For the quarter ended March 31, 2013, Banner recorded $5.3 million in state and federal income tax expense for an effective tax rate of approximately 31.3%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits. For the quarter ended March 31, 2012, Banner had no provision for income taxes as a result of the full valuation allowance for its deferred tax assets (DTA) at that date. The DTA valuation allowance was eliminated during the final three quarters of 2012 which resulted in the substantially reduced provision for income taxes of $4.6 million, or an effective rate of 24.0%, in the fourth quarter of 2012.Credit Quality "All of Banner's key credit quality metrics have improved over the last year, including further progress during the first quarter, while our reserve levels have remained substantial," said Grescovich, "providing us additional benefit in the current quarter's earnings." As a result of substantial reserves already in place representing 2.38% of total loans outstanding, as well as declining net charge-offs, Banner did not record a provision for loan losses in the first quarter of 2013. This compares to a $1.0 million provision in the preceding quarter and a $5.0 million provision in the first quarter a year ago. The allowance for loan losses at March 31, 2013 was $77.1 million, representing 231% of non-performing loans. Non-performing loans decreased by 3% to $33.4 million at March 31, 2013, compared to $34.4 million three months earlier, and decreased 49% when compared to $64.9 million a year earlier. Real estate owned and repossessed assets decreased 28% to $11.5 million at March 31, 2013, compared to $15.9 million three months earlier, and decreased 59% when compared to $27.7 million a year ago. Net charge-offs in the first quarter of 2013 totaled $363,000, or 0.01% of average loans outstanding, compared to $2.3 million, or 0.07% of average loans outstanding in the fourth quarter of 2012 and $6.4 million, or 0.20% of average loans outstanding in the first quarter a year ago.