Banner Corporation Earns $9.2 Million, Or $0.40 Per Diluted Share, In First Quarter; Net Income Highlighted By Strong Revenue Generation And Improved Credit Quality

First Quarter 2012 Highlights (compared to first quarter 2011 except as noted)

• Net income was $9.2 million, compared to a net loss of $7.8 million in the first quarter a year ago.
• Revenues from core operations* increased 7% to $50.4 million.
• The net interest margin improved to 4.11%, compared to 4.07% in the preceding quarter and 3.94% for the first quarter of 2011.
• Net interest income before provision for loan losses increased 3%.
• Deposit fees and service charges increased 11%.
• Mortgage banking revenues increased 175%.
• Non-performing assets decreased to $93.1 million at March 31, 2012, a 22% decrease compared to three months earlier and a 59% decrease compared to a year earlier.
• Non-performing loans decreased to $64.9 million at March 31, 2012, a 14% decrease compared to three months earlier and a 51% decrease compared to a year earlier.
• Real estate owned and repossessed assets decreased to $27.7 million at March 31, 2012, a 36% decrease compared to three months earlier and a 71% decrease compared to a year earlier.

Credit Quality

“Improving the risk profile of Banner and aggressively managing our troubled assets has been and will remain a primary focus for the Company. We continue to show good progress as nonperforming assets have been reduced nearly 22% compared to the fourth quarter of 2011 and 59% compared to a year ago. Credit costs continue to decline and were significantly below those of a year ago as our special asset teams continued to make meaningful progress at reducing problem assets,” said Grescovich.

Banner recorded a $5.0 million provision for loan losses in the first quarter of 2012, equal to the provision in the preceding quarter and substantially lower than the $17.0 million provision recorded in the first quarter a year ago. The allowance for loan losses at March 31, 2012 totaled $81.5 million, representing 2.52% of total loans outstanding and 126% of non-performing loans. Non-performing loans decreased 14% to $64.9 million at March 31, 2012, compared to $75.3 million three months earlier, and decreased 51% when compared to $131.7 million a year earlier.

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