WALLA WALLA, Wash., Oct. 25, 2007 (PRIME NEWSWIRE) -- Banner Corporation (Nasdaq:BANR), the parent company of Banner Bank and Islanders Bank, today reported that substantial loan and deposit growth, both internal and through acquisition, as well as a substantial net change in the value of financial instruments carried at fair value, contributed to higher third quarter profits. In the quarter ended September 30, 2007, net income was $10.0 million, or $0.64 per diluted share, compared to $8.0 million, or $0.65 per diluted share, in the third quarter of 2006. For the first nine months of this year, net income increased 3% to $24.9 million, or $1.73 per diluted share, compared to $24.2 million, or $1.98 per diluted share, in the first nine months of 2006.
"Banner has posted a solid quarter following its basic banking strategy of growing high-quality earning assets funded by low-cost deposits," said D. Michael Jones, President and Chief Executive Officer. "While growth slowed in the current quarter, our larger balance sheet and expanded franchise is producing substantially more revenue than a year ago and, although this quarter was burdened with abnormally high operating expenses, primarily due to the costs of absorbing and converting systems at banks acquired in the second quarter of this year, we are confident that this strategy will deliver consistent earnings growth over time. Our continuing focus on credit quality is important to our results. Although we share others' concerns about deterioration in the national housing market, we have not engaged in any sub-prime lending and our credit quality remains acceptable. Also, during the quarter we strengthened our capital position by issuing an additional $25.8 million of trust preferred securities at pricing very favorable to Banner.
"Through our aggressive franchise expansion, we have added 18 new branches through acquisition, opened 19 new branches and relocated eight others in the last three years. Most recently, we opened branches in Tualatin, Oregon and Bellingham, Washington, and on October 10, 2007, we closed our acquisition of NCW Community Bank of Wenatchee, Washington. NCW Community Bank had approximately $99 million in assets, $91 million in total loans and $89 million in deposit balances at September 30, 2007. We have three additional branches scheduled to open this year; however, we are rapidly reaching a size in terms of number of branches that will generate deposit growth sufficient to fund our expected loan growth and pay off FHLB borrowings. As a result, we anticipate that we will slow down our de novo branch expansion program to a more moderate pace beginning in 2008."
In the third quarter, Banner's net income included net gains of $3.1 million ($2.0 million after tax) as a result of changes in the valuation of financial instruments carried at fair value in accordance with the adoption of Statement of Financial Accounting Standards (SFAS) No. 159 and SFAS No. 157. Excluding fair value adjustments, third quarter net income from recurring operations was $8.0 million, or $0.51 per diluted share, compared to $8.0 million, or $0.65 per diluted share in the third quarter of 2006. For the first nine months of 2007, excluding fair value adjustments as well as the insurance recovery received in the second quarter of 2006, net income increased 13% to $23.4 million, or $1.62 per diluted share, compared to $20.7 million, or $1.70 per diluted share, in the first nine months of 2006. See the footnote below and "Pro Forma Disclosures Excluding Fair Value Adjustments and 2006 Insurance Recovery."
Third Quarter 2007 Highlights (compared to third quarter 2006)
* Net income, excluding fair value adjustments, was $8.0 million,
or $0.51 per diluted share, compared to $8.0 million, or $0.65
per diluted share, a year ago.*
* Net interest income before provision for loan losses grew 25%
to $40.7 million.
* Revenues advanced 26% to $48.1 million, excluding fair value
adjustments.
* Total deposits increased 31% to $3.60 billion.
* Loans increased 25% to $3.58 billion.
* Credit quality remains acceptable with non-performing assets
representing 0.54% of total assets and net charge-offs at just
0.01% of average loans.
* Issuance of $25.8 million of junior subordinated debentures
(trust preferred securities) strengthened capital position.
*Earnings information excluding the fair value adjustments and the insurance recovery (net income from recurring operations) 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 more useful and comparative information to assess trends in the Company's core operations reflected in the current quarter and year-to-date results. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
Credit Quality
"Asset quality remains an important focus for us and we place a strong emphasis on maintaining our credit standards in a highly competitive market," Jones said. "We apply a disciplined approach in monitoring for signs of loan quality deterioration. While our local economies remain strong and Banner Bank has not engaged in any sub-prime lending, we have seen an increase in non-performing loans. This increase was not unexpected, however, and net charge-offs have remained low and our reserve levels appropriate." Banner added $1.5 million to its provision for loan losses in the third quarter, compared to $1.0 million in the third quarter a year ago. The allowance for loan losses at quarter-end totaled $44.2 million, representing 1.22% of total loans outstanding. Non-performing assets were $23.2 million, or 0.54% of total assets, at September 30, 2007, compared to $14.9 million, or 0.35% of total assets at June 30, 2007 and $12.4 million, or 0.36% of total assets, at September 30, 2006. Banner's net charge-offs in the third quarter totaled $536,000.
Income Statement Review
"Despite the recent decrease in the Prime Rate, our net interest margin was essentially unchanged from the previous quarter and, reflecting an improved asset/liability mix, was eleven basis points higher than the same quarter a year ago," said Jones. "While there is currently pressure on asset yields, we expect our net interest margin to remain stable during the next few quarters as we benefit from the improved funding base generated by our branch growth and acquisition initiatives. We also believe the Northwest economy, although slowing slightly, will continue to afford us good growth opportunities." Banner's net interest margin was 4.10% for the third quarter of 2007, compared to 4.11% in the proceeding quarter and 3.99% for the quarter ended September 30, 2006. Funding costs for the quarter ended September 30, 2007 decreased six basis points compared to the previous quarter and decreased four basis points from the third quarter a year earlier, while asset yields decreased five basis points from the prior linked quarter but increased six basis points from the comparable quarter a year ago.
In the third quarter, net interest income before the provision for loan losses increased 25% to $40.7 million, compared to $32.7 million in the same quarter a year ago, reflecting the Company's larger earning asset base. Year-to-date, net interest income before the provision for loan losses increased 18% to $111.0 million, compared to $93.8 million for the first nine months of 2006. Banner's net interest margin for the nine months year-to-date was 4.06%, compared to 4.11% for the first nine months of 2006.
Revenues (net interest income before the provision for loan losses plus other operating income) excluding fair value adjustments increased 26% to $48.1 million in the third quarter, from $38.1 million in the third quarter last year. Revenues increased 20% to $130.5 million, excluding fair value adjustments, in the first nine months of 2007, compared to $108.7 million in the same period a year ago.
Total other operating income, excluding fair value adjustments, for the third quarter increased 37% to $7.5 million, compared to $5.4 million for the same quarter a year ago. For the first nine months of 2007, total other operating income increased 30% to $19.5 million, excluding fair value adjustments, compared to $14.9 million in the first nine months of 2006. Income from deposit fees and other service charges increased 56% to $4.8 million in the third quarter, compared to $3.0 million for the same period in 2006. Income from mortgage banking operations increased 2% from the third quarter of 2006 and was essentially equal to the prior quarter, reflecting similar levels of production despite the slowing housing markets. Net fair value adjustments as a result of changes in the value of financial assets and liabilities recorded at fair value under SFAS No. 159 resulted in an increase of $3.1 million for the quarter ended September 30, 2007 and an increase of $2.4 million for the first nine months of 2007.
"During the third quarter we completed our data processing conversion of the F&M Bank platform and incurred one time costs associated with the conversion in the amount of approximately $700,000," said Jones. "In addition, the new and acquired branches have increased expenses over the quarter and year-to-date. However, they are proving to be very successful in helping us reach new customers and grow deposits, and over time they will add to our profitability by providing low-cost core deposits to fund our loan growth." Other operating expenses increased to $34.8 million in the third quarter of 2007, compared to $25.3 million in the third quarter a year ago, reflecting both new branches and the acquisitions of F&M Bank and Islanders Bank. "While not yet reflected in third quarter results, we are making good progress toward implementing the cost savings and revenue enhancement strategies anticipated with respect to the F&M Bank and Islanders Bank acquisitions," added Jones. "As a result, we believe our ratio of recurring operating expenses to average assets will decline in future periods."
The efficiency ratio was 68.05% (72.38% excluding fair value adjustments) in the quarter ended September 30, 2007, compared to 66.50% a year earlier. For the first nine months of 2007, the efficiency ratio was 69.43% (70.69% excluding fair value adjustments), compared to 63.04% (67.96% excluding the insurance recovery) for the first nine months of 2006.
Banner Corporation elected early adoption of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, and SFAS No. 157, Fair Value Measurements, effective January 1, 2007. SFAS No. 159, which was issued in February 2007, generally permits the measurement of selected eligible financial instruments at fair value at specified election dates. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), and expands disclosures about fair value measurement. The Company made this election to allow it more flexibility with respect to the management of its investment securities, wholesale borrowings and interest rate risk position in future periods.
Upon adoption of SFAS No.159, the Company selected fair value measurement for all of its "available for sale" investment securities, Federal Home Loan Bank advances and junior subordinated debentures, which had fair values of approximately $226.2 million, $176.8 million and $124.4 million, respectively, on January 1, 2007. The initial fair value measurement of these instruments resulted in a $3.5 million adjustment for the cumulative effect, net of tax, as a result of the change in accounting, which was recorded as a reduction in retained earnings as of January 1, 2007, and which under SFAS No. 159 has not been recognized in current earnings. While the adjustment to retained earnings is permanent, approximately $2.6 million of the amount was previously reported as accumulated other comprehensive loss at December 31, 2006, so the reduction in total shareholders' equity was only $897,000 on January 1, 2007. Following the initial election, changes in the value of financial instruments recorded at fair value are recognized as gains or losses in earnings in subsequent financial reporting periods. As a result of the adoption of SFAS No. 159 and changes in the fair value measurement of the financial assets and liabilities noted above, the Company recorded a net gain of $1.2 million ($755,000 after tax) in the quarter ended March 31, 2007, a net loss of $1.9 million ($1.2 million after tax) in the quarter ended June 30, 2007, and a net gain of $3.1 million ($2.0 million after-tax) in the quarter ended September 30, 2007, resulting in a cumulative net gain of $2.4 million ($1.5 million after tax) for the nine-month period.
Balance Sheet Review
"Loan growth was somewhat disappointing during the third quarter, as we have continued to be perhaps overly cautious in our underwriting and experienced some meaningful payoffs in portions of our real estate loan portfolio," said Jones. "In addition, we experienced the beginning of the seasonal declines in agricultural loan balances as well as residential mortgage loans held for sale. Commercial business and consumer loans, on the other hand, continued to grow, reflecting the still vibrant Northwest economy." Net loans increased 25% (18% from acquisitions) to $3.58 billion at September 30, 2007 compared to $2.87 billion a year earlier.
Total deposits increased 31% (17% from acquisitions) to $3.60 billion at September 30, 2007, compared to $2.74 billion at September 30, 2006. Non-interest-bearing accounts increased 45% and total transaction and savings accounts increased 52% during the twelve months ending September 30, 2007, while certificates of deposit increased 17%. "We continue to be successful in increasing the number of transaction and savings accounts; however, as loan growth slowed during the quarter, we chose not to renew approximately $31 million of maturing brokered certificates of deposit and bid less aggressively for public funds certificates, resulting in a $46 million decline in those deposit balances," said Jones. "Excluding these discretionary sources, our retail deposits increased by nearly $83 million compared to the prior quarter and we are optimistic that our expanded branch network will deliver continued deposit growth and related fee income."
FHLB borrowings declined substantially to $24.6 million at September 30, 2007, compared to $213.9 million at September 30, 2006 as a result of Banner's asset/liability management strategies, which resulted in strong deposit growth and declining securities balances. Banner reduced its securities portfolio 27% to $212.2 million at September 30, 2007, from $290.5 million a year earlier, through sales, maturities and principal prepayments. This reduction occurred despite the addition of $33.0 million of securities held by the two acquired banks on the effective closing date. Nonetheless, the Company's liquidity position remained strong, including an increase of $37.9 million of interest-earning cash balances at September 30, 2007 compared to the same date a year earlier.
During the quarter ended September 30, 2007, the Company's capital position was enhanced by the issuance of $25.8 million of junior subordinated debentures (trust preferred securities) at an initial rate of 6.74% with quarterly adjustments based on a 138 basis point spread to three-month LIBOR. During the second quarter of 2007, the Company had called and repaid $25.8 million of junior subordinated debentures (trust preferred securities), which carried an interest rate of 9.09% for the six months immediately preceding the call date and adjustments based on a 370 basis point spread to six-month LIBOR.
During the quarter ended June 30, 2007, the Company issued 2,592,611 shares of common stock in connection with the acquisitions of F&M Bank and San Juan Financial Holding Company (Islanders Bank), resulting in $113.2 million of additional equity. The acquisitions also resulted in an increase of $93.5 million of goodwill and other intangibles. The Company has also issued shares through its Dividend Reinvestment and Stock Purchase Plan and in connection with the exercise of vested stock options. This stock issuance, combined with the changes in retained earnings as a result of operations and the effects of fair value accounting, net of quarterly dividend distributions, resulted in a 71% increase in shareholders' equity for the quarter ended September 30, 2007 compared to September 30, 2006. At September 30, 2007, shareholder's equity was $413.6 million compared to $241.7 million at September 30, 2006. A year ago Banner had 12.0 million shares outstanding, but as a result of the two acquisitions and the stock issuance noted above, it had 15.6 million shares outstanding as of September 30, 2007 and, following the NCW Community Bank acquisition, it now has 15.9 million shares outstanding.
Assets increased 25% to $4.30 billion at September 30, 2007, compared to $3.45 billion a year earlier. Book value per share increased to $26.54 at September 30, 2007, from $20.15 a year earlier, and tangible book value per share was $19.30 at quarter-end, compared to $17.12 a year earlier.
Conference Call
Banner will host a conference call on Friday, October 26, 2007, at 8:00 a.m. PT, to discuss third quarter results. The conference call can be accessed live by telephone at 303-262-2140. To listen to the call online, go to the Company's website at www.bannerbank.com. An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11098880# until Friday, November 2, 2007, or via the Internet at www.bannerbank.com.
About the Company
Banner Corporation is a $4.3 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.
Statements concerning future performance, developments or events, expectations for earnings, growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements, which are subject to a number of risks and uncertainties that are beyond Banner's control and might cause actual results to differ materially from the expectations and stated objectives. Factors which could cause actual results to differ materially include, but are not limited to, regional and general economic conditions, management's ability to generate continued improvement in asset quality and profitability, changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, competition, loan delinquency rates, the successful operation of the newly-opened branches and loan offices, the ability to successfully complete consolidation and conversion activities, incorporate acquisitions into operations, retain key employees and achieve cost savings, changes in accounting principles, practices, policies or guidelines, changes in legislation or regulation, other economic, competitive, governmental, regulatory and technological factors affecting operations, pricing, products and services, Banner's ability to successfully resolve outstanding credit issues and other risks detailed in Banner's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Banner undertakes no responsibility to update or revise any forward-looking statements.
RESULTS OF OPERATIONS
---------------------
Quarters Ended Nine Months Ended
---------------------------------- ----------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2007 2007 2006 2007 2006
---------- ---------- ---------- ---------- ----------
(In thousands
except share
and per share
data)
INTEREST
INCOME:
Loans
recei-
vable $ 75,668 $ 71,047 $ 60,933 $ 208,543 $ 165,147
Mortgage-
backed
securities 1,343 1,535 1,921 4,653 6,015
Securities
and cash
equivalents 2,199 1,829 2,046 5,871 5,658
---------- ---------- ---------- ---------- ----------
79,210 74,411 64,900 219,067 176,820
INTEREST
EXPENSE:
Deposits 35,341 32,378 24,661 95,329 62,920
Federal
Home
Loan Bank
advances 292 1,164 4,392 3,733 11,659
Other
borrowings 730 790 1,112 2,448 2,576
Junior
subordinated
debentures 2,177 1,969 2,074 6,600 5,875
---------- ---------- ---------- ---------- ----------
38,540 36,301 32,239 108,110 83,030
---------- ---------- ---------- ---------- ----------
Net interest
income
before
provision
for loan
losses 40,670 38,110 32,661 110,957 93,790
PROVISION
FOR LOAN
LOSSES 1,500 1,400 1,000 3,900 4,500
---------- ---------- ---------- ---------- ----------
Net interest
income 39,170 36,710 31,661 107,057 89,290
OTHER OPERATING
INCOME:
Deposit fees
and other
service
charges 4,750 4,090 3,036 11,803 8,419
Mortgage
banking
operations 1,782 1,808 1,744 4,945 4,350
Loan servicing
fees 457 373 315 1,205 1,039
Miscellaneous 483 592 276 1,536 1,065
---------- ---------- ---------- ---------- ----------
7,472 6,863 5,371 19,489 14,873
Gain (loss)
on sale of
securities -- -- 65 -- 65
Increase
(decrease)
in valuation
of financial
instruments
carried at
fair value 3,062 (1,877) -- 2,365 --
---------- ---------- ---------- ---------- ----------
Total other
operating
income 10,534 4,986 5,436 21,854 14,938
OTHER OPERATING
EXPENSE:
Salary and
employee
benefits 20,431 19,635 16,705 56,534 48,747
Less
capitalized
loan
origination
costs (2,455) (3,175) (2,956) (8,224) (8,776)
Occupancy
and
equipment 5,484 5,106 3,927 14,942 11,659
Information/
computer
data
services 2,031 1,767 1,193 5,167 3,778
Miscellaneous 9,355 7,966 6,467 23,797 18,487
---------- ---------- ---------- ---------- ----------
34,846 31,299 25,336 92,216 73,895
Insurance
recovery,
net proceeds -- -- -- -- (5,350)
FHLB
prepayment
penalties -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total other
operating
expense 34,846 31,299 25,336 92,216 68,545
----------- ----------- ----------- ----------- -----------
Income
before
provision
for
income
taxes 14,858 10,397 11,761 36,695 35,683
PROVISION
FOR INCOME
TAXES 4,871 3,286 3,752 11,784 11,527
---------- ---------- ---------- ---------- ----------
NET INCOME $ 9,987 $ 7,111 $ 8,009 $ 24,911 $ 24,156
========== ========== ========== ========== ==========
Earnings
per share
Basic $ 0.64 $ 0.49 $ 0.67 $ 1.76 $ 2.03
Diluted $ 0.64 $ 0.48 $ 0.65 $ 1.73 $ 1.98
Cumulative
dividends
declared
per common
share $ 0.19 $ 0.19 $ 0.18 $ 0.57 $ 0.54
Weighted
average
shares
outstanding
Basic 15,497,193 14,519,669 11,963,637 14,124,607 11,879,126
Diluted 15,720,248 14,791,195 12,293,444 14,399,211 12,205,568
Shares
repurchased
during the
period 700 2,624 -- 11,310 63,422
Shares
issued in
connection
with
acquisitions -- 2,592,611 -- 2,592,611 --
Shares
issued in
connection
with
exercise
of stock
options
or DRIP 141,281 110,820 30,136 925,496 280,660
PRO FORMA DISCLOSURES EXCLUDING THE EFFECTS OF THE CHANGE IN THE
VALUATION OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE AND THE 2006
INSURANCE RECOVERY
NET INCOME
from
above $ 9,987 $ 7,111 $ 8,009 $ 24,911 $ 24,156
ADJUSTMENTS
FOR CHANGE
IN VALUATION
OF FINANCIAL
INSTRUMENTS
AND THE
2006 INSURANCE
RECOVERY
Change in
valuation of
financial
instruments
carried at
fair value (3,062) 1,877 -- (2,365) --
2006 insurance
recovery -- -- -- -- (5,350)
Income tax
provision
(benefit)
related
to above
items 1,102 (676) -- 851 1,926
---------- ---------- ---------- ---------- ----------
Above items,
net of
income
tax
provision
(benefit) (1,960) 1,201 -- (1,514) (3,424)
---------- ---------- ---------- ---------- ----------
NET INCOME
FROM
RECURRING
OPERA-
TIONS $ 8,027 $ 8,312 $ 8,009 $ 23,397 $ 20,732
========== ========== ========== ========== ==========
Earnings per
share
EXCLUDING
the effects
of change in
valuation
of financial
instruments
carried at
fair value
and the 2006
insurance
recovery
Basic $ 0.52 $ 0.57 $ 0.67 $ 1.66 $ 1.75
Diluted $ 0.51 $ 0.56 $ 0.65 $ 1.62 $ 1.70
FINANCIAL CONDITION
-------------------
Sep 30, Jun 30, Sep 30, Dec 31,
2007 2007 2006 2006
---------- ---------- ---------- ----------
(In thousands except
share and per share
data)
ASSETS
Cash and due from
banks $ 83,933 $ 81,366 $ 58,742 $ 68,317
Federal funds and
interest-bearing
deposits 62,628 25,437 24,696 5,068
Securities -trading 158,932 182,969 -- --
Securities -available
for sale -- -- 242,243 226,153
Securities -held to
maturity 53,259 48,196 48,304 47,872
Federal Home Loan
Bank stock 37,291 37,291 35,844 35,844
Loans receivable:
Held for sale 4,121 8,178 7,135 5,080
Held for portfolio 3,617,130 3,610,174 2,895,104 2,960,910
Allowance for loan
losses (44,212) (43,248) (35,160) (35,535)
---------- ---------- ---------- ----------
3,577,039 3,575,104 2,867,079 2,930,455
Accrued interest
receivable 26,376 24,885 21,332 23,272
Real estate owned held
for sale, net 3,072 1,700 1,319 918
Property and
equipment, net 95,816 87,327 54,297 58,003
Goodwill and other
intangibles, net 128,868 129,126 36,295 36,287
Deferred income tax
asset, net 3,660 4,764 7,164 7,533
Bank-owned life
insurance 51,024 50,441 38,114 38,527
Other assets 18,463 20,443 17,611 17,317
---------- ---------- ---------- ----------
$4,300,361 $4,269,049 $3,453,040 $3,495,566
========== ========== ========== ==========
LIABILITIES
Deposits:
Non-interest-
bearing $ 473,571 $ 455,628 $ 327,093 $ 332,372
Interest-bearing
transaction and
savings accounts 1,299,232 1,307,680 857,354 905,746
Interest-bearing
certificates 1,825,096 1,829,473 1,559,904 1,556,474
---------- ---------- ---------- ----------
3,597,899 3,592,781 2,744,351 2,794,592
Advances from Federal
Home Loan Bank -- -- 213,930 177,430
Advances from Federal
Home Loan Bank at
fair value 24,577 33,826 -- --
Customer repurchase
agreements and other
borrowings 78,511 71,926 110,670 103,184
Junior subordinated
debentures -- -- 97,942 123,716
Junior subordinated
debentures at fair
value 122,220 98,419 -- --
Accrued expenses and
other liabilities 47,577 51,792 35,932 36,888
Deferred compensation 10,830 10,497 7,005 7,025
Income taxes payable 5,163 7,501 1,490 2,504
---------- ---------- ---------- ----------
3,886,777 3,866,742 3,211,320 3,245,339
STOCKHOLDERS' EQUITY
Common stock 282,636 278,447 132,887 135,149
Retained earnings 133,278 126,249 114,479 120,206
Accumulated other
comprehensive income
(loss) (189) (202) (2,816) (2,852)
Unearned shares of
common stock issued to
Employee Stock
Ownership Plan (ESOP)
trust: at cost (1,987) (1,987) (2,494) (1,987)
Net carrying value of
stock related deferred
compensation plans (154) (200) (336) (289)
---------- ---------- ---------- ----------
413,584 402,307 241,720 250,227
---------- ---------- ---------- ----------
$4,300,361 $4,269,049 $3,453,040 $3,495,566
========== ========== ========== ==========
Shares Issued:
Shares outstanding
at end of period 15,821,067 15,680,486 12,299,714 12,314,270
Less unearned ESOP
shares at end of
period 240,381 240,381 301,786 240,381
---------- ---------- ---------- ----------
Shares outstanding
at end of period
excluding unearned
ESOP shares 15,580,686 15,440,105 11,997,928 12,073,889
========== ========== ========== ==========
Book value per
share (1) $ 26.54 $ 26.06 $ 20.15 $ 20.72
Tangible book value
per share (1) (2) $ 19.30 $ 18.78 $ 17.12 $ 17.72
Consolidated Tier 1
leverage capital
ratio 9.82% 9.66% 8.49% 8.76%
(1) - Calculation is based on number of shares outstanding at the
end of the period rather than weighted average shares
outstanding and excludes unallocated shares in the ESOP
(2) - Tangible book value excludes goodwill
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
Sep 30, Jun 30, Sep 30, Dec 31,
2007 2007 2006 2006
---------- ---------- ---------- ----------
LOANS (including
loans held for sale):
Commercial real estate $ 811,816 $ 811,072 $ 584,832 $ 596,488
Multifamily real estate 170,316 174,315 146,094 147,311
Commercial construction 84,176 87,821 94,231 98,224
Multifamily construction 41,814 35,552 49,986 39,908
One- to four-family
construction 624,280 654,558 550,285 570,501
Land and land
development 463,514 457,264 371,626 402,665
Commercial business 630,827 595,250 469,293 467,745
Agricultural business
including secured by
farmland 178,158 181,505 169,349 163,518
One- to four-family
real estate 424,122 445,585 349,808 361,625
Consumer 192,228 175,430 116,735 118,005
---------- ---------- ---------- ----------
Total loans
outstanding $3,621,251 $3,618,352 $2,902,239 $2,965,990
========== ========== ========== ==========
NON-PERFORMING ASSETS:
Sep 30, Jun 30, Sep 30, Dec 31,
2007 2007 2006 2006
---------- ---------- ---------- ----------
Loans on non-accrual
status $ 19,788 $ 12,984 $ 10,153 $ 13,463
Loans more than 90
days delinquent,
still on accrual 79 193 853 593
---------- ---------- ---------- ----------
Total non-performing
loans 19,867 13,177 11,006 14,056
Real estate owned
(REO)/ Repossessed
assets 3,294 1,712 1,352 918
---------- ---------- ---------- ----------
Total non-performing
assets $ 23,161 $ 14,889 $ 12,358 $ 14,974
========== ========== ========== ==========
Total non-performing
assets/Total assets 0.54% 0.35% 0.36% 0.43%
CHANGE IN THE ALLOWANCE FOR LOAN LOSSES:
Quarters Ended Nine Months Ended
---------------------------------- ----------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2007 2007 2006 2007 2006
---------- ---------- ---------- ---------- ----------
Balance,
beginning
of period $ 43,248 $ 36,299 $ 33,618 $ 35,535 $ 30,898
Acquisitions/
(divestitures) -- 5,957 -- 5,957 --
Provision 1,500 1,400 1,000 3,900 4,500
Recoveries
of loans
previously
charged off 469 231 1,219 1,364 1,544
Loans
charged-off (1,005) (639) (677) (2,544) (1,782)
---------- ---------- ---------- ---------- ----------
Net
(charge-offs)
recoveries (536) (408) 542 (1,180) (238)
---------- ---------- ---------- ---------- ----------
Balance,
end of
period $ 44,212 $ 43,248 $ 35,160 $ 44,212 $ 35,160
========== ========== ========== ========== ==========
Net charge-offs
(recoveries)/
Average loans
outstanding 0.01% 0.01% (0.02%) 0.04% 0.01%
Allowance for
loan losses/
Total loans
outstanding 1.22% 1.20% 1.21% 1.22% 1.21%
DEPOSITS
Sep 30, Jun 30, Sep 30, Dec 31,
2007 2007 2006 2006
---------- ---------- ---------- ----------
Non-interest-
bearing $ 473,571 $ 455,628 $ 327,093 $ 332,372
---------- ---------- ---------- ----------
Interest-bearing
checking 438,974 461,749 311,056 327,836
Regular savings
accounts 602,190 570,117 306,822 364,957
Money market accounts 258,068 275,814 239,476 212,953
---------- ---------- ---------- ----------
Interest-bearing
transaction &
savings accounts 1,299,232 1,307,680 857,354 905,746
---------- ---------- ---------- ----------
Three-month maturity
money market
certificates 167,025 176,107 184,871 178,981
Other certificates 1,658,071 1,653,366 1,375,033 1,377,493
---------- ---------- ---------- ----------
Interest-bearing
certificates 1,825,096 1,829,473 1,559,904 1,556,474
---------- ---------- ---------- ----------
Total deposits $3,597,899 $3,592,781 $2,744,351 $2,794,592
========== ========== ========== ==========
Included in other
borrowings
Customer repurchase
agreements/ "Sweep
accounts" $ 78,511 $ 69,726 $ 83,357 $ 76,825
---------- ---------- ---------- ----------
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
(Rates / Ratios Annualized)
Quarters Ended Nine Months Ended
---------------------------------- ----------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2007 2007 2006 2007 2006
---------- ---------- ---------- ---------- ----------
OPERATING
PERFORMANCE:
Average
loans $3,626,541 $3,413,095 $2,899,848 $3,343,901 $2,706,181
Average
securities
and deposits 313,325 302,971 350,121 312,903 347,217
Average
non-interest-
earning
assets 346,762 286,725 192,822 277,587 191,653
---------- ---------- ---------- ---------- ----------
Total
average
assets $4,286,628 $4,002,791 $3,442,791 $3,934,391 $3,245,051
========== ========== ========== ========== ==========
Average
deposits $3,593,722 $3,302,750 $2,622,215 $3,232,959 $2,464,352
Average
borrowings 221,837 278,366 537,877 297,294 510,412
Average
non-interest-
earning
liabilities 62,054 60,413 42,551 57,029 36,455
---------- ---------- ---------- ---------- ----------
Total
average
liabil-
ities 3,877,613 3,641,529 3,202,643 3,587,282 3,011,219
Total average
stockholders'
equity 409,015 361,262 240,148 347,109 233,832
---------- ---------- ---------- ---------- ----------
Total
average
liabilities
and
equity $4,286,628 $4,002,791 $3,442,791 $3,934,391 $3,245,051
========== ========== ========== ========== ==========
Interest
rate yield
on loans 8.28% 8.35% 8.34% 8.34% 8.16%
Interest rate
yield on
securities
and deposits 4.48% 4.45% 4.50% 4.50% 4.49%
---------- ---------- ---------- ---------- ----------
Interest rate
yield on
interest-
earning
assets 7.98% 8.03% 7.92% 8.01% 7.74%
---------- ---------- ---------- ---------- ----------
Interest rate
expense on
deposits 3.90% 3.93% 3.73% 3.94% 3.41%
Interest rate
expense on
borrowings 5.72% 5.65% 5.59% 5.75% 5.27%
---------- ---------- ---------- ---------- ----------
Interest
rate expense
on interest-
bearing
liabilities 4.01% 4.07% 4.05% 4.09% 3.73%
---------- ---------- ---------- ---------- ----------
Interest
rate spread 3.97% 3.96% 3.87% 3.92% 4.01%
========== ========== ========== ========== ==========
Net interest
margin 4.10% 4.11% 3.99% 4.06% 4.11%
========== ========== ========== ========== ==========
Other operating
income/Average
assets 0.97% 0.50% 0.63% 0.74% 0.62%
Other operating
expense/Average
assets 3.23% 3.14% 2.92% 3.13% 2.82%
Efficiency
ratio (other
operating
expense/
revenue) 68.05% 72.63% 66.50% 69.43% 63.04%
Return on
average
assets 0.92% 0.71% 0.92% 0.85% 1.00%
Return on
average
equity 9.69% 7.90% 13.23% 9.60% 13.81%
Return on
average
tangible
equity (1) 13.36% 10.29% 15.59% 12.43% 16.35%
Average
equity/
Average
assets 9.54% 9.03% 6.98% 8.82% 7.21%
(1) - Average tangible equity excludes goodwill
Operating performance for the periods presented excluding the effects
of change in valuation of financial instruments carried at fair
value and the 2006 insurance recovery.
Other operating
income (loss)
EXCLUDING
change in
valuation of
financial
instruments
carried at
fair value/
Average
assets 0.69% 0.69% 0.63% 0.66% 0.62%
Other operating
expense
EXCLUDING the
2006 insurance
recovery/
Average
assets 3.23% 3.14% 2.92% 3.13% 3.04%
Efficiency
ratio (other
operating
expense/
revenue)
EXCLUDING
change in
valuation of
financial
instruments
carried at
fair value
and the
2006 insurance
recovery 72.38% 69.60% 66.50% 70.69% 67.96%
Return on
average
assets
EXCLUDING
change in
valuation
of financial
instruments
carried at
fair value
and the
2006 insurance
recovery 0.74% 0.83% 0.92% 0.80% 0.85%
Return on
average
equity
EXCLUDING
change in
valuation of
financial
instruments
carried at
fair value
and the
2006 insurance
recovery 7.79% 9.23% 13.23% 9.01% 11.85%
Return on
average
tangible
equity
EXCLUDING
change in
valuation of
financial
instruments
carried at
fair value
and the
2006 insurance
recovery 10.73% 12.03% 15.59% 11.67% 14.03%