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Banner Corporation First Quarter Net Income Increases to $23.8 Million, or $0.72 per Diluted Share; Total Assets Surpass $10 Billion

WALLA WALLA, Wash., April 24, 2017 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported continued strong revenue generation contributed to solid first quarter 2017 operating results. Net income in the first quarter of 2017 increased 4% to $23.8 million, or $0.72 per diluted share, compared to $22.8 million, or $0.69 per diluted share, in the preceding quarter and increased 34% compared to $17.8 million, or $0.52 per diluted share, in the first quarter a year ago. The current quarter results did not include any acquisition-related expenses. The results for the preceding quarter included $788,000 of acquisition-related expenses which, net of tax benefit, reduced net income by $0.02 per diluted share, while operating results in the first quarter a year ago included $6.8 million of acquisition-related expenses which, net of tax benefit, reduced net income by $0.13 per diluted share.

“During the first quarter of 2017 we continued to improve our operating performance, with good loan origination and core deposit growth as well as continued strong core revenues,” stated Mark J. Grescovich, President and Chief Executive Officer. “We also benefited from the very positive economic conditions in our market areas, as well as the successful integration of the AmericanWest Bank acquisition, which has made a dramatic impact on our scale and reach and is providing enhanced opportunities for client and revenue growth. During the first quarter, we crossed the threshold of $10 billion in total assets and again incurred increased expenses related to enhanced infrastructure and regulatory compliance costs. While increasing regulatory costs are a significant headwind, through the hard work of our employees, we are continuing to execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders.”

At March 31, 2017, Banner Corporation had $10.07 billion in assets, $7.33 billion in net loans and $8.42 billion in deposits. Banner operates 190 branch offices located in nine of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2017 Highlights

  • Net income was $23.8 million, compared to $22.8 million in the preceding quarter and increased substantially compared to $17.8 million in the first quarter of 2016.
  • Return on average assets was 0.97% in the current quarter, 0.92% in the preceding quarter and 0.73% in the same quarter a year ago.
  • Revenues from core operations* were $116.4 million, compared to $117.5 million in the preceding quarter, and increased 5% compared to $111.0 million in the first quarter a year ago.
  • Net interest margin was 4.25% for the current quarter, compared to 4.32% in the preceding quarter and 4.13% in the first quarter a year ago.
  • Excluding the impact of acquisition accounting adjustments, the net interest margin was 4.15%*, compared to 4.13%* in the fourth quarter and was 4.01%* in the first quarter a year ago.
  • Deposit fees and other service charges were $12.2 million, the same as in the preceding quarter and increased compared to $11.8 million in the same quarter a year ago.
  • Revenues from mortgage banking operations decreased to $4.6 million compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter a year ago.
  • Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $86.5 million or 1.17% of total loans.
  • Core deposits increased 3% during the current quarter and represented 86% of total deposits at March 31, 2017.
  • Quarterly dividends to shareholders were increased to $0.25 per share, providing a current yield of 1.8% based on our March 31, 2017, closing price.
  • Common shareholders' tangible equity per share* was $31.68 at March 31, 2017, compared to $31.06 at the preceding quarter end and $30.38 a year ago.
  • The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.72% at March 31, 2017, compared to 10.83% at the preceding quarter end and 10.98% 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 shareholders' 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 four pages of this press release.

Income Statement Review

Banner’s first quarter net interest income, before the provision for loan losses, decreased slightly to $94.9 million, compared to $97.2 million in the preceding quarter. First quarter 2017 net interest income, before the provision for loan losses, increased 4% compared to $91.0 million in the first quarter a year ago.

“Our net interest margin decreased seven basis points compared to the preceding quarter, largely as a result of decreased accretion from acquisition accounting loan discounts,” said Grescovich. "In addition, in the preceding quarter our loan yields and the net interest margin were elevated as a result of significant prepayment fees on a single large credit relationship. Excluding the impact of acquisition accounting, the net interest margin increased two basis points compared to the preceding quarter, and increased by 14 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 4.25% for the first quarter of 2017, which included eight basis points as a result of accretion from acquisition accounting loan discounts, one basis point from the amortization of deposit premiums and one basis point as a result of the impact of the net loan acquisition discounts on average earning assets. The net interest margin was 4.32% in the preceding quarter and 4.13% in the first quarter a year ago. Excluding the effects of acquisition accounting, the net interest margin was 4.15%* in the first quarter, 4.13%* in the preceding quarter and 4.01%* in the first quarter a year ago.

Average interest-earning asset yields decreased five basis points to 4.44% compared to 4.49% for the preceding quarter and increased 12 basis points compared to 4.32% in the first quarter a year ago. Average loan yields decreased 13 basis points to 4.80% compared to the preceding quarter, reflecting significantly less discount accretion, but increased two basis points from the first quarter a year ago. Accretion of the acquisition accounting discounts added 11 basis points to loan yields in the current quarter compared to 21 basis points in the preceding quarter and 12 basis points in the first quarter a year ago. Deposit costs increased one basis point to 0.14% compared to the preceding quarter and decreased one basis point compared to the first quarter a year ago. Amortization of acquisition accounting net premiums on certificates of deposit reduced the cost of deposits by one basis point in the first quarter of 2017, compared to two basis points in the preceding quarter and two basis points in the first quarter a year ago. The total cost of funds increased two basis points to 0.20% during the first quarter compared to the preceding quarter and was unchanged compared to the first quarter a year ago.

“As expected, due to the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, we recorded a $2.0 million provision for loan losses during the first quarter, the same as in the preceding quarter,” added Grescovich. "While our asset quality metrics remain exceptionally good, adding to the loan loss allowance as the acquisition accounting discounts are accreted to income and growth in new and renewed loans occurs will likely continue as we strive to maintain an appropriate level of reserves and maintain a moderate risk profile." In the first quarter a year ago, Banner did not record a provision.

Reflecting seasonal trends and the adverse impact of higher interest rates, mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.6 million in the first quarter compared to $5.1 million in the preceding quarter and $5.6 million in the first quarter of 2016. Sales of multifamily loans in the current quarter resulted in gains of $70,000, while sales of multifamily loans generated $254,000 of gains in the preceding quarter. Home purchase activity accounted for 64% of first quarter one- to four-family mortgage banking loan originations.

Banner’s deposit fees and other service charges were $12.2 million in the first quarter, which was unchanged compared to the preceding quarter and increased 3% compared to $11.8 million in the first quarter a year ago.

Miscellaneous income for the current quarter included a one-time gain of $2.5 million on the sale of a single loan that had been acquired a number of years ago as a partial settlement on a non-performing credit relationship and was carried at a significant discount to its contractual loan amount and eventual sales price.

First quarter 2017 results included a $688,000 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 a $13,000 net gain on the sale of securities. In the preceding quarter, results included a $1.1 million net loss for fair value adjustments that was partly offset by a $311,000 net gain on the sale of securities. In the first quarter a year ago, results included a $29,000 net gain for fair value adjustments and a $21,000 net gain on the sale of securities.

Total revenues were $115.7 million for the first quarter of 2017, compared to $116.6 million in the preceding quarter and $111.0 million in the first 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) was $116.4 million in the first quarter of 2017, compared to $117.5 million in the preceding quarter and increased 5% compared to $111.0 million in the first quarter of 2016.

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 $20.8 million in the first quarter of 2017, compared to $19.5 million in the fourth quarter of 2016 and $20.0 million in the first 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 $21.5 million in the first quarter of 2017, compared to $20.3 million for the fourth quarter of 2017 and $19.9 million in the first quarter a year ago.

Banner’s total non-interest expenses were $78.1 million in the first quarter of 2017, compared to $79.9 million in the preceding quarter and $84.0 million in the first quarter of 2016. The current quarter's non-interest expenses included increased compensation and employee benefit expense, elevated costs for professional services largely as result of enhanced regulatory compliance requirements and additional charges for customer refunds related to prior periods, which were generally offset compared to the preceding quarter by reductions in other expenses and a $1.2 million gain on the sale of real estate owned reflected in real estate operations. Miscellaneous expenses for the current quarter included accruals of $865,000 for customer refunds for deposit fees that we determined should not have been charged during a six-year period from 2010 to 2015, which was more than offset by the release of a $1.2 million reserve for possible credit losses on an unfunded commitment for a credit relationship that was terminated. There were no acquisition-related expenses in the current quarter compared to $788,000 in the preceding quarter and $6.8 million in the first quarter a year ago.

For the first quarter of 2017, Banner recorded $11.8 million in state and federal income tax expense for an effective tax rate of 33.2%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income and certain tax credits.

Balance Sheet Review

Banner’s total assets increased to $10.07 billion at March 31, 2017, from $9.79 billion at December 31, 2016 and $9.75 billion a year ago. The total of securities and interest-bearing deposits held at other banks was $1.62 billion at March 31, 2017, compared to $1.16 billion at December 30, 2016 and $1.59 billion a year ago. The increase in the securities portfolio during the current quarter reflects Banner's renewed leveraging strategy as it crossed the $10 billion assets threshold. In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016. The average effective duration of Banner's securities portfolio was approximately 3.8 years at March 31, 2017, compared to 2.9 years at March 31, 2016.

“Net loans decreased slightly during the quarter, but were up 3% year over year, with good production in targeted loan types, including increases in commercial real estate and construction and development loans,” said Grescovich. “We continue to see significant potential for growth in our loan origination pipelines.”

Net loans receivable decreased slightly to $7.33 billion at March 31, 2017, compared to $7.37 billion at December 31, 2016, largely as a result of seasonal factors and continuing repayments on one- to four-family loans, but increased 3% compared to $7.11 billion a year ago. Commercial real estate and multifamily real estate loans increased modestly to $3.63 billion at March 31, 2017, compared to $3.59 billion at December 31, 2016, and increased 5% compared to $3.44 billion a year ago. Commercial business loans increased slightly to $1.22 billion at March 31, 2017, compared to $1.21 billion three months earlier and were unchanged compared to a year ago. Agricultural business loans, which are seasonal by nature, decreased to $313.4 million at March 31, 2017, compared to $369.2 million three months earlier and $340.4 million a year ago. Total construction, land and land development loans decreased to $803.7 million at March 31, 2017, compared to $823.1 million at December 31, 2016, but increased 27% compared to $632.1 million a year earlier. One- to four-family loans continued to decline as a result of repayments, with nearly all newly originated mortgage loans being sold in the secondary market.

Loans held for sale decreased significantly to $86.7 million at March 31, 2017, compared to $246.4 million at December 31, 2016, largely due to the sale of $200.7 million of multifamily loans during the first quarter. Loans held for sale were $47.5 million at March 31, 2016. Loans held for sale at March 31, 2017, included $72.5 million of multifamily loans and $14.2 million of one- to four-family loans.

Total deposits were $8.42 billion at March 31, 2017, a 4% increase compared to $8.12 billion at December 31, 2016, and a 5% increase compared to $8.03 billion a year ago. Non-interest-bearing account balances increased 6% to $3.21 billion at March 31, 2017, compared to $3.04 billion a year ago. Interest-bearing transaction and savings accounts increased 10% to $4.06 billion compared to $3.71 billion a year ago. Certificates of deposit decreased 11% to $1.14 billion at March 31, 2017, compared to $1.29 billion a year earlier. Brokered deposits totaled $171.5 million at March 31, 2017, compared to $34.1 million at December 31, 2016 and $135.6 million a year ago. Brokered deposits increased in the current quarter in connection with Banner's leveraging strategy as higher yielding investment securities were purchased and total assets were allowed to increase above the $10 billion threshold.

Reflecting additional account growth as well as increased balances for existing clients, core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased by 3% during the current quarter. Core deposits represented 86% of total deposits at March 31, 2017, compared to 87% of total deposits at December 31, 2016, and 84% of total deposits a year earlier. The average cost of deposits was 0.14% for the quarter ended March 31, 2017, a one basis point increase compared to the preceding quarter, and a one basis point decline compared to the quarter ended March 31, 2016.

At March 31, 2017, total common shareholders' equity was $1.32 billion, or $39.92 per share, compared to $1.31 billion at December 31, 2016 and $1.32 billion a year ago. During the quarter Banner declared and accrued a $0.25 per share quarterly dividend. At March 31, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.05 billion, or 10.72% of tangible assets*, compared to $1.03 billion, or 10.83% of tangible assets, at December 31, 2016, and $1.04 billion, or 10.98% of tangible assets, a year ago. Banner's tangible book value per share* increased to $31.68 at March 31, 2017, compared to $30.38 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 March 31, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.46%, its Tier 1 leverage capital to average assets ratio was 11.79%, and its total capital to risk-weighted assets ratio was 13.85%.

Credit Quality

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for 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 Bank.

The allowance for loan losses was $86.5 million at March 31, 2017, or 1.17% of total loans outstanding and 479% of non-performing loans compared to $78.2 million at March 31, 2016, or 1.09% of total loans outstanding and 501% of non-performing loans. Banner had net charge-offs of $1.5 million in the first quarter compared to net charge-offs of $253,000 in the fourth quarter of 2016 and net recoveries of $189,000 in the first quarter a year ago. Primarily as a result of the addition of new loans 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 first quarter of 2016. If the allowance for loan losses included the remaining loan discount*, the adjusted allowance for loan losses to adjusted loans would have been 1.56% as of March 31, 2017 as compared to 1.67% a year ago. Non-performing loans were $18.1 million at March 31, 2017, compared to $22.6 million at December 31, 2016 and $15.6 million a year ago. Real estate owned and other repossessed assets were $3.2 million at March 31, 2017, compared to $11.2 million at December 31, 2016, and $7.4 million a year ago.

Banner's non-performing assets were $21.3 million, or 0.21% of total assets, at March 31, 2017, compared to $33.8 million, or 0.35% of total assets, at December 31, 2016 and $23.0 million, or 0.24% of total assets, a year ago. In addition to non-performing assets, purchased credit-impaired loans decreased to $30.5 million at March 31, 2017, compared to $32.3 million at December 31, 2016, and $53.3 million a year ago.

Conference Call

Banner will host a conference call on Tuesday, April 25, 2017, at 8:00 a.m. PDT, to discuss its first 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 10103898, or at www.bannerbank.com.

About the Company

Banner Corporation is a $10.1 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) 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; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon, Utah and California in particular; (11) the costs, effects and outcomes of litigation; (12) 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; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF OPERATIONS Quarters Ended
(in thousands except shares and per share data) Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
INTEREST INCOME:
Loans receivable $91,288 $93,915 $86,958
Mortgage-backed securities 4,647 3,861 5,390
Securities and cash equivalents 3,161 3,231 2,953
99,096 101,007 95,301
INTEREST EXPENSE:
Deposits 2,791 2,604 2,946
Federal Home Loan Bank advances 273 79 279
Other borrowings 74 76 75
Junior subordinated debentures 1,104 1,077 958
4,242 3,836 4,258
Net interest income before provision for loan losses 94,854 97,171 91,043
PROVISION FOR LOAN LOSSES 2,000 2,030
Net interest income 92,854 95,141 91,043
NON-INTEREST INCOME:
Deposit fees and other service charges 12,186 12,199 11,818
Mortgage banking operations 4,603 5,143 5,643
Bank owned life insurance 1,095 893 1,185
Miscellaneous 3,636 2,065 1,263
21,520 20,300 19,909
Net gain on sale of securities 13 311 21
Net change in valuation of financial instruments carried at fair value (688) (1,148) 29
Total non-interest income 20,845 19,463 19,959
NON-INTEREST EXPENSE:
Salary and employee benefits 46,063 44,387 46,564
Less capitalized loan origination costs (4,316) (4,785) (4,250)
Occupancy and equipment 11,996 12,581 10,388
Information / computer data services 3,994 4,674 4,920
Payment and card processing services 5,020 5,440 4,785
Professional services 5,152 2,384 2,614
Advertising and marketing 1,328 3,220 1,734
Deposit insurance 1,266 1,012 1,338
State/municipal business and use taxes 799 952 838
Real estate operations (966) (338) 397
Amortization of core deposit intangibles 1,624 1,722 1,808
Miscellaneous 6,118 7,820 6,085
78,078 79,069 77,221
Acquisition related expenses 788 6,813
Total non-interest expense 78,078 79,857 84,034
Income before provision for income taxes 35,621 34,747 26,968
PROVISION FOR INCOME TAXES 11,828 11,943 9,194
NET INCOME $23,793 $22,804 $17,774
Earnings per share available to common shareholders:
Basic $0.72 $0.69 $0.52
Diluted $0.72 $0.69 $0.52
Cumulative dividends declared per common share $0.25 $0.23 $0.21
Weighted average common shares outstanding:
Basic 32,933,444 33,134,222 34,023,800
Diluted 33,051,459 33,201,333 34,103,727
Decrease in common shares outstanding (40,523) (673,924) (20,804)


FINANCIAL CONDITION Percentage Change
(in thousands except shares and per share data) Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Prior Qtr Prior Yr Qtr
ASSETS
Cash and due from banks $196,277 $177,083 $153,706 10.8% 27.7%
Interest-bearing deposits 104,431 70,636 106,864 47.8% (2.3)%
Total cash and cash equivalents 300,708 247,719 260,570 21.4% 15.4%
Securities - trading 24,753 24,568 33,994 0.8% (27.2)%
Securities - available for sale 1,223,764 800,917 1,199,279 52.8% 2.0%
Securities - held to maturity 266,391 267,873 246,320 (0.6)% 8.1%
Federal Home Loan Bank stock 10,334 12,506 13,347 (17.4)% (22.6)%
Loans held for sale 86,707 246,353 47,523 (64.8)% 82.5%
Loans receivable 7,421,255 7,451,148 7,185,999 (0.4)% 3.3%
Allowance for loan losses (86,527) (85,997) (78,197) 0.6% 10.7%
Net loans 7,334,728 7,365,151 7,107,802 (0.4)% 3.2%
Accrued interest receivable 30,312 30,178 30,674 0.4% (1.2)%
Real estate owned held for sale, net 3,040 11,081 7,207 (72.6)% (57.8)%
Property and equipment, net 162,467 166,481 168,807 (2.4)% (3.8)%
Goodwill 244,583 244,583 244,811 % (0.1)%
Other intangibles, net 28,488 30,162 35,598 (5.6)% (20.0)%
Bank-owned life insurance 159,948 158,936 156,928 0.6% 1.9%
Other assets 192,155 187,160 192,734 2.7% (0.3)%
Total assets $10,068,378 $9,793,668 $9,745,594 2.8% 3.3%
LIABILITIES
Deposits:
Non-interest-bearing $3,213,044 $3,140,451 $3,036,330 2.3% 5.8%
Interest-bearing transaction and savings accounts 4,064,198 3,935,630 3,705,658 3.3% 9.7%
Interest-bearing certificates 1,144,718 1,045,333 1,287,873 9.5% (11.1)%
Total deposits 8,421,960 8,121,414 8,029,861 3.7% 4.9%
Advances from Federal Home Loan Bank at fair value 213 54,216 75,400 (99.6)% (99.7)%
Customer repurchase agreements and other borrowings 120,245 105,685 106,132 13.8% 13.3%
Junior subordinated debentures at fair value 96,040 95,200 92,879 0.9% 3.4%
Accrued expenses and other liabilities 66,201 71,369 81,485 (7.2)% (18.8)%
Deferred compensation 40,315 40,074 39,682 0.6% 1.6%
Total liabilities 8,744,974 8,487,958 8,425,439 3.0% 3.8%
SHAREHOLDERS' EQUITY
Common stock 1,214,517 1,213,837 1,262,050 0.1% (3.8)%
Retained earnings 110,783 95,328 50,230 16.2% 120.6%
Other components of shareholders' equity (1,896) (3,455) 7,875 (45.1)% (124.1)%
Total shareholders' equity 1,323,404 1,305,710 1,320,155 1.4% 0.2%
Total liabilities and shareholders' equity $10,068,378 $9,793,668 $9,745,594 2.8% 3.3%
Common Shares Issued:
Shares outstanding at end of period 33,152,864 33,193,387 34,221,451
Common shareholders' equity per share (1) $39.92 $39.34 $38.58
Common shareholders' tangible equity per share (1) (2) $31.68 $31.06 $30.38
Common shareholders' tangible equity to tangible assets (2) 10.72% 10.83% 10.98%
Consolidated Tier 1 leverage capital ratio 11.79% 11.83% 11.28%


(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 four pages of the press release tables.


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Percentage Change
LOANS Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Prior Qtr Prior Yr Qtr
Commercial real estate:
Owner occupied $1,361,095 $1,352,999 $1,328,034 0.6% 2.5%
Investment properties 2,011,618 1,986,336 1,805,243 1.3% 11.4%
Multifamily real estate 254,246 248,150 307,019 2.5% (17.2)%
Commercial construction 141,505 124,068 87,711 14.1% 61.3%
Multifamily construction 114,728 124,126 79,737 (7.6)% 43.9%
One- to four-family construction 366,191 375,704 297,348 (2.5)% 23.2%
Land and land development:
Residential 151,649 170,004 142,841 (10.8)% 6.2%
Commercial 29,597 29,184 24,493 1.4% 20.8%
Commercial business 1,224,541 1,207,879 1,224,915 1.4% %
Agricultural business including secured by farmland 313,374 369,156 340,350 (15.1)% (7.9)%
One- to four-family real estate 802,991 813,077 910,719 (1.2)% (11.8)%
Consumer:
Consumer secured by one- to four-family real estate 493,495 493,211 481,590 0.1% 2.5%
Consumer-other 156,225 157,254 155,999 (0.7)% 0.1%
Total loans receivable $7,421,255 $7,451,148 $7,185,999 (0.4)% 3.3%
Restructured loans performing under their restructured terms $17,193 $18,907 $19,450
Loans 30 - 89 days past due and on accrual (1) $22,214 $11,571 $28,264
Total delinquent loans (including loans on non-accrual), net (2) $37,563 $30,553 $43,986
Total delinquent loans / Total loans outstanding 0.51% 0.41% 0.61%

(1) Includes $2.4 million of purchased credit-impaired loans at March 31, 2017 compared to $470,000 at December 31, 2016 and $1.6 million at March 31, 2016.
(2) Delinquent loans include $3.5 million of delinquent purchased credit-impaired loans at March 31, 2017 compared to $1.7 million at December 31, 2016 and $4.9 million at March 31, 2016.

LOANS BY GEOGRAPHIC LOCATION Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Amount Percentage Amount Percentage Amount Percentage
Washington $3,401,005 45.8% $3,433,617 46.1% $3,333,912 46.4%
Oregon 1,493,054 20.1% 1,505,369 20.2% 1,420,749 19.8%
California 1,255,597 16.9% 1,239,989 16.6% 1,173,203 16.3%
Idaho 471,519 6.4% 495,992 6.7% 493,905 6.9%
Utah 281,379 3.8% 283,890 3.8% 289,082 4.0%
Other 518,701 7.0% 492,291 6.6% 475,148 6.6%
Total loans $7,421,255 100.0% $7,451,148 100.0% $7,185,999 100.0%


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Quarters Ended
CHANGE IN THE Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $85,997 $84,220 $78,008
Provision for loan losses 2,000 2,030
Recoveries of loans previously charged off:
Commercial real estate 70 484 38
Construction and land 83 903 471
One- to four-family real estate 145 231 12
Commercial business 173 218 720
Agricultural business, including secured by farmland 113 20 17
Consumer 94 81 207
678 1,937 1,465
Loans charged off:
Commercial real estate (566) (180)
Construction and land (616)
One- to four-family real estate (249)
Commercial business (1,626) (305) (139)
Agricultural business, including secured by farmland (159) (567)
Consumer (363) (454) (390)
(2,148) (2,190) (1,276)
Net (charge-offs) recoveries (1,470) (253) 189
Balance, end of period $86,527 $85,997 $78,197
Net (charge-offs) recoveries / Average loans outstanding (0.019)% (0.003)% 0.003%


ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Specific or allocated loss allowance:
Commercial real estate $20,472 $20,993 $19,732
Multifamily real estate 1,378 1,360 2,853
Construction and land 29,464 34,252 29,318
One- to four-family real estate 1,974 2,238 2,170
Commercial business 19,768 16,533 15,118
Agricultural business, including secured by farmland 3,245 2,967 4,282
Consumer 3,840 4,104 3,541
Total allocated 80,141 82,447 77,014
Unallocated 6,386 3,550 1,183
Total allowance for loan losses $86,527 $85,997 $78,197
Allowance for loan losses / Total loans outstanding 1.17% 1.15% 1.09%
Allowance for loan losses / Non-performing loans 479% 381% 501%



ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial$6,910 $8,237 $4,145
Multifamily147
Construction and land1,775 1,748 2,250
One- to four-family3,386 2,263 4,803
Commercial business2,700 3,074 1,558
Agricultural business, including secured by farmland1,012 3,229 663
Consumer1,285 1,875 906
17,215 20,426 14,325
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial 701
Multifamily 147
One- to four-family545 1,233 1,039
Consumer297 72 251
842 2,153 1,290
Total non-performing loans18,057 22,579 15,615
Real estate owned (REO)3,040 11,081 7,207
Other repossessed assets162 166 202
Total non-performing assets$21,259 $33,826 $23,024
Total non-performing assets to total assets0.21% 0.35% 0.24%
Purchased credit-impaired loans, net$30,501 $32,322 $53,271


Quarters Ended
REAL ESTATE OWNEDMar 31, 2017 Dec 31, 2016 Mar 31, 2016
Balance, beginning of period$11,081 $4,717 $11,627
Additions from loan foreclosures(68) 8,375 2
Additions from acquisitions 400
Proceeds from dispositions of REO(9,125) (2,791) (4,666)
Gain on sale of REO1,202 852 49
Valuation adjustments in the period(50) (72) (205)
Balance, end of period$3,040 $11,081 $7,207



ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION Percentage Change
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Prior Qtr Prior Yr
Non-interest-bearing $3,213,044 $3,140,451 $3,036,330 2.3% 5.8%
Interest-bearing checking 928,232 914,484 767,460 1.5% 20.9%
Regular savings accounts 1,592,023 1,523,391 1,327,558 4.5% 19.9%
Money market accounts 1,543,943 1,497,755 1,610,640 3.1% (4.1)%
Total interest-bearing transaction and savings accounts 4,064,198 3,935,630 3,705,658 3.3% 9.7%
Interest-bearing certificates 1,144,718 1,045,333 1,287,873 9.5% (11.1)%
Total deposits $8,421,960 $8,121,414 $8,029,861 3.7% 4.9%


GEOGRAPHIC CONCENTRATION OF DEPOSITS Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Amount Percentage Amount Percentage Amount Percentage
Washington $4,619,457 54.9% $4,347,644 53.6% $4,209,332 52.4%
Oregon 1,746,143 20.7% 1,708,973 21.0% 1,668,421 20.8%
California 1,469,351 17.4% 1,469,748 18.1% 1,565,326 19.5%
Idaho 429,850 5.1% 447,019 5.5% 428,681 5.3%
Utah 157,159 1.9% 148,030 1.8% 158,101 2.0%
Total deposits $8,421,960 100.0% $8,121,414 100.0% $8,029,861 100.0%


INCLUDED IN TOTAL DEPOSITS Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Public non-interest-bearing accounts $80,322 $92,789 $82,527
Public interest-bearing transaction & savings accounts 125,921 128,976 123,713
Public interest-bearing certificates 31,024 25,650 29,983
Total public deposits $237,267 $247,415 $236,223
Total brokered deposits $171,521 $34,074 $135,603


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 March 31, 2017 Amount Ratio Amount Ratio Amount Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets $1,227,333 13.85% $708,897 8.00% $886,122 10.00%
Tier 1 capital to risk-weighted assets 1,138,357 12.85% 531,673 6.00% 531,673 6.00%
Tier 1 leverage capital to average assets 1,138,357 11.79% 386,229 4.00% n/a n/a
Common equity tier 1 capital to risk-weighted assets 1,015,251 11.46% 398,755 4.50% n/a n/a
Banner Bank:
Total capital to risk-weighted assets 1,053,255 12.15% 693,425 8.00% 866,781 10.00%
Tier 1 capital to risk-weighted assets 966,485 11.15% 520,068 6.00% 693,425 8.00%
Tier 1 leverage capital to average assets 966,485 10.29% 375,777 4.00% 469,721 5.00%
Common equity tier 1 capital to risk-weighted assets 966,485 11.15% 390,051 4.50% 563,407 6.50%
Islanders Bank:
Total capital to risk-weighted assets 35,728 19.02% 15,031 8.00% 18,788 10.00%
Tier 1 capital to risk-weighted assets 33,522 17.84% 11,273 6.00% 15,031 8.00%
Tier 1 leverage capital to average assets 33,522 13.06% 10,271 4.00% 12,839 5.00%
Common equity tier 1 capital to risk-weighted assets 33,522 17.84% 8,455 4.50% 12,212 6.50%



ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREADQuarters Ended
March 31, 2017 December 31, 2016 March 31, 2016
Average BalanceInterest and DividendsYield / Cost(3) Average BalanceInterest and DividendsYield / Cost(3) Average BalanceInterest and DividendsYield / Cost(3)
Interest-earning assets:
Mortgage loans$6,104,779 $72,549 4.82% $5,960,506 $74,538 4.97% $5,707,882 $68,743 4.84%
Commercial/agricultural loans1,464,532 16,546 4.58% 1,469,407 17,192 4.65% 1,471,638 16,025 4.38%
Consumer and other loans138,033 2,193 6.44% 141,133 2,185 6.16% 141,361 2,190 6.23%
Total loans(1)7,707,344 91,288 4.80% 7,571,046 93,915 4.93% 7,320,881 86,958 4.78%
Mortgage-backed securities842,071 4,647 2.24% 796,625 3,861 1.93% 1,004,836 5,390 2.16%
Other securities453,793 3,037 2.71% 469,377 3,062 2.60% 421,241 2,772 2.65%
Interest-bearing deposits with banks32,195 93 1.17% 91,625 95 0.41% 103,775 101 0.39%
FHLB stock15,550 31 0.81% 11,668 74 2.52% 17,531 80 1.84%
Total investment securities1,343,609 7,808 2.36% 1,369,295 7,092 2.06% 1,547,383 8,343 2.17%
Total interest-earning assets9,050,953 99,096 4.44% 8,940,341 101,007 4.49% 8,868,264 95,301 4.32%
Non-interest-earning assets923,165 904,846 900,296
Total assets$9,974,118 $9,845,187 $9,768,560
Deposits:
Interest-bearing checking accounts$896,764 200 0.09% $876,904 197 0.09% $934,072 196 0.08%
Savings accounts1,557,734 523 0.14% 1,470,548 493 0.13% 1,307,369 423 0.13%
Money market accounts1,522,470 651 0.17% 1,541,258 677 0.17% 1,620,524 862 0.21%
Certificates of deposit1,089,316 1,417 0.53% 1,089,337 1,237 0.45% 1,328,741 1,465 0.44%
Total interest-bearing deposits5,066,284 2,791 0.22% 4,978,047 2,604 0.21% 5,190,706 2,946 0.23%
Non-interest-bearing deposits3,148,520 % 3,193,172 % 2,788,372 %
Total deposits8,214,804 2,791 0.14% 8,171,219 2,604 0.13% 7,979,078 2,946 0.15%
Other interest-bearing liabilities:
FHLB advances130,274 273 0.85% 32,932 79 0.95% 169,204 279 0.66%
Other borrowings108,091 74 0.28% 107,819 76 0.28% 102,865 75 0.29%
Junior subordinated debentures140,212 1,104 3.19% 140,212 1,077 3.06% 140,212 958 2.75%
Total borrowings378,577 1,451 1.55% 280,963 1,232 1.74% 412,281 1,312 1.28%
Total funding liabilities8,593,381 4,242 0.20% 8,452,182 3,836 0.18% 8,391,359 4,258 0.20%
Other non-interest-bearing liabilities(2)58,489 67,536 63,014
Total liabilities8,651,870 8,519,718 8,454,373
Shareholders' equity1,322,248 1,325,469 1,314,187
Total liabilities and shareholders' equity$9,974,118 $9,845,187 $9,768,560
Net interest income/rate spread $94,854 4.24% $97,171 4.31% $91,043 4.12%
Net interest margin 4.25% 4.32% 4.13%
Additional Key Financial Ratios:
Return on average assets 0.97% 0.92% 0.73%
Return on average equity 7.30% 6.84% 5.44%
Average equity/average assets 13.26% 13.46% 13.45%
Average interest-earning assets/average interest-bearing liabilities 166.23% 170.00% 158.28%
Average interest-earning assets/average funding liabilities 105.32% 105.78% 105.68%
Non-interest income/average assets 0.85% 0.79% 0.82%
Non-interest expense/average assets 3.17% 3.23% 3.46%
Efficiency ratio(4) 67.48% 68.47% 75.70%
Adjusted efficiency ratio(5) 65.84% 65.32% 66.86%


(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 core deposit intangibles (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 four pages of the press release tables.


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
* Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented.
REVENUE FROM CORE OPERATIONSQuarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Net interest income before provision for loan losses$94,854 $97,171 $91,043
Total non-interest income20,845 19,463 19,959
Total GAAP revenue115,699 116,634 111,002
Exclude net gain on sale of securities(13) (311) (21)
Exclude change in valuation of financial instruments carried at fair value688 1,148 (29)
Revenue from core operations (non-GAAP)$116,374 $117,471 $110,952


NON-INTEREST INCOME/EXPENSE FROM CORE OPERATIONS Quarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Total non-interest income (GAAP) $20,845 $19,463 $19,959
Exclude net gain on sale of securities (13) (311) (21)
Exclude change in valuation of financial instruments carried at fair value 688 1,148 (29)
Non-interest income from core operations (non-GAAP) $21,520 $20,300 $19,909
Total non-interest expense (GAAP) $78,078 $79,857 $84,034
Exclude acquisition related costs (788) (6,813)
Non-interest expense from core operations (non-GAAP) $78,078 $79,069 $77,221


INCOME FROM CORE OPERATIONSQuarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Income before provision for taxes (GAAP)$35,621 $34,747 $26,968
Exclude net gain on sale of securities(13) (311) (21)
Exclude change in valuation of financial instruments carried at fair value688 1,148 (29)
Exclude acquisition costs 788 6,813
Income from core operations before provision for taxes (non-GAAP)$36,296 $36,372 $33,731


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
EARNINGS FROM CORE OPERATIONS Quarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Net income (GAAP) $23,793 $22,804 $17,774
Exclude net gain on sale of securities (13) (311) (21)
Exclude change in valuation of financial instruments carried at fair value 688 1,148 (29)
Exclude acquisition-related costs 788 6,813
Exclude related tax benefit (243) (585) (2,417)
Total earnings from core operations (non-GAAP) $24,225 $23,844 $22,120
Diluted earnings per share (GAAP) $0.72 $0.69 $0.52
Diluted core earnings per share (non-GAAP) $0.73 $0.72 $0.65
RETURN ON AVERAGE ASSETS - CORE
Average assets $9,974,118 $9,845,187 $9,768,560
Return on average assets (GAAP) 0.97% 0.92% 0.73%
Core return on average assets (non-GAAP) 0.99% 0.96% 0.91%
NET EFFECT OF ACQUISITION-RELATED COSTS ON EARNINGS Quarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Acquisition-related costs $ $(788) $(6,813)
Related tax benefit 284 2,435
Total net effect of acquisition-related costs on earnings $ $(504) $(4,378)
Diluted weighted average shares outstanding 33,051,459 33,201,333 34,103,727
Total net effect of acquisition-related costs on diluted weighted average earnings per share $ $(0.02) $(0.13)


ACQUISITION ACCOUNTING IMPACT ON NET INTEREST MARGINQuarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Net interest income before provision for loan losses (GAAP)$94,854 $97,171 $91,043
Exclude discount accretion on acquired loans(1,777) (3,635) (1,689)
Exclude premium amortization on acquired certificates of deposit(132) (315) (461)
Net interest income before acquisition accounting impact (non-GAAP)$92,945 $93,221 $88,893
Average interest-earning assets (GAAP)$9,050,953 $8,940,341 $8,868,264
Exclude average net loan discount on acquired loans30,058 32,773 43,347
Average interest-earning assets before acquired loan discount (non-GAAP)$9,081,011 $8,973,114 $8,911,611
Net interest margin (GAAP)4.25% 4.32% 4.13%
Exclude impact on net interest margin from discount accretion on acquired loans(0.08) (0.16) (0.08)
Exclude impact on net interest margin from acquired certificates of deposit premium amortization(0.01) (0.01) (0.02)
Exclude impact on net interest margin of net loan discount on average earning assets(0.01) (0.02) (0.02)
Net margin before acquisition accounting impact (non-GAAP)4.15% 4.13% 4.01%


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
Quarters Ended
ACQUISITION ACCOUNTING IMPACT ON LOAN YIELDMar 31, 2017 Dec 31, 2016 Mar 31, 2016
Average total loans (GAAP)$7,707,344 $7,571,046 $7,320,881
Exclude average net loan discount on acquired loans30,058 32,773 43,347
Adjusted average total loans (non-GAAP)$7,737,402 $7,603,819 $7,364,228
Interest income on loans (GAAP)$91,288 $93,915 $86,958
Exclude discount accretion on acquired loans(1,777) (3,635) (1,689)
Adjusted interest income on loans (non-GAAP)$89,511 $90,280 $85,269
Loan yield (GAAP)4.80% 4.93% 4.78%
Loan yield before acquisition accounting impact (non-GAAP)4.69% 4.72% 4.66%
Impact on loan yield from acquisition accounting0.11% 0.21% 0.12%
ACQUISITION ACCOUNTING IMPACT ON DEPOSIT COST
Average deposits$8,214,804 $8,171,219 $7,979,078
Interest expense on deposits (GAAP)$2,791 $2,604 $2,946
Exclude premium amortization on acquired certificates of deposit132 315 461
Adjusted interest expense on deposits (non-GAAP)$2,923 $2,919 $3,407
Deposit cost (GAAP)0.14% 0.13% 0.15%
Deposit cost before acquisition accounting impact (non-GAAP)0.15% 0.15% 0.17%
Impact on deposit cost from acquisition accounting(0.01)% (0.02)% (0.02)%


ADJUSTED EFFICIENCY RATIO Quarters Ended
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Non-interest expense (GAAP) $78,078 $79,857 $84,034
Exclude acquisition-related costs (788) (6,813)
Exclude CDI amortization (1,624) (1,722) (1,808)
Exclude state/municipal tax expense (799) (952) (838)
Exclude REO gain (loss) 966 338 (397)
Adjusted non-interest expense (non-GAAP) $76,621 $76,733 $74,178
Net interest income before provision for loan losses (GAAP) $94,854 $97,171 $91,043
Non-interest income (GAAP) 20,845 19,463 19,959
Total revenue 115,699 116,634 111,002
Exclude net gain on sale of securities (13) (311) (21)
Exclude net change in valuation of financial instruments carried at fair value 688 1,148 (29)
Adjusted revenue (non-GAAP) $116,374 $117,471 $110,952
Efficiency ratio (GAAP) 67.48% 68.47% 75.70%
Adjusted efficiency ratio (non-GAAP) 65.84% 65.32% 66.86%


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
RATIO OF ADJUSTED ALLOWANCE FOR LOAN LOSSES TO ADJUSTED LOANS
Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Loans receivable (GAAP) $7,421,255 $7,451,148 $7,185,999
Net loan discount on acquired loans 29,352 31,110 42,302
Adjusted loans (non-GAAP) $7,450,607 $7,482,258 $7,228,301
Allowance for loan losses (GAAP) $86,527 $85,997 $78,197
Net loan discount on acquired loans 29,352 31,110 42,302
Adjusted allowance for loan losses (non-GAAP) $115,879 $117,107 $120,499
Allowance for loan losses / Total loans (GAAP) 1.17% 1.15% 1.09%
Adjusted allowance for loan losses / Adjusted loans (non-GAAP) 1.56% 1.57% 1.67%


Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS
Shareholders' equity (GAAP) $1,323,404 $1,305,710 $1,320,155
Exclude goodwill and other intangible assets, net 273,071 274,745 280,409
Tangible common shareholders' equity (non-GAAP) $1,050,333 $1,030,965 $1,039,746
Total assets (GAAP) $10,068,378 $9,793,668 $9,745,594
Exclude goodwill and other intangible assets, net 273,071 274,745 280,409
Total tangible assets (non-GAAP) $9,795,307 $9,518,923 $9,465,185
Common shareholders' equity to total assets (GAAP) 13.14% 13.33% 13.55%
Tangible common shareholders' equity to tangible assets (non-GAAP) 10.72% 10.83% 10.98%
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
Tangible common shareholders' equity $1,050,333 $1,030,965 $1,039,746
Common shares outstanding at end of period 33,152,864 33,193,387 34,221,451
Common shareholders' equity (book value) per share (GAAP) $39.92 $39.34 $38.58
Tangible common shareholders' equity (tangible book value) per share (non-GAAP) $31.68 $31.06 $30.38


CONTACT: MARK J. GRESCOVICH PRESIDENT & CEO LLOYD W. BAKER, CFO (509) 527-3636

Source:Banner Corporation