WALLA WALLA, Wash., July 29, 2009 (GLOBE NEWSWIRE) -- Banner Corporation (Nasdaq:BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $16.5 million for the second quarter ended June 30, 2009, compared to a net loss of $52.3 million for the second quarter of 2008. The current quarter's results include a $45.0 million provision for loan losses and a $2.1 million special assessment from the FDIC. The current quarter's results also include an $11.0 million net gain from the valuation of financial instruments carried at fair value.
"Similar to recent quarters, our significant provision for loan losses during the quarter reflects material levels of non-performing loans and net charge-offs, particularly for loans for the construction of one-to-four family homes and for acquisition and development of land for residential properties," said D. Michael Jones, President and CEO. "While certain segments showed modest improvement, housing markets generally remained weak in many of our service areas, resulting in further deterioration in property values and the need to provide for additional loan losses. By contrast, the non-housing related segments of our loan portfolio have continued to perform as expected with only normal levels of credit problems given the serious economic slowdown. In addition, continued pressure on our net interest margin and substantial increases in FDIC insurance charges had a further negative impact on our operating results."
For the first six months of 2009, Banner reported a net loss of $25.8 million compared to a net loss of $48.5 million for the first six months of 2008. The second quarter and year-to-date 2008 results included a $50.0 million goodwill impairment charge.
In the fourth quarter of 2008, Banner issued $124 million of senior preferred stock to the U.S. Treasury as a participant in the Treasury's Capital Purchase Program. In the quarter ended June 30, 2009, Banner paid a $1.6 million dividend on this preferred stock and accrued $373,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net loss available to common shareholders was $18.4 million, or $1.04 per diluted share, for the second quarter, compared to a net loss of $52.3 million, or $3.31 per diluted share, for the quarter ended June 30, 2008. For the six months ended June 30, 2009, the net loss available to common shareholders was $29.6 million, or $1.70 per diluted share, compared to a net loss of $48.5 million, or $3.06 per diluted share for the first six months of 2008.
"A continuing highlight of the quarter was our Great Northwest Home Rush promotion, which we began initially in the Portland market and expanded to the Puget Sound region and to other markets where we have financed new home construction. Through this program, we have partnered with our builders to deliver customers excellent prices on new homes and equally attractive home loan rates," said Jones. "As we noted at the end of the first quarter, this promotion has been encouraging and is contributing to a meaningful reduction in our exposure to residential construction loans. Through the date of this announcement our builders have accepted purchase offers on 299 of the 617 homes listed under this program, with 173 of those sales having closed through June 30, 2009."
Again notable in the second quarter of 2009 was very strong mortgage banking activity and revenues as exceptionally low interest rates resulted in significant refinancing opportunities for many of our customers, and lower home prices and first-time buyer incentives have resulted in improving home sales activity and purchase financing.
Credit Quality
"Reflecting continuing weakness in the housing market in many of our primary service areas, non-performing assets remained high, primarily centered in our construction and land development loan portfolios," said Jones. "In addition, property values exhibited further declines, particularly for land and developed building lots, resulting in increased charge-offs and impairment reserves. As a result, our provision for loan losses this quarter was significantly larger than in the immediately preceding quarter and the same quarter a year ago and was in excess of our normal expectations. Although property values have declined, sales of finished homes have improved, our reserve levels are substantial, and both our impairment analysis and charge-off actions reflect current appraisals and valuation estimates. Unfortunately, with respect to land and lot loans, those appraisals generally reflect a very limited number of sales which frequently involve distressed transactions, assume in many cases that market recoveries will be protracted and resulted in disappointingly low and uncertain valuation estimates which required increased provisioning. We are hopeful that the final resolution of many of these loans will reflect better than currently recognized values."
Banner added $45.0 million to its provision for loan losses in the second quarter, compared to $22.0 million in the preceding quarter and $15.0 million in the second quarter of 2008. For the first six months of the year, Banner added $67.0 million to its provision for loan losses compared to $21.5 million for the first six months of 2008. The allowance for loan losses at June 30, 2009 was $90.7 million, representing 2.32% of total loans outstanding. Non-performing loans totaled $225.1 million at June 30, 2009, compared to $224.1 million in the preceding quarter and $89.9 million at June 30, 2008. In addition, Banner's real estate owned and repossessed assets totaled $57.2 million at the end of June 2009, compared to $39.1 million three months earlier and $11.4 million at June 30, 2008. Banner's net charge-offs in the quarter ended June 30, 2009 totaled $34.0 million, or 0.87% of average loans and year-to-date net charge-offs were $51.5 million, or 1.31% of average loans.
At June 30, 2009, the geographic distribution of our construction and land development loans, including residential and commercial properties, is approximately 32% in the greater Puget Sound market, 40% in the greater Portland, Oregon market, and 9% in the greater Boise, Idaho market, with the remaining 19% distributed in various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank. One-to-four family residential construction and related lot and land loans represent 18% of the total loan portfolio and 77% of non-performing assets. The geographic distribution of non-performing construction, land and land development loans and real estate owned included approximately $106 million, or 44%, in the Puget Sound region, $90 million, or 38%, in the greater Portland market area and $26 million, or 11%, in the greater Boise market area.
Income Statement Review
Banner's net interest margin was 3.24% for the second quarter of 2009, compared to 3.26% in the preceding quarter and 3.50% for the second quarter of 2008. Funding costs decreased 13 basis points compared to the previous quarter and decreased 65 basis points from the same quarter a year earlier, while asset yields decreased 14 basis points from the prior linked quarter and 95 basis points from the second quarter a year ago, all reflecting the much lower interest rate environment. For the first half of 2009, the net interest margin was 3.25% compared to 3.57% for the first half of 2008.
"Funding costs improved as expected, which helped to maintain our net interest margin at a nearly unchanged level compared to the two previous quarters, despite higher levels of non-performing assets," said Jones. Non-accruing loans reduced the margin by approximately 45 basis points in this year's second quarter compared to approximately 38 basis points in the first quarter of 2009 and approximately 16 basis points in the second quarter of 2008.
For the second quarter of 2009, net interest income before the provision for loan losses was $34.9 million, compared to $35.0 million in the preceding quarter and $37.1 million in the second quarter a year ago. In the first half of 2009, net interest income before the provision for loan losses was $69.9 million, compared to $74.5 million in the first half of 2008. Revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value adjustments) were $43.9 million in the second quarter of 2009, compared to $42.9 million in the first quarter of 2009 and $45.0 million for the second quarter a year ago. Revenues from core operations for the first half of 2009 were $86.7 million, compared to $89.7 million in the first half of 2008.
Banner's results for the second quarter of 2009 included a net gain of $11.0 million ($7.0 million after tax), compared to a net gain of $649,000 ($415,000 after tax) in the second quarter of 2008, for fair value adjustments 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) Nos. 157 and 159. The fair value adjustments in the current quarter predominantly reflect changes in the valuation of trust preferred securities and junior subordinated debentures, both owned and issued by the Company.
Total other operating income, which includes the changes in the valuation of financial instruments noted above, was $20.0 million in the second quarter, compared to $4.7 million in the preceding quarter and $8.6 million for the same quarter a year ago. For the first half of 2009, total other operating income was $24.6 million, compared to $16.7 million in the first half of 2008. Total other operating income from core operations* (excluding fair value adjustments) for the current quarter was $8.9 million, compared to $7.9 million in the preceding quarter and $7.9 million for the same quarter a year ago. For the first half of 2009, total other operating income from core operations increased 11% to $16.8 million, compared to $15.2 million in the first half of 2008. Income from deposit fees and other service charges increased to $5.4 million in the second quarter of 2009, compared to $4.9 million for the preceding quarter; however, reflecting the reduction in customer transaction volumes in the current economic environment, fees were slightly less than the $5.5 million recorded in the second quarter a year ago despite growth in the number of accounts. Income from mortgage banking operations increased to $2.9 million in the second quarter of 2009 compared to $2.7 million in the preceding quarter and $1.6 million in the same quarter a year ago.
"The soft economy continued to adversely affect our payment processing business this quarter as activity levels for deposit customers, cardholders and merchants remained subdued; however, we are pleased with the year-over-year growth in our customer base and encouraged by the increase in activity compared to the very low levels we experienced in the previous quarter," said Jones. "We are also pleased that our mortgage banking revenues remained strong and substantially above the levels reported a year ago. Although not as significant as in the previous quarter, the high level of refinancing activity again resulted in accelerated termination of mortgage servicing rights as reflected in the impairment of loan servicing revenues in the quarter just ended. Amortization and write-off of mortgage servicing rights totaled $559,000 for the quarter ended June 30, 2009, compared to $912,000 in the preceding quarter and $533,000 in the second quarter a year ago."
"Manageable operating expenses were generally well controlled in the second quarter, reflecting continuing efforts to improve our processes and efficiency, although collection and legal costs, including charges related to acquired real estate, remained high," said Jones. "However, FDIC insurance expense increased substantially as a result of increased regular assessment rates for the current quarter as well as a one-time special assessment levied on all banks at quarter end. FDIC insurance charges were $4.1 million for the second quarter of 2009 compared to $1.5 million for the preceding quarter and $633,000 for the second quarter of 2008. Although we anticipate collection costs and FDIC insurance premiums will continue to be above historical levels for a number of future quarters, we expect continued expense discipline will be exhibited in our ongoing operating results."
Total other operating expenses from core operations* (non-interest expenses excluding the goodwill write-off that occurred during the quarter ended June 30, 2008) were $36.9 million in the second quarter of 2009, compared to $33.8 million in the preceding quarter and $35.2 million in the same quarter a year ago. For the first half of the year, other operating expenses from core operations were $70.7 million compared to $68.9 million in the first half of 2008. Operating expenses from core operations as a percentage of average assets was 3.27% in the second quarter of 2009, compared to 3.02% in the previous quarter and 3.08% in the second quarter a year ago.
*Earnings information excluding the goodwill impairment charge and fair value adjustments (alternately referred to as total other operating income from core operations, total other operating expenses from core operations, revenues from core operations, or operating expenses from core 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 useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
Balance Sheet Review
Net loans were $3.82 billion at June 30, 2009, compared to $3.91 billion a year earlier. Total assets were $4.53 billion at June 30, 2009, compared to $4.64 billion a year earlier.
"In the second quarter of 2009, commercial and multifamily real estate loan balances increased by $14 million and commercial business loans increased by $28 million. In addition, agricultural loans experienced an expected seasonal increase of $17 million and one-to-four family residential loans increased by $10 million," said Jones. "However, the continued reductions in construction and land development loans resulted in a modest decrease in total loan balances compared to the prior quarter end. Although still slower than historical levels, home sales have improved, contributing to a $203 million reduction in our portfolio of one-to-four family construction loans over the past twelve months, including a $28 million decrease in the most recent quarter. As a result, at June 30, 2009 our one-to-four family construction loans totaled $337 million, a decline of $317 million from their peak quarter-end balance of $655 million at June 30, 2007.
Total deposits were $3.75 billion at June 30, 2009, compared to $3.63 billion at the end of the previous quarter and $3.76 billion a year earlier. Non-interest-bearing accounts of $508 million were unchanged for the quarter, but up nearly 7% compared to a year earlier. Interest-bearing accounts increased by $123 million for the second quarter of 2009, but declined by $38 million compared to a year earlier. "Our retail deposit franchise produced good results for the quarter as we were able to effectively replace the public funds and brokered deposits that we have chosen to de-emphasize this year," said Jones. "For the first six months of the year we have allowed $156 million in public funds, including $72 million of interest-bearing transaction accounts, to run off as the new higher collateralization requirements and the shared risk exposure under the Washington and Oregon State requirements have made retaining those deposits less desirable than in the past. Brokered deposits declined by $21 million during the first six months of 2009. We are pleased that we were able to produce this retail deposit growth while also reducing our overall cost of deposits by 18 basis points during the quarter."
On November 21, 2008, Banner received $124 million from the U.S. Treasury Department as a part of the Treasury's Capital Purchase Program. This funding marked Banner's successful completion of the sale of $124 million in senior preferred stock, with a related warrant to purchase up to $18.6 million in common stock, to the U.S. Treasury. The warrant provides the Treasury the option to purchase up to 1,707,989 shares of Banner Corporation common stock at a price of $10.89 per share at any time during the next ten years.
"Despite the challenging operating environment, Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as 'well-capitalized' under applicable regulatory standards," concluded Jones. Banner Corporation's Tier 1 leverage capital to average assets ratio was 9.90% and its total capital to risk-weighted assets ratio was 12.49% at June 30, 2009.
Tangible stockholders' equity at June 30, 2009 was $397.1 million, including $116.6 million attributable to preferred stock, compared to $295.2 million at June 30, 2008. Tangible common stockholders' equity was $280.4 million at June 30, 2009, or 6.20% of tangible assets, compared to $295.2 million, or 6.49% of tangible assets a year earlier. Tangible book value per common share was $15.42 at quarter-end, compared to $18.38 a year earlier. At June 30, 2009, Banner had 18.2 million shares outstanding, while it had 16.1 million shares outstanding a year ago.
Conference Call
Banner will host a conference call on Thursday, July 30, 2009, at 8:00 a.m. PDT, to discuss second quarter 2009 results. The conference call can be accessed live by telephone at 480-629-9770 using access code 4095680 to participate in the call. To listen to the call online, go to the Company's website at www.bannerbank.com. A replay will be available for a week at (303) 590-3030, using access code 4095680.
About the Company
Banner Corporation is a $4.5 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
This press release contains statements that the Company believes are "forward-looking statements." These statements relate to the Company's financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; fluctuations in agricultural commodity prices, crop yields and weather conditions; our ability to control operating costs and expenses; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in Banner's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
RESULTS OF OPERATIONS
---------------------
(in thousands except shares and per share data)
Quarters Ended Six Months
-------------------------------- ---------------------
Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
INTEREST
INCOME:
Loans
receivable $55,500 $56,347 $64,174 $111,847 $132,300
Mortgage-
backed
securities 1,569 1,801 1,087 3,370 2,240
Securities
and cash
equivalents 2,089 2,183 2,861 4,272 5,588
---------- ---------- ---------- ---------- ----------
59,158 60,331 68,122 119,489 140,128
INTEREST
EXPENSE:
Deposits 21,638 23,092 27,565 44,730 57,628
Federal Home
Loan Bank
advances 675 720 1,301 1,395 3,150
Other
borrowings 671 227 530 898 1,140
Junior
subordinated
debentures 1,249 1,333 1,666 2,582 3,730
---------- ---------- ---------- ---------- ----------
24,233 25,372 31,062 49,605 65,648
---------- ---------- ---------- ---------- ----------
Net interest
income
before
provision
for loan
losses 34,925 34,959 37,060 69,884 74,480
PROVISION
FOR LOAN
LOSSES 45,000 22,000 15,000 67,000 21,500
---------- ---------- ---------- ---------- ----------
Net interest
income
(loss) (10,075) 12,959 22,060 2,884 52,980
OTHER
OPERATING
INCOME:
Deposit fees
and other
service
charges 5,408 4,936 5,494 10,344 10,507
Mortgage
banking
operations 2,860 2,715 1,579 5,575 3,194
Loan
servicing
fees 248 (270) 467 (22) 816
Miscellaneous 412 520 363 932 694
---------- ---------- ---------- ---------- ----------
8,928 7,901 7,903 16,829 15,211
Increase
(Decrease)
in
valuation
of
financial
instruments
carried
at fair
value 11,049 (3,253) 649 7,796 1,472
---------- ---------- ---------- ---------- ----------
Total other
operating
income 19,977 4,648 8,552 24,625 16,683
OTHER
OPERATING
EXPENSE:
Salary and
employee
benefits 17,528 17,601 19,744 35,129 39,382
Less
capitalized
loan
origination
costs (2,834) (2,116) (2,728) (4,950) (4,969)
Occupancy
and
equipment 5,928 6,054 5,989 11,982 11,857
Information/
computer
data
services 1,599 1,534 1,840 3,133 3,829
Payment
and card
processing
services 1,555 1,453 1,768 3,008 3,299
Professional
services 1,183 1,194 1,331 2,377 2,086
Advertising
and
marketing 2,207 1,832 1,677 4,039 3,095
Deposit
insurance 4,102 1,497 633 5,599 960
State/
municipal
business
and use
taxes 532 540 576 1,072 1,140
Real estate
operations 1,805 623 678 2,428 834
Miscellaneous 3,286 3,581 3,714 6,867 7,417
---------- ---------- ---------- ---------- ----------
36,891 33,793 35,222 70,684 68,930
Goodwill
write-off -- -- 50,000 -- 50,000
---------- ---------- ---------- ---------- ----------
Total other
operating
expense 36,891 33,793 85,222 70,684 118,930
---------- ---------- ---------- ---------- ----------
Income
(Loss)
before
provision
(benefit)
for income
taxes (26,989) (16,186) (54,610) (43,175) (49,267)
PROVISION FOR
(BENEFIT FROM)
INCOME TAXES (10,478) (6,923) (2,305) (17,401) (796)
---------- ---------- ---------- ---------- ----------
NET INCOME
(LOSS) $(16,511) $(9,263) $(52,305) $(25,774) $(48,471)
========== ========== ========== ========== ==========
PREFERRED
STOCK
DIVIDEND
AND DISCOUNT
ACCRETION
Preferred
stock
dividend 1,550 1,550 -- 3,100 --
Preferred
stock
discount
accretion 373 373 -- 746 --
---------- ---------- ---------- ---------- ----------
NET INCOME
(LOSS)
AVAILABLE TO
COMMON
SHAREHOLDERS $(18,434) $(11,186) $(52,305) $(29,620) $(48,471)
========== ========== ========== ========== ==========
Earnings
(Loss) per
share
available to
common
shareholder
Basic $(1.04) $(0.65) $(3.31) $(1.70) $(3.06)
Diluted $(1.04) $(0.65) $(3.31) $(1.70) $(3.06)
Cumulative
dividends
declared per
common share $0.01 $0.01 $0.20 $0.02 $ 0.40
Weighted
average
common
shares
outstanding
Basic 17,746,051 17,159,793 15,821,934 17,454,542 15,834,728
Diluted 17,746,051 17,159,793 15,821,934 17,454,542 15,834,728
Common shares
repurchased
during the
period -- -- -- -- 613,903
Common shares
issued in
connection
with exercise
of stock
options
or DRIP 780,906 493,514 401,645 1,274,420 653,036
FINANCIAL CONDITION
--------------------
(in thousands except shares and per share data)
Jun 30, Mar 31, Jun 30, Dec 31,
2009 2009 2008 2008
----------- ---------- ----------- -----------
ASSETS
------
Cash and due
from banks $ 67,339 $ 72,811 $ 91,953 $ 89,964
Federal funds
and interest
-bearing
deposits 16,919 2,699 430 12,786
Securities -
at fair value 167,476 161,963 238,670 203,902
Securities -
available for
sale 50,980 66,963 -- 53,272
Securities -
held to
maturity 77,321 67,401 55,612 59,794
Federal Home
Loan Bank
stock 37,371 37,371 37,371 37,371
Loans
receivable:
Held for sale 8,377 11,071 6,817 7,413
Held for
portfolio 3,904,704 3,904,476 3,966,482 3,953,995
Allowance for
loan losses (90,694) (79,724) (58,570) (75,197)
----------- ---------- ----------- -----------
3,822,387 3,835,823 3,914,729 3,886,211
Accrued
interest
receivable 18,892 20,821 22,890 21,219
Real estate
owned held
for sale, net 56,967 38,951 11,390 21,782
Property and
equipment,
net 103,709 97,847 97,928 97,647
Goodwill and
other
intangibles,
net 12,365 13,026 86,205 13,716
Bank-owned
life
insurance 53,341 53,163 52,213 52,680
Other assets 47,475 41,285 26,953 34,024
----------- ---------- ----------- -----------
$ 4,532,542 $4,510,124 $ 4,636,344 $ 4,584,368
=========== ========== =========== ===========
LIABILITIES
-----------
Deposits:
Non-interest
-bearing $ 508,284 $ 508,593 $ 477,144 $ 509,105
Interest
-bearing
transaction
and savings
accounts 1,131,093 1,099,837 1,216,217 1,137,878
Interest
-bearing
certificates 2,110,466 2,019,074 2,063,392 2,131,867
----------- ---------- ----------- -----------
3,749,843 3,627,504 3,756,753 3,778,850
Advances from
Federal Home
Loan Bank at
fair value 115,946 172,102 182,496 111,415
Customer
repurchase
agreements
and other
borrowings 158,249 181,194 164,192 145,230
Junior
subordinated
debentures at
fair value 49,563 53,819 101,358 61,776
Accrued
expenses and
other
liabilities 36,652 37,759 37,438 40,600
Deferred
compensation 12,815 13,203 12,694 13,149
----------- ---------- ----------- -----------
4,123,068 4,085,581 4,254,931 4,151,020
STOCKHOLDERS' EQUITY
--------------------
Preferred
stock - Series A 116,661 116,288 -- 115,915
Common stock 322,582 318,628 299,425 316,740
Retained
earnings
(accumulated
deficit) (27,826) (9,210) 84,204 2,150
Other
components of
stockholders'
equity (1,943) (1,163) (2,216) (1,457)
----------- ---------- ----------- -----------
409,474 424,543 381,413 433,348
$ 4,532,542 $4,510,124 $ 4,636,344 $ 4,584,368
=========== ========== =========== ===========
Common Shares Issued:
Shares
outstanding
at end of
period 18,426,458 17,645,552 16,305,282 17,152,038
Less unearned
ESOP shares
at end of
period 240,381 240,381 240,381 240,381
----------- ---------- ----------- -----------
Shares
outstanding
at end of
period
excluding
unearned ESOP
shares 18,186,077 17,405,171 16,064,901 16,911,657
========== ========== ========== ==========
Common
stockholders'
equity per
share (1) $ 16.10 $ 17.71 $ 23.74 $ 18.77
Common
stockholders'
tangible
equity per
share (1) (2) $ 15.42 $ 16.96 $ 18.38 $ 17.96
Tangible
common
stockholders'
equity to
tangible
assets 6.20% 6.56% 6.49% 6.64%
Consolidated
Tier 1
leverage
capital ratio 9.90% 10.27% 8.80% 10.32%
(1) - Calculation is based on number of common shares outstanding at
the end of the period rather than weighted average shares
outstanding and excludes unallocated shares in the ESOP.
(2) - Tangible common equity excludes preferred stock, goodwill,
core deposit and other intangibles.
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
LOANS (including
loans held for Jun 30, Mar 31, Jun 30, Dec 31,
sale): 2009 2009 2008 2008
--------------- ---------- ---------- ---------- ----------
Commercial real
estate $1,049,921 $1,036,285 $ 983,732 $1,013,709
Multifamily real
estate 150,168 149,442 145,016 151,274
Commercial
construction 90,762 103,643 103,009 104,495
Multifamily
construction 56,968 46,568 17,681 33,661
One- to four-family
construction 337,368 365,421 540,718 420,673
Land and land
development 403,697 446,128 494,944 486,130
Commercial business 678,273 650,123 709,109 679,867
Agricultural business
including secured by
farmland 215,339 197,972 212,397 204,142
One- to four-family
real estate 653,513 643,705 511,611 599,169
Consumer 277,072 276,260 255,082 268,288
---------- ---------- ---------- ----------
Total loans
outstanding $3,913,081 $3,915,547 $3,973,299 $3,961,408
========== ========== ========== ==========
Restructured loans
performing under
their restructured
terms $ 55,031 $ 27,550 $ 7,771 $ 23,635
========== ========== ========== ==========
Loans 30 - 89 days
past due and on
accrual $ 34,038 $ 111,683 $ 22,659 $ 61,124
========== ========== ========== ==========
Total delinquent
loans (including
loans on non
-accrual) $ 259,107 $ 335,780 $ 112,577 $ 248,469
========== ========== ========== ==========
Total delinquent
loans / Total
loans outstanding 6.62% 8.58% 2.83% 6.27%
GEOGRAPHIC CONCENTRATION OF LOANS AT
June 30, 2009
------------------------------------
Washington Oregon Idaho Other Total
---------- ---------- ---------- ---------- ----------
Commercial
real
estate $785,186 $ 172,632 $81,478 $ 10,625 $1,049,921
Multifamily
real
estate 125,599 12,405 8,813 3,351 150,168
Commercial
con-
struction 65,357 15,171 10,234 -- 90,762
Multifamily
con-
struction 31,431 25,537 -- -- 56,968
One- to four-
family
con-
struction 166,637 151,704 19,027 -- 337,368
Land and
land
devel-
opment 195,192 155,902 52,603 -- 403,697
Commercial
business 496,605 93,752 70,818 17,098 678,273
Agricultural
business
including
secured by
farmland 101,717 48,807 64,815 -- 215,339
One- to four-
family
real
estate 486,614 131,853 31,766 3,280 653,513
Consumer 197,377 61,659 17,535 501 277,072
---------- --------- -------- -------- ----------
Total loans
outstand-
ing $2,651,715 $ 869,422 $ 357,089 $ 34,855 $3,913,081
========== ========= ========== ========== ==========
Percent of
total
loans 67.8% 22.2% 9.1% 0.9% 100.0%
DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT
June 30, 2009
--------------------------------------------
Washington Oregon Idaho Other Total
---------- ---------- ---------- ---------- ----------
Residential
Acquisition &
develop-
ment $ 94,895 $ 112,263 $ 22,088 $ -- $ 229,246
Improved
lots 48,448 30,581 4,107 -- 83,136
Unimproved
land 25,523 10,988 21,167 -- 57,678
Commercial
& industrial
Acquisition &
develop-
ment 4,013 -- 197 -- 4,210
Improved
land 11,366 587 398 -- 12,351
Unimproved
land 10,947 1,483 4,646 -- 17,076
---------- ---------- ---------- ---------- ----------
Total
land &
land
development
loans
outstand-
ing $ 195,192 $ 155,902 $ 52,603 $ -- $ 403,697
========== ========== ========== ========== ==========
BANR - Second Quarter 2009 Results
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Quarters Ended Six Months Ended
--------------------------- -----------------
CHANGE IN THE Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
ALLOWANCE FOR 2009 2009 2008 2009 2008
LOAN LOSSES ------- ------- ------- ------- -------
--------------
Balance, beginning
of period $79,724 $75,197 $50,446 $75,197 $45,827
Provision 45,000 22,000 15,000 67,000 21,500
Recoveries of loans
previously charged
off:
Commercial real
estate -- -- -- -- --
Multifamily real
estate -- -- -- -- --
Construction
and land 266 52 9 318 9
One- to four-
family real
estate 89 2 40 91 40
Commercial
business 249 70 174 319 260
Agricultural
business,
including
secured by
farmland 22 -- 5 22 8
Consumer 32 31 27 63 82
------- ------- ------- ------- -------
658 155 255 813 399
Loans charged-off:
Commercial
real estate -- -- (7) -- (7)
Multifamily
real estate -- -- -- -- --
Construction
and land (27,290) (12,417) (5,081) (39,707) (6,049)
One- to four-
family real
estate (1,181) (1,091) (119) (2,272) (191)
Commercial
business (2,438) (3,794) (1,770) (6,232) (2,550)
Agricultural
business,
including
secured by
farmland (3,186) -- -- (3,186) --
Consumer (593) (326) (154) (919) (359)
------- ------- ------- ------- -------
(34,688) (17,628) (7,131) (52,316) (9,156)
------- ------- ------- ------- -------
Net charge-offs (34,030) (17,473) (6,876) (51,503) (8,757)
------- ------- ------- ------- -------
Balance, end of
period $90,694 $79,724 $58,570 $90,694 $58,570
======= ======= ======= ======= =======
Net charge-offs /
Average loans
outstanding 0.87% 0.44% 0.18% 1.31% 0.23%
ALLOCATION OF
ALLOWANCE FOR Jun 30, Mar 31, Jun 30, Dec 31,
LOAN LOSSES 2009 2009 2008 2008
-------------- ------- ------- ------- -------
Specific or
allocated loss
allowance
Commercial
real estate $ 5,333 $ 4,972 $ 4,518 $ 4,199
Multifamily
real estate 83 84 524 87
Construction
and land 55,585 46,297 19,991 38,253
One- to four-
family real
estate 1,333 814 2,322 752
Commercial
business 19,474 18,186 21,494 16,533
Agricultural
business,
including secured
by farmland 1,323 587 1,634 530
Consumer 1,540 1,682 2,583 1,730
------- ------- ------- -------
Total allocated 84,671 72,622 53,066 62,084
Estimated
allowance for
undisbursed
commitments 1,976 1,358 543 1,108
Unallocated 4,047 5,744 4,961 12,005
------- ------- ------- -------
Total allowance
for loan losses $90,694 $79,724 $58,570 $75,197
======= ======= ======= =======
Allowance for loan
losses / Total
loans outstanding 2.32% 2.04% 1.47% 1.90%
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Jun 30, Mar 31, Jun 30, Dec 31,
2009 2009 2008 2008
--------- --------- --------- ---------
NON-PERFORMING ASSETS
---------------------
Loans on non-accrual
status
Secured by real estate:
Commercial $ 7,244 $ 15,180 $ 5,907 $ 12,879
Multifamily -- 968 -- --
Construction and land 180,989 175,794 70,340 154,823
One- to four-family 15,167 21,900 5,526 8,649
Commercial business 10,508 7,500 6,875 8,617
Agricultural business,
including secured by
farmland 7,478 2,176 265 1,880
Consumer 2,058 275 -- 130
--------- --------- --------- ---------
223,444 223,793 88,913 186,978
Loans more than 90 days
delinquent, still on
accrual
Secured by real estate:
Commercial -- -- -- --
Multifamily -- -- -- --
Construction and land 603 -- -- --
One- to four-family 624 161 889 124
Commercial business 209 -- -- --
Agricultural business,
including secured by
farmland -- -- -- --
Consumer 189 143 116 243
--------- --------- --------- ---------
1,625 304 1,005 367
--------- --------- --------- ----------
Total non-performing
loans 225,069 224,097 89,918 187,345
Securities on non-accrual
at fair value -- 160 -- --
Real estate owned (REO) /
Repossessed assets 57,197 39,109 11,397 21,886
--------- --------- --------- ---------
Total non-performing
assets $ 282,266 $ 263,366 $ 101,315 $ 209,231
========= ========= ========= =========
Total non-performing
assets / Total assets 6.23% 5.84% 2.19% 4.56%
DETAIL & GEOGRAPHIC
CONCENTRATION OF
NON-PERFORMING
ASSETS AT
June 30, 2009
------------- Washington Oregon Idaho Other Total
---------- ---------- ---------- ---------- ----------
Secured by real
estate:
Commercial $ 6,611 $ 483 $ 150 $ -- $ 7,244
Multifamily -- -- -- -- --
Construction
and land
One- to four-
family
construction 33,652 30,181 10,732 -- 74,565
Residential
land
acquisition
& development 31,951 31,365 8,633 -- 71,949
Residential
land improved
lots 7,636 6,238 1,894 -- 15,768
Residential
land
unimproved 11,711 180 2,253 -- 14,144
Commercial
land
acquisition
& development -- -- -- -- --
Commercial
land improved -- 591 -- -- 591
Commercial
land un-
improved 4,382 -- 193 -- 4,575
---------- ---------- ---------- ---------- ----------
Total
construction
and land 89,332 68,555 23,705 -- 181,592
One- to four-
family 8,202 2,006 5,557 26 15,791
Commercial
business 9,731 456 530 -- 10,717
Agricultural
business,
including
secured by
farmland 694 378 6,406 -- 7,478
Consumer 1,522 448 184 93 2,247
---------- ---------- ---------- ---------- ----------
Total non-
performing
loans 116,092 72,326 36,532 119 225,069
Securities on
non - accrual -- -- -- -- 0
Real estate
owned (REO) and
repossessed
assets 38,354 15,131 2,833 879 57,197
---------- ---------- ---------- ---------- ----------
Total non-
performing
assets at
end of the
period $ 154,446 $ 87,457 $ 39,365 $ 998 $ 282,266
========== ========== ========== ========== ==========
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSITS & OTHER
BORROWINGS
---------------- Jun 30, Mar 31, Jun 30, Dec 31,
BREAKDOWN OF DEPOSITS 2009 2009 2008 2008
--------------------- ---------- ---------- ---------- ----------
Non-interest-bearing $ 508,284 $ 508,593 $ 477,144 $ 509,105
---------- ---------- ---------- ----------
Interest-bearing
checking 312,024 307,741 411,571 378,952
Regular savings
accounts 499,447 490,239 580,482 474,885
Money market accounts 319,622 301,857 224,164 284,041
---------- ---------- ---------- ----------
Interest-bearing
transaction & savings
accounts 1,131,093 1,099,837 1,216,217 1,137,878
---------- ---------- ---------- ----------
Interest-bearing
certificates 2,110,466 2,019,074 2,063,392 2,131,867
---------- ---------- ---------- ----------
Total deposits $3,749,843 $3,627,504 $3,756,753 $3,778,850
========== ========== ========== ==========
INCLUDED IN OTHER
BORROWINGS
-----------------
Customer repurchase
agreements / "Sweep
accounts" $ 108,277 $ 131,224 $ 91,192 $ 145,230
========== ========== ========== ==========
GEOGRAPHIC CONCENTRATION
OF DEPOSITS AT
June 30, 2009 Washington Oregon Idaho Total
--------------------- ---------- ---------- ---------- ----------
$2,941,140 $ 566,065 $ 242,638 $3,749,843
========== ========== ========== ==========
REGULATORY CAPITAL
RATIOS AT Minimum
------------------ for Capital
June 30, 2009 Actual or "Well Capitalized"
------------------ ---------------------- ----------------------
Amount Ratio Amount Ratio
---------- ---------- ---------- ----------
Banner Corporation-
consolidated
Total capital to
risk-weighted assets $ 497,049 12.49% $ 318,332 8.00%
Tier 1 capital to
risk-weighted assets 446,804 11.23% 159,166 4.00%
Tier 1 leverage capital
to average assets 446,804 9.90% 180,436 4.00%
Banner Bank
Total capital to
risk-weighted assets 465,484 12.19% 382,002 10.00%
Tier 1 capital to
risk-weighted assets 417,222 10.92% 229,201 6.00%
Tier 1 leverage capital
to average assets 417,222 9.63% 216,703 5.00%
Islanders Bank
Total capital to
risk-weighted assets 25,209 13.60% 18,542 10.00%
Tier 1 capital to
risk-weighted assets 23,726 12.80% 11,125 6.00%
Tier 1 leverage capital
to average assets 23,726 11.59% 10,240 5.00%
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
Quarters Ended Six Months Ended
-------------------------------- ---------------------
OPERATING Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
PERFORMANCE 2009 2009 2008 2009 2008
----------- ---------- ---------- ---------- ---------- ----------
Average loans $3,925,196 $3,942,917 $3,917,563 $3,934,002 $3,874,277
Average
securities
and deposits 394,244 403,514 336,662 398,856 324,605
Average non-
interest-
earning assets 199,981 193,188 352,639 196,604 354,960
---------- ---------- ---------- ---------- ----------
Total average
assets $4,519,421 $4,539,619 $4,606,864 $4,529,462 $4,553,842
========== ========== ========== ========== ==========
Average
deposits $3,679,653 $3,693,345 $3,719,748 $3,686,455 $3,662,934
Average
borrowings 429,708 416,927 419,280 423,359 415,421
Average non-
interest-
bearing
liabilities (18,421) (7,922) 31,475 (13,201) 36,130
---------- ---------- ---------- ---------- ----------
Total average
liabilities 4,090,940 4,102,350 4,170,503 4,096,613 4,114,485
Total average
stockholders'
equity 428,481 437,269 436,361 432,849 439,357
---------- ---------- ---------- ---------- ----------
Total average
liabilities
and equity $4,519,421 $4,539,619 $4,606,864 $4,529,462 $4,553,842
========== ========== ========== ========== ==========
Interest rate
yield on loans 5.67% 5.80% 6.59% 5.73% 6.87%
Interest rate
yield on
securities
and deposits 3.72% 4.00% 4.72% 3.86% 4.85%
---------- ---------- ---------- ---------- ----------
Interest rate
yield on
interest-
earning
assets 5.49% 5.63% 6.44% 5.56% 6.71%
---------- ---------- ---------- ---------- ----------
Interest rate
expense on
deposits 2.36% 2.54% 2.98% 2.45% 3.16%
Interest rate
expense on
borrowings 2.42% 2.22% 3.35% 2.32% 3.88%
---------- ---------- ---------- ---------- ----------
Interest rate
expense on
interest-
bearing
liabilities 2.37% 2.50% 3.02% 2.43% 3.24%
---------- ---------- ---------- ---------- ----------
Interest rate
spread 3.12% 3.13% 3.42% 3.13% 3.47%
========== ========== ========== ========== ==========
Net interest
margin 3.24% 3.26% 3.50% 3.25% 3.57%
========== ========== ========== ========== ==========
Other operating
income /
Average assets 1.77% 0.42% 0.75% 1.10% 0.74%
Other operating
income (loss)
EXCLUDING
change in
valuation of
financial
instruments
carried at
fair value /
Average
assets (1) 0.79% 0.71% 0.69% 0.75% 0.67%
Other operating
expense /
Average assets 3.27% 3.02% 7.44% 3.15% 5.25%
Other operating
expense
EXCLUDING
goodwill
write-off /
Average
assets (1) 3.27% 3.02% 3.08% 3.15% 3.04%
Efficiency
ratio (other
operating
expense /
revenue) 67.19% 85.32% 186.84% 74.79% 130.46%
Return (Loss)
on average
assets (1.47%) (0.83%) (4.57%) (1.15%) (2.14%)
Return (Loss)
on average
equity (15.46%) (8.59%) (48.21%) (12.01%) (22.19%)
Return (Loss)
on average
tangible
equity (2) (15.93%) (8.86%) (70.04%) (12.38%) (32.20%)
Average equity/
Average assets 9.48% 9.63% 9.47% 9.56% 9.65%
(1) - Earnings information excluding the fair value adjustments and
goodwill impairment charge (alternately referred to as
operating income (loss) from core operations and expenses from
core operations) represent non-GAAP (Generally Accepted
Accounting Principles) financial measures
(2) - Average tangible equity excludes goodwill, core deposit and
other intangibles