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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240117582408/en/
MARK J. GRESCOVICH, PRESIDENT & CEO ROBERT G. BUTTERFIELD,
CFO (509) 527-3636
Grafico Azioni Banner (NASDAQ:BANR)
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