Credit Quality“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. “Charge-offs and delinquencies as well as real estate owned expenses and valuation adjustments continued to be concentrated in loans for the construction of single-family homes and residential land development projects. However, our exposure to one- to four-family residential construction and land development loans has continued to decline and at the end of December 31, 2011 had been reduced to 7.3% of our loan portfolio. Importantly, strong sales activity reduced our portfolio of real estate owned through foreclosure by $23.5 million during the fourth quarter, resulting in a net decrease of $57.9 million during 2011. We are encouraged by the recent pace of problem asset resolution as well as the significant reduction in non-performing assets over the last year and remain diligent in our efforts to further improve our risk profile.” Banner recorded a $5.0 million provision for loan losses in the fourth quarter of 2011, equal to the provision in the preceding quarter and reduced substantially from $20.0 million in the fourth quarter a year ago. The allowance for loan losses at December 31, 2011 totaled $82.9 million, representing 2.52% of total loans outstanding and 110% of non-performing loans. Non-performing loans decreased to $75.3 million at December 31, 2011, compared to $151.5 million at December 31, 2010 and $83.1 million at September 30, 2011. Banner’s real estate owned and repossessed assets decreased to $43.0 million at December 31, 2011, compared to $100.9 million a year earlier and $66.5 million three months earlier. Net charge-offs in the fourth quarter of 2011 totaled $8.2 million, or 0.25% of average loans outstanding, compared to $10.9 million, or 0.33% of average loans outstanding for the third quarter of 2011 and $19.0 million, or 0.55% of average loans outstanding, for the fourth quarter a year ago. For all of 2011, net charge-offs were $49.5 million, compared to $67.9 million in 2010.