WALLA WALLA, Wash., April 24, 2017 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation contributed to solid first quarter 2017 operating results. Net income in the first quarter of 2017 increased 4% to $23.8 million, or $0.72 per diluted share, compared to $22.8 million, or $0.69 per diluted share, in the preceding quarter and increased 34% compared to $17.8 million, or $0.52 per diluted share, in the first quarter a year ago. The current quarter results did not include any acquisition-related expenses. The results for the preceding quarter included $788,000 of acquisition-related expenses which, net of tax benefit, reduced net income by $0.02 per diluted share, while operating results in the first quarter a year ago included $6.8 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.13 per diluted share.
“During the first quarter of 2017 we continued to improve our operating performance, with good loan origination and core deposit growth as well as continued strong core revenues,” stated Mark J. Grescovich, President and Chief Executive Officer. “We also benefited from the very positive economic conditions in our market areas, as well as the successful integration of the AmericanWest Bank acquisition, which has made a dramatic impact on our scale and reach and is providing enhanced opportunities for client and revenue growth. During the first quarter, we crossed the threshold of $10 billion in total assets and again incurred increased expenses related to enhanced infrastructure and regulatory compliance costs. While increasing regulatory costs are a significant headwind, through the hard work of our employees, we are continuing to execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders.”
At March 31, 2017, Banner Corporation had $10.07 billion in assets, $7.33 billion in net loans and $8.42 billion in deposits. Banner operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.
First Quarter 2017 Highlights
- Net income was $23.8 million, compared to $22.8 million in the preceding quarter and increased substantially compared to $17.8 million in the first quarter of 2016.
- Return on average assets was 0.97% in the current quarter, 0.92% in the preceding quarter and 0.73% in the same quarter a year ago.
- Revenues from core operations* were $116.4 million, compared to $117.5 million in the preceding quarter, and increased 5% compared to $111.0 million in the first quarter a year ago.
- Net interest margin was 4.25% for the current quarter, compared to 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.
- Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.15%*, compared to 4.13%* in the fourth quarter and was 4.01%* in the first quarter a year ago.
- Deposit fees and other service charges were $12.2 million, the same as in the preceding quarter and increased compared to $11.8 million in the same quarter a year ago.
- Revenues from mortgage banking operations decreased to $4.6 million compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter a year ago.
- Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $86.5 million or 1.17% of total loans.
- Core deposits increased 3% during the current quarter and represented 86% of total deposits at March 31, 2017.
- Quarterly dividends to shareholders were increased to $0.25 per share, providing a current yield of 1.8% based on our March 31, 2017, closing price.
- Common shareholders' tangible equity per share* was $31.68 at March 31, 2017, compared to $31.06 at the preceding quarter end and $30.38 a year ago.
- The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.72% at March 31, 2017, compared to 10.83% at the preceding quarter end and 10.98% a year ago.
*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest expense from core operations (which excludes acquisition-related costs), the adjusted allowance for loan losses to adjusted loans (which includes net loan discounts on acquired loans) and references to 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) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. See also Non-GAAP Financial Measures reconciliation tables on the last four pages of this press release.
Income Statement Review
Banner’s first quarter net interest income, before the provision for loan losses, decreased slightly to $94.9 million, compared to $97.2 million in the preceding quarter. First quarter 2017 net interest income, before the provision for loan losses, increased 4% compared to $91.0 million in the first quarter a year ago.
“Our net interest margin decreased seven basis points compared to the preceding quarter, largely as a result of decreased accretion from acquisition accounting loan discounts,” said Grescovich. "In addition, in the preceding quarter our loan yields and the net interest margin were elevated as a result of significant prepayment fees on a single large credit relationship. Excluding the impact of acquisition accounting, the net interest margin increased two basis points compared to the preceding quarter, and increased by 14 basis points compared to a year ago.*”
Net interest margin is enhanced by the amortization of acquisition accounting discounts on loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense. Banner's net interest margin was 4.25% for the first quarter of 2017, which included eight basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and one basis point as a result of the impact of the net loan acquisition discounts on average earning assets. The net interest margin was 4.32% in the preceding quarter and 4.13% in the first quarter a year ago. Excluding the effects of acquisition accounting, the net interest margin was 4.15%* in the first quarter, 4.13%* in the preceding quarter and 4.01%* in the first quarter a year ago.
Average interest-earning asset yields decreased five basis points to 4.44% compared to 4.49% for the preceding quarter and increased 12 basis points compared to 4.32% in the first quarter a year ago. Average loan yields decreased 13 basis points to 4.80% compared to the preceding quarter, reflecting significantly less discount accretion, but increased two basis points from the first quarter a year ago. Accretion of the acquisition accounting discounts added 11 basis points to loan yields in the current quarter compared to 21 basis points in the preceding quarter and 12 basis points in the first quarter a year ago. Deposit costs increased one basis point to 0.14% compared to the preceding quarter and decreased one basis point compared to the first quarter a year ago. Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by one basis point in the first quarter of 2017, compared to two basis points in the preceding quarter and two basis points in the first quarter a year ago. The total cost of funds increased two basis points to 0.20% during the first quarter compared to the preceding quarter and was unchanged compared to the first quarter a year ago.
“As expected, due to the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the first quarter, the same as in the preceding quarter,” added Grescovich. "While our asset quality metrics remain exceptionally good, adding to the loan loss allowance as the acquisition accounting discounts are accreted to income and growth in new and renewed loans occurs will likely continue as we strive to maintain an appropriate level of reserves and maintain a moderate risk profile." In the first quarter a year ago, Banner did not record a provision.
Reflecting seasonal trends and the adverse impact of higher interest rates, mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.6 million in the first quarter compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter of 2016. Sales of multifamily loans in the current quarter resulted in gains of $70,000, while sales of multifamily loans generated $254,000 of gains in the preceding quarter. Home purchase activity accounted for 64% of first quarter one- to four-family mortgage banking loan originations.
Banner’s deposit fees and other service charges were $12.2 million in the first quarter, which was unchanged compared to the preceding quarter and increased 3% compared to $11.8 million in the first quarter a year ago.
Miscellaneous income for the current quarter included a one-time gain of $2.5 million on the sale of a single loan that had been acquired a number of years ago as a partial settlement on a non-performing credit relationship and was carried at a significant discount to its contractual loan amount and eventual sales price.
First quarter 2017 results included a $688,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partly offset by a $13,000 net gain on the sale of securities. In the preceding quarter, results included a $1.1 million net loss for fair value adjustments that was partly offset by a $311,000 net gain on the sale of securities. In the first quarter a year ago, results included a $29,000 net gain for fair value adjustments and a $21,000 net gain on the sale of securities.
Total revenues were $115.7 million for the first quarter of 2017, compared to $116.6 million in the preceding quarter and $111.0 million in the first quarter a year ago. Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) was $116.4 million in the first quarter of 2017, compared to $117.5 million in the preceding quarter and increased 5% compared to $111.0 million in the first quarter of 2016.
Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.8 million in the first quarter of 2017, compared to $19.5 million in the fourth quarter of 2016 and $20.0 million in the first quarter a year ago. Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $21.5 million in the first quarter of 2017, compared to $20.3 million for the fourth quarter of 2017 and $19.9 million in the first quarter a year ago.
Banner’s total non-interest expenses were $78.1 million in the first quarter of 2017, compared to $79.9 million in the preceding quarter and $84.0 million in the first quarter of 2016. The current quarter's non-interest expenses included increased compensation and employee benefit expense, elevated costs for professional services largely as result of enhanced regulatory compliance requirements and additional charges for customer refunds related to prior periods, which were generally offset compared to the preceding quarter by reductions in other expenses and a $1.2 million gain on the sale of real estate owned reflected in real estate operations. Miscellaneous expenses for the current quarter included accruals of $865,000 for customer refunds for deposit fees that we determined should not have been charged during a six-year period from 2010 to 2015, which was more than offset by the release of a $1.2 million reserve for possible credit losses on an unfunded commitment for a credit relationship that was terminated. There were no acquisition-related expenses in the current quarter compared to $788,000 in the preceding quarter and $6.8 million in the first quarter a year ago.
For the first quarter of 2017, Banner recorded $11.8 million in state and federal income tax expense for an effective tax rate of 33.2%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.
Balance Sheet Review
Banner’s total assets increased to $10.07 billion at March 31, 2017, from $9.79 billion at December 31, 2016 and $9.75 billion a year ago. The total of securities and interest-bearing deposits held at other banks was $1.62 billion at March 31, 2017, compared to $1.16 billion at December 30, 2016 and $1.59 billion a year ago. The increase in the securities portfolio during the current quarter reflects Banner's renewed leveraging strategy as it crossed the $10 billion assets threshold. In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016. The average effective duration of Banner's securities portfolio was approximately 3.8 years at March 31, 2017, compared to 2.9 years at March 31, 2016.
“Net loans decreased slightly during the quarter, but were up 3% year over year, with good production in targeted loan types, including increases in commercial real estate and construction and development loans,” said Grescovich. “We continue to see significant potential for growth in our loan origination pipelines.”
Net loans receivable decreased slightly to $7.33 billion at March 31, 2017, compared to $7.37 billion at December 31, 2016, largely as a result of seasonal factors and continuing repayments on one- to four-family loans, but increased 3% compared to $7.11 billion a year ago. Commercial real estate and multifamily real estate loans increased modestly to $3.63 billion at March 31, 2017, compared to $3.59 billion at December 31, 2016, and increased 5% compared to $3.44 billion a year ago. Commercial business loans increased slightly to $1.22 billion at March 31, 2017, compared to $1.21 billion three months earlier and were unchanged compared to a year ago. Agricultural business loans, which are seasonal by nature, decreased to $313.4 million at March 31, 2017, compared to $369.2 million three months earlier and $340.4 million a year ago. Total construction, land and land development loans decreased to $803.7 million at March 31, 2017, compared to $823.1 million at December 31, 2016, but increased 27% compared to $632.1 million a year earlier. One- to four-family loans continued to decline as a result of repayments, with nearly all newly originated mortgage loans being sold in the secondary market.
Loans held for sale decreased significantly to $86.7 million at March 31, 2017, compared to $246.4 million at December 31, 2016, largely due to the sale of $200.7 million of multifamily loans during the first quarter. Loans held for sale were $47.5 million at March 31, 2016. Loans held for sale at March 31, 2017, included $72.5 million of multifamily loans and $14.2 million of one- to four-family loans.
Total deposits were $8.42 billion at March 31, 2017, a 4% increase compared to $8.12 billion at December 31, 2016, and a 5% increase compared to $8.03 billion a year ago. Non-interest-bearing account balances increased 6% to $3.21 billion at March 31, 2017, compared to $3.04 billion a year ago. Interest-bearing transaction and savings accounts increased 10% to $4.06 billion compared to $3.71 billion a year ago. Certificates of deposit decreased 11% to $1.14 billion at March 31, 2017, compared to $1.29 billion a year earlier. Brokered deposits totaled $171.5 million at March 31, 2017, compared to $34.1 million at December 31, 2016 and $135.6 million a year ago. Brokered deposits increased in the current quarter in connection with Banner's leveraging strategy as higher yielding investment securities were purchased and total assets were allowed to increase above the $10 billion threshold.
Reflecting additional account growth as well as increased balances for existing clients, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 3% during the current quarter. Core deposits represented 86% of total deposits at March 31, 2017, compared to 87% of total deposits at December 31, 2016, and 84% of total deposits a year earlier. The average cost of deposits was 0.14% for the quarter ended March 31, 2017, a one basis point increase compared to the preceding quarter, and a one basis point decline compared to the quarter ended March 31, 2016.
At March 31, 2017, total common shareholders' equity was $1.32 billion, or $39.92 per share, compared to $1.31 billion at December 31, 2016 and $1.32 billion a year ago. During the quarter Banner declared and accrued a $0.25 per share quarterly dividend. At March 31, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 10.72% of tangible assets*, compared to $1.03 billion, or 10.83% of tangible assets, at December 31, 2016, and $1.04 billion, or 10.98% of tangible assets, a year ago. Banner's tangible book value per share* increased to $31.68 at March 31, 2017, compared to $30.38 per share a year ago.
Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards. At March 31, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.46%, its Tier 1 leverage capital to average assets ratio was 11.79%, and its total capital to risk-weighted assets ratio was 13.85%.
Credit Quality
In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date. Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw Bank.
The allowance for loan losses was $86.5 million at March 31, 2017, or 1.17% of total loans outstanding and 479% of non-performing loans compared to $78.2 million at March 31, 2016, or 1.09% of total loans outstanding and 501% of non-performing loans. Banner had net charge-offs of $1.5 million in the first quarter compared to net charge-offs of $253,000 in the fourth quarter of 2016 and net recoveries of $189,000 in the first quarter a year ago. Primarily as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter. Banner did not record a provision for the first quarter of 2016. If the allowance for loan losses included the remaining loan discount*, the adjusted allowance for loan losses to adjusted loans would have been 1.56% as of March 31, 2017 as compared to 1.67% a year ago. Non-performing loans were $18.1 million at March 31, 2017, compared to $22.6 million at December 31, 2016 and $15.6 million a year ago. Real estate owned and other repossessed assets were $3.2 million at March 31, 2017, compared to $11.2 million at December 31, 2016, and $7.4 million a year ago.
Banner's non-performing assets were $21.3 million, or 0.21% of total assets, at March 31, 2017, compared to $33.8 million, or 0.35% of total assets, at December 31, 2016 and $23.0 million, or 0.24% of total assets, a year ago. In addition to non-performing assets, purchased credit-impaired loans decreased to $30.5 million at March 31, 2017, compared to $32.3 million at December 31, 2016, and $53.3 million a year ago.
Conference Call
Banner will host a conference call on Tuesday, April 25, 2017, at 8:00 a.m. PDT, to discuss its first quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one week at (877) 344-7529 using access code 10103898, or at www.bannerbank.com.
About the Company
Banner Corporation is a $10.1 billion bank holding company operating two commercial banks in five Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
Forward-Looking Statements
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner. Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner's operating and stock price performance.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
| RESULTS OF OPERATIONS | Quarters Ended | |||||||||||
| (in thousands except shares and per share data) | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| INTEREST INCOME: | ||||||||||||
| Loans receivable | $ | 91,288 | $ | 93,915 | $ | 86,958 | ||||||
| Mortgage-backed securities | 4,647 | 3,861 | 5,390 | |||||||||
| Securities and cash equivalents | 3,161 | 3,231 | 2,953 | |||||||||
| 99,096 | 101,007 | 95,301 | ||||||||||
| INTEREST EXPENSE: | ||||||||||||
| Deposits | 2,791 | 2,604 | 2,946 | |||||||||
| Federal Home Loan Bank advances | 273 | 79 | 279 | |||||||||
| Other borrowings | 74 | 76 | 75 | |||||||||
| Junior subordinated debentures | 1,104 | 1,077 | 958 | |||||||||
| 4,242 | 3,836 | 4,258 | ||||||||||
| Net interest income before provision for loan losses | 94,854 | 97,171 | 91,043 | |||||||||
| PROVISION FOR LOAN LOSSES | 2,000 | 2,030 | — | |||||||||
| Net interest income | 92,854 | 95,141 | 91,043 | |||||||||
| NON-INTEREST INCOME: | ||||||||||||
| Deposit fees and other service charges | 12,186 | 12,199 | 11,818 | |||||||||
| Mortgage banking operations | 4,603 | 5,143 | 5,643 | |||||||||
| Bank owned life insurance | 1,095 | 893 | 1,185 | |||||||||
| Miscellaneous | 3,636 | 2,065 | 1,263 | |||||||||
| 21,520 | 20,300 | 19,909 | ||||||||||
| Net gain on sale of securities | 13 | 311 | 21 | |||||||||
| Net change in valuation of financial instruments carried at fair value | (688 | ) | (1,148 | ) | 29 | |||||||
| Total non-interest income | 20,845 | 19,463 | 19,959 | |||||||||
| NON-INTEREST EXPENSE: | ||||||||||||
| Salary and employee benefits | 46,063 | 44,387 | 46,564 | |||||||||
| Less capitalized loan origination costs | (4,316 | ) | (4,785 | ) | (4,250 | ) | ||||||
| Occupancy and equipment | 11,996 | 12,581 | 10,388 | |||||||||
| Information / computer data services | 3,994 | 4,674 | 4,920 | |||||||||
| Payment and card processing services | 5,020 | 5,440 | 4,785 | |||||||||
| Professional services | 5,152 | 2,384 | 2,614 | |||||||||
| Advertising and marketing | 1,328 | 3,220 | 1,734 | |||||||||
| Deposit insurance | 1,266 | 1,012 | 1,338 | |||||||||
| State/municipal business and use taxes | 799 | 952 | 838 | |||||||||
| Real estate operations | (966 | ) | (338 | ) | 397 | |||||||
| Amortization of core deposit intangibles | 1,624 | 1,722 | 1,808 | |||||||||
| Miscellaneous | 6,118 | 7,820 | 6,085 | |||||||||
| 78,078 | 79,069 | 77,221 | ||||||||||
| Acquisition related expenses | — | 788 | 6,813 | |||||||||
| Total non-interest expense | 78,078 | 79,857 | 84,034 | |||||||||
| Income before provision for income taxes | 35,621 | 34,747 | 26,968 | |||||||||
| PROVISION FOR INCOME TAXES | 11,828 | 11,943 | 9,194 | |||||||||
| NET INCOME | $ | 23,793 | $ | 22,804 | $ | 17,774 | ||||||
| Earnings per share available to common shareholders: | ||||||||||||
| Basic | $ | 0.72 | $ | 0.69 | $ | 0.52 | ||||||
| Diluted | $ | 0.72 | $ | 0.69 | $ | 0.52 | ||||||
| Cumulative dividends declared per common share | $ | 0.25 | $ | 0.23 | $ | 0.21 | ||||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 32,933,444 | 33,134,222 | 34,023,800 | |||||||||
| Diluted | 33,051,459 | 33,201,333 | 34,103,727 | |||||||||
| Decrease in common shares outstanding | (40,523 | ) | (673,924 | ) | (20,804 | ) | ||||||
| FINANCIAL CONDITION | Percentage Change | |||||||||||||||||
| (in thousands except shares and per share data) | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | Prior Qtr | Prior Yr Qtr | |||||||||||||
| ASSETS | ||||||||||||||||||
| Cash and due from banks | $ | 196,277 | $ | 177,083 | $ | 153,706 | 10.8 | % | 27.7 | % | ||||||||
| Interest-bearing deposits | 104,431 | 70,636 | 106,864 | 47.8 | % | (2.3 | )% | |||||||||||
| Total cash and cash equivalents | 300,708 | 247,719 | 260,570 | 21.4 | % | 15.4 | % | |||||||||||
| Securities - trading | 24,753 | 24,568 | 33,994 | 0.8 | % | (27.2 | )% | |||||||||||
| Securities - available for sale | 1,223,764 | 800,917 | 1,199,279 | 52.8 | % | 2.0 | % | |||||||||||
| Securities - held to maturity | 266,391 | 267,873 | 246,320 | (0.6 | )% | 8.1 | % | |||||||||||
| Federal Home Loan Bank stock | 10,334 | 12,506 | 13,347 | (17.4 | )% | (22.6 | )% | |||||||||||
| Loans held for sale | 86,707 | 246,353 | 47,523 | (64.8 | )% | 82.5 | % | |||||||||||
| Loans receivable | 7,421,255 | 7,451,148 | 7,185,999 | (0.4 | )% | 3.3 | % | |||||||||||
| Allowance for loan losses | (86,527 | ) | (85,997 | ) | (78,197 | ) | 0.6 | % | 10.7 | % | ||||||||
| Net loans | 7,334,728 | 7,365,151 | 7,107,802 | (0.4 | )% | 3.2 | % | |||||||||||
| Accrued interest receivable | 30,312 | 30,178 | 30,674 | 0.4 | % | (1.2 | )% | |||||||||||
| Real estate owned held for sale, net | 3,040 | 11,081 | 7,207 | (72.6 | )% | (57.8 | )% | |||||||||||
| Property and equipment, net | 162,467 | 166,481 | 168,807 | (2.4 | )% | (3.8 | )% | |||||||||||
| Goodwill | 244,583 | 244,583 | 244,811 | — | % | (0.1 | )% | |||||||||||
| Other intangibles, net | 28,488 | 30,162 | 35,598 | (5.6 | )% | (20.0 | )% | |||||||||||
| Bank-owned life insurance | 159,948 | 158,936 | 156,928 | 0.6 | % | 1.9 | % | |||||||||||
| Other assets | 192,155 | 187,160 | 192,734 | 2.7 | % | (0.3 | )% | |||||||||||
| Total assets | $ | 10,068,378 | $ | 9,793,668 | $ | 9,745,594 | 2.8 | % | 3.3 | % | ||||||||
| LIABILITIES | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Non-interest-bearing | $ | 3,213,044 | $ | 3,140,451 | $ | 3,036,330 | 2.3 | % | 5.8 | % | ||||||||
| Interest-bearing transaction and savings accounts | 4,064,198 | 3,935,630 | 3,705,658 | 3.3 | % | 9.7 | % | |||||||||||
| Interest-bearing certificates | 1,144,718 | 1,045,333 | 1,287,873 | 9.5 | % | (11.1 | )% | |||||||||||
| Total deposits | 8,421,960 | 8,121,414 | 8,029,861 | 3.7 | % | 4.9 | % | |||||||||||
| Advances from Federal Home Loan Bank at fair value | 213 | 54,216 | 75,400 | (99.6 | )% | (99.7 | )% | |||||||||||
| Customer repurchase agreements and other borrowings | 120,245 | 105,685 | 106,132 | 13.8 | % | 13.3 | % | |||||||||||
| Junior subordinated debentures at fair value | 96,040 | 95,200 | 92,879 | 0.9 | % | 3.4 | % | |||||||||||
| Accrued expenses and other liabilities | 66,201 | 71,369 | 81,485 | (7.2 | )% | (18.8 | )% | |||||||||||
| Deferred compensation | 40,315 | 40,074 | 39,682 | 0.6 | % | 1.6 | % | |||||||||||
| Total liabilities | 8,744,974 | 8,487,958 | 8,425,439 | 3.0 | % | 3.8 | % | |||||||||||
| SHAREHOLDERS' EQUITY | ||||||||||||||||||
| Common stock | 1,214,517 | 1,213,837 | 1,262,050 | 0.1 | % | (3.8 | )% | |||||||||||
| Retained earnings | 110,783 | 95,328 | 50,230 | 16.2 | % | 120.6 | % | |||||||||||
| Other components of shareholders' equity | (1,896 | ) | (3,455 | ) | 7,875 | (45.1 | )% | (124.1 | )% | |||||||||
| Total shareholders' equity | 1,323,404 | 1,305,710 | 1,320,155 | 1.4 | % | 0.2 | % | |||||||||||
| Total liabilities and shareholders' equity | $ | 10,068,378 | $ | 9,793,668 | $ | 9,745,594 | 2.8 | % | 3.3 | % | ||||||||
| Common Shares Issued: | ||||||||||||||||||
| Shares outstanding at end of period | 33,152,864 | 33,193,387 | 34,221,451 | |||||||||||||||
| Common shareholders' equity per share (1) | $ | 39.92 | $ | 39.34 | $ | 38.58 | ||||||||||||
| Common shareholders' tangible equity per share (1) (2) | $ | 31.68 | $ | 31.06 | $ | 30.38 | ||||||||||||
| Common shareholders' tangible equity to tangible assets (2) | 10.72 | % | 10.83 | % | 10.98 | % | ||||||||||||
| Consolidated Tier 1 leverage capital ratio | 11.79 | % | 11.83 | % | 11.28 | % | ||||||||||||
| (1 | ) | Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding. |
| (2 | ) | Common shareholders' tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables. |
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||
| Percentage Change | ||||||||||||||||||
| LOANS | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | Prior Qtr | Prior Yr Qtr | |||||||||||||
| Commercial real estate: | ||||||||||||||||||
| Owner occupied | $ | 1,361,095 | $ | 1,352,999 | $ | 1,328,034 | 0.6 | % | 2.5 | % | ||||||||
| Investment properties | 2,011,618 | 1,986,336 | 1,805,243 | 1.3 | % | 11.4 | % | |||||||||||
| Multifamily real estate | 254,246 | 248,150 | 307,019 | 2.5 | % | (17.2 | )% | |||||||||||
| Commercial construction | 141,505 | 124,068 | 87,711 | 14.1 | % | 61.3 | % | |||||||||||
| Multifamily construction | 114,728 | 124,126 | 79,737 | (7.6 | )% | 43.9 | % | |||||||||||
| One- to four-family construction | 366,191 | 375,704 | 297,348 | (2.5 | )% | 23.2 | % | |||||||||||
| Land and land development: | ||||||||||||||||||
| Residential | 151,649 | 170,004 | 142,841 | (10.8 | )% | 6.2 | % | |||||||||||
| Commercial | 29,597 | 29,184 | 24,493 | 1.4 | % | 20.8 | % | |||||||||||
| Commercial business | 1,224,541 | 1,207,879 | 1,224,915 | 1.4 | % | — | % | |||||||||||
| Agricultural business including secured by farmland | 313,374 | 369,156 | 340,350 | (15.1 | )% | (7.9 | )% | |||||||||||
| One- to four-family real estate | 802,991 | 813,077 | 910,719 | (1.2 | )% | (11.8 | )% | |||||||||||
| Consumer: | ||||||||||||||||||
| Consumer secured by one- to four-family real estate | 493,495 | 493,211 | 481,590 | 0.1 | % | 2.5 | % | |||||||||||
| Consumer-other | 156,225 | 157,254 | 155,999 | (0.7 | )% | 0.1 | % | |||||||||||
| Total loans receivable | $ | 7,421,255 | $ | 7,451,148 | $ | 7,185,999 | (0.4 | )% | 3.3 | % | ||||||||
| Restructured loans performing under their restructured terms | $ | 17,193 | $ | 18,907 | $ | 19,450 | ||||||||||||
| Loans 30 - 89 days past due and on accrual (1) | $ | 22,214 | $ | 11,571 | $ | 28,264 | ||||||||||||
| Total delinquent loans (including loans on non-accrual), net (2) | $ | 37,563 | $ | 30,553 | $ | 43,986 | ||||||||||||
| Total delinquent loans / Total loans outstanding | 0.51 | % | 0.41 | % | 0.61 | % | ||||||||||||
(1) Includes $2.4 million of purchased credit-impaired loans at March 31, 2017 compared to $470,000 at December 31, 2016 and $1.6 million at March 31, 2016.
(2) Delinquent loans include $3.5 million of delinquent purchased credit-impaired loans at March 31, 2017 compared to $1.7 million at December 31, 2016 and $4.9 million at March 31, 2016.
| LOANS BY GEOGRAPHIC LOCATION | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||||||||||
| Amount | Percentage | Amount | Percentage | Amount | Percentage | ||||||||||||||||
| Washington | $ | 3,401,005 | 45.8 | % | $ | 3,433,617 | 46.1 | % | $ | 3,333,912 | 46.4 | % | |||||||||
| Oregon | 1,493,054 | 20.1 | % | 1,505,369 | 20.2 | % | 1,420,749 | 19.8 | % | ||||||||||||
| California | 1,255,597 | 16.9 | % | 1,239,989 | 16.6 | % | 1,173,203 | 16.3 | % | ||||||||||||
| Idaho | 471,519 | 6.4 | % | 495,992 | 6.7 | % | 493,905 | 6.9 | % | ||||||||||||
| Utah | 281,379 | 3.8 | % | 283,890 | 3.8 | % | 289,082 | 4.0 | % | ||||||||||||
| Other | 518,701 | 7.0 | % | 492,291 | 6.6 | % | 475,148 | 6.6 | % | ||||||||||||
| Total loans | $ | 7,421,255 | 100.0 | % | $ | 7,451,148 | 100.0 | % | $ | 7,185,999 | 100.0 | % | |||||||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||
| (dollars in thousands) | ||||||||||||
| Quarters Ended | ||||||||||||
| CHANGE IN THE | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| ALLOWANCE FOR LOAN LOSSES | ||||||||||||
| Balance, beginning of period | $ | 85,997 | $ | 84,220 | $ | 78,008 | ||||||
| Provision for loan losses | 2,000 | 2,030 | — | |||||||||
| Recoveries of loans previously charged off: | ||||||||||||
| Commercial real estate | 70 | 484 | 38 | |||||||||
| Construction and land | 83 | 903 | 471 | |||||||||
| One- to four-family real estate | 145 | 231 | 12 | |||||||||
| Commercial business | 173 | 218 | 720 | |||||||||
| Agricultural business, including secured by farmland | 113 | 20 | 17 | |||||||||
| Consumer | 94 | 81 | 207 | |||||||||
| 678 | 1,937 | 1,465 | ||||||||||
| Loans charged off: | ||||||||||||
| Commercial real estate | — | (566 | ) | (180 | ) | |||||||
| Construction and land | — | (616 | ) | — | ||||||||
| One- to four-family real estate | — | (249 | ) | — | ||||||||
| Commercial business | (1,626 | ) | (305 | ) | (139 | ) | ||||||
| Agricultural business, including secured by farmland | (159 | ) | — | (567 | ) | |||||||
| Consumer | (363 | ) | (454 | ) | (390 | ) | ||||||
| (2,148 | ) | (2,190 | ) | (1,276 | ) | |||||||
| Net (charge-offs) recoveries | (1,470 | ) | (253 | ) | 189 | |||||||
| Balance, end of period | $ | 86,527 | $ | 85,997 | $ | 78,197 | ||||||
| Net (charge-offs) recoveries / Average loans outstanding | (0.019 | )% | (0.003 | )% | 0.003 | % | ||||||
| ALLOCATION OF | ||||||||||||
| ALLOWANCE FOR LOAN LOSSES | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| Specific or allocated loss allowance: | ||||||||||||
| Commercial real estate | $ | 20,472 | $ | 20,993 | $ | 19,732 | ||||||
| Multifamily real estate | 1,378 | 1,360 | 2,853 | |||||||||
| Construction and land | 29,464 | 34,252 | 29,318 | |||||||||
| One- to four-family real estate | 1,974 | 2,238 | 2,170 | |||||||||
| Commercial business | 19,768 | 16,533 | 15,118 | |||||||||
| Agricultural business, including secured by farmland | 3,245 | 2,967 | 4,282 | |||||||||
| Consumer | 3,840 | 4,104 | 3,541 | |||||||||
| Total allocated | 80,141 | 82,447 | 77,014 | |||||||||
| Unallocated | 6,386 | 3,550 | 1,183 | |||||||||
| Total allowance for loan losses | $ | 86,527 | $ | 85,997 | $ | 78,197 | ||||||
| Allowance for loan losses / Total loans outstanding | 1.17 | % | 1.15 | % | 1.09 | % | ||||||
| Allowance for loan losses / Non-performing loans | 479 | % | 381 | % | 501 | % | ||||||
| ADDITIONAL FINANCIAL INFORMATION | |||||||||||
| (dollars in thousands) | |||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| NON-PERFORMING ASSETS | |||||||||||
| Loans on non-accrual status: | |||||||||||
| Secured by real estate: | |||||||||||
| Commercial | $ | 6,910 | $ | 8,237 | $ | 4,145 | |||||
| Multifamily | 147 | — | — | ||||||||
| Construction and land | 1,775 | 1,748 | 2,250 | ||||||||
| One- to four-family | 3,386 | 2,263 | 4,803 | ||||||||
| Commercial business | 2,700 | 3,074 | 1,558 | ||||||||
| Agricultural business, including secured by farmland | 1,012 | 3,229 | 663 | ||||||||
| Consumer | 1,285 | 1,875 | 906 | ||||||||
| 17,215 | 20,426 | 14,325 | |||||||||
| Loans more than 90 days delinquent, still on accrual: | |||||||||||
| Secured by real estate: | |||||||||||
| Commercial | — | 701 | — | ||||||||
| Multifamily | — | 147 | — | ||||||||
| One- to four-family | 545 | 1,233 | 1,039 | ||||||||
| Consumer | 297 | 72 | 251 | ||||||||
| 842 | 2,153 | 1,290 | |||||||||
| Total non-performing loans | 18,057 | 22,579 | 15,615 | ||||||||
| Real estate owned (REO) | 3,040 | 11,081 | 7,207 | ||||||||
| Other repossessed assets | 162 | 166 | 202 | ||||||||
| Total non-performing assets | $ | 21,259 | $ | 33,826 | $ | 23,024 | |||||
| Total non-performing assets to total assets | 0.21 | % | 0.35 | % | 0.24 | % | |||||
| Purchased credit-impaired loans, net | $ | 30,501 | $ | 32,322 | $ | 53,271 | |||||
| Quarters Ended | |||||||||||
| REAL ESTATE OWNED | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||
| Balance, beginning of period | $ | 11,081 | $ | 4,717 | $ | 11,627 | |||||
| Additions from loan foreclosures | (68 | ) | 8,375 | 2 | |||||||
| Additions from acquisitions | — | — | 400 | ||||||||
| Proceeds from dispositions of REO | (9,125 | ) | (2,791 | ) | (4,666 | ) | |||||
| Gain on sale of REO | 1,202 | 852 | 49 | ||||||||
| Valuation adjustments in the period | (50 | ) | (72 | ) | (205 | ) | |||||
| Balance, end of period | $ | 3,040 | $ | 11,081 | $ | 7,207 | |||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||
| DEPOSIT COMPOSITION | Percentage Change | |||||||||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | Prior Qtr | Prior Yr | ||||||||||||||
| Non-interest-bearing | $ | 3,213,044 | $ | 3,140,451 | $ | 3,036,330 | 2.3 | % | 5.8 | % | ||||||||
| Interest-bearing checking | 928,232 | 914,484 | 767,460 | 1.5 | % | 20.9 | % | |||||||||||
| Regular savings accounts | 1,592,023 | 1,523,391 | 1,327,558 | 4.5 | % | 19.9 | % | |||||||||||
| Money market accounts | 1,543,943 | 1,497,755 | 1,610,640 | 3.1 | % | (4.1 | )% | |||||||||||
| Total interest-bearing transaction and savings accounts | 4,064,198 | 3,935,630 | 3,705,658 | 3.3 | % | 9.7 | % | |||||||||||
| Interest-bearing certificates | 1,144,718 | 1,045,333 | 1,287,873 | 9.5 | % | (11.1 | )% | |||||||||||
| Total deposits | $ | 8,421,960 | $ | 8,121,414 | $ | 8,029,861 | 3.7 | % | 4.9 | % | ||||||||
| GEOGRAPHIC CONCENTRATION OF DEPOSITS | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||||||||||
| Amount | Percentage | Amount | Percentage | Amount | Percentage | ||||||||||||||||
| Washington | $ | 4,619,457 | 54.9 | % | $ | 4,347,644 | 53.6 | % | $ | 4,209,332 | 52.4 | % | |||||||||
| Oregon | 1,746,143 | 20.7 | % | 1,708,973 | 21.0 | % | 1,668,421 | 20.8 | % | ||||||||||||
| California | 1,469,351 | 17.4 | % | 1,469,748 | 18.1 | % | 1,565,326 | 19.5 | % | ||||||||||||
| Idaho | 429,850 | 5.1 | % | 447,019 | 5.5 | % | 428,681 | 5.3 | % | ||||||||||||
| Utah | 157,159 | 1.9 | % | 148,030 | 1.8 | % | 158,101 | 2.0 | % | ||||||||||||
| Total deposits | $ | 8,421,960 | 100.0 | % | $ | 8,121,414 | 100.0 | % | $ | 8,029,861 | 100.0 | % | |||||||||
| INCLUDED IN TOTAL DEPOSITS | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| Public non-interest-bearing accounts | $ | 80,322 | $ | 92,789 | $ | 82,527 | ||||||
| Public interest-bearing transaction & savings accounts | 125,921 | 128,976 | 123,713 | |||||||||
| Public interest-bearing certificates | 31,024 | 25,650 | 29,983 | |||||||||
| Total public deposits | $ | 237,267 | $ | 247,415 | $ | 236,223 | ||||||
| Total brokered deposits | $ | 171,521 | $ | 34,074 | $ | 135,603 | ||||||
| ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||
| Actual | Minimum to be categorized as "Adequately Capitalized" | Minimum to be categorized as "Well Capitalized" | |||||||||||||||||||
| REGULATORY CAPITAL RATIOS AS OF March 31, 2017 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
| Banner Corporation-consolidated: | |||||||||||||||||||||
| Total capital to risk-weighted assets | $ | 1,227,333 | 13.85 | % | $ | 708,897 | 8.00 | % | $ | 886,122 | 10.00 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 1,138,357 | 12.85 | % | 531,673 | 6.00 | % | 531,673 | 6.00 | % | ||||||||||||
| Tier 1 leverage capital to average assets | 1,138,357 | 11.79 | % | 386,229 | 4.00 | % | n/a | n/a | |||||||||||||
| Common equity tier 1 capital to risk-weighted assets | 1,015,251 | 11.46 | % | 398,755 | 4.50 | % | n/a | n/a | |||||||||||||
| Banner Bank: | |||||||||||||||||||||
| Total capital to risk-weighted assets | 1,053,255 | 12.15 | % | 693,425 | 8.00 | % | 866,781 | 10.00 | % | ||||||||||||
| Tier 1 capital to risk-weighted assets | 966,485 | 11.15 | % | 520,068 | 6.00 | % | 693,425 | 8.00 | % | ||||||||||||
| Tier 1 leverage capital to average assets | 966,485 | 10.29 | % | 375,777 | 4.00 | % | 469,721 | 5.00 | % | ||||||||||||
| Common equity tier 1 capital to risk-weighted assets | 966,485 | 11.15 | % | 390,051 | 4.50 | % | 563,407 | 6.50 | % | ||||||||||||
| Islanders Bank: | |||||||||||||||||||||
| Total capital to risk-weighted assets | 35,728 | 19.02 | % | 15,031 | 8.00 | % | 18,788 | 10.00 | % | ||||||||||||
| Tier 1 capital to risk-weighted assets | 33,522 | 17.84 | % | 11,273 | 6.00 | % | 15,031 | 8.00 | % | ||||||||||||
| Tier 1 leverage capital to average assets | 33,522 | 13.06 | % | 10,271 | 4.00 | % | 12,839 | 5.00 | % | ||||||||||||
| Common equity tier 1 capital to risk-weighted assets | 33,522 | 17.84 | % | 8,455 | 4.50 | % | 12,212 | 6.50 | % | ||||||||||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||
| (rates / ratios annualized) | ||||||||||||||||||||||||||
| ANALYSIS OF NET INTEREST SPREAD | Quarters Ended | |||||||||||||||||||||||||
| March 31, 2017 | December 31, 2016 | March 31, 2016 | ||||||||||||||||||||||||
| Average Balance | Interest and Dividends | Yield / Cost(3) | Average Balance | Interest and Dividends | Yield / Cost(3) | Average Balance | Interest and Dividends | Yield / Cost(3) | ||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||
| Mortgage loans | $ | 6,104,779 | $ | 72,549 | 4.82 | % | $ | 5,960,506 | $ | 74,538 | 4.97 | % | $ | 5,707,882 | $ | 68,743 | 4.84 | % | ||||||||
| Commercial/agricultural loans | 1,464,532 | 16,546 | 4.58 | % | 1,469,407 | 17,192 | 4.65 | % | 1,471,638 | 16,025 | 4.38 | % | ||||||||||||||
| Consumer and other loans | 138,033 | 2,193 | 6.44 | % | 141,133 | 2,185 | 6.16 | % | 141,361 | 2,190 | 6.23 | % | ||||||||||||||
| Total loans(1) | 7,707,344 | 91,288 | 4.80 | % | 7,571,046 | 93,915 | 4.93 | % | 7,320,881 | 86,958 | 4.78 | % | ||||||||||||||
| Mortgage-backed securities | 842,071 | 4,647 | 2.24 | % | 796,625 | 3,861 | 1.93 | % | 1,004,836 | 5,390 | 2.16 | % | ||||||||||||||
| Other securities | 453,793 | 3,037 | 2.71 | % | 469,377 | 3,062 | 2.60 | % | 421,241 | 2,772 | 2.65 | % | ||||||||||||||
| Interest-bearing deposits with banks | 32,195 | 93 | 1.17 | % | 91,625 | 95 | 0.41 | % | 103,775 | 101 | 0.39 | % | ||||||||||||||
| FHLB stock | 15,550 | 31 | 0.81 | % | 11,668 | 74 | 2.52 | % | 17,531 | 80 | 1.84 | % | ||||||||||||||
| Total investment securities | 1,343,609 | 7,808 | 2.36 | % | 1,369,295 | 7,092 | 2.06 | % | 1,547,383 | 8,343 | 2.17 | % | ||||||||||||||
| Total interest-earning assets | 9,050,953 | 99,096 | 4.44 | % | 8,940,341 | 101,007 | 4.49 | % | 8,868,264 | 95,301 | 4.32 | % | ||||||||||||||
| Non-interest-earning assets | 923,165 | 904,846 | 900,296 | |||||||||||||||||||||||
| Total assets | $ | 9,974,118 | $ | 9,845,187 | $ | 9,768,560 | ||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||
| Interest-bearing checking accounts | $ | 896,764 | 200 | 0.09 | % | $ | 876,904 | 197 | 0.09 | % | $ | 934,072 | 196 | 0.08 | % | |||||||||||
| Savings accounts | 1,557,734 | 523 | 0.14 | % | 1,470,548 | 493 | 0.13 | % | 1,307,369 | 423 | 0.13 | % | ||||||||||||||
| Money market accounts | 1,522,470 | 651 | 0.17 | % | 1,541,258 | 677 | 0.17 | % | 1,620,524 | 862 | 0.21 | % | ||||||||||||||
| Certificates of deposit | 1,089,316 | 1,417 | 0.53 | % | 1,089,337 | 1,237 | 0.45 | % | 1,328,741 | 1,465 | 0.44 | % | ||||||||||||||
| Total interest-bearing deposits | 5,066,284 | 2,791 | 0.22 | % | 4,978,047 | 2,604 | 0.21 | % | 5,190,706 | 2,946 | 0.23 | % | ||||||||||||||
| Non-interest-bearing deposits | 3,148,520 | — | — | % | 3,193,172 | — | — | % | 2,788,372 | — | — | % | ||||||||||||||
| Total deposits | 8,214,804 | 2,791 | 0.14 | % | 8,171,219 | 2,604 | 0.13 | % | 7,979,078 | 2,946 | 0.15 | % | ||||||||||||||
| Other interest-bearing liabilities: | ||||||||||||||||||||||||||
| FHLB advances | 130,274 | 273 | 0.85 | % | 32,932 | 79 | 0.95 | % | 169,204 | 279 | 0.66 | % | ||||||||||||||
| Other borrowings | 108,091 | 74 | 0.28 | % | 107,819 | 76 | 0.28 | % | 102,865 | 75 | 0.29 | % | ||||||||||||||
| Junior subordinated debentures | 140,212 | 1,104 | 3.19 | % | 140,212 | 1,077 | 3.06 | % | 140,212 | 958 | 2.75 | % | ||||||||||||||
| Total borrowings | 378,577 | 1,451 | 1.55 | % | 280,963 | 1,232 | 1.74 | % | 412,281 | 1,312 | 1.28 | % | ||||||||||||||
| Total funding liabilities | 8,593,381 | 4,242 | 0.20 | % | 8,452,182 | 3,836 | 0.18 | % | 8,391,359 | 4,258 | 0.20 | % | ||||||||||||||
| Other non-interest-bearing liabilities(2) | 58,489 | 67,536 | 63,014 | |||||||||||||||||||||||
| Total liabilities | 8,651,870 | 8,519,718 | 8,454,373 | |||||||||||||||||||||||
| Shareholders' equity | 1,322,248 | 1,325,469 | 1,314,187 | |||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 9,974,118 | $ | 9,845,187 | $ | 9,768,560 | ||||||||||||||||||||
| Net interest income/rate spread | $ | 94,854 | 4.24 | % | $ | 97,171 | 4.31 | % | $ | 91,043 | 4.12 | % | ||||||||||||||
| Net interest margin | 4.25 | % | 4.32 | % | 4.13 | % | ||||||||||||||||||||
| Additional Key Financial Ratios: | ||||||||||||||||||||||||||
| Return on average assets | 0.97 | % | 0.92 | % | 0.73 | % | ||||||||||||||||||||
| Return on average equity | 7.30 | % | 6.84 | % | 5.44 | % | ||||||||||||||||||||
| Average equity/average assets | 13.26 | % | 13.46 | % | 13.45 | % | ||||||||||||||||||||
| Average interest-earning assets/average interest-bearing liabilities | 166.23 | % | 170.00 | % | 158.28 | % | ||||||||||||||||||||
| Average interest-earning assets/average funding liabilities | 105.32 | % | 105.78 | % | 105.68 | % | ||||||||||||||||||||
| Non-interest income/average assets | 0.85 | % | 0.79 | % | 0.82 | % | ||||||||||||||||||||
| Non-interest expense/average assets | 3.17 | % | 3.23 | % | 3.46 | % | ||||||||||||||||||||
| Efficiency ratio(4) | 67.48 | % | 68.47 | % | 75.70 | % | ||||||||||||||||||||
| Adjusted efficiency ratio(5) | 65.84 | % | 65.32 | % | 66.86 | % | ||||||||||||||||||||
| (1 | ) | Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans. |
| (2 | ) | Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures. |
| (3 | ) | Yields and costs have not been adjusted for the effect of tax-exempt interest. |
| (4 | ) | Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income. |
| (5 | ) | Adjusted non-interest expense divided by adjusted revenue. Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments. Adjusted non-interest expense excludes acquisition related costs, amortization of core deposit intangibles (CDI), real estate operations expense, and state/municipal business and use taxes. These represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables. |
| 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. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. | |||||||||||
| REVENUE FROM CORE OPERATIONS | Quarters Ended | ||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| Net interest income before provision for loan losses | $ | 94,854 | $ | 97,171 | $ | 91,043 | |||||
| Total non-interest income | 20,845 | 19,463 | 19,959 | ||||||||
| Total GAAP revenue | 115,699 | 116,634 | 111,002 | ||||||||
| Exclude net gain on sale of securities | (13 | ) | (311 | ) | (21 | ) | |||||
| Exclude change in valuation of financial instruments carried at fair value | 688 | 1,148 | (29 | ) | |||||||
| Revenue from core operations (non-GAAP) | $ | 116,374 | $ | 117,471 | $ | 110,952 | |||||
| NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS | Quarters Ended | |||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| Total non-interest income (GAAP) | $ | 20,845 | $ | 19,463 | $ | 19,959 | ||||||
| Exclude net gain on sale of securities | (13 | ) | (311 | ) | (21 | ) | ||||||
| Exclude change in valuation of financial instruments carried at fair value | 688 | 1,148 | (29 | ) | ||||||||
| Non-interest income from core operations (non-GAAP) | $ | 21,520 | $ | 20,300 | $ | 19,909 | ||||||
| Total non-interest expense (GAAP) | $ | 78,078 | $ | 79,857 | $ | 84,034 | ||||||
| Exclude acquisition related costs | — | (788 | ) | (6,813 | ) | |||||||
| Non-interest expense from core operations (non-GAAP) | $ | 78,078 | $ | 79,069 | $ | 77,221 | ||||||
| INCOME FROM CORE OPERATIONS | Quarters Ended | ||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| Income before provision for taxes (GAAP) | $ | 35,621 | $ | 34,747 | $ | 26,968 | |||||
| Exclude net gain on sale of securities | (13 | ) | (311 | ) | (21 | ) | |||||
| Exclude change in valuation of financial instruments carried at fair value | 688 | 1,148 | (29 | ) | |||||||
| Exclude acquisition costs | — | 788 | 6,813 | ||||||||
| Income from core operations before provision for taxes (non-GAAP) | $ | 36,296 | $ | 36,372 | $ | 33,731 | |||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||
| (dollars in thousands) | ||||||||||||
| EARNINGS FROM CORE OPERATIONS | Quarters Ended | |||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| Net income (GAAP) | $ | 23,793 | $ | 22,804 | $ | 17,774 | ||||||
| Exclude net gain on sale of securities | (13 | ) | (311 | ) | (21 | ) | ||||||
| Exclude change in valuation of financial instruments carried at fair value | 688 | 1,148 | (29 | ) | ||||||||
| Exclude acquisition-related costs | — | 788 | 6,813 | |||||||||
| Exclude related tax benefit | (243 | ) | (585 | ) | (2,417 | ) | ||||||
| Total earnings from core operations (non-GAAP) | $ | 24,225 | $ | 23,844 | $ | 22,120 | ||||||
| Diluted earnings per share (GAAP) | $ | 0.72 | $ | 0.69 | $ | 0.52 | ||||||
| Diluted core earnings per share (non-GAAP) | $ | 0.73 | $ | 0.72 | $ | 0.65 | ||||||
| RETURN ON AVERAGE ASSETS - CORE | ||||||||||||
| Average assets | $ | 9,974,118 | $ | 9,845,187 | $ | 9,768,560 | ||||||
| Return on average assets (GAAP) | 0.97 | % | 0.92 | % | 0.73 | % | ||||||
| Core return on average assets (non-GAAP) | 0.99 | % | 0.96 | % | 0.91 | % | ||||||
| NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS | Quarters Ended | |||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| Acquisition-related costs | $ | — | $ | (788 | ) | $ | (6,813 | ) | ||||
| Related tax benefit | — | 284 | 2,435 | |||||||||
| Total net effect of acquisition-related costs on earnings | $ | — | $ | (504 | ) | $ | (4,378 | ) | ||||
| Diluted weighted average shares outstanding | 33,051,459 | 33,201,333 | 34,103,727 | |||||||||
| Total net effect of acquisition-related costs on diluted weighted average earnings per share | $ | — | $ | (0.02 | ) | $ | (0.13 | ) | ||||
| ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN | Quarters Ended | ||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | |||||||||
| Net interest income before provision for loan losses (GAAP) | $ | 94,854 | $ | 97,171 | $ | 91,043 | |||||
| Exclude discount accretion on acquired loans | (1,777 | ) | (3,635 | ) | (1,689 | ) | |||||
| Exclude premium amortization on acquired certificates of deposit | (132 | ) | (315 | ) | (461 | ) | |||||
| Net interest income before acquisition accounting impact (non-GAAP) | $ | 92,945 | $ | 93,221 | $ | 88,893 | |||||
| Average interest-earning assets (GAAP) | $ | 9,050,953 | $ | 8,940,341 | $ | 8,868,264 | |||||
| Exclude average net loan discount on acquired loans | 30,058 | 32,773 | 43,347 | ||||||||
| Average interest-earning assets before acquired loan discount (non-GAAP) | $ | 9,081,011 | $ | 8,973,114 | $ | 8,911,611 | |||||
| Net interest margin (GAAP) | 4.25 | % | 4.32 | % | 4.13 | % | |||||
| Exclude impact on net interest margin from discount accretion on acquired loans | (0.08 | ) | (0.16 | ) | (0.08 | ) | |||||
| Exclude impact on net interest margin from acquired certificates of deposit premium amortization | (0.01 | ) | (0.01 | ) | (0.02 | ) | |||||
| Exclude impact on net interest margin of net loan discount on average earning assets | (0.01 | ) | (0.02 | ) | (0.02 | ) | |||||
| Net margin before acquisition accounting impact (non-GAAP) | 4.15 | % | 4.13 | % | 4.01 | % | |||||
| ADDITIONAL FINANCIAL INFORMATION | |||||||||||
| (dollars in thousands) | |||||||||||
| Quarters Ended | |||||||||||
| ACQUISITION ACCOUNTING IMPACT ON LOAN YIELD | Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||
| Average total loans (GAAP) | $ | 7,707,344 | $ | 7,571,046 | $ | 7,320,881 | |||||
| Exclude average net loan discount on acquired loans | 30,058 | 32,773 | 43,347 | ||||||||
| Adjusted average total loans (non-GAAP) | $ | 7,737,402 | $ | 7,603,819 | $ | 7,364,228 | |||||
| Interest income on loans (GAAP) | $ | 91,288 | $ | 93,915 | $ | 86,958 | |||||
| Exclude discount accretion on acquired loans | (1,777 | ) | (3,635 | ) | (1,689 | ) | |||||
| Adjusted interest income on loans (non-GAAP) | $ | 89,511 | $ | 90,280 | $ | 85,269 | |||||
| Loan yield (GAAP) | 4.80 | % | 4.93 | % | 4.78 | % | |||||
| Loan yield before acquisition accounting impact (non-GAAP) | 4.69 | % | 4.72 | % | 4.66 | % | |||||
| Impact on loan yield from acquisition accounting | 0.11 | % | 0.21 | % | 0.12 | % | |||||
| ACQUISITION ACCOUNTING IMPACT ON DEPOSIT COST | |||||||||||
| Average deposits | $ | 8,214,804 | $ | 8,171,219 | $ | 7,979,078 | |||||
| Interest expense on deposits (GAAP) | $ | 2,791 | $ | 2,604 | $ | 2,946 | |||||
| Exclude premium amortization on acquired certificates of deposit | 132 | 315 | 461 | ||||||||
| Adjusted interest expense on deposits (non-GAAP) | $ | 2,923 | $ | 2,919 | $ | 3,407 | |||||
| Deposit cost (GAAP) | 0.14 | % | 0.13 | % | 0.15 | % | |||||
| Deposit cost before acquisition accounting impact (non-GAAP) | 0.15 | % | 0.15 | % | 0.17 | % | |||||
| Impact on deposit cost from acquisition accounting | (0.01 | )% | (0.02 | )% | (0.02 | )% | |||||
| ADJUSTED EFFICIENCY RATIO | Quarters Ended | |||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| Non-interest expense (GAAP) | $ | 78,078 | $ | 79,857 | $ | 84,034 | ||||||
| Exclude acquisition-related costs | — | (788 | ) | (6,813 | ) | |||||||
| Exclude CDI amortization | (1,624 | ) | (1,722 | ) | (1,808 | ) | ||||||
| Exclude state/municipal tax expense | (799 | ) | (952 | ) | (838 | ) | ||||||
| Exclude REO gain (loss) | 966 | 338 | (397 | ) | ||||||||
| Adjusted non-interest expense (non-GAAP) | $ | 76,621 | $ | 76,733 | $ | 74,178 | ||||||
| Net interest income before provision for loan losses (GAAP) | $ | 94,854 | $ | 97,171 | $ | 91,043 | ||||||
| Non-interest income (GAAP) | 20,845 | 19,463 | 19,959 | |||||||||
| Total revenue | 115,699 | 116,634 | 111,002 | |||||||||
| Exclude net gain on sale of securities | (13 | ) | (311 | ) | (21 | ) | ||||||
| Exclude net change in valuation of financial instruments carried at fair value | 688 | 1,148 | (29 | ) | ||||||||
| Adjusted revenue (non-GAAP) | $ | 116,374 | $ | 117,471 | $ | 110,952 | ||||||
| Efficiency ratio (GAAP) | 67.48 | % | 68.47 | % | 75.70 | % | ||||||
| Adjusted efficiency ratio (non-GAAP) | 65.84 | % | 65.32 | % | 66.86 | % | ||||||
| ADDITIONAL FINANCIAL INFORMATION | ||||||||||||
| (dollars in thousands) | ||||||||||||
| RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS | ||||||||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| Loans receivable (GAAP) | $ | 7,421,255 | $ | 7,451,148 | $ | 7,185,999 | ||||||
| Net loan discount on acquired loans | 29,352 | 31,110 | 42,302 | |||||||||
| Adjusted loans (non-GAAP) | $ | 7,450,607 | $ | 7,482,258 | $ | 7,228,301 | ||||||
| Allowance for loan losses (GAAP) | $ | 86,527 | $ | 85,997 | $ | 78,197 | ||||||
| Net loan discount on acquired loans | 29,352 | 31,110 | 42,302 | |||||||||
| Adjusted allowance for loan losses (non-GAAP) | $ | 115,879 | $ | 117,107 | $ | 120,499 | ||||||
| Allowance for loan losses / Total loans (GAAP) | 1.17 | % | 1.15 | % | 1.09 | % | ||||||
| Adjusted allowance for loan losses / Adjusted loans (non-GAAP) | 1.56 | % | 1.57 | % | 1.67 | % | ||||||
| Mar 31, 2017 | Dec 31, 2016 | Mar 31, 2016 | ||||||||||
| TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS | ||||||||||||
| Shareholders' equity (GAAP) | $ | 1,323,404 | $ | 1,305,710 | $ | 1,320,155 | ||||||
| Exclude goodwill and other intangible assets, net | 273,071 | 274,745 | 280,409 | |||||||||
| Tangible common shareholders' equity (non-GAAP) | $ | 1,050,333 | $ | 1,030,965 | $ | 1,039,746 | ||||||
| Total assets (GAAP) | $ | 10,068,378 | $ | 9,793,668 | $ | 9,745,594 | ||||||
| Exclude goodwill and other intangible assets, net | 273,071 | 274,745 | 280,409 | |||||||||
| Total tangible assets (non-GAAP) | $ | 9,795,307 | $ | 9,518,923 | $ | 9,465,185 | ||||||
| Common shareholders' equity to total assets (GAAP) | 13.14 | % | 13.33 | % | 13.55 | % | ||||||
| Tangible common shareholders' equity to tangible assets (non-GAAP) | 10.72 | % | 10.83 | % | 10.98 | % | ||||||
| TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE | ||||||||||||
| Tangible common shareholders' equity | $ | 1,050,333 | $ | 1,030,965 | $ | 1,039,746 | ||||||
| Common shares outstanding at end of period | 33,152,864 | 33,193,387 | 34,221,451 | |||||||||
| Common shareholders' equity (book value) per share (GAAP) | $ | 39.92 | $ | 39.34 | $ | 38.58 | ||||||
| Tangible common shareholders' equity (tangible book value) per share (non-GAAP) | $ | 31.68 | $ | 31.06 | $ | 30.38 | ||||||