Market Overview

Banner Corporation Reports Net Income of $33.3 Million, or $0.95 Per Diluted Share, in First Quarter 2019; Revenue Grows by 11% from First Quarter of 2018; Completion of Skagit Bank Integration Complemented by Good Core Deposit Growth

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WALLA WALLA, Wash., April 24, 2019 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) ("Banner"), the parent company of Banner Bank and Islanders Bank, today reported net income in the first quarter of 2019 was $33.3 million, or $0.95 per diluted share, compared to $37.5 million, or $1.09 per diluted share, in the preceding quarter and $28.8 million, or $0.89 per diluted share, in the first quarter of 2018.  First quarter results include a $676,000 write-down on a former administration building as well as $2.1 million of acquisition related expenses, compared to $4.6 million of acquisition related expenses in the preceding quarter and no acquisition related expenses in the first quarter a year ago.  In addition, fourth quarter 2018 profits included a $5.5 million benefit from the revaluation of the Company's deferred tax asset.

"Our first quarter operating performance continued to reflect the success of our super community bank strategy, which produced solid revenue and additional low-cost core deposit growth," stated Mark J. Grescovich, President and Chief Executive Officer.  "During the quarter, we also benefited from the successful completion of the integration of the Skagit Bank acquisition, which further expands our presence in the growing communities of Northwest Washington.  The acquisition of Skagit Bank added $916 million in assets and, after consolidation, six banking locations along the I-5 corridor from Seattle to the Canadian border."

At March 31, 2019, Banner Corporation had $11.73 billion in assets, $8.60 billion in net loans and $9.38 billion in deposits.  Banner operates 176 branch offices located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2019 Highlights

  • Revenues were $134.2 million during the quarter ended March 31, 2019, compared to $138.5 million during the preceding quarter and increased 11% compared to $120.7 million during the first quarter a year ago.
  • Net interest income, before the provision for loan losses, was $116.1 million, compared to $117.5 million in the preceding quarter and increased 17% from $99.4 million in the first quarter a year ago.
  • Net interest margin was 4.37% for the current quarter, compared to 4.47% in the preceding quarter and 4.35% in the first quarter a year ago.
  • Net loans receivable increased modestly to $8.60 billion at March 31, 2019, compared to $8.59 billion at December 31, 2018 and increased 15% when compared to $7.46 billion at March 31, 2018.
  • Provision for loan losses was $2.0 million for the quarter, increasing the allowance for loan losses to $97.3 million, or 1.12% of total loans, as of March 31, 2019.
  • Core deposits increased 1% to $8.21 billion compared to the preceding quarter and increased 9% compared to a year ago.  Core deposits represented 88% of total deposits at March 31, 2019.
  • Quarterly dividends to shareholders for the current quarter were $0.41 per share, an increase of 17% from the quarterly dividend for the first quarter a year ago.
  • Common shareholders' equity per share increased to $42.99 at March 31, 2019, an increase of 2% from $42.03 at the preceding quarter end and an increase of 11% from $38.68 a year ago.
  • Tangible common shareholders' equity per share* increased to $32.47 at March 31, 2019, an increase of 3% from $31.45 at the preceding quarter end and an increase of 6% from $30.54 a year ago.
  • Non-performing assets increased to $22.0 million, or 0.19% of total assets, at March 31, 2019, compared to $18.9 million, or 0.16% of total assets three months earlier, but decreased when compared to $23.5 million, or 0.23% of total assets, at March 31, 2018.

*Tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to revenue from core operations (which excludes fair value adjustments and gain (loss) on the sale of securities from the total of net interest income before provision for loan losses and non-interest income) and the adjusted efficiency ratio (which excludes acquisition related expenses, amortization of core deposit intangibles, real estate owned gain (loss) and state/municipal taxes from non-interest expense divided by revenues from core operations) represent non-GAAP (Generally Accepted Accounting Principles) financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in 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 2018 Consolidated Financial Statements and/or schedules to conform to the 2019 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.

Recent Events

On November 1, 2018, Banner completed its acquisition of Skagit Bancorp, Inc. ("Skagit") and its wholly-owned subsidiary, Skagit Bank, of Burlington, Washington.  As of the closing of the transaction, Skagit Bank had eleven retail branches along the I-5 corridor from Seattle to the Canadian border.  Pursuant to the previously announced terms of the acquisition, Skagit shareholders received 5.6664 shares of Banner common stock in exchange for each share of Skagit common stock, plus cash in lieu of any fractional shares and to cancel Skagit stock options for a total consideration paid of $180.0 million.

The Skagit merger was accounted for using the acquisition method of accounting.  Accordingly, the assets (including identifiable intangible assets) and the liabilities of Skagit were measured at their respective estimated fair values as of the merger date. The excess of the purchase price over the fair value of the net assets acquired was attributed to goodwill.  The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date.  The acquisition accounting is subject to adjustment within a measurement period of one year from the acquisition date.  The acquisition provided $915.8 million of assets, $632.4 million of loans, and $810.2 million of deposits to Banner.

Income Statement Review

"Our net interest margin increased slightly from a year ago and contracted during the quarter reflecting rising deposit costs and variability in the discount accretion on acquired loans," said Grescovich.  Banner's net interest margin was 4.37% for the first quarter of 2019, a ten basis-point decrease compared to 4.47% in the preceding quarter and a two basis-point improvement compared to 4.35% in the first quarter a year ago.  Acquisition accounting adjustments added seven basis points to the net interest margin in the current quarter, compared to 12 basis points in the preceding quarter and eight basis points in the first quarter a year ago.  The total purchase discount for acquired loans was $24.2 million at March 31, 2019, compared to $25.7 million at December 31, 2018 and $19.4 million at March 31, 2018.

Average interest-earning asset yields decreased one basis point to 4.89% compared to 4.90% for the preceding quarter and increased 30 basis points compared to 4.59% in the first quarter a year ago.  Average loan yields decreased six basis points to 5.31% compared to 5.37% in the preceding quarter and increased 33 basis points compared to 4.98% in the first quarter a year ago.  Loan discount accretion added nine basis points to loan yields in the first quarter of 2019, compared to 16 basis points in the preceding quarter and ten basis points in the first quarter a year ago.  Deposit costs were 0.37% in the first quarter of 2019, a five basis-point increase compared to the preceding quarter and a 21 basis-point increase compared to the first quarter a year ago.  The total cost of funds was 0.56% during the first quarter of 2019, a ten basis-point increase compared to the preceding quarter and a 31 basis-point increase compared to the first quarter a year ago, largely reflecting an increase in the cost of deposits and in FHLB advances.

Primarily as a result of the origination of new loans, the renewal of acquired loans out of the discounted acquired loan portfolio and net charge-offs, Banner recorded a $2.0 million provision for loan losses in the current quarter, compared to $2.5 million recorded in the prior quarter and $2.0 million in the same quarter a year ago.

Deposit fees and other service charges were $12.6 million in the first quarter of 2019, compared to $12.5 million in the preceding quarter and $11.3 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, were $3.4 million in the first quarter, compared to $6.0 million in the preceding quarter and $4.9 million in the first quarter of 2018.  The lower fees reflected seasonal declines in multifamily and residential mortgage loan production combined with a compression in gain-on-sale spreads.  Home purchase activity accounted for 80% of one- to four-family mortgage loan originations in the first quarter of 2019, compared to 78% in the prior quarter and 72% in the first quarter of 2018.

Banner's first quarter 2019 results included an $11,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and a $1,000 net gain on the sale of securities.  In the preceding quarter, results included a $198,000 net gain for fair value adjustments and an $885,000 net loss on the sale of securities.  In the first quarter a year ago, results included a $3.3 million net gain for fair value adjustments and a $4,000 net gain on the partial calls of securities.

Total revenues declined 3% to $134.2 million for the first quarter of 2019, compared to $138.5 million in the preceding quarter and increased 11% compared to $120.7 million in the first quarter a year ago.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and the net change in valuation of financial instruments) were $134.2 million in the first quarter of 2019, compared to $139.2 million in the preceding quarter and $117.4 million in the first quarter of 2018.

Total non-interest income was $18.1 million in the first quarter of 2019, compared to $21.0 million in the fourth quarter of 2018 and $21.4 million in the first quarter a year ago. The decline in non-interest income was primarily attributed to lower mortgage banking revenues, specifically lower gains on multifamily loan sales, during the first quarter of 2019 compared to prior periods.  In addition, fourth quarter 2018 miscellaneous non-interest income included $834,000 of non-recurring use tax refunds.

Banner's total non-interest expense was $90.0 million in the first quarter of 2019, compared to $95.4 million in the preceding quarter and $81.7 million in the first quarter of 2018.  Acquisition related expenses were $2.1 million for the first quarter of 2019, compared to $4.6 million for the preceding quarter and no acquisition related expenses for the year ago quarter.  Banner's efficiency ratio improved to 67.06% for the current quarter, compared to 68.89% in the preceding quarter and 67.67% in the year ago quarter.  Banner's adjusted efficiency ratio* was 63.32% for the current quarter, compared to 63.06% in the preceding quarter and 67.42% in the year ago quarter.

For the first quarter of 2019, Banner recorded $8.9 million in state and federal income tax expense for an effective tax rate of 21.0%, reflecting in part the benefits from tax exempt income sources.  Banner's normal, expected statutory income tax rate is 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.  Fourth quarter 2018 income tax expense included a $5.5 million benefit from the revaluation of the company's deferred tax asset.

Balance Sheet Review

Total assets were $11.73 billion at March 31, 2019, compared to $11.87 billion at December 31, 2018 and $10.32 billion at March 31, 2018.  The total of securities and interest-bearing deposits held at other banks was $1.89 billion at March 31, 2019, compared to $1.94 billion at December 31, 2018 and $1.75 billion at March 31, 2018.  The average effective duration of Banner's securities portfolio was approximately 3.0 years at March 31, 2019, compared to 3.9 years at March 31, 2018.

Net loans receivable increased modestly to $8.60 billion at March 31, 2019, compared to $8.59 billion at December 31, 2018 and increased 15% when compared to $7.46 billion at March 31, 2018.  The year-over-year increase in net loans included $631.7 million of portfolio loans acquired in the Skagit acquisition during the preceding quarter.  Commercial real estate and multifamily real estate loans increased modestly to $3.95 billion at March 31, 2019, compared to $3.93 billion at December 31, 2018, and increased 14% compared to $3.48 billion a year ago.  Commercial business loans increased 3% to $1.52 billion at March 31, 2019, compared to $1.48 billion at December 31, 2018, and increased 18% compared to $1.30 billion a year ago.  Agricultural business loans decreased by 8% to $373.3 million at March 31, 2019, compared to $404.9 million three months earlier and increased by 22% compared to $307.2 million a year ago.  Total construction, land and land development loans decreased slightly to $1.10 billion at March 31, 2019, compared to $1.11 billion at December 31, 2018 and increased 16% compared to $948.7 million a year earlier.  Consumer loans decreased slightly to $777.4 million at March 31, 2019, compared to $785.0 million at December 31, 2018 and increased 12% compared to $693.0 million a year ago.  One- to four-family loans were $967.6 million at March 31, 2019, compared to $973.6 million at December 31, 2018 and increased 16% compared to $833.6 million a year ago.

Loans held for sale decreased substantially to $45.9 million at March 31, 2019, compared to $171.0 million at December 31, 2018 and $141.8 million at March 31, 2018.  The volume of one- to four- family residential mortgage loans sold was $107.2 million in the current quarter, compared to $130.1 million in the preceding quarter and $124.5 million in the first quarter a year ago.  During the first quarter of 2019, Banner sold $149.9 million in multifamily loans, compared to $26.8 million in the preceding quarter and no sales of multifamily loans in the first quarter a year ago.

Total deposits decreased slightly to $9.38 billion at March 31, 2019, compared to $9.48 billion at December 31, 2018 and increased 10% when compared to $8.54 billion a year ago, as the addition of both deposits from the Skagit acquisition and brokered certificates of deposit was partially offset by continuing declines in retail, or non-brokered, certificates of deposit.  Non-interest-bearing account balances increased 1% to $3.68 billion at March 31, 2019, compared to $3.66 billion at December 31, 2018 and increased 9% compared to $3.38 billion a year ago.  Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 1% from the prior quarter and increased 9% compared to a year ago.  The core deposit balance at December 31, 2018 was positively impacted by $696.3 million of core deposits acquired in the Skagit acquisition.  Core deposits represented 88% of total deposits at March 31, 2019, compared to 86% of total deposits three months earlier and 88% of total deposits a year earlier.  Certificates of deposit decreased 12% to $1.16 billion at March 31, 2019, compared to $1.32 billion at December 31, 2018 and increased 14% compared to $1.02 billion a year earlier.  Brokered deposits decreased to $239.4 million at March 31, 2019, compared to $377.3 million at December 31, 2018 and increased 41% when compared to $169.5 million a year earlier.

On January 1, 2019, Banner adopted Accounting Standard Update (ASU) No. 2016-02, Leases (Topic 842).  In connection with the adoption of this ASU, Banner recorded a $51 million lease right of use asset and a $53 million lease liability.  These amounts are presented in the Statement of Financial Condition in other assets and other liabilities.

At March 31, 2019, total common shareholders' equity was $1.51 billion, or 12.88% of assets, compared to $1.48 billion or 12.46% of assets at December 31, 2018 and $1.25 billion or 12.16% of assets a year ago.  At March 31, 2018, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.14 billion, or 10.05% of tangible assets*, compared to $1.11 billion, or 9.62% of tangible assets, at December 31, 2018 and $990.2 million, or 9.85% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $32.47 at March 31, 2019, compared to $30.54 per share a year ago.

There were no repurchases of common stock during the first quarter of 2019.  During the fourth quarter of 2018, Banner repurchased 325,000 shares of its common stock and during the first quarter of 2018, Banner repurchased 269,711 shares of its common stock .  Banner 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 Act regulatory standards.  At March 31, 2019, Banner's common equity Tier 1 capital ratio was 12.53%, its Tier 1 leverage capital to average assets ratio was 10.73%, and its total capital to risk-weighted assets ratio was 13.55%.

Credit Quality

The allowance for loan losses was $97.3 million at March 31, 2019, or 1.12% of total loans outstanding and 504% of non-performing loans compared to $96.5 million at December 31, 2018, or 1.11% of total loans outstanding and 616% of non-performing loans, and $92.2 million at March 31, 2018, or 1.22% of total loans outstanding and 410% of non-performing loans.  Net loan charge-offs totaled $1.2 million in the first quarter, compared to net loan charge-offs of $1.3 million in the preceding quarter and net loan recoveries of $1.2 million in the first quarter a year ago.  Primarily as a result of the origination of new loans, the renewal of acquired loans out of the discounted acquired loan portfolio and net charge-offs, Banner recorded a $2.0 million provision for loan losses in the current quarter, compared to $2.5 million recorded in the prior quarter and $2.0 million in the year ago quarter.  Non-performing loans were $19.3 million at March 31, 2019, compared to $15.7 million at December 31, 2018 and $22.5 million a year ago.  Real estate owned and other repossessed assets were $2.7 million at March 31, 2019, compared to $3.2 million at December 31, 2018 and $1.0 million a year ago.  The increase compared to a year ago primarily reflects $2.6 million of real estate owned acquired in the Skagit acquisition.

In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net discount to the loans' contractual amounts, a portion of which reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  At March 31, 2019, the total purchase discount for acquired loans was $24.2 million.

Banner's non-performing assets were $22.0 million, or 0.19% of total assets, at March 31, 2019, compared to $18.9 million, or 0.16% of total assets, at December 31, 2018, and $23.5 million, or 0.23% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $13.3 million at March 31, 2019, when compared to $14.4 million at December 31, 2018, and $19.3 million at March 31, 2018.

Conference Call

Banner will host a conference call on Thursday, April 25, 2019, 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 10129817, or at www.bannerbank.com.

About the Company

Banner Corporation is an $11.73 billion bank holding company operating two commercial banks in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

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

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the Skagit acquisition 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 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; (3) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) the ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (12) the costs, effects and outcomes of litigation; (13) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (14) changes in accounting principles, policies or guidelines; (15) future acquisitions by Banner of other depository institutions or lines of business; (16) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.


             
RESULTS OF OPERATIONS Quarters Ended
(in thousands except shares and per share data)   Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
             
INTEREST INCOME:            
Loans receivable   $ 115,455     $ 114,627     $ 94,022  
Mortgage-backed securities   10,507     9,931     7,331  
Securities and cash equivalents   4,034     4,183     3,467  
    129,996     128,741     104,820  
INTEREST EXPENSE:            
Deposits   8,643     7,503     3,358  
Federal Home Loan Bank advances   3,476     2,072     677  
Other borrowings   60     66     70  
Junior subordinated debentures   1,713     1,641     1,342  
    13,892     11,282     5,447  
Net interest income before provision for loan losses   116,104     117,459     99,373  
PROVISION FOR LOAN LOSSES   2,000     2,500     2,000  
Net interest income   114,104     114,959     97,373  
NON-INTEREST INCOME:            
Deposit fees and other service charges   12,618     12,539     11,296  
Mortgage banking operations   3,415     6,019     4,864  
Bank-owned life insurance   1,276     994     853  
Miscellaneous   804     2,153     1,037  
    18,113     21,705     18,050  
Net gain (loss) on sale of securities   1     (885 )   4  
Net change in valuation of financial instruments carried at fair value   11     198     3,308  
Total non-interest income   18,125     21,018     21,362  
NON-INTEREST EXPENSE:            
Salary and employee benefits   54,640     52,122     50,067  
Less capitalized loan origination costs   (4,849 )   (4,863 )   (4,011 )
Occupancy and equipment   13,766     13,490     11,766  
Information / computer data services   5,326     5,112     4,381  
Payment and card processing services   3,984     4,233     3,700  
Professional and legal expenses   2,434     6,669     4,428  
Advertising and marketing   1,529     2,588     1,830  
Deposit insurance   1,418     1,093     1,341  
State/municipal business and use taxes   945     854     713  
Real estate operations   (123 )   251     439  
Amortization of core deposit intangibles   2,052     1,935     1,382  
Miscellaneous   6,744     7,310     5,670  
    87,866     90,794     81,706  
Acquisition related expenses   2,148     4,602      
Total non-interest expense   90,014     95,396     81,706  
Income before provision for income taxes   42,215     40,581     37,029  
PROVISION FOR INCOME TAXES   8,869     3,053     8,239  
NET INCOME   $ 33,346     $ 37,528     $ 28,790  
             
Earnings per share available to common shareholders:            
Basic   $ 0.95     $ 1.10     $ 0.89  
Diluted   $ 0.95     $ 1.09     $ 0.89  
Cumulative dividends declared per common share   $ 0.41     $ 0.38     $ 0.35  
                         
Weighted average common shares outstanding:            
Basic   35,050,376     34,221,048     32,397,568  
Diluted   35,172,056     34,342,641     32,516,456  
                   
(Decrease) increase in common shares outstanding   (30,026 )   2,780,015     (302,812 )
                   


                 
FINANCIAL CONDITION               Percentage Change
(in thousands except shares and per share data)   Mar 31, 2019   Dec 31, 2018   Mar 31, 2018   Prior Qtr   Prior Yr Qtr
                     
ASSETS                    
Cash and due from banks   $ 218,458     $ 231,029     $ 188,418     (5.4 )%   15.9 %
Interest-bearing deposits   43,080     41,167     53,630     4.6 %   (19.7 )%
Total cash and cash equivalents   261,538     272,196     242,048     (3.9 )%   8.1 %
Securities - trading   25,838     25,896     25,574     (0.2 )%   1.0 %
Securities - available for sale   1,603,804     1,636,223     1,406,505     (2.0 )%   14.0 %
Securities - held to maturity   218,993     234,220     262,645     (6.5 )%   (16.6 )%
Total securities   1,848,635     1,896,339     1,694,724     (2.5 )%   9.1 %
Federal Home Loan Bank stock   27,063     31,955     18,036     (15.3 )%   50.0 %
Loans held for sale   45,865     171,031     141,808     (73.2 )%   (67.7 )%
Loans receivable   8,692,657     8,684,595     7,556,046     0.1 %   15.0 %
Allowance for loan losses   (97,308 )   (96,485 )   (92,207 )   0.9 %   5.5 %
Net loans receivable   8,595,349     8,588,110     7,463,839     0.1 %   15.2 %
Accrued interest receivable   41,220     38,593     32,824     6.8 %   25.6 %
Real estate owned held for sale, net   2,611     2,611     328     %   696.0 %
Property and equipment, net   171,057     171,809     156,005     (0.4 )%   9.6 %
Goodwill   339,154     339,154     242,659     %   39.8 %
Other intangibles, net   30,647     32,924     21,251     (6.9 )%   44.2 %
Bank-owned life insurance   178,202     177,467     163,519     0.4 %   9.0 %
Other assets   188,302     149,128     140,223     26.3 %   34.3 %
Total assets   $ 11,729,643     $ 11,871,317     $ 10,317,264     (1.2 )%   13.7 %
LIABILITIES                    
Deposits:                    
Non-interest-bearing   $ 3,676,984     $ 3,657,817     $ 3,383,439     0.5 %   8.7 %
Interest-bearing transaction and savings accounts   4,535,969     4,498,966     4,141,268     0.8 %   9.5 %
Interest-bearing certificates   1,163,276     1,320,265     1,018,355     (11.9 )%   14.2 %
Total deposits   9,376,229     9,477,048     8,543,062     (1.1 )%   9.8 %
Advances from Federal Home Loan Bank   418,000     540,189     192,195     (22.6 )%   117.5 %
Customer repurchase agreements and other borrowings   121,719     118,995     101,844     2.3 %   19.5 %
Junior subordinated debentures at fair value   113,917     114,091     112,516     (0.2 )%   1.2 %
Accrued expenses and other liabilities   148,027     102,061     72,497     45.0 %   104.2 %
Deferred compensation   40,560     40,338     41,027     0.6 %   (1.1 )%
Total liabilities   10,218,452     10,392,722     9,063,141     (1.7 )%   12.7 %
SHAREHOLDERS' EQUITY                    
Common stock   1,338,386     1,337,436     1,172,960     0.1 %   14.1 %
Retained earnings   152,911     134,055     79,773     14.1 %   91.7 %
Other components of shareholders' equity   19,894     7,104     1,390     180.0 %   nm
Total shareholders' equity   1,511,191     1,478,595     1,254,123     2.2 %   20.5 %
Total liabilities and shareholders' equity   $ 11,729,643     $ 11,871,317     $ 10,317,264     (1.2 )%   13.7 %
Common Shares Issued:                    
Shares outstanding at end of period   35,152,746     35,182,772     32,423,673          
Common shareholders' equity per share (1)   $ 42.99     $ 42.03     $ 38.68          
Common shareholders' tangible equity per share (1) (2)   $ 32.47     $ 31.45     $ 30.54          
Common shareholders' tangible equity to tangible assets (2)   10.05 %   9.62 %   9.85 %        
Consolidated Tier 1 leverage capital ratio   10.73 %   10.98 %   11.09 %        


(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, 2019   Dec 31, 2018   Mar 31, 2018   Prior Qtr   Prior Yr Qtr
                     
Commercial real estate:                    
Owner occupied   $ 1,442,724     $ 1,430,097     $ 1,278,814     0.9 %   12.8 %
Investment properties   2,124,049     2,131,059     1,876,937     (0.3 )%   13.2 %
Multifamily real estate   387,142     368,836     321,039     5.0 %   20.6 %
Commercial construction   181,888     172,410     163,314     5.5 %   11.4 %
Multifamily construction   183,203     184,630     159,108     (0.8 )%   15.1 %
One- to four-family construction   514,468     534,678     434,204     (3.8 )%   18.5 %
Land and land development:                    
Residential   187,660     188,508     167,783     (0.4 )%   11.8 %
Commercial   28,928     27,278     24,331     6.0 %   18.9 %
Commercial business   1,524,298     1,483,614     1,296,691     2.7 %   17.6 %
Agricultural business including secured by farmland   373,322     404,873     307,243     (7.8 )%   21.5 %
One- to four-family real estate   967,581     973,616     833,598     (0.6 )%   16.1 %
Consumer:                    
Consumer secured by one- to four-family real estate   564,872     568,979     522,826     (0.7 )%   8.0 %
Consumer-other   212,522     216,017     170,158     (1.6 )%   24.9 %
Total loans receivable   $ 8,692,657     $ 8,684,595     $ 7,556,046     0.1 %   15.0 %
Restructured loans performing under their restructured terms   $ 13,036     $ 13,422     $ 14,264          
Loans 30 - 89 days past due and on accrual (1)   $ 28,972     $ 25,108     $ 23,557          
Total delinquent loans (including loans on non-accrual), net (2)   $ 46,616     $ 38,721     $ 42,186          
Total delinquent loans / Total loans receivable   0.54 %   0.45 %   0.56 %        


(1) Includes no purchased credit-impaired loans at March 31, 2019 compared to $3,000 at December 31, 2018 and $1.5 million at March 31, 2018.
(2) Delinquent loans include $480,000 of delinquent purchased credit-impaired loans at March 31, 2019 compared to $519,000 at December 31, 2018 and $2.3 million at March 31, 2018.
   


                     
LOANS BY GEOGRAPHIC LOCATION                   Percentage Change
    Mar 31, 2019   Dec 31, 2018   Mar 31, 2018   Prior Qtr   Prior Yr Qtr
    Amount   Percentage   Amount   Amount        
                         
Washington   $ 4,329,759     49.8 %   $ 4,324,588     $ 3,490,646     0.1 %   24.0 %
Oregon   1,639,427     18.9 %   1,636,152     1,580,278     0.2 %   3.7 %
California   1,581,654     18.2 %   1,596,604     1,405,411     (0.9 )%   12.5 %
Idaho   524,705     6.0 %   521,026     481,972     0.7 %   8.9 %
Utah   59,940     0.7 %   57,318     83,637     4.6 %   (28.3 )%
Other   557,172     6.4 %   548,907     514,102     1.5 %   8.4 %
Total loans receivable   $ 8,692,657     100.0 %   $ 8,684,595     $ 7,556,046     0.1 %   15.0 %
                                           


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)

The following table shows loan originations (excluding loans held for sale) activity for the three months ending March 31, 2019, December 31, 2018, and March 31, 2018 (in thousands):

           
LOAN ORIGINATIONS Three Months Ended
  Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
Commercial real estate $ 94,196   $ 172,885   $ 65,725
Multifamily real estate 7,617   16,731   735
Construction and land 233,494   397,702   330,923
Commercial business 125,912   206,922   132,987
Agricultural business 32,059   18,901   26,574
One-to four-family residential 31,789   81,522   17,935
Consumer 63,774   72,500   70,533
Total loan originations (excluding loans held for sale) $ 588,841   $ 967,163   $ 645,412
                 


                         
ADDITIONAL FINANCIAL INFORMATION
                       
(dollars in thousands)                        
                         
    Quarters Ended
CHANGE IN THE     Mar 31, 2019       Dec 31, 2018       Mar 31, 2018  
ALLOWANCE FOR LOAN LOSSES                        
Balance, beginning of period   $ 96,485     $ 95,263     $ 89,028  
Provision for loan losses   2,000     2,500     2,000  
Recoveries of loans previously charged off:            
Commercial real estate   21     66     1,352  
Construction and land   22     23     174  
One- to four-family real estate   43     18     290  
Commercial business   23     193     170  
Agricultural business, including secured by farmland       23      
Consumer   110     102     112  
    219     425     2,098  
Loans charged off:            
Commercial real estate   (431 )        
One- to four-family real estate           (16 )
Commercial business   (590 )   (684 )   (519 )
Agricultural business, including secured by farmland   (4 )   (415 )   (7 )
Consumer   (371 )   (604 )   (377 )
    (1,396 )   (1,703 )   (919 )
Net (charge-offs) recoveries   (1,177 )   (1,278 )   1,179  
Balance, end of period   $ 97,308     $ 96,485     $ 92,207  
Net (charge-offs) recoveries / Average loans receivable   (0.013 )%   (0.015 )%   0.015 %
                   


                         
ALLOCATION OF                        
ALLOWANCE FOR LOAN LOSSES     Mar 31, 2019       Dec 31, 2018       Mar 31, 2018  
Specific or allocated loss allowance:                        
Commercial real estate   $ 27,091     $ 27,132     $ 23,461  
Multifamily real estate   4,020     3,818     2,592  
Construction and land   23,713     24,442     28,766  
One- to four-family real estate   4,711     4,714     3,779  
Commercial business   18,662     19,438     19,885  
Agricultural business, including secured by farmland   3,596     3,778     2,999  
Consumer   7,980     7,972     5,514  
Total allocated   89,773     91,294     86,996  
Unallocated   7,535     5,191     5,211  
                         
Total allowance for loan losses   $ 97,308     $ 96,485     $ 92,207  
                         
                   
                   
Allowance for loan losses / Total loans receivable   1.12 %   1.11 %   1.22 %
                   
Allowance for loan losses / Non-performing loans   504 %   616 %   410 %
                   


           
ADDITIONAL FINANCIAL INFORMATION          
(dollars in thousands)          
  Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
NON-PERFORMING ASSETS          
Loans on non-accrual status:          
Secured by real estate:          
Commercial $ 5,734     $ 4,088     $ 6,877  
Construction and land 3,036     3,188     984  
One- to four-family 1,538     1,544     2,815  
Commercial business 3,614     2,936     3,037  
Agricultural business, including secured by farmland 2,507     1,751     6,120  
Consumer 2,181     1,241     1,237  
  18,610     14,748     21,070  
Loans more than 90 days delinquent, still on accrual:          
Secured by real estate:          
One- to four-family 640     658     591  
Commercial business 1     1     1  
Agricultural business, including secured by farmland         820  
Consumer 42     247     7  
  683     906     1,419  
Total non-performing loans 19,293     15,654     22,489  
Real estate owned (REO) 2,611     2,611     328  
Other repossessed assets 50     592     694  
Total non-performing assets $ 21,954     $ 18,857     $ 23,511  
Total non-performing assets to total assets 0.19 %   0.16 %   0.23 %
Purchased credit-impaired loans, net $ 13,330     $ 14,413     $ 19,316  
                       


   
  Quarters Ended
REAL ESTATE OWNED Mar 31, 2019     Dec 31, 2018     Mar 31, 2018  
Balance, beginning of period $ 2,611     $ 364        
Additions from loan foreclosures     139     128  
Additions from acquisitions     2,593      
Proceeds from dispositions of REO     (453 )    
Gain on sale of REO     168      
Valuation adjustments in the period     (200 )   (160 )
Balance, end of period $ 2,611     $ 2,611     $ 328  
                       


                     
ADDITIONAL FINANCIAL INFORMATION                    
(dollars in thousands)                    
                     
DEPOSIT COMPOSITION               Percentage Change
    Mar 31, 2019   Dec 31, 2018   Mar 31, 2018   Prior Qtr   Prior Yr Qtr
                     
Non-interest-bearing   $ 3,676,984   $ 3,657,817   $ 3,383,439   0.5%   8.7%
Interest-bearing checking   1,174,169   1,191,016   1,043,840   (1.4)%   12.5%
Regular savings accounts   1,865,852   1,842,581   1,637,814   1.3%   13.9%
Money market accounts   1,495,948   1,465,369   1,459,614   2.1%   2.5%
Total interest-bearing transaction and savings accounts   4,535,969   4,498,966   4,141,268   0.8%   9.5%
Total core deposits   8,212,953   8,156,783   7,524,707   0.7%   9.1%
Interest-bearing certificates   1,163,276   1,320,265   1,018,355   (11.9)%   14.2%
Total deposits   $ 9,376,229   $ 9,477,048   $ 8,543,062   (1.1)%   9.8%
                           


                     
GEOGRAPHIC CONCENTRATION OF DEPOSITS                   Percentage Change
    Mar 31, 2019   Dec 31, 2018   Mar 31, 2018   Prior Qtr   Prior Yr Qtr
    Amount   Percentage   Amount   Amount        
Washington   $ 5,604,567     59.8 %   $ 5,674,328     $ 4,766,646     (1.2)%   17.6%
Oregon   1,906,132     20.3 %   1,891,145     1,868,043     0.8%   2.0%
California   1,402,213     15.0 %   1,434,033     1,454,421     (2.2)%   (3.6)%
Idaho   463,317     4.9 %   477,542     453,952     (3.0)%   2.1%
Total deposits   $ 9,376,229     100.0 %   $ 9,477,048     $ 8,543,062     (1.1)%   9.8%
                                       



         
INCLUDED IN TOTAL DEPOSITS Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
Public non-interest-bearing accounts $ 92,122   $ 96,009   $ 78,714
Public interest-bearing transaction & savings accounts 118,033   121,392   111,597
Public interest-bearing certificates 29,572   30,089   24,928
           
Total public deposits $ 239,727   $ 247,490   $ 215,239
           
Total brokered deposits $ 239,444   $ 377,347   $ 169,523
           


     
ADDITIONAL FINANCIAL INFORMATION    
(in thousands)    
     
     
ACQUISITION OF SKAGIT BANCORP, INC.    
The following table* provides the estimated fair value of the assets acquired and liabilities assumed in the Skagit acquisition at November 1, 2018 (in thousands):    
  November 1, 2018
     
Cash paid   $ 329  
Fair value of common shares issued   179,709  
Total consideration   180,038  
     
Fair value of assets acquired:    
Cash and cash equivalents 19,167  
Securities 210,326  
Loans receivable 632,374  
Real estate owned held for sale 2,593  
Property and equipment 15,788  
Core deposit intangible 16,368  
Deferred tax asset 95  
Other assets 19,110  
Total assets acquired 915,821  
     
Fair value of liabilities assumed:    
Deposits 810,209  
Other liabilities 22,069  
Total liabilities assumed 832,278  
     
Net assets acquired   83,543  
     
Goodwill   $ 96,495  
     
* Amounts recorded in this table are preliminary estimates of fair value.  Additional adjustments to the acquisition accounting may be required with a measurement period of one-year from the acquisition date.
 


                         
ADDITIONAL FINANCIAL INFORMATION                        
(dollars in thousands)                        
                         
    Actual   Minimum to be categorized as
"Adequately Capitalized"
  Minimum to be categorized as 
"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF MARCH 31, 2019   Amount   Ratio   Amount   Ratio   Amount   Ratio
                         
Banner Corporation-consolidated:                        
  Total capital to risk-weighted assets   $ 1,323,711   13.55%   $ 781,580   8.00%   $ 976,975   10.00%
  Tier 1 capital to risk-weighted assets   1,223,804   12.53%   586,185   6.00%   586,185   6.00%
  Tier 1 leverage capital to average assets   1,223,804   10.73%   456,375   4.00%   n/a   n/a
  Common equity tier 1 capital to risk-weighted assets   1,087,804   11.13%   439,639   4.50%   n/a   n/a
Banner Bank:                        
  Total capital to risk-weighted assets   1,236,021   12.91%   766,195   8.00%   957,744   10.00%
  Tier 1 capital to risk-weighted assets   1,138,596   11.89%   574,646   6.00%   766,195   8.00%
  Tier 1 leverage capital to average assets   1,138,596   10.23%   445,258   4.00%   556,572   5.00%
  Common equity tier 1 capital to risk-weighted assets   1,138,596   11.89%   430,985   4.50%   622,534   6.50%
Islanders Bank:                        
  Total capital to risk-weighted assets   35,180   18.44%   15,262   8.00%   19,077   10.00%
  Tier 1 capital to risk-weighted assets   32,794   17.19%   11,446   6.00%   15,262   8.00%
  Tier 1 leverage capital to average assets   32,794   11.86%   11,065   4.00%   13,831   5.00%
  Common equity tier 1 capital to risk-weighted assets   32,794   17.19%   8,585   4.50%   12,400   6.50%
                         


                                     
ADDITIONAL FINANCIAL INFORMATION                                    
(dollars in thousands)                                    
(rates / ratios annualized)                                    
ANALYSIS OF NET INTEREST SPREAD Quarters Ended
  March 31, 2019   December 31, 2018   March 31, 2018
  Average Balance Interest and Dividends Yield / Cost(3)   Average Balance Interest and Dividends Yield / Cost(3)   Average Balance Interest and Dividends Yield / Cost(3)
Interest-earning assets:                                    
Held for sale loans $ 98,005   $ 1,121 4.64%   $ 83,741 $ 1,056 5.00%   $ 58,669 $ 681 4.71%
Mortgage loans 6,833,933   88,602 5.26%   6,573,278 88,560 5.35%   6,006,530 73,665 4.97%
Commercial/agricultural loans 1,703,503   22,812 5.43%   1,631,133 22,257 5.41%   1,456,303 17,423 4.85%
Consumer and other loans 183,451   2,920 6.46%   172,934 2,754 6.32%   140,627 2,253 6.50%
Total loans(1) 8,818,892   115,455 5.31%   8,461,086 114,627 5.37%   7,662,129 94,022 4.98%
Mortgage-backed securities 1,392,118   10,507 3.06%   1,400,508 9,931 2.81%   1,057,878 7,331 2.81%
Other securities 484,134   3,479 2.91%   474,659 3,633 3.04%   462,947 3,090 2.71%
Interest-bearing deposits with banks 44,757   289 2.62%   54,577 305 2.22%   64,512 231 1.45%
FHLB stock 31,761   266 3.40%   22,791 245 4.26%   16,549 146 3.58%
Total investment securities 1,952,770   14,541 3.02%   1,952,535 14,114 2.87%   1,601,886 10,798 2.73%
Total interest-earning assets 10,771,662   129,996 4.89%   10,413,621 128,741 4.90%   9,264,015 104,820 4.59%
Non-interest-earning assets 1,031,591         903,165       805,503    
Total assets $ 11,803,253         $ 11,316,786       $ 10,069,518    
Deposits:                      
Interest-bearing checking accounts $ 1,153,949   475 0.17%   $ 1,131,030 403 0.14%   $ 1,003,929 246 0.10%
Savings accounts 1,854,123   1,920 0.42%   1,779,288 1,505 0.34%   1,601,671 627 0.16%
Money market accounts 1,490,326   2,251 0.61%   1,440,889 1,638 0.45%   1,442,685 666 0.19%
Certificates of deposit 1,253,613   3,997 1.29%   1,287,114 3,957 1.22%   998,738 1,819 0.74%
Total interest-bearing deposits 5,752,011   8,643 0.61%   5,638,321 7,503 0.53%   5,047,023 3,358 0.27%
Non-interest-bearing deposits 3,605,922   —%   3,608,930 —%   3,282,686 —%
Total deposits 9,357,933   8,643 0.37%   9,247,251 7,503 0.32%   8,329,709 3,358 0.16%
Other interest-bearing liabilities:                      
FHLB advances 534,238   3,476 2.64%   311,046 2,072 2.64%   155,540 677 1.77%
Other borrowings 118,008   60 0.21%   117,724 66 0.22%   101,111 70 0.28%
Junior subordinated debentures 140,212   1,713 4.95%   140,212 1,641 4.64%   140,212 1,342 3.88%
Total borrowings 792,458   5,249 2.69%   568,982 3,779 2.64%   396,863 2,089 2.13%
Total funding liabilities 10,150,391   13,892 0.56%   9,816,233 11,282 0.46%   8,726,572 5,447 0.25%
Other non-interest-bearing liabilities(2) 151,937         92,003       65,978    
Total liabilities 10,302,328         9,908,236       8,792,550    
Shareholders' equity 1,500,925         1,408,550       1,276,968    
Total liabilities and shareholders' equity $ 11,803,253         $ 11,316,786       $ 10,069,518    
Net interest income/rate spread   $ 116,104 4.33%     $ 117,459 4.44%     $ 99,373 4.34%
Net interest margin     4.37%       4.47%       4.35%
Additional Key Financial Ratios:                      
Return on average assets     1.15%       1.32%       1.16%
Return on average equity     9.01%       10.57%       9.14%
Average equity/average assets     12.72%       12.45%       12.68%
Average interest-earning assets/average interest-bearing liabilities     164.59%       167.76%       170.17%
Average interest-earning assets/average funding liabilities     106.12%       106.09%       106.16%
Non-interest income/average assets     0.62%       0.74%       0.86%
Non-interest expense/average assets     3.09%       3.34%       3.29%
Efficiency ratio(4)     67.06%       68.89%       67.67%
Adjusted efficiency ratio(5)     63.32%       63.06%       67.42%


(1 ) Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2 ) Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3 ) Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4 ) Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5 ) Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related expense, 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 this press release.
     


           
ADDITIONAL FINANCIAL INFORMATION          
(dollars in thousands)          
           
* Non-GAAP Financial Measures          
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
                 
REVENUE FROM CORE OPERATIONS Quarters Ended
  Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
Net interest income before provision for loan losses $ 116,104     $ 117,459     $ 99,373  
Total non-interest income 18,125     21,018     21,362  
Total GAAP revenue 134,229     138,477     120,735  
Exclude net (gain) loss on sale of securities (1 )   885     (4 )
Exclude change in valuation of financial instruments carried at fair value (11 )   (198 )   (3,308 )
Revenue from core operations (non-GAAP) $ 134,217     $ 139,164     $ 117,423  
                       


                   
EARNINGS FROM CORE OPERATIONS   Quarters Ended
    Mar 31, 2019     Dec 31, 2018     Mar 31, 2018  
Net income (GAAP)
  $ 33,346     $ 37,528     $ 28,790  
Exclude net (gain) loss on sale of securities   (1 )   885     (4 )
Exclude change in valuation of financial instruments carried at fair value   (11 )   (198 )   (3,308 )
Exclude acquisition related expenses   2,148     4,602      
Exclude related tax (benefit) expense   (513 )   (1,159 )   795  
Exclude tax adjustments related to tax reform and valuation reserves       (4,207 )    
Total earnings from core operations (non-GAAP)   $ 34,969     $ 37,451     $ 26,273  
             
Diluted earnings per share (GAAP)   $ 0.95     $ 1.09     $ 0.89  
Diluted core earnings per share (non-GAAP)   $ 0.99     $ 1.09     $ 0.81  
                   


                   
ADDITIONAL FINANCIAL INFORMATION                  
(dollars in thousands)                  
                   
ADJUSTED EFFICIENCY RATIO   Quarters Ended
    Mar 31, 2019     Dec 31, 2018     Mar 31, 2018   
Non-interest expense (GAAP)   $ 90,014     $ 95,396     $ 81,706  
Exclude acquisition related expenses   (2,148 )   (4,602 )    
Exclude CDI amortization   (2,052 )   (1,935 )   (1,382 )
Exclude state/municipal tax expense   (945 )   (854 )   (713 )
Exclude REO gain (loss)   123     (251 )   (439 )
Adjusted non-interest expense (non-GAAP)   $ 84,992     $ 87,754     $ 79,172  
             
Net interest income before provision for loan losses (GAAP)   $ 116,104     $ 117,459     $ 99,373  
Non-interest income (GAAP)   18,125     21,018     21,362  
Total revenue   134,229     138,477     120,735  
Exclude net (gain) loss on sale of securities   (1 )   885     (4 )
Exclude net change in valuation of financial instruments carried at fair value   (11 )   (198 )   (3,308 )
Revenue from core operations (non-GAAP)   $ 134,217     $ 139,164     $ 117,423  
             
Efficiency ratio (GAAP)   67.06 %   68.89 %   67.67 %
Adjusted efficiency ratio (non-GAAP)   63.32 %   63.06 %   67.42 %


                   
TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS   Mar 31, 2019   Dec 31, 2018   Mar 31, 2018
Shareholders' equity (GAAP)    1,511,191     1,478,595     1,254,123  
Exclude goodwill and other intangible assets, net   369,801     372,078     263,910  
Tangible common shareholders' equity (non-GAAP)   $ 1,141,390     $ 1,106,517     $ 990,213  
             
Total assets (GAAP)   $ 11,729,643     $ 11,871,317     $ 10,317,264  
Exclude goodwill and other intangible assets, net   369,801     372,078     263,910  
Total tangible assets (non-GAAP)   $ 11,359,842     $ 11,499,239     $ 10,053,354  
Common shareholders' equity to total assets (GAAP)   12.88 %   12.46 %   12.16 %
Tangible common shareholders' equity to tangible assets (non-GAAP)   10.05 %   9.62 %   9.85 %
             
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE            
Tangible common shareholders' equity   $ 1,141,390     $ 1,106,517     $ 990,213  
Common shares outstanding at end of period   35,152,746     35,182,772     32,423,673  
Common shareholders' equity (book value) per share (GAAP)   $ 42.99     $ 42.03     $ 38.68  
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)   $ 32.47     $ 31.45     $ 30.54  
                         

CONTACT:
MARK J. GRESCOVICH,  
PRESIDENT & CEO  
PETER J. CONNER, CFO  
(509) 527-3636

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