WALLA WALLA, Wash., Jan. 22, 2014 (GLOBE NEWSWIRE) -- Banner Corporation (Nasdaq:BANR), the parent company of Banner Bank and Islanders Bank, today reported net income available to common shareholders in the fourth quarter of 2013 of $11.6 million, or $0.60 per diluted share, compared to $11.7 million, or $0.60 per diluted share, in the preceding quarter and $13.3 million, or $0.69 per diluted share, in the fourth quarter a year ago. For the full year 2013, Banner reported net income available to common shareholders of $46.6 million, or $2.40 per diluted share, compared to $59.1 million, or $3.16 per diluted share in 2012. Banner's results for 2012 were significantly augmented by a $24.8 million net tax benefit as a result of the reversal of its deferred tax asset valuation allowance, which was partially offset by a $16.5 million net loss for fair value adjustments.
"We are pleased with Banner's 2013 performance and operating results, which reflect our positive momentum and the hard work of our employees, as we continue to successfully execute on our growth strategies and focus on priorities to deliver sustainable profitability to our shareholders," said Mark J. Grescovich, President and Chief Executive Officer. "Indeed, Banner's 2013 results clearly demonstrate that our strategic plan is effective, and we continue to make strides in building shareholder value. As expected, our fourth quarter results also reflect the difficult operating environment presented by continued very low interest rates and slow economic growth, which pressured net interest margin and reduced mortgage banking revenues. Nevertheless, our strong balance sheet and improved operations have positioned us well to meet this difficult environment. In the fourth quarter, our client acquisition strategies again resulted in significant core deposit and loan growth and, coupled with further improvements in asset quality, confirm that our value proposition and strategic execution are being well-received. Banner's solid financial metrics and market share gains, for both the fourth quarter and the full year 2013, provide strong evidence that our super community bank business model is effectively building franchise and shareholder value."
Fourth Quarter 2013 Highlights (compared to fourth quarter 2012, except as noted)
- Net income was $11.6 million, or $0.60 per diluted share.
- Annualized return on average assets was 1.06%.
- Annualized return on average equity was 8.52%.
- Revenues from core operations* remained strong at $51.6 million, compared to $52.4 million in the preceding quarter and $54.5 million in the fourth quarter a year ago.
- Net interest margin was 4.01%, compared to 4.09% in both the preceding quarter and in the fourth quarter a year ago.
- Core deposits increased 9% and represent 76% of total deposits.
- Deposit fees and other service charges increased 4% to $6.7 million.
- Total loans increased $143.0 million during the quarter and increased 6% compared to a year ago.
- Non-performing assets decreased to $28.9 million, or 0.66% of total assets, at December 31, 2013, a 3% decrease compared to three months earlier and a 42% decrease compared to a year earlier.
- Common tangible equity per share increased to $27.50 at December 31, 2013 compared to $27.02 in the preceding quarter and $25.88 in the fourth quarter a year ago.
- The ratio of tangible common equity to tangible assets increased to 12.23% at December 31, 2013.*
- Banner paid a regular quarterly cash dividend of $0.15 per share.
*Earnings information excluding gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments and, in the current quarter and year, a termination fee related to a cancelled bank acquisition transaction (alternately referred to as other operating income from core operations or revenues from core operations) and the ratio of tangible common equity (which excludes other intangible assets) to tangible assets represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented.
Income Statement Review
Fourth quarter net interest income, before the provision for loan losses, was $41.6 million, compared to $41.9 million in the preceding quarter and $41.5 million in the fourth quarter a year ago. For the year ended December 31, 2013, net interest income, before the provision for loan losses, was $166.7 million compared to $167.6 million in the year ended December 31, 2012. Growth in average earning assets for the quarter and year-to-date periods ended December 31, 2013, generally offset the negative effect on net interest income due to the decreases in net interest margin compared to the same periods a year earlier.
"Further pressure on asset yields led to margin compression during the fourth quarter. However, our margin remains strong as a result of continuing reductions in our cost of funds and changes in our asset and liability mix," said Grescovich. Banner's net interest margin was 4.01% for the fourth quarter of 2013, compared to 4.09% for both the preceding quarter and in the fourth quarter a year ago. For the year ended December 31, 2013, the net interest margin was 4.11% compared to 4.17% for the year ended December 31, 2012.
Earning asset yields decreased 10 basis points compared to the preceding quarter and decreased 19 basis points from the fourth quarter a year ago. Loan yields decreased by 14 basis points compared to the preceding quarter and were 34 basis points lower than the fourth quarter a year ago. Deposit costs decreased by two basis points in the fourth quarter of 2013 compared to the preceding quarter and 11 basis points compared to the fourth quarter a year ago. Total cost of funds decreased two basis points in the fourth quarter compared to the preceding quarter and 12 basis points compared to the fourth quarter a year ago.
Banner's mortgage banking activities declined during the quarter, as higher mortgage rates resulted in a reduction in refinance activity and home purchases from the robust pace of the previous few quarters. Mortgage banking operations contributed $2.2 million to fourth quarter revenues compared to $2.6 million in the preceding quarter and $4.3 million in the fourth quarter of 2012. In the fourth quarter of 2013, mortgage banking revenues were augmented by $300,000 as a result of reversal of the remaining valuation allowance for previously recorded impairment charges related to mortgage servicing rights. Similar partial reversals of $600,000 and $400,000 were recognized in the second and third quarters of 2013. In 2013, revenues from mortgage banking operations were $11.2 million compared to $13.8 million in 2012.
Deposit fees and other service charges were $6.7 million in the fourth quarter of 2013, compared to $7.0 million in the preceding quarter, and increased 4% compared to $6.4 million the fourth quarter a year ago. For year ended December 31, 2013, deposit fees increased 5% to $26.6 million compared to $25.3 million for the year ended December 31, 2012. The increases in deposit fees and service charges continue to reflect additional client acquisition and growth in the number of deposit accounts as a result of successful marketing initiatives.
Revenues in the current quarter were augmented by nearly $3.0 million as a result of a termination fee received related to the cancellation of the proposed acquisition of Home Federal Bank. Banner incurred approximately $550,000 of costs related to this cancelled transaction, which are also reflected in the current quarter and full year operating results. Revenues from core operations* (revenues excluding gain on the sale of securities, fair value adjustments and the termination fee) were $51.6 million in the fourth quarter compared to $52.4 million in the third quarter of 2013 and $54.5 million in the fourth quarter of 2012. For the year ended December 31, 2013, Banner's revenues from core operations* were $208.0 million compared to $211.4 million in 2012, with the reduction primarily the result of decreased mortgage banking revenues.
Banner's fourth quarter 2013 results included a $324,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value. In the preceding quarter, Banner recorded a net loss of $352,000 for fair value adjustments compared to a net gain of $386,000 in the fourth quarter a year ago. In 2013, Banner's results included a net charge of $2.3 million for fair value adjustments compared to a net charge of $16.5 million in 2012. The net charge in the prior year primarily reflected a change of $23.1 million in the estimated fair value of Banner's junior subordinated debentures, which was partially offset by increases in the estimated value of similar trust preferred securities owned by the Company. Banner's results for the year ended December 2013 also included a $1.0 million gain on the sale of securities and an OTTI recovery of $409,000, which resulted from the reversal of the same-sized OTTI charge in 2012.
Total other operating income, including the gain on sale of securities, changes in the valuation of financial instruments and the termination fee, was $12.6 million in the fourth quarter of 2013, compared to $10.1 million in the third quarter of 2013 and $13.3 million in the fourth quarter a year ago. For the year ended December 31, 2013, other operating income increased to $43.3 million compared to $26.9 million during the year ended December 31, 2012, principally due to inclusion of the termination fee and the reduction in the net charge for fair value adjustments. Other operating income from core operations* (excluding gain on the sale of securities, fair value adjustments and the termination fee) was $9.9 million for the fourth quarter of 2013, compared to $10.5 million for the preceding quarter and $12.9 million for the fourth quarter a year ago. For the year 2013, other operating income from core operations* was $41.2 million compared to $43.8 million in 2012, with the decrease principally resulting from the decline in mortgage banking revenues.
Banner's total other operating expenses (non-interest expenses) were $36.9 million in the fourth quarter of 2013, compared to $34.5 million in both the preceding quarter and the fourth quarter of 2012. Operating expenses for the current quarter included approximately $550,000 related to the termination of the proposed acquisition of Home Federal Bank. For fiscal 2013, total other operating expenses declined slightly to $141.0 million compared to $141.5 million in 2012, as increased compensation and payment and card processing expenses were generally offset by reduced deposit insurance charges and expenses related to real estate owned, as well as gains on the sale of real estate owned.
For the fourth quarter of 2013, Banner recorded $5.7 million in state and federal income tax expense for an effective tax rate of approximately 33.05%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits. Banner's provision for income taxes for 2013 was $22.5 million compared to a net tax benefit of $24.8 million for the year ended December 31, 2012, as a result of the elimination of Banner's deferred tax asset valuation allowance which more than offset the accrual of tax expense on 2012's pre-tax income.
Credit Quality
"Banner's credit quality metrics remained strong in the current quarter and reflect our focused attention on maintaining a moderate risk profile. Non-performing loan balances, real estate owned and other repossessed assets all declined modestly compared to the prior quarter and are significantly below the year ago levels," said Grescovich. "Further, our reserve levels remain substantial, providing additional benefit in the current quarter's and year's earnings as no provision for loan losses was required during 2013." Banner's allowance for loan losses was 2.19% of total loans outstanding at December 31, 2013. Net charge offs were $2.5 million in 2013, a $15.9 million or 86% decline as compared to 2012. Net charge-offs in the fourth quarter of 2013 were $1.7 million, or 0.05% of average loans outstanding compared to $196,000, or 0.01% of average loans outstanding in the third quarter of 2013 and $2.3 million, or 0.07% of average loans outstanding in the fourth quarter a year ago. As a result, Banner did not record a provision for loan losses for the fourth quarter of 2013 or for the year 2013. In 2012, Banner recorded a $1.0 million provision in the fourth quarter and a $13.0 million provision for the full year. The allowance for loan losses was $75.0 million at December 31, 2013, representing 303% of non-performing loans. Non-performing loans decreased slightly to $24.8 million at December 31, 2013, compared to $24.9 million at September 30, 2013, and decreased 28% when compared to $34.4 million a year earlier.
REO and repossessed assets decreased 16% to $4.2 million at December 30, 2013, compared to $4.9 million at September 30, 2013, and decreased 74% when compared to $15.9 million a year ago.
Banner's non-performing assets were 0.66% of total assets at December 31, 2013, compared to 0.70% at September 30, 2013 and 1.18% a year ago. Non-performing assets decreased 3% to $28.9 million at December 31, 2013, compared to $29.8 million at September 30, 2013 and decreased 42% compared to $50.2 million a year ago.
Balance Sheet Review
"We had an outstanding quarter for loan growth, particularly with respect to targeted loan categories, and core deposits growth," said Grescovich. "Total loans outstanding increased 4% compared to the prior quarter end and increased 6% compared to a year ago. Further, we remain encouraged by the potential for growth in our loan origination pipelines. Non-certificate core deposits increased by 4% during the quarter and increased by nearly 9% compared to a year ago. As a result, these core deposits represented 76% of total deposits at the end of the year, compared to 71% of total deposits a year earlier."
Net loans were $3.34 billion at December 31, 2013, compared to $3.20 billion at September 30, 2013, and $3.16 billion a year ago. Commercial real estate and multifamily real estate loans increased 6% to $1.33 billion at December 31, 2013 compared to $1.26 billion at September 30, 2013 and increased 10% compared to $1.21 billion a year ago. Commercial and agricultural business loans increased 6% to $910.5 million at December 31, 2013, compared to $858.8 million three months earlier and increased 7% compared to $848.1 million a year ago. Total construction and development loans increased 2% to $340.2 million at December 31, 2013, compared to $333.6 million at September 30, 2013, and increased 12% compared to $304.6 million a year earlier.
The total of securities and interest-bearing deposits was $702.9 million at December 31, 2013, compared to $744.5 million at September 30, 2013, and $745.5 million a year ago. The average effective duration of Banner's securities portfolio was approximately 3.4 years at December 31, 2013.
Total deposits increased modestly to $3.62 billion at December 31, 2013, compared to $3.54 billion at September 30, 2013 and $3.56 billion a year ago. However, non-interest-bearing account balances increased 6% to $1.12 billion at December 31, 2013, compared to $1.05 billion at September 30, 2013, and increased 14% compared to $981.2 million a year ago. Interest-bearing transaction and savings accounts increased 3% to $1.63 billion at December 31, 2013, compared to $1.58 billion at September 30, 2013 and increased 5% compared to $1.55 billion a year ago. Certificates of deposit declined to $872.7 million at December 31, 2013, compared to $900.0 million at September 30, 2013 and $1.03 billion a year earlier.
"We continue to focus on enhancing our deposit franchise, which involves lowering our funding costs, adding new client relationships, and improving our core funding position," said Grescovich. "As a result, Banner's cost of deposits declined another two basis points to 0.24% for the quarter ended December 31, 2013 compared to 0.26% for the quarter ended September 30, 2013, and declined 11 basis points from 0.35% for the quarter ended December 31, 2012."
Total assets increased 2% to $4.39 billion at December 31, 2013, compared to $4.28 billion at September 30, 2013 and increased 3% compared to $4.27 billion a year ago. At December 31, 2013, total common stockholders' equity was $539.0 million, or $27.63 per share, compared to $506.9 million, or $26.10 per share, a year ago. Banner had 19.5 million shares of common stock outstanding at December 31, 2013 compared to 19.4 million shares one year earlier. At year end, tangible common stockholders' equity, which excludes other intangible assets, was $536.5 million, or 12.23% of tangible assets, compared to $527.1 million, or 12.32% of tangible assets, at September 30, 2013, and $502.7 million, or 11.80% of tangible assets, a year ago. Banner's tangible book value per share increased to $27.50 at year end, compared to $25.88 per share a year ago.
Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as "well-capitalized" under applicable regulatory standards. Banner Corporation's Tier 1 leverage capital to average assets ratio was 13.64% and its total capital to risk-weighted assets ratio was 16.99% at December 31, 2013.
Conference Call
Banner will host a conference call on Thursday, January 23, 2014, at 8:00 a.m. PST, to discuss its fourth quarter results. The conference call can be accessed live by telephone at (480) 629-9835 to participate in the call. To listen to the call on-line, go to the Company's website at www.bannerbank.com. A replay will be available at www.bannerbank.com.
About the Company
Banner Corporation is a $4.39 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
This press release contains statements that the Company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Company's financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates and the relative differences between short and long-term interest rates, loan and deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and of our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or any of the Banks which could require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including changes related to Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets and liabilities, which estimates may prove to be incorrect and result in significant changes in valuations; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; the failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock and interest or principal payments on our junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed in Banner Corporation's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements whether as a result of new information, future events or otherwise. These risks could cause our actual results for 2013 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect our operating and stock price performance.
| RESULTS OF OPERATIONS | Quarters Ended | Year Ended | |||
| (in thousands except shares and per share data) | Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | Dec 31, 2013 | Dec 31, 2012 |
| INTEREST INCOME: | |||||
| Loans receivable | $ 41,470 | $ 41,953 | $ 42,341 | $ 167,204 | $ 174,322 |
| Mortgage-backed securities | 1,321 | 1,281 | 1,165 | 5,168 | 4,176 |
| Securities and cash equivalents | 1,804 | 1,803 | 2,019 | 7,340 | 8,664 |
| 44,595 | 45,037 | 45,525 | 179,712 | 187,162 | |
| INTEREST EXPENSE: | |||||
| Deposits | 2,198 | 2,330 | 3,088 | 9,737 | 15,107 |
| Federal Home Loan Bank advances | 7 | 28 | 63 | 99 | 254 |
| Other borrowings | 41 | 44 | 64 | 192 | 758 |
| Junior subordinated debentures | 742 | 742 | 776 | 2,968 | 3,395 |
| 2,988 | 3,144 | 3,991 | 12,996 | 19,514 | |
| Net interest income before provision for loan losses | 41,607 | 41,893 | 41,534 | 166,716 | 167,648 |
| PROVISION FOR LOAN LOSSES | — | — | 1,000 | — | 13,000 |
| Net interest income | 41,607 | 41,893 | 40,534 | 166,716 | 154,648 |
| OTHER OPERATING INCOME: | |||||
| Deposit fees and other service charges | 6,670 | 6,982 | 6,433 | 26,581 | 25,266 |
| Mortgage banking operations | 2,168 | 2,590 | 4,292 | 11,170 | 13,812 |
| Miscellaneous | 1,110 | 920 | 2,197 | 3,484 | 4,697 |
| 9,948 | 10,492 | 12,922 | 41,235 | 43,775 | |
| Gain on sale of securities | 2 | 2 | 3 | 1,022 | 51 |
| Other-than-temporary impairment recovery (loss) | — | — | — | 409 | (409) |
| Net change in valuation of financial instruments carried at fair value | (324) | (352) | 386 | (2,278) | (16,515) |
| Proposed acquisition termination fee | 2,954 | — | — | 2,954 | — |
| Total other operating income | 12,580 | 10,142 | 13,311 | 43,342 | 26,902 |
| OTHER OPERATING EXPENSE: | |||||
| Salary and employee benefits | 21,191 | 21,244 | 20,182 | 84,388 | 78,696 |
| Less capitalized loan origination costs | (2,371) | (2,915) | (2,752) | (11,227) | (10,404) |
| Occupancy and equipment | 5,362 | 5,317 | 5,320 | 21,423 | 21,812 |
| Information / computer data services | 1,956 | 1,710 | 1,836 | 7,309 | 6,904 |
| Payment and card processing services | 2,586 | 2,530 | 2,263 | 9,870 | 8,604 |
| Professional services | 1,531 | 1,074 | 850 | 4,331 | 4,411 |
| Advertising and marketing | 2,033 | 1,556 | 1,602 | 6,885 | 7,215 |
| Deposit insurance | 502 | 564 | 715 | 2,329 | 3,685 |
| State/municipal business and use taxes | 478 | 461 | 574 | 1,941 | 2,289 |
| Real estate operations | 357 | (601) | 91 | (689) | 3,354 |
| Amortization of core deposit intangibles | 488 | 471 | 509 | 1,941 | 2,092 |
| Miscellaneous | 2,816 | 3,079 | 3,329 | 12,474 | 12,795 |
| Total other operating expense | 36,929 | 34,490 | 34,519 | 140,975 | 141,453 |
| Income before provision for (benefit from) income taxes | 17,258 | 17,545 | 19,326 | 69,083 | 40,097 |
| PROVISION (BENEFIT) FOR INCOME TAXES | 5,704 | 5,880 | 4,638 | 22,528 | (24,785) |
| NET INCOME | 11,554 | 11,665 | 14,688 | 46,555 | 64,882 |
| PREFERRED STOCK DIVIDEND AND ADJUSTMENTS: | |||||
| Preferred stock dividend | — | — | 611 | — | 4,938 |
| Preferred stock discount accretion | — | — | 1,174 | — | 3,298 |
| Gain on repurchase and retirement of preferred stock | — | — | (401) | — | (2,471) |
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ 11,554 | $ 11,665 | $ 13,304 | $ 46,555 | $ 59,117 |
| Earnings per share available to common shareholders: | |||||
| Basic | $ 0.60 | $ 0.60 | $ 0.69 | $ 2.40 | $ 3.17 |
| Diluted | $ 0.60 | $ 0.60 | $ 0.69 | $ 2.40 | $ 3.16 |
| Cumulative dividends declared per common share | $ 0.15 | $ 0.15 | $ 0.01 | $ 0.54 | $ 0.04 |
| Weighted average common shares outstanding: | |||||
| Basic | 19,344,174 | 19,338,564 | 19,312,761 | 19,361,411 | 18,650,336 |
| Diluted | 19,398,213 | 19,397,329 | 19,420,612 | 19,397,360 | 18,722,859 |
| Common shares issued via restricted stock grants (net), DRIP and stock purchases | 719 | (10,139) | 86 | 88,804 | 1,901,493 |
| FINANCIAL CONDITION | ||||||
| (in thousands except shares and per share data) | Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | |||
| ASSETS | ||||||
| Cash and due from banks | $ 69,711 | $ 69,340 | $ 66,370 | |||
| Federal funds and interest-bearing deposits | 67,638 | 106,625 | 114,928 | |||
| Securities - at fair value | 62,472 | 63,887 | 71,232 | |||
| Securities - available for sale | 470,280 | 477,407 | 472,920 | |||
| Securities - held to maturity | 102,513 | 96,545 | 86,452 | |||
| Federal Home Loan Bank stock | 35,390 | 35,708 | 36,705 | |||
| Loans receivable: | ||||||
| Held for sale | 2,734 | 8,394 | 11,920 | |||
| Held for portfolio | 3,415,711 | 3,267,042 | 3,223,794 | |||
| Allowance for loan losses | (74,990) | (76,657) | (77,491) | |||
| 3,343,455 | 3,198,779 | 3,158,223 | ||||
| Accrued interest receivable | 13,996 | 15,164 | 13,930 | |||
| Real estate owned held for sale, net | 4,044 | 4,818 | 15,778 | |||
| Property and equipment, net | 90,267 | 89,092 | 89,117 | |||
| Other intangibles, net | 2,449 | 2,937 | 4,230 | |||
| Bank-owned life insurance | 61,945 | 61,442 | 59,891 | |||
| Other assets | 64,006 | 60,809 | 75,788 | |||
| $ 4,388,166 | $ 4,282,553 | $ 4,265,564 | ||||
| LIABILITIES | ||||||
| Deposits: | ||||||
| Non-interest-bearing | $ 1,115,346 | $ 1,051,831 | $ 981,240 | |||
| Interest-bearing transaction and savings accounts | 1,629,885 | 1,583,430 | 1,547,271 | |||
| Interest-bearing certificates | 872,695 | 900,024 | 1,029,293 | |||
| 3,617,926 | 3,535,285 | 3,557,804 | ||||
| Advances from Federal Home Loan Bank at fair value | 27,250 | 20,258 | 10,304 | |||
| Customer repurchase agreements | 83,056 | 82,909 | 76,633 | |||
| Junior subordinated debentures at fair value | 73,928 | 73,637 | 73,063 | |||
| Accrued expenses and other liabilities | 30,592 | 24,830 | 26,389 | |||
| Deferred compensation | 16,442 | 15,642 | 14,452 | |||
| 3,849,194 | 3,752,561 | 3,758,645 | ||||
| STOCKHOLDERS' EQUITY | ||||||
| Common stock | 569,028 | 568,535 | 567,907 | |||
| Retained earnings (accumulated deficit) | (25,073) | (33,701) | (61,102) | |||
| Other components of stockholders' equity | (4,983) | (4,842) | 114 | |||
| 538,972 | 529,992 | 506,919 | ||||
| $ 4,388,166 | $ 4,282,553 | $ 4,265,564 | ||||
| Common Shares Issued: | ||||||
| Shares outstanding at end of period | 19,543,769 | 19,543,050 | 19,454,965 | |||
| Less unearned ESOP shares at end of period | 34,340 | 34,340 | 34,340 | |||
| Shares outstanding at end of period excluding unearned ESOP shares | 19,509,429 | 19,508,710 | 19,420,625 | |||
| Common stockholders' equity per share (1) | $ 27.63 | $ 27.17 | $ 26.10 | |||
| Common stockholders' tangible equity per share (1) (2) | $ 27.50 | $ 27.02 | $ 25.88 | |||
| Common stockholders' tangible equity to tangible assets (2) | 12.23% | 12.32% | 11.80% | |||
| Consolidated Tier 1 leverage capital ratio | 13.64% | 13.63% | 12.74% | |||
| (1) Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding and excludes unallocated shares in the ESOP. | ||||||
| (2) Common stockholders' tangible equity excludes preferred stock and other intangibles. Tangible assets excludes other intangible assets. These ratios represent non-GAAP financial measures. | ||||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||
| (dollars in thousands) | ||||||||||
| Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | ||||||||
| LOANS (including loans held for sale): | ||||||||||
| Commercial real estate: | ||||||||||
| Owner occupied | $ 502,601 | $ 508,341 | $ 489,581 | |||||||
| Investment properties | 692,457 | 613,757 | 583,641 | |||||||
| Multifamily real estate | 137,153 | 133,770 | 137,504 | |||||||
| Commercial construction | 12,168 | 18,730 | 30,229 | |||||||
| Multifamily construction | 52,081 | 33,888 | 22,581 | |||||||
| One- to four-family construction | 189,807 | 194,187 | 160,815 | |||||||
| Land and land development: | ||||||||||
| Residential | 75,695 | 75,576 | 77,010 | |||||||
| Commercial | 10,450 | 11,231 | 13,982 | |||||||
| Commercial business | 682,169 | 635,658 | 618,049 | |||||||
| Agricultural business including secured by farmland | 228,291 | 223,187 | 230,031 | |||||||
| One- to four-family real estate | 540,551 | 543,263 | 581,670 | |||||||
| Consumer: | ||||||||||
| Consumer secured by one- to four-family real estate | 173,188 | 170,019 | 170,123 | |||||||
| Consumer-other | 121,834 | 113,829 | 120,498 | |||||||
| Total loans outstanding | $ 3,418,445 | $ 3,275,436 | $ 3,235,714 | |||||||
| Restructured loans performing under their restructured terms | $ 47,428 | $ 50,430 | $ 57,462 | |||||||
| Loans 30 - 89 days past due and on accrual | $ 8,784 | $ 9,313 | $ 11,685 | |||||||
| Total delinquent loans (including loans on non-accrual) | $ 22,010 | $ 27,804 | $ 45,300 | |||||||
| Total delinquent loans / Total loans outstanding | 0.64% | 0.85% | 1.40% | |||||||
| GEOGRAPHIC CONCENTRATION OF LOANS AT | ||||||||||
| December 31, 2013 | Washington | Oregon | Idaho | Other | Total | |||||
| Commercial real estate: | ||||||||||
| Owner occupied | $ 379,666 | $ 56,054 | $ 58,279 | $ 8,602 | $ 502,601 | |||||
| Investment properties | 487,775 | 101,326 | 60,216 | 43,140 | 692,457 | |||||
| Multifamily real estate | 108,121 | 19,108 | 9,765 | 159 | 137,153 | |||||
| Commercial construction | 11,335 | 703 | 130 | — | 12,168 | |||||
| Multifamily construction | 37,979 | 14,102 | — | — | 52,081 | |||||
| One- to four-family construction | 101,305 | 86,850 | 1,652 | — | 189,807 | |||||
| Land and land development: | ||||||||||
| Residential | 42,364 | 32,046 | 1,285 | — | 75,695 | |||||
| Commercial | 5,156 | 3,364 | 1,930 | — | 10,450 | |||||
| Commercial business | 405,275 | 85,676 | 68,853 | 122,365 | 682,169 | |||||
| Agricultural business including secured by farmland | 118,569 | 59,020 | 50,702 | — | 228,291 | |||||
| One- to four-family real estate | 340,871 | 175,285 | 21,805 | 2,590 | 540,551 | |||||
| Consumer: | ||||||||||
| Consumer secured by one- to four-family real estate | 113,710 | 45,917 | 12,864 | 697 | 173,188 | |||||
| Consumer-other | 83,724 | 32,322 | 5,742 | 46 | 121,834 | |||||
| Total loans outstanding | $ 2,235,850 | $ 711,773 | $ 293,223 | $ 177,599 | $ 3,418,445 | |||||
| Percent of total loans | 65.4% | 20.8% | 8.6% | 5.2% | 100.0% | |||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||
| (dollars in thousands) | ||||||||||
| Quarters Ended | Year Ended | |||||||||
| CHANGE IN THE | Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | Dec 31, 2013 | Dec 31, 2012 | |||||
| ALLOWANCE FOR LOAN LOSSES | ||||||||||
| Balance, beginning of period | $ 76,657 | $ 76,853 | $ 78,783 | $ 77,491 | $ 82,912 | |||||
| Provision | — | — | 1,000 | — | 13,000 | |||||
| Recoveries of loans previously charged off: | ||||||||||
| Commercial real estate | 72 | 331 | 159 | 2,367 | 921 | |||||
| Construction and land | 1,330 | 507 | 1,499 | 2,275 | 2,954 | |||||
| One- to four-family real estate | 7 | 19 | 174 | 145 | 586 | |||||
| Commercial business | 282 | 339 | 1,395 | 1,673 | 2,425 | |||||
| Agricultural business, including secured by farmland | 85 | 265 | 4 | 697 | 49 | |||||
| Consumer | 53 | 68 | 108 | 340 | 531 | |||||
| 1,829 | 1,529 | 3,339 | 7,497 | 7,466 | ||||||
| Loans charged off: | ||||||||||
| Commercial real estate | (953) | (850) | (558) | (2,569) | (4,065) | |||||
| Construction and land | (967) | — | (1,301) | (1,821) | (6,546) | |||||
| One- to four-family real estate | (879) | (207) | (1,748) | (2,139) | (5,328) | |||||
| Commercial business | (209) | (246) | (1,094) | (1,782) | (6,485) | |||||
| Agricultural business, including secured by farmland | — | (248) | (155) | (248) | (456) | |||||
| Consumer | (488) | (174) | (775) | (1,439) | (3,007) | |||||
| (3,496) | (1,725) | (5,631) | (9,998) | (25,887) | ||||||
| Net charge-offs | (1,667) | (196) | (2,292) | (2,501) | (18,421) | |||||
| Balance, end of period | $ 74,990 | $ 76,657 | $ 77,491 | $ 74,990 | $ 77,491 | |||||
| Net charge-offs / Average loans outstanding | 0.05% | 0.01% | 0.07% | 0.08% | 0.57% | |||||
| ALLOCATION OF | ||||||||||
| ALLOWANCE FOR LOAN LOSSES | Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | |||||||
| Specific or allocated loss allowance: | ||||||||||
| Commercial real estate | $ 16,759 | $ 15,618 | $ 15,322 | |||||||
| Multifamily real estate | 5,306 | 5,283 | 4,506 | |||||||
| Construction and land | 17,640 | 16,668 | 14,991 | |||||||
| One- to four-family real estate | 11,486 | 13,187 | 16,475 | |||||||
| Commercial business | 11,773 | 10,676 | 9,957 | |||||||
| Agricultural business, including secured by farmland | 2,841 | 3,411 | 2,295 | |||||||
| Consumer | 1,335 | 948 | 1,348 | |||||||
| Total allocated | 67,140 | 65,791 | 64,894 | |||||||
| Estimated allowance for undisbursed commitments | 630 | 717 | 758 | |||||||
| Unallocated | 7,220 | 10,149 | 11,839 | |||||||
| Total allowance for loan losses | $ 74,990 | $ 76,657 | $ 77,491 | |||||||
| Allowance for loan losses / Total loans outstanding | 2.19% | 2.34% | 2.39% | |||||||
| Allowance for loan losses / Non-performing loans | 303% | 308% | 225% | |||||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||
| (dollars in thousands) | ||||||||
| Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | ||||||
| NON-PERFORMING ASSETS | ||||||||
| Loans on non-accrual status: | ||||||||
| Secured by real estate: | ||||||||
| Commercial | $ 6,287 | $ 4,762 | $ 6,579 | |||||
| Multifamily | — | 333 | — | |||||
| Construction and land | 1,193 | 1,660 | 3,673 | |||||
| One- to four-family | 12,532 | 10,717 | 12,964 | |||||
| Commercial business | 723 | 963 | 4,750 | |||||
| Consumer | 1,173 | 1,634 | 3,395 | |||||
| 21,908 | 20,069 | 31,361 | ||||||
| Loans more than 90 days delinquent, still on accrual: | ||||||||
| Secured by real estate: | ||||||||
| Multifamily | — | 1,701 | — | |||||
| Construction and land | — | 242 | — | |||||
| One- to four-family | 2,611 | 2,774 | 2,877 | |||||
| Commercial business | — | 24 | — | |||||
| Agricultural business, including secured by farmland | 105 | — | — | |||||
| Consumer | 144 | 52 | 152 | |||||
| 2,860 | 4,793 | 3,029 | ||||||
| Total non-performing loans | 24,768 | 24,862 | 34,390 | |||||
| Real estate owned (REO) and repossessed assets | 4,159 | 4,937 | 15,853 | |||||
| Total non-performing assets | $ 28,927 | $ 29,799 | $ 50,243 | |||||
| Total non-performing assets / Total assets | 0.66 | 0.70 | 1.18 | |||||
| DETAIL & GEOGRAPHIC CONCENTRATION OF | ||||||||
| NON-PERFORMING ASSETS AT | ||||||||
| December 31, 2013 | Washington | Oregon | Idaho | Total | ||||
| Secured by real estate: | ||||||||
| Commercial | $ 6,239 | $ — | $ 48 | $ 6,287 | ||||
| Construction and land: | ||||||||
| One- to four-family construction | — | 269 | — | 269 | ||||
| Residential land acquisition & development | — | 750 | — | 750 | ||||
| Residential land improved lots | — | 174 | — | 174 | ||||
| Total construction and land | — | 1,193 | — | 1,193 | ||||
| One- to four-family | 9,466 | 5,066 | 611 | 15,143 | ||||
| Commercial business | 663 | 60 | — | 723 | ||||
| Agricultural business, including secured by farmland | 105 | — | — | 105 | ||||
| Consumer | 1,021 | 40 | 256 | 1,317 | ||||
| Total non-performing loans | 17,494 | 6,359 | 915 | 24,768 | ||||
| Real estate owned (REO) and repossessed assets | 2,026 | 1,628 | 505 | 4,159 | ||||
| Total non-performing assets at end of the period | $ 19,520 | $ 7,987 | $ 1,420 | $ 28,927 | ||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||
| (dollars in thousands) | ||||||||
| Quarters Ended | Year Ended | |||||||
| REAL ESTATE OWNED | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2013 | Dec 31, 2012 | ||||
| Balance, beginning of period | $ 4,818 | $ 20,356 | $ 15,778 | $ 42,965 | ||||
| Additions from loan foreclosures | 700 | 2,332 | 3,168 | 13,930 | ||||
| Additions from capitalized costs | 4 | 69 | 347 | 300 | ||||
| Proceeds from dispositions of REO | (1,186) | (7,357) | (16,945) | (40,965) | ||||
| Gain on sale of REO | 3 | 1,104 | 2,481 | 4,725 | ||||
| Valuation adjustments in the period | (295) | (726) | (785) | (5,177) | ||||
| Balance, end of period | $ 4,044 | $ 15,778 | $ 4,044 | $ 15,778 | ||||
| REAL ESTATE OWNED- BY TYPE AND STATE | ||||||||
| December 31, 2013 | Washington | Oregon | Idaho | Total | ||||
| Commercial real estate | $ — | $ — | $ 175 | $ 175 | ||||
| Land development- residential | 1,028 | 1,275 | 33 | 2,336 | ||||
| One- to four-family real estate | 888 | 348 | 297 | 1,533 | ||||
| Total | $ 1,916 | $ 1,623 | $ 505 | $ 4,044 | ||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||
| (dollars in thousands) | ||||||||
| DEPOSITS & OTHER BORROWINGS | ||||||||
| Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | ||||||
| DEPOSIT COMPOSITION | ||||||||
| Non-interest-bearing | $ 1,115,346 | $ 1,051,831 | $ 981,240 | |||||
| Interest-bearing checking | 422,910 | 399,343 | 410,316 | |||||
| Regular savings accounts | 798,764 | 775,260 | 727,957 | |||||
| Money market accounts | 408,211 | 408,827 | 408,998 | |||||
| Interest-bearing transaction & savings accounts | 1,629,885 | 1,583,430 | 1,547,271 | |||||
| Interest-bearing certificates | 872,695 | 900,024 | 1,029,293 | |||||
| Total deposits | $ 3,617,926 | $ 3,535,285 | $ 3,557,804 | |||||
| INCLUDED IN TOTAL DEPOSITS | ||||||||
| Public non-interest-bearing accounts | $ 21,699 | $ 20,630 | $ 22,081 | |||||
| Public interest-bearing transaction & savings accounts | 65,822 | 49,840 | 57,874 | |||||
| Public interest-bearing certificates | 51,465 | 51,562 | 60,518 | |||||
| Total public deposits | $ 138,986 | $ 122,032 | $ 140,473 | |||||
| Total brokered deposits | $ 4,291 | $ 4,531 | $ 15,702 | |||||
| OTHER BORROWINGS | ||||||||
| Customer repurchase agreements / "Sweep accounts" | $ 83,056 | $ 82,909 | $ 76,333 | |||||
| GEOGRAPHIC CONCENTRATION OF DEPOSITS AT | ||||||||
| December 31, 2013 | Washington | Oregon | Idaho | Total | ||||
| $ 2,743,230 | $ 626,959 | $ 247,737 | $ 3,617,926 | |||||
| 75.9% | 17.3% | 6.8% | 100.0% | |||||
| REGULATORY CAPITAL RATIOS AT | Actual |
Minimum for Capital Adequacy or "Well Capitalized" |
||||||
| December 31, 2013 | Amount | Ratio | Amount | Ratio | ||||
| Banner Corporation-consolidated: | ||||||||
| Total capital to risk-weighted assets | $ 631,674 | 16.99% | $ 297,493 | 8.00% | ||||
| Tier 1 capital to risk-weighted assets | 584,838 | 15.73% | 148,747 | 4.00% | ||||
| Tier 1 leverage capital to average assets | 584,838 | 13.64% | 171,553 | 4.00% | ||||
| Banner Bank: | ||||||||
| Total capital to risk-weighted assets | 557,253 | 15.75% | 353,730 | 10.00% | ||||
| Tier 1 capital to risk-weighted assets | 512,689 | 14.49% | 212,238 | 6.00% | ||||
| Tier 1 leverage capital to average assets | 512,689 | 12.65% | 202,707 | 5.00% | ||||
| Islanders Bank: | ||||||||
| Total capital to risk-weighted assets | 34,795 | 18.73% | 18,574 | 10.00% | ||||
| Tier 1 capital to risk-weighted assets | 32,469 | 17.48% | 11,144 | 6.00% | ||||
| Tier 1 leverage capital to average assets | 32,469 | 13.60% | 11,941 | 5.00% | ||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||
| (dollars in thousands) | ||||||||||
| (rates / ratios annualized) | ||||||||||
| Quarters Ended | Year Ended | |||||||||
| OPERATING PERFORMANCE | Dec 31, 2013 | Sep 30, 2013 | Dec 31, 2012 | Dec 31, 2013 | Dec 31, 2012 | |||||
| Average loans | $ 3,343,494 | $ 3,291,950 | $ 3,201,389 | $ 3,275,767 | $ 3,223,777 | |||||
| Average securities | 686,845 | 689,257 | 660,731 | 692,117 | 657,649 | |||||
| Average interest earning cash | 85,335 | 79,607 | 175,441 | 85,178 | 138,179 | |||||
| Average non-interest-earning assets | 196,035 | 190,621 | 227,728 | 204,077 | 199,561 | |||||
| Total average assets | $ 4,311,709 | $ 4,251,435 | $ 4,265,289 | $ 4,257,139 | $ 4,219,166 | |||||
| Average deposits | $ 3,573,607 | $ 3,496,194 | $ 3,507,202 | $ 3,515,493 | $ 3,447,905 | |||||
| Average borrowings | 209,155 | 241,006 | 214,275 | 227,612 | 236,124 | |||||
| Average non-interest-bearing other liabilities (1) | (9,116) | (13,016) | (2,208) | (11,970) | (22,757) | |||||
| Total average liabilities | 3,773,646 | 3,724,184 | 3,719,269 | 3,731,135 | 3,661,272 | |||||
| Total average stockholders' equity | 538,063 | 527,251 | 546,020 | 526,004 | 557,894 | |||||
| Total average liabilities and equity | $ 4,311,709 | $ 4,251,435 | $ 4,265,289 | $ 4,257,139 | $ 4,219,166 | |||||
| Interest rate yield on loans | 4.92% | 5.06% | 5.26% | 5.10% | 5.41% | |||||
| Interest rate yield on securities | 1.77% | 1.75% | 1.85% | 1.78% | 1.90% | |||||
| Interest rate yield on cash | 0.26% | 0.22% | 0.26% | 0.25% | 0.24% | |||||
| Interest rate yield on interest-earning assets | 4.30% | 4.40% | 4.49% | 4.43% | 4.66% | |||||
| Interest rate expense on deposits | 0.24% | 0.26% | 0.35% | 0.28% | 0.44% | |||||
| Interest rate expense on borrowings | 1.50% | 1.34% | 1.68% | 1.43% | 1.87% | |||||
| Interest rate expense on interest-bearing liabilities | 0.31% | 0.33% | 0.43% | 0.35% | 0.53% | |||||
| Interest rate spread | 3.99% | 4.07% | 4.06% | 4.08% | 4.13% | |||||
| Net interest margin | 4.01% | 4.09% | 4.09% | 4.11% | 4.17% | |||||
| Other operating income / Average assets | 1.16% | 0.95% | 1.24% | 1.02% | 0.64% | |||||
| Core operating income / Average assets (2) | 0.92% | 0.98% | 1.21% | 0.97% | 1.04% | |||||
| Other operating expense / Average assets | 3.40% | 3.22% | 3.22% | 3.31% | 3.35% | |||||
| Efficiency ratio (other operating expense / revenue) | 68.15% | 66.28% | 62.94% | 67.11% | 72.71% | |||||
| Efficiency ratio (other operating expense / core operating revenue) (2) | 70.56% | 65.84% | 63.39% | 67.53% | 66.91% | |||||
| Return on average assets | 1.06% | 1.09% | 1.37% | 1.09% | 1.54% | |||||
| Return on average equity | 8.52% | 8.78% | 10.70% | 8.85% | 11.63% | |||||
| Return on average tangible equity (3) | 8.56% | 8.83% | 10.79% | 8.91% | 11.74% | |||||
| Average equity / Average assets | 12.48% | 12.40% | 12.80% | 12.36% | 13.22% | |||||
| (1) Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures. | ||||||||||
| (2) Core operating income excluding gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments and, in the current quarter and year, a termination fee and expenses related to a cancelled bank acquisition transaction represents non-GAAP financial measures. | ||||||||||
| (3) Average tangible equity excludes other intangibles and represents a non-GAAP financial measure. | ||||||||||