WALLA WALLA, Wash., April 20, 2015 (GLOBE NEWSWIRE) -- Banner Corporation BANR, the parent company of Banner Bank and Islanders Bank, today reported net income in the first quarter of 2015 was $12.1 million, or $0.61 per diluted share, compared to $10.6 million, or $0.54 per diluted share, for the first quarter a year ago. In the preceding quarter, net income was $11.7 million, or $0.60 per diluted share. The current quarter results were impacted by $1.6 million of acquisition-related expenses which, net of taxes, reduced net income by $0.07 per diluted share, and the preceding quarter results were impacted by $2.8 million of acquisition-related expenses which, net of taxes, reduced net income by $0.09 per diluted share.
"Banner had another good quarter of operating performance, with strong revenue growth, a solid net interest margin and increased non-interest income led by record mortgage banking activities and increased deposit fees and service charges. In addition, during the quarter, we completed the merger of Siuslaw Bank into Banner Bank, including the successful conversion of all the data processing and operating systems, expanding our presence in Oregon and complementing our purchase in June 2014 of six branches from Umpqua Bank," said Mark J. Grescovich, President and Chief Executive Officer. "We are also making good progress with respect to our pending acquisition of AmericanWest Bank of Spokane, Washington. With these strategic combinations, we will deploy our super community bank model throughout a strengthened presence in Washington, Oregon and Idaho, and enter attractive growth markets in California and Utah. In addition to being good geographic and cultural fits, we anticipate these acquisitions will generate considerable operating synergies. We also expect these mergers to provide significant benefits to our expanded group of clients, communities, employees and shareholders."
Completion of the pending merger with AmericanWest Bank, which remains subject to regulatory approval and other closing conditions with closing anticipated early in the third quarter of 2015, will create a super community bank with approximately $9.7 billion in assets, $6.8 billion in loans, $8.0 billion in deposits, and 190 branches across five western states. The combined company will benefit from a diversified geography with significant growth opportunities, including nine of the top 20 western Metropolitan Statistical Areas by population.
First Quarter 2015 Highlights (compared to first quarter 2014, except as noted)
- Net income was $12.1 million, or $0.61 per diluted share, compared to $10.6 million, or $0.54 per diluted share in the first quarter of 2014.
- Annualized return on average assets was 1.02%.
- Annualized return on average equity was 8.09%.
- Revenues from core operations* increased 16% to $59.7 million, compared to $51.4 million in the first quarter a year ago.
- Net interest margin was 4.09% for the current quarter, compared to 4.08% in the fourth quarter of 2014 and 4.07% a year ago.
- Total deposits increased $420 million during the quarter to $4.32 billion and increased 17% compared to a year ago.
- Core deposits increased 28% compared to a year earlier and represent 82% of total deposits at March 31, 2015.
- Deposit fees and other service charges increased 23% to $8.1 million.
- Total loans increased $281.5 million to $4.04 billion during the quarter and increased 17% compared to a year ago.
- Revenues from mortgage banking operations were $4.1 million, an increase of 123%.
- Common stockholders' tangible equity per share* increased to $29.75 at March 31, 2015, compared to $29.68 at the preceding quarter end and $27.87 a year ago.
- The ratio of tangible common stockholders' equity to tangible assets* remained strong at 12.04% at March 31, 2015.
*Revenues from core operations and other operating income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), other operating expense from core operations (which excludes acquisition-related costs) and references to tangible common stockholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude other intangible assets) 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 final page of this press release.
Income Statement Review
Banner's first quarter net interest income, before the provision for loan losses, was nearly unchanged at $46.5 million, compared to $46.7 million in the preceding quarter despite having two fewer days and increased 10% compared to $42.3 million in the first quarter a year ago largely reflecting strong client acquisition and significant loan and deposit growth.
"Banner maintained a solid net interest margin during the first quarter as a result of continued improvement in our earning asset mix and cost of funds, which more than offsets the decline in loan yields," said Grescovich. "This consistent net interest margin coupled with our continuing growth of earning assets is providing a solid base for our increasing revenues from core operations." Banner's net interest margin was 4.09% for the first quarter of 2015, compared to 4.08% in the preceding quarter and 4.07% in the first quarter a year ago.
Earning asset yields were unchanged compared to the preceding quarter and decreased two basis points from the first quarter a year ago. Loan yields also were unchanged compared to the preceding quarter but were seven basis points lower than the first quarter a year ago. Deposit costs were unchanged compared to the preceding quarter and decreased by four basis points compared to the first quarter a year ago. The total cost of funds declined one basis point in the first quarter compared to the preceding quarter and declined five basis points compared to the first quarter a year ago.
"Banner's mortgage banking activities further improved during the first quarter of 2015, which reflects our increased market presence as a result of our continued investment in this business line, as well as a strong home purchase market and an increase in refinance activity," said Grescovich. Mortgage banking operations contributed $4.1 million to first quarter revenues compared to $3.0 million in the preceding quarter and $1.8 million in the first quarter of 2014.
Deposit fees and other service charges were $8.1 million in the first quarter of 2015, compared to $8.3 million in the preceding quarter and a 23% increase compared to $6.6 million in the first quarter a year ago. The year-over-year increase reflects strong organic growth as well as the recent acquisitions resulting in growth in the number of deposit accounts and increased transaction activity.
Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) were $59.7 million in the first quarter ended March 31, 2015, compared to $58.9 million in the preceding quarter and $51.4 million in the first quarter of 2014. Total revenues were $60.2 million for the quarter ended March 31, 2015, compared to $58.6 million in the preceding quarter and $51.2 million in the first quarter a year ago.
Banner's first quarter 2015 results included a $1.1 million net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, which was partially offset by $510,000 in net loss on the sale of securities. The net fair value adjustments and loss on sale of securities principally related to the sale of two pooled trust preferred collateralized debt obligation securities (TRUP CDOs) which had been carried at fair value. In the preceding quarter, Banner's results included a $287,000 net loss for fair value adjustments, and in the first quarter of 2014, Banner recorded a net loss of $255,000 for fair value adjustments.
Total other operating income, which includes the changes in the valuation of financial instruments, and gains and losses on the sale of securities, was $13.7 million in the first quarter of 2015, compared to $11.9 million in the fourth quarter of 2014 and $8.9 million in the first quarter a year ago. Other operating income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $13.2 million for the first quarter of 2015, compared to $12.2 million for the preceding quarter and $9.1 million for the first quarter a year ago.
Banner's total other operating expenses (non-interest expenses) were $41.9 million in the first quarter of 2015, compared to $41.2 million in the preceding quarter and $35.6 million in the first quarter of 2014. The increase in operating expenses was largely attributable to acquisition-related costs and incremental costs associated with operating the 16 branches acquired in June 2014 and March 2015, as well as generally increased compensation and marketing expenses. Acquisition-related expenses were $1.6 million in the current quarter compared to $2.8 million in the preceding quarter and $45,000 in the first quarter one year ago.
For the first quarter of 2015, Banner recorded $6.1 million in state and federal income tax expense for an effective tax rate of 33.8%, which reflects normal marginal tax rates increased by the effect of certain non-deductible merger expenses and reduced by the effect of tax-exempt income and certain tax credits.
Credit Quality
"Banner's first quarter credit quality metrics continue to reflect our moderate risk profile. While our non-performing assets increased modestly compared to the fourth quarter of 2014 primarily as a result of the recent acquisition of Siuslaw Bank, they are still at a very manageable level and all of the loans and REO acquired in the merger transaction have been recorded at appropriate fair values," said Grescovich. "Additionally, our reserve levels remain adequate, and no provision for loan losses was required during the first quarter despite continued organic loan growth."
Banner's allowance for loan losses was $75.4 million at March 31, 2015, or 1.83% of total loans outstanding and 305% of non-performing loans. Banner had net charge-offs of $542,000 in the first quarter compared to net recoveries of $1.6 million in the fourth quarter of 2014, and net recoveries of $113,000 in the first quarter a year ago. Banner did not record a provision for loan losses for the first quarter of 2015 or for either the preceding or year-ago quarter.
Non-performing loans were $24.7 million at March 31, 2015, including $9.2 million from the Siuslaw Bank acquisition, compared to $16.7 million at December 31, 2014 and $22.9 million at March 31, 2014. Real estate owned and other repossessed assets totaled $5.0 million at March 31, 2015, compared to $3.4 million at December 31, 2014 and $3.5 million a year ago.
Banner's non-performing assets were 0.57% of total assets at March 31, 2015, compared to 0.43% at December 31, 2014 and 0.59% a year ago. Non-performing assets increased to $29.7 million at March 31, 2015, compared to $20.2 million at December 31, 2014, and $26.4 million a year ago.
Balance Sheet Review
"Net loans increased by $281.5 million, or 7%, during the quarter including $247 million as a result of the Siuslaw acquisition and increased 17% year over year due to strong organic growth as well as the branch purchase and Siuslaw acquisition. Loan production remained solid, and we continue to see significant potential for growth in our loan origination pipelines; however, we did experience a normal seasonal paydown in our agricultural portfolio during the quarter," added Grescovich. Net loans were $4.04 billion at March 31, 2015, compared to $3.76 billion at December 31, 2014, and $3.45 billion a year ago. The branch purchase and Siuslaw acquisition accounted for $86 million and $247 million, respectively, of the quarter-end loan portfolio. Commercial real estate and multifamily real estate loans increased 13% to $1.77 billion at March 31, 2015, compared to $1.57 billion at December 31, 2014, and increased 26% compared to $1.40 billion a year ago. Commercial business loans increased 7% to $776.6 million at March 31, 2015, compared to $724.0 million three months earlier and increased 8% compared to $716.5 million a year ago. Agricultural business loans decreased to $208.6 million at March 31, 2015, compared to $238.5 million three months earlier but were nearly unchanged compared to $208.8 million a year ago. Total construction, land and land development loans increased 5% to $431.0 million at March 31, 2015, compared to $411.0 million at December 31, 2014, and increased 14% compared to $378.8 million a year earlier.
Largely as a result of the acquisition of Siuslaw Bank, total assets increased 10% to $5.21 billion at March 31, 2015, compared to $4.72 billion at December 31, 2014 and increased 16% compared to $4.49 billion a year ago. The total of securities and interest-bearing deposits held at other banks was $782.4 million at March 31, 2015, compared to $637.5 million at December 31, 2014 and $704.1 million a year ago. The average effective duration of Banner's securities portfolio was approximately 2.8 years at March 31, 2015.
Banner's total deposits increased 11% to $4.32 billion at March 31, 2015, compared to $3.90 billion at December 31, 2014 and increased 17% compared to $3.68 billion a year ago. The branch purchase and Siuslaw acquisition accounted for $209 million and $316 million, respectively, of the deposit portfolio at March 31, 2015. Non-interest-bearing account balances increased 16% to $1.50 billion at March 31, 2015, compared to $1.30 billion three months earlier and increased 37% compared to $1.10 billion a year ago. Interest-bearing transaction and savings accounts increased 11% to $2.04 billion at March 31, 2015, compared to $1.83 billion three months earlier and increased 21% compared to $1.68 billion a year ago. Certificates of deposit increased modestly to $778.0 million at March 31, 2015, compared to $770.5 million at December 31, 2014, and decreased 14% compared to $905.0 million a year earlier. Brokered deposits totaled $4.8 million at March 31, 2015, which was unchanged from December 31, 2014. At March 31, 2014, Banner's brokered deposits totaled $59.3 million.
"In addition to adding solid core deposits from our acquisition of Siuslaw Bank, we also further reduced our funding costs by remixing our deposits away from higher-priced certificates of deposit and improving our core funding position. As a result, total core deposits increased by 28% compared to the same quarter a year ago," said Grescovich.
Banner's core deposits represented 82% of total deposits at March 31, 2015, compared to 76% of total deposits a year earlier. The cost of deposits was 0.18% for the quarter ended March 31, 2015, which was the same as the preceding quarter, and declined four basis points from 0.22% for the quarter ended March 31, 2014.
At March 31, 2015, total common stockholders' equity was $651.3 million, or $31.05 per share, compared to $583.6 million at December 31, 2014, and to $547.5 million a year ago. Banner had 21.0 million shares of common stock outstanding at quarter end, compared to 19.6 million shares one year earlier. On March 6, 2015, Banner issued 1.3 million shares in connection with the acquisition of Siuslaw Financial Group, which were valued at $44.02 per share and added $58.1 million to stockholders' equity. At quarter end, tangible common stockholders' equity*, which excludes other intangible assets, was $624.1 million, or 12.04% of tangible assets*, compared to $580.8 million, or 12.30% of tangible assets, at December 31, 2014, and $545.6 million, or 12.16% of tangible assets, a year ago. Banner's tangible book value per share* increased by 7% to $29.75 at March 31, 2015, compared to $27.87 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 newly implemented Basel III and Dodd Frank regulatory standards. Banner Corporation's common equity Tier 1 capital ratio was 13.48%, its Tier 1 leverage capital to average assets ratio was 14.50% and its total capital to risk-weighted assets ratio was 16.34% at March 31, 2015.
Conference Call
Banner will host a conference call on Tuesday, April 21, 2015, at 8:00 a.m. PDT, to discuss its first quarter results. To listen to the call on-line, go to the Company's website at www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one month at (877) 344-7529 using access code 10062495, or at www.bannerbank.com.
About the Company
Banner Corporation is a $5.21 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
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. 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. Statements about the expected timing, completion and effects of the proposed merger and all other statements in this release other than historical facts constitute forward-looking statements.
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) expected revenues, cost savings, synergies and other benefits from the merger of Banner Bank and Siuslaw Bank and the proposed merger of Banner Bank and AmericanWest Bank ("AmericanWest") might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the requisite regulatory approvals for the proposed merger might not be obtained; (3) 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; (4) 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; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (10) the ability to access cost-effective funding; (11) changes in financial markets; (12) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (13) the costs, effects and outcomes of litigation; (14) 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; (15) changes in accounting principles, policies or guidelines; (16) future acquisitions by Banner of other depository institutions or lines of business; and (17) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors.
Banner does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made except where expressly required by law.
RESULTS OF OPERATIONS | Quarters Ended | ||
(in thousands except shares and per share data) | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
INTEREST INCOME: | |||
Loans receivable | $ 46,365 | $ 46,102 | $ 41,743 |
Mortgage-backed securities | 1,027 | 1,403 | 1,471 |
Securities and cash equivalents | 1,677 | 1,746 | 1,892 |
49,069 | 49,251 | 45,106 | |
INTEREST EXPENSE: | |||
Deposits | 1,733 | 1,801 | 1,964 |
Federal Home Loan Bank advances | 17 | 16 | 38 |
Other borrowings | 43 | 40 | 44 |
Junior subordinated debentures | 740 | 734 | 721 |
2,533 | 2,591 | 2,767 | |
Net interest income before provision for loan losses | 46,536 | 46,660 | 42,339 |
PROVISION FOR LOAN LOSSES | — | — | — |
Net interest income | 46,536 | 46,660 | 42,339 |
OTHER OPERATING INCOME: | |||
Deposit fees and other service charges | 8,126 | 8,317 | 6,602 |
Mortgage banking operations | 4,109 | 2,966 | 1,840 |
Miscellaneous | 921 | 916 | 636 |
13,156 | 12,199 | 9,078 | |
Net gain (loss) on sale of securities | (510) | 1 | 35 |
Net change in valuation of financial instruments carried at fair value | 1,050 | (287) | (255) |
Total other operating income | 13,696 | 11,913 | 8,858 |
OTHER OPERATING EXPENSE: | |||
Salary and employee benefits | 24,287 | 23,321 | 21,156 |
Less capitalized loan origination costs | (2,838) | (3,050) | (2,195) |
Occupancy and equipment | 6,006 | 5,689 | 5,696 |
Information / computer data services | 2,253 | 2,147 | 1,935 |
Payment and card processing services | 3,016 | 2,998 | 2,515 |
Professional services | 814 | 863 | 1,006 |
Advertising and marketing | 1,610 | 1,387 | 1,055 |
Deposit insurance | 567 | 595 | 576 |
State/municipal business and use taxes | 453 | 415 | 159 |
Real estate operations | 24 | (187) | 39 |
Amortization of core deposit intangibles | 616 | 531 | 479 |
Miscellaneous | 3,458 | 3,735 | 3,115 |
40,266 | 38,444 | 35,536 | |
Acquisition related costs | 1,648 | 2,785 | 45 |
Total other operating expense | 41,914 | 41,229 | 35,581 |
Income before provision for income taxes | 18,318 | 17,344 | 15,616 |
PROVISION FOR INCOME TAXES | 6,184 | 5,600 | 5,046 |
NET INCOME | $ 12,134 | $ 11,744 | $ 10,570 |
Earnings per share available to common shareholders: | |||
Basic | $ 0.61 | $ 0.61 | $ 0.55 |
Diluted | $ 0.61 | $ 0.60 | $ 0.54 |
Cumulative dividends declared per common share | $ 0.18 | $ 0.18 | $ 0.18 |
Weighted average common shares outstanding: | |||
Basic | 19,760,645 | 19,374,228 | 19,345,732 |
Diluted | 19,845,019 | 19,441,712 | 19,409,584 |
Change in common shares outstanding | 1,405,093 | 43 | 32,766 |
FINANCIAL CONDITION | |||
(in thousands except shares and per share data) | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
ASSETS | |||
Cash and due from banks | $ 83,401 | $ 71,077 | $ 73,316 |
Federal funds and interest-bearing deposits | 215,114 | 54,995 | 71,459 |
Securities - trading | 38,074 | 40,258 | 58,387 |
Securities - available for sale | 395,607 | 411,021 | 464,657 |
Securities - held to maturity | 133,649 | 131,258 | 109,567 |
Federal Home Loan Bank stock | 25,544 | 27,036 | 33,288 |
Loans receivable: | |||
Held for sale | 9,419 | 2,786 | 3,239 |
Held for portfolio | 4,105,399 | 3,831,034 | 3,519,673 |
Allowance for loan losses | (75,365) | (75,907) | (74,371) |
4,039,453 | 3,757,913 | 3,448,541 | |
Accrued interest receivable | 16,873 | 15,279 | 15,202 |
Real estate owned held for sale, net | 4,922 | 3,352 | 3,236 |
Property and equipment, net | 98,728 | 91,185 | 89,440 |
Goodwill and other intangibles, net | 27,258 | 2,831 | 1,970 |
Bank-owned life insurance | 71,290 | 63,759 | 62,377 |
Other assets | 61,459 | 53,935 | 56,856 |
$ 5,211,372 | $ 4,723,899 | $ 4,488,296 | |
LIABILITIES | |||
Deposits: | |||
Non-interest-bearing | $ 1,504,768 | $ 1,298,866 | $ 1,095,665 |
Interest-bearing transaction and savings accounts | 2,036,600 | 1,829,568 | 1,681,854 |
Interest-bearing certificates | 778,049 | 770,516 | 905,016 |
4,319,417 | 3,898,950 | 3,682,535 | |
Advances from Federal Home Loan Bank at fair value | 250 | 32,250 | 48,351 |
Customer repurchase agreements | 97,020 | 77,185 | 89,921 |
Junior subordinated debentures at fair value | 84,326 | 78,001 | 74,135 |
Accrued expenses and other liabilities | 38,164 | 37,082 | 29,189 |
Deferred compensation | 20,882 | 16,807 | 16,641 |
4,560,059 | 4,140,275 | 3,940,772 | |
STOCKHOLDERS' EQUITY | |||
Common stock | 627,553 | 568,882 | 566,964 |
Retained earnings (accumulated deficit) | 22,623 | 15,000 | (18,026) |
Other components of stockholders' equity | 1,137 | (258) | (1,414) |
651,313 | 583,624 | 547,524 | |
$ 5,211,372 | $ 4,723,899 | $ 4,488,296 | |
Common Shares Issued: | |||
Shares outstanding at end of period | 20,976,641 | 19,571,548 | 19,576,535 |
Common stockholders' equity per share (1) | $ 31.05 | $ 29.82 | $ 27.97 |
Common stockholders' tangible equity per share (1) (2) | $ 29.75 | $ 29.68 | $ 27.87 |
Common stockholders' tangible equity to tangible assets (2) | 12.04% | 12.30% | 12.16% |
Consolidated Tier 1 leverage capital ratio | 14.50% | 13.41% | 13.53% |
(1) | Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding. |
(2) |
Common stockholders' tangible equity excludes other intangibles. Tangible assets exclude other intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final page of the press release tables. |
ADDITIONAL FINANCIAL INFORMATION | |||
(dollars in thousands) | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
LOANS (including loans held for sale): | |||
Commercial real estate: | |||
Owner occupied | $ 627,531 | $ 546,783 | $ 504,429 |
Investment properties | 936,693 | 856,942 | 746,670 |
Multifamily real estate | 208,687 | 167,524 | 153,003 |
Commercial construction | 30,434 | 17,337 | 11,146 |
Multifamily construction | 56,201 | 60,193 | 63,862 |
One- to four-family construction | 228,224 | 219,889 | 219,169 |
Land and land development: | |||
Residential | 98,930 | 102,435 | 73,733 |
Commercial | 17,174 | 11,152 | 10,864 |
Commercial business | 776,579 | 723,964 | 716,546 |
Agricultural business including secured by farmland | 208,635 | 238,499 | 208,817 |
One- to four-family real estate | 552,423 | 539,894 | 517,621 |
Consumer: | |||
Consumer secured by one- to four-family real estate | 233,643 | 222,205 | 177,855 |
Consumer-other | 139,664 | 127,003 | 119,197 |
Total loans outstanding | $ 4,114,818 | $ 3,833,820 | $ 3,522,912 |
Restructured loans performing under their restructured terms | $ 23,180 | $ 29,154 | $ 40,165 |
Loans 30 - 89 days past due and on accrual | $ 8,157 | $ 8,387 | $ 12,662 |
Total delinquent loans (including loans on non-accrual) | $ 32,892 | $ 25,124 | $ 24,602 |
Total delinquent loans / Total loans outstanding | 0.80% | 0.66% | 0.70% |
GEOGRAPHIC CONCENTRATION | |||||
OF LOANS AT MARCH 31, 2015 | Washington | Oregon | Idaho | Other | Total |
Commercial real estate: | |||||
Owner occupied | $ 392,416 | $ 158,137 | $ 56,696 | $ 20,282 | $ 627,531 |
Investment properties | 527,257 | 184,038 | 60,160 | 165,238 | 936,693 |
Multifamily real estate | 119,166 | 74,536 | 14,672 | 313 | 208,687 |
Commercial construction | 26,783 | 1,663 | 1,988 | — | 30,434 |
Multifamily construction | 47,857 | 6,990 | 1,354 | — | 56,201 |
One- to four-family construction | 130,366 | 95,262 | 2,596 | — | 228,224 |
Land and land development: | |||||
Residential | 53,467 | 43,737 | 1,051 | 675 | 98,930 |
Commercial | 6,194 | 8,164 | 2,816 | — | 17,174 |
Commercial business | 429,680 | 144,751 | 82,825 | 119,323 | 776,579 |
Agricultural business including secured by farmland | 108,464 | 59,837 | 40,292 | 42 | 208,635 |
One- to four-family real estate | 336,332 | 189,572 | 25,778 | 741 | 552,423 |
Consumer: | |||||
Consumer secured by one- to four-family real estate | 142,461 | 74,669 | 15,499 | 1,014 | 233,643 |
Consumer-other | 83,021 | 50,042 | 6,222 | 379 | 139,664 |
Total loans outstanding | $ 2,403,464 | $ 1,091,398 | $ 311,949 | $ 308,007 | $ 4,114,818 |
Percent of total loans | 58.4% | 26.5% | 7.6% | 7.5% | 100.0% |
ADDITIONAL FINANCIAL INFORMATION | |||
(dollars in thousands) | |||
Quarters Ended | |||
Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 | |
CHANGE IN THE | |||
ALLOWANCE FOR LOAN LOSSES | |||
Balance, beginning of period | $ 75,907 | $ 74,331 | $ 74,258 |
Provision | — | — | — |
Recoveries of loans previously charged off: | |||
Commercial real estate | 14 | 843 | 296 |
Construction and land | 108 | 988 | 232 |
One- to four-family real estate | 6 | 83 | 188 |
Commercial business | 178 | 153 | 293 |
Agricultural business, including secured by farmland | 295 | 328 | 350 |
Consumer | 46 | 135 | 282 |
647 | 2,530 | 1,641 | |
Loans charged off: | |||
Commercial real estate | — | — | (238) |
One- to four-family real estate | (75) | (253) | (379) |
Commercial business | (107) | (263) | (738) |
Agricultural business, including secured by farmland | (818) | (54) | — |
Consumer | (189) | (384) | (173) |
(1,189) | (954) | (1,528) | |
Net (charge-offs) recoveries | (542) | 1,576 | 113 |
Balance, end of period | $ 75,365 | $ 75,907 | $ 74,371 |
Net (charge-offs) recoveries / Average loans outstanding | (0.014)% | 0.041% | 0.003% |
ALLOCATION OF | |||
ALLOWANCE FOR LOAN LOSSES | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Specific or allocated loss allowance: | |||
Commercial real estate | $ 19,103 | $ 18,784 | $ 17,412 |
Multifamily real estate | 4,401 | 4,562 | 5,652 |
Construction and land | 24,398 | 23,545 | 18,620 |
One- to four-family real estate | 8,141 | 8,447 | 10,913 |
Commercial business | 12,892 | 12,043 | 11,363 |
Agricultural business, including secured by farmland | 3,732 | 2,821 | 2,636 |
Consumer | 585 | 483 | 912 |
Total allocated | 73,252 | 70,685 | 67,508 |
Unallocated | 2,113 | 5,222 | 6,863 |
Total allowance for loan losses | $ 75,365 | $ 75,907 | $ 74,371 |
Allowance for loan losses / Total loans outstanding | 1.83% | 1.98% | 2.11% |
Allowance for loan losses / Non-performing loans | 305% | 454% | 325% |
ADDITIONAL FINANCIAL INFORMATION | |||
(dollars in thousands) | |||
Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 | |
NON-PERFORMING ASSETS | |||
Loans on non-accrual status: | |||
Secured by real estate: | |||
Commercial | $ 4,141 | $ 1,132 | $ 6,201 |
Multifamily | 578 | — | — |
Construction and land | 7,522 | 1,275 | 2,135 |
One- to four-family | 7,111 | 8,834 | 10,587 |
Commercial business | 418 | 537 | 977 |
Agricultural business, including secured by farmland | 1,566 | 1,597 | — |
Consumer | 1,843 | 1,187 | 1,399 |
23,179 | 14,562 | 21,299 | |
Loans more than 90 days delinquent, still on accrual: | |||
Secured by real estate: | |||
One- to four-family | 1,548 | 2,095 | 1,465 |
Agricultural business, including secured by farmland | — | — | 104 |
Consumer | 7 | 79 | — |
1,555 | 2,174 | 1,569 | |
Total non-performing loans | 24,734 | 16,736 | 22,868 |
Real estate owned (REO) | 4,922 | 3,352 | 3,236 |
Other repossessed assets | 62 | 76 | 273 |
Total non-performing assets | $ 29,718 | $ 20,164 | $ 26,377 |
Total non-performing assets / Total assets | 0.57% | 0.43% | 0.59% |
DETAIL & GEOGRAPHIC CONCENTRATION OF | ||||
NON-PERFORMING ASSETS AT MARCH 31, 2015 | Washington | Oregon | Idaho | Total |
Secured by real estate: | ||||
Commercial | $ 2,259 | $ 1,847 | $ 35 | $ 4,141 |
Multifamily | — | 578 | — | 578 |
Construction and land: | ||||
One- to four-family construction | — | 1,388 | — | 1,388 |
Residential land acquisition & development | — | 750 | — | 750 |
Residential land improved lots | — | 514 | — | 514 |
Commercial land improved | — | 4,870 | — | 4,870 |
Total construction and land | — | 7,522 | — | 7,522 |
One- to four-family | 7,282 | 1,012 | 365 | 8,659 |
Commercial business | 384 | 34 | — | 418 |
Agricultural business, including secured by farmland | 772 | 794 | — | 1,566 |
Consumer | 1,182 | 479 | 189 | 1,850 |
Total non-performing loans | 11,879 | 12,266 | 589 | 24,734 |
Real estate owned (REO) | 1,056 | 3,833 | 33 | 4,922 |
Other repossessed assets | 54 | 8 | — | 62 |
Total non-performing assets at end of the period | $ 12,989 | $ 16,107 | $ 622 | $ 29,718 |
ADDITIONAL FINANCIAL INFORMATION | ||
(dollars in thousands) | ||
Quarters Ended | ||
Mar 31, 2015 | Mar 31, 2014 | |
REAL ESTATE OWNED | ||
Balance, beginning of period | $ 3,352 | $ 4,044 |
Additions from loan foreclosures | 668 | 707 |
Additions from acquisitions | 2,525 | — |
Additions from capitalized costs | — | 4 |
Proceeds from dispositions of REO | (1,738) | (1,641) |
Gain on sale of REO | 115 | 159 |
Valuation adjustments in the period | — | (37) |
Balance, end of period | $ 4,922 | $ 3,236 |
DEPOSIT COMPOSITION | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Non-interest-bearing | $ 1,504,768 | $ 1,298,866 | $ 1,095,665 |
Interest-bearing checking | 472,033 | 439,480 | 435,910 |
Regular savings accounts | 979,824 | 901,142 | 829,282 |
Money market accounts | 584,743 | 488,946 | 416,662 |
Interest-bearing transaction & savings accounts | 2,036,600 | 1,829,568 | 1,681,854 |
Interest-bearing certificates | 778,049 | 770,516 | 905,016 |
Total deposits | $ 4,319,417 | $ 3,898,950 | $ 3,682,535 |
GEOGRAPHIC CONCENTRATION | ||||
OF DEPOSITS AT MARCH 31, 2015 | Washington | Oregon | Idaho | Total |
Total deposits | $ 2,865,536 | $ 1,206,944 | $ 246,937 | $ 4,319,417 |
Percent of total deposits | 66.3% | 28.0% | 5.7% | 100.0% |
INCLUDED IN TOTAL DEPOSITS | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Public non-interest-bearing accounts | $ 44,195 | $ 39,381 | $ 18,931 |
Public interest-bearing transaction & savings accounts | 58,023 | 63,473 | 65,909 |
Public interest-bearing certificates | 35,326 | 35,346 | 57,202 |
Total public deposits | $ 137,544 | $ 138,200 | $ 142,042 |
Total brokered deposits | $ 4,800 | $ 4,799 | $ 59,304 |
OTHER BORROWINGS | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Customer repurchase agreements / "Sweep accounts" | $ 97,020 | $ 77,185 | $ 89,921 |
ADDITIONAL FINANCIAL INFORMATION | ||
(in thousands) | ||
ACQUISITION OF SIX OREGON BRANCHES | June 20, 2014 | |
Total consideration | $ — | |
Fair value of assets acquired: | ||
Cash | $ 127,557 | |
Loans receivable | 87,923 | |
Property and equipment | 3,079 | |
Intangible assets | 2,372 | |
Other assets | 275 | |
Total assets acquired | 221,206 | |
Fair value of liabilities assumed: | ||
Deposits | 212,085 | |
Other liabilities | 42 | |
Total liabilities assumed | 212,127 | |
Net assets acquired | 9,079 | |
Acquisition bargain purchase gain | $ (9,079) |
ACQUISITION OF SIUSLAW BANK | March 6, 2015 | |
Amounts recorded in this table are preliminary estimates of fair value. Additional adjustments to the purchase price allocation may be required. | ||
Cash paid | $ 5,800 | |
Fair value of common shares issued | 58,106 | |
Total consideration | 63,906 | |
Fair value of assets acquired: | ||
Cash | $ 84,405 | |
Securities - available for sale | 12,865 | |
Loans receivable | 247,098 | |
Real estate owned held for sale | 2,525 | |
Property and equipment | 8,127 | |
Intangible assets | 3,895 | |
Other assets | 11,391 | |
Total assets acquired | 370,306 | |
Fair value of liabilities assumed: | ||
Deposits | 316,406 | |
Junior subordinated debentures | 5,959 | |
Other liabilities | 5,183 | |
Total liabilities assumed | 327,548 | |
Net assets acquired | 42,758 | |
Goodwill | $ 21,148 |
ADDITIONAL FINANCIAL INFORMATION | ||||||
(dollars in thousands) | ||||||
|
Minimum to be categorized as "Adequately Capitalized" |
Minimum to be categorized as "Well Capitalized" |
||||
REGULATORY CAPITAL RATIOS AS OF MARCH 31, 2015 | Amount | Ratio | Amount | Ratio | Amount | Ratio |
Banner Corporation-consolidated: | ||||||
Total capital to risk-weighted assets | $ 756,727 | 16.34% | $ 370,451 | 8.00% | $ 463,063 | 10.00% |
Tier 1 capital to risk-weighted assets | 698,628 | 15.09% | 277,838 | 6.00% | 370,451 | 8.00% |
Tier 1 leverage capital to average assets | 698,628 | 14.50% | 192,665 | 4.00% | 240,831 | 5.00% |
Common equity tier 1 capital | 624,028 | 13.48% | 208,379 | 4.50% | 300,991 | 6.50% |
Banner Bank: | ||||||
Total capital to risk-weighted assets | 666,565 | 14.95% | 356,637 | 8.00% | 445,796 | 10.00% |
Tier 1 capital to risk-weighted assets | 610,625 | 13.70% | 267,478 | 6.00% | 356,637 | 8.00% |
Tier 1 leverage capital to average assets | 610,625 | 13.37% | 182,654 | 4.00% | 228,317 | 5.00% |
Common equity tier 1 capital | 610,625 | 13.70% | 200,608 | 4.50% | 289,767 | 6.50% |
Islanders Bank: | ||||||
Total capital to risk-weighted assets | 37,233 | 19.32% | 15,419 | 8.00% | 19,273 | 10.00% |
Tier 1 capital to risk-weighted assets | 34,824 | 18.07% | 11,564 | 6.00% | 15,419 | 8.00% |
Tier 1 leverage capital to average assets | 34,824 | 13.95% | 9,983 | 4.00% | 12,478 | 5.00% |
Common equity tier 1 capital | 34,824 | 18.07% | 8,673 | 4.50% | 12,528 | 6.50% |
ADDITIONAL FINANCIAL INFORMATION | |||
(dollars in thousands) | |||
(rates / ratios annualized) | |||
Quarters Ended | |||
OPERATING PERFORMANCE | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Average loans | $ 3,920,255 | $ 3,813,606 | $ 3,475,369 |
Average securities | 600,806 | 643,665 | 687,764 |
Average interest earning cash | 91,202 | 76,082 | 58,352 |
Average non-interest-earning assets | 230,634 | 212,071 | 200,227 |
Total average assets | $ 4,842,897 | $ 4,745,424 | $ 4,421,712 |
Average deposits | $ 3,997,763 | $ 3,942,903 | $ 3,619,299 |
Average borrowings | 232,147 | 218,170 | 262,378 |
Average non-interest-bearing other liabilities (1) | 4,569 | 2,039 | (6,083) |
Total average liabilities | 4,234,479 | 4,163,112 | 3,875,594 |
Total average stockholders' equity | 608,418 | 582,312 | 546,118 |
Total average liabilities and equity | $ 4,842,897 | $ 4,745,424 | $ 4,421,712 |
Interest rate yield on loans | 4.80% | 4.80% | 4.87% |
Interest rate yield on securities | 1.79% | 1.91% | 1.96% |
Interest rate yield on cash | 0.24% | 0.29% | 0.31% |
Interest rate yield on interest-earning assets | 4.31% | 4.31% | 4.33% |
Interest rate expense on deposits | 0.18% | 0.18% | 0.22% |
Interest rate expense on borrowings | 1.40% | 1.44% | 1.24% |
Interest rate expense on interest-bearing liabilities | 0.24% | 0.25% | 0.29% |
Interest rate spread | 4.07% | 4.06% | 4.04% |
Net interest margin | 4.09% | 4.08% | 4.07% |
Other operating income / Average assets | 1.15% | 1.00% | 0.81% |
Core operating income / Average assets (2) | 1.10% | 1.02% | 0.83% |
Other operating expense / Average assets | 3.51% | 3.45% | 3.26% |
Core other operating expense / Average assets (2) | 3.37% | 3.21% | 3.26% |
Efficiency ratio (other operating expense / revenue) | 69.59% | 70.39% | 69.50% |
Efficiency ratio (core other operating expense / core operating revenue)(2) | 67.46% | 65.32% | 69.11% |
Return on average assets | 1.02% | 0.98% | 0.97% |
Return on average equity | 8.09% | 8.00% | 7.85% |
Return on average tangible equity (3) | 8.22% | 8.04% | 7.88% |
Average equity / Average assets | 12.56% | 12.27% | 12.35% |
(1) | Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures. |
(2) |
Core operating income (or core operating revenue) excludes net gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments. Core other operating expense excludes acquisition related costs. These represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final page of these press release tables. |
(3) |
Average tangible equity excludes other intangible assets and represents a non-GAAP financial measure. See also Non-GAAP Financial Measures reconciliation tables on the final page of these press release tables. |
ADDITIONAL FINANCIAL INFORMATION | |||
(dollars in thousands except shares and per share data) | |||
* Non-GAAP Financial Measures (unaudited) | |||
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, 2015 | Dec 31, 2014 | Mar 31, 2014 | |
Net interest income before provision for loan losses | $ 46,536 | $ 46,660 | $ 42,339 |
Total other operating income | 13,696 | 11,913 | 8,858 |
Total GAAP revenue | 60,232 | 58,573 | 51,197 |
Exclude net gain on sale of securities | 510 | (1) | (35) |
Exclude change in valuation of financial instruments carried at fair value | (1,050) | 287 | 255 |
Revenue from core operations (non-GAAP) | $ 59,692 | $ 58,859 | $ 51,417 |
OTHER OPERATING INCOME/EXPENSE FROM CORE OPERATIONS | Quarters Ended | ||
Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 | |
Total other operating income (GAAP) | $ 13,696 | $ 11,913 | $ 8,858 |
Exclude net gain (loss) on sale of securities | 510 | (1) | (35) |
Exclude change in valuation of financial instruments carried at fair value | (1,050) | 287 | 255 |
Other operating income from core operations (non-GAAP) | $ 13,156 | $ 12,199 | $ 9,078 |
Total other operating expense (GAAP) | $ 41,914 | $ 41,229 | $ 35,581 |
Exclude acquisition related costs | (1,648) | (2,785) | (45) |
Other operating expense from core operations (non-GAAP) | $ 40,266 | $ 38,444 | $ 35,536 |
TANGIBLE COMMON STOCKHOLDERS' EQUITY TO TANGIBLE ASSETS | Mar 31, 2015 | Dec 31, 2014 | Mar 31, 2014 |
Stockholders' equity (GAAP) | $ 651,313 | $ 583,624 | $ 547,524 |
Exclude other intangible assets, net | 27,258 | 2,831 | 1,970 |
Tangible common stockholders' equity (non-GAAP) | $ 624,055 | $ 580,793 | $ 545,554 |
Total assets (GAAP) | $ 5,211,372 | $ 4,723,899 | $ 4,488,296 |
Exclude other intangible assets, net | 27,258 | 2,831 | 1,970 |
Total tangible assets (non-GAAP) | $ 5,184,114 | $ 4,721,068 | $ 4,486,326 |
Tangible common stockholders' equity to tangible assets (non-GAAP) | 12.04% | 12.30% | 12.16% |
TANGIBLE COMMON STOCKHOLDERS' EQUITY PER SHARE | |||
Tangible common stockholders' equity | $ 624,055 | $ 580,793 | $ 545,554 |
Common shares outstanding at end of period | 20,976,641 | 19,571,548 | 19,576,535 |
Common stockholders' equity (book value) per share (GAAP) | $ 31.05 | $ 29.82 | $ 27.97 |
Tangible common stockholders' equity (tangible book value) per share (non-GAAP) | $ 29.75 | $ 29.68 | $ 27.87 |
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