | | |
Common shareholders' tangible equity to tangible assets (2) | | 10.98 | % | | 10.67 | % | | 12.04 | % | | | | |
| Consolidated Tier 1 leverage capital ratio | | 11.28 | % | | 11.06 | % | | 14.67 | % | | | | |
| (1) | Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding. |
| (2) | Common shareholders' tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables. |
BANR- First Quarter 2016 Results
April 25, 2016
Page 8
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | | | | | | | Percentage Change |
| LOANS | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 | | Prior Qtr | | Prior Yr |
| | | | | | | | | | | |
| Commercial real estate: | | | | | | | | | | |
| Owner occupied | | $ | 1,328,034 | | | $ | 1,327,807 | | | $ | 627,531 | | | — | % | | 111.6 | % |
| Investment properties | | 1,805,243 | | | 1,765,353 | | | 936,693 | | | 2.3 | % | | 92.7 | % |
| Multifamily real estate | | 307,019 | | | 472,976 | | | 208,687 | | | (35.1 | )% | | 47.1 | % |
| Commercial construction | | 87,711 | | | 72,103 | | | 30,434 | | | 21.6 | % | | 188.2 | % |
| Multifamily construction | | 79,737 | | | 63,846 | | | 56,201 | | | 24.9 | % | | 41.9 | % |
| One- to four-family construction | | 297,348 | | | 278,469 | | | 228,224 | | | 6.8 | % | | 30.3 | % |
| Land and land development: | | | | | | | | | | |
| Residential | | 142,841 | | | 126,773 | | | 98,930 | | | 12.7 | % | | 44.4 | % |
| Commercial | | 24,493 | | | 33,179 | | | 17,174 | | | (26.2 | )% | | 42.6 | % |
| Commercial business | | 1,224,915 | | | 1,207,944 | | | 776,579 | | | 1.4 | % | | 57.7 | % |
| Agricultural business including secured by farmland | | 340,350 | | | 376,531 | | | 208,635 | | | (9.6 | )% | | 63.1 | % |
| One- to four-family real estate | | 910,719 | | | 952,633 | | | 543,004 | | | (4.4 | )% | | 67.7 | % |
| Consumer: | | | | | | | | | | |
| Consumer secured by one- to four-family real estate | | 481,590 | | | 478,420 | | | 233,643 | | | 0.7 | % | | 106.1 | % |
| Consumer-other | | 155,999 | | | 158,470 | | | 139,664 | | | (1.6 | )% | | 11.7 | % |
Total loans outstanding | | $ | 7,185,999 | | | $ | 7,314,504 | | | $ | 4,105,399 | | | (1.8 | )% | | 75.0 | % |
Restructured loans performing under their restructured terms | | $ | 19,450 | | | $ | 21,777 | | | $ | 27,558 | | | | | |
Loans 30 - 89 days past due and on accrual | | $ | 28,264 | | | $ | 18,834 | | | $ | 8,157 | | | | | |
Total delinquent loans (including loans on non-accrual), net(1) | | $ | 43,986 | | | $ | 30,994 | | | $ | 20,822 | | | | | |
Total delinquent loans / Total loans outstanding | | 0.61 | % | | 0.42 | % | | 0.51 | % | | | | |
Purchased credit-impaired loans, net | | $ | 53,271 | | | $ | 58,555 | | | $ | 5,674 | | | | | |
(1) Delinquent loans include $4.9 million of delinquent purchased credit-impaired loans at March 31, 2015 compared to $6.3 million at December 31, 2015 and $1.1 million at March 31, 2015.
| LOANS BY GEOGRAPHIC LOCATION | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| | | Amount | | Percentage | | Amount | | Percentage | | Amount | | Percentage |
| | | | | | | | | | | | | |
| Washington | | $ | 3,333,912 | | | 46.4% | | $ | 3,343,112 | | | 45.7% | | $ | 2,398,848 | | | 58.5% |
| Oregon | | 1,420,749 | | | 19.8% | | 1,446,531 | | | 19.8% | | 1,088,596 | | | 26.5% |
| California | | 1,173,203 | | | 16.3% | | 1,234,016 | | | 16.9% | | 119,805 | | | 2.9% |
| Idaho | | 493,905 | | | 6.9% | | 496,870 | | | 6.8% | | 309,948 | | | 7.5% |
| Utah | | 289,082 | | | 4.0% | | 325,011 | | | 4.4% | | 4,490 | | | 0.1% |
| Other | | 475,148 | | | 6.6% | | 468,964 | | | 6.4% | | 183,712 | | | 4.5% |
| Total loans | | $ | 7,185,999 | | | 100.0% | | $ | 7,314,504 | | | 100.0% | | $ | 4,105,399 | | | 100.0% |
BANR- First Quarter 2016 Results
April 25, 2016
Page 9
ADDITIONAL FINANCIAL INFORMATION | | | | | | |
| (dollars in thousands) | | | | | | |
| | | Quarters Ended |
| CHANGE IN THE | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | |
| Balance, beginning of period | | $ | 78,008 | | | $ | 77,320 | | | $ | 75,907 | |
Provision for loan losses | | — | | | — | | | — | |
Recoveries of loans previously charged off: | | | | | | |
| Commercial real estate | | 38 | | | 233 | | | 14 | |
| Construction and land | | 471 | | | 578 | | | 108 | |
| One- to four-family real estate | | 12 | | | 631 | | | 6 | |
| Commercial business | | 720 | | | 143 | | | 178 | |
| Agricultural business, including secured by farmland | | 17 | | | 261 | | | 295 | |
| Consumer | | 207 | | | 197 | | | 46 | |
| | | 1,465 | | | 2,043 | | | 647 | |
| Loans charged off: | | | | | | |
| Commercial real estate | | (180 | ) | | (537 | ) | | — | |
| One- to four-family real estate | | — | | | (292 | ) | | (75 | ) |
| Commercial business | | (139 | ) | | — | | | (107 | ) |
| Agricultural business, including secured by farmland | | (567 | ) | | (161 | ) | | (818 | ) |
| Consumer | | (390 | ) | | (365 | ) | | (189 | ) |
| | | (1,276 | ) | | (1,355 | ) | | (1,189 | ) |
| Net (charge-offs) recoveries | | 189 | | | 688 | | | (542 | ) |
Balance, end of period | | $ | 78,197 | | | $ | 78,008 | | | $ | 75,365 | |
Net (charge-offs) recoveries / Average loans outstanding | | 0.003 | % | | 0.009 | % | | (0.014 | )% |
| ALLOCATION OF | | | | | | |
| ALLOWANCE FOR LOAN LOSSES | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Specific or allocated loss allowance: | | | | | | |
| Commercial real estate | | $ | 19,732 | | | $ | 20,716 | | | $ | 19,103 | |
| Multifamily real estate | | 2,853 | | | 4,195 | | | 4,401 | |
| Construction and land | | 29,318 | | | 27,131 | | | 24,398 | |
| One- to four-family real estate | | 2,170 | | | 4,732 | | | 8,141 | |
| Commercial business | | 15,118 | | | 13,856 | | | 12,892 | |
| Agricultural business, including secured by farmland | | 4,282 | | | 3,645 | | | 3,732 | |
| Consumer | | 3,541 | | | 902 | | | 585 | |
| Total allocated | | 77,014 | | | 75,177 | | | 73,252 | |
| Unallocated | | 1,183 | | | 2,831 | | | 2,113 | |
| Total allowance for loan losses | | $ | 78,197 | | | $ | 78,008 | | | $ | 75,365 | |
Allowance for loan losses / Total loans outstanding | | 1.09 | % | | 1.07 | % | | 1.83 | % |
Allowance for loan losses / Non-performing loans | | 501 | % | | 512 | % | | 305 | % |
BANR- First Quarter 2016 Results
April 25, 2016
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | |
| (dollars in thousands) | | | | | |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| NON-PERFORMING ASSETS | | | | | |
| Loans on non-accrual status: | | | | | |
| Secured by real estate: | | | | | |
| Commercial | $ | 4,145 | | | $ | 3,751 | | | $ | 4,141 | |
| Multifamily | — | | | — | | | 578 | |
| Construction and land | 2,250 | | | 2,260 | | | 7,523 | |
| One- to four-family | 4,803 | �� | | 4,700 | | | 7,111 | |
| Commercial business | 1,558 | | | 2,159 | | | 418 | |
| Agricultural business, including secured by farmland | 663 | | | 697 | | | 1,566 | |
| Consumer | 906 | | | 703 | | | 1,843 | |
| | 14,325 | | | 14,270 | | | 23,180 | |
| Loans more than 90 days delinquent, still on accrual: | | | | | |
| One- to four-family | 1,039 | | | 899 | | | 1,548 | |
| Commercial business | — | | | 8 | | | — | |
| Consumer | 251 | | | 45 | | | 7 | |
| | 1,290 | | | 952 | | | 1,555 | |
| Total non-performing loans | 15,615 | | | 15,222 | | | 24,735 | |
| Real estate owned (REO) | 7,207 | | | 11,627 | | | 4,922 | |
| Other repossessed assets | 202 | | | 268 | | | 62 | |
Total non-performing assets | $ | 23,024 | | | $ | 27,117 | | | $ | 29,719 | |
Total non-performing assets / Total assets | 0.24 | % | | 0.28 | % | | 0.57 | % |
Purchase credit impaired loans (net) | $ | 53,271 | | | $ | 58,555 | | | $ | 5,674 | |
| | Quarters Ended |
| REAL ESTATE OWNED | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Balance, beginning of period | $ | 11,627 | | | $ | 6,363 | | | $ | 3,352 | |
| Additions from loan foreclosures | 2 | | | 1,125 | | | 668 | |
| Additions from acquisitions | 400 | | | 5,706 | | | 2,525 | |
| Proceeds from dispositions of REO | (4,666 | ) | | (1,585 | ) | | (1,738 | ) |
| Gain on sale of REO | 49 | | | 18 | | | 115 | |
| Valuation adjustments in the period | (205 | ) | | — | | | — | |
| Balance, end of period | $ | 7,207 | | | $ | 11,627 | | | $ | 4,922 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | |
| | | | | | | | | | | |
| DEPOSIT COMPOSITION | | | | | | | | Percentage Change |
| | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 | | Prior Qtr | | Prior Yr |
| | | | | | | | | | | |
| Non-interest-bearing | | $ | 3,036,330 | | | $ | 2,619,618 | | | $ | 1,504,768 | | | 15.9 | % | | 101.8 | % |
Interest-bearing checking | | 767,460 | | | 1,159,846 | | | 472,033 | | | (33.8 | )% | | 62.6 | % |
| Regular savings accounts | | 1,327,558 | | | 1,284,642 | | | 979,824 | | | 3.3 | % | | 35.5 | % |
| Money market accounts | | 1,610,640 | | | 1,637,092 | | | 584,743 | | | (1.6 | )% | | 175.4 | % |
Interest-bearing transaction & savings accounts | | 3,705,658 | | | 4,081,580 | | | 2,036,600 | | | (9.2 | )% | | 82.0 | % |
Interest-bearing certificates | | 1,287,873 | | | 1,353,870 | | | 778,049 | | | (4.9 | )% | | 65.5 | % |
Total deposits | | $ | 8,029,861 | | | $ | 8,055,068 | | | $ | 4,319,417 | | | (0.3 | )% | | 85.9 | % |
| GEOGRAPHIC CONCENTRATION OF DEPOSITS | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| | | Amount | | Percentage | | Amount | | Percentage | | Amount | | Percentage |
| Washington | | $ | 4,209,332 | | | 52.4% | | $ | 4,219,304 | | | 52.4% | | $ | 2,865,536 | | | 66.4% |
| Oregon | | 1,668,421 | | | 20.8% | | 1,648,421 | | | 20.4% | | 1,206,944 | | | 27.9% |
| California | | 1,565,326 | | | 19.5% | | 1,592,365 | | | 19.8% | | — | | | —% |
| Idaho | | 428,681 | | | 5.3% | | 435,099 | | | 5.4% | | 246,937 | | | 5.7% |
| Utah | | 158,101 | | | 2.0% | | 159,879 | | | 2.0% | | — | | | —% |
| Total deposits | | $ | 8,029,861 | | | 100.0% | | $ | 8,055,068 | | | 100.0% | | $ | 4,319,417 | | | 100.0% |
| INCLUDED IN TOTAL DEPOSITS | | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Public non-interest-bearing accounts | | $ | 82,527 | | | $ | 85,489 | | | $ | 44,195 | |
| Public interest-bearing transaction & savings accounts | | 123,713 | | | 123,941 | | | 58,023 | |
| Public interest-bearing certificates | | 29,983 | | | 31,281 | | | 35,326 | |
Total public deposits | | $ | 236,223 | | | $ | 240,711 | | | $ | 137,544 | |
Total brokered deposits | | $ | 135,603 | | | $ | 162,936 | | | $ | 4,800 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 12
ADDITIONAL FINANCIAL INFORMATION | | | | |
| (in thousands) | | | | |
| | | | | |
| BUSINESS COMBINATIONS | | | | |
ACQUISITION OF STARBUCK BANCSHARES, INC.* | | October 1, 2015 |
| | | | | |
| Cash paid | | | | $ | 130,000 | |
| Fair value of common shares issued | | | | 630,674 | |
| Total consideration | | | | 760,674 | |
| | | | | |
| Fair value of assets acquired: | | | | |
| Cash and cash equivalents | | $ | 95,821 | | | |
| Securities | | 1,037,238 | | | |
| Loans receivable | | 2,999,130 | | | |
| Real estate owned held for sale | | 6,105 | | | |
| Property and equipment | | 66,728 | | | |
| Core deposit intangible | | 33,500 | | | |
| Deferred tax asset | | 108,454 | | | |
| Other assets | | 112,782 | | | |
| Total assets acquired | | 4,459,758 | | | |
| | | | | |
| Fair value of liabilities assumed: | | | | |
| Deposits | | 3,638,596 | | | |
| FHLB advances | | 221,442 | | | |
| Junior subordinated debentures | | 5,806 | | | |
| Other liabilities | | 56,359 | | | |
Total liabilities assumed | | 3,922,203 | | | |
Net assets acquired | | | | 537,555 | |
Goodwill | | | | $ | 223,119 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 13
| ACQUISITION OF SIUSLAW FINANCIAL GROUP | | March 6, 2015 |
| | | | | |
| Cash paid | | | | $ | 5,806 | |
| Fair value of common shares issued | | | | 58,100 | |
| Total consideration | | | | 63,906 | |
| | | | | |
| Fair value of assets acquired: | | | | |
| Cash and cash equivalents | | $ | 84,405 | | | |
| Securities - available for sale | | 12,865 | | | |
| Loans receivable | | 247,098 | | | |
| Real estate owned held for sale | | 2,525 | | | |
| Property and equipment | | 8,127 | | | |
| Core deposit intangible | | 3,895 | | | |
| Other assets | | 10,848 | | | |
| Total assets acquired | | 369,763 | | | |
| | | | | |
| Fair value of liabilities assumed: | | | | |
| Deposits | | 316,406 | | | |
| Junior subordinated debentures | | 5,959 | | | |
| Other liabilities | | 5,183 | | | |
Total liabilities assumed | | 327,548 | | | |
Net assets acquired | | | | 42,215 | |
Goodwill | | | | $ | 21,691 | |
* Amounts recorded in this table are preliminary estimates of fair value. Additional adjustments to the purchase price allocation may be required.
MERGER AND ACQUISITION EXPENSE (1) | Quarters Ended |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| By expense category: | | | | | |
| Personnel severance/retention fees | $ | 1,313 | | | $ | 6,134 | | | $ | — | |
| Professional services | 852 | | | 5,757 | | | 1,280 | |
| Branch consolidation and other occupancy expenses | 1,949 | | | 976 | | | 24 | |
| Client communications | 251 | | | 306 | | | 66 | |
| Information/computer data services | 1,417 | | | 2,069 | | | 40 | |
| Miscellaneous | 1,031 | | | 3,127 | | | 238 | |
| Total merger and acquisition expense | $ | 6,813 | | | $ | 18,369 | | | $ | 1,648 | |
| | | | | | |
| By acquisition: | | | | | |
| Siuslaw Financial Group | $ | — | | | $ | 133 | | | $ | 670 | |
| Starbuck Bancshares, Inc. (AmericanWest) | 6,813 | | | 18,236 | | | 978 | |
| Total merger and acquisition expense | $ | 6,813 | | | $ | 18,369 | | | $ | 1,648 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 14
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | Actual | | Minimum to be categorized as "Adequately Capitalized" | | Minimum to be categorized as "Well Capitalized" |
| REGULATORY CAPITAL RATIOS AS OF MARCH 31, 2016 | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | |
| Banner Corporation-consolidated: | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 1,146,218 | | | 13.58 | % | | $ | 675,182 | | | 8.00 | % | | $ | 843,977 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 1,064,372 | | | 12.61 | % | | 506,386 | | | 6.00 | % | | 675,182 | | | 8.00 | % |
| Tier 1 leverage capital to average assets | | 1,064,372 | | | 11.28 | % | | 377,320 | | | 4.00 | % | | 471,650 | | | 5.00 | % |
| Common equity tier 1 capital to risk-weighted assets | | 1,006,886 | | | 11.93 | % | | 379,790 | | | 4.50 | % | | 548,585 | | | 6.50 | % |
| | | | | | | | | | | | | |
| Banner Bank: | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | 1,034,320 | | | 12.54 | % | | 659,676 | | | 8.00 | % | | 824,595 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 954,697 | | | 11.58 | % | | 494,757 | | | 6.00 | % | | 659,676 | | | 8.00 | % |
| Tier 1 leverage capital to average assets | | 954,697 | | | 10.42 | % | | 366,529 | | | 4.00 | % | | 458,161 | | | 5.00 | % |
| Common equity tier 1 capital to risk-weighted assets | | 954,697 | | | 11.58 | % | | 371,068 | | | 4.50 | % | | 535,987 | | | 6.50 | % |
| | | | | | | | | | | | | |
| Islanders Bank: | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | 38,876 | | | 20.23 | % | | 15,371 | | | 8.00 | % | | 19,214 | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | 36,653 | | | 19.08 | % | | 11,528 | | | 6.00 | % | | 15,371 | | | 8.00 | % |
| Tier 1 leverage capital to average assets | | 36,653 | | | 13.71 | % | | 10,695 | | | 4.00 | % | | 13,369 | | | 5.00 | % |
| Common equity tier 1 capital to risk-weighted assets | | 36,653 | | | 19.08 | % | | 8,646 | | | 4.50 | % | | 12,489 | | | 6.50 | % |
BANR- First Quarter 2016 Results
April 25, 2016
Page 15
ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | |
| | | | | | | | | | | | |
| ANALYSIS OF NET INTEREST SPREAD | Quarter Ended |
| | March 31, 2016 | | December 31, 2015 | | March 31, 2015 |
| | Average Balance | Interest and Dividends | Yield/ Cost(3) | | Average Balance | Interest and Dividends | Yield /Cost(3) | | Average Balance | Interest and Dividends | Yield /Cost(3) |
| Interest-earning assets: | | | | | | | | | | | |
| Mortgage loans | $ | 5,707,882 | | $ | 68,743 | | 4.84 | % | | $ | 5,785,986 | | $ | 69,552 | | 4.77 | % | | $ | 2,913,207 | | $ | 35,561 | | 4.95 | % |
| Commercial/agricultural loans | 1,471,638 | | 16,025 | | 4.38 | % | | 1,469,445 | | 16,303 | | 4.40 | % | | 885,940 | | 8,967 | | 4.10 | % |
| Consumer and other loans | 141,361 | | 2,190 | | 6.23 | % | | 142,599 | | 2,245 | | 6.25 | % | | 121,108 | | 1,837 | | 6.15 | % |
Total loans(1) | 7,320,881 | | 86,958 | | 4.78 | % | | 7,398,030 | | 88,100 | | 4.72 | % | | 3,920,255 | | 46,365 | | 4.80 | % |
| Mortgage-backed securities | 1,004,836 | | 5,390 | | 2.16 | % | | 1,025,612 | | 5,440 | | 2.10 | % | | 308,068 | | 1,027 | | 1.35 | % |
| Other securities | 421,241 | | 2,772 | | 2.65 | % | | 457,521 | | 2,787 | | 2.42 | % | | 265,796 | | 1,617 | | 2.47 | % |
| Interest-bearing deposits with banks | 103,775 | | 101 | | 0.39 | % | | 129,797 | | 76 | | 0.23 | % | | 91,202 | | 53 | | 0.24 | % |
| FHLB stock | 17,531 | | 80 | | 1.84 | % | | 17,268 | | 92 | | 2.11 | % | | 26,942 | | 7 | | 0.11 | % |
| Total investment securities | 1,547,383 | | 8,343 | | 2.17 | % | | 1,630,198 | | 8,395 | | 2.04 | % | | 692,008 | | 2,704 | | 1.58 | % |
| Total interest-earning assets | 8,868,264 | | 95,301 | | 4.32 | % | | 9,028,228 | | 96,495 | | 4.24 | % | | 4,612,263 | | 49,069 | | 4.31 | % |
| Non-interest-earning assets | 900,296 | | | | | 870,169 | | | | | 230,634 | | | |
| Total assets | $ | 9,768,560 | | | | | $ | 9,898,397 | | | | | $ | 4,842,897 | | | |
| Deposits: | | | | | | | | | | | |
| Interest-bearing checking accounts | $ | 934,072 | | 196 | | 0.08 | % | | $ | 1,127,541 | | 234 | | 0.08 | % | | $ | 445,614 | | 90 | | 0.08 | % |
| Savings accounts | 1,307,369 | | 423 | | 0.13 | % | | 1,595,451 | | 420 | | 0.10 | % | | 929,852 | | 344 | | 0.15 | % |
| Money market accounts | 1,620,524 | | 862 | | 0.21 | % | | 1,311,383 | | 881 | | 0.27 | % | | 521,839 | | 203 | | 0.16 | % |
| Certificates of deposit | 1,328,741 | | 1,465 | | 0.44 | % | | 1,418,774 | | 1,611 | | 0.45 | % | | 769,378 | | 1,096 | | 0.58 | % |
| Total interest-bearing deposits | 5,190,706 | | 2,946 | | 0.23 | % | | 5,453,149 | | 3,146 | | 0.23 | % | | 2,666,683 | | 1,733 | | 0.26 | % |
| Non-interest-bearing deposits | 2,788,372 | | — | | — | % | | 2,665,676 | | — | | — | % | | 1,331,080 | | — | | — | % |
| Total deposits | 7,979,078 | | 2,946 | | 0.15 | % | | 8,118,825 | | 3,146 | | 0.15 | % | | 3,997,763 | | 1,733 | | 0.18 | % |
| Other interest-bearing liabilities: | | | | | | | | | | | |
| FHLB advances | 169,204 | | 279 | | 0.66 | % | | 178,399 | | 287 | | 0.64 | % | | 17,744 | | 17 | | 0.39 | % |
| Other borrowings | 102,865 | | 75 | | 0.29 | % | | 99,515 | | 73 | | 0.29 | % | | 88,304 | | 43 | | 0.20 | % |
| Junior subordinated debentures | 140,212 | | 958 | | 2.75 | % | | 140,212 | | 890 | | 2.52 | % | | 126,099 | | 740 | | 2.38 | % |
| Total borrowings | 412,281 | | 1,312 | | 1.28 | % | | 418,126 | | 1,250 | | 1.19 | % | | 232,147 | | 800 | | 1.40 | % |
| Total funding liabilities | 8,391,359 | | 4,258 | | 0.20 | % | | 8,536,951 | | 4,396 | | 0.20 | % | | 4,229,910 | | 2,533 | | 0.24 | % |
Other non-interest-bearing liabilities(2) | 63,014 | | | | | 54,967 | | | | | 4,569 | | | |
| Total liabilities | 8,454,373 | | | | | 8,591,918 | | | | | 4,234,479 | | | |
| Shareholders' equity | 1,314,187 | | | | | 1,306,479 | | | | | 608,418 | | | |
| Total liabilities and shareholders' equity | $ | 9,768,560 | | | | | $ | 9,898,397 | | | | | $ | 4,842,897 | | | |
| Net interest income/rate spread | | $ | 91,043 | | 4.12 | % | | | $ | 92,099 | | 4.04 | % | | | $ | 46,536 | | 4.07 | % |
| Net interest margin | | | 4.13 | % | | | | 4.05 | % | | | | 4.09 | % |
| | | | | | | | | | | | |
| Additional Key Financial Ratios: | | | | | | | | | | | |
| Return on average assets | | | 0.73 | % | | | | 0.28 | % | | | | 1.02 | % |
| Return on average equity | | | 5.44 | % | | | | 2.09 | % | | | | 8.09 | % |
| Average equity/average assets | | | 13.45 | % | | | | 13.20 | % | | | | 12.56 | % |
| Average interest-earning assets/average interest-bearing liabilities | | | 158.28 | % | | | | 153.77 | % | | | | 159.11 | % |
| Average interest-earning assets/average funding liabilities | | | 105.68 | % | | | | 105.75 | % | | | | 109.04 | % |
| Non-interest income/average assets | | | 0.82 | % | | | | 0.74 | % | | | | 1.15 | % |
| Non-interest expense/average assets | | | 3.46 | % | | | | 4.02 | % | | | | 3.51 | % |
Efficiency ratio(4) | | | 75.70 | % | | | | 90.76 | % | | | | 69.59 | % |
| (1) | Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans |
| (2) | Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures. |
| (3) | Yields and costs have not been adjusted for the effect of tax-exempt interest. |
| (4) | Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income. |
BANR- First Quarter 2016 Results
April 25, 2016
Page 16
ADDITIONAL FINANCIAL INFORMATION | | | | | |
| (dollars in thousands) | | | | | |
| | | | | | |
| * 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 |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Net interest income before provision for loan losses | $ | 91,043 | | | $ | 92,099 | | | $ | 46,536 | |
| Total non-interest income | 19,959 | | | 18,356 | | | 13,696 | |
| Total GAAP revenue | 111,002 | | | 110,455 | | | 60,232 | |
| Exclude net (gain) loss on sale of securities | (21 | ) | | 3 | | | 510 | |
| Exclude change in valuation of financial instruments carried at fair value | (29 | ) | | 1,547 | | | (1,050 | ) |
| Revenue from core operations (non-GAAP) | $ | 110,952 | | | $ | 112,005 | | | $ | 59,692 | |
| ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN | Quarters Ended |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Net interest income before provision for loan losses (GAAP) | $ | 91,043 | | | $ | 92,099 | | | $ | 46,536 | |
| Exclude discount accretion on purchased loans | (1,689 | ) | | (2,579 | ) | | (111 | ) |
| Exclude premium amortization on acquired certificates of deposit | (461 | ) | | (572 | ) | | (69 | ) |
| Net interest income before discount accretion (non-GAAP) | $ | 88,893 | | | $ | 88,948 | | | $ | 46,356 | |
| | | | | | |
| Average interest-earning assets (GAAP) | $ | 8,868,264 | | | $ | 9,028,228 | | | $ | 4,612,263 | |
| Exclude average net loan discount on acquired loans | 43,347 | | | 43,109 | | | 1,576 | |
| Average interest-earning assets before acquired loan discount (non-GAAP) | $ | 8,911,611 | | | $ | 9,071,337 | | | $ | 4,613,839 | |
| | | | | | |
| Net interest margin (GAAP) | 4.13 | % | | 4.05 | % | | 4.09 | % |
| Exclude impact on net interest margin from discount accretion | (0.08 | ) | | (0.11 | ) | | (0.01 | ) |
| Exclude impact on net interest margin from CD premium amortization | (0.02 | ) | | (0.03 | ) | | (0.01 | ) |
| Exclude impact of net loan discount on average earning assets | (0.02 | ) | | (0.02 | ) | | — | |
| Net margin before discount accretion (non-GAAP) | 4.01 | % | | 3.89 | % | | 4.07 | % |
| NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS | Quarters Ended |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| Total non-interest income (GAAP) | $ | 19,959 | | | $ | 18,356 | | | $ | 13,696 | |
| Exclude net (gain) loss on sale of securities | (21 | ) | | 3 | | | 510 | |
| Exclude change in valuation of financial instruments carried at fair value | (29 | ) | | 1,547 | | | (1,050 | ) |
| Non-interest income from core operations (non-GAAP) | $ | 19,909 | | | $ | 19,906 | | | $ | 13,156 | |
| | | | | | |
| Total non-interest expense (GAAP) | $ | 84,034 | | | $ | 100,254 | | | $ | 41,914 | |
| Exclude acquisition related costs | (6,813 | ) | | (18,369 | ) | | (1,648 | ) |
| Non-interest expense from core operations (non-GAAP) | $ | 77,221 | | | $ | 81,885 | | | $ | 40,266 | |
BANR- First Quarter 2016 Results
April 25, 2016
Page 17
| ADDITIONAL FINANCIAL INFORMATION | | | | | |
| (dollars in thousands except shares and per share data) | | | | | |
| | Quarters Ended |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| EARNINGS FROM CORE OPERATIONS | | | | | |
| Net income (GAAP) | $ | 17,774 | | | $ | 6,893 | | | $ | 12,134 | |
| Exclude net (gain) loss on sale of securities | (21 | ) | | 3 | | | 510 | |
| Exclude change in valuation of financial instruments carried at fair value | (29 | ) | | 1,547 | | | (1,050 | ) |
| Exclude acquisition-related costs | 6,813 | | | 18,369 | | | 1,648 | |
| Exclude related tax expense (benefit) | (2,417 | ) | | (6,425 | ) | | (120 | ) |
| Total earnings from core operations (non-GAAP) | $ | 22,120 | | | $ | 20,387 | | | $ | 13,122 | |
| | | | | | |
| Diluted earnings per share (GAAP) | $ | 0.52 | | | $ | 0.20 | | | $ | 0.61 | |
| Diluted core earnings per share (non-GAAP) | $ | 0.65 | | | $ | 0.60 | | | $ | 0.66 | |
| | | | | | |
| NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS | | | | | |
| Acquisition-related costs | $ | (6,813 | ) | | $ | (18,369 | ) | | $ | (1,648 | ) |
| Related tax benefit | 2,435 | | | 5,867 | | | 315 | |
| Total net effect of acquisition-related costs on earnings | $ | (4,378 | ) | | $ | (12,502 | ) | | $ | (1,333 | ) |
| | | | | | |
| Diluted weighted average shares outstanding | 34,103,727 | | | 33,934,426 | | | 19,845,019 | |
| Total net effect of acquisition-related costs on diluted weighted average earnings per share | $ | (0.13 | ) | | $ | (0.37 | ) | | $ | (0.07 | ) |
| | |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS | | | | | |
| Shareholders' equity (GAAP) | $ | 1,320,155 | | | $ | 1,300,059 | | | $ | 651,313 | |
| Exclude goodwill and other intangible assets, net | 280,409 | | | 285,210 | | | 27,258 | |
| Tangible common shareholders' equity (non-GAAP) | $ | 1,039,746 | | | $ | 1,014,849 | | | $ | 624,055 | |
| | | | | | |
| Total assets (GAAP) | $ | 9,745,594 | | | $ | 9,796,298 | | | $ | 5,211,372 | |
| Exclude goodwill and other intangible assets, net | 280,409 | | | 285,210 | | | 27,258 | |
| Total tangible assets (non-GAAP) | $ | 9,465,185 | | | $ | 9,511,088 | | | $ | 5,184,114 | |
| Tangible common shareholders' equity to tangible assets (non-GAAP) | 10.98 | % | | 10.67 | % | | 12.04 | % |
| | | | | | |
| TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE | | | | | |
| Tangible common shareholders' equity | $ | 1,039,746 | | | $ | 1,014,849 | | | $ | 624,055 | |
| Common shares outstanding at end of period | 34,221,451 | | | 34,242,255 | | | 20,976,641 | |
| Common shareholders' equity (book value) per share (GAAP) | $ | 38.58 | | | $ | 37.97 | | | $ | 31.05 | |
| Tangible common shareholders' equity (tangible book value) per share (non-GAAP) | $ | 30.38 | | | $ | 29.64 | | | $ | 29.75 | |
| ADDITIONAL FINANCIAL INFORMATION | | | | | |
| (dollars in thousands except shares and per share data) | | | | | |
| | |
| | Mar 31, 2016 | | Dec 31, 2015 | | Mar 31, 2015 |
| RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS | | | | | |
| Loans receivable (GAAP) | $ | 7,185,999 | | | $ | 7,314,504 | | | $ | 4,105,399 | |
| Net loan discount on acquired loans | 42,302 | | | 43,657 | | | 5,032 | |
| Adjusted loans (non-GAAP) | $ | 7,228,301 | | | $ | 7,358,161 | | | $ | 4,110,431 | |
| | | | | | |
| Allowance for loan losses (GAAP) | $ | 78,197 | | | $ | 78,008 | | | $ | 75,365 | |
| Net loan discount on acquired loans | 42,302 | | | 43,657 | | | 5,032 | |
| Adjusted allowance for loan losses (non-GAAP) | $ | 120,499 | | | $ | 121,665 | | | $ | 80,397 | |
| | | | | | |
| Adjusted allowance for loan losses / Adjusted loans (non-GAAP) | 1.67 | % | | 1.65 | % | | 1.96 | % |
