BANR - Banner Corporation Reports Net Income of $39.6 Million or $1.15 Per Diluted Share for Second Quarter 2023; Declares Quarterly Cash Dividend of $0.48 Per Share

WALLA WALLA, Wash., July 19, 2023 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $39.6 million, or $1.15 per diluted share, for the second quarter of 2023, a 29% decrease compared to $55.6 million, or $1.61 per diluted share, for the preceding quarter and a 17% decrease compared to $48.0 million, or $1.39 per diluted share, for the second quarter of 2022. Net interest income was $142.5 million in the second quarter of 2023, compared to $153.3 million in the preceding quarter and $129.0 million in the second quarter a year ago. The decrease in net interest income compared to the preceding quarter reflects an increase in funding costs, while the increase from the prior year quarter reflects an increase in yields on earning assets. Banner’s second quarter 2023 results include $6.8 million in provision for credit losses, compared to $524,000 recapture of provision for credit losses in the preceding quarter and $4.5 million in provision for credit losses in the second quarter of 2022. In addition, the second quarter of 2022 included a $7.8 million gain related to the sale of four branches. For the six months ended June 30, 2023, net income increased 4% to $95.1 million, or $2.76 per diluted share, compared to net income of $91.9 million, or $2.66 per diluted share for the prior year. Banner’s results for the first six months of 2023 include $6.2 million in provision for credit losses, compared to $2.4 million in recapture of provision for credit losses in 2022.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.48 per share. The dividend will be payable August 11, 2023, to common shareholders of record on August 1, 2023.

“Our business model, which emphasizes moderate risk and strong relationship banking, continues to serve us well in these uncertain economic times,” said Mark Grescovich, President and CEO. “Our performance for the second quarter of 2023 benefited from loan growth and higher yields on interest-earning assets. However, the higher interest rate environment and its effect on funding costs impacted our net interest margin during the quarter. Our continued focus on growing client relationships is serving us well, with core deposits representing 90% of total deposits at quarter end. Banner’s overarching goals continue to be to do the right thing for our clients, communities, colleagues, our company and shareholders; and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events,” concluded Grescovich.

At June 30, 2023, Banner Corporation had $15.58 billion in assets, $10.33 billion in net loans and $13.10 billion in deposits. Banner operates 137 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Second Quarter 2023 Highlights

• Revenues decreased 7% to $150.9 million, compared to $162.6 million in the preceding quarter, and decreased 3% compared to $156.2 million in the second quarter a year ago.
• Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $158.6 million in the second quarter of 2023, compared to $170.4 million in the preceding quarter and $148.3 million in the second quarter a year ago.
• Net interest income decreased 7% to $142.5 million in the second quarter of 2023, compared to $153.3 million in the preceding quarter and increased 10% compared to $129.0 million in the second quarter a year ago.
• Net interest margin, on a tax equivalent basis, was 4.00%, compared to 4.30% in the preceding quarter and 3.44% in the second quarter a year ago.
• Mortgage banking revenues decreased 37% to $1.7 million, compared to $2.7 million in the preceding quarter, and decreased 58% compared to $4.0 million in the second quarter a year ago.
• Return on average assets was 1.02%, compared to 1.44% in the preceding quarter and 1.16% in the second quarter a year ago.
• Net loans receivable increased 3% to $10.33 billion at June 30, 2023, compared to $10.02 billion at March 31, 2023, and increased 11% compared to $9.33 billion at June 30, 2022.
• Non-performing assets increased to $28.7 million, or 0.18% of total assets, at June 30, 2023, compared to $27.1 million, or 0.17% of total assets at March 31, 2023, and $19.1 million, or 0.12% of total assets, at June 30, 2022.
• The allowance for credit losses - loans was $144.7 million, or 1.38% of total loans receivable, as of June 30, 2023, compared to $141.5 million, or 1.39% of total loans receivable as of March 31, 2023 and $128.7 million, or 1.36% of total loans receivable as of June 30, 2022.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) decreased to $11.74 billion at June 30, 2023, compared to $12.20 billion at March 31, 2023, and to $13.46 billion a year ago. Core deposits represented 90% of total deposits at June 30, 2023.
• Banner Bank’s uninsured deposits were 31% of total deposits at June 30, 2023, compared to 33% at March 31, 2023.
• Banner Bank’s uninsured deposits excluding collateralized public deposits and affiliate deposits were 28% of total deposits at June 30, 2023, compared to 31% at March 31, 2023.
• Available borrowing capacity was $4.02 billion at June 30, 2023, compared to $4.25 billion at March 31, 2023.
• On balance sheet liquidity was $3.07 billion at June 30, 2023, compared to $3.40 billion at March 31, 2023.
• Dividends paid to shareholders were $0.48 per share in the quarter ended June 30, 2023.
• Common shareholders’ equity per share increased 1% to $44.91 at June 30, 2023, compared to $44.64 at the preceding quarter end, and increased 3% from $43.46 a year ago.
• Tangible common shareholders’ equity per share* increased 1% to $33.83 at June 30, 2023, compared to $33.52 at the preceding quarter end, and increased 5% from $32.20 a year ago.
  
  

*Non-GAAP (Generally Accepted Accounting Principles) measure; See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Income Statement Review

Net interest income was $142.5 million in the second quarter of 2023, compared to $153.3 million in the preceding quarter and $129.0 million in the second quarter a year ago. Net interest margin on a tax equivalent basis was 4.00% for the second quarter of 2023, a 30 basis-point decrease compared to 4.30% in the preceding quarter and a 56 basis-point increase compared to 3.44% in the second quarter a year ago. Net interest margin for the current quarter was impacted by an increase in funding costs due to an increase in the mix of higher cost CDs and the lag effect of prior market rate increases on current period deposit costs, partially offset by increased yields on loans due to the rising interest rates during the quarter.

Average yields on interest-earning assets increased 12 basis points to 4.80% for the second quarter of 2023, compared to 4.68% for the preceding quarter and increased 126 basis points compared to 3.54% in the second quarter a year ago. Since March 2022, in response to inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve System has increased the target range for the federal funds rate by 500 basis points, including 25 basis points during the second quarter of 2023, to a range of 5.00% to 5.25%. The increase in average yields on interest-earning assets during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. Average loan yields increased 13 basis points to 5.51% compared to 5.38% in the preceding quarter and increased 97 basis points compared to 4.54% in the second quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding and prior year quarters was primarily the result of rising interest rates. Total deposit costs were 0.64% in the second quarter of 2023, which was a 36 basis-point increase compared to the preceding quarter and a 58 basis-point increase compared to the second quarter a year ago. The increase in the costs of deposits was due to elevated competition for deposits, an increase in the mix of higher cost CDs and the lag effect of prior market rate increases on current period deposit costs. The average rate paid on FHLB advances was 5.29% in the second quarter of 2023, which was a 45 basis-point increase compared to 4.84% in the preceding quarter. There were no FHLB advances during second quarter a year ago. The average rate paid on other borrowings in the second quarter of 2023 was 1.64%, which was a 97 basis-point increase compared to 0.67% in the preceding quarter and a 151 basis-point increase compared to 0.13% in the second quarter a year ago. The total cost of funding liabilities was 0.86% during the second quarter of 2023, a 46 basis-point increase compared to 0.40% in the preceding quarter and a 75 basis-point increase compared to 0.11% in the second quarter a year ago.

A $6.8 million provision for credit losses was recorded in the current quarter (comprised of a $3.6 million provision for credit losses - loans, a $1.2 million provision for credit losses - unfunded loan commitments, a $2.0 million provision for credit losses - available for sale securities and a $16,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $524,000 recapture of provision for credit losses in the prior quarter (comprised of a $774,000 provision for credit losses - loans, a $1.3 million recapture of provision for credit losses - unfunded loan commitments and a $20,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $4.5 million provision for credit losses in the second quarter a year ago (comprised of a $3.1 million provision for credit losses - loans, a $1.4 million provision for credit losses - unfunded loan commitments and a $4,000 provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current quarter primarily reflects increased loan balances and unfunded loan commitments, a deterioration in forecasted economic conditions and rating downgrades on bank subordinated debt investments. The recapture of provision for credit losses for the preceding quarter primarily reflected a decrease in unfunded construction loan commitments, which was partially offset by higher net loan charge-offs during the preceding quarter.

Total non-interest income was $8.4 million in the second quarter of 2023, compared to $9.3 million in the preceding quarter and $27.2 million in the second quarter a year ago. The decrease in non-interest income during the current quarter compared to the prior quarter was primarily due to a $1.0 million decrease in mortgage banking revenues. The decrease in non-interest income during the current quarter compared to the prior year quarter was primarily due to a $2.3 million decrease in mortgage banking revenues, a $4.5 million net loss recognized on the sale of securities during the current quarter, a $3.2 million net loss for fair value adjustments on financial instruments carried at fair value in the current quarter, and a $7.8 million gain recognized on the sale of four branches in the second quarter of 2022. Total non-interest income was $17.7 million for the six months ended June 30, 2023, compared to $46.6 million for the same period a year earlier.

Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, were $1.7 million in the second quarter of 2023, compared to $2.7 million in the preceding quarter and $4.0 million in the second quarter a year ago. The decrease from the preceding quarter primarily reflects a downward lower of cost or market adjustment on multifamily held for sale loans. The decrease from the second quarter of 2022 primarily reflects a reduction in the volume and a decrease in the gain on sale margin for one- to four-family loans sold. The reduction in the volume of one- to four-family loans sold compared to the prior year quarter primarily reflects reduced refinancing activity, as well as decreased purchase activity as interest rates increased. Home purchase activity accounted for 93% of one- to four-family mortgage loan originations in the second quarter of 2023, compared to 88% in the preceding quarter and 82% in the second quarter of 2022. Mortgage banking revenue included a $757,000 lower of cost or market downward adjustment on multifamily held for sale loans for the current quarter due to increases in market interest rates during the second quarter. There were no multifamily loans sold during the second quarter of 2023. This compares to a $295,000 lower of cost or market upward adjustment recorded during the preceding quarter due to decreases in market interest rates during the first quarter as well as $87,000 of gain recognized on the sale of multifamily loans. During the second quarter of 2022, a $458,000 lower of cost or market downward adjustment was recorded due to increases in market rates. There were no multifamily loans sold during the second quarter of 2022.

Second quarter 2023 non-interest income also included a $3.2 million net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and limited partnership investments, and a $4.5 million net loss on the sale of securities. In the preceding quarter, results included a $552,000 net loss for fair value adjustments and a $7.3 million net loss on the sale of securities. In the second quarter a year ago, results included a $69,000 net gain for fair value adjustments and a $32,000 net gain on the sale of securities.

Total revenue decreased 7% to $150.9 million for the second quarter of 2023, compared to $162.6 million in the preceding quarter, and 3% compared to $156.2 million in the second quarter of 2022. Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $158.6 million in the second quarter of 2023, compared to $170.4 million in the preceding quarter and $148.3 million in the second quarter a year ago. In the first six months of the year, adjusted revenue* was $329.0 million, compared to $285.9 million in the first six months of 2022.

Total non-interest expense was $95.4 million in the second quarter of 2023, compared to $94.6 million in the preceding quarter and $92.1 million in the second quarter of 2022. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $583,000 increase in salary and employee benefits expense and a $949,000 increase in deposit insurance expense, partially offset by a $1.0 million increase in capitalized loan origination costs, primarily due to increased loan production. The increase in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects an increase in salary and employee benefits expense, a decrease in capitalized loan origination costs, an increase in information and computer data services expense and an increase in deposit insurance expense, partially offset by decreases in occupancy and equipment expenses and payment and card processing services expense. Year-to-date, total non-interest expense was $190.0 million, compared to $183.2 million in the same period a year earlier. Banner’s efficiency ratio was 63.21% for the second quarter, compared to 58.20% in the preceding quarter and 58.94% in the same quarter a year ago. Banner’s adjusted efficiency ratio* was 58.58% for the second quarter, compared to 54.23% in the preceding quarter and 59.46% in the year ago quarter.

Federal and state income tax expense totaled $9.2 million for the second quarter of 2023 resulting in an effective tax rate of 18.8%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate for the quarter ended June 30, 2023, was 23.5%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Balance Sheet Review

Total assets increased to $15.58 billion at June 30, 2023, compared to $15.53 billion at March 31, 2023, and decreased 5% from $16.39 billion at June 30, 2022. The total of securities and interest-bearing deposits held at other banks totaled $3.64 billion at June 30, 2023, compared to $3.99 billion at March 31, 2023 and $5.45 billion at June 30, 2022. The decrease compared to the prior quarter was primarily due to the sale of $127.4 million of securities as well as $150.0 million of reverse repurchase agreements maturing during the current quarter. The decrease compared to the prior year quarter was primarily due to an additional $150.0 million of reverse repurchase agreements maturing during the first quarter of 2023, the sale of securities and a decrease in interest-bearing deposits held at other banks. The average effective duration of the securities portfolio was approximately 6.8 years at June 30, 2023, compared to 6.5 years at June 30, 2022.

Total loans receivable increased to $10.47 billion at June 30, 2023, compared to $10.16 billion at March 31, 2023, and $9.46 billion at June 30, 2022. Commercial real estate loans increased $60.2 million to $3.63 billion at June 30, 2023, compared to $3.57 billion at March 31, 2023. One- to four-family residential loans increased 7% to $1.34 billion at June 30, 2023, compared to $1.25 billion at March 31, 2023, and increased 54% compared to $868.2 million a year ago. The increase in one- to four-family residential loans was primarily the result of one- to four-family construction loans converting to one- to four-family portfolio loans upon the completion of the construction phase and new production. Commercial business loans increased 3% to $2.30 billion at June 30, 2023, compared to $2.23 billion at March 31, 2023, and increased 11% compared to $2.07 billion a year ago, primarily due to new loan production. Multifamily real estate loans increased to $699.8 million at June 30, 2023, compared to $696.9 million at March 31, 2023, and increased 22% compared to $575.2 million a year ago. The increase in multifamily loans compared to a year ago was primarily due to growth in affordable housing loan balances as well as the transfer of $54.0 million of multifamily held for sale loans to the held for investment loan portfolio during the fourth quarter of 2022.

Loans held for sale were $60.6 million at June 30, 2023, compared to $49.0 million at March 31, 2023, and $69.2 million at June 30, 2022. One- to four- family residential mortgage loans sold totaled $62.6 million in the current quarter, compared to $40.5 million in the preceding quarter and $88.6 million in the second quarter a year ago, while there were no multifamily loans sold during the second quarter of 2023, compared to $7.6 million sold in the preceding quarter and none sold in the second quarter a year ago.

Total deposits decreased to $13.10 billion at June 30, 2023, compared to $13.15 billion at March 31, 2023, and $14.21 billion a year ago. The decline in deposits was primarily due to interest rate sensitive clients moving a portion of their non-operating deposit balances to higher yielding investments as well as seasonal outflows for tax payments. Non-interest-bearing account balances decreased 7% to $5.37 billion at June 30, 2023, compared to $5.76 billion at March 31, 2023, and 16% compared to $6.39 billion a year ago. Core deposits were 90% of total deposits at June 30, 2023, 93% of total deposits at March 31, 2023 and 95% of total deposits at June 30, 2022. Certificates of deposit increased 43% to $1.36 billion at June 30, 2023, compared to $949.9 million at March 31, 2023, and increased 79% compared to $756.3 million a year earlier. The increase in certificates of deposits during the current quarter was principally due to a $203.6 million increase in brokered deposits and clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposits.

Banner Bank’s uninsured deposits were $4.06 billion or 31% of total deposits at June 30, 2023, compared to $4.42 billion or 33% of total deposits at March 31, 2023. The uninsured deposit calculation includes $309.7 million and $277.7 million of collateralized public deposits at June 30, 2023 and March 31, 2023, respectively. Uninsured deposits also include cash held by the holding company of $95.0 million and $88.0 million at June 30, 2023 and March 31, 2023, respectively. Banner Bank’s uninsured deposits, excluding collateralized public deposits and cash held at the holding company, were 28% of deposits at June 30, 2023, compared to 31% of total deposits at March 31, 2023.

Banner had $270.0 million of FHLB borrowings at June 30, 2023, compared to $170.0 million at March 31, 2023 and none a year ago. At June 30, 2023, Banner’s off-balance sheet liquidity included additional borrowing capacity of $2.64 billion at the FHLB and $1.26 billion at the Federal Reserve as well as federal funds line of credit agreements with other financial institutions of $125.0 million.

Subordinated notes, net of issuance costs, were $92.6 million at June 30, 2023 compared to $99.0 million at March 31, 2023 and $98.8 million a year ago. The decrease in subordinated notes was due to Banner Bank’s purchase of $6.5 million of Banner’s subordinated debt during the second quarter of 2023.

At June 30, 2023, total common shareholders’ equity was $1.54 billion, or 9.90% of assets, compared to $1.53 billion or 9.86% of assets at March 31, 2023, and $1.49 billion or 9.07% of assets a year ago. The increase in total common shareholders’ equity at June 30, 2023 compared to March 31, 2023 was primarily due to a $22.9 million increase in retained earnings as a result of $39.6 million in net income during the second quarter of 2023, partially offset by a $13.8 million increase in accumulated other comprehensive loss, primarily due to a decrease in the fair value of the security portfolio as a result of an increase in interest rates during the second quarter of 2023, and the accrual of $16.7 million of cash dividends during the quarter. The increase in total common shareholders’ equity from June 30, 2022 reflects a $134.8 million increase in retained earnings, partially offset by an $83.5 million increase in accumulated other comprehensive loss, primarily due to a decrease in the fair value of the security portfolio as a result of an increase in interest rates during 2022, and the payment of cash dividends. At June 30, 2023, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.16 billion, or 7.64% of tangible assets*, compared to $1.15 billion, or 7.59% of tangible assets, at March 31, 2023, and $1.10 billion, or 6.88% of tangible assets, a year ago.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At June 30, 2023, Banner’s estimated common equity Tier 1 capital ratio was 11.59%, its estimated Tier 1 leverage capital to average assets ratio was 10.22%, and its estimated total capital to risk-weighted assets ratio was 14.14%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Credit Quality

The allowance for credit losses - loans was $144.7 million, or 1.38% of total loans receivable and 513% of non-performing loans, at June 30, 2023, compared to $141.5 million, or 1.39% of total loans receivable and 528% of non-performing loans, at March 31, 2023, and $128.7 million, or 1.36% of total loans receivable and 688% of non-performing loans, at June 30, 2022. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $14.7 million at June 30, 2023, compared to $13.4 million at March 31, 2023, and $14.2 million at June 30, 2022. Net loan charge-offs totaled $336,000 in the second quarter of 2023, compared to net loan charge-offs of $782,000 in the preceding quarter and net loan recoveries of $87,000 in the second quarter a year ago. Non-performing loans were $28.2 million at June 30, 2023, compared to $26.8 million at March 31, 2023, and $18.7 million a year ago.

Substandard loans were $145.0 million at June 30, 2023, compared to $148.0 million at March 31, 2023, and $154.5 million a year ago. The decreases from the prior quarter and a year ago primarily reflect risk rating upgrades as well as the payoff of substandard loans.

Total non-performing assets were $28.7 million, or 0.18% of total assets, at June 30, 2023, compared to $27.1 million, or 0.17% of total assets, at March 31, 2023, and $19.1 million, or 0.12% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday July 20, 2023, at 8:00 a.m. PDT, to discuss its second quarter results. Interested investors may listen to the call live at www.bannerbank.com. Investment professionals are invited to dial (833) 470-1428 using access code 066243 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 362835 or at www.bannerbank.com.

About the Company

Banner Corporation is a $15.58 billion bank holding company operating one commercial bank in four 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 “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.

Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as supply chain disruptions; (2) higher inflation and the impact of current and future monetary policies of the Federal Reserve in response thereto; (3) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (4) 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; (5) 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; (6) competitive pressures among depository institutions; (7) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (8) the transition away from the London Interbank Offered Rate (LIBOR) toward new interest rate benchmarks; (9) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (10) fluctuations in real estate values; (11) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (12) the ability to access cost-effective funding; (13) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (14) changes in financial markets; (15) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (16) the costs, effects and outcomes of litigation; (17) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (18) changes in accounting principles, policies or guidelines; (19) future acquisitions by Banner of other depository institutions or lines of business; (20) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (21) the costs associated with Banner Forward; (22) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (23) other risks detailed from time to time in Banner’s other reports filed with and furnished to the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)