Banner Corp., the parent company of Banner Bank and Islanders Bank, this month reported that it had a net loss of $3.5 million for the fourth quarter ended Dec. 31, 2009, compared to a net loss of $6.4 million in the immediately preceding quarter.
The current quarter’s results include a $17 million provision for loan losses and a $1.4 million loss from the valuation of financial instruments carried at fair value.
“The difficult economic environment and resulting credit costs have been a persistent challenge throughout all of 2009,” D. Michael Jones, President and CEO said in a release. “As a direct result, the provision for loan losses, while substantially less than both the preceding quarter and the same quarter a year ago, remained high in the fourth quarter, reflecting still significant, though moderating, levels of non-performing loans and net charge-offs.”
He said charge-offs and delinquencies continue to be concentrated in loans for the construction of single-family homes and for acquisition and development of land for residential properties. However, he added, bank officials are encouraged by the further reduction in the exposure to residential construction loans during the quarter and the slowdown in the surfacing of new problem assets.
By contrast to the bank’s construction and development loan portfolio, the non-housing related segments of its portfolio continued to perform with only normal levels of credit problems given the serious economic slowdown, he said.
In the fourth quarter, Banner paid a $1.6 million dividend on the $124 million of senior preferred stock it issued to the U.S. Treasury in the fourth quarter of 2008 in connection with its participation in the Treasury’s Capital Purchase Program.
In addition, Banner accrued $373,000 for related discount accretion. Including the preferred stock dividend and related accretion, the net loss to common shareholders was $5.5 million, or $0.27 per diluted share, for the fourth quarter of 2009, compared to a net loss of $79.4 million or $4.72 per diluted share, for the fourth quarter a year ago. Fourth quarter 2008 results included a $71.1 million goodwill impairment charge and a preferred dividend of $689,000.
“Distressed property values, particularly for land and developed building lots, placed further stress on certain borrowers and projects during the quarter resulting in additional charge-offs and impairment reserves,” said Jones. “As a result, our provision for loan losses for the fourth quarter, while decreased significantly from the preceding quarter, was again in excess of our normal expectations.”