EX-99.1 2 ex99172110.htm EXHIBIT 99.1 ex99172110.htm
 
Exhibit 99.1 
 
 

 
Contact: D. Michael Jones, CEO
Mark J. Grescovich, President
Lloyd W. Baker, CFO
(509) 527-3636
 
 
 News Release
 
Banner Corporation Announces Second Quarter Results

Walla Walla, WA – July 21, 2010 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $4.9 million in the second quarter ended June 30, 2010, compared to a net loss of $1.5 million in the immediately preceding quarter and a net loss of $16.5 million in the second quarter a year ago.
 
“Our second quarter was highlighted by a successful capital raise and a continued reduction in our deposit costs which contributed to net interest margin expansion for the fourth consecutive quarter,” said D. Michael Jones, Chief Executive Officer.  “We are making a concerted effort to reduce the overall cost of the deposit portfolio, and with our improved liquidity position we are able to let higher cost funding, primarily certificates of deposit and wholesale funds, run off.  Our deposit mix improvement reflects continuing growth in customer relationships as a result of the determined efforts of our staff and the further maturing of the expanded branch network we have built over the past five years.  Despite the current difficult economic environment, we are optimistic that the strength of this deposit franchise and our improved capital position will provide the foundation for better operating results in future periods.”
 
In the second quarter, Banner paid a $1.6 million dividend on the $124 million of senior preferred stock it issued to the U.S. Treasury in the fourth quarter of 2008 in connection with its participation in the Treasury’s Capital Purchase Program.  In addition, Banner accrued $399,000 for related discount accretion.  Including the preferred stock dividend and related accretion, the net loss to common shareholders was $6.9 million, or $0.28 per share, for the second quarter of 2010, compared to a net loss to common shareholders of $3.5 million, or $0.16 per share, in the first quarter of 2010 and a net loss to common shareholders of $18.4 million, or $1.04 per share, for the second quarter a year ago.
 
For the first six months of 2010, Banner reported a net loss of $6.5 million compared to a net loss of $25.8 million for the first six months of 2009.  For the most recent six month period, the net loss to common shareholders was $0.44 per share, compared to a net loss of $1.70 per share for the first six months of 2009.
 
Common Stock Offering
 
On June 30, 2010, Banner announced the completion of its offering of 75,000,000 shares of its common stock and the sale of an additional 3,500,000 shares pursuant to the partial exercise of the underwriters’ over-allotment option, at a price to the public of $2.00 per share.  On July 2, 2010, Banner announced the completion of the capital raise as the underwriters had exercised their over-allotment option for an additional 7,139,000 shares, at a price to the public of $2.00 per share.  Together with the 78,500,000 shares the Company issued on June 30, 2010 (including 3,500,000 shares issued pursuant to the underwriters’ initial exercise of their over-allotment option), Banner issued a total of 85,639,000 shares in the offering, resulting in net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses, of approximately $161.6 million.
 
Banner intends to use a significant portion of the net proceeds from the offering to strengthen Banner Bank’s regulatory capital ratios and to support managed growth.  To that end, at June 30, 2010, the Company had invested $50 million as additional paid-in common equity in Banner Bank.  The Company expects to use the remaining net proceeds for general working capital purposes, including additional capital investments in its subsidiary banks if appropriate.
 
Income Statement Review
 
“Continued reductions in our cost of funds through changes in our deposit mix and reduced pricing pressures over the past year resulted in further expansion of our net interest margin during the second quarter of 2010 to 3.65%, an increase of four basis points compared to the immediately preceding quarter and an increase of 41 basis points compared to the same quarter a year ago,” said Jones.  “While loan yields have been relatively stable for a number of quarters now, overall asset yields have declined slightly primarily as a result of the growth of our on-balance-sheet liquidity which is currently invested in short term instruments that pay very low interest rates.”  Banner’s net interest margin was 3.65% for the second quarter, compared to 3.61% in the preceding quarter and 3.24% in the second quarter a year ago.  For the first six months of 2010, Banner’s net interest margin was 3.62%, a 37 basis point improvement compared to the first six months of 2009.
 
For the second quarter of 2010, funding costs decreased 13 basis points compared to the previous quarter and 77 basis points from the second quarter a year ago.  Deposit costs decreased by 15 basis points compared to the preceding quarter and 82 basis points compared to the second quarter a year earlier.  Asset yields decreased eight basis points from the prior linked quarter and 28 basis points from the second quarter a year ago.  Loan yields declined by two basis points compared to the preceding quarter, but increased
 
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BANR – Second Quarter 2010 Results
July 21, 2010
Page 2
 
by five basis points from the second quarter a year ago.  Non-accruing loans reduced the margin by approximately 34 basis points in the second quarter of 2010 compared to approximately 34 basis points in the preceding quarter and approximately 45 basis points in the second quarter of 2009.
 
Net interest income before the provision for loan losses was $38.9 million in the second quarter of 2010, compared to $38.2 million in the preceding quarter and $34.9 million in the second quarter a year ago.  In the first half of 2010, net interest income before the provision for loan losses increased 10% to $77.1 million, compared to $69.9 million in the first half of 2009.  Revenues from core operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value and other-than-temporary impairment (OTTI) adjustments) were $45.9 million in the second quarter of 2010, compared to $45.2 million in the first quarter of 2010 and $43.9 million for the second quarter a year ago.  Revenues from core operations for the first half of 2010 increased 5% to $91.1 million, compared to $86.7 million in the first half of 2009.
 
Second quarter 2010 results included a net loss of $821,000 ($525,000 after tax, or $0.02 loss per share) for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, compared to a net gain (net of OTTI charges) of $677,000 ($433,000 after tax, or $0.02 earnings per share) in the first quarter of 2010 and a net gain (net of OTTI charges) of $11.0 million ($7.0 million after tax, or $0.62 earnings per share) in the second quarter a year ago.  There were no OTTI charges in the second quarter of 2010, compared to $1.2 million in the first quarter of 2010 and $162,000 in the second quarter of 2009.
 
Total other operating income, which includes the changes in the valuation of financial instruments noted above, was $6.2 million, or $0.25 per share, in the second quarter of 2010, compared to $7.7 million, or $0.35 per share, in the preceding quarter and $20.0 million, or $1.13 per share, for the second quarter a year ago.  For the first half of 2010, total other operating income was $13.9 million, compared to $24.6 million in the first half of 2009.  Total other operating income from core operations* (excluding fair value and OTTI adjustments) for the current quarter was $7.0 million, unchanged from the preceding quarter, and was $8.9 million for the second quarter a year ago.  For the first half of 2010, total other operating income from core operations was $14.0 million, compared to $16.8 million in the first half of 2009.  Income from deposit fees and other service charges improved modestly to $5.6 million in the second quarter compared to $5.2 million in the preceding quarter and $5.4 million in the second quarter a year ago.  Income from mortgage banking operations decreased to $817,000 in the second quarter compared to $948,000 in the preceding quarter and $2.9 million for the second quarter a year ago.
 
“Our payment processing business continues to be adversely affected by the soft economy, as activity for cardholders and merchants remained lower than in periods before 2009,” said Jones.  “However, we are encouraged by the improvement in deposit fees and other service charges compared to the preceding quarter, which in addition to reflecting account growth may be a sign of improving economic conditions.”  By contrast, mortgage banking revenues continued to decline, reflecting decreased mortgage loan production despite the current very low level of mortgage interest rates.
 
“We have made progress in improving our core operating efficiency as compensation, occupancy and other manageable operating expenses have been reduced over the past year,” said Jones.  “Unfortunately, collection and legal costs, including charges related to acquired real estate, continue to remain high.  We expect collection expenses and costs associated with real estate to remain elevated for a number of future quarters as we work down our inventory of non-performing assets.”
 
Total other operating expenses, or non-interest expenses, were $38.0 million in the second quarter of 2010, compared to $35.4 million in the preceding quarter and $36.9 million in the second quarter a year ago.  For the first half of the year, other operating expenses were $73.4 million compared to $70.7 million in the first half of 2009.  Largely as the result of the increase in REO and collection costs, operating expenses as a percentage of average assets increased to 3.35% in the second quarter of 2010, compared to 3.16% in the preceding quarter and 3.27% in the second quarter a year ago.
 
*Earnings information excluding fair value adjustments (alternately referred to as total other operating income from core operation or revenues from core operations) represent non-GAAP (Generally Accepted Accounting Principles) financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company’s core operations reflected in the current quarter’s results.  Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.
 
Credit Quality
 
“The credit costs associated with this difficult economic environment have been a persistent challenge throughout the past several quarters and continue to drag on profitability,” said Jones.  “The $16 million provision for loan losses in the second quarter of the year, while less than in the second quarter a year ago, remains high, reflecting still significant levels of non-performing loans and net charge-offs.  Charge-offs and delinquencies continue to be concentrated in loans for the construction of single-family homes and residential land development projects.  However, our exposure to single-family home construction and development loans has continued to decline and at June 30, 2010 was 11% of total loans outstanding.  Our reserve levels are substantial and both our impairment analysis and charge-off actions reflect current appraisals and valuation estimates.  We remain hopeful that credit costs will moderate during the remainder of 2010 and in 2011.”
 
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BANR – Second Quarter 2010 Results
July 21, 2010
Page 3
 
Banner recorded a $16.0 million provision for loan losses in the second quarter, compared to $14.0 million in the preceding quarter and $45.0 million in the second quarter a year ago.  For the first six months of 2010, the provision for loan losses was $30.0 million, compared to $67.0 million for the first six months of 2009.  The allowance for loan losses at June 30, 2010 totaled $95.5 million, representing 2.63% of total loans outstanding and 54% of non-performing loans.  Non-performing loans totaled $177.2 million at June 30, 2010, compared to $196.0 million in the preceding quarter and $225.1 million at June 30, 2009.  Banner’s real estate owned and repossessed assets totaled $101.7 million at June 30, 2010, compared to $95.2 million three months earlier and $57.2 million a year ago.  Net charge-offs in the quarter totaled $16.2 million, or 0.44% of average loans outstanding, compared to $13.5 million, or 0.36% of average loans outstanding for the first quarter of 2010 and $34.0 million, or 0.87% of average loans outstanding for the second quarter of last year.  Non-performing assets totaled $282.4 million at June 30, 2010, compared to $294.2 million in the preceding quarter and $282.3 million at June 30, 2009.  At the end of June, Banner’s non-performing assets were 6.01% of total assets, compared to 6.42% at the end of the preceding quarter and 6.23% a year ago.
 
The geographic distribution of construction, land and land development loans, including residential and commercial properties, was approximately $194 million, or 33%, in the greater Puget Sound market, $208 million, or 36%, in the greater Portland, Oregon market and $39 million, or 7%, in the greater Boise, Idaho market as of June 30, 2010.  The remaining $140 million, or 24%, was distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.  The geographic distribution of non-performing construction, land and land development loans and related real estate owned included approximately $83 million, or 46%, in the greater Puget Sound market, $64 million, or 35%, in the greater Portland market and $14 million, or 8%, in the greater Boise market, with the remaining $20 million, or 11%, distributed in the various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.
 
One-to-four family residential construction, lot and land loans were $411 million, or 11% of the total loan portfolio at June 30, 2010.  Non-performing residential construction, lot and land loans and related real estate owned were $155 million, or 55% of non-performing assets at June 30, 2010.
 
Balance Sheet Review
 
“As we have substantially reduced our construction and land development loans over the past year, our total loan balances declined relative to a year ago; however, we did have encouraging growth in commercial and agricultural business loans during the quarter,” said Jones.  “At the end of June, our one-to-four family construction loans totaled $183 million, a $154 million reduction over the past year, including a $31 million decrease in the most recent quarter.  Our one-to-four family construction loans have now declined by $472 million from their peak quarter-end balance of $655 million at June 30, 2007.  Similarly, total construction, land and land development loans have declined by $654 million from their peak quarter-end balance of $1.24 billion, also at June 30, 2007.”  Net loans were $3.54 billion at June 30, 2010, compared to $3.59 billion three months earlier and $3.82 billion at June 30, 2009.
 
Total assets were $4.70 billion at June 30, 2010, compared to $4.58 billion at the end of the preceding quarter and $4.53 billion a year ago.  Deposits totaled $3.84 billion at June 30, 2010, compared to $3.85 billion at the end of the preceding quarter and $3.75 billion a year ago.  Non-interest-bearing accounts were $548.3 million at June 30, 2010, compared to $549.3 million at the end of the preceding quarter and $508.3 million a year ago, a year-over-year increase of 8%.  At June 30, 2010, interest-bearing transaction and savings accounts were $1.4 billion, which was unchanged from three months earlier but a $272.1 million increase compared to $1.1 billion a year ago, a year-over-year increase of 24%.
 
“Banner’s retail deposit franchise had another solid quarter and has allowed us to steadily build our short-term liquidity and lower our loans-to-deposits ratio, which was 95% at June 30, 2010,” said Jones.  “In addition, this substantial core deposit growth has led to our improved net interest margin and increased deposit fee revenue.”
 
Augmented by the recent stock offering, Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as “well-capitalized” under applicable regulatory standards.  Banner Corporation’s Tier 1 leverage capital to average assets ratio was 13.02% and its total capital to risk-weighted assets ratio was 17.12% at June 30, 2010.  Importantly, reflecting the $50 million down-streamed capital investment, Banner Bank’s Tier 1 leverage ratio increased to 10.77% at June 30, 2010.
 
Tangible stockholders’ equity at June 30, 2010 was $544.1 million, including $118.2 million attributable to preferred stock, compared to $397.1 million a year ago.  Tangible book value per common share was $4.15 at quarter-end.  At June 30, 2010, Banner had 102.7 million shares outstanding, compared to 18.2 million shares outstanding a year ago.  Tangible common stockholders’ equity was $425.9 million at June 30, 2010, or 9.08% of tangible assets, compared to $278.5 million, or 6.09% of tangible assets at March 31, 2010 and $280.4 million, or 6.20% of tangible assets at June 30, 2009.
 

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BANR – Second Quarter 2010 Results
July 21, 2010
Page 4
 
Conference Call
 
Banner will host a conference call on Thursday, July 22, 2010, at 8:00 a.m. PDT, to discuss second quarter 2010 results.  The conference call can be accessed live by telephone at 480-629-9772 to participate in the call.  To listen to the call online, go to the Company’s website at www.bannerbank.com.  A replay will be available for a week at (303) 590-3030, using access code 4326727.
 
About the Company
 
Banner Corporation is a $4.7 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho.  Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.
 
This press release contains statements that the Company believes are “forward-looking statements.” These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and of our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or any of the Banks which could require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions; the requirements and restrictions that have been imposed upon Banner and Banner Bank under the memoranda of understanding with the Federal Reserve Bank of San Francisco (in the case of Banner) and the FDIC and the Washington DFI (in the case of Banner Bank) and the possibility that Banner and Banner Bank will be unable to fully comply with the memoranda of understanding, which could result in the imposition of additional requirements or restrictions; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect or result in significant declines in valuation; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; the failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and preferred stock and interest or principal payments on our junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; future legislative changes in the United States Department of Treasury  Troubled Asset Relief Program Capital Purchase Program; and other risks detailed in Banner’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2010 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect our operating and stock price performance.


 

 

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BANR – Second Quarter 2010 Results
July 21, 2010
Page 5
 
RESULTS OF OPERATIONS
    
Quarters Ended
     Six Months Ended  
(in thousands except shares and per share data)
    
Jun 30, 2010
    
Mar 31, 2010
    
Jun 30, 2009
    
Jun 30, 2010
    
Jun 30, 2009
  
                                       
                                       
INTEREST INCOME:
                                  
 
Loans receivable
    
$
           52,473
 
$
          52,759
 
$
          55,500
 
$
        105,232
 
$
        111,847
  
 
Mortgage-backed securities
    
             1,045
    
            1,126
    
            1,569
    
            2,171
    
            3,370
  
 
Securities and cash equivalents
    
             2,116
    
            2,085
    
            2,089
    
            4,201
    
            4,272
  
           
           55,634
    
          55,970
    
          59,158
    
        111,604
    
        119,489
  
INTEREST EXPENSE:
                                  
 
Deposits
      
           14,700
    
          15,798
    
          21,638
    
          30,498
    
          44,730
  
 
Federal Home Loan Bank advances
    
                320
    
               361
    
               675
    
               681
    
            1,395
  
 
Other borrowings
      
                626
    
               634
    
               671
    
            1,260
    
               898
  
 
Junior subordinated debentures
    
             1,047
    
            1,027
    
            1,249
    
            2,074
    
            2,582
  
           
           16,693
    
          17,820
    
          24,233
    
          34,513
    
          49,605
  
 
Net interest income before provision for loan losses
    
           38,941
    
          38,150
    
          34,925
    
          77,091
    
          69,884
  
PROVISION FOR LOAN LOSSES
    
           16,000
    
          14,000
    
          45,000
    
          30,000
    
          67,000
  
 
Net interest income
      
           22,941
    
          24,150
    
        (10,075
 )   
          47,091
    
            2,884
  
OTHER OPERATING INCOME:
                                
 
Deposit fees and other service charges
    
             5,632
    
            5,160
    
            5,408
    
          10,792
    
          10,344
  
 
Mortgage banking operations
    
                817
    
               948
    
            2,860
    
            1,765
    
            5,575
  
 
Loan servicing fees
      
                315
    
               313
    
               248
    
               628
    
               (22
 ) 
 
Miscellaneous
      
                243
    
               626
    
               412
    
               869
    
               932
  
           
7,007
    
7,047
    
8,928
    
14,054
    
16,829
  
 
Other-than-temporary impairment losses
    
                  - -
    
           (1,231
 )   
             (162
 )   
          (1,231
 )   
             (162
 ) 
 
Net change in valuation of financial instruments carried at fair value
  
              (821
 )   
            1,908
    
          11,211
    
            1,087
    
            7,958
  
 
Total other operating income
    
             6,186
    
            7,724
    
          19,977
    
          13,910
    
          24,625
  
                                       
OTHER OPERATING EXPENSE:
                                
 
Salary and employee benefits
    
           16,793
    
          16,559
    
          17,528
    
          33,352
    
          35,129
  
 
Less capitalized loan origination costs
    
           (1,740
 )   
           (1,605
 )   
          (2,834
 )   
          (3,345
 )   
          (4,950
 ) 
 
Occupancy and equipment
    
             5,581
    
            5,604
    
            5,928
    
          11,185
    
          11,982
  
 
Information / computer data services
    
             1,594
    
            1,506
    
            1,599
    
            3,100
    
            3,133
  
 
Payment and card processing services
    
             1,683
    
            1,424
    
            1,555
    
            3,107
    
            3,008
  
 
Professional services
      
             1,874
    
            1,287
    
            1,183
    
            3,161
    
            2,377
  
 
Advertising and marketing
    
             1,742
    
            1,950
    
            2,207
    
            3,692
    
            4,039
  
 
Deposit insurance
      
             2,209
    
            2,132
    
            4,102
    
            4,341
    
            5,599
  
 
State/municipal business and use taxes
    
                533
    
               480
    
               532
    
            1,013
    
            1,072
  
 
Real estate operations
      
             4,166
    
            3,058
    
            1,805
    
            7,224
    
            2,428
  
 
Amortization of core deposit intangibles
    
                615
    
               644
    
               661
    
            1,259
    
            1,351
  
 
Miscellaneous
      
             2,974
    
            2,376
    
            2,625
    
            5,350
    
            5,516
  
 
Total other operating expense
    
           38,024
    
          35,415
    
          36,891
    
          73,439
    
          70,684
  
 
Income (loss) before provision for (benefit from) income taxes
    
           (8,897
 )   
           (3,541
 )   
        (26,989
 )   
        (12,438
 )   
        (43,175
 ) 
PROVISION FOR  (BENEFIT FROM ) INCOME TAXES
    
           (3,951
 )   
           (2,024
 )   
        (10,478
 )   
          (5,975
 )   
        (17,401
 ) 
NET INCOME (LOSS)
      
           (4,946
 )   
           (1,517
 )   
        (16,511
 )   
          (6,463
 )   
        (25,774
 ) 
PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION:
                              
 
Preferred stock dividend
      
             1,550
    
            1,550
    
            1,550
    
            3,100
    
            3,100
  
 
Preferred stock discount accretion
    
                399
    
               398
    
               373
    
               797
    
               746
  
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
$
           (6,895
) 
$
           (3,465
) 
$
        (18,434
) 
 $
        (10,360
) 
$
        (29,620
 ) 
Earnings (loss) per share available to common shareholder
                                
   
Basic
    
$
             (0.28
) 
$
             (0.16
) 
$
            (1.04
) 
$
            (0.44
) 
$
            (1.70
 ) 
   
Diluted
    
$
             (0.28
) 
$
             (0.16
) 
$
            (1.04
) 
$
            (0.44
) 
$
            (1.70
 ) 
Cumulative dividends declared per common share
  
$
               0.01
 
$
              0.01
 
$
              0.01
 
$
              0.02
 
$
              0.02
  
Weighted average common shares outstanding
                                
   
Basic
      
    24,452,356
    
   22,131,671
    
   17,746,051
    
   23,298,424
    
   17,454,542
  
   
Diluted
      
    24,452,356
    
   22,131,671
    
   17,746,051
    
   23,298,424
    
   17,454,542
  
Common shares issued in connection with exercise of stock options or DRIP
      1,353,589
    
     1,561,559
    
        780,906
    
     2,915,148
    
     1,274,420
  
                                       

(more)
 
 
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 6

 
FINANCIAL  CONDITION
                      
(in thousands except shares and per share data)
    
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Dec 31, 2009
  
                         
                         
ASSETS
                      
Cash and due from banks
    
$
             67,322
$
             41,123
$
             81,559
$
             78,364
  
Federal funds and interest-bearing deposits
    
           369,864
  
           236,629
  
               2,699
  
           244,641
  
Securities - at fair value
      
           105,381
  
           138,659
  
           167,476
  
           147,151
  
Securities - available for sale
      
           140,342
  
             96,718
  
             50,980
  
             95,667
  
Securities - held to maturity
      
             73,632
  
             73,555
  
             77,321
  
             74,834
  
Federal Home Loan Bank stock
    
             37,371
  
             37,371
  
             37,371
  
             37,371
  
                         
Loans receivable:
                      
 
Held for sale
      
               4,819
  
               4,398
  
               8,377
  
               4,497
  
 
Held for portfolio
      
        3,626,685
  
        3,684,459
  
        3,904,704
  
        3,785,624
  
 
Allowance for loan losses
      
            (95,508
 ) 
           (95,733)
  
            (90,694
 ) 
           (95,269
 ) 
         
        3,535,996
  
        3,593,124
  
        3,822,387
  
        3,694,852
  
                         
Accrued interest receivable
      
             16,930
  
             18,501
  
             18,892
  
             18,998
  
Real estate owned held for sale, net
    
           101,485
  
             95,074
  
             56,967
  
             77,743
  
Property and equipment, net
      
             99,536
  
           101,541
  
           103,709
  
           103,542
  
Other intangibles, net
      
               9,811
  
             10,426
  
             12,365
  
             11,070
  
Bank-owned life insurance
      
             55,477
  
             55,125
  
             53,341
  
             54,596
  
Other assets
      
             88,459
  
             83,865
  
             47,475
  
             83,392
  
       
$
        4,701,606
$
        4,581,711
$
        4,532,542
$
        4,722,221
  
                         
LIABILITIES
                      
Deposits:
                      
 
Non-interest-bearing
    
$
           548,251
$
           549,291
$
           508,284
$
           582,480
  
 
Interest-bearing transaction and savings accounts
    
        1,403,231
  
        1,404,301
  
        1,131,093
  
        1,341,145
  
 
Interest-bearing certificates
    
        1,887,513
  
        1,896,186
  
        2,110,466
  
        1,941,925
  
         
        3,838,995
  
        3,849,778
  
        3,749,843
  
        3,865,550
  
                         
Advances from Federal Home Loan Bank at fair value
    
             47,003
  
             62,108
  
           115,946
  
           189,779
  
Customer repurchase agreements and other borrowings
    
           172,737
  
           177,244
  
           158,249
  
           176,842
  
Junior subordinated debentures at fair value
    
             49,808
  
             48,147
  
             49,563
  
             47,694
  
                         
Accrued expenses and other liabilities
    
             25,440
  
             24,049
  
             36,652
  
             24,020
  
Deferred compensation
      
             13,665
  
             13,661
  
             12,815
  
             13,208
  
         
        4,147,648
  
        4,174,987
  
        4,123,068
  
        4,317,093
  
                         
STOCKHOLDERS' EQUITY
                      
Preferred stock - Series A
      
           118,204
  
           117,805
  
           116,661
  
           117,407
  
Common stock
      
           490,119
  
           335,877
  
           322,582
  
           331,538
  
Retained earnings (accumulated deficit)
    
            (53,768
 ) 
           (45,775)
  
            (27,826
 ) 
           (42,077
 ) 
Other components of stockholders' equity
    
                 (597
 ) 
             (1,183)
  
              (1,943
 ) 
             (1,740
 ) 
         
           553,958
  
           406,724
  
           409,474
  
           405,128
  
       
$
        4,701,606
$
        4,581,711
$
        4,532,542
$
        4,722,221
  
                         
Common Shares Issued:
                      
Shares outstanding at end of period
    
    102,954,738
  
      23,101,149
  
      18,426,458
  
      21,539,590
  
 
Less unearned ESOP shares at end of period
    
           240,381
  
           240,381
  
           240,381
  
           240,381
  
Shares outstanding at end of period excluding unearned ESOP shares
  
    102,714,357
  
      22,860,768
  
      18,186,077
  
      21,299,209
  
Common stockholders' equity per share (1)
  
$
                 4.24
$
               12.64
$
               16.10
$
               13.51
  
Common stockholders' tangible equity per share (1) (2)
  
$
                 4.15
$
               12.18
$
               15.42
$
               12.99
  
                         
Tangible common stockholders' equity to tangible assets
  
9.08%
  
6.09%
  
6.20%
  
5.87%
  
Consolidated Tier 1 leverage capital ratio
    
13.02%
  
9.76%
  
9.90%
  
9.62%
  
                         
(1)
- Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares
      
 
 outstanding and excludes unallocated shares in the ESOP.
                  
(2)
- Tangible common equity excludes preferred stock, goodwill, core deposit and other intangibles.
            
(more)
 
 
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 7
 
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                          
           
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Dec 31, 2009
      
LOANS (including loans held for sale):
                        
Commercial real estate
                          
 
Owner occupied
    
$
              503,796
$
              515,542
$
              475,749
$
              509,464
      
 
Investment properties
      
              553,689
  
              557,134
  
              574,172
  
              573,495
      
Multifamily real estate
      
              149,980
  
              147,659
  
              150,168
  
              153,497
      
Commercial construction
      
                84,379
  
                83,879
  
                90,762
  
                80,236
      
Multifamily construction
      
                56,573
  
                61,924
  
                56,968
  
                57,422
      
One- to four-family construction
      
              182,928
  
              213,438
  
              337,368
  
              239,135
      
Land and land development
                          
 
Residential
      
              228,156
  
              256,607
  
              371,247
  
              284,331
      
 
Commercial
      
                29,410
  
                48,194
  
                32,450
  
                43,743
      
Commercial business
      
              635,130
  
              616,396
  
              678,273
  
              637,823
      
Agricultural business including secured by farmland
    
              208,815
  
              187,207
  
              215,339
  
              205,307
      
One- to four-family real estate
      
              702,420
  
              697,565
  
              653,513
  
              703,277
      
Consumer
      
              103,065
  
              109,092
  
                91,173
  
              110,937
      
Consumer secured by one- to four-family real estate
  
              193,163
  
              194,220
  
              185,899
  
              191,454
      
   
Total loans outstanding
    
$
           3,631,504
$
           3,688,857
$
           3,913,081
$
           3,790,121
      
Restructured loans performing under their restructured terms
$
                43,899
$
                45,471
$
                55,031
$
                43,683
      
Loans 30 - 89 days past due and on accrual
  
$
                25,853
$
                51,328
$
                34,038
$
                34,156
      
Total delinquent loans (including loans on non-accrual)
$
              203,097
$
              247,338
$
              259,107
$
              248,006
      
Total delinquent loans  /  Total loans outstanding
    
5.59%
  
6.71%
  
6.62%
  
6.54%
      
                               
                               
GEOGRAPHIC CONCENTRATION OF LOANS AT
                      
   
June 30, 2010
      
Washington
  
Oregon
  
Idaho
  
Other
  
Total
  
                               
Commercial real estate
                          
 
Owner occupied
    
$
              390,085
$
                64,642
$
                45,491
$
                  3,578
$
              503,796
  
 
Investment properties
      
              397,813
  
              107,790
  
                41,669
  
                  6,417
  
              553,689
  
Multifamily real estate
      
              123,707
  
                12,177
  
                  9,580
  
                  4,516
  
              149,980
  
Commercial construction
      
                61,202
  
                11,689
  
                11,488
  
                       - -
  
                84,379
  
Multifamily construction
      
                28,324
  
                28,249
  
                       - -
  
                       - -
  
                56,573
  
One- to four-family construction
      
                87,895
  
                84,796
  
                10,237
  
                       - -
  
              182,928
  
Land and land development
                          
 
Residential
      
              119,268
  
                86,619
  
                22,269
  
                       - -
  
              228,156
  
 
Commercial
      
                25,807
  
                  1,144
  
                  2,459
  
                       - -
  
                29,410
  
Commercial business
      
              447,545
  
                97,569
  
                71,344
  
                18,672
  
              635,130
  
Agricultural business including secured by farmland
    
              112,674
  
                39,266
  
                56,875
  
                       - -
  
              208,815
  
One- to four-family real estate
      
              458,681
  
              213,069
  
                28,241
  
                  2,429
  
              702,420
  
Consumer
      
                74,522
  
                22,860
  
                  5,683
  
                       - -
  
              103,065
  
Consumer secured by one- to four-family real estate
  
              136,559
  
                41,598
  
                14,506
  
                     500
  
              193,163
  
   
Total loans outstanding
    
$
           2,464,082
$
              811,468
$
              319,842
$
                36,112
$
           3,631,504
  
   
Percent of total loans
      
67.9%
  
22.3%
  
8.8%
  
1.0%
  
100.0%
  
                               
                               
DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT
                      
   
June 30, 2010
      
Washington
  
Oregon
  
Idaho
  
Other
  
Total
  
                               
Residential
                          
 
Acquisition & development
    
$
                53,196
$
                52,154
$
                  6,219
$
                       - -
$
              111,569
  
 
Improved lots
      
                43,863
  
                27,027
  
                  1,568
  
                       - -
  
                72,458
  
 
Unimproved land
      
                22,209
  
                  7,438
  
                14,482
  
                       - -
  
                44,129
  
   
Total residential land and development
  
$
              119,268
$
                86,619
$
                22,269
$
                       - -
$
              228,156
  
Commercial & industrial
                          
 
Acquisition & development
    
$
                  5,896
$
                       - -
$
                     559
$
                       - -
$
                  6,455
  
 
Improved land
      
                  8,857
  
                       - -
  
                       - -
  
                       - -
  
                  8,857
  
 
Unimproved land
      
                11,054
  
                  1,144
  
                  1,900
  
                       - -
  
                14,098
  
   
Total commercial land and development
  
$
                25,807
$
                  1,144
$
                  2,459
$
                       - -
$
                29,410
  
 
(more)
 
 
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 8
 
ADDITIONAL FINANCIAL INFORMATION
                      
(dollars in thousands)
                          
                               
               
Quarters Ended
       Six Months Ended  
CHANGE IN THE
      
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Jun 30, 2010
  
Jun 30, 2009
  
ALLOWANCE FOR LOAN LOSSES
                        
                               
Balance, beginning of period
  
$
                95,733
$
                95,269
$
                79,724
$
                95,269
$
                75,197
  
                               
Provision
      
                16,000
  
                14,000
  
                45,000
  
                30,000
  
                67,000
  
                               
Recoveries of loans previously charged off:
                      
   
Commercial real estate
      
                       - -
  
                       - -
  
                       - -
  
                       - -
  
                       - -
  
   
Multifamily real estate
      
                       - -
  
                       - -
  
                       - -
  
                       - -
  
                       - -
  
   
Construction and land
      
                     235
  
                     387
  
                     266
  
                     622
  
                     318
  
   
One- to four-family real estate
    
                       71
  
                       - -
  
                       89
  
                       71
  
                       91
  
   
Commercial business
      
                     595
  
                  1,290
  
                     249
  
                  1,885
  
                     319
  
   
Agricultural business, including secured by farmland
  
                       - -
  
                       - -
  
                       22
  
                       - -
  
                       22
  
   
Consumer
      
                       69
  
                       59
  
                       32
  
                     128
  
                       63
  
           
                     970
  
                  1,736
  
                     658
  
                  2,706
  
                     813
  
Loans charged off:
                          
   
Commercial real estate
      
                       - -
  
                     (92
 ) 
                       - -
  
                     (92
 ) 
                       - -
  
   
Multifamily real estate
      
                       - -
  
                       - -
  
                       - -
  
                       - -
  
                       - -
  
   
Construction and land
      
              (12,255
 ) 
                (7,724
 ) 
              (25,767
 ) 
              (19,979
 ) 
              (38,184
 ) 
   
One- to four-family real estate
    
                (2,128
 ) 
                (2,115
 ) 
                (2,704
 ) 
                (4,243
 ) 
                (3,795
 ) 
   
Commercial business
      
                (1,447
 ) 
                (4,784
 ) 
                (2,438
 ) 
                (6,231
 ) 
                (6,232
 ) 
   
Agricultural business, including secured by farmland
  
                   (986
 ) 
                       (2
 ) 
                (3,186
 ) 
                   (988
 ) 
                (3,186
 ) 
   
Consumer
      
                   (379
 ) 
                   (555
 ) 
                   (593
 ) 
                   (934
 ) 
                   (919
 ) 
           
              (17,195
 ) 
              (15,272
 ) 
              (34,688
 ) 
              (32,467
 ) 
              (52,316
 ) 
   
Net charge-offs
      
              (16,225
 ) 
              (13,536
 ) 
              (34,030
 ) 
              (29,761
 ) 
              (51,503
 ) 
                               
Balance, end of period
    
$
                95,508
$
                95,733
$
                90,694
$
                95,508
$
                90,694
  
                               
Net charge-offs / Average loans outstanding
0.44%
  
0.36%
  
0.87%
  
0.80%
  
1.31%
  
                               
                               
ALLOCATION OF
                          
ALLOWANCE FOR LOAN LOSSES
    
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Dec 31, 2009
      
Specific or allocated loss allowance
                        
 
Commercial real estate
    
$
                  7,044
$
                  8,279
$
                  5,333
$
                  8,278
      
 
Multifamily real estate
      
                  4,993
  
                  2,072
  
                       83
  
                       90
      
 
Construction and land
      
                42,972
  
                44,078
  
                55,585
  
                45,209
      
 
One- to four-family real estate
    
                  3,530
  
                  3,093
  
                  1,333
  
                  2,912
      
 
Commercial business
      
                23,907
  
                24,530
  
                19,474
  
                22,054
      
 
Agricultural business, including secured by farmland
  
                     679
  
                     949
  
                  1,323
  
                     919
      
 
Consumer
      
                  1,895
  
                  1,898
  
                  1,540
  
                  1,809
      
   
Total allocated
      
85,020
  
84,899
  
84,671
  
81,271
      
                               
 
Estimated allowance for undisbursed commitments
  
                     909
  
                  1,161
  
                  1,976
  
                  1,594
      
 
Unallocated
      
                  9,579
  
                  9,673
  
                  4,047
  
                12,404
      
   
Total allowance for loan losses
  
$
95,508
$
95,733
$
90,694
$
95,269
      
                               
Allowance for loan losses  /  Total loans outstanding
  
2.63%
  
2.60%
  
2.32%
  
2.51%
      
                               

(more)
 
 
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 9

 
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                          
                                 
             
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Dec 31, 2009
      
NON-PERFORMING ASSETS
                        
                                 
Loans on non-accrual status
                        
 
Secured by real estate:
                          
     
Commercial
    
$
                8,815
$
                6,801
$
                7,244
$
                7,300
      
     
Multifamily
      
                   363
  
                   373
  
                      - -
  
                   383
      
     
Construction and land
    
            110,931
  
            138,245
  
            180,989
  
            159,264
      
     
One- to four-family
      
              19,878
  
              19,777
  
              15,167
  
              14,614
      
 
Commercial business
      
              23,474
  
              19,353
  
              10,508
  
              21,640
      
 
Agricultural business, including secured by farmland
  
                7,556
  
                8,013
  
                7,478
  
                6,277
      
 
Consumer
      
                3,508
  
                3,387
  
                2,058
  
                3,923
      
             
            174,525
  
            195,949
  
            223,444
  
            213,401
      
                                 
Loans more than 90 days delinquent, still on accrual
                      
 
Secured by real estate:
                          
     
Commercial
      
                1,137
  
                      - -
  
                      - -
  
                      - -
      
     
Multifamily
      
                      - -
  
                      - -
  
                      - -
  
                      - -
      
     
Construction and land
    
                   692
  
                      - -
  
                   603
  
                      - -
      
     
One- to four-family
      
                   772
  
                      - -
  
                   624
  
                   358
      
 
Commercial business
      
                      - -
  
                      - -
  
                   209
  
                      - -
      
 
Agricultural business, including secured by farmland
  
                      - -
  
                      - -
  
                      - -
  
                      - -
      
 
Consumer
      
                   118
  
                     61
  
                   189
  
                     91
      
             
                2,719
  
                     61
  
                1,625
  
                   449
      
Total non-performing loans
      
            177,244
  
            196,010
  
            225,069
  
            213,850
      
Securities on non-accrual
      
                3,500
  
                3,000
  
                      - -
  
                4,232
      
Real estate owned (REO) and repossessed assets
  
            101,701
  
              95,167
  
              57,197
  
              77,802
      
     
Total non-performing assets
  
$
            282,445
$
            294,177
$
            282,266
$
            295,884
      
                                 
Total non-performing assets  /  Total assets
    
6.01%
  
6.42%
  
6.23%
  
6.27%
      
                                 
DETAIL & GEOGRAPHIC CONCENTRATION OF
                      
 
NON-PERFORMING ASSETS AT
                        
     
June 30, 2010
      
Washington
  
Oregon
  
Idaho
  
Other
  
Total
  
Secured by real estate:
                          
 
Commercial
    
$
                8,870
$
                   744
$
                   338
$
                      - -
$
                9,952
  
 
Multifamily
      
                   363
  
                      - -
  
                      - -
  
                      - -
  
                   363
  
 
Construction and land
                          
   
One- to four-family construction
    
              10,966
  
                6,978
  
                5,568
  
                      - -
  
              23,512
  
   
Commercial construction
    
                1,551
  
                      - -
  
                      - -
  
                      - -
  
                1,551
  
   
Multifamily construction
    
                9,280
  
                      - -
  
                      - -
  
                      - -
  
                9,280
  
   
Residential land acquisition & development
  
              30,076
  
              16,765
  
                   898
  
                      - -
  
              47,739
  
   
Residential land improved lots
    
                3,771
  
                9,610
  
                   317
  
                      - -
  
              13,698
  
   
Residential land unimproved
    
              10,644
  
                   348
  
                   321
  
                      - -
  
              11,313
  
   
Commercial land acquisition & development
  
                      - -
  
                      - -
  
                      - -
  
                      - -
  
                      - -
  
   
Commercial land improved
    
                   454
  
                      - -
  
                      - -
  
                      - -
  
                   454
  
   
Commercial land unimproved
    
                4,076
  
                      - -
  
                      - -
  
                      - -
  
                4,076
  
     
Total construction and land
    
              70,818
  
              33,701
  
                7,104
  
                      - -
  
            111,623
  
 
One- to four-family
      
              13,068
  
                7,582
  
                      - -
  
                      - -
  
              20,650
  
Commercial business
      
              14,117
  
                4,424
  
                   958
  
                3,975
  
              23,474
  
Agricultural business, including secured by farmland
  
                1,775
  
                   569
  
                5,212
  
                      - -
  
                7,556
  
Consumer
      
                3,342
  
                     42
  
                   242
  
                      - -
  
                3,626
  
Total non-performing loans
      
112,353
  
47,062
  
13,854
  
3,975
  
177,244
  
Securities on non-accrual
      
                3,250
  
                      - -
  
                   250
  
                      - -
  
3,500
  
Real estate owned (REO) and repossessed assets
  
              45,199
  
              40,277
  
              16,225
  
                      - -
  
            101,701
  
     
Total  non-performing assets at end of the period
$
            160,802
$
              87,339
$
              30,329
$
                3,975
$
            282,445
  

(more)
 
 
 

BANR – Second Quarter 2010 Results
July 21, 2010
Page 10

 
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                          
                             
           
Quarters Ended
 
 Six Months Ended      
                             
REAL ESTATE OWNED
      
Jun 30, 2010
  
Jun 30, 2009
  
Jun 30, 2010
  
Jun 30, 2009
      
                             
Balance, beginning of period
  
$
            95,074
$
            38,951
$
            77,743
$
            21,782
      
 
Additions for loan foreclosures
    
            17,966
  
            32,863
  
            45,293
  
            52,038
      
 
Additions from capitalized costs
    
                 380
  
              1,624
  
              1,516
  
              2,663
      
 
Dispositions of REO
      
          (10,451
 ) 
          (16,112
 ) 
          (20,366
 ) 
          (19,206
 )     
 
Gain (loss) on sale of REO
    
               (660
 ) 
               (296
 ) 
            (1,361
 ) 
               (197
 )     
 
Valuation adjustments in the period
    
               (824
 ) 
                 (63
 ) 
            (1,340
 ) 
               (113
 )     
Balance, end of period
    
$
101,485
$
56,967
$
101,485
$
56,967
      
                             
         
Quarters Ended
  
                             
REAL ESTATE OWNED- FIVE COMPARATIVE QUARTERS
  
Jun 30, 2010
  
Mar 31, 2010
  
Dec 31, 2009
  
Sep 30, 2009
  
Jun 30, 2009
  
                             
Balance, beginning of period
  
$
            95,074
$
            77,743
$
            53,576
$
            56,967
$
            38,951
  
 
Additions for loan foreclosures
    
            17,966
  
            27,327
  
            39,802
  
            10,013
  
            32,863
  
 
Additions from capitalized costs
    
                 380
  
              1,136
  
              1,712
  
              1,689
  
              1,624
  
 
Dispositions of REO
      
          (10,451
 ) 
            (9,915
 ) 
          (10,064
 ) 
          (13,439
 ) 
          (16,112
 ) 
 
Transfers to property and equipment
    
                   - -
  
                   - -
  
            (7,030
 ) 
                   - -
  
                   - -
  
 
Gain (loss) on sale of REO
    
               (660
 ) 
               (701
 ) 
               (189
 ) 
               (188
 ) 
               (296
 ) 
 
Valuation adjustments in the period
    
               (824
 ) 
               (516
 ) 
                 (64
 ) 
            (1,466
 ) 
                 (63
 ) 
Balance, end of period
    
$
101,485
$
95,074
$
77,743
$
53,576
$
56,967
  
                             
REAL ESTATE OWNED- BY TYPE AND STATE
    
Washington
  
Oregon
  
Idaho
  
Total
      
                             
Commercial real estate
    
$
              8,349
$
                   - -
$
                   - -
$
              8,349
      
One- to four-family construction
    
                 891
  
              1,190
  
                   - -
  
              2,081
      
Land development- commercial
    
              3,430
  
              6,656
  
                 485
  
            10,571
      
Land development- residential
    
            22,681
  
            24,579
  
              9,731
  
            56,991
      
Agricultural land
      
                 329
  
                   - -
  
              2,236
  
              2,565
      
One- to four-family real estate
    
              9,354
  
              7,801
  
              3,773
  
            20,928
      
Total
    
$
45,034
$
40,226
$
16,225
$
101,485
      
                             

 
(more)
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 11
 
ADDITIONAL FINANCIAL INFORMATION
                    
(dollars in thousands)
                      
                           
                           
DEPOSITS & OTHER BORROWINGS
                    
           
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Dec 31, 2009
  
 
DEPOSIT COMPOSITION
                      
                           
 
Non-interest-bearing
    
$
              548,251
$
              549,291
$
              508,284
$
              582,480
  
 
Interest-bearing checking
      
              368,418
  
              366,786
  
              312,024
  
              360,256
  
 
Regular savings accounts
      
              593,591
  
              577,704
  
              499,447
  
              538,765
  
 
Money market accounts
      
              441,222
  
              459,811
  
              319,622
  
              442,124
  
   
Interest-bearing transaction & savings accounts
    
           1,403,231
  
           1,404,301
  
           1,131,093
  
           1,341,145
  
 
Interest-bearing certificates
      
           1,887,513
  
           1,896,186
  
           2,110,466
  
           1,941,925
  
   
Total deposits
    
$
           3,838,995
$
           3,849,778
$
           3,749,843
$
           3,865,550
  
                           
                           
 
INCLUDED IN TOTAL DEPOSITS
                    
                           
 
Public transaction accounts
    
$
                85,292
$
                80,942
$
                48,644
$
                78,202
  
 
Public interest-bearing certificates
    
                81,668
  
                82,362
  
              134,213
  
                88,186
  
   
Total public deposits
    
$
              166,960
$
              163,304
$
              182,857
$
              166,388
  
                           
 
Total brokered deposits
    
$
              145,571
$
              150,577
$
              249,619
$
              165,016
  
                           
                           
                           
                           
 
INCLUDED IN OTHER BORROWINGS
                    
 
Customer repurchase agreements / "Sweep accounts"
$
              122,755
$
              126,954
$
              108,277
$
              124,330
  
                           
                           
                           
 
GEOGRAPHIC CONCENTRATION OF DEPOSITS AT
                  
   
June 30, 2010
      
Washington
  
Oregon
  
Idaho
  
Total
  
                           
         
$
           2,943,408
$
              615,790
$
              279,797
$
           3,838,995
  
                           
                           
                   
Minimum for Capital Adequacy
  
REGULATORY CAPITAL RATIOS AT
      
Actual
  
or "Well Capitalized"
  
   
June 30, 2010
      
Amount
  
Ratio
  
Amount
  
Ratio
  
                           
Banner Corporation-consolidated
                    
   
Total capital to risk-weighted assets
  
$
639,089
  
17.12%
$
298,716
  
8.00%
  
   
Tier 1 capital to risk-weighted assets
    
591,812
  
15.85%
  
149,358
  
4.00%
  
   
Tier 1 leverage capital to average assets
    
591,812
  
13.02%
  
181,816
  
4.00%
  
                           
Banner Bank
                      
   
Total capital to risk-weighted assets
    
512,933
  
14.44%
  
355,137
  
10.00%
  
   
Tier 1 capital to risk-weighted assets
    
467,936
  
13.18%
  
213,082
  
6.00%
  
   
Tier 1 leverage capital to average assets
    
467,936
  
10.77%
  
217,307
  
5.00%
  
                           
Islanders Bank
                      
   
Total capital to risk-weighted assets
    
28,046
  
13.68%
  
20,497
  
10.00%
  
   
Tier 1 capital to risk-weighted assets
    
25,942
  
12.66%
  
12,298
  
6.00%
  
   
Tier 1 leverage capital to average assets
    
25,942
  
11.94%
  
10,861
  
5.00%
  
                           


(more)
 
 
 
BANR – Second Quarter 2010 Results
July 21, 2010
Page 12

 
 
ADDITIONAL FINANCIAL INFORMATION
                        
 
(dollars in thousands)
                          
 
(rates / ratios annualized)
                          
           
Quarters Ended
   Six Months Ended  
                               
 
OPERATING PERFORMANCE
    
Jun 30, 2010
  
Mar 31, 2010
  
Jun 30, 2009
  
Jun 30, 2010
  
Jun 30, 2009
  
                               
                               
 
Average loans
    
$
       3,677,140
$
       3,726,243
$
       3,925,196
$
       3,701,552
$
       3,934,002
  
 
Average securities and deposits
    
          607,643
  
          563,562
  
          394,244
  
          587,014
  
          398,856
  
 
Average non-interest-earning assets
    
          268,864
  
          258,060
  
          199,981
  
          262,193
  
          196,604
  
   
Total average assets
    
$
       4,553,647
$
       4,547,865
$
       4,519,421
$
       4,550,759
$
       4,529,462
  
                               
 
Average deposits
    
$
       3,830,659
$
       3,800,888
$
       3,679,653
$
       3,815,798
$
       3,686,455
  
 
Average borrowings
      
          349,997
  
          373,192
  
          429,708
  
          361,578
  
          423,359
  
 
Average non-interest-bearing liabilities
    
          (38,527
 ) 
          (36,459
 ) 
          (18,421
 ) 
          (37,498
 ) 
          (13,201
 ) 
   
Total average liabilities
      
       4,142,129
  
       4,137,621
  
       4,090,940
  
       4,139,878
  
       4,096,613
  
                               
 
Total average stockholders' equity
    
          411,518
  
          410,244
  
          428,481
  
          410,881
  
          432,849
  
   
Total average liabilities and equity
  
$
       4,553,647
$
       4,547,865
$
       4,519,421
$
       4,550,759
$
       4,529,462
  
                               
 
Interest rate yield on loans
      
5.72%
  
5.74%
  
5.67%
  
5.73%
  
5.73%
  
 
Interest rate yield on securities and deposits
    
2.09%
  
2.31%
  
3.72%
  
2.19%
  
3.86%
  
   
Interest rate yield on interest-earning assets
    
5.21%
  
5.29%
  
5.49%
  
5.25%
  
5.56%
  
                               
 
Interest rate expense on deposits
    
1.54%
  
1.69%
  
2.36%
  
1.61%
  
2.45%
  
 
Interest rate expense on borrowings
    
2.28%
  
2.20%
  
2.42%
  
2.24%
  
2.32%
  
   
Interest rate expense on interest-bearing liabilities
    
1.60%
  
1.73%
  
2.37%
  
1.67%
  
2.43%
  
 
Interest rate spread
      
3.61%
  
3.56%
  
3.12%
  
3.58%
  
3.13%
  
 
Net interest margin
      
3.65%
  
3.61%
  
3.24%
  
3.62%
  
3.25%
  
                               
 
Other operating income / Average assets
    
0.54%
  
0.69%
  
1.77%
  
0.62%
  
1.10%
  
                               
 
Other operating income (loss) EXCLUDING change in valuation of
                      
   
financial instruments carried at fair value / Average assets (1)
  
0.62%
  
0.52%
  
0.78%
  
0.57%
  
0.74%
  
                               
 
Other operating expense / Average assets
    
3.35%
  
3.16%
  
3.27%
  
3.25%
  
3.15%
  
                               
 
Efficiency ratio (other operating expense / revenue)
    
84.26%
  
77.20%
  
67.19%
  
80.70%
  
74.79%
  
                               
 
Return (Loss) on average assets
    
(0.44%)
  
(0.14%)
  
(1.47%)
  
(0.29%)
  
(1.15%)
  
                               
 
Return (Loss) on average equity
    
(4.82%)
  
(1.50%)
  
(15.46%)
  
(3.17%)
  
(12.01%)
  
                               
 
Return (Loss) on average tangible equity (2)
    
(4.94%)
  
(1.54%)
  
(15.93%)
  
(3.25%)
  
(12.38%)
  
                               
 
Average equity  /  Average assets
    
9.04%
  
9.02%
  
9.48%
  
9.03%
  
9.56%
  
                               
 
(1)
 - Earnings information excluding the fair value adjustments and goodwill impairment charge (alternately referred to as operating
      
   
   income (loss) from core operations and expenses from core operations) represent non-GAAP (Generally Accepted
        
   
   Accounting Principles) financial measures.
                        
                               
 
(2)
 - Average tangible equity excludes goodwill, core deposit and other intangibles.
                  
                               


(more)