Banner Corporation Reports Earnings of $36.9 Million, or $2.49 Per Diluted Share, in 2007 and Fourth Quarter Earnings of $12.0 Million, or $0.74 Per Diluted Share


WALLA WALLA, Wash., Jan. 22, 2008 (PRIME NEWSWIRE) -- Banner Corporation (Nasdaq:BANR), the parent company of Banner Bank and Islanders Bank, today reported that 2007 revenues increased 20% fueled by strong loan and deposit growth and that profits were significantly impacted by a substantial net change in the value of financial instruments carried at fair value. Net income for the year ended December 31, 2007 totaled $36.9 million, or $2.49 per diluted share, compared with $31.5 million, or $2.58 per diluted share, for the year ended December 31, 2006. In the fourth quarter of 2007, net income was $12.0 million, or $0.74 per diluted share, compared to $7.9 million, or $0.64 per diluted share, in the fourth quarter of 2006.

Banner's net income included net gains of $9.2 million ($5.9 million after tax) in the fourth quarter and $11.6 million ($7.4 million after tax) for the full year of 2007, as a result of changes in the valuation of financial instruments carried at fair value in accordance with the adoption of Statement of Financial Accounting Standards (SFAS) No. 159 and SFAS No. 157. Excluding fair value adjustments, net income from recurring operations was $6.1 million, or $0.38 per diluted share, in the fourth quarter and $29.5 million, or $1.99 per diluted share, for the full year of 2007. There was no adjustment for fair value in either period of 2006; however, Banner received a substantial insurance recovery in the second quarter of 2006. Excluding that settlement, net income was $28.1 million, or $2.30 per diluted share in 2006. See the footnote below and "Pro Forma Disclosures Excluding Fair Value Adjustments and 2006 Insurance Recovery."

"In 2007, we continued to focus on building our franchise through both acquisitions and de novo branching in key markets. As a result, our larger balance sheet and expanded franchise are producing substantially more revenue than a year ago," said D. Michael Jones, President and Chief Executive Officer. "Unfortunately, recently declining interest rates, slowing housing markets and a high level of operating expenses combined to offset much of this revenue growth and our net income was less than we had expected. The effect of these offsetting factors was particularly evident in the fourth quarter, as our net interest margin contracted, credit costs increased and the full burden of our expense growth was realized.

"While increased delinquencies, particularly in our construction and land development portfolio, significantly impacted our net interest margin (17 basis points in the fourth quarter due to non-accruals) and required a higher level of loan loss provisioning, we believe our level of nonperforming assets is very manageable and that our reserves are satisfactory. We shared others' concerns about the downturn in the national housing market and initially backed away from construction lending in the Boise, Idaho market early last year. And, although we remain optimistic about the Northwest economy, we became more cautious in our approach to construction and land development lending in other markets as the year progressed. As a result, our total construction and land development loan originations in 2007 were approximately 35% lower than in the previous year. In addition, we have not engaged in any sub-prime lending and have no direct exposure to sub-prime lending problems in our loan portfolio. Nonetheless, in the current difficult housing environment, we will continue to direct significant efforts to managing our loan portfolios and overall credit quality.

"As part of our rapid franchise expansion, we added 18 new branches through acquisition, opened 21 new branches and relocated eight others in the last three years," Jones continued. "Most recently, we opened branches in Nampa, Idaho, and Oak Harbor, Washington. During the fourth quarter of 2007, we completed the acquisition of NCW Community Bank, based in central Washington, which had approximately $99 million in assets, $91 million in total loans and $87 million in deposit balances on the date of acquisition. We now have reached our goal in terms of the number of branches required to generate deposit growth sufficient to fund our expected loan growth and produce significant fee generating opportunities. As a result, we plan to open only three additional branches in 2008, a normal level of growth for a bank of our size."

2007 Highlights (compared to 2006)



 -- Net income, excluding fair value adjustments and the insurance
    settlement, was $29.5 million, or $1.99 per diluted share, in 2007
    compared to $28.1 million, or $2.30 per diluted share, in 2006.*
 -- Net interest income before provision for loan losses grew 18% to
    $149.6 million.
 -- Revenues increased 20% to $176.6 million, excluding fair value
    adjustments.
 -- Total deposits increased 30% to $3.62 billion.
 -- Loans increased 28% to $3.76 billion.
 -- Nonperforming assets increased to 0.98% of total assets, while net
    charge-offs remained modest at 0.08% of average loans.
 -- Banner's capital position was strengthened, resulting in a Tier 1
    Leverage Ratio of 9.80% at December 31, 2007, compared to 8.77% a
    year earlier.
 -- Tangible book value per share increased to $18.73 at December 31,
    2007, compared to $17.75 a year earlier.
 -- Three acquisitions increased loans by $596 million and deposits by
    $560 million.

 * Earnings information excluding the fair value adjustments and the
   insurance recovery (net income from recurring operations) represent
   non-GAAP (Generally Accepted Accounting Principles) financial
   measures.  Management has presented these non-GAAP financial
   measures in this earnings release because it believes that they
   provide more useful and comparative information to assess trends in
   the Company's core operations reflected in the current quarter and
   year-to-date results.  Where applicable, the Company has also
   presented comparable earnings information using GAAP financial
   measures.

Credit Quality

"We have always placed a strong emphasis on managing asset quality by applying a disciplined approach to credit approval and monitoring for signs of deterioration in loan quality," said Jones. "While we are not engaged in any sub-prime lending, we have seen an increase in delinquencies and nonperforming loans, primarily construction and land development loans for one- to four-family residential properties. This increase was not unexpected, as housing markets have clearly slowed. However, our net charge-offs remain reasonable and we continue to build our reserves for possible loan losses." Banner added $2.0 million to its provision for loan losses in the fourth quarter, compared to $1.5 million in the third quarter of 2007 and $1.0 million in the fourth quarter of 2006. The allowance for loan losses at quarter-end totaled $45.8 million, representing 1.20% of total loans outstanding. Non-performing assets were $44.3 million, or 0.98% of total assets, at December 31, 2007, compared to $23.2 million, or 0.54%, in the previous quarter, and $15.0 million or 0.43% at December 31, 2006. Banner's net charge-offs in the current quarter totaled $1.7 million, or 0.05% of average loans. For the twelve months ended December 31, 2007, the provision for loan losses was $5.9 million and net charge-offs were $2.9 million, or 0.08% of average loans.

"We are obviously not pleased with the growth of nonperforming loans," stated Jones, "but believe the underlying asset values remain sufficient to minimize principal losses even as the borrowers are using up their liquidity servicing these loans. While construction and land development loans represented 32% of our portfolio and approximately 80% of our nonperforming assets, they are significantly diversified with respect to geography and sub-markets, price ranges and borrowers. Of course, the vast majority of these loans are performing as agreed and we are experiencing continuing loan payoffs and portfolio turnover." The geographic distribution of construction and land developments loans is approximately 35% in the greater Puget Sound market, 45% in the greater Portland, Oregon market, and 9% in the greater Boise, Idaho market, with the remaining 11% distributed in various eastern Washington and eastern Oregon markets served by Banner Bank.

Income Statement Review

"The 100 basis point drop in the Fed Funds rate over the past four months adversely impacted our operating profits and net interest margin in the fourth quarter, with asset yields dropping faster than funding costs," said Jones. Banner's net interest margin was 3.82% for the fourth quarter of 2007, compared to 4.10% in the preceding quarter and 4.01% for the fourth quarter of 2006. For the full year, the net interest margin was 3.99%, compared to 4.08 % in 2006. Funding costs decreased 17 basis points compared to the previous quarter and decreased 29 basis points from the fourth quarter a year earlier, while asset yields decreased 45 basis points from the prior linked quarter and 48 basis points from the fourth quarter a year ago. "While deposit costs moved significantly lower in the fourth quarter, declining each month as the quarter progressed, the more immediate impact of lower prime rates on a substantial portion of our loan portfolio resulted in some compression of our net interest margin. In addition, the higher level of delinquencies is also reflected in our lower net interest margin, as non-accruing loans reduced the margin by approximately 17 basis points in the fourth quarter," Jones noted.

In the fourth quarter of 2007, net interest income before the provision for loan losses increased 17% to $38.7 million, compared to $33.1 million in the same quarter a year ago, reflecting Banner's larger earning asset base. Revenues (net interest income before the provision for loan losses plus other operating income) excluding fair value adjustments increased 19% to $46.2 million in the fourth quarter of 2007, from $38.8 million in the fourth quarter of 2006.

Total other operating income, excluding fair value adjustments, for the fourth quarter increased 33% to $7.5 million, compared to $5.6 million for the same quarter a year ago. Income from deposit fees and other service charges increased 59% to $4.8 million in the fourth quarter of 2007, compared to $3.0 million for the same period in 2006. Income from mortgage banking operations decreased 10% from the fourth quarter of 2006 and fell 26% from the prior quarter, reflecting lower levels of production in a slowing housing market. Net fair value adjustments as a result of changes in the value of financial assets and liabilities recorded at fair value under SFAS No. 159 resulted in an increase of $9.2 million and $11.6 million, respectively, for the quarter and year ended December 31, 2007, largely as a result of changes in the fair value of the junior subordinated debentures (trust preferred securities) issued by the Company.

For the year ended December 31, 2007, net interest income before the provision for loan losses increased 18% to $149.6 million, compared to $126.9 million a year ago. Revenues increased 20% to $176.6 million, excluding fair value adjustments, in 2007, compared to $147.5 million in 2006. Total other operating income increased 32% to $27.0 million, excluding fair value adjustments, in 2007, compared to $20.5 million in full-year 2006.

"On October 10, 2007, we completed the acquisition of NCW Community Bank. Additionally, during the current quarter we opened two new branches and relocated two other branches," said Jones. "For the full year ended December 31, 2007, through acquisitions and new branch openings, we added 26 locations to our distribution network. These new and acquired branches have increased expenses over the quarter and year-to-date; however, they are proving to be very successful in helping us reach new customers and grow deposits. While we need to reduce our level of expenses from what we incurred in the fourth quarter, recurring operating expenses exclusive of the NCW Community Bank acquisition in October were slightly reduced from the level of those expenses in the third quarter. Over time we expect these new offices and acquisitions will add to our profitability by providing low-cost core deposits and additional revenue generating opportunities." Other operating expenses increased to $35.3 million in the fourth quarter of 2007, compared to $25.8 million in the fourth quarter a year ago, reflecting both new branches and acquisition activity. For the full year, other operating expenses were $127.5 million, compared to $99.7 million, excluding the insurance recovery, and $94.4 million after the recovery in 2006. "Approximately 50% of the year-over-year increase in operating expenses was due to the three acquisitions. However, we clearly have work to do in reducing our expense levels by capturing more cost savings in the acquired banks and substantially slowing our de novo branch expansion," said Jones.

Balance Sheet Review

Assets increased 29% to $4.5 billion at December 31, 2007, compared to $3.5 billion a year earlier. "Loan growth, exclusive of the NCW Community Bank acquisition, improved to an annualized rate of 11% in the fourth quarter and was strongest in the commercial business and consumer sectors, reflecting the still solid Northwest economy," said Jones. "However, we have continued to be very cautious in our underwriting and we have significantly slowed our production of construction and land development loans." Net loans increased 28% (20% from acquisitions) to $3.76 billion at December 31, 2007, compared to $2.93 billion a year earlier.

Total deposits increased 30% (20% from acquisitions) to $3.62 billion at December 31, 2007, compared to $2.79 billion at December 31, 2006. Non-interest-bearing accounts increased 46% and total transaction and savings accounts increased 43% during the twelve months ending December 31, 2007, while certificates of deposit increased 19%. "We chose not to renew approximately $86 million of matured brokered certificates of deposit in the second half of the year, which resulted in slower deposit growth; however, our retail growth for the whole year was very encouraging," said Jones. "We are optimistic that our expanded branch network will deliver continued deposit growth and related fee income as we have experienced excellent growth in the number of transaction deposit accounts throughout the system."

Shareholders' equity for the year ended December 31, 2007 increased 75% year over year. At December 31, 2007, shareholders' equity was $437.8 million compared to $250.6 million at December 31, 2006. The $187.2 million rise in equity primarily reflects the issuance of stock associated with the three acquisitions in 2007. During the fourth quarter of 2007, the Company issued 340,000 shares of common stock in connection with the acquisition of NCW Community Bank, resulting in $11.8 million of additional equity. During the quarter ended June 30, 2007, the Company issued 2.6 million shares of common stock in connection with the acquisitions of F&M Bank and San Juan Financial Holding Company (Islanders Bank), resulting in $113.1 million of additional equity. The three acquisitions also resulted in a combined increase of $103.1 million of goodwill and other intangibles. The Company has also issued shares through its Dividend Reinvestment and Stock Purchase Plan and in connection with the exercise of vested stock options. At December 31, 2006, Banner had 12.3 million shares outstanding, but as a result of the three acquisitions and the stock issuance noted above, it had 16.3 million shares outstanding at December 31, 2007.

Book value per share increased 32% to $27.32 at year-end, from $20.76 a year earlier, and tangible book value per share was up 6% to $18.73 at year-end, compared to $17.75 a year earlier.

Accounting Treatments

Banner Corporation elected early adoption of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, and SFAS No. 157, Fair Value Measurements, effective January 1, 2007. SFAS No. 159, which was issued in February 2007, generally permits the measurement of selected eligible financial instruments at fair value at specified election dates. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), and expands disclosures about fair value measurement. The Company made this election to allow it more flexibility with respect to the management of its investment securities, wholesale borrowings and interest rate risk position in future periods.

Upon adoption of SFAS No.159, the Company selected fair value measurement for all of its "available for sale" investment securities, Federal Home Loan Bank advances and junior subordinated debentures, which had fair values of approximately $226.2 million, $176.8 million and $124.4 million, respectively, on January 1, 2007. The initial fair value measurement of these instruments resulted in a $3.5 million adjustment for the cumulative effect, net of tax, as a result of the change in accounting, which was recorded as a reduction in retained earnings as of January 1, 2007, and which under SFAS No. 159 has not been recognized in current earnings. While the adjustment to retained earnings is permanent, approximately $2.6 million of the amount was previously reported as accumulated other comprehensive loss at December 31, 2006, so the reduction in total shareholders' equity was only $897,000 on January 1, 2007. Following the initial election, changes in the value of financial instruments recorded at fair value are recognized as gains or losses in earnings in subsequent financial reporting periods. As a result of the adoption of SFAS No. 159 and changes in the fair value measurement of the financial assets and liabilities noted above, Banner recorded a net gain of $1.2 million ($755,000 after tax) in the quarter ended March 31, 2007, a net loss of $1.9 million ($1.2 million after tax) in the quarter ended June 30, 2007, a net gain of $3.1 million ($2.0 million after-tax) in the quarter ended September 30, 2007, and a net gain of $9.2 million ($5.9 million after tax), in the quarter ended December 31, 2007, resulting in a cumulative net gain of $11.6 million ($7.4 million after tax) for the twelve-month period.

Restatement and Reclassification

Operating results and financial statements for the quarter and year ended December 31, 2006 have been restated to reflect non-material adjustments to our provision for income taxes, income taxes payable and the common stock and retained earnings components of stockholders' equity related to the tax treatment of certain elements of stock-based compensation. The effects of these adjustments are increases of $155,000 and $619,000, respectively, in the provision for income taxes for the quarter and year ended December 31, 2006; as well as a reduction of $2.4 million of retained earnings and increases of $2.8 million and $379,000, respectively, in common stock (paid-in capital) and total stockholders' equity as of December 31, 2006. These adjustments have immaterially affected certain previously reported ratios for those prior periods.

In addition, certain reclassifications have been made to the prior periods' consolidated financial statements and/or schedules to conform to the current period's presentation. These reclassifications may have slightly affected certain ratios for the prior periods. These reclassifications had no effect on retained earnings or net income as previously presented and the effect of these reclassifications is considered immaterial.

Conference Call

Banner will host a conference call on Wednesday, January 23, 2008, at 6:00 a.m. PST, to discuss fourth quarter and year end results. The conference call can be accessed live by telephone at 303-262-2130. To listen to the call online, go to the Company's website at www.bannerbank.com. An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11104221# until Wednesday, January 30, 2008, or via the Internet at www.bannerbank.com.

About the Company

Banner Corporation is a $4.5 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

Statements concerning future performance, developments or events, expectations for earnings, growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements, which are subject to a number of risks and uncertainties that are beyond Banner's control and might cause actual results to differ materially from the expectations and stated objectives. Factors which could cause actual results to differ materially include, but are not limited to, regional and general economic conditions, management's ability to generate improvement in asset quality and profitability, changes in interest rates, deposit flows, demand for housing, mortgages and other loans, real estate values, competition, loan delinquency rates, the successful operation of the newly-opened branches and loan offices, the ability to successfully complete consolidation and conversion activities, incorporate acquisitions into operations, retain key employees and achieve cost savings, changes in accounting principles, practices, policies or guidelines, changes in legislation or regulation, other economic, competitive, governmental, regulatory and technological factors affecting operations, pricing, products and services, Banner's ability to successfully resolve outstanding credit issues and other risks detailed in Banner's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Banner undertakes no responsibility to update or revise any forward-looking statements.



 RESULTS OF OPERATIONS
 (In thousands except share and per share data)

                        Quarters Ended           Twelve Months Ended
                -------------------------------- ---------------------
                  Dec 31,    Sep 30,    Dec 31,    Dec 31,    Dec 31,
                   2007       2007       2006       2007       2006
                ---------- ---------- ---------- ---------- ----------
                                      RESTATED(1)           RESTATED(1)

 INTEREST INCOME:
  Loans
   receivable   $   72,592 $   75,668  $  62,514 $  281,135 $  227,661
  Mortgage-backed
   securities        1,179      1,343      1,845      5,832      7,860
  Securities
   and cash
   equivalents       2,471      2,199      1,840      8,342      7,498
                ---------- ---------- ---------- ---------- ----------
                    76,242     79,210     66,199    295,309    243,019

 INTEREST EXPENSE:
  Deposits          34,091     35,341     27,067    129,420     89,987
  Federal Home
   Loan Bank
   advances            435        292      2,695      4,168     14,354
  Other borrowings     766        730      1,168      3,214      3,744
  Junior
   subordinated
   debentures        2,288      2,177      2,154      8,888      8,029
                ---------- ---------- ---------- ---------- ----------
                    37,580     38,540     33,084    145,690    116,114
                ---------- ---------- ---------- ---------- ----------

  Net interest
   income before
   provision for
   loan losses      38,662     40,670     33,115    149,619    126,905

 PROVISION FOR
  LOAN LOSSES        2,000      1,500      1,000      5,900      5,500
                ---------- ---------- ---------- ---------- ----------
  Net interest
   income           36,662     39,170     32,115    143,719    121,405
 OTHER OPERATING
  INCOME:
  Deposit fees
   and other
   service
   charges           4,770      4,750      2,998     16,573     11,417
  Mortgage banking
   operations        1,325      1,782      1,474      6,270      5,824
  Loan servicing
   fees                625        457        260      1,830      1,299
  Miscellaneous        800        483        905      2,336      1,970
                ---------- ---------- ---------- ---------- ----------
                     7,520      7,472      5,637     27,009     20,510
  Gain (loss) on
   sale of
   securities           --         --         --         --         65
  Increase
   (decrease)
   in valuation
   of financial
   instruments
   carried at
   fair value        9,209      3,062         --     11,574         --
                ---------- ---------- ---------- ---------- ----------
  Total other
   operating
   income           16,729     10,534      5,637     38,583     20,575
 OTHER OPERATING
  EXPENSE:
  Salary and
   employee
   benefits         19,441     20,431     16,369     75,975     65,116
  Less capitalized
   loan
   origination
   costs            (2,459)    (2,455)    (2,672)   (10,683)   (11,448)
  Occupancy and
   equipment         6,011      5,484      4,279     20,953     15,938
  Information /
   computer data
   services          2,130      2,031      1,342      7,297      5,120
  Miscellaneous     10,150      9,355      6,518     33,947     25,005
                ---------- ---------- ---------- ---------- ----------
                    35,273     34,846     25,836    127,489     99,731
  Insurance
   recovery, net
   proceeds             --         --         --         --     (5,350)
                ---------- ---------- ---------- ---------- ----------
  Total other
   operating
   expense          35,273     34,846     25,836    127,489     94,381
                ---------- ---------- ---------- ---------- ----------

  Income before
   provision for
   income taxes     18,118     14,858     11,916     54,813     47,599
 PROVISION FOR
  INCOME TAXES       6,106      4,871      4,064     17,890     16,055
                ---------- ---------- ---------- ---------- ----------
 NET INCOME     $   12,012 $    9,987 $    7,852 $   36,923 $   31,544
                ========== ========== ========== ========== ==========
 Earnings per 
  share
  Basic         $     0.75 $     0.64 $     0.65 $     2.53 $     2.65
  Diluted       $     0.74 $     0.64 $     0.64 $     2.49 $     2.58
 Cumulative
  dividends
  declared per
  common share  $     0.20 $     0.19 $     0.19 $     0.77 $     0.73
 Weighted average
  shares
  outstanding
  Basic         15,936,430 15,497,193 12,004,212 14,581,286 11,905,598
  Diluted       16,141,941 15,720,248 12,358,008 14,838,469 12,238,933
 Shares
  repurchased
   during the
   period           58,157        700      2,220     69,467     65,642
 Shares issued
  in connection
  with
  acquisitions     339,860         --         --  2,932,471         --
 Shares issued
  in connection
  with exercise
  of stock
  options or DRIP  163,379    141,281     16,776  1,088,875    297,436

 (1) Provision for income taxes has been restated to reflect
     adjustments related to the tax treatment of certain elements of
     stock-based compensation.
 ---------------------------------------------------------------------
 PRO FORMA DISCLOSURES EXCLUDING THE EFFECTS OF THE CHANGE IN THE
 VALUATION OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE AND THE 2006
 INSURANCE RECOVERY

 NET INCOME
  from above    $   12,012 $    9,987 $    7,852 $   36,923 $   31,544
   ADJUSTMENTS
    FOR CHANGE
    IN VALUATION
    OF FINANCIAL
    INSTRUMENTS
    AND THE 2006
    INSURANCE
    RECOVERY
   Change in
    valuation of
    financial
    instruments
    carried at
    fair value      (9,209)    (3,062)        --    (11,574)        --
   2006 insurance
    recovery            --         --         --         --     (5,350)
   Income tax
    provision
    (benefit)
    related to
    above items      3,315      1,102         --      4,167      1,926
                ---------- ---------- ---------- ---------- ----------

     Above items,
      net of
      income tax
      provision
      (benefit)     (5,894)    (1,960)        --     (7,407)    (3,424)
                ---------- ---------- ---------- ---------- ----------

 NET INCOME FROM
  RECURRING
  OPERATIONS    $    6,118 $    8,027 $    7,852 $   29,516 $   28,120
                ========== ========== ========== ========== ==========
 Earnings per
  share EXCLUDING
  the effects
  of change in
  valuation of
  financial
  instruments
  carried at
  fair value
  and the 2006
  insurance
  recovery
   Basic        $     0.38 $     0.52 $     0.65 $     2.02 $     2.36
   Diluted      $     0.38 $     0.51 $     0.64 $     1.99 $     2.30

 FINANCIAL CONDITION                                                                
 (In thousands except share and per share data)                                      
                                                                                     
                                   Dec 31,      Sep 30,      Dec 31,                 
                                    2007         2007         2006                   
                                 -----------  -----------  -----------               
                                              RESTATED(1)  RESTATED(1)               
                                                                                     
 ASSETS                                                                              
 ------                                                                              
 Cash and due from banks         $    98,120  $    83,933  $    68,317               
 Federal funds and interest-                                                         
  bearing deposits                       310       62,628        5,068               
 Securities - trading                202,863      158,932           --               
 Securities - available for sale          --           --      226,153               
 Securities - held to maturity        53,516       53,259       47,872               
                                                                                     
 Federal Home Loan Bank stock         37,371       37,291       35,844               
                                                                                     
 Loans receivable:                                                                   
    Held for sale                      4,596        4,121        5,080               
    Held for portfolio             3,805,021    3,617,130    2,960,910               
    Allowance for loan losses        (45,827)     (44,212)     (35,535)              
                                 -----------  -----------  -----------               
                                   3,763,790    3,577,039    2,930,455               
                                                                                     
 Accrued interest receivable          24,980       26,376       23,272               
 Real estate owned held for                                                          
  sale, net                            1,867        3,072          918               
 Property and equipment, net          98,098       95,816       58,003               
 Goodwill and other                                                                  
  intangibles, net                   137,654      128,868       36,287               
 Bank-owned life insurance            51,483       51,024       38,527               
 Other assets                         25,089       22,123       24,850               
                                 -----------  -----------  -----------               
                                 $ 4,495,141  $ 4,300,361  $ 3,495,566               
                                 ===========  ===========  ===========               
                                                                                     
 LIABILITIES                                                                        
 ----------- 
 Deposits:                                                                           
    Non-interest-bearing         $   484,251  $   473,571  $   332,372               
    Interest-bearing transaction                                                     
     and savings accounts          1,288,110    1,299,232      905,746               
    Interest-bearing certificates  1,848,232    1,825,096    1,556,474               
                                 -----------  -----------  -----------               
                                   3,620,593    3,597,899    2,794,592               
                                                                                     
 Advances from Federal Home                                                          
  Loan Bank                               --           --      177,430               
 Advances from Federal Home                                                          
  Loan Bank at fair value            167,045       24,577           --               
 Customer repurchase agreements                                                      
  and other borrowings                91,724       78,511      103,184               
                                                                                     
 Junior subordinated debentures           --           --      123,716               
 Junior subordinated debentures                                                      
  at fair value                      113,270      122,220           --               
                                                                                     
 Accrued expenses and other                                                          
  liabilities                         48,189       47,577       36,888               
 Deferred compensation                11,396       10,830        7,025               
 Income taxes payable (1)              5,078        4,783        2,124               
                                 -----------  -----------  -----------               
                                   4,057,295    3,886,397    3,244,959               
                                                                                     
 STOCKHOLDERS' EQUITY                                                               
 --------------------
 Common stock (1)                    300,486      285,468      137,981               
 Retained earnings (1)               139,636      130,826      117,754               
 Other components of                                                                 
  stockholders' equity                (2,276)      (2,330)      (5,128)              
                                 -----------  -----------  -----------               
                                     437,846      413,964      250,607               
                                 -----------  -----------  -----------               
                                 $ 4,495,141  $ 4,300,361  $ 3,495,566               
                                 ===========  ===========  ===========               
 Shares Issued:                                                                      
 Shares outstanding at end of                                                        
  period                          16,266,149   15,821,067   12,314,270               
   Less unearned ESOP shares at                                                      
    end of period                    240,381      240,381      240,381               
                                 -----------  -----------  -----------               
 Shares outstanding at end of                                                        
  period excluding unearned                                                          
  ESOP shares                     16,025,768   15,580,686   12,073,889               
                                 ===========  ===========  ===========               
 Book value per share (1)(2)     $     27.32  $     26.57  $     20.76               
 Tangible book value per                                                             
  share (1)(2)(3)                $     18.73  $     18.30  $     17.75               
                                                                                     
 Consolidated Tier 1 leverage                                                        
  capital ratio                         9.80%        9.83%        8.77%              
                                                                                     
 (1) Income taxes payable, common stock and retained earnings have been 
     restated to reflect adjustments related to the tax treatment of 
     certain elements of stock-based compensation.               
                                                                                     
 (2) Calculation is based on number of shares outstanding at the end of
     the period rather than weighted average shares outstanding and 
     excludes unallocated shares in the ESOP.                        
                                                                                     
 (3) Tangible book value excludes goodwill, core deposit and other                  
     intangilbles.                                                                   
                                                                                  
 ADDITIONAL FINANCIAL INFORMATION
 ( Dollars in thousands )

                  Dec 31,    Sep 30,    Dec 31,
                    2007      2007       2006
                ---------- ---------- ----------
 LOANS (including
  loans held
  for sale):
 ----------------
 Commercial
  real estate   $  882,523 $  811,816 $  596,488
 Multifamily
  real estate      165,886    170,316    147,311
 Commercial
  construction      74,123     84,176     98,224
 Multifamily
  construction      35,318     41,814     39,908
 One- to four-
  family
  construction     613,779    624,280    570,501
 Land and land
  development      497,962    463,514    402,665
 Commercial
  business         696,350    630,827    467,745
 Agricultural
  business
  including
  secured by
  farmland         186,305    178,158    163,518
 One- to four-
  family real
  estate           463,954    424,122    361,625
 Consumer          193,417    192,228    118,005
                ---------- ---------- ----------

   Total loans
    outstanding $3,809,617 $3,621,251 $2,965,990
                ========== ========== ==========
 Total 
  delinquent
  loans         $   69,031 $   38,974 $   17,818
                ========== ========== ==========
 Total delinquent
  loans /
  Total loans
  outstanding         1.81%      1.08%      0.60%


 NON-PERFORMING   Dec 31,    Sep 30,    Dec 31,
  ASSETS:          2007       2007       2006
 -------------- ---------- ---------- ----------
 Loans on non-
  accrual
  status        $   42,068 $   19,788 $   13,463
 Loans more than
  90 days
  delinquent,
  still on
  accrual              315        132        593
                ---------- ---------- ----------
 Total non-
  performing
  loans             42,383     19,920     14,056
 Real estate
  owned ( REO ) /
  Repossessed
  assets             1,885      3,294        918
                ---------- ---------- ----------

   Total non-
    performing
    assets      $   44,268 $   23,214 $   14,974
                ========== ========== ==========
 Total non-
  performing
  assets  /
  Total assets        0.98%      0.54%      0.43%


                         Quarters Ended           Twelve Months Ended
 CHANGE IN THE  -------------------------------- ---------------------
  ALLOWANCE FOR   Dec 31,    Sep 30,    Dec 31,    Dec 31,    Dec 31,
  LOAN LOSSES:     2007       2007       2006       2007       2006
 -------------- ---------- ---------- ---------- ---------- ----------
 Balance,
  beginning of
  period        $   44,212 $   43,248 $   35,160 $   35,535 $   30,898
 Acquisitions /
  ( divestitures )   1,319         --         --      7,276         --
 Provision           2,000      1,500      1,000      5,900      5,500

 Recoveries of
  loans previously
  charged off          127        469        354      1,491      1,898
 Loans charged
  -off              (1,831)    (1,005)      (979)    (4,375)    (2,761)
                ---------- ---------- ---------- ---------- ----------
   Net (charge-
    offs)
    recoveries      (1,704)      (536)      (625)    (2,884)      (863)
                ---------- ---------- ---------- ---------- ----------

 Balance, end
  of period     $   45,827 $   44,212 $   35,535 $   45,827 $   35,535
                ========== ========== ========== ========== ==========
 Net charge-offs
 (recoveries) /
  Average loans
  outstanding         0.05%       0.01%     0.02%      0.08%      0.03%
 Allowance for
  loan losses /
  Total loans
  outstanding         1.20%       1.22%     1.20%      1.20%      1.20%



                  Dec 31,    Sep 30,    Dec 31,
 DEPOSITS          2007       2007       2006
 --------       ---------- ---------- ----------
 Non-interest-
  bearing       $  484,251 $  473,571 $  332,372
                ---------- ---------- ----------

 Interest-bearing
  checking         430,635    438,974    327,836
 Regular savings
  accounts         609,073    602,190    364,957
 Money market
  accounts         248,403    258,068    212,953
                ---------- ---------- ----------

   Interest-
    bearing
    transaction
    & savings
    accounts     1,288,111  1,299,232    905,746
                ---------- ---------- ----------

 Three-month
  maturity money
  market
  certificates     165,693    167,025    178,981
 Other
  certificates   1,682,538  1,658,071  1,377,493
                ---------- ---------- ----------
  Interest-
   bearing
   certificates  1,848,231  1,825,096  1,556,474
                ---------- ---------- ----------

    Total
     deposits   $3,620,593 $3,597,899 $2,794,592
                ========== ========== ==========

 Included in
  other
  borrowings
 -----------
 Customer
  repurchase
  agreements /
  "Sweep
  accounts"     $   91,724 $   78,511 $   76,825
                ---------- ---------- ----------



 ADDITIONAL FINANCIAL INFORMATION                                             
 (Dollars in thousands)                                                       
 (Rates / Ratios Annualized)                                                  
                                                                              
                         Quarters Ended           Twelve Months Ended         
                -------------------------------- ---------------------        
 OPERATING        Dec 31,    Sep 30,    Dec 31,    Dec 31,    Dec 31,         
  PERFORMANCE:     2007       2007       2006       2007       2006           
 -------------  ---------- ---------- ---------- ---------- ----------        
                           RESTATED(1)RESTATED(1)           RESTATED(1)       
                                                                              
 Average loans  $3,716,512 $3,626,541 $2,950,193 $3,437,259 $2,767,585        
 Average                                                                      
  securities                                                                  
  and deposits     301,071    313,325    328,241    309,860    342,434        
 Average non-                                                                 
  interest-                                                                   
  earning assets   356,752    346,762    191,363    297,353    191,579        
                ---------- ---------- ---------- ---------- ----------        
   Total average                                                              
    assets      $4,374,335 $4,286,628 $3,469,797 $4,044,472 $3,301,598        
                ========== ========== ========== ========== ==========        
                                                                              
 Average                                                                      
  deposits      $3,628,581 $3,593,722 $2,749,618 $3,332,098 $2,536,154        
 Average                                                                      
  borrowings       258,431    221,837    425,398    287,478    488,984        
 Average non-                                                                 
  interest-                                                                   
  earning                                                                     
  liabilities       62,415     62,054     45,884     58,371     39,103        
                ---------- ---------- ---------- ---------- ----------        
   Total average                                                              
    liabilities  3,949,427  3,877,613  3,220,900  3,677,947  3,064,241        
                                                                              
 Total average                                                                
  stockholders'                                                               
  equity           424,908    409,015    248,897    366,525    237,357        
                ---------- ---------- ---------- ---------- ----------        
                                                            `                 
   Total average                                                              
    liabilities                                                               
    and equity  $4,374,335 $4,286,628 $3,469,797 $4,044,472 $3,301,598        
                ========== ========== ========== ========== ==========        
                                                                              
 Interest rate                                                                
  yield on loans      7.75%      8.28%      8.41%      8.18%      8.23%       
 Interest rate                                                                
  yield on                                                                    
  securities                                                                  
  and deposits        4.81%      4.48%      4.45%      4.57%      4.48%       
                ---------- ---------- ---------- ---------- ----------        
                                                                              
   Interest rate                                                              
    yield on                                                                  
    interest-                                                                 
    earning                                                                   
    assets            7.53%      7.98%      8.01%      7.88%      7.81%       
                ---------- ---------- ---------- ---------- ----------        
                                                                              
 Interest rate                                                                
  expense on                                                                  
  deposits            3.73%      3.90%      3.91%      3.88%      3.55%       
 Interest rate                                                                
  expense on                                                                  
  borrowings          5.36%      5.72%      5.61%      5.66%      5.34%       
                ---------- ---------- ---------- ---------- ----------        
                                                                              
   Interest rate                                                              
    expense on                                                                
    interest-                                                                 
    bearing                                                                   
    liabilities       3.84%      4.01%      4.13%      4.03%      3.84%       
                ---------- ---------- ---------- ---------- ----------        
                                                                              
 Interest rate                                                                
  spread              3.69%      3.97%      3.88%      3.85%      3.97%       
                ========== ========== ========== ========== ==========        
                                                                              
 Net interest                                                                 
  margin              3.82%      4.10%      4.01%      3.99%      4.08%       
                ========== ========== ========== ========== ==========        
                                                                              
 Other operating                                                              
  income /                                                                    
  Average assets      1.52%      0.97%      0.64%      0.95%      0.62%       
                                                                              
 Other operating                                                              
  expense /                                                                   
  Average assets      3.20%      3.23%      2.95%      3.15%      2.86%       
                                                                              
 Efficiency ratio                                                             
  (other operating                                                            
  expense /                                                                   
  revenue)           63.68%     68.05%     66.67%     67.74%     64.00%       
                                                                              
 Return on                                                                    
  average assets      1.09%      0.92%      0.90%      0.91%      0.96%       
                                                                              
 Return on                                                                    
  average equity     11.22%      9.69%     12.52%     10.07%     13.29%       
                                                                              
 Return on                                                                    
  average                                                                     
  tangible                                                                    
  equity (1)         15.28%     13.36%     14.65%     13.27%     15.69%       
                                                                              
 Average equity /                                                             
  Average assets      9.71%      9.54%      7.17%      9.06%      7.19%       
                                                                              
 (1) Average non-interest-earning liabilities and average                     
     stockholders' equity have been restated to reflect adjustments           
     related to the tax treatment of certain elements of stock-based          
     compensation                                                             
                                                                              
 (2) Average tangible equity excludes goodwill                                
 ---------------------------------------------------------------------        
                                                                              
 Operating performance for the periods presented excluding the effects        
  of change in valuation of financial instruments carried at fair             
  value and the 2006 insurance recovery.                                      
                                                                              
 Other operating                                                              
  income (loss)                                                               
  EXCLUDING                                                                   
  change in                                                                   
  valuation of                                                                
  financial                                                                   
  instruments                                                                 
  carried at                                                                  
  fair value /                                                                
  Average assets      0.68%      0.69%      0.64%      0.67%      0.62%       
                                                                              
 Other operating                                                              
  expense                                                                     
  EXCLUDING                                                                   
  the 2006                                                                    
  insurance                                                                   
  recovery /                                                                  
  Average assets      3.20%      3.23%      2.95%      3.15%      3.02%       
                                                                              
 Efficiency ratio                                                             
  (other operating                                                            
  expense /                                                                   
  revenue)                                                                    
  EXCLUDING                                                                   
  change in                                                                   
  valuation                                                                   
  of financial                                                                
  instruments                                                                 
  carried at                                                                  
  fair value                                                                  
  and the 2006                                                                
  insurance                                                                   
  recovery           76.38%     72.38%     66.67%     72.18%     67.62%       
                                                                              
 Return on                                                                    
  average assets                                                              
  EXCLUDING                                                                   
  change in                                                                   
  valuation of                                                                
  financial                                                                   
  instruments                                                                 
  carried at                                                                  
  fair value                                                                  
  and the 2006                                                                
  insurance                                                                   
  recovery            0.55%      0.74%      0.90%      0.73%      0.85%       
                                                                              
 Return on                                                                    
  average equity                                                              
  EXCLUDING                                                                   
  change in                                                                   
  valuation of                                                                
  financial                                                                   
  instruments                                                                 
  carried at                                                                  
  fair value                                                                  
  and the 2006                                                                
  insurance                                                                   
  recovery            5.71%      7.79%     12.52%      8.05%     11.85%       
                                                                              
 Return on                                                                    
  average                                                                     
  tangible                                                                    
  equity                                                                      
  EXCLUDING                                                                   
  change in                                                                   
  valuation of                                                                
  financial                                                                   
  instruments                                                                 
  carried at                                                                  
  fair value                                                                  
  and the 2006                                                                
  insurance                                                                   
  recovery            7.78%     10.73%     14.65%     10.61%     13.99%       
                                                                              



 ADDITIONAL FINANCIAL INFORMATION
 ( Dollars in thousands )

                                   Dec 31,      Sep 30,      Dec 31,
                                    2007         2007         2006
                                 -----------  -----------  -----------
 NON-PERFORMING ASSETS:
 ----------------------
 Loans on non-accrual status
   Secured by real estate:
    One- to four-family          $     3,371  $     1,070  $     1,198
    Commercial                         1,357          544        4,215
    Multifamily                        1,222        1,250          792
    Construction and land             33,432       10,699        2,056
   Commercial business                 2,250        5,713        4,498
   Agricultural business,
    including secured by farmland        436          512          703
   Consumer                               --           --            1
                                 -----------  -----------  -----------
                                      42,068       19,788       13,463

 Loans more than 90 days
  delinquent, still on accrual
  Secured by real estate:
    One- to four-family                  221          54           593
    Commercial                            --           --           --
    Multifamily                           --           --           --
    Construction and land                 --           --           --
   Commercial business                    --           --           --
   Agricultural business,
    including secured by farmland         --           --           --
   Consumer                               94           78           --
                                 -----------  -----------  -----------
                                         315          132          593
                                 -----------  -----------  -----------
 Total non-performing loans           42,383       19,920       14,056
 Real estate owned ( REO )
  / Repossessed assets                 1,885        3,294          918
                                 -----------  -----------  -----------

    Total non-performing assets  $    44,268  $    23,214  $    14,974
                                 ===========  ===========  ===========


            

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