Exhibit 99.1
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CONTACT:
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MARK J. GRESCOVICH,
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PRESIDENT & CEO
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PETER J. CONNER, CFO
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(509) 527-3636
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NEWS RELEASE
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Banner Corporation Reports Net Income of $49.9 Million, or $1.44 Per Diluted Share, for Third Quarter 2021;
Announces Banner Forward;
Declares Quarterly Cash Dividend of $0.41 Per Share
Walla Walla, WA - October 20, 2021 - Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today
reported net income of $49.9 million, or $1.44 per diluted share, for the third quarter of 2021, an 8% decrease compared to $54.4 million, or $1.56 per diluted share, for the second quarter of 2021 and a 36% increase compared to $36.5 million, or
$1.03 per diluted share, for the third quarter of 2020. Banner’s third quarter 2021 results include $8.6 million in recapture of provision for credit losses, compared to $10.3 million in recapture of provision for credit losses in the preceding
quarter and $15.2 million in provision for credit losses in the third quarter of 2020. The third quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic. In the first nine months of 2021, net income
was $151.1 million, or $4.32 per diluted share, compared to net income of $77.0 million, or $2.17 per diluted share for the same period a year earlier. Banner’s first nine months of 2021 results include $28.1 million in recapture of provision for
credit losses, compared to $67.3 million in provision for credit losses in the first nine months of 2020.
Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be
payable November 12, 2021, to common shareholders of record on November 02, 2021.
“Our third quarter 2021 performance continues to demonstrate the success of our super community bank model, which is based on responsive service that
generates client loyalty and attracts new client relationships,” said Mark Grescovich, President and CEO. “We benefited from continued core deposit growth and an acceleration of SBA PPP loan fee income as a result of SBA PPP loan forgiveness. The
unprecedented level of market liquidity and our continued focus on building client relationships contributed to our core deposits increasing 18% compared to September 30, 2020. Additionally, Banner had provided 13,293 SBA PPP loans totaling nearly
$1.61 billion as of September 30, 2021. As of quarter end, SBA forgiveness had been received for 10,548 SBA PPP loans totaling $1.23 billion. Our essential onsite employees, such as those working in our branches, continue to serve clients in
person. In July 2021, we began to normalize our operations by returning additional groups of employees back to bank worksites; however, due to the recent increases in COVID-19 cases, we have currently suspended returning our remaining employees to
bank worksites.”
“After a comprehensive review of our business, we implemented Banner Forward, a bank-wide initiative to drive revenue growth and reduce operating expense,”
said Grescovich. “Implementation of this plan commenced during the third quarter of 2021 with full implementation expected in 2023, with the goal of producing meaningful results in the near term while staying true to our mission and value
proposition of being connected, knowledgeable and responsive to our clients, communities and employees. The focus of Banner Forward is to accelerate growth in commercial banking, deepen relationships with retail customers, advance technology
strategies to enhance our digital service channels, while streamlining underwriting and back office processes. As part of Banner Forward, we have identified potential additional opportunities to rationalize our physical footprint. During the third
quarter of 2021, we incurred expenses of $7.6 million related to Banner Forward.”
“Due to improvements in economic forecasts and continued solid performance of the loan portfolio during the current quarter, we
recorded an $8.6 million recapture to our provision for credit losses during the current quarter. This compares to a $10.3 million recapture to our provision for credit losses during the preceding quarter and a $15.2 million provision for credit
losses in the third quarter a year ago. Our allowance for credit losses - loans remains strong at 1.52% of total loans and 485% of non-performing loans at September 30, 2021, compared to 1.53% of total loans and 481% of non-performing loans at June
30, 2021,” said Grescovich.
At September 30, 2021, Banner Corporation had $16.64 billion in assets, $9.08 billion in net loans and $14.16 billion in deposits.
Banner operates 150 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.
BANR - Third Quarter 2021 Results
October 20, 2021
Page 2
Third Quarter 2021 Highlights
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Revenues increased 4% to $155.5 million, compared to $149.9 million in the preceding quarter, and increased 4% when compared to $149.2 million in
the third quarter a year ago.
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Net interest income, before the recapture of provision for credit losses, increased to $130.1 million in the third quarter of 2021, compared to
$127.6 million in the preceding quarter and $121.0 million in the third quarter a year ago.
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Net interest margin on a tax equivalent basis was 3.47%, compared to 3.52% in the preceding quarter and 3.72% in the third quarter a year ago.
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Mortgage banking revenues increased 30% to $9.8 million, compared to $7.5 million in the preceding quarter, and decreased 41% compared to $16.6
million in the third quarter a year ago.
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Return on average assets was 1.20%, compared to 1.36% in the preceding quarter and 1.01% in the third quarter a year ago.
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Net loans receivable decreased to $9.08 billion at September 30, 2021, compared to $9.51 billion at June 30, 2021, and decreased 9% when compared
to $10.00 billion at September 30, 2020.
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Non-performing assets decreased to $29.7 million, or 0.18% of total assets, at September 30, 2021, compared to $31.5 million, or 0.19% of total
assets in the preceding quarter, and decreased from $36.7 million, or 0.25% of total assets, at September 30, 2020.
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The allowance for credit losses - loans was $139.9 million, or 1.52% of total loans receivable, as of September 30, 2021, compared to $148.0
million, or 1.53% of total loans receivable as of June 30, 2021 and $168.0 million or 1.65% of total loans receivable as of September 30, 2020.
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Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 4% to $13.31 billion at September 30, 2021,
compared to $12.76 billion at June 30, 2021, and increased 18% compared to $11.30 billion a year ago. Core deposits represented 94% of total deposits at September 30, 2021.
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Dividends to shareholders were $0.41 per share in the quarter ended September 30, 2021.
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Common shareholders’ equity per share increased 1% to $48.67 at September 30, 2021, compared to $48.31 at the preceding quarter end, and
increased 4% from $46.83 a year ago.
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Tangible common shareholders’ equity per share* increased 1% to $37.30 at September 30, 2021, compared to $36.99 at the preceding quarter end,
and increased 5% from $35.56 a year ago.
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Banner repurchased 300,000 shares of its common stock during the quarter at an average cost of $55.50 per share.
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*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 adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and non-interest income) and the
adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations and state/municipal taxes from non-interest expense
divided by adjusted revenue) 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.
Significant Recent Initiatives and Events
In September 2021, Banner completed the consolidation of five branches as it continues to see migration of transactions to the digital
space, reducing in-branch transactions. During the past year, client adoption of mobile and digital banking accelerated, while physical branch transaction volume declined. Banner anticipates this shift in client service delivery channel preference
will continue after the COVID-19 pandemic related restrictions have ended.
Income Statement Review
Net interest income, before the recapture of provision for credit losses, was $130.1 million in the third quarter of 2021, compared to
$127.6 million in the preceding quarter and $121.0 million in the third quarter a year ago.
Banner’s net interest margin on a tax equivalent basis was 3.47% for the third quarter of 2021, a five basis-point decrease compared to
3.52% in the preceding quarter and a 25 basis-point decrease compared to 3.72% in the third quarter a year ago.
“Higher core deposit balances, resulting in an increase in low yielding short term investments, adversely affected our net interest
margin during the quarter. This impact was partly offset by higher interest income, primarily as a result of the decline in low yielding SBA PPP loans and a corresponding acceleration of the recognition of deferred loan fee income due to loan
repayments from SBA loan forgiveness,” said Grescovich. “Additionally, the ongoing low interest rate environment continues to place downward pressure on loan yields.” Acquisition accounting adjustments added three basis points to the net interest
margin in both the current and preceding quarter and seven basis points in the third quarter a year ago. The total purchase discount for acquired loans was $11.5 million at September 30, 2021, compared to $12.5 million at June 30, 2021, and $17.9
million at
BANR - Third Quarter 2021 Results
October 20, 2021
Page 3
September 30, 2020. In the first nine months of 2021, Banner’s net interest margin on a tax equivalent basis was 3.48% compared to
3.93% in the first nine months of 2020.
Average interest-earning asset yields decreased six basis points to 3.62% in the third quarter compared to 3.68% for the preceding
quarter and decreased 36 basis points compared to 3.98% in the third quarter a year ago. Average loan yields increased 18 basis points to 4.88% compared to 4.70% in the preceding quarter and increased 41 basis points compared to 4.47% in the third
quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in the average balance of low yielding SBA PPP loans due to loan repayments from SBA loan
forgiveness during the last two quarters, partially offset by lower rates on new originations and adjustable-rate loans resetting to lower current market rates. Loan discount accretion added five basis points to average loan yields in both the
current and preceding quarter and nine basis points in the third quarter a year ago. Deposit costs were 0.08% in the third quarter of 2021, a one basis-point decrease compared to the preceding quarter and a nine basis-point decrease compared to the
third quarter a year ago. The year-over-year decrease in quarterly deposit costs was primarily the result of decreases in market interest rates during 2020. The total cost of funds was 0.16% during the third quarter of 2021, a one basis-point
decrease compared to the preceding quarter and an 11 basis-point decrease compared to the third quarter a year ago.
Banner recorded an $8.6 million recapture of provision for credit losses in the current quarter (comprised of an $8.9 million recapture
of credit losses - loans and a $218,000 provision for credit losses - unfunded loan commitments). This recapture compares to a $10.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.1 million recapture of
provision for credit losses - loans and a $2.2 million recapture of provision for credit losses - unfunded loan commitments) and a $15.2 million provision for credit losses in the third quarter a year ago (comprised of a $13.6 million provision for
credit losses - loans and a $1.5 million recapture of provision for credit losses - unfunded loan commitments). The recapture of provision for credit losses for the current and preceding quarters primarily reflects improvement in forecasted economic
indicators and a decrease in adversely classified loans. The provision for credit losses recorded in the third quarter a year ago primarily reflected expected lifetime credit losses based upon the economic conditions and the potential effects from
forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of September 30, 2020.
Total non-interest income was $25.3 million in the third quarter of 2021, compared to $22.3 million in the preceding quarter and $28.2
million in the third quarter a year ago. Deposit fees and other service charges were $10.5 million in the third quarter of 2021, compared to $9.8 million in the preceding quarter and $8.7 million in the third quarter a year ago. The increase in
deposit fees and other service charges from the third quarter a year ago is primarily a result of increased transaction deposit account activity and higher fees on certain transactions. Mortgage banking revenues, including gains on one- to
four-family and multifamily loan sales and loan servicing fees, increased to $9.8 million in the third quarter, compared to $7.5 million in the preceding quarter and decreased compared to $16.6 million in the third quarter of 2020. The higher
mortgage banking revenue quarter-over-quarter primarily reflects an increase in the gain on sale margin on one- to four-family held-for-sale loans and higher gains on the sale of multifamily held-for-sale loans. The decrease compared to the third
quarter of 2020 was primarily due to a decrease in the gain on sale margin on one- to four-family held-for-sale loans, partially offset by higher gains on the sale of multifamily held-for-sale loans as well as a reduction in the volume of one- to
four-family loans sold. Home purchase activity accounted for 68% of one- to four-family mortgage loan originations in the third quarter of 2021, compared to 66% in the prior quarter and 56% in the third quarter of 2020. In the first nine months of
2021, total non-interest income decreased 4% to $71.9 million, compared to $75.1 million in the first nine months of 2020.
Banner’s third quarter 2021 results included a $1.8 million 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 $56,000 net gain on the sale of securities. In the preceding quarter, results included a $58,000 net gain for fair value
adjustments and a $77,000 net gain on the sale of securities. In the third quarter a year ago, results included a $37,000 net gain for fair value adjustments and a $644,000 net gain on the sale of securities.
Total revenue increased 4% to $155.5 million for the third quarter of 2021, compared to $149.9 million in the preceding quarter, and
increased 4% compared to $149.2 million in the third quarter a year ago. Year-to-date, total revenues increased 3% to $447.3 million compared to $435.0 million for the same period one year earlier. Adjusted revenue* (the total of net interest
income and total non-interest income excluding the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $153.6 million in the third quarter of 2021, compared to $149.8 million in the preceding
quarter and $148.6 million in the third quarter of 2020. In the first nine months of the year, adjusted revenue* was $444.8 million, compared to $436.5 million in the first nine months of 2020.
Total non-interest expense was $102.1 million in the third quarter of 2021, compared to $92.6 million in the preceding quarter and
$90.0 million in the third quarter of 2020. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an $8.0 million increase in professional and legal expenses, primarily due to increased
consultant expense, which included $5.8 million of expense related to the Banner Forward initiative in the current quarter, compared to $1.5 million in the prior quarter, as well as a $4.0 million accrual recorded related to pending litigation during
the current quarter. Additionally, payment and card processing services expense increased $1.2 million primarily reflecting an increase in fraud related losses. These increases for the current quarter were partially offset by a $2.1 million
decrease from the preceding quarter in salary and employee benefits expense related to a reduction in staffing. The year-over-year quarterly increase in non-interest expense also reflects increases in payment and card processing services expense,
professional and legal expenses, and miscellaneous non-interest expense. The year-over-
BANR - Third Quarter 2021 Results
October 20, 2021
Page 4
year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19
expenses. COVID-19 expenses were $44,000 for the third quarter of 2021, compared to $117,000 for the preceding quarter and $778,000 in the third quarter a year ago. Year-to-date, total non-interest expense was $288.3 million, compared to $274.0
million in the same period a year earlier. Banner’s efficiency ratio was 65.70% for the current quarter, compared to 61.79% in the preceding quarter and 60.32% in the year ago quarter. Banner’s adjusted efficiency ratio* was 59.65% for the current
quarter, compared to 58.50% in the preceding quarter and 58.02% in the year ago quarter.
For the third quarter of 2021, Banner had $12.1 million in state and federal income tax expense for an effective tax rate of 19.5%, reflecting the benefits
from tax exempt income. Banner’s 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.
Balance Sheet Review
Total assets increased to $16.64 billion at September 30, 2021, compared to $16.18 billion at June 30, 2021, and increased 14% when
compared to $14.64 billion at September 30, 2020. The total of securities and interest-bearing deposits held at other banks was $6.03 billion at September 30, 2021, compared to $5.19 billion at June 30, 2021 and $2.63 billion at September 30, 2020.
The average effective duration of Banner's securities portfolio was approximately 4.4 years at September 30, 2021, compared to 4.0 years at September 30, 2020.
Net loans receivable decreased 4% to $9.08 billion at September 30, 2021, compared to $9.51 billion at June 30, 2021, and decreased 9%
when compared to $10.00 billion at September 30, 2020. The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans. SBA PPP loans decreased 62% to $310.2 million at September 30, 2021, compared to
$825.1 million at June 30, 2021, and decreased 73% when compared to $1.15 billion at September 30, 2020. The decrease in SBA PPP loans was partially offset by increases in commercial real estate, multifamily real estate and one- to four-family
loans. Commercial real estate and multifamily real estate loans increased 2% to $4.24 billion at September 30, 2021, compared to $4.14 billion at June 30, 2021, and increased 4% compared to $4.07 billion a year ago. Commercial business loans
decreased 21% to $2.12 billion at September 30, 2021, compared to $2.68 billion at June 30, 2021, and decreased 32% compared to $3.11 billion a year ago, primarily due to SBA PPP loans forgiven. Excluding PPP loans, commercial business loans
decreased 3% to $1.82 billion at September 30, 2021, compared to $1.87 billion at June 30, 2021, and decreased 7% compared to $1.96 billion a year ago. Agricultural business loans increased to $287.5 million at September 30, 2021, compared to $265.4
million three months earlier and decreased from $326.2 million a year ago. Total construction, land and land development loans were $1.33 billion at September 30, 2021, a 3% decrease from $1.37 billion at June 30, 2021, and a 5% increase compared to
$1.27 billion a year earlier. Consumer loans increased slightly to $561.2 million at September 30, 2021, compared to $560.7 million at June 30, 2021, and decreased from $622.8 million a year ago. One- to four-family loans increased to $682.4
million at September 30, 2021, compared to $637.7 million at June 30, 2021, and decreased from $771.4 million a year ago. The year over year decrease primarily reflects held for investment loans being refinanced and sold as held for sale loans.
Loans held for sale were $63.7 million at September 30, 2021, compared to $71.7 million at June 30, 2021, and $185.9 million at
September 30, 2020. The volume of one- to four- family residential mortgage loans sold was $232.2 million in the current quarter, compared to $266.7 million in the preceding quarter and $327.7 million in the third quarter a year ago. During the
third quarter of 2021, Banner sold $96.1 million in multifamily loans, compared to $83.9 million in the preceding quarter and $108.6 million in the third quarter a year ago.
Total deposits increased 4% to $14.16 billion at September 30, 2021, compared to $13.64 billion at June 30, 2021, and increased 16%
when compared to $12.22 billion a year ago. The year-over-year increase in total deposits was due primarily to SBA PPP loan funds deposited into client accounts and an increase in general client liquidity due to reduced business investment and
consumer spending during the COVID-19 pandemic. Non-interest-bearing account balances increased 5% to $6.40 billion at September 30, 2021, compared to $6.09 billion at June 30, 2021, and increased 18% compared to $5.41 billion a year ago. Core
deposits were 94% of total deposits at both September 30, 2021 and June 30, 2021 and increased 18% compared to a year ago. Certificates of deposit decreased to $851.1 million at September 30, 2021, compared to $873.0 million at June 30, 2021, and
decreased 7% compared to $915.4 million a year earlier. FHLB borrowings decreased to $50.0 million at September 30, 2021, compared to $100.0 million at June 30, 2021 and decreased from $150.0 million a year ago.
At September 30, 2021, total common shareholders’ equity was $1.67 billion, or 10.02% of assets, compared to $1.67 billion or 10.32% of
assets at June 30, 2021, and $1.65 billion or 11.25% of assets a year ago. At September 30, 2021, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 7.86% of tangible assets*,
compared to $1.28 billion, or 8.09% of tangible assets, at June 30, 2021, and $1.25 billion, or 8.78% of tangible assets, a year ago. Banner’s tangible book value per share* increased to $37.30 at September 30, 2021, compared to $35.56 per share a
year ago.
Banner and its subsidiary bank continue to maintain capital levels in excess of the requirements to be categorized as
“well-capitalized.” At September 30, 2021, Banner's common equity Tier 1 capital ratio was 11.25%, its Tier 1 leverage capital to average assets ratio was 8.79%, and its total capital to risk-weighted assets ratio was 14.55%.
BANR - Third Quarter 2021 Results
October 20, 2021
Page 5
Credit Quality
The allowance for credit losses - loans was $139.9 million at September 30, 2021, or 1.52% of total loans receivable outstanding and
485% of non-performing loans, compared to $148.0 million at June 30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, and $168.0 million at September 30, 2020, or 1.65% of total loans receivable outstanding and
482% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $10.1 million at September 30, 2021, compared to $9.9 million at June 30,
2021 and $12.1 million at September 30, 2020. Net loan recoveries totaled $756,000 in the third quarter of 2021, compared to net loan recoveries of $55,000 in the preceding quarter and $2.0 million of net loan charge-offs in the third quarter a year
ago. Non-performing loans were $28.9 million at September 30, 2021, compared to $30.8 million at June 30, 2021, and $34.8 million a year ago. Real estate owned and other repossessed assets were $869,000 at September 30, 2021, compared to $780,000
at June 30, 2021, and $1.8 million a year ago.
Banner’s total substandard loans were $225.8 million at September 30, 2021, compared to $272.8 million at June 30, 2021, and $423.2
million a year ago. The quarter over quarter decrease reflects the payoff of substandard loans as well as risk rating upgrades as certain industries impacted by the COVID-19 pandemic have begun to stabilize.
Banner’s total non-performing assets were $29.7 million, or 0.18% of total assets, at September 30, 2021, compared to $31.5 million, or
0.19% of total assets, at June 30, 2021, and $36.7 million, or 0.25% of total assets, a year ago.
At September 30, 2021, Banner had 41 mortgage loans totaling $12.4 million operating under forbearance agreements due to COVID-19.
Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings pursuant to applicable accounting and regulatory guidance.
Conference Call
Banner will host a conference call on Thursday, October 21, 2021, at 8:00 a.m. PDT, to discuss its third 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 10160533, or at www.bannerbank.com.
About the Company
Banner Corporation is a $16.64 billion bank holding company operating one commercial bank 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.
The COVID-19, pandemic is adversely affecting us, our clients, counterparties, employees, and third-party service providers, and the
ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates, or turbulence in
domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and increase stock price volatility. In addition, changes to
statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results
anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of
loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other
financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or
impose restrictions or penalties with respect to Banner’s activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on client behavior and net interest margin; (5) the impact of repricing and
competitors’ pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to
BANR - Third Quarter 2021 Results
October 20, 2021
Page 6
technological changes to meet clients’ needs and developments in the market place; (8) the ability to access cost-effective funding;
(9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) 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; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or
lines of business; (15) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; (16) the costs associated with Banner Forward 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.
BANR - Third Quarter 2021 Results
October 20, 2021
Page 7
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RESULTS OF OPERATIONS
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Quarters Ended
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Nine Months Ended
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(in thousands except shares and per share data)
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Sep 30, 2021
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Jun 30, 2021
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Sep 30, 2020
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Sep 30, 2021
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Sep 30, 2020
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INTEREST INCOME:
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||||||||||||||||
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Loans receivable
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$
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116,487
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$
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115,391
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$
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116,716
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$
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340,802
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$
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350,815
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Mortgage-backed securities
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11,695
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11,437
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7,234
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32,503
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24,354
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|||||||||||||||
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Securities and cash equivalents
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7,686
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6,737
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5,631
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20,649
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14,824
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|||||||||||||||
|
|
135,868
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133,565
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129,581
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393,954
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389,993
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INTEREST EXPENSE:
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|
|
||||||||||||||||
|
Deposits
|
2,749
|
3,028
|
5,179
|
9,386
|
20,623
|
|||||||||||||||
|
Federal Home Loan Bank advances
|
655
|
655
|
988
|
2,244
|
4,036
|
|||||||||||||||
|
Other borrowings
|
125
|
124
|
128
|
358
|
482
|
|||||||||||||||
|
Junior subordinated debentures and subordinated notes
|
2,193
|
2,204
|
2,260
|
6,605
|
4,988
|
|||||||||||||||
|
|
5,722
|
6,011
|
8,555
|
18,593
|
30,129
|
|||||||||||||||
|
Net interest income
|
130,146
|
127,554
|
121,026
|
375,361
|
359,864
|
|||||||||||||||
|
(RECAPTURE)/PROVISION FOR CREDIT LOSSES
|
(8,638)
|
(10,256)
|
15,180
|
(28,145)
|
67,273
|
|||||||||||||||
|
Net interest income after (recapture)/provision for credit losses
|
138,784
|
137,810
|
105,846
|
403,506
|
292,591
|
|||||||||||||||
|
NON-INTEREST INCOME:
|
|
|
|
|
||||||||||||||||
|
Deposit fees and other service charges
|
10,457
|
9,758
|
8,742
|
29,154
|
26,091
|
|||||||||||||||
|
Mortgage banking operations
|
9,752
|
7,478
|
16,562
|
28,670
|
40,891
|
|||||||||||||||
|
Bank-owned life insurance
|
1,245
|
1,245
|
1,286
|
3,797
|
4,653
|
|||||||||||||||
|
Miscellaneous
|
2,046
|
3,720
|
951
|
7,808
|
5,017
|
|||||||||||||||
|
|
23,500
|
22,201
|
27,541
|
69,429
|
76,652
|
|||||||||||||||
|
Net gain on sale of securities
|
56
|
77
|
644
|
618
|
815
|
|||||||||||||||
|
Net change in valuation of financial instruments carried at fair value
|
1,778
|
58
|
37
|
1,895
|
(2,360)
|
|||||||||||||||
|
Total non-interest income
|
25,334
|
22,336
|
28,222
|
71,942
|
75,107
|
|||||||||||||||
|
NON-INTEREST EXPENSE:
|
|
|
|
|
||||||||||||||||
|
Salary and employee benefits
|
59,799
|
61,935
|
61,171
|
186,553
|
184,494
|
|||||||||||||||
|
Less capitalized loan origination costs
|
(8,290)
|
(8,768)
|
(8,517)
|
(26,754)
|
(25,433)
|
|||||||||||||||
|
Occupancy and equipment
|
13,153
|
12,823
|
13,022
|
38,965
|
39,114
|
|||||||||||||||
|
Information / computer data services
|
6,110
|
5,602
|
6,090
|
17,915
|
17,984
|
|||||||||||||||
|
Payment and card processing services
|
6,181
|
4,975
|
4,044
|
15,482
|
12,135
|
|||||||||||||||
|
Professional and legal expenses
|
12,324
|
4,371
|
2,368
|
20,023
|
6,450
|
|||||||||||||||
|
Advertising and marketing
|
1,521
|
1,181
|
1,105
|
3,965
|
3,584
|
|||||||||||||||
|
Deposit insurance expense
|
1,469
|
1,241
|
1,628
|
4,243
|
4,968
|
|||||||||||||||
|
State/municipal business and use taxes
|
1,219
|
1,083
|
1,196
|
3,367
|
3,284
|
|||||||||||||||
|
Real estate operations
|
53
|
118
|
(11)
|
(71)
|
93
|
|||||||||||||||
|
Amortization of core deposit intangibles
|
1,575
|
1,711
|
1,864
|
4,997
|
5,867
|
|||||||||||||||
|
Miscellaneous
|
6,977
|
6,156
|
5,285
|
18,642
|
16,841
|
|||||||||||||||
|
102,091
|
92,428
|
89,245
|
287,327
|
269,381
|
||||||||||||||||
|
COVID-19 expenses
|
44
|
117
|
778
|
309
|
3,169
|
|||||||||||||||
|
Merger and acquisition-related expenses
|
10
|
79
|
5
|
660
|
1,483
|
|||||||||||||||
|
Total non-interest expense
|
102,145
|
92,624
|
90,028
|
288,296
|
274,033
|
|||||||||||||||
|
Income before provision for income taxes
|
61,973
|
67,522
|
44,040
|
187,152
|
93,665
|
|||||||||||||||
|
PROVISION FOR INCOME TAXES
|
12,089
|
13,140
|
7,492
|
36,031
|
16,694
|
|||||||||||||||
|
NET INCOME
|
$
|
49,884
|
$
|
54,382
|
$
|
36,548
|
$
|
151,121
|
$
|
76,971
|
||||||||||
|
Earnings per share available to common shareholders:
|
|
|
|
|
||||||||||||||||
|
Basic
|
$
|
1.45
|
$
|
1.57
|
$
|
1.04
|
$
|
4.35
|
$
|
2.18
|
||||||||||
|
Diluted
|
$
|
1.44
|
$
|
1.56
|
$
|
1.03
|
$
|
4.32
|
$
|
2.17
|
||||||||||
|
Cumulative dividends declared per common share
|
$
|
0.41
|
$
|
0.41
|
$
|
0.41
|
$
|
1.23
|
$
|
0.82
|
||||||||||
|
Weighted average common shares outstanding:
|
|
|
|
|
||||||||||||||||
|
Basic
|
34,446,510
|
34,736,639
|
35,193,109
|
34,716,914
|
35,285,567
|
|||||||||||||||
|
Diluted
|
34,669,492
|
34,933,714
|
35,316,679
|
35,012,228
|
35,524,771
|
|||||||||||||||
|
(Decrease) increase in common shares outstanding
|
(298,897)
|
(184,455)
|
669
|
(907,209)
|
(593,008)
|
|||||||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 8
|
FINANCIAL CONDITION
|
|
|
|
Percentage Change
|
||||||||||||||||||
|
(in thousands except shares and per share data)
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
Prior Qtr
|
Prior Yr Qtr
|
||||||||||||||||
|
ASSETS
|
|
|
|
|||||||||||||||||||
|
Cash and due from banks
|
$
|
392,035
|
$
|
329,359
|
$
|
311,899
|
$
|
289,144
|
19.0
|
%
|
35.6
|
%
|
||||||||||
|
Interest-bearing deposits
|
1,808,547
|
1,138,572
|
922,284
|
416,394
|
58.8
|
%
|
334.3
|
%
|
||||||||||||||
|
Total cash and cash equivalents
|
2,200,582
|
1,467,931
|
1,234,183
|
705,538
|
49.9
|
%
|
211.9
|
%
|
||||||||||||||
|
Securities - trading
|
26,875
|
25,097
|
24,980
|
23,276
|
7.1
|
%
|
15.5
|
%
|
||||||||||||||
|
Securities - available for sale
|
3,446,575
|
3,275,979
|
2,322,593
|
1,758,384
|
5.2
|
%
|
96.0
|
%
|
||||||||||||||
|
Securities - held to maturity
|
447,708
|
455,256
|
421,713
|
429,033
|
(1.7)
|
%
|
4.4
|
%
|
||||||||||||||
|
Total securities
|
3,921,158
|
3,756,332
|
2,769,286
|
2,210,693
|
4.4
|
%
|
77.4
|
%
|
||||||||||||||
|
Equity securities
|
—
|
—
|
—
|
450,255
|
nm
|
(100.0)
|
%
|
|||||||||||||||
|
Federal Home Loan Bank stock
|
12,000
|
14,001
|
16,358
|
16,363
|
(14.3)
|
%
|
(26.7)
|
%
|
||||||||||||||
|
Securities purchased under agreements to resell
|
300,000
|
300,000
|
—
|
—
|
—
|
%
|
nm
|
|||||||||||||||
|
Loans held for sale
|
63,678
|
71,741
|
243,795
|
185,938
|
(11.2)
|
%
|
(65.8)
|
%
|
||||||||||||||
|
Loans receivable
|
9,218,384
|
9,654,181
|
9,870,982
|
10,163,917
|
(4.5)
|
%
|
(9.3)
|
%
|
||||||||||||||
|
Allowance for credit losses - loans
|
(139,915)
|
(148,009)
|
(167,279)
|
(167,965)
|
(5.5)
|
%
|
(16.7)
|
%
|
||||||||||||||
|
Net loans receivable
|
9,078,469
|
9,506,172
|
9,703,703
|
9,995,952
|
(4.5)
|
%
|
(9.2)
|
%
|
||||||||||||||
|
Accrued interest receivable
|
43,644
|
46,979
|
46,617
|
48,321
|
(7.1)
|
%
|
(9.7)
|
%
|
||||||||||||||
|
Real estate owned (REO) held for sale, net
|
852
|
763
|
816
|
1,795
|
11.7
|
%
|
(52.5)
|
%
|
||||||||||||||
|
Property and equipment, net
|
151,503
|
156,063
|
164,556
|
171,576
|
(2.9)
|
%
|
(11.7)
|
%
|
||||||||||||||
|
Goodwill
|
373,121
|
373,121
|
373,121
|
373,121
|
—
|
%
|
—
|
%
|
||||||||||||||
|
Other intangibles, net
|
16,429
|
18,004
|
21,426
|
23,291
|
(8.7)
|
%
|
(29.5)
|
%
|
||||||||||||||
|
Bank-owned life insurance
|
192,950
|
192,677
|
191,830
|
191,755
|
0.1
|
%
|
0.6
|
%
|
||||||||||||||
|
Operating lease right-of-use assets
|
58,523
|
55,287
|
55,367
|
58,114
|
5.9
|
%
|
0.7
|
%
|
||||||||||||||
|
Other assets
|
224,970
|
222,786
|
210,565
|
209,363
|
1.0
|
%
|
7.5
|
%
|
||||||||||||||
|
Total assets
|
$
|
16,637,879
|
$
|
16,181,857
|
$
|
15,031,623
|
$
|
14,642,075
|
2.8
|
%
|
13.6
|
%
|
||||||||||
|
LIABILITIES
|
|
|
|
|||||||||||||||||||
|
Deposits:
|
|
|
|
|||||||||||||||||||
|
Non-interest-bearing
|
$
|
6,400,864
|
$
|
6,090,063
|
$
|
5,492,924
|
$
|
5,412,570
|
5.1
|
%
|
18.3
|
%
|
||||||||||
|
Interest-bearing transaction and savings accounts
|
6,912,759
|
6,673,598
|
6,159,052
|
5,887,419
|
3.6
|
%
|
17.4
|
%
|
||||||||||||||
|
Interest-bearing certificates
|
851,054
|
873,047
|
915,320
|
915,352
|
(2.5)
|
%
|
(7.0)
|
%
|
||||||||||||||
|
Total deposits
|
14,164,677
|
13,636,708
|
12,567,296
|
12,215,341
|
3.9
|
%
|
16.0
|
%
|
||||||||||||||
|
Advances from Federal Home Loan Bank
|
50,000
|
100,000
|
150,000
|
150,000
|
(50.0)
|
%
|
(66.7)
|
%
|
||||||||||||||
|
Customer repurchase agreements and other borrowings
|
247,358
|
237,736
|
184,785
|
176,983
|
4.0
|
%
|
39.8
|
%
|
||||||||||||||
|
Subordinated notes, net
|
98,472
|
98,380
|
98,201
|
98,114
|
0.1
|
%
|
0.4
|
%
|
||||||||||||||
|
Junior subordinated debentures at fair value
|
124,853
|
117,520
|
116,974
|
109,821
|
6.2
|
%
|
13.7
|
%
|
||||||||||||||
|
Operating lease liabilities
|
62,946
|
59,117
|
59,343
|
61,869
|
6.5
|
%
|
1.7
|
%
|
||||||||||||||
|
Accrued expenses and other liabilities
|
175,960
|
216,399
|
143,300
|
138,169
|
(18.7)
|
%
|
27.4
|
%
|
||||||||||||||
|
Deferred compensation
|
46,494
|
46,786
|
45,460
|
45,249
|
(0.6)
|
%
|
2.8
|
%
|
||||||||||||||
|
Total liabilities
|
14,970,760
|
14,512,646
|
13,365,359
|
12,995,546
|
3.2
|
%
|
15.2
|
%
|
||||||||||||||
|
SHAREHOLDERS’ EQUITY
|
|
|
|
|||||||||||||||||||
|
Common stock
|
1,297,145
|
1,311,455
|
1,349,879
|
1,347,612
|
(1.1)
|
%
|
(3.7)
|
%
|
||||||||||||||
|
Retained earnings
|
355,035
|
319,505
|
247,316
|
222,959
|
11.1
|
%
|
59.2
|
%
|
||||||||||||||
|
Other components of shareholders’ equity
|
14,939
|
38,251
|
69,069
|
75,958
|
(60.9)
|
%
|
(80.3)
|
%
|
||||||||||||||
|
Total shareholders’ equity
|
1,667,119
|
1,669,211
|
1,666,264
|
1,646,529
|
(0.1)
|
%
|
1.3
|
%
|
||||||||||||||
|
Total liabilities and shareholders’ equity
|
$
|
16,637,879
|
$
|
16,181,857
|
$
|
15,031,623
|
$
|
14,642,075
|
2.8
|
%
|
13.6
|
%
|
||||||||||
|
Common Shares Issued:
|
|
|
|
|||||||||||||||||||
|
Shares outstanding at end of period
|
34,251,991
|
34,550,888
|
35,159,200
|
35,158,568
|
||||||||||||||||||
|
Common shareholders’ equity per share (1)
|
$
|
48.67
|
$
|
48.31
|
$
|
47.39
|
$
|
46.83
|
||||||||||||||
|
Common shareholders’ tangible equity per share (1) (2)
|
$
|
37.30
|
$
|
36.99
|
$
|
36.17
|
$
|
35.56
|
||||||||||||||
|
Common shareholders’ tangible equity to tangible assets (2)
|
7.86
|
%
|
8.09
|
%
|
8.69
|
%
|
8.78
|
%
|
||||||||||||||
|
Consolidated Tier 1 leverage capital ratio
|
8.79
|
%
|
8.86
|
%
|
9.50
|
%
|
9.56
|
%
|
||||||||||||||
|
(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 final two pages of the press release tables.
|
BANR - Third Quarter 2021 Results
October 20, 2021
Page 9
|
ADDITIONAL FINANCIAL INFORMATION
|
|
|
|
|||||||||||||||||||
|
(dollars in thousands)
|
|
|
|
|||||||||||||||||||
|
Percentage Change
|
||||||||||||||||||||||
|
LOANS
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
Prior Qtr
|
Prior Yr Qtr
|
||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
Commercial real estate:
|
|
|
|
|||||||||||||||||||
|
Owner-occupied
|
$
|
1,122,275
|
$
|
1,066,237
|
$
|
1,076,467
|
$
|
1,049,877
|
5.3
|
%
|
6.9
|
%
|
||||||||||
|
Investment properties
|
1,980,284
|
1,950,211
|
1,955,684
|
1,991,258
|
1.5
|
%
|
(0.6)
|
%
|
||||||||||||||
|
Small balance CRE
|
601,751
|
621,102
|
573,849
|
597,971
|
(3.1)
|
%
|
0.6
|
%
|
||||||||||||||
|
Multifamily real estate
|
532,760
|
504,445
|
428,223
|
426,659
|
5.6
|
%
|
24.9
|
%
|
||||||||||||||
|
Construction, land and land development:
|
||||||||||||||||||||||
|
Commercial construction
|
170,205
|
182,868
|
228,937
|
220,285
|
(6.9)
|
%
|
(22.7)
|
%
|
||||||||||||||
|
Multifamily construction
|
278,184
|
295,661
|
305,527
|
291,105
|
(5.9)
|
%
|
(4.4)
|
%
|
||||||||||||||
|
One- to four-family construction
|
571,431
|
603,895
|
507,810
|
518,085
|
(5.4)
|
%
|
10.3
|
%
|
||||||||||||||
|
Land and land development
|
308,164
|
290,404
|
248,915
|
240,803
|
6.1
|
%
|
28.0
|
%
|
||||||||||||||
|
Commercial business:
|
||||||||||||||||||||||
|
Commercial business
|
1,039,731
|
1,124,359
|
1,133,989
|
1,193,651
|
(7.5)
|
%
|
(12.9)
|
%
|
||||||||||||||
|
SBA PPP
|
306,976
|
807,172
|
1,044,472
|
1,149,968
|
(62.0)
|
%
|
(73.3)
|
%
|
||||||||||||||
|
Small business scored
|
775,554
|
743,975
|
743,451
|
763,824
|
4.2
|
%
|
1.5
|
%
|
||||||||||||||
|
Agricultural business, including secured by farmland:
|
||||||||||||||||||||||
|
Agricultural business, including secured by farmland
|
284,255
|
247,467
|
299,949
|
326,169
|
14.9
|
%
|
(12.9)
|
%
|
||||||||||||||
|
SBA PPP
|
3,214
|
17,962
|
—
|
—
|
(82.1)
|
%
|
nm
|
|||||||||||||||
|
One- to four-family residential
|
682,368
|
637,701
|
717,939
|
771,431
|
7.0
|
%
|
(11.5)
|
%
|
||||||||||||||
|
Consumer:
|
||||||||||||||||||||||
|
Consumer—home equity revolving lines of credit
|
462,819
|
458,915
|
491,812
|
504,523
|
0.9
|
%
|
(8.3)
|
%
|
||||||||||||||
|
Consumer—other
|
98,413
|
101,807
|
113,958
|
118,308
|
(3.3)
|
%
|
(16.8)
|
%
|
||||||||||||||
|
Total loans receivable
|
$
|
9,218,384
|
$
|
9,654,181
|
$
|
9,870,982
|
$
|
10,163,917
|
(4.5)
|
%
|
(9.3)
|
%
|
||||||||||
|
Restructured loans performing under their restructured terms
|
$
|
5,273
|
$
|
5,472
|
$
|
6,673
|
$
|
5,790
|
||||||||||||||
|
Loans 30 - 89 days past due and on accrual
|
$
|
6,911
|
$
|
5,656
|
$
|
12,291
|
$
|
18,158
|
||||||||||||||
|
Total delinquent loans (including loans on non-accrual), net
|
$
|
18,619
|
$
|
23,582
|
$
|
36,131
|
$
|
37,464
|
||||||||||||||
|
Total delinquent loans / Total loans receivable
|
0.20
|
%
|
0.24
|
%
|
0.37
|
%
|
0.37
|
%
|
||||||||||||||
|
LOANS BY GEOGRAPHIC LOCATION
|
Percentage Change
|
|||||||||||||||||||||||
|
Sep 30, 2021
|
Jun 30,
2021
|
Dec 31,
2020
|
Sep 30, 2020
|
Prior Qtr
|
Prior Yr Qtr
|
|||||||||||||||||||
|
Amount
|
Percentage
|
Amount
|
Amount
|
Amount
|
||||||||||||||||||||
|
Washington
|
$
|
4,319,008
|
46.9%
|
$
|
4,541,792
|
$
|
4,647,553
|
$
|
4,767,113
|
(4.9)
|
%
|
(9.4)
|
%
|
|||||||||||
|
California
|
2,160,280
|
23.4%
|
2,246,580
|
2,279,749
|
2,316,739
|
(3.8)
|
%
|
(6.8)
|
%
|
|||||||||||||||
|
Oregon
|
1,679,452
|
18.2%
|
1,753,285
|
1,792,156
|
1,858,465
|
(4.2)
|
%
|
(9.6)
|
%
|
|||||||||||||||
|
Idaho
|
536,128
|
5.8%
|
525,610
|
537,996
|
576,983
|
2.0
|
%
|
(7.1)
|
%
|
|||||||||||||||
|
Utah
|
89,620
|
1.0%
|
92,103
|
80,704
|
76,314
|
(2.7)
|
%
|
17.4
|
%
|
|||||||||||||||
|
Other
|
433,896
|
4.7%
|
494,811
|
532,824
|
568,303
|
(12.3)
|
%
|
(23.7)
|
%
|
|||||||||||||||
|
Total loans receivable
|
$
|
9,218,384
|
100.0%
|
$
|
9,654,181
|
$
|
9,870,982
|
$
|
10,163,917
|
(4.5)
|
%
|
(9.3)
|
%
|
|||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 10
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
|
LOAN ORIGINATIONS
|
Quarters Ended
|
||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
|||||||||
|
Commercial real estate
|
$
|
174,827
|
$
|
103,415
|
$
|
74,400
|
|||||
|
Multifamily real estate
|
26,155
|
45,674
|
2,664
|
||||||||
|
Construction and land
|
496,386
|
509,828
|
412,463
|
||||||||
|
Commercial business:
|
|||||||||||
|
Commercial business
|
229,859
|
181,996
|
128,729
|
||||||||
|
SBA PPP
|
907
|
55,990
|
24,848
|
||||||||
|
Agricultural business
|
9,223
|
12,546
|
16,990
|
||||||||
|
One-to four-family residential
|
49,594
|
47,086
|
32,733
|
||||||||
|
Consumer
|
145,102
|
131,424
|
132,100
|
||||||||
|
Total loan originations (excluding loans held for sale)
|
$
|
1,132,053
|
$
|
1,087,959
|
$
|
824,927
|
|||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 11
|
ADDITIONAL FINANCIAL INFORMATION
|
|
|
|
|||||||||
|
(dollars in thousands)
|
|
|
|
|||||||||
|
|
Quarters Ended
|
|||||||||||
|
CHANGE IN THE
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
|||||||||
|
ALLOWANCE FOR CREDIT LOSSES - LOANS
|
|
|
|
|||||||||
|
Balance, beginning of period
|
$
|
148,009
|
$
|
156,054
|
$
|
156,352
|
||||||
|
(Recapture)/provision for credit losses - loans
|
(8,850)
|
(8,100)
|
13,641
|
|||||||||
|
Recoveries of loans previously charged off:
|
||||||||||||
|
Commercial real estate
|
923
|
147
|
23
|
|||||||||
|
One- to four-family real estate
|
19
|
20
|
94
|
|||||||||
|
Commercial business
|
230
|
321
|
246
|
|||||||||
|
Agricultural business, including secured by farmland
|
17
|
8
|
—
|
|||||||||
|
Consumer
|
227
|
97
|
82
|
|||||||||
|
|
1,416
|
593
|
445
|
|||||||||
|
Loans charged off:
|
||||||||||||
|
Commercial real estate
|
—
|
(3)
|
(379)
|
|||||||||
|
One- to four-family real estate
|
—
|
—
|
(72)
|
|||||||||
|
Commercial business
|
(362)
|
(123)
|
(1,297)
|
|||||||||
|
Agricultural business, including secured by farmland
|
(179)
|
(2)
|
(492)
|
|||||||||
|
Consumer
|
(119)
|
(410)
|
(233)
|
|||||||||
|
|
(660)
|
(538)
|
(2,473)
|
|||||||||
|
Net recoveries (charge-offs)
|
756
|
55
|
(2,028)
|
|||||||||
|
Balance, end of period
|
$
|
139,915
|
$
|
148,009
|
$
|
167,965
|
||||||
|
Net recoveries (charge-offs) / Average loans receivable
|
0.008
|
%
|
0.001
|
%
|
(0.019)
|
%
|
||||||
|
ALLOCATION OF
|
|
|||||||||||
|
ALLOWANCE FOR CREDIT LOSSES - LOANS
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
|||||||||
|
Specific or allocated credit loss allowance:
|
|
|||||||||||
|
Commercial real estate
|
$
|
57,215
|
$
|
60,349
|
$
|
59,705
|
||||||
|
Multifamily real estate
|
6,657
|
5,807
|
3,256
|
|||||||||
|
Construction and land
|
29,342
|
30,899
|
39,477
|
|||||||||
|
One- to four-family real estate
|
9,460
|
9,800
|
12,868
|
|||||||||
|
Commercial business
|
26,873
|
30,830
|
35,369
|
|||||||||
|
Agricultural business, including secured by farmland
|
3,177
|
3,256
|
5,051
|
|||||||||
|
Consumer
|
7,191
|
7,068
|
12,239
|
|||||||||
|
Total allowance for credit losses - loans
|
$
|
139,915
|
$
|
148,009
|
$
|
167,965
|
||||||
|
Allowance for credit losses - loans / Total loans receivable
|
1.52
|
%
|
1.53
|
%
|
1.65
|
%
|
||||||
|
Allowance for credit losses - loans / Non-performing loans
|
485
|
%
|
481
|
%
|
482
|
%
|
||||||
|
|
Quarters Ended
|
|||||||||||
|
CHANGE IN THE
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
|||||||||
|
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
|
|
|
|
|||||||||
|
Balance, beginning of period
|
$
|
9,909
|
$
|
12,077
|
$
|
10,555
|
||||||
|
Provision/(recapture) for credit losses - unfunded loan commitments
|
218
|
(2,168)
|
1,539
|
|||||||||
|
Balance, end of period
|
$
|
10,127
|
$
|
9,909
|
$
|
12,094
|
||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 12
|
ADDITIONAL FINANCIAL INFORMATION
|
|||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||
|
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
|||||||||||
|
NON-PERFORMING ASSETS
|
|
|
|
||||||||||||
|
Loans on non-accrual status:
|
|
|
|
||||||||||||
|
Secured by real estate:
|
|
|
|
||||||||||||
|
Commercial
|
$
|
14,931
|
$
|
17,427
|
$
|
18,199
|
$
|
7,824
|
|||||||
|
Construction and land
|
354
|
541
|
936
|
937
|
|||||||||||
|
One- to four-family
|
3,182
|
4,007
|
3,556
|
2,978
|
|||||||||||
|
Commercial business
|
2,700
|
3,673
|
5,407
|
14,867
|
|||||||||||
|
Agricultural business, including secured by farmland
|
1,022
|
1,200
|
1,743
|
2,066
|
|||||||||||
|
Consumer
|
1,850
|
1,799
|
2,719
|
2,896
|
|||||||||||
|
|
24,039
|
28,647
|
32,560
|
31,568
|
|||||||||||
|
Loans more than 90 days delinquent, still on accrual:
|
|
|
|
||||||||||||
|
Secured by real estate:
|
|
|
|
||||||||||||
|
Commercial
|
3,955
|
911
|
—
|
—
|
|||||||||||
|
One- to four-family
|
772
|
579
|
1,899
|
2,649
|
|||||||||||
|
Commercial business
|
61
|
495
|
1,025
|
425
|
|||||||||||
|
Consumer
|
34
|
131
|
130
|
181
|
|||||||||||
|
|
4,822
|
2,116
|
3,054
|
3,255
|
|||||||||||
|
Total non-performing loans
|
28,861
|
30,763
|
35,614
|
34,823
|
|||||||||||
|
REO
|
852
|
763
|
816
|
1,795
|
|||||||||||
|
Other repossessed assets
|
17
|
17
|
51
|
37
|
|||||||||||
|
Total non-performing assets
|
$
|
29,730
|
$
|
31,543
|
$
|
36,481
|
$
|
36,655
|
|||||||
|
Total non-performing assets to total assets
|
0.18
|
%
|
0.19
|
%
|
0.24
|
%
|
0.25
|
%
|
|||||||
|
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
|||||||||||
|
LOANS BY CREDIT RISK RATING
|
|
|
|
||||||||||||
|
|
|
|
|||||||||||||
|
Pass
|
$
|
8,956,604
|
$
|
9,315,264
|
$
|
9,494,147
|
$
|
9,699,098
|
|||||||
|
Special Mention
|
36,001
|
66,103
|
36,598
|
41,575
|
|||||||||||
|
Substandard
|
225,779
|
272,814
|
340,237
|
423,244
|
|||||||||||
|
Total
|
$
|
9,218,384
|
$
|
9,654,181
|
$
|
9,870,982
|
$
|
10,163,917
|
|||||||
|
|
Quarters Ended
|
Nine Months Ended
|
|||||||||||||||||
|
REAL ESTATE OWNED
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
||||||||||||||
|
Balance, beginning of period
|
$
|
763
|
$
|
340
|
$
|
2,400
|
$
|
816
|
$
|
814
|
|||||||||
|
Additions from loan foreclosures
|
89
|
423
|
—
|
512
|
1,588
|
||||||||||||||
|
Proceeds from dispositions of REO
|
—
|
—
|
(707)
|
(783)
|
(805)
|
||||||||||||||
|
Gain on sale of REO
|
—
|
—
|
120
|
307
|
216
|
||||||||||||||
|
Valuation adjustments in the period
|
—
|
—
|
(18)
|
—
|
(18)
|
||||||||||||||
|
Balance, end of period
|
$
|
852
|
$
|
763
|
$
|
1,795
|
$
|
852
|
$
|
1,795
|
|||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 13
|
ADDITIONAL FINANCIAL INFORMATION
|
||||||||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||||||||
|
DEPOSIT COMPOSITION
|
Percentage Change
|
|||||||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
Prior Qtr
|
Prior Yr Qtr
|
|||||||||||||||||
|
Non-interest-bearing
|
$
|
6,400,864
|
$
|
6,090,063
|
$
|
5,492,924
|
$
|
5,412,570
|
5.1
|
%
|
18.3
|
%
|
||||||||||
|
Interest-bearing checking
|
1,799,657
|
1,736,696
|
1,569,435
|
1,434,224
|
3.6
|
%
|
25.5
|
%
|
||||||||||||||
|
Regular savings accounts
|
2,773,995
|
2,646,302
|
2,398,482
|
2,332,287
|
4.8
|
%
|
18.9
|
%
|
||||||||||||||
|
Money market accounts
|
2,339,107
|
2,290,600
|
2,191,135
|
2,120,908
|
2.1
|
%
|
10.3
|
%
|
||||||||||||||
|
Total interest-bearing transaction and savings accounts
|
6,912,759
|
6,673,598
|
6,159,052
|
5,887,419
|
3.6
|
%
|
17.4
|
%
|
||||||||||||||
|
Total core deposits
|
13,313,623
|
12,763,661
|
11,651,976
|
11,299,989
|
4.3
|
%
|
17.8
|
%
|
||||||||||||||
|
Interest-bearing certificates
|
851,054
|
873,047
|
915,320
|
915,352
|
(2.5)
|
%
|
(7.0)
|
%
|
||||||||||||||
|
Total deposits
|
$
|
14,164,677
|
$
|
13,636,708
|
$
|
12,567,296
|
$
|
12,215,341
|
3.9
|
%
|
16.0
|
%
|
||||||||||
|
GEOGRAPHIC CONCENTRATION OF DEPOSITS
|
|||||||||||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
Percentage Change
|
|||||||||||||||||||||
|
Amount
|
Percentage
|
Amount
|
Amount
|
Amount
|
Prior Qtr
|
Prior Yr Qtr
|
|||||||||||||||||||
|
Washington
|
$
|
7,877,919
|
55.6
|
%
|
$
|
7,547,591
|
$
|
7,058,404
|
$
|
6,820,329
|
4.4
|
%
|
15.5
|
%
|
|||||||||||
|
Oregon
|
3,030,109
|
21.4
|
%
|
2,939,667
|
2,604,908
|
2,486,760
|
3.1
|
%
|
21.8
|
%
|
|||||||||||||||
|
California
|
2,501,521
|
17.7
|
%
|
2,417,387
|
2,237,949
|
2,254,681
|
3.5
|
%
|
10.9
|
%
|
|||||||||||||||
|
Idaho
|
755,128
|
5.3
|
%
|
732,063
|
666,035
|
653,571
|
3.2
|
%
|
15.5
|
%
|
|||||||||||||||
|
Total deposits
|
$
|
14,164,677
|
100.0
|
%
|
$
|
13,636,708
|
$
|
12,567,296
|
$
|
12,215,341
|
3.9
|
%
|
16.0
|
%
|
|||||||||||
|
INCLUDED IN TOTAL DEPOSITS
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
||||||||||||
|
Public non-interest-bearing accounts
|
$
|
193,414
|
$
|
187,702
|
$
|
175,352
|
$
|
142,415
|
||||||||
|
Public interest-bearing transaction & savings accounts
|
161,407
|
156,987
|
127,523
|
117,514
|
||||||||||||
|
Public interest-bearing certificates
|
40,851
|
41,444
|
59,127
|
54,219
|
||||||||||||
|
Total public deposits
|
$
|
395,672
|
$
|
386,133
|
$
|
362,002
|
$
|
314,148
|
||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 14
|
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 SEPTEMBER 30, 2021
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||
|
Banner Corporation-consolidated:
|
|
|
|
|
|||||||||||||||||
|
Total capital to risk-weighted assets
|
$
|
1,635,458
|
14.55
|
%
|
$
|
899,302
|
8.00
|
%
|
$
|
1,124,128
|
10.00
|
%
|
|||||||||
|
Tier 1 capital to risk-weighted assets
|
1,407,993
|
12.53
|
%
|
674,477
|
6.00
|
%
|
674,477
|
6.00
|
%
|
||||||||||||
|
Tier 1 leverage capital to average assets
|
1,407,993
|
8.79
|
%
|
640,528
|
4.00
|
%
|
n/a
|
n/a
|
|||||||||||||
|
Common equity tier 1 capital to risk-weighted assets
|
1,264,493
|
11.25
|
%
|
505,857
|
4.50
|
%
|
n/a
|
n/a
|
|||||||||||||
|
Banner Bank:
|
|
|
|
|
|||||||||||||||||
|
Total capital to risk-weighted assets
|
1,524,897
|
13.57
|
%
|
898,803
|
8.00
|
%
|
1,123,504
|
10.00
|
%
|
||||||||||||
|
Tier 1 capital to risk-weighted assets
|
1,397,432
|
12.44
|
%
|
674,102
|
6.00
|
%
|
898,803
|
8.00
|
%
|
||||||||||||
|
Tier 1 leverage capital to average assets
|
1,397,432
|
8.73
|
%
|
640,385
|
4.00
|
%
|
800,482
|
5.00
|
%
|
||||||||||||
|
Common equity tier 1 capital to risk-weighted assets
|
1,397,432
|
12.44
|
%
|
505,577
|
4.50
|
%
|
730,278
|
6.50
|
%
|
||||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 15
|
ADDITIONAL FINANCIAL INFORMATION
|
||||||||||||||||||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||||||||||||||||||
|
(rates / ratios annualized)
|
||||||||||||||||||||||||||||||||
|
ANALYSIS OF NET INTEREST SPREAD
|
Quarters Ended
|
|||||||||||||||||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
||||||||||||||||||||||||||||||
|
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
|
$
|
114,938
|
$
|
996
|
3.44
|
%
|
$
|
69,908
|
$
|
544
|
3.12
|
%
|
$
|
161,385
|
$
|
1,535
|
3.78
|
%
|
||||||||||||||
|
Mortgage loans
|
7,245,962
|
83,803
|
4.59
|
%
|
7,147,733
|
80,673
|
4.53
|
%
|
7,339,181
|
88,011
|
4.77
|
%
|
||||||||||||||||||||
|
Commercial/agricultural loans
|
1,534,978
|
15,776
|
4.08
|
%
|
1,480,954
|
15,818
|
4.28
|
%
|
1,721,186
|
18,553
|
4.29
|
%
|
||||||||||||||||||||
|
SBA PPP loans
|
566,515
|
15,421
|
10.80
|
%
|
1,144,195
|
17,796
|
6.24
|
%
|
1,141,105
|
7,843
|
2.73
|
%
|
||||||||||||||||||||
|
Consumer and other loans
|
120,112
|
1,774
|
5.86
|
%
|
122,951
|
1,828
|
5.96
|
%
|
140,493
|
2,195
|
6.22
|
%
|
||||||||||||||||||||
|
Total loans(1)(3)
|
9,582,505
|
117,770
|
4.88
|
%
|
9,965,741
|
116,659
|
4.70
|
%
|
10,503,350
|
118,137
|
4.47
|
%
|
||||||||||||||||||||
|
Mortgage-backed securities
|
2,560,027
|
11,820
|
1.83
|
%
|
2,440,913
|
11,563
|
1.90
|
%
|
1,250,759
|
7,333
|
2.33
|
%
|
||||||||||||||||||||
|
Other securities
|
1,491,035
|
7,873
|
2.09
|
%
|
1,250,417
|
7,088
|
2.27
|
%
|
884,916
|
6,036
|
2.71
|
%
|
||||||||||||||||||||
|
Equity securities
|
—
|
—
|
—
|
%
|
—
|
—
|
—
|
%
|
379,483
|
186
|
0.19
|
%
|
||||||||||||||||||||
|
Interest-bearing deposits with banks
|
1,486,839
|
586
|
0.16
|
%
|
1,139,749
|
376
|
0.13
|
%
|
171,894
|
123
|
0.28
|
%
|
||||||||||||||||||||
|
FHLB stock
|
13,957
|
135
|
3.84
|
%
|
14,001
|
161
|
4.61
|
%
|
16,363
|
163
|
3.96
|
%
|
||||||||||||||||||||
|
Total investment securities (3)
|
5,551,858
|
20,414
|
1.46
|
%
|
4,845,080
|
19,188
|
1.59
|
%
|
2,703,415
|
13,841
|
2.04
|
%
|
||||||||||||||||||||
|
Total interest-earning assets
|
15,134,363
|
138,184
|
3.62
|
%
|
14,810,821
|
135,847
|
3.68
|
%
|
13,206,765
|
131,978
|
3.98
|
%
|
||||||||||||||||||||
|
Non-interest-earning assets
|
1,301,383
|
|
|
1,227,167
|
1,259,816
|
|
|
|||||||||||||||||||||||||
|
Total assets
|
$
|
16,435,746
|
|
|
$
|
16,037,988
|
$
|
14,466,581
|
|
|
||||||||||||||||||||||
|
Deposits:
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
Interest-bearing checking accounts
|
$
|
1,771,869
|
282
|
0.06
|
%
|
$
|
1,754,363
|
302
|
0.07
|
%
|
$
|
1,413,085
|
321
|
0.09
|
%
|
|||||||||||||||||
|
Savings accounts
|
2,721,028
|
458
|
0.07
|
%
|
2,622,716
|
454
|
0.07
|
%
|
2,251,294
|
813
|
0.14
|
%
|
||||||||||||||||||||
|
Money market accounts
|
2,322,453
|
668
|
0.11
|
%
|
2,288,638
|
668
|
0.12
|
%
|
2,096,037
|
1,224
|
0.23
|
%
|
||||||||||||||||||||
|
Certificates of deposit
|
863,971
|
1,341
|
0.62
|
%
|
889,020
|
1,604
|
0.72
|
%
|
966,028
|
2,821
|
1.16
|
%
|
||||||||||||||||||||
|
Total interest-bearing deposits
|
7,679,321
|
2,749
|
0.14
|
%
|
7,554,737
|
3,028
|
0.16
|
%
|
6,726,444
|
5,179
|
0.31
|
%
|
||||||||||||||||||||
|
Non-interest-bearing deposits
|
6,275,634
|
—
|
—
|
%
|
6,057,884
|
—
|
—
|
%
|
5,340,688
|
—
|
—
|
%
|
||||||||||||||||||||
|
Total deposits
|
13,954,955
|
2,749
|
0.08
|
%
|
13,612,621
|
3,028
|
0.09
|
%
|
12,067,132
|
5,179
|
0.17
|
%
|
||||||||||||||||||||
|
Other interest-bearing liabilities:
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
FHLB advances
|
98,370
|
655
|
2.64
|
%
|
100,000
|
655
|
2.63
|
%
|
150,000
|
988
|
2.62
|
%
|
||||||||||||||||||||
|
Other borrowings
|
252,720
|
125
|
0.20
|
%
|
240,229
|
124
|
0.21
|
%
|
177,628
|
128
|
0.29
|
%
|
||||||||||||||||||||
|
Junior subordinated debentures and subordinated notes
|
247,944
|
2,193
|
3.51
|
%
|
247,944
|
2,204
|
3.57
|
%
|
247,944
|
2,260
|
3.63
|
%
|
||||||||||||||||||||
|
Total borrowings
|
599,034
|
2,973
|
1.97
|
%
|
588,173
|
2,983
|
2.03
|
%
|
575,572
|
3,376
|
2.33
|
%
|
||||||||||||||||||||
|
Total funding liabilities
|
14,553,989
|
5,722
|
0.16
|
%
|
14,200,794
|
6,011
|
0.17
|
%
|
12,642,704
|
8,555
|
0.27
|
%
|
||||||||||||||||||||
|
Other non-interest-bearing liabilities(2)
|
202,918
|
|
|
199,619
|
193,256
|
|
|
|||||||||||||||||||||||||
|
Total liabilities
|
14,756,907
|
|
|
14,400,413
|
12,835,960
|
|
|
|||||||||||||||||||||||||
|
Shareholders’ equity
|
1,678,839
|
|
|
1,637,575
|
1,630,621
|
|
|
|||||||||||||||||||||||||
|
Total liabilities and shareholders’ equity
|
$
|
16,435,746
|
|
|
$
|
16,037,988
|
$
|
14,466,581
|
|
|
||||||||||||||||||||||
|
Net interest income/rate spread (tax equivalent)
|
$
|
132,462
|
3.46
|
%
|
$
|
129,836
|
3.51
|
%
|
$
|
123,423
|
3.71
|
%
|
||||||||||||||||||||
|
Net interest margin (tax equivalent)
|
3.47
|
%
|
3.52
|
%
|
3.72
|
%
|
||||||||||||||||||||||||||
|
Reconciliation to reported net interest income:
|
||||||||||||||||||||||||||||||||
|
Adjustments for taxable equivalent basis
|
(2,316)
|
(2,282)
|
(2,397)
|
|||||||||||||||||||||||||||||
|
Net interest income and margin, as reported
|
$
|
130,146
|
3.41
|
%
|
$
|
127,554
|
3.45
|
%
|
$
|
121,026
|
3.65
|
%
|
||||||||||||||||||||
|
Additional Key Financial Ratios:
|
||||||||||||||||||||||||||||||||
|
Return on average assets
|
1.20
|
%
|
1.36
|
%
|
1.01
|
%
|
||||||||||||||||||||||||||
|
Return on average equity
|
11.79
|
%
|
13.32
|
%
|
8.92
|
%
|
||||||||||||||||||||||||||
|
Average equity/average assets
|
10.21
|
%
|
10.21
|
%
|
11.27
|
%
|
||||||||||||||||||||||||||
|
Average interest-earning assets/average interest-bearing liabilities
|
182.82
|
%
|
181.89
|
%
|
180.86
|
%
|
||||||||||||||||||||||||||
|
Average interest-earning assets/average funding liabilities
|
103.99
|
%
|
104.30
|
%
|
104.46
|
%
|
||||||||||||||||||||||||||
|
Non-interest income/average assets
|
0.61
|
%
|
0.56
|
%
|
0.78
|
%
|
||||||||||||||||||||||||||
|
Non-interest expense/average assets
|
2.47
|
%
|
2.32
|
%
|
2.48
|
%
|
||||||||||||||||||||||||||
|
Efficiency ratio(4)
|
65.70
|
%
|
61.79
|
%
|
60.32
|
%
|
||||||||||||||||||||||||||
|
Adjusted efficiency ratio(5)
|
59.65
|
%
|
58.50
|
%
|
58.02
|
%
|
||||||||||||||||||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 16
|
(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 junior subordinated debentures.
|
|
(3)
|
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.3 million,
$1.3 million, and $1.4 million for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $1.0
million, and $976,000 for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.
|
|
(4)
|
Non-interest expense divided by the total of net interest income and non-interest income.
|
|
(5)
|
Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on
the final two pages of the press release tables.
|
BANR - Third Quarter 2021 Results
October 20, 2021
Page 17
|
ADDITIONAL FINANCIAL INFORMATION
|
|||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||
|
(rates / ratios annualized)
|
|||||||||||||||||||||
|
ANALYSIS OF NET INTEREST SPREAD
|
Nine Months Ended
|
||||||||||||||||||||
|
Sep 30, 2021
|
Sep 30, 2020
|
||||||||||||||||||||
|
Average Balance
|
Interest and Dividends
|
Yield/Cost(3)
|
Average Balance
|
Interest and Dividends
|
Yield/Cost(3)
|
||||||||||||||||
|
Interest-earning assets:
|
|||||||||||||||||||||
|
Held for sale loans
|
$
|
101,380
|
$
|
2,465
|
3.25
|
%
|
$
|
155,571
|
$
|
4,506
|
3.87
|
%
|
|||||||||
|
Mortgage loans
|
7,179,859
|
245,056
|
4.56
|
%
|
7,321,206
|
268,244
|
4.89
|
%
|
|||||||||||||
|
Commercial/agricultural loans
|
1,511,723
|
47,513
|
4.20
|
%
|
1,811,854
|
61,424
|
4.53
|
%
|
|||||||||||||
|
SBA PPP loans
|
958,848
|
44,009
|
6.14
|
%
|
638,380
|
13,131
|
2.75
|
%
|
|||||||||||||
|
Consumer and other loans
|
123,483
|
5,549
|
6.01
|
%
|
151,968
|
7,151
|
6.29
|
%
|
|||||||||||||
|
Total loans(1)(3)
|
9,875,293
|
344,592
|
4.67
|
%
|
10,078,979
|
354,456
|
4.70
|
%
|
|||||||||||||
|
Mortgage-backed securities
|
2,320,474
|
32,855
|
1.89
|
%
|
1,297,020
|
24,652
|
2.54
|
%
|
|||||||||||||
|
Other securities
|
1,265,056
|
21,648
|
2.29
|
%
|
710,967
|
15,205
|
2.86
|
%
|
|||||||||||||
|
Equity securities
|
574
|
—
|
—
|
%
|
165,395
|
309
|
0.25
|
%
|
|||||||||||||
|
Interest-bearing deposits with banks
|
1,221,241
|
1,224
|
0.13
|
%
|
159,065
|
688
|
0.58
|
%
|
|||||||||||||
|
FHLB stock
|
14,629
|
457
|
4.18
|
%
|
19,822
|
785
|
5.29
|
%
|
|||||||||||||
|
Total investment securities(3)
|
4,821,974
|
56,184
|
1.56
|
%
|
2,352,269
|
41,639
|
2.36
|
%
|
|||||||||||||
|
Total interest-earning assets
|
14,697,267
|
400,776
|
3.65
|
%
|
12,431,248
|
396,095
|
4.26
|
%
|
|||||||||||||
|
Non-interest-earning assets
|
1,255,512
|
|
1,232,997
|
||||||||||||||||||
|
Total assets
|
$
|
15,952,779
|
|
$
|
13,664,245
|
||||||||||||||||
|
Deposits:
|
|
|
|||||||||||||||||||
|
Interest-bearing checking accounts
|
$
|
1,714,920
|
899
|
0.07
|
%
|
$
|
1,352,369
|
1,164
|
0.11
|
%
|
|||||||||||
|
Savings accounts
|
2,611,046
|
1,433
|
0.07
|
%
|
2,133,780
|
3,566
|
0.22
|
%
|
|||||||||||||
|
Money market accounts
|
2,284,904
|
2,111
|
0.12
|
%
|
1,940,096
|
5,228
|
0.36
|
%
|
|||||||||||||
|
Certificates of deposit
|
888,502
|
4,943
|
0.74
|
%
|
1,069,145
|
10,665
|
1.33
|
%
|
|||||||||||||
|
Total interest-bearing deposits
|
7,499,372
|
9,386
|
0.17
|
%
|
6,495,390
|
20,623
|
0.42
|
%
|
|||||||||||||
|
Non-interest-bearing deposits
|
6,001,354
|
—
|
—
|
%
|
4,738,559
|
—
|
—
|
%
|
|||||||||||||
|
Total deposits
|
13,500,726
|
9,386
|
0.09
|
%
|
11,233,949
|
20,623
|
0.25
|
%
|
|||||||||||||
|
Other interest-bearing liabilities:
|
|
|
|
|
|
|
|||||||||||||||
|
FHLB advances
|
114,103
|
2,244
|
2.63
|
%
|
236,949
|
4,036
|
2.28
|
%
|
|||||||||||||
|
Other borrowings
|
232,142
|
358
|
0.21
|
%
|
195,977
|
482
|
0.33
|
%
|
|||||||||||||
|
Junior subordinated debentures and subordinated notes
|
247,944
|
6,605
|
3.56
|
%
|
181,886
|
4,988
|
3.66
|
%
|
|||||||||||||
|
Total borrowings
|
594,189
|
9,207
|
2.07
|
%
|
614,812
|
9,506
|
2.07
|
%
|
|||||||||||||
|
Total funding liabilities
|
14,094,915
|
18,593
|
0.18
|
%
|
11,848,761
|
30,129
|
0.34
|
%
|
|||||||||||||
|
Other non-interest-bearing liabilities(2)
|
203,349
|
|
197,912
|
||||||||||||||||||
|
Total liabilities
|
14,298,264
|
|
12,046,673
|
||||||||||||||||||
|
Shareholders’ equity
|
1,654,515
|
|
1,617,572
|
||||||||||||||||||
|
Total liabilities and shareholders’ equity
|
$
|
15,952,779
|
|
$
|
13,664,245
|
||||||||||||||||
|
Net interest income/rate spread (tax equivalent)
|
$
|
382,183
|
3.47
|
%
|
$
|
365,966
|
3.92
|
%
|
|||||||||||||
|
Net interest margin (tax equivalent)
|
3.48
|
%
|
3.93
|
%
|
|||||||||||||||||
|
Reconciliation to reported net interest income:
|
|||||||||||||||||||||
|
Adjustments for taxable equivalent basis
|
(6,822)
|
(6,102)
|
|||||||||||||||||||
|
Net interest income and margin, as reported
|
$
|
375,361
|
3.41
|
%
|
$
|
359,864
|
3.87
|
%
|
|||||||||||||
|
Additional Key Financial Ratios:
|
|||||||||||||||||||||
|
Return on average assets
|
1.27
|
%
|
0.75
|
%
|
|||||||||||||||||
|
Return on average equity
|
12.21
|
%
|
6.36
|
%
|
|||||||||||||||||
|
Average equity/average assets
|
10.37
|
%
|
11.84
|
%
|
|||||||||||||||||
|
Average interest-earning assets/average interest-bearing liabilities
|
`
|
181.59
|
%
|
174.84
|
%
|
||||||||||||||||
|
Average interest-earning assets/average funding liabilities
|
104.27
|
%
|
104.92
|
%
|
|||||||||||||||||
|
Non-interest income/average assets
|
0.60
|
%
|
0.73
|
%
|
|||||||||||||||||
|
Non-interest expense/average assets
|
2.42
|
%
|
2.68
|
%
|
|||||||||||||||||
|
Efficiency ratio(4)
|
64.45
|
%
|
63.00
|
%
|
|||||||||||||||||
|
Adjusted efficiency ratio(5)
|
60.39
|
%
|
59.59
|
%
|
|||||||||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 18
|
(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 junior subordinated debentures.
|
|
(3)
|
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $3.8 million and $3.6 million
for the nine months ended September 30, 2021 and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.0 million and $2.5 million for the nine months ended
September 30, 2021 and September 30, 2020, respectively.
|
|
(4)
|
Non-interest expense divided by the total of net interest income and non-interest income.
|
|
(5)
|
Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two
pages of the press release tables.
|
|
ADDITIONAL FINANCIAL INFORMATION
|
|||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
|
* Non-GAAP Financial Measures
|
|||||||||||||||||||
|
In addition to results presented in accordance with generally accepted accounting principles in the United States of America
(GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess
trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. 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:
|
|||||||||||||||||||
|
ADJUSTED REVENUE
|
Quarters Ended
|
Nine Months Ended
|
|||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
|||||||||||||||
|
Net interest income
|
$
|
130,146
|
$
|
127,554
|
$
|
121,026
|
$
|
375,361
|
$
|
359,864
|
|||||||||
|
Total non-interest income
|
25,334
|
22,336
|
28,222
|
71,942
|
75,107
|
||||||||||||||
|
Total revenue (GAAP)
|
155,480
|
149,890
|
149,248
|
447,303
|
434,971
|
||||||||||||||
|
Exclude net gain on sale of securities
|
(56)
|
(77)
|
(644)
|
(618)
|
(815)
|
||||||||||||||
|
Exclude net change in valuation of financial instruments carried at fair value
|
(1,778)
|
(58)
|
(37)
|
(1,895)
|
2,360
|
||||||||||||||
|
Adjusted revenue (non-GAAP)
|
$
|
153,646
|
$
|
149,755
|
$
|
148,567
|
$
|
444,790
|
$
|
436,516
|
|||||||||
|
ADJUSTED EARNINGS
|
Quarters Ended
|
Nine Months Ended
|
||||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
||||||||||||||||
|
Net income (GAAP)
|
$
|
49,884
|
$
|
54,382
|
$
|
36,548
|
$
|
151,121
|
$
|
76,971
|
||||||||||
|
Exclude net gain on sale of securities
|
(56)
|
(77)
|
(644)
|
(618)
|
(815)
|
|||||||||||||||
|
Exclude net change in valuation of financial instruments carried at fair value
|
(1,778)
|
(58)
|
(37)
|
(1,895)
|
2,360
|
|||||||||||||||
|
Exclude merger and acquisition-related expenses
|
10
|
79
|
5
|
660
|
1,483
|
|||||||||||||||
|
Exclude COVID-19 expenses
|
44
|
117
|
778
|
309
|
3,169
|
|||||||||||||||
|
Exclude Banner Forward expenses
|
7,592
|
1,905
|
—
|
10,447
|
—
|
|||||||||||||||
|
Exclude related net tax expense (benefit)
|
(1,395)
|
(472)
|
(24)
|
(2,137)
|
(1,476)
|
|||||||||||||||
|
Total adjusted earnings (non-GAAP)
|
$
|
54,301
|
$
|
55,876
|
$
|
36,626
|
$
|
157,887
|
$
|
81,692
|
||||||||||
|
Diluted earnings per share (GAAP)
|
$
|
1.44
|
$
|
1.56
|
$
|
1.03
|
$
|
4.32
|
$
|
2.17
|
||||||||||
|
Diluted adjusted earnings per share (non-GAAP)
|
$
|
1.57
|
$
|
1.60
|
$
|
1.04
|
$
|
4.51
|
$
|
2.30
|
||||||||||
BANR - Third Quarter 2021 Results
October 20, 2021
Page 19
|
ADDITIONAL FINANCIAL INFORMATION
|
||||||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||||||
|
ADJUSTED EFFICIENCY RATIO
|
Quarters Ended
|
Nine Months Ended
|
||||||||||||||||||
|
Sep 30, 2021
|
Jun 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
||||||||||||||||
|
Non-interest expense (GAAP)
|
$
|
102,145
|
$
|
92,624
|
$
|
90,028
|
$
|
288,296
|
$
|
274,033
|
||||||||||
|
Exclude merger and acquisition-related expenses
|
(10)
|
(79)
|
(5)
|
(660)
|
(1,483)
|
|||||||||||||||
|
Exclude COVID-19 expenses
|
(44)
|
(117)
|
(778)
|
(309)
|
(3,169)
|
|||||||||||||||
|
Exclude Banner Forward expenses
|
(7,592)
|
(1,905)
|
—
|
(10,447)
|
—
|
|||||||||||||||
|
Exclude CDI amortization
|
(1,575)
|
(1,711)
|
(1,864)
|
(4,997)
|
(5,867)
|
|||||||||||||||
|
Exclude state/municipal tax expense
|
(1,219)
|
(1,083)
|
(1,196)
|
(3,367)
|
(3,284)
|
|||||||||||||||
|
Exclude REO operations
|
(53)
|
(118)
|
11
|
71
|
(93)
|
|||||||||||||||
|
Adjusted non-interest expense (non-GAAP)
|
$
|
91,652
|
$
|
87,611
|
$
|
86,196
|
$
|
268,587
|
$
|
260,137
|
||||||||||
|
Net interest income (GAAP)
|
$
|
130,146
|
$
|
127,554
|
$
|
121,026
|
$
|
375,361
|
$
|
359,864
|
||||||||||
|
Non-interest income (GAAP)
|
25,334
|
22,336
|
28,222
|
71,942
|
75,107
|
|||||||||||||||
|
Total revenue
|
155,480
|
149,890
|
149,248
|
447,303
|
434,971
|
|||||||||||||||
|
Exclude net gain on sale of securities
|
(56)
|
(77)
|
(644)
|
(618)
|
(815)
|
|||||||||||||||
|
Exclude net change in valuation of financial instruments carried at fair value
|
(1,778)
|
(58)
|
(37)
|
(1,895)
|
2,360
|
|||||||||||||||
|
Adjusted revenue (non-GAAP)
|
$
|
153,646
|
$
|
149,755
|
$
|
148,567
|
$
|
444,790
|
$
|
436,516
|
||||||||||
|
Efficiency ratio (GAAP)
|
65.70
|
%
|
61.79
|
%
|
60.32
|
%
|
64.45
|
%
|
63.00
|
%
|
||||||||||
|
Adjusted efficiency ratio (non-GAAP)
|
59.65
|
%
|
58.50
|
%
|
58.02
|
%
|
60.39
|
%
|
59.59
|
%
|
||||||||||
|
TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS
|
Sep 30, 2021
|
Jun 30, 2021
|
Dec 31, 2020
|
Sep 30, 2020
|
||||||||||||
|
Shareholders’ equity (GAAP)
|
$
|
1,667,119
|
$
|
1,669,211
|
$
|
1,666,264
|
$
|
1,646,529
|
||||||||
|
Exclude goodwill and other intangible assets, net
|
389,550
|
391,125
|
394,547
|
396,412
|
||||||||||||
|
Tangible common shareholders’ equity (non-GAAP)
|
$
|
1,277,569
|
$
|
1,278,086
|
$
|
1,271,717
|
$
|
1,250,117
|
||||||||
|
Total assets (GAAP)
|
$
|
16,637,879
|
$
|
16,181,857
|
$
|
15,031,623
|
$
|
14,642,075
|
||||||||
|
Exclude goodwill and other intangible assets, net
|
389,550
|
391,125
|
394,547
|
396,412
|
||||||||||||
|
Total tangible assets (non-GAAP)
|
$
|
16,248,329
|
$
|
15,790,732
|
$
|
14,637,076
|
$
|
14,245,663
|
||||||||
|
Common shareholders’ equity to total assets (GAAP)
|
10.02
|
%
|
10.32
|
%
|
11.09
|
%
|
11.25
|
%
|
||||||||
|
Tangible common shareholders’ equity to tangible assets (non-GAAP)
|
7.86
|
%
|
8.09
|
%
|
8.69
|
%
|
8.78
|
%
|
||||||||
|
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
|
||||||||||||||||
|
Tangible common shareholders’ equity (non-GAAP)
|
$
|
1,277,569
|
$
|
1,278,086
|
$
|
1,271,717
|
$
|
1,250,117
|
||||||||
|
Common shares outstanding at end of period
|
34,251,991
|
34,550,888
|
35,159,200
|
35,158,568
|
||||||||||||
|
Common shareholders’ equity (book value) per share (GAAP)
|
$
|
48.67
|
$
|
48.31
|
$
|
47.39
|
$
|
46.83
|
||||||||
|
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)
|
$
|
37.30
|
$
|
36.99
|
$
|
36.17
|
$
|
35.56
|
||||||||
