Banner Corporation Reports Net Income of $42.6 Million, or $1.24 Per Diluted Share, for 4th Quarter 2023; Earns $183.6 Million in Net Income, or $5.33 Per Diluted Share, for the Full Year of 2023; Declares Quarterly Cash Dividend of $0.48 Per Share

WALLA WALLA, Wash.--()--Banner Corporation (NASDAQ: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $42.6 million, or $1.24 per diluted share, for the fourth quarter of 2023, a 7% decrease compared to $45.9 million, or $1.33 per diluted share, for the preceding quarter and a 22% decrease compared to $54.4 million, or $1.58 per diluted share, for the fourth quarter of 2022. Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago. The decrease in net interest income compared to the preceding quarter and prior year quarter reflects an increase in funding costs, partially offset by an increase in yields on earning assets. Banner’s fourth quarter 2023 results include a $4.8 million net loss on the sale of securities, compared to a $2.7 million net loss on the sale of securities in the preceding quarter and a $3.7 million net loss on the sale of securities in the fourth quarter of 2022. Banner’s fourth quarter 2023 results also include a $2.5 million provision for credit losses, compared to a $2.0 million provision for credit losses in the preceding quarter and a $6.7 million provision for credit losses in the fourth quarter of 2022. Net income was $183.6 million, or $5.33 per diluted share, for the year ended December 31, 2023, compared to net income of $195.4 million, or $5.67 per diluted share, for the year ended December 31, 2022. Banner’s results for the year ended 2023 include a $10.8 million provision for credit losses, a $19.2 million net loss on the sale of securities and a $4.2 million net decrease in the fair value adjustments on financial instruments carried at fair value, compared to a $10.4 million provision for credit losses, a $3.2 million net loss on the sale of securities and an $807,000 net increase in the fair value adjustments on financial instruments carried at fair value during the same period in 2022.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.48 per share. The dividend will be payable February 16, 2024, to common shareholders of record on February 7, 2024.

“Our super community bank business strategy of emphasizing a moderate risk profile and strong relationship banking, continues to provide stable operating performance and has positioned the Company well to weather recent market headwinds,” said Mark Grescovich, President and CEO. “Banner’s performance for the fourth quarter of 2023 benefited from strong loan growth and higher yields on interest-earning assets. However, the continued higher interest rate environment and its effect on funding costs resulted in moderate compression in our net interest margin during the quarter. We continue to maintain very strong credit quality metrics and a solid reserve for potential loan losses. Additionally, we continue to benefit from a strong core deposit base, with core deposits representing 89% of total deposits at quarter end. Banner’s overarching goals continue to be to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events.”

At December 31, 2023, Banner, on a consolidated basis, had $15.67 billion in assets, $10.66 billion in net loans and $13.03 billion in deposits. Banner operates 135 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Fourth Quarter 2023 Highlights

  • Revenues were $152.5 million for the fourth quarter of 2023, compared to $154.4 million in the preceding quarter, and $172.1 million in the fourth quarter a year ago.
  • Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.1 million in the fourth quarter of 2023, compared to $157.7 million in the preceding quarter and $175.7 million in the fourth quarter a year ago.
  • Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago.
  • Net interest margin, on a tax equivalent basis, was 3.83%, compared to 3.93% in the preceding quarter and 4.23% in the fourth quarter a year ago.
  • Mortgage banking operations revenue was $5.4 million for the fourth quarter of 2023, compared to $2.0 million in the preceding quarter and $2.3 million in the fourth quarter a year ago.
  • Return on average assets was 1.09%, compared to 1.17% in the preceding quarter and 1.34% in the fourth quarter a year ago.
  • Net loans receivable increased 2% to $10.66 billion at December 31, 2023, compared to $10.46 billion at September 30, 2023, and increased 7% compared to $10.01 billion at December 31, 2022.
  • Non-performing assets were $30.1 million, or 0.19% of total assets, at December 31, 2023, compared to $26.8 million, or 0.17% of total assets at September 30, 2023, and $23.4 million, or 0.15% of total assets, at December 31, 2022.
  • The allowance for credit losses - loans was $149.6 million, or 1.38% of total loans receivable, as of December 31, 2023, compared to $147.0 million, or 1.38% of total loans receivable as of September 30, 2023 and $141.5 million, or 1.39% of total loans receivable as of December 31, 2022.
  • Total deposits decreased to $13.03 billion at December 31, 2023, compared to $13.17 billion at September 30, 2023 and $13.62 billion at December 31, 2022. Core deposits represented 89% of total deposits at December 31, 2023.
  • Banner Bank’s estimated uninsured deposits were approximately 31% of total deposits at both December 31, 2023 and September 30, 2023.
  • Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and affiliate deposits, were approximately 28% of total deposits at both December 31, 2023 and September 30, 2023.
  • Available borrowing capacity was $4.65 billion at December 31, 2023, compared to $4.62 billion at September 30, 2023.
  • On-balance sheet liquidity was $2.93 billion at December 31, 2023, compared to $2.86 billion at September 30, 2023.
  • Dividends paid to shareholders were $0.48 per share in the quarter ended December 31, 2023.
  • Common shareholders’ equity per share increased 9% to $48.12 at December 31, 2023, compared to $44.27 at the preceding quarter end, and increased 13% from $42.59 at December 31, 2022.
  • Tangible common shareholders’ equity per share* increased 12% to $37.09 at December 31, 2023, compared to $33.22 at the preceding quarter end, and increased 18% from $31.41 at December 31, 2022.

*Non-GAAP (Generally Accepted Accounting Principles) measure; See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Income Statement Review

Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago. Net interest margin on a tax equivalent basis was 3.83% for the fourth quarter of 2023, a ten basis-point decrease compared to 3.93% in the preceding quarter and a 40 basis-point decrease compared to 4.23% in the fourth quarter a year ago. Net interest margin for the current quarter was impacted by an increase in funding costs due to an increase in the percentage of deposits being interest bearing and a large mix of higher cost retail CDs, partially offset by a decrease in FHLB advances and increased yields on loans due to the benefit of variable rate interest-earning loans repricing for the first time since the start of the rising rate environment.

Average yields on interest-earning assets increased 12 basis points to 5.06% for the fourth quarter of 2023, compared to 4.94% for the preceding quarter and increased 66 basis points compared to 4.40% in the fourth quarter a year ago. Average loan yields increased 12 basis points to 5.77% compared to 5.65% in the preceding quarter and increased 63 basis points compared to 5.14% in the fourth quarter a year ago. The increase in average yields on interest-earning assets, particularly loans, during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. Total deposit costs were 1.18% in the fourth quarter of 2023, which was a 24 basis-point increase compared to the preceding quarter and a 108 basis-point increase compared to the fourth quarter a year ago. The increase in the costs of deposits was due to an increase in the mix of higher cost retail CDs as well as a larger percentage of core deposits being in interest bearing accounts. The average rate paid on borrowings was 4.77% in the fourth quarter of 2023, a 13 basis-point increase compared to 4.64% in the preceding quarter and a 223 basis-point increase compared to 2.54% in the fourth quarter a year ago. The total cost of funding liabilities was 1.31% during the fourth quarter of 2023, a 23 basis-point increase compared to 1.08% in the preceding quarter and a 113 basis-point increase compared to 0.18% in the fourth quarter a year ago.

A $2.5 million provision for credit losses was recorded in the current quarter (comprised of a $3.8 million provision for credit losses - loans, a $526,000 recapture of provision for credit losses - unfunded loan commitments, a $750,000 recapture of provision for credit losses - available for sale securities and a $23,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $2.0 million provision for credit losses in the prior quarter (comprised of a $2.9 million provision for credit losses - loans, a $346,000 provision for credit losses - unfunded loan commitments, a $1.3 million recapture of provision for credit losses - available for sale securities and a $12,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $6.7 million provision for credit losses in the fourth quarter a year ago (comprised of a $6.0 million provision for credit losses - loans, a $680,000 provision for credit losses - unfunded loan commitments and a $19,000 recapture of provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current quarter primarily reflects the increasing loan balances and the higher net loan charge-offs, partially offset by an increase in the trading price of bank subordinated debt investments. The provision for credit losses for the preceding quarter primarily reflected increased loan balances and unfunded loan commitments, partially offset by an increase in the trading price on bank subordinated debt investments.

Total non-interest income was $14.1 million in the fourth quarter of 2023, compared to $12.7 million in the preceding quarter and $13.1 million in the fourth quarter a year ago. The increase in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $3.3 million increase in mortgage banking operations revenue and a $793,000 increase in the fair value adjustments on financial instruments carried at fair value during the current quarter, partially offset by a $1.4 million decrease in deposit fees and other service charges and a $2.1 million increase in the net loss recognized on the sale of securities. The increase in non-interest income during the current quarter compared to the prior year quarter was primarily due to a $3.1 million increase in mortgage banking operations revenue, partially offset by a $1.3 million decrease in deposit fees and other service charges and a $1.1 million increase in the net loss recognized on the sale of securities. Total non-interest income was $44.4 million for the year ended December 31, 2023, compared to $75.3 million for the same period a year earlier.

Mortgage banking operations revenue, including gains on one- to four-family and multifamily loan sales and loan servicing fees, was $5.4 million in the fourth quarter of 2023, compared to $2.0 million in the preceding quarter and $2.3 million in the fourth quarter a year ago. The increase from the preceding quarter and the fourth quarter of 2022 primarily reflects the reversal of the lower of cost or market adjustment on multifamily loans held for sale recognized during the current period due to the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023. In addition, the volume of one- to four-family loans sold during the current quarter increased compared to the prior year quarter, although overall volumes remained low due to reduced refinancing and purchase activity amid rising interest rates. The increase in volume of one- to four-family loans sold during the current quarter compared to the prior year quarter was partially offset by a decrease in the gain on sale margin of one- to four-family loans sold. Home purchase activity accounted for 92% of one- to four-family mortgage loan originations in the fourth quarter of 2023, compared to 90% in both the preceding quarter and in the fourth quarter of 2022. For the fourth quarter of 2023, mortgage banking operations revenue included a $3.5 million lower of cost or market upward adjustment on multifamily loans held for sale, attributed to the transfer of $43.5 million of multifamily loans from held for sale to the held for investment portfolio. For the third quarter of 2023, we recorded a $456,000 lower of cost or market downward adjustment on multifamily loans held for sale, driven by increases in market interest rates. During the fourth quarter of 2022, a $723,000 lower of cost or market upward adjustment was recorded due to the transfer of a pool of multifamily loans held for sale to held for investment portfolio loans, partially offset by a negative fair value adjustment on multifamily loans held for sale.

Fourth quarter 2023 non-interest income included a $139,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and limited partnership investments, and a $4.8 million net loss on the sale of securities. In the preceding quarter, non-interest income included a $654,000 net loss for fair value adjustments and a $2.7 million net loss on the sale of securities. In the fourth quarter a year ago, non-interest income included a $157,000 net gain for fair value adjustments and a $3.7 million net loss on the sale of securities.

Total revenue decreased 1% to $152.5 million for the fourth quarter of 2023, compared to $154.4 million in the preceding quarter, and decreased 11% compared to $172.1 million in the fourth quarter of 2022. Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.1 million in the fourth quarter of 2023, compared to $157.7 million in the preceding quarter and $175.7 million in the fourth quarter a year ago. Total revenue was $620.4 million for the year ended December 31, 2023, compared to $628.4 million for the year ended December 31, 2022. Adjusted revenue* was $643.9 million for the year ended December 31, 2023, compared to $623.1 million for the year ended December 31, 2022.

Total non-interest expense was $96.6 million in the fourth quarter of 2023, compared to $95.9 million in the preceding quarter and $99.0 million in the fourth quarter of 2022. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $627,000 decrease in capitalized loan origination costs, a $478,000 increase in occupancy and equipment expense, a $916,000 increase in payment and card processing services expense, and a $430,000 increase in REO operations, partially offset by a $980,000 decrease in salary and employee benefits expense, primarily due to decreases in severance expenses, and a $775,000 decrease in professional and legal expense. The prior quarter included $996,000 of Banner Forward expenses related to the consolidation of two branch locations, as well as expenses related to the discontinuation of the Multifamily Originated for Sale business line due to the continued lack of an active secondary market for originated for sale multifamily loans. The decrease in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects decreases in occupancy and equipment expense and professional and legal expense, partially offset by a decrease in capitalized loan origination costs and increases in payment and card processing services expense and deposit insurance expense. The prior year quarter included a $3.5 million accrual related to a potential settlement of a pending litigation matter. For the year ended December 31, 2022, total non-interest expense was $382.5 million, compared to $377.3 million for the year ended December 31, 2022. Banner’s efficiency ratio was 63.37% for the fourth quarter of 2023, compared to 62.10% in the preceding quarter and 57.52% in the same quarter a year ago. Banner’s adjusted efficiency ratio* was 60.04% for the fourth quarter of 2023, compared to 59.00% in the preceding quarter and 54.43% in the year ago quarter.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Federal and state income tax expense totaled $10.7 million for the fourth quarter of 2023 resulting in an effective tax rate of 20.1%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate for the quarter ended December 31, 2023, was 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased to $15.67 billion at December 31, 2023, compared to $15.51 billion at September 30, 2023, and decreased from $15.83 billion at December 31, 2022. The total of securities and interest-bearing deposits held at other banks totaled $3.48 billion at December 31, 2023, compared to $3.44 billion at September 30, 2023 and $4.28 billion at December 31, 2022. The decrease compared to the prior year quarter was primarily due to reverse repurchase agreements maturing during the first six months of 2023 and the sale of securities. The average effective duration of the securities portfolio was approximately 6.5 years at both December 31, 2023 and 2022.

Total loans receivable increased to $10.81 billion at December 31, 2023, compared to $10.61 billion at September 30, 2023, and $10.15 billion at December 31, 2022. One- to four-family residential loans increased 6% to $1.52 billion at December 31, 2023, compared to $1.44 billion at September 30, 2023, and increased 29% compared to $1.17 billion at December 31, 2022. The increase in one- to four-family residential loans was the result of one- to four-family construction loans converting to one- to four-family portfolio loans upon the completion of the construction phase and new production. Multifamily real estate loans increased 6% to $811.2 million at December 31, 2023, compared to $766.6 million at September 30, 2023, and increased 26% compared to $645.1 million at December 31, 2022. The increase in multifamily loans was the result of the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023; when compared to the prior year quarter the primary driver for the increase was the conversion of affordable housing construction loans to the multifamily portfolio upon the completion of the construction phase. Agricultural business loans decreased 1% to $331.1 million at December 31, 2023, compared to $334.6 million at September 30, 2023, primarily due to operating line paydowns and increased 12% compared to $295.1 million at December 31, 2022, primarily due to new loan production and advances on agricultural lines of credit.

Loans held for sale were $11.2 million at December 31, 2023, compared to $54.2 million at September 30, 2023, and $56.9 million at December 31, 2022. One- to four- family residential mortgage loans sold totaled $65.6 million in the current quarter, compared to $87.3 million in the preceding quarter and $39.3 million in the fourth quarter a year ago. The decrease in loans held for sale during the current quarter was due to the previously mentioned transfer of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023; there were no multifamily loans held for sale at December 31, 2023.

Total deposits decreased to $13.03 billion at December 31, 2023, compared to $13.17 billion at September 30, 2023 and $13.62 billion a year ago. The decline in deposits from a year ago was primarily due to interest rate sensitive clients shifting a portion of their non-operating deposit balances to higher yielding investments. Non-interest-bearing account balances decreased 8% to $4.79 billion at December 31, 2023, compared to $5.20 billion at September 30, 2023, and decreased 22% compared to $6.18 billion at December 31, 2022. Core deposits were 89% of total deposits at both December 31, 2023 and September 30, 2023 and were 95% of total deposits at December 31, 2022. Certificates of deposit increased 1% to $1.48 billion at December 31, 2023, compared to $1.46 billion at September 30, 2023, and increased 104% compared to $723.5 million a year earlier. The increase in certificates of deposit during the current quarter compared to the preceding quarter and fourth quarter a year ago was principally due to clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposit. The increase in certificates of deposit from the fourth quarter a year ago was also due to a $108.1 million increase in brokered deposits.

Banner Bank’s estimated uninsured deposits were $4.08 billion or 31% of total deposits at December 31, 2023, compared to $4.08 billion or 31% of total deposits at September 30, 2023. The uninsured deposit calculation includes $305.3 million and $300.2 million of collateralized public deposits at December 31, 2023 and September 30, 2023, respectively. Uninsured deposits also include cash held by the holding company of $108.2 million and $97.8 million at December 31, 2023 and September 30, 2023, respectively. Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and cash held at the holding company, were 28% of total deposits at both December 31, 2023 and September 30, 2023.

Banner had $323.0 million of FHLB borrowings at December 31, 2023, compared to $140.0 million at September 30, 2023 and $50.0 million a year ago. At December 31, 2023, Banner’s off-balance sheet liquidity included additional borrowing capacity of $2.97 billion at the FHLB and $1.56 billion at the Federal Reserve as well as federal funds line of credit agreements with other financial institutions of $125.0 million.

Subordinated notes, net of issuance costs, were $92.9 million at December 31, 2023 compared to $92.7 million at September 30, 2023 and $98.9 million at December 31, 2022. The decrease in subordinated notes from the prior year was due to Banner Bank’s purchase of $6.5 million of Banner’s subordinated debt during the second quarter of 2023.

At December 31, 2023, total common shareholders’ equity was $1.65 billion, or 10.55% of total assets, compared to $1.52 billion or 9.81% of total assets at September 30, 2023, and $1.46 billion or 9.20% of total assets at December 31, 2022. The increase in total common shareholders’ equity at December 31, 2023 compared to September 30, 2023 was primarily due to a $103.8 million decrease in accumulated other comprehensive loss, primarily due to an increase in the fair value of the security portfolio as a result of a decrease in market interest rates during the fourth quarter of 2023 and by a $26.0 million increase in retained earnings as a result of $42.6 million in net income, offset by the accrual of $16.7 million of cash dividends during the fourth quarter of 2023. The increase in total common shareholders’ equity from December 31, 2022 reflects a $116.9 million increase in retained earnings and a $73.6 million decrease in accumulated other comprehensive loss, primarily due to an increase in the fair value of the security portfolio as a result of a decrease in interest rates during the fourth quarter of 2023, and the sale of securities during 2023. At December 31, 2023, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.27 billion, or 8.33% of tangible assets*, compared to $1.14 billion, or 7.54% of tangible assets, at September 30, 2023, and $1.07 billion, or 6.95% of tangible assets, a year ago.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At December 31, 2023, Banner’s estimated common equity Tier 1 capital ratio was 11.97%, its estimated Tier 1 leverage capital to average assets ratio was 10.56%, and its estimated total capital to risk-weighted assets ratio was 14.58%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

Credit Quality

The allowance for credit losses - loans was $149.6 million, or 1.38% of total loans receivable and 506% of non-performing loans, at December 31, 2023, compared to $147.0 million, or 1.38% of total loans receivable and 560% of non-performing loans, at September 30, 2023, and $141.5 million, or 1.39% of total loans receivable and 615% of non-performing loans, at December 31, 2022. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $14.5 million at December 31, 2023, compared to $15.0 million at September 30, 2023, and $14.7 million at December 31, 2022. Net loan charge-offs totaled $1.1 million in the fourth quarter of 2023, compared to net loan charge-offs of $663,000 in the preceding quarter and net loan charge-offs of $496,000 in the fourth quarter a year ago. Non-performing loans were $29.6 million at December 31, 2023, compared to $26.3 million at September 30, 2023, and $23.0 million a year ago.

Substandard loans were $125.4 million at December 31, 2023, compared to $124.5 million at September 30, 2023, and $137.2 million a year ago. The decrease from the comparable quarter a year ago primarily reflect risk rating upgrades as well as the payoff of substandard loans.

Total non-performing assets were $30.1 million, or 0.19% of total assets, at December 31, 2023, compared to $26.8 million, or 0.17% of total assets, at September 30, 2023, and $23.4 million, or 0.15% of total assets, a year ago.

Conference Call

Banner will host a conference call on Friday January 19, 2024, at 8:00 a.m. PDT, to discuss its fourth quarter results. Interested investors may listen to the call live at www.bannerbank.com. Investment professionals are invited to dial (833) 470-1428 using access code 238589 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 197139 or at www.bannerbank.com.

About the Company

Banner Corporation is a $15.67 billion bank holding company operating a commercial bank in four 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 “may,” “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “potential,” 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.

Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth, or increased political instability due to acts of war; (2) changes in the interest rate environment, including the recent increases in the Board of Governors of the Federal Reserve System (the “Federal Reserve”) benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; (3) the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; (4) the effects of any federal government shutdown; (5) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (6) 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 credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (7) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (8) competitive pressures among depository institutions; (9) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (10) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (11) fluctuations in real estate values; (12) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (13) the ability to access cost-effective funding; (14) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (15) changes in financial markets; (16) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (17) the costs, effects and outcomes of litigation; (18) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (19) changes in accounting principles, policies or guidelines; (20) future acquisitions by Banner of other depository institutions or lines of business; (21) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (22) effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; (23) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (24) other risks detailed from time to time in Banner’s other reports filed with and furnished to the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

 

RESULTS OF OPERATIONS

 

Quarters Ended

 

Year Ended

(in thousands except shares and per share data)

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

INTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

Loans receivable

 

$

154,532

 

 

$

149,254

 

 

$

129,450

 

 

$

577,891

 

 

$

450,916

 

Mortgage-backed securities

 

 

17,398

 

 

 

17,691

 

 

 

19,099

 

 

 

72,352

 

 

 

67,585

 

Securities and cash equivalents

 

 

11,808

 

 

 

12,119

 

 

 

17,009

 

 

 

51,329

 

 

 

54,068

 

Total interest income

 

 

183,738

 

 

 

179,064

 

 

 

165,558

 

 

 

701,572

 

 

 

572,569

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

39,342

 

 

 

31,001

 

 

 

3,623

 

 

 

100,126

 

 

 

10,124

 

Federal Home Loan Bank (FHLB) advances

 

 

1,870

 

 

 

2,233

 

 

 

198

 

 

 

10,524

 

 

 

489

 

Other borrowings

 

 

1,125

 

 

 

1,099

 

 

 

132

 

 

 

3,376

 

 

 

377

 

Subordinated debt

 

 

2,992

 

 

 

2,965

 

 

 

2,534

 

 

 

11,541

 

 

 

8,400

 

Total interest expense

 

 

45,329

 

 

 

37,298

 

 

 

6,487

 

 

 

125,567

 

 

 

19,390

 

Net interest income

 

 

138,409

 

 

 

141,766

 

 

 

159,071

 

 

 

576,005

 

 

 

553,179

 

PROVISION FOR CREDIT LOSSES

 

 

2,522

 

 

 

2,027

 

 

 

6,704

 

 

 

10,789

 

 

 

10,364

 

Net interest income after provision for credit losses

 

 

135,887

 

 

 

139,739

 

 

 

152,367

 

 

 

565,216

 

 

 

542,815

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

Deposit fees and other service charges

 

 

9,560

 

 

 

10,916

 

 

 

10,821

 

 

 

41,638

 

 

 

44,459

 

Mortgage banking operations

 

 

5,391

 

 

 

2,049

 

 

 

2,311

 

 

 

11,817

 

 

 

10,834

 

Bank-owned life insurance

 

 

2,609

 

 

 

2,062

 

 

 

2,120

 

 

 

9,245

 

 

 

7,794

 

Miscellaneous

 

 

1,159

 

 

 

942

 

 

 

1,382

 

 

 

5,169

 

 

 

6,805

 

 

 

 

18,719

 

 

 

15,969

 

 

 

16,634

 

 

 

67,869

 

 

 

69,892

 

Net loss on sale of securities

 

 

(4,806

)

 

 

(2,657

)

 

 

(3,721

)

 

 

(19,242

)

 

 

(3,248

)

Net change in valuation of financial instruments carried at fair value

 

 

139

 

 

 

(654

)

 

 

157

 

 

 

(4,218

)

 

 

807

 

Gain on sale of branches, including related deposits

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,804

 

Total non-interest income

 

 

14,052

 

 

 

12,658

 

 

 

13,070

 

 

 

44,409

 

 

 

75,255

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

Salary and employee benefits

 

 

60,111

 

 

 

61,091

 

 

 

60,309

 

 

 

244,563

 

 

 

242,266

 

Less capitalized loan origination costs

 

 

(3,871

)

 

 

(4,498

)

 

 

(4,877

)

 

 

(16,257

)

 

 

(24,313

)

Occupancy and equipment

 

 

12,200

 

 

 

11,722

 

 

 

13,506

 

 

 

47,886

 

 

 

52,018

 

Information and computer data services

 

 

7,098

 

 

 

7,118

 

 

 

6,535

 

 

 

28,445

 

 

 

25,986

 

Payment and card processing services

 

 

6,088

 

 

 

5,172

 

 

 

5,109

 

 

 

20,547

 

 

 

21,195

 

Professional and legal expenses

 

 

2,267

 

 

 

3,042

 

 

 

6,328

 

 

 

9,830

 

 

 

14,005

 

Advertising and marketing

 

 

1,686

 

 

 

1,362

 

 

 

1,350

 

 

 

4,794

 

 

 

3,959

 

Deposit insurance

 

 

2,926

 

 

 

2,874

 

 

 

1,739

 

 

 

10,529

 

 

 

6,649

 

State and municipal business and use taxes

 

 

1,372

 

 

 

1,359

 

 

 

1,304

 

 

 

5,260

 

 

 

4,693

 

Real estate operations, net

 

 

47

 

 

 

(383

)

 

 

28

 

 

 

(538

)

 

 

(104

)

Amortization of core deposit intangibles

 

 

858

 

 

 

857

 

 

 

1,215

 

 

 

3,756

 

 

 

5,279

 

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

793

 

Miscellaneous

 

 

5,839

 

 

 

6,175

 

 

 

6,467

 

 

 

23,723

 

 

 

24,869

 

Total non-interest expense

 

 

96,621

 

 

 

95,891

 

 

 

99,013

 

 

 

382,538

 

 

 

377,295

 

Income before provision for income taxes

 

 

53,318

 

 

 

56,506

 

 

 

66,424

 

 

 

227,087

 

 

 

240,775

 

PROVISION FOR INCOME TAXES

 

 

10,694

 

 

 

10,652

 

 

 

12,044

 

 

 

43,463

 

 

 

45,397

 

NET INCOME

 

$

42,624

 

 

$

45,854

 

 

$

54,380

 

 

$

183,624

 

 

$

195,378

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.24

 

 

$

1.33

 

 

$

1.59

 

 

$

5.35

 

 

$

5.70

 

Diluted

 

$

1.24

 

 

$

1.33

 

 

$

1.58

 

 

$

5.33

 

 

$

5.67

 

Cumulative dividends declared per common share

 

$

0.48

 

 

$

0.48

 

 

$

0.44

 

 

$

1.92

 

 

$

1.76

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

34,381,780

 

 

 

34,379,865

 

 

 

34,226,162

 

 

 

34,344,142

 

 

 

34,264,322

 

Diluted

 

 

34,472,155

 

 

 

34,429,726

 

 

 

34,437,151

 

 

 

34,450,412

 

 

 

34,459,922

 

Increase (decrease) in common shares outstanding

 

 

2,420

 

 

 

1,322

 

 

 

2,259

 

 

 

154,351

 

 

 

(58,614

)

 
 

FINANCIAL CONDITION

 

 

 

 

 

 

 

Percentage Change

(in thousands except shares and per share data)

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Prior Qtr

 

Prior Yr Qtr

ASSETS

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

209,634

 

 

$

207,171

 

 

$

198,154

 

 

1.2

%

 

5.8

%

Interest-bearing deposits

 

 

44,830

 

 

 

44,535

 

 

 

44,908

 

 

0.7

%

 

(0.2

)%

Total cash and cash equivalents

 

 

254,464

 

 

 

251,706

 

 

 

243,062

 

 

1.1

%

 

4.7

%

Securities - trading

 

 

—

 

 

 

25,268

 

 

 

28,694

 

 

(100.0

)%

 

(100.0

)%

Securities - available for sale, amortized cost $2,729,980, $2,774,972 and $3,218,777, respectively

 

 

2,373,783

 

 

 

2,287,993

 

 

 

2,789,031

 

 

3.7

%

 

(14.9

)%

Securities - held to maturity, fair value $907,514, $853,653 and $942,180, respectively

 

 

1,059,055

 

 

 

1,082,156

 

 

 

1,117,588

 

 

(2.1

)%

 

(5.2

)%

Total securities

 

 

3,432,838

 

 

 

3,395,417

 

 

 

3,935,313

 

 

1.1

%

 

(12.8

)%

FHLB stock

 

 

24,028

 

 

 

15,600

 

 

 

12,000

 

 

54.0

%

 

100.2

%

Securities purchased under agreements to resell

 

 

—

 

 

 

—

 

 

 

300,000

 

 

nm

 

(100.0

)%

Loans held for sale

 

 

11,170

 

 

 

54,158

 

 

 

56,857

 

 

(79.4

)%

 

(80.4

)%

Loans receivable

 

 

10,810,455

 

 

 

10,611,417

 

 

 

10,146,724

 

 

1.9

%

 

6.5

%

Allowance for credit losses – loans

 

 

(149,643

)

 

 

(146,960

)

 

 

(141,465

)

 

1.8

%

 

5.8

%

Net loans receivable

 

 

10,660,812

 

 

 

10,464,457

 

 

 

10,005,259

 

 

1.9

%

 

6.6

%

Accrued interest receivable

 

 

63,100

 

 

 

61,040

 

 

 

57,284

 

 

3.4

%

 

10.2

%

Property and equipment, net

 

 

132,231

 

 

 

136,504

 

 

 

138,754

 

 

(3.1

)%

 

(4.7

)%

Goodwill

 

 

373,121

 

 

 

373,121

 

 

 

373,121

 

 

—

%

 

—

%

Other intangibles, net

 

 

5,684

 

 

 

6,542

 

 

 

9,440

 

 

(13.1

)%

 

(39.8

)%

Bank-owned life insurance

 

 

304,366

 

 

 

303,347

 

 

 

297,565

 

 

0.3

%

 

2.3

%

Operating lease right-of-use assets

 

 

43,731

 

 

 

43,447

 

 

 

49,283

 

 

0.7

%

 

(11.3

)%

Other assets

 

 

364,846

 

 

 

402,541

 

 

 

355,493

 

 

(9.4

)%

 

2.6

%

Total assets

 

$

15,670,391

 

 

$

15,507,880

 

 

$

15,833,431

 

 

1.0

%

 

(1.0

)%

LIABILITIES

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing

 

$

4,792,369

 

 

$

5,197,854

 

 

$

6,176,998

 

 

(7.8

)%

 

(22.4

)%

Interest-bearing transaction and savings accounts

 

 

6,759,661

 

 

 

6,518,385

 

 

 

6,719,531

 

 

3.7

%

 

0.6

%

Interest-bearing certificates

 

 

1,477,467

 

 

 

1,458,313

 

 

 

723,530

 

 

1.3

%

 

104.2

%

Total deposits

 

 

13,029,497

 

 

 

13,174,552

 

 

 

13,620,059

 

 

(1.1

)%

 

(4.3

)%

Advances from FHLB

 

 

323,000

 

 

 

140,000

 

 

 

50,000

 

 

130.7

%

 

546.0

%

Other borrowings

 

 

182,877

 

 

 

188,440

 

 

 

232,799

 

 

(3.0

)%

 

(21.4

)%

Subordinated notes, net

 

 

92,851

 

 

 

92,748

 

 

 

98,947

 

 

0.1

%

 

(6.2

)%

Junior subordinated debentures at fair value

 

 

66,413

 

 

 

66,284

 

 

 

74,857

 

 

0.2

%

 

(11.3

)%

Operating lease liabilities

 

 

48,659

 

 

 

48,642

 

 

 

55,205

 

 

—

%

 

(11.9

)%

Accrued expenses and other liabilities

 

 

228,428

 

 

 

231,478

 

 

 

200,839

 

 

(1.3

)%

 

13.7

%

Deferred compensation

 

 

45,975

 

 

 

45,129

 

 

 

44,293

 

 

1.9

%

 

3.8

%

Total liabilities

 

 

14,017,700

 

 

 

13,987,273

 

 

 

14,376,999

 

 

0.2

%

 

(2.5

)%

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

1,299,651

 

 

 

1,297,307

 

 

 

1,293,959

 

 

0.2

%

 

0.4

%

Retained earnings

 

 

642,175

 

 

 

616,215

 

 

 

525,242

 

 

4.2

%

 

22.3

%

Accumulated other comprehensive loss

 

 

(289,135

)

 

 

(392,915

)

 

 

(362,769

)

 

(26.4

)%

 

(20.3

)%

Total shareholders’ equity

 

 

1,652,691

 

 

 

1,520,607

 

 

 

1,456,432

 

 

8.7

%

 

13.5

%

Total liabilities and shareholders’ equity

 

$

15,670,391

 

 

$

15,507,880

 

 

$

15,833,431

 

 

1.0

%

 

(1.0

)%

Common Shares Issued:

 

 

 

 

 

 

 

 

 

 

Shares outstanding at end of period

 

 

34,348,369

 

 

 

34,345,949

 

 

 

34,194,018

 

 

 

 

 

Common shareholders’ equity per share (1)

 

$

48.12

 

 

$

44.27

 

 

$

42.59

 

 

 

 

 

Common shareholders’ tangible equity per share (1) (2)

 

$

37.09

 

 

$

33.22

 

 

$

31.41

 

 

 

 

 

Common shareholders’ tangible equity to tangible assets (2)

 

 

8.33

%

 

 

7.54

%

 

 

6.95

%

 

 

 

 

Consolidated Tier 1 leverage capital ratio

 

 

10.56

%

 

 

10.40

%

 

 

9.45

%

 

 

 

 

(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 and tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

 
 
ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage Change

LOANS

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Prior Qtr

 

Prior Yr Qtr

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate (CRE):

 

 

 

 

 

 

 

 

 

 

Owner-occupied

 

$

915,897

 

 

$

911,540

 

 

$

845,320

 

 

0.5

%

 

8.3

%

Investment properties

 

 

1,541,344

 

 

 

1,530,087

 

 

 

1,589,975

 

 

0.7

%

 

(3.1

)%

Small balance CRE

 

 

1,178,500

 

 

 

1,169,828

 

 

 

1,200,251

 

 

0.7

%

 

(1.8

)%

Multifamily real estate

 

 

811,232

 

 

 

766,571

 

 

 

645,071

 

 

5.8

%

 

25.8

%

Construction, land and land development:

 

 

 

 

 

 

 

 

 

 

Commercial construction

 

 

170,011

 

 

 

168,061

 

 

 

184,876

 

 

1.2

%

 

(8.0

)%

Multifamily construction

 

 

503,993

 

 

 

453,129

 

 

 

325,816

 

 

11.2

%

 

54.7

%

One- to four-family construction

 

 

526,432

 

 

 

536,349

 

 

 

647,329

 

 

(1.8

)%

 

(18.7

)%

Land and land development

 

 

336,639

 

 

 

346,362

 

 

 

328,475

 

 

(2.8

)%

 

2.5

%

Commercial business:

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

1,255,734

 

 

 

1,263,747

 

 

 

1,283,407

 

 

(0.6

)%

 

(2.2

)%

Small business scored

 

 

1,022,154

 

 

 

1,000,714

 

 

 

947,092

 

 

2.1

%

 

7.9

%

Agricultural business, including secured by farmland:

 

 

 

 

 

 

 

 

 

 

Agricultural business, including secured by farmland

 

 

331,089

 

 

 

334,626

 

 

 

295,077

 

 

(1.1

)%

 

12.2

%

One- to four-family residential

 

 

1,518,046

 

 

 

1,438,694

 

 

 

1,173,112

 

 

5.5

%

 

29.4

%

Consumer:

 

 

 

 

 

 

 

 

 

 

Consumer—home equity revolving lines of credit

 

 

588,703

 

 

 

579,836

 

 

 

566,291

 

 

1.5

%

 

4.0

%

Consumer—other

 

 

110,681

 

 

 

111,873

 

 

 

114,632

 

 

(1.1

)%

 

(3.4

)%

Total loans receivable

 

$

10,810,455

 

 

$

10,611,417

 

 

$

10,146,724

 

 

1.9

%

 

6.5

%

Loans 30 - 89 days past due and on accrual

 

$

19,744

 

 

$

6,108

 

 

$

17,186

 

 

 

 

 

Total delinquent loans (including loans on non-accrual), net

 

$

43,164

 

 

$

28,312

 

 

$

32,371

 

 

 

 

 

Total delinquent loans / Total loans receivable

 

 

0.40

%

 

 

0.27

%

 

 

0.32

%

 

 

 

 

 

LOANS BY GEOGRAPHIC LOCATION

 

 

 

 

 

 

 

 

 

Percentage Change

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Prior Qtr

 

Prior Yr Qtr

 

 

Amount

 

Percentage

 

Amount

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington

 

$

5,095,602

 

47.2

%

 

$

5,046,028

 

$

4,777,546

 

1.0

%

 

6.7

%

California

 

 

2,670,923

 

24.7

%

 

 

2,570,175

 

 

2,484,980

 

3.9

%

 

7.5

%

Oregon

 

 

1,974,001

 

18.3

%

 

 

1,929,531

 

 

1,826,743

 

2.3

%

 

8.1

%

Idaho

 

 

610,064

 

5.6

%

 

 

600,648

 

 

565,586

 

1.6

%

 

7.9

%

Utah

 

 

68,931

 

0.6

%

 

 

57,711

 

 

75,967

 

19.4

%

 

(9.3

)%

Other

 

 

390,934

 

3.6

%

 

 

407,324

 

 

415,902

 

(4.0

)%

 

(6.0

)%

Total loans receivable

 

$

10,810,455

 

100.0

%

 

$

10,611,417

 

$

10,146,724

 

1.9

%

 

6.5

%

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

 

LOAN ORIGINATIONS

Quarters Ended

 

Year Ended

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

Commercial real estate

$

76,277

 

$

62,337

 

$

117,787

 

$

309,022

 

$

418,635

Multifamily real estate

 

5,360

 

 

12,725

 

 

8,881

 

 

57,046

 

 

37,612

Construction and land

 

382,905

 

 

421,656

 

 

301,804

 

 

1,541,383

 

 

1,935,476

Commercial business

 

166,984

 

 

157,833

 

 

298,396

 

 

585,047

 

 

1,034,950

Agricultural business

 

15,058

 

 

17,466

 

 

24,314

 

 

84,072

 

 

89,655

One-to four-family residential

 

37,446

 

 

43,622

 

 

83,491

 

 

167,951

 

 

358,976

Consumer

 

57,427

 

 

70,043

 

 

102,502

 

 

300,913

 

 

545,254

Total loan originations (excluding loans held for sale)

$

741,457

 

$

785,682

 

$

937,175

 

$

3,045,434

 

$

4,420,558

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

Year Ended

CHANGE IN THE

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

ALLOWANCE FOR CREDIT LOSSES – LOANS

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

146,960

 

 

$

144,680

 

 

$

135,918

 

 

$

141,465

 

 

$

132,099

 

Provision for credit losses – loans

 

 

3,821

 

 

 

2,943

 

 

 

6,043

 

 

 

11,097

 

 

 

8,158

 

Recoveries of loans previously charged off:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

129

 

 

 

170

 

 

 

88

 

 

 

557

 

 

 

392

 

Construction and land

 

 

—

 

 

 

29

 

 

 

—

 

 

 

29

 

 

 

384

 

One- to four-family real estate

 

 

18

 

 

 

59

 

 

 

18

 

 

 

230

 

 

 

181

 

Commercial business

 

 

237

 

 

 

403

 

 

 

616

 

 

 

1,283

 

 

 

1,923

 

Agricultural business, including secured by farmland

 

 

16

 

 

 

19

 

 

 

91

 

 

 

146

 

 

 

475

 

Consumer

 

 

131

 

 

 

126

 

 

 

153

 

 

 

543

 

 

 

566

 

 

 

 

531

 

 

 

806

 

 

 

966

 

 

 

2,788

 

 

 

3,921

 

Loans charged off:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2

)

Construction and land

 

 

(933

)

 

 

—

 

 

 

—

 

 

 

(1,089

)

 

 

(30

)

One- to four-family real estate

 

 

(8

)

 

 

—

 

 

 

—

 

 

 

(42

)

 

 

—

 

Commercial business

 

 

(310

)

 

 

(616

)

 

 

(1,231

)

 

 

(2,650

)

 

 

(1,699

)

Agricultural business, including secured by farmland

 

 

—

 

 

 

(564

)

 

 

—

 

 

 

(564

)

 

 

(42

)

Consumer

 

 

(418

)

 

 

(289

)

 

 

(231

)

 

 

(1,362

)

 

 

(940

)

 

 

 

(1,669

)

 

 

(1,469

)

 

 

(1,462

)

 

 

(5,707

)

 

 

(2,713

)

Net (charge-offs) recoveries

 

 

(1,138

)

 

 

(663

)

 

 

(496

)

 

 

(2,919

)

 

 

1,208

 

Balance, end of period

 

$

149,643

 

 

$

146,960

 

 

$

141,465

 

 

$

149,643

 

 

$

141,465

 

Net (charge-offs) recoveries / Average loans receivable

 

 

(0.011

)%

 

 

(0.006

)%

 

 

(0.005

)%

 

 

(0.028

)%

 

 

0.013

%

 

 

 

 

 

 

 

ALLOCATION OF

 

 

 

 

 

 

ALLOWANCE FOR CREDIT LOSSES – LOANS

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Commercial real estate

 

$

44,384

 

 

$

44,016

 

 

$

44,086

 

Multifamily real estate

 

 

9,326

 

 

 

8,804

 

 

 

7,734

 

Construction and land

 

 

28,095

 

 

 

29,389

 

 

 

29,171

 

One- to four-family real estate

 

 

19,271

 

 

 

17,925

 

 

 

14,729

 

Commercial business

 

 

35,464

 

 

 

34,065

 

 

 

33,299

 

Agricultural business, including secured by farmland

 

 

3,865

 

 

 

3,718

 

 

 

3,475

 

Consumer

 

 

9,238

 

 

 

9,043

 

 

 

8,971

 

Total allowance for credit losses – loans

 

$

149,643

 

 

$

146,960

 

 

$

141,465

 

Allowance for credit losses - loans / Total loans receivable

 

 

1.38

%

 

 

1.38

%

 

 

1.39

%

Allowance for credit losses - loans / Non-performing loans

 

 

506

%

 

 

560

%

 

 

615

%

 

 

 

Quarters Ended

 

Year Ended

CHANGE IN THE

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

15,010

 

 

$

14,664

 

$

14,041

 

$

14,721

 

 

$

12,432

(Recapture) provision for credit losses - unfunded loan commitments

 

 

(526

)

 

 

346

 

 

680

 

 

(237

)

 

 

2,289

Balance, end of period

 

$

14,484

 

 

$

15,010

 

$

14,721

 

$

14,484

 

 

$

14,721

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

NON-PERFORMING ASSETS

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Loans on non-accrual status:

 

 

 

 

 

Secured by real estate:

 

 

 

 

 

Commercial

$

2,677

 

 

$

1,365

 

 

$

3,683

 

Construction and land

 

3,105

 

 

 

5,538

 

 

 

181

 

One- to four-family

 

5,702

 

 

 

5,480

 

 

 

5,236

 

Commercial business

 

9,002

 

 

 

5,289

 

 

 

9,886

 

Agricultural business, including secured by farmland

 

3,167

 

 

 

3,170

 

 

 

594

 

Consumer

 

3,204

 

 

 

3,378

 

 

 

2,126

 

 

 

26,857

 

 

 

24,220

 

 

 

21,706

 

Loans more than 90 days delinquent, still on accrual:

 

 

 

 

 

Secured by real estate:

 

 

 

 

 

Construction and land

 

1,138

 

 

 

—

 

 

 

—

 

One- to four-family

 

1,205

 

 

 

1,799

 

 

 

1,023

 

Commercial business

 

1

 

 

 

—

 

 

 

—

 

Consumer

 

401

 

 

 

245

 

 

 

264

 

 

 

2,745

 

 

 

2,044

 

 

 

1,287

 

Total non-performing loans

 

29,602

 

 

 

26,264

 

 

 

22,993

 

REO

 

526

 

 

 

546

 

 

 

340

 

Other repossessed assets

 

—

 

 

 

—

 

 

 

17

 

Total non-performing assets

$

30,128

 

 

$

26,810

 

 

$

23,350

 

Total non-performing assets to total assets

 

0.19

%

 

 

0.17

%

 

 

0.15

%

LOANS BY CREDIT RISK RATING

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Pass

$

10,671,281

 

$

10,467,498

 

$

10,000,493

Special Mention

 

13,732

 

 

19,394

 

 

9,081

Substandard

 

125,442

 

 

124,525

 

 

137,150

Total

$

10,810,455

 

$

10,611,417

 

$

10,146,724

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEPOSIT COMPOSITION

 

 

 

 

 

 

 

Percentage Change

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Prior Qtr

 

Prior Yr Qtr

Non-interest-bearing

 

$

4,792,369

 

$

5,197,854

 

$

6,176,998

 

(7.8

)%

 

(22.4

)%

Interest-bearing checking

 

 

2,098,526

 

 

2,006,866

 

 

1,811,153

 

4.6

%

 

15.9

%

Regular savings accounts

 

 

2,980,530

 

 

2,751,453

 

 

2,710,090

 

8.3

%

 

10.0

%

Money market accounts

 

 

1,680,605

 

 

1,760,066

 

 

2,198,288

 

(4.5

)%

 

(23.5

)%

Total interest-bearing transaction and savings accounts

 

 

6,759,661

 

 

6,518,385

 

 

6,719,531

 

3.7

%

 

0.6

%

Total core deposits

 

 

11,552,030

 

 

11,716,239

 

 

12,896,529

 

(1.4

)%

 

(10.4

)%

Interest-bearing certificates

 

 

1,477,467

 

 

1,458,313

 

 

723,530

 

1.3

%

 

104.2

%

Total deposits

 

$

13,029,497

 

$

13,174,552

 

$

13,620,059

 

(1.1

)%

 

(4.3

)%

 

GEOGRAPHIC CONCENTRATION OF DEPOSITS

 

 

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Percentage Change

 

 

Amount

 

Percentage

 

Amount

 

Amount

 

Prior Qtr

 

Prior Yr Qtr

Washington

 

$

7,247,392

 

55.6

%

 

$

7,241,341

 

$

7,563,056

 

0.1

%

 

(4.2

)%

Oregon

 

 

2,852,677

 

21.9

%

 

 

2,918,446

 

 

2,998,572

 

(2.3

)%

 

(4.9

)%

California

 

 

2,269,557

 

17.4

%

 

 

2,342,345

 

 

2,331,524

 

(3.1

)%

 

(2.7

)%

Idaho

 

 

659,871

 

5.1

%

 

 

672,420

 

 

726,907

 

(1.9

)%

 

(9.2

)%

Total deposits

 

$

13,029,497

 

100.0

%

 

$

13,174,552

 

$

13,620,059

 

(1.1

)%

 

(4.3

)%

 

INCLUDED IN TOTAL DEPOSITS

 

 

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Public non-interest-bearing accounts

 

$

146,916

 

$

169,058

 

$

212,533

Public interest-bearing transaction & savings accounts

 

 

209,699

 

 

188,831

 

 

180,326

Public interest-bearing certificates

 

 

52,048

 

 

46,349

 

 

26,810

Total public deposits

 

$

408,663

 

$

404,238

 

$

419,669

Collateralized public deposits

 

$

305,306

 

$

300,189

 

$

304,244

Total brokered deposits

 

$

108,058

 

$

162,856

 

$

—

 

 

 

 

 

 

 

AVERAGE ACCOUNT BALANCE PER DEPOSIT ACCOUNT

 

 

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Number of deposit accounts

 

 

463,750

 

 

466,159

 

 

471,140

Average account balance per account

 

$

29

 

$

28

 

$

29

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED REGULATORY CAPITAL RATIOS AS OF DECEMBER 31, 2023

 

Actual

 

Minimum to be categorized as "Adequately Capitalized"

 

Minimum to be

categorized as

"Well Capitalized"

 

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

Banner Corporation-consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Total capital to risk-weighted assets

 

$

1,904,533

 

14.58

%

 

$

1,045,181

 

8.00

%

 

$

1,306,476

 

10.00

%

Tier 1 capital to risk-weighted assets

 

 

1,650,872

 

12.64

%

 

 

783,886

 

6.00

%

 

 

783,886

 

6.00

%

Tier 1 leverage capital to average assets

 

 

1,650,872

 

10.56

%

 

 

625,387

 

4.00

%

 

 

n/a

 

n/a

 

Common equity tier 1 capital to risk-weighted assets

 

 

1,564,372

 

11.97

%

 

 

587,914

 

4.50

%

 

 

n/a

 

n/a

 

Banner Bank:

 

 

 

 

 

 

 

 

 

 

 

 

Total capital to risk-weighted assets

 

 

1,789,371

 

13.69

%

 

 

1,045,273

 

8.00

%

 

 

1,306,592

 

10.00

%

Tier 1 capital to risk-weighted assets

 

 

1,635,710

 

12.52

%

 

 

783,955

 

6.00

%

 

 

1,045,273

 

8.00

%

Tier 1 leverage capital to average assets

 

 

1,635,710

 

10.46

%

 

 

625,298

 

4.00

%

 

 

781,622

 

5.00

%

Common equity tier 1 capital to risk-weighted assets

 

 

1,635,710

 

12.52

%

 

 

587,966

 

4.50

%

 

 

849,285

 

6.50

%

 

These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(rates / ratios annualized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANALYSIS OF NET INTEREST SPREAD

Quarters Ended

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held for sale loans

$

31,148

 

$

447

 

 

5.69

%

 

$

56,697

 

$

765

 

 

5.35

%

 

$

45,654

 

$

527

 

 

4.58

%

Mortgage loans

 

8,770,029

 

 

123,382

 

 

5.58

%

 

 

8,596,705

 

 

118,285

 

 

5.46

%

 

 

8,175,281

 

 

103,478

 

 

5.02

%

Commercial/agricultural loans

 

1,818,198

 

 

30,420

 

 

6.64

%

 

 

1,822,609

 

 

29,866

 

 

6.50

%

 

 

1,742,517

 

 

24,727

 

 

5.63

%

SBA PPP loans

 

3,871

 

 

27

 

 

2.77

%

 

 

4,298

 

 

28

 

 

2.58

%

 

 

9,347

 

 

224

 

 

9.51

%

Consumer and other loans

 

138,049

 

 

2,237

 

 

6.43

%

 

 

138,723

 

 

2,226

 

 

6.37

%

 

 

140,801

 

 

2,125

 

 

5.99

%

Total loans(1)

 

10,761,295

 

 

156,513

 

 

5.77

%

 

 

10,619,032

 

 

151,170

 

 

5.65

%

 

 

10,113,600

 

 

131,081

 

 

5.14

%

Mortgage-backed securities

 

2,798,647

 

 

17,541

 

 

2.49

%

 

 

2,863,345

 

 

17,834

 

 

2.47

%

 

 

3,187,557

 

 

19,244

 

 

2.40

%

Other securities

 

1,035,842

 

 

11,993

 

 

4.59

%

 

 

1,071,389

 

 

12,128

 

 

4.49

%

 

 

1,628,553

 

 

15,945

 

 

3.88

%

Interest-bearing deposits with banks

 

45,286

 

 

506

 

 

4.43

%

 

 

43,594

 

 

529

 

 

4.81

%

 

 

245,538

 

 

2,126

 

 

3.44

%

FHLB stock

 

15,326

 

 

215

 

 

5.57

%

 

 

16,443

 

 

385

 

 

9.29

%

 

 

10,773

 

 

76

 

 

2.80

%

Total investment securities

 

3,895,101

 

 

30,255

 

 

3.08

%

 

 

3,994,771

 

 

30,876

 

 

3.07

%

 

 

5,072,421

 

 

37,391

 

 

2.92

%

Total interest-earning assets

 

14,656,396

 

 

186,768

 

 

5.06

%

 

 

14,613,803

 

 

182,046

 

 

4.94

%

 

 

15,186,021

 

 

168,472

 

 

4.40

%

Non-interest-earning assets

 

875,719

 

 

 

 

 

 

932,364

 

 

 

 

 

 

927,585

 

 

 

 

Total assets

$

15,532,115

 

 

 

 

 

$

15,546,167

 

 

 

 

 

$

16,113,606

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking accounts

$

2,060,226

 

 

5,907

 

 

1.14

%

 

$

1,971,179

 

 

4,190

 

 

0.84

%

 

$

1,818,907

 

 

566

 

 

0.12

%

Savings accounts

 

2,885,167

 

 

12,560

 

 

1.73

%

 

 

2,659,890

 

 

8,400

 

 

1.25

%

 

 

2,761,323

 

 

866

 

 

0.12

%

Money market accounts

 

1,723,426

 

 

7,644

 

 

1.76

%

 

 

1,793,953

 

 

6,639

 

 

1.47

%

 

 

2,256,867

 

 

1,337

 

 

0.24

%

Certificates of deposit

 

1,477,474

 

 

13,231

 

 

3.55

%

 

 

1,412,542

 

 

11,772

 

 

3.31

%

 

 

709,974

 

 

854

 

 

0.48

%

Total interest-bearing deposits

 

8,146,293

 

 

39,342

 

 

1.92

%

 

 

7,837,564

 

 

31,001

 

 

1.57

%

 

 

7,547,071

 

 

3,623

 

 

0.19

%

Non-interest-bearing deposits

 

5,036,523

 

 

—

 

 

—

%

 

 

5,316,023

 

 

—

 

 

—

%

 

 

6,402,297

 

 

—

 

 

—

%

Total deposits

 

13,182,816

 

 

39,342

 

 

1.18

%

 

 

13,153,587

 

 

31,001

 

 

0.94

%

 

 

13,949,368

 

 

3,623

 

 

0.10

%

Other interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

 

129,630

 

 

1,870

 

 

5.72

%

 

 

161,087

 

 

2,233

 

 

5.50

%

 

 

19,337

 

 

198

 

 

4.06

%

Other borrowings

 

185,518

 

 

1,125

 

 

2.41

%

 

 

194,659

 

 

1,099

 

 

2.24

%

 

 

238,217

 

 

132

 

 

0.22

%

Junior subordinated debentures and subordinated notes

 

182,678

 

 

2,992

 

 

6.50

%

 

 

182,678

 

 

2,965

 

 

6.44

%

 

 

189,178

 

 

2,534

 

 

5.31

%

Total borrowings

 

497,826

 

 

5,987

 

 

4.77

%

 

 

538,424

 

 

6,297

 

 

4.64

%

 

 

446,732

 

 

2,864

 

 

2.54

%

Total funding liabilities

 

13,680,642

 

 

45,329

 

 

1.31

%

 

 

13,692,011

 

 

37,298

 

 

1.08

%

 

 

14,396,100

 

 

6,487

 

 

0.18

%

Other non-interest-bearing liabilities(2)

 

311,539

 

 

 

 

 

 

296,578

 

 

 

 

 

 

292,480

 

 

 

 

Total liabilities

 

13,992,181

 

 

 

 

 

 

13,988,589

 

 

 

 

 

 

14,688,580

 

 

 

 

Shareholders’ equity

 

1,539,934

 

 

 

 

 

 

1,557,578

 

 

 

 

 

 

1,425,026

 

 

 

 

Total liabilities and shareholders’ equity

$

15,532,115

 

 

 

 

 

$

15,546,167

 

 

 

 

 

$

16,113,606

 

 

 

 

Net interest income/rate spread (tax equivalent)

 

 

$

141,439

 

 

3.75

%

 

 

 

$

144,748

 

 

3.86

%

 

 

 

$

161,985

 

 

4.22

%

Net interest margin (tax equivalent)

 

 

 

 

3.83

%

 

 

 

 

 

3.93

%

 

 

 

 

 

4.23

%

Reconciliation to reported net interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments for taxable equivalent basis

 

 

 

(3,030

)

 

 

 

 

 

 

(2,982

)

 

 

 

 

 

 

(2,914

)

 

 

Net interest income and margin, as reported

 

 

$

138,409

 

 

3.75

%

 

 

 

$

141,766

 

 

3.85

%

 

 

 

$

159,071

 

 

4.16

%

Additional Key Financial Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

 

 

1.09

%

 

 

 

 

 

1.17

%

 

 

 

 

 

1.34

%

Return on average equity

 

 

 

 

10.98

%

 

 

 

 

 

11.68

%

 

 

 

 

 

15.14

%

Average equity/average assets

 

 

 

 

9.91

%

 

 

 

 

 

10.02

%

 

 

 

 

 

8.84

%

Average interest-earning assets/average interest-bearing liabilities

 

 

 

 

169.55

%

 

 

 

 

 

174.47

%

 

 

 

 

 

189.97

%

Average interest-earning assets/average funding liabilities

 

 

 

 

107.13

%

 

 

 

 

 

106.73

%

 

 

 

 

 

105.49

%

Non-interest income/average assets

 

 

 

 

0.36

%

 

 

 

 

 

0.32

%

 

 

 

 

 

0.32

%

Non-interest expense/average assets

 

 

 

 

2.47

%

 

 

 

 

 

2.45

%

 

 

 

 

 

2.44

%

Efficiency ratio(4)

 

 

 

 

63.37

%

 

 

 

 

 

62.10

%

 

 

 

 

 

57.52

%

Adjusted efficiency ratio(5)

 

 

 

 

60.04

%

 

 

 

 

 

59.00

%

 

 

 

 

 

54.43

%

(1)

Average balances include loans accounted for on a nonaccrual basis and accruing 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 junior subordinated debentures.

(3)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.0 million, $1.9 million and $1.6 million for the quarters ended December 31, 2023, September 30, 2023 and December 31, 2022, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $1.1 million and $1.3 million for the quarters ended December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

(4)

Non-interest expense divided by the total of net interest income and non-interest income.

(5)

Adjusted non-interest expense divided by adjusted revenue. Represent non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

 

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

(rates / ratios annualized)

 

 

 

 

 

 

 

 

 

 

 

ANALYSIS OF NET INTEREST SPREAD

Year Ended

 

Dec 31, 2023

 

Dec 31, 2022

 

Average Balance

 

Interest and Dividends

 

Yield/Cost(3)

 

Average Balance

 

Interest and Dividends

 

Yield/Cost(3)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

Held for sale loans

$

49,106

 

$

2,621

 

 

5.34

%

 

$

82,030

 

$

2,973

 

 

3.62

%

Mortgage loans

 

8,513,487

 

 

460,664

 

 

5.41

%

 

 

7,731,195

 

 

364,499

 

 

4.71

%

Commercial/agricultural loans

 

1,777,099

 

 

113,078

 

 

6.36

%

 

 

1,617,191

 

 

77,309

 

 

4.78

%

SBA PPP loans

 

5,042

 

 

172

 

 

3.41

%

 

 

41,167

 

 

4,677

 

 

11.36

%

Consumer and other loans

 

138,196

 

 

8,715

 

 

6.31

%

 

 

123,667

 

 

7,332

 

 

5.93

%

Total loans(1)

 

10,482,930

 

 

585,250

 

 

5.58

%

 

 

9,595,250

 

 

456,790

 

 

4.76

%

Mortgage-backed securities

 

2,927,650

 

 

72,927

 

 

2.49

%

 

 

3,130,124

 

 

68,148

 

 

2.18

%

Other securities

 

1,173,637

 

 

52,148

 

 

4.44

%

 

 

1,625,250

 

 

48,278

 

 

2.97

%

Interest-bearing deposits with banks

 

46,815

 

 

2,200

 

 

4.70

%

 

 

969,952

 

 

9,633

 

 

0.99

%

FHLB stock

 

17,903

 

 

847

 

 

4.73

%

 

 

10,628

 

 

357

 

 

3.36

%

Total investment securities

 

4,166,005

 

 

128,122

 

 

3.08

%

 

 

5,735,954

 

 

126,416

 

 

2.20

%

Total interest-earning assets

 

14,648,935

 

 

713,372

 

 

4.87

%

 

 

15,331,204

 

 

583,206

 

 

3.80

%

Non-interest-earning assets

 

917,018

 

 

 

 

 

 

1,169,271

 

 

 

 

Total assets

$

15,565,953

 

 

 

 

 

$

16,500,475

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking accounts

$

1,921,326

 

 

13,334

 

 

0.69

%

 

$

1,890,917

 

 

1,557

 

 

0.08

%

Savings accounts

 

2,674,936

 

 

27,739

 

 

1.04

%

 

 

2,810,264

 

 

2,053

 

 

0.07

%

Money market accounts

 

1,908,983

 

 

24,089

 

 

1.26

%

 

 

2,364,122

 

 

3,143

 

 

0.13

%

Certificates of deposit

 

1,209,261

 

 

34,964

 

 

2.89

%

 

 

764,255

 

 

3,371

 

 

0.44

%

Total interest-bearing deposits

 

7,714,506

 

 

100,126

 

 

1.30

%

 

 

7,829,558

 

 

10,124

 

 

0.13

%

Non-interest-bearing deposits

 

5,436,953

 

 

—

 

 

—

%

 

 

6,434,670

 

 

—

 

 

—

%

Total deposits

 

13,151,459

 

 

100,126

 

 

0.76

%

 

 

14,264,228

 

 

10,124

 

 

0.07

%

Other interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

 

196,819

 

 

10,524

 

 

5.35

%

 

 

15,285

 

 

489

 

 

3.20

%

Other borrowings

 

199,291

 

 

3,376

 

 

1.69

%

 

 

249,681

 

 

377

 

 

0.15

%

Junior subordinated debentures and subordinated notes

 

185,883

 

 

11,541

 

 

6.21

%

 

 

189,870

 

 

8,400

 

 

4.42

%

Total borrowings

 

581,993

 

 

25,441

 

 

4.37

%

 

 

454,836

 

 

9,266

 

 

2.04

%

Total funding liabilities

 

13,733,452

 

 

125,567

 

 

0.91

%

 

 

14,719,064

 

 

19,390

 

 

0.13

%

Other non-interest-bearing liabilities(2)

 

295,098

 

 

 

 

 

 

253,983

 

 

 

 

Total liabilities

 

14,028,550

 

 

 

 

 

 

14,973,047

 

 

 

 

Shareholders’ equity

 

1,537,403

 

 

 

 

 

 

1,527,428

 

 

 

 

Total liabilities and shareholders’ equity

$

15,565,953

 

 

 

 

 

$

16,500,475

 

 

 

 

Net interest income/rate spread (tax equivalent)

 

 

$

587,805

 

 

3.96

%

 

 

 

$

563,816

 

 

3.67

%

Net interest margin (tax equivalent)

 

 

 

 

4.01

%

 

 

 

 

 

3.68

%

Reconciliation to reported net interest income:

 

 

 

 

 

 

 

 

 

 

 

Adjustments for taxable equivalent basis

 

 

 

(11,800

)

 

 

 

 

 

 

(10,637

)

 

 

Net interest income and margin, as reported

 

 

$

576,005

 

 

3.93

%

 

 

 

$

553,179

 

 

3.61

%

Additional Key Financial Ratios:

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

 

 

1.18

%

 

 

 

 

 

1.18

%

Return on average equity

 

 

 

 

11.94

%

 

 

 

 

 

12.79

%

Average equity/average assets

 

 

 

 

9.88

%

 

 

 

 

 

9.26

%

Average interest-earning assets/average interest-bearing liabilities

 

 

 

 

176.57

%

 

 

 

 

 

185.06

%

Average interest-earning assets/average funding liabilities

 

 

 

 

106.67

%

 

 

 

 

 

104.16

%

Non-interest income/average assets

 

 

 

 

0.29

%

 

 

 

 

 

0.46

%

Non-interest expense/average assets

 

 

 

 

2.46

%

 

 

 

 

 

2.29

%

Efficiency ratio(4)

 

 

 

 

61.66

%

 

 

 

 

 

60.04

%

Adjusted efficiency ratio(5)

 

 

 

 

57.89

%

 

 

 

 

 

57.99

%

(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 junior subordinated debentures.

(3)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $7.4 million and $5.9 million for the years ended December 31, 2023 and December 31, 2022, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.4 million and $4.8 million for the years ended December 31, 2023 and December 31, 2022, respectively.

(4)

Non-interest expense divided by the total of net interest income and non-interest income.

(5)

Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

 

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. Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets, and references to adjusted revenue, adjusted earnings and the adjusted efficiency ratio represent 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. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

 

 

 

 

 

 

 

 

 

 

ADJUSTED REVENUE

Quarters Ended

 

Year Ended

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

Net interest income (GAAP)

$

138,409

 

 

$

141,766

 

$

159,071

 

 

$

576,005

 

$

553,179

 

Non-interest income (GAAP)

 

14,052

 

 

 

12,658

 

 

13,070

 

 

 

44,409

 

 

75,255

 

Total revenue (GAAP)

 

152,461

 

 

 

154,424

 

 

172,141

 

 

 

620,414

 

 

628,434

 

Exclude: Net loss on sale of securities

 

4,806

 

 

 

2,657

 

 

3,721

 

 

 

19,242

 

 

3,248

 

Net change in valuation of financial instruments carried at fair value

 

(139

)

 

 

654

 

 

(157

)

 

 

4,218

 

 

(807

)

Gain on sale of branches

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

(7,804

)

Adjusted revenue (non-GAAP)

$

157,128

 

 

$

157,735

 

$

175,705

 

 

$

643,874

 

$

623,071

 

 

ADJUSTED EARNINGS

Quarters Ended

 

Year Ended

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

Net income (GAAP)

$

42,624

 

 

$

45,854

 

 

$

54,380

 

 

$

183,624

 

 

$

195,378

 

Exclude: Net loss on sale of securities

 

4,806

 

 

 

2,657

 

 

 

3,721

 

 

 

19,242

 

 

 

3,248

 

Net change in valuation of financial instruments carried at fair value

 

(139

)

 

 

654

 

 

 

(157

)

 

 

4,218

 

 

 

(807

)

Gain on sale of branches

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,804

)

Banner Forward expenses (1)

 

—

 

 

 

996

 

 

 

838

 

 

 

1,334

 

 

 

5,293

 

Loss on extinguishment of debt

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

793

 

Related net tax benefit

 

(1,121

)

 

 

(1,033

)

 

 

(1,057

)

 

 

(5,951

)

 

 

(174

)

Total adjusted earnings (non-GAAP)

$

46,170

 

 

$

49,128

 

 

$

57,725

 

 

$

202,467

 

 

$

195,927

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share (GAAP)

$

1.24

 

 

$

1.33

 

 

$

1.58

 

 

$

5.33

 

 

$

5.67

 

Diluted adjusted earnings per share (non-GAAP)

$

1.34

 

 

$

1.43

 

 

$

1.68

 

 

$

5.88

 

 

$

5.69

 

(1)

Included in miscellaneous expenses in results of operations.

ADDITIONAL FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

ADJUSTED EFFICIENCY RATIO

 

Quarters Ended

 

Year Ended

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

 

Dec 31, 2023

 

Dec 31, 2022

Non-interest expense (GAAP)

 

$

96,621

 

 

$

95,891

 

 

$

99,013

 

 

$

382,538

 

 

$

377,295

 

Exclude: Banner Forward expenses (1)

 

 

—

 

 

 

(996

)

 

 

(838

)

 

 

(1,334

)

 

 

(5,293

)

CDI amortization

 

 

(858

)

 

 

(857

)

 

 

(1,215

)

 

 

(3,756

)

 

 

(5,279

)

State/municipal tax expense

 

 

(1,372

)

 

 

(1,359

)

 

 

(1,304

)

 

 

(5,260

)

 

 

(4,693

)

REO operations

 

 

(47

)

 

 

383

 

 

 

(28

)

 

 

538

 

 

 

104

 

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(793

)

Adjusted non-interest expense (non-GAAP)

 

$

94,344

 

 

$

93,062

 

 

$

95,628

 

 

$

372,726

 

 

$

361,341

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (GAAP)

 

$

138,409

 

 

$

141,766

 

 

$

159,071

 

 

$

576,005

 

 

$

553,179

 

Non-interest income (GAAP)

 

 

14,052

 

 

 

12,658

 

 

 

13,070

 

 

 

44,409

 

 

 

75,255

 

Total revenue (GAAP)

 

 

152,461

 

 

 

154,424

 

 

 

172,141

 

 

 

620,414

 

 

 

628,434

 

Exclude: Net loss on sale of securities

 

 

4,806

 

 

 

2,657

 

 

 

3,721

 

 

 

19,242

 

 

 

3,248

 

Net change in valuation of financial instruments carried at fair value

 

 

(139

)

 

 

654

 

 

 

(157

)

 

 

4,218

 

 

 

(807

)

Gain on sale of branches

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,804

)

Adjusted revenue (non-GAAP)

 

$

157,128

 

 

$

157,735

 

 

$

175,705

 

 

$

643,874

 

 

$

623,071

 

 

 

 

 

 

 

 

 

 

 

 

Efficiency ratio (GAAP)

 

 

63.37

%

 

 

62.10

%

 

 

57.52

%

 

 

61.66

%

 

 

60.04

%

Adjusted efficiency ratio (non-GAAP)

 

 

60.04

%

 

 

59.00

%

 

 

54.43

%

 

 

57.89

%

 

 

57.99

%

(1)

Included in miscellaneous expenses in results of operations.

 

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS

 

 

 

 

 

 

 

 

Dec 31, 2023

 

Sep 30, 2023

 

Dec 31, 2022

Shareholders’ equity (GAAP)

 

$

1,652,691

 

 

$

1,520,607

 

 

$

1,456,432

 

Exclude goodwill and other intangible assets, net

 

 

378,805

 

 

 

379,663

 

 

 

382,561

 

Tangible common shareholders’ equity (non-GAAP)

 

$

1,273,886

 

 

$

1,140,944

 

 

$

1,073,871

 

 

 

 

 

 

 

 

Total assets (GAAP)

 

$

15,670,391

 

 

$

15,507,880

 

 

$

15,833,431

 

Exclude goodwill and other intangible assets, net

 

 

378,805

 

 

 

379,663

 

 

 

382,561

 

Total tangible assets (non-GAAP)

 

$

15,291,586

 

 

$

15,128,217

 

 

$

15,450,870

 

Common shareholders’ equity to total assets (GAAP)

 

 

10.55

%

 

 

9.81

%

 

 

9.20

%

Tangible common shareholders’ equity to tangible assets (non-GAAP)

 

 

8.33

%

 

 

7.54

%

 

 

6.95

%

 

 

 

 

 

 

 

TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE

 

 

 

 

 

 

Tangible common shareholders’ equity (non-GAAP)

 

$

1,273,886

 

 

$

1,140,944

 

 

$

1,073,871

 

Common shares outstanding at end of period

 

 

34,348,369

 

 

 

34,345,949

 

 

 

34,194,018

 

Common shareholders’ equity (book value) per share (GAAP)

 

$

48.12

 

 

$

44.27

 

 

$

42.59

 

Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)

 

$

37.09

 

 

$

33.22

 

 

$

31.41

 

 

Contacts

MARK J. GRESCOVICH,
PRESIDENT & CEO
ROBERT G. BUTTERFIELD, CFO
(509) 527-3636

Contacts

MARK J. GRESCOVICH,
PRESIDENT & CEO
ROBERT G. BUTTERFIELD, CFO
(509) 527-3636