Banner Corp., the Walla Walla, Wash.-based parent of Banner Bank, has reported a third-quarter net loss of about $44.7 million, or 40 cents a share, compared with a loss of $8.4 million, or 44 cents a share, in the year-earlier quarter.

Banner says it had solid growth in net interest income during the quarter, but took big noncash hits, totaling about $55.6 million, for a previously announced income-tax adjustment, a real estate valuation charge, a loan-loss provision, and an investment impairment.

"Credit costs have been a persistent challenge through the past several quarters and continue to adversely impact our profitability," says Banner President and CEO Mark J. Grescovich. "The provision for loan losses in the third quarter ($20 million) remains high, reflecting still significant levels of nonperforming loans and net charge-offs."

The bank holding company's total loans fell to $3.4 billion as of Sept. 30, from $3.8 billion a year earlier, reflecting the continued economic downturn.

"Loan demand was modest during the quarter, as both businesses and consumers remained very cautious in the current economic environment," Grescovich says. "In addition, we have continued to intentionally reduce our construction and land development loans over the past year."

Banner's deposits also declined over the year, to $3.76 billion as of Sept. 30, compared with $3.86 billion a year earlier. The bank says it "encouraged a significant reduction in higher-cost certificate of deposit balances," but had a "solid quarter of core deposit growth."

The company's total assets declined to $4.6 billion as of Sept. 30, from $4.79 billion a year earlier.

Banner has made headway in working to resolve credit issues. As of Sept. 30, some 5.39 percent of its total loans were delinquent, compared with 6.79 percent a year earlier.

Similarly, the bank says that as of the end of September, 6.03 percent of its total assets were nonperforming, compared with 6.23 percent a year earlier.

"Improving our asset quality through aggressive management of our problem assets, including appropriate valuation adjustments when necessary, remains the primary focus for Banner," Grescovich says.

In June, Banner raised about $162 million in a common stock offering of 75 million shares, and says it plans to use the funds mostly to strengthen its regulatory capital ratios and to support growth.

In addition to Banner Bank, Banner Corp. operates Islanders Bank, headquartered in Friday Harbor, Wash. Between the two banking operations, it has 89 branches and seven loan offices throughout Washington, Oregon, and Idaho. Banner acquired F&M Bank here in 2007 and now operates about a dozen branches in the Spokane area.