Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Banner Corporation First Quarter 2014 Conference Call and Webcast. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) I would now like to turn the conference over to Mr. Grescovich, President and CEO of Banner Corporation. Please go ahead, sir.

Thank you, George, and good morning everyone. I would also like to welcome you to the first quarter 2014 earnings call for Banner Corporation. As is customary, joining me on the call today is Rick Barton, our Chief Credit Officer; Lloyd Baker, our Chief Financial Officer; and Albert Marshall, the Secretary of the Corporation. Albert, would you please read our forward-looking Safe Harbor Statement?

Good morning. Our presentation today discusses Banner's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecast of financial or other performance measures and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question-and-answer period following management's discussion. These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and a recently filed Form 10-K for the period ended December 31, 2013. Forward-looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expectations.

Thank you, Al. As announced, Banner Corporation had another strong quarter of performance which reflected a good start for 2014, reporting a net profit available to common shareholders of $10.6 million or $0.54 per share for the period ended March 31, 2014. This compared to a net profit to common shareholders of $0.60 per share for the first quarter of 2013 and $0.60 per share in the fourth quarter of 2013. As you know, earnings in the fourth quarter of 2013 included a $3 million fee related to the termination of a proposed acquisition which net of related expenses added $0.08 per share to earnings in that quarter. The first quarter performance continued our positive momentum and further demonstrated that through the hard work of our employees throughout the Company, we continue the successful execution of our strategies and priorities to deliver sustainable profitability to Banner and expand our balance sheet with strong organic loan and deposit growth. Our return to profitability for the last 12 quarters further demonstrates that our strategic plan is effective and we continue building shareholder value. Our operating performance again this quarter was very solid when analyzing our core key metrics. Our first quarter of 2014 core revenue was a strong $51.4 million, despite slowing mortgage banking revenue due to a reduction in refinancing activity. Supported by an improved earning asset mix, our net interest margin remained above 4% and was 4.07% in the first quarter of 2014, and our cost of deposits again decreased in the most recent quarter to 22 basis points compared to 31 basis points in the first quarter of 2013. This performance resulted in a solid return on average assets of 0.97% in the quarter. This quarter's strength is reflective of the continued execution on our super community bank strategy…

Thanks Mark. Moderate risk profile, this term was used in our press release and by Mark this morning to characterize Banner's asset quality and loan portfolio. Our obvious goal will be to maintain this profile as we grow our portfolio and manage through future economic cycles. The strength of our current position is highlighted by quickly reviewing several key portfolio metrics. Recoveries on previously charged off loans more than offset first quarter losses, leaving us with a net recovery of $113,000. The losses taken were granular and not concentrated in any portfolio segment. Total non-performing assets declined another 9% from the linked quarter and are now 0.59% of total assets. This improvement was driven by reductions of REO and one- to four-family final loans more than 90 days past due and on accrual. Non-performing loans decreased $600,000 or 3% during the quarter. Classified loans in Banner's portfolio were $80 million versus $91 million at year-end 2013. This is a decrease of 12%. Classified loans now represent only 2.3% of total loans. Delinquent loans, including non-performing loans, were 0.7%. This is a small increase from the linked-quarter statistic of 0.64%. This type of fluctuation is normal when delinquencies are at this level. The provision for loan loss continues as a source of strength for the Company, even with another quarter of no provision. Average of non-performing loans is a strong 325%. The reserve to total loans also is strong at 2.11%, even after five consecutive quarters of no loan loss provision and the meaningful loan growth we have recorded over that same period of time. As I said at the close of my remarks last quarter, we are excited to have achieved a moderate risk profile for the Banner loan portfolio. This position along with the Company's strong capital ratios will allow us to continue executing our strategic plans which include further growth of the Company. With that, I'll turn the mike over to Lloyd for his comments.

Thank you, Rick, and good morning everyone. As mark has already indicated and as reported in our press release, our first quarter operating result reflect solid performance and a good start to 2014. This solid performance follows on the heels of two very successful years in 2012 and 2013 and continues to demonstrate the strength of our balance sheet, consistent earnings momentum, and the value of the Banner franchise. As reported, our net income available to common shareholders was $10.6 million or $0.54 per diluted share in the quarter ended March 31, 2014, compared to $11.6 million or $0.60 per share in both the immediately preceding quarter and the same quarter a year ago. As noted, the immediately preceding quarter results were augmented by the one-time termination fee for proposed acquisition which added $0.08 per share to earnings. Adjusting for that fee and the related cost, we actually experienced a $0.02 per share improvement in core earnings in the current quarter compared to the fourth quarter. Recognizing that the first quarter is always subject to pressures on revenues as a result of seasonal factors and a shorter day count, this improvement compared to the fourth quarter is encouraging. However, as I've noted on recent calls, our past success is making comparison to prior periods more challenging and our first quarter results, encouraging as they were, continue to reflect the difficult reality presented by the prolonged period of very low interest rates which again pressured asset yields and our net interest margin. While our net interest margin increased by 6 basis points compared to the fourth quarter as a result of strong loan growth and improvement in the yield on our securities portfolio, loan yields continued to decline, and despite further reduction in our funding costs, our net interest margin was…

Thank you, Lloyd, and thank you, Rick, for your comments. That concludes our prepared remarks, and George, we will now open the call and welcome your questions.

Thank you, sir. (Operator Instructions) Our first question is from the line of Jeff Rulis with D.A. Davidson. Please go ahead. Jeff Rulis - D.A. Davidson & Co.: Question on the loan growth. It's been pretty robust I guess. Any sense that there's an increase in demand happening in the region relative to – I guess it seems more than just beating out peer banks, the environment have been more about sort of market share stealing but do you have a sense that there's sort of an underpinning of real demand coming back?

Jeff, this is Rick. I'd make a couple of comments here. First of all, I think that we can give credit to our bankers who worked extremely hard to begin to drive this loan growth. Secondly, as we've talked consistently over the last three or four years, we've been making investment in our human capital and bankers through various sales and credit training activities as well as selectively adding product offerings to their menu and adding strategically additional bankers when it made sense. Along with that, we have seen an improving economy in the Northwest, and that combination of factors I think is driving the loan growth that you're seeing. Jeff Rulis - D.A. Davidson & Co.: Got you. Yes, not to discredit the work you've done, I guess just from an industry perspective, I guess and I'm talking more about the last couple of quarters, is there been a notable change in demand pickup?

Jeff, this is Mark. I think we've been saying for several quarters now that the economy in the Pacific Northwest, the economic drivers of the industries in the Northwest have fared much better through this economic cycle coming out than other parts of the country, and I think that's evidence as well in our loan book. So there is a pickup in demand on the business front. Jeff Rulis - D.A. Davidson & Co.: Fair enough. And maybe Lloyd, could you comment on just the mortgage banking line item, I guess is that approaching a trough or really could that approach zero, I guess just kind of the feel for what that line item may look like going forward?

So I hope and certainly believe that it's approaching the trough, Jeff. Actually, our purchase activity was stronger in terms of balances and the number of transactions in the first quarter of this year than it was in the first quarter of last year. Obviously the refinance activity has changed, but we're about 70% now purchase activity, and as I noted, more loan closings on purchase transactions than a year ago. Compared to the immediately preceding quarter, if you adjust for the $300,000 mortgage servicing rights valuation, we were only off $100,000 in mortgage banking revenues for the quarter. So, we've been investing in additional production capacity there as well and I'm reasonably optimistic we'll see stronger results throughout the balance of the year. Jeff Rulis - D.A. Davidson & Co.: And then maybe one last one on the branch acquisition, is that still set for a June close?

It is, late June, Jeff. Everything's lining up very well for that. Jeff Rulis - D.A. Davidson & Co.: Okay. And I don't know if you could just touch on the general overhead and fees you expect to kind of bring on on-board and perhaps any sort of margin impact, at least initially from that transaction?

Well, in terms of fee revenue, what's that, it's going to add you know 2% or 3% to total fee revenue based on the size of the branches acquired. Margin will probably be pretty negligible impact. The funding cost is low. It's a very attractive deposit franchise, and so their funding cost was – for those branches was slightly lower than ours for 2013, but I don't think you'll see a marginal impact – a meaningful impact on the margin there. What you will see is that it will help support continued growth as we're bringing on about $125 million, $130 million of deposits in excess of loans. Jeff Rulis - D.A. Davidson & Co.: And then the expense profile?

Well obviously it's going to add some expense, nothing unusual there, just consistent and proportionate with the size of the operation there relative to our entire operation. So again, 2%, 3%, 4% impact on expense base probably. Jeff Rulis - D.A. Davidson & Co.: Okay, that's it for me. Thanks.

A comment I suppose I should make on that, Jeff, is that you will see, I don't know the exact magnitude of it yet but you will see a one-time bargain purchase gain [as a] (ph) result of that transaction in the June quarter as well.

Thank you and our next question comes from the line of Jackie Chimera with KBW Financial. Please go ahead. Jackie Chimera - Keefe, Bruyette & Woods: Mark, I wondered if you could touch a little bit on the loan portfolio, specifically on construction. I know that it had really solid growth in the quarter. Was any of that – was there any sort of a mitigating impact by construction loans pulling into other loan books during the quarter?

Thank you for the question, Jackie. I'll ask Rick to respond to that.

We did have solid loan growth. A part of that was driven by the continued funding of some multi-family commitments that we made during 2013, along with continued activity in the residential construction portfolio. In terms of what's been happening with those loans is the construction phase is completed. Obviously the res construction has been sold to consumers and that inventory is aging out very, very well. And with respect to the larger commercial commitments, we're seeing most of those or a good chunk of those flow into the institutional markets rather than into our permanent loan portfolio. Jackie Chimera - Keefe, Bruyette & Woods: Okay, so most construction is kind of building up and moving out?

Yes.

Yes, the velocity and the – this is Mark again – the velocity and the construction portfolio is still very, very strong, and the competition for permanent financing is very strong as well which is why most of it is going to institutions rather than us booking it. Jackie Chimera - Keefe, Bruyette & Woods: Were you surprised by the strength of the loan generation in 1Q, just given seasonal factors and everything else?

This is Mark. No. I think we've been telegraphing for several quarters now that our pipeline have been building, that our sales process along with our product offering additions and the additional bankers we added, we felt confident that the turn was going to come and we saw is solidly in the fourth quarter and the latter half of 2013 but more solidly in the fourth quarter and it carried that momentum into the first quarter. So, I'm not surprised by it and we've been telegraphing that. Jackie Chimera - Keefe, Bruyette & Woods: Okay, and would you say that it's fair to say that the momentum will continue over the next couple of quarters?

I would tell you that we're optimistic about our loan pipeline but the growth factor that we have I think is extremely solid and it will be very reliant now on the economy, of whether this pace continues. So I don't know that it's going to be as robust as it was in the first quarter, but right now every indicator suggests that our pipelines are still strong and we're very optimistic about loan growth. Jackie Chimera - Keefe, Bruyette & Woods: Okay. And just turning quickly to the loan-to-deposit ratio, I know you like that 95% level, what sort of things you have in place just to kind of attract deposit growth alongside loan growth?

The first thing is we just bought $225 million in new deposits, fresh deposits for the Company, and a very attractive acquisition. So that's one thing, that's why that acquisition outside of being financially attractive made sense for the Company. That's number one. And number two is, we still maintain our goal of having a loan-to-deposit ratio between 90% and 95%. So we've continued to augment and grow our core deposit base as evidenced by this quarter's improvement, and our client acquisition has been very strong, it continues to be strong. So we're going to just right now continue most of our organic growth strategies, we're going to augment them a little bit with some activity in the markets that have much more disruption in them such as the Idaho market, and we obviously will try and fill in with deposit franchises where appropriate, very similar to what we did in Coos County. Jackie Chimera - Keefe, Bruyette & Woods: Okay, great. Thanks for the color, Mark. I appreciate it.

(Operator Instructions) Our next question is from the line of Don Worthington with Raymond James. Please go ahead.

Couple of things. One, you mentioned in the press release the broker deposit increase was primarily to support loan growth. Look like there was a small increase in FHLB advances also. Could those be just characterized as short-term and could we expect to see maybe those paydown when you get the deposits on-board?

This is Lloyd. That certainly is our expectation at the moment. I think I made the point, and if I didn't I should have, that we do have a very definite seasonal pattern in our deposit activity in the first quarter and it was very evident in fact in non-interest-bearing accounts since they were down just slightly during the quarter. So there was some temporary borrowing going on to fund that strong loan demand. At the same time, as we noted, those accounts, total accounts year-over-year are up 14%. So, if that seasonal pattern plays out, and it is starting to as we're [going] (ph) through the second quarter now, we would expect that the need for broker deposits will diminish some. And yes, we did take those down with rather short maturities.

Okay, great. And then is the gain on the branch purchase subject to any adjustment?

We will need to go through all sorts of fair value adjustments and expense recognition on that transaction before we get to the final amount of that gain. So I don't expect to be the full $7 million of that.

Okay, all right, thanks. And then I guess lastly, any update just in terms of M&A activity in the region and kind of what you're seeing in terms of bid ask spreads versus say last quarter?

Don, this is Mark. I don't think that it's changed dramatically from quarter to quarter. What I do think is happening is, most of the organizations are advancing their tangible book value upwards just as Banner is. So the values I think for those franchises are actually going up. But I would characterize the bid ask as still pretty wide and I don't think it's change much.

Okay, great. Thank you.

Thank you, and I'm showing no further questions. I'll turn the call back to Mr. Grescovich for closing comments.

Thank you, George. As I stated, we are very pleased with our strong first quarter performance and the reinforcing evidence that we are making substantial and sustainable progress on our disciplined strategic plan to build shareholder value by executing on our super community bank model, by growing market share, as evidenced by our expanding balance sheet, strengthening our deposit franchise, improving our core operating performance and maintaining a moderate risk profile. I would like to thank all my colleagues who are driving this solid performance for our Company. Thank you for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future. Have a great day everyone. Thank you.

Ladies and gentlemen, if you would like to listen to a replay of today's conference, it will be available on bannerbank.com. We appreciate your participation. You may now disconnect.