Banner Corporation (NASDAQ: BANR) (“Banner”), the parent company
of Banner Bank, today reported net income of $45.2 million, or
$1.30 per diluted share, for the third quarter of 2024, compared to
$39.8 million, or $1.15 per diluted share, for the preceding
quarter and $45.9 million, or $1.33 per diluted share, for the
third quarter of 2023. Net interest income was $135.7 million in
the third quarter of 2024, compared to $132.5 million in the
preceding quarter and $141.8 million in the third quarter a year
ago. The increase in net interest income compared to the preceding
quarter reflects an increase in interest-earning assets and net
interest margin. The decrease in net interest income compared to
the prior year quarter reflects an increase in funding costs,
partially offset by an increase in yields on earning assets.
Banner’s results for the preceding quarter included a $562,000 net
loss on the sale of securities and for the third quarter a year ago
a $2.7 million net loss recorded on the sale of securities,
compared to no gain or loss during the current quarter as no
securities were sold during the third quarter of 2024. Third
quarter 2024 results included a $1.7 million provision for credit
losses, down from $2.4 million in the preceding quarter and $2.0
million in the third quarter of 2023.
Net income was $122.5 million, or $3.54 per diluted share, for
the nine months ended September 30, 2024, compared to $141.0
million, or $4.09 per diluted share, for the nine months ended
September 30, 2023. Results for the nine months ended September 30,
2024 included a $4.6 million provision for credit losses, a $5.5
million net loss on the sale of securities and a $1.1 million net
decrease in the fair value adjustments on financial instruments
carried at fair value, compared to an $8.3 million provision for
credit losses, a $14.4 million net loss on the sale of securities
and a $4.4 million net decrease in the fair value adjustments on
financial instruments carried at fair value during the same period
in 2023.
Banner announced that its Board of Directors declared a regular
quarterly cash dividend of $0.48 per share payable November 15,
2024, to common shareholders of record on November 5, 2024.
“Banner’s third quarter operating results reflect the continued
successful execution of our super community bank strategy, which
emphasizes growing new client relationships, maintaining our core
funding position, promoting client loyalty and advocacy through our
responsive service model, and sustaining a moderate risk profile,”
said Mark Grescovich, President and CEO. “Our earnings for the
third quarter of 2024 benefited from our solid year over year loan
growth coupled with our expanded net interest margin. Additionally,
Banner's credit metrics continue to be strong, our reserve for loan
losses remained solid, and our capital base continues to be robust.
We continue to benefit from a strong core deposit base that has
been resilient in a highly competitive environment, with core
deposits representing 89% of total deposits at quarter end. Banner
has upheld its core values for the past 133 years, which are to do
the right thing for our clients, communities, colleagues, company
and shareholders; and to provide consistent and reliable strength
through all economic cycles and change events.”
At September 30, 2024, Banner, on a consolidated basis, had
$16.19 billion in assets, $11.07 billion in net loans and $13.54
billion in deposits. Banner operates 135 full-service branch
offices, including branches located in eight of the top 20 largest
western Metropolitan Statistical Areas by population.
Third Quarter 2024 Highlights
- Revenue was $153.7 million for the third quarter of 2024,
compared to $149.7 million in the preceding quarter and $154.4
million in the third quarter a year ago.
- Adjusted revenue* (the total of net interest income and total
non-interest income adjusted for the net gain or loss on the sale
of securities and the net change in valuation of financial
instruments) was $153.7 million in the third quarter of 2024,
compared to $150.5 million in the preceding quarter and $157.7
million in the third quarter a year ago.
- Net interest income was $135.7 million in the third quarter of
2024, compared to $132.5 million in the preceding quarter and
$141.8 million in the third quarter a year ago.
- Net interest margin, on a tax equivalent basis, was 3.72%,
compared to 3.70% in the preceding quarter and 3.93% in the third
quarter a year ago.
- Mortgage banking operations revenue was $3.2 million for the
third quarter of 2024, compared to $3.0 million in the preceding
quarter and $2.0 million in the third quarter a year ago.
- Return on average assets was 1.13%, compared to 1.02% in the
preceding quarter and 1.17% in the third quarter a year ago.
- Net loans receivable increased 1% to $11.07 billion at
September 30, 2024, compared to $10.99 billion at June 30, 2024,
and increased 6% compared to $10.46 billion at September 30,
2023.
- Non-performing assets were $45.2 million, or 0.28% of total
assets, at September 30, 2024, compared to $33.3 million, or 0.21%
of total assets, at June 30, 2024 and $26.8 million, or 0.17% of
total assets, at September 30, 2023.
- The allowance for credit losses - loans was $154.6 million, or
1.38% of total loans receivable, as of September 30, 2024, compared
to $152.8 million, or 1.37% of total loans receivable, as of June
30, 2024 and $147.0 million, or 1.38% of total loans receivable, as
of September 30, 2023.
- Total deposits increased to $13.54 billion at September 30,
2024, compared to $13.08 billion at June 30, 2024 and $13.17
billion at September 30, 2023.
- Core deposits represented 89% of total deposits at September
30, 2024.
- Dividends paid to shareholders were $0.48 per share in the
quarter ended September 30, 2024.
- Common shareholders’ equity per share increased 6% to $52.06 at
September 30, 2024, compared to $49.07 at the preceding quarter
end, and increased 18% from $44.27 at September 30, 2023.
- Tangible common shareholders’ equity per share* increased 8% to
$41.12 at September 30, 2024, compared to $38.12 at the preceding
quarter end, and increased 24% from $33.22 at September 30,
2023.
*Non-GAAP (Generally Accepted Accounting Principles) financial
measure; See, “Additional Financial Information - Non-GAAP
Financial Measures” on the final two pages of this press release
for a reconciliation of non-GAAP financial measures.
Income Statement Review
Net interest income was $135.7 million in the third quarter of
2024, compared to $132.5 million in the preceding quarter and
$141.8 million in the third quarter a year ago. Net interest margin
on a tax equivalent basis increased two basis points to 3.72% for
the third quarter of 2024, compared to 3.70% in the preceding
quarter, and decreased compared to 3.93% in the third quarter a
year ago. Net interest margin for the current quarter benefited
from increased yields on loans due to new loans being originated at
higher interest rates and adjustable rate loans repricing higher,
partially offset by increased funding costs. On September 18, 2024,
the Federal Open Market Committee of the Federal Reserve System
decreased the target range for the federal funds rate by 50 basis
points, and as the change occurred late in the third quarter of
2024, it had minimal impact on our current quarter net interest
margin.
Average yields on interest-earning assets increased eight basis
points to 5.33% for the third quarter of 2024, compared to 5.25%
for the preceding quarter, and increased compared to 4.94% in the
third quarter a year ago. Average loan yields increased eight basis
points to 6.04%, compared to 5.96% in the preceding quarter, and
increased compared to 5.65% in the third quarter a year ago. The
increase in average yields, especially loans, during the current
quarter reflects the benefit of originating new loans at higher
interest rates as well as adjustable rate loans repricing
higher.
Total deposit costs increased 11 basis points to 1.61% in the
third quarter of 2024, compared to 1.50% in the preceding quarter,
and increased compared to 0.94% in the third quarter a year ago.
The increase in deposit costs was due to a larger percentage of
growth in higher costing deposits during the quarter. The average
rate paid on borrowings increased one basis-point to 5.08% in the
third quarter of 2024, compared to 5.07% in the preceding quarter,
and increased compared to 4.64% in the third quarter a year ago.
The total cost of funding liabilities increased seven basis points
to 1.73% during the third quarter of 2024, compared to 1.66% in the
preceding quarter, and increased compared to 1.08% in the third
quarter a year ago.
A $1.7 million provision for credit losses was recorded in the
current quarter (comprised of a $2.0 million provision for credit
losses - loans, a $262,000 recapture of provision for credit losses
- unfunded loan commitments and a $13,000 recapture of provision
for credit losses - held-to-maturity debt securities). This
compares to a $2.4 million provision for credit losses in the prior
quarter (comprised of a $2.0 million provision for credit losses -
loans, a $430,000 provision for credit losses - unfunded loan
commitments and a $14,000 recapture of provision for credit losses
- held-to-maturity debt securities) and a $2.0 million provision
for credit losses in the third quarter a year ago (comprised of a
$2.9 million provision for credit losses - loans, a $346,000
provision for credit losses - unfunded loan commitments, a $1.3
million recapture of provision for credit losses - available for
sale securities and a $12,000 recapture of provision for credit
losses - held-to-maturity debt securities). The provision for
credit losses for the current quarter primarily reflected an
increase in the reserve for non-performing collateral dependent
loans.
Total non-interest income was $18.1 million in the third quarter
of 2024, compared to $17.2 million in the preceding quarter and
$12.7 million in the third quarter a year ago. The increase in
non-interest income during the current quarter compared to the
preceding quarter was primarily due to a $562,000 decrease in the
net loss recognized on the sale of securities. The increase in
non-interest income during the current quarter compared to the
prior year quarter was primarily due to a $1.1 million increase in
mortgage banking operations revenue, a $2.7 million decrease in the
net loss recognized on the sale of securities and a $693,000
decrease in the net loss recognized for fair value adjustments on
financial instruments carried at fair value. Total non-interest
income was $46.9 million for the nine months ended September 30,
2024, compared to $30.4 million for the same period a year
earlier.
Mortgage banking operations revenue was $3.2 million in the
third quarter of 2024, compared to $3.0 million in the preceding
quarter and $2.0 million in the third quarter a year ago. The
volume of one- to four-family loans sold during the current quarter
increased compared to the preceding and prior year quarters,
although overall volumes remained low due to reduced refinancing
and purchase activity in the current rate environment. The increase
in mortgage banking operations revenue from the preceding quarter
was also impacted by increases in the pricing on the one- to
four-family loans sold during the current quarter. Home purchase
activity accounted for 88% of one- to four-family mortgage loan
originations in the third quarter of 2024, 89% in the preceding
quarter and 90% in the third quarter of 2023.
Total non-interest expense was $96.3 million in the third
quarter of 2024, compared to $98.1 million in the preceding quarter
and $95.9 million in the third quarter of 2023. The decrease in
non-interest expense for the current quarter compared to the prior
quarter reflects a $2.0 million decrease in salary and employee
benefits, primarily resulting from decreased medical premiums
expense and unemployment and workers compensation expense. The
increase in non-interest expense for the current quarter compared
to the same quarter a year ago primarily reflects increases in
salary and employee benefits and real estate operations, net
expenses, partially offset by a decrease in professional and legal
expenses. For the nine months ended September 30, 2024, total
non-interest expense was $292.1 million, compared to $285.9 million
for the nine months ended September 30, 2023. Banner’s efficiency
ratio was 62.63% for the third quarter of 2024, compared to 65.53%
in the preceding quarter and 62.10% in the same quarter a year ago.
Banner’s adjusted efficiency ratio, a non-GAAP financial measure,
was 61.27% for the third quarter of 2024, compared to 63.60% in the
preceding quarter and 59.00% in the year ago quarter. See,
“Additional Financial Information - Non-GAAP Financial Measures” on
the final two pages of this press release for a discussion and
reconciliation of non-GAAP financial measures.
Balance Sheet Review
Total assets increased to $16.19 billion at September 30, 2024,
compared to $15.82 billion at June 30, 2024, and $15.51 billion at
September 30, 2023. Securities and interest-bearing deposits held
at other banks totaled $3.50 billion at September 30, 2024,
compared to $3.27 billion at June 30, 2024 and $3.44 billion at
September 30, 2023. The increase compared to the prior quarter was
primarily due to an increase in interest-bearing deposit balances.
The average effective duration of the securities portfolio was
approximately 6.3 years at September 30, 2024, compared to 6.8
years at September 30, 2023.
Total loans receivable increased to $11.22 billion at September
30, 2024, compared to $11.14 billion at June 30, 2024, and $10.61
billion at September 30, 2023. One- to four-family residential
loans decreased 2% to $1.58 billion at September 30, 2024, compared
to $1.60 billion at June 30, 2024, and increased 9% compared to
$1.44 billion at September 30, 2023. The decrease in one- to
four-family residential loans from the prior quarter was primarily
the result of the transfer of $47.5 million of one- to four-family
residential loans from portfolio to held for sale. The increase in
one- to four-family residential loans from the prior year was
primarily the result of one- to four-family construction loans
converting to one- to four-family portfolio loans upon the
completion of the construction phase and new loan production.
Multifamily real estate loans increased 24% to $889.9 million at
September 30, 2024, compared to $717.1 million at June 30, 2024,
and increased 16% compared to $766.6 million at September 30, 2023.
The increase in multifamily real estate loans from June 30, 2024
and September 30, 2023 was primarily the result of the conversion
of multifamily construction loans to the multifamily portfolio upon
the completion of the construction phase. The increase from the
prior year also reflects the transfer of $43.5 million of
multifamily loans held for sale to the held for investment loan
portfolio in the fourth quarter of 2023, partially offset by the
transfer of certain affordable housing loans to small balance
commercial real estate loans. Construction, land and land
development loans decreased 9% to $1.53 billion at September 30,
2024, compared to $1.68 billion at June 30, 2024, and increased 1%
compared to $1.50 billion at September 30, 2023. The decrease in
construction, land and land development loans was primarily the
result of multifamily construction loans converting to multifamily
portfolio loans upon the completion of the construction phase.
Agricultural business loans increased 4% to $346.7 million at
September 30, 2024, compared to $334.6 million at June 30, 2024 and
increased 4% compared to $334.6 million at September 30, 2023,
primarily due to advances on agricultural lines of credit.
Loans held for sale were $78.8 million at September 30, 2024,
compared to $13.4 million at June 30, 2024 and $54.2 million at
September 30, 2023. One- to four-family residential mortgage held
for sale loans sold in the current quarter totaled $95.0 million,
compared to $75.0 million in the preceding quarter and $87.3
million in the third quarter a year ago. The increase in loans held
for sale was primarily the result of the transfer of $47.5 million
of one- to four-family residential loans from portfolio to held for
sale during the current quarter. The increase from the prior year
was partially offset by the previously mentioned transfer of
multifamily loans held for sale to the held for investment loan
portfolio in the fourth quarter of 2023. There were no multifamily
loans held for sale at September 30, 2024 or June 30, 2024.
Total deposits increased to $13.54 billion at September 30,
2024, compared to $13.08 billion at June 30, 2024 and $13.17
billion a year ago. Core deposits increased 4% to $12.02 billion at
September 30, 2024, compared to $11.55 billion at June 30, 2024,
and increased 3% compared to $11.72 billion at September 30, 2023.
The increase in core deposits compared to the prior quarter
primarily reflects normal seasonal increases primarily from
agricultural clients. The increase in core deposits compared to the
prior year quarter primarily reflects an increase in third-party
insured sweep accounts. Core deposits were 89% of total deposits at
September 30, 2024, compared to 88% of total deposits at June 30,
2024 and 89% of total deposits at September 30, 2023. Certificates
of deposit decreased slightly to $1.52 billion at September 30,
2024, compared to $1.53 billion at June 30, 2024, and increased 4%
compared to $1.46 billion a year earlier. The decrease in
certificates of deposit during the current quarter compared to the
preceding quarter was principally due to a $55.0 million decrease
in brokered deposits. The increase in certificates of deposit
during the current quarter compared to the third quarter a year ago
was principally due to clients seeking higher yields moving funds
from core deposit accounts to higher yielding certificates of
deposits, partially offset by a $112.5 million decrease in brokered
deposits.
FHLB advances were $230.0 million at September 30, 2024,
compared to $398.0 million at June 30, 2024 and $140.0 million a
year ago. At September 30, 2024, off-balance sheet liquidity
included additional borrowing capacity of $3.23 billion at the FHLB
and $1.53 billion at the Federal Reserve as well as federal funds
line of credit agreements with other financial institutions of
$125.0 million.
At September 30, 2024, total common shareholders’ equity was
$1.79 billion, or 11.08% of total assets, compared to $1.69 billion
or 10.69% of total assets at June 30, 2024, and $1.52 billion or
9.81% of total assets at September 30, 2023. The increase in total
common shareholders’ equity at September 30, 2024 compared to June
30, 2024 was due to a $28.4 million increase in retained earnings
as a result of $45.2 million in net income, partially offset by the
accrual of $16.7 million of cash dividends during the third quarter
of 2024, as well as a decrease in accumulated other comprehensive
loss of $72.0 million as the result of an increase in the fair
value of the security portfolio. At September 30, 2024, tangible
common shareholders’ equity, a non-GAAP financial measure, was
$1.42 billion, or 8.96% of tangible assets, compared to $1.31
billion, or 8.51% of tangible assets, at June 30, 2024, and $1.14
billion, or 7.54% of tangible assets, a year ago. See, “Additional
Financial Information - Non-GAAP Financial Measures” on the final
two pages of this press release for a reconciliation of non-GAAP
financial measures.
Banner and Banner Bank continue to maintain capital levels in
excess of the requirements to be categorized as “well-capitalized.”
At September 30, 2024, Banner’s estimated common equity Tier 1
capital ratio was 12.30%, its estimated Tier 1 leverage capital to
average assets ratio was 10.91%, and its estimated total capital to
risk-weighted assets ratio was 14.92%. These regulatory capital
ratios are estimates, pending completion and filing of Banner’s
regulatory reports.
Credit Quality
The allowance for credit losses - loans was $154.6 million, or
1.38% of total loans receivable and 359% of non-performing loans,
at September 30, 2024, compared to $152.8 million, or 1.37% of
total loans receivable and 498% of non-performing loans, at June
30, 2024, and $147.0 million, or 1.38% of total loans receivable
and 560% of non-performing loans, at September 30, 2023. In
addition to the allowance for credit losses - loans, Banner
maintains an allowance for credit losses - unfunded loan
commitments, which was $13.8 million at September 30, 2024,
compared to $14.0 million at June 30, 2024, and $15.0 million at
September 30, 2023. Net loan charge-offs totaled $230,000 in the
third quarter of 2024, compared to $245,000 in the preceding
quarter and $663,000 in the third quarter a year ago.
Non-performing loans were $43.0 million at September 30, 2024,
compared to $30.7 million at June 30, 2024, and $26.3 million a
year ago.
An increase in adversely classified loans, offset in part by
payoffs and paydowns, resulted in total substandard loans of $150.1
million as of September 30, 2024. This compares to $122.0 million
as of June 30, 2024 and $124.5 million a year ago.
Total non-performing assets were $45.2 million, or 0.28% of
total assets, at September 30, 2024, compared to $33.3 million, or
0.21% of total assets, at June 30, 2024, and $26.8 million, or
0.17% of total assets, a year ago.
Conference Call
Banner will host a conference call on Thursday, October 17,
2024, at 8:00 a.m. PDT, to discuss its third quarter results.
Interested investors may listen to the call live at
www.bannerbank.com. Investment professionals are invited to dial
(833) 470-1428 using access code 433614 to participate in the call.
A replay of the call will be available at www.bannerbank.com.
About the Company
Banner Corporation is a $16.19 billion bank holding company
operating a commercial bank in four Western states through a
network of branches offering a full range of deposit services and
business, commercial real estate, construction, residential,
agricultural and consumer loans. Visit Banner Bank on the Web at
www.bannerbank.com.
Forward-Looking Statements
When used in this press release and in other documents filed
with or furnished to the Securities and Exchange Commission (the
“SEC”), in press releases or other public stockholder
communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases “may,”
“believe,” “will,” “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimate,” “project,” “plans,”
“potential,” or similar expressions are intended to identify
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. You are cautioned not to
place undue reliance on any forward-looking statements, which speak
only as of the date such statements are made and based only on
information then actually known to Banner. Banner does not
undertake and specifically disclaims any obligation to revise any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements. These statements may relate to future financial
performance, strategic plans or objectives, revenues or earnings
projections, or other financial information. By their nature, these
statements are subject to numerous uncertainties that could cause
actual results to differ materially from those anticipated in the
statements and could negatively affect Banner’s operating and stock
price performance.
Factors that could cause Banner’s actual results to differ
materially from those described in the forward-looking statements,
include but are not limited to, the following: (1) adverse impacts
to economic conditions in our local market areas, other markets
where the Company has lending relationships, or other aspects of
the Company’s business operations or financial markets, including,
without limitation, as a result of employment levels, labor
shortages and the effects of inflation, a recession or slowed
economic growth, or increased political instability due to acts of
war; (2) changes in the interest rate environment, including
increases or decreases in the Board of Governors of the Federal
Reserve System (the “Federal Reserve”) benchmark rate and duration
at which such interest rate levels are maintained, which could
affect our revenues and expenses, the value of assets and
obligations, and the availability and cost of capital and
liquidity; (3) the impact of inflation and the current and future
monetary policies of the Federal Reserve in response thereto; (4)
the effects of any federal government shutdown; (5) the impact of
bank failures or adverse developments at other banks and related
negative press about the banking industry in general on investor
and depositor sentiment; (6) expectations regarding key growth
initiatives and strategic priorities; (7) the credit risks of
lending activities, including changes in the level and direction of
loan delinquencies and write-offs and changes in estimates of the
adequacy of the allowance for credit losses, which could
necessitate additional provisions for credit losses, resulting both
from loans originated and loans acquired from other financial
institutions; (8) results of examinations by regulatory
authorities, including the possibility that any such regulatory
authority may, among other things, require increases in the
allowance for credit losses or writing down of assets or impose
restrictions or penalties with respect to Banner’s activities; (9)
competitive pressures among depository institutions; (10) the
effect of inflation on interest rate movements and their impact on
client behavior and net interest margin; (11) the impact of
repricing and competitors’ pricing initiatives on loan and deposit
products; (12) fluctuations in real estate values; (13) the ability
to adapt successfully to technological changes to meet clients’
needs and developments in the market place; (14) the ability to
access cost-effective funding; (15) disruptions, security breaches
or other adverse events, failures or interruptions in, or attacks
on, information technology systems or on the third-party vendors
who perform critical processing functions; (16) changes in
financial markets; (17) changes in economic conditions in general
and in Washington, Idaho, Oregon and California in particular; (18)
the costs, effects and outcomes of litigation; (19) legislation or
regulatory changes, including but not limited to changes in
regulatory policies and principles, or the interpretation of
regulatory capital or other rules, other governmental initiatives
affecting the financial services industry and changes in federal
and/or state tax laws or interpretations thereof by taxing
authorities; (20) changes in accounting principles, policies or
guidelines; (21) future acquisitions by Banner of other depository
institutions or lines of business; (22) future goodwill impairment
due to changes in Banner’s business or changes in market
conditions; (23) effects of critical accounting policies and
judgments, including the use of estimates in determining fair value
of certain of our assets, which estimates may prove to be incorrect
and result in significant declines in valuation; (24)
environmental, social and governance goals and targets; (25) other
economic, competitive, governmental, regulatory, and technological
factors affecting our operations, pricing, products and services;
and (26) other risks detailed from time to time in Banner’s other
reports filed with and furnished to the Securities and Exchange
Commission including Banner’s Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K.
RESULTS OF
OPERATIONS
Quarters Ended
Nine Months Ended
(in thousands except shares and per share
data)
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Sep 30, 2024
Sep 30, 2023
INTEREST INCOME:
Loans receivable
$
168,338
$
161,191
$
149,254
$
486,004
$
423,359
Mortgage-backed securities
16,357
16,708
17,691
49,999
54,954
Securities and cash equivalents
11,146
11,239
12,119
33,664
39,521
Total interest income
195,841
189,138
179,064
569,667
517,834
INTEREST EXPENSE:
Deposits
53,785
48,850
31,001
147,248
60,784
Federal Home Loan Bank (FHLB) advances
2,263
3,621
2,233
8,856
8,654
Other borrowings
1,147
1,160
1,099
3,482
2,251
Subordinated debt
2,971
2,961
2,965
8,901
8,549
Total interest expense
60,166
56,592
37,298
168,487
80,238
Net interest income
135,675
132,546
141,766
401,180
437,596
PROVISION FOR CREDIT LOSSES
1,692
2,369
2,027
4,581
8,267
Net interest income after provision for
credit losses
133,983
130,177
139,739
396,599
429,329
NON-INTEREST INCOME:
Deposit fees and other service charges
10,741
10,590
10,916
32,353
32,078
Mortgage banking operations
3,180
3,006
2,049
8,521
6,426
Bank-owned life insurance
2,445
2,367
2,062
7,049
6,636
Miscellaneous
1,658
1,988
942
5,538
4,010
18,024
17,951
15,969
53,461
49,150
Net loss on sale of securities
—
(562
)
(2,657
)
(5,465
)
(14,436
)
Net change in valuation of financial
instruments carried at fair value
39
(190
)
(654
)
(1,143
)
(4,357
)
Total non-interest income
18,063
17,199
12,658
46,853
30,357
NON-INTEREST EXPENSE:
Salary and employee benefits
61,832
63,831
61,091
188,032
184,452
Less capitalized loan origination
costs
(4,354
)
(4,639
)
(4,498
)
(12,669
)
(12,386
)
Occupancy and equipment
12,040
12,128
11,722
36,630
35,686
Information and computer data services
7,134
7,240
7,118
21,694
21,347
Payment and card processing services
5,346
5,691
5,172
16,747
14,459
Professional and legal expenses
2,102
1,201
3,042
4,833
7,563
Advertising and marketing
1,161
1,198
1,362
3,438
3,108
Deposit insurance
2,874
2,858
2,874
8,541
7,603
State and municipal business and use
taxes
1,432
1,394
1,359
4,130
3,888
Real estate operations, net
103
297
(383
)
180
(585
)
Amortization of core deposit
intangibles
590
724
857
2,037
2,898
Miscellaneous
6,031
6,205
6,175
18,467
17,884
Total non-interest expense
96,291
98,128
95,891
292,060
285,917
Income before provision for income
taxes
55,755
49,248
56,506
151,392
173,769
PROVISION FOR INCOME TAXES
10,602
9,453
10,652
28,885
32,769
NET INCOME
$
45,153
$
39,795
$
45,854
$
122,507
$
141,000
Earnings per common share:
Basic
$
1.31
$
1.15
$
1.33
$
3.56
$
4.11
Diluted
$
1.30
$
1.15
$
1.33
$
3.54
$
4.09
Cumulative dividends declared per common
share
$
0.48
$
0.48
$
0.48
$
1.44
$
1.44
Weighted average number of common shares
outstanding:
Basic
34,498,830
34,488,163
34,379,865
34,459,662
34,331,458
Diluted
34,650,322
34,537,012
34,429,726
34,575,498
34,439,214
Increase in common shares outstanding
936
60,531
1,322
108,319
151,931
FINANCIAL
CONDITION
Percentage Change
(in thousands except shares and per share
data)
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Prior Qtr
Prior Yr Qtr
ASSETS
Cash and due from banks
$
226,568
$
195,163
$
209,634
$
207,171
16
%
9
%
Interest-bearing deposits
252,227
52,295
44,830
44,535
382
%
466
%
Total cash and cash equivalents
478,795
247,458
254,464
251,706
93
%
90
%
Securities – trading
—
—
—
25,268
nm
(100
)%
Securities - available for sale, amortized
cost $2,523,968, $2,572,544, $2,729,980 and $2,774,972,
respectively
2,237,939
2,197,693
2,373,783
2,287,993
2
%
(2
)%
Securities - held to maturity, fair value
$879,278, $852,709, $907,514 and $853,653, respectively
1,013,903
1,023,028
1,059,055
1,082,156
(1
)%
(6
)%
Total securities
3,251,842
3,220,721
3,432,838
3,395,417
1
%
(4
)%
FHLB stock
19,751
27,311
24,028
15,600
(28
)%
27
%
Loans held for sale
78,841
13,421
11,170
54,158
487
%
46
%
Loans receivable
11,224,606
11,143,848
10,810,455
10,611,417
1
%
6
%
Allowance for credit losses – loans
(154,585
)
(152,848
)
(149,643
)
(146,960
)
1
%
5
%
Net loans receivable
11,070,021
10,991,000
10,660,812
10,464,457
1
%
6
%
Accrued interest receivable
66,981
67,520
63,100
61,040
(1
)%
10
%
Property and equipment, net
125,256
126,465
132,231
136,504
(1
)%
(8
)%
Goodwill
373,121
373,121
373,121
373,121
—
%
—
%
Other intangibles, net
3,647
4,237
5,684
6,542
(14
)%
(44
)%
Bank-owned life insurance
310,400
307,948
304,366
303,347
1
%
2
%
Operating lease right-of-use assets
38,192
39,628
43,731
43,447
(4
)%
(12
)%
Other assets
371,829
397,364
364,846
402,541
(6
)%
(8
)%
Total assets
$
16,188,676
$
15,816,194
$
15,670,391
$
15,507,880
2
%
4
%
LIABILITIES
Deposits:
Non-interest-bearing
$
4,688,244
$
4,537,803
$
4,792,369
$
5,197,854
3
%
(10
)%
Interest-bearing transaction and savings
accounts
7,328,051
7,016,327
6,759,661
6,518,385
4
%
12
%
Interest-bearing certificates
1,521,853
1,525,133
1,477,467
1,458,313
—
%
4
%
Total deposits
13,538,148
13,079,263
13,029,497
13,174,552
4
%
3
%
Advances from FHLB
230,000
398,000
323,000
140,000
(42
)%
64
%
Other borrowings
154,533
165,956
182,877
188,440
(7
)%
(18
)%
Subordinated notes, net
80,170
89,561
92,851
92,748
(10
)%
(14
)%
Junior subordinated debentures at fair
value
66,257
66,831
66,413
66,284
(1
)%
—
%
Operating lease liabilities
42,318
44,056
48,659
48,642
(4
)%
(13
)%
Accrued expenses and other liabilities
237,128
235,515
228,428
231,478
1
%
2
%
Deferred compensation
46,401
46,246
45,975
45,129
—
%
3
%
Total liabilities
14,394,955
14,125,428
14,017,700
13,987,273
2
%
3
%
SHAREHOLDERS’
EQUITY
Common stock
1,304,792
1,302,236
1,299,651
1,297,307
—
%
1
%
Retained earnings
714,472
686,079
642,175
616,215
4
%
16
%
Accumulated other comprehensive loss
(225,543
)
(297,549
)
(289,135
)
(392,915
)
(24
)%
(43
)%
Total shareholders’ equity
1,793,721
1,690,766
1,652,691
1,520,607
6
%
18
%
Total liabilities and shareholders’
equity
$
16,188,676
$
15,816,194
$
15,670,391
$
15,507,880
2
%
4
%
Common Shares Issued:
Shares outstanding at end of period
34,456,688
34,455,752
34,348,369
34,345,949
Common shareholders’ equity per share
(1)
$
52.06
$
49.07
$
48.12
$
44.27
Common shareholders’ tangible equity per
share (1) (2)
$
41.12
$
38.12
$
37.09
$
33.22
Common shareholders’ equity to total
assets
11.08
%
10.69
%
10.55
%
9.81
%
Common shareholders’ tangible equity to
tangible assets (2)
8.96
%
8.51
%
8.33
%
7.54
%
Consolidated Tier 1 leverage capital
ratio
10.91
%
10.80
%
10.56
%
10.40
%
nm
Not meaningful
(1)
Calculation is based on number of common
shares outstanding at the end of the period rather than weighted
average shares outstanding.
(2)
Common shareholders’ tangible equity and
tangible assets exclude goodwill and other intangible assets. These
ratios represent non-GAAP financial measures. See, “Additional
Financial Information - Non-GAAP Financial Measures” on the final
two pages of this press release for a reconciliation of non-GAAP
financial measures.
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
Percentage Change
LOANS
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Prior Qtr
Prior Yr Qtr
Commercial real estate (CRE):
Owner-occupied
$
990,516
$
950,922
$
915,897
$
911,540
4
%
9
%
Investment properties
1,583,863
1,536,142
1,541,344
1,530,087
3
%
4
%
Small balance CRE
1,218,822
1,234,302
1,178,500
1,169,828
(1
)%
4
%
Multifamily real estate
889,866
717,089
811,232
766,571
24
%
16
%
Construction, land and land
development:
Commercial construction
124,051
173,296
170,011
168,061
(28
)%
(26
)%
Multifamily construction
524,108
663,989
503,993
453,129
(21
)%
16
%
One- to four-family construction
507,350
490,237
526,432
536,349
3
%
(5
)%
Land and land development
370,690
352,184
336,639
346,362
5
%
7
%
Commercial business:
Commercial business
1,281,615
1,298,134
1,255,734
1,263,747
(1
)%
1
%
Small business scored
1,087,714
1,074,465
1,022,154
1,000,714
1
%
9
%
Agricultural business, including secured
by farmland:
Agricultural business, including secured
by farmland
346,686
334,583
331,089
334,626
4
%
4
%
One- to four-family residential
1,575,164
1,603,266
1,518,046
1,438,694
(2
)%
9
%
Consumer:
Consumer—home equity revolving lines of
credit
622,615
611,739
588,703
579,836
2
%
7
%
Consumer—other
101,546
103,500
110,681
111,873
(2
)%
(9
)%
Total loans receivable
$
11,224,606
$
11,143,848
$
10,810,455
$
10,611,417
1
%
6
%
Loans 30 - 89 days past due and on
accrual
$
13,030
$
11,850
$
19,744
$
6,108
Total delinquent loans (including loans on
non-accrual), net
$
44,656
$
32,081
$
43,164
$
28,312
Total delinquent loans / Total loans
receivable
0.40
%
0.29
%
0.40
%
0.27
%
LOANS BY
GEOGRAPHIC LOCATION
Percentage Change
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Prior Qtr
Prior Yr Qtr
Amount
Percentage
Amount
Amount
Amount
Washington
$
5,203,637
46
%
$
5,182,378
$
5,095,602
$
5,046,028
—
%
3
%
California
2,796,965
25
%
2,787,190
2,670,923
2,570,175
—
%
9
%
Oregon
2,108,229
19
%
2,072,153
1,974,001
1,929,531
2
%
9
%
Idaho
652,148
6
%
641,209
610,064
600,648
2
%
9
%
Utah
85,316
1
%
80,295
68,931
57,711
6
%
48
%
Other
378,311
3
%
380,623
390,934
407,324
(1
)%
(7
)%
Total loans receivable
$
11,224,606
100
%
$
11,143,848
$
10,810,455
$
10,611,417
1
%
6
%
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
LOAN
ORIGINATIONS
Quarters Ended
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Commercial real estate
$
114,372
$
102,258
$
62,337
Multifamily real estate
314
2,774
12,725
Construction and land
472,506
546,675
421,656
Commercial business
179,871
167,168
157,833
Agricultural business
5,877
22,255
17,466
One- to four-family residential
24,488
34,498
43,622
Consumer
96,137
120,470
70,043
Total loan originations (excluding loans
held for sale)
$
893,565
$
996,098
$
785,682
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
Quarters Ended
CHANGE IN THE
ALLOWANCE FOR CREDIT LOSSES – LOANS
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Balance, beginning of period
$
152,848
$
151,140
$
144,680
Provision for credit losses – loans
1,967
1,953
2,943
Recoveries of loans previously charged
off:
Commercial real estate
65
98
170
Construction and land
—
—
29
One- to four-family real estate
14
17
59
Commercial business
613
324
403
Agricultural business, including secured
by farmland
1
195
19
Consumer
41
112
126
734
746
806
Loans charged off:
Commercial real estate
—
(347
)
—
Construction and land
(145
)
—
—
Commercial business
(414
)
(137
)
(616
)
Agricultural business, including secured
by farmland
—
—
(564
)
Consumer
(405
)
(507
)
(289
)
(964
)
(991
)
(1,469
)
Net charge-offs
(230
)
(245
)
(663
)
Balance, end of period
$
154,585
$
152,848
$
146,960
Net charge-offs / Average loans
receivable
(0.002
)%
(0.002
)%
(0.006
)%
ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES – LOANS
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Commercial real estate
$
40,040
$
39,064
$
44,016
Multifamily real estate
10,233
8,253
8,804
Construction and land
28,322
31,597
29,389
One- to four-family real estate
20,463
20,906
17,925
Commercial business
39,779
38,835
34,065
Agricultural business, including secured
by farmland
5,340
4,045
3,718
Consumer
10,408
10,148
9,043
Total allowance for credit losses –
loans
$
154,585
$
152,848
$
146,960
Allowance for credit losses - loans /
Total loans receivable
1.38
%
1.37
%
1.38
%
Allowance for credit losses - loans /
Non-performing loans
359
%
498
%
560
%
Quarters Ended
CHANGE IN THE
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN
COMMITMENTS
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Balance, beginning of period
$
14,027
$
13,597
$
14,664
(Recapture) provision for credit losses -
unfunded loan commitments
(262
)
430
346
Balance, end of period
$
13,765
$
14,027
$
15,010
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
NON-PERFORMING
ASSETS
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Loans on non-accrual status:
Secured by real estate:
Commercial
$
2,127
$
2,326
$
2,677
$
1,365
Construction and land
4,286
3,999
3,105
5,538
One- to four-family
9,592
8,184
5,702
5,480
Commercial business
10,705
8,694
9,002
5,289
Agricultural business, including secured
by farmland
7,703
1,586
3,167
3,170
Consumer
4,636
3,380
3,204
3,378
39,049
28,169
26,857
24,220
Loans more than 90 days delinquent, still
on accrual:
Secured by real estate:
Commercial
2,258
—
—
—
Construction and land
380
—
1,138
—
One- to four-family
961
1,861
1,205
1,799
Commercial business
—
—
1
—
Consumer
359
692
401
245
3,958
2,553
2,745
2,044
Total non-performing loans
43,007
30,722
29,602
26,264
REO
2,221
2,564
526
546
Total non-performing assets
$
45,228
$
33,286
$
30,128
$
26,810
Total non-performing assets to total
assets
0.28
%
0.21
%
0.19
%
0.17
%
LOANS BY CREDIT
RISK RATING
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Pass
$
11,022,014
$
10,971,850
$
10,671,281
$
10,467,498
Special Mention
52,497
50,027
13,732
19,394
Substandard
150,095
121,971
125,442
124,525
Total
$
11,224,606
$
11,143,848
$
10,810,455
$
10,611,417
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
DEPOSIT
COMPOSITION
Percentage Change
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Prior Qtr
Prior Yr Qtr
Non-interest-bearing
$
4,688,244
$
4,537,803
$
4,792,369
$
5,197,854
3
%
(10
)%
Interest-bearing checking
2,344,561
2,208,742
2,098,526
2,006,866
6
%
17
%
Regular savings accounts
3,339,859
3,192,036
2,980,530
2,751,453
5
%
21
%
Money market accounts
1,643,631
1,615,549
1,680,605
1,760,066
2
%
(7
)%
Total interest-bearing transaction and
savings accounts
7,328,051
7,016,327
6,759,661
6,518,385
4
%
12
%
Total core deposits
12,016,295
11,554,130
11,552,030
11,716,239
4
%
3
%
Interest-bearing certificates
1,521,853
1,525,133
1,477,467
1,458,313
—
%
4
%
Total deposits
$
13,538,148
$
13,079,263
$
13,029,497
$
13,174,552
4
%
3
%
GEOGRAPHIC
CONCENTRATION OF DEPOSITS
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Percentage Change
Amount
Percentage
Amount
Amount
Amount
Prior Qtr
Prior Yr Qtr
Washington
$
7,413,414
55
%
$
7,171,699
$
7,247,392
$
7,241,341
3
%
2
%
Oregon
2,997,843
22
%
2,909,838
2,852,677
2,918,446
3
%
3
%
California
2,423,295
18
%
2,331,793
2,269,557
2,342,345
4
%
3
%
Idaho
703,596
5
%
665,933
659,871
672,420
6
%
5
%
Total deposits
$
13,538,148
100
%
$
13,079,263
$
13,029,497
$
13,174,552
4
%
3
%
INCLUDED IN TOTAL
DEPOSITS
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Public non-interest-bearing accounts
$
141,541
$
149,012
$
169,058
Public interest-bearing transaction &
savings accounts
246,332
250,136
188,831
Public interest-bearing certificates
28,144
29,101
46,349
Total public deposits
$
416,017
$
428,249
$
404,238
Collateralized public deposits
$
317,960
$
326,524
$
300,189
Total brokered deposits
$
50,333
$
105,309
$
162,856
AVERAGE ACCOUNT
BALANCE PER DEPOSIT ACCOUNT
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Number of deposit accounts
459,127
460,107
466,159
Average account balance per account
$
30
$
29
$
28
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
ESTIMATED
REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2024
Actual
Minimum to be
categorized as
"Adequately
Capitalized"
Minimum to be
categorized as
"Well
Capitalized"
Amount
Ratio
Amount
Ratio
Amount
Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets
$
1,988,948
14.92
%
$
1,066,549
8.00
%
$
1,333,186
10.00
%
Tier 1 capital to risk-weighted assets
1,725,690
12.94
%
799,912
6.00
%
799,912
6.00
%
Tier 1 leverage capital to average
assets
1,725,690
10.91
%
632,760
4.00
%
n/a
n/a
Common equity tier 1 capital to
risk-weighted assets
1,639,190
12.30
%
599,934
4.50
%
n/a
n/a
Banner Bank:
Total capital to risk-weighted assets
1,862,242
13.95
%
1,067,758
8.00
%
1,334,697
10.00
%
Tier 1 capital to risk-weighted assets
1,698,984
12.73
%
800,818
6.00
%
1,067,758
8.00
%
Tier 1 leverage capital to average
assets
1,698,984
10.74
%
632,851
4.00
%
791,063
5.00
%
Common equity tier 1 capital to
risk-weighted assets
1,698,984
12.73
%
600,614
4.50
%
867,553
6.50
%
These regulatory capital ratios are
estimates, pending completion and filing of Banner’s regulatory
reports.
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET
INTEREST SPREAD
Quarters Ended
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Average
Balance
Interest
and
Dividends
Yield /
Cost (3)
Average
Balance
Interest
and
Dividends
Yield /
Cost (3)
Average
Balance
Interest
and
Dividends
Yield /
Cost (3)
Interest-earning assets:
Held for sale loans
$
26,954
$
453
6.69
%
$
11,665
$
206
7.10
%
$
56,697
$
765
5.35
%
Mortgage loans
9,207,468
135,497
5.85
%
9,006,857
129,230
5.77
%
8,596,705
118,285
5.46
%
Commercial/agricultural loans
1,879,215
32,547
6.89
%
1,874,039
31,761
6.82
%
1,826,907
29,894
6.49
%
Consumer and other loans
128,548
2,154
6.67
%
132,661
2,156
6.54
%
138,723
2,226
6.37
%
Total loans (1)
11,242,185
170,651
6.04
%
11,025,222
163,353
5.96
%
10,619,032
151,170
5.65
%
Mortgage-backed securities
2,623,399
16,498
2.50
%
2,672,187
16,850
2.54
%
2,863,345
17,834
2.47
%
Other securities
943,310
11,120
4.69
%
958,809
11,181
4.69
%
1,071,389
12,128
4.49
%
Interest-bearing deposits with banks
51,604
493
3.80
%
58,022
578
4.01
%
43,594
529
4.81
%
FHLB stock
16,664
412
9.84
%
21,080
365
6.96
%
16,443
385
9.29
%
Total investment securities
3,634,977
28,523
3.12
%
3,710,098
28,974
3.14
%
3,994,771
30,876
3.07
%
Total interest-earning assets
14,877,162
199,174
5.33
%
14,735,320
192,327
5.25
%
14,613,803
182,046
4.94
%
Non-interest-earning assets
981,290
926,411
932,364
Total assets
$
15,858,452
$
15,661,731
$
15,546,167
Deposits:
Interest-bearing checking accounts
$
2,295,723
9,497
1.65
%
$
2,156,214
7,621
1.42
%
$
1,971,179
4,190
0.84
%
Savings accounts
3,268,647
19,299
2.35
%
3,147,522
17,200
2.20
%
2,659,890
8,400
1.25
%
Money market accounts
1,611,543
9,184
2.27
%
1,659,327
9,124
2.21
%
1,793,953
6,639
1.47
%
Certificates of deposit
1,540,637
15,805
4.08
%
1,503,597
14,905
3.99
%
1,412,542
11,772
3.31
%
Total interest-bearing deposits
8,716,550
53,785
2.45
%
8,466,660
48,850
2.32
%
7,837,564
31,001
1.57
%
Non-interest-bearing deposits
4,601,755
—
—
%
4,634,738
—
—
%
5,316,023
—
—
%
Total deposits
13,318,305
53,785
1.61
%
13,101,398
48,850
1.50
%
13,153,587
31,001
0.94
%
Other interest-bearing liabilities:
FHLB advances
161,413
2,263
5.58
%
259,549
3,621
5.61
%
161,087
2,233
5.50
%
Other borrowings
159,439
1,147
2.86
%
175,518
1,160
2.66
%
194,659
1,099
2.24
%
Junior subordinated debentures and
subordinated notes
179,075
2,971
6.60
%
179,178
2,961
6.65
%
182,678
2,965
6.44
%
Total borrowings
499,927
6,381
5.08
%
614,245
7,742
5.07
%
538,424
6,297
4.64
%
Total funding liabilities
13,818,232
60,166
1.73
%
13,715,643
56,592
1.66
%
13,692,011
37,298
1.08
%
Other non-interest-bearing liabilities
(2)
311,803
294,794
296,578
Total liabilities
14,130,035
14,010,437
13,988,589
Shareholders’ equity
1,728,417
1,651,294
1,557,578
Total liabilities and shareholders’
equity
$
15,858,452
$
15,661,731
$
15,546,167
Net interest income/rate spread (tax
equivalent)
$
139,008
3.60
%
$
135,735
3.59
%
$
144,748
3.86
%
Net interest margin (tax equivalent)
3.72
%
3.70
%
3.93
%
Reconciliation to
reported net interest income:
Adjustments for taxable equivalent
basis
(3,333
)
(3,189
)
(2,982
)
Net interest income and margin, as
reported
$
135,675
3.63
%
$
132,546
3.62
%
$
141,766
3.85
%
Additional Key Financial
Ratios:
Return on average assets
1.13
%
1.02
%
1.17
%
Adjusted return on average assets (4)
1.13
%
1.04
%
1.25
%
Return on average equity
10.39
%
9.69
%
11.68
%
Adjusted return on average equity (4)
10.39
%
9.83
%
12.51
%
Average equity/average assets
10.90
%
10.54
%
10.02
%
Average interest-earning assets/average
interest-bearing liabilities
161.42
%
162.27
%
174.47
%
Average interest-earning assets/average
funding liabilities
107.66
%
107.43
%
106.73
%
Non-interest income/average assets
0.45
%
0.44
%
0.32
%
Non-interest expense/average assets
2.42
%
2.52
%
2.45
%
Efficiency ratio
62.63
%
65.53
%
62.10
%
Adjusted efficiency ratio (4)
61.27
%
63.60
%
59.00
%
(1)
Average balances include loans accounted
for on a nonaccrual basis and accruing loans 90 days or more past
due. Amortization of net deferred loan fees/costs is included with
interest on loans.
(2)
Average other non-interest-bearing
liabilities include fair value adjustments related to junior
subordinated debentures.
(3)
Tax-exempt income is calculated on a tax
equivalent basis. The tax equivalent yield adjustment to interest
earned on loans was $2.3 million, $2.2 million and $1.9 million for
the quarters ended September 30, 2024, June 30, 2024 and September
30, 2023, respectively. The tax equivalent yield adjustment to
interest earned on tax exempt securities was $1.0 million for both
the quarters ended September 30, 2024 and June 30, 2024 and $1.1
million for the quarter ended September 30, 2023.
(4)
Represent non-GAAP financial measures.
See, “Additional Financial Information - Non-GAAP Financial
Measures” on the final two pages of this press release for a
reconciliation of non-GAAP financial measures.
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET
INTEREST SPREAD
Nine Months Ended
Sep 30, 2024
Sep 30, 2023
Average
Balance
Interest and
Dividends
Yield/Cost (3)
Average
Balance
Interest and
Dividends
Yield/Cost (3)
Interest-earning assets:
Held for sale loans
$
16,225
$
826
6.80
%
$
55,157
$
2,174
5.27
%
Mortgage loans
9,036,256
390,011
5.77
%
8,427,034
337,282
5.35
%
Commercial/agricultural loans
1,861,182
95,155
6.83
%
1,768,685
82,803
6.26
%
Consumer and other loans
131,676
6,506
6.60
%
138,246
6,478
6.26
%
Total loans (1)
11,045,339
492,498
5.96
%
10,389,122
428,737
5.52
%
Mortgage-backed securities
2,674,555
50,424
2.52
%
2,971,124
55,386
2.49
%
Other securities
962,183
33,802
4.69
%
1,220,074
40,155
4.40
%
Interest-bearing deposits with banks
51,630
1,530
3.96
%
47,330
1,694
4.79
%
FHLB stock
18,931
986
6.96
%
18,772
632
4.50
%
Total investment securities
3,707,299
86,742
3.13
%
4,257,300
97,867
3.07
%
Total interest-earning assets
14,752,638
579,240
5.24
%
14,646,422
526,604
4.81
%
Non-interest-earning assets
950,588
930,934
Total assets
$
15,703,226
$
15,577,356
Deposits:
Interest-bearing checking accounts
$
2,185,796
23,834
1.46
%
$
1,874,518
7,427
0.53
%
Savings accounts
3,161,266
51,778
2.19
%
2,604,089
15,179
0.78
%
Money market accounts
1,648,208
26,696
2.16
%
1,971,514
16,445
1.12
%
Certificates of deposit
1,514,982
44,940
3.96
%
1,118,874
21,733
2.60
%
Total interest-bearing deposits
8,510,252
147,248
2.31
%
7,568,995
60,784
1.07
%
Non-interest-bearing deposits
4,649,297
—
—
%
5,571,896
—
—
%
Total deposits
13,159,549
147,248
1.49
%
13,140,891
60,784
0.62
%
Other interest-bearing liabilities:
FHLB advances
211,135
8,856
5.60
%
219,461
8,654
5.27
%
Other borrowings
171,838
3,482
2.71
%
203,932
2,251
1.48
%
Junior subordinated debentures and
subordinated notes
179,941
8,901
6.61
%
186,964
8,549
6.11
%
Total borrowings
562,914
21,239
5.04
%
610,357
19,454
4.26
%
Total funding liabilities
13,722,463
168,487
1.64
%
13,751,248
80,238
0.78
%
Other non-interest-bearing liabilities
(2)
303,367
289,558
Total liabilities
14,025,830
14,040,806
Shareholders’ equity
1,677,396
1,536,550
Total liabilities and shareholders’
equity
$
15,703,226
$
15,577,356
Net interest income/rate spread (tax
equivalent)
$
410,753
3.60
%
$
446,366
4.03
%
Net interest margin (tax equivalent)
3.72
%
4.07
%
Reconciliation to
reported net interest income:
Adjustments for taxable equivalent
basis
(9,573
)
(8,770
)
Net interest income and margin, as
reported
$
401,180
3.63
%
$
437,596
3.99
%
Additional Key Financial
Ratios:
Return on average assets
1.04
%
1.21
%
Adjusted return on average assets (4)
1.08
%
1.34
%
Return on average equity
9.76
%
12.27
%
Adjusted return on average equity (4)
10.16
%
13.60
%
Average equity/average assets
10.68
%
9.86
%
Average interest-earning assets/average
interest-bearing liabilities
162.60
%
179.07
%
Average interest-earning assets/average
funding liabilities
107.51
%
106.51
%
Non-interest income/average assets
0.40
%
0.26
%
Non-interest expense/average assets
2.48
%
2.45
%
Efficiency ratio
65.19
%
61.10
%
Adjusted efficiency ratio (4)
62.84
%
57.19
%
(1)
Average balances include loans accounted
for on a nonaccrual basis and loans 90 days or more past due.
Amortization of net deferred loan fees/costs is included with
interest on loans.
(2)
Average other non-interest-bearing
liabilities include fair value adjustments related to junior
subordinated debentures.
(3)
Tax-exempt income is calculated on a tax
equivalent basis. The tax equivalent yield adjustment to interest
earned on loans was $6.5 million and $5.4 million for the nine
months ended September 30, 2024 and September 30, 2023,
respectively. The tax equivalent yield adjustment to interest
earned on tax exempt securities was $3.1 million and $3.4 million
for the nine months ended September 30, 2024 and September 30,
2023, respectively.
(4)
Represent non-GAAP financial measures.
See, “Additional Financial Information - Non-GAAP Financial
Measures” on the final two pages of this press release for a
reconciliation of non-GAAP financial measures.
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
* Non-GAAP
Financial Measures
In addition to results presented in
accordance with generally accepted accounting principles in the
United States of America (GAAP), this earnings release contains
certain non-GAAP financial measures. Tangible common shareholders’
equity per share and the ratio of tangible common equity to
tangible assets, and references to adjusted revenue, adjusted
earnings, the adjusted return on average assets, the adjusted
return on average equity and the adjusted efficiency ratio
represent non-GAAP financial measures. Management has presented
these non-GAAP financial measures in this earnings release because
it believes that they provide useful and comparative information to
assess trends in Banner’s core operations reflected in the current
quarter’s results and facilitate the comparison of our performance
with the performance of our peers. However, these non-GAAP
financial measures are supplemental and are not a substitute for
any analysis based on GAAP. Where applicable, comparable earnings
information using GAAP financial measures is also presented.
Because not all companies use the same calculations, our
presentation may not be comparable to other similarly titled
measures as calculated by other companies. For a reconciliation of
these non-GAAP financial measures, see the tables below:
ADJUSTED REVENUE
Quarters Ended
Nine Months Ended
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Sep 30, 2024
Sep 30, 2023
Net interest income (GAAP)
$
135,675
$
132,546
$
141,766
$
401,180
$
437,596
Non-interest income (GAAP)
18,063
17,199
12,658
46,853
30,357
Total revenue (GAAP)
153,738
149,745
154,424
448,033
467,953
Exclude: Net loss on sale of
securities
—
562
2,657
5,465
14,436
Net change in valuation of financial
instruments carried at fair value
(39
)
190
654
1,143
4,357
Adjusted revenue (non-GAAP)
$
153,699
$
150,497
$
157,735
$
454,641
$
486,746
ADJUSTED EARNINGS
Quarters Ended
Nine Months Ended
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Sep 30, 2024
Sep 30, 2023
Net income (GAAP)
$
45,153
$
39,795
$
45,854
$
122,507
$
141,000
Exclude: Net loss on sale of
securities
—
562
2,657
5,465
14,436
Net change in valuation of financial
instruments carried at fair value
(39
)
190
654
1,143
4,357
Banner Forward expenses (1)
—
—
996
—
1,334
Related net tax expense (benefit)
9
(180
)
(1,033
)
(1,586
)
(4,830
)
Total adjusted earnings (non-GAAP)
$
45,123
$
40,367
$
49,128
$
127,529
$
156,297
Diluted earnings per share (GAAP)
$
1.30
$
1.15
$
1.33
$
3.54
$
4.09
Diluted adjusted earnings per share
(non-GAAP)
$
1.30
$
1.17
$
1.43
$
3.69
$
4.54
Return on average assets
1.13
%
1.02
%
1.17
%
1.04
%
1.21
%
Adjusted return on average assets (2)
1.13
%
1.04
%
1.25
%
1.08
%
1.34
%
Return on average equity
10.39
%
9.69
%
11.68
%
9.76
%
12.27
%
Adjusted return on average equity (3)
10.39
%
9.83
%
12.51
%
10.16
%
13.60
%
(1)
Included in miscellaneous expenses in
results of operations.
(2)
Adjusted earnings (non-GAAP) divided by
average assets.
(3)
Adjusted earnings (non-GAAP) divided by
average equity.
ADDITIONAL FINANCIAL
INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO
Quarters Ended
Nine Months Ended
Sep 30, 2024
Jun 30, 2024
Sep 30, 2023
Sep 30, 2024
Sep 30, 2023
Non-interest expense (GAAP)
$
96,291
$
98,128
$
95,891
$
292,060
$
285,917
Exclude: Banner Forward expenses (1)
—
—
(996
)
—
(1,334
)
CDI amortization
(590
)
(724
)
(857
)
(2,037
)
(2,898
)
State/municipal tax expense
(1,432
)
(1,394
)
(1,359
)
(4,130
)
(3,888
)
REO operations
(103
)
(297
)
383
(180
)
585
Adjusted non-interest expense
(non-GAAP)
$
94,166
$
95,713
$
93,062
$
285,713
$
278,382
Net interest income (GAAP)
$
135,675
$
132,546
$
141,766
$
401,180
$
437,596
Non-interest income (GAAP)
18,063
17,199
12,658
46,853
30,357
Total revenue (GAAP)
153,738
149,745
154,424
448,033
467,953
Exclude: Net loss on sale of
securities
—
562
2,657
5,465
14,436
Net change in valuation of financial
instruments carried at fair value
(39
)
190
654
1,143
4,357
Adjusted revenue (non-GAAP)
$
153,699
$
150,497
$
157,735
$
454,641
$
486,746
Efficiency ratio (GAAP)
62.63
%
65.53
%
62.10
%
65.19
%
61.10
%
Adjusted efficiency ratio (non-GAAP)
(2)
61.27
%
63.60
%
59.00
%
62.84
%
57.19
%
(1)
Included in miscellaneous expenses in
results of operations.
(2)
Adjusted non-interest expense (non-GAAP)
divided by adjusted revenue.
TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO
TANGIBLE ASSETS
Sep 30, 2024
Jun 30, 2024
Dec 31, 2023
Sep 30, 2023
Shareholders’ equity (GAAP)
$
1,793,721
$
1,690,766
$
1,652,691
$
1,520,607
Exclude goodwill and other intangible
assets, net
376,768
377,358
378,805
379,663
Tangible common shareholders’ equity
(non-GAAP)
$
1,416,953
$
1,313,408
$
1,273,886
$
1,140,944
Total assets (GAAP)
$
16,188,676
$
15,816,194
$
15,670,391
$
15,507,880
Exclude goodwill and other intangible
assets, net
376,768
377,358
378,805
379,663
Total tangible assets (non-GAAP)
$
15,811,908
$
15,438,836
$
15,291,586
$
15,128,217
Common shareholders’ equity to total
assets (GAAP)
11.08
%
10.69
%
10.55
%
9.81
%
Tangible common shareholders’ equity to
tangible assets (non-GAAP)
8.96
%
8.51
%
8.33
%
7.54
%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY
PER SHARE
Shareholders’ equity (GAAP)
$
1,793,721
$
1,690,766
$
1,652,691
$
1,520,607
Tangible common shareholders’ equity
(non-GAAP)
$
1,416,953
$
1,313,408
$
1,273,886
$
1,140,944
Common shares outstanding at end of
period
34,456,688
34,455,752
34,348,369
34,345,949
Common shareholders’ equity (book value)
per share (GAAP)
$
52.06
$
49.07
$
48.12
$
44.27
Tangible common shareholders’ equity
(tangible book value) per share (non-GAAP)
$
41.12
$
38.12
$
37.09
$
33.22
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241016545160/en/
MARK J. GRESCOVICH, PRESIDENT & CEO ROBERT G. BUTTERFIELD,
CFO (509) 527-3636
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