Market Overview

Banner Corporation Reports First Quarter Net Income of $28.8 Million, or $0.89 Per Diluted Share; Highlighted by Strong Deposit Growth, Net Interest Margin Expansion and Solid Revenue Generation

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WALLA WALLA, Wash., April 23, 2018 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported that strong core deposit growth, a re-leveraged balance sheet and improved net interest margin contributed to continued solid revenue generation, which coupled with a significantly lower federal tax rate, resulted in substantially increased first quarter 2018 financial results.  Net income in the first quarter of 2018 increased 21% to $28.8 million, or $0.89 per diluted share, compared to $23.8 million, or $0.72 per diluted share, in the first quarter a year ago. In the preceding quarter, following a revaluation of deferred tax assets due to the Tax Cuts and Jobs Act resulting in an additional tax expense of $42.6 million, or $1.30 per diluted share, Banner reported a net loss of $13.5 million, or $0.41 per diluted share.

"Banner's first quarter operating performance continues to reflect the success of our proven client acquisition strategies, which are producing strong core earnings and a healthy net interest margin," stated Mark J. Grescovich, President and Chief Executive Officer. "We are benefiting from the successful integration of our recent acquisitions, which have had a dramatic impact on the scale and reach of the company and are providing a great opportunity for revenue growth.  Our larger and improved earning asset mix as well as higher asset yields and stable funding costs have resulted in an expanded net interest margin and increased net interest income.  We also continued to enjoy strong deposit fee and service charge income and stable mortgage banking revenues.  Overall, these factors contributed to a return on average assets of 1.16% for the quarter.  Based on this solid performance, coupled with our strong tangible common equity ratio of 9.82%*, we increased our cash dividend in the quarter by 40% to $0.35 per share and repurchased nearly 270,000 shares of common stock."

At March 31, 2018, Banner Corporation had $10.32 billion in assets, $7.46 billion in net loans and $8.54 billion in deposits.  Banner operates 178 branch offices located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2018 Highlights

  • Net income increased 21% to $28.8 million, or $0.89 per diluted share, compared to $23.8 million, or $0.72 per diluted share, in the first quarter a year ago.
  • Net interest income, before the provision for loan losses, was $99.4 million, compared to $98.3 million in the preceding quarter and $94.9 million in the first quarter a year ago.
  • Net interest margin was 4.35% for the current quarter, compared to 4.18% in the preceding quarter and 4.25% in the first quarter a year ago.
  • Revenues were $120.7 million during the quarter ended March 31, 2018, $125.9 million during the preceding quarter and $113.9 million during the first quarter a year ago.
  • Revenues from core operations* were $117.4 million, compared to $117.1 million in the preceding quarter, and $114.6 million in the first quarter a year ago.
  • Return on average assets was 1.16% in the current quarter, compared to 0.97% in the first quarter a year ago.
  • Return on average equity was 9.14% in the current quarter, compared to 7.30% in the first quarter a year ago.
  • Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $92.2 million or 1.22% of total loans.
  • Net loans receivable were $7.46 billion at March 31, 2018, compared to $7.51 billion at December 31, 2017, and increased 2% compared to $7.33 billion a year ago.
  • Core deposits increased 3% compared to March 31, 2017 and represented 88% of total deposits at March 31, 2018.
  • Increased quarterly cash dividend to shareholders by 40% to $0.35 per share.
  • Common shareholders' tangible equity per share* was $30.43 at March 31, 2018, compared to $30.78 at the preceding quarter end and $31.68 a year ago.
  • The ratio of tangible common shareholders' equity to tangible assets* remained strong at 9.82% at March 31, 2018, compared to 10.61% at the preceding quarter end and 10.72% a year ago.
  • Repurchased 269,711 shares of common stock at an average price of $56.93 per share.
  • Non-performing assets declined by $4.0 million to $23.5 million or 0.23% of total assets.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments, gains and losses on the sale of securities and gain on the sale of branches), 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 two pages of this press release.

Certain reclassifications have been made to the 2017 Consolidated Financial Statements and/or schedules to conform to the 2018 presentation.  These reclassifications have affected certain line items and ratios for the prior periods but have not changed net income or shareholders' equity for those periods.  The effect of these reclassifications is considered immaterial.

Significant Recent Initiatives and Events

On October 6, 2017, Banner Bank completed the sale of its seven branches and related assets and liabilities in Utah to People's Intermountain Bank, a banking subsidiary of People's Utah Bancorp.  Under the terms of the purchase and assumption agreement, the sale included $253.8 million in loans and $160.3 million in deposits.

During the fourth quarter of 2017, Banner recorded a one-time net tax charge of $42.6 million, or $1.30 per diluted share, related to the revaluation of deferred tax items as a result of the Tax Cuts and Jobs Act. This increase in income tax expense was reflected in operating results for the fourth quarter of 2017 and was in addition to the normal provision for income tax related to pre-tax net operating income.

In addition, during the fourth quarter Banner implemented a number of strategic balance sheet initiatives designed to keep its assets below $10 billion at December 31, 2017, in order to postpone the adverse impact of certain enhanced regulatory requirements and the Durbin Amendment to the Dodd-Frank Act limits on, among other things, debit card interchange fees.  As previously disclosed, based on current debit card transaction volumes, Banner anticipates that the Durbin Amendment will have a $12 million annualized negative impact on pre-tax revenues commencing in July 2019.  In December 2017, Banner sold approximately $470 million of investment securities in the available-for-sale portfolio, using the proceeds to fund loan originations and to pay down certain wholesale borrowings and maturing brokered deposits.  Banner incurred pre-tax net losses of $2.3 million in connection with the sale of these investment securities, which produced tax benefits based upon the 2017 marginal federal income tax rate of 35%.  The net interest income on investment securities beginning in 2018 was subject to the new lower marginal corporate federal income tax rate.  In recent periods Banner has incurred a blended effective federal and state tax rate of 33% to 34%.  As a result of the reduced marginal federal tax rate, Banner anticipates that its blended effective federal and state tax rate will be approximately 22% to 23% in 2018.

Income Statement Review

"Our net interest margin increased substantially during the quarter as we benefited from increased market interest rates which produced higher yields on loans while deposit costs remained nearly unchanged.  Our net interest margin and net interest income also increased as a result of re-leveraging the balance sheet with higher-yielding securities," said Grescovich.  Banner's net interest margin was 4.35% for the first quarter of 2018, a 17 basis point improvement compared to 4.18% in the preceding quarter and a ten basis point improvement compared to 4.25% in the first quarter a year ago.  Acquisition accounting adjustments, principally loan discount accretion, added eight basis points to the net interest margin in the current quarter compared to five basis points in the preceding quarter and ten basis points in the first quarter a year ago.  The total purchase discount for acquired loans was $19.4 million at March 31, 2018, a decrease from $21.1 million at December 31, 2017 and $29.4 million a year ago, primarily as a result of discount accretion.

Average interest-earning asset yields increased 19 basis points to 4.59% compared to 4.40% for the preceding quarter and increased 15 basis points compared to 4.44% in the first quarter a year ago.  Average loan yields increased 16 basis points to 4.98% compared to the preceding quarter and increased 18 basis points from the first quarter a year ago.  Loan discount accretion added ten basis points to loan yields in the first quarter, compared to six basis points in the preceding quarter and 11 basis points in the first quarter a year ago.  Deposit costs were 0.16% in the first quarter, a one basis point increase compared to the preceding quarter and a two basis point increase compared to the first quarter a year ago.  The total cost of funds was 0.25% during the first quarter, a two basis point increase compared to the preceding quarter and a five basis point increase compared to the first quarter a year ago largely reflecting increased borrowing costs.

Primarily as a result of the origination of new loans and the renewal of acquired loans out of the discounted acquired loan portfolio, Banner recorded a $2.0 million provision for loan losses during the first quarter, the same as in both the preceding and year ago quarters as credit quality metrics remained very good.

Deposit fees and other service charges were $11.3 million in the first quarter, compared to $10.8 million in the preceding quarter and $10.4 million in the first quarter a year ago.  Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased modestly to $4.9 million in the first quarter compared to $5.0 million in the preceding quarter and increased compared to $4.6 million in the first quarter of 2017.  Home purchase activity accounted for 72% of first quarter 2018 one- to four-family mortgage loan originations.

First quarter 2018 results included a $3.3 million net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally certain investment securities held for trading.  In the preceding quarter, results included a $1.0 million net loss for fair value adjustments and a $2.3 million net loss on the sale of securities.  In the first quarter a year ago, results included a $688,000 net loss for fair value adjustments that was partially offset by a $13,000 net gain on the sale of securities.  Following the adoption of new accounting guidance, beginning in the current quarter we no longer reflect changes in the fair value of our junior subordinated debentures related to instrument-specific credit risk in the Consolidated Statements of Operations, but rather report those changes in the Consolidated Statements of Comprehensive Income and include them in total shareholders' equity in the Consolidated Statements of Financial Condition.

Total revenues decreased 4% to $120.7 million for the first quarter of 2018, compared to $125.9 million in the preceding quarter which included a $12.2 million gain on the sale of our Utah branches, and increased 6% compared to $113.9 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 and in the preceding quarter the gain on sale of the Utah branches) increased to $117.4 million in the first quarter of 2018, compared to $117.1 million in the preceding quarter, and $114.6 million in the first quarter of 2017.

Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value, gains and losses on the sale of securities, and the fourth quarter 2017 gain on sale of the Utah branches, was $21.4 million in the first quarter of 2018, compared to $27.7 million in the fourth quarter of 2017 and $19.0 million in the first quarter a year ago.  Non-interest income from core operations,* which excludes gains and losses on sale of securities, net changes in the valuation of financial instruments and the fourth quarter 2017 gain on sale of the Utah branches, was $18.1 million in the first quarter of 2018, compared to $18.8 million for the fourth quarter of 2017 and $19.7 million in the first quarter a year ago.

Banner's total non-interest expense was $81.7 million in the first quarter of 2018, compared to $82.5 million in the preceding quarter and $76.3 million in the first quarter of 2017.  In addition to normal wage increases, the current and preceding quarter's non-interest expenses included increased salary and employee benefits as compared to the first quarter a year ago largely due to enhanced regulatory requirements attributable to compliance and risk management infrastructure build-out.  Similarly, all three quarters presented included, elevated costs for professional services related to these compliance and risk management activities.

For the first quarter of 2018, Banner recorded $8.2 million in state and federal income tax expense for an effective tax rate of 22.3%, reflecting the new lower federal corporate income tax rate.  For the fourth quarter of 2017, Banner recorded $55.0 million in state and federal income tax expense, which, in addition to the normal provision for income taxes related to pre-tax income, included a $42.6 million net charge related to the revaluation of its deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act as well as a net credit of $1.7 million for the release of a valuation reserve on an acquisition-related net operating loss carryforward deferred tax asset.

Balance Sheet Review

Banner's total assets were $10.32 billion at March 31, 2018, compared to $9.76 billion at December 31, 2017, and $10.07 billion at March 31, 2017.  The total of securities and interest-bearing deposits held at other banks was $1.75 billion at March 31, 2018, compared to $1.26 billion at December 31, 2017 and $1.62 billion at March 31, 2017.  The increase in the securities portfolio during the current quarter reflects Banner's renewed leveraging strategy as it crossed the $10 billion in total assets threshold.  In the fourth quarters of 2017, 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, 2017, to postpone the adverse impact of the Durbin Amendment.  The average effective duration of Banner's securities portfolio was approximately 3.9 years at March 31, 2018, compared to 3.8 years at March 31, 2017.

Net loans receivable decreased to $7.46 billion at March 31, 2018, compared to $7.51 billion at December 31, 2017; however, despite the sale of our Utah branches, which included the sale of $253.8 million of loans during the preceding quarter, net loans increased 2% compared to $7.33 billion a year ago.  Commercial real estate and multifamily real estate loans decreased slightly to $3.48 billion at March 31, 2018, compared to $3.54 billion at December 31, 2017, and $3.63 billion a year ago, as we experienced significant payoffs of both owner occupied and investment commercial real estate loans which were partially offset by growth in multifamily real estate loans.  Commercial business loans increased modestly to $1.30 billion at March 31, 2018, compared to $1.28 billion three months earlier and increased 6% compared to $1.22 billion a year ago.  Reflecting normal seasonal trends agricultural business loans declined to $307.2 million at March 31, 2018, compared to $338.4 million three months earlier and were slightly less than the $313.4 million a year ago.  Total construction, land and land development loans increased 5% to $948.7 million at March 31, 2018, compared to $907.5 million at December 31, 2017, and increased 18% compared to $803.7 million a year earlier.  Consumer loans increased modestly to $693.0 million at March 31, 2018, compared to $688.8 million at December 31, 2017, and increased 7% compared to $649.7 million a year ago, in part due to a successful second quarter 2017 campaign to generate additional home equity lines of credit.  One- to four-family loans decreased to $833.6 million compared to $848.3 million at December 31, 2017, but increased 4% compared to $803.0 million a year ago.

Loans held for sale increased 248% to $141.8 million at March 31, 2018, compared to $40.7 million at December 31, 2017, and increased 64% compared to $86.7 million at March 31, 2017.  The volume of one- to four- family residential mortgage loans sold was $124.5 million in the current quarter compared to $141.1 million in the preceding quarter and $139.3 million in the first quarter a year ago.  While production of multifamily loans was strong in the current quarter, no sales occurred during the current quarter resulting in a significant increase in loans held for sale.  Banner did not sell any multifamily loans during the quarter ended March 31, 2018, compared to $74.1 million during the preceding quarter and $200.7 million during the first quarter last year.  Loans held for sale at March 31, 2018 included $116.2 million of multifamily loans and $25.6 million of one- to four-family loans.

Total deposits increased 4% to $8.54 billion at March 31, 2018, compared to $8.18 billion at December 31, 2017, and increased modestly compared to $8.42 billion a year ago, as strong core deposit growth was partially offset by continuing declines in retail or non-brokered certificates of deposit.  Compared to a year earlier, total deposits at March 31, 2018 were negatively impacted by the sale of the Utah branches which included $160.3 million of deposits.  Non-interest-bearing account balances increased 4% to $3.38 billion at March 31, 2018, compared to $3.27 billion at December 31, 2017 and increased 5% compared to $3.21 billion a year ago.  Core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased 4% during the current quarter and increased 3% compared to March 31, 2017 despite the sale of the Utah branches.  Core deposits represented 88% of total deposits at both March 31, 2018 and December 31, 2017.  Core deposits were 86% of total deposits a year earlier.  Certificates of deposit were $1.02 billion at March 31, 2018, compared to $966.9 million at December 31, 2017 and $1.14 billion a year earlier.  Brokered deposits increased to $169.5 million at March 31, 2018, compared to $57.2 million at December 31, 2017 and were $171.5 million a year earlier.  The average cost of deposits was 0.16% for the quarter ended March 31, 2018, compared to 0.15% in the preceding quarter and 0.14% in the quarter ended March 31, 2017.

At March 31, 2018, total common shareholders' equity was $1.25 billion, or $38.68 per share, compared to $1.27 billion at December 31, 2017 and $1.32 billion a year ago.  At March 31, 2018, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $986.5 million, or 9.82% of tangible assets*, compared to $1.01 billion, or 10.61% of tangible assets, at December 31, 2017 and $1.05 billion, or 10.72% of tangible assets, a year ago.  Banner's tangible book value per share* was $30.43 at March 31, 2018, compared to $31.68 per share a year ago.

During the first quarter of 2018, Banner repurchased 269,711 shares of its common stock at an average price per share of $56.93 for a total purchase price of $15.4 million.  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, 2018, Banner Corporation's common equity Tier 1 capital ratio was 10.68%, its Tier 1 leverage capital to average assets ratio was 11.06%, and its total capital to risk-weighted assets ratio was 13.28%.

Credit Quality

"While we have been effectively executing on our strategies to protect our net interest margin, grow client relationships, deliver sustainable profitability and prudently invest our capital, we have also focused on maintaining our moderate risk profile," said Grescovich. "Again this quarter, our credit quality metrics reflect our moderate credit risk profile and our reserve and capital levels remain strong."

The allowance for loan losses was $92.2 million at March 31, 2018, or 1.22% of total loans outstanding and 410% of non-performing loans compared to $89.0 million at December 31, 2017, or 1.17% of total loans outstanding and 329% of non-performing loans, and $86.5 million at March 31, 2017, or 1.17% of total loans outstanding and 479% of non-performing loans.  Net loan recoveries totaled $1.2 million in the first quarter compared to net charge-offs of $2.1 million in the preceding quarter and net charge-offs of $1.5 million in the first quarter a year ago.  Primarily as a result of the origination of new loans and the renewal of acquired loans out of the discounted acquired 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 and in the year ago quarter.  Non-performing loans were $22.5 million at March 31, 2018, compared to $27.0 million at December 31, 2017 and $18.1 million a year ago.  Real estate owned and other repossessed assets were $1.0 million at March 31, 2018, compared to $467,000 at December 31, 2017 and $3.2 million a year ago.

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank in 2015 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.  At March 31, 2018, the total purchase discount for acquired loans was $19.3 million.

Banner's non-performing assets were $23.5 million, or 0.23% of total assets, at March 31, 2018, compared to $27.5 million, or 0.28% of total assets, at December 31, 2017 and $21.3 million, or 0.21% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $19.3 million at March 31, 2018, compared to $21.3 million at December 31, 2017 and $30.5 million a year ago.

Conference Call

Banner will host a conference call on Tuesday, April 24, 2018, 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 10118284, or at www.bannerbank.com.

About the Company

Banner Corporation is a $10.32 billion bank holding company operating two commercial banks in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "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 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, 2018   Dec 31, 2017   Mar 31, 2017
             
INTEREST INCOME:            
Loans receivable   $ 94,022     $ 93,145     $ 91,288  
Mortgage-backed securities   7,331     7,006     4,647  
Securities and cash equivalents   3,467     3,324     3,161  
    104,820     103,475     99,096  
INTEREST EXPENSE:            
Deposits   3,358     3,111     2,791  
Federal Home Loan Bank advances   677     766     273  
Other borrowings   70     77     74  
Junior subordinated debentures   1,342     1,257     1,104  
    5,447     5,211     4,242  
Net interest income before provision for loan losses   99,373     98,264     94,854  
PROVISION FOR LOAN LOSSES   2,000     2,000     2,000  
Net interest income   97,373     96,264     92,854  
NON-INTEREST INCOME:            
Deposit fees and other service charges   11,296     10,840     10,389  
Mortgage banking operations   4,864     5,025     4,603  
Bank owned life insurance   853     1,020     1,095  
Miscellaneous   1,037     1,923     3,636  
    18,050     18,808     19,723  
Net gain (loss) on sale of securities   4     (2,310 )   13  
Net change in valuation of financial instruments carried at fair value   3,308     (1,013 )   (688 )
Gain on sale of branches, including related loans and deposits       12,189      
Total non-interest income   21,362     27,674     19,048  
NON-INTEREST EXPENSE:            
Salary and employee benefits   50,067     48,082     46,063  
Less capitalized loan origination costs   (4,011 )   (4,134 )   (4,316 )
Occupancy and equipment   11,766     12,088     11,996  
Information / computer data services   4,381     4,731     3,994  
Payment and card processing services   3,700     3,807     3,223  
Professional services   4,428     5,301     5,152  
Advertising and marketing   1,830     3,412     1,328  
Deposit insurance   1,341     1,251     1,266  
State/municipal business and use taxes   713     737     799  
Real estate operations   439     (941 )   (966 )
Amortization of core deposit intangibles   1,382     1,457     1,624  
Miscellaneous   5,670     6,710     6,118  
Total non-interest expense   81,706     82,501     76,281  
Income before provision for income taxes   37,029     41,437     35,621  
PROVISION FOR INCOME TAXES   8,239     54,985     11,828  
NET INCOME (LOSS)   $ 28,790     $ (13,548 )   $ 23,793  
             
Earnings (Loss) per share available to common shareholders:            
Basic   $ 0.89     $ (0.41 )   $ 0.72  
Diluted   $ 0.89     $ (0.41 )   $ 0.72  
Cumulative dividends declared per common share   $ 0.35     $ 0.25     $ 0.25  
Weighted average common shares outstanding:            
Basic   32,397,568     32,655,973     32,933,444  
Diluted   32,516,456     32,766,335     33,051,459  
Decrease in common shares outstanding   (302,812 )   (528,299 )   (40,523 )


FINANCIAL CONDITION               Percentage Change
(in thousands except shares and per share data)   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017   Prior Qtr   Prior Yr Qtr
                     
ASSETS                    
Cash and due from banks   $ 188,418     $ 199,624     $ 196,277     (5.6 )%   (4.0 )%
Interest-bearing deposits   53,630     61,576     104,431     (12.9 )%   (48.6 )%
Total cash and cash equivalents   242,048     261,200     300,708     (7.3 )%   (19.5 )%
Securities - trading   25,574     22,318     24,753     14.6 %   3.3 %
Securities - available for sale   1,406,505     919,485     1,223,764     53.0 %   14.9 %
Securities - held to maturity   262,645     260,271     266,391     0.9 %   (1.4 )%
Federal Home Loan Bank stock   18,036     10,334     10,334     74.5 %   74.5 %
Loans held for sale   141,808     40,725     86,707     248.2 %   63.5 %
Loans receivable   7,556,046     7,598,884     7,421,255     (0.6 )%   1.8 %
Allowance for loan losses   (92,207 )   (89,028 )   (86,527 )   3.6 %   6.6 %
Net loans   7,463,839     7,509,856     7,334,728     (0.6 )%   1.8 %
Accrued interest receivable   32,824     31,259     30,312     5.0 %   8.3 %
Real estate owned held for sale, net   328     360     3,040     (8.9 )%   (89.2 )%
Property and equipment, net   156,005     154,815     162,467     0.8 %   (4.0 )%
Goodwill   242,659     242,659     244,583     %   (0.8 )%
Other intangibles, net   24,966     22,655     28,488     10.2 %   (12.4 )%
Bank-owned life insurance   163,519     162,668     159,948     0.5 %   2.2 %
Other assets   136,508     124,604     192,155     9.6 %   (29.0 )%
Total assets   $ 10,317,264     $ 9,763,209     $ 10,068,378     5.7 %   2.5 %
LIABILITIES                    
Deposits:                    
Non-interest-bearing   $ 3,383,439     $ 3,265,544     $ 3,213,044     3.6 %   5.3 %
Interest-bearing transaction and savings accounts   4,141,268     3,950,950     4,064,198     4.8 %   1.9 %
Interest-bearing certificates   1,018,355     966,937     1,144,718     5.3 %   (11.0 )%
Total deposits   8,543,062     8,183,431     8,421,960     4.4 %   1.4 %
Advances from Federal Home Loan Bank at fair value   192,195     202     213     nm     nm  
Customer repurchase agreements and other borrowings   101,844     95,860     120,245     6.2 %   (15.3 )%
Junior subordinated debentures at fair value   112,516     98,707     96,040     14.0 %   17.2 %
Accrued expenses and other liabilities   72,497     71,344     66,201     1.6 %   9.5 %
Deferred compensation   41,027     41,039     40,315     %   1.8 %
Total liabilities   9,063,141     8,490,583     8,744,974     6.7 %   3.6 %
SHAREHOLDERS' EQUITY                    
Common stock   1,172,960     1,187,127     1,214,517     (1.2 )%   (3.4 )%
Retained earnings   79,773     90,535     110,783     (11.9 )%   (28.0 )%
Other components of shareholders' equity   1,390     (5,036 )   (1,896 )   nm     (173.3 )%
Total shareholders' equity   1,254,123     1,272,626     1,323,404     (1.5 )%   (5.2 )%
Total liabilities and shareholders' equity   $ 10,317,264     $ 9,763,209     $ 10,068,378     5.7 %   2.5 %
Common Shares Issued:                    
Shares outstanding at end of period   32,423,673     32,726,485     33,152,864          
Common shareholders' equity per share (1)   $ 38.68     $ 38.89     $ 39.92          
Common shareholders' tangible equity per share (1) (2)   $ 30.43     $ 30.78     $ 31.68          
Common shareholders' tangible equity to tangible assets (2)   9.82 %   10.61 %   10.72 %        
Consolidated Tier 1 leverage capital ratio   11.06 %   11.33 %   11.79 %        


(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 two pages of the press release tables.


ADDITIONAL FINANCIAL INFORMATION                    
(dollars in thousands)                    
                Percentage Change
LOANS   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017   Prior Qtr   Prior Yr Qtr
                     
Commercial real estate:                    
Owner occupied   $ 1,278,814     $ 1,284,363     $ 1,361,095     (0.4 )%   (6.0 )%
Investment properties   1,876,937     1,937,423     2,011,618     (3.1 )%   (6.7 )%
Multifamily real estate   321,039     314,188     254,246     2.2 %   26.3 %
Commercial construction   163,314     148,435     141,505     10.0 %   15.4 %
Multifamily construction   159,108     154,662     114,728     2.9 %   38.7 %
One- to four-family construction   434,204     415,327     366,191     4.5 %   18.6 %
Land and land development:                    
Residential   167,783     164,516     151,649     2.0 %   10.6 %
Commercial   24,331     24,583     29,597     (1.0 )%   (17.8 )%
Commercial business   1,296,691     1,279,894     1,224,541     1.3 %   5.9 %
Agricultural business including secured by farmland   307,243     338,388     313,374     (9.2 )%   (2.0 )%
One- to four-family real estate   833,598     848,289     802,991     (1.7 )%   3.8 %
Consumer:                    
Consumer secured by one- to four-family real estate   522,826     522,931     493,495     %   5.9 %
Consumer-other   170,158     165,885     156,225     2.6 %   8.9 %
Total loans receivable   $ 7,556,046     $ 7,598,884     $ 7,421,255     (0.6 )%   1.8 %
Restructured loans performing under their restructured terms   $ 14,264     $ 16,115     $ 17,193          
Loans 30 - 89 days past due and on accrual (1)   $ 23,557     $ 29,278     $ 22,214          
Total delinquent loans (including loans on non-accrual), net (2)   $ 42,186     $ 50,503     $ 37,563          
Total delinquent loans / Total loans outstanding   0.56 %   0.66 %   0.51 %        

(1) Includes $1.5 million of purchased credit-impaired loans at March 31, 2018 compared to $943,000 at December 31, 2017, and $2.4 million at March 31, 2017.
(2) Delinquent loans include $2.3 million of delinquent purchased credit-impaired loans March 31, 2018 compared to $2.2 million at December 31, 2017, and $3.5 million at March 31, 2017.


LOANS BY GEOGRAPHIC LOCATION   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
    Amount   Percentage   Amount   Percentage   Amount   Percentage
                         
Washington   $ 3,490,646     46.2 %   $ 3,508,542     46.2 %   $ 3,401,005     45.8 %
Oregon   1,580,278     20.9 %   1,590,233     20.9 %   1,493,054     20.1 %
California   1,405,411     18.6 %   1,415,076     18.6 %   1,255,597     16.9 %
Idaho   481,972     6.4 %   492,603     6.5 %   471,519     6.4 %
Utah   83,637     1.1 %   73,382     1.0 %   281,379     3.8 %
Other   514,102     6.8 %   519,048     6.8 %   518,701     7.0 %
Total loans   $ 7,556,046     100.0 %   $ 7,598,884     100.0 %   $ 7,421,255     100.0 %



ADDITIONAL FINANCIAL INFORMATION            
(dollars in thousands)            
      Quarters Ended
CHANGE IN THE   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
ALLOWANCE FOR LOAN LOSSES            
Balance, beginning of period   $ 89,028     $ 89,100     $ 85,997  
Provision for loan losses   2,000     2,000     2,000  
Recoveries of loans previously charged off:            
Commercial real estate   1,352     19     70  
Construction and land   174     57     83  
One- to four-family real estate   290     8     145  
Commercial business   170     305     173  
Agricultural business, including secured by farmland       1     113  
Consumer   112     188     94  
    2,098     578     678  
Loans charged off:            
Commercial real estate       (549 )    
One- to four-family real estate   (16 )   (38 )    
Commercial business   (519 )   (517 )   (1,626 )
Agricultural business, including secured by farmland   (7 )   (1,110 )   (159 )
Consumer   (377 )   (436 )   (363 )
    (919 )   (2,650 )   (2,148 )
Net (charge-offs) recoveries   1,179     (2,072 )   (1,470 )
Balance, end of period   $ 92,207     $ 89,028     $ 86,527  
Net (charge-offs) recoveries / Average loans outstanding   0.015 %   (0.027 )%   (0.019 )%


ALLOCATION OF            
ALLOWANCE FOR LOAN LOSSES   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Specific or allocated loss allowance:            
Commercial real estate   $ 23,461     $ 22,824     $ 20,472  
Multifamily real estate   2,592     1,633     1,378  
Construction and land   28,766     27,568     29,464  
One- to four-family real estate   3,779     2,055     1,974  
Commercial business   19,885     18,311     19,768  
Agricultural business, including secured by farmland   2,999     4,053     3,245  
Consumer   5,514     3,866     3,840  
Total allocated   86,996     80,310     80,141  
Unallocated   5,211     8,718     6,386  
Total allowance for loan losses   $ 92,207     $ 89,028     $ 86,527  
Allowance for loan losses / Total loans outstanding   1.22 %   1.17 %   1.17 %
Allowance for loan losses / Non-performing loans   410 %   329 %   479 %


ADDITIONAL FINANCIAL INFORMATION          
(dollars in thousands)          
  Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
NON-PERFORMING ASSETS          
Loans on non-accrual status:          
Secured by real estate:          
Commercial $ 6,877     $ 10,646     $ 6,910  
Multifamily         147  
Construction and land 984     798     1,775  
One- to four-family 2,815     3,264     3,386  
Commercial business 3,037     3,406     2,700  
Agricultural business, including secured by farmland 6,120     6,132     1,012  
Consumer 1,237     1,297     1,285  
  21,070     25,543     17,215  
Loans more than 90 days delinquent, still on accrual:          
Secured by real estate:          
Construction and land     298      
One- to four-family 591     1,085     545  
Commercial business 1     18      
Agricultural business, including secured by farmland 820          
Consumer 7     85     297  
  1,419     1,486     842  
Total non-performing loans 22,489     27,029     18,057  
Real estate owned (REO) 328     360     3,040  
Other repossessed assets 694     107     162  
Total non-performing assets $ 23,511     $ 27,496     $ 21,259  
Total non-performing assets to total assets 0.23 %   0.28 %   0.21 %
Purchased credit-impaired loans, net $ 19,316     $ 21,310     $ 30,501  


  Quarters Ended
REAL ESTATE OWNED Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Balance, beginning of period $ 360     $ 1,496     $ 11,081  
Additions from loan foreclosures 128          
Proceeds from dispositions of REO     (2,092 )   (9,193 )
Gain on sale of REO     956     1,202  
Valuation adjustments in the period (160 )       (50 )
Balance, end of period $ 328     $ 360     $ 3,040  



ADDITIONAL FINANCIAL INFORMATION                    
(dollars in thousands)                    
                     
DEPOSIT COMPOSITION               Percentage Change
    Mar 31, 2018   Dec 31, 2017   Mar 31, 2017   Prior Qtr   Prior Yr
                     
Non-interest-bearing   $ 3,383,439     $ 3,265,544     $ 3,213,044     3.6 %   5.3 %
Interest-bearing checking   1,043,840     971,137     928,232     7.5 %   12.5 %
Regular savings accounts   1,637,814     1,557,500     1,592,023     5.2 %   2.9 %
Money market accounts   1,459,614     1,422,313     1,543,943     2.6 %   (5.5 )%
Total interest-bearing transaction and savings accounts   4,141,268     3,950,950     4,064,198     4.8 %   1.9 %
Interest-bearing certificates   1,018,355     966,937     1,144,718     5.3 %   (11.0 )%
Total deposits   $ 8,543,062     $ 8,183,431     $ 8,421,960     4.4 %   1.4 %


GEOGRAPHIC CONCENTRATION OF DEPOSITS   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
    Amount   Percentage   Amount   Percentage   Amount   Percentage
Washington   $ 4,766,646     55.8 %   $ 4,506,249     55.0 %   $ 4,619,457     54.9 %
Oregon   1,868,043     21.9 %   1,797,147     22.0 %   1,746,143     20.7 %
California   1,454,421     17.0 %   1,432,819     17.5 %   1,469,351     17.4 %
Idaho   453,952     5.3 %   447,216     5.5 %   429,850     5.1 %
Utah       %       %   157,159     1.9 %
Total deposits   $ 8,543,062     100.0 %   $ 8,183,431     100.0 %   $ 8,421,960     100.0 %


INCLUDED IN TOTAL DEPOSITS   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Public non-interest-bearing accounts   $ 78,714     $ 86,987     $ 80,322  
Public interest-bearing transaction & savings accounts   111,597     111,732     125,921  
Public interest-bearing certificates   24,928     23,685     31,024  
Total public deposits   $ 215,239     $ 222,404     $ 237,267  
Total brokered deposits   $ 169,523     $ 57,228     $ 171,521  


ADDITIONAL FINANCIAL INFORMATION                        
(dollars in thousands)                        
    Actual   Minimum to be
categorized as
"Adequately Capitalized"
  Minimum to be
categorized as
"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF MARCH 31, 2018   Amount   Ratio   Amount   Ratio   Amount   Ratio
                         
Banner Corporation-consolidated:                        
  Total capital to risk-weighted assets   $ 1,176,192     13.28 %   $ 708,592     8.00 %   $ 885,739     10.00 %
  Tier 1 capital to risk-weighted assets   1,081,536     12.21 %   531,444     6.00 %   531,444     6.00 %
  Tier 1 leverage capital to average assets   1,081,536     11.06 %   391,147     4.00 %     n/a     n/a  
  Common equity tier 1 capital to risk-weighted assets   945,536     10.68 %   398,583     4.50 %     n/a     n/a  
Banner Bank:                        
  Total capital to risk-weighted assets   1,115,304     12.88 %   692,895     8.00 %   866,118     10.00 %
  Tier 1 capital to risk-weighted assets   1,023,061     11.81 %   519,671     6.00 %   692,895     8.00 %
  Tier 1 leverage capital to average assets   1,023,061     10.76 %   380,234     4.00 %   475,292     5.00 %
  Common equity tier 1 capital to risk-weighted assets   1,023,061     11.81 %   389,753     4.50 %   562,977     6.50 %
Islanders Bank:                        
  Total capital to risk-weighted assets   32,716     16.77 %   15,607     8.00 %   19,509     10.00 %
  Tier 1 capital to risk-weighted assets   30,303     15.53 %   11,705     6.00 %   15,607     8.00 %
  Tier 1 leverage capital to average assets   30,303     11.03 %   10,985     4.00 %   13,731     5.00 %
  Common equity tier 1 capital to risk-weighted assets   30,303     15.53 %   8,779     4.50 %   12,681     6.50 %


ADDITIONAL FINANCIAL INFORMATION                      
(dollars in thousands)                      
(rates / ratios annualized)                      
                       
ANALYSIS OF NET INTEREST SPREAD Quarters Ended
  March 31, 2018   December 31, 2017   March 31, 2017
  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 $ 6,065,199   $ 74,346   4.97 %   $ 6,064,650   $ 73,349   4.80 %   $ 6,104,779   $ 72,549   4.82 %
Commercial/agricultural loans 1,456,303   17,423   4.85 %   1,454,639   17,549   4.79 %   1,464,532   16,546   4.58 %
Consumer and other loans 140,627   2,253   6.50 %   144,412   2,247   6.17 %   138,033   2,193   6.44 %
Total loans(1) 7,662,129   94,022   4.98 %   7,663,701   93,145   4.82 %   7,707,344   91,288   4.80 %
Mortgage-backed securities 1,057,878   7,331   2.81 %   1,131,692   7,006   2.46 %   842,071   4,647   2.24 %
Other securities 462,947   3,090   2.71 %   459,065   3,028   2.62 %   453,793   3,037   2.71 %
Interest-bearing deposits with banks 64,512   231   1.45 %   60,109   191   1.26 %   32,195   93   1.17 %
FHLB stock 16,549   146   3.58 %   18,496   105   2.25 %   15,550   31   0.81 %
Total investment securities 1,601,886   10,798   2.73 %   1,669,362   10,330   2.46 %   1,343,609   7,808   2.36 %
Total interest-earning assets 9,264,015   104,820   4.59 %   9,333,063   103,475   4.40 %   9,050,953   99,096   4.44 %
Non-interest-earning assets 805,503         861,232         923,165      
Total assets $ 10,069,518         $ 10,194,295         $ 9,974,118      
Deposits:                      
Interest-bearing checking accounts $ 1,003,929   246   0.10 %   $ 964,306   222   0.09 %   $ 896,764   200   0.09 %
Savings accounts 1,601,671   627   0.16 %   1,567,845   550   0.14 %   1,557,734   523   0.14 %
Money market accounts 1,442,685   666   0.19 %   1,471,875   645   0.17 %   1,522,470   651   0.17 %
Certificates of deposit 998,738   1,819   0.74 %   1,024,069   1,694   0.66 %   1,089,316   1,417   0.53 %
Total interest-bearing deposits 5,047,023   3,358   0.27 %   5,028,095   3,111   0.25 %   5,066,284   2,791   0.22 %
Non-interest-bearing deposits 3,282,686     %   3,325,452     %   3,148,520     %
Total deposits 8,329,709   3,358   0.16 %   8,353,547   3,111   0.15 %   8,214,804   2,791   0.14 %
Other interest-bearing liabilities:                      
FHLB advances 155,540   677   1.77 %   204,502   766   1.49 %   130,274   273   0.85 %
Other borrowings 101,111   70   0.28 %   106,678   77   0.29 %   108,091   74   0.28 %
Junior subordinated debentures 140,212   1,342   3.88 %   140,212   1,257   3.56 %   140,212   1,104   3.19 %
Total borrowings 396,863   2,089   2.13 %   451,392   2,100   1.85 %   378,577   1,451   1.55 %
Total funding liabilities 8,726,572   5,447   0.25 %   8,804,939   5,211   0.23 %   8,593,381   4,242   0.20 %
Other non-interest-bearing liabilities(2) 65,978         63,654         58,489      
Total liabilities 8,792,550         8,868,593         8,651,870      
Shareholders' equity 1,276,968         1,325,702         1,322,248      
Total liabilities and shareholders' equity $ 10,069,518         $ 10,194,295         $ 9,974,118      
Net interest income/rate spread   $ 99,373   4.34 %     $ 98,264   4.17 %     $ 94,854   4.24 %
Net interest margin     4.35 %       4.18 %       4.25 %
Additional Key Financial Ratios:                      
Return on average assets     1.16 %       (0.53 )%       0.97 %
Return on average equity     9.14 %       (4.05 )%       7.30 %
Average equity/average assets     12.68 %       13.00 %       13.26 %
Average interest-earning assets/average interest-bearing liabilities     170.17 %       170.33 %       166.23 %
Average interest-earning assets/average funding liabilities     106.16 %       106.00 %       105.32 %
Non-interest income/average assets     0.86 %       1.08 %       0.77 %
Non-interest expense/average assets     3.29 %       3.21 %       3.10 %
Efficiency ratio(4)     67.67 %       65.51 %       66.97 %
Adjusted efficiency ratio(5)     67.42 %       69.40 %       65.30 %


(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 amortization of core deposit intangibles (CDI), REO gain (loss), and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of 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, 2018   Dec 31, 2017   Mar 31, 2017
Net interest income before provision for loan losses $ 99,373     $ 98,264     $ 94,854  
Total non-interest income 21,362     27,674     19,048  
Total GAAP revenue 120,735     125,938     113,902  
Exclude net (gain) loss on sale of securities (4 )   2,310     (13 )
Exclude change in valuation of financial instruments carried at fair value (3,308 )   1,013     688  
Exclude gain on sale of branches     (12,189 )    
Revenue from core operations (non-GAAP) $ 117,423     $ 117,072     $ 114,577  


NON-INTEREST INCOME FROM CORE OPERATIONS   Quarters Ended
    Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Total non-interest income (GAAP)   $ 21,362     $ 27,674     $ 19,048  
Exclude net (gain) loss on sale of securities   (4 )   2,310     (13 )
Exclude change in valuation of financial instruments carried at fair value   (3,308 )   1,013     688  
Exclude gain on sale of branches       (12,189 )    
Non-interest income from core operations (non-GAAP)   $ 18,050     $ 18,808     $ 19,723  


EARNINGS FROM CORE OPERATIONS   Quarters Ended
    Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Net income (GAAP)   $ 28,790     $ (13,548 )   $ 23,793  
Exclude net (gain) loss on sale of securities   (4 )   2,310     (13 )
Exclude change in valuation of financial instruments carried at fair value   (3,308 )   1,013     688  
Exclude gain on sale of branches       (12,189 )    
Exclude related tax expense (benefit)   795     3,192     (243 )
Exclude deferred tax asset revaluation due to new tax law       42,630      
Total earnings from core operations (non-GAAP)   $ 26,273     $ 23,408     $ 24,225  
             
Diluted earnings (loss) per share (GAAP)   $ 0.89     $ (0.41 )   $ 0.72  
Diluted core earnings per share (non-GAAP)   $ 0.81     $ 0.71     $ 0.73  


ADDITIONAL FINANCIAL INFORMATION            
(dollars in thousands)            
     
ADJUSTED EFFICIENCY RATIO   Quarters Ended
    Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Non-interest expense (GAAP)   $ 81,706     $ 82,501     $ 76,281  
Exclude CDI amortization   (1,382 )   (1,457 )   (1,624 )
Exclude state/municipal tax expense   (713 )   (737 )   (799 )
Exclude REO (loss) gain   (439 )   941     966  
Adjusted non-interest expense (non-GAAP)   $ 79,172     $ 81,248     $ 74,824  
             
Net interest income before provision for loan losses (GAAP)   $ 99,373     $ 98,264     $ 94,854  
Non-interest income (GAAP)   21,362     27,674     19,048  
Total revenue   120,735     125,938     113,902  
Exclude net (gain) loss on sale of securities   (4 )   2,310     (13 )
Exclude net change in valuation of financial instruments carried at fair value   (3,308 )   1,013     688  
Exclude gain on sale of branches       (12,189 )    
Adjusted revenue (non-GAAP)   $ 117,423     $ 117,072     $ 114,577  
             
Efficiency ratio (GAAP)   67.67 %   65.51 %   66.97 %
Adjusted efficiency ratio (non-GAAP)   67.42 %   69.40 %   65.30 %


TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS   Mar 31, 2018   Dec 31, 2017   Mar 31, 2017
Shareholders' equity (GAAP)   $ 1,254,123     $ 1,272,626     $ 1,323,404  
Exclude goodwill and other intangible assets, net   267,625     265,314     273,071  
Tangible common shareholders' equity (non-GAAP)   $ 986,498     $ 1,007,312     $ 1,050,333  
             
Total assets (GAAP)   $ 10,317,264     $ 9,763,209     $ 10,068,378  
Exclude goodwill and other intangible assets, net   267,625     265,314     273,071  
Total tangible assets (non-GAAP)   $ 10,049,639     $ 9,497,895     $ 9,795,307  
Common shareholders' equity to total assets (GAAP)   12.16 %   13.03 %   13.14 %
Tangible common shareholders' equity to tangible assets (non-GAAP)   9.82 %   10.61 %   10.72 %
             
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE            
Tangible common shareholders' equity   $ 986,498     $ 1,007,312     $ 1,050,333  
Common shares outstanding at end of period   32,423,673     32,726,485     33,152,864  
Common shareholders' equity (book value) per share (GAAP)   $ 38.68     $ 38.89     $ 39.92  
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)   $ 30.43     $ 30.78     $ 31.68  


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

 

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