| | | | Exhibit 99.1
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| | CONTACT: | MARK J. GRESCOVICH, |
| | PRESIDENT & CEO |
| | PETER J. CONNER, CFO |
| | (509) 527-3636 |
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| NEWS RELEASE |
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Banner Corporation Reports Net Income of $49.1 Million, or $1.43 Per Diluted Share, for Third Quarter 2022;
Declares Quarterly Cash Dividend of $0.44 Per Share
Walla Walla, WA - October 19, 2022 - Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $49.1 million, or $1.43 per diluted share, for the third quarter of 2022, a 2% increase compared to $48.0 million, or $1.39 per diluted share, for the preceding quarter and a 2% decrease compared to $49.9 million, or $1.44 per diluted share, for the third quarter of 2021. Banner’s third quarter 2022 results include $6.1 million of provision for credit losses, compared to $4.5 million of provision for credit losses in the preceding quarter and $8.6 million in recapture of provision for credit losses in the third quarter of 2021. In addition, Banner recognized a $7.8 million gain related to the branch sale completed during the preceding quarter. For the first nine months of 2022, net income was $141.0 million, or $4.09 per diluted share, compared to net income of $151.1 million, or $4.32 per diluted share for the same period a year earlier. Banner’s first nine months of 2022 results include $3.7 million in provision for credit losses, compared to $28.1 million in recapture of provision for credit losses in the first nine months of 2021.
Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.44 per share. The dividend will be payable November 10, 2022, to common shareholders of record on October 31, 2022.
“Banner’s third quarter operating results reflect the continued successful execution of our super community bank strategy, and the ongoing implementation of Banner Forward,” said Mark Grescovich, President and CEO. “Our performance for the third quarter of 2022 benefited from solid loan growth and higher yields on interest-earning assets that led to net interest margin expansion. Our continued focus on fostering new client relationships contributed to our 10% growth in loans, excluding PPP loans, compared to September 30, 2021. We remain well positioned for rising interest rates with an asset sensitive position, which should further expand our net interest margin, and ample on-balance sheet liquidity to support loan demand and mitigate rising deposit costs. Our goal of consistently delivering outstanding service and value to our clients, communities, colleagues and shareholders while meeting our performance objectives continues to guide our success.”
“During the third quarter of 2021 we began implementing Banner Forward, a bank-wide initiative to enhance revenue growth and reduce operating expense,” said Grescovich. “Banner Forward is focused on accelerating growth in commercial banking, deepening relationships with retail clients, and advancing technology strategies to enhance our digital service channels, while streamlining underwriting and back office processes. The revenue enhancements associated with Banner Forward are already starting to have a positive impact on earnings, and the implementation of the revenue initiatives are expected to continue ramping up over the fourth quarter and into 2023. The remaining efficiency-related initiatives associated with Banner Forward are anticipated to be implemented during the fourth quarter, and we expect full implementation of Banner Forward by the end of next year. During the third quarter of 2022, we incurred expenses of $411,000 related to Banner Forward.”
At September 30, 2022, Banner Corporation had $16.36 billion in assets, $9.69 billion in net loans and $14.23 billion in deposits. Banner operates 137 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.
BANR - Third Quarter 2022 Results
October 19, 2022
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Third Quarter 2022 Highlights
| • | Revenues increased 4% to $162.0 million, compared to $156.2 million in the preceding quarter, and increased 4% compared to $155.5 million in the third quarter a year ago. |
| • | Net interest income increased 14% to $146.4 million in the third quarter of 2022, compared to $129.0 million in the preceding quarter and increased 13%, compared to $130.1 million in the third quarter a year ago. |
| • | Net interest margin, on a tax equivalent basis, was 3.85%, compared to 3.44% in the preceding quarter and 3.47% in the third quarter a year ago. |
| • | Mortgage banking revenues decreased 97% to $105,000, compared to $4.0 million in the preceding quarter, and decreased 99% compared to $9.6 million in the third quarter a year ago. |
| • | Return on average assets was 1.18%, compared to 1.16% in the preceding quarter and 1.20% in the third quarter a year ago. |
| • | Net loans receivable increased 4% to $9.69 billion at September 30, 2022, compared to $9.33 billion at June 30, 2022, and increased 7% compared to $9.08 billion at September 30, 2021. |
| • | Non-performing assets decreased to $15.6 million, or 0.10% of total assets, at September 30, 2022, compared to $19.1 million, or 0.12% of total assets at June 30, 2022, and $29.7 million, or 0.18% of total assets, at September 30, 2021. |
| • | The allowance for credit losses - loans was $135.9 million, or 1.38% of total loans receivable, as of September 30, 2022, compared to $128.7 million, or 1.36% of total loans receivable as of June 30, 2022 and $139.9 million, or 1.52% of total loans receivable as of September 30, 2021. |
| • | Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased to $13.51 billion at September 30, 2022, compared to $13.46 billion at June 30, 2022, and $13.31 billion a year ago. Core deposits represented 95% of total deposits at September 30, 2022. |
| • | Dividends to shareholders were $0.44 per share in the quarter ended September 30, 2022. |
| • | Common shareholders’ equity per share decreased 5% to $41.20 at September 30, 2022, compared to $43.46 at the preceding quarter end, and decreased 15% from $48.67 a year ago. |
| • | Tangible common shareholders’ equity per share* decreased 7% to $29.97 at September 30, 2022, compared to $32.20 at the preceding quarter end, and decreased 20% from $37.30 a year ago. |
*Non-GAAP (Generally Accepted Accounting Principles) measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.
Income Statement Review
Net interest income was $146.4 million in the third quarter of 2022, compared to $129.0 million in the preceding quarter and $130.1 million in the third quarter a year ago. Banner’s net interest margin on a tax equivalent basis was 3.85% for the third quarter of 2022, a 41 basis-point increase compared to 3.44% in the preceding quarter and a 38 basis-point increase compared to 3.47% in the third quarter a year ago. “Rising market interest rates during the quarter produced higher yields on loans and investment securities which improved our net interest margin. Our net interest margin was also enhanced by increases in average loan balances during the quarter,” said Grescovich.
Average yields on interest-earning assets increased 43 basis points to 3.97% for the third quarter of 2022 compared to 3.54% for the preceding quarter and increased 35 basis points compared to 3.62% in the third quarter a year ago. Since March 2022, in response to inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve System has increased the target range for the federal funds rate by 300 basis points, including 150 basis points during the third quarter of 2022, to a range of 3.00% to 3.25%. The increase in average yields on interest-earning assets during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. Average loan yields increased 28 basis points to 4.82% compared to 4.54% in the preceding quarter and decreased six basis points compared to 4.88% in the third quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding quarter was primarily the result of rising interest rates as well as increases in average loan balances. The year-over-year decrease in average loan yields was primarily the result of a decline in the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness compared to the prior year quarter. Total deposit costs were 0.07% in the third quarter of 2022, which was a one basis-point increase compared to the preceding quarter and a one basis-point decrease compared to the third quarter a year ago. The total cost of funding liabilities was 0.13% during the third quarter of 2022, a two basis-point increase compared to the preceding quarter and a three basis-point decrease compared to 0.16% in the third quarter a year ago.
Banner recorded a $6.1 million provision for credit losses in the current quarter (comprised of a $6.3 million provision for credit losses - loans, a $205,000 recapture of provision for credit losses - unfunded loan commitments and a $55,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $4.5 million provision for credit losses in the prior quarter (comprised of a $3.1 million provision for credit losses - loans, a $1.4 million provision for credit losses - unfunded loan commitments and a $4,000 provision for credit losses - held-to-maturity debt securities) and a $8.6 million recapture of provision for credit losses in the third quarter a year ago (comprised of an $8.9 million recapture of provision for credit losses - loans, a $218,000 provision for credit losses - unfunded loan commitments and a $6,000 recapture of provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current and preceding quarter primarily reflects loan growth and, to a lesser extent, a deterioration in forecasted economic conditions and indicators utilized to estimate credit losses.
BANR - Third Quarter 2022 Results
October 19, 2022
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Total non-interest income was $15.6 million in the third quarter of 2022, compared to $27.2 million in the preceding quarter and $25.3 million in the third quarter a year ago. The decrease in non-interest income during the current quarter, compared to the prior quarter was primarily due to a $7.8 million gain recognized on the branch sale completed during the prior quarter, as well as a $3.9 million decrease in mortgage banking revenues. Deposit fees and other service charges were $11.4 million in the third quarter of 2022, compared to $11.0 million in the preceding quarter and $10.5 million in the third quarter a year ago. The increase in deposit fees and other service charges from the third quarter a year ago primarily reflects increased deposit transaction account activity and the benefit from implementing Banner Forward initiatives. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $105,000 in the third quarter, compared to $4.0 million in the preceding quarter and $9.6 million in the third quarter a year ago. The decrease from the preceding quarter and from the third quarter of 2021 primarily reflects a reduction in the volume and a decrease in the gain on sale margin for one- to four-family loans sold along with a negative fair market adjustment on multifamily held for sale loans. The reduction in one-to four family loans sold primarily reflects a reduction in refinancing activity, as well as decreased purchase activity as interest rates increased during the current quarter. Home purchase activity accounted for 88% of one- to four-family mortgage loan originations in the third quarter of 2022, compared to 82% in the preceding quarter and was 68% in the third quarter of 2021. Mortgage banking revenue included a $2.2 million and $458,000 lower of cost or market downward adjustment recorded for the current quarter and preceding quarter, respectively, on multifamily held for sale loans due to increases in market interest rates this year.
Banner’s third quarter 2022 results included a $532,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and limited partnership investments, and a $6,000 net gain on the sale of securities. In the preceding quarter, results included a $69,000 net gain for fair value adjustments and a $32,000 net gain on the sale of securities. In the third quarter a year ago, results included a $1.8 million net gain for fair value adjustments and a $56,000 net gain on the sale of securities.
Total revenue increased 4% to $162.0 million for the third quarter of 2022, compared to $156.2 million in the preceding quarter, and increased 4% compared to $155.5 million in the third quarter of 2021. Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities, the net change in valuation of financial instruments, and the gain on sale of branches) was $161.5 million in the third quarter of 2022, compared to $148.3 million in the preceding quarter and $153.6 million in the third quarter a year ago. In the first nine months of the year, adjusted revenue* was $447.4 million, compared to $444.8 million in the first nine months of 2021.
Total non-interest expense was $95.0 million in the third quarter of 2022, compared to $92.1 million in the preceding quarter and $102.1 million in the third quarter of 2021. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an $807,000 increase in salary and employee benefits expenses, primarily due to an increase in bonus and commission expense, a $1.2 million decrease in capitalized loan origination costs, primarily due to decreases in production for one- to four-family residential and construction loans, and an $806,000 increase in information / computer data services expense, primarily due to an increase in computer software expenses, partially offset by a $1.3 million decrease in occupancy and equipment expense, primarily due to a reduction in building rent expense during the current quarter as the result of exiting a large lease agreement in the second quarter of 2022. The year-over-year quarterly decrease in non-interest expense primarily reflects a decrease in professional and legal expenses, primarily due to a reduction in consultant expense, and a reduction in occupancy and equipment expense, due to the previously mentioned reduction in building rent expense, partially offset by an increase in salary and employee benefits expense and a decrease in capitalized loan origination costs. Year-to-date, total non-interest expense was $278.3 million, compared to $288.3 million in the same period a year earlier. Banner’s efficiency ratio was 58.65% for the second quarter, compared to 58.94% in the preceding quarter and 65.70% in same quarter a year ago. Banner’s adjusted efficiency ratio* was 57.04% for the second quarter, compared to 59.46% in the preceding quarter and 59.65% in the year ago quarter.
For the third quarter of 2022, Banner had $11.8 million in state and federal income tax expense for an effective tax rate of 19.4%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate is 23.6%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.
* Non-GAAP measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.
Balance Sheet Review
Total assets decreased slightly to $16.36 billion at September 30, 2022, compared to $16.39 billion at June 30, 2022, and decreased 2% when compared to $16.64 billion at September 30, 2021. The total of securities and interest-bearing deposits held at other banks was $5.01 billion at September 30, 2022, compared to $5.45 billion at June 30, 2022 and $6.03 billion at September 30, 2021. The average effective duration of Banner's securities portfolio was approximately 6.4 years at September 30, 2022, compared to 4.4 years at September 30, 2021.
Total loans receivable increased to $9.83 billion at September 30, 2022, compared to $9.46 billion at June 30, 2022, and $9.22 billion at September 30, 2021. Excluding SBA PPP loans, total loans receivable increased $387.9 million from the preceding quarter and increased $905.5 million from the third quarter a year ago. SBA PPP loans decreased 57% to $13.4 million at September 30, 2022, compared to $31.0 million at June 30, 2022, and decreased 96% when compared to $310.2 million at September 30, 2021. One- to four-family residential loans increased to $1.03 billion at September 30, 2022, compared to $868.2 million at June 30, 2022, and $656.0 million a year ago. The increase in one- to four-family residential loans from the preceding quarter was primarily the result of new production and one- to four-family construction loans converting to one- to four-family
BANR - Third Quarter 2022 Results
October 19, 2022
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portfolio loans as they matured during the third quarter of 2022. Multifamily real estate loans increased 3% to $592.8 million at September 30, 2022, compared to $575.2 million at June 30, 2022, and increased 19% compared to $497.5 million a year ago. Commercial real estate loans decreased slightly to $3.66 billion at September 30, 2022, compared to $3.67 billion at June 30, 2022 and decreased 3% when compared to $3.78 billion at September 30, 2021. Commercial business loans increased 4% to $2.15 billion at September 30, 2022, compared to $2.07 billion at June 30, 2022, and increased 1% compared to $2.12 billion a year ago. Excluding SBA PPP loans, commercial business loans increased 5% to $2.14 billion at September 30, 2022, compared to $2.04 billion at June 30, 2022, and increased 18% compared to $1.81 billion a year ago. Agricultural business loans increased to $299.4 million at September 30, 2022, compared to $283.4 million at June 30, 2022, and increased from $281.1 million a year ago. Total construction, land and land development loans were $1.44 billion at September 30, 2022, a 3% increase from $1.40 billion at June 30, 2022, and a 9% increase from $1.33 billion at September 30, 2021. Consumer loans increased to $662.2 million at September 30, 2022, compared to $595.6 million at June 30, 2022, and increased from $561.2 million a year ago. The increase in consumer loans was partially due to the purchase of a $25.6 million pool of consumer marine loans during the current quarter.
Loans held for sale were $84.4 million at September 30, 2022, compared to $69.2 million at June 30, 2022, and $63.7 million at September 30, 2021. The volume of one- to four- family residential mortgage loans sold was $49.7 million in the current quarter, compared to $88.6 million in the preceding quarter and $232.2 million in the third quarter a year ago. Banner sold $10.5 million of multifamily loans during the third quarter of 2022, compared to none in the preceding quarter and $96.1 million in the third quarter a year ago.
Total deposits increased slightly to $14.23 billion at September 30, 2022, compared to $14.21 billion at June 30, 2022, and $14.16 billion a year ago. Non-interest-bearing account balances increased 2% to $6.51 billion at September 30, 2022, compared to $6.39 billion at June 30, 2022, and increased 2% compared to $6.40 billion a year ago. Core deposits were 95% of total deposits at both September 30, 2022 and June 30, 2022 and were 94% of total deposits at September 30, 2021. Certificates of deposit decreased to $721.9 million at September 30, 2022, compared to $756.3 million at June 30, 2022, and decreased 15% compared to $851.1 million a year earlier. Banner had no FHLB borrowings at both September 30, 2022 and June 30, 2022, compared to $50.0 million a year ago.
At September 30, 2022, total common shareholders’ equity was $1.41 billion, or 8.61% of assets, compared to $1.49 billion or 9.07% of assets at June 30, 2022, and $1.67 billion or 10.02% of assets a year ago. The decrease in total common shareholders’ equity during the current quarter was primarily due to a $113.3 million decrease in accumulated other comprehensive income related to an increase in the unrealized loss on available for sale securities reflecting the increase in market interest rates during the current quarter. The decrease from the prior year, reflects a $384.1 million decrease in accumulated other comprehensive income and also includes the repurchase of 200,000 shares of common stock in the second quarter of 2022 at an average cost of $54.80 per share. At September 30, 2022, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.02 billion, or 6.41% of tangible assets*, compared to $1.10 billion, or 6.88% of tangible assets, at June 30, 2022, and $1.28 billion, or 7.86% of tangible assets, a year ago. Banner’s tangible book value per share* decreased to $29.97 at September 30, 2022, compared to $32.20 at June 30, 2022, and $37.30 per share a year ago.
Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At September 30, 2022, Banner's common equity Tier 1 capital ratio was 11.27%, its Tier 1 leverage capital to average assets ratio was 9.06%, and its total capital to risk-weighted assets ratio was 13.85%.
* Non-GAAP measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.
Credit Quality
The allowance for credit losses - loans was $135.9 million at September 30, 2022, or 1.38% of total loans receivable and 895% of non-performing loans, compared to $128.7 million at June 30, 2022, or 1.36% of total loans receivable and 688% of non-performing loans, and $139.9 million at September 30, 2021, or 1.52% of total loans receivable and 485% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $14.0 million at September 30, 2022, compared to $14.2 million at June 30, 2022 and $10.1 million at September 30, 2021. Net loan recoveries totaled $869,000 in the third quarter of 2022, compared to $87,000 in the preceding quarter and $756,000 in the third quarter a year ago. Non-performing loans were $15.2 million at September 30, 2022, compared to $18.7 million at June 30, 2022, and $28.9 million a year ago.
Banner’s total substandard loans were $136.4 million at September 30, 2022, compared to $154.5 million at June 30, 2022, and $225.8 million a year ago. The quarter over quarter decrease primarily reflects risk rating upgrades.
Banner’s total non-performing assets were $15.6 million, or 0.10% of total assets, at September 30, 2022, compared to $19.1 million, or 0.12% of total assets, at June 30, 2022, and $29.7 million, or 0.18% of total assets, a year ago.
BANR - Third Quarter 2022 Results
October 19, 2022
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Conference Call
Banner will host a conference call on Thursday October 20, 2022, at 8:00 a.m. PDT, to discuss its third quarter results. Interested investors may listen to the call live at www.bannerbank.com. Investment professionals are invited to dial (844) 200-6205 using access code 664717 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 067235 or at www.bannerbank.com.
About the Company
Banner Corporation is a $16.36 billion bank holding company operating one commercial bank in four 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 “may,” “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “potential,” 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.
Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing oil prices and supply chain disruptions, and any governmental or societal responses to the COVID-19 pandemic, including the possibility of new COVID-19 variants; (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 credit losses, which could necessitate additional provisions for credit 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 credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (4) competitive pressures among depository institutions; (5) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (6) uncertainty regarding the future of the London Interbank Offered Rate (LIBOR), and the transition away from LIBOR toward new interest rate benchmarks; (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 clients’ needs and developments in the market place; (10) the ability to access cost-effective funding; (11) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (12) changes in financial markets; (13) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular, including the risk of inflation; (14) the costs, effects and outcomes of litigation; (15) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) future acquisitions by Banner of other depository institutions or lines of business; (18) future goodwill impairment due to changes in Banner’s business, changes in market conditions;(19) the costs associated with Banner Forward and (20) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (21) other risks detailed from time to time in Banner’s filings with the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
BANR - Third Quarter 2022 Results
October 19, 2022
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RESULTS OF OPERATIONS | | Quarters Ended | | | Nine Months Ended | |
| (in thousands except shares and per share data) | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | | | Sep 30, 2022 | | | Sep 30, 2021 | |
| | | | | | | | | | | | | | | | |
| INTEREST INCOME: | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 116,610 | | | $ | 104,506 | | | $ | 116,487 | | | $ | 321,466 | | | $ | 340,802 | |
| Mortgage-backed securities | | | 17,558 | | | | 16,819 | | | | 11,695 | | | | 48,486 | | | | 32,503 | |
| Securities and cash equivalents | | | 16,951 | | | | 11,676 | | | | 7,686 | | | | 37,059 | | | | 20,649 | |
| | | | 151,119 | | | | 133,001 | | | | 135,868 | | | | 407,011 | | | | 393,954 | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 2,407 | | | | 2,008 | | | | 2,749 | | | | 6,501 | | | | 9,386 | |
| Federal Home Loan Bank advances | | | — | | | | — | | | | 655 | | | | 291 | | | | 2,244 | |
| Other borrowings | | | 81 | | | | 80 | | | | 125 | | | | 245 | | | | 358 | |
| Subordinated debt | | | 2,188 | | | | 1,902 | | | | 2,193 | | | | 5,866 | | | | 6,605 | |
| | | | 4,676 | | | | 3,990 | | | | 5,722 | | | | 12,903 | | | | 18,593 | |
| Net interest income | | | 146,443 | | | | 129,011 | | | | 130,146 | | | | 394,108 | | | | 375,361 | |
| PROVISION (RECAPTURE) FOR CREDIT LOSSES | | | 6,087 | | | | 4,534 | | | | (8,638 | ) | | | 3,660 | | | | (28,145 | ) |
| Net interest income after provision (recapture) for credit losses | | | 140,356 | | | | 124,477 | | | | 138,784 | | | | 390,448 | | | | 403,506 | |
| NON-INTEREST INCOME: | | | | | | | | | | | | | | | | | | | | |
| Deposit fees and other service charges | | | 11,449 | | | | 11,000 | | | | 10,457 | | | | 33,638 | | | | 29,154 | |
| Mortgage banking operations | | | 105 | | | | 3,978 | | | | 9,613 | | | | 8,523 | | | | 28,305 | |
| Bank-owned life insurance | | | 1,804 | | | | 2,239 | | | | 1,245 | | | | 5,674 | | | | 3,797 | |
| Miscellaneous | | | 1,689 | | | | 2,051 | | | | 2,185 | | | | 5,423 | | | | 8,173 | |
| | | | 15,047 | | | | 19,268 | | | | 23,500 | | | | 53,258 | | | | 69,429 | |
| Net gain on sale of securities | | | 6 | | | | 32 | | | | 56 | | | | 473 | | | | 618 | |
| Net change in valuation of financial instruments carried at fair value | | | 532 | | | | 69 | | | | 1,778 | | | | 650 | | | | 1,895 | |
| Gain on sale of branches, including related deposits | | | — | | | | 7,804 | | | | — | | | | 7,804 | | | | — | |
| Total non-interest income | | | 15,585 | | | | 27,173 | | | | 25,334 | | | | 62,185 | | | | 71,942 | |
| NON-INTEREST EXPENSE: | | | | | | | | | | | | | | | | | | | | |
| Salary and employee benefits | | | 61,639 | | | | 60,832 | | | | 59,799 | | | | 181,957 | | | | 186,553 | |
| Less capitalized loan origination costs | | | (5,984 | ) | | | (7,222 | ) | | | (8,290 | ) | | | (19,436 | ) | | | (26,754 | ) |
| Occupancy and equipment | | | 12,008 | | | | 13,284 | | | | 13,153 | | | | 38,512 | | | | 38,965 | |
| Information / computer data services | | | 6,803 | | | | 5,997 | | | | 6,110 | | | | 19,451 | | | | 17,915 | |
| Payment and card processing services | | | 5,508 | | | | 5,682 | | | | 6,181 | | | | 16,086 | | | | 15,482 | |
| Professional and legal expenses | | | 2,619 | | | | 2,878 | | | | 12,324 | | | | 7,677 | | | | 20,023 | |
| Advertising and marketing | | | 1,326 | | | | 822 | | | | 1,521 | | | | 2,609 | | | | 3,965 | |
| Deposit insurance | | | 1,946 | | | | 1,440 | | | | 1,469 | | | | 4,910 | | | | 4,243 | |
| State/municipal business and use taxes | | | 1,223 | | | | 1,004 | | | | 1,219 | | | | 3,389 | | | | 3,367 | |
| Real estate operations | | | 68 | | | | (121 | ) | | | 53 | | | | (132 | ) | | | (71 | ) |
| Amortization of core deposit intangibles | | | 1,215 | | | | 1,425 | | | | 1,575 | | | | 4,064 | | | | 4,997 | |
| Loss on extinguishment of debt | | | — | | | | — | | | | — | | | | 793 | | | | — | |
| Miscellaneous | | | 6,663 | | | | 6,032 | | | | 6,977 | | | | 18,402 | | | | 18,642 | |
| | | | 95,034 | | | | 92,053 | | | | 102,091 | | | | 278,282 | | | | 287,327 | |
| COVID-19 expenses | | | — | | | | — | | | | 44 | | | | — | | | | 309 | |
| Merger and acquisition-related expenses | | | — | | | | — | | | | 10 | | | | — | | | | 660 | |
| Total non-interest expense | | | 95,034 | | | | 92,053 | | | | 102,145 | | | | 278,282 | | | | 288,296 | |
| Income before provision for income taxes | | | 60,907 | | | | 59,597 | | | | 61,973 | | | | 174,351 | | | | 187,152 | |
| PROVISION FOR INCOME TAXES | | | 11,837 | | | | 11,632 | | | | 12,089 | | | | 33,353 | | | | 36,031 | |
| NET INCOME | | $ | 49,070 | | | $ | 47,965 | | | $ | 49,884 | | | $ | 140,998 | | | $ | 151,121 | |
| Earnings per common share: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.43 | | | $ | 1.40 | | | $ | 1.45 | | | $ | 4.11 | | | $ | 4.35 | |
| Diluted | | $ | 1.43 | | | $ | 1.39 | | | $ | 1.44 | | | $ | 4.09 | | | $ | 4.32 | |
| Cumulative dividends declared per common share | | $ | 0.44 | | | $ | 0.44 | | | $ | 0.41 | | | $ | 1.32 | | | $ | 1.23 | |
| Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 34,224,640 | | | | 34,307,001 | | | | 34,446,510 | | | | 34,277,182 | | | | 34,716,914 | |
| Diluted | | | 34,416,017 | | | | 34,451,740 | | | | 34,669,492 | | | | 34,499,246 | | | | 35,012,228 | |
| Increase (decrease) in common shares outstanding | | | 429 | | | | (181,454 | ) | | | (298,897 | ) | | | (60,873 | ) | | | (907,209 | ) |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 7
FINANCIAL CONDITION | | | | | | | | | | | | | | Percentage Change | |
| (in thousands except shares and per share data) | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | | | Prior Qtr | | | Prior Yr Qtr | |
| | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 273,052 | | | $ | 294,717 | | | $ | 358,461 | | | $ | 392,035 | | | | (7.4 | )% | | | (30.4 | )% |
| Interest-bearing deposits | | | 548,869 | | | | 876,130 | | | | 1,775,839 | | | | 1,808,547 | | | | (37.4 | )% | | | (69.7 | )% |
| Total cash and cash equivalents | | | 821,921 | | | | 1,170,847 | | | | 2,134,300 | | | | 2,200,582 | | | | (29.8 | )% | | | (62.6 | )% |
| Securities - trading | | | 28,383 | | | | 27,886 | | | | 26,981 | | | | 26,875 | | | | 1.8 | % | | | 5.6 | % |
| Securities - available for sale | | | 2,996,173 | | | | 3,094,422 | | | | 3,638,993 | | | | 3,446,575 | | | | (3.2 | )% | | | (13.1 | )% |
| Securities - held to maturity | | | 1,132,852 | | | | 1,151,765 | | | | 520,922 | | | | 447,708 | | | | (1.6 | )% | | | 153.0 | % |
| Total securities | | | 4,157,408 | | | | 4,274,073 | | | | 4,186,896 | | | | 3,921,158 | | | | (2.7 | )% | | | 6.0 | % |
| Federal Home Loan Bank stock | | | 10,000 | | | | 10,000 | | | | 12,000 | | | | 12,000 | | | | — | % | | | (16.7 | )% |
| Securities purchased under agreements to resell | | | 300,000 | | | | 300,000 | | | | 300,000 | | | | 300,000 | | | | — | % | | | — | % |
| Loans held for sale | | | 84,358 | | | | 69,161 | | | | 96,487 | | | | 63,678 | | | | 22.0 | % | | | 32.5 | % |
| Loans receivable | | | 9,827,096 | | | | 9,456,829 | | | | 9,084,763 | | | | 9,218,384 | | | | 3.9 | % | | | 6.6 | % |
| Allowance for credit losses - loans | | | (135,918 | ) | | | (128,702 | ) | | | (132,099 | ) | | | (139,915 | ) | | | 5.6 | % | | | (2.9 | )% |
| Net loans receivable | | | 9,691,178 | | | | 9,328,127 | | | | 8,952,664 | | | | 9,078,469 | | | | 3.9 | % | | | 6.7 | % |
| Accrued interest receivable | | | 50,689 | | | | 45,408 | | | | 42,916 | | | | 43,644 | | | | 11.6 | % | | | 16.1 | % |
| Real estate owned (REO) held for sale, net | | | 340 | | | | 340 | | | | 852 | | | | 852 | | | | — | % | | | (60.1 | )% |
| Property and equipment, net | | | 141,280 | | | | 141,114 | | | | 148,759 | | | | 151,503 | | | | 0.1 | % | | | (6.7 | )% |
| Goodwill | | | 373,121 | | | | 373,121 | | | | 373,121 | | | | 373,121 | | | | — | % | | | — | % |
| Other intangibles, net | | | 10,655 | | | | 11,870 | | | | 14,855 | | | | 16,429 | | | | (10.2 | )% | | | (35.1 | )% |
| Bank-owned life insurance | | | 295,443 | | | | 293,631 | | | | 244,156 | | | | 192,950 | | | | 0.6 | % | | | 53.1 | % |
| Operating lease right-of-use assets | | | 51,908 | | | | 49,792 | | | | 55,257 | | | | 58,523 | | | | 4.2 | % | | | (11.3 | )% |
| Other assets | | | 372,508 | | | | 317,713 | | | | 242,609 | | | | 224,970 | | | | 17.2 | % | | | 65.6 | % |
| Total assets | | $ | 16,360,809 | | | $ | 16,385,197 | | | $ | 16,804,872 | | | $ | 16,637,879 | | | | (0.1 | )% | | | (1.7 | )% |
LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing | | $ | 6,507,523 | | | $ | 6,388,815 | | | $ | 6,385,177 | | | $ | 6,400,864 | | | | 1.9 | % | | | 1.7 | % |
| Interest-bearing transaction and savings accounts | | | 7,004,799 | | | | 7,067,437 | | | | 7,103,125 | | | | 6,912,759 | | | | (0.9 | )% | | | 1.3 | % |
| Interest-bearing certificates | | | 721,944 | | | | 756,312 | | | | 838,631 | | | | 851,054 | | | | (4.5 | )% | | | (15.2 | )% |
| Total deposits | | | 14,234,266 | | | | 14,212,564 | | | | 14,326,933 | | | | 14,164,677 | | | | 0.2 | % | | | 0.5 | % |
| Advances from Federal Home Loan Bank (FHLB) | | | — | | | | — | | | | 50,000 | | | | 50,000 | | | | — | % | | | (100.0 | )% |
| Other borrowings | | | 234,006 | | | | 234,737 | | | | 264,490 | | | | 247,358 | | | | (0.3 | )% | | | (5.4 | )% |
| Subordinated notes, net | | | 98,849 | | | | 98,752 | | | | 98,564 | | | | 98,472 | | | | 0.1 | % | | | 0.4 | % |
| Junior subordinated debentures at fair value | | | 73,841 | | | | 72,229 | | | | 119,815 | | | | 124,853 | | | | 2.2 | % | | | (40.9 | )% |
| Operating lease liabilities | | | 58,031 | | | | 55,746 | | | | 59,756 | | | | 62,946 | | | | 4.1 | % | | | (7.8 | )% |
| Accrued expenses and other liabilities | | | 209,226 | | | | 180,999 | | | | 148,303 | | | | 175,960 | | | | 15.6 | % | | | 18.9 | % |
| Deferred compensation | | | 43,931 | | | | 44,340 | | | | 46,684 | | | | 46,494 | | | | (0.9 | )% | | | (5.5 | )% |
| Total liabilities | | | 14,952,150 | | | | 14,899,367 | | | | 15,114,545 | | | | 14,970,760 | | | | 0.4 | % | | | (0.1 | )% |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | 1,291,741 | | | | 1,289,499 | | | | 1,299,381 | | | | 1,297,145 | | | | 0.2 | % | | | (0.4 | )% |
| Retained earnings | | | 486,108 | | | | 452,246 | | | | 390,762 | | | | 355,035 | | | | 7.5 | % | | | 36.9 | % |
| Accumulated other comprehensive (loss) income | | | (369,190 | ) | | | (255,915 | ) | | | 184 | | | | 14,939 | | | | 44.3 | % | | | (2,571.3 | )% |
| Total shareholders’ equity | | | 1,408,659 | | | | 1,485,830 | | | | 1,690,327 | | | | 1,667,119 | | | | (5.2 | ) % | | | (15.5 | )% |
| Total liabilities and shareholders’ equity | | $ | 16,360,809 | | | $ | 16,385,197 | | | $ | 16,804,872 | | | $ | 16,637,879 | | | | (0.1 | )%
| | | (1.7 | )% |
| Common Shares Issued: | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares outstanding at end of period | | | 34,191,759 | | | | 34,191,330 | | | | 34,252,632 | | | | 34,251,991 | | | | | | | | | |
Common shareholders’ equity per share (1) | | $ | 41.20 | | | $ | 43.46 | | | $ | 49.35 | | | $ | 48.67 | | | | | | | | | |
Common shareholders’ tangible equity per share (1) (2) | | $ | 29.97 | | | $ | 32.20 | | | $ | 38.02 | | | $ | 37.30 | | | | | | | | | |
Common shareholders’ tangible equity to tangible assets (2) | | | 6.41 | % | | | 6.88 | % | | | 7.93 | % | | | 7.86 | % | | | | | | | | |
| Consolidated Tier 1 leverage capital ratio | | | 9.06 | % | | | 8.74 | % | | | 8.76 | % | | | 8.79 | % | | | | | | | | |
| (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 final two pages of the press release tables. |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 8
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percentage Change | |
LOANS (1) | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | | | Prior Qtr | | | Prior Yr Qtr | |
| | | | | | | | | | | | | | | | | | | |
| Commercial real estate (CRE): | | | | | | | | | | | | | | | | | | |
| Owner-occupied | | $ | 862,792 | | | $ | 845,184 | | | $ | 831,623 | | | $ | 823,477 | | | | 2.1 | % | | | 4.8 | % |
| Investment properties | | | 1,604,881 | | | | 1,628,105 | | | | 1,674,027 | | | | 1,667,098 | | | | (1.4 | )% | | | (3.7 | )% |
| Small balance CRE | | | 1,188,351 | | | | 1,191,903 | | | | 1,281,863 | | | | 1,284,596 | | | | (0.3 | )% | | | (7.5 | )% |
| Multifamily real estate | | | 592,834 | | | | 575,183 | | | | 530,885 | | | | 497,517 | | | | 3.1 | % | | | 19.2 | % |
| Construction, land and land development: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial construction | | | 171,029 | | | | 193,984 | | | | 167,998 | | | | 168,663 | | | | (11.8 | )% | | | 1.4 | % |
| Multifamily construction | | | 275,488 | | | | 256,952 | | | | 259,116 | | | | 278,184 | | | | 7.2 | % | | | (1.0 | )% |
| One- to four-family construction | | | 666,350 | | | | 625,488 | | | | 568,753 | | | | 571,431 | | | | 6.5 | % | | | 16.6 | % |
| Land and land development | | | 329,459 | | | | 320,041 | | | | 313,454 | | | | 308,164 | | | | 2.9 | % | | | 6.9 | % |
| Commercial business: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial business | | | 1,229,490 | | | | 1,176,287 | | | | 1,038,206 | | | | 1,038,417 | | | | 4.5 | % | | | 18.4 | % |
| SBA PPP | | | 13,060 | | | | 30,651 | | | | 132,574 | | | | 306,976 | | | | (57.4 | )% | | | (95.7 | )% |
| Small business scored | | | 906,647 | | | | 865,828 | | | | 792,310 | | | | 775,554 | | | | 4.7 | % | | | 16.9 | % |
| Agricultural business, including secured by farmland: | | | | | | | | | | | | | | | | | | | | | | | | |
| Agricultural business, including secured by farmland | | | 299,056 | | | | 283,059 | | | | 279,224 | | | | 277,850 | | | | 5.7 | % | | | 7.6 | % |
| SBA PPP | | | 344 | | | | 356 | | | | 1,354 | | | | 3,214 | | | | (3.4 | )% | | | (89.3 | )% |
| One- to four-family residential | | | 1,025,143 | | | | 868,175 | | | | 657,474 | | | | 656,011 | | | | 18.1 | % | | | 56.3 | % |
| Consumer: | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer—home equity revolving lines of credit | | | 545,807 | | | | 506,524 | | | | 458,533 | | | | 462,819 | | | | 7.8 | % | | | 17.9 | % |
| Consumer—other | | | 116,365 | | | | 89,109 | | | | 97,369 | | | | 98,413 | | | | 30.6 | % | | | 18.2 | % |
| Total loans receivable | | $ | 9,827,096 | | | $ | 9,456,829 | | | $ | 9,084,763 | | | $ | 9,218,384 | | | | 3.9 | % | | | 6.6 | % |
| Restructured loans performing under their restructured terms | | $ | 4,352 | | | $ | 4,370 | | | $ | 5,309 | | | $ | 5,273 | | | | | | | | | |
| Loans 30 - 89 days past due and on accrual | | $ | 15,208 | | | $ | 8,336 | | | $ | 11,558 | | | $ | 6,911 | | | | | | | | | |
| Total delinquent loans (including loans on non-accrual), net | | $ | 21,728 | | | $ | 18,123 | | | $ | 18,688 | | | $ | 18,619 | | | | | | | | | |
| Total delinquent loans / Total loans receivable | | | 0.22 | % | | | 0.19 | % | | | 0.21 | % | | | 0.20 | % | | | | | | | | |
(1) | December 31, 2021 and September 30, 2021 loan balances were reclassified to match current period presentation. |
LOANS BY GEOGRAPHIC LOCATION | | | | | | | | | | | | | | | | | Percentage Change | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | | | Prior Qtr | | | Prior Yr Qtr | |
| | | Amount | | | Percentage | | | Amount | | | Amount | | | Amount | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Washington | | $ | 4,648,124 | | | | 47.3 | % | | $ | 4,436,092 | | | $ | 4,264,590 | | | $ | 4,319,008 | | | | 4.8 | % | | | 7.6 | % |
| California | | | 2,323,740 | | | | 23.6 | % | | | 2,227,532 | | | | 2,138,340 | | | | 2,160,280 | | | | 4.3 | % | | | 7.6 | % |
| Oregon | | | 1,765,254 | | | | 18.0 | % | | | 1,699,238 | | | | 1,652,364 | | | | 1,679,452 | | | | 3.9 | % | | | 5.1 | % |
| Idaho | | | 588,498 | | | | 6.0 | % | | | 562,464 | | | | 525,141 | | | | 536,128 | | | | 4.6 | % | | | 9.8 | % |
| Utah | | | 95,250 | | | | 1.0 | % | | | 94,508 | | | | 74,913 | | | | 89,620 | | | | 0.8 | % | | | 6.3 | % |
| Other | | | 406,230 | | | | 4.1 | % | | | 436,995 | | | | 429,415 | | | | 433,896 | | | | (7.0 | )% | | | (6.4 | )% |
| Total loans receivable | | $ | 9,827,096 | | | | 100.0 | % | | $ | 9,456,829 | | | $ | 9,084,763 | | | $ | 9,218,384 | | | | 3.9 | % | | | 6.6 | % |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 9
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
LOAN ORIGINATIONS | | Quarters Ended | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | |
| Commercial real estate | | $ | 92,062 | | | $ | 121,365 | | | $ | 174,827 | |
| Multifamily real estate | | | 4,603 | | | | 2,959 | | | | 26,155 | |
| Construction and land | | | 444,365 | | | | 643,832 | | | | 496,386 | |
| Commercial business: | | | | | | | | | | | | |
| Commercial business | | | 218,044 | | | | 245,997 | | | | 229,859 | |
| SBA PPP | | | — | | | | — | | | | 907 | |
| Agricultural business | | | 9,879 | | | | 26,786 | | | | 9,223 | |
| One-to four-family residential | | | 92,701 | | | | 126,963 | | | | 49,594 | |
| Consumer | | | 126,940 | | | | 193,853 | | | | 145,102 | |
| Total loan originations (excluding loans held for sale) | | $ | 988,594 | | | $ | 1,361,755 | | | $ | 1,132,053 | |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 10
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | |
| | | Quarters Ended | |
| CHANGE IN THE | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | |
ALLOWANCE FOR CREDIT LOSSES – LOANS | | | | | | | | | |
| Balance, beginning of period | | $ | 128,702 | | | $ | 125,471 | | | $ | 148,009 | |
| Provision (recapture) for credit losses – loans | | | 6,347 | | | | 3,144 | | | | (8,850 | ) |
| Recoveries of loans previously charged off: | | | | | | | | | | | | |
| Commercial real estate | | | 88 | | | | 129 | | | | 923 | |
| One- to four-family real estate | | | 25 | | | | 98 | | | | 19 | |
| Commercial business | | | 924 | | | | 234 | | | | 230 | |
| Agricultural business, including secured by farmland | | | 252 | | | | 14 | | | | 17 | |
| Consumer | | | 85 | | | | 112 | | | | 227 | |
| | | | 1,374 | | | | 587 | | | | 1,416 | |
| Loans charged off: | | | | | | | | | | | | |
| Construction and land | | | (25 | ) | | | — | | | | — | |
| Commercial business | | | (138 | ) | | | (248 | ) | | | (362 | ) |
| Agricultural business, including secured by farmland | | | (42 | ) | | | — | | | | (179 | ) |
| Consumer | | | (300 | ) | | | (252 | ) | | | (119 | ) |
| | | | (505 | ) | | | (500 | ) | | | (660 | ) |
| Net recoveries | | | 869 | | | | 87 | | | | 756 | |
| Balance, end of period | | $ | 135,918 | | | $ | 128,702 | | | $ | 139,915 | |
| Net recoveries / Average loans receivable | | | 0.009 | % | | | 0.001 | % | | | 0.008 | % |
| | | | | | | | | | |
| ALLOCATION OF | | | | �� | | | | | |
ALLOWANCE FOR CREDIT LOSSES – LOANS | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | |
| Specific or allocated credit loss allowance: | | | | | | | | | |
| Commercial real estate | | $ | 44,365 | | | $ | 46,373 | | | $ | 57,215 | |
| Multifamily real estate | | | 7,114 | | | | 6,906 | | | | 6,657 | |
| Construction and land | | | 27,985 | | | | 26,939 | | | | 29,342 | |
| One- to four-family real estate | | | 12,394 | | | | 9,573 | | | | 9,460 | |
| Commercial business | | | 31,854 | | | | 28,673 | | | | 26,873 | |
| Agricultural business, including secured by farmland | | | 3,455 | | | | 3,002 | | | | 3,177 | |
| Consumer | | | 8,751 | | | | 7,236 | | | | 7,191 | |
| Total allowance for credit losses – loans | | $ | 135,918 | | | $ | 128,702 | | | $ | 139,915 | |
| Allowance for credit losses - loans / Total loans receivable | | | 1.38 | % | | | 1.36 | % | | | 1.52 | % |
| Allowance for credit losses - loans / Non-performing loans | | | 895 | % | | | 688 | % | | | 485 | % |
| | | Quarters Ended | |
| CHANGE IN THE | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | |
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS | | | | | | | | | |
| Balance, beginning of period | | $ | 14,246 | | | $ | 12,860 | | | $ | 9,909 | |
| (Recapture) provision for credit losses - unfunded loan commitments | | | (205 | ) | | | 1,386 | | | | 218 | |
| Balance, end of period | | $ | 14,041 | | | $ | 14,246 | | | $ | 10,127 | |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 11
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | |
NON-PERFORMING ASSETS | | | | | | | | | | | | |
| Loans on non-accrual status: | | | | | | | | | | | | |
| Secured by real estate: | | | | | | | | | | | | |
| Commercial | | $ | 6,997 | | | $ | 10,041 | | | $ | 14,159 | | | $ | 14,931 | |
| Construction and land | | | 299 | | | | 200 | | | | 479 | | | | 354 | |
| One- to four-family | | | 2,381 | | | | 2,002 | | | | 2,711 | | | | 3,182 | |
| Commercial business | | | 1,462 | | | | 1,521 | | | | 2,156 | | | | 2,700 | |
| Agricultural business, including secured by farmland | | | 594 | | | | 1,022 | | | | 1,022 | | | | 1,022 | |
| Consumer | | | 1,779 | | | | 1,874 | | | | 1,754 | | | | 1,850 | |
| | | | 13,512 | | | | 16,660 | | | | 22,281 | | | | 24,039 | |
| Loans more than 90 days delinquent, still on accrual: | | | | | | | | | | | | | | | | |
| Secured by real estate: | | | | | | | | | | | | | | | | |
| Commercial | | | — | | | | 899 | | | | — | | | | 3,955 | |
| One- to four-family | | | 1,556 | | | | 1,053 | | | | 436 | | | | 772 | |
| Commercial business | | | 64 | | | | 20 | | | | 2 | | | | 61 | |
| Consumer | | | 61 | | | | 83 | | | | 117 | | | | 34 | |
| | | | 1,681 | | | | 2,055 | | | | 555 | | | | 4,822 | |
| Total non-performing loans | | | 15,193 | | | | 18,715 | | | | 22,836 | | | | 28,861 | |
| REO | | | 340 | | | | 340 | | | | 852 | | | | 852 | |
| Other repossessed assets | | | 17 | | | | 17 | | | | 17 | | | | 17 | |
| Total non-performing assets | | $ | 15,550 | | | $ | 19,072 | | | $ | 23,705 | | | $ | 29,730 | |
| Total non-performing assets to total assets | | | 0.10 | % | | | 0.12 | % | | | 0.14 | % | | | 0.18 | % |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | |
LOANS BY CREDIT RISK RATING | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Pass | | $ | 9,672,473 | | | $ | 9,274,655 | | | $ | 8,874,468 | | | $ | 8,956,604 | |
| Special Mention | | | 18,251 | | | | 27,711 | | | | 11,932 | | | | 36,001 | |
| Substandard | | | 136,372 | | | | 154,463 | | | | 198,363 | | | | 225,779 | |
| Total | | $ | 9,827,096 | | | $ | 9,456,829 | | | $ | 9,084,763 | | | $ | 9,218,384 | |
| | | Quarters Ended | | | Nine Months Ended | |
REAL ESTATE OWNED | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | | | Sep 30, 2022 | | | Sep 30, 2021 | |
| Balance, beginning of period | | $ | 340 | | | $ | 429 | | | $ | 763 | | | $ | 852 | | | $ | 816 | |
| Additions from loan foreclosures | | | — | | | | — | | | | 89 | | | | — | | | | 512 | |
| Proceeds from dispositions of REO | | | — | | | | (257 | ) | | | — | | | | (864 | ) | | | (783 | ) |
| Gain on sale of REO | | | — | | | | 168 | | | | — | | | | 352 | | | | 307 | |
| Balance, end of period | | $ | 340 | | | $ | 340 | | | $ | 852 | | | $ | 340 | | | $ | 852 | |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 12
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
DEPOSIT COMPOSITION | | | | | | | | | | | | | | Percentage Change | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | | | Prior Qtr | | | Prior Yr Qtr | |
| | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing | | $ | 6,507,523 | | | $ | 6,388,815 | | | $ | 6,385,177 | | | $ | 6,400,864 | | | | 1.9 | % | | | 1.7 | % |
| Interest-bearing checking | | | 1,856,244 | | | | 1,859,582 | | | | 1,947,414 | | | | 1,799,657 | | | | (0.2 | )% | | | 3.1 | % |
| Regular savings accounts | | | 2,824,711 | | | | 2,801,177 | | | | 2,784,716 | | | | 2,773,995 | | | | 0.8 | % | | | 1.8 | % |
| Money market accounts | | | 2,323,844 | | | | 2,406,678 | | | | 2,370,995 | | | | 2,339,107 | | | | (3.4 | )% | | | (0.7 | )% |
| Total interest-bearing transaction and savings accounts | | | 7,004,799 | | | | 7,067,437 | | | | 7,103,125 | | | | 6,912,759 | | | | (0.9 | )% | | | 1.3 | % |
| Total core deposits | | | 13,512,322 | | | | 13,456,252 | | | | 13,488,302 | | | | 13,313,623 | | | | 0.4 | % | | | 1.5 | % |
| Interest-bearing certificates | | | 721,944 | | | | 756,312 | | | | 838,631 | | | | 851,054 | | | | (4.5 | )% | | | (15.2 | )% |
| Total deposits | | $ | 14,234,266 | | | $ | 14,212,564 | | | $ | 14,326,933 | | | $ | 14,164,677 | | | | 0.2 | % | | | 0.5 | % |
GEOGRAPHIC CONCENTRATION OF DEPOSITS | | | | | | | | | | | | | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | | | Percentage Change | |
| | | Amount | | | Percentage | | | Amount | | | Amount | | | Amount | | | Prior Qtr | | | Prior Yr Qtr | |
| Washington | | $ | 7,845,755 | | | | 55.2 | % | | $ | 7,820,321 | | | $ | 7,952,376 | | | $ | 7,877,919 | | | | 0.3 | % | | | (0.4 | )% |
| Oregon | | | 3,148,520 | | | | 22.1 | % | | | 3,123,110 | | | | 3,067,054 | | | | 3,030,109 | | | | 0.8 | % | | | 3.9 | % |
| California | | | 2,493,977 | | | | 17.5 | % | | | 2,520,493 | | | | 2,524,296 | | | | 2,501,521 | | | | (1.1 | )% | | | (0.3 | )% |
| Idaho | | | 746,014 | | | | 5.2 | % | | | 748,640 | | | | 783,207 | | | | 755,128 | | | | (0.4 | )% | | | (1.2 | )% |
| Total deposits | | $ | 14,234,266 | | | | 100.0 | % | | $ | 14,212,564 | | | $ | 14,326,933 | | | $ | 14,164,677 | | | | 0.2 | % | | | 0.5 | % |
INCLUDED IN TOTAL DEPOSITS | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | |
| Public non-interest-bearing accounts | | $ | 192,742 | | | $ | 220,694 | | | $ | 193,917 | | | $ | 193,414 | |
| Public interest-bearing transaction & savings accounts | | | 172,567 | | | | 179,930 | | | | 159,957 | | | | 161,407 | |
| Public interest-bearing certificates | | | 33,787 | | | | 37,415 | | | | 39,961 | | | | 40,851 | |
| Total public deposits | | $ | 399,096 | | | $ | 438,039 | | | $ | 393,835 | | | $ | 395,672 | |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 13
| 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 SEPTEMBER 30, 2022 | | Amount | | | Ratio | | | Amount | | | Ratio | | | Amount | | | Ratio | |
| | | | | | | | | | | | | | | | | | | |
| Banner Corporation-consolidated: | | | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | $ | 1,716,295 | | | | 13.85 | % | | $ | 991,112 | | | | 8.00 | % | | $ | 1,238,890 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 1,482,138 | | | | 11.96 | % | | | 743,334 | | | | 6.00 | % | | | 743,334 | | | | 6.00 | % |
| Tier 1 leverage capital to average assets | | | 1,482,138 | | | | 9.06 | % | | | 654,646 | | | | 4.00 | % | | | n/a | | | | n/a | |
| Common equity tier 1 capital to risk-weighted assets | | | 1,395,638 | | | | 11.27 | % | | | 557,500 | | | | 4.50 | % | | | n/a | | | | n/a | |
| Banner Bank: | | | | | | | | | | | | | | | | | | | | | | | | |
| Total capital to risk-weighted assets | | | 1,641,723 | | | | 13.26 | % | | | 990,256 | | | | 8.00 | % | | | 1,237,820 | | | | 10.00 | % |
| Tier 1 capital to risk-weighted assets | | | 1,507,566 | | | | 12.18 | % | | | 742,692 | | | | 6.00 | % | | | 990,256 | | | | 8.00 | % |
| Tier 1 leverage capital to average assets | | | 1,507,566 | | | | 9.22 | % | | | 654,248 | | | | 4.00 | % | | | 817,809 | | | | 5.00 | % |
| Common equity tier 1 capital to risk-weighted assets | | | 1,507,566 | | | | 12.18 | % | | | 557,019 | | | | 4.50 | % | | | 804,583 | | | | 6.50 | % |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 14
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | | | | | |
ANALYSIS OF NET INTEREST SPREAD | Quarters Ended |
| | Sep 30, 2022 | | Jun 30, 2022 | | Sep 30, 2021 |
| | 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: | | | | | | | | | | | | | | | | | |
| Held for sale loans | $ 68,608 | | $ 676 | | 3.91% | | $ 69,338 | | $ 655 | | 3.79% | | $ 114,938 | | $ 996 | | 3.44% |
| Mortgage loans | 7,841,018 | | 94,581 | | 4.79% | | 7,565,894 | | 85,408 | | 4.53% | | 7,245,962 | | 83,803 | | 4.59% |
| Commercial/agricultural loans | 1,670,595 | | 20,418 | | 4.85% | | 1,572,957 | | 17,153 | | 4.37% | | 1,534,978 | | 15,776 | | 4.08% |
| SBA PPP loans | 21,943 | | 613 | | 11.08% | | 45,739 | | 1,056 | | 9.26% | | 566,515 | | 15,421 | | 10.80% |
| Consumer and other loans | 120,583 | | 1,824 | | 6.00% | | 117,162 | | 1,683 | | 5.76% | | 120,112 | | 1,774 | | 5.86% |
Total loans(1) | 9,722,747 | | 118,112 | | 4.82% | | 9,371,090 | | 105,955 | | 4.54% | | 9,582,505 | | 117,770 | | 4.88% |
| Mortgage-backed securities | 3,183,837 | | 17,704 | | 2.21% | | 3,170,915 | | 16,965 | | 2.15% | | 2,560,027 | | 11,820 | | 1.83% |
| Other securities | 1,671,305 | | 13,578 | | 3.22% | | 1,626,204 | | 10,326 | | 2.55% | | 1,491,035 | | 7,873 | | 2.09% |
| Interest-bearing deposits with banks | 778,196 | | 4,406 | | 2.25% | | 1,176,591 | | 2,281 | | 0.78% | | 1,486,839 | | 586 | | 0.16% |
| FHLB stock | 10,000 | | 75 | | 2.98% | | 10,000 | | 100 | | 4.01% | | 13,957 | | 135 | | 3.84% |
| Total investment securities | 5,643,338 | | 35,763 | | 2.51% | | 5,983,710 | | 29,672 | | 1.99% | | 5,551,858 | | 20,414 | | 1.46% |
| Total interest-earning assets | 15,366,085 | | 153,875 | | 3.97% | | 15,354,800 | | 135,627 | | 3.54% | | 15,134,363 | | 138,184 | | 3.62% |
| Non-interest-earning assets | 1,100,313 | | | | | | 1,282,649 | | | | | | 1,301,383 | | | | |
| Total assets | $16,466,398 | | | | | | $16,637,449 | | | | | | $16,435,746 | | | | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Interest-bearing checking accounts | $1,862,887 | | 429 | | 0.09% | | $1,924,896 | | 289 | | 0.06% | | $1,771,869 | | 282 | | 0.06% |
| Savings accounts | 2,822,153 | | 481 | | 0.07% | | 2,841,286 | | 352 | | 0.05% | | 2,721,028 | | 458 | | 0.07% |
| Money market accounts | 2,378,851 | | 769 | | 0.13% | | 2,431,456 | | 531 | | 0.09% | | 2,322,453 | | 668 | | 0.11% |
| Certificates of deposit | 740,014 | | 728 | | 0.39% | | 783,536 | | 836 | | 0.43% | | 863,971 | | 1,341 | | 0.62% |
| Total interest-bearing deposits | 7,803,905 | | 2,407 | | 0.12% | | 7,981,174 | | 2,008 | | 0.10% | | 7,679,321 | | 2,749 | | 0.14% |
| Non-interest-bearing deposits | 6,458,749 | | — | | —% | | 6,456,432 | | — | | —% | | 6,275,634 | | — | | —% |
| Total deposits | 14,262,654 | | 2,407 | | 0.07% | | 14,437,606 | | 2,008 | | 0.06% | | 13,954,955 | | 2,749 | | 0.08% |
| Other interest-bearing liabilities: | | | | | | | | | | | | | | | | | |
| FHLB advances | — | | — | | —% | | — | | — | | —% | | 98,370 | | 655 | | 2.64% |
| Other borrowings | 242,658 | | 81 | | 0.13% | | 252,085 | | 80 | | 0.13% | | 252,720 | | 125 | | 0.20% |
| Junior subordinated debentures and subordinated notes | 189,178 | | 2,188 | | 4.59% | | 189,178 | | 1,902 | | 4.03% | | 247,944 | | 2,193 | | 3.51% |
| Total borrowings | 431,836 | | 2,269 | | 2.08% | | 441,263 | | 1,982 | | 1.80% | | 599,034 | | 2,973 | | 1.97% |
| Total funding liabilities | 14,694,490 | | 4,676 | | 0.13% | | 14,878,869 | | 3,990 | | 0.11% | | 14,553,989 | | 5,722 | | 0.16% |
Other non-interest-bearing liabilities(2) | 257,058 | | | | | | 239,676 | | | | | | 202,918 | | | | |
| Total liabilities | 14,951,548 | | | | | | 15,118,545 | | | | | | 14,756,907 | | | | |
| Shareholders’ equity | 1,514,850 | | | | | | 1,518,904 | | | | | | 1,678,839 | | | | |
| Total liabilities and shareholders’ equity | $ 16,466,398 | | | | | | $16,637,449 | | | | | | $16,435,746 | | | | |
| Net interest income/rate spread (tax equivalent) | | | $ 149,199 | | 3.84% | | | | $ 131,637 | | 3.43% | | | | $ 132,462 | | 3.46% |
| Net interest margin (tax equivalent) | | | | | 3.85% | | | | | | 3.44% | | | | | | 3.47% |
Reconciliation to reported net interest income: | | | | | | | | | | | | | | | | | |
| Adjustments for taxable equivalent basis | | | (2,756) | | | | | | (2,626) | | | | | | (2,316) | | |
| Net interest income and margin, as reported | | | $ 146,443 | | 3.78% | | | | $ 129,011 | | 3.37% | | | | $ 130,146 | | 3.41% |
| Additional Key Financial Ratios: | | | | | | | | | | | | | | | | | |
| Return on average assets | | | | | 1.18% | | | | | | 1.16% | | | | | | 1.20% |
| Return on average equity | | | | | 12.85% | | | | | | 12.67% | | | | | | 11.79% |
| Average equity/average assets | | | | | 9.20% | | | | | | 9.13% | | | | | | 10.21% |
| Average interest-earning assets/average interest-bearing liabilities | | | | | 186.58% | | | | | | 182.31% | | | | | | 182.82% |
| Average interest-earning assets/average funding liabilities | | | | | 104.57% | | | | | | 103.20% | | | | | | 103.99% |
| Non-interest income/average assets | | | | | 0.38% | | | | | | 0.66% | | | | | | 0.61% |
| Non-interest expense/average assets | | | | | 2.29% | | | | | | 2.22% | | | | | | 2.47% |
Efficiency ratio(4) | | | | | 58.65% | | | | | | 58.94% | | | | | | 65.70% |
Adjusted efficiency ratio(5) | | | | | 57.04% | | | | | | 59.46% | | | | | | 59.65% |
(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 junior subordinated debentures. |
(3) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.5 million, $1.4 million and $1.3 million for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.3 million, $1.2 million, and $1.0 million for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. |
(4) | Non-interest expense divided by the total of net interest income and non-interest income. |
(5) | Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16. |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 15
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | | | | |
| (rates / ratios annualized) | | | | | | | | | | | | | | | | | | |
ANALYSIS OF NET INTEREST SPREAD | | Nine Months Ended | |
| | | Sep 30, 2022 | | | Sep 30, 2021 | |
| | | Average Balance | | | Interest and Dividends | | | Yield/Cost(3) | | | Average Balance | | | Interest and Dividends | | | Yield/Cost(3) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
| Held for sale loans | | $ | 94,289 | | | $ | 2,446 | | | | 3.47 | % | | $ | 101,380 | | | $ | 2,465 | | | | 3.25 | % |
| Mortgage loans | | | 7,581,540 | | | | 261,021 | | | | 4.60 | % | | | 7,179,859 | | | | 245,056 | | | | 4.56 | % |
| Commercial/agricultural loans | | | 1,574,957 | | | | 52,582 | | | | 4.46 | % | | | 1,511,723 | | | | 47,513 | | | | 4.20 | % |
| SBA PPP loans | | | 51,890 | | | | 4,453 | | | | 11.47 | % | | | 958,848 | | | | 44,009 | | | | 6.14 | % |
| Consumer and other loans | | | 117,892 | | | | 5,207 | | | | 5.91 | % | | | 123,483 | | | | 5,549 | | | | 6.01 | % |
Total loans(1) | | | 9,420,568 | | | | 325,709 | | | | 4.62 | % | | | 9,875,293 | | | | 344,592 | | | | 4.67 | % |
| Mortgage-backed securities | | | 3,110,769 | | | | 48,904 | | | | 2.10 | % | | | 2,320,474 | | | | 32,855 | | | | 1.89 | % |
| Other securities | | | 1,624,138 | | | | 32,333 | | | | 2.66 | % | | | 1,265,056 | | | | 21,648 | | | | 2.29 | % |
| Equity securities | | | — | | | | — | | | | — | % | | | 574 | | | | — | | | | — | % |
| Interest-bearing deposits with banks | | | 1,214,076 | | | | 7,507 | | | | 0.83 | % | | | 1,221,241 | | | | 1,224 | | | | 0.13 | % |
| FHLB stock | | | 10,579 | | | | 281 | | | | 3.55 | % | | | 14,629 | | | | 457 | | | | 4.18 | % |
| Total investment securities | | | 5,959,562 | | | | 89,025 | | | | 2.00 | % | | | 4,821,974 | | | | 56,184 | | | | 1.56 | % |
| Total interest-earning assets | | | 15,380,130 | | | | 414,734 | | | | 3.61 | % | | | 14,697,267 | | | | 400,776 | | | | 3.65 | % |
| Non-interest-earning assets | | | 1,250,719 | | | | | | | | | | | | 1,255,512 | | | | | | | | | |
| Total assets | | $ | 16,630,849 | | | | | | | | | | | $ | 15,952,779 | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing checking accounts | | $ | 1,915,184 | | | | 991 | | | | 0.07 | % | | $ | 1,714,920 | | | | 899 | | | | 0.07 | % |
| Savings accounts | | | 2,826,757 | | | | 1,187 | | | | 0.06 | % | | | 2,611,046 | | | | 1,433 | | | | 0.07 | % |
| Money market accounts | | | 2,400,267 | | | | 1,806 | | | | 0.10 | % | | | 2,284,904 | | | | 2,111 | | | | 0.12 | % |
| Certificates of deposit | | | 782,548 | | | | 2,517 | | | | 0.43 | % | | | 888,502 | | | | 4,943 | | | | 0.74 | % |
| Total interest-bearing deposits | | | 7,924,756 | | | | 6,501 | | | | 0.11 | % | | | 7,499,372 | | | | 9,386 | | | | 0.17 | % |
| Non-interest-bearing deposits | | | 6,445,579 | | | | — | | | | — | % | | | 6,001,354 | | | | — | | | | — | % |
| Total deposits | | | 14,370,335 | | | | 6,501 | | | | 0.06 | % | | | 13,500,726 | | | | 9,386 | | | | 0.09 | % |
| Other interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| FHLB advances | | | 13,919 | | | | 291 | | | | 2.80 | % | | | 114,103 | | | | 2,244 | | | | 2.63 | % |
| Other borrowings | | | 253,545 | | | | 245 | | | | 0.13 | % | | | 232,142 | | | | 358 | | | | 0.21 | % |
| Junior subordinated debentures and subordinated notes | | | 190,103 | | | | 5,866 | | | | 4.13 | % | | | 247,944 | | | | 6,605 | | | | 3.56 | % |
| Total borrowings | | | 457,567 | | | | 6,402 | | | | 1.87 | % | | | 594,189 | | | | 9,207 | | | | 2.07 | % |
| Total funding liabilities | | | 14,827,902 | | | | 12,903 | | | | 0.12 | % | | | 14,094,915 | | | | 18,593 | | | | 0.18 | % |
Other non-interest-bearing liabilities(2) | | | 241,010 | | | | | | | | | | | | 203,349 | | | | | | | | | |
| Total liabilities | | | 15,068,912 | | | | | | | | | | | | 14,298,264 | | | | | | | | | |
| Shareholders’ equity | | | 1,561,937 | | | | | | | | | | | | 1,654,515 | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 16,630,849 | | | | | | | | | | | $ | 15,952,779 | | | | | | | | | |
| Net interest income/rate spread (tax equivalent) | | | | | | $ | 401,831 | | | | 3.49 | % | | | | | | $ | 382,183 | | | | 3.47 | % |
| Net interest margin (tax equivalent) | | | | | | | | | | | 3.49 | % | | | | | | | | | | | 3.48 | % |
Reconciliation to reported net interest income: | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustments for taxable equivalent basis | | | | | | | (7,723 | ) | | | | | | | | | | | (6,822 | ) | | | | |
| Net interest income and margin, as reported | | | | | | $ | 394,108 | | | | 3.43 | % | | | | | | $ | 375,361 | | | | 3.41 | % |
| Additional Key Financial Ratios: | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | | | | | | | | | 1.13 | % | | | | | | | | | | | 1.27 | % |
| Return on average equity | | | | | | | | | | | 12.07 | % | | | | | | | | | | | 12.21 | % |
| Average equity/average assets | | | | | | | | | | | 9.39 | % | | | | | | | | | | | 10.37 | % |
| Average interest-earning assets/average interest-bearing liabilities | | | | | | | | | | | 183.48 | % | | | | | | | | | | | 181.59 | % |
| Average interest-earning assets/average funding liabilities | | | | | | | | | | | 103.72 | % | | | | | | | | | | | 104.27 | % |
| Non-interest income/average assets | | | | | | | | | | | 0.50 | % | | | | | | | | | | | 0.60 | % |
| Non-interest expense/average assets | | | | | | | | | | | 2.24 | % | | | | | | | | | | | 2.42 | % |
Efficiency ratio(4) | | | | | | | | | | | 60.99 | % | | | | | | | | | | | 64.45 | % |
Adjusted efficiency ratio(5) | | | | | | | | | | | 59.39 | % | | | | | | | | | | | 60.39 | % |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 16
(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 junior subordinated debentures. |
(3) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $4.2 million and $3.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.5 million and $3.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. |
(4) | Non-interest expense divided by the total of net interest income and non-interest income. |
(5) | Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16. |
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | |
| | | | | | | | | | |
* Non-GAAP Financial Measures | | | | | | | | | |
| 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. Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments, net gain (loss) on the sale of securities and gain on sale of branches from the total of net interest income and total non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations, loss on extinguishment of debt and state/municipal taxes from non-interest expense divided by adjusted revenue) represent 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. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below: |
| | | | | | | | | | |
| ADJUSTED REVENUE | Quarters Ended | | Nine Months Ended |
| | Sep 30, 2022 | | Jun 30, 2022 | | Sep 30, 2021 | | Sep 30, 2022 | | Sep 30, 2021 |
| Net interest income (GAAP) | $ 146,443 | | $ 129,011 | | $ 130,146 | | $ 394,108 | | $ 375,361 |
| Non-interest income (GAAP) | 15,585 | | 27,173 | | 25,334 | | 62,185 | | 71,942 |
| Total revenue (GAAP) | 162,028 | | 156,184 | | 155,480 | | 456,293 | | 447,303 |
| Exclude net gain on sale of securities | (6) | | (32) | | (56) | | (473) | | (618) |
| Exclude net change in valuation of financial instruments carried at fair value | (532) | | (69) | | (1,778) | | (650) | | (1,895) |
| Exclude gain on sale of branches | — | | (7,804) | | — | | (7,804) | | — |
| Adjusted revenue (non-GAAP) | $ 161,490 | | $ 148,279 | | $ 153,646 | | $ 447,366 | | $ 444,790 |
| ADJUSTED EARNINGS | Quarters Ended | | Nine Months Ended |
| | Sep 30, 2022 | | Jun 30, 2022 | | Sep 30, 2021 | | Sep 30, 2022 | | Sep 30, 2021 |
| Net income (GAAP) | $ 49,070 | | $ 47,965 | | $ 49,884 | | $ 140,998 | | $ 151,121 |
| Exclude net gain on sale of securities | (6) | | (32) | | (56) | | (473) | | (618) |
| Exclude net change in valuation of financial instruments carried at fair value | (532) | | (69) | | (1,778) | | (650) | | (1,895) |
| Exclude merger and acquisition-related expenses | — | | — | | 10 | | — | | 660 |
| Exclude COVID-19 expenses | — | | — | | 44 | | — | | 309 |
| Exclude gain on sale of branches | — | | (7,804) | | — | | (7,804) | | — |
| Exclude Banner Forward expenses | 411 | | 1,579 | | 7,592 | | 4,455 | | 10,447 |
| Exclude loss on extinguishment of debt | — | | — | | — | | 793 | | — |
| Exclude related net tax expense (benefit) | 31 | | 1,518 | | (1,395) | | 883 | | (2,137) |
| Total adjusted earnings (non-GAAP) | $ 48,974 | | $ 43,157 | | $ 54,301 | | $ 138,202 | | $ 157,887 |
| | | | | | | | | | |
| Diluted earnings per share (GAAP) | $ 1.43 | | $ 1.39 | | $ 1.44 | | $ 4.09 | | $ 4.32 |
| Diluted adjusted earnings per share (non-GAAP) | $ 1.42 | | $ 1.25 | | $ 1.57 | | $ 4.01 | | $ 4.51 |
BANR - Third Quarter 2022 Results
October 19, 2022
Page 17
| ADDITIONAL FINANCIAL INFORMATION | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | |
| ADJUSTED EFFICIENCY RATIO | | Quarters Ended | | | Nine Months Ended | |
| | | Sep 30, 2022 | | | Jun 30, 2022 | | | Sep 30, 2021 | | | Sep 30, 2022 | | | Sep 30, 2021 | |
| Non-interest expense (GAAP) | | $ | 95,034 | | | $ | 92,053 | | | $ | 102,145 | | | $ | 278,282 | | | $ | 288,296 | |
| Exclude merger and acquisition-related expenses | | | — | | | | — | | | | (10 | ) | | | — | | | | (660 | ) |
| Exclude COVID-19 expenses | | | — | | | | — | | | | (44 | ) | | | — | | | | (309 | ) |
| Exclude Banner Forward expenses | | | (411 | ) | | | (1,579 | ) | | | (7,592 | ) | | | (4,455 | ) | | | (10,447 | ) |
| Exclude CDI amortization | | | (1,215 | ) | | | (1,425 | ) | | | (1,575 | ) | | | (4,064 | ) | | | (4,997 | ) |
| Exclude state/municipal tax expense | | | (1,223 | ) | | | (1,004 | ) | | | (1,219 | ) | | | (3,389 | ) | | | (3,367 | ) |
| Exclude REO operations | | | (68 | ) | | | 121 | | | | (53 | ) | | | 132 | | | | 71 | |
| Exclude loss on extinguishment of debt | | | — | | | | — | | | | — | | | | (793 | ) | | | — | |
| Adjusted non-interest expense (non-GAAP) | | $ | 92,117 | | | $ | 88,166 | | | $ | 91,652 | | | $ | 265,713 | | | $ | 268,587 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income (GAAP) | | $ | 146,443 | | | $ | 129,011 | | | $ | 130,146 | | | $ | 394,108 | | | $ | 375,361 | |
| Non-interest income (GAAP) | | | 15,585 | | | | 27,173 | | | | 25,334 | | | | 62,185 | | | | 71,942 | |
| Total revenue (GAAP) | | | 162,028 | | | | 156,184 | | | | 155,480 | | | | 456,293 | | | | 447,303 | |
| Exclude net gain on sale of securities | | | (6 | ) | | | (32 | ) | | | (56 | ) | | | (473 | ) | | | (618 | ) |
| Exclude net change in valuation of financial instruments carried at fair value | | | (532 | ) | | | (69 | ) | | | (1,778 | ) | | | (650 | ) | | | (1,895 | ) |
| Exclude gain on sale of branches | | | — | | | | (7,804 | ) | | | — | | | | (7,804 | ) | | | — | |
| Adjusted revenue (non-GAAP) | | $ | 161,490 | | | $ | 148,279 | | | $ | 153,646 | | | $ | 447,366 | | | $ | 444,790 | |
| | | | | | | | | | | | | | | | | | | | | |
| Efficiency ratio (GAAP) | | | 58.65 | % | | | 58.94 | % | | | 65.70 | % | | | 60.99 | % | | | 64.45 | % |
| Adjusted efficiency ratio (non-GAAP) | | | 57.04 | % | | | 59.46 | % | | | 59.65 | % | | | 59.39 | % | | | 60.39 | % |
| TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS | | Sep 30, 2022 | | | Jun 30, 2022 | | | Dec 31, 2021 | | | Sep 30, 2021 | |
| Shareholders’ equity (GAAP) | | $ | 1,408,659 | | | $ | 1,485,830 | | | $ | 1,690,327 | | | $ | 1,667,119 | |
| Exclude goodwill and other intangible assets, net | | | 383,776 | | | | 384,991 | | | | 387,976 | | | | 389,550 | |
| Tangible common shareholders’ equity (non-GAAP) | | $ | 1,024,883 | | | $ | 1,100,839 | | | $ | 1,302,351 | | | $ | 1,277,569 | |
| | | | | | | | | | | | | | | | | |
| Total assets (GAAP) | | $ | 16,360,809 | | | $ | 16,385,197 | | | $ | 16,804,872 | | | $ | 16,637,879 | |
| Exclude goodwill and other intangible assets, net | | | 383,776 | | | | 384,991 | | | | 387,976 | | | | 389,550 | |
| Total tangible assets (non-GAAP) | | $ | 15,977,033 | | | $ | 16,000,206 | | | $ | 16,416,896 | | | $ | 16,248,329 | |
| Common shareholders’ equity to total assets (GAAP) | | | 8.61 | % | | | 9.07 | % | | | 10.06 | % | | | 10.02 | % |
| Tangible common shareholders’ equity to tangible assets (non-GAAP) | | | 6.41 | % | | | 6.88 | % | | | 7.93 | % | | | 7.86 | % |
| | | | | | | | | | | | | | | | | |
| TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE | | | | | | | | | | | | | | | | |
| Tangible common shareholders’ equity (non-GAAP) | | $ | 1,024,883 | | | $ | 1,100,839 | | | $ | 1,302,351 | | | $ | 1,277,569 | |
| Common shares outstanding at end of period | | | 34,191,759 | | | | 34,191,330 | | | | 34,252,632 | | | | 34,251,991 | |
| Common shareholders’ equity (book value) per share (GAAP) | | $ | 41.20 | | | $ | 43.46 | | | $ | 49.35 | | | $ | 48.67 | |
| Tangible common shareholders’ equity (tangible book value) per share (non-GAAP) | | $ | 29.97 | | | $ | 32.20 | | | $ | 38.02 | | | $ | 37.30 | |
