Banner Corp. (NASDAQ:BANR) filed Amended Quarterly Report for the period ended 2009-09-30.
Banner Corporation is the parent of Banner Bank, a Washington state chartered commercial bank, which operates a total of 39 branch offices and six loan offices in 18 counties in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Banner Corp. has a market cap of $57.4 million; its shares were traded at around $3.03 with and P/S ratio of 0.2. The dividend yield of Banner Corp. stocks is 1.3%. Banner Corp. had an annual average earning growth of 12.6% over the past 10 years.
Highlight of Business Operations:As noted above, in the quarter ended September 30, 2009, our net income included a $4.6 million net gain in the valuation of the selected financial assets and liabilities we record at fair value. The fair value adjustment resulted in a reduction of $3.0 million (net after tax), or $0.16 per share (diluted), to the net loss reported for the quarter ended September 30, 2009. By comparison, the $6.1 million fair value loss for the same quarter one year earlier resulted in a net loss of $3.9 million (net after tax), or ($0.24) per share (diluted). Excluding the net fair value adjustments, the net loss from core operations was $9.4 million ($11.3 million available to common shareholders) for the quarter ended September 30, 2009, compared to a net gain from core operations of $2.9 million for the quarter ended September 30, 2008. Earnings or loss from core operations and other earnings information excluding the change in valuation of financial instruments carried at fair value and goodwill impairment charges represent non-GAAP financial measures. Management has presented these non-GAAP financial measures in this discussion and analysis because it believes that they provide useful and comparative information to assess trends in our core operations. Where applicable, we have also presented comparable earnings information using GAAP financial measures. The decrease in earnings from core operations primarily reflects the increased loan loss provisioning, narrower net interest margin, higher FDIC insurance charges and increased collection costs.
General. Total assets increased $204 million, or 4%, from $4.584 billion at December 31, 2008, to $4.788 billion at September 30, 2009. Net loans receivable (gross loans less loans in process, deferred fees and discounts, and allowance for loan losses) decreased $85 million, or 2%, from $3.886 billion at December 31, 2008, to $3.801 billion at September 30, 2009. The contraction in net loans was largely due to decreases of $143 million in one- to four-family construction loans and $94 million in land and land development loans, as well as a decrease of $21 million in commercial construction loans. These changes were partially offset by increases of $78 million in one- to four-family mortgage loans, $53 million in commercial real estate loans, $29 million in multi-family construction loans and $21 million agricultural business loans. We continue to maintain a significant, although decreasing, investment in construction and land loans; however, new production of these types of loans during the past two years has declined appreciably and is expected to remain modest for the foreseeable future. As a result of the much slower pace of new originations and continuing payoffs on existing loans, loans to finance the construction of one- to four-family residential real estate, which totaled $277 million at September 30, 2009, have decreased by $378 million, or 58%, since their peak quarter-end balance of $655 million at June 30, 2007, including a decrease of $205 million over the last twelve months. In addition, land and development loans have decreased by $109 million, or 22%, compared to their peak quarter-end balances at March 31, 2008. Given the current housing and economic environment and our reduced level of construction and land development loan originations, we anticipate that construction and land loan balances will continue to decline for the foreseeable future, although the pace of decline for land development loans will be modest until there are further significant reductions in the amount of completed new construction homes on the market.
Securities increased $2 million, or 1%, from $317 million at December 31, 2008, to $319 million at September 30, 2009, as purchases slightly exceeded repayments and net fair value adjustments. During the nine months ended September 30, 2009, net fair value adjustments for trading and available-for-sale securities reduced their carrying values by $2 million. Effective January 1, 2007, we elected to reclassify most of our securities to fair value. At September 30, 2009, the fair value of our trading securities was $44 million less than their amortized cost. The reduction reflected in the fair value of these securities compared to their amortized cost primarily was due to a net decrease of $40 million in the value of single-issuer trust preferred securities and collateralized debt obligations secured by pools of trust preferred securities issued by bank holding companies and insurance companies as well as a decrease of $6 million in the value of Fannie Mae and Freddie Mac common and preferred equity securities, offset by a small gain in all other trading securities. Although we do not normally engage in trading activities, these securities are reported as trading securities for financial reporting purposes. (See Note 11, Fair Value Accounting and Measurement, in the Selected Notes to the Consolidated Financial Statements.) Periodically, we also acquire securities which are designated as available-for-sale or held-to-maturity. At September 30, 2009, we recorded an increase of $748,000 ($627,000 net of tax) in net fair value adjustments related to available-for-sale securities, which was included as a component of other comprehensive income. Generally, securities designated as held-to-maturity are reported at their amortized cost for financial reporting purposes.
Real estate owned acquired through foreclosures increased $32 million, from $22 million at December 31, 2008 to $54 million at September 30, 2009. The quarter-ending total included $32 million in land or land development projects, $8 million in commercial real estate and $14 million in single family homes. During the nine months ended September 30, 2009, we transferred $63 million of loans into real estate owned along with an additional investment of $4 million into those properties, sold approximately $33 million of foreclosed properties during that same period and recognized a $2 million charge in valuation adjustments related to real estate owned. (See “Asset Quality” discussion below.)
Deposits increased $82 million, or 2%, from $3.779 billion at December 31, 2008, to $3.861 billion at September 30, 2009. Non-interest-bearing deposits increased by $38 million, or 7%, from $509 million to $547 million, and interest-bearing deposits increased $44 million, or 1%, to $3.314 billion at September 30, 2009. In response to the now higher costs of collateralizing public fund deposits and to reduce the shared risk exposure under Washington and Oregon State regulations, we encouraged the runoff of $196 million in public funds, including $73 million of interest-bearing transaction accounts, since December 31, 2008. We anticipate further declines in public fund deposits as we continue to adjust to these new regulations. In addition, we elected to reduce brokered deposits by $82 million during this nine month period, including $61 million during the quarter ended September 30, 2009. The decrease in public funds and brokered deposits has been more than offset by growth in retail deposits, particularly in the two most recent quarters.
Reflecting the weak economic conditions, ongoing strains in the financial and housing markets, and further deterioration of property values for the quarter ended September 30, 2009, we had a net loss of $6.5 million which, after providing for the preferred stock dividend of $1.6 million and related discount accretion of $373,000, resulted in a net loss of $8.4 million, or ($0.44) per diluted share, available to common shareholders. This loss compares to a net loss of $991,000, or ($0.06) per diluted share, for the quarter ended September 30, 2008, when we did not have any preferred stock issued. For the nine months ended September 30, 2009, we had a net loss of $32.2 million, which after providing for the preferred stock dividend of $4.7 million and related discount accretion of $1.1 million, resulted in a net loss of $38.0 million, or ($2.11) per diluted share, available to common shareholders, compared to a net loss of $49.5 million, or ($3.09) per diluted share, for the nine months ended September 30, 2008, which included a $50 million charge for the impairment of goodwill.
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