Banner Corporation Third Quarter Earnings Increase 41%, Loans Increase 23% and Deposits Increase 21%.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: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 loan and deposit growth, reduced credit costs and controlled expense growth contributed to record third quarter profits. Net income increased 41% to $8.0 million, or $0.65 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $5.7 million, or $0.47 per diluted share, in the third quarter a year ago. For the first nine months of 2006, net income increased 57% to $24.2 million, or $1.98 per diluted share, compared to $15.4 million, or $1.29 per diluted share, in the first nine months of 2005. "Our third quarter and year-to-date profits are a direct result of the sustained growth in our balance sheet. Substantial growth in loans and deposits has strengthened our revenue generating capacity and contributed to year-over-year margin expansion," said D. Michael Jones Mike or Michael Jones may refer to: In sports:
Boise is the capital and most populous city of the U.S. state of Idaho. It is the county seat of Ada County and the principal city of the Boise metropolitan area. , in the environmentally award-winning Banner Bank Building. We are continuing to explore branch expansion opportunities in our primary markets and look forward to a number of new branch openings already scheduled for later this year and throughout 2007. Two new branches could open in December of this year, one in Boise, Idaho and one in Portland, Oregon." In June 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 financial results in the second quarter ended June 30, 2006 and for the nine months ended September 30, 2006. Third Quarter 2006 Highlights (compared to third quarter 2005) * Net income increased 41% to $8.0 million. * Revenues advanced 15% to $38.1 million. * Net interest income before provision for loan losses grew 16% to $32.7 million. * Total deposits increased 21% to $2.74 billion. * Loans increased 23% to $2.87 billion. * Net interest margin improved 22 basis points to 3.99%. * Credit quality remains solid with non-performing assets representing 0.35% of total assets. Income Statement Review Third quarter 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. ) grew 15% to $38.1 million, compared to $33.1 million in the third quarter last year. Revenues increased 16% to $108.7 million in the first nine months of 2006, compared to $93.6 million in the same period a year ago. For the third quarter, net interest income before the provision for loan losses increased 16% to $32.7 million, compared to $28.1 million in the same quarter a year ago. Year-to-date, net interest income before the provision for loan losses increased 17% to $93.8 million, compared to $80.0 million in the same period a year ago. "The increased earnings power in the balance sheet is a direct result of our continuing asset growth," 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 third quarter increased 9% to $5.4 million, compared to $5.0 million for the same quarter last year. Year-to-date, total other operating income increased 10% to $14.9 million, compared to $13.6 million in the first nine months of 2005. Income from deposit fees and other service charges increased 19% to $3.0 million in the third quarter, compared to $2.5 million for the same period in 2005. Banner's net interest margin improved 22 basis points to 3.99% for the third quarter, compared to 3.77% in the third quarter a year ago. However, the margin declined from 4.11% in the second quarter of 2006. Year-to-date, net interest margin improved 36 basis points to 4.11%, compared to 3.75% in the same period a year ago. "Our net interest margin came under pressure again this quarter as deposit costs increased faster than loan yields and changes occurred in our liability mix, both as a result of changes in customer behavior and the funding requirements driven by our loan growth," said Jones. "We expect our net interest margin to experience continued pressure during the next few quarters as pricing remains competitive, the yield curve remains very flat and our funding needs continue to be significant." Funding costs increased 31 basis points compared to the previous quarter and increased 104 basis points from the third quarter a year earlier, while asset yields increased 16 basis points from the prior linked quarter and 121 basis points from a year ago. 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. were $25.3 million in the third quarter of 2006, compared to $25.4 million (excluding the insurance recovery) in the immediately preceding quarter and $23.6 million in the third quarter a year ago. For the first nine months of 2006, other operating expenses were $68.5 million ($73.9 million excluding the insurance recovery), compared to $67.7 million in the first nine months of 2005. The increase is largely due to the branch expansion strategy and the exceptional loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. activity in 2006. "During the last two years we have opened twelve new branches and relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. six other branches. Generally, these new branches are proving to be very successful in helping us to reach new customers and grow deposits. While our expenses were well-behaved in the third quarter, these new branches initially put pressure on our expense ratios; however, over time they will 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 2.92% in the third quarter of 2006, compared to 2.98% for the third quarter last year. Without the insurance recovery, the ratio for the second quarter of 2006 would have been 3.14%. Banner's return on equity (ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. ) was 13.23% for the third quarter compared to 10.03% a year ago. Year-to-date, ROE was 13.81% compared to 9.30% in the nine month period a year ago. The efficiency ratio was 66.50% in the quarter ended September 30, 2006, versus 71.26% a year earlier. For the first nine months of 2006, the efficiency ratio was 63.04%, compared to 72.27% in the first nine months of 2005. Excluding the insurance recovery, the efficiency ratio was 67.96% for the nine months ended September 30, 2006. Balance Sheet Review Total deposits increased 21% to $2.74 billion at September 30, 2006, compared to $2.28 billion at the end of September 2005. 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 4% during the twelve months ending September 30, 2006, and certificates of deposit increased 37%. "In the quarter ended September 30, 2006, we experienced a further shift towards higher-yielding interest-bearing deposit accounts; however, we continue to have success in adding non-interest-bearing deposit accounts as well," said Jones. "While higher rates have motivated mo·ti·vate tr.v. mo·ti·vat·ed, mo·ti·vat·ing, mo·ti·vates To provide with an incentive; move to action; impel. mo customers to more efficiently manage their transaction account balances, as evidenced by the slower rate of growth in non-interest-bearing deposits and the more rapid increase in certificates of deposits, we are still pleased by our growing number of new customer transaction accounts." Net loans increased 23% to $2.87 billion at September 30, 2006, compared to $2.33 billion a year earlier. Year-to-date, loans have increased 19%. "Our lending team is doing an outstanding job of adding excellent new loans to the portfolio while maintaining a high level of credit quality. 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 29%, commercial and multifamily real estate loans 7% and commercial and agricultural business loans 9%." Assets increased 8% to $3.45 billion at September 30, 2006, compared to $3.19 billion a year earlier. Book value per share increased to $20.15 at September 30, 2006, from $19.01 a year earlier, and tangible book value per share was $17.12 at quarter-end, compared to $15.89 a year earlier. Largely as a result of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). transactions in the fourth quarter of 2005, but also reflecting maturities and principal prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , the securities portfolio declined by 46% to $290.5 million at September 30, 2006, from $535.2 million a year earlier. FHLB FHLB Federal Home Loan Bank borrowings declined 56% to $213.9 million at September 30, 2006, from $484.9 million a year earlier, as a result of the restructuring transactions and strong deposit growth, particularly in the quarter ended September 30, 2006. Credit Quality "Loan growth during the first half of the year exceeded our expectations and our budgeted amounts, prompting a significant increase in our loan loss provision during the second quarter of 2006. Fortunately, continued favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. asset quality trends and a significant recovery on a previously charged off loan allowed us to reduce the loan loss provision for the third quarter," noted Jones. The provision for loan losses for the third quarter was $1.0 million, compared to $1.3 million in the same quarter of 2005 and $2.3 million for the second quarter of 2006. Non-performing assets were $12.1 million, or 0.35% of total assets, at September 30, 2006, compared to $13.9 million, or 0.44% of total assets, at September 30, 2005. At June 30, 2006, Banner's non-performing assets totaled $11.0 million or 0.32% of total assets. Banner's net recoveries in the third quarter totaled $542,000, and the allowance for loan losses at quarter-end totaled $35.2 million, representing 1.21% of total loans outstanding. Conference Call Banner will host a conference call on Thursday, October 26, 2006, at 8:00 a.m. PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT , to discuss third quarter results. The conference call can be accessed live by telephone at 303-262-2141. 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 11071745# until Thursday, November 2, 2006, or via the Internet at www.fulldisclosure.com. About the Company Banner Corporation is the parent company of Banner Bank, a commercial bank that operates a total of 58 branch offices and 12 loan offices in 24 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 delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rates, the successful operation of the newly-opened branches and loan offices, changes in accounting principles, practices, policies or guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. , 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] [TABLE OMITTED] [TABLE OMITTED] |
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