BANR Banner Corporation

Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation contributed to solid first quarter 2017 operating results.  Net income in the first quarter of 2017 increased 4% to $23.8 million, or $0.72 per diluted share, compared to $22.8 million, or $0.69 per diluted share, in the preceding quarter and increased 34% compared to $17.8 million, or $0.52 per diluted share, in the first quarter a year ago.  The current quarter results did not include any acquisition-related expenses.  The results for the preceding quarter included $788,000 of acquisition-related expenses which, net of tax benefit, reduced net income by $0.02 per diluted share, while operating results in the first quarter a year ago included $6.8 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.13 per diluted share.

“During the first quarter of 2017 we continued to improve our operating performance, with good loan origination and core deposit growth as well as continued strong core revenues,” stated Mark J. Grescovich, President and Chief Executive Officer.  “We also benefited from the very positive economic conditions in our market areas, as well as the successful integration of the AmericanWest Bank acquisition, which has made a dramatic impact on our scale and reach and is providing enhanced opportunities for client and revenue growth.  During the first quarter, we crossed the threshold of $10 billion in total assets and again incurred increased expenses related to enhanced infrastructure and regulatory compliance costs.  While increasing regulatory costs are a significant headwind, through the hard work of our employees, we are continuing to execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders.”

At March 31, 2017, Banner Corporation had $10.07 billion in assets, $7.33 billion in net loans and $8.42 billion in deposits.  Banner operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2017 Highlights

• Net income was $23.8 million, compared to $22.8 million in the preceding quarter and increased substantially compared to $17.8 million in the first quarter of 2016.
• Return on average assets was 0.97% in the current quarter, 0.92% in the preceding quarter and 0.73% in the same quarter a year ago.
• Revenues from core operations* were $116.4 million, compared to $117.5 million in the preceding quarter, and increased 5% compared to $111.0 million in the first quarter a year ago.
• Net interest margin was 4.25% for the current quarter, compared to 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.
• Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.15%*, compared to 4.13%* in the fourth quarter and was 4.01%* in the first quarter a year ago.
• Deposit fees and other service charges were $12.2 million, the same as in the preceding quarter and increased compared to $11.8 million in the same quarter a year ago.
• Revenues from mortgage banking operations decreased to $4.6 million compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter a year ago.
• Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $86.5 million or 1.17% of total loans.
• Core deposits increased 3% during the current quarter and represented 86% of total deposits at March 31, 2017.
• Quarterly dividends to shareholders were increased to $0.25 per share, providing a current yield of 1.8% based on our March 31, 2017, closing price.
• Common shareholders' tangible equity per share* was $31.68 at March 31, 2017, compared to $31.06 at the preceding quarter end and $30.38 a year ago.
• The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.72% at March 31, 2017, compared to 10.83% at the preceding quarter end and 10.98% a year ago.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest expense from core operations (which excludes acquisition-related costs), the adjusted allowance for loan losses to adjusted loans (which includes net loan discounts on acquired loans) and references to tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of this press release.

Income Statement Review

Banner’s first quarter net interest income, before the provision for loan losses, decreased slightly to $94.9 million, compared to $97.2 million in the preceding quarter.  First quarter 2017 net interest income, before the provision for loan losses, increased 4% compared to $91.0 million in the first quarter a year ago.

“Our net interest margin decreased seven basis points compared to the preceding quarter, largely as a result of  decreased accretion from acquisition accounting loan discounts,” said Grescovich.  "In addition, in the preceding quarter our loan yields and the net interest margin were elevated as a result of significant prepayment fees on a single large credit relationship.  Excluding the impact of acquisition accounting, the net interest margin increased two basis points compared to the preceding quarter, and increased by 14 basis points compared to a year ago.*”

Net interest margin is enhanced by the amortization of acquisition accounting discounts on loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense.  Banner's net interest margin was 4.25% for the first quarter of 2017, which included eight basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and one basis point as a result of the impact of the net loan acquisition discounts on average earning assets. The net interest margin was 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.  Excluding the effects of acquisition accounting, the net interest margin was 4.15%* in the first quarter, 4.13%* in the preceding quarter and 4.01%* in the first quarter a year ago.

Average interest-earning asset yields decreased five basis points to 4.44% compared to 4.49% for the preceding quarter and increased 12 basis points compared to 4.32% in the first quarter a year ago.  Average loan yields decreased 13 basis points to 4.80% compared to the preceding quarter, reflecting significantly less discount accretion, but increased two basis points from the first quarter a year ago.  Accretion of the acquisition accounting discounts added 11 basis points to loan yields in the current quarter compared to 21 basis points in the preceding quarter and 12 basis points in the first quarter a year ago.  Deposit costs increased one basis point to 0.14% compared to the preceding quarter and decreased one basis point compared to the first quarter a year ago.  Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by one basis point in the first quarter of 2017, compared to two basis points in the preceding quarter and two basis points in the first quarter a year ago.  The total cost of funds increased two basis points to 0.20% during the first quarter compared to the preceding quarter and was unchanged compared to the first quarter a year ago.

“As expected, due to the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the first quarter, the same as in the preceding quarter,” added Grescovich.  "While our asset quality metrics remain exceptionally good, adding to the loan loss allowance as the acquisition accounting discounts are accreted to income and growth in new and renewed loans occurs will likely continue as we strive to maintain an appropriate level of reserves and maintain a moderate risk profile."  In the first quarter a year ago, Banner did not record a provision.

Reflecting seasonal trends and the adverse impact of higher interest rates, mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.6 million in the first quarter compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter of 2016.  Sales of multifamily loans in the current quarter resulted in gains of $70,000, while sales of multifamily loans generated $254,000 of gains in the preceding quarter.  Home purchase activity accounted for 64% of first quarter one- to four-family mortgage banking loan originations.

Banner’s deposit fees and other service charges were $12.2 million in the first quarter, which was unchanged compared to the preceding quarter and increased 3% compared to $11.8 million in the first quarter a year ago.

Miscellaneous income for the current quarter included a one-time gain of $2.5 million on the sale of a single loan that had been acquired a number of years ago as a partial settlement on a non-performing credit relationship and was carried at a significant discount to its contractual loan amount and eventual sales price.

First quarter 2017 results included a $688,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partly offset by a $13,000 net gain on the sale of securities.  In the preceding quarter, results included a $1.1 million net loss for fair value adjustments that was partly offset by a $311,000 net gain on the sale of securities.  In the first quarter a year ago, results included a $29,000 net gain for fair value adjustments and a $21,000 net gain on the sale of securities.

Total revenues were $115.7 million for the first quarter of 2017, compared to $116.6 million in the preceding quarter and $111.0 million in the first quarter a year ago.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) was $116.4 million in the first quarter of 2017, compared to $117.5 million in the preceding quarter and increased 5% compared to $111.0 million in the first quarter of 2016.

Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.8 million in the first quarter of 2017, compared to $19.5 million in the fourth quarter of 2016 and $20.0 million in the first quarter a year ago.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $21.5 million in the first quarter of 2017, compared to $20.3 million for the fourth quarter of 2017 and $19.9 million in the first quarter a year ago.

Banner’s total non-interest expenses were $78.1 million in the first quarter of 2017, compared to $79.9 million in the preceding quarter and $84.0 million in the first quarter of 2016.  The current quarter's non-interest expenses included increased compensation and employee benefit expense, elevated costs for professional services largely as result of enhanced regulatory compliance requirements and additional charges for customer refunds related to prior periods, which were generally offset compared to the preceding quarter by reductions in other expenses and a $1.2 million gain on the sale of real estate owned reflected in real estate operations.  Miscellaneous expenses for the current quarter included accruals of $865,000 for customer refunds for deposit fees that we determined should not have been charged during a six-year period from 2010 to 2015, which was more than offset by the release of a $1.2 million reserve for possible credit losses on an unfunded commitment for a credit relationship that was terminated. There were no acquisition-related expenses in the current quarter compared to $788,000 in the preceding quarter and $6.8 million in the first quarter a year ago.

For the first quarter of 2017, Banner recorded $11.8 million in state and federal income tax expense for an effective tax rate of 33.2%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.

Balance Sheet Review

Banner’s total assets increased to $10.07 billion at March 31, 2017, from $9.79 billion at December 31, 2016 and $9.75 billion a year ago.  The total of securities and interest-bearing deposits held at other banks was $1.62 billion at March 31, 2017, compared to $1.16 billion at December 30, 2016 and $1.59 billion a year ago.  The increase in the securities portfolio during the current quarter reflects Banner's renewed leveraging strategy as it crossed the $10 billion assets threshold.  In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016.  The average effective duration of Banner's securities portfolio was approximately 3.8 years at March 31, 2017, compared to 2.9 years at March 31, 2016.

“Net loans decreased slightly during the quarter, but were up 3% year over year, with good production in targeted loan types, including increases in commercial real estate and construction and development loans,” said Grescovich.  “We continue to see significant potential for growth in our loan origination pipelines.”

Net loans receivable decreased slightly to $7.33 billion at March 31, 2017, compared to $7.37 billion at December 31, 2016, largely as a result of seasonal factors and continuing repayments on one- to four-family loans, but increased 3% compared to $7.11 billion a year ago.  Commercial real estate and multifamily real estate loans increased modestly to $3.63 billion at March 31, 2017, compared to $3.59 billion at December 31, 2016, and increased 5% compared to $3.44 billion a year ago.  Commercial business loans increased slightly to $1.22 billion at March 31, 2017, compared to $1.21 billion three months earlier and were unchanged compared to a year ago.  Agricultural business loans, which are seasonal by nature, decreased to $313.4 million at March 31, 2017, compared to $369.2 million three months earlier and $340.4 million a year ago.  Total construction, land and land development loans decreased to $803.7 million at March 31, 2017, compared to $823.1 million at December 31, 2016, but increased 27% compared to $632.1 million a year earlier.  One- to four-family loans continued to decline as a result of repayments, with nearly all newly originated mortgage loans being sold in the secondary market.

Loans held for sale decreased significantly to $86.7 million at March 31, 2017, compared to $246.4 million at December 31, 2016, largely due to the sale of $200.7 million of multifamily loans during the first quarter.  Loans held for sale were $47.5 million at March 31, 2016.  Loans held for sale at March 31, 2017, included $72.5 million of multifamily loans and $14.2 million of one- to four-family loans.

Total deposits were $8.42 billion at March 31, 2017, a 4% increase compared to $8.12 billion at December 31, 2016, and a 5% increase compared to $8.03 billion a year ago.  Non-interest-bearing account balances increased 6% to $3.21 billion at March 31, 2017, compared to $3.04 billion a year ago.  Interest-bearing transaction and savings accounts increased 10% to $4.06 billion compared to $3.71 billion a year ago.  Certificates of deposit decreased 11% to $1.14 billion at March 31, 2017, compared to $1.29 billion a year earlier.  Brokered deposits totaled $171.5 million at March 31, 2017, compared to $34.1 million at December 31, 2016 and $135.6 million a year ago.  Brokered deposits increased in the current quarter in connection with Banner's leveraging strategy as higher yielding investment securities were purchased and total assets were allowed to increase above the $10 billion threshold.

Reflecting additional account growth as well as increased balances for existing clients, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 3% during the current quarter.  Core deposits represented 86% of total deposits at March 31, 2017, compared to 87% of total deposits at December 31, 2016, and 84% of total deposits a year earlier.  The average cost of deposits was 0.14% for the quarter ended March 31, 2017, a one basis point increase compared to the preceding quarter, and a one basis point decline compared to the quarter ended March 31, 2016.

At March 31, 2017, total common shareholders' equity was $1.32 billion, or $39.92 per share, compared to $1.31 billion at December 31, 2016 and $1.32 billion a year ago.  During the quarter Banner declared and accrued a $0.25 per share quarterly dividend.  At March 31, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 10.72% of tangible assets*, compared to $1.03 billion, or 10.83% of tangible assets, at December 31, 2016, and $1.04 billion, or 10.98% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.68 at March 31, 2017, compared to $30.38 per share a year ago.

Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards.  At March 31, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.46%, its Tier 1 leverage capital to average assets ratio was 11.79%, and its total capital to risk-weighted assets ratio was 13.85%.

Credit Quality

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw Bank.

The allowance for loan losses was $86.5 million at March 31, 2017, or 1.17% of total loans outstanding and 479% of non-performing loans compared to $78.2 million at March 31, 2016, or 1.09% of total loans outstanding and 501% of non-performing loans.  Banner had net charge-offs of $1.5 million in the first quarter compared to net charge-offs of $253,000 in the fourth quarter of 2016 and net recoveries of $189,000 in the first quarter a year ago.  Primarily as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter.  Banner did not record a provision for the first quarter of 2016.  If the allowance for loan losses included the remaining loan discount*, the adjusted allowance for loan losses to adjusted loans would have been 1.56% as of March 31, 2017 as compared to 1.67% a year ago.  Non-performing loans were $18.1 million at March 31, 2017, compared to $22.6 million at December 31, 2016 and $15.6 million a year ago.  Real estate owned and other repossessed assets were $3.2 million at March 31, 2017, compared to $11.2 million at December 31, 2016, and $7.4 million a year ago.

Banner's non-performing assets were $21.3 million, or 0.21% of total assets, at March 31, 2017, compared to $33.8 million, or 0.35% of total assets, at December 31, 2016 and $23.0 million, or 0.24% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $30.5 million at March 31, 2017, compared to $32.3 million at December 31, 2016, and $53.3 million a year ago.

Conference Call

Banner will host a conference call on Tuesday, April 25, 2017, at 8:00 a.m. PDT, to discuss its first quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10103898, or at www.bannerbank.com.

About the Company

Banner Corporation is a $10.1 billion bank holding company operating two commercial banks in five Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner's operating and stock price performance.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF OPERATIONS		Quarters Ended
(in thousands except shares and per share data)		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
INTEREST INCOME:
Loans receivable		$	91,288			$	93,915			$	86,958
Mortgage-backed securities		4,647				3,861				5,390
Securities and cash equivalents		3,161				3,231				2,953
		99,096				101,007				95,301
INTEREST EXPENSE:
Deposits		2,791				2,604				2,946
Federal Home Loan Bank advances		273				79				279
Other borrowings		74				76				75
Junior subordinated debentures		1,104				1,077				958
		4,242				3,836				4,258
Net interest income before provision for loan losses		94,854				97,171				91,043
PROVISION FOR LOAN LOSSES		2,000				2,030				—
Net interest income		92,854				95,141				91,043
NON-INTEREST INCOME:
Deposit fees and other service charges		12,186				12,199				11,818
Mortgage banking operations		4,603				5,143				5,643
Bank owned life insurance		1,095				893				1,185
Miscellaneous		3,636				2,065				1,263
		21,520				20,300				19,909
Net gain on sale of securities		13				311				21
Net change in valuation of financial instruments carried at fair value		(688		)		(1,148		)		29
Total non-interest income		20,845				19,463				19,959
NON-INTEREST EXPENSE:
Salary and employee benefits		46,063				44,387				46,564
Less capitalized loan origination costs		(4,316		)		(4,785		)		(4,250		)
Occupancy and equipment		11,996				12,581				10,388
Information / computer data services		3,994				4,674				4,920
Payment and card processing services		5,020				5,440				4,785
Professional services		5,152				2,384				2,614
Advertising and marketing		1,328				3,220				1,734
Deposit insurance		1,266				1,012				1,338
State/municipal business and use taxes		799				952				838
Real estate operations		(966		)		(338		)		397
Amortization of core deposit intangibles		1,624				1,722				1,808
Miscellaneous		6,118				7,820				6,085
		78,078				79,069				77,221
Acquisition related expenses		—				788				6,813
Total non-interest expense		78,078				79,857				84,034
Income before provision for income taxes		35,621				34,747				26,968
PROVISION FOR INCOME TAXES		11,828				11,943				9,194
NET INCOME		$	23,793			$	22,804			$	17,774
Earnings per share available to common shareholders:
Basic		$	0.72			$	0.69			$	0.52
Diluted		$	0.72			$	0.69			$	0.52
Cumulative dividends declared per common share		$	0.25			$	0.23			$	0.21
Weighted average common shares outstanding:
Basic		32,933,444				33,134,222				34,023,800
Diluted		33,051,459				33,201,333				34,103,727
Decrease in common shares outstanding		(40,523		)		(673,924		)		(20,804		)

FINANCIAL CONDITION														Percentage Change
(in thousands except shares and per share data)		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016				Prior Qtr			Prior Yr Qtr
ASSETS
Cash and due from banks		$	196,277			$	177,083			$	153,706			10.8	%		27.7	%
Interest-bearing deposits		104,431				70,636				106,864				47.8	%		(2.3	)%
Total cash and cash equivalents		300,708				247,719				260,570				21.4	%		15.4	%
Securities - trading		24,753				24,568				33,994				0.8	%		(27.2	)%
Securities - available for sale		1,223,764				800,917				1,199,279				52.8	%		2.0	%
Securities - held to maturity		266,391				267,873				246,320				(0.6	)%		8.1	%
Federal Home Loan Bank stock		10,334				12,506				13,347				(17.4	)%		(22.6	)%
Loans held for sale		86,707				246,353				47,523				(64.8	)%		82.5	%
Loans receivable		7,421,255				7,451,148				7,185,999				(0.4	)%		3.3	%
Allowance for loan losses		(86,527		)		(85,997		)		(78,197		)		0.6	%		10.7	%
Net loans		7,334,728				7,365,151				7,107,802				(0.4	)%		3.2	%
Accrued interest receivable		30,312				30,178				30,674				0.4	%		(1.2	)%
Real estate owned held for sale, net		3,040				11,081				7,207				(72.6	)%		(57.8	)%
Property and equipment, net		162,467				166,481				168,807				(2.4	)%		(3.8	)%
Goodwill		244,583				244,583				244,811				—	%		(0.1	)%
Other intangibles, net		28,488				30,162				35,598				(5.6	)%		(20.0	)%
Bank-owned life insurance		159,948				158,936				156,928				0.6	%		1.9	%
Other assets		192,155				187,160				192,734				2.7	%		(0.3	)%
Total assets		$	10,068,378			$	9,793,668			$	9,745,594			2.8	%		3.3	%
LIABILITIES
Deposits:
Non-interest-bearing		$	3,213,044			$	3,140,451			$	3,036,330			2.3	%		5.8	%
Interest-bearing transaction and savings accounts		4,064,198				3,935,630				3,705,658				3.3	%		9.7	%
Interest-bearing certificates		1,144,718				1,045,333				1,287,873				9.5	%		(11.1	)%
Total deposits		8,421,960				8,121,414				8,029,861				3.7	%		4.9	%
Advances from Federal Home Loan Bank at fair value		213				54,216				75,400				(99.6	)%		(99.7	)%
Customer repurchase agreements and other borrowings		120,245				105,685				106,132				13.8	%		13.3	%
Junior subordinated debentures at fair value		96,040				95,200				92,879				0.9	%		3.4	%
Accrued expenses and other liabilities		66,201				71,369				81,485				(7.2	)%		(18.8	)%
Deferred compensation		40,315				40,074				39,682				0.6	%		1.6	%
Total liabilities		8,744,974				8,487,958				8,425,439				3.0	%		3.8	%
SHAREHOLDERS' EQUITY
Common stock		1,214,517				1,213,837				1,262,050				0.1	%		(3.8	)%
Retained earnings		110,783				95,328				50,230				16.2	%		120.6	%
Other components of shareholders' equity		(1,896		)		(3,455		)		7,875				(45.1	)%		(124.1	)%
Total shareholders' equity		1,323,404				1,305,710				1,320,155				1.4	%		0.2	%
Total liabilities and shareholders' equity		$	10,068,378			$	9,793,668			$	9,745,594			2.8	%		3.3	%
Common Shares Issued:
Shares outstanding at end of period		33,152,864				33,193,387				34,221,451
Common shareholders' equity per share (1)		$	39.92			$	39.34			$	38.58
Common shareholders' tangible equity per share (1) (2)		$	31.68			$	31.06			$	30.38
Common shareholders' tangible equity to tangible assets (2)		10.72		%		10.83		%		10.98		%
Consolidated Tier 1 leverage capital ratio		11.79		%		11.83		%		11.28		%

(1	)	Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2	)	Common shareholders' tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
														Percentage Change
LOANS		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016				Prior Qtr			Prior Yr Qtr
Commercial real estate:
Owner occupied		$	1,361,095			$	1,352,999			$	1,328,034			0.6	%		2.5	%
Investment properties		2,011,618				1,986,336				1,805,243				1.3	%		11.4	%
Multifamily real estate		254,246				248,150				307,019				2.5	%		(17.2	)%
Commercial construction		141,505				124,068				87,711				14.1	%		61.3	%
Multifamily construction		114,728				124,126				79,737				(7.6	)%		43.9	%
One- to four-family construction		366,191				375,704				297,348				(2.5	)%		23.2	%
Land and land development:
Residential		151,649				170,004				142,841				(10.8	)%		6.2	%
Commercial		29,597				29,184				24,493				1.4	%		20.8	%
Commercial business		1,224,541				1,207,879				1,224,915				1.4	%		—	%
Agricultural business including secured by farmland		313,374				369,156				340,350				(15.1	)%		(7.9	)%
One- to four-family real estate		802,991				813,077				910,719				(1.2	)%		(11.8	)%
Consumer:
Consumer secured by one- to four-family real estate		493,495				493,211				481,590				0.1	%		2.5	%
Consumer-other		156,225				157,254				155,999				(0.7	)%		0.1	%
Total loans receivable		$	7,421,255			$	7,451,148			$	7,185,999			(0.4	)%		3.3	%
Restructured loans performing under their restructured terms		$	17,193			$	18,907			$	19,450
Loans 30 - 89 days past due and on accrual (1)		$	22,214			$	11,571			$	28,264
Total delinquent loans (including loans on non-accrual), net (2)		$	37,563			$	30,553			$	43,986
Total delinquent loans / Total loans outstanding		0.51		%		0.41		%		0.61		%

(1) Includes $2.4 million of purchased credit-impaired loans at March 31, 2017 compared to $470,000 at December 31, 2016 and $1.6 million at March 31, 2016.(2) Delinquent loans include $3.5 million of delinquent purchased credit-impaired loans at March 31, 2017 compared to $1.7 million at December 31, 2016 and $4.9 million at March 31, 2016.

LOANS BY GEOGRAPHIC LOCATION		Mar 31, 2017							Dec 31, 2016							Mar 31, 2016
		Amount				Percentage			Amount				Percentage			Amount				Percentage
Washington		$	3,401,005			45.8	%		$	3,433,617			46.1	%		$	3,333,912			46.4	%
Oregon		1,493,054				20.1	%		1,505,369				20.2	%		1,420,749				19.8	%
California		1,255,597				16.9	%		1,239,989				16.6	%		1,173,203				16.3	%
Idaho		471,519				6.4	%		495,992				6.7	%		493,905				6.9	%
Utah		281,379				3.8	%		283,890				3.8	%		289,082				4.0	%
Other		518,701				7.0	%		492,291				6.6	%		475,148				6.6	%
Total loans		$	7,421,255			100.0	%		$	7,451,148			100.0	%		$	7,185,999			100.0	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period		$	85,997			$	84,220			$	78,008
Provision for loan losses		2,000				2,030				—
Recoveries of loans previously charged off:
Commercial real estate		70				484				38
Construction and land		83				903				471
One- to four-family real estate		145				231				12
Commercial business		173				218				720
Agricultural business, including secured by farmland		113				20				17
Consumer		94				81				207
		678				1,937				1,465
Loans charged off:
Commercial real estate		—				(566		)		(180		)
Construction and land		—				(616		)		—
One- to four-family real estate		—				(249		)		—
Commercial business		(1,626		)		(305		)		(139		)
Agricultural business, including secured by farmland		(159		)		—				(567		)
Consumer		(363		)		(454		)		(390		)
		(2,148		)		(2,190		)		(1,276		)
Net (charge-offs) recoveries		(1,470		)		(253		)		189
Balance, end of period		$	86,527			$	85,997			$	78,197
Net (charge-offs) recoveries / Average loans outstanding		(0.019		)%		(0.003		)%		0.003		%

ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Specific or allocated loss allowance:
Commercial real estate		$	20,472			$	20,993			$	19,732
Multifamily real estate		1,378				1,360				2,853
Construction and land		29,464				34,252				29,318
One- to four-family real estate		1,974				2,238				2,170
Commercial business		19,768				16,533				15,118
Agricultural business, including secured by farmland		3,245				2,967				4,282
Consumer		3,840				4,104				3,541
Total allocated		80,141				82,447				77,014
Unallocated		6,386				3,550				1,183
Total allowance for loan losses		$	86,527			$	85,997			$	78,197
Allowance for loan losses / Total loans outstanding		1.17		%		1.15		%		1.09		%
Allowance for loan losses / Non-performing loans		479		%		381		%		501		%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	6,910			$	8,237			$	4,145
Multifamily	147				—				—
Construction and land	1,775				1,748				2,250
One- to four-family	3,386				2,263				4,803
Commercial business	2,700				3,074				1,558
Agricultural business, including secured by farmland	1,012				3,229				663
Consumer	1,285				1,875				906
	17,215				20,426				14,325
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	—				701				—
Multifamily	—				147				—
One- to four-family	545				1,233				1,039
Consumer	297				72				251
	842				2,153				1,290
Total non-performing loans	18,057				22,579				15,615
Real estate owned (REO)	3,040				11,081				7,207
Other repossessed assets	162				166				202
Total non-performing assets	$	21,259			$	33,826			$	23,024
Total non-performing assets to total assets	0.21		%		0.35		%		0.24		%
Purchased credit-impaired loans, net	$	30,501			$	32,322			$	53,271

	Quarters Ended
REAL ESTATE OWNED	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Balance, beginning of period	$	11,081			$	4,717			$	11,627
Additions from loan foreclosures	(68		)		8,375				2
Additions from acquisitions	—				—				400
Proceeds from dispositions of REO	(9,125		)		(2,791		)		(4,666		)
Gain on sale of REO	1,202				852				49
Valuation adjustments in the period	(50		)		(72		)		(205		)
Balance, end of period	$	3,040			$	11,081			$	7,207

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION														Percentage Change
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016				Prior Qtr			Prior Yr
Non-interest-bearing		$	3,213,044			$	3,140,451			$	3,036,330			2.3	%		5.8	%
Interest-bearing checking		928,232				914,484				767,460				1.5	%		20.9	%
Regular savings accounts		1,592,023				1,523,391				1,327,558				4.5	%		19.9	%
Money market accounts		1,543,943				1,497,755				1,610,640				3.1	%		(4.1	)%
Total interest-bearing transaction and savings accounts		4,064,198				3,935,630				3,705,658				3.3	%		9.7	%
Interest-bearing certificates		1,144,718				1,045,333				1,287,873				9.5	%		(11.1	)%
Total deposits		$	8,421,960			$	8,121,414			$	8,029,861			3.7	%		4.9	%

GEOGRAPHIC CONCENTRATION OF DEPOSITS		Mar 31, 2017							Dec 31, 2016							Mar 31, 2016
		Amount				Percentage			Amount				Percentage			Amount				Percentage
Washington		$	4,619,457			54.9	%		$	4,347,644			53.6	%		$	4,209,332			52.4	%
Oregon		1,746,143				20.7	%		1,708,973				21.0	%		1,668,421				20.8	%
California		1,469,351				17.4	%		1,469,748				18.1	%		1,565,326				19.5	%
Idaho		429,850				5.1	%		447,019				5.5	%		428,681				5.3	%
Utah		157,159				1.9	%		148,030				1.8	%		158,101				2.0	%
Total deposits		$	8,421,960			100.0	%		$	8,121,414			100.0	%		$	8,029,861			100.0	%

INCLUDED IN TOTAL DEPOSITS		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Public non-interest-bearing accounts		$	80,322			$	92,789			$	82,527
Public interest-bearing transaction & savings accounts		125,921				128,976				123,713
Public interest-bearing certificates		31,024				25,650				29,983
Total public deposits		$	237,267			$	247,415			$	236,223
Total brokered deposits		$	171,521			$	34,074			$	135,603

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Actual							Minimum to be categorized as "Adequately Capitalized"							Minimum to becategorized as"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF March 31, 2017		Amount				Ratio			Amount				Ratio			Amount				Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,227,333			13.85	%		$	708,897			8.00	%		$	886,122			10.00	%
Tier 1 capital to risk-weighted assets		1,138,357				12.85	%		531,673				6.00	%		531,673				6.00	%
Tier 1 leverage capital to average assets		1,138,357				11.79	%		386,229				4.00	%		n/a				n/a
Common equity tier 1 capital to risk-weighted assets		1,015,251				11.46	%		398,755				4.50	%		n/a				n/a
Banner Bank:
Total capital to risk-weighted assets		1,053,255				12.15	%		693,425				8.00	%		866,781				10.00	%
Tier 1 capital to risk-weighted assets		966,485				11.15	%		520,068				6.00	%		693,425				8.00	%
Tier 1 leverage capital to average assets		966,485				10.29	%		375,777				4.00	%		469,721				5.00	%
Common equity tier 1 capital to risk-weighted assets		966,485				11.15	%		390,051				4.50	%		563,407				6.50	%
Islanders Bank:
Total capital to risk-weighted assets		35,728				19.02	%		15,031				8.00	%		18,788				10.00	%
Tier 1 capital to risk-weighted assets		33,522				17.84	%		11,273				6.00	%		15,031				8.00	%
Tier 1 leverage capital to average assets		33,522				13.06	%		10,271				4.00	%		12,839				5.00	%
Common equity tier 1 capital to risk-weighted assets		33,522				17.84	%		8,455				4.50	%		12,212				6.50	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	March 31, 2017									December 31, 2016									March 31, 2016
	Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)
Interest-earning assets:
Mortgage loans	$	6,104,779		$	72,549		4.82	%		$	5,960,506		$	74,538		4.97	%		$	5,707,882		$	68,743		4.84	%
Commercial/agricultural loans	1,464,532			16,546			4.58	%		1,469,407			17,192			4.65	%		1,471,638			16,025			4.38	%
Consumer and other loans	138,033			2,193			6.44	%		141,133			2,185			6.16	%		141,361			2,190			6.23	%
Total loans(1)	7,707,344			91,288			4.80	%		7,571,046			93,915			4.93	%		7,320,881			86,958			4.78	%
Mortgage-backed securities	842,071			4,647			2.24	%		796,625			3,861			1.93	%		1,004,836			5,390			2.16	%
Other securities	453,793			3,037			2.71	%		469,377			3,062			2.60	%		421,241			2,772			2.65	%
Interest-bearing deposits with banks	32,195			93			1.17	%		91,625			95			0.41	%		103,775			101			0.39	%
FHLB stock	15,550			31			0.81	%		11,668			74			2.52	%		17,531			80			1.84	%
Total investment securities	1,343,609			7,808			2.36	%		1,369,295			7,092			2.06	%		1,547,383			8,343			2.17	%
Total interest-earning assets	9,050,953			99,096			4.44	%		8,940,341			101,007			4.49	%		8,868,264			95,301			4.32	%
Non-interest-earning assets	923,165									904,846									900,296
Total assets	$	9,974,118								$	9,845,187								$	9,768,560
Deposits:
Interest-bearing checking accounts	$	896,764		200			0.09	%		$	876,904		197			0.09	%		$	934,072		196			0.08	%
Savings accounts	1,557,734			523			0.14	%		1,470,548			493			0.13	%		1,307,369			423			0.13	%
Money market accounts	1,522,470			651			0.17	%		1,541,258			677			0.17	%		1,620,524			862			0.21	%
Certificates of deposit	1,089,316			1,417			0.53	%		1,089,337			1,237			0.45	%		1,328,741			1,465			0.44	%
Total interest-bearing deposits	5,066,284			2,791			0.22	%		4,978,047			2,604			0.21	%		5,190,706			2,946			0.23	%
Non-interest-bearing deposits	3,148,520			—			—	%		3,193,172			—			—	%		2,788,372			—			—	%
Total deposits	8,214,804			2,791			0.14	%		8,171,219			2,604			0.13	%		7,979,078			2,946			0.15	%
Other interest-bearing liabilities:
FHLB advances	130,274			273			0.85	%		32,932			79			0.95	%		169,204			279			0.66	%
Other borrowings	108,091			74			0.28	%		107,819			76			0.28	%		102,865			75			0.29	%
Junior subordinated debentures	140,212			1,104			3.19	%		140,212			1,077			3.06	%		140,212			958			2.75	%
Total borrowings	378,577			1,451			1.55	%		280,963			1,232			1.74	%		412,281			1,312			1.28	%
Total funding liabilities	8,593,381			4,242			0.20	%		8,452,182			3,836			0.18	%		8,391,359			4,258			0.20	%
Other non-interest-bearing liabilities(2)	58,489									67,536									63,014
Total liabilities	8,651,870									8,519,718									8,454,373
Shareholders' equity	1,322,248									1,325,469									1,314,187
Total liabilities and shareholders' equity	$	9,974,118								$	9,845,187								$	9,768,560
Net interest income/rate spread				$	94,854		4.24	%					$	97,171		4.31	%					$	91,043		4.12	%
Net interest margin							4.25	%								4.32	%								4.13	%
Additional Key Financial Ratios:
Return on average assets							0.97	%								0.92	%								0.73	%
Return on average equity							7.30	%								6.84	%								5.44	%
Average equity/average assets							13.26	%								13.46	%								13.45	%
Average interest-earning assets/average interest-bearing liabilities							166.23	%								170.00	%								158.28	%
Average interest-earning assets/average funding liabilities							105.32	%								105.78	%								105.68	%
Non-interest income/average assets							0.85	%								0.79	%								0.82	%
Non-interest expense/average assets							3.17	%								3.23	%								3.46	%
Efficiency ratio(4)							67.48	%								68.47	%								75.70	%
Adjusted efficiency ratio(5)							65.84	%								65.32	%								66.86	%

(1	)	Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2	)	Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3	)	Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4	)	Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5	)	Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of core deposit intangibles (CDI), real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
* Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.
REVENUE FROM CORE OPERATIONS	Quarters Ended
	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Net interest income before provision for loan losses	$	94,854			$	97,171			$	91,043
Total non-interest income	20,845				19,463				19,959
Total GAAP revenue	115,699				116,634				111,002
Exclude net gain on sale of securities	(13		)		(311		)		(21		)
Exclude change in valuation of financial instruments carried at fair value	688				1,148				(29		)
Revenue from core operations (non-GAAP)	$	116,374			$	117,471			$	110,952

NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS		Quarters Ended
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Total non-interest income (GAAP)		$	20,845			$	19,463			$	19,959
Exclude net gain on sale of securities		(13		)		(311		)		(21		)
Exclude change in valuation of financial instruments carried at fair value		688				1,148				(29		)
Non-interest income from core operations (non-GAAP)		$	21,520			$	20,300			$	19,909
Total non-interest expense (GAAP)		$	78,078			$	79,857			$	84,034
Exclude acquisition related costs		—				(788		)		(6,813		)
Non-interest expense from core operations (non-GAAP)		$	78,078			$	79,069			$	77,221

INCOME FROM CORE OPERATIONS	Quarters Ended
	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Income before provision for taxes (GAAP)	$	35,621			$	34,747			$	26,968
Exclude net gain on sale of securities	(13		)		(311		)		(21		)
Exclude change in valuation of financial instruments carried at fair value	688				1,148				(29		)
Exclude acquisition costs	—				788				6,813
Income from core operations before provision for taxes (non-GAAP)	$	36,296			$	36,372			$	33,731

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
EARNINGS FROM CORE OPERATIONS		Quarters Ended
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Net income (GAAP)		$	23,793			$	22,804			$	17,774
Exclude net gain on sale of securities		(13		)		(311		)		(21		)
Exclude change in valuation of financial instruments carried at fair value		688				1,148				(29		)
Exclude acquisition-related costs		—				788				6,813
Exclude related tax benefit		(243		)		(585		)		(2,417		)
Total earnings from core operations (non-GAAP)		$	24,225			$	23,844			$	22,120
Diluted earnings per share (GAAP)		$	0.72			$	0.69			$	0.52
Diluted core earnings per share (non-GAAP)		$	0.73			$	0.72			$	0.65
RETURN ON AVERAGE ASSETS - CORE
Average assets		$	9,974,118			$	9,845,187			$	9,768,560
Return on average assets (GAAP)		0.97		%		0.92		%		0.73		%
Core return on average assets (non-GAAP)		0.99		%		0.96		%		0.91		%
NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS		Quarters Ended
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Acquisition-related costs		$	—			$	(788	)		$	(6,813	)
Related tax benefit		—				284				2,435
Total net effect of acquisition-related costs on earnings		$	—			$	(504	)		$	(4,378	)
Diluted weighted average shares outstanding		33,051,459				33,201,333				34,103,727
Total net effect of acquisition-related costs on diluted weighted average earnings per share		$	—			$	(0.02	)		$	(0.13	)

ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN	Quarters Ended
	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Net interest income before provision for loan losses (GAAP)	$	94,854			$	97,171			$	91,043
Exclude discount accretion on acquired loans	(1,777		)		(3,635		)		(1,689		)
Exclude premium amortization on acquired certificates of deposit	(132		)		(315		)		(461		)
Net interest income before acquisition accounting impact (non-GAAP)	$	92,945			$	93,221			$	88,893
Average interest-earning assets (GAAP)	$	9,050,953			$	8,940,341			$	8,868,264
Exclude average net loan discount on acquired loans	30,058				32,773				43,347
Average interest-earning assets before acquired loan discount (non-GAAP)	$	9,081,011			$	8,973,114			$	8,911,611
Net interest margin (GAAP)	4.25		%		4.32		%		4.13		%
Exclude impact on net interest margin from discount accretion on acquired loans	(0.08		)		(0.16		)		(0.08		)
Exclude impact on net interest margin from acquired certificates of deposit premium amortization	(0.01		)		(0.01		)		(0.02		)
Exclude impact on net interest margin of net loan discount on average earning assets	(0.01		)		(0.02		)		(0.02		)
Net margin before acquisition accounting impact (non-GAAP)	4.15		%		4.13		%		4.01		%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Quarters Ended
ACQUISITION ACCOUNTING IMPACT ON LOAN YIELD	Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Average total loans (GAAP)	$	7,707,344			$	7,571,046			$	7,320,881
Exclude average net loan discount on acquired loans	30,058				32,773				43,347
Adjusted average total loans (non-GAAP)	$	7,737,402			$	7,603,819			$	7,364,228
Interest income on loans (GAAP)	$	91,288			$	93,915			$	86,958
Exclude discount accretion on acquired loans	(1,777		)		(3,635		)		(1,689		)
Adjusted interest income on loans (non-GAAP)	$	89,511			$	90,280			$	85,269
Loan yield (GAAP)	4.80		%		4.93		%		4.78		%
Loan yield before acquisition accounting impact (non-GAAP)	4.69		%		4.72		%		4.66		%
Impact on loan yield from acquisition accounting	0.11		%		0.21		%		0.12		%
ACQUISITION ACCOUNTING IMPACT ON DEPOSIT COST
Average deposits	$	8,214,804			$	8,171,219			$	7,979,078
Interest expense on deposits (GAAP)	$	2,791			$	2,604			$	2,946
Exclude premium amortization on acquired certificates of deposit	132				315				461
Adjusted interest expense on deposits (non-GAAP)	$	2,923			$	2,919			$	3,407
Deposit cost (GAAP)	0.14		%		0.13		%		0.15		%
Deposit cost before acquisition accounting impact (non-GAAP)	0.15		%		0.15		%		0.17		%
Impact on deposit cost from acquisition accounting	(0.01		)%		(0.02		)%		(0.02		)%

ADJUSTED EFFICIENCY RATIO		Quarters Ended
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Non-interest expense (GAAP)		$	78,078			$	79,857			$	84,034
Exclude acquisition-related costs		—				(788		)		(6,813		)
Exclude CDI amortization		(1,624		)		(1,722		)		(1,808		)
Exclude state/municipal tax expense		(799		)		(952		)		(838		)
Exclude REO gain (loss)		966				338				(397		)
Adjusted non-interest expense (non-GAAP)		$	76,621			$	76,733			$	74,178
Net interest income before provision for loan losses (GAAP)		$	94,854			$	97,171			$	91,043
Non-interest income (GAAP)		20,845				19,463				19,959
Total revenue		115,699				116,634				111,002
Exclude net gain on sale of securities		(13		)		(311		)		(21		)
Exclude net change in valuation of financial instruments carried at fair value		688				1,148				(29		)
Adjusted revenue (non-GAAP)		$	116,374			$	117,471			$	110,952
Efficiency ratio (GAAP)		67.48		%		68.47		%		75.70		%
Adjusted efficiency ratio (non-GAAP)		65.84		%		65.32		%		66.86		%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS
		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
Loans receivable (GAAP)		$	7,421,255			$	7,451,148			$	7,185,999
Net loan discount on acquired loans		29,352				31,110				42,302
Adjusted loans (non-GAAP)		$	7,450,607			$	7,482,258			$	7,228,301
Allowance for loan losses (GAAP)		$	86,527			$	85,997			$	78,197
Net loan discount on acquired loans		29,352				31,110				42,302
Adjusted allowance for loan losses (non-GAAP)		$	115,879			$	117,107			$	120,499
Allowance for loan losses / Total loans (GAAP)		1.17		%		1.15		%		1.09		%
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)		1.56		%		1.57		%		1.67		%

		Mar 31, 2017				Dec 31, 2016				Mar 31, 2016
TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS
Shareholders' equity (GAAP)		$	1,323,404			$	1,305,710			$	1,320,155
Exclude goodwill and other intangible assets, net		273,071				274,745				280,409
Tangible common shareholders' equity (non-GAAP)		$	1,050,333			$	1,030,965			$	1,039,746
Total assets (GAAP)		$	10,068,378			$	9,793,668			$	9,745,594
Exclude goodwill and other intangible assets, net		273,071				274,745				280,409
Total tangible assets (non-GAAP)		$	9,795,307			$	9,518,923			$	9,465,185
Common shareholders' equity to total assets (GAAP)		13.14		%		13.33		%		13.55		%
Tangible common shareholders' equity to tangible assets (non-GAAP)		10.72		%		10.83		%		10.98		%
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
Tangible common shareholders' equity		$	1,050,333			$	1,030,965			$	1,039,746
Common shares outstanding at end of period		33,152,864				33,193,387				34,221,451
Common shareholders' equity (book value) per share (GAAP)		$	39.92			$	39.34			$	38.58
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)		$	31.68			$	31.06			$	30.38

 

CONTACT: MARK J. GRESCOVICH
PRESIDENT & CEO
LLOYD W. BAKER, CFO
(509) 527-3636