Banner's Fourth Quarter Earnings from Recurring Operations Increase 42%(Note A), Loans Increase 22% and Deposits Rise 20%.WALLA WALLA Walla Walla (wŏl`ə wŏl`ə), city (1990 pop. 26,478), seat of Walla Walla co., SE Wash., at the junction of the Walla Walla River and Mill Creek, near the Oregon line; inc. 1862. , Wash. -- Banner Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BANR BANR Board on Agriculture and Natural Resources ), the parent company of Banner Bank Banner Bank is a Washington financial institution based in Walla Walla. Originally known as First Federal Savings And Loan Of Walla Walla, it was the oldest Savings and Loan institution in the state of Washington. , today reported that strong balance sheet growth and an improved net interest margin contributed to higher fourth quarter profits. Net income increased 42% to $8.0 million, or $0.65 per diluted share, compared to earnings from recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. operations, exclusive of the restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , of $5.6 million, or $0.47 per diluted share, in the fourth quarter a year ago (see footnote below and "Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Disclosures Excluding 2006 Insurance Recovery and 2005 Restructuring Charges"). For the full year ended December 31, 2006, net income increased 53% to $32.2 million, or $2.63 per diluted share, compared to earnings from recurring operations, exclusive of the restructuring charges, of $21.0 million, or $1.76 per diluted share, in 2005. "Our improved 2006 profits are a direct result of the sustained growth in our balance sheet and improved net interest margin. Our substantial loan and deposit growth has strengthened our revenue generating capacity and, combined with the balance sheet restructuring that took place at the end of 2005, contributed to this year's margin expansion," said D. Michael Jones Mike or Michael Jones may refer to: In sports:
San Juan (săn wän, Span. sän hwän), city (1991 pop. 353,476), capital of San Juan prov., W Argentina. It is a commercial and industrial center in an agricultural region. Financial Holding Company of Friday Harbor, Washington Friday Harbor is a town in San Juan County, Washington, United States. The population was 1,989 at the 2000 census. Located on San Juan Island, it is the major commercial center of the San Juan Islands archipelago. . F&M Bank will significantly expand our presence in Spokane, the fourth largest metropolitan market in the Pacific Northwest, and San Juan Financial Holding Company will expand our presence in the North Puget Sound Puget Sound (py  `jĕt), arm of the Pacific Ocean, NW Wash., connected with the Pacific by Juan de Fuca Strait, entered through the Admiralty Inlet and extending in two arms c. region
of Washington State. We are well positioned to complete these mergers
and look forward to integrating these new partner institutions. In
addition, we are continuing to explore branch expansion opportunities in
our primary markets and look forward to a number of new branch openings
scheduled for 2007."
In the fourth quarter of 2005, Banner sold $207 million of securities and prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. $142 million of high-cost, fixed-term Federal
Home Loan Bank (FHLB FHLB Federal Home Loan Bank ) borrowings. The remainder of the proceeds were
applied to repay other relatively high-cost short-term borrowings from
the FHLB. Including the effects of the restructuring charges, Banner
reported a loss of $2.9 million, or $0.25 per diluted share, for the
fourth quarter of 2005 and earnings of $12.4 million, or $1.04 per
diluted share, for the year ended December 31, 2005.
In the second quarter of 2006, Banner announced that it had reached a $5.5 million insurance settlement relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a loss incurred in 2001. The net amount of the settlement, after costs, resulted in a $5.4 million credit to other operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. and contributed approximately $3.4 million, or $0.28 per share, to second quarter earnings. 2006 Highlights (compared to 2005) * Signed definitive merger agreements with F&M Bank and San Juan Financial Holding Company. * Total net income increased to $32.2 million and net income from recurring operations increased to $28.7 million. * Net interest income before provision for loan losses grew 17% to $126.9 million. * Total deposits increased 20% to $2.79 billion. * Loans increased 22% to $2.93 billion. * Net interest margin improved 29 basis points to 4.08%. * Credit quality remains solid with non-performing assets representing 0.43% of total assets and net charge-offs declining to just 0.03% of average loans. Income Statement Review Banner's net interest margin was 4.01% for the fourth quarter of 2006, an improvement from 3.99% in the quarter ended September 30, 2006, and from 3.93% for the fourth quarter of 2005. For the full year, the net interest margin was 4.08%, a 29 basis point improvement from 3.79% in 2005. "We expanded our net interest margin in part as a result of the restructuring transactions that took place a year ago. The margin benefited from the strong loan and deposit growth we experienced throughout the year," said Jones. "However, we expect our net interest margin to experience pressure during the next few quarters as pricing remains very competitive, our funding needs continue to be significant and the interest rate environment remains challenging." Funding costs increased 8 basis points compared to the previous quarter and increased 99 basis points from the fourth quarter a year earlier, while asset yields increased 9 basis points from the prior linked quarter and 102 basis points from a year ago. Banner's net interest income before the provision for loan losses increased 15% to $33.1 million in the fourth quarter of 2006, compared to $28.8 million in the same quarter a year ago. Revenues (net interest income before the provision for loan losses plus other operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ) increased 17% to $38.8 million in the fourth quarter of 2006, compared to $33.0 million in the fourth quarter of 2005, excluding the net loss on the sale of securities relating to the balance-sheet restructuring in the fourth quarter of 2005. "The increased earnings power in the balance sheet is a direct result of our continuing asset growth and changing asset mix," said Jones. "Our strong loan growth is producing greater interest income and solid deposit growth is meaningfully adding to our fee income, as well." Total other operating income for the fourth quarter increased 33% to $5.6 million compared to $4.3 million in fourth quarter last year, excluding the net loss on the sale of securities relating to the balance-sheet restructuring in the fourth quarter of 2005. Income from deposit fees and other service charges increased 19% to $3.0 million in the fourth quarter, reflecting increases in debit card debit card, card that allows the cost of goods or services that are purchased to be deducted directly from the purchaser's checking account. They can also be used at automated teller machines for withdrawing cash from the user's checking account. use and merchant banking activity. Income from mortgage banking operations increased by 34% from the fourth quarter of 2005, despite the moderating housing market. During the fourth quarter of 2006 Banner recorded the sale of a branch facility in Walla Walla. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). before taxes for the sold branch produced a pre-tax gain of $670,000 ($429,000 after tax), and are included in miscellaneous income. The facility had been condemned for construction of a new road and will be replaced with a new facility on a nearby site which is scheduled to open in July 2007. For the year ended December 31, 2006, net interest income before the provision for loan losses increased 17% to $126.9 million, compared to $108.8 million a year ago. Revenues increased 16% to $147.5 million for the year, compared to $126.6 million a year ago, excluding the net loss on sale of securities. Total other operating income, excluding the net gain on the sale of the branch facility, increased 11% to $19.8 million for the year ended December 31, 2006, compared to $17.8 million in 2005. Other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased to $25.8 million in the fourth quarter of 2006, compared to $25.3 million in the third quarter of 2006 and $23.8 million in the fourth quarter of 2005, excluding the FHLB prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. relating to the balance-sheet restructuring. For all of 2006, recurring other operating expenses, excluding the insurance recovery, were $99.7 million, a 9% increase compared to $91.5 million in the prior year, exclusive of the FHLB prepayment penalties. The increase is largely due to continued branch expansion activities. "During the last two years we have opened twelve new branches and relocated six other branches. Generally, these new branches are proving to be very successful in helping us to reach new customers and grow low cost deposits to fund our loan growth. Although these new branches initially put pressure on our expense ratios, over time they should add to our profitability by providing low cost core deposits and additional fee income opportunities," said Jones. The ratio of other operating expense (expense ratio) to average assets was 2.95% for the fourth quarter of 2006, compared to 2.92% for the third quarter of 2006 and 3.05% for the fourth quarter a year ago exclusive of the FHLB prepayment penalties. The ratio of recurring other operating expense to average assets was 3.02% for the year ended December 31, 2006, compared to 3.00% for the year ended December 31, 2005, again excluding the FHLB prepayment penalties in the fourth quarter of 2005 and the insurance recovery in the second quarter of 2006. Banner's return on equity (ROE) was 12.77% for the fourth quarter compared to 10.04% a year ago, excluding the restructuring charges. For 2006, ROE was 13.54% (12.10% excluding the insurance recovery) compared to 9.49% a year ago, excluding the restructuring charges. The efficiency ratio was 66.67% in the quarter ended December 31, 2006, versus 72.12% a year earlier, excluding the restructuring charges. For all of 2006, the efficiency ratio was 64.00% (67.62% excluding the insurance recovery), compared to 72.23% in 2005, excluding the restructuring charges. Balance Sheet Review Total deposits increased 20% to $2.79 billion at December 31, 2006, compared to $2.32 billion at the end of December 2005. While non-interest-bearing accounts only increased 1%, total transaction and savings accounts Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: increased 10% during the twelve months ending December 31, 2006, and certificates of deposit increased 29%. "Throughout the year ended December 31, 2006, we experienced a shift towards higher-yielding interest-bearing deposit accounts; however, even though growth in non-interest-bearing account balances was disappointing, we continued to have success in adding to the number of transaction accounts," said Jones. "The 10% increase in transaction and savings deposits Savings deposits Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand. this year over last is a direct result of franchise growth and our ongoing emphasis on building our deposit base system-wide." Net loans increased 22% to $2.93 billion at December 31, 2006, compared to $2.41 billion a year earlier. "While construction and development lending clearly led the way, the major components of the loan portfolio are all showing significant growth over the prior year's balances," said Jones. "Compared to a year ago, we increased construction and land loans 61%, consumer loans 28%, commercial and multifamily real estate loans 6% and commercial and agricultural business loans 7%." Assets increased 15% to $3.50 billion at December 31, 2006, compared to $3.04 billion a year earlier. Book value per share increased to $20.72 at December 31, 2006, from $18.81 a year earlier, and tangible book value per share was $17.72 at quarter-end, compared to $15.73 a year earlier. FHLB borrowings declined 33% to $177.4 million at December 31, 2006, from $265.0 million a year earlier, as a result of strong deposit growth and declining securities balances. The securities portfolio declined by 12% to $274.0 million at December 31, 2006, from $311.2 million a year earlier primarily as a result of maturities and principal prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. . Credit Quality The provision for loan losses for the fourth quarter was $1.0 million, compared to $1.1 million in the same quarter of 2005 and $1.0 million for the third quarter of 2006. For the year 2006, the provision for loan losses was $5.5 million, compared to $4.9 million in 2005. Non-performing assets were $15.0 million, or 0.43% of total assets, at December 31, 2006, compared to $11.0 million, or 0.36% of total assets, at December 31, 2005. At September 30, 2006, Banner's non-performing assets totaled $12.4 million or 0.36% of total assets. Banner's net charge-offs in the fourth quarter totaled $625,000, and the allowance for loan losses at quarter-end totaled $35.5 million, representing 1.20% of total loans outstanding. Conference Call Banner will host a conference call on Thursday, January 25, 2007, at 8:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there , to discuss fourth quarter results. The conference call can be accessed live by telephone at 303-262-2140. To listen to the call online, go to the Company's website at www.bannerbank.com or to www.fulldisclosure.com. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. may access the call via the subscriber-only site, www.streetevents.com. An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11080798# until Thursday, February 1, 2007, or via the Internet at www.fulldisclosure.com. Note A: Earnings information excluding the restructuring charges and insurance recovery represent non-GAAP (Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide more useful and comparative information to assess trends in the Company's core operations reflected in the current quarter and year-to-date results. Where applicable, the Company has also presented comparable earnings information using GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measures. About the Company Banner Corporation is the parent company of Banner Bank, a commercial bank that operates a total of 61 branch offices and 12 loan offices in 26 counties in Washington This is a list of counties in Washington. There are thirty-nine counties in the U.S. state of Washington. Certain residents of Snohomish County consider themselves to be part of Freedom County. , Oregon and Idaho. Banner Bank serves the Pacific Northwest region
The Northwest Region with 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. Statements concerning future performance, developments or events, expectations for earnings, growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are subject to a number of risks and uncertainties that are beyond Banner's control and might cause actual results to differ materially from the expectations and stated objectives. Factors which could cause actual results to differ materially include, but are not limited to, regional and general economic conditions, management's ability to generate continued improvement in asset quality and profitability, changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, competition, loan delinquency rates, the successful operation of the newly-opened branches and loan offices, the ability to successfully complete consolidation and conversion activities, incorporate acquisitions into operations, retain key employees and achieve cost savings, changes in accounting principles, practices, policies or guidelines, changes in legislation or regulation, other economic, competitive, governmental, regulatory and technological factors affecting operations, pricing, products and services, Banner's ability to successfully resolve outstanding credit issues and other risks detailed in Banner's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005. Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Banner undertakes no responsibility to update or revise any forward-looking statements. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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