Banner Corporation (NASDAQ GSM: BANR) ("Banner"), the parent
company of Banner Bank and Islanders Bank, today reported net
income of $16.9 million, or $0.47 per diluted share, for the first
quarter 2020, compared to $33.7 million, or $0.95 per diluted
share, in the preceding quarter and $33.3 million, or $0.95 per
diluted share, in the first quarter of 2019. Banner's first
quarter earnings reflect the impact of the COVID-19 pandemic
resulting in a substantial reduction in business activity or the
closing of businesses in all the western states Banner operates.
First quarter of 2020 results also include $1.1
million of acquisition-related expenses, compared to $4.4 million
of acquisition-related expenses in the preceding quarter and $2.1
million in the first quarter of 2019.
“We are in unprecedented times - as a health
crisis has quickly evolved to also become an economic crisis,
creating far-reaching impacts to clients and the communities we
serve,” said Mark Grescovich, President and CEO. “In
mid-March we began preparations for the COVID-19 pandemic by
closing branch lobbies, mobilizing personnel to work from home and
providing appropriate IT equipment and services to accommodate
Stay-At-Home Orders. Our lending teams have reached out to
borrowers that have been affected by the economic decline and
offered assistance in various forms including deferred payments and
interest-only payments. We have worked with our customers to
file applications for the Paycheck Protection Program offered
through the Small Business Administration and expect this program
to provide some near-term relief to help small businesses sustain
operations. Meanwhile, we are monitoring the economy closely
and reviewing loan payment deferrals and interest waivers daily and
have elevated our liquidity levels in anticipation of cash needs of
our customers.”
Grescovich concluded, “In anticipation of future
credit losses, we determined it is prudent to increase the
allowance for credit losses through the addition of $21.7 million
in credit loss provisions for the quarter ended March 31, 2020.”
This provision compares to a $4.0 million provision for loan losses
during the previous quarter and a $2.0 million provision for loan
losses in the first quarter a year ago. The allowance for
credit losses - loans was 1.41% of total loans and 299% of
non-performing loans at the end of the first quarter of 2020. The
increased allowance includes provisions taken in anticipation of
changes in risks associated with loan classification assignments
and a deteriorating economy.
At March 31, 2020, Banner Corporation had
$12.78 billion in assets, $9.16 billion in net loans and $10.45
billion in deposits. Banner operates 176 branch offices,
including branches located in eight of the top 20 largest western
Metropolitan Statistical Areas by population.
COVID-19 Pandemic Response
- SBA Paycheck Protection
Program. The U.S. Small Business Administration
(SBA) is providing assistance to small businesses impacted by
COVID-19 through the Paycheck Protection Program (PPP), which is
designed to provide near-term relief to help small businesses
sustain operations. Banner is offering small businesses loans
to clients in its service area through this program. As of
April 16, 2020, the funds allocated to the PPP from the CARES Act
had been fully allocated. Congress recently approved a second round
of funding for the PPP. Banner will continue to process
applications received under the PPP until the available funds have
been fully allocated. Banner is also planning to assist small
businesses with accessing other borrowing options as they become
available, including the Main Street Lending Program and other
government sponsored lending programs, as appropriate.
- Loan
Accommodations. Banner is offering payment and financial
relief programs for borrowers impacted by COVID-19. These programs
include loan payment deferrals for up to 90 days, waived late fees,
and, on a more limited basis, waived interest or allowed
interest-only loan payments and we have temporarily suspended
foreclosure proceedings. Since these loans were performing
loans that were current on their payments prior to COVID-19, these
modifications are not considered to be troubled debt
restructurings.
- Allowance for Credit Losses
- Loans. Banner recorded a provision for credit
losses of $21.7 million for the first quarter of 2020, compared to
a $4.0 million provision in the preceding quarter and a $2.0
million provision in the first quarter a year ago. The
provision for the current quarter reflects expected lifetime credit
losses based upon the conditions and economic outlook that existed
as of March 31, 2020. The probability of further decline in
economic conditions, including higher unemployment rates and lower
gross domestic product, has increased since quarter end and should
it materialize, an additional provision for expected credit losses
will be necessary.
- Branch Operations, IT
Changes and One-Time Expenses. We have taken various steps
to help protect customers and staff by limiting branch activities
to appointment only and use of our drive-up facilities, and by
encouraging the use of our digital and electronic banking channels,
all the while adjusting for evolving State and Federal
guidelines. To further the well-being of staff and customers,
Banner implemented measures to allow employees to work from home to
the extent practicable. To facilitate this approach, Banner
allocated additional computer equipment to staff and enhanced the
Company's network capabilities with several upgrades. These
expenses plus other expenses incurred in response to the COVID-19
pandemic resulted in $239,000 of related costs during the first
quarter of 2020.
- Capital
Management. At March 31, 2020, the tangible
common shareholders' equity to tangible assets ratio was 9.70% and
Banner’s capital was well in excess of all regulatory requirements.
During the current quarter, prior to the COVID-19 pandemic
outbreak, Banner repurchased 624,780 shares of its common
stock. To preserve capital, Banner has discontinued any
additional repurchase of shares until further notice and will
closely monitor capital levels going forward.
First Quarter 2020
Highlights
- Revenues were $138.4 million,
compared to $139.8 million in the preceding quarter, and increased
3% when compared to $134.2 million in the first quarter a year
ago.
- Net interest income, before the
provision for loan losses, was $119.3 million in the first quarter
of 2020, compared to $119.5 million in the preceding quarter and
$116.1 million in the first quarter a year ago.
- Net interest margin was 4.19%,
compared to 4.20% in the preceding quarter and 4.37% in the first
quarter a year ago.
- Mortgage banking revenues increased
63% to $10.2 million, compared to $6.2 million in the preceding
quarter, and increased 198% compared to $3.4 million in the first
quarter a year ago, reflecting strong refinance demand due to
decreasing market interest rates.
- Return on average assets was 0.54%,
compared to 1.07% in the preceding quarter and 1.15% in the first
quarter a year ago.
- Net loans receivable decreased
modestly to $9.16 billion at March 31, 2020, compared to $9.20
billion at December 31, 2019, and increased 7% when compared
to $8.60 billion at March 31, 2019.
- Non-performing assets increased to
$46.1 million, or 0.36% of total assets, at March 31, 2020,
compared to $40.5 million, or 0.32% of total assets in the
preceding quarter, and $22.0 million, or 0.19% of total assets, at
March 31, 2019.
- Provision for credit losses - loans
was $21.7 million, and the allowance for credit losses - loans was
$130.5 million, or 1.41% of total loans receivable, as of
March 31, 2020, compared to $100.6 million, or 1.08% of total
loans receivable as of December 31, 2019.
- Provision for credit losses -
unfunded loan commitments was $1.7 million, and the allowance for
credit losses - unfunded loan commitments was $11.5 million as of
March 31, 2020, compared to $2.7 million as of
December 31, 2019.
- Core deposits increased 4% to $9.28
billion at March 31, 2020, compared to $8.93 billion at
December 31, 2019, and increased 13% compared to $8.21 billion
a year ago. Core deposits represented 89% of total deposits
at March 31, 2020.
- Dividends to shareholders were
$0.41 per share in the quarter ended March 31, 2020.
- Common shareholders’ equity per
share increased 2% to $45.63 at March 31, 2020, compared to
$44.59 at the preceding quarter end, and increased 6% from $42.99 a
year ago.
- Tangible common shareholders'
equity per share* increased 3% to $34.23 at March 31, 2020,
compared to $33.33 at the preceding quarter end, and increased 5%
from $32.47 a year ago.
*Tangible common shareholders' equity per share
and the ratio of tangible common equity to tangible assets (both of
which exclude goodwill and other intangible assets, net), and
references to adjusted revenue (which excludes fair value
adjustments and net gain (loss) on the sale of securities from the
total of net interest income before provision for loan losses and
non-interest income) and the adjusted efficiency ratio (which
excludes acquisition-related expenses, COVID-19 expenses,
amortization of core deposit intangibles, real estate owned gain
(loss), Federal Home Loan Bank (FHLB) prepayment penalties and
state/municipal taxes from non-interest expense divided by adjusted
revenue) 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 two pages of this press
release.
Significant Recent Initiatives and
Events
On November 1, 2019, Banner completed the
acquisition of AltaPacific Bancorp (“AltaPacific”) and its
wholly-owned subsidiary, AltaPacific Bank, of Santa Rosa,
California. At closing AltaPacific Bank had six branch
locations, including one in Northern California and five in
Southern California. Pursuant to the previously announced
terms, AltaPacific shareholders received 0.2712 shares of Banner
common stock in exchange for each share of AltaPacific common
stock, plus cash in lieu of any fractional shares and cash to
buyout AltaPacific stock options for a total consideration paid of
$87.6 million.
The AltaPacific merger was accounted for using
the acquisition method of accounting. Accordingly, the assets
(including identifiable intangible assets) and the liabilities of
AltaPacific were measured at their respective estimated fair values
as of the merger date. The excess of the purchase price over
the fair value of the net assets acquired was attributed to
goodwill. The fair value on the merger date represents
management's best estimates based on available information and
facts and circumstances in existence on the merger date. The
acquisition accounting is subject to adjustment within a
measurement period of one year from the acquisition date. The
acquisition provided $425.7 million of assets, $332.4 million of
loans, and $313.4 million of deposits to Banner. During the
first quarter of 2020, Banner completed the integration of
AltaPacific systems into Banner's core systems and closure of
overlapping branches.
Adoption of New Accounting
Standard
In June 2016, Financial Accounting Standards
Board issued Accounting Standard Update No. 2016-13, Measurement of
Credit Losses on Financial Instruments (ASU 2016-13). GAAP
prior to ASU 2016-13 required an “incurred loss” methodology for
recognizing credit losses that delays recognition until it is
probable a loss has been incurred. The main objective of ASU
2016-13 is to provide financial statement users with more
decision-useful information about the expected credit losses on
financial instruments and other commitments to extend credit held
by a reporting entity at each reporting date. ASU 2016-13
became effective for Banner on January 1, 2020. The adoption
of ASU No. 2016-13 resulted in a $7.8 million increase to its
allowance for credit losses - loans and a $7.0 million increase to
its allowance for credit losses - unfunded loan commitments.
The combined increases were recorded net of tax as an $11.2 million
reduction to retained earnings as of the adoption date.
Income Statement Review
Net interest income, before the provision for
credit losses, was $119.3 million in the first quarter of 2020,
compared to $119.5 million in the preceding quarter and $116.1
million in the first quarter a year ago.
Banner's net interest margin was 4.19% for the
first quarter of 2020, a one basis-point decrease compared to 4.20%
in the preceding quarter and an 18 basis-point decrease compared to
4.37% in the first quarter a year ago. Grescovich added, "The
net interest margin remained steady during the quarter as improved
securities yields combined with a decline in funding cost helped
offset the decline in loan yields. The 150 basis-point
decrease in the fed funds target rate did not occur until late in
the quarter in March 2020, and the full effect of the lower
interest rate environment had not yet been realized at quarter
end. Banner expects to see further margin compression during
the second quarter." Acquisition accounting adjustments added
ten basis points to the net interest margin in the current quarter
compared to eight basis points in the preceding quarter and seven
basis points in the first quarter a year ago. The total
purchase discount for acquired loans was $22.2 million at
March 31, 2020, compared to $25.0 million at December 31,
2019, and $24.2 million at March 31, 2019.
Average interest-earning asset yields decreased
six basis points to 4.63% in the first quarter compared to 4.69%
for the preceding quarter and decreased 26 basis points compared to
4.89% in the first quarter a year ago. Average loan yields
decreased ten basis points to 5.03% compared to 5.13% in the
preceding quarter and decreased 28 basis points compared to 5.31%
in the first quarter a year ago. Loan discount accretion
added 12 basis points to loan yields in the first quarter of 2020,
compared to 11 basis points in the preceding quarter and nine basis
points in the first quarter a year ago. Deposit costs were
0.35% in the first quarter of 2020, a five basis-point decrease
compared to the preceding quarter and a two basis-point decrease
compared to the first quarter a year ago. The decrease in
deposit costs during the current quarter compared to the preceding
quarter are the result of recent decreases in market interest
rates; however, changes in the average rate paid on
interest-bearing deposits tend to lag changes in market interest
rates. The total cost of funds was 0.46% during the first
quarter of 2020, a six basis-point decrease compared to the
preceding quarter and a ten basis-point decrease compared to the
first quarter a year ago.
Banner recorded a $21.7 million provision for
credit losses in the current quarter, compared to $4.0 million in
the prior quarter and $2.0 million in the same quarter a year ago
as calculated under the prior incurred loss methodology. The
provision for the current quarter reflects expected lifetime credit
losses based upon the conditions that existed as of March 31, 2020
and the potential effects from forecasted deterioration of economic
metrics due to the COVID-19 pandemic based on the outlook as of
March 31, 2020.
Total non-interest income was $19.2 million in
the first quarter of 2020, compared to $20.3 million in the fourth
quarter of 2019 and $18.1 million in the first quarter a year
ago. Deposit fees and other service charges were $9.8 million
in the first quarter of 2020, compared to $9.6 million in the
preceding quarter and $12.6 million in the first quarter a year
ago. The decrease in deposit fees and other service charges
from the first quarter a year ago is primarily a result of Banner
becoming subject to the Durbin Amendment on July 1, 2019, which
reduced interchange fee income by approximately $7 million during
the second half of 2019. Mortgage banking revenues, including
gains on one- to four-family and multifamily loan sales and loan
servicing fees, increased to $10.2 million in the first quarter,
compared to $6.2 million in the preceding quarter and $3.4 million
in the first quarter of 2019. The higher mortgage banking
revenue quarter-over-quarter primarily reflects an increase in the
gain on sale spread on one- to four-family held for sale
loans. The increases compared to the first quarter of 2019
were primarily due to increased production of one- to four-family
held-for-sale loans primarily due to increased refinance
activity. Home purchase activity accounted for 54% of one- to
four-family mortgage loan originations in the first quarter of
2020, compared to 56% in the prior quarter and 80% in the first
quarter of 2019.
Banner’s first quarter 2020 results included a
$4.6 million net loss for fair value adjustments as a result of
changes in the valuation of financial instruments carried at fair
value, principally comprised of certain investment securities held
for trading as a result of widening market spreads during the
quarter, and a $78,000 net gain on the sale of securities. In
the preceding quarter, results included a $36,000 net loss for fair
value adjustments and a $62,000 net gain on the sale of
securities. In the first quarter a year ago, results included
an $11,000 net gain for fair value adjustments and a $1,000 net
gain on the sale of securities.
Total revenue decreased nominally to $138.4
million for the first quarter of 2020, compared to $139.8 million
in the preceding quarter, and increased 3% compared to $134.2
million in the first quarter a year ago. Adjusted revenue*
(the total of net interest income before provision for credit
losses and total non-interest income excluding the net gain and
loss on the sale of securities and the net change in valuation of
financial instruments) was $142.9 million in the first quarter of
2020, compared to $139.7 million in the preceding quarter and
$134.2 million in the first quarter of 2019.
Banner’s total non-interest expense was $95.2
million in the first quarter of 2020, compared to $93.7 million in
the preceding quarter and $90.0 million in the first quarter of
2019. The increase in non-interest expense during the first
quarter of 2020 reflects the first full quarter expenses associated
with the operations acquired from AltaPacific, as well as lower
deferred loan costs primarily related to lower loan
originations. Acquisition-related expenses were $1.1 million
for the first quarter of 2020, compared to $4.4 million for the
preceding quarter and $2.1 million in the first quarter of
2019. The current quarter includes a $1.7 million provision
for credit losses - unfunded loan commitments compared to no
provision for the prior quarter or the year ago quarter.
Banner’s efficiency ratio was 68.76% for the current quarter,
compared to 67.03% in the preceding quarter and 67.06% in the year
ago quarter. Banner’s adjusted efficiency ratio* was 63.47%
for the current quarter, compared to 61.19% in the preceding
quarter and 63.32% in the year ago quarter.
For the first quarter of 2020, Banner had $4.6
million in state and federal income tax expense for an effective
tax rate of 21.4%, reflecting the benefits from tax exempt
income. Banner’s statutory income tax rate is 23.5%,
representing a blend of the statutory federal income tax rate of
21.0% and apportioned effects of the state income tax rates.
Balance Sheet Review
Total assets increased 1% to $12.78 billion at
March 31, 2020, compared to $12.60 billion at
December 31, 2019, and increased 9% when compared to $11.74
billion at March 31, 2019. The total of securities and
interest-bearing deposits held at other banks was $2.15 billion at
March 31, 2020, compared to $1.89 billion at both
December 31, 2019 and March 31, 2019. The increase
during the current quarter was primarily the result of security
purchases made towards the end of the quarter as balance sheet
liquidity increased and market spreads widened. The average
effective duration of Banner's securities portfolio was
approximately 2.9 years at March 31, 2020, compared to 3.0 years at
March 31, 2019.
Net loans receivable decreased modestly to $9.16
billion at March 31, 2020, compared to $9.20 billion at
December 31, 2019, and increased 7% when compared to $8.60
billion at March 31, 2019. The year-over-year increase
in net loans included $332.4 million of portfolio loans acquired in
the AltaPacific acquisition during the preceding quarter.
Commercial real estate and multifamily real estate loans increased
slightly to $4.02 billion at March 31, 2020, compared to $4.01
billion at December 31, 2019, and increased 11% compared to
$3.63 billion a year ago. Commercial business loans increased
1% to $2.17 billion at March 31, 2020, compared to $2.14
billion at December 31, 2019, and increased 12% compared to
$1.94 billion a year ago. Agricultural business loans
decreased to $330.3 million at March 31, 2020, compared to
$337.3 million three months earlier and $339.5 million a year
ago. Total construction, land and land development loans were
$1.22 billion at March 31, 2020, a small decrease from $1.23
billion at December 31, 2019, and a 6% increase compared to
$1.15 billion a year earlier. Consumer loans decreased to
$661.8 million at March 31, 2020, compared to $664.3 million
at December 31, 2019, and $693.3 million a year ago. One- to
four-family loans decreased to $881.4 million at March 31,
2020, compared to $925.5 million at December 31, 2019, and
$942.5 million a year ago.
Loans held for sale were $182.4 million at
March 31, 2020, compared to $210.4 million at
December 31, 2019, and $45.9 million at March 31,
2019. The volume of one- to four- family residential mortgage
loans sold was $204.0 million in the current quarter, compared to
$268.1 million in the preceding quarter and $107.2 million in the
first quarter a year ago. During the first quarter of 2020,
Banner sold $119.7 million in multifamily loans compared to $103.4
million in the preceding quarter and $149.9 million in the first
quarter a year ago.
Total deposits increased 4% to $10.45 billion at
March 31, 2020, compared to $10.05 billion at
December 31, 2019, and increased 11% when compared to $9.38
billion a year ago. The year-over-year increase in deposits
included $313.4 million in deposits acquired in the AltaPacific
acquisition during the preceding quarter.
Non-interest-bearing account balances increased 4% to $4.11 billion
at March 31, 2020, compared to $3.95 billion at
December 31, 2019, and increased 12% compared to $3.68 billion
a year ago. Core deposits (non-interest-bearing and
interest-bearing transaction and savings accounts) increased 4%
from the prior quarter and increased 13% compared to a year ago and
represented 89% of total deposits at March 31, 2020.
Certificates of deposit increased 4% to $1.17 billion at
March 31, 2020, compared to $1.12 billion at December 31,
2019, and increased slightly compared to $1.16 billion a year
earlier. The increase in certificates of deposit during the
first quarter of 2020 primarily reflects the increase in brokered
deposits to $251.0 million at March 31, 2020, compared to
$202.9 million at December 31, 2019 and $239.4 million a year
ago. FHLB borrowings totaled $247.0 million at March 31,
2020, compared to $450.0 million at December 31, 2019, and
$418.0 million a year earlier.
At March 31, 2020, total common
shareholders' equity was $1.60 billion, or 12.53% of assets,
compared to $1.59 billion or 12.65% of assets at December 31,
2019, and $1.51 billion or 12.87% of assets a year ago. At
March 31, 2020, tangible common shareholders' equity*, which
excludes goodwill and other intangible assets, net, was $1.20
billion, or 9.70% of tangible assets*, compared to $1.19 billion,
or 9.77% of tangible assets, at December 31, 2019, and $1.14
billion, or 10.04% of tangible assets, a year ago. Banner's
tangible book value per share* increased to $34.23 at
March 31, 2020, compared to $32.47 per share a year ago.
Banner and its subsidiary banks continue to
maintain capital levels in excess of the requirements to be
categorized as “well-capitalized.” At March 31,
2020, Banner's common equity Tier 1 capital ratio was 10.52%, its
Tier 1 leverage capital to average assets ratio was 10.45%, and its
total capital to risk-weighted assets ratio was 12.98%.
Credit Quality
The allowance for credit losses - loans was
$130.5 million at March 31, 2020, or 1.41% of total loans
receivable outstanding and 299% of non-performing loans, compared
to $100.6 million at December 31, 2019, or 1.08% of total
loans receivable outstanding and 254% of non-performing loans, and
$97.3 million at March 31, 2019, or 1.12% of total loans
receivable outstanding and 504% of non-performing loans. In
addition to the allowance for credit losses - loans, Banner
maintains an allowance for credit losses - unfunded loan
commitments which was $11.5 million at March 31, 2020, compared to
$2.7 million at December 31, 2019 and $2.6 million at March 31,
2019. Net loan recoveries totaled $404,000 in the first
quarter, compared to net loan charge-offs of $1.2 million in both
the preceding quarter and in the first quarter a year ago.
Banner recorded a $21.7 million provision for credit losses in the
current quarter, compared to $4.0 million in the prior quarter and
$2.0 million in the year ago quarter primarily due to forecasted
credit losses related to the COVID-19 pandemic.
Non-performing loans were $43.7 million at March 31, 2020,
compared to $39.6 million at December 31, 2019, and $19.3
million a year ago. The increase in non-performing loans
year-over-year was largely due to one commercial banking
relationship totaling $14.7 million moving to nonaccrual during the
prior quarter. Real estate owned and other repossessed assets
were $2.4 million at March 31, 2020, compared to $936,000 at
December 31, 2019, and $2.7 million a year ago.
In accordance with acquisition accounting, loans
acquired from acquisitions 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 credit losses is
recorded for acquired loans at the acquisition date. At
March 31, 2020, the total purchase discount for acquired loans
was $22.2 million.
Banner's total non-performing assets were $46.1
million, or 0.36% of total assets, at March 31, 2020, compared
to $40.5 million, or 0.32% of total assets, at December 31,
2019, and $22.0 million, or 0.19% of total assets, a year ago.
Conference Call
Banner will host a conference call on Tuesday,
April 28, 2020, 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
10140349, or at www.bannerbank.com.
About the Company
Banner Corporation is a $12.78 billion bank
holding company operating two commercial banks in four Western
states through a network of branches offering a full range of
deposit services and business, commercial real estate,
construction, residential, agricultural and consumer loans.
Visit Banner Bank on the Web at www.bannerbank.com.
Forward-Looking Statements
When used in this press release and in other
documents filed with or furnished to the Securities and Exchange
Commission (the “SEC”), in press releases or other public
stockholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases
"may," “believe,” “will,” “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimate,” “project,” “plans,”
"potential," or similar expressions are intended to identify
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. You are cautioned
not to place undue reliance on any forward-looking statements,
which speak only as of the date such statements are made and based
only on information then actually known to Banner. Banner
does not undertake and specifically disclaims any obligation to
revise any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date
of such statements. These statements may relate to future
financial performance, strategic plans or objectives, revenues or
earnings projections, or other financial information. By
their nature, these statements are subject to numerous
uncertainties that could cause actual results to differ materially
from those anticipated in the statements and could negatively
affect Banner's operating and stock price performance.
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 effect of the COVID-19 pandemic, including on Banner’s
credit quality and business operations, as well as its impact on
general economic and financial market conditions and other
uncertainties resulting from the COVID-19 pandemic, such as the
extent and duration of the impact on public health, the U.S. and
global economies, and consumer and corporate customers, including
economic activity, employment levels and market liquidity;
(2) the credit risks of lending activities, including changes in
the level and direction of loan delinquencies and write-offs and
changes in estimates of the adequacy of the allowance for credit
losses, which could necessitate additional provisions for credit
losses, resulting both from loans originated and loans acquired
from other financial institutions; (3) results of examinations by
regulatory authorities, including the possibility that any such
regulatory authority may, among other things, require increases in
the allowance for credit losses or writing down of assets or impose
restrictions or penalties with respect to Banner's activities; (5)
competitive pressures among depository institutions; (6) interest
rate movements and their impact on customer behavior and net
interest margin; (6) the impact of repricing and competitors'
pricing initiatives on loan and deposit products; (7) fluctuations
in real estate values; (8) the ability to adapt successfully to
technological changes to meet customers' needs and developments in
the market place; (9) the ability to access cost-effective funding;
(10) changes in financial markets; (11) changes in economic
conditions in general and in Washington, Idaho, Oregon and
California in particular; (12) the costs, effects and outcomes of
litigation; (13) legislation or regulatory changes, including but
not limited to the impact of the Dodd-Frank Act and regulations
adopted thereunder, changes in regulatory capital requirements
pursuant to 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; (14) changes in
accounting principles, policies or guidelines; (15) future
acquisitions by Banner of other depository institutions or lines of
business; (16) future goodwill impairment due to changes in
Banner's business, changes in market conditions, including as a
result of the COVID-19 pandemic or other factors; and (17) 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.
|
CONTACT: |
MARK J. GRESCOVICH, |
|
|
PRESIDENT & CEO |
|
|
PETER J. CONNER,
CFO |
|
|
(509) 527-3636 |
| RESULTS OF
OPERATIONS |
|
Quarters Ended |
| (in thousands except shares and
per share data) |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| |
|
|
|
|
|
|
| INTEREST
INCOME: |
|
|
|
|
|
|
|
Loans receivable |
|
$ |
118,926 |
|
|
$ |
120,915 |
|
|
$ |
115,455 |
|
|
Mortgage-backed securities |
|
9,137 |
|
|
8,924 |
|
|
10,507 |
|
|
Securities and cash equivalents |
|
3,602 |
|
|
3,570 |
|
|
4,034 |
|
| |
|
131,665 |
|
|
133,409 |
|
|
129,996 |
|
| INTEREST
EXPENSE: |
|
|
|
|
|
|
|
Deposits |
|
8,750 |
|
|
9,950 |
|
|
8,643 |
|
|
Federal Home Loan Bank advances |
|
2,064 |
|
|
2,281 |
|
|
3,476 |
|
|
Other borrowings |
|
116 |
|
|
121 |
|
|
60 |
|
|
Junior subordinated debentures |
|
1,477 |
|
|
1,566 |
|
|
1,713 |
|
| |
|
12,407 |
|
|
13,918 |
|
|
13,892 |
|
|
Net interest income before provision for credit losses |
|
119,258 |
|
|
119,491 |
|
|
116,104 |
|
| PROVISION FOR CREDIT
LOSSES |
|
21,748 |
|
|
4,000 |
|
|
2,000 |
|
|
Net interest income |
|
97,510 |
|
|
115,491 |
|
|
114,104 |
|
| NON-INTEREST
INCOME: |
|
|
|
|
|
|
|
Deposit fees and other service charges |
|
9,803 |
|
|
9,637 |
|
|
12,618 |
|
|
Mortgage banking operations |
|
10,191 |
|
|
6,248 |
|
|
3,415 |
|
|
Bank-owned life insurance |
|
1,050 |
|
|
1,170 |
|
|
1,276 |
|
|
Miscellaneous |
|
2,639 |
|
|
3,201 |
|
|
804 |
|
| |
|
23,683 |
|
|
20,256 |
|
|
18,113 |
|
|
Net gain on sale of securities |
|
78 |
|
|
62 |
|
|
1 |
|
|
Net change in valuation of financial instruments carried at fair
value |
|
(4,596 |
) |
|
(36 |
) |
|
11 |
|
|
Total non-interest income |
|
19,165 |
|
|
20,282 |
|
|
18,125 |
|
| NON-INTEREST
EXPENSE: |
|
|
|
|
|
|
|
Salary and employee benefits |
|
59,908 |
|
|
57,050 |
|
|
54,640 |
|
|
Less capitalized loan origination costs |
|
(5,806 |
) |
|
(8,797 |
) |
|
(4,849 |
) |
|
Occupancy and equipment |
|
13,107 |
|
|
13,377 |
|
|
13,766 |
|
|
Information / computer data services |
|
5,810 |
|
|
6,202 |
|
|
5,326 |
|
|
Payment and card processing services |
|
4,240 |
|
|
4,638 |
|
|
3,984 |
|
|
Professional and legal expenses |
|
1,919 |
|
|
2,262 |
|
|
2,434 |
|
|
Advertising and marketing |
|
1,827 |
|
|
2,021 |
|
|
1,529 |
|
|
Deposit insurance expense |
|
1,635 |
|
|
1,608 |
|
|
1,418 |
|
|
State/municipal business and use taxes |
|
984 |
|
|
917 |
|
|
945 |
|
|
Real estate operations |
|
100 |
|
|
40 |
|
|
(123 |
) |
|
Amortization of core deposit intangibles |
|
2,001 |
|
|
2,061 |
|
|
2,052 |
|
|
Provision for credit losses - unfunded loan commitments |
|
1,722 |
|
|
— |
|
|
— |
|
|
Miscellaneous |
|
6,357 |
|
|
7,892 |
|
|
6,744 |
|
|
|
|
93,804 |
|
|
89,271 |
|
|
87,866 |
|
|
COVID-19 expenses |
|
239 |
|
|
— |
|
|
— |
|
|
Acquisition-related expenses |
|
1,142 |
|
|
4,419 |
|
|
2,148 |
|
|
Total non-interest expense |
|
95,185 |
|
|
93,690 |
|
|
90,014 |
|
|
Income before provision for income taxes |
|
21,490 |
|
|
42,083 |
|
|
42,215 |
|
| PROVISION
FOR INCOME TAXES |
|
4,608 |
|
|
8,428 |
|
|
8,869 |
|
| NET
INCOME |
|
$ |
16,882 |
|
|
$ |
33,655 |
|
|
$ |
33,346 |
|
| Earnings per share available
to common shareholders: |
|
|
|
|
|
|
|
Basic |
|
$ |
0.48 |
|
|
$ |
0.96 |
|
|
$ |
0.95 |
|
|
Diluted |
|
$ |
0.47 |
|
|
$ |
0.95 |
|
|
$ |
0.95 |
|
| Cumulative dividends declared
per common share |
|
$ |
0.41 |
|
|
$ |
1.41 |
|
|
$ |
0.41 |
|
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
35,463,541 |
|
|
35,188,399 |
|
|
35,050,376 |
|
|
Diluted |
|
35,640,463 |
|
|
35,316,736 |
|
|
35,172,056 |
|
| (Decrease) increase in common
shares outstanding |
|
(649,117 |
) |
|
1,578,219 |
|
|
(30,026 |
) |
|
FINANCIAL CONDITION |
|
|
|
|
|
|
|
Percentage Change |
| (in thousands except shares and
per share data) |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Prior Qtr |
|
Prior Yr Qtr |
| |
|
|
|
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
211,013 |
|
|
$ |
234,359 |
|
|
$ |
218,458 |
|
|
(10.0 |
)% |
|
(3.4 |
)% |
| Interest-bearing deposits |
|
83,988 |
|
|
73,376 |
|
|
43,080 |
|
|
14.5 |
% |
|
95.0 |
% |
|
Total cash and cash equivalents |
|
295,001 |
|
|
307,735 |
|
|
261,538 |
|
|
(4.1 |
)% |
|
12.8 |
% |
| Securities - trading |
|
21,040 |
|
|
25,636 |
|
|
25,838 |
|
|
(17.9 |
)% |
|
(18.6 |
)% |
| Securities - available for
sale |
|
1,608,224 |
|
|
1,551,557 |
|
|
1,603,804 |
|
|
3.7 |
% |
|
0.3 |
% |
| Securities - held to
maturity |
|
437,846 |
|
|
236,094 |
|
|
218,993 |
|
|
85.5 |
% |
|
99.9 |
% |
|
Total securities |
|
2,067,110 |
|
|
1,813,287 |
|
|
1,848,635 |
|
|
14.0 |
% |
|
11.8 |
% |
| Federal Home Loan Bank
stock |
|
20,247 |
|
|
28,342 |
|
|
27,063 |
|
|
(28.6 |
)% |
|
(25.2 |
)% |
| Loans held for sale |
|
182,428 |
|
|
210,447 |
|
|
45,865 |
|
|
(13.3 |
)% |
|
297.7 |
% |
| Loans receivable |
|
9,285,744 |
|
|
9,305,357 |
|
|
8,692,657 |
|
|
(0.2 |
)% |
|
6.8 |
% |
| Allowance for credit losses -
loans |
|
(130,488 |
) |
|
(100,559 |
) |
|
(97,308 |
) |
|
29.8 |
% |
|
34.1 |
% |
|
Net loans receivable |
|
9,155,256 |
|
|
9,204,798 |
|
|
8,595,349 |
|
|
(0.5 |
)% |
|
6.5 |
% |
| Accrued interest
receivable |
|
40,732 |
|
|
37,962 |
|
|
41,220 |
|
|
7.3 |
% |
|
(1.2 |
)% |
| Real estate owned held for
sale, net |
|
2,402 |
|
|
814 |
|
|
2,611 |
|
|
195.1 |
% |
|
(8.0 |
)% |
| Property and equipment,
net |
|
175,235 |
|
|
178,008 |
|
|
171,057 |
|
|
(1.6 |
)% |
|
2.4 |
% |
| Goodwill |
|
373,121 |
|
|
373,121 |
|
|
339,154 |
|
|
— |
% |
|
10.0 |
% |
| Other intangibles, net |
|
27,157 |
|
|
29,158 |
|
|
30,647 |
|
|
(6.9 |
)% |
|
(11.4 |
)% |
| Bank-owned life insurance |
|
193,140 |
|
|
192,088 |
|
|
178,202 |
|
|
0.5 |
% |
|
8.4 |
% |
| Other assets |
|
249,121 |
|
|
228,271 |
|
|
198,944 |
|
|
9.1 |
% |
|
25.2 |
% |
|
Total assets |
|
$ |
12,780,950 |
|
|
$ |
12,604,031 |
|
|
$ |
11,740,285 |
|
|
1.4 |
% |
|
8.9 |
% |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
| Deposits: |
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing |
|
$ |
4,107,262 |
|
|
$ |
3,945,000 |
|
|
$ |
3,676,984 |
|
|
4.1 |
% |
|
11.7 |
% |
|
Interest-bearing transaction and savings accounts |
|
5,175,969 |
|
|
4,983,238 |
|
|
4,535,969 |
|
|
3.9 |
% |
|
14.1 |
% |
|
Interest-bearing certificates |
|
1,166,306 |
|
|
1,120,403 |
|
|
1,163,276 |
|
|
4.1 |
% |
|
0.3 |
% |
|
Total deposits |
|
10,449,537 |
|
|
10,048,641 |
|
|
9,376,229 |
|
|
4.0 |
% |
|
11.4 |
% |
| Advances from Federal Home
Loan Bank |
|
247,000 |
|
|
450,000 |
|
|
418,000 |
|
|
(45.1 |
)% |
|
(40.9 |
)% |
| Customer repurchase agreements
and other borrowings |
|
128,764 |
|
|
118,474 |
|
|
121,719 |
|
|
8.7 |
% |
|
5.8 |
% |
| Junior subordinated debentures
at fair value |
|
99,795 |
|
|
119,304 |
|
|
113,917 |
|
|
(16.4 |
)% |
|
(12.4 |
)% |
| Accrued expenses and other
liabilities |
|
208,753 |
|
|
227,889 |
|
|
158,669 |
|
|
(8.4 |
)% |
|
31.6 |
% |
| Deferred compensation |
|
45,401 |
|
|
45,689 |
|
|
40,560 |
|
|
(0.6 |
)% |
|
11.9 |
% |
|
Total liabilities |
|
11,179,250 |
|
|
11,009,997 |
|
|
10,229,094 |
|
|
1.5 |
% |
|
9.3 |
% |
| SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
1,343,699 |
|
|
1,373,940 |
|
|
1,338,386 |
|
|
(2.2 |
)% |
|
0.4 |
% |
| Retained earnings |
|
177,922 |
|
|
186,838 |
|
|
152,911 |
|
|
(4.8 |
)% |
|
16.4 |
% |
| Other components of
shareholders' equity |
|
80,079 |
|
|
33,256 |
|
|
19,894 |
|
|
140.8 |
% |
|
nm |
|
|
Total shareholders' equity |
|
1,601,700 |
|
|
1,594,034 |
|
|
1,511,191 |
|
|
0.5 |
% |
|
6.0 |
% |
|
Total liabilities and shareholders' equity |
|
$ |
12,780,950 |
|
|
$ |
12,604,031 |
|
|
$ |
11,740,285 |
|
|
1.4 |
% |
|
8.9 |
% |
| Common Shares
Issued: |
|
|
|
|
|
|
|
|
|
|
| Shares outstanding at end of
period |
|
35,102,459 |
|
|
35,751,576 |
|
|
35,152,746 |
|
|
|
|
|
| Common shareholders' equity
per share (1) |
|
$ |
45.63 |
|
|
$ |
44.59 |
|
|
$ |
42.99 |
|
|
|
|
|
| Common shareholders' tangible
equity per share (1) (2) |
|
$ |
34.23 |
|
|
$ |
33.33 |
|
|
$ |
32.47 |
|
|
|
|
|
| Common shareholders' tangible
equity to tangible assets (2) |
|
9.70 |
% |
|
9.77 |
% |
|
10.04 |
% |
|
|
|
|
| Consolidated Tier 1 leverage
capital ratio |
|
10.45 |
% |
|
10.71 |
% |
|
10.73 |
% |
|
|
|
|
|
(1 |
) |
Calculation is based on number of
common shares outstanding at the end of the period rather than
weighted average shares outstanding. |
|
(2 |
) |
Common shareholders' tangible
equity excludes goodwill and other intangible assets. Tangible
assets exclude goodwill and other intangible assets. These
ratios represent non-GAAP financial measures. See also
Non-GAAP Financial Measures reconciliation tables on the final two
pages of the press release tables. |
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Percentage Change |
| LOANS |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Prior Qtr |
|
Prior Yr Qtr |
| |
|
|
|
|
|
|
|
|
|
|
| Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied |
|
$ |
1,024,089 |
|
|
$ |
980,021 |
|
|
$ |
869,634 |
|
|
4.5 |
% |
|
17.8 |
% |
|
Investment properties |
|
2,007,537 |
|
|
2,024,988 |
|
|
1,838,328 |
|
|
(0.9 |
)% |
|
9.2 |
% |
|
Small balance CRE |
|
591,783 |
|
|
613,484 |
|
|
619,646 |
|
|
(3.5 |
)% |
|
(4.5 |
)% |
| Multifamily real estate |
|
400,206 |
|
|
388,388 |
|
|
300,684 |
|
|
3.0 |
% |
|
33.1 |
% |
| Construction, land and land
development: |
|
|
|
|
|
|
|
|
|
|
|
Commercial construction |
|
205,476 |
|
|
210,668 |
|
|
181,888 |
|
|
(2.5 |
)% |
|
13.0 |
% |
|
Multifamily construction |
|
250,410 |
|
|
233,610 |
|
|
183,203 |
|
|
7.2 |
% |
|
36.7 |
% |
|
One- to four-family construction |
|
534,956 |
|
|
544,308 |
|
|
514,410 |
|
|
(1.7 |
)% |
|
4.0 |
% |
|
Land and land development |
|
232,506 |
|
|
245,530 |
|
|
271,038 |
|
|
(5.3 |
)% |
|
(14.2 |
)% |
| Commercial business: |
|
|
|
|
|
|
|
|
|
|
|
Commercial business |
|
1,357,817 |
|
|
1,364,650 |
|
|
1,199,930 |
|
|
(0.5 |
)% |
|
13.2 |
% |
|
Small business scored |
|
807,539 |
|
|
772,657 |
|
|
738,665 |
|
|
4.5 |
% |
|
9.3 |
% |
| Agricultural business,
including secured by farmland |
|
330,257 |
|
|
337,271 |
|
|
339,472 |
|
|
(2.1 |
)% |
|
(2.7 |
)% |
| One- to four-family
residential |
|
881,387 |
|
|
925,531 |
|
|
942,477 |
|
|
(4.8 |
)% |
|
(6.5 |
)% |
| Consumer: |
|
|
|
|
|
|
|
|
|
|
|
Consumer—home equity revolving lines of credit |
|
521,618 |
|
|
519,336 |
|
|
532,600 |
|
|
0.4 |
% |
|
(2.1 |
)% |
|
Consumer—other |
|
140,163 |
|
|
144,915 |
|
|
160,682 |
|
|
(3.3 |
)% |
|
(12.8 |
)% |
|
Total loans receivable |
|
$ |
9,285,744 |
|
|
$ |
9,305,357 |
|
|
$ |
8,692,657 |
|
|
(0.2 |
)% |
|
6.8 |
% |
| Restructured loans performing
under their restructured terms |
|
$ |
6,423 |
|
|
$ |
6,466 |
|
|
$ |
13,036 |
|
|
|
|
|
| Loans 30 - 89 days past due
and on accrual |
|
$ |
39,974 |
|
|
$ |
20,178 |
|
|
$ |
28,972 |
|
|
|
|
|
| Total delinquent loans
(including loans on non-accrual), net |
|
$ |
61,101 |
|
|
$ |
38,322 |
|
|
$ |
46,616 |
|
|
|
|
|
| Total delinquent
loans / Total loans receivable |
|
0.66 |
% |
|
0.41 |
% |
|
0.54 |
% |
|
|
|
|
| LOANS BY GEOGRAPHIC
LOCATION |
|
|
|
|
|
|
|
|
|
Percentage Change |
| |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Prior Qtr |
|
Prior Yr Qtr |
| |
|
Amount |
|
Percentage |
|
Amount |
|
Amount |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Washington |
|
$ |
4,350,273 |
|
|
46.7 |
% |
|
$ |
4,364,764 |
|
|
$ |
4,329,759 |
|
|
(0.3 |
)% |
|
0.5 |
% |
| California |
|
2,140,895 |
|
|
23.1 |
% |
|
2,129,789 |
|
|
1,581,654 |
|
|
0.5 |
% |
|
35.4 |
% |
| Oregon |
|
1,664,652 |
|
|
17.9 |
% |
|
1,650,704 |
|
|
1,639,427 |
|
|
0.8 |
% |
|
1.5 |
% |
| Idaho |
|
524,663 |
|
|
5.7 |
% |
|
530,016 |
|
|
524,705 |
|
|
(1.0 |
)% |
|
— |
% |
| Utah |
|
52,747 |
|
|
0.6 |
% |
|
60,958 |
|
|
59,940 |
|
|
(13.5 |
)% |
|
(12.0 |
)% |
| Other |
|
552,514 |
|
|
6.0 |
% |
|
569,126 |
|
|
557,172 |
|
|
(2.9 |
)% |
|
(0.8 |
)% |
| Total loans receivable |
|
$ |
9,285,744 |
|
|
100.0 |
% |
|
$ |
9,305,357 |
|
|
$ |
8,692,657 |
|
|
(0.2 |
)% |
|
6.8 |
% |
ADDITIONAL FINANCIAL INFORMATION(dollars in
thousands)
The following table shows loan originations (excluding loans
held for sale) activity for the quarters ending March 31,
2020, December 31, 2019, and March 31, 2019.
| LOAN
ORIGINATIONS |
Quarters Ended |
| |
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Commercial real estate |
$ |
76,359 |
|
|
$ |
165,064 |
|
|
$ |
92,183 |
|
| Multifamily real estate |
10,171 |
|
|
20,034 |
|
|
3,733 |
|
| Construction and land |
369,613 |
|
|
530,195 |
|
|
231,744 |
|
| Commercial business |
199,873 |
|
|
228,050 |
|
|
137,142 |
|
| Agricultural business |
31,261 |
|
|
25,992 |
|
|
30,483 |
|
| One-to four-family
residential |
31,041 |
|
|
30,432 |
|
|
31,186 |
|
| Consumer |
67,357 |
|
|
70,539 |
|
|
62,370 |
|
| Total loan originations
(excluding loans held for sale) |
$ |
785,675 |
|
|
$ |
1,070,306 |
|
|
$ |
588,841 |
|
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
| |
|
Quarters Ended |
| CHANGE IN
THE |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| ALLOWANCE FOR CREDIT
LOSSES - LOANS |
|
|
|
|
|
|
| Balance, beginning of
period |
|
$ |
100,559 |
|
|
$ |
97,801 |
|
|
$ |
96,485 |
|
| Beginning balance adjustment
for adoption of ASC 326 |
|
7,812 |
|
|
— |
|
|
— |
|
| Provision for credit losses -
loans |
|
21,713 |
|
|
4,000 |
|
|
2,000 |
|
| Recoveries of loans previously
charged off: |
|
|
|
|
|
|
|
Commercial real estate |
|
167 |
|
|
199 |
|
|
21 |
|
|
Construction and land |
|
— |
|
|
— |
|
|
22 |
|
|
One- to four-family real estate |
|
148 |
|
|
159 |
|
|
43 |
|
|
Commercial business |
|
205 |
|
|
225 |
|
|
23 |
|
|
Agricultural business, including secured by farmland |
|
1,750 |
|
|
10 |
|
|
— |
|
|
Consumer |
|
96 |
|
|
61 |
|
|
110 |
|
| |
|
2,366 |
|
|
654 |
|
|
219 |
|
| Loans charged off: |
|
|
|
|
|
|
|
Commercial real estate |
|
(100 |
) |
|
— |
|
|
(431 |
) |
|
Multifamily real estate |
|
(66 |
) |
|
— |
|
|
— |
|
|
Construction and land |
|
— |
|
|
(45 |
) |
|
— |
|
|
One- to four-family real estate |
|
(64 |
) |
|
— |
|
|
— |
|
|
Commercial business |
|
(1,384 |
) |
|
(1,180 |
) |
|
(590 |
) |
|
Agricultural business, including secured by farmland |
|
— |
|
|
(4 |
) |
|
(4 |
) |
|
Consumer |
|
(348 |
) |
|
(667 |
) |
|
(371 |
) |
| |
|
(1,962 |
) |
|
(1,896 |
) |
|
(1,396 |
) |
|
Net recoveries/(charge-offs) |
|
404 |
|
|
(1,242 |
) |
|
(1,177 |
) |
| Balance, end of period |
|
$ |
130,488 |
|
|
$ |
100,559 |
|
|
$ |
97,308 |
|
| Net recoveries/(charge-offs) /
Average loans receivable |
|
0.004 |
% |
|
(0.013 |
)% |
|
(0.013 |
)% |
| ALLOCATION
OF |
|
|
|
|
|
|
| ALLOWANCE FOR CREDIT
LOSSES - LOANS |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Specific or allocated credit
loss allowance: |
|
|
|
|
|
|
|
Commercial real estate |
|
$ |
29,339 |
|
|
$ |
30,591 |
|
|
$ |
27,091 |
|
|
Multifamily real estate |
|
2,805 |
|
|
4,754 |
|
|
4,020 |
|
|
Construction and land |
|
34,217 |
|
|
22,994 |
|
|
23,713 |
|
|
One- to four-family real estate |
|
11,884 |
|
|
4,136 |
|
|
4,711 |
|
|
Commercial business |
|
31,648 |
|
|
23,370 |
|
|
18,662 |
|
|
Agricultural business, including secured by farmland |
|
4,513 |
|
|
4,120 |
|
|
3,596 |
|
|
Consumer |
|
16,082 |
|
|
8,202 |
|
|
7,980 |
|
|
Total allocated |
|
130,488 |
|
|
98,167 |
|
|
89,773 |
|
| Unallocated |
|
— |
|
|
2,392 |
|
|
7,535 |
|
|
Total allowance for credit losses - loans |
|
$ |
130,488 |
|
|
$ |
100,559 |
|
|
$ |
97,308 |
|
| Allowance for credit losses -
loans / Total loans receivable |
|
1.41 |
% |
|
1.08 |
% |
|
1.12 |
% |
| Allowance for credit losses -
loans / Non-performing loans |
|
299 |
% |
|
254 |
% |
|
504 |
% |
| |
|
Quarters Ended |
| CHANGE IN
THE |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| ALLOWANCE FOR CREDIT
LOSSES - UNFUNDED LOAN COMMITMENTS |
|
|
|
|
|
|
| Balance, beginning of
period |
|
$ |
2,716 |
|
|
$ |
2,599 |
|
|
$ |
2,599 |
|
| Beginning balance adjustment
for adoption of ASC 326 |
|
7,022 |
|
|
— |
|
|
— |
|
| Provision for credit losses -
unfunded loan commitments |
|
1,722 |
|
|
— |
|
|
— |
|
| Additions through
acquisitions |
|
— |
|
|
117 |
|
|
— |
|
| Balance, end of period |
|
$ |
11,460 |
|
|
$ |
2,716 |
|
|
$ |
2,599 |
|
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
| |
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| NON-PERFORMING
ASSETS |
|
|
|
|
|
| Loans on non-accrual
status: |
|
|
|
|
|
|
Secured by real estate: |
|
|
|
|
|
|
Commercial |
$ |
8,512 |
|
|
$ |
5,952 |
|
|
$ |
5,734 |
|
|
Multifamily |
— |
|
|
85 |
|
|
— |
|
|
Construction and land |
1,393 |
|
|
1,905 |
|
|
3,036 |
|
|
One- to four-family |
3,045 |
|
|
3,410 |
|
|
1,538 |
|
|
Commercial business |
25,027 |
|
|
23,015 |
|
|
3,614 |
|
|
Agricultural business, including secured by farmland |
495 |
|
|
661 |
|
|
2,507 |
|
|
Consumer |
1,812 |
|
|
2,473 |
|
|
2,181 |
|
| |
40,284 |
|
|
37,501 |
|
|
18,610 |
|
| Loans more than 90 days
delinquent, still on accrual: |
|
|
|
|
|
|
Secured by real estate: |
|
|
|
|
|
|
Commercial |
24 |
|
|
89 |
|
|
— |
|
|
Construction and land |
1,407 |
|
|
332 |
|
|
— |
|
|
One- to four-family |
1,089 |
|
|
877 |
|
|
640 |
|
|
Commercial business |
77 |
|
|
401 |
|
|
1 |
|
|
Agricultural business, including secured by farmland |
461 |
|
|
— |
|
|
— |
|
|
Consumer |
320 |
|
|
398 |
|
|
42 |
|
| |
3,378 |
|
|
2,097 |
|
|
683 |
|
| Total non-performing
loans |
43,662 |
|
|
39,598 |
|
|
19,293 |
|
| Real estate owned (REO) |
2,402 |
|
|
814 |
|
|
2,611 |
|
| Other repossessed assets |
47 |
|
|
122 |
|
|
50 |
|
|
Total non-performing assets |
$ |
46,111 |
|
|
$ |
40,534 |
|
|
$ |
21,954 |
|
| Total non-performing
assets to total assets |
0.36 |
% |
|
0.32 |
% |
|
0.19 |
% |
| |
Quarters Ended |
| REAL ESTATE
OWNED |
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Balance, beginning of
period |
$ |
814 |
|
|
$ |
228 |
|
|
$ |
2,611 |
|
|
Additions from loan foreclosures |
1,588 |
|
|
— |
|
|
— |
|
|
Additions from acquisitions |
— |
|
|
650 |
|
|
— |
|
|
Proceeds from dispositions of REO |
— |
|
|
(105 |
) |
|
— |
|
|
Gain on sale of REO |
— |
|
|
41 |
|
|
— |
|
| Balance, end of period |
$ |
2,402 |
|
|
$ |
814 |
|
|
$ |
2,611 |
|
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| DEPOSIT
COMPOSITION |
|
|
|
|
|
|
|
Percentage Change |
| |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Prior Qtr |
|
Prior Yr Qtr |
| |
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing |
|
$ |
4,107,262 |
|
|
$ |
3,945,000 |
|
|
$ |
3,676,984 |
|
|
4.1 |
% |
|
11.7 |
% |
| Interest-bearing checking |
|
1,331,860 |
|
|
1,280,003 |
|
|
1,174,169 |
|
|
4.1 |
% |
|
13.4 |
% |
| Regular savings accounts |
|
1,997,265 |
|
|
1,934,041 |
|
|
1,865,852 |
|
|
3.3 |
% |
|
7.0 |
% |
| Money market accounts |
|
1,846,844 |
|
|
1,769,194 |
|
|
1,495,948 |
|
|
4.4 |
% |
|
23.5 |
% |
|
Total interest-bearing transaction and savings accounts |
|
5,175,969 |
|
|
4,983,238 |
|
|
4,535,969 |
|
|
3.9 |
% |
|
14.1 |
% |
|
Total core deposits |
|
9,283,231 |
|
|
8,928,238 |
|
|
8,212,953 |
|
|
4.0 |
% |
|
13.0 |
% |
| Interest-bearing
certificates |
|
1,166,306 |
|
|
1,120,403 |
|
|
1,163,276 |
|
|
4.1 |
% |
|
0.3 |
% |
|
Total deposits |
|
$ |
10,449,537 |
|
|
$ |
10,048,641 |
|
|
$ |
9,376,229 |
|
|
4.0 |
% |
|
11.4 |
% |
| GEOGRAPHIC
CONCENTRATION OF DEPOSITS |
|
|
|
|
|
|
|
|
|
|
| |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Percentage Change |
| |
|
Amount |
|
Percentage |
|
Amount |
|
Amount |
|
Prior Qtr |
|
Prior Yr Qtr |
| Washington |
|
$ |
6,037,864 |
|
|
57.8 |
% |
|
$ |
5,861,809 |
|
|
$ |
5,604,567 |
|
|
3.0 |
% |
|
7.7 |
% |
| Oregon |
|
2,093,738 |
|
|
20.0 |
% |
|
2,006,163 |
|
|
1,906,132 |
|
|
4.4 |
% |
|
9.8 |
% |
| California |
|
1,828,064 |
|
|
17.5 |
% |
|
1,698,289 |
|
|
1,402,213 |
|
|
7.6 |
% |
|
30.4 |
% |
| Idaho |
|
489,871 |
|
|
4.7 |
% |
|
482,380 |
|
|
463,317 |
|
|
1.6 |
% |
|
5.7 |
% |
| Total deposits |
|
$ |
10,449,537 |
|
|
100.0 |
% |
|
$ |
10,048,641 |
|
|
$ |
9,376,229 |
|
|
4.0 |
% |
|
11.4 |
% |
| INCLUDED IN TOTAL
DEPOSITS |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Public non-interest-bearing
accounts |
|
$ |
115,354 |
|
|
$ |
111,015 |
|
|
$ |
92,122 |
|
| Public interest-bearing
transaction & savings accounts |
|
130,958 |
|
|
133,403 |
|
|
118,033 |
|
| Public interest-bearing
certificates |
|
48,232 |
|
|
35,184 |
|
|
29,572 |
|
|
Total public deposits |
|
$ |
294,544 |
|
|
$ |
279,602 |
|
|
$ |
239,727 |
|
| Total brokered deposits |
|
$ |
250,977 |
|
|
$ |
202,884 |
|
|
$ |
239,444 |
|
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
| (in thousands) |
|
|
| |
|
|
| |
|
|
| ACQUISITION OF
ALTAPACIFIC BANCORP |
|
|
| The following table* provides
the estimated fair value of the assets acquired and liabilities
assumed in the AltaPacific acquisition at November 1, 2019 (in
thousands): |
|
|
| |
November 1, 2019 |
| |
|
|
|
Cash paid |
|
$ |
2,360 |
|
| Fair value of common shares
issued |
|
85,200 |
|
|
Total consideration |
|
87,560 |
|
| |
|
|
| Fair value of assets
acquired: |
|
|
|
Cash and cash equivalents |
39,686 |
|
|
|
Securities |
20,348 |
|
|
|
Federal Home Loan Bank stock |
2,005 |
|
|
|
Loans receivable |
332,355 |
|
|
|
Real estate owned held for sale |
650 |
|
|
|
Property and equipment |
3,809 |
|
|
|
Core deposit intangible |
4,610 |
|
|
|
Bank-owned life insurance |
11,890 |
|
|
|
Deferred tax asset |
166 |
|
|
|
Other assets |
10,150 |
|
|
|
Total assets acquired |
425,669 |
|
|
| |
|
|
| Fair value of liabilities
assumed: |
|
|
|
Deposits |
313,374 |
|
|
|
Advances from FHLB |
40,226 |
|
|
|
Junior subordinated debentures |
5,814 |
|
|
|
Deferred compensation |
4,508 |
|
|
|
Other liabilities |
8,154 |
|
|
|
Total liabilities assumed |
372,076 |
|
|
| |
|
|
|
Net assets acquired |
|
53,593 |
|
| |
|
|
|
Goodwill |
|
$ |
33,967 |
|
| |
|
|
| * Amounts recorded
in this table are preliminary estimates of fair value.
Additional adjustments to the acquisition accounting may be
required with a measurement period of one-year from the acquisition
date. |
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Actual |
|
Minimum to be categorized as "Adequately
Capitalized" |
|
Minimum to becategorized
as"Well Capitalized" |
| REGULATORY CAPITAL
RATIOS AS OF MARCH 31, 2020 |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Banner
Corporation-consolidated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
$ |
1,397,202 |
|
|
12.98 |
% |
|
$ |
860,978 |
|
|
8.00 |
% |
|
$ |
1,076,223 |
|
|
10.00 |
% |
|
Tier 1 capital to risk-weighted assets |
|
1,275,806 |
|
|
11.85 |
% |
|
645,734 |
|
|
6.00 |
% |
|
645,734 |
|
|
6.00 |
% |
|
Tier 1 leverage capital to average assets |
|
1,275,806 |
|
|
10.45 |
% |
|
488,124 |
|
|
4.00 |
% |
|
|
n/a |
|
|
n/a |
|
|
Common equity tier 1 capital to risk-weighted assets |
|
1,132,306 |
|
|
10.52 |
% |
|
484,300 |
|
|
4.50 |
% |
|
|
n/a |
|
|
n/a |
|
| Banner Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
1,331,615 |
|
|
12.59 |
% |
|
846,284 |
|
|
8.00 |
% |
|
1,057,856 |
|
|
10.00 |
% |
|
Tier 1 capital to risk-weighted assets |
|
1,212,733 |
|
|
11.46 |
% |
|
634,713 |
|
|
6.00 |
% |
|
846,284 |
|
|
8.00 |
% |
|
Tier 1 leverage capital to average assets |
|
1,212,733 |
|
|
10.18 |
% |
|
476,371 |
|
|
4.00 |
% |
|
595,464 |
|
|
5.00 |
% |
|
Common equity tier 1 capital to risk-weighted assets |
|
1,212,733 |
|
|
11.46 |
% |
|
476,035 |
|
|
4.50 |
% |
|
687,606 |
|
|
6.50 |
% |
| Islanders Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
31,693 |
|
|
16.99 |
% |
|
14,923 |
|
|
8.00 |
% |
|
18,654 |
|
|
10.00 |
% |
|
Tier 1 capital to risk-weighted assets |
|
29,398 |
|
|
15.76 |
% |
|
11,193 |
|
|
6.00 |
% |
|
14,923 |
|
|
8.00 |
% |
|
Tier 1 leverage capital to average assets |
|
29,398 |
|
|
10.05 |
% |
|
11,706 |
|
|
4.00 |
% |
|
14,632 |
|
|
5.00 |
% |
|
Common equity tier 1 capital to risk-weighted assets |
|
29,398 |
|
|
15.76 |
% |
|
8,394 |
|
|
4.50 |
% |
|
12,125 |
|
|
6.50 |
% |
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| (rates / ratios
annualized) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| ANALYSIS OF NET
INTEREST SPREAD |
Quarters Ended |
| |
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
| |
Average Balance |
Interest and Dividends |
Yield / Cost(3) |
|
Average Balance |
Interest and Dividends |
Yield / Cost(3) |
|
Average Balance |
Interest and Dividends |
Yield / Cost(3) |
| Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Held for sale loans |
$ |
152,627 |
|
$ |
1,520 |
|
4.01 |
% |
|
$ |
202,686 |
|
$ |
2,048 |
|
4.01 |
% |
|
$ |
98,005 |
|
$ |
1,121 |
|
4.64 |
% |
|
Mortgage loans |
7,310,115 |
|
92,454 |
|
5.09 |
% |
|
7,134,231 |
|
92,926 |
|
5.17 |
% |
|
6,833,933 |
|
88,602 |
|
5.26 |
% |
|
Commercial/agricultural loans |
1,884,006 |
|
22,357 |
|
4.77 |
% |
|
1,853,447 |
|
23,256 |
|
4.98 |
% |
|
1,703,503 |
|
22,812 |
|
5.43 |
% |
|
Consumer and other loans |
163,098 |
|
2,595 |
|
6.40 |
% |
|
169,197 |
|
2,685 |
|
6.30 |
% |
|
183,451 |
|
2,920 |
|
6.46 |
% |
|
Total loans(1) |
9,509,846 |
|
118,926 |
|
5.03 |
% |
|
9,359,561 |
|
120,915 |
|
5.13 |
% |
|
8,818,892 |
|
115,455 |
|
5.31 |
% |
|
Mortgage-backed securities |
1,354,585 |
|
9,137 |
|
2.71 |
% |
|
1,371,438 |
|
8,924 |
|
2.58 |
% |
|
1,392,118 |
|
10,507 |
|
3.06 |
% |
|
Other securities |
458,116 |
|
2,887 |
|
2.53 |
% |
|
418,767 |
|
2,663 |
|
2.52 |
% |
|
484,134 |
|
3,479 |
|
2.91 |
% |
|
Interest-bearing deposits with banks |
92,659 |
|
393 |
|
1.71 |
% |
|
107,959 |
|
531 |
|
1.95 |
% |
|
44,757 |
|
289 |
|
2.62 |
% |
|
FHLB stock |
26,522 |
|
322 |
|
4.88 |
% |
|
26,036 |
|
376 |
|
5.73 |
% |
|
31,761 |
|
266 |
|
3.40 |
% |
|
Total investment securities |
1,931,882 |
|
12,739 |
|
2.65 |
% |
|
1,924,200 |
|
12,494 |
|
2.58 |
% |
|
1,952,770 |
|
14,541 |
|
3.02 |
% |
|
Total interest-earning assets |
11,441,728 |
|
131,665 |
|
4.63 |
% |
|
11,283,761 |
|
133,409 |
|
4.69 |
% |
|
10,771,662 |
|
129,996 |
|
4.89 |
% |
| Non-interest-earning
assets |
1,193,256 |
|
|
|
|
1,152,751 |
|
|
|
|
1,031,591 |
|
|
|
|
Total assets |
$ |
12,634,984 |
|
|
|
|
$ |
12,436,512 |
|
|
|
|
$ |
11,803,253 |
|
|
|
| Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
$ |
1,266,647 |
|
469 |
|
0.15 |
% |
|
$ |
1,228,936 |
|
564 |
|
0.18 |
% |
|
$ |
1,153,949 |
|
475 |
|
0.17 |
% |
|
Savings accounts |
2,039,857 |
|
1,755 |
|
0.35 |
% |
|
1,999,656 |
|
2,027 |
|
0.40 |
% |
|
1,854,123 |
|
1,920 |
|
0.42 |
% |
|
Money market accounts |
1,743,118 |
|
2,439 |
|
0.56 |
% |
|
1,607,954 |
|
2,842 |
|
0.70 |
% |
|
1,490,326 |
|
2,251 |
|
0.61 |
% |
|
Certificates of deposit |
1,124,994 |
|
4,087 |
|
1.46 |
% |
|
1,189,530 |
|
4,517 |
|
1.51 |
% |
|
1,253,613 |
|
3,997 |
|
1.29 |
% |
|
Total interest-bearing deposits |
6,174,616 |
|
8,750 |
|
0.57 |
% |
|
6,026,076 |
|
9,950 |
|
0.66 |
% |
|
5,752,011 |
|
8,643 |
|
0.61 |
% |
|
Non-interest-bearing deposits |
3,965,380 |
|
— |
|
— |
% |
|
3,959,097 |
|
— |
|
— |
% |
|
3,605,922 |
|
— |
|
— |
% |
|
Total deposits |
10,139,996 |
|
8,750 |
|
0.35 |
% |
|
9,985,173 |
|
9,950 |
|
0.40 |
% |
|
9,357,933 |
|
8,643 |
|
0.37 |
% |
| Other interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
405,429 |
|
2,064 |
|
2.05 |
% |
|
387,435 |
|
2,281 |
|
2.34 |
% |
|
534,238 |
|
3,476 |
|
2.64 |
% |
|
Other borrowings |
124,771 |
|
116 |
|
0.37 |
% |
|
126,782 |
|
121 |
|
0.38 |
% |
|
118,008 |
|
60 |
|
0.21 |
% |
|
Junior subordinated debentures |
147,944 |
|
1,477 |
|
4.02 |
% |
|
145,339 |
|
1,566 |
|
4.27 |
% |
|
140,212 |
|
1,713 |
|
4.95 |
% |
|
Total borrowings |
678,144 |
|
3,657 |
|
2.17 |
% |
|
659,556 |
|
3,968 |
|
2.39 |
% |
|
792,458 |
|
5,249 |
|
2.69 |
% |
|
Total funding liabilities |
10,818,140 |
|
12,407 |
|
0.46 |
% |
|
10,644,729 |
|
13,918 |
|
0.52 |
% |
|
10,150,391 |
|
13,892 |
|
0.56 |
% |
| Other non-interest-bearing
liabilities(2) |
212,162 |
|
|
|
|
189,682 |
|
|
|
|
151,937 |
|
|
|
|
Total liabilities |
11,030,302 |
|
|
|
|
10,834,411 |
|
|
|
|
10,302,328 |
|
|
|
| Shareholders' equity |
1,604,682 |
|
|
|
|
1,602,101 |
|
|
|
|
1,500,925 |
|
|
|
|
Total liabilities and shareholders' equity |
$ |
12,634,984 |
|
|
|
|
$ |
12,436,512 |
|
|
|
|
$ |
11,803,253 |
|
|
|
| Net interest income/rate
spread |
|
$ |
119,258 |
|
4.17 |
% |
|
|
$ |
119,491 |
|
4.17 |
% |
|
|
$ |
116,104 |
|
4.33 |
% |
| Net interest margin |
|
|
4.19 |
% |
|
|
|
4.20 |
% |
|
|
|
4.37 |
% |
| Additional Key
Financial Ratios: |
|
|
|
|
|
|
|
|
|
|
|
| Return on average assets |
|
|
0.54 |
% |
|
|
|
1.07 |
% |
|
|
|
1.15 |
% |
| Return on average equity |
|
|
4.23 |
% |
|
|
|
8.33 |
% |
|
|
|
9.01 |
% |
| Average equity/average
assets |
|
|
12.70 |
% |
|
|
|
12.88 |
% |
|
|
|
12.72 |
% |
| Average interest-earning
assets/average interest-bearing liabilities |
|
|
166.97 |
% |
|
|
|
168.78 |
% |
|
|
|
164.59 |
% |
| Average interest-earning
assets/average funding liabilities |
|
|
105.76 |
% |
|
|
|
106.00 |
% |
|
|
|
106.12 |
% |
| Non-interest income/average
assets |
|
|
0.61 |
% |
|
|
|
0.65 |
% |
|
|
|
0.62 |
% |
| Non-interest expense/average
assets |
|
|
3.03 |
% |
|
|
|
2.99 |
% |
|
|
|
3.09 |
% |
| Efficiency ratio(4) |
|
|
68.76 |
% |
|
|
|
67.03 |
% |
|
|
|
67.06 |
% |
| Adjusted efficiency
ratio(5) |
|
|
63.47 |
% |
|
|
|
61.19 |
% |
|
|
|
63.32 |
% |
|
(1 |
) |
Average balances include loans
accounted for on a nonaccrual basis and loans 90 days or more past
due. Amortization of net deferred loan fees/costs is included
with interest on loans. |
|
(2 |
) |
Average other
non-interest-bearing liabilities include fair value adjustments
related to junior subordinated debentures. |
|
(3 |
) |
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
expenses, COVID-19 expenses, amortization of core deposit
intangibles (CDI), REO gain (loss), FHLB prepayment penalties and
state/municipal business and use taxes. These represent
non-GAAP financial measures. See also Non-GAAP Financial
Measures reconciliation tables on the last two pages of this press
release. |
| 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. However, these non-GAAP financial
measures are supplemental and are not a substitute for any analysis
based on GAAP. Where applicable, comparable earnings
information using GAAP financial measures is also presented.
Because not all companies use the same calculations, our
presentation may not be comparable to other similarly titled
measures as calculated by other companies. For a reconciliation of
these non-GAAP financial measures, see the tables below: |
| |
|
|
|
|
|
| ADJUSTED
REVENUE |
Quarters Ended |
| |
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Net interest income before
provision for loan losses |
$ |
119,258 |
|
|
$ |
119,491 |
|
|
$ |
116,104 |
|
| Total non-interest income |
19,165 |
|
|
20,282 |
|
|
18,125 |
|
| Total GAAP revenue |
138,423 |
|
|
139,773 |
|
|
134,229 |
|
|
Exclude net gain on sale of securities |
(78 |
) |
|
(62 |
) |
|
(1 |
) |
|
Exclude net change in valuation of financial instruments carried at
fair value |
4,596 |
|
|
36 |
|
|
(11 |
) |
| Adjusted revenue
(non-GAAP) |
$ |
142,941 |
|
|
$ |
139,747 |
|
|
$ |
134,217 |
|
| ADJUSTED
EARNINGS |
|
Quarters Ended |
| |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Net income (GAAP) |
|
$ |
16,882 |
|
|
$ |
33,655 |
|
|
$ |
33,346 |
|
|
Exclude net gain on sale of securities |
|
(78 |
) |
|
(62 |
) |
|
(1 |
) |
|
Exclude net change in valuation of financial instruments carried at
fair value |
|
4,596 |
|
|
36 |
|
|
(11 |
) |
|
Exclude acquisition-related expenses |
|
1,142 |
|
|
4,419 |
|
|
2,148 |
|
|
Exclude COVID-19 expenses |
|
239 |
|
|
— |
|
|
— |
|
|
Exclude related net tax benefit |
|
(1,405 |
) |
|
(1,074 |
) |
|
(513 |
) |
|
Exclude FHLB prepayment penalties |
|
— |
|
|
735 |
|
|
— |
|
| Total adjusted earnings
(non-GAAP) |
|
$ |
21,376 |
|
|
$ |
37,709 |
|
|
$ |
34,969 |
|
| |
|
|
|
|
|
|
| Diluted earnings per share
(GAAP) |
|
$ |
0.47 |
|
|
$ |
0.95 |
|
|
$ |
0.95 |
|
| Diluted adjusted earnings per
share (non-GAAP) |
|
$ |
0.60 |
|
|
$ |
1.07 |
|
|
$ |
0.99 |
|
| ADDITIONAL FINANCIAL
INFORMATION |
|
|
|
|
|
|
| (dollars in thousands) |
|
|
|
|
|
|
| ADJUSTED EFFICIENCY
RATIO |
|
Quarters Ended |
| |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
|
Non-interest expense (GAAP) |
|
$ |
95,185 |
|
|
$ |
93,690 |
|
|
$ |
90,014 |
|
|
Exclude acquisition-related expenses |
|
(1,142 |
) |
|
(4,419 |
) |
|
(2,148 |
) |
|
Exclude COVID-19 expenses |
|
(239 |
) |
|
— |
|
|
— |
|
|
Exclude CDI amortization |
|
(2,001 |
) |
|
(2,061 |
) |
|
(2,052 |
) |
|
Exclude state/municipal tax expense |
|
(984 |
) |
|
(917 |
) |
|
(945 |
) |
|
Exclude REO operations |
|
(100 |
) |
|
(40 |
) |
|
123 |
|
|
Exclude FHLB prepayment penalties |
|
— |
|
|
(735 |
) |
|
— |
|
| Adjusted non-interest expense
(non-GAAP) |
|
$ |
90,719 |
|
|
$ |
85,518 |
|
|
$ |
84,992 |
|
| |
|
|
|
|
|
|
| Net interest income before
provision for loan losses (GAAP) |
|
$ |
119,258 |
|
|
$ |
119,491 |
|
|
$ |
116,104 |
|
| Non-interest income
(GAAP) |
|
19,165 |
|
|
20,282 |
|
|
18,125 |
|
| Total revenue |
|
138,423 |
|
|
139,773 |
|
|
134,229 |
|
|
Exclude net gain on sale of securities |
|
(78 |
) |
|
(62 |
) |
|
(1 |
) |
|
Exclude net change in valuation of financial instruments carried at
fair value |
|
4,596 |
|
|
36 |
|
|
(11 |
) |
| Adjusted revenue
(non-GAAP) |
|
$ |
142,941 |
|
|
$ |
139,747 |
|
|
$ |
134,217 |
|
| |
|
|
|
|
|
|
| Efficiency ratio (GAAP) |
|
68.76 |
% |
|
67.03 |
% |
|
67.06 |
% |
| Adjusted efficiency ratio
(non-GAAP) |
|
63.47 |
% |
|
61.19 |
% |
|
63.32 |
% |
| TANGIBLE COMMON
SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS |
|
Mar 31, 2020 |
|
Dec 31, 2019 |
|
Mar 31, 2019 |
| Shareholders' equity
(GAAP) |
|
$ |
1,601,700 |
|
|
$ |
1,594,034 |
|
|
$ |
1,511,191 |
|
|
Exclude goodwill and other intangible assets, net |
|
400,278 |
|
|
402,279 |
|
|
369,801 |
|
| Tangible common shareholders'
equity (non-GAAP) |
|
$ |
1,201,422 |
|
|
$ |
1,191,755 |
|
|
$ |
1,141,390 |
|
| |
|
|
|
|
|
|
| Total assets (GAAP) |
|
$ |
12,780,950 |
|
|
$ |
12,604,031 |
|
|
$ |
11,740,285 |
|
|
Exclude goodwill and other intangible assets, net |
|
400,278 |
|
|
402,279 |
|
|
369,801 |
|
| Total tangible assets
(non-GAAP) |
|
$ |
12,380,672 |
|
|
$ |
12,201,752 |
|
|
$ |
11,370,484 |
|
| Common shareholders' equity to
total assets (GAAP) |
|
12.53 |
% |
|
12.65 |
% |
|
12.87 |
% |
| Tangible common shareholders'
equity to tangible assets (non-GAAP) |
|
9.70 |
% |
|
9.77 |
% |
|
10.04 |
% |
| |
|
|
|
|
|
|
| TANGIBLE COMMON
SHAREHOLDERS' EQUITY PER SHARE |
|
|
|
|
|
|
| Tangible common shareholders'
equity (non-GAAP) |
|
$ |
1,201,422 |
|
|
$ |
1,191,755 |
|
|
$ |
1,141,390 |
|
| Common shares outstanding at
end of period |
|
35,102,459 |
|
|
35,751,576 |
|
|
35,152,746 |
|
| Common shareholders' equity
(book value) per share (GAAP) |
|
$ |
45.63 |
|
|
$ |
44.59 |
|
|
$ |
42.99 |
|
| Tangible common shareholders'
equity (tangible book value) per share (non-GAAP) |
|
$ |
34.23 |
|
|
$ |
33.33 |
|
|
$ |
32.47 |
|
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