Walla Walla, WA - October 26, 2016 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation fueled by growth from last year's acquisitions that contributed to solid third quarter results.  Net income in the third quarter of 2016 increased to $23.9 million, or $0.70 per diluted share, compared to $21.0 million, or $0.61 per diluted share, in the preceding quarter and $12.9 million, or $0.62 per diluted share, in the third quarter a year ago.  The current quarter results were impacted by $1.7 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.03 per diluted share, and the preceding quarter results were impacted by $2.4 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.05 per diluted share.

In the first nine months of 2016, net income increased to $62.6 million, or $1.83 per diluted share, compared to $38.3 million, or $1.87 per diluted share, in the first nine months of 2015. Acquisition-related expenses were $10.9 million (or $0.21 net of tax per diluted share) for the nine months ended September 30, 2016, compared to $7.7 million (or $0.27 net of tax per diluted share) for the nine months ended September 30, 2015.

"Our third quarter core operating performance continued to reflect the success of our proven client acquisition, balance sheet management and product pricing strategies, which produced additional core revenue and core deposit growth.  We also benefited from the successful integration of last year's AmericanWest Bank acquisition, which had a dramatic impact on the scale and reach of the Company and is providing enhanced opportunity for future client and revenue growth," stated Mark J. Grescovich, President and Chief Executive Officer.  "During the third quarter, we completed our electronic banking systems conversion and made additional progress in generating operating synergies as a result of the consolidation of overlapping locations and integration of operational activities.  Through the hard work of our employees across the franchise, we are successfully executing on our strategies and priorities to deliver sustainable profitability and revenue growth to Banner."

At September 30, 2016, Banner Corporation had $9.84 billion in assets, $7.31 billion in net loans and $8.11 billion in deposits.  The Company operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.

Third Quarter 2016 Highlights

•	Net income increased 14% to $23.9 million, compared to $21.0 million in the preceding quarter and increased 84% compared to $12.9 million in the third quarter of 2015.

•	Return on average assets was 0.96% in the current quarter, 0.86% in the preceding quarter and 0.97% in the same quarter a year ago.

•	Acquisition-related expenses were $1.7 million which, net of tax benefit, reduced net income by $0.03 per diluted share for the quarter ended September 30, 2016.

•	Revenues from core operations* increased 3% to $117.5 million, compared to $114.4 million in the preceding quarter and increased 74% compared to $67.4 million in the third quarter a year ago.

•	Net interest margin was 4.15% for the current quarter, compared to 4.20% in the second quarter of 2016 and 4.14% in the third quarter a year ago.

•	Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.01%*, the same as in the preceding quarter and was 4.10%* in the third quarter a year ago.

•	Deposit fees and other service charges were $12.9 million, compared to $12.2 million in the preceding quarter and $9.7 million in the same quarter a year ago.

•	Revenues from mortgage banking operations were $8.1 million compared to $6.6 million in the preceding quarter and $4.4 million in the third quarter a year ago.

•	Provision for loan losses was $2.0 million.

•	Net loans increased by $3.02 billion, or 70% year-over-year and increased $69.8 million, or 1%, during the current quarter.

•	Total deposits increased by $3.72 billion, or 85%, compared to a year ago and increased $192.2 million, or 2%, during the current quarter.

BANR - Third Quarter 2016 Results

October 26, 2016

Page 2

 

•	Core deposits increased by $3.33 billion, or 91%, year-over-year, increased $277.9 million, or 4%, during the current quarter, and represented 86% of total deposits at September 30, 2016.

•	Quarterly dividend to shareholders increased 10% to $0.23 per share.

•	Repurchased 484,350 shares of common stock at a cost of $21.1 million and an average price of $43.56 per share.

•	Common shareholders' tangible equity per share* increased to $31.14 at September 30, 2016, compared to $30.86 at the preceding quarter end and $30.75 a year ago.

•	The ratio of tangible common shareholders' equity to tangible assets* remained strong at 11.03% at September 30, 2016 compared to 11.00% at the preceding quarter end and 12.20% a year ago.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), acquisition accounting impact on net interest margin, non-interest expense from core operations (which excludes acquisition-related costs), the adjusted allowance for loan losses to adjusted loans (which includes net loan discounts on acquired loans) and references to tangible common stockholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of this press release.

Acquisition of AmericanWest Bank

Effective October 1, 2015, Banner completed the acquisition of Starbuck Bancshares, Inc. ("Starbuck") and its wholly owned subsidiary AmericanWest Bank.  The merger was accounted for using the acquisition method of accounting.  Accordingly, the acquired assets (including identifiable intangible assets) and assumed liabilities of Starbuck were recognized at their respective estimated fair values as of the merger date.  The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill.  The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date.  The acquisition accounting is subject to adjustment within a post-closing measurement period.  During the third quarter of 2016, there were no post-closing adjustments to goodwill; however, post-closing adjustments reduced goodwill by $3.2 million during the nine months ending September 30, 2016.  The Company does not expect any additional adjustments to goodwill.

In addition to the acquisition of AmericanWest Bank, the acquisition of Siuslaw Financial Group and its wholly-owned subsidiary Siuslaw Bank ("Siuslaw") on March 6, 2015 had a significant impact on the current and historical operating results of Banner.  For additional details regarding acquisitions and merger related expenses, see the tables under Business Combinations on page 12 of this press release.

Income Statement Review

Banner's third quarter net interest income, before the provision for loan losses, increased to $93.7 million, compared to $93.1 million in the preceding quarter.  Third quarter 2016 net interest income, before the provision for loan losses, increased 80% compared to $52.2 million in the third quarter a year ago, largely reflecting the acquisition of AmericanWest Bank but also reflecting continued client acquisition.  In the first nine months of 2016, Banner's net interest income, before the provision for loan losses, increased 85% to $277.9 million compared to $150.2 million in the first nine months of 2015.

"Our net interest margin contracted five basis points compared to the preceding quarter as a result of decreased accretion of acquisition accounting discounts," said Grescovich.  "The net interest margin increased one basis point compared to a year ago.  Excluding the impact of acquisition accounting, the net interest margin was unchanged compared to the preceding quarter, but declined by nine basis points compared to a year ago.*"

Net interest margin is enhanced by the amortization of acquisition accounting discounts on loans acquired in the acquisitions, which are accreted into loan interest income, as well as by net premiums on non-market-rate certificate of deposit liabilities assumed, which are amortized as a reduction to deposit interest expense.  Banner's net interest margin was 4.15% for the third quarter of 2016, which included 11 basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and two basis points as a result of the impact of the net loan acquisition discounts on average earning assets from both the AmericanWest Bank and Siuslaw acquisitions, compared to a net interest margin of 4.20% in the preceding quarter and 4.14% in the third quarter a year ago.  Excluding the effects of acquisition accounting, the net interest margin was 4.01%* in the third quarter and the preceding quarter and 4.10%* in the third quarter a year ago.  The decline compared to a year earlier primarily reflects lower average yields on the loans acquired in the AmericanWest Bank acquisition, as well as the proportionally larger size of the securities portfolio following that acquisition.

 

 

 

Average interest-earning asset yields decreased four basis points to 4.34% compared to 4.38% for the preceding quarter and were unchanged compared to the third quarter a year ago.  Loan yields decreased eight basis points compared to the preceding quarter and increased two basis points from the third quarter a year ago.  The accretion of discounts and related balance sheet impact on the loans acquired through the acquisitions added 15 basis points to reported loan yields for the quarter.  Deposit costs remained unchanged compared to the preceding quarter and decreased two basis points compared to the third quarter a year ago.  Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by two basis points in the third quarter 2016.  The total cost of funds decreased one basis point to 0.19% during the third quarter compared to the preceding quarter and declined three basis points compared to 0.22% for the third quarter a year ago.

"Our credit quality metrics continue to reflect our moderate risk profile," said Grescovich.  "As expected, due to loan growth and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the third quarter, the same as in the preceding quarter."  In the third quarter a year ago, Banner did not record a provision.

"Revenues from mortgage banking were again strong, as home purchase activity continues to be robust in our markets, and low long term interest rates supported additional refinance activity," said Grescovich.  Mortgage banking revenues including gains on single and multifamily loan sales increased 23% to $8.1 million in the third quarter compared to $6.6 million in the preceding quarter and increased 84% compared to $4.4 million in the third quarter of 2015.  Home purchase activity accounted for 65% of third quarter one- to four-family mortgage banking loan originations.  In the first nine months of 2016, mortgage banking revenues increased 54% to $20.4 million compared to $13.2 million in the same period one year ago.  Gains on the sale of multifamily loans were $1.4 million for the third quarter of 2016 and totaled $3.1 million for the first nine months of 2016.

Deposit fees and other service charges increased 6% to $12.9 million in the third quarter compared to $12.2 million in the preceding quarter and increased 33% compared to $9.7 million in the third quarter a year ago.  Reflecting the significant increase in core deposits compared to a year earlier, deposit fees and other service charges increased 35% to $37.0 million for the nine months ended September 30, 2016, compared to $27.4 million in the first nine months of 2015.

Banner's total revenues were $117.2 million for the quarter ended September 30, 2016, compared to $113.7 million in the preceding quarter and $66.3 million in the third quarter a year ago.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) increased 3% to $117.5 million in the third quarter ended September 30, 2016, compared to $114.4 million in the preceding quarter and increased 74% compared to $67.4 million in the third quarter of 2015.  Total revenues for the first nine months of 2016 were $341.9 million compared to $194.1 million in the first nine months of 2015, with the significant increase largely attributable to the acquisition of AmericanWest Bank.  Year-to-date, revenues from core operations* increased 77% to $342.8 million compared to $193.9 million in the first nine months of 2015.

Third quarter 2016 results included a $1.1 million net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partly offset by an $891,000 net gain on the sale of securities.  In the preceding quarter, results included a $377,000 net loss for fair value adjustments, as well as a $380,000 net loss on the sale of securities.  In the third quarter a year ago, results included a $1.1 million net loss for fair value adjustments.

Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $23.5 million in the third quarter of 2016, compared to $20.5 million in the second quarter of 2016 and $14.1 million in the third quarter a year ago.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $23.7 million, compared to $21.3 million for the second quarter of 2016 and $15.2 million in the third quarter a year ago.  For the first nine months of the year, Banner's total non-interest income was $64.0 million compared to $43.9 million in the same period a year ago and non-interest income from core operations* was $64.9 million compared to $43.7 million for the same periods, respectively.

Banner's total non-interest expenses were $79.1 million in the third quarter of 2016, compared to $79.9 million in the preceding quarter and $46.7 million in the third quarter of 2015.  The year-over-year increase in non-interest expenses was largely attributable to the incremental costs associated with operating the branches and the related operations acquired in the AmericanWest Bank merger on October 1, 2015, as well as generally increased compensation, occupancy and payment and card processing services reflecting increased transaction volume.  The current quarter's non-interest expenses also included elevated costs for professional services largely as result of seasonal factors relating to accounting, audit and examination processes, costs incurred in anticipation of enhanced regulatory compliance requirements and costs associated with sales and registration of restricted shares issued in the AmericanWest Bank merger.  There were $1.7 million in acquisition-related expenses in the current quarter compared to $2.4 million in the preceding quarter and $2.2 million in the third quarter a year ago.  In the first nine months of 2016, total non-interest expenses were $243.0 million compared to $136.3 million in the first nine months of 2015.

For the third quarter of 2016, Banner recorded $12.3 million in state and federal income tax expense for an effective tax rate of 34.0%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.

 

 

 

Balance Sheet Review

Reflecting our previously announced strategy to maintain total assets below $10.0 billion through December 31, 2016, Banner's total assets decreased to $9.84 billion at September 30, 2016, from $9.92 billion at June 30, 2016; however total assets increased by 85% compared to $5.31 billion a year ago, largely as a result of the AmericanWest Bank acquisition but also due to strong organic growth.  The total of securities and interest-bearing deposits held at other banks was $1.39 billion at September 30, 2016, compared to $1.54 billion at June 30, 2016 and $648.5 million a year ago.  The decrease in the securities portfolio during the current quarter reflects the temporary deleveraging strategy, while the increase in the securities portfolio compared to a year earlier was primarily a result of securities held by AmericanWest Bank at the time of the merger.  The average effective duration of Banner's securities portfolio was approximately 2.9 years at September 30, 2016 compared to 2.6 years at June 30, 2016.

"Net loans increased during the quarter, with good production in targeted loan types and seasonal growth in certain loan types, including meaningful increases in commercial real estate, construction and development, and agricultural business loans.  Loan production remains solid, as does the regional economy, and we continue to see significant potential for growth in our loan origination pipelines," said Grescovich.

Net loans increased 70% to $7.31 billion at September 30, 2016, compared to $4.29 billion a year ago.  Net loans were $7.24 billion at June 30, 2016.  Commercial real estate and multifamily real estate loans increased 1% to $3.53 billion at September 30, 2016, compared to $3.49 billion at June 30, 2016, and increased 86% compared to $1.90 billion a year ago.  Commercial business loans decreased to $1.19 billion at September 30, 2016, compared to $1.23 billion three months earlier but increased 46% compared to $812.1 million a year ago.  Agricultural business loans increased 3% to $383.3 million at September 30, 2016, compared to $370.5 million three months earlier and increased 58% compared to $242.6 million a year ago.  Total construction, land and land development loans increased 12% to $797.3 million at September 30, 2016, compared to $713.3 million at June 30, 2016, and increased 61% compared to $493.8 million a year earlier.

Banner's total deposits were $8.11 billion at September 30, 2016, a 2% increase compared to $7.92 billion at June 30, 2016, and an 85% increase compared to $4.39 billion a year ago.  In connection with certain product changes earlier in the year, Banner converted approximately $420 million of former AmericanWest Bank interest-bearing deposits to non-interest-bearing deposits during the first quarter of 2016.  As a result of the acquisition and product changes as well as organic growth, non-interest-bearing account balances increased 104% to $3.19 billion at September 30, 2016, compared to $1.56 billion a year ago.  Interest-bearing transaction and savings accounts increased 81% to $3.80 billion compared to $2.10 billion a year ago.  Certificates of deposit increased 54% to $1.12 billion at September 30, 2016, compared to $730.7 million a year earlier.  Brokered deposits totaled $60.3 million at September 30, 2016, compared to $93.0 million at June 30, 2016 and $10.1 million a year ago.

In part reflecting expected seasonal trends but also as a result of additional account growth, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 4% during the current quarter.  Core deposits represented 86% of total deposits at September 30, 2016, compared to 85% of total deposits at June 30, 2016 and 83% of total deposits a year earlier.  As a result of this improved deposit mix as well as modest pricing adjustments, the cost of deposits was 0.14% for the quarter ended September 30, 2016 and for the preceding quarter, and declined two basis points from 0.16% for the quarter ended September 30, 2015.

At September 30, 2016, total common shareholders' equity was $1.33 billion, or $39.31 per share, compared to $1.34 billion at June 30, 2016 and $671.2 million a year ago.  The decrease in shareholders' equity compared to the prior quarter primarily reflects the repurchase of 484,350 shares of common stock at an average price of $43.56 per share as well as the $0.23 per share quarterly dividend, which was partially offset by net income for the quarter. The year-over-year increase was mostly due to 13.23 million shares of voting common and non-voting common stock issued on October 1, 2015 in connection with the AmericanWest Bank acquisition, which were valued at $47.67 per share and increased shareholders' equity by $630.7 million.  At September 30, 2016, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 11.03% of tangible assets*, compared to $1.06 billion, or 11.00% of tangible assets, at June 30, 2016, and $644.6 million, or 12.20% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.14 at September 30, 2016, compared to $30.75 per share a year ago.

Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under the Basel III and Dodd Frank regulatory standards.  At September 30, 2016, Banner Corporation's common equity Tier 1 capital ratio was 11.68%, its Tier 1 leverage capital to average assets ratio was 11.40%, and its total capital to risk-weighted assets ratio was 13.39%.

 

 

 

Credit Quality

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw were recorded at their estimated fair value, which resulted in a net discount to the loans' contractual amounts, of which a portion reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value and as a result no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw.

The allowance for loan losses was $84.2 million at September 30, 2016, or 1.14% of total loans outstanding and 309% of non-performing loans compared to $77.3 million at September 30, 2015, or 1.77% of total loans outstanding and 329% of non-performing loans.  Banner had net recoveries of $902,000 in the third quarter compared to net recoveries of $1.1 million in the second quarter of 2016 and net charge-offs of $9,000 in the third quarter a year ago.  Primarily as a result of loan growth and the renewal of acquired loans out of the discounted loan portfolio, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter.  Banner did not record a provision for the quarter ended September 30, 2015.  If the allowance for loan losses were grossed up for the remaining loan discount, the adjusted allowance for loan losses to adjusted loans would have been 1.60% as of September 30, 2016.  Non-performing loans were $27.3 million at September 30, 2016, compared to $25.3 million at June 30, 2016 and $23.5 million a year ago.  Real estate owned and other repossessed assets decreased to $4.9 million at September 30, 2016, compared to $6.4 million at June 30, 2016, and $6.4 million a year ago.

Banner's non-performing assets were 0.33% of total assets at September 30, 2016, compared to 0.32% at June 30, 2016 and 0.56% a year ago.  Non-performing assets were $32.2 million at September 30, 2016, compared to $31.7 million at June 30, 2016 and $29.9 million a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $38.7 million at September 30, 2016 compared to $45.4 million at June 30, 2016 and $5.4 million a year ago.

Conference Call

Banner will host a conference call on Thursday, October 27, 2016, at 8:00 a.m. PDT, to discuss its third quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10093302, or at www.bannerbank.com.

About the Company

On October 1, 2015, Banner Corporation completed the acquisition of AmericanWest Bank which was merged into Banner Bank, a transformational merger that brought together two financially strong, well-respected institutions and created a leading Western bank.  Banner Corporation is now a $9.8 billion bank holding company operating two commercial banks in five Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner's operating and stock price performance.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the merger of Banner Bank and Siuslaw Bank and the merger of Banner Bank and AmericanWest Bank might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (3) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to the Company's activities; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on

 

 

customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) the ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (12) the costs, effects and outcomes of litigation; (13) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (14) changes in accounting principles, policies or guidelines; (15) future acquisitions by Banner of other depository institutions or lines of business; (16) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

 

 

 

RESULTS OF OPERATIONS		Quarters Ended												Nine months ended
(in thousands except shares and per share data)		Sep 30, 2016				Jun 30, 2016				Sep 30, 2015				Sep 30, 2016				Sep 30, 2015
INTEREST INCOME:
Loans receivable		$	89,805			$	88,935			$	51,749			$	265,697			$	149,192
Mortgage-backed securities		4,803				5,274				1,307				15,467				3,609
Securities and cash equivalents		3,241				3,112				1,737				9,306				5,138
		97,849				97,321				54,793				290,470				157,939
INTEREST EXPENSE:
Deposits		2,784				2,771				1,738				8,501				5,240
Federal Home Loan Bank advances		256				339				4				874				24
Other borrowings		82				78				47				234				137
Junior subordinated debentures		1,019				985				816				2,962				2,357
		4,141				4,173				2,605				12,571				7,758
Net interest income before provision for loan losses		93,708				93,148				52,188				277,899				150,181
PROVISION FOR LOAN LOSSES		2,000				2,000				—				4,000				—
Net interest income		91,708				91,148				52,188				273,899				150,181
NON-INTEREST INCOME:
Deposit fees and other service charges		12,927				12,213				9,746				36,957				27,435
Mortgage banking operations		8,141				6,625				4,426				20,409				13,238
Bank owned life insurance		1,333				1,128				550				3,646				1,441
Miscellaneous		1,344				1,328				489				3,936				1,623
		23,745				21,294				15,211				64,948				43,737
Net gain (loss) on sale of securities		891				(380		)		—				531				(537		)
Net change in valuation of financial instruments carried at fair value		(1,124		)		(377		)		(1,113		)		(1,472		)		735
Total non-interest income		23,512				20,537				14,098				64,007				43,935
NON-INTEREST EXPENSE:
Salary and employee benefits		44,758				45,175				27,026				136,497				78,057
Less capitalized loan origination costs		(4,953		)		(4,907		)		(3,747		)		(14,110		)		(10,372		)
Occupancy and equipment		10,979				11,052				6,470				32,419				18,833
Information / computer data services		4,836				4,852				2,219				14,607				6,744
Payment and card processing services		5,878				5,501				4,168				16,164				10,926
Professional services		2,258				865				951				5,736				2,489
Advertising and marketing		2,282				2,474				1,959				6,489				5,767
Deposit insurance		890				1,311				713				3,539				1,905
State/municipal business and use taxes		956				770				475				2,564				1,383
Real estate operations		(21		)		137				(2		)		513				190
Amortization of core deposit intangibles		1,724				1,808				286				5,339				1,268
Miscellaneous		7,785				8,437				3,972				22,311				11,416
		77,372				77,475				44,490				232,068				128,606
Acquisition related costs		1,720				2,412				2,207				10,945				7,741
Total non-interest expense		79,092				79,887				46,697				243,013				136,347
Income before provision for income taxes		36,128				31,798				19,589				94,893				57,769
PROVISION FOR INCOME TAXES		12,277				10,841				6,642				32,312				19,440
NET INCOME		$	23,851			$	20,957			$	12,947			$	62,581			$	38,329
Earnings per share available to common shareholders:
Basic		$	0.70			$	0.62			$	0.62			$	1.84			$	1.88
Diluted		$	0.70			$	0.61			$	0.62			$	1.83			$	1.87
Cumulative dividends declared per common share		$	0.23			$	0.21			$	0.18			$	0.65			$	0.54
Weighted average common shares outstanding:
Basic		34,045,225				34,069,234				20,755,394				34,050,459				20,417,601
Diluted		34,124,611				34,116,498				20,821,377				34,104,875				20,467,609
Increase (decrease)  in common shares outstanding		(483,249		)		129,109				(8,381		)		(374,944		)		1,390,752

 

 

 

FINANCIAL  CONDITION																		Percentage Change
(in thousands except shares and per share data)		Sep 30, 2016				Jun 30, 2016				Dec 31, 2015				Sep 30, 2015				Prior Qtr			Prior Yr Qtr
ASSETS
Cash and due from banks		$	161,710			$	158,446			$	117,657			$	74,695			2.1	%		116.5	%
Interest-bearing deposits		84,207				76,210				144,260				60,544				10.5	%		39.1	%
Total cash and cash equivalents		245,917				234,656				261,917				135,239				4.8	%		81.8	%
Securities - trading		30,889				33,753				34,134				37,515				(8.5	)%		(17.7	)%
Securities - available for sale		1,006,414				1,177,757				1,138,573				418,254				(14.5	)%		140.6	%
Securities - held to maturity		271,975				254,666				220,666				132,150				6.8	%		105.8	%
Federal Home Loan Bank stock		12,826				23,347				16,057				6,767				(45.1	)%		89.5	%
Loans held for sale		123,144				113,230				44,712				3,136				8.8	%		nm
Loans receivable		7,398,637				7,325,925				7,314,504				4,369,458				1.0	%		69.3	%
Allowance for loan losses		(84,220		)		(81,318		)		(78,008		)		(77,320		)		3.6	%		8.9	%
Net loans		7,314,417				7,244,607				7,236,496				4,292,138				1.0	%		70.4	%
Accrued interest receivable		30,345				30,052				29,627				17,966				1.0	%		68.9	%
Real estate owned held for sale, net		4,717				6,147				11,627				6,363				(23.3	)%		(25.9	)%
Property and equipment, net		167,621				167,597				167,604				102,881				—	%		62.9	%
Goodwill		244,583				244,583				247,738				21,148				—	%		nm
Other intangibles, net		31,934				33,724				37,472				5,457				(5.3	)%		nm
Bank-owned life insurance		158,831				158,001				156,865				71,842				0.5	%		121.1	%
Other assets		197,415				194,085				192,810				61,454				1.7	%		221.2	%
Total assets		$	9,841,028			$	9,916,205			$	9,796,298			$	5,312,310			(0.8	)%		85.2	%
LIABILITIES
Deposits:
Non-interest-bearing		$	3,190,293			$	3,023,986			$	2,619,618			$	1,561,516			5.5	%		104.3	%
Interest-bearing transaction and savings accounts		3,798,668				3,687,118				4,081,580				2,095,476				3.0	%		81.3	%
Interest-bearing certificates		1,123,011				1,208,671				1,353,870				730,661				(7.1	)%		53.7	%
Total deposits		8,111,972				7,919,775				8,055,068				4,387,653				2.4	%		84.9	%
Advances from Federal Home Loan Bank at fair value		62,342				325,383				133,381				16,435				(80.8	)%		nm
Customer repurchase agreements and other borrowings		108,911				112,308				98,325				88,083				(3.0	)%		23.6	%
Junior subordinated debentures at fair value		94,364				93,298				92,480				85,183				1.1	%		10.8	%
Accrued expenses and other liabilities		92,783				87,441				76,511				42,844				6.1	%		116.6	%
Deferred compensation		39,385				39,483				40,474				20,910				(0.2	)%		88.4	%
Total liabilities		8,509,757				8,577,688				8,496,239				4,641,108				(0.8	)%		83.4	%
SHAREHOLDERS' EQUITY
Common stock		1,243,205				1,263,085				1,261,174				628,958				(1.6	)%		97.7	%
Retained earnings		80,053				63,967				39,615				41,269				25.1	%		94.0	%
Other components of shareholders' equity		8,013				11,465				(730		)		975				(30.1	)%		nm
Total shareholders' equity		1,331,271				1,338,517				1,300,059				671,202				(0.5	)%		98.3	%
Total liabilities and shareholders' equity		$	9,841,028			$	9,916,205			$	9,796,298			$	5,312,310			(0.8	)%		85.2	%
Common Shares Issued:
Shares outstanding at end of period		33,867,311				34,350,560				34,242,255				20,962,300
Common shareholders' equity per share (1)		$	39.31			$	38.97			$	37.97			$	32.02
Common shareholders' tangible equity per share (1) (2)		$	31.14			$	30.86			$	29.64			$	30.75
Common shareholders' tangible equity to tangible assets (2)		11.03		%		11.00		%		10.67		%		12.20		%
Consolidated Tier 1 leverage capital ratio		11.68		%		11.85		%		11.06		%		13.85		%

 

(1)	Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2)	Common shareholders' tangible equity excludes goodwill and other intangible assets.  Tangible assets exclude goodwill and other intangible assets.  These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of the press release tables.

 

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
																		Percentage Change
LOANS		Sep 30, 2016				Jun 30, 2016				Dec 31, 2015				Sep 30, 2015				Prior Qtr			Prior Yr Qtr
Commercial real estate:
Owner occupied		$	1,340,577			$	1,351,015			$	1,327,807			$	635,146			(0.8	)%		111.1	%
Investment properties		1,918,639				1,849,123				1,765,353				1,062,418				3.8	%		80.6	%
Multifamily real estate		266,883				287,783				472,976				198,874				(7.3	)%		34.2	%
Commercial construction		135,487				105,594				72,103				47,490				28.3	%		185.3	%
Multifamily construction		105,669				97,697				63,846				72,987				8.2	%		44.8	%
One- to four-family construction		363,586				330,474				278,469				246,715				10.0	%		47.4	%
Land and land development:
Residential		162,029				156,964				126,773				111,091				3.2	%		45.9	%
Commercial		30,556				22,578				33,179				15,517				35.3	%		96.9	%
Commercial business		1,187,848				1,231,182				1,207,944				812,070				(3.5	)%		46.3	%
Agricultural business including secured by farmland		383,275				370,515				376,531				242,556				3.4	%		58.0	%
One- to four-family real estate		846,899				878,986				952,633				533,189				(3.7	)%		58.8	%
Consumer:
Consumer secured by one- to four-family real estate		497,643				485,545				478,420				250,029				2.5	%		99.0	%
Consumer-other		159,546				158,469				158,470				141,376				0.7	%		12.9	%
Total loans outstanding		$	7,398,637			$	7,325,925			$	7,314,504			$	4,369,458			1.0	%		69.3	%
Restructured loans performing under their restructured terms		$	17,649			$	18,835			$	21,777			$	23,981
Loans 30 - 89 days past due and on accrual (1)		$	12,668			$	14,447			$	18,834			$	4,152
Total delinquent loans (including loans on non-accrual), net (2)		$	39,543			$	38,038			$	30,994			$	27,682
Total delinquent loans  /  Total loans outstanding		0.53		%		0.52		%		0.42		%		0.63		%

 ⁽¹⁾ Includes $486,000 of purchased credit-impaired loans at September 30, 2016 compared to $1.4 million at June 30, 2016, $4.3 million at

     December 31, 2015, and none at September 30, 2015.

   ⁽²⁾ Delinquent loans include $3.6 million of delinquent purchased credit-impaired loans at September 30, 2016 compared to $4.4 million at

       June 30, 2016, $6.3 million at December 31, 2015 and $913,000 at September 30, 2015.

LOANS BY GEOGRAPHIC LOCATION		Sep 30, 2016						Jun 30, 2016							Dec 31, 2015						Sep 30, 2015
		Amount				Percentage		Amount				Percentage			Amount				Percentage		Amount				Percentage
Washington		$	3,415,413			46.2%		$	3,401,656			46.4	%		$	3,343,112			45.7%		$	2,449,120			56.1%
Oregon		1,466,845				19.8%		1,461,906				20.0	%		1,446,531				19.8%		1,148,887				26.3%
California		1,204,273				16.3%		1,184,392				16.2	%		1,234,016				16.9%		90,808				2.1%
Idaho		517,607				7.0%		505,594				6.9	%		496,870				6.8%		364,495				8.3%
Utah		292,088				3.9%		294,102				4.0	%		325,011				4.4%		13,470				0.3%
Other		502,411				6.8%		478,275				6.5	%		468,964				6.4%		302,678				6.9%
Total loans		$	7,398,637			100.0%		$	7,325,925			100.0	%		$	7,314,504			100.0%		$	4,369,458			100.0%

 

 

 

 

 

 

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended												Nine months ended
CHANGE IN THE		Sep 30, 2016				Jun 30, 2016				Sep 30, 2015				Sep 30, 2016				Sep 30, 2015
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period		$	81,318			$	78,197			$	77,329			$	78,008			$	75,907
Provision for loan losses		2,000				2,000				—				4,000				—
Recoveries of loans previously charged off:
Commercial real estate		34				26				375				98				587
Multifamily real estate		—				—				—				—				113
Construction and land		673				124				282				1,268				1,234
One- to four-family real estate		482				558				42				1,052				141
Commercial business		433				622				128				1,775				803
Agricultural business, including secured by farmland		(138		)		160				146				39				1,666
Consumer		73				249				91				529				369
		1,557				1,739				1,064				4,761				4,913
Loans charged off:
Commercial real estate		—				—				—				(180		)		(64		)
Construction and land		—				—				(352		)		—				(352		)
One- to four-family real estate		(92		)		(34		)		(12		)		(126		)		(127		)
Commercial business		(333		)		(171		)		(312		)		(643		)		(745		)
Agricultural business, including secured by farmland		—				—				—				(567		)		(1,064		)
Consumer		(230		)		(413		)		(397		)		(1,033		)		(1,148		)
		(655		)		(618		)		(1,073		)		(2,549		)		(3,500		)
Net recoveries (charge-offs)		902				1,121				(9		)		2,212				1,413
Balance, end of period		$	84,220			$	81,318			$	77,320			$	84,220			$	77,320
Net recoveries / Average loans outstanding		0.012		%		0.015		%		—		%		0.030		%		0.034		%

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

 

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

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

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

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

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

 

 

 

 

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

MERGER AND ACQUISITION EXPENSE	Quarters Ended												Nine months ended
	Sep 30, 2016				Jun 30, 2016				Sep 30, 2015				Sep 30, 2016				Sep 30, 2015
By expense category:
Personnel severance/retention fees	$	16			$	(24	)		$	227			$	1,304			$	443
Professional services	687				599				1,185				2,138				5,411
Branch consolidation and other occupancy expenses	94				924				5				2,517				55
Client communications	527				126				151				904				221
Information/computer data services	459				532				301				2,409				807
Miscellaneous	(63		)		255				338				1,673				804
Total merger and acquisition expense	$	1,720			$	2,412			$	2,207			$	10,945			$	7,741
By acquisition:
Siuslaw Financial Group	1				94				340				95				1,867
Starbuck Bancshares, Inc. (AmericanWest)	1,719				2,318				1,867				10,850				5,874
Total merger and acquisition expense	$	1,720			$	2,412			$	2,207			$	10,945			$	7,741

 

 

 

 

 

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Actual							Minimum to be categorized as "Adequately Capitalized"							Minimum to be categorized as "Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2016		Amount				Ratio			Amount				Ratio			Amount				Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,176,129			13.39	%		$	702,514			8.00	%		$	878,142			10.00	%
Tier 1 capital to risk-weighted assets		1,088,260				12.39	%		526,885				6.00	%		526,885				6.00	%
Tier 1 leverage capital to average assets		1,088,260				11.40	%		381,961				4.00	%		N/A				N/A
Common equity tier 1 capital to risk-weighted assets		1,025,683				11.68	%		395,164				4.50	%		N/A				N/A
Banner Bank:
Total capital to risk-weighted assets		1,075,145				12.53	%		686,511				8.00	%		858,139				10.00	%
Tier 1 capital to risk-weighted assets		989,527				11.53	%		514,883				6.00	%		686,511				8.00	%
Tier 1 leverage capital to average assets		989,527				10.69	%		370,197				4.00	%		462,747				5.00	%
Common equity tier 1 capital to risk-weighted assets		989,527				11.53	%		386,162				4.50	%		557,790				6.50	%
Islanders Bank:
Total capital to risk-weighted assets		39,888				20.39	%		15,646				8.00	%		19,558				10.00	%
Tier 1 capital to risk-weighted assets		37,637				19.24	%		11,735				6.00	%		15,646				8.00	%
Tier 1 leverage capital to average assets		37,637				12.97	%		11,604				4.00	%		14,505				5.00	%
Common equity tier 1 capital to risk-weighted assets		37,637				19.24	%		8,801				4.50	%		12,713				6.50	%

 

 

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD		Quarter Ended
		September 30, 2016									June 30, 2016									September 30, 2015
		Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)
Interest-earning assets:
Mortgage loans		$	5,843,381		$	70,223		4.78	%		$	5,715,740		$	68,914		4.85	%		$	3,200,184		$	39,504		4.90	%
Commercial/agricultural loans		1,495,611			17,373			4.62	%		1,504,969			17,816			4.76	%		984,159			10,273			4.14	%
Consumer and other loans		142,977			2,209			6.15	%		140,355			2,205			6.32	%		129,496			1,972			6.04	%
Total loans(1)		7,481,969			89,805			4.78	%		7,361,064			88,935			4.86	%		4,313,839			51,749			4.76	%
Mortgage-backed securities		920,560			4,803			2.08	%		1,004,044			5,274			2.11	%		314,941			1,307			1.65	%
Other securities		472,159			3,050			2.57	%		450,528			2,931			2.62	%		261,580			1,638			2.48	%
Interest-bearing deposits with banks		86,868			98			0.45	%		95,668			101			0.42	%		109,445			97			0.35	%
FHLB stock		16,413			93			2.25	%		18,911			80			1.70	%		6,180			2			0.13	%
Total investment securities		1,496,000			8,044			2.14	%		1,569,151			8,386			2.15	%		692,146			3,044			1.74	%
Total interest-earning assets		8,977,969			97,849			4.34	%		8,930,215			97,321			4.38	%		5,005,985			54,793			4.34	%
Non-interest-earning assets		913,991									903,706									276,761
Total assets		$	9,891,960								$	9,833,921								$	5,282,746
Deposits:
Interest-bearing checking accounts		$	837,930		188			0.09	%		$	789,626		185			0.09	%		$	477,105		95			0.08	%
Savings accounts		1,371,911			449			0.13	%		1,329,104			431			0.13	%		1,019,059			381			0.15	%
Money market accounts		1,564,906			749			0.19	%		1,577,320			811			0.21	%		574,968			229			0.16	%
Certificates of deposit		1,173,630			1,398			0.47	%		1,244,796			1,344			0.43	%		749,702			1,033			0.55	%
Total interest-bearing deposits		4,948,377			2,784			0.22	%		4,940,846			2,771			0.23	%		2,820,834			1,738			0.24	%
Non-interest-bearing deposits		3,120,279			—			—	%		3,029,890			—			—	%		1,559,053			—			—	%
Total deposits		8,068,656			2,784			0.14	%		7,970,736			2,771			0.14	%		4,379,887			1,738			0.16	%
Other interest-bearing liabilities:
FHLB advances		152,198			256			0.67	%		214,290			339			0.64	%		1,660			4			0.96	%
Other borrowings		111,016			82			0.29	%		111,987			78			0.28	%		92,550			47			0.20	%
Junior subordinated debentures		140,212			1,019			2.89	%		140,212			985			2.83	%		131,964			816			2.45	%
Total borrowings		403,426			1,357			1.34	%		466,489			1,402			1.21	%		226,174			867			1.52	%
Total funding liabilities		8,472,082			4,141			0.19	%		8,437,225			4,173			0.20	%		4,606,061			2,605			0.22	%
Other non-interest-bearing liabilities(2)		68,566									62,858									6,731
Total liabilities		8,540,648									8,500,083									4,612,792
Shareholders' equity		1,351,312									1,333,838									669,954
Total liabilities and shareholders' equity		$	9,891,960								$	9,833,921								$	5,282,746
Net interest income/rate spread					$	93,708		4.15	%					$	93,148		4.18	%					$	52,188		4.12	%
Net interest margin								4.15	%								4.20	%								4.14	%
Additional Key Financial Ratios:
Return on average assets								0.96	%								0.86	%								0.97	%
Return on average equity								7.02	%								6.32	%								7.67	%
Average equity/average assets								13.66	%								13.56	%								12.68	%
Average interest-earning assets/average interest-bearing liabilities								167.76	%								165.15	%								164.29	%
Average interest-earning assets/average funding liabilities								105.97	%								105.84	%								108.68	%
Non-interest income/average assets								0.95	%								0.84	%								1.06	%
Non-interest expense/average assets								3.18	%								3.27	%								3.51	%
Efficiency ratio(4)								67.47	%								70.27	%								70.45	%
Adjusted efficiency ratio(5)								63.61	%								65.33	%								64.88	%
(1)	Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2)	Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3)	Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4)	Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5)	Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of CDI, real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last three pages of the press release tables.