BANR 2nd Qtr Results
http://finance.yahoo.com/news/Banner-Corporation-Announces-pz-2443304203.html?x=0&.v=1
WALLA WALLA, Wash., July 21, 2010 (GLOBE NEWSWIRE) -- Banner Corporation (Nasdaq:BANR - News), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $4.9 million in the second quarter ended June 30, 2010, compared to a net loss of $1.5 million in the immediately preceding quarter and a net loss of $16.5 million in the second quarter a year ago.
"Our second quarter was highlighted by a successful capital raise and a continued reduction in our deposit costs which contributed to net interest margin expansion for the fourth consecutive quarter," said D. Michael Jones, Chief Executive Officer. "We are making a concerted effort to reduce the overall cost of the deposit portfolio, and with our improved liquidity position we are able to let higher cost funding, primarily certificates of deposit and wholesale funds, run off. Our deposit mix improvement reflects continuing growth in customer relationships as a result of the determined efforts of our staff and the further maturing of the expanded branch network we have built over the past five years. Despite the current difficult economic environment, we are optimistic that the strength of this deposit franchise and our improved capital position will provide the foundation for better operating results in future periods."
In the second quarter, Banner paid a $1.6 million dividend on the $124 million of senior preferred stock it issued to the U.S. Treasury in the fourth quarter of 2008 in connection with its participation in the Treasury's Capital Purchase Program. In addition, Banner accrued $399,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net loss to common shareholders was $6.9 million, or $0.28 per share, for the second quarter of 2010, compared to a net loss to common shareholders of $3.5 million, or $0.16 per share, in the first quarter of 2010 and a net loss to common shareholders of $18.4 million, or $1.04 per share, for the second quarter a year ago.
For the first six months of 2010, Banner reported a net loss of $6.5 million compared to a net loss of $25.8 million for the first six months of 2009. For the most recent six month period, the net loss to common shareholders was $0.44 per share, compared to a net loss of $1.70 per share for the first six months of 2009.
Common Stock Offering
On June 30, 2010, Banner announced the completion of its offering of 75,000,000 shares of its common stock and the sale of an additional 3,500,000 shares pursuant to the partial exercise of the underwriters' over-allotment option, at a price to the public of $2.00 per share. On July 2, 2010, Banner announced the completion of the capital raise as the underwriters had exercised their over-allotment option for an additional 7,139,000 shares, at a price to the public of $2.00 per share. Together with the 78,500,000 shares the Company issued on June 30, 2010 (including 3,500,000 shares issued pursuant to the underwriters' initial exercise of their over-allotment option), Banner issued a total of 85,639,000 shares in the offering, resulting in net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses, of approximately $161.6 million.
Banner intends to use a significant portion of the net proceeds from the offering to strengthen Banner Bank's regulatory capital ratios and to support managed growth. To that end, at June 30, 2010, the Company had invested $50 million as additional paid-in common equity in Banner Bank. The Company expects to use the remaining net proceeds for general working capital purposes, including additional capital investments in its subsidiary banks if appropriate.
Income Statement Review
"Continued reductions in our cost of funds through changes in our deposit mix and reduced pricing pressures over the past year resulted in further expansion of our net interest margin during the second quarter of 2010 to 3.65%, an increase of four basis points compared to the immediately preceding quarter and an increase of 41 basis points compared to the same quarter a year ago," said Jones. "While loan yields have been relatively stable for a number of quarters now, overall asset yields have declined slightly primarily as a result of the growth of our on-balance-sheet liquidity which is currently invested in short term instruments that pay very low interest rates." Banner's net interest margin was 3.65% for the second quarter, compared to 3.61% in the preceding quarter and 3.24% in the second quarter a year ago. For the first six months of 2010, Banner's net interest margin was 3.62%, a 37 basis point improvement compared to the first six months of 2009.
For the second quarter of 2010, funding costs decreased 13 basis points compared to the previous quarter and 77 basis points from the second quarter a year ago. Deposit costs decreased by 15 basis points compared to the preceding quarter and 82 basis points compared to the second quarter a year earlier. Asset yields decreased eight basis points from the prior linked quarter and 28 basis points from the second quarter a year ago. Loan yields declined by two basis points compared to the preceding quarter, but increased by five basis points from the second quarter a year ago. Non-accruing loans reduced the margin by approximately 34 basis points in the second quarter of 2010 compared to approximately 34 basis points in the preceding quarter and approximately 45 basis points in the second quarter of 2009.
Net interest income before the provision for loan losses was $38.9 million in the second quarter of 2010, compared to $38.2 million in the preceding quarter and $34.9 million in the second quarter a year ago. In the first half of 2010, net interest income before the provision for loan losses increased 10% to $77.1 million, compared to $69.9 million in the first half of 2009. Revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value and other-than-temporary impairment (OTTI) adjustments) were $45.9 million in the second quarter of 2010, compared to $45.2 million in the first quarter of 2010 and $43.9 million for the second quarter a year ago. Revenues from core operations for the first half of 2010 increased 5% to $91.1 million, compared to $86.7 million in the first half of 2009.
Second quarter 2010 results included a net loss of $821,000 ($525,000 after tax, or $0.02 loss per share) for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, compared to a net gain (net of OTTI charges) of $677,000 ($433,000 after tax, or $0.02 earnings per share) in the first quarter of 2010 and a net gain (net of OTTI charges) of $11.0 million ($7.0 million after tax, or $0.62 earnings per share) in the second quarter a year ago. There were no OTTI charges in the second quarter of 2010, compared to $1.2 million in the first quarter of 2010 and $162,000 in the second quarter of 2009.
Total other operating income, which includes the changes in the valuation of financial instruments noted above, was $6.2 million, or $0.25 per share, in the second quarter of 2010, compared to $7.7 million, or $0.35 per share, in the preceding quarter and $20.0 million, or $1.13 per share, for the second quarter a year ago. For the first half of 2010, total other operating income was $13.9 million, compared to $24.6 million in the first half of 2009. Total other operating income from core operations* (excluding fair value and OTTI adjustments) for the current quarter was $7.0 million, unchanged from the preceding quarter, and was $8.9 million for the second quarter a year ago. For the first half of 2010, total other operating income from core operations was $14.0 million, compared to $16.8 million in the first half of 2009. Income from deposit fees and other service charges improved modestly to $5.6 million in the second quarter compared to $5.2 million in the preceding quarter and $5.4 million in the second quarter a year ago. Income from mortgage banking operations decreased to $817,000 in the second quarter compared to $948,000 in the preceding quarter and $2.9 million for the second quarter a year ago.
"Our payment processing business continues to be adversely affected by the soft economy, as activity for cardholders and merchants remained lower than in periods before 2009," said Jones. "However, we are encouraged by the improvement in deposit fees and other service charges compared to the preceding quarter, which in addition to reflecting account growth may be a sign of improving economic conditions." By contrast, mortgage banking revenues continued to decline, reflecting decreased mortgage loan production despite the current very low level of mortgage interest rates.
"We have made progress in improving our core operating efficiency as compensation, occupancy and other manageable operating expenses have been reduced over the past year," said Jones. "Unfortunately, collection and legal costs, including charges related to acquired real estate, continue to remain high. We expect collection expenses and costs associated with real estate to remain elevated for a number of future quarters as we work down our inventory of non-performing assets."
Total other operating expenses, or non-interest expenses, were $38.0 million in the second quarter of 2010, compared to $35.4 million in the preceding quarter and $36.9 million in the second quarter a year ago. For the first half of the year, other operating expenses were $73.4 million compared to $70.7 million in the first half of 2009. Largely as the result of the increase in REO and collection costs, operating expenses as a percentage of average assets increased to 3.35% in the second quarter of 2010, compared to 3.16% in the preceding quarter and 3.27% in the second quarter a year ago.
*Earnings information excluding fair value adjustments (alternately referred to as total other operating income from core operation or 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 the Company's core operations reflected in the current quarter's results. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
Credit Quality
"The credit costs associated with this difficult economic environment have been a persistent challenge throughout the past several quarters and continue to drag on profitability," said Jones. "The $16 million provision for loan losses in the second quarter of the year, while less than in the second quarter a year ago, remains high, reflecting still significant levels of non-performing loans and net charge-offs. Charge-offs and delinquencies continue to be concentrated in loans for the construction of single-family homes and residential land development projects. However, our exposure to single-family home construction and development loans has continued to decline and at June 30, 2010 was 11% of total loans outstanding. Our reserve levels are substantial and both our impairment analysis and charge-off actions reflect current appraisals and valuation estimates. We remain hopeful that credit costs will moderate during the remainder of 2010 and in 2011."
Banner recorded a $16.0 million provision for loan losses in the second quarter, compared to $14.0 million in the preceding quarter and $45.0 million in the second quarter a year ago. For the first six months of 2010, the provision for loan losses was $30.0 million, compared to $67.0 million for the first six months of 2009. The allowance for loan losses at June 30, 2010 totaled $95.5 million, representing 2.63% of total loans outstanding and 54% of non-performing loans. Non-performing loans totaled $177.2 million at June 30, 2010, compared to $196.0 million in the preceding quarter and $225.1 million at June 30, 2009. Banner's real estate owned and repossessed assets totaled $101.7 million at June 30, 2010, compared to $95.2 million three months earlier and $57.2 million a year ago. Net charge-offs in the quarter totaled $16.2 million, or 0.44% of average loans outstanding, compared to $13.5 million, or 0.36% of average loans outstanding for the first quarter of 2010 and $34.0 million, or 0.87% of average loans outstanding for the second quarter of last year. Non-performing assets totaled $282.4 million at June 30, 2010, compared to $294.2 million in the preceding quarter and $282.3 million at June 30, 2009. At the end of June, Banner's non-performing assets were 6.01% of total assets, compared to 6.42% at the end of the preceding quarter and 6.23% a year ago.
The geographic distribution of construction, land and land development loans, including residential and commercial properties, was approximately $194 million, or 33%, in the greater Puget Sound market, $208 million, or 36%, in the greater Portland, Oregon market and $39 million, or 7%, in the greater Boise, Idaho market as of June 30, 2010. The remaining $140 million, or 24%, was distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank. The geographic distribution of non-performing construction, land and land development loans and related real estate owned included approximately $83 million, or 46%, in the greater Puget Sound market, $64 million, or 35%, in the greater Portland market and $14 million, or 8%, in the greater Boise market, with the remaining $20 million, or 11%, distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.
One-to-four family residential construction, lot and land loans were $411 million, or 11% of the total loan portfolio at June 30, 2010. Non-performing residential construction, lot and land loans and related real estate owned were $155 million, or 55% of non-performing assets at June 30, 2010.
Balance Sheet Review
"As we have substantially reduced our construction and land development loans over the past year, our total loan balances declined relative to a year ago; however, we did have encouraging growth in commercial and agricultural business loans during the quarter," said Jones. "At the end of June, our one-to-four family construction loans totaled $183 million, a $154 million reduction over the past year, including a $31 million decrease in the most recent quarter. Our one-to-four family construction loans have now declined by $472 million from their peak quarter-end balance of $655 million at June 30, 2007. Similarly, total construction, land and land development loans have declined by $654 million from their peak quarter-end balance of $1.24 billion, also at June 30, 2007." Net loans were $3.54 billion at June 30, 2010, compared to $3.59 billion three months earlier and $3.82 billion at June 30, 2009.
Total assets were $4.70 billion at June 30, 2010, compared to $4.58 billion at the end of the preceding quarter and $4.53 billion a year ago. Deposits totaled $3.84 billion at June 30, 2010, compared to $3.85 billion at the end of the preceding quarter and $3.75 billion a year ago. Non-interest-bearing accounts were $548.3 million at June 30, 2010, compared to $549.3 million at the end of the preceding quarter and $508.3 million a year ago, a year-over-year increase of 8%. At June 30, 2010, interest-bearing transaction and savings accounts were $1.4 billion, which was unchanged from three months earlier but a $272.1 million increase compared to $1.1 billion a year ago, a year-over-year increase of 24%.
"Banner's retail deposit franchise had another solid quarter and has allowed us to steadily build our short-term liquidity and lower our loans-to-deposits ratio, which was 95% at June 30, 2010," said Jones. "In addition, this substantial core deposit growth has led to our improved net interest margin and increased deposit fee revenue."
Augmented by the recent stock offering, Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as "well-capitalized" under applicable regulatory standards. Banner Corporation's Tier 1 leverage capital to average assets ratio was 13.02% and its total capital to risk-weighted assets ratio was 17.12% at June 30, 2010. Importantly, reflecting the $50 million down-streamed capital investment, Banner Bank's Tier 1 leverage ratio increased to 10.77% at June 30, 2010.
Tangible stockholders' equity at June 30, 2010 was $544.1 million, including $118.2 million attributable to preferred stock, compared to $397.1 million a year ago. Tangible book value per common share was $4.15 at quarter-end. At June 30, 2010, Banner had 102.7 million shares outstanding, compared to 18.2 million shares outstanding a year ago. Tangible common stockholders' equity was $425.9 million at June 30, 2010, or 9.08% of tangible assets, compared to $278.5 million, or 6.09% of tangible assets at March 31, 2010 and $280.4 million, or 6.20% of tangible assets at June 30, 2009.
Conference Call
Banner will host a conference call on Thursday, July 22, 2010, at 8:00 a.m. PDT, to discuss second quarter 2010 results. The conference call can be accessed live by telephone at 480-629-9772 to participate in the call. To listen to the call online, go to the Company's website at www.bannerbank.com. A replay will be available for a week at (303) 590-3030, using access code 4326727.
About the Company
Banner Corporation is a $4.7 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
This press release contains statements that the Company believes are "forward-looking statements." These statements relate to the Company's financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and of our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or any of the Banks which could require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions; the requirements and restrictions that have been imposed upon Banner and Banner Bank under the memoranda of understanding with the Federal Reserve Bank of San Francisco (in the case of Banner) and the FDIC and the Washington DFI (in the case of Banner Bank) and the possibility that Banner and Banner Bank will be unable to fully comply with the memoranda of understanding, which could result in the imposition of additional requirements or restrictions; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect or result in significant declines in valuation; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; the failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and preferred stock and interest or principal payments on our junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; future legislative changes in the United States Department of Treasury Troubled Asset Relief Program Capital Purchase Program; and other risks detailed in Banner's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009. We do not undertake and specifically disclaim 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 risks could cause our actual results for 2010 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect our operating and stock price performance.
RESULTS OF OPERATIONS Quarters Ended Six Months Ended
(in thousands except shares and per share data) Jun 30, 2010 Mar 31, 2010 Jun 30, 2009 Jun 30, 2010 Jun 30, 2009
INTEREST INCOME:
Loans receivable $52,473 $52,759 $55,500 $105,232 $111,847
Mortgage-backed securities 1,045 1,126 1,569 2,171 3,370
Securities and cash equivalents 2,116 2,085 2,089 4,201 4,272
55,634 55,970 59,158 111,604 119,489
INTEREST EXPENSE:
Deposits 14,700 15,798 21,638 30,498 44,730
Federal Home Loan Bank advances 320 361 675 681 1,395
Other borrowings 626 634 671 1,260 898
Junior subordinated debentures 1,047 1,027 1,249 2,074 2,582
16,693 17,820 24,233 34,513 49,605
Net interest income before provision for loan losses 38,941 38,150 34,925 77,091 69,884
PROVISION FOR LOAN LOSSES 16,000 14,000 45,000 30,000 67,000
Net interest income 22,941 24,150 (10,075) 47,091 2,884
OTHER OPERATING INCOME:
Deposit fees and other service charges 5,632 5,160 5,408 10,792 10,344
Mortgage banking operations 817 948 2,860 1,765 5,575
Loan servicing fees 315 313 248 628 (22)
Miscellaneous 243 626 412 869 932
7,007 7,047 8,928 14,054 16,829
Other-than-temporary impairment losses -- (1,231) (162) (1,231) (162)
Net change in valuation of financial instruments carried at fair value (821) 1,908 11,211 1,087 7,958
Total other operating income 6,186 7,724 19,977 13,910 24,625
OTHER OPERATING EXPENSE:
Salary and employee benefits 16,793 16,559 17,528 33,352 35,129
Less capitalized loan origination costs (1,740) (1,605) (2,834) (3,345) (4,950)
Occupancy and equipment 5,581 5,604 5,928 11,185 11,982
Information / computer data services 1,594 1,506 1,599 3,100 3,133
Payment and card processing services 1,683 1,424 1,555 3,107 3,008
Professional services 1,874 1,287 1,183 3,161 2,377
Advertising and marketing 1,742 1,950 2,207 3,692 4,039
Deposit insurance 2,209 2,132 4,102 4,341 5,599
State/municipal business and use taxes 533 480 532 1,013 1,072
Real estate operations 4,166 3,058 1,805 7,224 2,428
Amortization of core deposit intangibles 615 644 661 1,259 1,351
Miscellaneous 2,974 2,376 2,625 5,350 5,516
Total other operating expense 38,024 35,415 36,891 73,439 70,684
Income (loss) before provision for (benefit from) income taxes (8,897) (3,541) (26,989) (12,438) (43,175)
PROVISION FOR (BENEFIT FROM ) INCOME TAXES (3,951) (2,024) (10,478) (5,975) (17,401)
NET INCOME (LOSS) (4,946) (1,517) (16,511) (6,463) (25,774)
PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION:
Preferred stock dividend 1,550 1,550 1,550 3,100 3,100
Preferred stock discount accretion 399 398 373 797 746
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $(6,895) $(3,465) $(18,434) $(10,360) $(29,620)
Earnings (loss) per share available to common shareholder
Basic $(0.28) $(0.16) $(1.04) $(0.44) $(1.70)
Diluted $(0.28) $(0.16) $(1.04) $(0.44) $(1.70)
Cumulative dividends declared per common share $0.01 $0.01 $0.01 $0.02 $0.02
Weighted average common shares outstanding
Basic 24,452,356 22,131,671 17,746,051 23,298,424 17,454,542
Diluted 24,452,356 22,131,671 17,746,051 23,298,424 17,454,542
Common shares issued in connection with exercise of stock options or DRIP 1,353,589 1,561,559 780,906 2,915,148 1,274,420
FINANCIAL CONDITION
(in thousands except shares and per share data) Jun 30,
2010 Mar 31,
2010 Jun 30,
2009 Dec 31, 2009
ASSETS
Cash and due from banks $67,322 $41,123 $81,559 $78,364
Federal funds and interest-bearing deposits 369,864 236,629 2,699 244,641
Securities - at fair value 105,381 138,659 167,476 147,151
Securities - available for sale 140,342 96,718 50,980 95,667
Securities - held to maturity 73,632 73,555 77,321 74,834
Federal Home Loan Bank stock 37,371 37,371 37,371 37,371
Loans receivable:
Held for sale 4,819 4,398 8,377 4,497
Held for portfolio 3,626,685 3,684,459 3,904,704 3,785,624
Allowance for loan losses (95,508) (95,733) (90,694) (95,269)
3,535,996 3,593,124 3,822,387 3,694,852
Accrued interest receivable 16,930 18,501 18,892 18,998
Real estate owned held for sale, net 101,485 95,074 56,967 77,743
Property and equipment, net 99,536 101,541 103,709 103,542
Other intangibles, net 9,811 10,426 12,365 11,070
Bank-owned life insurance 55,477 55,125 53,341 54,596
Other assets 88,459 83,865 47,475 83,392
$4,701,606 $4,581,711 $4,532,542 $4,722,221
LIABILITIES
Deposits:
Non-interest-bearing $548,251 $549,291 $508,284 $582,480
Interest-bearing transaction and savings accounts 1,403,231 1,404,301 1,131,093 1,341,145
Interest-bearing certificates 1,887,513 1,896,186 2,110,466 1,941,925
3,838,995 3,849,778 3,749,843 3,865,550
Advances from Federal Home Loan Bank at fair value 47,003 62,108 115,946 189,779
Customer repurchase agreements and other borrowings 172,737 177,244 158,249 176,842
Junior subordinated debentures at fair value 49,808 48,147 49,563 47,694
Accrued expenses and other liabilities 25,440 24,049 36,652 24,020
Deferred compensation 13,665 13,661 12,815 13,208
4,147,648 4,174,987 4,123,068 4,317,093
STOCKHOLDERS' EQUITY
Preferred stock - Series A 118,204 117,805 116,661 117,407
Common stock 490,119 335,877 322,582 331,538
Retained earnings (accumulated deficit) (53,768) (45,775) (27,826) (42,077)
Other components of stockholders' equity (597) (1,183) (1,943) (1,740)
553,958 406,724 409,474 405,128
$4,701,606 $4,581,711 $4,532,542 $4,722,221
Common Shares Issued:
Shares outstanding at end of period 102,954,738 23,101,149 18,426,458 21,539,590
Less unearned ESOP shares at end of period 240,381 240,381 240,381 240,381
Shares outstanding at end of period excluding unearned ESOP shares 102,714,357 22,860,768 18,186,077 21,299,209
Common stockholders' equity per share (1) $4.24 $12.64 $16.10 $13.51
Common stockholders' tangible equity per share (1) (2) $4.15 $12.18 $15.42 $12.99
Tangible common stockholders' equity to tangible assets 9.08% 6.09% 6.20% 5.87%
Consolidated Tier 1 leverage capital ratio 13.02% 9.76% 9.90% 9.62%
(1) - Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding and excludes unallocated shares in the ESOP.
(2) - Tangible common equity excludes preferred stock, goodwill, core deposit and other intangibles.
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Jun 30,
2010 Mar 31,
2010 Jun 30,
2009 Dec 31,
2009
LOANS (including loans held for sale):
Commercial real estate
Owner occupied $503,796 $515,542 $475,749 $509,464
Investment properties 553,689 557,134 574,172 573,495
Multifamily real estate 149,980 147,659 150,168 153,497
Commercial construction 84,379 83,879 90,762 80,236
Multifamily construction 56,573 61,924 56,968 57,422
One- to four-family construction 182,928 213,438 337,368 239,135
Land and land development
Residential 228,156 256,607 371,247 284,331
Commercial 29,410 48,194 32,450 43,743
Commercial business 635,130 616,396 678,273 637,823
Agricultural business including secured by farmland 208,815 187,207 215,339 205,307
One- to four-family real estate 702,420 697,565 653,513 703,277
Consumer 103,065 109,092 91,173 110,937
Consumer secured by one- to four-family real estate 193,163 194,220 185,899 191,454
Total loans outstanding $3,631,504 $3,688,857 $3,913,081 $3,790,121
Restructured loans performing under their restructured terms $43,899 $45,471 $55,031 $43,683
Loans 30 - 89 days past due and on accrual $25,853 $51,328 $34,038 $34,156
Total delinquent loans (including loans on non-accrual) $203,097 $247,338 $259,107 $248,006
Total delinquent loans / Total loans outstanding 5.59% 6.71% 6.62% 6.54%
GEOGRAPHIC CONCENTRATION OF LOANS AT
June 30, 2010 Washington Oregon Idaho Other Total
Commercial real estate
Owner occupied $390,085 $64,642 $45,491 $3,578 $503,796
Investment properties 397,813 107,790 41,669 6,417 553,689
Multifamily real estate 123,707 12,177 9,580 4,516 149,980
Commercial construction 61,202 11,689 11,488 -- 84,379
Multifamily construction 28,324 28,249 -- -- 56,573
One- to four-family construction 87,895 84,796 10,237 -- 182,928
Land and land development
Residential 119,268 86,619 22,269 -- 228,156
Commercial 25,807 1,144 2,459 -- 29,410
Commercial business 447,545 97,569 71,344 18,672 635,130
Agricultural business including secured by farmland 112,674 39,266 56,875 -- 208,815
One- to four-family real estate 458,681 213,069 28,241 2,429 702,420
Consumer 74,522 22,860 5,683 -- 103,065
Consumer secured by one- to four-family real estate 136,559 41,598 14,506 500 193,163
Total loans outstanding $2,464,082 $811,468 $319,842 $36,112 $3,631,504
Percent of total loans 67.9% 22.3% 8.8% 1.0% 100.0%
DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT
June 30, 2010 Washington Oregon Idaho Other Total
Residential
Acquisition & development $53,196 $52,154 $6,219 $-- $111,569
Improved lots 43,863 27,027 1,568 -- 72,458
Unimproved land 22,209 7,438 14,482 -- 44,129
Total residential land and development $119,268 $86,619 $22,269 $-- $228,156
Commercial & industrial
Acquisition & development $5,896 $-- $559 $-- $6,455
Improved land 8,857 -- -- -- 8,857
Unimproved land 11,054 1,144 1,900 -- 14,098
Total commercial land and development $25,807 $1,144 $2,459 $-- $29,410
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Quarters Ended Six Months Ended
CHANGE IN THE Jun 30, 2010 Mar 31, 2010 Jun 30, 2009 Jun 30, 2010 Jun 30, 2009
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $95,733 $95,269 $79,724 $95,269 $75,197
Provision 16,000 14,000 45,000 30,000 67,000
Recoveries of loans previously charged off:
Commercial real estate -- -- -- -- --
Multifamily real estate -- -- -- -- --
Construction and land 235 387 266 622 318
One- to four-family real estate 71 -- 89 71 91
Commercial business 595 1,290 249 1,885 319
Agricultural business, including secured by farmland -- -- 22 -- 22
Consumer 69 59 32 128 63
970 1,736 658 2,706 813
Loans charged off:
Commercial real estate -- (92) -- (92) --
Multifamily real estate -- -- -- -- --
Construction and land (12,255) (7,724) (25,767) (19,979) (38,184)
One- to four-family real estate (2,128) (2,115) (2,704) (4,243) (3,795)
Commercial business (1,447) (4,784) (2,438) (6,231) (6,232)
Agricultural business, including secured by farmland (986) (2) (3,186) (988) (3,186)
Consumer (379) (555) (593) (934) (919)
(17,195) (15,272) (34,688) (32,467) (52,316)
Net charge-offs (16,225) (13,536) (34,030) (29,761) (51,503)
Balance, end of period $95,508 $95,733 $90,694 $95,508 $90,694
Net charge-offs / Average loans outstanding 0.44% 0.36% 0.87% 0.80% 1.31%
ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES Jun 30, 2010 Mar 31, 2010 Jun 30, 2009 Dec 31, 2009
Specific or allocated loss allowance
Commercial real estate $7,044 $8,279 $5,333 $8,278
Multifamily real estate 4,993 2,072 83 90
Construction and land 42,972 44,078 55,585 45,209
One- to four-family real estate 3,530 3,093 1,333 2,912
Commercial business 23,907 24,530 19,474 22,054
Agricultural business, including secured by farmland 679 949 1,323 919
Consumer 1,895 1,898 1,540 1,809
Total allocated 85,020 84,899 84,671 81,271
Estimated allowance for undisbursed commitments 909 1,161 1,976 1,594
Unallocated 9,579 9,673 4,047 12,404
Total allowance for loan losses $95,508 $95,733 $90,694 $95,269
Allowance for loan losses / Total loans outstanding 2.63% 2.60% 2.32% 2.51%
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Jun 30, 2010 Mar 31, 2010 Jun 30, 2009 Dec 31, 2009
NON-PERFORMING ASSETS
Loans on non-accrual status
Secured by real estate:
Commercial $8,815 $6,801 $7,244 $7,300
Multifamily 363 373 -- 383
Construction and land 110,931 138,245 180,989 159,264
One- to four-family 19,878 19,777 15,167 14,614
Commercial business 23,474 19,353 10,508 21,640
Agricultural business, including secured by farmland 7,556 8,013 7,478 6,277
Consumer 3,508 3,387 2,058 3,923
174,525 195,949 223,444 213,401
Loans more than 90 days delinquent, still on accrual
Secured by real estate:
Commercial 1,137 -- -- --
Multifamily -- -- -- --
Construction and land 692 -- 603 --
One- to four-family 772 -- 624 358
Commercial business -- -- 209 --
Agricultural business, including secured by farmland -- -- -- --
Consumer 118 61 189 91
2,719 61 1,625 449
Total non-performing loans 177,244 196,010 225,069 213,850
Securities on non-accrual 3,500 3,000 -- 4,232
Real estate owned (REO) and repossessed assets 101,701 95,167 57,197 77,802
Total non-performing assets 282,445 294,177 282,266 295,884
Total non-performing assets / Total assets 6.01% 6.42% 6.23% 6.27%
DETAIL & GEOGRAPHIC CONCENTRATION OF
NON-PERFORMING ASSETS AT
June 30, 2010 Washington Oregon Idaho Other Total
Secured by real estate:
Commercial $8,870 $744 $338 $-- $9,952
Multifamily 363 -- -- -- 363
Construction and land
One- to four-family construction 10,966 6,978 5,568 -- 23,512
Commercial construction 1,551 -- -- -- 1,551
Multifamily construction 9,280 -- -- -- 9,280
Residential land acquisition & development 30,076 16,765 898 -- 47,739
Residential land improved lots 3,771 9,610 317 -- 13,698
Residential land unimproved 10,644 348 321 -- 11,313
Commercial land acquisition & development -- -- -- -- --
Commercial land improved 454 -- -- -- 454
Commercial land unimproved 4,076 -- -- -- 4,076
Total construction and land 70,818 33,701 7,104 -- 111,623
One- to four-family 13,068 7,582 -- -- 20,650
Commercial business 14,117 4,424 958 3,975 23,474
Agricultural business, including secured by farmland 1,775 569 5,212 -- 7,556
Consumer 3,342 42 242 -- 3,626
Total non-performing loans 112,353 47,062 13,854 3,975 177,244
Securities on non-accrual 3,250 -- 250 -- 3,500
Real estate owned (REO) and repossessed assets 45,199 40,277 16,225 -- 101,701
Total non-performing assets at end of the period $160,802 $87,339 $30,329 $3,975 $282,445
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Quarters Ended Six Months Ended
REAL ESTATE OWNED Jun 30, 2010 Jun 30, 2009 Jun 30, 2010 Jun 30, 2009
Balance, beginning of period $95,074 $38,951 $77,743 $21,782
Additions for loan foreclosures 17,966 32,863 45,293 52,038
Additions from capitalized costs 380 1,624 1,516 2,663
Dispositions of REO (10,451) (16,112) (20,366) (19,206)
Gain (loss) on sale of REO (660) (296) (1,361) (197)
Valuation adjustments in the period (824) (63) (1,340) (113)
Balance, end of period $101,485 $56,967 $101,485 $56,967
Quarters Ended
REAL ESTATE OWNED- FIVE COMPARATIVE QUARTERS Jun 30,
2010 Mar 31,
2010 Dec 31,
2009 Sep 30,
2009 Jun 30,
2009
Balance, beginning of period $95,074 $77,743 $53,576 $56,967 $38,951
Additions for loan foreclosures 17,966 27,327 39,802 10,013 32,863
Additions from capitalized costs 380 1,136 1,712 1,689 1,624
Dispositions of REO (10,451) (9,915) (10,064) (13,439) (16,112)
Transfers to property and equipment -- -- (7,030) -- --
Gain (loss) on sale of REO (660) (701) (189) (188) (296)
Valuation adjustments in the period (824) (516) (64) (1,466) (63)
Balance, end of period $101,485 $95,074 $77,743 $53,576 $56,967
REAL ESTATE OWNED- BY TYPE AND STATE Washington Oregon Idaho Total
Commercial real estate $8,349 $-- $-- $8,349
One- to four-family construction 891 1,190 -- 2,081
Land development- commercial 3,430 6,656 485 10,571
Land development- residential 22,681 24,579 9,731 56,991
Agricultural land 329 -- 2,236 2,565
One- to four-family real estate 9,354 7,801 3,773 20,928
Total $45,034 $40,226 $16,225 $101,485
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSITS & OTHER BORROWINGS
Jun 30, 2010 Mar 31, 2010 Jun 30, 2009 Dec 31, 2009
DEPOSIT COMPOSITION
Non-interest-bearing $548,251 $549,291 $508,284 $582,480
Interest-bearing checking 368,418 366,786 312,024 360,256
Regular savings accounts 593,591 577,704 499,447 538,765
Money market accounts 441,222 459,811 319,622 442,124
Interest-bearing transaction & savings accounts 1,403,231 1,404,301 1,131,093 1,341,145
Interest-bearing certificates 1,887,513 1,896,186 2,110,466 1,941,925
Total deposits $3,838,995 $3,849,778 $3,749,843 $3,865,550
INCLUDED IN TOTAL DEPOSITS
Public transaction accounts $85,292 $80,942 $48,644 $78,202
Public interest-bearing certificates 81,668 82,362 134,213 88,186
Total public deposits $166,960 $163,304 $182,857 $166,388
Total brokered deposits $145,571 $150,577 $249,619 $165,016
INCLUDED IN OTHER BORROWINGS
Customer repurchase agreements / "Sweep accounts" $122,755 $126,954 $108,277 $124,330
GEOGRAPHIC CONCENTRATION OF DEPOSITS AT
June 30, 2010 Washington Oregon Idaho Total
$2,943,408 $615,790 $279,797 $3,838,995
Minimum for Capital Adequacy
REGULATORY CAPITAL RATIOS AT Actual or "Well Capitalized"
June 30, 2010 Amount Ratio Amount Ratio
Banner Corporation-consolidated
Total capital to risk-weighted assets $639,089 17.12% $298,716 8.00%
Tier 1 capital to risk-weighted assets 591,812 15.85% 149,358 4.00%
Tier 1 leverage capital to average assets 591,812 13.02% 181,816 4.00%
Banner Bank
Total capital to risk-weighted assets 512,933 14.44% 355,137 10.00%
Tier 1 capital to risk-weighted assets 467,936 13.18% 213,082 6.00%
Tier 1 leverage capital to average assets 467,936 10.77% 217,307 5.00%
Islanders Bank
Total capital to risk-weighted assets 28,046 13.68% 20,497 10.00%
Tier 1 capital to risk-weighted assets 25,942 12.66% 12,298 6.00%
Tier 1 leverage capital to average assets 25,942 11.94% 10,861 5.00%
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
Quarters Ended Six Months Ended
OPERATING PERFORMANCE Jun 30,
2010 Mar 31,
2010 Jun 30,
2009 Jun 30,
2010 Jun 30, 2009
Average loans $3,677,140 $3,726,243 $3,925,196 $3,701,552 $3,934,002
Average securities and deposits 607,643 563,562 394,244 587,014 398,856
Average non-interest-earning assets 268,864 258,060 199,981 262,193 196,604
Total average assets $4,553,647 $4,547,865 $4,519,421 $4,550,759 $4,529,462
Average deposits $3,830,659 $3,800,888 $3,679,653 $3,815,798 $3,686,455
Average borrowings 349,997 373,192 429,708 361,578 423,359
Average non-interest-bearing liabilities (38,527) (36,459) (18,421) (37,498) (13,201)
Total average liabilities 4,142,129 4,137,621 4,090,940 4,139,878 4,096,613
Total average stockholders' equity 411,518 410,244 428,481 410,881 432,849
`
Total average liabilities and equity $4,553,647 $4,547,865 $4,519,421 $4,550,759 $4,529,462
Interest rate yield on loans 5.72% 5.74% 5.67% 5.73% 5.73%
Interest rate yield on securities and deposits 2.09% 2.31% 3.72% 2.19% 3.86%
Interest rate yield on interest-earning assets 5.21% 5.29% 5.49% 5.25% 5.56%
Interest rate expense on deposits 1.54% 1.69% 2.36% 1.61% 2.45%
Interest rate expense on borrowings 2.28% 2.20% 2.42% 2.24% 2.32%
Interest rate expense on interest-bearing liabilities 1.60% 1.73% 2.37% 1.67% 2.43%
Interest rate spread 3.61% 3.56% 3.12% 3.58% 3.13%
Net interest margin 3.65% 3.61% 3.24% 3.62% 3.25%
Other operating income / Average assets 0.54% 0.69% 1.77% 0.62% 1.10%
Other Operating income (loss) EXCLUDING change in valuation of financial instruments carried at fair value / Average assets (1) 0.62% 0.52% 0.78% 0.57% 0.74%
Other operating expense / Average assets 3.35% 3.16% 3.27% 3.25% 3.15%
Efficiency ratio (other operating expense / revenue) 84.26% 77.20% 67.19% 80.70% 74.79%
Return (Loss) on average assets (0.44%) (0.14%) (1.47%) (0.29%) (1.15%)
Return (Loss) on average equity (4.82%) (1.50%) (15.46%) (3.17%) (12.01%)
Return (Loss) on average tangible equity (2) (4.94%) (1.54%) (15.93%) (3.25%) (12.38%)
Average equity / Average assets 9.04% 9.02% 9.48% 9.03% 9.56%
(1) - Earnings information excluding the fair value adjustments and goodwill impairment charge (alternately referred to as operating income (loss) from core operations and expenses from core operations) represent non-GAAP (Generally Accepted Accounting Principles) financial measures.
(2) - Average tangible equity excludes goodwill, core deposit and other intangibles
Contact:
Banner CorporationD. Michael Jones, CEOMark J. Grescovich, PresidentLloyd W. Baker, CFO(509) 527-3636Related Headlines
•BANNER CORP Files SEC form 8-K, Results of Operations and Financial Condition, Financial Statements and Exhibits - EDGAR Online
•Banner Corporation Announces Second Quarter Results - GlobeNewswire
•Q2 2010 Banner Corporation Earnings Release - After Market Close - CCBN
•7 Oversold Stocks Reporting Earnings This Week - at Seeking Alpha
•Banner Corporation to Present at Keefe, Bruyette & Woods Community Bank Investor Conference - GlobeNewswire
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