s308.htm
As filed
with the Securities and Exchange Commission on December 19, 2008
Registration
Nos. 333-________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
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BANNER
CORPORATION
(Exact
name of registrant as specified in its
charter)
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Washington
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91-1691604
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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10
S. First Avenue
Walla
Walla, Washington 99362
(509)
527-3636
(Address,
including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Albert
H. Marshall
Vice
President
Banner
Corporation
10
S. First Avenue
Walla
Walla, Washington 99362
(509)
527-3636
(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
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Copy
of communications to:
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John
F. Breyer, Jr., Esq.
Breyer
& Associates PC
8180
Greensboro Drive, Suite 785
McLean,
Virginia 22102
(703)
883-1100
(703)
883-2911 (fax)
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Martin
L. Meyrowitz, P.C.
Craig
M. Scheer, P.C.
Silver,
Freedman & Taff, L.L.P.
3299
K Street, N.W., Suite 100
Washington,
D.C. 20007
(202)
295-4500
(202)
337-5502 (fax)
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Approximate date of commencement of
proposed sale to the public: From time to time after this Registration
Statement becomes effective.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
[__]
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[__]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [__]
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [__]
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the
Securities Act, check the following box. [__]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
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CALCULATION
OF REGISTRATION FEE
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TITLE
OF EACH CLASS OF
SECURITIES
TO BE REGISTERED
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AMOUNT
TO
BE
REGISTERED
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PROPOSED
MAXIMUM
OFFERING
PRICE
PER
UNIT
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PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE
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AMOUNT
OF
REGISTRATION
FEE(3)
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Fixed
Rate Cumulative Perpetual
Preferred
Stock, Series A (2)
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124,000
shares
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$1,000.00(1)
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$124,000,000
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$4,874
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Depositary
Shares (2)
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---
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---
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---
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---
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Common
Stock (3)
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1,707,989
shares
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$10.36(4)
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$
17,694,767
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696
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Warrants
(3)
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---
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---
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---
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---
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Total
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$141,694,767
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$5,570
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(1)
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Represents
the liquidation preference amount per share of the preferred stock being
registered for resale (the “Series A Preferred Stock”), which we sold to
the United States Department of the Treasury (“Treasury”) pursuant to
Treasury’s Troubled Asset Relief Program Capital Purchase
Program.
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(2)
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In
the event Treasury requests that we deposit the shares of Series A
Preferred Stock with a depositary pursuant to a depositary arrangement,
depositary shares evidencing fractional shares of the Series A Preferred
Stock may be sold pursuant to this registration statement in lieu of whole
shares of Series A Preferred Stock.
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(3)
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The
shares of common stock being registered are purchasable upon exercise of
the warrants being registered, which we issued to Treasury concurrent with
the sale of the Series A Preferred Stock to Treasury as described in
footnote (1). In addition to the number of shares of common
stock stated in the table above, there is registered, pursuant to Rule
416, such number of additional shares of common stock, of a currently
undeterminable amount, as may from time to time become issuable by reason
of stock splits, stock dividends and certain other anti-dilution
provisions set forth in the warrants. Pursuant to Rule 457(g),
no additional fee is payable for the
warrants.
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(4)
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Estimated
in accordance with Rule 457(c), calculated on the basis of $10.36 per
share, which was the average of the high and low sales prices per share of
the common stock on the NASDAQ Stock Market on December 17,
2008.
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_____________________
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. The selling
securityholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state or jurisdiction where the offer or
sale is not permitted.
Subject
to Completion
Preliminary
Prospectus dated December 19, 2008
PROSPECTUS
Banner
Corporation
124,000
Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A,
Liquidation
Preference Amount $1,000 Per Share
(or
Depositary Shares Evidencing Fractional Interests in Such Shares)
1,707,989
Shares of Common Stock and Warrant to Purchase Such Shares
This
prospectus relates to (i)124,000 shares of our Fixed Rate Cumulative Perpetual
Preferred Stock, Series A, liquidation preference amount $1,000 per share, or,
in the event such shares are deposited with a depositary, as described in this
prospectus, depositary shares evidencing fractional interests in such shares,
(ii) a warrant, or portions thereof, which expires on November 21, 2018, to
purchase 1,707,989 shares of our common stock at an exercise price of $10.89 per
share, subject to adjustment as described in this prospectus, and (iii) the
shares of our common stock which may be purchased upon exercise of the
warrant. The shares of the Series A Preferred Stock and the warrant
were issued by us on November 21, 2008 to the United States Department of the
Treasury as part of Treasury’s Troubled Asset Relief Program Capital Purchase
Program in a private placement exempt from the registration requirements of the
Securities Act of 1933.
The
selling securityholders who may sell or otherwise dispose of the securities
offered by this prospectus include Treasury and any other holders of the
securities covered by this prospectus to whom Treasury has transferred its
registration rights in accordance with the terms of the securities purchase
agreement between us and Treasury. The selling securityholders may
offer the securities from time to time directly or through underwriters,
broker-dealers or agents and in one or more public or private transactions and
at fixed prices, at prevailing market prices, at prices related to prevailing
market prices or at negotiated prices. If these securities are sold
through underwriters, broker-dealers or agents, the selling securityholders will
be responsible for underwriting discounts or commissions or agents’ commissions,
if any. We will not receive any proceeds from the sale of
securities by the selling securityholders.
Our
common stock is listed on the NASDAQ Global Select Market under the symbol
“BANR.” On December 17, 2008, the closing sale price of our common
stock on the NASDAQ Global Select Market was $10.37 per
share. Neither the Series A Preferred Stock nor the warrant is
currently listed on any established securities exchange or quotation system and
we do not intend to seek such a listing for these securities unless we are
requested to do so by Treasury.
The
securities offered by this prospectus are not savings accounts, deposits or
other obligations of any bank and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Investing
in the securities offered by this prospectus involves risks. See “Risk
Factors” beginning on page 3 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission nor
any other regulatory body has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
The date
of this prospectus is ___________ ,
20__.
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| ABOUT THIS
PROSPECTUS |
iii
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| SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS |
iii
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| WHERE YOU CAN FIND
MORE INFORMATION |
iv
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| PROSPECTUS
SUMMARY |
1
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| RISK
FACTORS |
3
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| USE OF
PROCEEDS |
16
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| RATIOS OF EARNINGS
TO FIXED CHARGES |
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| REGULATORY
CONSIDERATIONS |
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| DESCRIPTION OF
SERIES A PREFERRED STOCK |
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| DESCRIPTION OF
DEPOSITARY SHARES |
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| DESCRIPTION OF
WARRANT |
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| DESCRIPTION OF
CAPITAL STOCK |
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| SELLING
SECURITYHOLDERS |
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| PLAN OF
DISTRIBUTION |
28
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| LEGAL
MATTERS |
30
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| EXPERTS |
30
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ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission (the “SEC”) using a “shelf” registration, or continuous
offering, process. Under this process, the selling securityholders
may from time to time sell or otherwise dispose of the securities described in
this prospectus in one or more offerings.
You
should rely only on the information contained or incorporated by reference in
this prospectus and any supplement to this prospectus. We have not, and the
selling securityholders have not, authorized anyone to provide you with
information different from that contained in this prospectus. The selling
securityholders are offering to sell, and seeking offers to buy, our securities
only in jurisdictions where it is lawful to do so. The information in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or any sale of our securities. Neither the
delivery of this prospectus nor any sale made under this prospectus shall, under
any circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained or
incorporated by reference in this prospectus is correct as of any time
subsequent to the date of such information.
All
references in this prospectus to “Banner,” “we,” “us,” “our” or similar
references mean Banner Corporation and its consolidated subsidiaries and all
references in this prospectus supplement to “Banner Corporation” mean Banner
Corporation excluding its subsidiaries, in each case unless otherwise expressly
stated or the context otherwise requires. When we refer to “Banner
Bank” and “Islanders Bank” in this prospectus, we mean our subsidiaries, Banner
Bank and Islanders Bank, respectively, each of which is a Washington
state-chartered commercial bank. We sometimes refer to Banner Bank
and Islanders Bank as, collectively, the “Banks” and, individually, a
“Bank.”
This
prospectus and the documents incorporated by reference may contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements often include the
words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,”
“plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar
expressions or future or conditional verbs such as “may,” “will,” “should,”
“would” and “could.” These forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from the forward-looking statements,
including:
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the
credit risks of lending activities, including changes in the level and
trend of loan delinquencies and
write-offs;
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changes
in general economic conditions, either nationally or in our market
areas;
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changes
in the levels of general interest rates, deposit interest rates, our net
interest margin and funding
sources;
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fluctuations
in the demand for loans, the number of unsold homes and other properties
and fluctuations in real estate values in our market
areas;
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results
of examinations of us by the Federal Reserve and our bank subsidiaries by
the Federal Deposit Insurance Corporation, the Washington State Department
of Financial Institutions, Division of Banks or other regulatory
authorities, including the possibility that any such regulatory authority
may, among other things, require us to increase our reserve for loan
losses or to write-down assets;
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fluctuations
in agricultural commodity prices, crop yields and weather
conditions;
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our
ability to control operating costs and
expenses;
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our
ability to implement our branch expansion
strategy;
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our
ability to successfully integrate any assets, liabilities, customers,
systems, and management personnel we have acquired or may in the future
acquire into our operations and our ability to realize any anticipated
revenue synergies and cost savings therefrom and any goodwill charges
related thereto;
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our
ability to manage loan delinquency
rates;
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our
ability to retain key members of our senior management
team;
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costs
and effects of litigation, including settlements and
judgments;
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increased
competitive pressures among financial services
companies;
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changes
in consumer spending, borrowing and savings
habits;
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legislative
or regulatory changes that adversely affect our
business;
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adverse
changes in the securities markets;
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inability
of key third-party providers to perform their obligations to
us;
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changes
in accounting policies and practices, as may be adopted by the financial
institution regulatory agencies or the Financial Accounting Standards
Board;
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war
or terrorist activities; and
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other
economic, competitive, governmental, regulatory, and technological factors
affecting our operations, pricing, products and services and the other
risks described elsewhere in this prospectus and the incorporated
documents and in our other filings with the
SEC.
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Some of
these and other factors are discussed in this prospectus under the caption “Risk
Factors” and elsewhere in this prospectus and in the incorporated documents.
Such developments could have an adverse impact on our financial position and our
results of operations.
Any
forward-looking statements are based upon management’s beliefs and assumptions
at the time they are made. We undertake no obligation to publicly update or
revise any forward-looking statements included or incorporated by reference in
this prospectus or to update the reasons why actual results could differ from
those contained in such statements, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking statements discussed in this prospectus or the
incorporated documents might not occur, and you should not put undue reliance on
any forward-looking statements.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Accordingly, we file annual, quarterly
and current reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements or other
information that we may file with the SEC at the SEC’s Public Reference Room at
100 F Street, N.E., Room 1580, Washington, D.C., 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information about issuers that file
electronically with the SEC. The address of the SEC’s Internet site is
http://www.sec.gov.
The SEC
allows us to incorporate by reference the information we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information that we incorporate by reference is considered
to be a part of this prospectus, and the information we later file with the SEC
that is incorporated by reference in this prospectus will automatically update
information previously contained in this prospectus and any incorporated
document. Any statement contained in this prospectus or in a document
incorporated by reference in this prospectus will be deemed modified or
superseded to the extent that a later statement contained in this prospectus or
in an incorporated document modifies or supersedes such earlier
statement.
This
prospectus incorporates by reference the documents listed below that we have
filed with the SEC (excluding any portion of any such document that has been
furnished to and deemed not to be filed with the SEC):
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Report(s)
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Period(s)
of Report(s) or Date(s) Filed
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• Annual
Report on Form 10-K
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For
the year ended December 31, 2007
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• Quarterly
Reports on Form 10-Q
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For
the quarters ended March 31, 2008, June 30, 2008 and September 30,
2008
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• Current
Reports on Form 8-K
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Filed
on May 6, 2008, September 24, 2008, November 4, 2008 and November 24,
2008
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We
incorporate by reference these documents and any future documents we may file
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, excluding any document or portion thereof that has been furnished to and
deemed not to be filed with the SEC.
These
documents are available without charge to you on the Internet at
http://www.bannerbank.com or if you call or write to: Investor Relations, Banner
Corporation, P.O. Box 907, Walla Walla, Washington 99362, telephone:
(800) 272-9933. The reference to our website is not intended to
be an active link and the information on our website is not, and you must not
consider the information to be, a part of this prospectus.
We have
also filed a registration statement with the SEC relating to the securities
offered by this prospectus. This prospectus, which constitutes part
of the registration statement, does not contain all of the information presented
or incorporated by reference in the registration statement and its exhibits. You
may obtain from the SEC a copy of the registration statement and exhibits that
we filed with the SEC as described above. The registration statement
may contain additional information that may be important to you.
This
summary highlights information contained elsewhere in, or incorporated by
reference into, this prospectus. As a result, it does not contain all of the
information that may be important to you or that you should consider before
investing in our securities. You should read this entire prospectus, including
the “Risk Factors” section, and the documents incorporated by reference, which
are described under “Where You Can Find More Information” in this
prospectus.
Banner
Corporation
Banner
Corporation is a bank holding company incorporated in the State of Washington.
We are primarily engaged in the business of planning, directing and coordinating
the business activities of our wholly owned subsidiaries, Banner Bank and,
subsequent to May 1, 2007, Islanders Bank. Banner Bank is a
Washington-chartered commercial bank that conducts business from its main office
in Walla Walla, Washington and, as of September 30, 2008, its 83 branch offices
and 12 loan production offices located in Washington, Oregon and
Idaho. Islanders Bank is also a Washington-chartered commercial bank
that we acquired in May 2007 and that conducts business from three locations in
San Juan County, Washington. Banner Corporation is subject to
regulation by the Board of Governors of the Federal Reserve System (“Federal
Reserve”). Banner Bank and Islanders Bank are subject to regulation
by the Washington State Department of Financial Institutions, Division of Banks
and the Federal Insurance Deposit Corporation (“FDIC”). The primary
source of liquidity for us is dividend payments from Banner Bank and to a
substantially lesser extent dividend payments from Islanders
Bank. Banner Bank and Islanders Bank are subject to certain legal
restrictions on their ability to pay dividends or make loans or advances to
us. For information about these restrictions, please see “Regulatory
Considerations” in this prospectus and “Item 1. Business—Regulation” and note 21
to our consolidated financial statements contained in our Annual Report on Form
10-K for the year ended December 31, 2007, which has been filed with the SEC and
is available as described under “Where You Can Find More
Information.”
As of
September 30, 2008, we had total consolidated assets of $4.7 billion, total
loans of $3.9 billion, total deposits of $3.8 billion and total stockholders’
equity of $386.9 million.
Banner
Bank is a regional bank which offers a wide variety of commercial banking
services and financial products to individuals, businesses and public sector
entities in its primary market areas. Islanders Bank is a community
bank which offers similar banking services to individuals, businesses and public
entities located in the San Juan Islands in the State of
Washington. Our primary business is that of a traditional financial
institution, accepting deposits and originating loans in locations surrounding
our offices in portions of Washington, Oregon and Idaho. Banner Bank
is also an active participant in the secondary residential mortgage market,
engaging in mortgage banking operations largely through the origination and sale
of one- to four-family residential loans. Lending activities include
commercial business and commercial real estate loans, agriculture business
loans, construction and land development loans, one- to four-family residential
loans and consumer loans.
Our
common stock is traded on the NASDAQ Global Select Market under the ticker
symbol “BANR.” Our principal executive offices are located at 10
South First Avenue, Walla Walla, Washington 99362-0265. Our telephone
number is (509) 527-3636.
Securities
Being Offered
On
November 21, 2008, pursuant to the Troubled Asset Relief Program Capital
Purchase Program of the United States Department of the Treasury (“Treasury”),
we sold to Treasury 124,000 shares of our Fixed Rate Cumulative Perpetual
Preferred Stock, Series A (the “Series A Preferred Stock”), liquidation
preference amount $1,000 per share, for an aggregate purchase price of $124.0
million, and concurrently issued to Treasury a ten-year warrant to purchase up
to 1,707,989 shares of our common stock at an exercise price of $10.89 per
share. The issuance of the Series A Preferred Stock and the warrant
were completed in a private placement to Treasury exempt from the registration
requirements of the Securities Act of 1933. We were required under
the terms of the related securities purchase agreement between us and Treasury
to register for resale the shares of the Series A Preferred Stock, the warrant
and the shares of our common stock underlying the warrant. This
registration includes depositary shares, representing fractional interests in
the Series A Preferred Stock, which may be resold pursuant to this prospectus in
lieu of whole shares of Series A Preferred Stock in the event Treasury requests
that we deposit the Series A Preferred Stock held by Treasury with a depositary
under a depositary arrangement entered into in accordance with the securities
purchase agreement. See “Description of Depositary
Shares.” The terms of the Series A Preferred Stock, the warrant and
our common stock are described under “Description of Series A Preferred Stock,”
“Description of Warrant,” and “Description of Capital
Stock.” The securities purchase agreement between us and
Treasury was attached as Exhibit 10.1 to our Current Report on Form 8-K filed on
November 24, 2008 and incorporated into this prospectus by
reference. See “Where You Can Find More Information.”
RISK
FACTORS
An
investment in our securities is subject to certain risks. You should carefully
review the following risk factors and other information contained in this
prospectus and the documents incorporated by reference, before deciding whether
an investment in our securities is suited to your particular
circumstances. The risks and uncertainties not presently known to us
or that we currently deem immaterial also may impair our business operations. If
any of the following risks actually occur, our business, results of operations
and financial condition could suffer. In that event, the value of our securities
could decline, and you may lose all or part of your investment. The risks
discussed below also include forward-looking statements, and our actual results
may differ materially from those discussed in these forward-looking
statements.
Risks
Relating to Banner
Difficult
economic and market conditions have adversely affected our
industry.
We are
particularly exposed to downturns in the U.S. housing market. Dramatic declines
in the housing market over the past year, with falling home prices and
increasing foreclosures, unemployment and under-employment, have negatively
impacted the credit performance of mortgage loans and resulted in significant
write-downs of asset values by financial institutions, including
government-sponsored entities, major commercial and investment banks, and
regional financial institutions like us. Reflecting concern about the
stability of the financial markets generally and the strength of counterparties,
many lenders and institutional investors have reduced or ceased providing
funding to borrowers, including to other financial institutions. This
market turmoil and tightening of credit have led to an increased level of
commercial and consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity
generally. The resulting economic pressure on consumers and lack of
confidence in the financial markets have adversely affected our business,
financial condition and results of operations. We do not expect that
the difficult conditions in the financial markets are likely to improve in the
near future. A worsening of these conditions would likely exacerbate
the adverse effects of these difficult market conditions on us and others in the
financial institutions industry. In particular, we may
face the following risks in connection with these events:
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We
potentially face increased regulation of our industry. Compliance with
such regulation may increase our costs and limit our ability to pursue
business opportunities.
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The
process we use to estimate losses inherent in our credit exposure requires
difficult, subjective and complex judgments, including forecasts of
economic conditions and how these economic conditions might impair the
ability of our borrowers to repay their loans. The level of
uncertainty concerning economic conditions may adversely affect the
accuracy of our estimates which may, in turn, impact the reliability of
the process.
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We
may be required to pay significantly higher FDIC premiums because market
developments have significantly depleted the insurance fund of the FDIC
and reduced the ratio of reserves to insured
deposits.
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Recent
legislative and regulatory initiatives to address difficult market and economic
conditions may not stabilize the U.S. banking system.
The
recently enacted Emergency Economic Stabilization Act of 2008 (the “EESA”)
authorizes Treasury to purchase from financial institutions and their holding
companies up to $700 billion in mortgage loans, mortgage-related securities and
certain other financial instruments, including debt and equity securities issued
by financial institutions and their holding companies, under a troubled asset
relief program, or “TARP.” The purpose of TARP is to restore
confidence and stability to the U.S. banking system and to encourage financial
institutions to increase their lending to customers and to each
other. The Treasury has allocated $250 billion towards the TARP
Capital Purchase Program. Under the TARP Capital Purchase Program,
Treasury is purchasing equity securities from participating
institutions. The Series A Preferred Stock and warrant offered by
this prospectus were issued by us to Treasury pursuant to the TARP Capital
Purchase Program. The EESA also increased federal deposit insurance
on
most
deposit accounts from $100,000 to $250,000. This increase is in place
until the end of 2009 and is not covered by deposit insurance premiums paid by
the banking industry.
The EESA
followed, and has been followed by, numerous actions by the Board of Governors
of the Federal Reserve System, the U.S. Congress, Treasury, the FDIC, the SEC
and others to address the current liquidity and credit crisis that has followed
the sub-prime meltdown that commenced in 2007. These measures include
homeowner relief that encourage loan restructuring and modification; the
establishment of significant liquidity and credit facilities for financial
institutions and investment banks; the lowering of the federal funds rate;
emergency action against short selling practices; a temporary guaranty program
for money market funds; the establishment of a commercial paper funding facility
to provide back-stop liquidity to commercial paper issuers; and coordinated
international efforts to address illiquidity and other weaknesses in the banking
sector. The purpose of these legislative and regulatory actions is to
stabilize the U.S. banking system. The EESA and the other regulatory
initiatives described above may not have their desired effects. If
the volatility in the markets continues and economic conditions fail to improve
or worsen, our business, financial condition and results of operations could be
materially and adversely affected.
Current
levels of market volatility are unprecedented.
The
capital and credit markets have been experiencing volatility and disruption for
more than a year. In recent months, the volatility and disruption has reached
unprecedented levels. In some cases, the markets have produced
downward pressure on stock prices and credit availability for certain issuers
without regard to those issuers’ underlying financial strength. If current
levels of market disruption and volatility continue or worsen, there can be no
assurance that we will not experience an adverse effect, which may be material,
on our ability to access capital and on our business, financial condition and
results of operations.
Weakness
in the Washington, Oregon or Idaho real estate markets could hurt our
business.
Our
business activities and credit exposure are primarily concentrated in parts of
Washington, Oregon and Idaho. While we did not participate
in any sub-prime loan programs, our construction and land loan portfolios,
our commercial and multifamily loan portfolios and certain of our other loans
have been affected by the downturn in the residential real estate
market. Substantially all of our loan portfolio consists of loans
secured by real estate located in Washington, Oregon or Idaho. During
the first nine months of 2008, evidence of this downturn became more apparent in
certain of the Washington, Oregon and Idaho markets we serve. If real
estate values continue to decline, especially in Washington, Oregon or Idaho,
the collateral for our loans will provide less security. As a result,
our ability to recover on defaulted loans by selling the underlying real estate
will be diminished, and we would be more likely to suffer losses on defaulted
loans. The events and conditions described in this risk factor could
therefore have a material adverse effect on our business, results of operations
and financial condition.
We
may be required to make further increases in our provisions for loan losses and
to charge off additional loans in the future, which could adversely affect our
results of operations.
We are
experiencing increasing loan delinquencies and credit losses and we increased
our provision for loan losses during the first three quarters of 2008, which
adversely affected our results of operations. With the exception of
residential construction and land development loans, non performing loans and
assets generally reflect unique operating difficulties for individual borrowers
rather than weakness in the overall economy of the Pacific
Northwest. However, slower sales and excess inventory in certain
housing markets have been the primary cause of the increase in delinquencies for
residential construction and land development loans, which represented
approximately 83% of our non-performing assets as of September 30,
2008. Further, our portfolio is concentrated in construction and land
loans and commercial and multi-family loans, all of which have a higher risk of
loss than residential mortgage loans. If current trends in the
housing and real estate markets continue, we expect that we will continue to
experience higher than normal delinquencies and credit
losses. Moreover, if a prolonged recession occurs we expect that it
could severely impact economic conditions in our market areas and that we
could experience significantly higher delinquencies and credit
losses. As a result, we may be required to make further increases in
our provision for loan losses and to charge off additional loans in the future,
which could adversely affect our results of operations. We may elect
to make further increases in our provision for loan losses in the
future,
particularly if economic conditions continue to deteriorate, which also could
have a material adverse effect on our financial condition and results of
operations.
Recent
negative developments in the financial industry and credit markets may continue
to adversely impact our financial condition and results of
operations.
Negative
developments in the sub-prime mortgage market and the securitization markets for
such loans, together with substantial volatility in oil prices and other
factors, have resulted in uncertainty in the financial markets in general and a
related general economic downturn. Many lending institutions,
including us, have experienced substantial declines in the performance of their
loans, including construction and land loans, multifamily loans, commercial
loans and consumer loans. Moreover, competition among depository
institutions for deposits and quality loans has increased significantly. In
addition, the values of real estate collateral supporting many construction and
land, commercial and multifamily and other commercial loans and home mortgages
have declined and may continue to decline. Bank and bank holding company stock
prices have been negatively affected, as has the ability of banks and bank
holding companies to raise capital or borrow in the debt markets compared to
recent years. These conditions may have a material adverse effect on our
financial condition and results of operations. In addition, as a
result of the foregoing factors, there is a potential for new federal or state
laws and regulations regarding lending and funding practices and liquidity
standards, and bank regulatory agencies are expected to be very aggressive in
responding to concerns and trends identified in examinations, including the
expected issuance of formal enforcement orders. Negative developments
in the financial industry and the impact of new legislation in response to those
developments could restrict our business operations, including our ability to
originate or sell loans, and adversely impact our results of operations and
financial condition.
We
may experience future goodwill impairment.
If our
estimates of the fair value of our goodwill change as a result of changes in our
business or other factors, we may determine that an impairment charge is
necessary. Estimates of fair value are based on a complex model using, among
other things, cash flows and company comparisons. If our estimates of
future cash flows or other components of our fair value calculations are
inaccurate, the fair value of goodwill reflected in our financial statements
could be inaccurate and we could be required to take asset impairment charges,
which could have a material adverse effect on our results of operations and
financial condition.
Liquidity
risk could impair our ability to fund operations and jeopardize our financial
condition.
Liquidity
is essential to our business. An inability to raise funds through
deposits, borrowings, the sale of loans and other sources could have a
substantial negative effect on our liquidity. Our access to funding
sources in amounts adequate to finance our activities on terms which are
acceptable to us could be impaired by factors that affect us specifically or the
financial services industry or economy in general. Factors that could
detrimentally impact our access to liquidity sources include a decrease in the
level of our business activity as a result of a downturn in the Washington,
Oregon or Idaho markets in which our loans are concentrated or adverse
regulatory action against us. Our ability to borrow could also be
impaired by factors that are not specific to us, such as a disruption in the
financial markets or negative views and expectations about the prospects for the
financial services industry in light of the recent turmoil faced by banking
organizations and the continued deterioration in credit markets.
We
may elect or be compelled to seek additional capital in the future, but that
capital may not be available when it is needed.
We are
required by federal and state regulatory authorities to maintain adequate levels
of capital to support our operations. In addition, we may elect to
raise additional capital to support our business or to finance acquisitions, if
any, or we may otherwise elect or be required to raise additional
capital. In that regard, a number of financial institutions have
recently raised considerable amounts of capital in response to a deterioration
in their results of operations and financial condition arising from the turmoil
in the mortgage loan market, deteriorating economic conditions, declines in real
estate values and other factors. Should we be required by regulatory
authorities to raise additional capital, we may seek to do so through the
issuance of, among other things, our common stock or preferred
stock.
Our
ability to raise additional capital, if needed, will depend on conditions in the
capital markets, economic conditions and a number of other factors, many of
which are outside our control, and on our financial performance. Accordingly, we
cannot assure you of our ability to raise additional capital if needed or on
terms acceptable to us. If we cannot raise additional capital when needed, it
may have a material adverse effect on our financial condition, results of
operations and prospects.
If
our allowance for loan losses is not sufficient to cover actual loan losses or
if we are required to increase our provision for loan losses, our results of
operations and financial condition could be materially adversely
affected.
We make
various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. In determining the amount of the allowance for loan
losses, we review our loans and the loss and delinquency experience, and
evaluate economic conditions. If our assumptions are incorrect, the
allowance for loan losses may not be sufficient to cover losses inherent in our
loan portfolio, resulting in the need for additions to our allowance through an
increase in the provision for loan losses. Material additions to the
allowance or increases in our provision for loan losses could have a material
adverse effect on our financial condition and results of
operations.
In
addition, bank regulators periodically review our allowance for loan losses and
may require us to increase our provision for loan losses or recognize further
loan charge-offs. Any increase in our allowance for loan losses or
loan charge-offs as required by these regulatory authorities may have a material
adverse effect on our financial condition and results of
operations.
The
maturity and repricing characteristics of our assets and liabilities are
mismatched and subject us to interest rate risk which could adversely affect our
results of operations and financial condition.
Our
financial condition and results of operations are influenced significantly by
general economic conditions, including the absolute level of interest rates, as
well as changes in interest rates and the slope of the yield
curve. Our ability to operate profitably is dependent to a large
extent on our net interest income, which is the difference between the interest
received from our interest-earning assets and the interest expense incurred on
our interest-bearing liabilities. Significant changes in market
interest rates or errors or misjudgments in our interest rate risk management
procedures could have a material adverse effect on our results of operations and
financial condition. We currently believe that declining interest
rates will adversely affect our results of operations.
Our
activities, like other financial institutions, inherently involve the assumption
of interest rate risk. Interest rate risk is the risk that changes in
market interest rates will have an adverse impact on our financial condition and
results of operations. Interest rate risk is determined by the
maturity and repricing characteristics of our assets, liabilities and
off-balance-sheet contracts. Interest rate risk is measured by the
variability of financial performance and economic value resulting from changes
in interest rates. Interest rate risk is the primary market risk
affecting our financial performance.
We
believe that the greatest source of interest rate risk to us results from the
mismatch of maturities or repricing intervals for our rate sensitive assets,
liabilities and off-balance-sheet contracts. This mismatch, or “gap,”
is generally characterized by a substantially shorter maturity structure for
interest-bearing liabilities than interest-earning assets. Additional
interest rate risk results from mismatched repricing indices and formulae (basis
risk and yield curve risk), and product caps and floors and early repayment or
withdrawal provisions (option risk), which may be contractual or market driven,
that are generally more favorable to customers than to us.
Our
primary monitoring tool for assessing interest rate risk is asset/liability
simulation modeling, which is designed to capture the dynamics of balance sheet,
interest rate and spread movements and to quantify variations in net interest
income and net market value of equity resulting from those movements under
different rate environments. We update and prepare our simulation
modeling at least quarterly for review by senior management and our
directors. Nonetheless, the interest rate sensitivity of our net
interest income and net market value of our equity could vary substantially if
different assumptions were used or if actual experience differs from the
assumptions used and, as a result, our interest rate risk management strategies
may prove to be inadequate.
Our
loan portfolio is concentrated in loans with a higher risk of loss.
We
originate construction and land loans, commercial and multifamily mortgage
loans, commercial business loans, consumer loans, agricultural mortgage loans
and agricultural loans as well as residential mortgage loans primarily within
our market areas. Generally, these types of loans, other than the
residential mortgage loans, have a higher risk of loss than the residential
mortgage loans. We had approximately $3.4 billion outstanding in
these types of higher risk loans at September 30, 2008, which is a significant
increase since December 31, 2006. These loans have greater credit
risk than residential real estate loans for a number of reasons, including those
described below:
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Construction and Land Loans.
This type of lending contains the inherent difficulty in estimating
both a property’s value at completion of the project and the estimated
cost (including interest) of the project. If the estimate of
construction cost proves to be inaccurate, we may be required to advance
funds beyond the amount originally committed to permit completion of the
project. If the estimate of value upon completion proves to be
inaccurate, we may be confronted at, or prior to, the maturity of the loan
with a project the value of which is insufficient to assure full
repayment. In addition, speculative construction loans to a
builder are often associated with homes that are not pre-sold, and thus
pose a greater potential risk to us than construction loans to individuals
on their personal residences. Loans on land under development
or held for future construction also poses additional risk because of the
lack of income being produced by the property and the potential illiquid
nature of the collateral. These risks can be significantly
impacted by supply and demand conditions. As a result, this
type of lending often involves the disbursement of substantial funds with
repayment dependent on the success of the ultimate project and the ability
of the borrower to sell or lease the property, rather than the ability of
the borrower or guarantor themselves to repay principal and
interest. During the years ended December 31, 2006 and 2005, we
significantly increased our origination of construction and land
loans. While new construction loan originations decreased by
approximately 35% in 2007, we continue to have a significant investment in
construction and land loan balances. Most of our construction
loans are for the construction of single family
residences.
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Commercial and Multifamily
Mortgage Loans. These loans typically involve higher
principal amounts than other types of loans, and repayment is dependent
upon income generated, or expected to be generated, by the property
securing the loan in amounts sufficient to cover operating expenses and
debt service, which may be adversely affected by changes in the economy or
local market conditions. Commercial and multifamily mortgage
loans also expose a lender to greater credit risk than loans secured by
residential real estate because the collateral securing these loans
typically cannot be sold as easily as residential real
estate. In addition, many of our commercial and multifamily
real estate loans are not fully amortizing and contain large balloon
payments upon maturity. Such balloon payments may require the
borrower to either sell or refinance the underlying property in order to
make the payment, which may increase the risk of default or
non-payment.
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Commercial Business
Loans. Our commercial loans are primarily made based on
the cash flow of the borrower and secondarily on the underlying collateral
provided by the borrower. The borrowers’ cash flow may be
unpredictable, and collateral securing these loans may fluctuate in
value. Most often, this collateral is accounts receivable,
inventory, equipment or real estate. In the case of loans secured by
accounts receivable, the availability of funds for the repayment of these
loans may be substantially dependent on the ability of the borrower to
collect amounts due from its customers. Other collateral
securing loans may depreciate over time, may be difficult to appraise and
may fluctuate in value based on the success of the
business.
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Agricultural
Loans. Repayment of agricultural loans is dependent upon
the successful operation of the business, which is greatly dependent on
many things outside the control of either us or the
borrowers. These factors include weather, commodity prices and
interest rates, among others. Collateral securing these loans
may be difficult to evaluate, manage or liquidate and may not provide an
adequate source of repayment.
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Consumer
Loans. Consumer loans (such as personal lines of credit)
are collateralized, if at all, with assets that may not provide an
adequate source of payment of the loan due to depreciation, damage, or
loss. In addition, consumer loan collections are dependent on
the borrower’s financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal
bankruptcy. Furthermore, the application of various federal and
state laws, including federal and state bankruptcy and insolvency laws,
may limit the amount that can be recovered on these
loans.
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We
may face risks with respect to our recent acquisitions and future
expansion.
We
completed three bank acquisitions in 2007 and may acquire other financial
institutions or parts of those institutions in the future. We also
plan to continue to engage in additional de novo branch expansion although at a
slower pace than in 2007. We may also consider and enter into new
lines of business or offer new products or services. Acquisitions and
mergers involve a number of risks, including:
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the
time and costs associated with identifying and evaluating potential
acquisitions and merger partners;
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the
estimates and judgments used to evaluate credit, operations, management
and market risks with respect to the target institution may not be
accurate;
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the
time and costs of evaluating new markets, hiring experienced local
management and opening new offices, and the time lags between these
activities and the generation of sufficient assets and deposits to support
the costs of the expansion;
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our
ability to finance an acquisition and possible dilution to our existing
shareholders;
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the
diversion of our management’s attention to the negotiation of a
transaction, and the integration of the operations and personnel of the
acquired businesses;
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entry
into new markets where we lack
experience;
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the
introduction of new products and services into our
business;
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the
incurrence and possible impairment of goodwill associated with an
acquisition and possible adverse short-term effects on our results of
operations; and
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the
risk of loss of key employees and
customers.
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We may
incur substantial costs to acquire other companies, businesses or assets in the
future and we can give no assurance that the results of any such acquisition
will meet our expectations or enhance our results of operations. We
may also incur substantial expenses integrating the operations of any acquired
company, business or assets with our existing operations. In that
regard, Islanders Bank, which we acquired in 2007, is currently utilizing the
same accounting and financial systems that it had in place prior to the time of
the acquisition, and we will incur expenses, which could be substantial, to
migrate Islanders Bank to our accounting and financial systems. Also,
we may issue equity securities, including common stock and securities
convertible into shares of our common stock, in connection with future
acquisitions, which could cause ownership and economic dilution to holders of
our common stock. There is no assurance that, following any future
mergers or acquisition, our integration efforts will be successful or that,
after giving effect to the acquisition, our results of operations will be
comparable to or better than, or will not be worse than, our historical results
of operations.
There
is no assurance that the change in the mix of our assets and liabilities will
benefit our operating results.
In
addition to lending and deposit gathering activities, we previously emphasized
investments in government agency and mortgage-backed securities, funded with
wholesale borrowings. This policy was designed to enhance our operating results
by allowing asset growth with relatively low associated overhead expense,
although these securities generally have lower yields than loans, resulting in a
lower interest rate spread and lower interest income. In recent
years, we have pursued a strategy to change the mix of our assets and
liabilities to have proportionately more loans and fewer securities and more
customer deposits, particularly transaction and savings deposits, and fewer
borrowings. Our implementation of this strategy has included
significant loan and deposit growth and was accelerated by a series of
balance-sheet restructuring transactions which we executed in the fourth quarter
of 2005. While the objective of this strategy, including the
balance-sheet restructuring, is to improve our results of operations in future
periods through an enhanced net interest margin, there is no assurance that this
strategy will succeed.
If
we are not able to achieve profitability on new branches it will negatively
affect our results of operations.
We have
expanded our presence throughout our market area, and although the pace of our
de novo branch expansion has slowed considerably, we intend to pursue further
expansion by opening additional new branches. The success of our expansion
strategy will depend on whether the revenue that we generate from the new
branches will exceed the increased expenses resulting from operating these
branches. Largely as a result of this de novo branching strategy, our
operating expenses have increased significantly, adversely affecting our
operating efficiency. As a result, our efficiency ratio, which is the
ratio of non-interest expense to net interest income and other income, is higher
than many of our competitor institutions. We expect that it may take
a period of time before certain of these branches can become profitable,
especially in areas in which we do not have an established presence, and it is
possible that some of these branches may not achieve
profitability. As a result, the expense of operating these branches
may negatively affect our results of operations.
If
external funds were not available, this could adversely impact our growth and
prospects.
We rely
on deposits and advances from the Federal Home Loan Bank (“FHLB”) of Seattle and
other borrowings to fund our operations. Although we have
historically been able to replace maturing deposits and advances as necessary,
we might not be able to replace such funds in the future if, among other things,
our results of operations or financial condition or the results of operations or
financial condition of the FHLB of Seattle or market conditions were to
change. Although we consider such sources of funds adequate for our
liquidity needs, there can be no assurance in this regard and we may be
compelled or elect to seek additional sources of financing in the
future. Likewise, we may seek additional debt in the future to
achieve our long-term business objectives, in connection with future
acquisitions or for other reasons. There can be no assurance
additional borrowings, if sought, would be available to us or, if available,
would be on favorable terms. If additional financing sources are
unavailable or not available on reasonable terms, our financial condition,
results of operations and future prospects could be materially adversely
affected.
Strong
competition within our market areas may limit our growth and adversely affect
our operating results.
Competition
in the banking and financial services industry is intense. We compete
in our market areas with commercial banks, savings institutions, mortgage
brokerage firms, credit unions, finance companies, mutual funds, insurance
companies, and brokerage and investment banking firms operating locally and
elsewhere. Some of these competitors have substantially greater
resources and lending limits than we do, have greater name recognition and
market presence that benefit them in attracting business and deposits, and offer
certain services that we do not or cannot provide. In addition,
larger competitors may be able to price loans and deposits more aggressively
than we do. Our results of operations depend upon our continued
ability to successfully compete in our market areas. The greater
resources and deposit and loan products offered by some of our competitors may
limit our ability to increase or maintain our interest-earning
assets. In that regard, the negative economic conditions that
began in 2007 and that have continued in 2008 have significantly reduced our
origination of new loans, and we cannot assure you that our total loans or
assets will increase or not decline in 2008.
The
loss of key members of our senior management team could adversely affect our
business.
We
believe that our success depends largely on the efforts and abilities of our
senior management and that their experience and industry contacts significantly
benefit us. The competition for qualified personnel in the financial
services industry is intense, and the loss of any of our key personnel or an
inability to continue to attract, retain and motivate key personnel could have a
material adverse effect on our business.
We
are subject to extensive government regulation and supervision.
We are
subject to extensive federal and state regulation and supervision, primarily
through Banner Bank and Islanders Bank and certain non-bank
subsidiaries. Banking regulations are primarily intended to protect
depositors’ funds, federal deposit insurance funds and the banking system as a
whole, and not holders of our common stock. These regulations affect
our lending practices, capital structure, investment practices, dividend policy
and growth, among other things. Congress and federal regulatory
agencies continually review banking laws, regulations and policies for possible
changes. Changes to statutes, regulations or regulatory policies,
including changes in interpretation or implementation of statutes, regulations
or policies, could affect us in substantial and unpredictable
ways. Such changes could subject us to additional costs, limit the
types of financial services and
products
we may offer and/or increase the ability of non-banks to offer competing
financial services and products, among other things. Failure to
comply with laws, regulations or policies could result in sanctions by
regulatory agencies, civil money penalties and/or reputational damage, which
could have a material adverse effect on our business, financial condition and
results of operations. While we have policies and procedures designed
to prevent any such violations, there can be no assurance that such violations
will not occur. In addition, we may be subject to new legislation in
response to negative developments in the financial industry and the economy as
described under “—Recent negative developments in the financial industry and
credit markets may continue to adversely impact our financial condition and
results of operations,” which also could have a
material adverse effect on our results of operations and financial
condition.
The
level of our commercial real estate loan portfolio may subject us to additional
regulatory scrutiny.
The FDIC,
the Federal Reserve and the Office of the Comptroller of the Currency, have
promulgated joint guidance on sound risk management practices for financial
institutions with concentrations in commercial real estate
lending. Under the guidance, a financial institution that, like us,
is actively involved in commercial real estate lending should perform a risk
assessment to identify concentrations. A financial institution may have a
concentration in commercial real estate lending if, among other
factors, (i) total reported loans for construction, land development,
and other land represent 100% or more of total capital or (ii) total reported
loans secured by multifamily and non-farm residential properties, loans for
construction, land development and other land and loans otherwise sensitive to
the general commercial real estate market, including loans to
commercial real estate related entities, represent 300% or more of
total capital. Management should also employ heightened risk
management practices including board and management oversight and strategic
planning, development of underwriting standards, risk assessment and monitoring
through market analysis and stress testing. We have concluded that we
have a concentration in commercial real estate lending under the foregoing
standards. While we believe we have implemented policies and
procedures with respect to our commercial real estate loan portfolio consistent
with this guidance, bank regulators could require us to implement additional
policies and procedures consistent with their interpretation of the guidance
which could result in additional costs to us.
Our
deposit insurance premiums are expected to increase substantially, which will
adversely affect our operating results.
Our
deposit insurance expense for the nine month period ended September 30, 2008 was
$1.7 million. Deposit insurance premiums are expected to increase in
2009 due to recent strains on the FDIC deposit insurance fund resulting from the
cost of large bank failures and increase in the number of troubled
banks. The current rates for the FDIC assessments have ranged from 5
to 43 basis points, depending on the health of the insurance
institution. The FDIC has proposed increasing that assessment range
to 12 to 50 basis points for the first quarter of 2009. For the
remainder of 2009, the FDIC has proposed a range of 10 to 45 basis points for
institutions that do not trigger risk factors for brokered deposits and
unsecured debt and higher rates for those that do trigger those risk
factors. The FDIC has also proposed that it could increase assessment
rates in the future without formal rulemaking.
Our
information systems may experience an interruption or breach in
security.
We rely
heavily on communications and information systems to conduct our
business. Any failure, interruption or breach in security of these
systems could result in failures or disruptions in our customer relationship
management, general ledger, deposit, loan and other systems. While we
have policies and procedures designed to prevent or limit the effect of the
failure, interruption or security breach of our information systems, there can
be no assurance that any such failures, interruptions or security breaches will
not occur or, if they do occur, that they will be adequately
addressed. The occurrence of any failures, interruptions or security
breaches of our information systems could damage our reputation, result in a
loss of customer business, subject us to additional regulatory scrutiny, or
expose us to civil litigation and possible financial liability, any of which
could have a material adverse effect on our financial condition and results of
operations.
If
we fail to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results or
prevent fraud, and, as a result, investors and depositors could lose confidence
in our financial reporting, which could materially adversely affect our
business, the trading price of our common stock and our ability to attract
additional deposits.
In
connection with the enactment of the Sarbanes-Oxley Act of 2002 and the
implementation of the rules and regulations promulgated by the SEC, we document
and evaluate our internal control over financial reporting in order to satisfy
the requirements of Section 404 of the Sarbanes-Oxley Act. This
requires us to prepare an annual management report on our internal control over
financial reporting, including among other matters, management’s assessment of
the effectiveness of internal control over financial reporting and an
attestation report by our independent auditors addressing these
assessments. If we fail to identify and correct any deficiencies in
the design or operating effectiveness of our internal control over financial
reporting or fail to prevent fraud, current and potential shareholders and
depositors could lose confidence in our internal controls and financial
reporting, which could materially adversely affect our business, financial
condition and results of operations, the trading price of our common stock and
our ability to attract additional deposits. In that regard, we
acquired Islanders Bank in 2007 and are beginning efforts to integrate Islanders
Bank into our financial and accounting systems, and we will need to successfully
complete this integration in order for our management to issue its report on our
internal control over financial reporting for 2008 and our independent auditors
to issue their related assessment report.
We
rely on dividends from subsidiaries for substantially all of our
revenue.
Banner
Corporation receives substantially all of its revenue as dividends from its
subsidiaries. Various federal and/or state laws and regulations limit
the amount of dividends that Banner Bank, Islanders Bank and certain non-bank
subsidiaries may pay to Banner Corporation. In the event the Banks
are unable to pay dividends to Banner Corporation, Banner Corporation may not be
able to service its debt, pay its other obligations or pay dividends on our
common stock. Accordingly, the inability to receive dividends from
the Banks could also have a material adverse effect on our business, financial
condition and results of operations.
Risks Relating to Both the Series A
Preferred Stock and Our Common Stock
The
Series A Preferred Stock is equity and is subordinate to all of our existing and
future indebtedness; regulatory and contractual restrictions may limit or
prevent us from paying dividends on the Series A Preferred Stock and our common
stock; and the Series A Preferred Stock places no limitations on the amount of
indebtedness we and our subsidiaries may incur in the future.
Shares of
the Series A Preferred Stock are equity interests in Banner Corporation and do
not constitute indebtedness. As such, the Series A Preferred Stock, like our
common stock, ranks junior to all indebtedness and other non-equity claims on
Banner Corporation with respect to assets available to satisfy claims on Banner
Corporation, including in a liquidation of Banner Corporation. Additionally,
unlike indebtedness, where principal and interest would customarily be payable
on specified due dates, in the case of preferred stock like the Series A
Preferred Stock, as with our common stock, (1) dividends are payable only
when, as and if authorized and declared by, our Board of Directors and depend
on, among other things, our results of operations, financial condition, debt
service requirements, other cash needs and any other factors our Board of
Directors deems relevant, and (2) as a Washington corporation, under
Washington law we are subject to restrictions on payments of dividends out of
lawfully available funds.
As a bank
holding company, Banner Corporation’s ability to declare and pay dividends is
dependent on certain federal regulatory considerations. Banner Corporation is an
entity separate and distinct from its principal subsidiaries, Banner Bank and
Islanders Bank, and derives substantially all of its revenue in the form of
dividends from those subsidiaries. Accordingly, Banner Corporation is
and will be dependent upon dividends from Banner Bank and Islanders Bank to pay
the principal of and interest on its indebtedness, to satisfy its other cash
needs and to pay dividends on the Series A Preferred Stock and its common
stock. Banner Bank’s and Islanders Bank’s ability to pay dividends is
subject to their ability to earn net income and to meet certain regulatory
requirements. In the event the Banks are unable to pay dividends to Banner
Corporation, it may not be able to service its debt, pay its obligations or pay
dividends on Banner Corporation’s common stock or the Series A Preferred
Stock. See “Regulatory Considerations” in this prospectus and Note 21
of the Notes to Consolidated Financial Statements included in our Annual Report
on Form 10-K for the year ended December 31, 2007. Also, Banner
Corporation’s
right to
participate in a distribution of assets upon a subsidiary’s liquidation or
reorganization is subject to the prior claims of the subsidiary’s
creditors. This includes claims under the liquidation account
maintained for the benefit of certain eligible deposit account holders of Banner
Bank established in connection with Banner Bank’s conversion from the mutual to
the stock form of ownership.
Banner
Corporation is also subject to certain contractual restrictions that could
prohibit it from declaring or paying dividends or making liquidation payments on
its common stock or the Series A Preferred Stock. See “If we defer
payments of interest on our outstanding junior subordinated debentures or if
certain defaults relating to those debentures occur, we will be prohibited from
declaring or paying dividends or distributions on, and from making liquidation
payments with respect to, the Series A Preferred Stock” below.
In
addition, the Series A Preferred Stock does not limit the amount of debt or
other obligations we or our subsidiaries may incur in the future. Accordingly,
we and our subsidiaries may incur substantial amounts of additional debt and
other obligations that will rank senior to the Series A Preferred Stock or to
which the Series A Preferred Stock will be structurally
subordinated.
If
we defer payments of interest on our outstanding junior subordinated debentures
or if certain defaults relating to those debentures occur, we will be prohibited
from declaring or paying dividends or distributions on, and from making
liquidation payments with respect to, the Series A Preferred Stock and our
common stock.
As of
September 30, 2008, we had outstanding $123.7 million aggregate principal amount
of junior subordinated debentures issued in connection with the sale of trust
preferred securities by certain of our subsidiaries that are statutory business
trusts. We have also guaranteed those trust preferred securities. There are
currently six separate series of these junior subordinated debentures
outstanding, each series having been issued under a separate indenture and with
a separate guarantee. Each of these indentures, together with the related
guarantee, prohibits us, subject to limited exceptions, from declaring or paying
any dividends or distributions on, or redeeming, repurchasing, acquiring or
making any liquidation payments with respect to, any of our capital stock
(including the Series A Preferred Stock and our common stock) at any
time when (i) there shall have occurred and be continuing an event of default
under such indenture or any event, act or condition that with notice or lapse of
time or both would constitute an event of default under such indenture; or (ii)
we are in default with respect to payment of any obligations under such
guarantee; or (iii) we have deferred payment of interest on the junior
subordinated debentures outstanding under that indenture. In that regard, we are
entitled, at our option but subject to certain conditions, to defer payments of
interest on the junior subordinated debentures of each series from time to time
for up to five years.
Events of
default under each indenture generally consist of our failure to pay interest on
the junior subordinated debentures outstanding under that indenture under
certain circumstances, our failure to pay any principal of or premium on such
junior subordinated debentures when due, our failure to comply with certain
covenants under such indenture, and certain events of bankruptcy, insolvency or
liquidation relating to us or, in the case of certain of these indentures, any
of our “significant subsidiaries” (as defined) that is a depository
institution.
As a
result of these provisions, if we were to elect to defer payments of interest on
any series of junior subordinated debentures, or if any of the other events
described in clause (i) or (ii) of the first paragraph of this risk factor were
to occur, we would be prohibited from declaring or paying any dividends on the
Series A Preferred Stock and our common stock, from repurchasing or otherwise
acquiring any of the Series A Preferred Stock or our common stock, and from
making any payments to holders of the Series A Preferred Stock or our common
stock in the event of our liquidation, which would likely have a material
adverse effect on the market value of the Series A Preferred Stock and our
common stock. Moreover, without notice to or consent from the holders
of the Series A Preferred Stock or our common stock, we may issue additional
series of junior subordinated debentures in the future with terms similar to
those of our existing junior subordinated debentures or enter into other
financing agreements that limit our ability to purchase or to pay dividends or
distributions on our capital stock, including our common stock.
The
prices of the Series A Preferred Stock and our common stock may fluctuate
significantly, and this may make it difficult for you to resell the Series A
Preferred Stock and/or common stock when you want or at prices you find
attractive.
There
currently is no market for the Series A Preferred Stock, and we cannot predict
how the Series A Preferred Stock or our common stock will trade in the future.
The market value of the Series A Preferred Stock and our common stock will
likely continue to fluctuate in response to a number of factors including the
following, most of which are beyond our control, as well as the other factors
described in this “Risk Factors” section:
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actual
or anticipated quarterly fluctuations in our operating and financial
results;
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developments
related to investigations, proceedings or litigation that involve
us;
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changes
in financial estimates and recommendations by financial
analysts;
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dispositions,
acquisitions and financings;
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actions
of our current shareholders, including sales of common stock by existing
shareholders and our directors and executive
officers;
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fluctuations
in the stock price and operating results of our
competitors;
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regulatory
developments; and
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developments
related to the financial services
industry.
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The
market value of the Series A Preferred Stock and our common stock may also be
affected by conditions affecting the financial markets in general, including
price and trading fluctuations. These conditions may result in
(i) volatility in the level of, and fluctuations in, the market prices of
stocks generally and, in turn, the Series A Preferred Stock and our common stock
and (ii) sales of substantial amounts of the Series A Preferred Stock or
our common stock in the market, in each case that could be unrelated or
disproportionate to changes in our operating performance. These broad market
fluctuations may adversely affect the market value of the Series A Preferred
Stock and our common stock.
There
may be future sales of additional common stock or preferred stock or other
dilution of our equity, which may adversely affect the market price of our
common stock or the Series A Preferred Stock.
We are
not restricted from issuing additional common stock or preferred stock,
including any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or preferred stock or any
substantially similar securities. The market value of our common stock or the
Series A Preferred Stock could decline as a result of sales by us of a large
number of shares of common stock or preferred stock or similar securities in the
market or the perception that such sales could occur.
The
voting limitation provision in our Articles of Incorporation could limit your
voting rights as a holder of the Series A Preferred Stock or our common
stock.
Our
Articles of Incorporation provide that, subject to certain limited exceptions,
if any person or group acting in concert acquires beneficial ownership of more
than 10% of any class of our equity securities (which would include the Series A
Preferred Stock as well as our common stock) without the prior approval by a
two-thirds vote of our “Continuing Directors,” (as defined therein), then with
respect to each share of voting stock in excess of 10% of all shares
of our voting stock, such person will be entitled to cast only
one-hundredth of one vote per share. See “Description of Capital
Stock—Anti-takeover Effects-Restrictions on Voting Rights.” This means that any
person owning more than 10% of our common stock will have limited voting rights
with respect to the shares owned in excess of 10% of the number of shares of
outstanding common stock. This also means that under the
circumstances where the holders of the Series A Preferred Stock have voting
rights (see “Description of Series A Preferred Stock-- Voting Rights”), whether
as a separate class or as a single class together with the holders of our common
stock and/or any other class of our equity securities then outstanding, any
person who holds shares of the Series A Preferred Stock representing (together
with any shares of common stock and/or any other class of our equity securities
then outstanding) more than 10% of the outstanding voting power with respect to
the matter being voted upon, will be able to cast only one-hundredth of one vote
per share for each share held in excess of the 10% limitation.
Anti-takeover
provisions could negatively impact our shareholders.
Provisions
in our Articles of Incorporation and Bylaws, the corporate law of the State of
Washington and federal regulations could delay, defer or prevent a third party
from acquiring us, despite the possible benefit to our shareholders, or
otherwise adversely affect the market price of any class of our equity
securities, including our common stock and the Series A Preferred
Stock. These provisions include: limitations on voting rights of
beneficial owners of more than 10% of our equity securities, supermajority
voting requirements for certain business combinations with any person who owns
10% or more of our outstanding common stock; the election of directors to
staggered terms of three years; advance notice requirements for nominations for
election to our Board of Directors and for proposing matters that shareholders
may act on at shareholder meetings, a requirement that only directors may fill a
vacancy in our Board of Directors, supermajority voting requirements to remove
any of our directors and the other provisions described under “Description of
Capital Stock─Anti-Takeover Effects.” In addition, we are subject to
Washington laws, including one that prohibits us from engaging in a significant
business combination with any shareholder who acquires 10% or more of our voting
stock for a period of five years from the date of that acquisition unless
certain conditions are met. Additionally, our Articles of Incorporation
authorize our Board of Directors to issue preferred stock, and preferred stock could be
issued as a defensive measure in response to a takeover proposal. For
further information, see “Description of Capital Stock—Preferred
Stock.” These provisions may discourage potential takeover attempts,
discourage bids for our common stock at a premium over market price or adversely
affect the market price of, and the voting and other rights of the holders of,
our common stock. These provisions could also discourage proxy
contests and make it more difficult for holders of our common stock to elect
directors other than the candidates nominated by our Board of
Directors.
Risks
Specific to the Series A Preferred Stock
An
active trading market for the Series A Preferred Stock may not
develop.
The
Series A Preferred Stock is not currently listed on any securities
exchange and we do not anticipate listing the Series A Preferred Stock on
an exchange unless we are requested to do so by Treasury pursuant to the
securities purchase agreement between us and Treasury. There can be
no assurance that an active trading market for the Series A Preferred Stock will
develop, or, if developed, that an active trading market will be maintained.
If an active market is not developed or sustained, the market value and
liquidity of the Series A Preferred Stock may be adversely
affected.
The
Series A Preferred Stock may be junior in rights and preferences to our future
preferred stock.
Subject
to approval by the holders of at least 66 2/3% of the shares of Series A
Preferred Stock then outstanding, voting together as a separate class, we may
issue preferred stock in the future the terms of which are expressly senior to
the Series A Preferred Stock. The terms of any such future preferred stock
expressly senior to the Series A Preferred Stock may restrict dividend payments
on the Series A Preferred Stock. For example, the terms of any such senior
preferred stock may provide that, unless full dividends for all of our
outstanding preferred stock senior to the Series A Preferred Stock have been
paid for the relevant periods, no dividends will be paid on the Series A
Preferred Stock, and no shares of the Series A Preferred Stock may be
repurchased, redeemed, or otherwise acquired by us. This could result in
dividends on the Series A Preferred Stock not being paid when
contemplated. In addition, in the event of our liquidation,
dissolution or winding-up, the terms of the senior preferred stock may prohibit
us from making payments on the Series A Preferred Stock until all amounts due to
holders of the senior preferred stock in such circumstances are paid in
full.
Holders
of the Series A Preferred Stock have limited voting rights.
Until and
unless we are in arrears on our dividend payments on the Preferred Stock for six
dividend periods, whether or not consecutive, the holders of the Series A
Preferred Stock will have no voting rights except with respect to certain
fundamental changes in the terms of the Series A Preferred Stock and certain
other matters and except as may be required by Washington law. If dividends on
the Preferred Stock are not paid in full for six dividend periods, whether or
not consecutive, the total number of positions on the Banner Corporation Board
of Directors will automatically increase by two and the holders of the Series A
Preferred Stock, acting as a class with any other parity securities having
similar voting rights, will have the right to elect two individuals to serve in
the
new
director positions. This right and the terms of such directors will end
when we have paid in full all accrued and unpaid dividends for all past dividend
periods. See “Description of Series A Preferred Stock—Voting
Rights.” Based on the current number of members of the Banner
Corporation Board of Directors (15), directors elected by the holders of the
common stock would have a controlling majority of the board and would be able to
take any action approved by them notwithstanding any objection by the directors
elected by the holders of the Series A Preferred
Stock.
If
we are unable to redeem the Series A Preferred Stock after five years, the cost
of this capital to us will increase substantially.
If we are unable to redeem the Series A
Preferred Stock prior to February 15, 2014, the cost of this capital to us will
increase substantially on that date, from 5.0% per annum (approximately $6.2
million annually) to 9.0% per annum (approximately $11.2 million
annually). See “Description of Series A Preferred Stock—Redemption
and Repurchases.” Depending on our financial condition at the time,
this increase in the annual dividend rate on the Series A Preferred Stock could
have a material negative effect on our liquidity.
Risks
Specific to the Common Stock
The
securities purchase agreement between us and Treasury limits our ability to pay
dividends on and repurchase our common stock.
The securities purchase agreement
between us and Treasury provides that prior to the earlier of (i) November 21,
2011 and (ii) the date on which all of the shares of the Series A Preferred
Stock have been redeemed by us or transferred by Treasury to third parties, we
may not, without the consent of Treasury, (a) increase the cash dividend on our
common stock or (b) subject to limited exceptions, redeem, repurchase or
otherwise acquire shares of our common stock or preferred stock other than the
Series A Preferred Stock or trust preferred securities. In addition,
we are unable to pay any dividends on our common stock unless we are current in
our dividend payments on the Series A Preferred Stock. These
restrictions, together with the potentially dilutive impact of the warrant
described in the next risk factor, could have a negative effect on the value of
our common stock. Moreover, holders of our common stock are entitled
to receive dividends only when, as and if declared by our Board of Directors.
Although we have historically paid cash dividends on our common stock, we
are not required to do so and our Board of Directors could reduce or eliminate
our common stock dividend in the future.
The
Series A Preferred Stock impacts net income available to our common shareholders
and earnings per common share and the warrant we issued to Treasury may be
dilutive to holders of our common stock.
The
dividends declared on the Series A Preferred Stock will reduce the net income
available to common shareholders and our earnings per common share. The
Series A Preferred Stock will also receive preferential treatment in the event
of liquidation, dissolution or winding up of Banner
Corporation. Additionally, the ownership interest of the existing
holders of our common stock will be diluted to the extent the warrant we issued
to Treasury in conjunction with the sale to Treasury of the Series A Preferred
Stock is exercised. The shares of common stock underlying the warrant
represent approximately 9.1% of the shares of our common stock outstanding as of
December 1, 2008 (including the shares issuable upon exercise of the warrant in
total shares outstanding). Although Treasury has agreed not to vote
any of the shares of common stock it receives upon exercise of the warrant, a
transferee of any portion of the warrant or of any shares of common stock
acquired upon exercise of the warrant is not bound by this
restriction.
The
federal banking laws limit the ownership of our common stock.
Because
we are a bank holding company, purchasers of 10% or more of our common stock may
be required to obtain approvals under the Change in Bank Control Act of 1978, as
amended, or Bank Holding Company Act of 1956, as amended (and in certain cases
such approvals may be required at a lesser percentage of
ownership). Specifically, under regulations adopted by the Federal
Reserve, (a) any other bank holding company may be required to obtain the
approval of the Federal Reserve to acquire or retain 5% or more of the common
stock and (b) any person other than a bank holding company may be required to
obtain the approval of the Federal Reserve to acquire or retain 10% or more of
the common stock.
All
securities sold pursuant to this prospectus will be sold by the selling
securityholders and we will not receive the proceeds from such
sales.
RATIOS
OF EARNINGS TO FIXED
CHARGES
Our
historical consolidated ratios of earnings to fixed charges for the periods
indicated, both including and excluding interest on deposits, are set forth in
the table below. During all periods presented below, we had no shares
of preferred stock outstanding. The ratio of earnings to fixed
charges is computed by dividing (i) income from continuing operations
before income taxes and fixed charges by (ii) total fixed charges. For
purposes of computing these ratios, fixed charges excluding interest on deposits
represents interest expense on Federal Home Loan Bank advances and other
borrowed funds and fixed charges including interest on deposits represents all
interest expense.
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Nine
Months
Ended
September
30,
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Year
Ended December 31,
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2008
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2007
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2007
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2006
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2005
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2004
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2003
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Restated
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Restated
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Restated
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Restated
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Ratio
of Earnings to
Fixed
Charges
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Excluding
interest on deposits
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--x(1)
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2.95x
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3.27x
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2.21x
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1.41x
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1.77x
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1.64x
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Including
interest on deposits
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0.48x
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1.23x
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1.25x
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1.27x
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1.15x
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1.32x
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1.27x
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(1)
The earnings coverage for the nine months ended September 30, 2008
was inadequate to cover total fixed charges.
The coverage deficiency for the period was $37.9 million.
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As a bank
holding company under the Bank Holding Company Act of 1956, Banner Corporation
is subject to regulation, supervision and examination by the Federal Reserve.
For a discussion of elements of the regulatory framework applicable to bank
holding companies and their subsidiaries, please refer to our Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 and the other
documents incorporated herein by reference as described under “Where You Can
Find More Information.” This regulatory framework is intended
primarily for the protection of depositors and the federal deposit insurance
fund and not for the protection of security holders, including holders of our
common stock and the Series A Preferred Stock. As a result of this
regulatory framework, our results of operations and financial condition are
affected by actions of the Federal Reserve, the FDIC, which insures the deposits
of our banking subsidiaries within certain limits, and the Washington State
Department of Financial Institutions, Division of Banks, which regulates Banner
Bank and Islanders Bank.
Our
ability to pay dividends on the Series A Preferred Stock and our common stock
depends primarily on dividends we receive from Banner Bank and Islanders
Bank. Under federal regulations, the dollar amount of dividends the
Banks may pay depends upon their capital position and recent net
income. Generally, if a Bank satisfies its regulatory capital
requirements, it may make dividend payments up to the limits prescribed under
state law and FDIC regulations. However, an institution that has
converted to a stock form of ownership may not declare or pay a dividend on, or
repurchase any of, its common stock if the effect thereof would cause the
regulatory capital of the institution to be reduced below the amount required
for the liquidation account which was established in connection with the
conversion. Banner Bank, our primary subsidiary, converted to a stock
form of ownership and is therefore subject to the limitation described in the
preceding sentence.
In
addition, under Washington law, Banner Corporation is prohibited from paying a
dividend if, after making such dividend payment, it would be unable to pay its
debts as they become due in the usual course of business, or if its total
liabilities, plus the amount that would be needed, in the event Banner
Corporation were to be dissolved at the time of the dividend payment, to satisfy
preferential rights on dissolution of holders of preferred stock ranking senior
in right of payment to the capital stock on which the applicable distribution is
to be made exceed our total assets. Banner Corporation must also
maintain required capital levels of a bank holding company before it may pay
dividends on its stock.
In
addition to the foregoing regulatory considerations, there are numerous
governmental requirements and regulations that affect our business activities. A
change in applicable statutes, regulations or regulatory policy may have a
material effect on our business and on our ability to pay dividends on our
common stock and the Series A Preferred Stock.
Depository
institutions, like Banner Bank and Islanders Bank, are also affected by various
federal laws, including those relating to consumer protection and similar
matters. Banner Corporation also has other financial services subsidiaries
regulated, supervised and examined by the Federal Reserve, as well as other
relevant state and federal regulatory agencies and self-regulatory
organizations. Our non-bank subsidiaries may be subject to other laws and
regulations of the federal government or the various states in which they are
authorized to do business.
In
addition to the foregoing regulatory restrictions, we are and may in the future
become subject to contractual restrictions that would limit or prohibit us from
paying dividends on our common stock, including those described under “Risk
Factors—Risks Relating to Both the Series A Preferred Stock and Our Common
Stock-If we defer payments of interest on our outstanding junior subordinated
debentures or if certain defaults relating to those debentures occur, we will be
prohibited from declaring or paying dividends or distributions on, and from
making liquidation payments with respect to, the Series A Preferred Stock or our
common stock” and “Description of Capital Stock—Common Stock-Restrictions on
Dividends and Repurchases Under Agreement with Treasury.”
This
section summarizes specific terms and provisions of the Series A Preferred
Stock. The description of the Series A Preferred Stock contained in
this section is qualified in its entirety by the actual terms of the Series
A Preferred Stock, as are stated in the articles of amendment to our Articles of
Incorporation, a copy of which was attached as Exhibit 3.1 to our Current Report
on Form 8-K filed on November 24, 2008 and incorporated by reference into this
prospectus. See “Where You Can Find More Information.”
General
The
Series A Preferred Stock constitutes a single series of our preferred stock,
consisting of 124,000 shares, par value $0.01 per share, having a liquidation
preference amount of $1,000 per share. The Series A Preferred Stock
has no maturity date. We issued the shares of Series A Preferred
Stock to Treasury on November 21, 2008 in connection with the TARP Capital
Purchase Program for a purchase price of $124.0 million. Pursuant to
the securities purchase agreement between us and Treasury, we have agreed, if
requested by Treasury, to enter into a depositary arrangement pursuant to which
the shares of Series A Preferred Stock may be deposited and depositary shares,
each representing a fraction of a share of Series A Preferred Stock as specified
by Treasury, may be issued. See “Description of Depositary
Shares.”
Dividends
Rate. Dividends on the Series
A Preferred Stock are payable quarterly in arrears, when, as and if authorized
and declared by our Board of Directors out of legally available funds, on a
cumulative basis on the $1,000 per share liquidation preference amount plus the
amount of accrued and unpaid dividends for any prior dividend periods, at a rate
of (i) 5% per annum, from the original issuance date to but excluding the first
day of the first dividend period commencing after the fifth anniversary of the
original issuance date (i.e., 5% per annum from November 21, 2008 to but
excluding February 15, 2014), and (ii) 9% per annum, from and after the first
day of the first dividend period commencing after the fifth anniversary of the
original issuance date (i.e., 9% per annum on and after February 15,
2014). Dividends are payable quarterly in arrears on February
15, May 15, August 15 and November 15 of each year,
commencing on February 15, 2009. Each dividend will be payable to holders
of record as they appear on our stock register on the applicable record date,
which will be the 15th
calendar day immediately preceding the related dividend payment date (whether or
not a business day), or such other record date determined by our Board of
Directors that is not more than 60 nor less than ten days prior to the related
dividend payment date. Each period from and including a dividend
payment date (or the date of the issuance of the Series A Preferred Stock) to
but excluding the following dividend payment date is referred to as a “dividend
period.” Dividends payable for each dividend period are computed on
the basis of a 360-day year consisting of twelve 30-day months. If a
scheduled dividend payment date falls on a day that is not a business day, the
dividend will be paid on the next business day as if it were paid on the
scheduled dividend payment date, and no interest or other additional amount will
accrue on the dividend. The term “business day” means any day except
Saturday, Sunday and any day on which banking institutions in the State of New
York generally are authorized or required by law or other governmental actions
to close.
Dividends
on the Series A Preferred Stock will be cumulative. If for any reason our
Board of Directors does not declare a dividend on the Series A Preferred Stock
for a particular dividend period, or if the Board of Directors declares less
than a full dividend, we will remain obligated to pay the unpaid portion of the
dividend for that period and the unpaid dividend will compound on each
subsequent dividend date (meaning that dividends for future dividend periods
will accrue on any unpaid dividend amounts for prior dividend
periods).
We are
not obligated to pay holders of the Series A Preferred Stock any dividend in
excess of the dividends on the Series A Preferred Stock that are payable as
described above. There is no sinking fund with respect to dividends on the
Series A Preferred Stock.
Priority of
Dividends. So long as the Series A Preferred Stock remains
outstanding, we may not declare or pay a dividend or other distribution on our
common stock or any other shares of Junior Stock (other than dividends payable
solely in common stock) or Parity Stock (other than dividends paid on a pro rata
basis with the Series A Preferred Stock), and we generally may not directly or
indirectly purchase, redeem or otherwise acquire any shares
of common
stock, Junior Stock or Parity Stock unless all accrued and unpaid dividends on
the Series A Preferred Stock for all past dividend periods are paid in
full.
“Junior
Stock” means our common stock and any other class or series of our stock the
terms of which expressly provide that it ranks junior to the Series A Preferred
Stock as to dividend rights and/or as to rights on liquidation, dissolution or
winding up of Banner Corporation. We currently have no outstanding
class or series of stock constituting Junior Stock other than our common
stock.
“Parity
Stock” means any class or series of our stock, other than the Series A Preferred
Stock, the terms of which do not expressly provide that such class or series
will rank senior or junior to the Series A Preferred Stock as to dividend rights
and/or as to rights on liquidation, dissolution or winding up of Banner
Corporation, in each case without regard to whether dividends accrue
cumulatively or non-cumulatively. We currently have no outstanding
class or series of stock constituting Parity Stock.
Liquidation
Rights
In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Banner Corporation, holders of the Series A Preferred Stock will
be entitled to receive for each share of Series A Preferred Stock, out of the
assets of Banner Corporation or proceeds available for distribution to our
shareholders, subject to any rights of our creditors, before any distribution of
assets or proceeds is made to or set aside for the holders of our common stock
and any other class or series of our stock ranking junior to the Series A
Preferred Stock, payment of an amount equal to the sum of (i) the $1,000
liquidation preference amount per share and (ii) the amount of any accrued and
unpaid dividends on the Series A Preferred Stock (including dividends accrued on
any unpaid dividends). To the extent the assets or proceeds available
for distribution to shareholders are not sufficient to fully pay the liquidation
payments owing to the holders of the Series A Preferred Stock and the holders of
any other class or series of our stock ranking equally with the Series A
Preferred Stock, the holders of the Series A Preferred Stock and such other
stock will share ratably in the distribution.
For
purposes of the liquidation rights of the Series A Preferred Stock, neither a
merger or consolidation of Banner Corporation with another entity nor a sale,
lease or exchange of all or substantially all of Banner Corporation’s assets
will constitute a liquidation, dissolution or winding up of the affairs of
Banner Corporation.
Redemption
and Repurchases
Subject
to the prior approval of the Federal Reserve, the Series A Preferred Stock is
redeemable at our option in whole or in part at a redemption price equal to 100%
of the liquidation preference amount of $1,000 per share plus any accrued and
unpaid dividends to but excluding the date of redemption (including dividends
accrued on any unpaid dividends), provided that any declared but unpaid dividend
payable on a redemption date that occurs subsequent to the record date for the
dividend will be payable to the holder of record of the redeemed shares on the
dividend record date, and provided further that the Series A Preferred Stock may
be redeemed prior to the first dividend payment date falling after the third
anniversary of the original issuance date (i.e., prior to February 15, 2012)
only if (i) we have, or our successor following a business combination with
another entity which also participated in the TARP Capital Purchase Program has,
raised aggregate gross proceeds in one or more Qualified Equity Offerings of at
least the Minimum Amount and (ii) the aggregate redemption price of the Series A
Preferred Stock does not exceed the aggregate net proceeds from such Qualified
Equity Offerings by us and any successor. The “Minimum Amount” means
$31.0 million plus, in the event we are succeeded in a business combination by
another entity which also participated in the TARP Capital Purchase Program, 25%
of the aggregate liquidation preference amount of the preferred stock issued by
that entity to Treasury. A “Qualified Equity Offering” is defined as
the sale for cash by Banner Corporation (or its successor) of preferred stock or
common stock that qualifies as Tier 1 capital under applicable regulatory
capital guidelines.
To
exercise the redemption right described above, we must give notice of the
redemption to the holders of record of the Series A Preferred Stock by first
class mail, not less than 30 days and not more than 60 days before the date of
redemption. Each notice of redemption given to a holder of Series A
Preferred Stock must state: (i) the redemption date; (ii) the number of shares
of Series A Preferred Stock to be redeemed and, if less than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed from
such holder; (iii) the
redemption
price; and (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price. In the case of a
partial redemption of the Series A Preferred Stock, the shares to be redeemed
will be selected either pro rata or in such other manner as our Board of
Directors determines to be fair and equitable.
Shares of
Series A Preferred Stock that we redeem, repurchase or otherwise acquire will
revert to authorized but unissued shares of preferred stock, which may then be
reissued by us as any series of preferred stock other than the Series A
Preferred Stock.
No
Conversion Rights
Holders
of the Series A Preferred Stock have no right to exchange or convert their
shares into common stock or any other securities.
Voting
Rights
The
holders of the Series A Preferred Stock do not have voting rights other than
those described below, except to the extent specifically required by
Washington law.
Whenever
dividends have not been paid on the Series A Preferred Stock for six or more
quarterly dividend periods, whether or not consecutive, the authorized number of
directors of Banner Corporation will automatically increase by two and the
holders of the Series A Preferred Stock will have the right, with the holders of
shares of any other classes or series of Voting Parity Stock outstanding at the
time, voting together as a class, to elect two directors (the “Preferred
Directors”) to fill such newly created directorships at our next annual meeting
of shareholders (or at a special meeting called for that purpose prior to the
next annual meeting) and at each subsequent annual meeting of shareholders until
all accrued and unpaid dividends for all past dividend periods on all
outstanding shares of Series A Preferred Stock have been paid in full at which
time this right will terminate with respect to the Series A Preferred Stock,
subject to revesting in the event of each and every subsequent default by us in
the payment of dividends on the Series A Preferred Stock.
No person
may be elected as a Preferred Director who would cause us to violate any
corporate governance requirements of any securities exchange or other trading
facility on which our securities may then be listed or traded that listed or
traded companies must have a majority of independent directors. Upon any
termination of the right of the holders of the Series A Preferred Stock and
Voting Parity Stock as a class to vote for directors as described above, the
Preferred Directors will cease to be qualified as directors, the terms of office
of all Preferred Directors then in office will terminate immediately and the
authorized number of directors will be reduced by the number of Preferred
Directors which had been elected by the holders of the Series A Preferred Stock
and the Voting Parity Stock. Any Preferred Director may be removed at any time,
with or without cause, and any vacancy created by such a removal may be filled,
only by the affirmative vote of the holders a majority of the outstanding shares
of Series A Preferred Stock voting separately as a class together with the
holders of shares of Voting Parity Stock, to the extent the voting rights of
such holders described above are then exercisable. If the office of any
Preferred Director becomes vacant for any reason other than removal from office,
the remaining Preferred Director may choose a successor who will hold office for
the unexpired term of the office in which the vacancy occurred.
The term
“Voting Parity Stock” means with regard to any matter as to which the holders of
the Series A Preferred Stock are entitled to vote, any series of Parity Stock
(as defined under “—Dividends-Priority of Dividends”) upon which voting rights
similar to those of the Series A Preferred Stock have been conferred and are
exercisable with respect to such matter. We currently have no
outstanding shares of Voting Parity Stock.
Under
regulations adopted by the Federal Reserve, if the holders of the Series A
Preferred Stock are or become entitled to vote for the election of directors,
the Series A Preferred Stock may then be deemed a “class of
voting
securities” and a holder of 10% or more of the Series A Preferred Stock that is
a company may then be subject to regulation as a bank holding company. In
addition, at such time as the Series A Preferred Stock is deemed a class of
voting securities, (a) any bank holding company that is a holder of more
than 5% of the Series A Preferred Stock may be required to obtain the approval
of the Federal Reserve to acquire or retain more than 5% of the Series A
Preferred Stock and (b) any person may be required to obtain the approval
of the Federal Reserve to acquire or retain 10% or more of the Series A
Preferred Stock.
In
addition to any other vote or consent required by Washington law or by our
Articles of Incorporation, the vote or consent of the holders of at least 66
2/3% of the outstanding shares of Series A Preferred Stock, voting as a separate
class, is required in order to do the following:
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amend
our Articles of Incorporation or the articles of amendment for the Series
A Preferred Stock to authorize or create or increase the authorized amount
of, or any issuance of, any shares of, or any securities convertible into
or exchangeable or exercisable for shares of, any class or series of stock
ranking senior to the Series A Preferred Stock with respect to the payment
of dividends and/or the distribution of assets on any liquidation,
dissolution or winding up of Banner Corporation;
or
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amend
our Articles of Incorporation or the articles of amendment for the Series
A Preferred Stock in a way that materially and adversely affect the
rights, preferences, privileges or voting powers of the Series A Preferred
Stock; or
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consummate
a binding share exchange or reclassification involving the Series A
Preferred Stock or a merger or consolidation of Banner Corporation with
another entity, unless (i) the shares of Series A Preferred Stock
remain outstanding or, in the case of a merger or consolidation in which
Banner Corporation is not the surviving or resulting entity, are converted
into or exchanged for preference securities of the surviving or resulting
entity or its ultimate parent, and (ii) the shares of Series A
Preferred Stock remaining outstanding or such preference securities, have
such rights, preferences, privileges, voting powers, limitations and
restrictions, taken as a whole, as are not materially less favorable than
the rights, preferences, privileges, voting powers, limitations and
restrictions of the Series A Preferred Stock prior to consummation of the
transaction, taken as a whole;
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provided, however, that
(1) any increase in the amount of our authorized but unissued shares of
preferred stock, and (2) the creation and issuance, or an increase in the
authorized or issued amount, of any other series of preferred stock, or any
securities convertible into or exchangeable or exercisable for any other series
of preferred stock, ranking equally with and/or junior to the Series A Preferred
Stock with respect to the payment of dividends, whether such dividends are
cumulative or non-cumulative and the distribution of assets upon our
liquidation, dissolution or winding up, will not be deemed to materially and
adversely affect the rights, preferences, privileges or voting powers of the
Series A Preferred Stock and will not require the vote or consent of the holders
of the Series A Preferred Stock.
To the
extent holders of the Series A Preferred Stock are entitled to vote, holders of
shares of the Series A Preferred Stock will be entitled to one for each share
then held.
The
voting provisions described above will not apply if, at or prior to the time
when the vote or consent of the holders of the Series A Preferred Stock would
otherwise be required, all outstanding shares of the Series A Preferred Stock
have been redeemed by us or called for redemption upon proper notice and
sufficient funds have been set aside by us for the benefit of the holders of
Series A Preferred Stock to effect the redemption.
DESCRIPTION
OF DEPOSITARY SHARES
Pursuant
to the securities purchase agreement between us and Treasury, we have agreed, if
requested by Treasury, to enter into a depositary arrangement pursuant to which
the shares of Series A Preferred Stock may be deposited and depositary shares,
each representing a fraction of a share of Series A Preferred Stock as specified
by Treasury, may be issued. The Shares of Series A Preferred Stock
would be held by a depositary (expected to be a bank or trust company)
reasonably acceptable to Treasury. If we enter into such a depositary
arrangement, the
selling
securityholders would be offering depositary shares, each representing a
fraction of a share of Series A Preferred Stock, instead of actual whole shares
of Series A Preferred Stock. The actual terms of any such depositary
arrangement would be set forth in a deposit agreement to which we would be a
party, which would be attached as an exhibit to a filing by us that would be
incorporated by reference into this prospectus. See “Where You
Can Find More Information.”
DESCRIPTION
OF WARRANT
This
section summarizes specific terms and provisions of the warrant we issued to
Treasury on November 21, 2008 concurrent with our sale to Treasury of 124,000
shares of Series A Preferred Stock pursuant to the TARP Capital Purchase
Program. The description of the warrant contained in this section is qualified
in its entirety by the actual terms of the warrant, a copy of which was attached
as Exhibit 4.2 to our Current Report on Form 8-K filed on November 24, 2008 and
incorporated by reference into this prospectus. See “Where You Can
Find More Information.”
General
The
warrant gives the holder the right to initially purchase up to 1,707,989 shares
of our common stock at an exercise price of $10.89 per share. Subject
to the limitations on exercise to which Treasury is subject described under
“—Transferability,” the warrant is immediately exercisable and expires on
November 21, 2018. The exercise price may be paid (i) by having us
withhold from the shares of common stock that would otherwise be issued to the
warrant holder upon exercise, a number of shares of common stock having a market
value equal to the aggregate exercise price or (ii) if both we and the warrant
holder consent, in cash.
Possible
Reduction in Number of Shares
If we (or
any successor to us by a business combination) complete one or more Qualified
Equity Offerings (as defined under “Description of Series A Preferred
Stock-Redemption and Repurchases”) prior to December 31, 2009 resulting in
aggregate gross proceeds of at least $124.0 million (plus the aggregate
liquidation preference amount of any preferred stock issued to Treasury by a
successor to us), the number of shares of common stock underlying the warrant
then held by Treasury will be reduced by 50%. The number of
shares subject to the warrant are subject to further adjustment as described
below under “—Other Adjustments.”
Transferability
The
warrant is not subject to any restrictions on transfer; however, Treasury may
only transfer or exercise the warrant with respect to one-half of the shares
underlying the warrant prior to the earlier of (i) the date on which we (or any
successor to us by a business combination) have received aggregate gross
proceeds of at least $124.0 million (plus the aggregate liquidation preference
amount of any preferred stock issued to Treasury by a successor to us) from one
or more Qualified Equity Offerings (including those by any successor to us by a
business combination) and (ii) December 31, 2009.
Voting
of Warrant Shares
Treasury
has agreed that it will not vote any of the shares of common stock that it
acquires upon exercise of the warrant. This does not apply to any
other person who acquires any portion of the warrant, or the shares of common
stock underlying the warrant, from Treasury. Our Articles of
Incorporation provide, however, that if any person or group acting in concert
acquires the beneficial ownership of more than 10% of any class of our equity
security without the prior approval by a two-thirds vote of our “Continuing
Directors,” (as defined therein) then, with respect to each vote in excess of
10% of the voting power of our outstanding shares of voting stock which such
person would otherwise have been entitled to cast, such person shall be entitled
to cast only one-hundredth of one vote per share. See “Description of
Capital Stock—Anti-takeover Effects-Restrictions on Voting Rights.”
Other
Adjustments
The
exercise price of the warrant and the number of shares underlying the warrant
automatically adjust to upon the following events:
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any stock split, stock dividend,
subdivision, reclassification or combination of our common
stock;
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until the earlier of (i) the date
on which Treasury no longer holds any portion of the warrant and (ii)
November 21, 2011, issuance of our common stock (or securities convertible
into our common stock) for consideration (or having a conversion price
per share) less than
90% of then current market value, except for issuances in connection with
benefit plans, business acquisitions and public
or other broadly marketed
offerings;
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a
pro rata repurchase by us of our common stock;
or
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a determination by our Board of
Directors to make an adjustment to the anti-dilution provisions as
are reasonably
necessary, in the good faith opinion of the Board, to protect the purchase
rights of the warrant holders.
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In
addition, if we declare any dividends or distributions on our common stock other
than our historical, ordinary cash dividends, dividends paid in our common stock
and other dividends or distributions covered by the first bullet point above,
the exercise price of the warrant will be adjusted to reflect such
distribution.
In the
event of any merger, consolidation, or other business combination to which we
are a party, the warrantholder’s right to receive shares of our common stock
upon exercise of the warrant will be converted into the right to exercise the
warrant to acquire the number of shares of stock or other securities or property
(including cash) which the common stock issuable upon exercise of the warrant
immediately prior to such business combination would have been entitled to
receive upon consummation of the business combination. For purposes
of the provision described in the preceding sentence, if the holders of our
common stock have the right to elect the amount or type of consideration to be
received by them in the business combination, then the consideration that the
warrantholder will be entitled to receive upon exercise will be the amount and
type of consideration received by a majority of the holders of the common stock
who affirmatively make an election.
No
Rights as Stockholders
The
warrant does not entitle its holder to any of the rights of a shareholder of
Banner Corporation prior to exercise.
Our
authorized capital stock consists of:
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25,000,000
shares of common stock, par value $.01 per share;
and
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500,000
shares of preferred stock, par value $.01 per
share.
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As of
December 1, 2008, there were 17,075,859 shares of our common stock issued and
outstanding and 124,000 shares of our preferred stock issued and outstanding,
all of which consisted of our Series A Preferred Stock.
In this
section we describe certain features and rights of our capital stock. The
summary does not purport to be exhaustive and is qualified in its entirety by
reference to our Articles of Incorporation, Bylaws, and to applicable Washington
law.
Common
Stock
General. Except as described
below under “—Anti-takeover
Effects – Restrictions on Voting Rights,” each holder of common stock is
entitled to one vote for each share on all matters to be voted upon by the
common shareholders. There are no cumulative voting rights. Subject to
preferences to which holders of any shares of
preferred
stock may be entitled, holders of common stock will be entitled to receive
ratably any dividends that may be declared from time to time by the Board of
Directors out of funds legally available for that purpose. In the
event of our liquidation, dissolution or winding up, holders of common stock
will be entitled to share in our assets remaining after the payment or provision
for payment of our debts and other liabilities, distributions or provisions for
distributions in settlement of the liquidation account established in connection
with the conversion of Banner Bank from the mutual to the stock form of
ownership, and the satisfaction of the liquidation preferences of the holders of
the Series A Preferred Stock and any other series of our preferred stock then
outstanding. Holders of common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or
sinking fund provisions that apply to the common stock. All shares of common
stock currently outstanding are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.
Restrictions on Dividends and
Repurchases Under Agreement with Treasury. The securities
purchase agreement between us and Treasury provides that prior to the earlier of
(i) November 21, 2011 and (ii) the date on which all of the shares of the Series
A Preferred Stock have been redeemed by us or transferred by Treasury to third
parties, we may not, without the consent of Treasury, (a) increase the cash
dividend on our common stock or (b) subject to limited exceptions, redeem,
repurchase or otherwise acquire shares of our common stock or preferred stock
other than the Series A Preferred Stock or trust preferred
securities.
Preferred
Stock
Our
Articles of Incorporation permits our Board of Directors to authorize the
issuance of up to 500,000 shares of preferred stock, par value $0.01, in one or
more series, without shareholder action. The Board of Directors can fix the
designation, powers, preferences and rights of each
series. Therefore, without approval of the holders of our common
stock or the Series A Preferred Stock (except as may be required under the terms
of the Series A Preferred Stock (see “Description of Series A Preferred
Stock—Voting Rights”) or by the rules of the NASDAQ Stock Market or any other
exchange or market on which our securities may then be listed or quoted), our
Board of Directors can authorize the issuance of preferred stock with voting,
dividend, liquidation and conversion and other rights that could dilute the
voting power or other rights or adversely affect the market value of our common
stock and the Series A Preferred Stock and may assist management in impeding any
unfriendly takeover or attempted change in control. See “—Anti-Takeover Effects – Authorized
Shares.”
For a
description of the terms of the Series A Preferred Stock, see “Description of
Series A Preferred Stock.”
Anti-takeover
Effects
The
provisions of our Articles of Incorporation, our Bylaws, and Washington law
summarized in the following paragraphs may have anti-takeover effects and could
delay, defer, or prevent a tender offer or takeover attempt that a shareholder
might consider to be in such shareholder’s best interest, including those
attempts that might result in a premium over the market price for the shares
held by shareholders, and may make removal of the incumbent management and
directors more difficult.
Authorized Shares. Our Articles of
Incorporation authorize the issuance of 25,000,000 shares of common stock and
500,000 shares of preferred stock. These shares of common stock and
preferred stock provide our Board of Directors with as much flexibility as
possible to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and the exercise of employee stock
options. However, these additional authorized shares may also be used
by the Board of Directors consistent with its fiduciary duty to deter future
attempts to gain control of us. The Board of Directors also has sole
authority to determine the terms of any one or more series of preferred stock,
including voting rights, conversion rates, and liquidation
preferences. As a result of the ability to fix voting rights for a
series of preferred stock, the Board has the power to the extent consistent with
its fiduciary duty to issue a series of preferred stock to persons friendly to
management in order to attempt to block a tender offer, merger or other
transaction by which a third party seeks control of us, and thereby assist
members of management to retain their positions.
Restrictions on Voting
Rights. Our Articles of
Incorporation provide for restrictions on voting rights of shares owned in
excess of 10% of any class of our equity security. Specifically, our
Articles of Incorporation provide that if any person or group acting in concert
acquires the beneficial ownership of more than 10% of any class of our equity
security without the prior approval by a two-thirds vote of our “Continuing
Directors,” (as defined therein) then, with respect to each vote in excess of
10% of the voting power of our outstanding shares of voting stock which such
person would otherwise have been entitled to cast, such person shall be entitled
to cast only one-hundredth of one vote per share. Exceptions from
this limitation are provided for, among other things, any proxy granted to one
or more of our “Continuing Directors” and for our employee benefit
plans. Under our Articles of Incorporation, the restriction on voting
shares beneficially owned in violation of the foregoing limitations is imposed
automatically, and the Articles of Incorporation provide that a majority of our
Continuing Directors have the power to construe the forgoing restrictions and to
make all determinations necessary or desirable to implement these
restrictions. These restrictions would, among other things, restrict
voting power of a beneficial owner of more than 10% of our outstanding shares of
common stock in a proxy contest or on other matters on which such person is
entitled to vote.
Board of Directors. Our Board of
Directors is divided into three classes, each of which contains approximately
one-third of the members of the Board. The members of each class are
elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total number
of directors is elected each year. The classification of directors,
together with the provisions in our Articles of Incorporation described below
that limit the ability of shareholders to remove directors and that permit only
the remaining directors to fill any vacancies on the Board of Directors, have
the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual meetings
of shareholders will be required for the shareholders to change a majority of
the directors, whether or not a change in the Board of Directors would be
beneficial and whether or not a majority of shareholders believe that such a
change would be desirable.
Our
Articles of Incorporation provides that the size of the Board shall be not less
than five or more than 25 as set in accordance with the Bylaws. In
accordance with the Bylaws, the number of directors is currently set at
twelve. The Articles of Incorporation provide that any vacancy
occurring in the Board, including a vacancy created by an increase in the number
of directors, shall be filled by a vote of two-thirds of the directors then in
office and any director so chosen shall hold office for a term expiring at the
annual meeting of shareholders at which the term of the class to which the
director has been chosen expires. The classified Board is intended to
provide for continuity of the Board of Directors and to make it more difficult
and time consuming for a shareholder group to fully use its voting power to gain
control of the Board of Directors without the consent of incumbent members of
the Board. The Articles of Incorporation further provide that a
director may be removed from the Board of Directors prior to the expiration of
his term only for cause and only upon the vote of the holders of 80% of the
total votes eligible to be cast thereon. In the absence of this
provision, the vote of the holders of a majority of the shares could remove the
entire Board, but only with cause, and replace it with persons of such holders'
choice.
The
foregoing description of our Board of Directors does not apply with respect to
directors that may be elected by the holders of the Series A Preferred Stock in
the event we do not pay dividends on the Series A Preferred Stock for six or
more dividend periods. See “Description of Series A Preferred
Stock—Voting Rights.”
Cumulative Voting,
Special Meetings and
Action by Written Consent. Our Articles of
Incorporation do not provide for cumulative voting for any
purpose. Moreover, the Articles of Incorporation provide that special
meetings of shareholders may be called only by our Board of Directors or by the
written request of not less than a majority of the shares entitled to vote at
the meeting. In addition, our Bylaws require that any action taken by
written consent must receive the consent of all of the outstanding voting stock
entitled to vote on the action taken.
Shareholder Vote Required to Approve
Business Combinations with Principal Shareholders. The Articles of
Incorporation require the approval of the holders of at least 80% of each class
of our outstanding shares of each class of voting stock to approve certain
"Business Combinations" (as defined therein) involving a "Related Person" (as
defined therein) except in cases where the proposed transaction has been
approved in advance by two-thirds of those members of Banner Corporation’s Board
of Directors who are unaffiliated with the Related Person and were directors
prior to the time when the Related Person became a Related
Person. The term "Related Person" is defined to include any
individual, corporation, partnership or other entity (other than tax-qualified
benefit plans of Banner
Corporation)
which owns beneficially or controls, directly or indirectly, 10% or more of the
outstanding shares of common stock of Banner Corporation or an affiliate of such
person or entity. This provision of the Articles of Incorporation
applies to any "Business Combination," which is defined to
include: (i) any merger or consolidation of Banner Corporation with
or into any Related Person; (ii) any sale, lease, exchange, mortgage, transfer,
or other disposition of 25% or more of the assets of Banner Corporation to a
Related Person; (iii) any merger or consolidation of a Related Person with or
into Banner Corporation or a subsidiary of Banner Corporation; (iv) any sale,
lease, exchange, transfer, or other disposition of certain assets of a Related
Person to Banner Corporation or a subsidiary of Banner Corporation; (v) the
issuance of any securities of Banner Corporation or a subsidiary of Banner
Corporation to a Related Person; (vi) the acquisition by Banner Corporation or a
subsidiary of Banner Corporation of any securities of a Related Person; (vii)
any reclassification of common stock of Banner Corporation or any
recapitalization involving the common stock of Banner Corporation; or (viii) any
agreement or other arrangement providing for any of the
foregoing.
Washington
law imposes restrictions on certain transactions between a corporation and
certain significant shareholders. Chapter 23B.19 of the Washington Business
Corporation Act prohibits a "target corporation," with certain exceptions, from
engaging in certain "significant business transactions" with an "Acquiring
Person" who acquires 10% or more of the voting securities of a target
corporation for a period of five years after such acquisition, unless the
transaction or acquisition of shares is approved by a majority of the members of
the target corporation's Board of Directors prior to the date of the acquisition
or, at or subsequent to the date of the acquisition, the transaction is approved
by a majority of the members of the target corporation’s Board of Directors and
authorized at a shareholders’ meeting by the vote of at least two-thirds of the
outstanding voting shares of the target corporation, excluding shares owned or
controlled by the Acquiring Person. The prohibited transactions
include, among others, a merger or consolidation with, disposition of assets to,
or issuance or redemption of stock to or from, the Acquiring Person, termination
of 5% or more of the employees of the target corporation as a result of the
Acquiring Person's acquisition of 10% or more of the shares, or allowing the
Acquiring Person to receive any disproportionate benefit as a shareholder. After
the five-year period during which significant business transactions are
prohibited, certain significant business transactions may occur if certain "fair
price" criteria or shareholder approval requirements are met. Target
corporations include all publicly-traded corporations incorporated under
Washington law, as well as publicly traded foreign corporations that meet
certain requirements.
Amendment of Articles of
Incorporation and Bylaws. Amendments to our
Articles of Incorporation must be approved by our Board of Directors by a
majority vote of the Board and by our shareholders by a majority of
the voting group comprising all the votes entitled to be cast on the proposed
amendment, and a majority of each other voting group entitled to vote separately
on the proposed amendment; provided, however, that the affirmative vote of the
holders of at least 80% of votes entitled to be cast by each separate voting
group entitled to vote thereon (after giving effect to the provision limiting
voting rights, if applicable) is required to amend or repeal certain provisions
of the Articles of Incorporation, including the provision limiting voting
rights, the provisions relating to the removal of directors, shareholder
nominations and proposals, the approval of certain business combinations,
calling special meetings, director and officer indemnification by us and
amendment of our Bylaws and Articles of Incorporation. Our Bylaws may
be amended by a majority vote of our Board of Directors, or by a vote of 80% of
the total votes entitled to vote generally in the election of directors at a
duly constituted meeting of shareholders.
Shareholder Nominations and
Proposals. Our Articles of
Incorporation generally require a shareholder who intends to nominate a
candidate for election to the Board of Directors, or to raise new business at a
shareholder meeting to give not less than 30 nor more than 60 days' advance
notice to the Secretary of Banner Corporation. The notice provision
requires a shareholder who desires to raise new business to provide certain
information to us concerning the nature of the new business, the shareholder and
the shareholder's interest in the business matter. Similarly, a
shareholder wishing to nominate any person for election as a director must
provide us with certain information concerning the nominee and the proposing
shareholder.
The
cumulative effect of the restrictions on a potential acquisition of us that are
contained in our Articles of Incorporation and Bylaws, and federal and
Washington law, may be to discourage potential takeover attempts and perpetuate
incumbent management, even though certain shareholders may deem a potential
acquisition to be in their best interests, or deem existing management not to be
acting in their best interests.
Transfer
Agent
The
transfer agent and registrar for our common stock is Computershare.
SELLING
SECURITYHOLDERS
The
selling securityholders may include (i) Treasury, which acquired all of the
shares of Series A Preferred Stock and the warrant from us in a private
placement exempt from the registration requirements of the Securities Act of
1933, and (ii) any other person or persons holding shares of Series A Preferred
Stock or depositary shares evidencing fractional interests in shares of Series A
Preferred Stock, any portion of the warrant and any shares of our common stock
issued upon exercise of the warrant, to whom Treasury has transferred its
registration rights under the terms of the securities purchase agreement between
us and Treasury. Treasury is required to notify us in writing of any
such transfer of its registration rights within ten days after the transfer,
including the name and address of the transferee and the number and type of
securities with respect to which the registration rights have been
assigned. As of the date of this prospectus, Treasury has not
notified us of any such transfer. Accordingly, we believe that
Treasury currently holds record and beneficial ownership of 100% of the
outstanding shares of the Series A Preferred Stock and the entire amount of the
warrant (none of which has been exercised) covered by this
prospectus.
|
·
|
124,000
shares of Series A Preferred Stock, representing 100% of the shares of
Series A Preferred Stock outstanding on the date of this prospectus, or,
in the event Treasury requests that we deposit the shares of Series A
Preferred Stock with a depositary in accordance with the securities
purchase agreement between us and Treasury, depositary shares evidencing
fractional share interests in such shares of Series A Preferred
Stock;
|
|
·
|
a
ten-year warrant to purchase 1,707,989 shares of our common stock at an
exercise price of $10.89 per share, subject to adjustment as described
under “Description of Warrant”; and
|
|
·
|
the
1,707,989 shares of our common stock issuable upon exercise of the warrant
(subject to adjustment as described under “Description of Warrant”), which
shares, if issued, would represent ownership of approximately 9.1% of the
shares of our common stock outstanding as of December 1, 2008 (including
the shares issuable upon exercise of the warrant in total shares
outstanding).
|
For
purposes of this prospectus, we have assumed that, after completion of the
offering, none of the securities covered by this prospectus will be held by the
selling securityholders.
We do not
know when or in what amounts the selling securityholders may offer the
securities for sale. The selling securityholders might not sell any or all of
the securities offered by this prospectus. Because the selling securityholders
may offer all or some of the securities pursuant to this offering, and because,
to our knowledge, no sale of any of the securities is currently subject to any
agreements, arrangements or understandings, we cannot estimate the number of the
securities that will be held by the selling securityholders after completion of
the offering.
The only
potential selling securityholder whose identity we are currently aware of is
Treasury. Other than with respect to Treasury’s acquisition of the
Series A Preferred Stock and warrant from us, Treasury has not had a material
relationship with us.
Information
about the selling securityholders may change over time and changed information
will be set forth in supplements to this prospectus if and when
necessary.
The
selling securityholders may sell all or a portion of the securities beneficially
owned by them and offered by this prospectus from time to time directly or
through one or more underwriters, broker-dealers or agents. If securities are
sold through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions. The selling
securityholders may use any one or more of the following methods when selling
shares:
|
·
|
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
|
·
|
in
the over-the-counter market;
|
|
·
|
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
|
·
|
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the selling securityholders to sell a specified number of
such shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling securityholders may also sell securities under Rule 144 under the
Securities Act of 1933, if available, rather than under this
prospectus.
Broker-dealers
engaged by the selling securityholders may arrange for other brokers-dealers to
participate in sales. If the selling securityholders effect such transactions by
selling securities to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling securityholders or
commissions from purchasers of the securities for whom they may act as agent or
to whom they may sell as principal. These discounts, concessions or commissions
as to any particular underwriter, broker-dealer or agent will be in amounts to
be negotiated, which are not expected to be in excess of those customary in the
types of transactions involved.
In
connection with sales of securities, the selling securityholders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the securities in the course of hedging in
positions they assume. The selling securityholders may also sell securities
short and if such short sale shall take place after the date that the
registration statement of which this prospectus is a part is declared effective
by the Securities and Exchange Commission, the selling securityholders may
deliver securities covered by this prospectus to close out short positions and
to return borrowed shares in connection with such short sales. The selling
securityholders may also loan or pledge securities to broker-dealers that in
turn may sell such shares. The selling securityholders may also enter into
option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
selling securityholders may pledge or grant a security interest in some or all
of the securities owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
securities from time to time pursuant to this prospectus or any amendment or
supplement to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, amending, if necessary, the identification of
selling securityholders to include the pledgee, transferee or other successors
in interest as selling securityholders under this prospectus. The selling
securityholders also may transfer and donate the securities in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The
selling securityholders and any broker-dealer participating in the distribution
of the securities may be deemed to be “underwriters” within the meaning of the
Securities Act of 1933, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act of 1933. . At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth (i) the
name of each such selling securityholder and of the participating
broker-dealer(s), (ii) the number of securities involved, (iii) the
price at which such securities were sold, (iv) the commissions paid or
discounts or concessions allowed to such broker-dealer(s), where applicable, and
(v) any other facts material to the transaction.
The
aggregate proceeds to the selling securityholders from the sale of
the securities will be the purchase price of the securities less
discounts and commissions, if any.
Under the
securities laws of some states, the securities covered by this prospectus may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the securities may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can
be no assurance that any selling securityholder will sell any or all of the
securities registered pursuant to the registration statement of which this
prospectus forms a part.
If a
selling securityholder uses this prospectus for any sale of securities, it will
be subject to the prospectus delivery requirements of the Securities Act of
1933. The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934 and the rules and regulations thereunder, including, without
limitation, Regulation M under the Exchange Act, which may limit the timing of
purchases and sales of any of the securities by the selling securityholders and
any other participating person. Regulation M may also restrict the ability of
any person engaged in the distribution of securities to engage in market-making
activities with respect to such securities. All of the foregoing may affect the
marketability of the securities covered by this prospectus and the ability of
any person or entity to engage in market-making activities with respect to such
securities.
Pursuant
to the securities purchase agreement between us and Treasury, we will pay
substantially all expenses of the registration of the securities covered by this
prospectus, including, without limitation, SEC filing fees and expenses of
compliance with state securities or “blue sky” laws; provided, however, that a selling
securityholder will pay all underwriting discounts and selling commissions, if
any. We will indemnify the selling securityholders against
liabilities, including some liabilities under the Securities Act of 1933, in
accordance with the
securities
purchase agreement between us and Treasury, or the selling securityholders will
be entitled to contribution. We have agreed under the
securities purchase agreement between us and Treasury to cause such of our
directors and senior executive officers to execute customary lock-up agreements
in such form and for such time period up to 90 days as may be requested by a
managing underwriter with respect to an underwritten offering of securities
covered by this prospectus.
We do not
intend to apply for listing of the Series A Preferred Stock on any securities
exchange or for inclusion of the Series A Preferred Stock in any automated
quotation system unless we are requested to do so by Treasury. No
assurance can be given as to the liquidity of the trading market, if any, for
the Series A Preferred Stock.
LEGAL MATTERS
The
validity of the securities offered by this prospectus has been passed upon for
us by Breyer & Associates PC, McLean, Virginia.
EXPERTS
The
consolidated financial statements of Banner Corporation and subsidiaries as of
December 31, 2007 and 2006 and for the years in the three year period ended
December 31, 2007, and the effectiveness of its internal control over financial
reporting as of December 31, 2007, incorporated in this document by reference
from Banner Corporation’s Annual Report on Form 10-K for the year ended December
31, 2007, have been audited by Moss Adams LLP, independent registered public
accounting firm, as stated in its report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
124,000
Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, Liquidation
Preference $1,000 Per Share
(or
Depositary Shares Evidencing Fractional Interests in Such Shares)
1,707,989
Shares of Common Stock and Warrant to Purchase Such Shares
Banner
Corporation
_______________________________
PROSPECTUS
___________________________
_________
__, 200_
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities covered by the registration
statement of which this prospectus is a part. Banner Corporation
(“Banner” or the “Registrant”) will bear all of these expenses.
| Registration fee
under the Securities Act |
$
5,570
|
|
| Legal fees and
expenses* |
$
50,000
|
|
| Accounting fees and
expenses* |
$
15,000
|
|
| Printing and other
miscellaneous fees and expenses* |
$
10,000
|
|
| Total |
$ 80,570
|
|
*Estimated
solely for the purpose of this Item. Actual expenses may be more or
less.
Item
15. Indemnification of Officers and Directors
Banner is
organized under the Washington Business Corporation Act (the “WBCA”) which, in
general, empowers Washington corporations to indemnify a person made a party to
a threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, other
than an action by or in the right of the corporation, by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another enterprise, against expenses,
including attorney's fees, judgments, amounts paid in settlements, penalties and
fines actually and reasonably incurred in connection therewith if the person
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation or its shareholders and, with respect
to a criminal action or proceeding, if the person had no reasonable cause to
believe his or her conduct was unlawful. Washington corporations may not
indemnify a person in connection with such proceedings if the person was
adjudged to have received an improper personal benefit.
The WBCA
also empowers Washington corporations to provide similar indemnity to such a
person in connection with actions or suits by or in the right of the corporation
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the interests of the corporation or its shareholders,
unless the person was adjudged liable to the corporation.
If
authorized by the articles of incorporation of a Washington corporation or by
its shareholders, a Washington corporation may indemnify and advance expenses to
the persons described above without regard to the limitations described above,
provided that such indemnity will not cover acts or omissions of the person
finally adjudged to be intentional misconduct or a knowing violation of law,
conduct finally adjudged to involve a violation of WBCA Section 310 (related to
certain unlawful distributions), and any transaction with respect to which it
was finally adjudged that the person received a benefit to which such person was
not legally entitled.
The WBCA
also permits a Washington corporation to purchase and maintain on behalf of such
person insurance against liabilities incurred in such capacities. Banner has
obtained a policy of directors' and officers' liability insurance.
The WBCA
further permits Washington corporations to limit the personal liability of
directors for a breach of their fiduciary duty. However, the WBCA does not
eliminate or limit the liability of a director for any of the following: (i)
acts or omissions that involve intentional misconduct by a director or a knowing
violation of law by a director; (ii) conduct violating WBCA Section 310; or
(iii) any transaction from which the director will personally receive a benefit
in money, property or services to which the director is not legally
entitled.
Banner's
Articles of Incorporation and Bylaws
Banner's
articles of incorporation limit the personal liability of directors for a breach
of their fiduciary duty except for under the circumstances required to excepted
under Washington law described above.
Banner's
articles of incorporation generally require Banner to indemnify directors,
officers, employees and agents to the fullest extent legally possible under the
WBCA. In addition, the articles of incorporation require Banner to similarly
indemnify any such person who is or was serving at the request of Banner as a
director, officer, partner, trustee, employee or agent of another entity.
Banner's articles of incorporation further provide for the advancement of
expenses under certain circumstances.
Item
16. Exhibits
The
following exhibits are filed with or incorporated by reference into this
registration statement:
|
Exhibit
Number
|
|
Description
of Document
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation of the Registrant(1)
|
|
|
|
|
|
3.2
|
|
Articles
of Amendment to Articles of Incorporation of the
Registrant(2)
|
|
|
|
|
|
3.3
|
|
Bylaws
of the Registrant(3)
|
|
|
|
|
|
4.1
4.2
|
|
Warrant
to purchase shares of the Registrant’s common stock dated November 21,
2008(4)
Letter
Agreement (including Securities Purchase Agreement Standard Terms attached
as Exhibit A) dated November 21, 2008 between the registrant and the
United States Department of the Treasury(5)
|
|
|
|
|
|
5.1
|
|
Opinion
of Breyer & Associates PC
|
|
|
|
|
|
12.1
|
|
Computation
of Ratio of Earnings to Fixed Charges
|
|
|
|
|
|
23.1
|
|
Consent
of Moss Adams LLP
|
|
|
|
|
|
23.2
|
|
Consent
of Breyer & Associates PC (contained in its opinion filed as Exhibit
5.1)
|
|
|
|
|
|
24.1
|
|
Power
of attorney (contained in the signature page of the registration
statement)
|
|
________________
|
|
|
(1)
|
Incorporated
by reference to Exhibit B to the Proxy Statement for the Annual Meeting of
Stockholders dated June 10,
1998.
|
|
|
(2)
|
Incorporated
by reference to Exhibit 3.1 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008
|
|
|
(3)
|
Incorporated
by reference to Exhibit 3.2 attached to the Current Report on Form 8-K
filed by the Registrant on December 18,
2007.
|
|
|
(4)
|
Incorporated
by reference to Exhibit 4.2 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008.
|
|
|
(5)
|
Incorporated
by reference to Exhibit 10.1 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008.
|
Item
17. Undertakings
The
undersigned Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
provided, however, that
Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement, or is contained in a form of prospectus filed pursuant
to Rule 424(b) that is part of the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(i) Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration
statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for
the purpose of providing the information required by section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in
Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date
of the registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
(5) That,
for the purpose of determining liability of the Registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities: The
undersigned Registrant undertakes that in a primary offering of securities of an
undersigned Registrant pursuant to this registration statement, regardless of
the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of an undersigned Registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned
Registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its securities provided
by or on behalf of the undersigned Registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
Registrant to the purchaser.
(6) That,
for purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant’s annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of Walla
Walla, State of Washington, on the 19th day of December, 2008.
| |
BANNER
CORPORATION |
| |
|
| |
|
| |
By:/s/D. Michael
Jones
|
| |
D. Michael
Jones |
| |
President and Chief
Executive Officer |
| |
(Duly Authorized
Representative) |
POWER
OF ATTORNEY
Each
person whose signature appears below appoints D. Michael Jones or Lloyd W.
Baker, as his or her true and lawful attorney-in-fact and agent, for
him or her and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any Registration Statement (including any amendment
thereto) for this offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or would do in person, hereby ratifying and confirming all that
said attorney-in fact and agent may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
| /s/D.
Michael
Jones
|
|
/s/Lloyd
W.
Baker
|
|
D.
Michael Jones
|
|
Lloyd
W. Baker
|
|
President,
Chief Executive Officer; Director
(Principal
Executive Officer)
|
|
Executive
Vice President & Chief Financial Officer
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
| /s/Robert
D.
Adams
|
|
/s/ Gordon
E.
Budke
|
|
Robert
D. Adams
|
|
Gordon
E. Budke
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
| /s/David
B.
Casper
|
|
/s/Edward
L.
Epstein
` |
|
David
B. Casper
|
|
Edward
L. Epstein
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date:
December 19, 2008
|
| /s/Jesse
G.
Foster
|
|
|
|
Jesse
G. Foster
|
|
David
A. Klaue
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: _________,
2008
|
|
|
|
|
| /s/Constance
H.
Kravas
|
|
/s/Robert
J.
Lane
|
|
Constance
H. Kravas
|
|
Robert
J. Lane
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
| /s/John
R.
Layman
|
|
/s/Dean
W.
Mitchell
|
|
John
R. Layman
|
|
Dean
W. Mitchell
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
| /s/Brent
A.
Orrico
|
|
/s/Wilber
E.
Pribilsky
|
|
Brent
A. Orrico
|
|
Wilber
E. Pribilsky
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
| /s/Gary
Sirmon
|
|
/s/Michael
M.
Smith
|
|
Gary
Sirmon
|
|
Michael
M. Smith
|
|
Director
|
|
Director
|
|
|
|
|
|
Date: December
19, 2008
|
|
Date: December
19, 2008
|
|
|
|
|
EXHIBIT
INDEX
|
Exhibit
Number
|
|
Description
of Document
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation of the Registrant(1)
|
|
|
|
|
|
3.2
|
|
Articles
of Amendment to Articles of Incorporation of the
Registrant(2)
|
|
|
|
|
|
3.3
|
|
Bylaws
of the Registrant(3)
|
|
|
|
|
|
4.1
4.2
|
|
Warrant
to purchase shares of the Registrant’s common stock dated November 21,
2008(4)
Letter
Agreement (including Securities Purchase Agreement Standard Terms attached
as Exhibit A) dated November 21, 2008 between the registrant and the
United States Department of the Treasury(5)
|
|
|
|
|
|
5.1
|
|
Opinion
of Breyer & Associates PC
|
|
|
|
|
|
12.1
|
|
Computation
of Ratio of Earnings to Fixed Charges
|
|
|
|
|
|
23.1
|
|
Consent
of Moss Adams LLP
|
|
|
|
|
|
23.2
|
|
Consent
of Breyer & Associates PC (contained in its opinion filed as Exhibit
5.1)
|
|
|
|
|
|
24.1
|
|
Power
of attorney (contained in the signature page of the registration
statement)
|
|
________________
|
|
|
(1)
|
Incorporated
by reference to Exhibit B to the Proxy Statement for the Annual Meeting of
Stockholders dated June 10,
1998.
|
|
|
(2)
|
Incorporated
by reference to Exhibit 3.1 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008
|
|
|
(3)
|
Incorporated
by reference to Exhibit 3.2 attached to the Current Report on Form 8-K
filed by the Registrant on December 18,
2007.
|
|
|
(4)
|
Incorporated
by reference to Exhibit 4.2 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008.
|
|
|
(5)
|
Incorporated
by reference to Exhibit 10.1 attached to the Current Report on Form 8-K
filed by the Registrant on November 24,
2008.
|
Exhibit
5.1
[LETTERHEAD
OF BREYER & ASSOCIATES PC]
December
19, 2008
Board
of Directors
Banner
Corporation
10
S. First Avenue
Walla
Walla, Washington 99362
Re:
Banner Corporation - Registration Statement on Form S-3
Ladies
and Gentlemen:
We
have acted as special counsel to Banner Corporation, a Washington corporation
(the “Company”), in connection with the preparation of a registration statement
on Form S-3 (the “Registration Statement”) being filed with the Securities and
Exchange Commission (the “Commission”) relating to the resale from time to time
by selling securityholders, pursuant to Rule 415 of the General Rules and
Regulations of the Commission promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), of the following securities of the Company: (i)
124,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock,
Series A (the “Series A Preferred Stock”); (ii) a warrant dated November 21,
2008 to purchase up to 1,707,989 shares of the Company’s common stock (the
“Warrant”); and (iii) the 1,707,989 shares of common stock underlying the
Warrant (the “Warrant Shares”). The Series A Preferred Stock and
Warrant were issued by the Company to the United States Department of the
Treasury (“Treasury”) on November 21, 2008 pursuant to that certain Letter
Agreement, dated as of November 21, 2008, between the Company and Treasury
(including the schedules thereto and the “Securities Purchase Agreement
Standards Terms” attached as Exhibit A thereto, the “Purchase Agreement”), in
connection with Treasury’s Troubled Asset Relief Program Capital Purchase
Program. The securities covered by the Registration Statement also
include depositary shares (the “Depositary Shares”), representing fractional
interests in the Series A Preferred Stock, which may be resold in lieu of whole
shares of Series A Preferred Stock in the event Treasury requests that the
Company deposit the Series A Preferred Stock held by Treasury with a depositary
under a depositary arrangement entered into in accordance with the terms of the
Purchase Agreement.
In
connection with this opinion, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of: (i) the Registration Statement;
(ii) the articles of incorporation of the Company as currently in effect,
including the articles of amendment setting forth the terms of the Series A
Preferred Stock; (ii) the bylaws of the Company as currently in effect; (iv) the
Warrant; (v) certain resolutions of the Board of Directors of the Company
relating to the Purchase Agreement and the issuance of the securities covered by
the Registration Statement; and (vi) such other documents, corporate records and
instruments as we have deemed necessary or appropriate in connection with
providing this opinion letter. In our examination, we
Banner
Corporation
December 19, 2008
Page 2
have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as copies.
Our
opinion expressed herein as to the legal validity, binding effect and
enforceability of the obligations of the Company is specifically qualified to
the extent that the legal validity, binding effect or enforceability of such
obligations may be subject to or limited by: (i) applicable bankruptcy,
insolvency, reorganization, conservatorship, receivorship, liquidation, voidable
preference, moratorium and other statutory or decisional laws relating to or
affecting creditors=
rights generally or the reorganization of financial institutions (including,
without limitation, preference and fraudulent conveyance or transfer laws),
heretofore or hereafter enacted or in effect; (ii) the exercise of judicial or
administrative discretion in accordance with general equitable principles,
whether enforcement is sought at law or in equity including, without limitation,
the exercise of judicial or administrative discretion with respect to provisions
relating to waivers, waiver of remedies (or the delay or omission of enforcement
thereof), disclaimers, releases of legal or equitable rights or discharges of
defenses; (iii) the availability of injunctive relief or other equitable
remedies; and (iv) the application by courts of competent jurisdiction of laws
containing provisions determined to have a paramount public
interest.
We
express no opinion (i) as to the enforceability of any provision or accumulation
of provisions that may be deemed to be unconscionable or against public policy;
(ii) as to provisions which purport to establish evidentiary standards; (iii) as
to provisions relating to venue, governing law, disclaimers or liability
limitations with respect to third parties; (iv) as to any anti-trust or state
securities laws; (v) as to provisions regarding indemnification, waiver of the
right to jury trial or waiver of objections to jurisdiction, each of which may
be subject to limitations of public policy; (vi) as to provisions relating to
waivers, waiver of remedies (or the delay or omission of enforcement thereof),
disclaimers, releases of legal or equitable rights or discharges of defenses; or
(vii) provisions which purport or would operate to render ineffective any waiver
or modification not in writing.
Our
opinions set forth below are limited to the matters expressly set forth in this
opinion letter. No opinion is to be implied or may be inferred beyond
the matters expressly so stated. Except as indicated in the next two sentences,
the opinions expressed herein are limited solely to matters involving the
application of the Business Corporation Law of the State of Washington, and we
express no opinion with respect to the laws of any other
jurisdiction. We are members of the Bar of the District of
Columbia. To the extent that the laws of any other jurisdiction
govern the legal validity, binding effect and enforceability of any obligation
of the Company as to which we opine herein, we have assumed that the laws of
such other jurisdiction do not differ, in any respect material to such opinion,
from the laws of the District of Columbia as currently in effect and the
judicial and administrative interpretations thereof. The opinions
expressed herein concern only the
Banner
Corporation
December 19, 2008
Page 3
effect
of laws as now in effect and are rendered as of the date hereof. We
undertake no, and hereby disclaim any, obligation to revise or supplement this
opinion letter should such laws be changed by legislative action, judicial
decision, or otherwise after the date of this opinion letter, or if we become
aware of any facts that might change the opinions expressed herein after the
date of this opinion letter.
Subject
to the foregoing and the other matters set forth herein, it is our opinion that,
as of the date hereof:
1. The
shares of Series A Preferred Stock have been duly authorized and validly issued,
and are fully paid and non-assessable.
2. The
Warrant has been duly authorized and constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
3. The
Warrant Shares have been duly authorized and upon issuance in connection with
the exercise of the Warrant in accordance with the terms thereof, including
payment to the Company of the exercise price for such shares in full, such
Warrant Shares will be validly issued, fully paid and
non-assessable.
4. With
respect to any Depositary Shares that may be issued, when: (a) the related
deposit agreement has been duly authorized and validly executed and delivered by
the Company and by an entity appointed as depositary by the Company (the
“Depositary”) deemed acceptable to Treasury in accordance with the Purchase
Agreement and meeting the qualifications stated in the related deposit
agreement; (b) the terms of the Depositary Shares and of the issuance and sale
thereof have been established so as to not violate any applicable law or the
Company’s articles of incorporation or bylaws, or result in a default
under or a breach of any agreement or instrument binding upon the Company and so
as to comply with any requirements or restrictions imposed by any court,
regulatory authority or other governmental body having jurisdiction over the
Company; (c) the related shares of Series A Preferred Stock have been deposited
with the Depositary; and (d) the depositary receipts representing the Depositary
Shares have been duly executed, authenticated, countersigned, registered and
issued, sold and delivered in the manner and for the consideration stated in the
applicable deposit agreement and the applicable definitive purchase,
underwriting or similar agreement, upon payment of the consideration therefor
provided for therein, the Depositary Shares will be validly issued, fully paid
and nonassessable.
Banner
Corporation
December
19, 2008
Page
4
We
hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the use of our name under the caption “Legal Matters” in the
Registration Statement and in the prospectus included therein. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Securities Act or the rules and
regulations of the Commission thereunder.
| |
Very truly
yours, |
| |
|
| |
/s/Breyer &
Associates PC |
| |
|
| |
BREYER &
ASSOCIATES PC |
EXHIBIT
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTATION
OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
|
|
|
(In
thousands except ratios)
|
|
|
|
|
|
|
|
|
|
Excluding
Interest on Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30 |
|
Year
Ended December 31 |
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
|
|
Restated
|
|
Restated
|
|
Restated
|
|
|
Income(loss)
before income taxes
|
|
$ |
(51,605)
|
|
|
$
|
36,695
|
|
|
$
|
54,813
|
|
$
|
47,599
|
|
$
|
16,876
|
|
$
|
27,925
|
|
$
|
22,998
|
|
|
|
Provision
for(benefit from) income taxes
|
|
(2,143)
|
|
|
|
11,784
|
|
|
|
17,890
|
|
|
16,055
|
|
|
4,896
|
|
|
8,911
|
|
|
7,129
|
|
|
|
Net
income
|
|
|
(49,462)
|
|
|
|
24,911
|
|
|
|
36,923
|
|
|
31,544
|
|
|
11,980
|
|
|
19,014
|
|
|
15,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
Home Bank advances
|
|
|
4,310
|
|
|
|
3,733
|
|
|
|
4,168
|
|
|
14,354
|
|
|
21,906
|
|
|
20,336
|
|
|
21,842
|
|
|
|
|
|
Other
borrowings
|
|
|
1,874
|
|
|
|
2,448
|
|
|
|
3,214
|
|
|
3,744
|
|
|
1,765
|
|
|
1,051
|
|
|
1,132
|
|
|
|
|
|
Junior
subordinated debentures
|
|
5,399
|
|
|
|
6,600
|
|
|
|
8,888
|
|
|
8,029
|
|
|
5,453
|
|
|
3,461
|
|
|
1,890
|
|
|
|
Total
fixed charges
|
|
|
11,583
|
|
|
|
12,781
|
|
|
|
16,270
|
|
|
26,127
|
|
|
29,124
|
|
|
24,848
|
|
|
24,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(for ratio calculation)
|
|
$
|
(37,879)
|
|
|
$
|
37,692
|
|
|
$
|
53,193
|
|
$
|
57,671
|
|
$
|
41,104
|
|
$
|
43,862
|
|
$
|
40,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
------
|
x
|
(1)
|
|
2.95
|
x
|
|
|
3.27
|
x
|
|
2.21
|
x
|
|
1.41
|
x
|
|
1.77
|
x
|
|
1.64
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
earnings coverage for the nine months ended September 30, 2008 was
inadequate to cover total fixed
|
|
|
|
|
|
|
|
|
charges. The
coverage deficiency for the period was $37.9 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including
Interest on Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
Year
Ended December 31
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
(51,605)
|
|
|
$
|
36,695
|
|
|
$
|
54,813
|
|
$
|
47,599
|
|
$
|
16,876
|
|
$
|
27,925
|
|
$
|
22,998
|
|
|
|
Provision
for income taxes
|
|
|
(2,143)
|
|
|
|
11,784
|
|
|
|
17,890
|
|
|
16,055
|
|
|
4,896
|
|
|
8,911
|
|
|
7,129
|
|
|
|
Net
income
|
|
|
(49,462)
|
|
|
|
24,911
|
|
|
|
36,923
|
|
|
31,544
|
|
|
11,980
|
|
|
19,014
|
|
|
15,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
84,446
|
|
|
|
95,329
|
|
|
|
129,420
|
|
|
89,987
|
|
|
52,253
|
|
|
35,067
|
|
|
34,984
|
|
|
|
|
|
Federal
Home Bank advances
|
|
|
4,310
|
|
|
|
3,733
|
|
|
|
4,168
|
|
|
14,354
|
|
|
21,906
|
|
|
20,336
|
|
|
21,842
|
|
|
|
|
|
Other
borrowings
|
|
|
1,874
|
|
|
|
2,448
|
|
|
|
3,214
|
|
|
3,744
|
|
|
1,765
|
|
|
1,051
|
|
|
1,132
|
|
|
|
|
|
Junior
subordinated debentures
|
|
5,399
|
|
|
|
6,600
|
|
|
|
8,888
|
|
|
8,029
|
|
|
5,453
|
|
|
3,461
|
|
|
1,890
|
|
|
|
Total
fixed charges
|
|
|
96,029
|
|
|
|
108,110
|
|
|
|
145,690
|
|
|
116,114
|
|
|
81,377
|
|
|
59,915
|
|
|
59,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(for ratio calculation)
|
|
$
|
46,567
|
|
|
$
|
133,021
|
|
|
$
|
182,613
|
|
$
|
147,658
|
|
$
|
93,357
|
|
$
|
78,929
|
|
$
|
75,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
0.48
|
x
|
|
|
1.23
|
x
|
|
|
1.25
|
x
|
|
1.27
|
x
|
|
1.15
|
x
|
|
1.32
|
x
|
|
1.27
|
x
|
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors
Banner
Corporation
Walla
Walla, Washington
We
consent to incorporation by reference in the prospectus constituting part of
this Registration Statement (Form S-3), of our report dated March 14, 2008,
with respect to the consolidated statements of financial condition of Banner
Corporation and subsidiaries as of December 31, 2007 and
2006, and the related consolidated statements of income, comprehensive income,
changes in stockholders’ equity, and cash
flows for each of the years in the three-year period ended December 31, 2007, and
in our same report, with respect to the Company’s internal
controls over financial reporting as of December 31, 2007, which appears in the
December 31, 2007,
annual report on Form 10-K of Banner Corporation. We also consent to the
references to our firm under the heading “Experts” in the
prospectus.
/s/Moss
Adams LLP
Spokane,
Washington
December
19, 2008