Safe and Sound

Banner Bank

Walla Walla, WA
4
Star Rating
Banner Bank is a Walla Walla, WA-based, FDIC-insured bank dating back to 1890. As of December 31, 2017, the bank held equity of $1.30 billion on $9.48 billion in assets.

Thanks to the efforts of 2,029 full-time employees in 179 offices in multiple states, the bank currently holds loans and leases worth $7.36 billion, including real estate loans of $5.94 billion. U.S. bank customers currently have $7.98 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Banner Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Banner Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Banner Bank's Tier 1 capital ratio was 11.79 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, Banner Bank held equity amounting to 13.71 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Banner Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.37 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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Banner Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Banner Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Banner Bank's most recent annualized quarterly return on equity was 4.99 percent, below the national average of 8.10 percent.

The bank recorded net income of $64.6 million on total equity of $1.30 billion for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.66 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 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.