• Banner Corporation Reports Third Quarter Net Income of $25.1 Million, or $0.76 per Diluted Share; Highlighted by Strong Loan and Core Deposit Growth

    Source: Nasdaq GlobeNewswire / 25 Oct 2017 16:00:18   America/New_York

    WALLA WALLA, Wash., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported that year-over-year revenue growth contributed to solid third quarter and year-to-date 2017 operating results.  Net income in the third quarter of 2017 was $25.1 million, or $0.76 per diluted share, compared to $25.5 million, or $0.77 per diluted share, in the preceding quarter and increased 5% compared to $23.9 million, or $0.70 per diluted share, in the third quarter a year ago.  There were no acquisition-related expenses in the third quarter of 2017 or the preceding quarter.  In the third quarter a year ago, acquisition-related expenses totaled $1.7 million.  In the first nine months of 2017, net income increased 19% to $74.3 million, or $2.25 per diluted share, compared to $62.6 million, or $1.83 per diluted share, in the first nine months of 2016.  There were no acquisition-related costs in the first nine months of 2017, compared to $10.9 million in acquisition-related expenses in the first nine months of 2016.

    “Our third quarter financial results were highlighted by strong loan and core deposit growth and solid net interest income reflecting earning asset expansion and our strong net interest margin,” stated Mark J. Grescovich, President and Chief Executive Officer.  “While we experienced a significant decrease in accretion income on loans acquired in merger transactions compared to recent quarters, strong business activity resulted in both loan and core deposit growth for the quarter and year to date, generating meaningful increases in contractual net interest income and deposit fees.  Earlier this year we crossed the threshold of $10.0 billion in total assets, incurring increased expenses related to enhanced infrastructure and regulatory compliance costs.  Although increasing regulatory costs are a significant headwind, we are continuing to successfully execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders while still maintaining our moderate risk profile.”

    At September 30, 2017, Banner Corporation had $10.44 billion in assets, $7.77 billion in net loans and $8.54 billion in deposits.  Banner operates 178 branch offices located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

    Third Quarter 2017 Highlights

    • Net income was $25.1 million, compared to $25.5 million in the preceding quarter and increased 5% compared to $23.9 million in the third quarter of 2016.
    • Return on average assets was 0.97% in the current quarter, compared to 1.01% in the preceding quarter and 0.96% in the same quarter a year ago.
    • Revenues from core operations* were $120.8 million, compared to $122.9 million in the preceding quarter, and increased 3% compared to $117.5 million in the third quarter a year ago.
    • Net interest margin was 4.22% for the current quarter, compared to 4.33% in the preceding quarter and 4.15% in the third quarter a year ago.
    • Deposit fees and other service charges were $13.3 million, compared to $13.2 million in the preceding quarter and a 3% increase compared to $12.9 million in the third quarter a year ago.
    • Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $89.1 million or 1.15% of total loans.
    • Net loans receivable increased 3% to $7.69 billion at September 30, 2017, compared to $7.46 billion at June 30, 2017, and increased 5% compared to $7.31 billion a year ago.
    • Core deposits increased 2% during the current quarter and increased 6% compared to September 30, 2016.
    • Core deposits represented 87% of total deposits at September 30, 2017.
    • Quarterly dividends to shareholders were $0.25 per share.  In addition, Banner paid a special dividend of $1.00 per share on July 18, 2017.
    • Common shareholders' tangible equity per share* was $31.79 at September 30, 2017, compared to $31.21 at the preceding quarter end and $31.14 a year ago.
    • The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.39% at September 30, 2017, compared to 10.46% at the preceding quarter end and 11.03% a year ago.

    *Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), and references to tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

    Income Statement Review

    Banner’s third quarter net interest income, before the provision for loan losses, increased modestly to $100.2 million, compared to $99.7 million in the preceding quarter and increased 7% compared to $93.7 million in the third quarter a year ago.  In the first nine months of 2017, net interest income, before the provision for loan losses, increased 6% to $294.8 million compared to $277.9 million in the first nine months of 2016.

    “Our net interest margin decreased compared to the preceding quarter, largely reflecting decreased purchased loan discount accretion,” said Grescovich.  Banner's net interest margin was 4.22% for the third quarter of 2017, compared to 4.33% in the preceding quarter and reflected a seven basis point improvement compared to 4.15% in the third quarter a year ago.  Acquisition accounting adjustments, principally loan discount accretion, added 10 basis points to the net interest margin in the current quarter compared to 15 basis points in the preceding quarter and 11 basis points in the third quarter a year ago.  In the first nine months of 2017, Banner’s net interest margin improved 11 basis points to 4.27% compared to 4.16% in the first nine months of 2016.  Purchase accounting adjustments added 12 basis points to the net interest margin for the first nine months of 2017 compared to 14 basis points for the first nine months of 2016.  The total purchase discount for acquired loans was $23.4 million at September 30, 2017, down from $25.8 million at June 30, 2017 and $34.9 million a year ago due to discount accretion.

    Average interest-earning asset yields decreased ten basis points to 4.43% compared to 4.53% for the preceding quarter and increased nine basis points compared to 4.34% in the third quarter a year ago.  Average loan yields decreased ten basis points to 4.88% compared to the preceding quarter and increased ten basis points from the third quarter a year ago.  Loan discount accretion added 12 basis points to loan yields in the third quarter, compared to 18 basis points in the preceding quarter and 15 basis points in the third quarter a year ago.  Deposit costs were 0.15% in the third quarter, the same as in the preceding quarter and a one basis point increase compared to the third quarter a year ago.  The total cost of funds increased one basis point to 0.23% during the third quarter compared to 0.22% for the preceding quarter and 0.19% for the third quarter a year ago.

    “While our asset quality metrics remain strong, we modestly increased the loan loss allowance during the quarter and expect to continue adding to the allowance as we strive to maintain solid reserves and a moderate risk profile,” said Grescovich.  Largely as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio as well as net charge-offs, Banner recorded a $2.0 million provision for loan losses during the third quarter, the same as in the preceding quarter and the year ago quarter.

    Deposit fees and other service charges were $13.3 million in the third quarter, a modest increase compared to $13.2 million in the preceding quarter and a 3% increase compared to $12.9 million in the third quarter a year ago.

    Banner’s mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.5 million in the third quarter compared to $6.8 million in the preceding quarter and $8.1 million in the third quarter of 2016.  Sales of one- to four-family loans in the current quarter resulted in gains of $3.7 million compared to $4.4 million in the preceding quarter.  The decrease was due to a decline in spreads on one- to four-family loan originations and sales during the quarter.  Home purchase activity accounted for 77% of third quarter one- to four-family mortgage loan originations.  Sales of multifamily loans in the current quarter resulted in gains of $268,000, while sales of multifamily loans generated $1.8 million of gains in the preceding quarter.  The decline in multifamily gain on sale income was due to a combination of declining market spreads on sold loans in the current quarter and the transition to hedge accounting in previous quarter.

    Third quarter 2017 results included a $493,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partially offset by a $270,000 net gain on the sale of securities.  In the preceding quarter, results included a $650,000 net loss for fair value adjustments and a $54,000 net loss on the sale of securities.  In the third quarter a year ago, results included a $1.1 million net loss for fair value adjustments that was partially offset by an $891,000 net gain on the sale of securities.

    Total revenues decreased slightly to $120.5 million for the third quarter of 2017, compared to $122.2 million in the preceding quarter but increased 3% compared to $117.2 million in the third quarter a year ago.  In the first nine months of 2017, total revenues increased 5% to $358.4 million, compared to $341.9 million in the first nine months of 2016.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) decreased to $120.8 million in the third quarter of 2017, compared to $122.9 million in the preceding quarter, but increased 3% compared to $117.5 million in the third quarter of 2016.  In the first nine months of 2017, revenues from core operations* increased 5% to $360.0 million, compared to $342.8 million in the first nine months of 2016.

    Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.3 million in the third quarter of 2017, compared to $22.5 million in the second quarter of 2017 and $23.5 million in the third quarter a year ago.  In the first nine months of 2017, total non-interest income was $63.7 million compared to $64.0 million in the first nine months of 2016.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $20.6 million in the third quarter of 2017, compared to $23.2 million for the second quarter of 2017 and $23.7 million in the third quarter a year ago.  In the first nine months of 2017, non-interest income from core operations* was $65.3 million, compared to $64.9 million in the first nine months of 2016.

    Banner’s total non-interest expenses were $82.6 million in the third quarter of 2017, compared to $81.9 million in the preceding quarter and $79.1 million in the third quarter of 2016.  The current and preceding quarter's non-interest expenses included increased salary and employee benefits and elevated costs for professional services as compared to the third quarter a year ago largely due to enhanced regulatory requirements attributable to compliance and risk management infrastructure build-out as a result of crossing the $10 billion asset threshold.  There were no acquisition-related expenses in the current quarter or in the preceding quarter, compared to $1.7 million in the third quarter a year ago.  In the first nine months of 2017, non-interest expense was $242.6 million compared to $243.0 million in the first nine months of 2016.  The first nine months of 2016 included $10.9 million of acquisition-related expenses.  There were no acquisition-related expenses in the first nine months of 2017.

    For the third quarter of 2017, Banner recorded $10.9 million in state and federal income tax expense for an effective tax rate of 30.3%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income, certain tax credits and  a $1.3 million annual return to provision adjustment related to filing our federal and state income tax returns.

    Balance Sheet Review

    Banner’s total assets increased to $10.44 billion at September 30, 2017, from $10.20 billion at June 30, 2017 and $9.84 billion a year ago.  The total of securities and interest-bearing deposits held at other banks was $1.68 billion at September 30, 2017, compared to $1.66 billion at June 30, 2017 and $1.16 billion at December 31, 2016.  The increase in the securities portfolio during the year reflects Banner's leveraging strategy as it crossed the $10 billion in assets threshold in 2017.  In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016.  The average effective duration of Banner's securities portfolio was approximately 3.6 years at September 30, 2017, compared to 3.8 years at December 31, 2016 and 2.9 years at September 30, 2016.

    “Net loans increased $222.4 million during the quarter and increased 5% year over year, with solid production in targeted loan types, including commercial business, commercial real estate, construction and development loans, residential real estate and consumer loans,” said Grescovich.  “We see significant potential for growth in our loan origination pipelines due to the robust economic activity in the markets that we serve, particularly in the Pacific Northwest.”

    Net loans receivable increased 3% to $7.69 billion at September 30, 2017, compared to $7.46 billion at June 30, 2017, and increased 5% compared to $7.31 billion a year ago.  Commercial real estate and multifamily real estate loans increased slightly to $3.67 billion at September 30, 2017, compared to $3.62 billion at June 30, 2017, and increased 4% compared to $3.53 billion a year ago.  Commercial business loans increased 2% to $1.31 billion at September 30, 2017, compared to $1.29 billion three months earlier and increased 10% compared to $1.19 billion a year ago.  Agricultural business loans declined to $339.9 million at September 30, 2017, compared to $344.4 million three months earlier and $383.3 million a year ago.  Total construction, land and land development loans increased 8% to $878.4 million at September 30, 2017, compared to $811.5 million at June 30, 2017, and increased 10% compared to $797.3 million a year earlier.  Consumer loans increased to $701.2 million at September 30, 2017, compared to $687.8 million at June 30, 2017, and increased 7% compared to $657.2 million a year ago largely as a result of a successful second quarter campaign to generate additional home equity lines of credit.  One- to four-family loans increased $69.5 million during the quarter to $869.6 million as a result of an increase in the amount of loans originated for the portfolio compared to loans sold in the secondary market.

    Loans held for sale increased to $71.9 million at September 30, 2017, compared to $66.2 million at June 30, 2017, but decreased compared to $123.1 million at September 30, 2016.  The volume of residential mortgage loans sold was $141.0 million in the current quarter compared to $131.0 million in the preceding quarter.  Banner sold $86.0 million of multifamily loans during the quarter ended September 30, 2017 and $114.8 million during the preceding quarter.  Loans held for sale at September 30, 2017 included $47.0 million of multifamily loans and $24.9 million of one- to four-family loans.

    Total deposits were $8.54 billion at September 30, 2017, a modest increase compared to $8.48 billion at June 30, 2017, and a 5% increase compared to $8.11 billion a year ago, as strong core deposit growth was partially offset by continuing declines in certificates of deposit.  Non-interest-bearing account balances were $3.38 billion at September 30, 2017, compared to $3.25 billion at June 30, 2017 and increased 6% compared to $3.19 billion a year ago.  Interest-bearing transaction and savings accounts were $4.06 billion at September 30, 2017, compared to $4.02 billion at June 30, 2017 and increased 7% compared to $3.80 billion a year ago.  Certificates of deposit were $1.10 billion at September 30, 2017, compared to $1.21 billion at June 30, 2017 and $1.12 billion a year earlier.  Brokered deposits totaled $171.7 million at September 30, 2017, compared to $250.0 million at June 30, 2017 and $60.3 million a year ago.  The increase in brokered deposits compared to a year ago provided funding for the purchase of investment securities in connection with Banner's leveraging strategy subsequent to December 31, 2016.

    Core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased 2% during the current quarter and increased 6% compared to September 30, 2016, reflecting additional account growth as well as increased balances from existing clients.  Core deposits represented 87% of total deposits September 30, 2017 compared to 86% of total deposits both at June 30, 2017 and a year earlier.  The average cost of deposits was 0.15% for the quarter ended September 30, 2017, the same as in the preceding quarter and a one basis point increase compared to the quarter ended September 30, 2016.

    At September 30, 2017, total common shareholders' equity was $1.33 billion, or $39.90 per share, compared to $1.31 billion at June 30, 2017 and $1.33 billion a year ago.  At September 30, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.06 billion, or 10.39% of tangible assets*, compared to $1.04 billion, or 10.46% of tangible assets, at June 30, 2017 and $1.05 billion, or 11.03% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.79 at September 30, 2017, compared to $31.14 per share a year ago.

    Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards.  At September 30, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.16%, its Tier 1 leverage capital to average assets ratio was 11.49%, and its total capital to risk-weighted assets ratio was13.52%.

    Credit Quality

    The allowance for loan losses was $89.1 million at September 30, 2017, or 1.15% of total loans outstanding and 296% of non-performing loans compared to $84.2 million at September 30, 2016, or 1.14% of total loans outstanding and 309% of non-performing loans.  Banner had net charge-offs of $1.5 million in the third quarter compared to net recoveries of $59,000 in the preceding quarter and net recoveries of $902,000 in the third quarter a year ago.  Primarily as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, as well as the net charge offs, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter and in the year ago quarter.  Non-performing loans were $30.1 million at September 30, 2017, compared to $21.9 million at June 30, 2017 and $27.3 million a year ago.  Real estate owned and other repossessed assets were $1.6 million at September 30, 2017, compared to $2.6 million at June 30, 2017 and $4.9 million a year ago.

    In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank in 2015 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw Bank.

    Banner's non-performing assets were $31.7 million, or 0.30% of total assets, at September 30, 2017, compared to $24.5 million, or 0.24% of total assets, at June 30, 2017 and $32.2 million, or 0.33% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $23.2 million at September 30, 2017, compared to $26.3 million at June 30, 2017 and $38.7 million a year ago.

    Subsequent Event

    On October 6, 2017, Banner Bank completed the sale of its seven branches and related assets and liabilities in Utah to People’s Intermountain Bank, a banking subsidiary of People’s Utah Bancorp (NASDAQ:PUB).  Under the terms of the purchase and assumption agreement, the sale included approximately $255 million in loans and $160 million in deposits.  The deposit premium is estimated to be approximately $13.8 million based on average deposits at closing.

    Conference Call

    Banner will host a conference call on Thursday, October 26, 2017, 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 10112453, or at www.bannerbank.com.

    About the Company

    Banner Corporation is a $10.4 billion bank holding company operating two commercial banks in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

    Forward-Looking Statements

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

    Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

    RESULTS OF OPERATIONS Quarters Ended Nine months ended
    (in thousands except shares and per share data) Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
               
    INTEREST INCOME:          
    Loans receivable $95,221  $94,795  $89,805  $281,304  $265,697 
    Mortgage-backed securities 6,644  6,239  4,803  17,529  15,467 
    Securities and cash equivalents 3,413  3,402  3,241  9,976  9,306 
      105,278  104,436  97,849  308,809  290,470 
    INTEREST EXPENSE:          
    Deposits 3,189  3,182  2,784  9,162  8,501 
    Federal Home Loan Bank advances 569  301  256  1,142  874 
    Other borrowings 84  83  82  241  234 
    Junior subordinated debentures 1,226  1,164  1,019  3,494  2,962 
      5,068  4,730  4,141  14,039  12,571 
    Net interest income before provision for loan losses 100,210  99,706  93,708  294,770  277,899 
    PROVISION FOR LOAN LOSSES 2,000  2,000  2,000  6,000  4,000 
    Net interest income 98,210  97,706  91,708  288,770  273,899 
    NON-INTEREST INCOME:          
    Deposit fees and other service charges 13,316  13,238  12,927  38,739  36,957 
    Mortgage banking operations 4,498  6,754  8,141  15,854  20,409 
    Bank owned life insurance 1,043  1,461  1,333  3,599  3,646 
    Miscellaneous 1,705  1,720  1,344  7,062  3,936 
      20,562  23,173  23,745  65,254  64,948 
    Net gain (loss) on sale of securities 270  (54) 891  230  531 
    Net change in valuation of financial instruments carried at fair value (493) (650) (1,124) (1,831) (1,472)
    Total non-interest income 20,339  22,469  23,512  63,653  64,007 
    NON-INTEREST EXPENSE:          
    Salary and employee benefits 48,931  49,019  44,758  144,014  136,497 
    Less capitalized loan origination costs (4,331) (4,598) (4,953) (13,245) (14,110)
    Occupancy and equipment 11,737  12,045  10,979  35,778  32,419 
    Information / computer data services 4,420  4,100  4,836  12,513  14,607 
    Payment and card processing services 5,839  5,792  5,878  16,651  16,164 
    Professional services 3,349  3,732  2,258  12,233  5,736 
    Advertising and marketing 2,130  1,766  2,282  5,225  6,489 
    Deposit insurance 1,101  1,071  890  3,438  3,539 
    State/municipal business and use taxes 780  279  956  1,857  2,564 
    Real estate operations 240  (363) (21) (1,089) 513 
    Amortization of core deposit intangibles 1,542  1,624  1,724  4,790  5,339 
    Miscellaneous 6,851  7,463  7,785  20,432  22,311 
      82,589  81,930  77,372  242,597  232,068 
    Acquisition related expenses     1,720    10,945 
    Total non-interest expense 82,589  81,930  79,092  242,597  243,013 
    Income before provision for income taxes 35,960  38,245  36,128  109,826  94,893 
    PROVISION FOR INCOME TAXES 10,883  12,791  12,277  35,502  32,312 
    NET INCOME $25,077  $25,454  $23,851  $74,324  $62,581 
    Earnings per share available to common shareholders:          
    Basic $0.76  $0.77  $0.70  $2.25  $1.84 
    Diluted $0.76  $0.77  $0.70  $2.25  $1.83 
    Cumulative dividends declared per common share $0.25  $1.25  $0.23  $1.75  $0.65 
    Weighted average common shares outstanding:          
    Basic 32,982,532  32,982,126  34,045,225  32,966,214  34,050,459 
    Diluted 33,079,099  33,051,527  34,124,611  33,061,172  34,104,875 
    (Decrease) increase in common shares outstanding (23,247) 125,167  (483,249) 61,397  (374,944)


    FINANCIAL CONDITION         Percentage Change
    (in thousands except shares and per share data) Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016 Prior Qtr Prior Yr Qtr
                 
    ASSETS            
    Cash and due from banks $192,278  $196,178  $177,083  $161,710  (2.0)% 18.9%
    Interest-bearing deposits 49,488  77,370  70,636  84,207  (36.0)% (41.2)%
    Total cash and cash equivalents 241,766  273,548  247,719  245,917  (11.6)% (1.7)%
    Securities - trading 23,466  24,950  24,568  30,889  (5.9)% (24.0)%
    Securities - available for sale 1,339,057  1,290,159  800,917  1,006,414  3.8% 33.1%
    Securities - held to maturity 264,752  268,050  267,873  271,975  (1.2)% (2.7)%
    Federal Home Loan Bank stock 20,854  12,334  12,506  12,826  69.1% 62.6%
    Loans held for sale 71,905  66,164  246,353  123,144  8.7% (41.6)%
    Loans receivable 7,774,449  7,551,563  7,451,148  7,398,637  3.0% 5.1%
    Allowance for loan losses (89,100) (88,586) (85,997) (84,220) 0.6% 5.8%
    Net loans 7,685,349  7,462,977  7,365,151  7,314,417  3.0% 5.1%
    Accrued interest receivable 33,837  30,722  30,178  30,345  10.1% 11.5%
    Real estate owned held for sale, net 1,496  2,427  11,081  4,717  (38.4)% (68.3)%
    Property and equipment, net 159,893  161,095  166,481  167,621  (0.7)% (4.6)%
    Goodwill 244,583  244,583  244,583  244,583  % %
    Other intangibles, net 25,219  26,813  30,162  31,934  (5.9)% (21.0)%
    Bank-owned life insurance 161,648  160,609  158,936  158,831  0.6% 1.8%
    Other assets 169,261  175,389  187,160  197,415  (3.5)% (14.3)%
    Total assets $10,443,086  $10,199,820  $9,793,668  $9,841,028  2.4% 6.1%
    LIABILITIES            
    Deposits:            
    Non-interest-bearing $3,379,841  $3,254,581  $3,140,451  $3,190,293  3.8% 5.9%
    Interest-bearing transaction and savings accounts 4,058,435  4,022,909  3,935,630  3,798,668  0.9% 6.8%
    Interest-bearing certificates 1,100,574  1,206,241  1,045,333  1,123,011  (8.8)% (2.0)%
    Total deposits 8,538,850  8,483,731  8,121,414  8,111,972  0.6% 5.3%
    Advances from Federal Home Loan Bank at fair value 263,349  50,212  54,216  62,342  424.5% 322.4%
    Customer repurchase agreements and other borrowings 103,713  116,455  105,685  108,911  (10.9)% (4.8)%
    Junior subordinated debentures at fair value 97,280  96,852  95,200  94,364  0.4% 3.1%
    Accrued expenses and other liabilities 72,604  102,511  71,369  92,783  (29.2)% (21.7)%
    Deferred compensation 40,279  40,208  40,074  39,385  0.2% 2.3%
    Total liabilities 9,116,075  8,889,969  8,487,958  8,509,757  2.5% 7.1%
    SHAREHOLDERS' EQUITY            
    Common stock 1,215,482  1,215,316  1,213,837  1,243,205  % (2.2)%
    Retained earnings 111,405  94,541  95,328  80,053  17.8% 39.2%
    Other components of shareholders' equity 124  (6) (3,455) 8,013  nm (98.5)%
    Total shareholders' equity 1,327,011  1,309,851  1,305,710  1,331,271  1.3% (0.3)%
    Total liabilities and shareholders' equity $10,443,086  $10,199,820  $9,793,668  $9,841,028  2.4% 6.1%
    Common Shares Issued:            
    Shares outstanding at end of period 33,254,784  33,278,031  33,193,387  33,867,311     
    Common shareholders' equity per share (1) $39.90  $39.36  $39.34  $39.31     
    Common shareholders' tangible equity per share (1) (2) $31.79  $31.21  $31.06  $31.14     
    Common shareholders' tangible equity to tangible assets (2) 10.39% 10.46% 10.83% 11.03%    
    Consolidated Tier 1 leverage capital ratio 11.49% 11.51% 11.83% 11.40%    


    (1)Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
    (2)Common shareholders' tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.


    ADDITIONAL FINANCIAL INFORMATION            
    (dollars in thousands)            
              Percentage Change
    LOANS Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016 Prior Qtr Prior Yr Qtr
                 
    Commercial real estate:            
    Owner occupied $1,369,130  $1,358,094  $1,352,999  $1,340,577  0.8% 2.1%
    Investment properties 1,993,144  1,975,075  1,986,336  1,918,639  0.9% 3.9%
    Multifamily real estate 311,706  288,442  248,150  266,883  8.1% 16.8%
    Commercial construction 157,041  144,092  124,068  135,487  9.0% 15.9%
    Multifamily construction 136,532  111,562  124,126  105,669  22.4% 29.2%
    One- to four-family construction 399,361  380,782  375,704  363,586  4.9% 9.8%
    Land and land development:            
    Residential 158,384  147,149  170,004  162,029  7.6% (2.2)%
    Commercial 27,095  27,917  29,184  30,556  (2.9)% (11.3)%
    Commercial business 1,311,409  1,286,204  1,207,879  1,187,848  2.0% 10.4%
    Agricultural business including secured by farmland 339,932  344,412  369,156  383,275  (1.3)% (11.3)%
    One- to four-family real estate 869,556  800,008  813,077  846,899  8.7% 2.7%
    Consumer:            
    Consumer secured by one- to four-family real estate 535,300  527,623  493,211  497,643  1.5% 7.6%
    Consumer-other 165,859  160,203  157,254  159,546  3.5% 4.0%
    Total loans receivable $7,774,449  $7,551,563  $7,451,148  $7,398,637  3.0% 5.1%
    Restructured loans performing under their restructured terms $12,744  $13,531  $18,907  $17,649     
    Loans 30 - 89 days past due and on accrual (1) $9,619  $15,564  $11,571  $12,668     
    Total delinquent loans (including loans on non-accrual), net (2) $34,792  $32,961  $30,553  $39,543     
    Total delinquent loans / Total loans outstanding 0.45% 0.44% 0.41% 0.53%    

    (1) Includes $1.0 million of purchased credit-impaired loans at September 30, 2017 compared to $835,000 at June 30, 2017, $470,000 at December 31, 2016 and $486,000 at September 30, 2016.
    (2) Delinquent loans include $2.9 million of delinquent purchased credit-impaired loans September 30, 2017 compared to $2.5 million at June 30, 2017, $1.7 million at December 31, 2016 and $3.6 million at September 30, 2016.

    LOANS BY GEOGRAPHIC LOCATION Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
      Amount Percentage Amount Percentage Amount Percentage Amount Percentage
                     
    Washington $3,515,881  45.2% $3,425,627  45.3% $3,433,617  46.1% $3,415,413  46.2%
    Oregon 1,561,723  20.1% 1,532,460  20.3% 1,505,369  20.2% 1,466,845  19.8%
    California 1,381,572  17.8% 1,304,194  17.3% 1,239,989  16.6% 1,204,273  16.3%
    Idaho 495,041  6.4% 487,378  6.5% 495,992  6.7% 517,607  7.0%
    Utah 304,740  3.9% 294,467  3.9% 283,890  3.8% 292,088  3.9%
    Other 515,492  6.6% 507,437  6.7% 492,291  6.6% 502,411  6.8%
    Total loans $7,774,449  100.0% $7,551,563  100.0% $7,451,148  100.0% $7,398,637  100.0%


    ADDITIONAL FINANCIAL INFORMATION          
    (dollars in thousands)          
        Quarters Ended Nine months ended
    CHANGE IN THE Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    ALLOWANCE FOR LOAN LOSSES          
    Balance, beginning of period $88,586  $86,527  $81,318  $85,997  $78,008 
    Provision for loan losses 2,000  2,000  2,000  6,000  4,000 
    Recoveries of loans previously charged off:          
    Commercial real estate 19  264  34  353  98 
    Multifamily real estate   11    11   
    Construction and land 73  1,024  673  1,180  1,268 
    One- to four-family real estate 8  109  482  262  1,052 
    Commercial business 577  171  433  921  1,775 
    Agricultural business, including secured by farmland 1  19  (138) 133  39 
    Consumer 98  101  73  293  529 
      776  1,699  1,557  3,153  4,761 
    Loans charged off:          
    Commercial real estate (584) (47)   (631) (180)
    One- to four-family real estate     (92)   (126)
    Commercial business (491) (1,169) (333) (3,286) (643)
    Agricultural business, including secured by farmland (1,001) (104)   (1,264) (567)
    Consumer (186) (320) (230) (869) (1,033)
      (2,262) (1,640) (655) (6,050) (2,549)
    Net (charge-offs) recoveries (1,486) 59  902  (2,897) 2,212 
    Balance, end of period $89,100  $88,586  $84,220  $89,100  $84,220 
    Net recoveries (charge-offs) / Average loans outstanding (0.019)% 0.001% 0.012% (0.038)% 0.030%


    ALLOCATION OF        
    ALLOWANCE FOR LOAN LOSSES Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
    Specific or allocated loss allowance:        
    Commercial real estate $23,431  $24,232  $20,993  $19,846 
    Multifamily real estate 1,625  1,562  1,360  1,436 
    Construction and land 29,422  27,312  34,252  33,803 
    One- to four-family real estate 2,040  2,010  2,238  2,190 
    Commercial business 18,657  19,126  16,533  16,507 
    Agricultural business, including secured by farmland 3,949  3,808  2,967  2,833 
    Consumer 4,016  3,987  4,104  3,934 
    Total allocated 83,140  82,037  82,447  80,549 
    Unallocated 5,960  6,549  3,550  3,671 
       Total allowance for loan losses $89,100  $88,586  $85,997  $84,220 
    Allowance for loan losses / Total loans outstanding 1.15% 1.17% 1.15% 1.14%
    Allowance for loan losses / Non-performing loans 296% 405% 381% 309%


    ADDITIONAL FINANCIAL INFORMATION       
    (dollars in thousands)       
     Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
    NON-PERFORMING ASSETS       
    Loans on non-accrual status:       
    Secured by real estate:       
    Commercial$11,632  $6,267  $8,237  $12,776 
    Multifamily      30 
    Construction and land1,726  1,726  1,748  1,747 
    One- to four-family2,878  2,955  2,263  3,414 
    Commercial business7,144  7,037  3,074  2,765 
    Agricultural business, including secured by farmland4,285  1,456  3,229  3,755 
    Consumer1,462  1,494  1,875  1,385 
     29,127  20,935  20,426  25,872 
    Loans more than 90 days delinquent, still on accrual:       
    Secured by real estate:       
    Commercial53    701   
    Multifamily    147  147 
    One- to four-family722  754  1,233  852 
    Commercial business51  77     
    Consumer101  108  72  425 
     927  939  2,153  1,424 
    Total non-performing loans30,054  21,874  22,579  27,296 
    Real estate owned (REO)1,496  2,427  11,081  4,717 
    Other repossessed assets145  181  166  164 
    Total non-performing assets$31,695  $24,482  $33,826  $32,177 
    Total non-performing assets to total assets0.30% 0.24% 0.35% 0.33%
    Purchased credit-impaired loans, net$23,221  $26,267  $32,322  $38,674 


     Quarters Ended Nine months ended
    REAL ESTATE OWNEDSep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    Balance, beginning of period$2,427  $3,040  $6,147  $11,081  $11,627 
    Additions from loan foreclosures  46  156  46  534 
    Additions from acquisitions        400 
    Additions from capitalized costs  54    54   
    Proceeds from dispositions of REO(961) (1,228) (1,699) (11,382) (8,021)
    Gain on sale of REO30  721  281  1,953  981 
    Valuation adjustments in the period  (206) (168) (256) (804)
    Balance, end of period$1,496  $2,427  $4,717  $1,496  $4,717 


    ADDITIONAL FINANCIAL INFORMATION            
    (dollars in thousands)            
                 
    DEPOSIT COMPOSITION         Percentage Change
      Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016 Prior Qtr Prior Yr
                 
    Non-interest-bearing $3,379,841  $3,254,581  $3,140,451  $3,190,293  3.8% 5.9%
    Interest-bearing checking 955,486  953,227  914,484  853,594  0.2% 11.9%
    Regular savings accounts 1,577,292  1,530,517  1,523,391  1,387,123  3.1% 13.7%
    Money market accounts 1,525,657  1,539,165  1,497,755  1,557,951  (0.9)% (2.1)%
    Total interest-bearing transaction and savings accounts 4,058,435  4,022,909  3,935,630  3,798,668  0.9% 6.8%
    Interest-bearing certificates 1,100,574  1,206,241  1,045,333  1,123,011  (8.8)% (2.0)%
    Total deposits $8,538,850  $8,483,731  $8,121,414  $8,111,972  0.6% 5.3%


    GEOGRAPHIC CONCENTRATION OF DEPOSITS Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
      Amount Percentage Amount Percentage Amount Percentage Amount Percentage
    Washington $4,654,406  54.6% $4,615,284  54.5% $4,347,644  53.6% $4,283,522  52.8%
    Oregon 1,811,459  21.2% 1,806,639  21.3% 1,708,973  21.0% 1,737,754  21.4%
    California 1,442,727  16.9% 1,445,621  17.0% 1,469,748  18.1% 1,491,903  18.4%
    Idaho 465,104  5.4% 416,933  4.9% 447,019  5.5% 435,090  5.4%
    Utah 165,154  1.9% 199,254  2.3% 148,030  1.8% 163,703  2.0%
    Total deposits $8,538,850  100.0% $8,483,731  100.0% $8,121,414  100.0% $8,111,972  100.0%


    INCLUDED IN TOTAL DEPOSITS Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
    Public non-interest-bearing accounts $86,262  $85,760  $92,789  $86,207 
    Public interest-bearing transaction & savings accounts 108,257  124,075  128,976  115,458 
    Public interest-bearing certificates 26,543  30,496  25,650  26,734 
    Total public deposits $221,062  $240,331  $247,415  $228,399 
    Total brokered deposits $171,718  $250,001  $34,074  $60,290 


    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, 2017 Amount Ratio Amount Ratio Amount Ratio
                 
    Banner Corporation-consolidated:            
      Total capital to risk-weighted assets $1,239,520  13.52% $733,633  8.00% $917,041  10.00%
      Tier 1 capital to risk-weighted assets 1,147,971  12.52% 550,224  6.00% 550,224  6.00%
      Tier 1 leverage capital to average assets 1,147,971  11.49% 399,595  4.00% n/a n/a
      Common equity tier 1 capital to risk-weighted assets 1,023,702  11.16% 412,668  4.50% n/a n/a
    Banner Bank:            
      Total capital to risk-weighted assets 1,089,048  12.14% 717,580  8.00% 896,974  10.00%
      Tier 1 capital to risk-weighted assets 999,815  11.15% 538,185  6.00% 717,580  8.00%
      Tier 1 leverage capital to average assets 999,815  10.30% 388,308  4.00% 485,385  5.00%
      Common equity tier 1 capital to risk-weighted assets 999,815  11.15% 403,639  4.50% 583,033  6.50%
    Islanders Bank:            
      Total capital to risk-weighted assets 31,690  16.35% 15,507  8.00% 19,384  10.00%
      Tier 1 capital to risk-weighted assets 29,375  15.15% 11,630  6.00% 15,507  8.00%
      Tier 1 leverage capital to average assets 29,375  10.66% 11,018  4.00% 13,773  5.00%
      Common equity tier 1 capital to risk-weighted assets 29,375  15.15% 8,723  4.50% 12,600  6.50%


    ADDITIONAL FINANCIAL INFORMATION           
    (dollars in thousands)           
    (rates / ratios annualized)           
                
    ANALYSIS OF NET INTEREST SPREADQuarters Ended
     September 30, 2017 June 30, 2017 September 30, 2016
     Average BalanceInterest and DividendsYield / Cost(3) Average BalanceInterest and DividendsYield / Cost(3) Average BalanceInterest and DividendsYield / Cost(3)
    Interest-earning assets:           
    Mortgage loans$6,086,554 $75,020 4.89% $5,987,295 $74,459 4.99% $5,843,381 $70,223 4.78%
    Commercial/agricultural loans1,520,946 17,992 4.69% 1,503,548 18,179 4.85% 1,495,611 17,373 4.62%
    Consumer and other loans140,758 2,209 6.23% 138,724 2,157 6.24% 142,977 2,209 6.15%
    Total loans(1)7,748,258 95,221 4.88% 7,629,567 94,795 4.98% 7,481,969 89,805 4.78%
    Mortgage-backed securities1,129,256 6,644 2.33% 1,067,255 6,239 2.34% 920,560 4,803 2.08%
    Other securities473,808 3,192 2.67% 471,894 3,192 2.71% 472,159 3,050 2.57%
    Interest-bearing deposits with banks51,607 159 1.22% 54,051 139 1.03% 86,868 98 0.45%
    FHLB stock16,961 62 1.45% 14,472 71 1.97% 16,413 93 2.25%
    Total investment securities1,671,632 10,057 2.39% 1,607,672 9,641 2.41% 1,496,000 8,044 2.14%
    Total interest-earning assets9,419,890 105,278 4.43% 9,237,239 104,436 4.53% 8,977,969 97,849 4.34%
    Non-interest-earning assets888,388    896,136    913,991   
    Total assets$10,308,278    $10,133,375    $9,891,960   
    Deposits:           
    Interest-bearing checking accounts$946,585 218 0.09% $927,375 210 0.09% $837,930 188 0.09%
    Savings accounts1,557,475 538 0.14% 1,553,019 527 0.14% 1,371,911 449 0.13%
    Money market accounts1,534,867 653 0.17% 1,534,551 689 0.18% 1,564,906 749 0.19%
    Certificates of deposit1,151,725 1,780 0.61% 1,200,435 1,756 0.59% 1,173,630 1,398 0.47%
    Total interest-bearing deposits5,190,652 3,189 0.24% 5,215,380 3,182 0.24% 4,948,377 2,784 0.22%
    Non-interest-bearing deposits3,300,185  % 3,158,727  % 3,120,279  %
    Total deposits8,490,837 3,189 0.15% 8,374,107 3,182 0.15% 8,068,656 2,784 0.14%
    Other interest-bearing liabilities:           
    FHLB advances165,586 569 1.36% 103,848 301 1.16% 152,198 256 0.67%
    Other borrowings116,297 84 0.29% 116,513 83 0.29% 111,016 82 0.29%
    Junior subordinated debentures140,212 1,226 3.47% 140,212 1,164 3.33% 140,212 1,019 2.89%
    Total borrowings422,095 1,879 1.77% 360,573 1,548 1.72% 403,426 1,357 1.34%
    Total funding liabilities8,912,932 5,068 0.23% 8,734,680 4,730 0.22% 8,472,082 4,141 0.19%
    Other non-interest-bearing liabilities(2)67,918    56,175    68,566   
    Total liabilities8,980,850    8,790,855    8,540,648   
    Shareholders' equity1,327,428    1,342,520    1,351,312   
    Total liabilities and shareholders' equity$10,308,278    $10,133,375    $9,891,960   
    Net interest income/rate spread $100,210 4.20%  $99,706 4.31%  $93,708 4.15%
    Net interest margin  4.22%   4.33%   4.15%
    Additional Key Financial Ratios:           
    Return on average assets  0.97%   1.01%   0.96%
    Return on average equity  7.49%   7.60%   7.02%
    Average equity/average assets  12.88%   13.25%   13.66%
    Average interest-earning assets/average interest-bearing liabilities  167.83%   165.66%   167.76%
    Average interest-earning assets/average funding liabilities  105.69%   105.75%   105.97%
    Non-interest income/average assets  0.78%   0.89%   0.95%
    Non-interest expense/average assets  3.18%   3.24%   3.18%
    Efficiency ratio(4)  68.51%   67.06%   67.47%
    Adjusted efficiency ratio(5)  66.26%   65.42%   63.61%


    (1)Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
    (2)Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
    (3)Yields and costs have not been adjusted for the effect of tax-exempt interest.
    (4)Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
    (5)Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of core deposit intangibles (CDI), real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.


    ADDITIONAL FINANCIAL INFORMATION       
    (dollars in thousands)       
    (rates / ratios annualized)       
            
    ANALYSIS OF NET INTEREST SPREADNine months ended
     September 30, 2017 September 30, 2016
     Average BalanceInterest and DividendsYield/Cost(3) Average BalanceInterest and DividendsYield/Cost(3)
    Interest-earning assets:       
    Mortgage loans$6,059,476 $222,028 4.90% $5,755,988 $207,881 4.82%
    Commercial/agricultural loans1,496,549 52,717 4.71% 1,490,757 51,213 4.59%
    Consumer and other loans139,181 6,559 6.30% 141,570 6,603 6.23%
    Total loans(1)7,695,206 281,304 4.89% 7,388,315 265,697 4.80%
    Mortgage-backed securities1,013,913 17,529 2.31% 976,267 15,467 2.12%
    Other securities466,572 9,420 2.70% 450,142 8,752 2.60%
    Interest-bearing deposits with banks46,022 392 1.14% 95,406 300 0.42%
    FHLB stock15,666 164 1.40% 17,614 254 1.93%
    Total investment securities1,542,173 27,505 2.38% 1,539,429 24,773 2.15%
    Total interest-earning assets9,237,379 308,809 4.47% 8,927,744 290,470 4.35%
    Non-interest-earning assets902,435    903,957   
    Total assets$10,139,814    $9,831,701   
    Deposits:       
    Interest-bearing checking accounts$923,757 627 0.09% $853,818 570 0.09%
    Savings accounts1,556,075 1,588 0.14% 1,336,259 1,303 0.13%
    Money market accounts1,530,675 1,994 0.17% 1,587,500 2,421 0.20%
    Certificates of deposit1,147,387 4,953 0.58% 1,248,781 4,207 0.45%
    Total interest-bearing deposits5,157,894 9,162 0.24% 5,026,358 8,501 0.23%
    Non-interest-bearing deposits3,203,033  % 2,980,027  %
    Total deposits8,360,927 9,162 0.15% 8,006,385 8,501 0.14%
    Other interest-bearing liabilities:       
    FHLB advances133,365 1,142 1.14% 178,468 874 0.65%
    Other borrowings113,664 241 0.28% 108,632 234 0.29%
    Junior subordinated debentures140,212 3,494 3.33% 140,212 2,962 2.82%
    Total borrowings387,241 4,877 1.68% 427,312 4,070 1.27%
    Total funding liabilities8,748,168 14,039 0.21% 8,433,697 12,571 0.20%
    Other non-interest-bearing liabilities(2)60,895    64,825   
    Total liabilities8,809,063    8,498,522   
    Shareholders' equity1,330,751    1,333,179   
    Total liabilities and shareholders' equity$10,139,814    $9,831,701   
    Net interest income/rate spread $294,770 4.26%  $277,899 4.15%
    Net interest margin  4.27%   4.16%
    Additional Key Financial Ratios:       
    Return on average assets  0.98%   0.85%
    Return on average equity  7.47%   6.27%
    Average equity/average assets  13.12%   13.56%
    Average interest-earning assets/average interest-bearing liabilities  166.59%   163.70%
    Average interest-earning assets/average funding liabilities  105.59%   105.86%
    Non-interest income/average assets  0.84%   0.87%
    Non-interest expense/average assets  3.20%   3.30%
    Efficiency ratio(4)  67.68%   71.08%
    Adjusted efficiency ratio(5)  65.84%   65.23%


    (1)Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
    (2)Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
    (3)Yields and costs have not been adjusted for the effect of tax-exempt interest.
    (4)Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
    (5)Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of CDI, real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.


    ADDITIONAL FINANCIAL INFORMATION         
    (dollars in thousands)         
              
    * Non-GAAP Financial Measures         
    In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.
              
    REVENUE FROM CORE OPERATIONSQuarters Ended Nine months ended
     Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    Net interest income before provision for loan losses$100,210  $99,706  $93,708  $294,770  $277,899 
    Total non-interest income20,339  22,469  23,512  63,653  64,007 
    Total GAAP revenue120,549  122,175  117,220  358,423  341,906 
    Exclude net (gain) loss on sale of securities(270) 54  (891) (230) (531)
    Exclude change in valuation of financial instruments carried at fair value493  650  1,124  1,831  1,472 
    Revenue from core operations (non-GAAP)$120,772  $122,879  $117,453  $360,024  $342,847 


    NON-INTEREST INCOME FROM CORE OPERATIONS Quarters Ended Nine months ended
      Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    Total non-interest income (GAAP) $20,339  $22,469  $23,512  $63,653  $64,007 
    Exclude net (gain) loss on sale of securities (270) 54  (891) (230) (531)
    Exclude change in valuation of financial instruments carried at fair value 493  650  1,124  1,831  1,472 
    Non-interest income from core operations (non-GAAP) $20,562  $23,173  $23,745  $65,254  $64,948 


    EARNINGS FROM CORE OPERATIONS Quarters Ended Nine months ended
      Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    Net income (GAAP) $25,077  $25,454  $23,851  $74,324  $62,581 
    Exclude net (gain) loss on sale of securities (270) 54  (891) (230) (531)
    Exclude change in valuation of financial instruments carried at fair value 493  650  1,124  1,831  1,472 
    Exclude acquisition-related costs     1,720    10,945 
    Exclude related tax benefit (80) (253) (703) (576) (4,261)
    Total earnings from core operations (non-GAAP) $25,220  $25,905  $25,101  $75,349  $70,206 
               
    Diluted earnings per share (GAAP) $0.76  $0.77  $0.70  $2.25  $1.83 
    Diluted core earnings per share (non-GAAP) $0.76  $0.78  $0.74  $2.28  $2.06 


    ADDITIONAL FINANCIAL INFORMATION          
    (dollars in thousands)          
    ADJUSTED EFFICIENCY RATIO Quarters Ended Nine months ended
      Sep 30, 2017 Jun 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
    Non-interest expense (GAAP) $82,589  $81,930  $79,092  $242,597  $243,013 
    Exclude acquisition-related costs     (1,720)   (10,945)
    Exclude CDI amortization (1,542) (1,624) (1,724) (4,790) (5,339)
    Exclude state/municipal tax expense (780) (279) (956) (1,857) (2,564)
    Exclude REO (loss) gain (240) 363  21  1,089  (513)
    Adjusted non-interest expense (non-GAAP) $80,027  $80,390  $74,713  $237,039  $223,652 
               
    Net interest income before provision for loan losses (GAAP) $100,210  $99,706  $93,708  $294,770  $277,899 
    Non-interest income (GAAP) 20,339  22,469  23,512  63,653  64,007 
    Total revenue 120,549  122,175  117,220  358,423  341,906 
    Exclude net (gain) loss on sale of securities (270) 54  (891) (230) (531)
    Exclude net change in valuation of financial instruments carried at fair value 493  650  1,124  1,831  1,472 
    Adjusted revenue (non-GAAP) $120,772  $122,879  $117,453  $360,024  $342,847 
               
    Efficiency ratio (GAAP) 68.51% 67.06% 67.47% 67.68% 71.08%
    Adjusted efficiency ratio (non-GAAP) 66.26% 65.42% 63.61% 65.84% 65.23%


    TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS Sep 30, 2017 Jun 30, 2017 Dec 31, 2016 Sep 30, 2016
    Shareholders' equity (GAAP) $1,327,011  $1,309,851  $1,305,710  $1,331,271 
    Exclude goodwill and other intangible assets, net 269,802  271,396  274,745  276,517 
    Tangible common shareholders' equity (non-GAAP) $1,057,209  $1,038,455  $1,030,965  $1,054,754 
             
    Total assets (GAAP) $10,443,086  $10,199,820  $9,793,668  $9,841,028 
    Exclude goodwill and other intangible assets, net 269,802  271,396  274,745  276,517 
    Total tangible assets (non-GAAP) $10,173,284  $9,928,424  $9,518,923  $9,564,511 
    Common shareholders' equity to total assets (GAAP) 12.71% 12.84% 13.33% 13.53%
    Tangible common shareholders' equity to tangible assets (non-GAAP) 10.39% 10.46% 10.83% 11.03%
             
    TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE        
    Tangible common shareholders' equity $1,057,209  $1,038,455  $1,030,965  $1,054,754 
    Common shares outstanding at end of period 33,254,784  33,278,031  33,193,387  33,867,311 
    Common shareholders' equity (book value) per share (GAAP) $39.90  $39.36  $39.34  $39.31 
    Tangible common shareholders' equity (tangible book value) per share (non-GAAP) $31.79  $31.21  $31.06  $31.14 

     

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

    Primary Logo

Share on