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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

Banner’s real estate owned and repossessed assets decreased 36% to $27.7 million at March 31, 2012, compared to $43.0 million three months earlier and decreased 71% when compared to $95.0 million a year ago. Net charge-offs in the first quarter of 2012 totaled $6.4 million, or 0.20% of average loans outstanding, compared to $8.2 million, or 0.25% of average loans outstanding for the fourth quarter of 2011 and $16.8 million, or 0.50% of average loans outstanding, for the first quarter a year ago.

Non-performing assets decreased 22% to $93.1 million at March 31, 2012, compared to $118.9 million three months earlier and decreased 59% when compared to $228.6 million a year ago. At March 31, 2012, Banner’s non-performing assets were 2.24% of total assets, compared to 2.79% at December 31, 2011 and 5.32% a year ago.

Income Statement Review

“The improvement in our net interest margin largely reflects continuing reductions in our funding costs, particularly in our deposit costs, and a significant reduction in the adverse effect of non-performing assets. This reduced cost of funds coupled with changes in our asset mix made it possible for us to maintain a strong net interest margin in recent quarters and to increase it by 17 basis points compared to the first quarter a year ago, despite continued downward pressure on asset yields,” said Grescovich. Banner’s net interest margin was 4.11% in the first quarter of 2012, compared to 4.07% in the preceding quarter and 3.94% in the first quarter a year ago.

Deposit costs decreased by seven basis points in the first quarter compared to the preceding quarter and 37 basis points compared to the first quarter a year earlier. Total funding costs for the first quarter of 2012 decreased six basis points compared to the previous quarter and 34 basis points from the first quarter a year ago. Asset yields decreased two basis points compared to the prior quarter and decreased 16 basis points from the first quarter a year ago. Loan yields decreased nine basis points compared to the preceding quarter and decreased 22 basis points from the first quarter a year ago. Nonaccrual loans reduced the margin by approximately 13 basis points in the first quarter of 2012 compared to approximately 14 basis points in the preceding quarter and approximately 27 basis points in the first quarter of 2011.

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