Banner Corporation Reports Net Income of $36.5 Million, or $1.03 Per Diluted Share, for Third Quarter 2020; Declares Quarterly Cash Dividend of $0.41 Per Share; Commits $1.5 million to Support Minority-Owned Small Businesses
Banner Corporation (NASDAQ GSM: BANR) reported a net income of $36.5 million ($1.03 per diluted share) for Q3 2020, up from $23.5 million in Q2, but down from $39.6 million in Q3 2019. Year-to-date net income stands at $77.0 million, a decline from $112.6 million last year. The Board declared a quarterly cash dividend of $0.41 per share, payable on November 12, 2020. The company increased its allowance for credit losses to $168.0 million due to COVID-19 impacts. Total assets rose to $14.64 billion, and net loans decreased to $10.00 billion, with mortgage revenues more than doubling YoY.
- Net income increased to $36.5 million from $23.5 million in Q2 2020.
- Quarterly cash dividend of $0.41 per share declared, payable on November 12, 2020.
- Mortgage banking revenues more than doubled YoY, reaching $16.6 million.
- Total revenues grew 1% quarter-over-quarter and 9% year-over-year.
- Year-to-date net income declined to $77.0 million from $112.6 million a year ago.
- Increased allowance for credit losses to $168.0 million due to economic uncertainties.
- Net loans decreased to $10.00 billion from $10.13 billion in Q2 2020.
WALLA WALLA, Wash., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank and Islanders Bank, today reported net income of
Banner also announced that its Board of Directors declared a regular quarterly cash dividend of
“The continued successful execution of our super community bank strategy generated solid revenue growth compared to both the preceding quarter and the year ago quarter. Mortgage banking revenues more than doubled compared to a year ago, reflecting strong refinance demand and higher margins due to decreasing market interest rates,” said Mark Grescovich, President and CEO. “Third quarter earnings were impacted by a number of items, including the allowance for credit losses based on the impact of the COVID-19 pandemic on the economy. As an additional way to support the communities we serve, during this period of economic adversity, the company committed
“Due to the pandemic, and its subsequent impact on our communities, we have proactively downgraded certain modified loans and other loans we consider at risk,” Grescovich said. “As a result, along with recent further deterioration in economic conditions, we increased the allowance for credit losses to
At September 30, 2020, Banner Corporation had
COVID-19 Pandemic Update
- SBA Paycheck Protection Program. The U.S. Small Business Administration (SBA) provides assistance to small businesses impacted by COVID-19 through the Paycheck Protection Program (PPP), which was designed to provide near-term relief to help small businesses sustain operations. As of September 30, 2020, Banner had funded 9,103 applications totaling
$1.15 billion of loans in its service area through the PPP program. The deadline for PPP loan applications to the SBA was August 8, 2020. Banner is no longer accepting new applications for PPP loans and is preparing to process applications for PPP loan forgiveness beginning in the fourth quarter of 2020. Banner will continue to assist small businesses with other borrowing options as they become available. - Loan Accommodations. Banner is continuing to offer payment and financial relief programs for borrowers impacted by COVID-19. These programs include initial loan payment deferrals or interest-only payments for up to 90 days, waived late fees, and, on a more limited basis, waived interest and temporarily suspended foreclosure proceedings. Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or may be eligible for an additional deferral period for up to 90 days. In addition, Banner has entered into payment forbearance agreements with other customers for periods of up to six months. Year to date, Banner has deferred payment or waived interest on 3,370 loans totaling
$1.09 billion . Through September 30, 2020 the deferral period had ended for approximately78% , or$849.7 million of these loans, leaving$239.6 million still on deferral. Of the loans still on deferral, 107 loans totaling$160.4 million have received a second deferral. Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings through September 30, 2020 pursuant to applicable accounting and regulatory guidance. - Allowance for Credit Losses - Loans. Banner recorded a provision for credit losses of
$13.6 million for the third quarter of 2020, compared to a$29.5 million provision in the preceding quarter and a$2.0 million provision for loan losses in the third quarter a year ago. The provisions for the current and preceding quarters reflect expected lifetime credit losses based upon the conditions and economic outlook that existed as of September 30, 2020 and June 30, 2020, respectively. - Branch Operations, IT Changes and One-Time Expenses. Banner has taken various steps to help protect customers and staff by limiting branch activities to appointment only and use of drive-up facilities, and by encouraging the use of digital and electronic banking channels. In select markets on a test basis, Banner has begun taking steps to resume more normal branch activities with specific guidelines in place to ensure the safety of its clients and personnel. To further the well-being of staff and customers, Banner implemented measures to allow employees to work from home to the extent practicable. To facilitate this approach, Banner allocated additional computer equipment to staff and enhanced Banner’s network capabilities with several upgrades. These expenses plus other expenses incurred in response to the COVID-19 pandemic resulted in
$778,000 of related costs during the third quarter of 2020, compared to$2.2 million of related costs in the second quarter of 2020. - Capital Management. At September 30, 2020, the tangible common shareholders’ equity to tangible assets* ratio was
8.78% and Banner’s capital was well in excess of all regulatory requirements. On June 30, 2020, Banner issued and sold in an underwritten offering$100.0 million aggregate principal amount of5.000% Fixed-to-Floating Rate Subordinated Notes due 2030 (Notes) at a public offering price equal to100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately$98.1 million . In response to the COVID-19 pandemic outbreak and to preserve capital, Banner has suspended repurchases of shares under its stock repurchase program until further notice and will closely monitor capital levels going forward.
Third Quarter 2020 Highlights
- Revenues increased to
$149.2 million , compared to$147.3 million in the preceding quarter, and increased9% when compared to$137.5 million in the third quarter a year ago. - Net interest income, before the provision for credit losses, increased to
$121.0 million in the third quarter of 2020, compared to$119.6 million in the preceding quarter and$116.6 million in the third quarter a year ago. - Net interest margin was
3.65% , compared to3.81% in the preceding quarter and4.25% in the third quarter a year ago. - Net interest margin on a tax equivalent basis was
3.72% , compared to3.87% in the preceding quarter and4.29% in the third quarter a year ago. - Mortgage banking revenues increased
17% to$16.6 million , compared to$14.1 million in the preceding quarter, and increased150% compared to$6.6 million in the third quarter a year ago, reflecting strong refinance and purchase demand coupled with higher margins due to decreasing market interest rates. - Return on average assets was
1.01% , compared to0.68% in the preceding quarter and1.31% in the third quarter a year ago. - Net loans receivable decreased to
$10.00 billion at September 30, 2020, compared to$10.13 billion at June 30, 2020, and increased14% when compared to$8.74 billion at September 30, 2019. - Non-performing assets decreased to
$36.7 million , or0.25% of total assets, at September 30, 2020, compared to$39.9 million , or0.28% of total assets in the preceding quarter, and increased from$18.6 million , or0.15% of total assets, at September 30, 2019. - Provision for credit losses - loans was
$13.6 million , and the allowance for credit losses - loans was$168.0 million , or1.65% of total loans receivable, as of September 30, 2020, compared to$156.4 million , or1.52% of total loans receivable as of June 30, 2020 and$97.8 million or1.11% of total loans receivable as of September 30, 2019. - A
$1.5 million provision for credit losses - unfunded loan commitments was recorded and the allowance for credit losses - unfunded loan commitments was$12.1 million as of September 30, 2020, compared to$10.6 million as of June 30, 2020. - Core deposits increased
3% to$11.30 billion at September 30, 2020, compared to$10.97 billion at June 30, 2020, and increased33% compared to$8.51 billion a year ago. Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) represented93% of total deposits at September 30, 2020. - Dividends to shareholders were
$0.41 per share in the quarter ended September 30, 2020. - Common shareholders’ equity per share increased
1% to$46.83 at September 30, 2020, compared to$46.22 at the preceding quarter end, and increased5% from$44.80 a year ago. - Tangible common shareholders’ equity per share* increased
2% to$35.56 at September 30, 2020, compared to$34.89 at the preceding quarter end, and increased4% from$34.10 a year ago.
*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income before provision for loan losses and non-interest income) and the adjusted efficiency ratio (which excludes acquisition-related expenses, COVID-19 expenses, amortization of core deposit intangibles, real estate owned gain (loss), Federal Home Loan Bank (FHLB) prepayment penalties and state/municipal taxes from non-interest expense divided by adjusted revenue) 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 two pages of this press release.
Significant Recent Initiatives and Events
On September 25, 2020, Banner completed the consolidation of six branches. In addition, Banner has made the decision to consolidate another 14 branches in December of 2020. Client adoption of mobile and digital banking accelerated during the second and third quarters, while physical branch transaction volume declined. We believe this shift in client service delivery channel preference will sustain after the pandemic social distancing related restrictions have ended.
On July 22, 2020, Banner announced plans to merge Islanders Bank into Banner Bank. Regulatory approvals for the merger were received in October 2020, and the merger is expected to be completed in the first quarter of 2021.
On November 1, 2019, Banner completed the acquisition of AltaPacific Bancorp (AltaPacific) and its wholly-owned subsidiary, AltaPacific Bank, of Santa Rosa, California. At closing, AltaPacific Bank had six branch locations, including one in Northern California and five in Southern California. Pursuant to the previously announced terms, AltaPacific shareholders received 0.2712 shares of Banner common stock in exchange for each share of AltaPacific common stock, plus cash in lieu of any fractional shares and cash to buyout AltaPacific stock options for a total consideration paid of
The AltaPacific merger was accounted for using the acquisition method of accounting. Accordingly, the assets (including identifiable intangible assets) and the liabilities of AltaPacific were measured 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 attributed 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 measurement period of one year from the acquisition date. The acquisition provided
Income Statement Review
Net interest income, before the provision for credit losses, was
Banner’s net interest margin on a tax equivalent basis was
“During the quarter, the low interest rate environment putting downward pressure on adjustable rate instruments combined with the impact of the low loan yields of the SBA PPP loan portfolio, and growth in core deposits, resulting in significant growth in low yielding interest-bearing deposits, adversely impacted our net interest margin,” said Grescovich. Acquisition accounting adjustments added seven basis points to the net interest margin in both the current quarter and in the preceding quarter and six basis points in the third quarter a year ago. The total purchase discount for acquired loans was
Average interest-earning asset yields decreased 18 basis points to
Banner recorded a
Total non-interest income was
Banner’s third quarter 2020 results included a
Banner’s total revenue increased
Total non-interest expense was
For the third quarter of 2020, Banner had
Balance Sheet Review
Total assets increased
Net loans receivable decreased
Loans held for sale were
Total deposits increased
At September 30, 2020, total common shareholders’ equity was
Banner and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At September 30, 2020, Banner's common equity Tier 1 capital ratio was
Credit Quality
The allowance for credit losses - loans was
In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net purchase discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for credit losses is recorded for acquired loans at the acquisition date. At September 30, 2020, the total purchase discount for acquired loans was
Banner’s total substandard loans were
Banner’s total non-performing assets were
Conference Call
Banner will host a conference call on Thursday, October 22, 2020, 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 10147897, or at www.bannerbank.com.
About the Company
Banner Corporation is a
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.
The COVID-19, pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
RESULTS OF OPERATIONS | Quarters Ended | Nine Months Ended | ||||||||||||||||||
(in thousands except shares and per share data) | Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | |||||||||||||||
INTEREST INCOME: | ||||||||||||||||||||
Loans receivable | $ | 116,716 | $ | 115,173 | $ | 118,096 | $ | 350,815 | $ | 350,558 | ||||||||||
Mortgage-backed securities | 7,234 | 7,983 | 9,415 | 24,354 | 29,716 | |||||||||||||||
Securities and cash equivalents | 5,631 | 5,591 | 3,925 | 14,824 | 11,996 | |||||||||||||||
129,581 | 128,747 | 131,436 | 389,993 | 392,270 | ||||||||||||||||
INTEREST EXPENSE: | ||||||||||||||||||||
Deposits | 5,179 | 6,694 | 10,014 | 20,623 | 27,680 | |||||||||||||||
Federal Home Loan Bank advances | 988 | 984 | 3,107 | 4,036 | 9,953 | |||||||||||||||
Other borrowings | 128 | 238 | 82 | 482 | 209 | |||||||||||||||
Junior subordinated debentures and subordinated notes | 2,260 | 1,251 | 1,612 | 4,988 | 5,008 | |||||||||||||||
8,555 | 9,167 | 14,815 | 30,129 | 42,850 | ||||||||||||||||
Net interest income before provision for credit losses | 121,026 | 119,580 | 116,621 | 359,864 | 349,420 | |||||||||||||||
PROVISION FOR CREDIT LOSSES | 13,641 | 29,528 | 2,000 | 64,917 | 6,000 | |||||||||||||||
Net interest income | 107,385 | 90,052 | 114,621 | 294,947 | 343,420 | |||||||||||||||
NON-INTEREST INCOME: | ||||||||||||||||||||
Deposit fees and other service charges | 8,742 | 7,546 | 10,331 | 26,091 | 36,995 | |||||||||||||||
Mortgage banking operations | 16,562 | 14,138 | 6,616 | 40,891 | 15,967 | |||||||||||||||
Bank-owned life insurance | 1,286 | 2,317 | 1,076 | 4,653 | 3,475 | |||||||||||||||
Miscellaneous | 951 | 1,427 | 2,914 | 5,017 | 5,431 | |||||||||||||||
27,541 | 25,428 | 20,937 | 76,652 | 61,868 | ||||||||||||||||
Net gain (loss) on sale of securities | 644 | 93 | (2 | ) | 815 | (29 | ) | |||||||||||||
Net change in valuation of financial instruments carried at fair value | 37 | 2,199 | (69 | ) | (2,360 | ) | (172 | ) | ||||||||||||
Total non-interest income | 28,222 | 27,720 | 20,866 | 75,107 | 61,667 | |||||||||||||||
NON-INTEREST EXPENSE: | ||||||||||||||||||||
Salary and employee benefits | 61,171 | 63,415 | 59,090 | 184,494 | 169,359 | |||||||||||||||
Less capitalized loan origination costs | (8,517 | ) | (11,110 | ) | (7,889 | ) | (25,433 | ) | (20,137 | ) | ||||||||||
Occupancy and equipment | 13,022 | 12,985 | 12,566 | 39,114 | 39,013 | |||||||||||||||
Information / computer data services | 6,090 | 6,084 | 5,657 | 17,984 | 16,256 | |||||||||||||||
Payment and card processing services | 4,044 | 3,851 | 4,330 | 12,135 | 12,355 | |||||||||||||||
Professional and legal expenses | 2,368 | 2,163 | 2,704 | 6,450 | 7,474 | |||||||||||||||
Advertising and marketing | 1,105 | 652 | 2,221 | 3,584 | 5,815 | |||||||||||||||
Deposit insurance expense | 1,628 | 1,705 | (1,604 | ) | 4,968 | 1,232 | ||||||||||||||
State/municipal business and use taxes | 1,196 | 1,104 | 1,011 | 3,284 | 2,963 | |||||||||||||||
Real estate operations | (11 | ) | 4 | 126 | 93 | 263 | ||||||||||||||
Amortization of core deposit intangibles | 1,864 | 2,002 | 1,985 | 5,867 | 6,090 | |||||||||||||||
Provision/(recapture) for credit losses - unfunded loan commitments | 1,539 | (905 | ) | — | 2,356 | — | ||||||||||||||
Miscellaneous | 5,285 | 5,199 | 6,435 | 16,841 | 20,230 | |||||||||||||||
90,784 | 87,149 | 86,632 | 271,737 | 260,913 | ||||||||||||||||
COVID-19 expenses | 778 | 2,152 | — | 3,169 | — | |||||||||||||||
Acquisition-related expenses | 5 | 336 | 676 | 1,483 | 3,125 | |||||||||||||||
Total non-interest expense | 91,567 | 89,637 | 87,308 | 276,389 | 264,038 | |||||||||||||||
Income before provision for income taxes | 44,040 | 28,135 | 48,179 | 93,665 | 141,049 | |||||||||||||||
PROVISION FOR INCOME TAXES | 7,492 | 4,594 | 8,602 | 16,694 | 28,426 | |||||||||||||||
NET INCOME | $ | 36,548 | $ | 23,541 | $ | 39,577 | $ | 76,971 | $ | 112,623 | ||||||||||
Earnings per share available to common shareholders: | ||||||||||||||||||||
Basic | $ | 1.04 | $ | 0.67 | $ | 1.15 | $ | 2.18 | $ | 3.24 | ||||||||||
Diluted | $ | 1.03 | $ | 0.67 | $ | 1.15 | $ | 2.17 | $ | 3.23 | ||||||||||
Cumulative dividends declared per common share | $ | 0.41 | $ | — | $ | 0.41 | $ | 0.82 | $ | 1.23 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||
Basic | 35,193,109 | 35,189,260 | 34,407,462 | 35,285,567 | 34,760,607 | |||||||||||||||
Diluted | 35,316,679 | 35,283,690 | 34,497,994 | 35,524,771 | 34,850,006 | |||||||||||||||
Increase (decrease) in common shares outstanding | 669 | 55,440 | (400,286 | ) | (593,008 | ) | (1,009,415 | ) |
FINANCIAL CONDITION | Percentage Change | |||||||||||||||||||||||||||||
(in thousands except shares and per share data) | Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | Prior Qtr | Prior Yr Qtr | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||
Cash and due from banks | $ | 289,144 | $ | 291,036 | $ | 234,359 | $ | 250,671 | (0.7 | ) | % | 15.3 | % | |||||||||||||||||
Interest-bearing deposits | 416,394 | 128,938 | 73,376 | 73,785 | 222.9 | % | 464.3 | % | ||||||||||||||||||||||
Total cash and cash equivalents | 705,538 | 419,974 | 307,735 | 324,456 | 68.0 | % | 117.5 | % | ||||||||||||||||||||||
Securities - trading | 23,276 | 23,239 | 25,636 | 25,672 | 0.2 | % | (9.3 | ) | % | |||||||||||||||||||||
Securities - available for sale | 1,758,384 | 1,706,781 | 1,551,557 | 1,539,908 | 3.0 | % | 14.2 | % | ||||||||||||||||||||||
Securities - held to maturity | 429,033 | 441,075 | 236,094 | 230,056 | (2.7 | ) | % | 86.5 | % | |||||||||||||||||||||
Total securities | 2,210,693 | 2,171,095 | 1,813,287 | 1,795,636 | 1.8 | % | 23.1 | % | ||||||||||||||||||||||
Equity securities | 450,255 | 340,052 | — | — | 32.4 | % | nm | |||||||||||||||||||||||
Federal Home Loan Bank stock | 16,363 | 16,363 | 28,342 | 25,623 | — | % | (36.1 | ) | % | |||||||||||||||||||||
Loans held for sale | 185,938 | 258,700 | 210,447 | 244,889 | (28.1 | ) | % | (24.1 | ) | % | ||||||||||||||||||||
Loans receivable | 10,163,917 | 10,283,999 | 9,305,357 | 8,835,368 | (1.2 | ) | % | 15.0 | % | |||||||||||||||||||||
Allowance for credit losses - loans | (167,965 | ) | (156,352 | ) | (100,559 | ) | (97,801 | ) | 7.4 | % | 71.7 | % | ||||||||||||||||||
Net loans receivable | 9,995,952 | 10,127,647 | 9,204,798 | 8,737,567 | (1.3 | ) | % | 14.4 | % | |||||||||||||||||||||
Accrued interest receivable | 48,321 | 48,806 | 37,962 | 40,033 | (1.0 | ) | % | 20.7 | % | |||||||||||||||||||||
Real estate owned held for sale, net | 1,795 | 2,400 | 814 | 228 | (25.2 | ) | % | 687.3 | % | |||||||||||||||||||||
Property and equipment, net | 171,576 | 173,360 | 178,008 | 171,279 | (1.0 | ) | % | 0.2 | % | |||||||||||||||||||||
Goodwill | 373,121 | 373,121 | 373,121 | 339,154 | — | % | 10.0 | % | ||||||||||||||||||||||
Other intangibles, net | 23,291 | 25,155 | 29,158 | 26,610 | (7.4 | ) | % | (12.5 | ) | % | ||||||||||||||||||||
Bank-owned life insurance | 191,755 | 190,468 | 192,088 | 179,076 | 0.7 | % | 7.1 | % | ||||||||||||||||||||||
Other assets | 267,477 | 258,466 | 228,271 | 213,291 | 3.5 | % | 25.4 | % | ||||||||||||||||||||||
Total assets | $ | 14,642,075 | $ | 14,405,607 | $ | 12,604,031 | $ | 12,097,842 | 1.6 | % | 21.0 | % | ||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||
Non-interest-bearing | $ | 5,412,570 | $ | 5,281,559 | $ | 3,945,000 | $ | 3,885,210 | 2.5 | % | 39.3 | % | ||||||||||||||||||
Interest-bearing transaction and savings accounts | 5,887,419 | 5,692,715 | 4,983,238 | 4,624,970 | 3.4 | % | 27.3 | % | ||||||||||||||||||||||
Interest-bearing certificates | 915,352 | 1,042,006 | 1,120,403 | 1,218,591 | (12.2 | ) | % | (24.9 | ) | % | ||||||||||||||||||||
Total deposits | 12,215,341 | 12,016,280 | 10,048,641 | 9,728,771 | 1.7 | % | 25.6 | % | ||||||||||||||||||||||
Advances from Federal Home Loan Bank | 150,000 | 150,000 | 450,000 | 382,000 | — | % | (60.7 | ) | % | |||||||||||||||||||||
Customer repurchase agreements and other borrowings | 176,983 | 166,084 | 118,474 | 120,014 | 6.6 | % | 47.5 | % | ||||||||||||||||||||||
Subordinated notes, net | 98,114 | 98,140 | — | — | — | % | nm | |||||||||||||||||||||||
Junior subordinated debentures at fair value | 109,821 | 109,613 | 119,304 | 113,417 | 0.2 | % | (3.2 | ) | % | |||||||||||||||||||||
Accrued expenses and other liabilities | 200,038 | 194,964 | 227,889 | 181,351 | 2.6 | % | 10.3 | % | ||||||||||||||||||||||
Deferred compensation | 45,249 | 45,423 | 45,689 | 41,354 | (0.4 | ) | % | 9.4 | % | |||||||||||||||||||||
Total liabilities | 12,995,546 | 12,780,504 | 11,009,997 | 10,566,907 | 1.7 | % | 23.0 | % | ||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||
Common stock | 1,347,612 | 1,345,096 | 1,373,940 | 1,286,711 | 0.2 | % | 4.7 | % | ||||||||||||||||||||||
Retained earnings | 222,959 | 201,448 | 186,838 | 203,704 | 10.7 | % | 9.5 | % | ||||||||||||||||||||||
Other components of shareholders’ equity | 75,958 | 78,559 | 33,256 | 40,520 | (3.3 | ) | % | 87.5 | % | |||||||||||||||||||||
Total shareholders’ equity | 1,646,529 | 1,625,103 | 1,594,034 | 1,530,935 | 1.3 | % | 7.6 | % | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 14,642,075 | $ | 14,405,607 | $ | 12,604,031 | $ | 12,097,842 | 1.6 | % | 21.0 | % | ||||||||||||||||||
Common Shares Issued: | ||||||||||||||||||||||||||||||
Shares outstanding at end of period | 35,158,568 | 35,157,899 | 35,751,576 | 34,173,357 | ||||||||||||||||||||||||||
Common shareholders’ equity per share (1) | $ | 46.83 | $ | 46.22 | $ | 44.59 | $ | 44.80 | ||||||||||||||||||||||
Common shareholders’ tangible equity per share (1) (2) | $ | 35.56 | $ | 34.89 | $ | 33.33 | $ | 34.10 | ||||||||||||||||||||||
Common shareholders’ tangible equity to tangible assets (2) | 8.78 | % | 8.76 | % | 9.77 | % | 9.93 | % | ||||||||||||||||||||||
Consolidated Tier 1 leverage capital ratio | 9.56 | % | 9.83 | % | 10.71 | % | 10.70 | % |
(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 final two pages of the press release tables. |
ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Percentage Change | ||||||||||||||||||||||||
LOANS | Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | Prior Qtr | Prior Yr Qtr | ||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Owner-occupied | $ | 1,049,877 | $ | 1,027,399 | $ | 980,021 | $ | 883,233 | 2.2 | % | 18.9 | % | ||||||||||||
Investment properties | 1,991,258 | 2,017,789 | 2,024,988 | 1,867,593 | (1.3 | ) | % | 6.6 | % | |||||||||||||||
Small balance CRE | 597,971 | 624,726 | 613,484 | 609,620 | (4.3 | ) | % | (1.9 | ) | % | ||||||||||||||
Multifamily real estate | 426,659 | 437,201 | 388,388 | 314,447 | (2.4 | ) | % | 35.7 | % | |||||||||||||||
Construction, land and land development: | ||||||||||||||||||||||||
Commercial construction | 220,285 | 215,860 | 210,668 | 190,532 | 2.0 | % | 15.6 | % | ||||||||||||||||
Multifamily construction | 291,105 | 256,335 | 233,610 | 214,878 | 13.6 | % | 35.5 | % | ||||||||||||||||
One- to four-family construction | 518,085 | 528,966 | 544,308 | 507,674 | (2.1 | ) | % | 2.1 | % | |||||||||||||||
Land and land development | 240,803 | 235,602 | 245,530 | 250,681 | 2.2 | % | (3.9 | ) | % | |||||||||||||||
Commercial business: | ||||||||||||||||||||||||
Commercial business | 2,343,619 | 2,372,216 | 1,364,650 | 1,277,089 | (1.2 | ) | % | 83.5 | % | |||||||||||||||
Small business scored | 763,824 | 779,678 | 772,657 | 769,538 | (2.0 | ) | % | (0.7 | ) | % | ||||||||||||||
Agricultural business, including secured by farmland | 326,169 | 328,077 | 337,271 | 355,994 | (0.6 | ) | % | (8.4 | ) | % | ||||||||||||||
One- to four-family residential | 771,431 | 817,787 | 925,531 | 908,988 | (5.7 | ) | % | (15.1 | ) | % | ||||||||||||||
Consumer: | ||||||||||||||||||||||||
Consumer—home equity revolving lines of credit | 504,523 | 515,603 | 519,336 | 534,876 | (2.1 | ) | % | (5.7 | ) | % | ||||||||||||||
Consumer—other | 118,308 | 126,760 | 144,915 | 150,225 | (6.7 | ) | % | (21.2 | ) | % | ||||||||||||||
Total loans receivable | $ | 10,163,917 | $ | 10,283,999 | $ | 9,305,357 | $ | 8,835,368 | (1.2 | ) | % | 15.0 | % | |||||||||||
Restructured loans performing under their restructured terms | $ | 5,790 | $ | 6,391 | $ | 6,466 | $ | 6,721 | ||||||||||||||||
Loans 30 - 89 days past due and on accrual | $ | 18,158 | $ | 20,807 | $ | 20,178 | $ | 11,496 | ||||||||||||||||
Total delinquent loans (including loans on non-accrual), net | $ | 37,464 | $ | 36,269 | $ | 38,322 | $ | 26,830 | ||||||||||||||||
Total delinquent loans / Total loans receivable | 0.37 | % | 0.35 | % | 0.41 | % | 0.30 | % |
LOANS BY GEOGRAPHIC LOCATION | Percentage Change | |||||||||||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | Prior Qtr | Prior Yr Qtr | |||||||||||||||||||||
Amount | Percentage | Amount | Amount | Amount | ||||||||||||||||||||||
Washington | $ | 4,767,113 | 46.8 | % | $ | 4,787,550 | $ | 4,364,764 | $ | 4,313,972 | (0.4 | ) | % | 10.5 | % | |||||||||||
California | 2,316,739 | 22.8 | % | 2,359,703 | 2,129,789 | 1,729,208 | (1.8 | ) | % | 34.0 | % | |||||||||||||||
Oregon | 1,858,465 | 18.3 | % | 1,899,933 | 1,650,704 | 1,615,192 | (2.2 | ) | % | 15.1 | % | |||||||||||||||
Idaho | 576,983 | 5.7 | % | 592,515 | 530,016 | 552,523 | (2.6 | ) | % | 4.4 | % | |||||||||||||||
Utah | 76,314 | 0.8 | % | 67,929 | 60,958 | 62,197 | 12.3 | % | 22.7 | % | ||||||||||||||||
Other | 568,303 | 5.6 | % | 576,369 | 569,126 | 562,276 | (1.4 | ) | % | 1.1 | % | |||||||||||||||
Total loans receivable | $ | 10,163,917 | 100.0 | % | $ | 10,283,999 | $ | 9,305,357 | $ | 8,835,368 | (1.2 | ) | % | 15.0 | % |
ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
The following table shows loan originations (excluding loans held for sale) activity for the quarters ending September 30, 2020, June 30, 2020, and September 30, 2019.
LOAN ORIGINATIONS | Quarters Ended | ||||||||||
Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | |||||||||
Commercial real estate | $ | 74,400 | $ | 111,765 | $ | 106,690 | |||||
Multifamily real estate | 2,664 | 6,384 | 27,522 | ||||||||
Construction and land | 412,463 | 290,955 | 303,151 | ||||||||
Commercial business | 153,577 | 1,318,438 | 208,277 | ||||||||
Agricultural business | 16,990 | 16,293 | 10,993 | ||||||||
One-to four-family residential | 32,733 | 24,537 | 27,184 | ||||||||
Consumer | 132,100 | 126,653 | 99,823 | ||||||||
Total loan originations (excluding loans held for sale) | $ | 824,927 | $ | 1,895,025 | $ | 783,640 |
ADDITIONAL FINANCIAL INFORMATION | ||||||||||||
(dollars in thousands) | ||||||||||||
Quarters Ended | ||||||||||||
CHANGE IN THE | Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | |||||||||
ALLOWANCE FOR CREDIT LOSSES - LOANS | ||||||||||||
Balance, beginning of period | $ | 156,352 | $ | 130,488 | $ | 98,254 | ||||||
Provision for credit losses - loans | 13,641 | 29,524 | 2,000 | |||||||||
Recoveries of loans previously charged off: | ||||||||||||
Commercial real estate | 23 | 54 | 107 | |||||||||
Construction and land | — | 105 | 156 | |||||||||
One- to four-family real estate | 94 | 31 | 129 | |||||||||
Commercial business | 246 | 370 | 162 | |||||||||
Agricultural business, including secured by farmland | — | 22 | 2 | |||||||||
Consumer | 82 | 60 | 154 | |||||||||
445 | 642 | 710 | ||||||||||
Loans charged off: | ||||||||||||
Commercial real estate | (379) | — | (314) | |||||||||
Construction and land | — | (100) | — | |||||||||
One- to four-family real estate | (72) | — | (86) | |||||||||
Commercial business | (1,297) | (3,553) | (1,599) | |||||||||
Agricultural business, including secured by farmland | (492) | (62) | (741) | |||||||||
Consumer | (233) | (587) | (423) | |||||||||
(2,473) | (4,302) | (3,163) | ||||||||||
Net (charge-offs)/recoveries | (2,028) | (3,660) | (2,453) | |||||||||
Balance, end of period | $ | 167,965 | $ | 156,352 | $ | 97,801 | ||||||
Net (charge-offs)/recoveries / Average loans receivable | (0.019) | % | (0.036) | % | (0.027) | % |
ALLOCATION OF | ||||||||||||
ALLOWANCE FOR CREDIT LOSSES - LOANS | Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | |||||||||
Specific or allocated credit loss allowance: | ||||||||||||
Commercial real estate | $ | 59,705 | $ | 53,166 | $ | 28,515 | ||||||
Multifamily real estate | 3,256 | 3,504 | 4,283 | |||||||||
Construction and land | 39,477 | 36,916 | 22,569 | |||||||||
One- to four-family real estate | 12,868 | 12,746 | 4,569 | |||||||||
Commercial business | 35,369 | 33,870 | 21,147 | |||||||||
Agricultural business, including secured by farmland | 5,051 | 4,517 | 3,895 | |||||||||
Consumer | 12,239 | 11,633 | 8,441 | |||||||||
Total allocated | 167,965 | 156,352 | 93,419 | |||||||||
Unallocated | — | — | 4,382 | |||||||||
Total allowance for credit losses - loans | $ | 167,965 | $ | 156,352 | $ | 97,801 | ||||||
Allowance for credit losses - loans / Total loans receivable | 1.65 | % | 1.52 | % | 1.11 | % | ||||||
Allowance for credit losses - loans / Non-performing loans | 482 | % | 418 | % | 536 | % |
Quarters Ended | ||||||||||||
CHANGE IN THE | Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | |||||||||
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS | ||||||||||||
Balance, beginning of period | $ | 10,555 | $ | 11,460 | $ | 2,599 | ||||||
Provision/(recapture) for credit losses - unfunded loan commitments | 1,539 | (905) | — | |||||||||
Balance, end of period | $ | 12,094 | $ | 10,555 | $ | 2,599 |
ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||
(dollars in thousands) | |||||||||||||||
Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | ||||||||||||
NON-PERFORMING ASSETS | |||||||||||||||
Loans on non-accrual status: | |||||||||||||||
Secured by real estate: | |||||||||||||||
Commercial | $ | 7,824 | $ | 10,845 | $ | 5,952 | $ | 5,092 | |||||||
Multifamily | — | — | 85 | 87 | |||||||||||
Construction and land | 937 | 732 | 1,905 | 1,318 | |||||||||||
One- to four-family | 2,978 | 2,942 | 3,410 | 3,007 | |||||||||||
Commercial business | 14,867 | 18,486 | 23,015 | 3,035 | |||||||||||
Agricultural business, including secured by farmland | 2,066 | 433 | 661 | 757 | |||||||||||
Consumer | 2,896 | 2,412 | 2,473 | 2,473 | |||||||||||
31,568 | 35,850 | 37,501 | 15,769 | ||||||||||||
Loans more than 90 days delinquent, still on accrual: | |||||||||||||||
Secured by real estate: | |||||||||||||||
Commercial | — | — | 89 | 89 | |||||||||||
Construction and land | — | — | 332 | 1,141 | |||||||||||
One- to four-family | 2,649 | 472 | 877 | 652 | |||||||||||
Commercial business | 425 | 1 | 401 | 358 | |||||||||||
Agricultural business, including secured by farmland | — | 1,061 | — | — | |||||||||||
Consumer | 181 | 36 | 398 | 247 | |||||||||||
3,255 | 1,570 | 2,097 | 2,487 | ||||||||||||
Total non-performing loans | 34,823 | 37,420 | 39,598 | 18,256 | |||||||||||
Real estate owned (REO) | 1,795 | 2,400 | 814 | 228 | |||||||||||
Other repossessed assets | 37 | 47 | 122 | 115 | |||||||||||
Total non-performing assets | $ | 36,655 | $ | 39,867 | $ | 40,534 | $ | 18,599 | |||||||
Total non-performing assets to total assets | 0.25 | % | 0.28 | % | 0.32 | % | 0.15 | % |
Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | ||||||||||||
LOANS BY CREDIT RISK RATING | |||||||||||||||
Pass | $ | 9,699,098 | $ | 9,869,917 | $ | 9,130,662 | $ | 8,702,171 | |||||||
Special Mention | 41,575 | 54,291 | 61,189 | 19,989 | |||||||||||
Substandard | 423,244 | 359,791 | 113,448 | 113,150 | |||||||||||
Doubtful | — | — | 58 | 58 | |||||||||||
Total | $ | 10,163,917 | $ | 10,283,999 | $ | 9,305,357 | $ | 8,835,368 |
Quarters Ended | Nine Months Ended | ||||||||||||||||||
REAL ESTATE OWNED | Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | ||||||||||||||
Balance, beginning of period | $ | 2,400 | $ | 2,402 | $ | 2,513 | $ | 814 | $ | 2,611 | |||||||||
Additions from loan foreclosures | — | — | 48 | 1,588 | 109 | ||||||||||||||
Proceeds from dispositions of REO | (707 | ) | (98 | ) | (2,333 | ) | (805 | ) | (2,483 | ) | |||||||||
Gain (loss) on sale of REO | 120 | 96 | — | 216 | (9 | ) | |||||||||||||
Valuation adjustments in the period | (18 | ) | — | — | (18 | ) | — | ||||||||||||
Balance, end of period | $ | 1,795 | $ | 2,400 | $ | 228 | $ | 1,795 | $ | 228 |
ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
DEPOSIT COMPOSITION | Percentage Change | |||||||||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | Prior Qtr | Prior Yr Qtr | |||||||||||||||||||
Non-interest-bearing | $ | 5,412,570 | $ | 5,281,559 | $ | 3,945,000 | $ | 3,885,210 | 2.5 | % | 39.3 | % | ||||||||||||
Interest-bearing checking | 1,434,224 | 1,399,593 | 1,280,003 | 1,209,826 | 2.5 | % | 18.5 | % | ||||||||||||||||
Regular savings accounts | 2,332,287 | 2,197,790 | 1,934,041 | 1,863,839 | 6.1 | % | 25.1 | % | ||||||||||||||||
Money market accounts | 2,120,908 | 2,095,332 | 1,769,194 | 1,551,305 | 1.2 | % | 36.7 | % | ||||||||||||||||
Total interest-bearing transaction and savings accounts | 5,887,419 | 5,692,715 | 4,983,238 | 4,624,970 | 3.4 | % | 27.3 | % | ||||||||||||||||
Total core deposits | 11,299,989 | 10,974,274 | 8,928,238 | 8,510,180 | 3.0 | % | 32.8 | % | ||||||||||||||||
Interest-bearing certificates | 915,352 | 1,042,006 | 1,120,403 | 1,218,591 | (12.2 | ) | % | (24.9 | ) | % | ||||||||||||||
Total deposits | $ | 12,215,341 | $ | 12,016,280 | $ | 10,048,641 | $ | 9,728,771 | 1.7 | % | 25.6 | % |
GEOGRAPHIC CONCENTRATION OF DEPOSITS | |||||||||||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | Percentage Change | |||||||||||||||||||||
Amount | Percentage | Amount | Amount | Amount | Prior Qtr | Prior Yr Qtr | |||||||||||||||||||
Washington | $ | 6,820,329 | 55.8 | % | $ | 6,765,186 | $ | 5,861,809 | $ | 5,833,547 | 0.8 | % | 16.9 | % | |||||||||||
Oregon | 2,486,760 | 20.4 | % | 2,440,617 | 2,006,163 | 1,990,155 | 1.9 | % | 25.0 | % | |||||||||||||||
California | 2,254,681 | 18.4 | % | 2,224,477 | 1,698,289 | 1,429,939 | 1.4 | % | 57.7 | % | |||||||||||||||
Idaho | 653,571 | 5.4 | % | 586,000 | 482,380 | 475,130 | 11.5 | % | 37.6 | % | |||||||||||||||
Total deposits | $ | 12,215,341 | 100.0 | % | $ | 12,016,280 | $ | 10,048,641 | $ | 9,728,771 | 1.7 | % | 25.6 | % |
INCLUDED IN TOTAL DEPOSITS | Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | ||||||||||||
Public non-interest-bearing accounts | $ | 142,415 | $ | 139,133 | $ | 111,015 | $ | 114,879 | ||||||||
Public interest-bearing transaction & savings accounts | 117,514 | 136,039 | 133,403 | 119,729 | ||||||||||||
Public interest-bearing certificates | 54,219 | 56,609 | 35,184 | 26,609 | ||||||||||||
Total public deposits | $ | 314,148 | $ | 331,781 | $ | 279,602 | $ | 261,217 | ||||||||
Total brokered deposits | $ | — | $ | 119,399 | $ | 202,884 | $ | 299,496 |
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, 2020 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
Banner Corporation-consolidated: | |||||||||||||||||||||
Total capital to risk-weighted assets | $ | 1,574,737 | 14.65 | % | $ | 859,979 | 8.00 | % | $ | 1,074,974 | 10.00 | % | |||||||||
Tier 1 capital to risk-weighted assets | 1,340,173 | 12.47 | % | 644,985 | 6.00 | % | 644,985 | 6.00 | % | ||||||||||||
Tier 1 leverage capital to average assets | 1,340,173 | 9.56 | % | 560,816 | 4.00 | % | n/a | n/a | |||||||||||||
Common equity tier 1 capital to risk-weighted assets | 1,196,673 | 11.13 | % | 483,738 | 4.50 | % | n/a | n/a | |||||||||||||
Banner Bank: | |||||||||||||||||||||
Total capital to risk-weighted assets | 1,409,158 | 13.34 | % | 845,076 | 8.00 | % | 1,056,344 | 10.00 | % | ||||||||||||
Tier 1 capital to risk-weighted assets | 1,276,928 | 12.09 | % | 633,807 | 6.00 | % | 845,076 | 8.00 | % | ||||||||||||
Tier 1 leverage capital to average assets | 1,276,928 | 9.31 | % | 548,867 | 4.00 | % | 686,083 | 5.00 | % | ||||||||||||
Common equity tier 1 capital to risk-weighted assets | 1,276,928 | 12.09 | % | 475,355 | 4.50 | % | 686,624 | 6.50 | % | ||||||||||||
Islanders Bank: | |||||||||||||||||||||
Total capital to risk-weighted assets | 29,516 | 15.14 | % | 15,594 | 8.00 | % | 19,493 | 10.00 | % | ||||||||||||
Tier 1 capital to risk-weighted assets | 27,077 | 13.89 | % | 11,696 | 6.00 | % | 15,594 | 8.00 | % | ||||||||||||
Tier 1 leverage capital to average assets | 27,077 | 8.15 | % | 13,289 | 4.00 | % | 16,611 | 5.00 | % | ||||||||||||
Common equity tier 1 capital to risk-weighted assets | 27,077 | 13.89 | % | 8,772 | 4.50 | % | 12,671 | 6.50 | % |
ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||
(rates / ratios annualized) | |||||||||||||||||||||||||||||||||||
ANALYSIS OF NET INTEREST SPREAD | Quarters Ended | ||||||||||||||||||||||||||||||||||
September 30, 2020 | June 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||||||||||
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 | $ | 161,385 | $ | 1,535 | 3.78 | % | $ | 152,636 | $ | 1,451 | 3.82 | % | $ | 154,529 | $ | 1,607 | 4.13 | % | |||||||||||||||||
Mortgage loans | 7,339,181 | 88,011 | 4.77 | % | 7,314,125 | 87,172 | 4.79 | % | 6,872,426 | 90,268 | 5.21 | % | |||||||||||||||||||||||
Commercial/agricultural loans | 2,862,291 | 26,396 | 3.67 | % | 2,599,878 | 25,200 | 3.90 | % | 1,809,397 | 24,319 | 5.33 | % | |||||||||||||||||||||||
Consumer and other loans | 140,493 | 2,195 | 6.22 | % | 152,438 | 2,361 | 6.23 | % | 173,342 | 2,791 | 6.39 | % | |||||||||||||||||||||||
Total loans(1)(3) | 10,503,350 | 118,137 | 4.47 | % | 10,219,077 | 116,184 | 4.57 | % | 9,009,694 | 118,985 | 5.24 | % | |||||||||||||||||||||||
Mortgage-backed securities | 1,250,759 | 7,333 | 2.33 | % | 1,286,223 | 8,083 | 2.53 | % | 1,358,448 | 9,484 | 2.77 | % | |||||||||||||||||||||||
Other securities | 884,916 | 6,036 | 2.71 | % | 787,957 | 5,859 | 2.99 | % | 414,994 | 3,378 | 3.23 | % | |||||||||||||||||||||||
Equity securities | 379,483 | 186 | 0.19 | % | 114,349 | 123 | 0.43 | % | — | — | — | % | |||||||||||||||||||||||
Interest-bearing deposits with banks | 171,894 | 123 | 0.28 | % | 212,502 | 172 | 0.33 | % | 82,836 | 489 | 2.34 | % | |||||||||||||||||||||||
FHLB stock | 16,363 | 163 | 3.96 | % | 16,620 | 300 | 7.26 | % | 29,400 | 378 | 5.10 | % | |||||||||||||||||||||||
Total investment securities (3) | 2,703,415 | 13,841 | 2.04 | % | 2,417,651 | 14,537 | 2.42 | % | 1,885,678 | 13,729 | 2.89 | % | |||||||||||||||||||||||
Total interest-earning assets | 13,206,765 | 131,978 | 3.98 | % | 12,636,728 | 130,721 | 4.16 | % | 10,895,372 | 132,714 | 4.83 | % | |||||||||||||||||||||||
Non-interest-earning assets | 1,259,816 | 1,245,626 | 1,078,621 | ||||||||||||||||||||||||||||||||
Total assets | $ | 14,466,581 | $ | 13,882,354 | $ | 11,973,993 | |||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||||||||
Interest-bearing checking accounts | $ | 1,413,085 | 321 | 0.09 | % | $ | 1,376,710 | 374 | 0.11 | % | $ | 1,194,633 | 621 | 0.21 | % | ||||||||||||||||||||
Savings accounts | 2,251,294 | 813 | 0.14 | % | 2,108,896 | 998 | 0.19 | % | 1,854,967 | 2,244 | 0.48 | % | |||||||||||||||||||||||
Money market accounts | 2,096,037 | 1,224 | 0.23 | % | 1,979,419 | 1,565 | 0.32 | % | 1,542,264 | 2,944 | 0.76 | % | |||||||||||||||||||||||
Certificates of deposit | 966,028 | 2,821 | 1.16 | % | 1,117,547 | 3,757 | 1.35 | % | 1,155,710 | 4,205 | 1.44 | % | |||||||||||||||||||||||
Total interest-bearing deposits | 6,726,444 | 5,179 | 0.31 | % | 6,582,572 | 6,694 | 0.41 | % | 5,747,574 | 10,014 | 0.69 | % | |||||||||||||||||||||||
Non-interest-bearing deposits | 5,340,688 | — | — | % | 4,902,992 | — | — | % | 3,786,143 | — | — | % | |||||||||||||||||||||||
Total deposits | 12,067,132 | 5,179 | 0.17 | % | 11,485,564 | 6,694 | 0.23 | % | 9,533,717 | 10,014 | 0.42 | % | |||||||||||||||||||||||
Other interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
FHLB advances | 150,000 | 988 | 2.62 | % | 156,374 | 984 | 2.53 | % | 476,435 | 3,107 | 2.59 | % | |||||||||||||||||||||||
Other borrowings | 177,628 | 128 | 0.29 | % | 285,735 | 238 | 0.34 | % | 122,035 | 82 | 0.27 | % | |||||||||||||||||||||||
Junior subordinated debentures and subordinated notes | 247,944 | 2,260 | 3.63 | % | 149,043 | 1,251 | 3.38 | % | 140,212 | 1,612 | 4.56 | % | |||||||||||||||||||||||
Total borrowings | 575,572 | 3,376 | 2.33 | % | 591,152 | 2,473 | 1.68 | % | 738,682 | 4,801 | 2.58 | % | |||||||||||||||||||||||
Total funding liabilities | 12,642,704 | 8,555 | 0.27 | % | 12,076,716 | 9,167 | 0.31 | % | 10,272,399 | 14,815 | 0.57 | % | |||||||||||||||||||||||
Other non-interest-bearing liabilities(2) | 193,256 | 188,369 | 163,809 | ||||||||||||||||||||||||||||||||
Total liabilities | 12,835,960 | 12,265,085 | 10,436,208 | ||||||||||||||||||||||||||||||||
Shareholders’ equity | 1,630,621 | 1,617,269 | 1,537,785 | ||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 14,466,581 | $ | 13,882,354 | $ | 11,973,993 | |||||||||||||||||||||||||||||
Net interest income/rate spread (tax equivalent) | $ | 123,423 | 3.71 | % | $ | 121,554 | 3.85 | % | $ | 117,899 | 4.26 | % | |||||||||||||||||||||||
Net interest margin (tax equivalent) | 3.72 | % | 3.87 | % | 4.29 | % | |||||||||||||||||||||||||||||
Reconciliation to reported net interest income: | |||||||||||||||||||||||||||||||||||
Adjustments for taxable equivalent basis | (2,397 | ) | (1,974 | ) | (1,278 | ) | |||||||||||||||||||||||||||||
Net interest income and margin, as reported | $ | 121,026 | 3.65 | % | $ | 119,580 | 3.81 | % | $ | 116,621 | 4.25 | % | |||||||||||||||||||||||
Additional Key Financial Ratios: | |||||||||||||||||||||||||||||||||||
Return on average assets | 1.01 | % | 0.68 | % | 1.31 | % | |||||||||||||||||||||||||||||
Return on average equity | 8.92 | % | 5.85 | % | 10.21 | % | |||||||||||||||||||||||||||||
Average equity/average assets | 11.27 | % | 11.65 | % | 12.84 | % | |||||||||||||||||||||||||||||
Average interest-earning assets/average interest-bearing liabilities | 180.86 | % | 176.15 | % | 167.98 | % | |||||||||||||||||||||||||||||
Average interest-earning assets/average funding liabilities | 104.46 | % | 104.64 | % | 106.06 | % | |||||||||||||||||||||||||||||
Non-interest income/average assets | 0.78 | % | 0.80 | % | 0.69 | % | |||||||||||||||||||||||||||||
Non-interest expense/average assets | 2.52 | % | 2.60 | % | 2.89 | % | |||||||||||||||||||||||||||||
Efficiency ratio(4) | 61.35 | % | 60.85 | % | 63.50 | % | |||||||||||||||||||||||||||||
Adjusted efficiency ratio(5) | 59.05 | % | 57.95 | % | 60.71 | % |
(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 |
(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. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables. |
ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
(rates / ratios annualized) | |||||||||||||||||||||||
ANALYSIS OF NET INTEREST SPREAD | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | ||||||||||||||||||||||
Average Balance | Interest and Dividends | Yield/Cost(3) | Average Balance | Interest and Dividends | Yield/Cost(3) | ||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||
Held for sale loans | $ | 155,571 | $ | 4,506 | 3.87 | % | $ | 100,273 | $ | 3,295 | 4.39 | % | |||||||||||
Mortgage loans | 7,321,206 | 268,244 | 4.89 | % | 6,835,861 | 269,588 | 5.27 | % | |||||||||||||||
Commercial/agricultural loans | 2,450,234 | 74,555 | 4.06 | % | 1,761,222 | 72,086 | 5.47 | % | |||||||||||||||
Consumer and other loans | 151,968 | 7,151 | 6.29 | % | 178,792 | 8,545 | 6.39 | % | |||||||||||||||
Total loans(1)(3) | 10,078,979 | 354,456 | 4.70 | % | 8,876,148 | 353,514 | 5.32 | % | |||||||||||||||
Mortgage-backed securities | 1,297,020 | 24,652 | 2.54 | % | 1,368,081 | 29,785 | 2.91 | % | |||||||||||||||
Other securities | 710,967 | 15,205 | 2.86 | % | 449,030 | 10,894 | 3.24 | % | |||||||||||||||
Equity securities | 165,395 | 309 | 0.25 | % | — | — | — | % | |||||||||||||||
Interest-bearing deposits with banks | 159,065 | 688 | 0.58 | % | 60,655 | 1,118 | 2.46 | % | |||||||||||||||
FHLB stock | 19,822 | 785 | 5.29 | % | 30,679 | 1,031 | 4.49 | % | |||||||||||||||
Total investment securities(3) | 2,352,269 | 41,639 | 2.36 | % | 1,908,445 | 42,828 | 3.00 | % | |||||||||||||||
Total interest-earning assets | 12,431,248 | 396,095 | 4.26 | % | 10,784,593 | 396,342 | 4.91 | % | |||||||||||||||
Non-interest-earning assets | 1,232,997 | 1,053,180 | |||||||||||||||||||||
Total assets | $ | 13,664,245 | $ | 11,837,773 | |||||||||||||||||||
Deposits: | |||||||||||||||||||||||
Interest-bearing checking accounts | $ | 1,352,369 | 1,164 | 0.11 | % | $ | 1,175,521 | 1,660 | 0.19 | % | |||||||||||||
Savings accounts | 2,133,780 | 3,566 | 0.22 | % | 1,853,671 | 6,283 | 0.45 | % | |||||||||||||||
Money market accounts | 1,940,096 | 5,228 | 0.36 | % | 1,510,293 | 7,851 | 0.70 | % | |||||||||||||||
Certificates of deposit | 1,069,145 | 10,665 | 1.33 | % | 1,171,363 | 11,886 | 1.36 | % | |||||||||||||||
Total interest-bearing deposits | 6,495,390 | 20,623 | 0.42 | % | 5,710,848 | 27,680 | 0.65 | % | |||||||||||||||
Non-interest-bearing deposits | 4,738,559 | — | — | % | 3,682,047 | — | — | % | |||||||||||||||
Total deposits | 11,233,949 | 20,623 | 0.25 | % | 9,392,895 | 27,680 | 0.39 | % | |||||||||||||||
Other interest-bearing liabilities: | |||||||||||||||||||||||
FHLB advances | 236,949 | 4,036 | 2.28 | % | 508,247 | 9,953 | 2.62 | % | |||||||||||||||
Other borrowings | 195,977 | 482 | 0.33 | % | 120,847 | 209 | 0.23 | % | |||||||||||||||
Junior subordinated debentures and subordinated notes | 181,886 | 4,988 | 3.66 | % | 140,212 | 5,008 | 4.78 | % | |||||||||||||||
Total borrowings | 614,812 | 9,506 | 2.07 | % | 769,306 | 15,170 | 2.64 | % | |||||||||||||||
Total funding liabilities | 11,848,761 | 30,129 | 0.34 | % | 10,162,201 | 42,850 | 0.56 | % | |||||||||||||||
Other non-interest-bearing liabilities(2) | 197,912 | 155,771 | |||||||||||||||||||||
Total liabilities | 12,046,673 | 10,317,972 | |||||||||||||||||||||
Shareholders’ equity | 1,617,572 | 1,519,801 | |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 13,664,245 | $ | 11,837,773 | |||||||||||||||||||
Net interest income/rate spread (tax equivalent) | $ | 365,966 | 3.92 | % | $ | 353,492 | 4.35 | % | |||||||||||||||
Net interest margin (tax equivalent) | 3.93 | % | 4.38 | % | |||||||||||||||||||
Reconciliation to reported net interest income: | |||||||||||||||||||||||
Adjustments for taxable equivalent basis | (6,102 | ) | (4,072 | ) | |||||||||||||||||||
Net interest income and margin, as reported | $ | 359,864 | 3.87 | % | $ | 349,420 | 4.33 | % | |||||||||||||||
Additional Key Financial Ratios: | |||||||||||||||||||||||
Return on average assets | 0.75 | % | 1.27 | % | |||||||||||||||||||
Return on average equity | 6.36 | % | 9.91 | % | |||||||||||||||||||
Average equity/average assets | 11.84 | % | 12.84 | % | |||||||||||||||||||
Average interest-earning assets/average interest-bearing liabilities | ` | 174.84 | % | 166.42 | % | ||||||||||||||||||
Average interest-earning assets/average funding liabilities | 104.92 | % | 106.12 | % | |||||||||||||||||||
Non-interest income/average assets | 0.73 | % | 0.70 | % | |||||||||||||||||||
Non-interest expense/average assets | 2.70 | % | 2.98 | % | |||||||||||||||||||
Efficiency ratio(4) | 63.54 | % | 64.23 | % | |||||||||||||||||||
Adjusted efficiency ratio(5) | 60.13 | % | 61.17 | % |
(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 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 |
(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. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables. |
ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
* Non-GAAP Financial Measures | |||||||||||||||||||
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. 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 | Nine Months Ended | |||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | |||||||||||||||
Net interest income before provision for credit losses | $ | 121,026 | $ | 119,580 | $ | 116,621 | $ | 359,864 | $ | 349,420 | |||||||||
Total non-interest income | 28,222 | 27,720 | 20,866 | 75,107 | 61,667 | ||||||||||||||
Total GAAP revenue | 149,248 | 147,300 | 137,487 | 434,971 | 411,087 | ||||||||||||||
Exclude net (gain) loss on sale of securities | (644 | ) | (93 | ) | 2 | (815 | ) | 29 | |||||||||||
Exclude net change in valuation of financial instruments carried at fair value | (37 | ) | (2,199 | ) | 69 | 2,360 | 172 | ||||||||||||
Adjusted revenue (non-GAAP) | $ | 148,567 | $ | 145,008 | $ | 137,558 | $ | 436,516 | $ | 411,288 |
ADJUSTED EARNINGS | Quarters Ended | Nine Months Ended | ||||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | ||||||||||||||||
Net income (GAAP) | $ | 36,548 | $ | 23,541 | $ | 39,577 | $ | 76,971 | $ | 112,623 | ||||||||||
Exclude net (gain) loss on sale of securities | (644) | (93) | 2 | (815) | 29 | |||||||||||||||
Exclude net change in valuation of financial instruments carried at fair value | (37) | (2,199) | 69 | 2,360 | 172 | |||||||||||||||
Exclude acquisition-related expenses | 5 | 336 | 676 | 1,483 | 3,125 | |||||||||||||||
Exclude COVID-19 expenses | 778 | 2,152 | — | 3,169 | — | |||||||||||||||
Exclude related net tax benefit | (24) | (47) | (49) | (1,476) | (668) | |||||||||||||||
Total adjusted earnings (non-GAAP) | $ | 36,626 | $ | 23,690 | $ | 40,275 | $ | 81,692 | $ | 115,281 | ||||||||||
Diluted earnings per share (GAAP) | $ | 1.03 | $ | 0.67 | $ | 1.15 | $ | 2.17 | $ | 3.23 | ||||||||||
Diluted adjusted earnings per share (non-GAAP) | $ | 1.04 | $ | 0.67 | $ | 1.17 | $ | 2.30 | $ | 3.31 |
ADDITIONAL FINANCIAL INFORMATION | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
ADJUSTED EFFICIENCY RATIO | Quarters Ended | Nine Months Ended | ||||||||||||||||||
Sep 30, 2020 | June 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | ||||||||||||||||
Non-interest expense (GAAP) | $ | 91,567 | $ | 89,637 | $ | 87,308 | $ | 276,389 | $ | 264,038 | ||||||||||
Exclude acquisition-related expenses | (5) | (336) | (676) | (1,483) | (3,125) | |||||||||||||||
Exclude COVID-19 expenses | (778) | (2,152) | — | (3,169) | — | |||||||||||||||
Exclude CDI amortization | (1,864) | (2,002) | (1,985) | (5,867) | (6,090) | |||||||||||||||
Exclude state/municipal tax expense | (1,196) | (1,104) | (1,011) | (3,284) | (2,963) | |||||||||||||||
Exclude REO operations | 11 | (4) | (126) | (93) | (263) | |||||||||||||||
Adjusted non-interest expense (non-GAAP) | $ | 87,735 | $ | 84,039 | $ | 83,510 | $ | 262,493 | $ | 251,597 | ||||||||||
Net interest income before provision for credit losses (GAAP) | $ | 121,026 | $ | 119,580 | $ | 116,621 | $ | 359,864 | $ | 349,420 | ||||||||||
Non-interest income (GAAP) | 28,222 | 27,720 | 20,866 | 75,107 | 61,667 | |||||||||||||||
Total revenue | 149,248 | 147,300 | 137,487 | 434,971 | 411,087 | |||||||||||||||
Exclude net (gain) loss on sale of securities | (644) | (93) | 2 | (815) | 29 | |||||||||||||||
Exclude net change in valuation of financial instruments carried at fair value | (37) | (2,199) | 69 | 2,360 | 172 | |||||||||||||||
Adjusted revenue (non-GAAP) | $ | 148,567 | $ | 145,008 | $ | 137,558 | $ | 436,516 | $ | 411,288 | ||||||||||
Efficiency ratio (GAAP) | 61.35 | % | 60.85 | % | 63.50 | % | 63.54 | % | 64.23 | % | ||||||||||
Adjusted efficiency ratio (non-GAAP) | 59.05 | % | 57.95 | % | 60.71 | % | 60.13 | % | 61.17 | % |
TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS | Sep 30, 2020 | June 30, 2020 | Dec 31, 2019 | Sep 30, 2019 | ||||||||||||
Shareholders’ equity (GAAP) | $ | 1,646,529 | $ | 1,625,103 | $ | 1,594,034 | $ | 1,530,935 | ||||||||
Exclude goodwill and other intangible assets, net | 396,412 | 398,276 | 402,279 | 365,764 | ||||||||||||
Tangible common shareholders’ equity (non-GAAP) | $ | 1,250,117 | $ | 1,226,827 | $ | 1,191,755 | $ | 1,165,171 | ||||||||
Total assets (GAAP) | $ | 14,642,075 | $ | 14,405,607 | $ | 12,604,031 | $ | 12,097,842 | ||||||||
Exclude goodwill and other intangible assets, net | 396,412 | 398,276 | 402,279 | 365,764 | ||||||||||||
Total tangible assets (non-GAAP) | $ | 14,245,663 | $ | 14,007,331 | $ | 12,201,752 | $ | 11,732,078 | ||||||||
Common shareholders’ equity to total assets (GAAP) | 11.25 | % | 11.28 | % | 12.65 | % | 12.65 | % | ||||||||
Tangible common shareholders’ equity to tangible assets (non-GAAP) | 8.78 | % | 8.76 | % | 9.77 | % | 9.93 | % | ||||||||
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE | ||||||||||||||||
Tangible common shareholders’ equity (non-GAAP) | $ | 1,250,117 | $ | 1,226,827 | $ | 1,191,755 | $ | 1,165,171 | ||||||||
Common shares outstanding at end of period | 35,158,568 | 35,157,899 | 35,751,576 | 34,173,357 | ||||||||||||
Common shareholders’ equity (book value) per share (GAAP) | $ | 46.83 | $ | 46.22 | $ | 44.59 | $ | 44.80 | ||||||||
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP) | $ | 35.56 | $ | 34.89 | $ | 33.33 | $ | 34.10 |
CONTACT: | MARK J. GRESCOVICH, |
PRESIDENT & CEO | |
PETER J. CONNER, CFO | |
(509) 527-3636 |
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