WALLA WALLA, Wash., April 24, 2017 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation contributed to solid first quarter 2017 operating results.  Net income in the first quarter of 2017 increased 4% to $23.8 million, or $0.72 per diluted share, compared to $22.8 million, or $0.69 per diluted share, in the preceding quarter and increased 34% compared to $17.8 million, or $0.52 per diluted share, in the first quarter a year ago.  The current quarter results did not include any acquisition-related expenses.  The results for the preceding quarter included $788,000 of acquisition-related expenses which, net of tax benefit, reduced net income by $0.02 per diluted share, while operating results in the first quarter a year ago included $6.8 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.13 per diluted share.

"During the first quarter of 2017 we continued to improve our operating performance, with good loan origination and core deposit growth as well as continued strong core revenues," stated Mark J. Grescovich, President and Chief Executive Officer.  "We also benefited from the very positive economic conditions in our market areas, as well as the successful integration of the AmericanWest Bank acquisition, which has made a dramatic impact on our scale and reach and is providing enhanced opportunities for client and revenue growth.  During the first quarter, we crossed the threshold of $10 billion in total assets and again incurred increased expenses related to enhanced infrastructure and regulatory compliance costs.  While increasing regulatory costs are a significant headwind, through the hard work of our employees, we are continuing to execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders."

At March 31, 2017, Banner Corporation had $10.07 billion in assets, $7.33 billion in net loans and $8.42 billion in deposits.  Banner operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2017 Highlights

  • Net income was $23.8 million, compared to $22.8 million in the preceding quarter and increased substantially compared to $17.8 million in the first quarter of 2016.
  • Return on average assets was 0.97% in the current quarter, 0.92% in the preceding quarter and 0.73% in the same quarter a year ago.
  • Revenues from core operations* were $116.4 million, compared to $117.5 million in the preceding quarter, and increased 5% compared to $111.0 million in the first quarter a year ago.
  • Net interest margin was 4.25% for the current quarter, compared to 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.
  • Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.15%*, compared to 4.13%* in the fourth quarter and was 4.01%* in the first quarter a year ago.
  • Deposit fees and other service charges were $12.2 million, the same as in the preceding quarter and increased compared to $11.8 million in the same quarter a year ago.
  • Revenues from mortgage banking operations decreased to $4.6 million compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter a year ago.
  • Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $86.5 million or 1.17% of total loans.
  • Core deposits increased 3% during the current quarter and represented 86% of total deposits at March 31, 2017.
  • Quarterly dividends to shareholders were increased to $0.25 per share, providing a current yield of 1.8% based on our March 31, 2017, closing price.
  • Common shareholders' tangible equity per share* was $31.68 at March 31, 2017, compared to $31.06 at the preceding quarter end and $30.38 a year ago.
  • The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.72% at March 31, 2017, compared to 10.83% at the preceding quarter end and 10.98% a year ago.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest expense from core operations (which excludes acquisition-related costs), the adjusted allowance for loan losses to adjusted loans (which includes net loan discounts on acquired loans) and references to tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) 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.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of this press release.

Income Statement Review

Banner's first quarter net interest income, before the provision for loan losses, decreased slightly to $94.9 million, compared to $97.2 million in the preceding quarter.  First quarter 2017 net interest income, before the provision for loan losses, increased 4% compared to $91.0 million in the first quarter a year ago.

"Our net interest margin decreased seven basis points compared to the preceding quarter, largely as a result of  decreased accretion from acquisition accounting loan discounts," said Grescovich.  "In addition, in the preceding quarter our loan yields and the net interest margin were elevated as a result of significant prepayment fees on a single large credit relationship.  Excluding the impact of acquisition accounting, the net interest margin increased two basis points compared to the preceding quarter, and increased by 14 basis points compared to a year ago.*"

Net interest margin is enhanced by the amortization of acquisition accounting discounts on loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense.  Banner's net interest margin was 4.25% for the first quarter of 2017, which included eight basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and one basis point as a result of the impact of the net loan acquisition discounts on average earning assets. The net interest margin was 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.  Excluding the effects of acquisition accounting, the net interest margin was 4.15%* in the first quarter, 4.13%* in the preceding quarter and 4.01%* in the first quarter a year ago.

Average interest-earning asset yields decreased five basis points to 4.44% compared to 4.49% for the preceding quarter and increased 12 basis points compared to 4.32% in the first quarter a year ago.  Average loan yields decreased 13 basis points to 4.80% compared to the preceding quarter, reflecting significantly less discount accretion, but increased two basis points from the first quarter a year ago.  Accretion of the acquisition accounting discounts added 11 basis points to loan yields in the current quarter compared to 21 basis points in the preceding quarter and 12 basis points in the first quarter a year ago.  Deposit costs increased one basis point to 0.14% compared to the preceding quarter and decreased one basis point compared to the first quarter a year ago.  Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by one basis point in the first quarter of 2017, compared to two basis points in the preceding quarter and two basis points in the first quarter a year ago.  The total cost of funds increased two basis points to 0.20% during the first quarter compared to the preceding quarter and was unchanged compared to the first quarter a year ago.

"As expected, due to the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the first quarter, the same as in the preceding quarter," added Grescovich.  "While our asset quality metrics remain exceptionally good, adding to the loan loss allowance as the acquisition accounting discounts are accreted to income and growth in new and renewed loans occurs will likely continue as we strive to maintain an appropriate level of reserves and maintain a moderate risk profile."  In the first quarter a year ago, Banner did not record a provision.

Reflecting seasonal trends and the adverse impact of higher interest rates, mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.6 million in the first quarter compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter of 2016.  Sales of multifamily loans in the current quarter resulted in gains of $70,000, while sales of multifamily loans generated $254,000 of gains in the preceding quarter.  Home purchase activity accounted for 64% of first quarter one- to four-family mortgage banking loan originations.

Banner's deposit fees and other service charges were $12.2 million in the first quarter, which was unchanged compared to the preceding quarter and increased 3% compared to $11.8 million in the first quarter a year ago.

Miscellaneous income for the current quarter included a one-time gain of $2.5 million on the sale of a single loan that had been acquired a number of years ago as a partial settlement on a non-performing credit relationship and was carried at a significant discount to its contractual loan amount and eventual sales price.

First quarter 2017 results included a $688,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partly offset by a $13,000 net gain on the sale of securities.  In the preceding quarter, results included a $1.1 million net loss for fair value adjustments that was partly offset by a $311,000 net gain on the sale of securities.  In the first quarter a year ago, results included a $29,000 net gain for fair value adjustments and a $21,000 net gain on the sale of securities.

Total revenues were $115.7 million for the first quarter of 2017, compared to $116.6 million in the preceding quarter and $111.0 million in the first quarter a year ago.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) was $116.4 million in the first quarter of 2017, compared to $117.5 million in the preceding quarter and increased 5% compared to $111.0 million in the first quarter of 2016.

Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.8 million in the first quarter of 2017, compared to $19.5 million in the fourth quarter of 2016 and $20.0 million in the first quarter a year ago.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $21.5 million in the first quarter of 2017, compared to $20.3 million for the fourth quarter of 2017 and $19.9 million in the first quarter a year ago.

Banner's total non-interest expenses were $78.1 million in the first quarter of 2017, compared to $79.9 million in the preceding quarter and $84.0 million in the first quarter of 2016.  The current quarter's non-interest expenses included increased compensation and employee benefit expense, elevated costs for professional services largely as result of enhanced regulatory compliance requirements and additional charges for customer refunds related to prior periods, which were generally offset compared to the preceding quarter by reductions in other expenses and a $1.2 million gain on the sale of real estate owned reflected in real estate operations.  Miscellaneous expenses for the current quarter included accruals of $865,000 for customer refunds for deposit fees that we determined should not have been charged during a six-year period from 2010 to 2015, which was more than offset by the release of a $1.2 million reserve for possible credit losses on an unfunded commitment for a credit relationship that was terminated. There were no acquisition-related expenses in the current quarter compared to $788,000 in the preceding quarter and $6.8 million in the first quarter a year ago.

For the first quarter of 2017, Banner recorded $11.8 million in state and federal income tax expense for an effective tax rate of 33.2%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.

Balance Sheet Review

Banner's total assets increased to $10.07 billion at March 31, 2017, from $9.79 billion at December 31, 2016 and $9.75 billion a year ago.  The total of securities and interest-bearing deposits held at other banks was $1.62 billion at March 31, 2017, compared to $1.16 billion at December 30, 2016 and $1.59 billion a year ago.  The increase in the securities portfolio during the current quarter reflects Banner's renewed leveraging strategy as it crossed the $10 billion assets threshold.  In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016.  The average effective duration of Banner's securities portfolio was approximately 3.8 years at March 31, 2017, compared to 2.9 years at March 31, 2016.

"Net loans decreased slightly during the quarter, but were up 3% year over year, with good production in targeted loan types, including increases in commercial real estate and construction and development loans," said Grescovich.  "We continue to see significant potential for growth in our loan origination pipelines."

Net loans receivable decreased slightly to $7.33 billion at March 31, 2017, compared to $7.37 billion at December 31, 2016, largely as a result of seasonal factors and continuing repayments on one- to four-family loans, but increased 3% compared to $7.11 billion a year ago.  Commercial real estate and multifamily real estate loans increased modestly to $3.63 billion at March 31, 2017, compared to $3.59 billion at December 31, 2016, and increased 5% compared to $3.44 billion a year ago.  Commercial business loans increased slightly to $1.22 billion at March 31, 2017, compared to $1.21 billion three months earlier and were unchanged compared to a year ago.  Agricultural business loans, which are seasonal by nature, decreased to $313.4 million at March 31, 2017, compared to $369.2 million three months earlier and $340.4 million a year ago.  Total construction, land and land development loans decreased to $803.7 million at March 31, 2017, compared to $823.1 million at December 31, 2016, but increased 27% compared to $632.1 million a year earlier.  One- to four-family loans continued to decline as a result of repayments, with nearly all newly originated mortgage loans being sold in the secondary market.

Loans held for sale decreased significantly to $86.7 million at March 31, 2017, compared to $246.4 million at December 31, 2016, largely due to the sale of $200.7 million of multifamily loans during the first quarter.  Loans held for sale were $47.5 million at March 31, 2016.  Loans held for sale at March 31, 2017, included $72.5 million of multifamily loans and $14.2 million of one- to four-family loans.

Total deposits were $8.42 billion at March 31, 2017, a 4% increase compared to $8.12 billion at December 31, 2016, and a 5% increase compared to $8.03 billion a year ago.  Non-interest-bearing account balances increased 6% to $3.21 billion at March 31, 2017, compared to $3.04 billion a year ago.  Interest-bearing transaction and savings accounts increased 10% to $4.06 billion compared to $3.71 billion a year ago.  Certificates of deposit decreased 11% to $1.14 billion at March 31, 2017, compared to $1.29 billion a year earlier.  Brokered deposits totaled $171.5 million at March 31, 2017, compared to $34.1 million at December 31, 2016 and $135.6 million a year ago.  Brokered deposits increased in the current quarter in connection with Banner's leveraging strategy as higher yielding investment securities were purchased and total assets were allowed to increase above the $10 billion threshold.

Reflecting additional account growth as well as increased balances for existing clients, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 3% during the current quarter.  Core deposits represented 86% of total deposits at March 31, 2017, compared to 87% of total deposits at December 31, 2016, and 84% of total deposits a year earlier.  The average cost of deposits was 0.14% for the quarter ended March 31, 2017, a one basis point increase compared to the preceding quarter, and a one basis point decline compared to the quarter ended March 31, 2016.

At March 31, 2017, total common shareholders' equity was $1.32 billion, or $39.92 per share, compared to $1.31 billion at December 31, 2016 and $1.32 billion a year ago.  During the quarter Banner declared and accrued a $0.25 per share quarterly dividend.  At March 31, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 10.72% of tangible assets*, compared to $1.03 billion, or 10.83% of tangible assets, at December 31, 2016, and $1.04 billion, or 10.98% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.68 at March 31, 2017, compared to $30.38 per share a year ago.

Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under the Basel III and Dodd Frank regulatory standards.  At March 31, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.46%, its Tier 1 leverage capital to average assets ratio was 11.79%, and its total capital to risk-weighted assets ratio was 13.85%.

Credit Quality

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank were recorded at their estimated fair value, which resulted in a net discount to the loans' contractual amounts, a portion of which reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw Bank.

The allowance for loan losses was $86.5 million at March 31, 2017, or 1.17% of total loans outstanding and 479% of non-performing loans compared to $78.2 million at March 31, 2016, or 1.09% of total loans outstanding and 501% of non-performing loans.  Banner had net charge-offs of $1.5 million in the first quarter compared to net charge-offs of $253,000 in the fourth quarter of 2016 and net recoveries of $189,000 in the first quarter a year ago.  Primarily as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter.  Banner did not record a provision for the first quarter of 2016.  If the allowance for loan losses included the remaining loan discount*, the adjusted allowance for loan losses to adjusted loans would have been 1.56% as of March 31, 2017 as compared to 1.67% a year ago.  Non-performing loans were $18.1 million at March 31, 2017, compared to $22.6 million at December 31, 2016 and $15.6 million a year ago.  Real estate owned and other repossessed assets were $3.2 million at March 31, 2017, compared to $11.2 million at December 31, 2016, and $7.4 million a year ago.

Banner's non-performing assets were $21.3 million, or 0.21% of total assets, at March 31, 2017, compared to $33.8 million, or 0.35% of total assets, at December 31, 2016 and $23.0 million, or 0.24% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $30.5 million at March 31, 2017, compared to $32.3 million at December 31, 2016, and $53.3 million a year ago.

Conference Call

Banner will host a conference call on Tuesday, April 25, 2017, at 8:00 a.m. PDT, to discuss its first quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10103898, or at www.bannerbank.com.

About the Company

Banner Corporation is a $10.1 billion bank holding company operating two commercial banks in five 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 "believe," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," 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.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) 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 loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
RESULTS OF OPERATIONS   Quarters Ended
(in thousands except shares and per share data)   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
             
INTEREST INCOME:            
Loans receivable   $ 91,288     $ 93,915     $ 86,958  
Mortgage-backed securities   4,647     3,861     5,390  
Securities and cash equivalents   3,161     3,231     2,953  
    99,096     101,007     95,301  
INTEREST EXPENSE:            
Deposits   2,791     2,604     2,946  
Federal Home Loan Bank advances   273     79     279  
Other borrowings   74     76     75  
Junior subordinated debentures   1,104     1,077     958  
    4,242     3,836     4,258  
Net interest income before provision for loan losses   94,854     97,171     91,043  
PROVISION FOR LOAN LOSSES   2,000     2,030      
Net interest income   92,854     95,141     91,043  
NON-INTEREST INCOME:            
Deposit fees and other service charges   12,186     12,199     11,818  
Mortgage banking operations   4,603     5,143     5,643  
Bank owned life insurance   1,095     893     1,185  
Miscellaneous   3,636     2,065     1,263  
    21,520     20,300     19,909  
Net gain on sale of securities   13     311     21  
Net change in valuation of financial instruments carried at fair value   (688 )   (1,148 )   29  
Total non-interest income   20,845     19,463     19,959  
NON-INTEREST EXPENSE:            
Salary and employee benefits   46,063     44,387     46,564  
Less capitalized loan origination costs   (4,316 )   (4,785 )   (4,250 )
Occupancy and equipment   11,996     12,581     10,388  
Information / computer data services   3,994     4,674     4,920  
Payment and card processing services   5,020     5,440     4,785  
Professional services   5,152     2,384     2,614  
Advertising and marketing   1,328     3,220     1,734  
Deposit insurance   1,266     1,012     1,338  
State/municipal business and use taxes   799     952     838  
Real estate operations   (966 )   (338 )   397  
Amortization of core deposit intangibles   1,624     1,722     1,808  
Miscellaneous   6,118     7,820     6,085  
    78,078     79,069     77,221  
Acquisition related expenses       788     6,813  
Total non-interest expense   78,078     79,857     84,034  
Income before provision for income taxes   35,621     34,747     26,968  
PROVISION FOR INCOME TAXES   11,828     11,943     9,194  
NET INCOME   $ 23,793     $ 22,804     $ 17,774  
Earnings per share available to common shareholders:            
Basic   $ 0.72     $ 0.69     $ 0.52  
Diluted   $ 0.72     $ 0.69     $ 0.52  
Cumulative dividends declared per common share   $ 0.25     $ 0.23     $ 0.21  
Weighted average common shares outstanding:            
Basic   32,933,444     33,134,222     34,023,800  
Diluted   33,051,459     33,201,333     34,103,727  
Decrease in common shares outstanding   (40,523 )   (673,924 )   (20,804 )

FINANCIAL CONDITION               Percentage Change
(in thousands except shares and per share data)   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016   Prior Qtr   Prior Yr Qtr
                     
ASSETS                    
Cash and due from banks   $ 196,277     $ 177,083     $ 153,706     10.8 %   27.7 %
Interest-bearing deposits   104,431     70,636     106,864     47.8 %   (2.3 )%
Total cash and cash equivalents   300,708     247,719     260,570     21.4 %   15.4 %
Securities - trading   24,753     24,568     33,994     0.8 %   (27.2 )%
Securities - available for sale   1,223,764     800,917     1,199,279     52.8 %   2.0 %
Securities - held to maturity   266,391     267,873     246,320     (0.6 )%   8.1 %
Federal Home Loan Bank stock   10,334     12,506     13,347     (17.4 )%   (22.6 )%
Loans held for sale   86,707     246,353     47,523     (64.8 )%   82.5 %
Loans receivable   7,421,255     7,451,148     7,185,999     (0.4 )%   3.3 %
Allowance for loan losses   (86,527 )   (85,997 )   (78,197 )   0.6 %   10.7 %
Net loans   7,334,728     7,365,151     7,107,802     (0.4 )%   3.2 %
Accrued interest receivable   30,312     30,178     30,674     0.4 %   (1.2 )%
Real estate owned held for sale, net   3,040     11,081     7,207     (72.6 )%   (57.8 )%
Property and equipment, net   162,467     166,481     168,807     (2.4 )%   (3.8 )%
Goodwill   244,583     244,583     244,811     %   (0.1 )%
Other intangibles, net   28,488     30,162     35,598     (5.6 )%   (20.0 )%
Bank-owned life insurance   159,948     158,936     156,928     0.6 %   1.9 %
Other assets   192,155     187,160     192,734     2.7 %   (0.3 )%
Total assets   $ 10,068,378     $ 9,793,668     $ 9,745,594     2.8 %   3.3 %
LIABILITIES                    
Deposits:                    
Non-interest-bearing   $ 3,213,044     $ 3,140,451     $ 3,036,330     2.3 %   5.8 %
Interest-bearing transaction and savings accounts   4,064,198     3,935,630     3,705,658     3.3 %   9.7 %
Interest-bearing certificates   1,144,718     1,045,333     1,287,873     9.5 %   (11.1 )%
Total deposits   8,421,960     8,121,414     8,029,861     3.7 %   4.9 %
Advances from Federal Home Loan Bank at fair value   213     54,216     75,400     (99.6 )%   (99.7 )%
Customer repurchase agreements and other borrowings   120,245     105,685     106,132     13.8 %   13.3 %
Junior subordinated debentures at fair value   96,040     95,200     92,879     0.9 %   3.4 %
Accrued expenses and other liabilities   66,201     71,369     81,485     (7.2 )%   (18.8 )%
Deferred compensation   40,315     40,074     39,682     0.6 %   1.6 %
Total liabilities   8,744,974     8,487,958     8,425,439     3.0 %   3.8 %
SHAREHOLDERS' EQUITY                    
Common stock   1,214,517     1,213,837     1,262,050     0.1 %   (3.8 )%
Retained earnings   110,783     95,328     50,230     16.2 %   120.6 %
Other components of shareholders' equity   (1,896 )   (3,455 )   7,875     (45.1 )%   (124.1 )%
Total shareholders' equity   1,323,404     1,305,710     1,320,155     1.4 %   0.2 %
Total liabilities and shareholders' equity   $ 10,068,378     $ 9,793,668     $ 9,745,594     2.8 %   3.3 %
Common Shares Issued:                    
Shares outstanding at end of period   33,152,864     33,193,387     34,221,451          
Common shareholders' equity per share (1)   $ 39.92     $ 39.34     $ 38.58          
Common shareholders' tangible equity per share (1) (2)   $ 31.68     $ 31.06     $ 30.38          
Common shareholders' tangible equity to tangible assets (2)   10.72 %   10.83 %   10.98 %        
Consolidated Tier 1 leverage capital ratio   11.79 %   11.83 %   11.28 %        

(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 excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION                    
(dollars in thousands)                    
                Percentage Change
LOANS   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016   Prior Qtr   Prior Yr Qtr
                     
Commercial real estate:                    
Owner occupied   $ 1,361,095     $ 1,352,999     $ 1,328,034     0.6 %   2.5 %
Investment properties   2,011,618     1,986,336     1,805,243     1.3 %   11.4 %
Multifamily real estate   254,246     248,150     307,019     2.5 %   (17.2 )%
Commercial construction   141,505     124,068     87,711     14.1 %   61.3 %
Multifamily construction   114,728     124,126     79,737     (7.6 )%   43.9 %
One- to four-family construction   366,191     375,704     297,348     (2.5 )%   23.2 %
Land and land development:                    
Residential   151,649     170,004     142,841     (10.8 )%   6.2 %
Commercial   29,597     29,184     24,493     1.4 %   20.8 %
Commercial business   1,224,541     1,207,879     1,224,915     1.4 %   %
Agricultural business including secured by farmland   313,374     369,156     340,350     (15.1 )%   (7.9 )%
One- to four-family real estate   802,991     813,077     910,719     (1.2 )%   (11.8 )%
Consumer:                    
Consumer secured by one- to four-family real estate   493,495     493,211     481,590     0.1 %   2.5 %
Consumer-other   156,225     157,254     155,999     (0.7 )%   0.1 %
Total loans receivable   $ 7,421,255     $ 7,451,148     $ 7,185,999     (0.4 )%   3.3 %
Restructured loans performing under their restructured terms   $ 17,193     $ 18,907     $ 19,450          
Loans 30 - 89 days past due and on accrual (1)   $ 22,214     $ 11,571     $ 28,264          
Total delinquent loans (including loans on non-accrual), net (2)   $ 37,563     $ 30,553     $ 43,986          
Total delinquent loans / Total loans outstanding   0.51 %   0.41 %   0.61 %        

(1) Includes $2.4 million of purchased credit-impaired loans at March 31, 2017 compared to $470,000 at December 31, 2016 and $1.6 million at March 31, 2016. (2) Delinquent loans include $3.5 million of delinquent purchased credit-impaired loans at March 31, 2017 compared to $1.7 million at December 31, 2016 and $4.9 million at March 31, 2016.
LOANS BY GEOGRAPHIC LOCATION   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
    Amount   Percentage   Amount   Percentage   Amount   Percentage
                         
Washington   $ 3,401,005     45.8 %   $ 3,433,617     46.1 %   $ 3,333,912     46.4 %
Oregon   1,493,054     20.1 %   1,505,369     20.2 %   1,420,749     19.8 %
California   1,255,597     16.9 %   1,239,989     16.6 %   1,173,203     16.3 %
Idaho   471,519     6.4 %   495,992     6.7 %   493,905     6.9 %
Utah   281,379     3.8 %   283,890     3.8 %   289,082     4.0 %
Other   518,701     7.0 %   492,291     6.6 %   475,148     6.6 %
Total loans   $ 7,421,255     100.0 %   $ 7,451,148     100.0 %   $ 7,185,999     100.0 %

ADDITIONAL FINANCIAL INFORMATION            
(dollars in thousands)            
      Quarters Ended
CHANGE IN THE   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
ALLOWANCE FOR LOAN LOSSES            
Balance, beginning of period   $ 85,997     $ 84,220     $ 78,008  
Provision for loan losses   2,000     2,030      
Recoveries of loans previously charged off:            
Commercial real estate   70     484     38  
Construction and land   83     903     471  
One- to four-family real estate   145     231     12  
Commercial business   173     218     720  
Agricultural business, including secured by farmland   113     20     17  
Consumer   94     81     207  
    678     1,937     1,465  
Loans charged off:            
Commercial real estate       (566 )   (180 )
Construction and land       (616 )    
One- to four-family real estate       (249 )    
Commercial business   (1,626 )   (305 )   (139 )
Agricultural business, including secured by farmland   (159 )       (567 )
Consumer   (363 )   (454 )   (390 )
    (2,148 )   (2,190 )   (1,276 )
Net (charge-offs) recoveries   (1,470 )   (253 )   189  
Balance, end of period   $ 86,527     $ 85,997     $ 78,197  
Net (charge-offs) recoveries / Average loans outstanding   (0.019 )%   (0.003 )%   0.003 %

ALLOCATION OF            
ALLOWANCE FOR LOAN LOSSES   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Specific or allocated loss allowance:            
Commercial real estate   $ 20,472     $ 20,993     $ 19,732  
Multifamily real estate   1,378     1,360     2,853  
Construction and land   29,464     34,252     29,318  
One- to four-family real estate   1,974     2,238     2,170  
Commercial business   19,768     16,533     15,118  
Agricultural business, including secured by farmland   3,245     2,967     4,282  
Consumer   3,840     4,104     3,541  
Total allocated   80,141     82,447     77,014  
Unallocated   6,386     3,550     1,183  
  Total allowance for loan losses   $ 86,527     $ 85,997     $ 78,197  
Allowance for loan losses / Total loans outstanding   1.17 %   1.15 %   1.09 %
Allowance for loan losses / Non-performing loans   479 %   381 %   501 %

ADDITIONAL FINANCIAL INFORMATION          
(dollars in thousands)          
  Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
NON-PERFORMING ASSETS          
Loans on non-accrual status:          
Secured by real estate:          
Commercial $ 6,910     $ 8,237     $ 4,145  
Multifamily 147          
Construction and land 1,775     1,748     2,250  
One- to four-family 3,386     2,263     4,803  
Commercial business 2,700     3,074     1,558  
Agricultural business, including secured by farmland 1,012     3,229     663  
Consumer 1,285     1,875     906  
  17,215     20,426     14,325  
Loans more than 90 days delinquent, still on accrual:          
Secured by real estate:          
Commercial     701      
Multifamily     147      
One- to four-family 545     1,233     1,039  
Consumer 297     72     251  
  842     2,153     1,290  
Total non-performing loans 18,057     22,579     15,615  
Real estate owned (REO) 3,040     11,081     7,207  
Other repossessed assets 162     166     202  
Total non-performing assets $ 21,259     $ 33,826     $ 23,024  
Total non-performing assets to total assets 0.21 %   0.35 %   0.24 %
Purchased credit-impaired loans, net $ 30,501     $ 32,322     $ 53,271  

  Quarters Ended
REAL ESTATE OWNED Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Balance, beginning of period $ 11,081     $ 4,717     $ 11,627  
Additions from loan foreclosures (68 )   8,375     2  
Additions from acquisitions         400  
Proceeds from dispositions of REO (9,125 )   (2,791 )   (4,666 )
Gain on sale of REO 1,202     852     49  
Valuation adjustments in the period (50 )   (72 )   (205 )
Balance, end of period $ 3,040     $ 11,081     $ 7,207  

ADDITIONAL FINANCIAL INFORMATION                    
(dollars in thousands)                    
                     
DEPOSIT COMPOSITION               Percentage Change
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016   Prior Qtr   Prior Yr
                     
Non-interest-bearing   $ 3,213,044     $ 3,140,451     $ 3,036,330     2.3 %   5.8 %
Interest-bearing checking   928,232     914,484     767,460     1.5 %   20.9 %
Regular savings accounts   1,592,023     1,523,391     1,327,558     4.5 %   19.9 %
Money market accounts   1,543,943     1,497,755     1,610,640     3.1 %   (4.1 )%
Total interest-bearing transaction and savings accounts   4,064,198     3,935,630     3,705,658     3.3 %   9.7 %
Interest-bearing certificates   1,144,718     1,045,333     1,287,873     9.5 %   (11.1 )%
Total deposits   $ 8,421,960     $ 8,121,414     $ 8,029,861     3.7 %   4.9 %

GEOGRAPHIC CONCENTRATION OF DEPOSITS   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
    Amount   Percentage   Amount   Percentage   Amount   Percentage
Washington   $ 4,619,457     54.9 %   $ 4,347,644     53.6 %   $ 4,209,332     52.4 %
Oregon   1,746,143     20.7 %   1,708,973     21.0 %   1,668,421     20.8 %
California   1,469,351     17.4 %   1,469,748     18.1 %   1,565,326     19.5 %
Idaho   429,850     5.1 %   447,019     5.5 %   428,681     5.3 %
Utah   157,159     1.9 %   148,030     1.8 %   158,101     2.0 %
Total deposits   $ 8,421,960     100.0 %   $ 8,121,414     100.0 %   $ 8,029,861     100.0 %

INCLUDED IN TOTAL DEPOSITS   Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Public non-interest-bearing accounts   $ 80,322     $ 92,789     $ 82,527  
Public interest-bearing transaction & savings accounts   125,921     128,976     123,713  
Public interest-bearing certificates   31,024     25,650     29,983  
Total public deposits   $ 237,267     $ 247,415     $ 236,223  
Total brokered deposits   $ 171,521     $ 34,074     $ 135,603  

ADDITIONAL FINANCIAL INFORMATION                        
(dollars in thousands)                        
    Actual   Minimum to be categorized as "Adequately Capitalized"   Minimum to be categorized as "Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF March 31, 2017   Amount   Ratio   Amount   Ratio   Amount   Ratio
                         
Banner Corporation-consolidated:                        
  Total capital to risk-weighted assets   $ 1,227,333     13.85 %   $ 708,897     8.00 %   $ 886,122     10.00 %
  Tier 1 capital to risk-weighted assets   1,138,357     12.85 %   531,673     6.00 %   531,673     6.00 %
  Tier 1 leverage capital to average assets   1,138,357     11.79 %   386,229     4.00 %   n/a   n/a
  Common equity tier 1 capital to risk-weighted assets   1,015,251     11.46 %   398,755     4.50 %   n/a   n/a
Banner Bank:                        
  Total capital to risk-weighted assets   1,053,255     12.15 %   693,425     8.00 %   866,781     10.00 %
  Tier 1 capital to risk-weighted assets   966,485     11.15 %   520,068     6.00 %   693,425     8.00 %
  Tier 1 leverage capital to average assets   966,485     10.29 %   375,777     4.00 %   469,721     5.00 %
  Common equity tier 1 capital to risk-weighted assets   966,485     11.15 %   390,051     4.50 %   563,407     6.50 %
Islanders Bank:                        
  Total capital to risk-weighted assets   35,728     19.02 %   15,031     8.00 %   18,788     10.00 %
  Tier 1 capital to risk-weighted assets   33,522     17.84 %   11,273     6.00 %   15,031     8.00 %
  Tier 1 leverage capital to average assets   33,522     13.06 %   10,271     4.00 %   12,839     5.00 %
  Common equity tier 1 capital to risk-weighted assets   33,522     17.84 %   8,455     4.50 %   12,212     6.50 %

ADDITIONAL FINANCIAL INFORMATION                      
(dollars in thousands)                      
(rates / ratios annualized)                      
                       
ANALYSIS OF NET INTEREST SPREAD Quarters Ended
  March 31, 2017   December 31, 2016   March 31, 2016
  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:                      
Mortgage loans $ 6,104,779   $ 72,549   4.82 %   $ 5,960,506   $ 74,538   4.97 %   $ 5,707,882   $ 68,743   4.84 %
Commercial/agricultural loans 1,464,532   16,546   4.58 %   1,469,407   17,192   4.65 %   1,471,638   16,025   4.38 %
Consumer and other loans 138,033   2,193   6.44 %   141,133   2,185   6.16 %   141,361   2,190   6.23 %
Total loans (1) 7,707,344   91,288   4.80 %   7,571,046   93,915   4.93 %   7,320,881   86,958   4.78 %
Mortgage-backed securities 842,071   4,647   2.24 %   796,625   3,861   1.93 %   1,004,836   5,390   2.16 %
Other securities 453,793   3,037   2.71 %   469,377   3,062   2.60 %   421,241   2,772   2.65 %
Interest-bearing deposits with banks 32,195   93   1.17 %   91,625   95   0.41 %   103,775   101   0.39 %
FHLB stock 15,550   31   0.81 %   11,668   74   2.52 %   17,531   80   1.84 %
Total investment securities 1,343,609   7,808   2.36 %   1,369,295   7,092   2.06 %   1,547,383   8,343   2.17 %
Total interest-earning assets 9,050,953   99,096   4.44 %   8,940,341   101,007   4.49 %   8,868,264   95,301   4.32 %
Non-interest-earning assets 923,165         904,846         900,296      
Total assets $ 9,974,118         $ 9,845,187         $ 9,768,560      
Deposits:                      
Interest-bearing checking accounts $ 896,764   200   0.09 %   $ 876,904   197   0.09 %   $ 934,072   196   0.08 %
Savings accounts 1,557,734   523   0.14 %   1,470,548   493   0.13 %   1,307,369   423   0.13 %
Money market accounts 1,522,470   651   0.17 %   1,541,258   677   0.17 %   1,620,524   862   0.21 %
Certificates of deposit 1,089,316   1,417   0.53 %   1,089,337   1,237   0.45 %   1,328,741   1,465   0.44 %
Total interest-bearing deposits 5,066,284   2,791   0.22 %   4,978,047   2,604   0.21 %   5,190,706   2,946   0.23 %
Non-interest-bearing deposits 3,148,520     %   3,193,172     %   2,788,372     %
Total deposits 8,214,804   2,791   0.14 %   8,171,219   2,604   0.13 %   7,979,078   2,946   0.15 %
Other interest-bearing liabilities:                      
FHLB advances 130,274   273   0.85 %   32,932   79   0.95 %   169,204   279   0.66 %
Other borrowings 108,091   74   0.28 %   107,819   76   0.28 %   102,865   75   0.29 %
Junior subordinated debentures 140,212   1,104   3.19 %   140,212   1,077   3.06 %   140,212   958   2.75 %
Total borrowings 378,577   1,451   1.55 %   280,963   1,232   1.74 %   412,281   1,312   1.28 %
Total funding liabilities 8,593,381   4,242   0.20 %   8,452,182   3,836   0.18 %   8,391,359   4,258   0.20 %
Other non-interest-bearing liabilities (2) 58,489         67,536         63,014      
Total liabilities 8,651,870         8,519,718         8,454,373      
Shareholders' equity 1,322,248         1,325,469         1,314,187      
Total liabilities and shareholders' equity $ 9,974,118         $ 9,845,187         $ 9,768,560      
Net interest income/rate spread   $ 94,854   4.24 %     $ 97,171   4.31 %     $ 91,043   4.12 %
Net interest margin     4.25 %       4.32 %       4.13 %
Additional Key Financial Ratios:                      
Return on average assets     0.97 %       0.92 %       0.73 %
Return on average equity     7.30 %       6.84 %       5.44 %
Average equity/average assets     13.26 %       13.46 %       13.45 %
Average interest-earning assets/average interest-bearing liabilities     166.23 %       170.00 %       158.28 %
Average interest-earning assets/average funding liabilities     105.32 %       105.78 %       105.68 %
Non-interest income/average assets     0.85 %       0.79 %       0.82 %
Non-interest expense/average assets     3.17 %       3.23 %       3.46 %
Efficiency ratio (4)     67.48 %       68.47 %       75.70 %
Adjusted efficiency ratio (5)     65.84 %       65.32 %       66.86 %

(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 FHLB advances and junior subordinated debentures.
(3 ) Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4 ) Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5 ) Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of core deposit intangibles (CDI), real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last four pages of the press release tables.

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 press release contains certain 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.  Where applicable, comparable earnings information using GAAP financial measures is also presented.
           
REVENUE FROM CORE OPERATIONS Quarters Ended
  Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Net interest income before provision for loan losses $ 94,854     $ 97,171     $ 91,043  
Total non-interest income 20,845     19,463     19,959  
Total GAAP revenue 115,699     116,634     111,002  
Exclude net gain on sale of securities (13 )   (311 )   (21 )
Exclude change in valuation of financial instruments carried at fair value 688     1,148     (29 )
Revenue from core operations (non-GAAP) $ 116,374     $ 117,471     $ 110,952  

NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS   Quarters Ended
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Total non-interest income (GAAP)   $ 20,845     $ 19,463     $ 19,959  
Exclude net gain on sale of securities   (13 )   (311 )   (21 )
Exclude change in valuation of financial instruments carried at fair value   688     1,148     (29 )
Non-interest income from core operations (non-GAAP)   $ 21,520     $ 20,300     $ 19,909  
             
Total non-interest expense (GAAP)   $ 78,078     $ 79,857     $ 84,034  
Exclude acquisition related costs       (788 )   (6,813 )
Non-interest expense from core operations (non-GAAP)   $ 78,078     $ 79,069     $ 77,221  

INCOME FROM CORE OPERATIONS Quarters Ended
  Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Income before provision for taxes (GAAP) $ 35,621     $ 34,747     $ 26,968  
Exclude net gain on sale of securities (13 )   (311 )   (21 )
Exclude change in valuation of financial instruments carried at fair value 688     1,148     (29 )
Exclude acquisition costs     788     6,813  
Income from core operations before provision for taxes (non-GAAP) $ 36,296     $ 36,372     $ 33,731  

ADDITIONAL FINANCIAL INFORMATION            
(dollars in thousands)            
EARNINGS FROM CORE OPERATIONS   Quarters Ended
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Net income (GAAP)   $ 23,793     $ 22,804     $ 17,774  
Exclude net gain on sale of securities   (13 )   (311 )   (21 )
Exclude change in valuation of financial instruments carried at fair value   688     1,148     (29 )
Exclude acquisition-related costs       788     6,813  
Exclude related tax benefit   (243 )   (585 )   (2,417 )
Total earnings from core operations (non-GAAP)   $ 24,225     $ 23,844     $ 22,120  
             
Diluted earnings per share (GAAP)   $ 0.72     $ 0.69     $ 0.52  
Diluted core earnings per share (non-GAAP)   $ 0.73     $ 0.72     $ 0.65  
RETURN ON AVERAGE ASSETS - CORE            
Average assets   $ 9,974,118     $ 9,845,187     $ 9,768,560  
Return on average assets (GAAP)   0.97 %   0.92 %   0.73 %
Core return on average assets (non-GAAP)   0.99 %   0.96 %   0.91 %
             
NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS   Quarters Ended
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Acquisition-related costs   $     $ (788 )   $ (6,813 )
Related tax benefit       284     2,435  
Total net effect of acquisition-related costs on earnings   $     $ (504 )   $ (4,378 )
             
Diluted weighted average shares outstanding   33,051,459     33,201,333     34,103,727  
Total net effect of acquisition-related costs on diluted weighted average earnings per share   $     $ (0.02 )   $ (0.13 )

ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN Quarters Ended
  Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Net interest income before provision for loan losses (GAAP) $ 94,854     $ 97,171     $ 91,043  
Exclude discount accretion on acquired loans (1,777 )   (3,635 )   (1,689 )
Exclude premium amortization on acquired certificates of deposit (132 )   (315 )   (461 )
Net interest income before acquisition accounting impact (non-GAAP) $ 92,945     $ 93,221     $ 88,893  
           
Average interest-earning assets (GAAP) $ 9,050,953     $ 8,940,341     $ 8,868,264  
Exclude average net loan discount on acquired loans 30,058     32,773     43,347  
Average interest-earning assets before acquired loan discount (non-GAAP) $ 9,081,011     $ 8,973,114     $ 8,911,611  
           
Net interest margin (GAAP) 4.25 %   4.32 %   4.13 %
Exclude impact on net interest margin from discount accretion on acquired loans (0.08 )   (0.16 )   (0.08 )
Exclude impact on net interest margin from acquired certificates of deposit premium amortization (0.01 )   (0.01 )   (0.02 )
Exclude impact on net interest margin of net loan discount on average earning assets (0.01 )   (0.02 )   (0.02 )
Net margin before acquisition accounting impact (non-GAAP) 4.15 %   4.13 %   4.01 %

ADDITIONAL FINANCIAL INFORMATION          
(dollars in thousands)          
  Quarters Ended
ACQUISITION ACCOUNTING IMPACT ON LOAN YIELD Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Average total loans (GAAP) $ 7,707,344     $ 7,571,046     $ 7,320,881  
Exclude average net loan discount on acquired loans 30,058     32,773     43,347  
Adjusted average total loans (non-GAAP) $ 7,737,402     $ 7,603,819     $ 7,364,228  
           
Interest income on loans (GAAP) $ 91,288     $ 93,915     $ 86,958  
Exclude discount accretion on acquired loans (1,777 )   (3,635 )   (1,689 )
Adjusted interest income on loans (non-GAAP) $ 89,511     $ 90,280     $ 85,269  
           
Loan yield (GAAP) 4.80 %   4.93 %   4.78 %
Loan yield before acquisition accounting impact (non-GAAP) 4.69 %   4.72 %   4.66 %
Impact on loan yield from acquisition accounting 0.11 %   0.21 %   0.12 %
           
ACQUISITION ACCOUNTING IMPACT ON DEPOSIT COST          
Average deposits $ 8,214,804     $ 8,171,219     $ 7,979,078  
           
Interest expense on deposits (GAAP) $ 2,791     $ 2,604     $ 2,946  
Exclude premium amortization on acquired certificates of deposit 132     315     461  
Adjusted interest expense on deposits (non-GAAP) $ 2,923     $ 2,919     $ 3,407  
           
Deposit cost (GAAP) 0.14 %   0.13 %   0.15 %
Deposit cost before acquisition accounting impact (non-GAAP) 0.15 %   0.15 %   0.17 %
Impact on deposit cost from acquisition accounting (0.01 )%   (0.02 )%   (0.02 )%

ADJUSTED EFFICIENCY RATIO   Quarters Ended
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Non-interest expense (GAAP)   $ 78,078     $ 79,857     $ 84,034  
Exclude acquisition-related costs       (788 )   (6,813 )
Exclude CDI amortization   (1,624 )   (1,722 )   (1,808 )
Exclude state/municipal tax expense   (799 )   (952 )   (838 )
Exclude REO gain (loss)   966     338     (397 )
Adjusted non-interest expense (non-GAAP)   $ 76,621     $ 76,733     $ 74,178  
             
Net interest income before provision for loan losses (GAAP)   $ 94,854     $ 97,171     $ 91,043  
Non-interest income (GAAP)   20,845     19,463     19,959  
Total revenue   115,699     116,634     111,002  
Exclude net gain on sale of securities   (13 )   (311 )   (21 )
Exclude net change in valuation of financial instruments carried at fair value   688     1,148     (29 )
Adjusted revenue (non-GAAP)   $ 116,374     $ 117,471     $ 110,952  
             
Efficiency ratio (GAAP)   67.48 %   68.47 %   75.70 %
Adjusted efficiency ratio (non-GAAP)   65.84 %   65.32 %   66.86 %

ADDITIONAL FINANCIAL INFORMATION            
(dollars in thousands)            
RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS    
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
Loans receivable (GAAP)   $ 7,421,255     $ 7,451,148     $ 7,185,999  
Net loan discount on acquired loans   29,352     31,110     42,302  
Adjusted loans (non-GAAP)   $ 7,450,607     $ 7,482,258     $ 7,228,301  
             
Allowance for loan losses (GAAP)   $ 86,527     $ 85,997     $ 78,197  
Net loan discount on acquired loans   29,352     31,110     42,302  
Adjusted allowance for loan losses (non-GAAP)   $ 115,879     $ 117,107     $ 120,499  
             
Allowance for loan losses / Total loans (GAAP)   1.17 %   1.15 %   1.09 %
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)   1.56 %   1.57 %   1.67 %

             
    Mar 31, 2017   Dec 31, 2016   Mar 31, 2016
TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS            
Shareholders' equity (GAAP)   $ 1,323,404     $ 1,305,710     $ 1,320,155  
Exclude goodwill and other intangible assets, net   273,071     274,745     280,409  
Tangible common shareholders' equity (non-GAAP)   $ 1,050,333     $ 1,030,965     $ 1,039,746  
             
Total assets (GAAP)   $ 10,068,378     $ 9,793,668     $ 9,745,594  
Exclude goodwill and other intangible assets, net   273,071     274,745     280,409  
Total tangible assets (non-GAAP)   $ 9,795,307     $ 9,518,923     $ 9,465,185  
Common shareholders' equity to total assets (GAAP)   13.14 %   13.33 %   13.55 %
Tangible common shareholders' equity to tangible assets (non-GAAP)   10.72 %   10.83 %   10.98 %
             
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE            
Tangible common shareholders' equity   $ 1,050,333     $ 1,030,965     $ 1,039,746  
Common shares outstanding at end of period   33,152,864     33,193,387     34,221,451  
Common shareholders' equity (book value) per share (GAAP)   $ 39.92     $ 39.34     $ 38.58  
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)   $ 31.68     $ 31.06     $ 30.38  

 
CONTACT: MARK J. GRESCOVICHPRESIDENT & CEOLLOYD W. BAKER, CFO(509) 527-3636

Primary Logo

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX