5 unchanged sentences
The Company’s longer term strategic initiatives continue to focus on originating high-quality assets and client acquisition, which we believe will continue to generate strong revenue while maintaining the Company’s moderate risk profile.
+Added: We strive to uphold our core values, which are to do the right thing for our clients, communities, colleagues, company and shareholders;
+Added: and to provide consistent and reliable strength through all economic cycles and change events.
2024 Financial Highlights
• Revenues were $608.6 million for the year ended December 31, 2024, compared to $620.4 million for the prior year.
+Added: • 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 $614.8 million or the year ended December 31, 2024, compared to $643.9 million for the prior year.
• Net income of $168.9 million, or $4.88 per diluted share, for the year ended December 31, 2024, compared to net income of $183.6 million, or $5.33 per diluted share for the prior year.
4 unchanged sentences
• Non-interest expense was $391.5 million for the year ended December 31, 2024, compared to $382.5 million for the prior year.
−Removed: • Return on average assets was 1.18% for both 2023 and 2022.
+Added: • Return on average assets was 1.07% for year ended December 31, 2024, compared to 1.18% for the prior year.
• Efficiency ratio was 64.33%, compared to 61.66% in the prior year.
4 unchanged sentences
• Core deposits represented 89% of total deposits at December 31, 2024.
−Removed: • Banner Bank’s estimated uninsured deposits were approximately 31% of total deposits at December 31, 2023.
−Removed: • Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and affiliate deposits, were approximately 28% of total deposits at December 31, 2023.
−Removed: • Available borrowing capacity was $4.65 billion at December 31, 2023.
−Removed: • On-balance sheet liquidity was $2.93 billion at December 31, 2023.
−Removed: • Cash dividends paid to shareholders were $1.92 per share, compared to $1.76 for the prior year.
+Added: • Cash dividends paid to shareholders were $1.92 per share, consistent with the prior year.
• Common shareholders’ equity per share increased to $51.49 at December 31, 2024, compared to $48.12 a year ago.
−Removed: • Tangible common shareholders’ equity per share* increased 12% to $37.09 at December 31, 2023, compared to $31.41 a year ago.
+Added: • Tangible common shareholders’ equity per share* decreased 1% to $40.57 at December 31, 2024, compared to $37.09 a year ago.
* Represents a non-GAAP financial measure.
For a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, see “Non-GAAP Financial Measures” below.
+Added: T able of C onten ts
Selected Financial Data:
16 unchanged sentences
Net interest income 541,716 576,005 553,179
−Removed: Provision (recapture) for credit losses 10,789 10,364 (33,388)
−Removed: Net interest income after provision (recapture) for credit losses
+Added: Provision for credit losses 7,581 10,789 10,364
+Added: Net interest income after provision for credit losses
534,135 565,216 542,815
1 unchanged sentence
Mortgage banking operations revenue 12,207 11,817 10,834
−Removed: Net (loss) gain on sale of securities (19,242) (3,248) 482
+Added: Net loss on sale of securities (5,190) (19,242) (3,248)
Net change in valuation of financial instruments carried at fair value
25 unchanged sentences
Dividend payout ratio (diluted) 39.34 % 36.02 % 31.04 %
+Added: T able of C onten ts
As of December 31,
8 unchanged sentences
1.07 % 1.18 % 1.18 %
+Added: Adjusted return on average assets (4) (10)
+Added: 1.10 1.30 1.19
Return on average common equity (5)
9.91 11.94 12.79
+Added: Adjusted return on average equity (6) (10)
+Added: 10.19 13.17 12.83
Average common equity to average assets 10.80 9.88 9.26
23 unchanged sentences
Common equity tier I capital to risk-weighted assets 12.44 11.97 11.44
−Removed: (1) Includes securities available-for-sale and held-to-maturity.
+Added: (1) Includes available-for-sale and held-to-maturity securities.
(2) Calculated using shares outstanding.
(3) Net income divided by average assets.
+Added: (4) Adjusted earnings (non-GAAP) divided by average assets.
(5) Net income divided by average common equity.
+Added: (6) Adjusted earnings (non-GAAP) divided by average equity.
(7) Net interest income as a percent of average interest-earning assets on a tax equivalent basis.
9 unchanged sentences
Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.
+Added: T able of C onten ts
Adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio are non-GAAP financial measures.
8 unchanged sentences
Total revenue (GAAP) 608,604 620,414 628,434
−Removed: Net loss (gain) on sale of securities 19,242 3,248 (482)
+Added: Net loss on sale of securities 5,190 19,242 3,248
Net change in valuation of financial instruments carried at fair value 982 4,218 (807)
3 unchanged sentences
Net income (GAAP) $ 168,898 $ 183,624 $ 195,378
−Removed: Net loss (gain) on sale of securities 19,242 3,248 (482)
+Added: Net loss on sale of securities 5,190 19,242 3,248
Net change in valuation of financial instruments carried at fair value 982 4,218 (807)
−Removed: Merger and acquisition-related costs — — 660
−Removed: COVID-19 expenses — — 436
Gain on sale of branches — — (7,804)
13 unchanged sentences
Non-interest expense (GAAP) $ 391,538 $ 382,538 $ 377,295
−Removed: Merger and acquisition-related costs — — (660)
−Removed: COVID-19 expenses — — (436)
Banner Forward expenses (1)
8 unchanged sentences
Total revenue (GAAP) 608,604 620,414 628,434
−Removed: Net loss (gain) on sale of securities 19,242 3,248 (482)
+Added: Net loss on sale of securities 5,190 19,242 3,248
Net change in valuation of financial instruments carried at fair value 982 4,218 (807)
4 unchanged sentences
(1) Included in miscellaneous expenses in the Consolidated Statement of Operations.
+Added: T able of C onten ts
The ratio of tangible common shareholders’ equity to tangible assets is a non-GAAP financial measure.
18 unchanged sentences
Critical Accounting Estimates
−Removed: The preparation of financial statements in conformity with GAAP requires Management to make estimates, assumptions and judgements that affect amounts reported in the consolidated financial statements.
+Added: The preparation of financial statements in conformity with GAAP requires Management to make estimates, assumptions and judgments that affect amounts reported in the consolidated financial statements.
These estimates, assumptions, and judgments are based on information available as of the date of the financial statements;
3 unchanged sentences
The allowance for credit losses reflects Management’s evaluation of our loans and their estimated loss potential, as well as the risk inherent in various components of the portfolio.
−Removed: There is significant judgment and assumptions applied in estimating the allowance for credit losses.
−Removed: These judgements, assumptions and estimates are susceptible to significant changes based on the current environment.
+Added: Significant judgment and assumptions are applied in estimating the allowance for credit losses.
+Added: These judgments, assumptions and estimates are susceptible to significant changes based on the current environment.
Among the material estimates required to establish the allowance for credit losses are a reasonable and supportable forecast;
8 unchanged sentences
Management considers various economic scenarios and forecasts to arrive at the estimate that most reflects Management’s expectations of future conditions.
+Added: As of December 31, 2024, Management used a baseline forecast to estimate the allowance for credit losses.
The selection of a more optimistic or pessimistic economic forecast would result in a lower or higher allowance for credit losses.
−Removed: The use of a protracted slump economic forecast would have increased the allowance for credit losses - loans by approximately 22% as of December 31, 2023, where the use of a stronger near-term growth economic forecast would have resulted in a negligible decrease in the allowance for credit losses - loans as of December 31, 2023.
+Added: While there are multiple economic forecast scenarios available, the use of a protracted slump economic forecast would have increased the allowance for credit losses - loans by approximately 11% as of December 31, 2024, where the use of a stronger near-term growth economic forecast would have resulted in a negligible decrease in the allowance for credit losses - loans as of December 31, 2024.
Management uses a scale to assign qualitative and environmental (QE) factor adjustments based on the level of estimated impact which requires a significant amount of judgment.
Some QE factors impact all loan segments equally while others may impact some loan segments more or less than others.
−Removed: If Management’s judgment were different for a QE factor that impacts all loan segments equally, a five basis-point change in this QE factor would increase or decrease the allowance for credit losses by 3.7% as of December 31, 2023.
+Added: If Management’s judgment was different for a QE factor that impacts all loan segments equally, a five basis-point change in this QE factor would increase or decrease the allowance for credit losses by 3.7% as of December 31, 2024.
+Added: T able of C onten ts
Fair Value Accounting and Measurement:
−Removed: We use fair value measurements to record fair value adjustments to certain financial assets and liabilities.
+Added: We use fair value measurements to record certain financial assets and liabilities at their estimated fair value.
A hierarchical disclosure framework associated with the level of pricing observability is utilized in measuring financial instruments at fair value.
6 unchanged sentences
A 25 basis-point increase or decrease in the discount rate used to calculate the fair value of our junior subordinated debentures would result in a $1.3 million decrease or increase in the reported fair value as of December 31, 2024, with an offsetting adjustment to our accumulated other comprehensive income.
−Removed: An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
−Removed: The qualitative assessment involves judgment by Management on determining whether there have been any triggering events that have occurred which would indicate potential impairment.
−Removed: If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed.
−Removed: Various valuation methodologies are considered when estimating the reporting unit’s fair value.
−Removed: The specific factors used in these various valuation methodologies that require judgment include the selection of comparable market transactions, discount rates, earnings capitalization rates and the future projected earnings of the reporting unit.
−Removed: Changes in these assumptions could result in changes to the estimated fair value of the reporting unit.
−Removed: The Company completed an assessment of qualitative factors as of December 31, 2023, and concluded that no further analysis was required as it is more likely than not that the fair value of the Bank, the reporting unit, exceeds the carrying value.
−Removed: Income Taxes and Deferred Taxes :
−Removed: The Company determines its deferred tax assets and liabilities based on the enacted tax rates that are expected to be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s income tax returns.
−Removed: The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
−Removed: A 1% change in tax rates would result in a $6.3 million increase or decrease in our net deferred tax asset as of December 31, 2023.
−Removed: Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations by the tax authorities and newly enacted statutory, judicial and regulatory guidance that could impact the relative merits of tax positions.
−Removed: These changes, when they occur, impact accrued taxes and can materially affect our operating results.
−Removed: The evaluation pertaining to the tax expense and related deferred tax asset and liability balances involves a high degree of judgment and subjectivity around the measurement and resolution of these matters.
−Removed: This includes an evaluation of our ability to use our net operating loss carryforwards.
−Removed: The ultimate realization of the deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss and credit carryforwards are deductible.
−Removed: Legal Contingencies:
−Removed: In the normal course of our business, we have various legal proceedings and other contingent matters pending.
−Removed: We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated.
−Removed: We assess our potential liability by analyzing our litigation and regulatory matters using available information.
−Removed: We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies.
−Removed: The estimated losses often involve a level of subjectivity and usually are a range of reasonable losses and not an exact number, in those situations we accrue the best estimate within the range or the low end of the range if no estimate within the range is better than another.
C omparison of Financial Condition at December 31, 2024 and 2023
−Removed: Total assets decreased to $15.67 billion at December 31, 2023, compared to $15.83 billion at December 31, 2022.
−Removed: The decrease in assets was primarily due to $300.0 million of reverse repurchase agreements maturing, as well as the sale of securities during 2023, partially offset by loan growth.
+Added: Total assets increased to $16.20 billion at December 31, 2024, compared to $15.67 billion at December 31, 2023.
+Added: The increase in assets was primarily due to loan growth and an increase in interest-bearing deposits, partially offset by the decrease in the securities portfolio in 2024.
Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $544.2 million, or 5%, to $11.35 billion at December 31, 2024, from $10.81 billion at December 31, 2023.
−Removed: The increase in total loans receivable primarily reflects growth in one- to four-family residential, multifamily real estate and multifamily construction loan balances.
−Removed: Loans held for sale decreased to $11.2 million at December 31, 2023, compared to $56.9 million at December 31, 2022, as a result of the transfer of $43.5 million of multifamily loans held for sale to held for investment during the fourth quarter of 2023.
−Removed: Loans held for sale at December 31, 2023, included no multifamily loans and $11.2 million of one- to four-family loans, compared to $49.5 million of multifamily loans and $7.4 million of one- to four-family loans at December 31, 2022.
−Removed: The aggregate of securities and interest-bearing deposits decreased $802.6 million, or 19%, to $3.48 billion at December 31, 2023, compared to $4.28 billion a year earlier, primarily due to a decrease in securities.
−Removed: Securities decreased to $3.43 billion at December 31, 2023, from $3.94 billion at December 31, 2022, primarily due to $300.0 million of reverse repurchase agreements maturing during 2023, as well as the sale of securities and normal security portfolio cash flows.
−Removed: Fair value adjustments for securities designated as available-for-sale reflected an increase of $54.3 million for the year ended December 31, 2023, which was included net of the associated tax expense as a component of other comprehensive income.
−Removed: Securities which are designated as trading decreased by $27.2 million from the prior year-end balance due to the transfer of TPS from trading to available-for-sale during the fourth quarter of 2023.
−Removed: The average effective duration of our securities portfolio was approximately 6.5 years at both December 31, 2023 and December 31, 2022.
−Removed: Deposits decreased $590.6 million, or 4%, to $13.03 billion at December 31, 2023, from $13.62 billion at December 31, 2022.
−Removed: The decline in deposits during the year ended 2023 was primarily due to interest rate-sensitive clients moving a portion of their non-operating deposit balances to higher yielding investments.
−Removed: Core deposits were 89% of total deposits at December 31, 2023, compared to 95% of total deposits one year earlier.
−Removed: Non-interest-bearing deposits decreased by $1.38 billion, or 22%, to $4.79 billion from $6.18 billion at December 31, 2022, while interest-bearing transaction and savings accounts increased by $40.1 million, or 1%, to $6.76 billion at December 31, 2023, from $6.72 billion at December 31, 2022.
−Removed: Certificates of deposit increased $753.9 million, or 104%, to $1.48 billion at December 31, 2023, from $723.5 million at December 31, 2022, reflecting higher rates attracting customers to these deposit types and a $108.1 million increase in brokered deposits.
−Removed: We had $108.1 million of brokered deposits at December 31, 2023, compared to none at December 31, 2022.
−Removed: We had $323.0 million and $50.0 million of FHLB advances at December 31, 2023 and December 31, 2022, respectively.
+Added: The increase in total loans receivable primarily reflects growth in multifamily real estate, commercial business, commercial real estate and one- to four-family residential loan balances.
+Added: The aggregate of securities and interest-bearing deposits decreased $73.1 million, or 2%, to $3.40 billion at December 31, 2024, compared to $3.48 billion a year earlier, primarily due to a decrease in securities, partially offset by an increase in interest-bearing deposits.
+Added: Securities decreased to $3.11 billion at December 31, 2024, from $3.43 billion at December 31, 2023, primarily due to normal security portfolio cash flows.
+Added: Fair value adjustments for securities designated as available-for-sale reflected a decrease of $5.0 million for the year ended December 31, 2024, which was included net of the associated tax benefit as a component of other comprehensive income.
+Added: The average effective duration of our securities portfolio was approximately 6.6 years at December 31, 2024, compared to 6.5 years at December 31, 2023.
+Added: Deposits increased $484.9 million, or 4%, to $13.51 billion at December 31, 2024, from $13.03 billion at December 31, 2023, with core deposits increasing $462.7 million and certificates of deposit increasing $22.2 million.
+Added: The increase in core deposits reflects increases in interest-bearing transaction and savings accounts.
+Added: Core deposits were 89% of total deposits at both December 31, 2024 and 2023.
+Added: Non-interest-bearing deposits decreased by $200.8 million, or 4%, to $4.59 billion from $4.79 billion at December 31, 2023, while interest-bearing transaction and savings accounts increased by $663.5 million, or 10%, to $7.42 billion at December 31, 2024, from $6.76 billion at December 31, 2023.
+Added: Certificates of deposit increased $22.2 million, or 2%, to $1.50 billion at December 31, 2024, from $1.48 billion at December 31, 2023, primarily due to clients moving funds from core deposit accounts to higher yielding certificates of deposit, partially offset by a $57.7 million decrease in brokered deposits.
+Added: We had $50.3 million of brokered deposits at December 31, 2024, compared to $108.1 million at December 31, 2023.
+Added: We had $290.0 million and $323.0 million of FHLB advances at December 31, 2024 and 2023, respectively.
Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $57.6 million to $125.3 million at December 31, 2024, compared to $182.9 million at December 31, 2023.
1 unchanged sentence
Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024, compared to $92.9 million at December 31, 2023.
+Added: The decrease was due to the Bank’s purchase of $13.0 million of Banner’s outstanding subordinated debt during 2024.
Total shareholders’ equity increased $121.6 million, to $1.77 billion at December 31, 2024, compared to $1.65 billion at December 31, 2023.
−Removed: The increase in shareholders’ equity primarily reflects $183.6 million of year-to-date net income and a $73.6 million decrease in AOCI, primarily due to an increase in the fair value of the security portfolio.
−Removed: This increase was partially offset by the accrual of $66.7 million of cash dividends to common shareholders.
+Added: The increase in shareholders’ equity primarily reflects $168.9 million of net income and an $11.9 million increase in AOCI.
+Added: This increase was partially offset by $67.0 million of cash dividends paid or accrued to common shareholders.
There were no shares of common stock repurchased during the year ended December 31, 2024.
1 unchanged sentence
Tangible common shareholders’ equity (a non-GAAP financial measure), which excludes goodwill and other intangible assets was $1.40 billion, or 8.84% of tangible assets at December 31, 2024, compared to $1.27 billion, or 8.33% at December 31, 2023.
−Removed: The increase in tangible common shareholders’ equity as a percentage of tangible assets was primarily due to the previously mentioned decrease in AOCI and an increase in retained earnings.
+Added: The increase in tangible common shareholders’ equity as a percentage of tangible assets was primarily due to the previously mentioned increase in AOCI and an increase in retained earnings.
The Company’s book value per share was $51.49 at December 31, 2024, compared to $48.12 per share a year ago, and its tangible book value per share (a non-GAAP financial measure) was $40.57 at December 31, 2024, compared to $37.09 per share a year ago.
See, “Executive Overview - Non-GAAP Financial Measures” above for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
−Removed: At December 31, 2023, our securities portfolio totaled $3.43 billion and consisted principally of mortgage-backed and mortgage-related securities.
+Added: T able of C onten ts
+Added: At December 31, 2024, our securities portfolio totaled $3.11 billion, consisting principally of mortgage-backed and mortgage-related securities.
Our investment levels may be increased or decreased depending upon Management’s projections as to the demand for funds to be used in our loan origination, deposit and other activities, and upon yields available on investment alternatives.
−Removed: During the year ended December 31, 2023, our aggregate investment in securities decreased $502.5 million, primarily due to $300.0 million of reverse repurchase agreements maturing as well as the sale of securities and normal security portfolio cash flows.
+Added: During the year ended December 31, 2024, our aggregate investment in securities decreased $326.8 million, primarily due to normal security portfolio cash flows and the sale of securities.
Mortgage-backed securities decreased $219.4 million and U.S.
−Removed: Government and agency obligations decreased $20.9 million, while municipal bonds decreased $165.5 million, corporate debt obligations decreased $30.1 million and asset-backed securities increased $9.3 million.
+Added: Government and agency obligations decreased $26.3 million, while municipal bonds decreased $6.8 million, corporate debt obligations decreased $23.1 million and asset-backed securities decreased $50.1 million.
Government and Agency Obligations:
21 unchanged sentences
At December 31, 2024, 100% of these securities had adjustable interest rates tied to three-month SOFR.
+Added: T able of C onten ts
The following tables set forth certain information regarding carrying values and percentage of total carrying values of our portfolio of securities—trading and securities—available-for-sale, both carried at estimated fair market value, and securities—held-to-maturity, carried at amortized cost, net of the allowance for credit losses - securities, as of December 31, 2024, 2023 and 2022 (dollars in thousands):
2 unchanged sentences
Corporate bonds (1)
−Removed: $ — n/a $ 28,694 100 % $ 26,981 100 %
−Removed: Total securities—trading $ — n/a $ 28,694 100 % $ 26,981 100 %
+Added: $ — n/a $ — n/a $ 28,694 100 %
+Added: Total securities—trading $ — n/a $ — n/a $ 28,694 100 %
Available-for-Sale
13 unchanged sentences
(1) In the fourth quarter of 2023, our corporate bonds classified as trading were transferred to available-for-sale.
+Added: T able of C onten ts
The following table shows the maturity or period to repricing of our available-for-sale and held-to-maturity securities as of December 31, 2024 (dollars in thousands):
15 unchanged sentences
(1) Tax-exempt weighted average yield is calculated on a tax equivalent basis using a federal tax rate of 21% and a tax disallowance of 10%.
+Added: T able of C onten ts
Loans and Lending.
12 unchanged sentences
Multifamily real estate 6,593 57,046 37,612
−Removed: Construction and land 1,541,383 1,935,476 1,975,664
−Removed: Commercial business:
+Added: Construction, land and land development 1,759,799 1,541,383 1,935,476
Commercial business 752,269 585,047 1,034,950
−Removed: SBA PPP — — 485,077
Agricultural business 79,715 84,072 89,655
2 unchanged sentences
Total loan originations (excluding loans held for sale) $ 3,469,550 $ 3,045,434 $ 4,420,558
−Removed: One- to Four-Family Residential Real Estate Lending:
+Added: One- to Four-Family Residential Lending:
At December 31, 2024, $1.59 billion, or 14% of our loan portfolio, consisted of permanent loans on one- to four-family residences.
−Removed: We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California and Idaho.
+Added: We are active originators of one- to four-family residential loans in the communities we serve.
Our balance of loans for one- to four-family residences increased by $73.2 million in 2024, compared to the prior year.
−Removed: The increase in one- to four-family real estate loans during 2023 was primarily the result of a higher percentage of one- to four-family construction loans converting to one- to four-family residential loans and a larger percentage of new production being held in portfolio.
−Removed: Construction and Land Lending:
+Added: The increase in one- to four-family residential loans during 2024 was primarily the result of a higher percentage of one- to four-family construction loans converting to one- to four-family residential loans and a larger percentage of new production being held in portfolio.
+Added: Construction, Land and Land Development Lending:
Our construction loan originations have been relatively strong in recent years as builders have expanded production and experienced strong home sales in many markets where we operate.
At December 31, 2024, construction, land and land development loans totaled $1.52 billion, or 14% of total loans.
−Removed: The largest shifts in our construction, land and land development portfolio occurred in multifamily and one- to four-family construction loans.
+Added: The largest shifts in this portfolio occurred in commercial construction and land and land development loans.
+Added: Commercial construction loans decreased $47.6 million, or 28%, to $122.4 million at December 31, 2024, primarily due to the conversion of commercial construction loans to the commercial real estate portfolio upon the completion of the construction phase, partially offset by new loan production.
+Added: Commercial construction loans represented approximately 1% of our total loan portfolio at December 31, 2024, comprised primarily of retail property construction projects.
+Added: Land and land development loans increased $33.0 million , or 10% , to $369.7 million at December 31, 2024.
+Added: Land and land development loans represented approximately 3% of our total loan portfolio at December 31, 2024 and was comprised of residential properties for personal use and development.
Multifamily construction loans increased $9.7 million, or 2%, to $513.7 million at December 31, 2024.
−Removed: Multifamily construction loans represented approximately 5% of our total loan portfolio at December 31, 2023 and is comprised of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint.
+Added: Multifamily construction loans represented approximately 5% of our total loan portfolio at December 31, 2024 and was comprised of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint.
One- to four-family construction loans decreased $12.2 million, or 2%, to $514.2 million at December 31, 2024.
2 unchanged sentences
We originate loans secured by commercial and multifamily real estate.
−Removed: Commercial and multifamily real estate loans originated by us include both fixed- and adjustable-rate loans with intermediate terms of generally five to 10 years.
−Removed: Our commercial real estate portfolio consists of loans on a variety of property types with no significant concentrations by property type, borrowers or locations.
+Added: These loans include both fixed- and adjustable-rate loans with intermediate terms of generally five to 10 years.
At December 31, 2024, our loan portfolio included $3.86 billion of commercial real estate loans, or 34% of the total loan portfolio, and $894.4 million of multifamily real estate loans, or 8% of the total loan portfolio.
−Removed: The increase in multifamily loans was the result of the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023 and the conversion of affordable housing construction loans to the multifamily portfolio upon the completion of the construction phase.
+Added: The increase in commercial real estate loans was primarily the result of new loan production and the conversion of commercial construction loans to commercial real estate loans upon the completion of the construction phase.
+Added: Our commercial real estate portfolio consists of loans on a variety of property types with no significant concentrations by property type, borrowers or locations.
+Added: Approximately 12% of our commercial real estate portfolio was secured by retail property at December 31, 2024.
+Added: Within this portfolio, we have limited exposure to the office sector, with only 6% of total loans secured by office properties, nearly 55% of which are owner-occupied.
+Added: The increase in multifamily real estate loans was the result of the conversion of multifamily construction loans to multifamily real estate loans upon the completion of the construction phase.
+Added: T able of C onten ts
Commercial Business Lending:
2 unchanged sentences
At December 31, 2024, commercial business loans, including small business scored, totaled $2.42 billion, or 21% of total loans.
+Added: Our commercial business loan portfolio at December 31, 2024 reflects an increase of 6% from December 31, 2023.
Our commercial business lending, to a lesser extent, includes participation in certain syndicated loans, including shared national credits which totaled $227.4 million, or 2% of our loan portfolio, at December 31, 2024.
Agricultural Lending:
−Removed: Agriculture is a major industry in many Washington, Oregon, California and Idaho locations in our service area.
+Added: Agriculture is a major industry in our footprint.
While agricultural loans are not a large part of our portfolio, we routinely make agricultural loans to borrowers with a strong capital base, sufficient management depth, proven ability to operate through agricultural cycles, reliable cash flows and adequate financial reporting.
5 unchanged sentences
At December 31, 2024, our consumer loans increased $22.0 million to $721.4 million, or 6% of our loan portfolio, compared to December 31, 2023.
−Removed: As of December 31, 2023, 84% of our consumer loans were secured by one- to four-family residences, including home equity lines of credit.
+Added: As of December 31, 2024, 87% of our consumer loans were secured by one- to four-family residences through home equity lines of credit.
Credit card balances totaled $45.2 million at December 31, 2024.
3 unchanged sentences
The portfolio included loans secured by property located primarily in the states of Washington, Oregon, Idaho and California.
−Removed: For the years ended December 31, 2023 and 2022, we recognized $7.8 million of loan servicing income in our results of operations.
+Added: For the years ended December 31, 2024 and 2023, we recognized $8.2 million and $7.8 million of loan servicing income in our results of operations, respectively.
+Added: T able of C onten ts
The following table sets forth the composition of the Company’s loan portfolio, net of discounts and deferred fees and costs, by type of loan as of the dates indicated (dollars in thousands):
Loan Portfolio Analysis
−Removed: During the first quarter of 2022, the Company changed the segmentation of its Small Balance CRE loan category based on the common risk characteristics used to measure the allowance for credit losses.
−Removed: The presentation of loans receivable at December 31, 2021, has been revised to match the segmentation used in the current period presentation.
December 31, 2024 December 31, 2023 December 31, 2022
29 unchanged sentences
Net loans $ 11,199,135 $ 10,660,812 $ 10,005,259
+Added: T able of C onten ts
The following table sets forth the Company’s loans by geographic concentration at December 31, 2024, 2023 and 2022 (dollars in thousands):
9 unchanged sentences
Total $ 11,354,656 100 % $ 10,810,455 100 % $ 10,146,724 100 %
+Added: The geographic concentration of our commercial real estate portfolio, as of December 31, 2024, was 48% in Washington and 26% in California.
The following table sets forth certain information at December 31, 2024 regarding the dollar amount of loans maturing in our portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments.
17 unchanged sentences
Commercial business 475,066 271,265 463,989 108,013 1,318,333
−Removed: SBA PPP — 3,646 — — 3,646
Small business scored 72,670 211,566 320,235 499,646 1,104,117
3 unchanged sentences
Consumer—home equity revolving lines of credit 5,836 10,995 3,045 605,804 625,680
−Removed: 3,776 11,736 4,415 568,776 588,703
Consumer—other 31,195 10,936 27,854 25,735 95,720
5 unchanged sentences
The average life of mortgage loans tends to increase, however, when current mortgage loan market rates are substantially higher than rates on existing mortgage loans and, conversely, decreases when rates on existing mortgage loans are substantially higher than current mortgage loan market rates.
+Added: T able of C onten ts
The following table sets forth the dollar amount of all loans maturing after December 31, 2025 which have fixed interest rates and floating or adjustable interest rates (in thousands):
15 unchanged sentences
Commercial business 573,054 270,213 843,267
−Removed: SBA PPP 3,646 — 3,646
Small business scored 160,694 870,753 1,031,447
3 unchanged sentences
Consumer—home equity revolving lines of credit 286 619,558 619,844
−Removed: 4,435 580,492 584,927
Consumer—other 62,054 2,471 64,525
3 unchanged sentences
Much of the focus of our expansion and current marketing efforts have been directed toward attracting additional deposit client relationships and balances.
−Removed: One of our key strategies is to strengthen our franchise by emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts with less reliance on higher cost certificates of deposit, which has been challenging over the last couple of years due to intense competition for deposits.
+Added: One of our key strategies is to strengthen our franchise by emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts with less reliance on higher cost certificates of deposit.
This strategy is intended to help control our cost of funds and increase the opportunity for deposit fee revenues, while stabilizing our funding base.
−Removed: Total deposits decreased $590.6 million, or 4%, to $13.03 billion at December 31, 2023 from $13.62 billion at December 31, 2022.
−Removed: The decline in deposits during the year ended December 31, 2023 was primarily due to interest rate-sensitive clients moving a portion of their non-operating deposit balances to higher yielding investments.
−Removed: Core deposits were 89% of total deposits at December 31, 2023, compared to 95% a year earlier.
−Removed: The Bank’s estimated uninsured deposits were $4.08 billion or 31% of total deposits at December 31, 2023, compared to $4.84 billion or 35% of total deposits at December 31, 2022.
−Removed: The estimated uninsured deposit calculation includes $305.3 million and $304.2 million of collateralized public deposits at December 31, 2023 and 2022, respectively.
−Removed: Estimated uninsured deposits also include cash held by Banner of $108.2 million and $77.2 million at December 31, 2023 and December 31, 2022, respectively.
−Removed: The Bank’s estimated uninsured deposits, excluding collateralized public deposits and cash held at the holding company, were 28% of total deposits at December 31, 2023, compared to 33% of total deposits at December 31, 2022.
+Added: Total deposits increased $484.9 million, or 4%, to $13.51 billion at December 31, 2024 from $13.03 billion at December 31, 2023.
+Added: The increase in deposits during the year ended December 31, 2024 was due to an increase in core deposits, primarily interest-bearing transaction and savings accounts.
+Added: Core deposits were 89% of total deposits at both December 31, 2024 and 2023.
+Added: T able of C onten ts
The following table sets forth the balances of deposits in the various types of accounts offered by the Bank at the dates indicated (dollars in thousands):
18 unchanged sentences
Total deposits in excess of the FDIC insurance limit $ 4,379,488 32 % $ 296,273 $ 4,083,215 31 % $ (761,482) $ 4,844,697 36 %
+Added: T able of C onten ts
The following table indicates the amount of the Bank’s certificates of deposit with balances in excess of the FDIC insurance limit by time remaining until maturity as of December 31, 2024 (in thousands):
18 unchanged sentences
At December 31, 2024, based upon our available unencumbered collateral, the Bank was eligible to borrow $1.52 billion from the Federal Reserve Bank, however, at that date we had no funds borrowed under this arrangement.
−Removed: Retail repurchase agreements, which are primarily associated with client sweep account arrangements, decreased $49.9 million to $182.9 million at December 31, 2023 from $232.8 million at December 31, 2022.
+Added: Other borrowings, consisting of retail repurchase agreements, which are primarily associated with client sweep account arrangements, decreased $57.6 million to $125.3 million at December 31, 2024 from $182.9 million at December 31, 2023.
At December 31, 2024, retail repurchase agreements had a weighted average rate of 1.98% and were secured by pledges of certain mortgage-backed securities and agency securities.
We had no borrowings under wholesale repurchase agreements at December 31, 2024.
−Removed: At December 31, 2023, we had an aggregate of $86.5 million of TPS.
+Added: At December 31, 2024, we had an aggregate of $86.5 million of junior subordinated debentures.
This includes $75.0 million issued by us and $11.5 million acquired in our bank acquisitions.
The junior subordinated debentures are carried at their estimated fair value of $67.5 million at December 31, 2024.
−Removed: At December 31, 2023, the TPS had a weighted average rate of 7.19%.
+Added: At December 31, 2024, the junior subordinated debentures had a weighted average rate of 6.32%.
Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024, compared to $92.9 million at December 31, 2023, and a weighted average interest rate of 5.00%.
−Removed: The decrease in subordinated notes was due to the Bank’s purchase of $6.5 million of Banner’s subordinated debt during the second quarter of 2023.
+Added: The decrease was due to the Bank’s purchase of $13.0 million of Banner’s outstanding subordinated debt from third parties during the year ended December 31, 2024.
Asset Quality.
2 unchanged sentences
At December 31, 2024, our allowance for credit losses - loans was $155.5 million, or 421% of non-performing loans, compared to $149.6 million, or 506% of non-performing loans, at December 31, 2023.
+Added: T able of C onten ts
The following table sets forth information with respect to our non-performing assets at the dates indicated (dollars in thousands):
24 unchanged sentences
Loans 30-89 days past due and on accrual $ 26,824 $ 19,744 $ 17,186
+Added: The increase in total non-performing loans was primarily due to increases in nonaccrual loans in the one- to four-family and agricultural business loan categories consisting of various borrowers with no meaningful concentrations.
+Added: The increases in these categories reflect loans transferred to nonaccrual, partially offset by payoffs of nonaccrual loans during 2024.
For the year ended December 31, 2024, interest income was reduced by $2.0 million as a result of nonaccrual loan activity, which includes the reversal of $826,000 of accrued interest as of the date the loans were placed on nonaccrual.
−Removed: There was no interest income recognized on nonaccrual loans during the year ended December 31, 2023.
+Added: For the year ended December 31, 2023, interest income was reduced by $1.6 million as a result of nonaccrual loan activity, which includes the reversal of $569,000 of accrued interest as of the date the loans were placed on nonaccrual.
+Added: For the year ended December 31, 2022, interest income was reduced by $725,000 as a result of nonaccrual loan activity, which includes the reversal of $322,000 of accrued interest as of the date the loan was placed on nonaccrual.
+Added: There was no interest income recognized on nonaccrual loans during the years ended December 31, 2024, 2023 and 2022.
The following table presents the Company’s portfolio of risk-rated loans and non-risk-rated loans by grade at the dates indicated (in thousands):
Loans by Grade
−Removed: For the years ended December 31,
2024 2023 2022
3 unchanged sentences
Total $ 11,354,656 $ 10,810,455 $ 10,146,724
−Removed: The decrease in substandard loans during the year ended December 31, 2023, primarily reflects the payoff of substandard loans as well as risk rating upgrades.
+Added: The increase in substandard loans during the year ended December 31, 2024 was primarily due to increases in adversely classified loans, primarily in the commercial business and agricultural loan segments, partially offset by payoffs and paydowns.
+Added: As of December 31, 2024, total substandard loans primarily consisted of loans within the commercial business, owner-occupied commercial real estate and agricultural loan segments.
+Added: T able of C onten ts
Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023
For the year ended December 31, 2024, net income was $168.9 million, or $4.88 per diluted share, compared to net income of $183.6 million, or $5.33 per diluted share for the year ended December 31, 2023.
−Removed: Current year results included a decrease in non-interest income, primarily due to the loss on the sale of securities, and increases in the provision for credit losses and non-interest expense, partially offset by increased net interest income.
−Removed: Our operating results depend largely on net interest income which increased $22.8 million to $576.0 million for the year ended December 31, 2023, compared to the prior year, primarily reflecting increased yields on loans and investment securities due to rising interest rates during the year, as well as higher average loan balances, partially offset by increased funding costs during the period.
−Removed: Revenues (net interest income and non-interest income) decreased $8.0 million, or 1%, to $620.4 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to increased funding costs, an increase in the net loss on the sale of securities and a net loss on financial instruments carried at fair value during the year ended December 31, 2023.
+Added: Current year results included a decrease in net interest income and an increase in non-interest expense, partially offset by an increase in non-interest income and a decrease in the provision for credit losses.
+Added: Our operating results depend largely on net interest income which decreased $34.3 million to $541.7 million for the year ended December 31, 2024, compared to the prior year, primarily reflecting increased funding costs, partially offset by increased yields on loans due to new loans being originated at higher interest rates and adjustable rate loans repricing higher, as well as higher average loan balances.
+Added: Revenues (net interest income and non-interest income) decreased $11.8 million, or 2%, to $608.6 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to increased funding costs, partially offset by increased interest income on loans and a decrease in the net loss on the sale of securities during the year ended December 31, 2024.
We recorded a $7.6 million provision for credit losses for the year ended December 31, 2024, compared to a $10.8 million provision for credit losses for the year ended December 31, 2023.
−Removed: The provision for credit losses for the year ended December 31, 2023, reflects growth in loan balances and a deterioration in forecasted economic conditions.
−Removed: Total non-interest income for the year ended December 31, 2023 decreased to $44.4 million compared to $75.3 million for the year ended December 31, 2022, primarily due to an increase in the net loss on the sale of securities and a net loss relating to the fair value adjustments on financial instruments.
−Removed: The decrease was also impacted by the $7.8 million gain on the sale of branches, including related deposits, during the prior year.
−Removed: Total non-interest expense increased to $382.5 million for the year ended December 31, 2023, compared to $377.3 million for the year ended December 31, 2022, largely as a result of a decrease in capitalized loan origination costs and, to a lesser extent, increases in salary and employee benefits, information and computer data services and deposit insurance expense, partially offset by decreases in occupancy and equipment expense and professional and legal expense.
+Added: The provision for credit losses for the year ended December 31, 2024, reflects risk rating downgrades, as well as growth in loan balances.
+Added: Total non-interest income for the year ended December 31, 2024 increased to $66.9 million compared to $44.4 million for the year ended December 31, 2023, primarily due to a decrease in the net loss on the sale of securities.
+Added: Total non-interest expense increased to $391.5 million for the year ended December 31, 2024, compared to $382.5 million for the year ended December 31, 2023, largely as a result of increases in salary and employee benefits and payment and card processing services expense, partially offset by decreases in professional and legal expense and the amortization of core deposit intangibles.
Net Interest Income.
−Removed: Net interest income increased $22.8 million, or 4%, to $576.0 million for the year ended December 31, 2023, compared to $553.2 million for the year ended December 31, 2022, primarily due to increases in the average yields on and, to a lesser extent, the average balance of interest-earning assets, partially offset by increased funding costs.
−Removed: The higher average yield on interest-earning assets compared to same prior year period reflects rising market interest rates during the year ended December 31, 2023.
−Removed: The net interest margin on a tax equivalent basis of 4.01% for the year ended December 31, 2023, was 33 basis points higher than the prior year.
−Removed: The increase in net interest margin reflects a 107 basis-point increase in yields on average interest-earning assets, offset by a 78 basis-point increase in the cost of funding liabilities.
+Added: Net interest income decreased $34.3 million, or 6%, to $541.7 million for the year ended December 31, 2024, compared to $576.0 million for the year ended December 31, 2023, primarily reflecting increased funding costs, partially offset by increased yields on loans due to new loans being originated at higher interest rates and adjustable rate loans repricing higher, as well as higher average loan balances.
+Added: The higher average yield on interest-earning assets, compared to the same period in the prior year, reflects the overall higher interest rate environment during 2024, despite the Federal Reserve reducing rates in late 2024.
+Added: While interest rate cuts during the year led to lower funding costs and yields on interest-earning assets in the fourth quarter, the overall results for the year were largely shaped by the elevated interest rates during most of 2024.
+Added: The net interest margin on a tax equivalent basis of 3.75% for the year ended December 31, 2024, was 26 basis points lower than the prior year.
+Added: The decrease in net interest margin reflects a 72 basis-point increase in the cost of funding liabilities, partially offset by a 39 basis-point increase in yields on average interest-earning assets.
+Added: The increase in the overall cost of funding liabilities was primarily due to the increase in rates across all deposit and borrowing categories due to higher market rates.
+Added: The higher funding costs was also impacted by a shift in the average balance of non-interest-bearing deposits to higher costing interest-bearing checking accounts, savings accounts and certificates of deposit.
The increase in average yields on interest-earning assets during the current year reflects the benefit of variable rate interest-earning assets repricing higher due to rising interest rates, as well as new loans being originated at higher interest rates.
−Removed: The increase in the overall cost of funding liabilities was primarily due to the increase in rates across all deposit and borrowing categories due to higher market rates generally, as well as a shift in the average balance of deposits to higher costing certificates of deposit.
Interest Income.
Interest income for the year ended December 31, 2024 was $766.1 million, compared to $701.6 million for the prior year, an increase of $64.5 million.
−Removed: The increase in interest income occurred as a result of the yields on interest-earnings assets increasing 107 basis points to 4.87%, partially offset by the average balance of interest-earning assets decreasing $682.3 million to $14.65 billion.
+Added: This increase was a result of yields on interest-earning assets increasing 39 basis points to 5.26%, as well as the average balance of interest-earning assets increasing $157.8 million to $14.81 billion.
The increased yield on interest-earning assets primarily reflects increases in the average yields on loans.
−Removed: Interest income on loans increased from the prior year $127.0 million to $577.9 million for the year ended December 31, 2023.
−Removed: The increase was primarily due to the average loan yields increasing 82 basis points to 5.58%, reflecting the impact of rising interest rates.
−Removed: Average loans receivable increased $887.7 million to $10.48 billion, primarily reflecting an increase in one- to four-family loans.
−Removed: Interest and dividend income on investment securities increased $1.7 million for the year ended December 31, 2023.
−Removed: The average yield on the combined portfolio increased 88 basis points to 3.08%, reflecting a 31 basis-point increase in the average yield on mortgage-backed securities and a 147 basis-point increase in the yield on other securities.
−Removed: The combined average balance of total investment securities decreased $1.57 billion to $4.17 billion (excluding the effect of fair value adjustments).
+Added: Interest income on loans increased $77.7 million from the prior year to $655.6 million for the year ended December 31, 2024.
+Added: The increase was primarily due to the average loan yields increasing 39 basis points to 5.97%, reflecting the impact of higher interest rates.
+Added: Average loans receivable increased $639.9 million to $11.12 billion, primarily reflecting increases in the average balances of one- to four-family residential, construction, land and land development, and multifamily real estate loans.
+Added: Interest and dividend income on investment securities decreased $13.5 million for the year ended December 31, 2024 due to a decline in the average balance of the investment securities portfolio.
+Added: The combined average balance of total investment securities decreased $482.2 million to $3.68 billion (excluding the effect of fair value adjustments).
+Added: The average yield on the combined portfolio increased to 3.11%, reflecting a three basis-point increase in the average yield on mortgage-backed securities and a 19 basis-point increase in the yield on other securities.
Interest Expense.
Interest expense for the year ended December 31, 2024 was $224.4 million, compared to $125.6 million for the prior year, an increase of $98.8 million, or 79%.
−Removed: The increase occurred as a result of a 78 basis-point increase in the average cost of all funding liabilities to 0.91%, partially offset by the average balance of funding liabilities decreasing $985.6 million to $13.73 billion.
−Removed: The decrease in the average balance of funding liabilities reflects decreases in non-interest-bearing deposits and interest-bearing transaction and savings accounts, partially offset by higher average balances of certificates of deposit and FHLB advances.
−Removed: Deposit interest expense increased $90.0 million to $100.1 million for the year ended December 31, 2023, compared to the prior year as a result of the average cost of total deposits increasing 69 basis points to 0.76%, partially offset by the average balance of interest-bearing deposits decreasing by $115.1 million.
+Added: The increase occurred as a result of a 72 basis-point increase in the average cost of all funding liabilities to 1.63% as well as the average balance of funding liabilities increasing $27.9 million to $13.76 billion.
+Added: The increase in the average cost of our funding liabilities increased due to increases in the rates paid on our interest rate deposits to remain competitive in the elevated interest rate environment.
+Added: The increase in the average balance of funding liabilities reflects increases in interest-bearing transaction and savings accounts and certificates of deposit, partially offset by lower average balances of money market accounts and non-interest bearing deposits.
+Added: T able of C onten ts
+Added: Deposit interest expense increased $99.3 million to $199.5 million for the year ended December 31, 2024, compared to the prior year, as a result of the average cost of total deposits increasing 74 basis points to 1.50% and the average balance of interest-bearing deposits increasing by $897.8 million.
The increase in the average cost of deposits between the periods was primarily due to the average cost of interest-bearing deposits increasing 102 basis points to 2.32% for the year ended December 31, 2024, compared to 1.30% in the prior year.
−Removed: The increase in the average cost of interest-bearing deposits was primarily the result of a 245 basis-point increase in the cost of certificates of deposit along with a $445.0 million increase in the average balance of certificates of deposit.
−Removed: The average rate paid on total borrowings increased 233 basis points to 4.37%, reflecting the 215 basis-point increase in the average cost of FHLB advances, the 154 basis-point increase in the average cost of other borrowings, and the 179 basis-point increase in the average cost of our subordinated debt.
−Removed: The increase in average total borrowings was largely due to a $181.5 million increase in average balance of FHLB advances, partially offset by a $50.4 million decrease in the average balance of other borrowings.
+Added: The increase in the average cost of interest-bearing deposits was primarily the result of a 79 basis-point increase in the cost of interest-bearing checking accounts, a 116 basis-point increase in the cost of savings accounts, a 90 basis-point increase in the cost money market accounts and a 107 basis-point increase in the cost of certificates of deposit.
+Added: The increase in the average balance of total interest-bearing deposits was primarily due to increases in the average balances of interest-bearing transaction and savings accounts and certificates of deposit, partially offset by lower average balances of money market accounts.
+Added: The average rate paid on total borrowings increased 60 basis points to 4.97%, reflecting a 24 basis-point increase in the average cost of FHLB advances, 92 basis-point increase in the average cost of other borrowings, and 38 basis-point increase in the average cost of our subordinated debt.
+Added: The decrease in the average balance of total borrowings was largely due to a $36.9 million decrease in the average balance of FHLB advances and a $34.7 million decrease in the average balance of other borrowings.
Table 13, Analysis of Net Interest Spread , presents, for the periods indicated, our condensed average balance sheet information, together with interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities.
Average balances are computed using daily average balances.
+Added: T able of C onten ts
The following table provides an analysis of our net interest spread for the last three years (dollars in thousands):
8 unchanged sentences
Commercial/agricultural loans 1,871,024 127,028 6.79 % 1,782,141 113,250 6.35 % 1,658,358 81,986 4.94 %
−Removed: SBA PPP loans 5,042 172 3.41 41,167 4,677 11.36 % 770,041 49,854 6.47 %
Consumer and other loans 129,929 8,584 6.61 % 138,196 8,715 6.31 % 123,667 7,332 5.93 %
35 unchanged sentences
(footnotes follow)
+Added: T able of C onten ts
(1) Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.
2 unchanged sentences
(3) Tax-exempt income is calculated on a tax equivalent basis.
−Removed: The tax equivalent yield adjustment to interest earned on loans was $7.4 million, $5.9 million, and $5.1 million for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.
−Removed: The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.4 million, $4.8 million, and $4.1 million for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.
+Added: The tax equivalent yield adjustment to interest earned on loans was $8.7 million, $7.4 million and $5.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.
+Added: The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.1 million, $4.4 million and $4.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown (in thousands).
13 unchanged sentences
Commercial/agricultural loans 7,967 5,811 13,778 24,782 6,482 31,264
−Removed: SBA PPP loans (1,999) (2,506) (4,505) 21,828 (67,005) (45,177)
Consumer and other loans 404 (535) (131) 486 897 1,383
24 unchanged sentences
The provision for credit losses - loans reflects the amount required to maintain the allowance for credit losses - loans at an appropriate level based upon Management’s evaluation of the adequacy of collective and individual loss reserves.
−Removed: The provision for credit losses - loans for the current year primarily reflects loan growth and a deterioration in forecasted economic conditions and indicators utilized to estimate credit losses, as well as increased charge-offs for the year.
−Removed: The prior year provision for credit losses - loans primarily reflected loan growth and, to a lesser extent, a deterioration in forecasted economic conditions and indicators utilized to estimate credit losses, partially offset by an improvement in the level of adversely classified loans.
+Added: The provision for credit losses - loans for the current year reflects an increase in our substandard loans in addition to growth in the loan portfolio.
+Added: The prior year provision for credit losses - loans primarily reflected loan growth and a deterioration in forecasted economic conditions and indicators utilized to estimate credit losses, as well as increased charge-offs for the prior year.
Future assessments of the expected credit losses will not only be impacted by changes to the reasonable and supportable forecast, but will also include an updated assessment of qualitative factors, as well as consideration of any required changes in the reasonable and supportable forecast reversion period.
+Added: T able of C onten ts
The following table sets forth an analysis of our allowance for credit losses - loans for the periods indicated (dollars in thousands):
3 unchanged sentences
Balance, beginning of period $ 149,643 $ 141,465 $ 132,099
−Removed: Provision (recapture) for credit losses – loans 11,097 8,158 (33,112)
+Added: Provision for credit losses – loans 8,563 11,097 8,158
Recoveries of loans previously charged off:
8 unchanged sentences
Commercial real estate (351) — (2)
−Removed: Multifamily real estate — — (59)
Construction and land (150) (1,089) (30)
10 unchanged sentences
Allowance for credit losses - loans as a percent of total loans 1.37 % 1.38 % 1.39 %
−Removed: As a percent of average outstanding loans during the period:
−Removed: Net loan (charge-offs) recoveries (0.03) % 0.01 % (0.02) %
−Removed: Commercial real estate 0.01 % — % (0.02) %
−Removed: Multifamily real estate — % — % — %
−Removed: Construction and land (0.01) % — % — %
−Removed: One- to four-family residential — % — % — %
−Removed: Commercial business (0.01) % — % — %
−Removed: Agricultural business, including secured by farmland — % — % — %
−Removed: Consumer (0.01) % — % — %
Allowance for credit losses - loans as a percent of nonaccrual loans 425 % 557 % 652 %
+Added: T able of C onten ts
The following table sets forth the breakdown of the allowance for credit losses - loans by loan category at the dates indicated (dollars in thousands):
21 unchanged sentences
Balance, end of period $ 13,562 $ 14,484 $ 14,721
+Added: T able of C onten ts
Non-interest Income.
11 unchanged sentences
Net change in valuation of financial instruments carried at fair value (982) (4,218) 3,236 (77) % (4,218) 807 (5,025) (623) %
−Removed: Gain on sale of branches, including related deposits — 7,804 (7,804) (100) % 7,804 — 7,804 nm
+Added: Gain on sale of branches, including related deposits — — — — % — 7,804 (7,804) (100) %
Total non-interest income $ 66,888 $ 44,409 $ 22,479 51 % $ 44,409 $ 75,255 $ (30,846) (41) %
−Removed: Non-interest income decreased for the year ended December 31, 2023, compared to the year ended December 31, 2022.
−Removed: The decrease was primarily due to the net loss recorded during the current period on the sale of securities, the recognition of a net loss for fair value adjustments on financial instruments carried at fair value, a decrease in deposit fees and other service charges and a gain on sale of branches recognized during the year ended December 31, 2022, with no similar gain recognized in 2023.
−Removed: Income from deposit fees and other service charges decreased primarily as a result of decreased deposit transaction activity and the discontinuation of certain deposit fees related to overdrafts during the current year.
−Removed: Revenue from mortgage banking operations, including gains on one- to four-family and multifamily loan sales and loan servicing fees, increased for the year ended December 31, 2023, compared to the prior year.
−Removed: The higher mortgage banking revenue primarily reflected a $2.5 million lower of cost or market upward adjustment on multifamily loans held for sale, attributed to the transfer of $43.5 million of multifamily loans from held for sale to portfolio during the fourth quarter of 2023, compared to a $2.5 million lower of cost or market downward adjustment for the year ended December 31, 2022.
+Added: Non-interest income increased for the year ended December 31, 2024, compared to the year ended December 31, 2023.
+Added: The increase was primarily due to decreases in the net loss recognized on the sale of securities and the net loss recognized on the valuation of financial instruments carried at fair value, as well as increases in miscellaneous income and deposit fees and other service charges.
+Added: Income from deposit fees and other service charges increased primarily as a result of an increase in fees related to overdrafts during the current year.
+Added: Revenue from mortgage banking operations, including gains from one- to four-family and multifamily loan sales and loan servicing fees, increased for the year ended December 31, 2024, compared to the prior year.
+Added: The volume of one- to four-family loans sold during the year ended December 31, 2024 increased compared to the prior year, although overall volumes remained low due to reduced refinancing and purchase activity in the current rate environment.
+Added: We sold $408.9 million of one- to four-family loans held for sale for the year ended December 31, 2024, compared to $256.0 million for the year ended December 31, 2023.
+Added: The increase was also impacted by increases in the pricing on the one- to four-family loans sold during the current year.
Sales of one- to four-family loans held for sale for the year ended December 31, 2024, resulted in gains of $8.0 million, compared to $5.1 million for the year ended December 31, 2023.
−Removed: The reduction in one- to four-family loans sold primarily reflects a reduction in refinancing activity, as well as decreased purchase activity as interest rates increased during 2023.
−Removed: The net loss on sale of securities during the year ended December 31, 2023, reflects strategic sales of securities to minimize the impact of increasing rates on our securities portfolio.
+Added: The prior year period also reflected a downward lower of cost or market adjustment on multifamily loans held for sale.
+Added: In 2023, the Bank discontinued the origination of multifamily loans for sale into the secondary market.
+Added: All of the multifamily loans held for sale were transferred to the held for investment loan portfolio and the related lower of cost or market adjustment was reversed in the fourth quarter of 2023.
+Added: Miscellaneous income increased for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily as a result of an increase in the gain on sale of SBA loans and a gain recognized on the sale of a non-performing loan during the fourth quarter of 2024.
+Added: The net loss on sale of securities during the year ended December 31, 2024, reflects strategic sales of securities, mostly in the first quarter of 2024, to minimize the impact of increasing rates on our securities portfolio.
The net loss on the valuation of financial instruments carried at fair value were due to declines during 2024 in the market valuation of investment securities carried at fair value.
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Non-interest Expense.
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Miscellaneous 24,414 23,723 691 3 % 23,723 24,869 (1,146) (5) %
−Removed: $ 382,538 $ 377,295 $ 5,243 1 % $ 377,295 $ 379,005 $ (1,710) — %
−Removed: COVID-19 expenses — — — nm — 436 (436) (100) %
−Removed: Merger and acquisition-related expenses — — — nm — 660 (660) (100) %
Total non-interest expense $ 391,538 $ 382,538 $ 9,000 2 % $ 382,538 $ 377,295 $ 5,243 1 %
−Removed: Non-interest expense for the year ended December 31, 2023, increased as compared to the same period in 2022.
−Removed: The increase was primarily due to an increase in salary and employee benefits, a decrease in capitalized loan origination costs, and increases in information and computer data services and deposit insurance, partially offset by decreases in occupancy and equipment, professional and legal expenses, and amortization of core deposit intangibles.
−Removed: Salary and employee benefits increased for the year ended December 31, 2023, compared to the prior year, primarily reflecting normal annual salary and wage increases, partially offset by decreases in loan production related commission expense.
−Removed: Capitalized loan origination costs decreased primarily due to decreased loan production.
−Removed: Information and computer data services increased primarily due to an increase in computer software expenses.
−Removed: Deposit insurance expense increased due to an increase in the FDIC assessment rate in 2023.
−Removed: Occupancy and equipment decreased for the year ended December 31, 2023, compared to the prior year, primarily due to a reduction in building rent expense during the current year as a result of the consolidation of back-office space.
−Removed: Professional and legal expense decreased for the year ended December 31, 2023, from the year ended December 31, 2022, primarily due to a $3.5 million accrual recorded in the prior year related to a potential settlement of a pending litigation matter.
+Added: Non-interest expense for the year ended December 31, 2024, increased compared to the same period in 2023.
+Added: The increase was primarily due to increases in salary and employee benefits and payment and card processing services, partially offset by a decrease in professional and legal expenses.
+Added: Salary and employee benefits increased for the year ended December 31, 2024, compared to the prior year, primarily as a result of normal annual salary and wage increases and an increase in loan production related commission expense, partially offset by lower medical expenses.
+Added: Payment and card processing services increased for the year ended December 31, 2024, compared to the prior year, primarily reflecting an increase in online banking costs and fraud losses.
+Added: Professional and legal expenses decreased for the year ended December 31, 2024, from the year ended December 31, 2023, primarily due to a reduction in legal and consulting expenses as well as a one-time reduction in litigation settlement costs.
Income Taxes.
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Our financial condition and operations are influenced significantly by general economic conditions, including the absolute level of interest rates as well as changes in interest rates and the slope of the yield curve.
−Removed: Our profitability depends, to a large extent, on our net interest income, which is the difference between the interest received from our interest-earning assets and the interest expense incurred on our interest-bearing liabilities.
+Added: Our profitability is dependent, to a large extent, on our net interest income, which is the difference between the interest received from our interest-earning assets and the interest expense incurred on our interest-bearing liabilities.
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Our activities, like those of all financial institutions, inherently involve the assumption of interest rate risk.
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Interest rate risk is the primary market risk affecting our financial performance.
−Removed: The greatest source of interest rate risk to us results from the mismatch of maturities or repricing intervals for rate sensitive assets, liabilities and off-balance-sheet contracts.
+Added: Our greatest source of interest rate risk results from the mismatch of maturities or repricing intervals for rate sensitive assets, liabilities and off-balance-sheet contracts.
This mismatch or gap is generally characterized by a substantially shorter maturity structure for interest-bearing liabilities than interest-earning assets, although our floating-rate assets tend to be more immediately responsive to changes in market rates than most deposit liabilities.
−Removed: Additional interest rate risk results from mismatched repricing indices (basis risk and yield curve risk), and product caps and floors and early repayment or withdrawal provisions (option risk), which may be contractual or market driven, that are generally more favorable to clients than to us.
+Added: Additional interest rate risk results from mismatched repricing indices and formula (basis risk and yield curve risk), and product caps and floors and early repayment or withdrawal provisions (option risk), which may be contractual or market driven, that are generally more favorable to clients than to us.
An exception to this generalization is the beneficial effect of interest rate floors on a portion of our performing floating-rate loans, which help us maintain higher loan yields in periods when market interest rates decline significantly.
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As of December 31, 2024, our loans with interest rates at their floors totaled $1.34 billion and had a weighted average note rate of 4.48%.
−Removed: The Company actively manages its exposure to interest rate risk through on-going adjustments to the mix of interest-earning assets and funding sources that affect the repricing speeds of loans, investments, interest-bearing deposits and borrowings.
+Added: The Company actively manages its exposure to interest rate risk through ongoing adjustments to the mix of interest-earning assets and funding sources that affect the repricing speeds of loans, investments, interest-bearing deposits and borrowings.
The principal objectives of asset/liability management are:
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Nonetheless, the interest rate sensitivity of our net interest income and net economic value of equity could vary substantially if different assumptions were used or if actual experience differs from the assumptions used.
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The following tables set forth, as of December 31, 2024, the estimated changes in our net interest income over one-year and two-year time horizons for our rate ramp and rate shock interest rate sensitivity scenarios, and the estimated changes in economic value of equity for our rate shock interest rate sensitivity scenario based on the indicated interest rate environments (dollars in thousands):
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Finally, the ability of some borrowers to service their debt may decrease in the event of a severe change in market rates.
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Table 22, Interest Sensitivity Gap , presents our interest sensitivity gap between interest-earning assets and interest-bearing liabilities at December 31, 2024.
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The interest rate risk indicators and interest sensitivity gaps as of December 31, 2024, are within our internal policy guidelines and Management considers that our current level of interest rate risk is reasonable.
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The following table provides a GAP analysis as of December 31, 2024 (dollars in thousands):
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(footnotes follow)
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(1) Adjustable-rate assets are included in the period in which interest rates are next scheduled to adjust rather than in the period in which they are due to mature, and fixed-rate assets are included in the period in which they are scheduled to be repaid based upon scheduled amortization, in each case adjusted to take into account estimated prepayments.
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For the purpose of the gap analysis, these accounts have been assigned decay rates to reflect their longer effective maturities.
−Removed: If these accounts had been assumed to be short-term, the one-year cumulative gap of interest-sensitive assets would have been a negative $3.54 billion, or a negative 22.59% of total assets at December 31, 2023.
+Added: If these accounts had been assumed to be short-term, the one-year cumulative gap of interest-sensitive assets would have been a negative $3.59 billion, or negative 22.19% of total assets at December 31, 2024.
Interest-bearing liabilities for this table exclude certain non-interest-bearing deposits that are included in the average balance calculations.
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The net result of these interest rate swaps is that the client pays a fixed rate of interest and the Bank receives a floating rate.
−Removed: The Bank also has interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans.
−Removed: These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Bank making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.
−Removed: The Bank is a party to $400.0 million in notional value of these types of interest rate swaps at December 31, 2023.
Based on our analysis of the interest rate risk scenarios and our strategies for managing our risk, Management believes our current level of interest rate risk is reasonable.
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Our primary investing activity is the origination of loans and, in certain periods, the purchase of securities or loans.
−Removed: During the years ended December 31, 2023 and 2022, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $886.8 million and $1.30 billion, respectively.
−Removed: There were no loan purchases during the year ended December 31, 2023, and $126.6 million of loans purchased during the year ended December 31, 2022.
+Added: During the years ended December 31, 2024 and 2023, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $984.7 million and $886.8 million, respectively.
+Added: There were $4.7 million of loans purchased during the year ended December 31, 2024, and no loans purchased during the year ended December 31, 2023.
During the years ended December 31, 2024 and 2023, we received proceeds of $435.3 million and $280.6 million, respectively, from the sale of loans.
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Our primary funding source is deposits.
−Removed: Total deposits decreased by $590.6 million during the year ended December 31, 2023, with core deposits decreasing $1.34 billion and certificates of deposit increasing $753.9 million.
+Added: Total deposits increased by $484.9 million during the year ended December 31, 2024, with core deposits increasing $462.7 million and certificates of deposit increasing $22.2 million.
At December 31, 2024, core deposits totaled $12.01 billion, or 89%, of total deposits, compared with $11.55 billion, or 89% of total deposits at December 31, 2023.
+Added: The increase in core deposits compared to the prior year quarter primarily reflects increases in interest-bearing transaction and savings accounts.
Certificates of deposit are generally more vulnerable to competition and more price sensitive than other retail deposits and our pricing of those deposits varies significantly based upon our liquidity management strategies at any point in time.
At December 31, 2024, certificates of deposit totaled $1.50 billion, or 11% of our total deposits, including $1.45 billion which were scheduled to mature within one year.
−Removed: Certificates of deposit increased from 5% of our total deposits at December 31, 2022 to 11% of our total deposits at December 31, 2023.
−Removed: The increase in certificates of deposit during 2023 was due to clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposit, as well as a $108.1 million increase in brokered deposits.
+Added: Certificates of deposit totaled 11% of our total deposits at December 31, 2023.
We had $290.0 million of FHLB advances at December 31, 2024, compared to $323.0 million at December 31, 2023.
−Removed: Other borrowings at December 31, 2023 decreased $49.9 million to $182.9 million from $232.8 million at December 31, 2022.
+Added: Other borrowings at December 31, 2024 decreased $57.6 million to $125.3 million from December 31, 2023.
Both the FHLB advances and other borrowings outstanding at December 31, 2024 mature during 2025.
−Removed: We must maintain an adequate level of liquidity to ensure the availability of sufficient funds to accommodate deposit withdrawals.
−Removed: This is to support loan growth, satisfy financial commitments and take advantage of investment opportunities.
+Added: We must maintain an adequate level of liquidity to ensure the availability of sufficient funds to accommodate deposit withdrawals, support loan growth, satisfy financial commitments and take advantage of investment opportunities.
We use our sources of funds primarily to fund loan growth and deposit outflows.
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In addition, at December 31, 2024, we had $14.1 million of commitments under operating lease agreements.
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We generally maintain sufficient cash and readily marketable securities to meet short-term liquidity needs;
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Under this program, based on pledged collateral, the Bank had available lines of credit of approximately $1.52 billion as of December 31, 2024, subject to certain collateral requirements, namely the collateral type and risk rating of eligible pledged loans.
−Removed: The Bank also had $120.4 million of additional borrowing capacity through the FRBSF’s bank term funding program.
We had no funds borrowed from the FRBSF at December 31, 2024 or 2023.
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Banner is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses and cash dividends.
+Added: During 2024, Banner and the Bank entered into an intercompany loan agreement for $50.0 million, which reduced Banner’s cash balance while maintaining liquidity with the note receivable from the Bank.
+Added: The note has a term of one year, automatically renewable each quarter.
+Added: The note eliminates upon consolidation.
Banner’s primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends.
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The Federal Reserve requires Banner to maintain capital adequacy that generally parallels the FDIC requirements.
−Removed: The FDIC requires the Bank to maintain minimum ratios of Total Capital, Tier 1 Capital, and Common Equity Tier 1 Capital to risk-weighted assets as well as Tier 1 leverage capital to average assets.
−Removed: In addition to the minimum capital ratios, the Bank has to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses.
+Added: The FDIC requires the Bank to maintain minimum capital ratios of total capital, tier 1 capital, and common equity tier 1 capital to risk-weighted assets as well as tier 1 leverage capital to average assets.
+Added: In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional common equity tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses.
At December 31, 2024, Banner and the Bank each exceeded all current regulatory capital requirements to be “well capitalized” and the fully phased-in capital conservation buffer requirement.
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See pages 58 – 63 of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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ITEM 8 – Financial Statements and Supplementary Data
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.