EX-99.1 2 exhibit9918k102616.htm EXHIBIT 99.1

Banner Corporation Earns $23.9 Million, or $0.70 per Diluted Share, in the Third Quarter of 2016;
Highlighted by Continued Revenue Growth

Walla Walla, WA - October 26, 2016 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation fueled by growth from last year's acquisitions that contributed to solid third quarter results.  Net income in the third quarter of 2016 increased to $23.9 million, or $0.70 per diluted share, compared to $21.0 million, or $0.61 per diluted share, in the preceding quarter and $12.9 million, or $0.62 per diluted share, in the third quarter a year ago.  The current quarter results were impacted by $1.7 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.03 per diluted share, and the preceding quarter results were impacted by $2.4 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.05 per diluted share.
In the first nine months of 2016, net income increased to $62.6 million, or $1.83 per diluted share, compared to $38.3 million, or $1.87 per diluted share, in the first nine months of 2015. Acquisition-related expenses were $10.9 million (or $0.21 net of tax per diluted share) for the nine months ended September 30, 2016, compared to $7.7 million (or $0.27 net of tax per diluted share) for the nine months ended September 30, 2015.
"Our third quarter core operating performance continued to reflect the success of our proven client acquisition, balance sheet management and product pricing strategies, which produced additional core revenue and core deposit growth.  We also benefited from the successful integration of last year's AmericanWest Bank acquisition, which had a dramatic impact on the scale and reach of the Company and is providing enhanced opportunity for future client and revenue growth," stated Mark J. Grescovich, President and Chief Executive Officer.  "During the third quarter, we completed our electronic banking systems conversion and made additional progress in generating operating synergies as a result of the consolidation of overlapping locations and integration of operational activities.  Through the hard work of our employees across the franchise, we are successfully executing on our strategies and priorities to deliver sustainable profitability and revenue growth to Banner."
At September 30, 2016, Banner Corporation had $9.84 billion in assets, $7.31 billion in net loans and $8.11 billion in deposits.  The Company operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.
Third Quarter 2016 Highlights
•
Net income increased 14% to $23.9 million, compared to $21.0 million in the preceding quarter and increased 84% compared to
$12.9 million in the third quarter of 2015.
•
Return on average assets was 0.96% in the current quarter, 0.86% in the preceding quarter and 0.97% in the same quarter a year ago.
•
Acquisition-related expenses were $1.7 million which, net of tax benefit, reduced net income by $0.03 per diluted share for the quarter
ended September 30, 2016.
•
Revenues from core operations* increased 3% to $117.5 million, compared to $114.4 million in the preceding quarter and increased
74% compared to $67.4 million in the third quarter a year ago.
•
Net interest margin was 4.15% for the current quarter, compared to 4.20% in the second quarter of 2016 and 4.14% in the third quarter
a year ago.
•
Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.01%*, the same as in the preceding quarter
and was 4.10%* in the third quarter a year ago.
•
Deposit fees and other service charges were $12.9 million, compared to $12.2 million in the preceding quarter and $9.7 million in the
same quarter a year ago.
•
Revenues from mortgage banking operations were $8.1 million compared to $6.6 million in the preceding quarter and $4.4 million in
the third quarter a year ago.
•
Provision for loan losses was $2.0 million.
•
Net loans increased by $3.02 billion, or 70% year-over-year and increased $69.8 million, or 1%, during the current quarter.
•
Total deposits increased by $3.72 billion, or 85%, compared to a year ago and increased $192.2 million, or 2%, during the current
quarter.
BANR - Third Quarter 2016 Results
October 26, 2016
Page 2
 
•
Core deposits increased by $3.33 billion, or 91%, year-over-year, increased $277.9 million, or 4%, during the current quarter, and
represented 86% of total deposits at September 30, 2016.
•
Quarterly dividend to shareholders increased 10% to $0.23 per share.
•
Repurchased 484,350 shares of common stock at a cost of $21.1 million and an average price of $43.56 per share.
•
Common shareholders' tangible equity per share* increased to $31.14 at September 30, 2016, compared to $30.86 at the preceding
quarter end and $30.75 a year ago.
•
The ratio of tangible common shareholders' equity to tangible assets* remained strong at 11.03% at September 30, 2016 compared to
11.00% at the preceding quarter end and 12.20% a year ago.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest expense from core operations (which excludes acquisition-related costs), the adjusted allowance for loan losses to adjusted loans (which includes net loan discounts on acquired loans) and references to tangible common stockholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of this press release.
Acquisition of AmericanWest Bank
Effective October 1, 2015, Banner completed the acquisition of Starbuck Bancshares, Inc. ("Starbuck") and its wholly owned subsidiary AmericanWest Bank.  The merger was accounted for using the acquisition method of accounting.  Accordingly, the acquired assets (including identifiable intangible assets) and assumed liabilities of Starbuck were recognized at their respective estimated fair values as of the merger date.  The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill.  The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date.  The acquisition accounting is subject to adjustment within a post-closing measurement period.  During the third quarter of 2016, there were no post-closing adjustments to goodwill; however, post-closing adjustments reduced goodwill by $3.2 million during the nine months ending September 30, 2016.  The Company does not expect any additional adjustments to goodwill.
In addition to the acquisition of AmericanWest Bank, the acquisition of Siuslaw Financial Group and its wholly-owned subsidiary Siuslaw Bank ("Siuslaw") on March 6, 2015 had a significant impact on the current and historical operating results of Banner.  For additional details regarding acquisitions and merger related expenses, see the tables under Business Combinations on page 12 of this press release.
Income Statement Review
Banner's third quarter net interest income, before the provision for loan losses, increased to $93.7 million, compared to $93.1 million in the preceding quarter.  Third quarter 2016 net interest income, before the provision for loan losses, increased 80% compared to $52.2 million in the third quarter a year ago, largely reflecting the acquisition of AmericanWest Bank but also reflecting continued client acquisition.  In the first nine months of 2016, Banner's net interest income, before the provision for loan losses, increased 85% to $277.9 million compared to $150.2 million in the first nine months of 2015.
"Our net interest margin contracted five basis points compared to the preceding quarter as a result of decreased accretion of acquisition accounting discounts," said Grescovich.  "The net interest margin increased one basis point compared to a year ago.  Excluding the impact of acquisition accounting, the net interest margin was unchanged compared to the preceding quarter, but declined by nine basis points compared to a year ago.*"
Net interest margin is enhanced by the amortization of acquisition accounting discounts on loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense.  Banner's net interest margin was 4.15% for the third quarter of 2016, which included 11 basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and two basis points as a result of the impact of the net loan acquisition discounts on average earning assets from both the AmericanWest Bank and Siuslaw acquisitions, compared to a net interest margin of 4.20% in the preceding quarter and 4.14% in the third quarter a year ago.  Excluding the effects of acquisition accounting, the net interest margin was 4.01%* in the third quarter and the preceding quarter and 4.10%* in the third quarter a year ago.  The decline compared to a year earlier primarily reflects lower average yields on the loans acquired in the AmericanWest Bank acquisition, as well as the proportionally larger size of the securities portfolio following that acquisition.
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 3
 
Average interest-earning asset yields decreased four basis points to 4.34% compared to 4.38% for the preceding quarter and were unchanged compared to the third quarter a year ago.  Loan yields decreased eight basis points compared to the preceding quarter and increased two basis points from the third quarter a year ago.  The accretion of discounts and related balance sheet impact on the loans acquired through the acquisitions added 15 basis points to reported loan yields for the quarter.  Deposit costs remained unchanged compared to the preceding quarter and decreased two basis points compared to the third quarter a year ago.  Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by two basis points in the third quarter 2016.  The total cost of funds decreased one basis point to 0.19% during the third quarter compared to the preceding quarter and declined three basis points compared to 0.22% for the third quarter a year ago.
"Our credit quality metrics continue to reflect our moderate risk profile," said Grescovich.  "As expected, due to loan growth and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the third quarter, the same as in the preceding quarter."  In the third quarter a year ago, Banner did not record a provision.
"Revenues from mortgage banking were again strong, as home purchase activity continues to be robust in our markets, and low long term interest rates supported additional refinance activity," said Grescovich.  Mortgage banking revenues including gains on single and multifamily loan sales increased 23% to $8.1 million in the third quarter compared to $6.6 million in the preceding quarter and increased 84% compared to $4.4 million in the third quarter of 2015.  Home purchase activity accounted for 65% of third quarter one- to four-family mortgage banking loan originations.  In the first nine months of 2016, mortgage banking revenues increased 54% to $20.4 million compared to $13.2 million in the same period one year ago.  Gains on the sale of multifamily loans were $1.4 million for the third quarter of 2016 and totaled $3.1 million for the first nine months of 2016.
Deposit fees and other service charges increased 6% to $12.9 million in the third quarter compared to $12.2 million in the preceding quarter and increased 33% compared to $9.7 million in the third quarter a year ago.  Reflecting the significant increase in core deposits compared to a year earlier, deposit fees and other service charges increased 35% to $37.0 million for the nine months ended September 30, 2016, compared to $27.4 million in the first nine months of 2015.
Banner's total revenues were $117.2 million for the quarter ended September 30, 2016, compared to $113.7 million in the preceding quarter and $66.3 million in the third quarter a year ago.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) increased 3% to $117.5 million in the third quarter ended September 30, 2016, compared to $114.4 million in the preceding quarter and increased 74% compared to $67.4 million in the third quarter of 2015.  Total revenues for the first nine months of 2016 were $341.9 million compared to $194.1 million in the first nine months of 2015, with the significant increase largely attributable to the acquisition of AmericanWest Bank.  Year-to-date, revenues from core operations* increased 77% to $342.8 million compared to $193.9 million in the first nine months of 2015.
Third quarter 2016 results included a $1.1 million net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partly offset by an $891,000 net gain on the sale of securities.  In the preceding quarter, results included a $377,000 net loss for fair value adjustments, as well as a $380,000 net loss on the sale of securities.  In the third quarter a year ago, results included a $1.1 million net loss for fair value adjustments.
Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $23.5 million in the third quarter of 2016, compared to $20.5 million in the second quarter of 2016 and $14.1 million in the third quarter a year ago.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $23.7 million, compared to $21.3 million for the second quarter of 2016 and $15.2 million in the third quarter a year ago.  For the first nine months of the year, Banner's total non-interest income was $64.0 million compared to $43.9 million in the same period a year ago and non-interest income from core operations* was $64.9 million compared to $43.7 million for the same periods, respectively.
Banner's total non-interest expenses were $79.1 million in the third quarter of 2016, compared to $79.9 million in the preceding quarter and $46.7 million in the third quarter of 2015.  The year-over-year increase in non-interest expenses was largely attributable to the incremental costs associated with operating the branches and the related operations acquired in the AmericanWest Bank merger on October 1, 2015, as well as generally increased compensation, occupancy and payment and card processing services reflecting increased transaction volume.  The current quarter's non-interest expenses also included elevated costs for professional services largely as result of seasonal factors relating to accounting, audit and examination processes, costs incurred in anticipation of enhanced regulatory compliance requirements and costs associated with sales and registration of restricted shares issued in the AmericanWest Bank merger.  There were $1.7 million in acquisition-related expenses in the current quarter compared to $2.4 million in the preceding quarter and $2.2 million in the third quarter a year ago.  In the first nine months of 2016, total non-interest expenses were $243.0 million compared to $136.3 million in the first nine months of 2015.
For the third quarter of 2016, Banner recorded $12.3 million in state and federal income tax expense for an effective tax rate of 34.0%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 4
 
Balance Sheet Review
Reflecting our previously announced strategy to maintain total assets below $10.0 billion through December 31, 2016, Banner's total assets decreased to $9.84 billion at September 30, 2016, from $9.92 billion at June 30, 2016; however total assets increased by 85% compared to $5.31 billion a year ago, largely as a result of the AmericanWest Bank acquisition but also due to strong organic growth.  The total of securities and interest-bearing deposits held at other banks was $1.39 billion at September 30, 2016, compared to $1.54 billion at June 30, 2016 and $648.5 million a year ago.  The decrease in the securities portfolio during the current quarter reflects the temporary deleveraging strategy, while the increase in the securities portfolio compared to a year earlier was primarily a result of securities held by AmericanWest Bank at the time of the merger.  The average effective duration of Banner's securities portfolio was approximately 2.9 years at September 30, 2016 compared to 2.6 years at June 30, 2016.
"Net loans increased during the quarter, with good production in targeted loan types and seasonal growth in certain loan types, including meaningful increases in commercial real estate, construction and development, and agricultural business loans.  Loan production remains solid, as does the regional economy, and we continue to see significant potential for growth in our loan origination pipelines," said Grescovich.
Net loans increased 70% to $7.31 billion at September 30, 2016, compared to $4.29 billion a year ago.  Net loans were $7.24 billion at June 30, 2016.  Commercial real estate and multifamily real estate loans increased 1% to $3.53 billion at September 30, 2016, compared to $3.49 billion at June 30, 2016, and increased 86% compared to $1.90 billion a year ago.  Commercial business loans decreased to $1.19 billion at September 30, 2016, compared to $1.23 billion three months earlier but increased 46% compared to $812.1 million a year ago.  Agricultural business loans increased 3% to $383.3 million at September 30, 2016, compared to $370.5 million three months earlier and increased 58% compared to $242.6 million a year ago.  Total construction, land and land development loans increased 12% to $797.3 million at September 30, 2016, compared to $713.3 million at June 30, 2016, and increased 61% compared to $493.8 million a year earlier.
Banner's total deposits were $8.11 billion at September 30, 2016, a 2% increase compared to $7.92 billion at June 30, 2016, and an 85% increase compared to $4.39 billion a year ago.  In connection with certain product changes earlier in the year, Banner converted approximately $420 million of former AmericanWest Bank interest-bearing deposits to non-interest-bearing deposits during the first quarter of 2016.  As a result of the acquisition and product changes as well as organic growth, non-interest-bearing account balances increased 104% to $3.19 billion at September 30, 2016, compared to $1.56 billion a year ago.  Interest-bearing transaction and savings accounts increased 81% to $3.80 billion compared to $2.10 billion a year ago.  Certificates of deposit increased 54% to $1.12 billion at September 30, 2016, compared to $730.7 million a year earlier.  Brokered deposits totaled $60.3 million at September 30, 2016, compared to $93.0 million at June 30, 2016 and $10.1 million a year ago.
In part reflecting expected seasonal trends but also as a result of additional account growth, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 4% during the current quarter.  Core deposits represented 86% of total deposits at September 30, 2016, compared to 85% of total deposits at June 30, 2016 and 83% of total deposits a year earlier.  As a result of this improved deposit mix as well as modest pricing adjustments, the cost of deposits was 0.14% for the quarter ended September 30, 2016 and for the preceding quarter, and declined two basis points from 0.16% for the quarter ended September 30, 2015.
At September 30, 2016, total common shareholders' equity was $1.33 billion, or $39.31 per share, compared to $1.34 billion at June 30, 2016 and $671.2 million a year ago.  The decrease in shareholders' equity compared to the prior quarter primarily reflects the repurchase of 484,350 shares of common stock at an average price of $43.56 per share as well as the $0.23 per share quarterly dividend, which was partially offset by net income for the quarter. The year-over-year increase was mostly due to 13.23 million shares of voting common and non-voting common stock issued on October 1, 2015 in connection with the AmericanWest Bank acquisition, which were valued at $47.67 per share and increased shareholders' equity by $630.7 million.  At September 30, 2016, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 11.03% of tangible assets*, compared to $1.06 billion, or 11.00% of tangible assets, at June 30, 2016, and $644.6 million, or 12.20% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.14 at September 30, 2016, compared to $30.75 per share a year ago.
Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under the Basel III and Dodd Frank regulatory standards.  At September 30, 2016, Banner Corporation's common equity Tier 1 capital ratio was 11.68%, its Tier 1 leverage capital to average assets ratio was 11.40%, and its total capital to risk-weighted assets ratio was 13.39%.
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 5
 
Credit Quality
In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw were recorded at their estimated fair value, which resulted in a net discount to the loans' contractual amounts, of which a portion reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value and as a result no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw.
The allowance for loan losses was $84.2 million at September 30, 2016, or 1.14% of total loans outstanding and 309% of non-performing loans compared to $77.3 million at September 30, 2015, or 1.77% of total loans outstanding and 329% of non-performing loans.  Banner had net recoveries of $902,000 in the third quarter compared to net recoveries of $1.1 million in the second quarter of 2016 and net charge-offs of $9,000 in the third quarter a year ago.  Primarily as a result of loan growth and the renewal of acquired loans out of the discounted loan portfolio, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter.  Banner did not record a provision for the quarter ended September 30, 2015.  If the allowance for loan losses were grossed up for the remaining loan discount, the adjusted allowance for loan losses to adjusted loans would have been 1.60% as of September 30, 2016.  Non-performing loans were $27.3 million at September 30, 2016, compared to $25.3 million at June 30, 2016 and $23.5 million a year ago.  Real estate owned and other repossessed assets decreased to $4.9 million at September 30, 2016, compared to $6.4 million at June 30, 2016, and $6.4 million a year ago.
Banner's non-performing assets were 0.33% of total assets at September 30, 2016, compared to 0.32% at June 30, 2016 and 0.56% a year ago.  Non-performing assets were $32.2 million at September 30, 2016, compared to $31.7 million at June 30, 2016 and $29.9 million a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $38.7 million at September 30, 2016 compared to $45.4 million at June 30, 2016 and $5.4 million a year ago.
Conference Call
Banner will host a conference call on Thursday, October 27, 2016, at 8:00 a.m. PDT, to discuss its third quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10093302, or at www.bannerbank.com.
About the Company
On October 1, 2015, Banner Corporation completed the acquisition of AmericanWest Bank which was merged into Banner Bank, a transformational merger that brought together two financially strong, well-respected institutions and created a leading Western bank.  Banner Corporation is now a $9.8 billion bank holding company operating two commercial banks in five Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.
Forward-Looking Statements
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner's operating and stock price performance.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the merger of Banner Bank and Siuslaw Bank and the merger of Banner Bank and AmericanWest Bank might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (3) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to the Company's activities; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
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customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) the ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (12) the costs, effects and outcomes of litigation; (13) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (14) changes in accounting principles, policies or guidelines; (15) future acquisitions by Banner of other depository institutions or lines of business; (16) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
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RESULTS OF OPERATIONS
  
Quarters Ended
  
Nine months ended
(in thousands except shares and per share data)
  
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
                     
INTEREST INCOME:
                    
      Loans receivable
  
$
89,805
    
$
88,935
    
$
51,749
    
$
265,697
    
$
149,192
  
      Mortgage-backed securities
  
4,803
    
5,274
    
1,307
    
15,467
    
3,609
  
      Securities and cash equivalents
  
3,241
    
3,112
    
1,737
    
9,306
    
5,138
  
   
97,849
    
97,321
    
54,793
    
290,470
    
157,939
  
INTEREST EXPENSE:
                    
      Deposits
  
2,784
    
2,771
    
1,738
    
8,501
    
5,240
  
      Federal Home Loan Bank advances
  
256
    
339
    
4
    
874
    
24
  
      Other borrowings
  
82
    
78
    
47
    
234
    
137
  
      Junior subordinated debentures
  
1,019
    
985
    
816
    
2,962
    
2,357
  
   
4,141
    
4,173
    
2,605
    
12,571
    
7,758
  
      Net interest income before provision for loan losses
  
93,708
    
93,148
    
52,188
    
277,899
    
150,181
  
PROVISION FOR LOAN LOSSES
  
2,000
    
2,000
    
—
    
4,000
    
—
  
      Net interest income
  
91,708
    
91,148
    
52,188
    
273,899
    
150,181
  
NON-INTEREST INCOME:
                    
      Deposit fees and other service charges
  
12,927
    
12,213
    
9,746
    
36,957
    
27,435
  
      Mortgage banking operations
  
8,141
    
6,625
    
4,426
    
20,409
    
13,238
  
      Bank owned life insurance
  
1,333
    
1,128
    
550
    
3,646
    
1,441
  
      Miscellaneous
  
1,344
    
1,328
    
489
    
3,936
    
1,623
  
   
23,745
    
21,294
    
15,211
    
64,948
    
43,737
  
      Net gain (loss) on sale of securities
  
891
    
(380
)
  
—
    
531
    
(537
)
      Net change in valuation of financial instruments carried at fair value
  
(1,124
)
  
(377
)
  
(1,113
)
  
(1,472
)
  
735
  
      Total non-interest income
  
23,512
    
20,537
    
14,098
    
64,007
    
43,935
  
NON-INTEREST EXPENSE:
                    
      Salary and employee benefits
  
44,758
    
45,175
    
27,026
    
136,497
    
78,057
  
      Less capitalized loan origination costs
  
(4,953
)
  
(4,907
)
  
(3,747
)
  
(14,110
)
  
(10,372
)
      Occupancy and equipment
  
10,979
    
11,052
    
6,470
    
32,419
    
18,833
  
      Information / computer data services
  
4,836
    
4,852
    
2,219
    
14,607
    
6,744
  
      Payment and card processing services
  
5,878
    
5,501
    
4,168
    
16,164
    
10,926
  
      Professional services
  
2,258
    
865
    
951
    
5,736
    
2,489
  
      Advertising and marketing
  
2,282
    
2,474
    
1,959
    
6,489
    
5,767
  
      Deposit insurance
  
890
    
1,311
    
713
    
3,539
    
1,905
  
      State/municipal business and use taxes
  
956
    
770
    
475
    
2,564
    
1,383
  
      Real estate operations
  
(21
)
  
137
    
(2
)
  
513
    
190
  
      Amortization of core deposit intangibles
  
1,724
    
1,808
    
286
    
5,339
    
1,268
  
      Miscellaneous
  
7,785
    
8,437
    
3,972
    
22,311
    
11,416
  
   
77,372
    
77,475
    
44,490
    
232,068
    
128,606
  
      Acquisition related costs
  
1,720
    
2,412
    
2,207
    
10,945
    
7,741
  
      Total non-interest expense
  
79,092
    
79,887
    
46,697
    
243,013
    
136,347
  
      Income before provision for income taxes
  
36,128
    
31,798
    
19,589
    
94,893
    
57,769
  
PROVISION FOR INCOME TAXES
  
12,277
    
10,841
    
6,642
    
32,312
    
19,440
  
NET INCOME
  
$
23,851
    
$
20,957
    
$
12,947
    
$
62,581
    
$
38,329
  
Earnings per share available to common shareholders:
                    
      Basic
  
$
0.70
    
$
0.62
    
$
0.62
    
$
1.84
    
$
1.88
  
      Diluted
  
$
0.70
    
$
0.61
    
$
0.62
    
$
1.83
    
$
1.87
  
Cumulative dividends declared per common share
  
$
0.23
    
$
0.21
    
$
0.18
    
$
0.65
    
$
0.54
  
Weighted average common shares outstanding:
                    
      Basic
  
34,045,225
    
34,069,234
    
20,755,394
    
34,050,459
    
20,417,601
  
      Diluted
  
34,124,611
    
34,116,498
    
20,821,377
    
34,104,875
    
20,467,609
  
Increase (decrease)  in common shares outstanding
  
(483,249
)
  
129,109
    
(8,381
)
  
(374,944
)
  
1,390,752
  
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 8
 
FINANCIAL  CONDITION
                  
Percentage Change
(in thousands except shares and per share data)
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
  
Prior Qtr
  
Prior Yr Qtr
                         
ASSETS
                        
Cash and due from banks
  
$
161,710
    
$
158,446
    
$
117,657
    
$
74,695
    
2.1
%
  
116.5
%
Interest-bearing deposits
  
84,207
    
76,210
    
144,260
    
60,544
    
10.5
%
  
39.1
%
Total cash and cash equivalents
  
245,917
    
234,656
    
261,917
    
135,239
    
4.8
%
  
81.8
%
Securities - trading
  
30,889
    
33,753
    
34,134
    
37,515
    
(8.5
)%
  
(17.7
)%
Securities - available for sale
  
1,006,414
    
1,177,757
    
1,138,573
    
418,254
    
(14.5
)%
  
140.6
%
Securities - held to maturity
  
271,975
    
254,666
    
220,666
    
132,150
    
6.8
%
  
105.8
%
Federal Home Loan Bank stock
  
12,826
    
23,347
    
16,057
    
6,767
    
(45.1
)%
  
89.5
%
Loans held for sale
  
123,144
    
113,230
    
44,712
    
3,136
    
8.8
%
  
nm
Loans receivable
  
7,398,637
    
7,325,925
    
7,314,504
    
4,369,458
    
1.0
%
  
69.3
%
Allowance for loan losses
  
(84,220
)
  
(81,318
)
  
(78,008
)
  
(77,320
)
  
3.6
%
  
8.9
%
Net loans
  
7,314,417
    
7,244,607
    
7,236,496
    
4,292,138
    
1.0
%
  
70.4
%
Accrued interest receivable
  
30,345
    
30,052
    
29,627
    
17,966
    
1.0
%
  
68.9
%
Real estate owned held for sale, net
  
4,717
    
6,147
    
11,627
    
6,363
    
(23.3
)%
  
(25.9
)%
Property and equipment, net
  
167,621
    
167,597
    
167,604
    
102,881
    
—
%
  
62.9
%
Goodwill
  
244,583
    
244,583
    
247,738
    
21,148
    
—
%
  
nm
Other intangibles, net
  
31,934
    
33,724
    
37,472
    
5,457
    
(5.3
)%
  
nm
Bank-owned life insurance
  
158,831
    
158,001
    
156,865
    
71,842
    
0.5
%
  
121.1
%
Other assets
  
197,415
    
194,085
    
192,810
    
61,454
    
1.7
%
  
221.2
%
Total assets
  
$
9,841,028
    
$
9,916,205
    
$
9,796,298
    
$
5,312,310
    
(0.8
)%
  
85.2
%
LIABILITIES
                        
Deposits:
                        
      Non-interest-bearing
  
$
3,190,293
    
$
3,023,986
    
$
2,619,618
    
$
1,561,516
    
5.5
%
  
104.3
%
      Interest-bearing transaction and savings accounts
  
3,798,668
    
3,687,118
    
4,081,580
    
2,095,476
    
3.0
%
  
81.3
%
      Interest-bearing certificates
  
1,123,011
    
1,208,671
    
1,353,870
    
730,661
    
(7.1
)%
  
53.7
%
Total deposits
  
8,111,972
    
7,919,775
    
8,055,068
    
4,387,653
    
2.4
%
  
84.9
%
Advances from Federal Home Loan Bank at fair value
  
62,342
    
325,383
    
133,381
    
16,435
    
(80.8
)%
  
nm
Customer repurchase agreements and other borrowings
  
108,911
    
112,308
    
98,325
    
88,083
    
(3.0
)%
  
23.6
%
Junior subordinated debentures at fair value
  
94,364
    
93,298
    
92,480
    
85,183
    
1.1
%
  
10.8
%
Accrued expenses and other liabilities
  
92,783
    
87,441
    
76,511
    
42,844
    
6.1
%
  
116.6
%
Deferred compensation
  
39,385
    
39,483
    
40,474
    
20,910
    
(0.2
)%
  
88.4
%
Total liabilities
  
8,509,757
    
8,577,688
    
8,496,239
    
4,641,108
    
(0.8
)%
  
83.4
%
SHAREHOLDERS' EQUITY
                        
Common stock
  
1,243,205
    
1,263,085
    
1,261,174
    
628,958
    
(1.6
)%
  
97.7
%
Retained earnings
  
80,053
    
63,967
    
39,615
    
41,269
    
25.1
%
  
94.0
%
Other components of shareholders' equity
  
8,013
    
11,465
    
(730
)
  
975
    
(30.1
)%
  
nm
Total shareholders' equity
  
1,331,271
    
1,338,517
    
1,300,059
    
671,202
    
(0.5
)%
  
98.3
%
Total liabilities and shareholders' equity
  
$
9,841,028
    
$
9,916,205
    
$
9,796,298
    
$
5,312,310
    
(0.8
)%
  
85.2
%
Common Shares Issued:
                        
Shares outstanding at end of period
  
33,867,311
    
34,350,560
    
34,242,255
    
20,962,300
          
Common shareholders' equity per share (1)
  
$
39.31
    
$
38.97
    
$
37.97
    
$
32.02
          
Common shareholders' tangible equity per share (1) (2)
  
$
31.14
    
$
30.86
    
$
29.64
    
$
30.75
          
Common shareholders' tangible equity to tangible assets (2)
  
11.03
%
  
11.00
%
  
10.67
%
  
12.20
%
        
Consolidated Tier 1 leverage capital ratio
  
11.68
%
  
11.85
%
  
11.06
%
  
13.85
%
        
 
(1)
Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2)
Common shareholders' tangible equity excludes goodwill and other intangible assets.  Tangible assets exclude goodwill and other intangible assets.  These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of the press release tables.
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 9
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                        
                   
Percentage Change
LOANS
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
  
Prior Qtr
  
Prior Yr Qtr
                         
Commercial real estate:
                        
     Owner occupied
  
$
1,340,577
    
$
1,351,015
    
$
1,327,807
    
$
635,146
    
(0.8
)%
  
111.1
%
     Investment properties
  
1,918,639
    
1,849,123
    
1,765,353
    
1,062,418
    
3.8
%
  
80.6
%
Multifamily real estate
  
266,883
    
287,783
    
472,976
    
198,874
    
(7.3
)%
  
34.2
%
Commercial construction
  
135,487
    
105,594
    
72,103
    
47,490
    
28.3
%
  
185.3
%
Multifamily construction
  
105,669
    
97,697
    
63,846
    
72,987
    
8.2
%
  
44.8
%
One- to four-family construction
  
363,586
    
330,474
    
278,469
    
246,715
    
10.0
%
  
47.4
%
Land and land development:
                        
     Residential
  
162,029
    
156,964
    
126,773
    
111,091
    
3.2
%
  
45.9
%
     Commercial
  
30,556
    
22,578
    
33,179
    
15,517
    
35.3
%
  
96.9
%
Commercial business
  
1,187,848
    
1,231,182
    
1,207,944
    
812,070
    
(3.5
)%
  
46.3
%
Agricultural business including secured by farmland
  
383,275
    
370,515
    
376,531
    
242,556
    
3.4
%
  
58.0
%
One- to four-family real estate
  
846,899
    
878,986
    
952,633
    
533,189
    
(3.7
)%
  
58.8
%
Consumer:
                        
     Consumer secured by one- to four-family real estate
  
497,643
    
485,545
    
478,420
    
250,029
    
2.5
%
  
99.0
%
     Consumer-other
  
159,546
    
158,469
    
158,470
    
141,376
    
0.7
%
  
12.9
%
            Total loans outstanding
  
$
7,398,637
    
$
7,325,925
    
$
7,314,504
    
$
4,369,458
    
1.0
%
  
69.3
%
Restructured loans performing under their restructured terms
  
$
17,649
    
$
18,835
    
$
21,777
    
$
23,981
          
Loans 30 - 89 days past due and on accrual (1)
  
$
12,668
    
$
14,447
    
$
18,834
    
$
4,152
          
Total delinquent loans (including loans on non-accrual), net (2)
  
$
39,543
    
$
38,038
    
$
30,994
    
$
27,682
          
Total delinquent loans  /  Total loans outstanding
  
0.53
%
  
0.52
%
  
0.42
%
  
0.63
%
        

 (1) Includes $486,000 of purchased credit-impaired loans at September 30, 2016 compared to $1.4 million at June 30, 2016, $4.3 million at
     December 31, 2015, and none at September 30, 2015.
   (2) Delinquent loans include $3.6 million of delinquent purchased credit-impaired loans at September 30, 2016 compared to $4.4 million at
       June 30, 2016, $6.3 million at December 31, 2015 and $913,000 at September 30, 2015.

LOANS BY GEOGRAPHIC LOCATION
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
   
Amount
  
Percentage
  
Amount
  
Percentage
  
Amount
  
Percentage
  
Amount
  
Percentage
                                 
Washington
  
$
3,415,413
    
46.2%
  
$
3,401,656
    
46.4
%
  
$
3,343,112
    
45.7%
  
$
2,449,120
    
56.1%
Oregon
  
1,466,845
    
19.8%
  
1,461,906
    
20.0
%
  
1,446,531
    
19.8%
  
1,148,887
    
26.3%
California
  
1,204,273
    
16.3%
  
1,184,392
    
16.2
%
  
1,234,016
    
16.9%
  
90,808
    
2.1%
Idaho
  
517,607
    
7.0%
  
505,594
    
6.9
%
  
496,870
    
6.8%
  
364,495
    
8.3%
Utah
  
292,088
    
3.9%
  
294,102
    
4.0
%
  
325,011
    
4.4%
  
13,470
    
0.3%
Other
  
502,411
    
6.8%
  
478,275
    
6.5
%
  
468,964
    
6.4%
  
302,678
    
6.9%
Total loans
  
$
7,398,637
    
100.0%
  
$
7,325,925
    
100.0
%
  
$
7,314,504
    
100.0%
  
$
4,369,458
    
100.0%
 
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 10
 
 
 
ADDITIONAL FINANCIAL INFORMATION
                    
(dollars in thousands)
                    
   
  Quarters Ended
  
Nine months ended
CHANGE IN THE
  
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
ALLOWANCE FOR LOAN LOSSES
                    
Balance, beginning of period
  
$
81,318
    
$
78,197
    
$
77,329
    
$
78,008
    
$
75,907
  
Provision for loan losses
  
2,000
    
2,000
    
—
    
4,000
    
—
  
Recoveries of loans previously charged off:
                    
     Commercial real estate
  
34
    
26
    
375
    
98
    
587
  
     Multifamily real estate
  
—
    
—
    
—
    
—
    
113
  
     Construction and land
  
673
    
124
    
282
    
1,268
    
1,234
  
     One- to four-family real estate
  
482
    
558
    
42
    
1,052
    
141
  
     Commercial business
  
433
    
622
    
128
    
1,775
    
803
  
     Agricultural business, including secured by farmland
  
(138
)
  
160
    
146
    
39
    
1,666
  
     Consumer
  
73
    
249
    
91
    
529
    
369
  
   
1,557
    
1,739
    
1,064
    
4,761
    
4,913
  
Loans charged off:
                    
      Commercial real estate
  
—
    
—
    
—
    
(180
)
  
(64
)
      Construction and land
  
—
    
—
    
(352
)
  
—
    
(352
)
      One- to four-family real estate
  
(92
)
  
(34
)
  
(12
)
  
(126
)
  
(127
)
      Commercial business
  
(333
)
  
(171
)
  
(312
)
  
(643
)
  
(745
)
      Agricultural business, including secured by farmland
  
—
    
—
    
—
    
(567
)
  
(1,064
)
      Consumer
  
(230
)
  
(413
)
  
(397
)
  
(1,033
)
  
(1,148
)
   
(655
)
  
(618
)
  
(1,073
)
  
(2,549
)
  
(3,500
)
             Net recoveries (charge-offs)
  
902
    
1,121
    
(9
)
  
2,212
    
1,413
  
Balance, end of period
  
$
84,220
    
$
81,318
    
$
77,320
    
$
84,220
    
$
77,320
  
Net recoveries / Average loans outstanding
  
0.012
%
  
0.015
%
  
—
%
  
0.030
%
  
0.034
%


ALLOCATION OF
                
ALLOWANCE FOR LOAN LOSSES
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
Specific or allocated loss allowance:
                
       Commercial real estate
  
$
19,846
    
$
20,149
    
$
20,716
    
$
19,640
  
       Multifamily real estate
  
1,436
    
1,515
    
4,195
    
4,363
  
       Construction and land
  
33,803
    
31,861
    
27,131
    
27,274
  
       One- to four-family real estate
  
2,190
    
2,204
    
4,732
    
7,937
  
       Commercial business
  
16,507
    
17,758
    
13,856
    
12,765
  
       Agricultural business, including secured by farmland
  
2,833
    
2,891
    
3,645
    
2,533
  
       Consumer
  
3,934
    
3,743
    
902
    
804
  
              Total allocated
  
80,549
    
80,121
    
75,177
    
75,316
  
Unallocated
  
3,671
    
1,197
    
2,831
    
2,004
  
                   Total allowance for loan losses
  
$
84,220
    
$
81,318
    
$
78,008
    
$
77,320
  
Allowance for loan losses / Total loans outstanding
  
1.14
%
  
1.11
%
  
1.07
%
  
1.77
%
Allowance for loan losses / Non-performing loans
  
309
%
  
321
%
  
512
%
  
329
%



BANR - Third Quarter 2016 Results
October 26, 2016
Page 11
 
ADDITIONAL FINANCIAL INFORMATION
              
(dollars in thousands)
              
 
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
NON-PERFORMING ASSETS
              
Loans on non-accrual status:
              
   Secured by real estate:
              
      Commercial
$
12,776
    
$
11,753
    
$
3,751
    
$
3,899
  
      Multifamily
30
    
31
    
—
    
—
  
      Construction and land
1,747
    
1,738
    
2,260
    
2,793
  
      One- to four-family
3,414
    
3,512
    
4,700
    
4,934
  
   Commercial business
2,765
    
1,426
    
2,159
    
980
  
   Agricultural business, including secured by farmland
3,755
    
4,459
    
697
    
228
  
   Consumer
1,385
    
1,165
    
703
    
789
  
 
25,872
    
24,084
    
14,270
    
13,623
  
Loans more than 90 days delinquent, still on accrual:
              
   Secured by real estate:
              
      Commercial
—
    
—
    
—
    
1,808
  
      Multifamily
147
    
—
    
—
    
556
  
      Construction and land
—
    
—
    
—
    
5,792
  
      One- to four-family
852
    
896
    
899
    
1,285
  
   Commercial business
—
    
—
    
8
    
5
  
   Consumer
425
    
337
    
45
    
461
  
 
1,424
    
1,233
    
952
    
9,907
  
Total non-performing loans
27,296
    
25,317
    
15,222
    
23,530
  
Real estate owned (REO)
4,717
    
6,147
    
11,627
    
6,363
  
Other repossessed assets
164
    
256
    
268
    
—
  
               Total non-performing assets
$
32,177
    
$
31,720
    
$
27,117
    
$
29,893
  
Total non-performing assets to total assets
0.33
%
  
0.32
%
  
0.28
%
  
0.56
%
Purchased credit-impaired loans, net
$
38,674
    
$
45,376
    
$
58,600
    
$
5,409
  

 
Quarters Ended
  
Nine months ended
REAL ESTATE OWNED
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
Balance, beginning of period
$
6,147
    
$
7,207
    
$
6,105
    
$
11,627
    
$
3,352
  
   Additions from loan foreclosures
156
    
376
    
1,085
    
534
    
3,226
  
   Additions from acquisitions
—
    
—
    
—
    
400
    
2,525
  
   Additions from capitalized costs
—
    
—
    
—
    
—
    
298
  
   Proceeds from dispositions of REO
(1,699
)
  
(1,656
)
  
(906
)
  
(8,021
)
  
(3,155
)
   Gain on sale of REO
281
    
651
    
113
    
981
    
333
  
   Valuation adjustments in the period
(168
)
  
(431
)
  
(34
)
  
(804
)
  
(216
)
Balance, end of period
$
4,717
    
$
6,147
    
$
6,363
    
$
4,717
    
$
6,363
  

BANR - Third Quarter 2016 Results
October 26, 2016
Page 12



ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                        
                         
DEPOSIT COMPOSITION
                  
Percentage Change
   
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
  
Prior Qtr
  
Prior Yr Qtr
                         
Non-interest-bearing
  
$
3,190,293
    
$
3,023,986
    
$
2,619,618
    
$
1,561,516
    
5.5
%
  
104.3
%
Interest-bearing checking
  
853,594
    
830,625
    
1,159,846
    
482,530
    
2.8
%
  
76.9
%
Regular savings accounts
  
1,387,123
    
1,321,518
    
1,284,642
    
1,030,177
    
5.0
%
  
34.6
%
Money market accounts
  
1,557,951
    
1,534,975
    
1,637,092
    
582,769
    
1.5
%
  
167.3
%
       Total interest-bearing transaction and savings accounts
  
3,798,668
    
3,687,118
    
4,081,580
    
2,095,476
    
3.0
%
  
81.3
%
Interest-bearing certificates
  
1,123,011
    
1,208,671
    
1,353,870
    
730,661
    
(7.1
)%
  
53.7
%
Total deposits
  
$
8,111,972
    
$
7,919,775
    
$
8,055,068
    
$
4,387,653
    
2.4
%
  
84.9
%


GEOGRAPHIC CONCENTRATION OF DEPOSITS
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
   
Amount
  
Percentage
  
Amount
  
Percentage
  
Amount
  
Percentage
  
Amount
  
Percentage
Washington
  
$
4,283,522
    
52.8%
  
$
4,158,639
    
52.5%
  
$
4,219,304
    
52.4%
  
$
2,911,674
    
66.4%
Oregon
  
1,737,754
    
21.4%
  
1,686,160
    
21.3%
  
1,648,421
    
20.4%
  
1,224,132
    
27.9%
California
  
1,491,903
    
18.4%
  
1,485,795
    
18.8%
  
1,592,365
    
19.8%
  
—
    
—%
Idaho
  
435,090
    
5.4%
  
421,427
    
5.3%
  
435,099
    
5.4%
  
251,847
    
5.7%
Utah
  
163,703
    
2.0%
  
167,754
    
2.1%
  
159,879
    
2.0%
  
—
    
—%
Total deposits
  
$
8,111,972
    
100.0%
  
$
7,919,775
    
100.0%
  
$
8,055,068
    
100.0%
  
$
4,387,653
    
100.0%


INCLUDED IN TOTAL DEPOSITS
  
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
Public non-interest-bearing accounts
  
$
86,207
    
$
102,486
    
$
85,489
    
$
48,814
  
Public interest-bearing transaction & savings accounts
  
115,458
    
127,045
    
123,941
    
74,446
  
Public interest-bearing certificates
  
26,734
    
26,574
    
31,281
    
27,791
  
        Total public deposits
  
$
228,399
    
$
256,105
    
$
240,711
    
$
151,051
  
Total brokered deposits
  
$
60,290
    
$
92,982
    
$
162,936
    
$
10,095
  
 
 
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 13


ADDITIONAL FINANCIAL INFORMATION
        
(in thousands)
        
BUSINESS COMBINATIONS
        
ACQUISITION OF STARBUCK BANCSHARES, INC.
  
October 1, 2015
         
Cash paid
      
$
130,000
  
Fair value of common shares issued
      
630,674
  
       Total consideration
      
760,674
  
         
Fair value of assets acquired:
        
       Cash and cash equivalents
  
$
95,821
      
       Securities
  
1,037,238
      
       Loans receivable
  
2,999,130
      
       Real estate owned held for sale
  
6,105
      
       Property and equipment
  
66,728
      
       Core deposit intangible
  
33,500
      
       Deferred tax asset
  
108,454
      
       Other assets
  
113,009
      
              Total assets acquired
  
4,459,985
      
         
Fair value of liabilities assumed:
        
       Deposits
  
3,638,596
      
       FHLB advances
  
221,442
      
       Junior subordinated debentures
  
5,806
      
      Other liabilities
  
56,359
      
             Total liabilities assumed
  
3,922,203
      
             Net assets acquired
      
537,782
  
                    Goodwill
      
$
222,892
  



MERGER AND ACQUISITION EXPENSE
Quarters Ended
  
Nine months ended
 
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
By expense category:
                  
Personnel severance/retention fees
$
16
    
$
(24
)
  
$
227
    
$
1,304
    
$
443
  
Professional services
687
    
599
    
1,185
    
2,138
    
5,411
  
Branch consolidation and other occupancy expenses
94
    
924
    
5
    
2,517
    
55
  
Client communications
527
    
126
    
151
    
904
    
221
  
Information/computer data services
459
    
532
    
301
    
2,409
    
807
  
Miscellaneous
(63
)
  
255
    
338
    
1,673
    
804
  
Total merger and acquisition expense
$
1,720
    
$
2,412
    
$
2,207
    
$
10,945
    
$
7,741
  
                   
By acquisition:
                  
Siuslaw Financial Group
1
    
94
    
340
    
95
    
1,867
  
Starbuck Bancshares, Inc. (AmericanWest)
1,719
    
2,318
    
1,867
    
10,850
    
5,874
  
Total merger and acquisition expense
$
1,720
    
$
2,412
    
$
2,207
    
$
10,945
    
$
7,741
  
 
 
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 14
 
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                        
   
Actual
  
Minimum to be categorized as "Adequately Capitalized"
  
Minimum to be
categorized as
"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2016
  
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
                         
Banner Corporation-consolidated:
                        
      Total capital to risk-weighted assets
  
$
1,176,129
    
13.39
%
  
$
702,514
    
8.00
%
  
$
878,142
    
10.00
%
      Tier 1 capital to risk-weighted assets
  
1,088,260
    
12.39
%
  
526,885
    
6.00
%
  
526,885
    
6.00
%
      Tier 1 leverage capital to average assets
  
1,088,260
    
11.40
%
  
381,961
    
4.00
%
  
N/A
  
N/A
      Common equity tier 1 capital to risk-weighted assets
  
1,025,683
    
11.68
%
  
395,164
    
4.50
%
  
N/A
  
N/A
Banner Bank:
                        
      Total capital to risk-weighted assets
  
1,075,145
    
12.53
%
  
686,511
    
8.00
%
  
858,139
    
10.00
%
      Tier 1 capital to risk-weighted assets
  
989,527
    
11.53
%
  
514,883
    
6.00
%
  
686,511
    
8.00
%
      Tier 1 leverage capital to average assets
  
989,527
    
10.69
%
  
370,197
    
4.00
%
  
462,747
    
5.00
%
      Common equity tier 1 capital to risk-weighted assets
  
989,527
    
11.53
%
  
386,162
    
4.50
%
  
557,790
    
6.50
%
Islanders Bank:
                        
      Total capital to risk-weighted assets
  
39,888
    
20.39
%
  
15,646
    
8.00
%
  
19,558
    
10.00
%
      Tier 1 capital to risk-weighted assets
  
37,637
    
19.24
%
  
11,735
    
6.00
%
  
15,646
    
8.00
%
      Tier 1 leverage capital to average assets
  
37,637
    
12.97
%
  
11,604
    
4.00
%
  
14,505
    
5.00
%
      Common equity tier 1 capital to risk-weighted assets
  
37,637
    
19.24
%
  
8,801
    
4.50
%
  
12,713
    
6.50
%
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 15
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                        
(rates / ratios annualized)
                        
                         
ANALYSIS OF NET INTEREST SPREAD
Quarter Ended
  
 
September 30, 2016
  
June 30, 2016
  
September 30, 2015
  
 
Average Balance
Interest and Dividends
Yield / Cost(3)
  
Average Balance
Interest and Dividends
Yield / Cost(3)
  
Average Balance
Interest and Dividends
Yield / Cost(3)
  
Interest-earning assets:
                        
Mortgage loans
$
5,843,381
  
$
70,223
  
4.78
%
  
$
5,715,740
  
$
68,914
  
4.85
%
  
$
3,200,184
  
$
39,504
  
4.90
%
  
Commercial/agricultural loans
1,495,611
  
17,373
  
4.62
%
  
1,504,969
  
17,816
  
4.76
%
  
984,159
  
10,273
  
4.14
%
  
Consumer and other loans
142,977
  
2,209
  
6.15
%
  
140,355
  
2,205
  
6.32
%
  
129,496
  
1,972
  
6.04
%
  
Total loans(1)
7,481,969
  
89,805
  
4.78
%
  
7,361,064
  
88,935
  
4.86
%
  
4,313,839
  
51,749
  
4.76
%
  
Mortgage-backed securities
920,560
  
4,803
  
2.08
%
  
1,004,044
  
5,274
  
2.11
%
  
314,941
  
1,307
  
1.65
%
  
Other securities
472,159
  
3,050
  
2.57
%
  
450,528
  
2,931
  
2.62
%
  
261,580
  
1,638
  
2.48
%
  
Interest-bearing deposits with banks
86,868
  
98
  
0.45
%
  
95,668
  
101
  
0.42
%
  
109,445
  
97
  
0.35
%
  
FHLB stock
16,413
  
93
  
2.25
%
  
18,911
  
80
  
1.70
%
  
6,180
  
2
  
0.13
%
  
Total investment securities
1,496,000
  
8,044
  
2.14
%
  
1,569,151
  
8,386
  
2.15
%
  
692,146
  
3,044
  
1.74
%
  
Total interest-earning assets
8,977,969
  
97,849
  
4.34
%
  
8,930,215
  
97,321
  
4.38
%
  
5,005,985
  
54,793
  
4.34
%
  
Non-interest-earning assets
913,991
        
903,706
        
276,761
        
Total assets
$
9,891,960
        
$
9,833,921
        
$
5,282,746
        
Deposits:
                        
Interest-bearing checking accounts
$
837,930
  
188
  
0.09
%
  
$
789,626
  
185
  
0.09
%
  
$
477,105
  
95
  
0.08
%
  
Savings accounts
1,371,911
  
449
  
0.13
%
  
1,329,104
  
431
  
0.13
%
  
1,019,059
  
381
  
0.15
%
  
Money market accounts
1,564,906
  
749
  
0.19
%
  
1,577,320
  
811
  
0.21
%
  
574,968
  
229
  
0.16
%
  
Certificates of deposit
1,173,630
  
1,398
  
0.47
%
  
1,244,796
  
1,344
  
0.43
%
  
749,702
  
1,033
  
0.55
%
  
Total interest-bearing deposits
4,948,377
  
2,784
  
0.22
%
  
4,940,846
  
2,771
  
0.23
%
  
2,820,834
  
1,738
  
0.24
%
  
Non-interest-bearing deposits
3,120,279
  
—
  
—
%
  
3,029,890
  
—
  
—
%
  
1,559,053
  
—
  
—
%
  
Total deposits
8,068,656
  
2,784
  
0.14
%
  
7,970,736
  
2,771
  
0.14
%
  
4,379,887
  
1,738
  
0.16
%
  
Other interest-bearing liabilities:
                        
FHLB advances
152,198
  
256
  
0.67
%
  
214,290
  
339
  
0.64
%
  
1,660
  
4
  
0.96
%
  
Other borrowings
111,016
  
82
  
0.29
%
  
111,987
  
78
  
0.28
%
  
92,550
  
47
  
0.20
%
  
Junior subordinated debentures
140,212
  
1,019
  
2.89
%
  
140,212
  
985
  
2.83
%
  
131,964
  
816
  
2.45
%
  
Total borrowings
403,426
  
1,357
  
1.34
%
  
466,489
  
1,402
  
1.21
%
  
226,174
  
867
  
1.52
%
  
Total funding liabilities
8,472,082
  
4,141
  
0.19
%
  
8,437,225
  
4,173
  
0.20
%
  
4,606,061
  
2,605
  
0.22
%
  
Other non-interest-bearing liabilities(2)
68,566
        
62,858
        
6,731
        
Total liabilities
8,540,648
        
8,500,083
        
4,612,792
        
Shareholders' equity
1,351,312
        
1,333,838
        
669,954
        
Total liabilities and shareholders' equity
$
9,891,960
        
$
9,833,921
        
$
5,282,746
        
Net interest income/rate spread
  
$
93,708
  
4.15
%
    
$
93,148
  
4.18
%
    
$
52,188
  
4.12
%
  
Net interest margin
    
4.15
%
      
4.20
%
      
4.14
%
  
Additional Key Financial Ratios:
                        
Return on average assets
    
0.96
%
      
0.86
%
      
0.97
%
  
Return on average equity
    
7.02
%
      
6.32
%
      
7.67
%
  
Average equity/average assets
    
13.66
%
      
13.56
%
      
12.68
%
  
Average interest-earning assets/average interest-bearing liabilities
    
167.76
%
      
165.15
%
      
164.29
%
  
Average interest-earning assets/average funding liabilities
    
105.97
%
      
105.84
%
      
108.68
%
  
Non-interest income/average assets
    
0.95
%
      
0.84
%
      
1.06
%
  
Non-interest expense/average assets
    
3.18
%
      
3.27
%
      
3.51
%
  
Efficiency ratio(4)
    
67.47
%
      
70.27
%
      
70.45
%
  
Adjusted efficiency ratio(5)
    
63.61
%
      
65.33
%
      
64.88
%
  
(1)
Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2)
Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3)
Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4)
Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5)
Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of CDI, real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of the press release tables.

 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 16
ADDITIONAL FINANCIAL INFORMATION
              
(dollars in thousands)
              
(rates / ratios annualized)
              
               
ANALYSIS OF NET INTEREST SPREAD
Nine months ended
 
September 30, 2016
  
September 30, 2015
 
Average Balance
Interest and Dividends
Yield/Cost(3)
  
Average Balance
Interest and Dividends
Yield/Cost(3)
Interest-earning assets:
              
Mortgage loans
$
5,755,988
  
$
207,881
  
4.82
%
  
$
3,069,745
  
$
113,707
  
4.95
%
Commercial/agricultural loans
1,490,757
  
51,213
  
4.59
%
  
943,999
  
29,750
  
4.21
%
Consumer and other loans
141,570
  
6,603
  
6.23
%
  
126,245
  
5,735
  
6.07
%
Total loans(1)
7,388,315
  
265,697
  
4.80
%
  
4,139,989
  
149,192
  
4.82
%
Mortgage-backed securities
976,267
  
15,467
  
2.12
%
  
309,503
  
3,609
  
1.56
%
Other securities
450,142
  
8,752
  
2.60
%
  
262,560
  
4,859
  
2.47
%
Interest-bearing deposits with banks
95,406
  
300
  
0.42
%
  
120,013
  
259
  
0.29
%
FHLB stock
17,614
  
254
  
1.93
%
  
16,599
  
20
  
0.16
%
Total investment securities
1,539,429
  
24,773
  
2.15
%
  
708,675
  
8,747
  
1.65
%
Total interest-earning assets
8,927,744
  
290,470
  
4.35
%
  
4,848,664
  
157,939
  
4.36
%
Non-interest-earning assets
903,957
        
259,641
      
Total assets
$
9,831,701
        
$
5,108,305
      
Deposits:
              
Interest-bearing checking accounts
$
853,818
  
570
  
0.09
%
  
$
468,211
  
284
  
0.08
%
Savings accounts
1,336,259
  
1,303
  
0.13
%
  
979,627
  
1,091
  
0.15
%
Money market accounts
1,587,500
  
2,421
  
0.20
%
  
556,831
  
657
  
0.16
%
Certificates of deposit
1,248,781
  
4,207
  
0.45
%
  
763,339
  
3,208
  
0.56
%
Total interest-bearing deposits
5,026,358
  
8,501
  
0.23
%
  
2,768,008
  
5,240
  
0.25
%
Non-interest-bearing deposits
2,980,027
  
—
  
—
%
  
1,460,859
  
—
  
—
%
Total deposits
8,006,385
  
8,501
  
0.14
%
  
4,228,867
  
5,240
  
0.17
%
Other interest-bearing liabilities:
              
FHLB advances
178,468
  
874
  
0.65
%
  
6,473
  
24
  
0.50
%
Other borrowings
108,632
  
234
  
0.29
%
  
92,377
  
137
  
0.20
%
Junior subordinated debentures
140,212
  
2,962
  
2.82
%
  
130,030
  
2,357
  
2.42
%
Total borrowings
427,312
  
4,070
  
1.27
%
  
228,880
  
2,518
  
1.47
%
Total funding liabilities
8,433,697
  
12,571
  
0.20
%
  
4,457,747
  
7,758
  
0.23
%
Other non-interest-bearing liabilities(2)
64,825
        
4,275
      
Total liabilities
8,498,522
        
4,462,022
      
Shareholders' equity
1,333,179
        
646,283
      
Total liabilities and shareholders' equity
$
9,831,701
        
$
5,108,305
      
Net interest income/rate spread
  
$
277,899
  
4.15
%
    
$
150,181
  
4.13
%
Net interest margin
    
4.16
%
      
4.14
%
Additional Key Financial Ratios:
              
Return on average assets
    
0.85
%
      
1.00
%
Return on average equity
    
6.27
%
      
7.93
%
Average equity/average assets
    
13.56
%
      
12.65
%
Average interest-earning assets/average interest-bearing liabilities
    
163.70
%
      
161.79
%
Average interest-earning assets/average funding liabilities
    
105.86
%
      
108.77
%
Non-interest income/average assets
    
0.87
%
      
1.15
%
Non-interest expense/average assets
    
3.30
%
      
3.57
%
Efficiency ratio(4)
    
71.08
%
      
70.24
%
Adjusted efficiency ratio(5)
    
65.23
%
      
64.85
%
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 17
 
(1)
Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2)
Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3)
Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4)
Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5)
Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of CDI, real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of the press release tables.
 
 
ADDITIONAL FINANCIAL INFORMATION
                  
(dollars in thousands)
                  
                   
* Non-GAAP Financial Measures (unaudited)
                  
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.
                   
REVENUE FROM CORE OPERATIONS
Quarters Ended
  
Nine months ended
 
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
Net interest income before provision for loan losses
$
93,708
    
$
93,148
    
$
52,188
    
$
277,899
    
$
150,181
  
Total non-interest income
23,512
    
20,537
    
14,098
    
64,007
    
43,935
  
Total GAAP revenue
117,220
    
113,685
    
66,286
    
341,906
    
194,116
  
      Exclude net (gain) loss on sale of securities
(891
)
  
380
    
—
    
(531
)
  
537
  
      Exclude change in valuation of financial instruments carried at fair value
1,124
    
377
    
1,113
    
1,472
    
(735
)
Revenue from core operations (non-GAAP)
$
117,453
    
$
114,442
    
$
67,399
    
$
342,847
    
$
193,918
  


INCOME FROM CORE OPERATIONS
Quarters Ended
  
Nine months ended
 
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
Income before provision for taxes (GAAP)
36,128
    
31,798
    
19,589
    
94,893
    
57,769
  
Exclude net (gain) loss on sale of securities
(891
)
  
380
    
—
    
(531
)
  
537
  
Exclude change in valuation of financial instruments carried at fair value
1,124
    
377
    
1,113
    
1,472
    
(735
)
Exclude acquisition costs
1,720
    
2,412
    
2,207
    
10,945
    
7,741
  
Income from core operations before provision for taxes (non-GAAP)
38,081
    
34,967
    
22,909
    
106,779
    
65,312
  

ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGIN
Quarters Ended
  
Nine months ended
 
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
Net interest income before provision for loan losses (GAAP)
$
93,708
    
$
93,148
    
$
52,188
    
$
277,899
    
$
150,181
  
Exclude discount accretion on purchased loans
(2,446
)
  
(3,214
)
  
(359
)
  
(7,349
)
  
(987
)
Exclude premium amortization on acquired certificates of deposit
(316
)
  
(460
)
  
(53
)
  
(1,237
)
  
(176
)
Net interest income before acquisition accounting impact (non-GAAP)
$
90,946
    
$
89,474
    
$
51,776
    
$
269,313
    
$
149,018
  
                   
Average interest-earning assets (GAAP)
$
8,977,969
    
$
8,930,215
    
$
5,005,985
    
$
8,927,744
    
$
4,848,664
  
Exclude average net loan discount on acquired loans
36,958
    
41,246
    
4,314
    
40,504
    
4,140
  
Average interest-earning assets before acquired loan discount (non-GAAP)
$
9,014,927
    
$
8,971,461
    
$
5,010,299
    
$
8,968,248
    
$
4,852,804
  
                   
Net interest margin (GAAP)
4.15
%
  
4.20
%
  
4.14
%
  
4.16
%
  
4.14
%
Exclude impact on net interest margin from discount accretion
(0.11
)
  
(0.14
)
  
(0.03
)
  
(0.11
)
  
(0.03
)
Exclude impact on net interest margin from CD premium amortization
(0.01
)
  
(0.02
)
  
—
    
(0.02
)
  
—
  
Exclude impact of net loan discount on average earning assets
(0.02
)
  
(0.03
)
  
(0.01
)
  
(0.02
)
  
—
  
Net margin before acquisition accounting impact (non-GAAP)
4.01
%
  
4.01
%
  
4.10
%
  
4.01
%
  
4.11
%
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 18

 
ADDITIONAL FINANCIAL INFORMATION
                    
(dollars in thousands except shares and per share data)
                    
   
Quarters Ended
  
Nine months ended
   
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS
                    
Total non-interest income (GAAP)
  
$
23,512
    
$
20,537
    
$
14,098
    
$
64,007
    
$
43,935
  
      Exclude net (gain) loss on sale of securities
  
(891
)
  
380
    
—
    
(531
)
  
537
  
      Exclude change in valuation of financial instruments carried at fair value
  
1,124
    
377
    
1,113
    
1,472
    
(735
)
Non-interest income from core operations (non-GAAP)
  
$
23,745
    
$
21,294
    
$
15,211
    
$
64,948
    
$
43,737
  
                     
Total non-interest expense (GAAP)
  
$
79,092
    
$
79,887
    
$
46,697
    
$
243,013
    
$
136,347
  
      Exclude acquisition related costs
  
(1,720
)
  
(2,412
)
  
(2,207
)
  
(10,945
)
  
(7,741
)
Non-interest expense from core operations (non-GAAP)
  
$
77,372
    
$
77,475
    
$
44,490
    
$
232,068
    
$
128,606
  

   
Quarters Ended
  
Nine months ended
   
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
EARNINGS FROM CORE OPERATIONS
                    
Net income (GAAP)
  
$
23,851
    
$
20,957
    
$
12,947
    
$
62,581
    
$
38,329
  
Exclude net (gain) loss on sale of securities
  
(891
)
  
380
    
—
    
(531
)
  
537
  
Exclude change in valuation of financial instruments carried at
fair value
  
1,124
    
377
    
1,113
    
1,472
    
(735
)
Exclude acquisition-related costs
  
1,720
    
2,412
    
2,207
    
10,945
    
7,741
  
Exclude related tax expense (benefit)
  
(703
)
  
(1,141
)
  
(1,092
)
  
(4,261
)
  
(2,165
)
Total earnings from core operations (non-GAAP)
  
$
25,101
    
$
22,985
    
$
15,175
    
$
70,206
    
$
43,707
  
                     
Diluted earnings per share (GAAP)
  
$
0.70
    
$
0.61
    
$
0.62
    
$
1.83
    
$
1.87
  
Diluted core earnings per share (non-GAAP)
  
$
0.74
    
$
0.67
    
$
0.73
    
$
2.06
    
$
2.14
  
                     
NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS
                    
Acquisition-related costs
  
$
(1,720
)
  
$
(2,412
)
  
$
(2,207
)
  
$
(10,945
)
  
$
(7,741
)
Related tax benefit
  
619
    
868
    
691
    
3,922
    
2,237
  
Total net effect of acquisition-related costs on earnings
  
$
(1,101
)
  
$
(1,544
)
  
$
(1,516
)
  
$
(7,023
)
  
$
(5,504
)
                     
Diluted weighted average shares outstanding
  
34,124,611
    
34,116,498
    
20,821,377
    
34,104,875
    
20,467,609
  
Total net effect of acquisition-related costs on diluted weighted average
earnings per share
  
$
(0.03
)
  
$
(0.05
)
  
$
(0.07
)
  
$
(0.21
)
  
$
(0.27
)
 
 

 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 19


ADDITIONAL FINANCIAL INFORMATION
                    
(dollars in thousands)
                    
   
Quarters Ended
  
Nine months ended
   
Sep 30, 2016
  
Jun 30, 2016
  
Sep 30, 2015
  
Sep 30, 2016
  
Sep 30, 2015
ADJUSTED EFFICIENCY RATIO
                    
Non-interest expense (GAAP)
  
$
79,092
    
$
79,887
    
$
46,697
    
$
243,013
    
$
136,347
  
Exclude acquisition-related costs
  
(1,720
)
  
(2,412
)
  
(2,207
)
  
(10,945
)
  
(7,741
)
Exclude CDI amortization
  
(1,724
)
  
(1,808
)
  
(286
)
  
(5,339
)
  
(1,268
)
Exclude B&O tax expense
  
(956
)
  
(770
)
  
(475
)
  
(2,564
)
  
(1,383
)
Exclude REO gain (loss)
  
21
    
(137
)
  
2
    
(513
)
  
(190
)
Adjusted non-interest expense (non-GAAP)
  
$
74,713
    
$
74,760
    
$
43,731
    
$
223,652
    
$
125,765
  
                     
Net interest income before provision for loan losses (GAAP)
  
$
93,708
    
$
93,148
    
$
52,188
    
$
277,899
    
$
150,181
  
Non-interest income (GAAP)
  
23,512
    
20,537
    
14,098
    
64,007
    
43,935
  
Total revenue
  
117,220
    
113,685
    
66,286
    
341,906
    
194,116
  
Exclude net (gain) loss on sale of securities
  
(891
)
  
380
    
—
    
(531
)
  
537
  
Exclude net change in valuation of financial instruments carried at fair value
  
1,124
    
377
    
1,113
    
1,472
    
(735
)
Adjusted revenue (non-GAAP)
  
$
117,453
    
$
114,442
    
$
67,399
    
$
342,847
    
$
193,918
  
                     
Efficiency ratio (GAAP)
  
67.47
%
  
70.27
%
  
70.45
%
  
71.08
%
  
70.24
%
Adjusted efficiency ratio (non-GAAP)
  
63.61
%
  
65.33
%
  
64.88
%
  
65.23
%
  
64.85
%

                 
   
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS
                
Shareholders' equity (GAAP)
  
$
1,331,271
    
$
1,338,517
    
$
1,300,059
    
$
671,202
  
      Exclude goodwill and other intangible assets, net
  
276,517
    
278,307
    
285,210
    
26,605
  
Tangible common shareholders' equity (non-GAAP)
  
$
1,054,754
    
$
1,060,210
    
$
1,014,849
    
$
644,597
  
                 
Total assets (GAAP)
  
$
9,841,028
    
$
9,916,205
    
$
9,796,298
    
$
5,312,310
  
      Exclude goodwill and other intangible assets, net
  
276,517
    
278,307
    
285,210
    
26,605
  
Total tangible assets (non-GAAP)
  
$
9,564,511
    
$
9,637,898
    
$
9,511,088
    
$
5,285,705
  
Tangible common shareholders' equity to tangible assets (non-GAAP)
  
11.03
%
  
11.00
%
  
10.67
%
  
12.20
%
                 
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
                
Tangible common shareholders' equity
  
$
1,054,754
    
$
1,060,210
    
$
1,014,849
    
$
644,597
  
Common shares outstanding at end of period
  
33,867,311
    
34,350,560
    
34,242,255
    
20,962,300
  
Common shareholders' equity (book value) per share (GAAP)
  
$
39.31
    
$
38.97
    
$
37.97
    
$
32.02
  
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)
  
$
31.14
    
$
30.86
    
$
29.64
    
$
30.75
  
 
 
 
BANR - Third Quarter 2016 Results
October 26, 2016
Page 20

ADDITIONAL FINANCIAL INFORMATION
                
(dollars in thousands)
                
   
Sep 30, 2016
  
Jun 30, 2016
  
Dec 31, 2015
  
Sep 30, 2015
RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS
                
Loans receivable (GAAP)
  
$
7,398,637
    
$
7,325,925
    
$
7,314,504
    
4,369,458
  
Net loan discount on acquired loans
  
34,867
    
38,838
    
43,657
    
4,258
  
Adjusted loans (non-GAAP)
  
$
7,433,504
    
$
7,364,763
    
$
7,358,161
    
4,373,716
  
                 
Allowance for loan losses (GAAP)
  
$
84,220
    
$
81,318
    
$
78,008
    
77,320
  
Net loan discount on acquired loans
  
34,867
    
38,838
    
43,657
    
4,258
  
Adjusted allowance for loan losses (non-GAAP)
  
$
119,087
    
$
120,156
    
$
121,665
    
81,578
  
                 
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)
  
1.60
%
  
1.63
%
  
1.65
%
  
1.87
%