Safe and Sound

Banner Bank

Walla Walla, WA
4
Star Rating
Started in 1890, Banner Bank is an FDIC-insured bank headquartered in Walla Walla, WA. The bank holds equity of $1.30 billion on $9,926,921,000 in assets, according to June 30, 2017, regulatory filings.

U.S. bank customers have $8.34 billion on deposit at 192 offices in multiple states run by 2,053 full-time employees. With that footprint, the bank currently holds loans and leases worth $7.34 billion, $5.90 billion of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Banner Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank faired on the three important criteria Bankrate used to evaluate American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial resilience. When looking at safety and soundness, the more capital, the better.
Banner Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is an important measure of this buffer. Banner Bank's Tier 1 capital ratio was 11.29 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Banner Bank held equity amounting to 13.13 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a failure in the future.

Banner Bank beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.30 percent of Banner Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Banner Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Banner Bank scored 16 out of a possible 30, less than the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Banner Bank's most recent annualized quarterly return on equity was 8.01 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $51.6 million on total equity of $1.30 billion. The bank reported an annualized return on average assets, or ROA, of 1.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 percent.








WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.