Walla Walla-based Banner Corp., which operates Banner Bank and acquired Spokane Valley-based F&M Bank earlier this year, says its loan and deposit growth from that acquisition and another helped bolster its net income for the third quarter.


Banner posted third-quarter earnings of $10 million, or 64 cents a diluted share, compared with $8 million, or 65 cents a share, in the year-earlier period. Per-share earnings fell in part because the company issued 2.6 million shares of stock in conjunction with its acquisitions in the second quarter of F&M and Friday Harbor, Wash.-based San Juan Financial Holding Co., which operated the three-branch Islanders Bank system.


F&M Bank had operated 14 branches, and those branches all now have been converted to Banner Bank offices. Lloyd Baker, Banner Corp.s chief financial officer, says the company is looking for sites for additional Spokane-area branches, but hasnt selected any locations yet.


The bank has looked at the former location of the Newport Cinemas, just north of the Northpointe Plaza retail center on Spokanes North Side, as a potential expansion site, but he cant comment further on its evaluation of any likely sites for new branches, Baker says.


For the first nine months of this year, Banner reported net income of $24.9 million, up 3 percent from $24.2 million in the year-earlier period. Banners third-quarter earnings included a $2 million after-tax gain associated with an accounting change in the valuation of financial instruments.


As of Sept. 30, Banner Corp.s assets were $4.3 billion, up 25 percent from a year earlier. Net loans also jumped 25 percent, to $3.58 billion, although most of the increase was due to the two acquisitions it made, Banner says.


Loan growth was somewhat disappointing as we have continued to be perhaps overly cautious in our underwriting, says D. Michael Jones, Banners president and CEO.


Banners total deposits grew to $3.6 billion as of Sept. 30, up 31 percent from a year earlier. Just over half of that deposit growth was due to the acquisitions, the company says.


Its net interest margin, the difference between interest income and interest expense, improved to 4.1 percent of earning assets for the third quarter, up from 3.99 percent in the year-earlier period.


Recurring operating expenses in the third quarter were $34.8 million, up 38 percent from the year-earlier period. The increase reflects the added costs of operating branches acquired in the F&M Bank and San Juan Financial Holding Co. transactions, Jones says.


Despite the increase in expenses associated with operating the acquired branches, Jones says the acquisitions are proving to be very successful in helping us reach new customers and grow deposits, and over time, they will add to our profitability.


Since the end of the third quarter, the company has acquired Wenatchee, Wash-based North Central Washington Community Bank, which operates two branches in the Wenatchee area.


Banner also says it will increase its quarterly cash dividend by 5 percent to 20 cents a share for shareholders in the fourth quarter.


Baker says the bank is planning in the fourth quarter to open branches in Nampa, Idaho; Oak Harbor, Wash.; and Federal Way, Wash.


Contact Mike McLean at (509) 344-1266 or via e-mail at [email protected].