Contact: Mark J. grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 News Release

Exhibit 99.1
 
 
     
Contact: Mark J. grescovich,
President & CEO
Lloyd W. Baker, CFO
(509) 527-3636
 
 
 
 
Banner Corporation Earns $45.2 million, or $1.89 per diluted share, in 2015;
Includes $6.9 Million, or $0.20 Per Diluted Share, in the Fourth Quarter of 2015;
Fourth Quarter Highlighted By Completed Acquisition of AmericanWest Bank

Walla Walla, WA - January 27, 2016 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income in the fourth quarter of 2015 of $6.9 million, or $0.20 per diluted share, compared to $12.9 million, or $0.62 per diluted share, in the preceding quarter and $11.7 million, or $0.60 per diluted share, in the fourth quarter a year ago.  The current quarter results were impacted by $18.4 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.37 per diluted share, and the preceding quarter results were impacted by $2.2 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.09 per diluted share.
 
For the year, net income was $45.2 million, or $1.89 per diluted share, compared to $54.1 million, or $2.79 per diluted share, in 2014.  Results for 2014 included a $9.1 million bargain purchase gain related to the acquisition of six branches in southwest Oregon, which net of taxes contributed $0.30 to diluted net income per share.  Acquisition-related expenses were $26.1 million, or $0.76 per diluted share net of tax benefit, in 2015 compared to $4.3 million, or $0.17 per diluted share net of tax benefit, in 2014.
 
“For Banner Corporation 2015 was a truly transformational year,” stated Mark J. Grescovich, President and Chief Executive Officer.  “While our operating results for the most recent quarter and full year continued to reflect the success of our proven client acquisition strategies, which produced strong organic growth of loans and deposits, as well as core revenues, we also benefited meaningfully from the successful acquisition and integration of Siuslaw Bank in March 2015 and the six branches in southwest Oregon that we acquired in June 2014.  In addition, the recently completed acquisition of AmericanWest Bank had a dramatic impact on our operating results for the fourth quarter of 2015, substantially increasing the scale and reach of the Company and providing tremendous opportunity for future revenue growth.  With this strategic combination, we will deploy our super community bank model throughout a strengthened presence in Washington, Oregon and Idaho, and enter attractive growth markets in California and Utah.  Although there remains significant additional work to be done to complete the full integration of the two companies and realize the expected operating synergies, we are exceptionally pleased with the progress we have made through the dedicated efforts of our employees and expect that, similar to the prior acquisitions, this acquisition of AmericanWest Bank will result in significant benefits to our expanding group of clients, communities, employees and shareholders.”

With the completion of the AmericanWest Bank acquisition, at December 31, 2015 Banner Corporation had $9.8 billion in assets, $7.2 billion in net loans and $8.1 billion in deposits.  As Banner Bank deploys its super community bank business model across five western states, the combined bank, with 202 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population, is benefiting from its diversified geographic footprint with significant growth opportunities.

Fourth Quarter 2015 Highlights
 
  
Completed acquisition of AmericanWest Bank on October 1, 2015, including $4.5 billion of assets, $3.0 billion of net loans and $3.6 billion in deposits.
  
Net income was $6.9 million, or $0.20 per diluted share.
•  
Acquisition-related expenses were $18.4 million which, net of tax benefit, reduced net income by $0.37 per diluted share for the quarter ended December 31, 2015.
  
Revenues from core operations* increased 90% to $112.0 million, compared to $59.1 million in the fourth quarter a year ago.
  
Net interest margin was 4.05% for the current quarter, compared to 4.14% in the third quarter of 2015 and 4.08% a year ago.
  
Deposit fees and other service charges were $13.2 million, an increase of 35% compared to the preceding quarter and 58% year-over-year.
  
Revenues from mortgage banking operations were $4.5 million, compared to $4.4 million in the preceding quarter and $3.0 million a year ago.
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 2
 
  
Net loans increased by $2.94 billion, or 69%, during the quarter, and increased 93% year-over-year.
  
Total deposits increased 107% to $8.06 billion compared to a year ago.
  
Core deposits increased by $3.03 billion, or 83%, during the quarter, and increased 114% year-over-year.
  
Core deposits represented 83% of total deposits at December 31, 2015.
  
Common stockholders' tangible equity per share* decreased to $29.66 at December 31, 2015, compared to $30.75 at the preceding quarter end but increased from $29.64 a year ago.
  
The ratio of tangible common stockholders' equity to tangible assets* remained strong at 10.68% at December 31, 2015.

*Revenues from core operations and other operating income from core operations (both of which exclude fair value adjustments, gains and losses on the sale of securities and the acquisition bargain purchase gain), acquisition accounting impact on net interest margin, other operating expense from core operations (which excludes acquisition-related costs) and references to tangible common stockholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets) 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.

Acquisition of AmericanWest Bank

Effective October 1, 2015, Banner completed the acquisition of Starbuck Bancshares, Inc. ("Starbuck") and its wholly owned subsidiary AmericanWest Bank.  The merger was accounted for using the acquisition method of accounting.  Accordingly, the purchase price was allocated to the assets (including identifiable intangible assets) and the liabilities of Starbuck at their respective estimated fair values as of the merger date.  The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill.  The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date.  The allocation of the purchase price is subject to adjustment within the measurement period.

In addition to the acquisition of AmericanWest Bank, the acquisition of Siuslaw Financial Group and its wholly-owned subsidiary Siuslaw Bank ("Siuslaw") in March 2015 and acquisition of six branches in southwest Oregon acquired in June 2014 (the (the "Branch purchase") had a significant impact on the current and historical operating results of Banner.  For additional details regarding these acquisitions and merger related expenses, see the tables under Business Combinations on pages 12 and 13 of this press release.

Income Statement Review
 
Banner’s fourth quarter net interest income, before the provision for loan losses, increased 76% to $92.1 million, compared to $52.2 million in the preceding quarter and increased 97% compared to $46.7 million in the fourth quarter a year ago, largely reflecting the acquisitions of AmericanWest Bank and Siuslaw and continued client acquisition.  In 2015, Banner’s net interest income increased 35% to $242.3 million compared to $179.9 million in 2014, which in addition to the acquisitions reflected the Branch purchase and significant organic loan and deposit growth.
 
“Although lower as expected following the acquisition of AmericanWest Bank, we maintained a solid net interest margin in the fourth quarter reflecting a strong loan to deposit ratio and well disciplined pricing decisions,” said Grescovich.  Net interest margin is enhanced by the amortization of acquisition accounting discounts on purchased loans received in Banner's acquisitions, which is accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed which are amortized as a reduction to deposit interest expense.  The preceding quarter was impacted by the accretion of acquisition accounting loan discounts from the Siuslaw acquisition and immaterial amount of deposit premium amortization which together contributed approximately three basis points to the margin in that period.  Banner's net interest margin was 4.05% for the fourth quarter of 2015, which included 11 basis points as a result of accretion from acquisition accounting loan discounts from both the AmericanWest Bank and Siuslaw acquisitions and three basis points from the amortization of deposit premiums, compared to 4.14% in the preceding quarter and 4.08% in the fourth quarter a year ago.  For the year, Banner’s net interest margin was 4.10%, which included seven basis points from acquisition accounting adjustments, compared to 4.07% in 2014, which included just one basis point from acquisition accounting adjustments.
 
Average interest-earning asset yields decreased ten basis points compared to the preceding quarter and decreased seven basis points from the fourth quarter a year ago.  Despite the positive impact from the accretion of discounts on the loans acquired through the acquisitions, which added
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 3
 
14 basis points to reported yields for the quarter, loan yields decreased four basis points compared to the preceding quarter and decreased eight basis points from the fourth quarter a year ago.  The decrease in the average loan yield was primarily attributable to changes in the portfolio mix as a result of the acquisitions, as well as payoffs of loans which had a higher yield than the average yield of newly originated loans.  Deposit costs decreased one basis point compared to the preceding quarter and decreased three basis points compared to the fourth quarter a year ago.  Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by three basis points in the fourth quarter 2015 and by one basis point for the full year.  The total cost of funds declined two basis points in the fourth quarter compared to the preceding quarter and declined five basis points compared to the fourth quarter a year ago.
 
“Home purchase activity remains robust in our markets, and revenues from mortgage banking remained strong, reflecting Banner’s increased market presence and our investment in this business line,” said Grescovich.  Mortgage banking operations contributed $4.5 million to fourth quarter revenues compared to $4.4 million in the preceding quarter and $3.0 million in the fourth quarter of 2014.  In 2015, mortgage banking operations produced $17.7 million of revenues compared to $10.2 million in 2014.  Home purchase activity accounted for 61% of fourth quarter mortgage banking originations and 63% of mortgage originations in 2015.
 
Deposit fees and other service charges increased 35% to $13.2 million in the fourth quarter of 2015, compared to $9.7 million in the preceding quarter and increased 58% compared to $8.3 million in the fourth quarter a year ago.  In 2015, deposit fees and other service charges increased 33% to $40.6 million compared to $30.6 million in 2014.  The year-over-year increase reflects strong organic growth, as well as the AmericanWest Bank and Siuslaw acquisitions and the Branch purchase, together resulting in significant growth in the number of deposit accounts and increased transaction activity.
 
Revenues from core operations* (revenues excluding gains and losses on the sale of securities, net change in valuation of financial instruments and the bargain purchase gain) increased 66% to $112.0 million in the fourth quarter ended December 31, 2015, compared to $67.4 million in the preceding quarter and increased 90% compared to $59.1 million in the fourth quarter of 2014.  In 2015, revenues from core operations* increased 36% to $305.9 million, compared to $224.4 million in 2014.  Total revenues were $110.5 million for the quarter ended December 31, 2015, compared to $66.3 million in the preceding quarter and $58.8 million in the fourth quarter a year ago.  In 2015, total revenues were $304.6 million, compared to $234.9 million in 2014.
 
Banner’s fourth quarter 2015 results included a $1.5 million net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, as well as a $3,000 net loss on the sale of securities.  In the preceding quarter, results included a $1.1 million net loss for fair value adjustments and in the fourth quarter a year ago results included a $287,000 net loss for fair value adjustments, as well as a $1,000 gain on the sale of securities.
 
Banner’s total other operating income, which includes the changes in the valuation of financial instruments and gains and losses on the sale of securities, was $18.4 million in the fourth quarter of 2015, compared to $14.1 million in the third quarter of 2015 and $12.1 million in the fourth quarter a year ago.  For the full year, total other operating income was $62.3 million compared to $55.0 million in 2014 which also included the $9.1 million bargain purchase gain from the Branch purchase.  Other operating income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $19.9 million for the fourth quarter of 2015, compared to $15.2 million for the preceding quarter and $12.4 million for the fourth quarter a year ago.  For the year, other operating income from core operations* increased 43% to $63.6 million, compared to $44.5 million in 2014.
 
Total other operating expenses (non-interest expenses) were $100.3 million in the fourth quarter of 2015, compared to $46.7 million in the preceding quarter and $41.2 million in the fourth quarter of 2014.  The year-over-year increase in operating expenses was largely attributable to acquisition-related expenses and incremental costs associated with operating the 98 branches acquired in the AmericanWest Bank acquisition on October 1, 2015 and the ten Siuslaw branches acquired in March 2015, as well as generally increased compensation, occupancy and payment and card processing services reflecting increased transaction volume.  There were $18.4 million in acquisition-related expenses in the current quarter compared to $2.2 million in the preceding quarter and $2.8 million in the fourth quarter a year ago.  For the year, total other operating expenses were $236.6 million, compared to $153.7 million in 2014, with acquisition-related expenses of $26.1 million, compared to $4.3 million in 2014.  Acquisition-related expenses in the year ended December 31, 2015 included $24.1 million related to the acquisition of AmericanWest Bank and $2.0 million related to the acquisition of Siuslaw.  In addition to the AmericanWest Bank and Siuslaw branches, the increase in total operating expenses for the full year reflects costs associated with operating the six southwest Oregon branches acquired in June 2014.
 
For the fourth quarter of 2015, Banner recorded $3.3 million in state and federal income tax expense for an effective tax rate of 32.4%, which reflects normal marginal tax rates increased by the effect of certain non-deductible merger expenses and reduced by the effect of tax-exempt income and certain tax credits.
 
Balance Sheet Review
 
Largely as a result of the AmericanWest Bank acquisition, but also reflecting organic growth, total assets increased by 87% to $9.80 billion at December 31, 2015, compared to $5.31 billion at September 30, 2015, and increased 107% compared to $4.72 billion a year ago.  The total of
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 4
 
securities and interest-bearing deposits held at other banks was $1.54 billion at December 31, 2015, compared to $648.5 million at September 30, 2015 and $637.5 million a year ago.  The increase in securities portfolio is primarily a result of positions held by AmericanWest at the time of the merger.  The average effective duration of Banner's securities portfolio was approximately 3.3 years at December 31, 2015.
 
“Net loans increased by $2.94 billion, or 69%, during the quarter and increased 93% year-over-year due to both the AmericanWest Bank and Siuslaw acquisitions and strong organic growth.  Loan production remained solid, as did the regional economy, and we continue to see significant potential for growth in our loan origination pipelines,” added Grescovich.
 
Net loans were $7.24 billion at December 31, 2015, compared to $4.29 billion at September 30, 2015, and $3.76 billion a year ago.  The AmericanWest Bank acquisition accounted for $2.82 billion of the year-end loan portfolio and the Siuslaw acquisition accounted for $236 million, of the year-end loan portfolio.  Commercial real estate and multifamily real estate loans increased 88% to $3.57 billion at December 31, 2015, compared to $1.90 billion at September 30, 2015, and increased 127% compared to $1.57 billion a year ago.  Commercial business loans increased 49% to $1.21 billion at December 31, 2015, compared to $812.1 million three months earlier and increased 67% compared to $724.0 million a year ago.  Agricultural business loans increased 55% to $376.5 million at December 31, 2015, compared to $242.6 million three months earlier and increased 58% compared to $238.5 million a year ago.  Total construction, land and land development loans increased 16% to $574.2 million at December 31, 2015, compared to $493.8 million at September 30, 2015, and increased 40% compared to $411.0 million a year earlier.
 
Banner’s total deposits increased 84% to $8.06 billion at December 31, 2015, compared to $4.39 billion at September 30, 2015 and increased 107% compared to $3.90 billion a year ago.  The AmericanWest Bank acquisition accounted for $3.54 billion and the Siuslaw acquisition accounted for  $336 million, respectively, of the deposit portfolio at December 31, 2015.  Non-interest-bearing account balances increased 68% to $2.62 billion at December 31, 2015, compared to $1.56 billion three months earlier and increased 102% compared to $1.30 billion a year ago.  Interest-bearing transaction and savings accounts increased 94% to $4.07 billion at December 31, 2015, compared to $2.10 billion three months earlier and increased 122% compared to $1.83 billion a year ago.  Certificates of deposit increased 87% to $1.37 billion at December 31, 2015, compared to $730.7 million at September 30, 2015, and increased 77% compared to $770.5 million a year earlier.  Brokered deposits totaled $162.9 million at December 31, 2015, compared to $10.1 million at September 30, 2015 and $4.8 million a year ago.
 
Banner’s core deposits represented 83% of total deposits at December 31, 2015, compared to 80% of total deposits a year earlier.  The cost of deposits was 0.15% for the quarter ended December 31, 2015, compared to 0.16% in the preceding quarter, and declined two basis points from 0.18% for the quarter ended December 31, 2014.
 
At December 31, 2015, total common stockholders' equity was $1.30 billion, or $37.97 per share, compared to $671.2 million at September 30, 2015 and $582.9 million a year ago.  This increase was mostly due to 13.23 million shares of common stock and non-voting common stock issued on October 1, 2015 in connection with the AmericanWest Bank acquisition, which were valued at $47.67 per share and increased stockholders’ equity by $630.7 million.  In addition, on March 6, 2015, Banner issued 1.3 million shares in connection with the Siuslaw acquisition, which were valued at $44.02 per share and added $58.1 million to stockholders’ equity.  At December 31, 2015, tangible common stockholders' equity*, which excludes goodwill and other intangible assets, was $1.02 billion, or 10.68% of tangible assets*, compared to $644.6 million, or 12.20% of tangible assets, at September 30, 2015, and $580.1 million, or 12.29% of tangible assets, a year ago.  Banner's tangible book value per share* increased slightly to $29.66 at December 31, 2015, compared to $29.64 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 newly implemented Basel III and Dodd Frank regulatory standards.  At December 31, 2015, Banner Corporation's common equity Tier 1 capital ratio was 12.15%, its Tier 1 leverage capital to average assets ratio was 11.06% and its total capital to risk-weighted assets ratio was 13.66%.
 
Credit Quality
 
“No provision for loan losses was required during the current quarter or the full year despite the organic loan growth,” said Grescovich.  “Our credit quality metrics continue to reflect our moderate risk profile and our reserve levels remain strong.”
 
In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion 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.
 
The allowance for loan losses was $78.0 million at December 31, 2015, or 1.07% of total loans outstanding and 512% of non-performing loans compared to $76.0 million at December 31, 2014, or 1.98% of total loans outstanding.  Banner had net recoveries of $688,000 in the fourth quarter compared to net charge-offs of $9,000 in the third quarter of 2015 and net recoveries of $1.6 million in the fourth quarter a year ago.  If the allowance for loan losses and loans were grossed up for the remaining loan discount the adjusted allowance for loans to adjusted loans would
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 5
 
 
have been 1.67% as of December 31, 2015.  Non-performing loans were $15.2 million at December 31, 2015, compared to $16.0 million at September 30, 2015, and $16.7 million a year ago.  Real estate owned and other repossessed assets increased to $11.6 million at December 31, 2015, compared to $6.4 million at September 30, 2015 and $3.4 million a year ago primarily due to additional real estate owned acquired in the mergers.
 
Banner's non-performing assets were 0.28% of total assets at December 31, 2015, compared to 0.42% at September 30, 2015 and 0.43% a year ago.  Non-performing assets were $27.1 million at December 31, 2015, compared to $22.4 million at September 30, 2015 and $20.2 million a year ago.  In addition to non-performing assets, purchase credit impaired loans increased to $58.6 million at December 31, 2015 compared to $5.4 million at September 30, 2015 as a result of the acquisition of AmericanWest Bank.
 
Conference Call
 
Banner will host a conference call on Thursday, January 28, 2015, at 8:00 a.m. PST, to discuss its fourth quarter and year end 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 10078834, or at www.bannerbank.com.
 
About the Company
 
On October 1, 2015, Banner Corporation completed the acquisition of AmericanWest Bank which was merged into Banner Bank, a transformational merger that brought together two financially strong, well-respected institutions and created a leading Western bank.  Banner Corporation is now a $9.8 billion bank holding company operating two commercial banks in five 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) expected revenues, cost savings, synergies and other benefits from the merger of Banner Bank and Siuslaw Bank and the merger of Banner Bank and AmericanWest Bank might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (3) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) the ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (12) the costs, effects and outcomes of litigation; (13) 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; (14) changes in accounting principles, policies or guidelines; (15) future acquisitions by Banner of other depository institutions or lines of business; (16) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
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RESULTS OF OPERATIONS
 
Quarters Ended
 
Years Ended
(in thousands except shares and per share data)
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
                     
INTEREST INCOME:
                   
Loans receivable
 
$
88,100
   
$
51,749
   
$
46,102
   
$
237,292
   
$
177,541
 
Mortgage-backed securities
 
5,440
   
1,307
   
1,403
   
9,049
   
5,779
 
Securities and cash equivalents
 
2,955
   
1,737
   
1,746
   
8,092
   
7,341
 
   
96,495
   
54,793
   
49,251
   
254,433
   
190,661
 
INTEREST EXPENSE:
                   
Deposits
 
3,146
   
1,738
   
1,801
   
8,385
   
7,578
 
Federal Home Loan Bank advances
 
287
   
4
   
16
   
311
   
125
 
Other borrowings
 
73
   
47
   
40
   
211
   
172
 
Junior subordinated debentures
 
890
   
816
   
734
   
3,247
   
2,914
 
   
4,396
   
2,605
   
2,591
   
12,154
   
10,789
 
Net interest income before provision for loan losses
 
92,099
   
52,188
   
46,660
   
242,279
   
179,872
 
PROVISION FOR LOAN LOSSES
 
   
   
   
   
 
Net interest income
 
92,099
   
52,188
   
46,660
   
242,279
   
179,872
 
OTHER OPERATING INCOME:
                   
Deposit fees and other service charges
 
13,172
   
9,746
   
8,317
   
40,607
   
30,553
 
Mortgage banking operations
 
4,482
   
4,426
   
2,966
   
17,720
   
10,249
 
Bank owned life insurance
 
1,056
   
550
   
465
   
2,497
   
1,809
 
Miscellaneous
 
1,196
   
489
   
652
   
2,821
   
1,885
 
   
19,906
   
15,211
   
12,400
   
63,645
   
44,496
 
Net gain (loss) on sale of securities
 
(3
)
 
   
1
   
(540
)
 
42
 
Net change in valuation of financial instruments carried at fair value
 
(1,547
)
 
(1,113
)
 
(287
)
 
(813
)
 
1,374
 
Acquisition bargain purchase gain
 
   
   
   
   
9,079
 
Total other operating income
 
18,356
   
14,098
   
12,114
   
62,292
   
54,991
 
OTHER OPERATING EXPENSE:
                   
Salary and employee benefits
 
49,225
   
27,026
   
23,321
   
127,282
   
89,778
 
Less capitalized loan origination costs
 
(4,007
)
 
(3,747
)
 
(3,050
)
 
(14,379
)
 
(11,730
)
Occupancy and equipment
 
11,533
   
6,470
   
5,689
   
30,366
   
22,743
 
Information / computer data services
 
5,365
   
2,219
   
2,147
   
12,110
   
8,131
 
Payment and card processing services
 
5,504
   
4,168
   
2,998
   
16,430
   
11,460
 
Professional services
 
2,341
   
951
   
863
   
4,828
   
3,753
 
Advertising and marketing
 
1,882
   
1,959
   
1,387
   
7,649
   
6,266
 
Deposit insurance
 
1,284
   
713
   
595
   
3,189
   
2,415
 
State/municipal business and use taxes
 
505
   
475
   
415
   
1,889
   
1,437
 
Real estate operations
 
207
   
(2
)
 
(187
)
 
397
   
(446
)
Amortization of core deposit intangibles
 
1,896
   
286
   
531
   
3,164
   
1,990
 
Miscellaneous
 
6,150
   
3,972
   
3,735
   
17,565
   
13,619
 
   
81,885
   
44,490
   
38,444
   
210,490
   
149,416
 
Acquisition related costs
 
18,369
   
2,207
   
2,785
   
26,110
   
4,325
 
Total other operating expense
 
100,254
   
46,697
   
41,229
   
236,600
   
153,741
 
Income before provision for income taxes
 
10,201
   
19,589
   
17,545
   
67,971
   
81,122
 
PROVISION FOR INCOME TAXES
 
3,308
   
6,642
   
5,831
   
22,749
   
27,052
 
NET INCOME
 
$
6,893
   
$
12,947
   
$
11,714
   
$
45,222
   
$
54,070
 
Earnings per share available to common shareholders:
                   
Basic
 
$
0.20
   
$
0.62
   
$
0.60
   
$
1.90
   
$
2.79
 
Diluted
 
$
0.20
   
$
0.62
   
$
0.60
   
$
1.89
   
$
2.79
 
Cumulative dividends declared per common share
 
$
0.18
   
$
0.18
   
$
0.18
   
$
0.72
   
$
0.72
 
Weighted average common shares outstanding:
                   
Basic
 
33,842,350
   
20,755,394
   
19,374,228
   
23,801,373
   
19,359,409
 
Diluted
 
33,934,426
   
20,821,377
   
19,441,712
   
23,866,621
   
19,402,656
 
Increase (decrease)  in common shares outstanding
 
13,279,955
   
(8,381
)
 
43
   
14,670,707
   
27,779
 
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 7
 
 
FINANCIAL  CONDITION
           
(in thousands except shares and per share data)
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
             
ASSETS
           
Cash and due from banks
 
$
117,657
   
$
74,695
   
$
71,077
 
Federal funds and interest-bearing deposits
 
144,260
   
60,544
   
54,995
 
Securities - trading
 
34,134
   
37,515
   
40,258
 
Securities - available for sale
 
1,138,573
   
418,254
   
411,021
 
Securities - held to maturity
 
220,666
   
132,150
   
131,258
 
Federal Home Loan Bank stock
 
16,057
   
6,767
   
27,036
 
Loans held for sale
 
44,712
   
3,136
   
2,786
 
Loans receivable:
           
Held for portfolio
 
7,314,504
   
4,369,458
   
3,831,034
 
Allowance for loan losses
 
(78,008
)
 
(77,320
)
 
(75,907
)
   
7,236,496
   
4,292,138
   
3,755,127
 
Accrued interest receivable
 
29,627
   
17,966
   
15,279
 
Real estate owned held for sale, net
 
11,627
   
6,363
   
3,352
 
Property and equipment, net
 
167,604
   
102,881
   
91,185
 
Goodwill
 
247,738
   
21,148
   
 
Other intangibles, net
 
36,762
   
5,457
   
2,831
 
Bank-owned life insurance
 
156,865
   
71,842
   
63,759
 
Other assets
 
193,520
   
61,454
   
53,199
 
   
$
9,796,298
   
$
5,312,310
   
$
4,723,163
 
LIABILITIES
           
Deposits:
           
Non-interest-bearing
 
$
2,619,618
   
$
1,561,516
   
$
1,298,866
 
Interest-bearing transaction and savings accounts
 
4,068,019
   
2,095,476
   
1,829,568
 
Interest-bearing certificates
 
1,367,431
   
730,661
   
770,516
 
   
8,055,068
   
4,387,653
   
3,898,950
 
Advances from Federal Home Loan Bank at fair value
 
133,381
   
16,435
   
32,250
 
Customer repurchase agreements and other borrowings
 
98,325
   
88,083
   
77,185
 
Junior subordinated debentures at fair value
 
92,480
   
85,183
   
78,001
 
Accrued expenses and other liabilities
 
76,511
   
42,844
   
37,082
 
Deferred compensation
 
40,474
   
20,910
   
16,807
 
   
8,496,239
   
4,641,108
   
4,140,275
 
STOCKHOLDERS' EQUITY
           
Common stock
 
1,261,174
   
628,958
   
568,882
 
Retained earnings
 
39,615
   
41,269
   
14,264
 
Other components of stockholders' equity
 
(730
)
 
975
   
(258
)
   
1,300,059
   
671,202
   
582,888
 
   
$
9,796,298
   
$
5,312,310
   
$
4,723,163
 
Common Shares Issued:
           
Shares outstanding at end of period
 
34,242,255
   
20,962,300
   
19,571,548
 
Common stockholders' equity per share (1)
 
$
37.97
   
$
32.02
   
$
29.78
 
Common stockholders' tangible equity per share (1) (2)
 
$
29.66
   
$
30.75
   
$
29.64
 
Common stockholders' tangible equity to tangible assets (2)
 
10.68
%
 
12.20
%
 
12.29
%
Consolidated Tier 1 leverage capital ratio
 
11.06
%
 
13.85
%
 
13.41
%

(1)
Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2)
Common stockholders' 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.
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 8
 
ADDITIONAL FINANCIAL INFORMATION
           
(dollars in thousands)
           
   
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
LOANS:
           
Commercial real estate:
           
Owner occupied
 
$
1,327,807
   
$
635,146
   
$
546,783
 
Investment properties
 
1,765,353
   
1,062,418
   
856,942
 
Multifamily real estate
 
472,976
   
198,874
   
167,524
 
Commercial construction
 
72,103
   
47,490
   
17,337
 
Multifamily construction
 
63,846
   
72,987
   
60,193
 
One- to four-family construction
 
278,469
   
246,715
   
219,889
 
Land and land development:
           
Residential
 
126,773
   
111,091
   
102,435
 
Commercial
 
33,179
   
15,517
   
11,152
 
Commercial business
 
1,207,944
   
812,070
   
723,964
 
Agricultural business including secured by farmland
 
376,531
   
242,556
   
238,499
 
One- to four-family real estate
 
952,633
   
533,189
   
537,108
 
Consumer:
           
Consumer secured by one- to four-family real estate
 
478,420
   
250,029
   
222,205
 
Consumer-other
 
158,470
   
141,376
   
127,003
 
Total loans outstanding
 
$
7,314,504
   
$
4,369,458
   
$
3,831,034
 
Restructured loans performing under their restructured terms
 
$
21,786
   
$
23,981
   
$
29,154
 
Loans 30 - 89 days past due and on accrual
 
$
18,834
   
$
4,152
   
$
8,387
 
Total delinquent loans (including loans on non-accrual)
 
$
34,086
   
$
27,682
   
$
25,124
 
Total delinquent loans  /  Total loans outstanding
 
0.47
%
 
0.63
%
 
0.66
%
Purchase credit impaired loans (net)
 
$
58,555
   
$
5,409
   
$
 
 
 
GEOGRAPHIC CONCENTRATION
                           
OF LOANS AT DECEMBER 31, 2015
 
Washington
 
Oregon
 
California
 
Idaho
 
Utah
 
Other
 
Total
Total loans outstanding
 
$
3,343,112
   
$
1,446,531
   
$
1,234,016
   
$
496,870
   
$
325,011
   
$
468,964
   
$
7,314,504
 
Percent of total loans
 
45.7
%
 
19.8
%
 
16.9
%
 
6.8
%
 
4.4
%
 
6.4
%
 
100.0
%
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 9
 
 
ADDITIONAL FINANCIAL INFORMATION
                   
(dollars in thousands)
                   
   
  Quarters Ended
 
Years Ended
CHANGE IN THE
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
ALLOWANCE FOR LOAN LOSSES
                   
Balance, beginning of period
 
$
77,320
   
$
77,329
   
$
74,331
   
$
75,907
   
$
74,258
 
Provision
 
   
   
   
   
 
Recoveries of loans previously charged off:
                   
Commercial real estate
 
233
   
375
   
843
   
819
   
1,507
 
Multifamily real estate
 
   
   
   
113
   
 
Construction and land
 
578
   
282
   
988
   
1,811
   
1,776
 
One- to four-family real estate
 
631
   
42
   
83
   
772
   
618
 
Commercial business
 
143
   
128
   
153
   
948
   
988
 
Agricultural business, including secured by farmland
 
261
   
146
   
328
   
1,927
   
1,576
 
Consumer
 
197
   
91
   
135
   
570
   
528
 
   
2,043
   
1,064
   
2,530
   
6,960
   
6,993
 
Loans charged off:
                   
Commercial real estate
 
(537
)
 
(352
)
 
   
(64
)
 
(1,239
)
Multifamily real estate
 
   
   
   
   
(20
)
Construction and land
 
   
   
   
(891
)
 
(207
)
One- to four-family real estate
 
(292
)
 
(12
)
 
(253
)
 
(419
)
 
(885
)
Commercial business
 
   
(312
)
 
(263
)
 
(746
)
 
(1,344
)
Agricultural business, including secured by farmland
 
(161
)
 
   
(54
)
 
(1,225
)
 
(179
)
Consumer
 
(365
)
 
(397
)
 
(384
)
 
(1,514
)
 
(1,470
)
   
(1,355
)
 
(1,073
)
 
(954
)
 
(4,859
)
 
(5,344
)
Net (charge-offs) recoveries
 
688
   
(9
)
 
1,576
   
2,101
   
1,649
 
Balance, end of period
 
$
78,008
   
$
77,320
   
$
75,907
   
$
78,008
   
$
75,907
 
Net (charge-offs) recoveries / Average loans outstanding
 
0.009
%
 
%
 
0.041
%
 
0.042
%
 
0.045
%

 
 
ALLOCATION OF
           
ALLOWANCE FOR LOAN LOSSES
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
Specific or allocated loss allowance:
           
Commercial real estate
 
$
20,716
   
$
19,640
   
$
18,784
 
Multifamily real estate
 
4,195
   
4,363
   
4,562
 
Construction and land
 
27,131
   
29,274
   
23,545
 
One- to four-family real estate
 
4,732
   
4,937
   
8,447
 
Commercial business
 
13,856
   
12,765
   
12,043
 
Agricultural business, including secured by farmland
 
3,645
   
3,533
   
2,821
 
Consumer
 
902
   
804
   
483
 
Total allocated
 
75,177
   
75,316
   
70,685
 
Unallocated
 
2,831
   
2,004
   
5,222
 
Total allowance for loan losses
 
$
78,008
   
$
77,320
   
$
75,907
 
Allowance for loan losses / Total loans outstanding
 
1.07
%
 
1.77
%
 
1.98
%
Allowance for loan losses / Non-performing loans
 
512
%
 
484
%
 
454
%
 



 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 10
 
ADDITIONAL FINANCIAL INFORMATION
         
(dollars in thousands)
         
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
NON-PERFORMING ASSETS
         
Loans on non-accrual status:
         
Secured by real estate:
         
Commercial
$
3,751
   
$
3,899
   
$
1,132
 
Construction and land
2,260
   
3,856
   
1,275
 
One- to four-family
4,700
   
4,934
   
8,834
 
Commercial business
2,159
   
980
   
537
 
Agricultural business, including secured by farmland
697
   
228
   
1,597
 
Consumer
703
   
789
   
1,187
 
 
14,270
   
14,686
   
14,562
 
Loans more than 90 days delinquent, still on accrual:
         
One- to four-family
899
   
1,285
   
2,095
 
Commercial business
8
   
5
   
 
Consumer
45
   
11
   
79
 
 
952
   
1,301
   
2,174
 
Total non-performing loans
15,222
   
15,987
   
16,736
 
Real estate owned (REO)
11,627
   
6,363
   
3,352
 
Other repossessed assets
268
   
   
76
 
Total non-performing assets
$
27,117
   
$
22,350
   
$
20,164
 
Total non-performing assets  /  Total assets
0.28
%
 
0.42
%
 
0.43
%
Purchase credit impaired loans (net)
$
58,555
   
$
5,409
   
$
 
 

 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 11

 
ADDITIONAL FINANCIAL INFORMATION
                 
(dollars in thousands)
                 
     
Quarters Ended
 
Years Ended
REAL ESTATE OWNED
   
Dec 31, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
Balance, beginning of period
   
$
6,363
   
$
3,928
   
$
3,352
   
$
4,044
 
Additions from loan foreclosures
   
1,125
   
427
   
4,351
   
3,264
 
Additions from acquisitions
   
5,706
   
   
8,231
   
 
Additions from capitalized costs
   
   
(5
)
 
298
   
30
 
Proceeds from dispositions of REO
   
(1,585
)
 
(1,291
)
 
(4,740
)
 
(4,923
)
Gain on sale of REO
   
18
   
293
   
351
   
973
 
Valuation adjustments in the period
   
   
   
(216
)
 
(36
)
Balance, end of period
   
$
11,627
   
$
3,352
   
$
11,627
   
$
3,352
 
                   
 
 
DEPOSIT COMPOSITION
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
Non-interest-bearing
 
$
2,619,618
   
$
1,561,516
   
$
1,298,866
 
Interest-bearing checking
 
1,159,846
   
482,530
   
439,480
 
Regular savings accounts
 
1,284,642
   
1,030,177
   
901,142
 
Money market accounts
 
1,623,531
   
582,769
   
488,946
 
Interest-bearing transaction & savings accounts
 
4,068,019
   
2,095,476
   
1,829,568
 
Interest-bearing certificates
 
1,367,431
   
730,661
   
770,516
 
Total deposits
 
$
8,055,068
   
$
4,387,653
   
$
3,898,950
 
 
 
GEOGRAPHIC CONCENTRATION
                       
OF DEPOSITS AT DECEMBER 31, 2015
 
Washington
 
Oregon
 
California
 
Idaho
 
Utah
 
Total
Total deposits
 
$
4,219,304
   
$
1,648,421
   
$
1,592,365
   
$
435,099
   
$
159,879
   
$
8,055,068
 
Percent of total deposits
 
52.4
%
 
20.4
%
 
19.8
%
 
5.4
%
 
2.0
%
 
100.0
%
 
 
INCLUDED IN TOTAL DEPOSITS
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
Public non-interest-bearing accounts
 
$
85,489
   
$
48,814
   
$
39,381
 
Public interest-bearing transaction & savings accounts
 
123,941
   
74,446
   
63,473
 
Public interest-bearing certificates
 
31,281
   
27,791
   
35,346
 
Total public deposits
 
$
240,711
   
$
151,051
   
$
138,200
 
Total brokered deposits
 
$
162,936
   
$
10,095
   
$
4,799
 
 
 
OTHER BORROWINGS
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
Customer repurchase agreements / "Sweep accounts"
 
$
93,325
   
$
88,083
   
$
77,185
 
Other
 
5,000
   
   
 
Total other borrowings
 
$
98,325
   
$
88,083
   
$
77,185
 
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 12

ADDITIONAL FINANCIAL INFORMATION
       
(in thousands)
       
BUSINESS COMBINATIONS
       
ACQUISITION OF STARBUCK BANCSHARES, INC.*
 
October 1, 2015
         
Cash paid
     
$
130,000
 
Fair value of common shares issued
     
630,674
 
Total consideration
     
760,674
 
         
Fair value of assets acquired:
       
Cash
 
$
95,821
     
Securities
 
1,037,238
     
Loans receivable
 
2,997,640
     
Real estate owned held for sale
 
5,706
     
Property and equipment
 
66,549
     
Intangible assets
 
33,500
     
Other assets
 
221,019
     
Total assets acquired
 
4,457,473
     
         
Fair value of liabilities assumed:
       
Deposits
 
3,638,596
     
Junior subordinated debentures
 
5,806
     
Other liabilities
 
278,445
     
Total liabilities assumed
 
3,922,847
     
Net assets acquired
     
534,626
 
Goodwill
     
$
226,048
 
 

 
ACQUISITION OF SIUSLAW FINANCIAL GROUP*
 
March 6, 2015
         
Cash paid
     
$
5,806
 
Fair value of common shares issued
     
58,100
 
Total consideration
     
63,906
 
         
Fair value of assets acquired:
       
Cash
 
$
84,405
     
Securities - available for sale
 
12,865
     
Loans receivable
 
247,098
     
Real estate owned held for sale
 
2,525
     
Property and equipment
 
8,127
     
Intangible assets
 
3,895
     
Other assets
 
11,391
     
Total assets acquired
 
370,306
     
         
Fair value of liabilities assumed:
       
Deposits
 
316,406
     
Junior subordinated debentures
 
5,959
     
Other liabilities
 
5,183
     
Total liabilities assumed
 
327,548
     
Net assets acquired
     
42,758
 
Goodwill
     
$
21,148
 
 
* Amounts recorded in this table are preliminary estimates of fair value.  Additional adjustments to the purchase price allocation may be required.
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 13

ADDITIONAL FINANCIAL INFORMATION
       
(in thousands)
       
         
ACQUISITION OF SIX OREGON BRANCHES
 
June 20, 2014
         
Total consideration
     
$
 
         
Fair value of assets acquired:
       
Cash
 
$
127,557
     
Loans receivable
 
87,923
     
Property and equipment
 
3,079
     
Intangible assets
 
2,372
     
Other assets
 
275
     
Total assets acquired
 
221,206
     
         
Fair value of liabilities assumed:
       
Deposits
 
212,085
     
Other liabilities
 
42
     
Total liabilities assumed
 
212,127
     
Net assets acquired
     
9,079
 
Acquisition bargain purchase gain
     
$
(9,079
)
 


 
MERGER AND ACQUISITION EXPENSE (1)
Quarters Ended
 
Years Ended
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
By expense category:
                 
Personnel (severance and retention fees in compensation)
$
6,134
   
$
227
   
$
   
$
6,577
   
$
 
Professional services
5,757
   
1,185
   
2,279
   
11,169
   
2,953
 
Non-capitalized equipment
976
   
5
   
6
   
1,031
   
105
 
Advertising and marketing
306
   
151
   
197
   
527
   
327
 
Information and computer data services
2,069
   
301
   
37
   
2,875
   
334
 
Payment and processing
12
   
16
   
119
   
28
   
185
 
Miscellaneous
3,115
   
322
   
147
   
3,903
   
421
 
Total merger and acquisition expense
$
18,369
   
$
2,207
   
$
2,785
   
$
26,110
   
$
4,325
 
                   
By acquisition:
                 
Acquisition of six Oregon branches
$
   
$
   
$
244
   
$
   
$
1,784
 
Siuslaw Financial Group
133
   
340
   
748
   
2,000
   
748
 
Starbuck Bancshares, Inc. (AmericanWest)
18,236
   
1,867
   
1,793
   
24,110
   
1,793
 
Total merger and acquisition expense
$
18,369
   
$
2,207
   
$
2,785
   
$
26,110
   
$
4,325
 
(1) Includes expenses related to preparing and filing a registration statement with respect to the restricted stock issued as consideration for the acquisition of Starbuck     Bancshares, Inc.
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 14
 
ADDITIONAL FINANCIAL INFORMATION
                       
(dollars in thousands)
                       
   
Actual
 
Minimum to be categorized as "Adequately Capitalized"
 
Minimum to be
categorized as
"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF DECEMBER 31, 2015
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
                         
Banner Corporation-consolidated:
                       
      Total capital to risk-weighted assets
 
$
1,139,554
   
13.66
%
 
$
667,551
   
8.00
%
 
$
834,438
   
10.00
%
      Tier 1 capital to risk-weighted assets
 
1,057,597
   
12.67
%
 
500,663
   
6.00
%
 
667,551
   
8.00
%
      Tier 1 leverage capital to average assets
 
1,057,597
   
11.06
%
 
382,614
   
4.00
%
 
478,267
   
5.00
%
      Common equity tier 1 capital to risk-weighted assets
 
1,013,971
   
12.15
%
 
375,497
   
4.50
%
 
542,385
   
6.50
%
Banner Bank:
                       
      Total capital to risk-weighted assets
 
1,030,601
   
12.63
%
 
652,939
   
8.00
%
 
816,174
   
10.00
%
      Tier 1 capital to risk-weighted assets
 
950,865
   
11.65
%
 
489,704
   
6.00
%
 
652,939
   
8.00
%
      Tier 1 leverage capital to average assets
 
950,865
   
10.28
%
 
385,126
   
4.00
%
 
481,408
   
5.00
%
      Common equity tier 1 capital to risk-weighted assets
 
950,865
   
11.65
%
 
367,278
   
4.50
%
 
530,513
   
6.50
%
Islanders Bank:
                       
      Total capital to risk-weighted assets
 
38,448
   
20.31
%
 
15,146
   
8.00
%
 
18,932
   
10.00
%
      Tier 1 capital to risk-weighted assets
 
36,227
   
19.14
%
 
11,359
   
6.00
%
 
15,146
   
8.00
%
      Tier 1 leverage capital to average assets
 
36,227
   
13.38
%
 
10,826
   
4.00
%
 
13,533
   
5.00
%
      Common equity tier 1 capital to risk-weighted assets
 
36,227
   
19.14
%
 
8,520
   
4.50
%
 
12,306
   
6.50
%
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 15

ADDITIONAL FINANCIAL INFORMATION
                   
(dollars in thousands)
                   
(rates / ratios annualized)
                   
   
Quarters Ended
 
Years Ended
OPERATING PERFORMANCE
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
                     
Average loans
 
$
7,398,030
   
$
4,313,839
   
$
3,813,606
   
$
4,961,193
   
$
3,679,264
 
Average securities
 
1,500,401
   
582,701
   
643,665
   
818,471
   
671,634
 
Average interest earning cash
 
129,797
   
109,445
   
76,082
   
122,479
   
68,696
 
Average non-interest-earning assets
 
870,169
   
276,761
   
212,071
   
413,503
   
205,378
 
Total average assets
 
$
9,898,397
   
$
5,282,746
   
$
4,745,424
   
$
6,315,646
   
$
4,624,972
 
Average deposits
 
$
8,118,825
   
$
4,379,887
   
$
3,942,903
   
$
5,209,350
   
$
3,815,979
 
Average borrowings
 
418,126
   
226,174
   
218,170
   
276,581
   
246,963
 
Average non-interest-bearing other liabilities (1)
 
54,967
   
6,731
   
2,039
   
17,051
   
(1,991
)
Total average liabilities
 
8,591,918
   
4,612,792
   
4,163,112
   
5,502,982
   
4,060,951
 
Total average stockholders' equity
 
1,306,479
   
669,954
   
582,312
   
812,664
   
564,021
 
Total average liabilities and equity
 
$
9,898,397
   
$
5,282,746
   
$
4,745,424
   
$
6,315,646
   
$
4,624,972
 
Interest rate yield on loans
 
4.72
%
 
4.76
%
 
4.80
%
 
4.78
%
 
4.83
%
Interest rate yield on securities
 
2.20
%
 
2.01
%
 
1.91
%
 
2.05
%
 
1.92
%
Interest rate yield on cash
 
0.23
%
 
0.35
%
 
0.29
%
 
0.27
%
 
0.30
%
Interest rate yield on interest-earning assets
 
4.24
%
 
4.34
%
 
4.31
%
 
4.31
%
 
4.31
%
Interest rate expense on deposits
 
0.15
%
 
0.16
%
 
0.18
%
 
0.16
%
 
0.20
%
Interest rate expense on borrowings
 
1.19
%
 
1.52
%
 
1.44
%
 
1.36
%
 
1.30
%
Interest rate expense on interest-bearing liabilities
 
0.20
%
 
0.22
%
 
0.25
%
 
0.22
%
 
0.27
%
Interest rate spread
 
4.04
%
 
4.12
%
 
4.06
%
 
4.09
%
 
4.04
%
Net interest margin
 
4.05
%
 
4.14
%
 
4.08
%
 
4.10
%
 
4.07
%
Other operating income / Average assets
 
0.74
%
 
1.06
%
 
1.01
%
 
0.99
%
 
1.19
%
Core other operating income / Average assets (2)
 
0.80
%
 
1.14
%
 
1.04
%
 
1.01
%
 
0.96
%
Other operating expense / Average assets
 
4.02
%
 
3.51
%
 
3.45
%
 
3.75
%
 
3.32
%
Core other operating expense / Average assets (2)
 
3.28
%
 
3.34
%
 
3.21
%
 
3.33
%
 
3.23
%
Efficiency ratio (other operating expense / revenue)
 
90.76
%
 
70.45
%
 
70.15
%
 
77.68
%
 
65.46
%
Efficiency ratio (core other operating expense / core operating revenue)(2)
 
73.11
%
 
66.01
%
 
65.09
%
 
68.80
%
 
66.59
%
Return on average assets
 
0.28
%
 
0.97
%
 
0.98
%
 
0.72
%
 
1.17
%
Return on average equity
 
2.09
%
 
7.67
%
 
7.98
%
 
5.56
%
 
9.59
%
Return on average tangible equity (3)
 
2.68
%
 
7.99
%
 
8.03
%
 
6.24
%
 
9.63
%
Average equity  /  Average assets
 
13.20
%
 
12.68
%
 
12.27
%
 
12.87
%
 
12.20
%
 
(1)
Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures.
(2)
Core other operating income excludes net gain (loss) on sale of securities, fair value adjustments and acquisition bargain purchase gain.  Core other operating expense excludes acquisition related costs.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of these press release tables.
(3)
Average tangible equity excludes goodwill and other intangible assets and represents a non-GAAP financial measure.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of these press release tables.
 
 
 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 16
 
ADDITIONAL FINANCIAL INFORMATION
                 
(dollars in thousands)
                 
                   
* Non-GAAP Financial Measures (unaudited)
                 
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 OPERATIONS
Quarters Ended
 
Years Ended
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
Net interest income before provision for loan losses
$
92,099
   
$
52,188
   
$
46,660
   
$
242,279
   
$
179,872
 
Total other operating income
18,356
   
14,098
   
12,114
   
62,292
   
54,991
 
Total GAAP revenue
110,455
   
66,286
   
58,774
   
304,571
   
234,863
 
Exclude net (gain) loss on sale of securities
3
   
   
(1
)
 
540
   
(42
)
Exclude change in valuation of financial instruments carried at fair value
1,547
   
1,113
   
287
   
813
   
(1,374
)
Exclude acquisition bargain purchase gain
   
   
   
   
(9,079
)
Revenue from core operations (non-GAAP)
$
112,005
   
$
67,399
   
$
59,060
   
$
305,924
   
$
224,368
 
 
 
ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN
Quarters Ended
 
Years Ended
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
Net interest income before provision for loan losses (GAAP)
$
92,099
   
$
52,188
   
$
46,660
   
$
242,279
   
$
179,872
 
Exclude discount accretion on purchased loans
(2,579
)
 
(359
)
 
(111
)
 
(3,566
)
 
(223
)
Exclude premium amortization on acquired certificates of deposit
(572
)
 
(60
)
 
(69
)
 
(748
)
 
(139
)
Net interest income before discount accretion (non-GAAP)
$
88,948
   
$
51,769
   
$
46,480
   
$
237,965
   
$
179,510
 
                   
Net interest margin (GAAP)
4.05
%
 
4.14
%
 
4.08
%
 
4.10
%
 
4.07
%
Exclude impact on net interest margin from discount accretion
(0.11
)
 
(0.03
)
 
(0.01
)
 
(0.06
)
 
(0.01
)
Exclude impact on net interest margin from CD premium amortization
(0.03
)
 
   
(0.01
)
 
(0.01
)
 
 
Net margin before discount accretion (non-GAAP)
3.91
%
 
4.11
%
 
4.06
%
 
4.03
%
 
4.06
%
 
 
OTHER OPERATING INCOME/EXPENSE FROM CORE OPERATIONS
Quarters Ended
 
Years Ended
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
 
Dec 31, 2015
 
Dec 31, 2014
Total other operating income (GAAP)
$
18,356
   
$
14,098
   
$
12,114
   
$
62,292
   
$
54,991
 
Exclude net (gain) loss on sale of securities
3
   
   
(1
)
 
540
   
(42
)
Exclude change in valuation of financial instruments carried at fair value
1,547
   
1,113
   
287
   
813
   
(1,374
)
Exclude acquisition bargain purchase gain
   
   
   
   
(9,079
)
Other operating income from core operations (non-GAAP)
$
19,906
   
$
15,211
   
$
12,400
   
$
63,645
   
$
44,496
 
                   
Total other operating expense (GAAP)
$
100,254
   
$
46,697
   
$
41,229
   
$
236,600
   
$
153,741
 
Exclude acquisition related costs
(18,369
)
 
(2,207
)
 
(2,785
)
 
(26,110
)
 
(4,325
)
Other operating expense from core operations (non-GAAP)
$
81,885
   
$
44,490
   
$
38,444
   
$
210,490
   
$
149,416
 
 


 
 

 
BANR - Fourth Quarter 2015 Results
January 27, 2016
Page 17



ADDITIONAL FINANCIAL INFORMATION
         
(dollars in thousands except shares and per share data)
         
           
 
Quarters Ended
 
Dec 31, 2015
 
Sep 30, 2015
 
Dec 31, 2014
TANGIBLE COMMON STOCKHOLDERS' EQUITY TO TANGIBLE ASSETS
         
Stockholders' equity (GAAP)
$
1,300,059
   
$
671,202
   
$
582,888
 
Exclude goodwill and other intangible assets, net
284,500
   
26,605
   
2,831
 
Tangible common stockholders' equity (non-GAAP)
$
1,015,559
   
$
644,597
   
$
580,057
 
           
Total assets (GAAP)
$
9,796,298
   
$
5,312,310
   
$
4,723,163
 
Exclude goodwill and other intangible assets, net
284,500
   
26,605
   
2,831
 
Total tangible assets (non-GAAP)
$
9,511,798
   
$
5,285,705
   
$
4,720,332
 
Tangible common stockholders' equity to tangible assets (non-GAAP)
10.68
%