GlobeNewswire Inc | Oct 21, 2020 04:00PM EDT

October 21, 2020

WALLA WALLA, Wash., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (Banner), the parent company of Banner Bank and Islanders Bank, today reported net income of $36.5 million, or $1.03 per diluted share, for the third quarter 2020, compared to $23.5 million, or $0.67 per diluted share, in the preceding quarter and $39.6 million, or $1.15 per diluted share, in the third quarter of 2019. Banners third quarter and year-to-date earnings reflect the continuing impact of the global COVID-19 pandemic. In the first nine months of 2020, net income was $77.0 million, or $2.17 per diluted share, compared to $112.6 million, or $3.23 per diluted share, in the first nine months a year ago. The results for the first nine months of 2020 include $1.5 million of acquisition-related expenses, compared to $3.1 million of acquisition-related expenses in the first nine months of 2019.

Banner also announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be payable November 12, 2020, to common shareholders of record on November 3, 2020.

The continued successful execution of our super community bank strategy generated solid revenue growth compared to both the preceding quarter and the year ago quarter. Mortgage banking revenues more than doubled compared to a year ago, reflecting strong refinance demand and higher margins due to decreasing market interest rates, said Mark Grescovich, President and CEO. Third quarter earnings were impacted by a number of items, including the allowance for credit losses based on the impact of the COVID-19 pandemic on the economy. As an additional way to support the communities we serve, during this period of economic adversity, the company committed $1.5million to selected Community Development Financial Institutions (CDFIs) in support of minority-owned small businesses as well as businesses located in economically disadvantaged rural and urban communities. Further, as of September30, 2020, Banner has provided SBA Paycheck Protection Program loans totaling nearly $1.15 billion to 9,103 businesses and provided deferred payments, or waived interest, on 3,370 loans totaling $1.09 billion. We will continue to do the right thing for our clients, our communities, our colleagues, our company and our shareholders while providing a consistent and reliable source of commerce and capital through all economic cycles and changing events.

Due to the pandemic, and its subsequent impact on our communities, we have proactively downgraded certain modified loans and other loans we consider at risk, Grescovich said. As a result, along with recent further deterioration in economic conditions, we increased the allowance for credit losses to $168.0 million with the addition of $13.6 million in credit loss provisions during the quarter ended September30, 2020. This provision compares to a $29.5 million provision for credit losses during the preceding quarter and a $2.0 million provision for loan losses in the third quarter a year ago. The allowance for credit losses - loans was 1.65% of total loans and 482% of non-performing loans at the end of the third quarter of 2020.

At September30, 2020, Banner Corporation had $14.64 billion in assets, $10.00 billion in net loans and $12.22 billion in deposits. Banner operates 170 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

COVID-19 Pandemic Update

-- SBA Paycheck Protection Program. The U.S. Small Business Administration (SBA) provides assistance to small businesses impacted by COVID-19 through the Paycheck Protection Program (PPP), which was designed to provide near-term relief to help small businesses sustain operations. As of September30, 2020, Banner had funded 9,103 applications totaling $1.15 billion of loans in its service area through the PPP program. The deadline for PPP loan applications to the SBA was August 8, 2020. Banner is no longer accepting new applications for PPP loans and is preparing to process applications for PPP loan forgiveness beginning in the fourth quarter of 2020. Banner will continue to assist small businesses with other borrowing options as they become available. -- Loan Accommodations. Banner is continuing to offer payment and financial relief programs for borrowers impacted by COVID-19. These programs include initial loan payment deferrals or interest-only payments for up to 90 days, waived late fees, and, on a more limited basis, waived interest and temporarily suspended foreclosure proceedings. Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or may be eligible for an additional deferral period for up to 90 days. In addition, Banner has entered into payment forbearance agreements with other customers for periods of up to six months. Year to date, Banner has deferred payment or waived interest on 3,370 loans totaling $1.09 billion. Through September30, 2020 the deferral period had ended for approximately 78%, or $849.7million of these loans, leaving $239.6million still on deferral. Of the loans still on deferral, 107 loans totaling $160.4million have received a second deferral. Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings through September30, 2020 pursuant to applicable accounting and regulatory guidance. -- Allowance for Credit Losses - Loans. Banner recorded a provision for credit losses of $13.6 million for the third quarter of 2020, compared to a $29.5 million provision in the preceding quarter and a $2.0 million provision for loan losses in the third quarter a year ago. The provisions for the current and preceding quarters reflect expected lifetime credit losses based upon the conditions and economic outlook that existed as of September30, 2020 and June 30, 2020, respectively. -- Branch Operations, IT Changes and One-Time Expenses. Banner has taken various steps to help protect customers and staff by limiting branch activities to appointment only and use of drive-up facilities, and by encouraging the use of digital and electronic banking channels. In select markets on a test basis, Banner has begun taking steps to resume more normal branch activities with specific guidelines in place to ensure the safety of its clients and personnel. To further the well-being of staff and customers, Banner implemented measures to allow employees to work from home to the extent practicable. To facilitate this approach, Banner allocated additional computer equipment to staff and enhanced Banners network capabilities with several upgrades. These expenses plus other expenses incurred in response to the COVID-19 pandemic resulted in $778,000 of related costs during the third quarter of 2020, compared to $2.2 million of related costs in the second quarter of 2020. -- Capital Management. At September30, 2020, the tangible common shareholders equity to tangible assets* ratio was 8.78% and Banners capital was well in excess of all regulatory requirements. On June 30, 2020, Banner issued and sold in an underwritten offering $100.0 million aggregate principal amount of 5.000% Fixed-to-Floating Rate Subordinated Notes due 2030 (Notes) at a public offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately $98.1 million. In response to the COVID-19 pandemic outbreak and to preserve capital, Banner has suspended repurchases of shares under its stock repurchase program until further notice and will closely monitor capital levels going forward.

Third Quarter 2020 Highlights

-- Revenues increased to $149.2 million, compared to $147.3 million in the preceding quarter, and increased 9% when compared to $137.5 million in the third quarter a year ago. -- Net interest income, before the provision for credit losses, increased to $121.0 million in the third quarter of 2020, compared to $119.6 million in the preceding quarter and $116.6 million in the third quarter a year ago. -- Net interest margin was 3.65%, compared to 3.81% in the preceding quarter and 4.25% in the third quarter a year ago. -- Net interest margin on a tax equivalent basis was 3.72%, compared to 3.87% in the preceding quarter and 4.29% in the third quarter a year ago. -- Mortgage banking revenues increased 17% to $16.6 million, compared to $14.1 million in the preceding quarter, and increased 150% compared to $6.6 million in the third quarter a year ago, reflecting strong refinance and purchase demand coupled with higher margins due to decreasing market interest rates. -- Return on average assets was 1.01%, compared to 0.68% in the preceding quarter and 1.31% in the third quarter a year ago. -- Net loans receivable decreased to $10.00 billion at September30, 2020, compared to $10.13 billion at June 30, 2020, and increased 14% when compared to $8.74 billion at September30, 2019. -- Non-performing assets decreased to $36.7 million, or 0.25% of total assets, at September30, 2020, compared to $39.9 million, or 0.28% of total assets in the preceding quarter, and increased from $18.6 million, or 0.15% of total assets, at September30, 2019. -- Provision for credit losses - loans was $13.6 million, and the allowance for credit losses - loans was $168.0 million, or 1.65% of total loans receivable, as of September30, 2020, compared to $156.4 million, or 1.52% of total loans receivable as of June 30, 2020 and $97.8 million or 1.11% of total loans receivable as of September30, 2019. -- A $1.5 million provision for credit losses - unfunded loan commitments was recorded and the allowance for credit losses - unfunded loan commitments was $12.1 million as of September30, 2020, compared to $10.6 million as of June 30, 2020. -- Core deposits increased 3% to $11.30 billion at September30, 2020, compared to $10.97 billion at June 30, 2020, and increased 33% compared to $8.51 billion a year ago. Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) represented 93% of total deposits at September30, 2020. -- Dividends to shareholders were $0.41 per share in the quarter ended September30, 2020. -- Common shareholders equity per share increased 1% to $46.83 at September30, 2020, compared to $46.22 at the preceding quarter end, and increased 5% from $44.80 a year ago. -- Tangible common shareholders equity per share* increased 2% to $35.56 at September30, 2020, compared to $34.89 at the preceding quarter end, and increased 4% from $34.10 a year ago.

*Tangible common shareholders equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income before provision for loan losses and non-interest income) and the adjusted efficiency ratio (which excludes acquisition-related expenses, COVID-19 expenses, amortization of core deposit intangibles, real estate owned gain (loss), Federal Home Loan Bank (FHLB) prepayment penalties and state/municipal taxes from non-interest expense divided by adjusted revenue) 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 useful and comparative information to assess trends in Banners core operations reflected in the current quarters results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

Significant Recent Initiatives and Events

On September 25, 2020, Banner completed the consolidation of six branches. In addition, Banner has made the decision to consolidate another 14 branches in December of 2020. Client adoption of mobile and digital banking accelerated during the second and third quarters, while physical branch transaction volume declined. We believe this shift in client service delivery channel preference will sustain after the pandemic social distancing related restrictions have ended.

On July 22, 2020, Banner announced plans to merge Islanders Bank into Banner Bank. Regulatory approvals for the merger were received in October 2020, and the merger is expected to be completed in the first quarter of 2021.

On November 1, 2019, Banner completed the acquisition of AltaPacific Bancorp (AltaPacific) and its wholly-owned subsidiary, AltaPacific Bank, of Santa Rosa, California. At closing, AltaPacific Bank had six branch locations, including one in Northern California and five in Southern California. Pursuant to the previously announced terms, AltaPacific shareholders received 0.2712 shares of Banner common stock in exchange for each share of AltaPacific common stock, plus cash in lieu of any fractional shares and cash to buyout AltaPacific stock options for a total consideration paid of $87.6 million.

The AltaPacific merger was accounted for using the acquisition method of accounting. Accordingly, the assets (including identifiable intangible assets) and the liabilities of AltaPacific were measured at their respective estimated fair values as of the merger date. The excess of the purchase price over the fair value of the net assets acquired was attributed to goodwill. The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date. The acquisition accounting is subject to adjustment within a measurement period of one year from the acquisition date. The acquisition provided $425.7 million of assets, $332.4 million of loans, and $313.4 million of deposits to Banner. During the first quarter of 2020, Banner completed the integration of AltaPacific systems into Banners core systems and closure of overlapping branches.

Income Statement Review

Net interest income, before the provision for credit losses, was $121.0 million in the third quarter of 2020, compared to $119.6 million in the preceding quarter and $116.6 million in the third quarter a year ago.

Banners net interest margin on a tax equivalent basis was 3.72% for the third quarter of 2020, a 15 basis-point decrease compared to 3.87% in the preceding quarter and a 57 basis-point decrease compared to 4.29% in the third quarter a year ago.

During the quarter, the low interest rate environment putting downward pressure on adjustable rate instruments combined with the impact of the low loan yields of the SBA PPP loan portfolio, and growth in core deposits, resulting in significant growth in low yielding interest-bearing deposits, adversely impacted our net interest margin, said Grescovich. Acquisition accounting adjustments added seven basis points to the net interest margin in both the current quarter and in the preceding quarter and six basis points in the third quarter a year ago. The total purchase discount for acquired loans was $17.9 million at September30, 2020, compared to $20.2 million at June 30, 2020, and $21.3 million at September30, 2019. In the first nine months of the year, Banners net interest margin on a tax equivalent basis was 3.93% compared to 4.38% in the first nine months of 2019.

Average interest-earning asset yields decreased 18 basis points to 3.98% in the third quarter compared to 4.16% for the preceding quarter and decreased 85 basis points compared to 4.83% in the third quarter a year ago. Average loan yields decreased ten basis points to 4.47% compared to 4.57% in the preceding quarter and decreased 77 basis points compared to 5.24% in the third quarter a year ago. Loan discount accretion added nine basis points to loan yields in the third quarter of 2020, compared to eight basis points in the preceding quarter and seven basis points in the third quarter a year ago. Deposit costs were 0.17% in the third quarter of 2020, a six basis-point decrease compared to the preceding quarter and a 25 basis-point decrease compared to the third quarter a year ago. The decrease in deposit costs during the current quarter compared to the preceding quarter was primarily the result of decreases in market interest rates earlier this year, as changes in the average rate paid on interest-bearing deposits tend to lag changes in market interest rates. The total cost of funds was 0.27% during the third quarter of 2020, a four basis-point decrease compared to the preceding quarter and a 30 basis-point decrease compared to the third quarter a year ago.

Banner recorded a $13.6 million provision for credit losses in the current quarter, compared to $29.5 million in the prior quarter and $2.0 million in the same quarter a year ago as calculated under the prior incurred loss methodology. The provisions for the current and preceding quarters reflect expected lifetime credit losses based upon the current conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of September30, 2020 and June 30, 2020, respectively.

Total non-interest income was $28.2 million in the third quarter of 2020, compared to $27.7 million in the preceding quarter and $20.9 million in the third quarter a year ago. Deposit fees and other service charges were $8.7 million in the third quarter of 2020, compared to $7.5 million in the preceding quarter and $10.3 million in the third quarter a year ago. The decrease in deposit fees and other service charges from the third quarter a year ago is primarily a result of fee waivers and reduced transaction deposit account activity since the start of the COVID-19 pandemic. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, increased to $16.6 million in the third quarter, compared to $14.1 million in the preceding quarter and $6.6 million in the third quarter of 2019. The higher mortgage banking revenue quarter-over-quarter primarily reflects an increase in the gain on sale spread on one- to four-family held for sale loans. The increases compared to the third quarter of 2019 were primarily due to increased production of one- to four-family held-for-sale loans due to increased production related to refinance activity as well as increased gains on the sale of multifamily held-for-sale loans. Home purchase activity accounted for 56% of one- to four-family mortgage loan originations in the third quarter of 2020, compared to 42% in the prior quarter and 56% in the third quarter of 2019. In the first nine months of 2020, total non-interest income increased 22% to $75.1 million, compared to $61.7 million in the first nine months of 2019.

Banners third quarter 2020 results included a $37,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading as a result of the tightening of market spreads during the quarter, and a $644,000 net gain on the sale of securities, primarily as a result of the gain recognized on the sale of our Visa Class B shares. In the preceding quarter, results included a $2.2 million net gain for fair value adjustments and a $93,000 net gain on the sale of securities. In the third quarter a year ago, results included a $69,000 net loss for fair value adjustments and a $2,000 net loss on the sale of securities.

Banners total revenue increased 1% to $149.2 million for the third quarter of 2020, compared to $147.3 million in the preceding quarter, and increased 9% compared to $137.5 million in the third quarter a year ago. Year-to-date, total revenues increased 6% to $435.0 million compared to $411.1 million for the same period one year earlier. Adjusted revenue* (the total of net interest income before provision for credit losses and total non-interest income excluding the net gain and loss on the sale of securities and the net change in valuation of financial instruments) was $148.6 million in the third quarter of 2020, compared to $145.0 million in the preceding quarter and $137.6 million in the third quarter of 2019. In the first nine months of the year, adjusted revenue* was $436.5 million, compared to $411.3 million in the first nine months of 2019.

Total non-interest expense was $91.6 million in the third quarter of 2020, compared to $89.6 million in the preceding quarter and $87.3 million in the third quarter of 2019. The increase in non-interest expense reflects an increase in the provision for credit losses - unfunded commitments in the current quarter. The current quarter includes a $1.5 million of provision for credit losses - unfunded loan commitments compared to a $905,000 recapture of provision for the prior quarter and no provision for the year ago quarter. A reduction in capitalized loan origination costs during third quarter of 2020, primarily related to the decline in the origination of SBA PPP loans compared to the prior quarter, also contributed to the quarter-over-quarter increase in non-interest expense. The decrease in COVID-19 expenses during the current quarter as well as lower salary and employee benefits as a result of lower medical claims partially offset these increases. The year-over-year increase also reflects an FDIC credit of $2.7 million for previously paid deposit insurance premiums which resulted in a net deposit insurance benefit of $1.6 million for the quarter ended September30, 2019. Acquisition-related expenses were $5,000 for the third quarter of 2020, compared to $336,000 for the preceding quarter and $676,000 in the third quarter a year ago. Year-to-date, total non-interest expense was $276.4 million, compared to $264.0 million in the same period a year earlier. Banners efficiency ratio was 61.35% for the current quarter, compared to 60.85% in the preceding quarter and 63.50% in the year ago quarter. Banners adjusted efficiency ratio* was 59.05% for the current quarter, compared to 57.95% in the preceding quarter and 60.71% in the year ago quarter.

For the third quarter of 2020, Banner had $7.5 million in state and federal income tax expense for an effective tax rate of 17.0%, reflecting the benefits from tax exempt income. Banners statutory income tax rate is 23.5%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased 2% to $14.64 billion at September30, 2020, compared to $14.41 billion at June 30, 2020, and increased 21% when compared to $12.10 billion at September30, 2019. The total of securities and interest-bearing deposits held at other banks was $2.63 billion at September30, 2020, compared to $2.30 billion at June 30, 2020 and $1.87 billion at September30, 2019. The average effective duration of Banner's securities portfolio was approximately 4.0 years at September30, 2020, compared to 3.1 years at September30, 2019.

Net loans receivable decreased 1% to $10.00 billion at September30, 2020, compared to $10.13 billion at June 30, 2020, and increased 14% when compared to $8.74 billion at September30, 2019. The year-over-year increase in net loans reflects the origination of SBA PPP loans, primarily during the second quarter of 2020, which totaled $1.15 billion as of September30, 2020 and also included $332.4 million of portfolio loans acquired in the AltaPacific acquisition during the fourth quarter of 2019. Commercial real estate and multifamily real estate loans decreased to $4.07 billion at September30, 2020, compared to $4.11 billion at June 30, 2020, and increased 11% compared to $3.67 billion a year ago. Commercial business loans decreased 1% to $3.11 billion at September30, 2020, compared to $3.15 billion at June 30, 2020, and increased 52% compared to $2.05 billion a year ago primarily due to SBA PPP loans. Agricultural business loans decreased to $326.2 million at September30, 2020, compared to $328.1 million three months earlier and $356.0 million a year ago. Total construction, land and land development loans were $1.27 billion at September30, 2020, a 3% increase from $1.24 billion at June 30, 2020, and a 9% increase compared to $1.16 billion a year earlier. Consumer loans decreased to $622.8 million at September30, 2020, compared to $642.4 million at June 30, 2020, and $685.1 million a year ago. One- to four-family loans decreased to $771.4 million at September30, 2020, compared to $817.8 million at June 30, 2020, and $909.0 million a year ago.

Loans held for sale were $185.9 million at September30, 2020, compared to $258.7 million at June 30, 2020, and $244.9 million at September30, 2019. The volume of one- to four- family residential mortgage loans sold was $327.7 million in the current quarter, compared to $292.4 million in the preceding quarter and $204.6 million in the third quarter a year ago. During the third quarter of 2020, Banner sold $108.6 million in multifamily loans compared to $3.1 million in the preceding quarter and $79.4 million in the third quarter a year ago. The lower level of multifamily loan sales in the second quarter of 2020 reflects a temporary disruption in the secondary market for multifamily loans as a result of the COVID-19 pandemic.

Total deposits increased 2% to $12.22 billion at September30, 2020, compared to $12.02 billion at June 30, 2020, and increased 26% when compared to $9.73 billion a year ago. The year-over-year increase in total deposits was due primarily to SBA PPP loan funds deposited into client accounts and an increase in deposits accounts due to changes in spending habits during the COVID-19 pandemic. The year-over-year increase in deposits also included $313.4 million in deposits acquired in the AltaPacific acquisition during the fourth quarter of 2019. Non-interest-bearing account balances increased 2% to $5.41 billion at September30, 2020, compared to $5.28 billion at June 30, 2020, and increased 39% compared to $3.89 billion a year ago. Core deposits increased 3% from the prior quarter and increased 33% compared to a year ago and represented 93% of total deposits at September30, 2020, compared to 91% at June 30, 2020. Certificates of deposit decreased 12% to $915.4 million at September30, 2020, compared to $1.04 billion at June 30, 2020, and decreased 25% compared to $1.22 billion a year earlier. Banner had no brokered deposits at September30, 2020, compared to $119.4 million in brokered deposits at June 30, 2020 and $299.5 million a year ago. FHLB borrowings totaled $150.0 million at September30, 2020, compared to $150.0 million at June 30, 2020, and $382.0 million a year earlier.

At September30, 2020, total common shareholders equity was $1.65 billion, or 11.25% of assets, compared to $1.63 billion or 11.28% of assets at June 30, 2020, and $1.53 billion or 12.65% of assets a year ago. At September30, 2020, tangible common shareholders equity*, which excludes goodwill and other intangible assets, net, was $1.25 billion, or 8.78% of tangible assets*, compared to $1.23 billion, or 8.76% of tangible assets, at June 30, 2020, and $1.17 billion, or 9.93% of tangible assets, a year ago. Banners tangible book value per share* increased to $35.56 at September30, 2020, compared to $34.10 per share a year ago.

Banner and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as well-capitalized. At September30, 2020, Banner's common equity Tier 1 capital ratio was 11.13%, its Tier 1 leverage capital to average assets ratio was 9.56%, and its total capital to risk-weighted assets ratio was 14.65%.

Credit Quality

The allowance for credit losses - loans was $168.0 million at September30, 2020, or 1.65% of total loans receivable outstanding and 482% of non-performing loans, compared to $156.4 million at June 30, 2020, or 1.52% of total loans receivable outstanding and 418% of non-performing loans, and $97.8 million at September30, 2019, or 1.11% of total loans receivable outstanding and 536% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments which was $12.1 million at September30, 2020, compared to $10.6 million at June 30, 2020 and $2.6 million at September30, 2019. Net loan charge-offs totaled $2.0 million in the third quarter of 2020, compared to net loan charge-offs of $3.7 million in the preceding quarter and $2.5 million of net charge-offs in the third quarter a year ago. Banner recorded a $13.6 million provision for credit losses in the current quarter, compared to $29.5 million in the prior quarter and $2.0 million in the year ago quarter primarily due to the further deterioration in economic variables, as a result of the COVID-19 pandemic, utilized to forecast credit losses. Non-performing loans were $34.8 million at September30, 2020, compared to $37.4 million at June 30, 2020, and $18.3 million a year ago. Real estate owned and other repossessed assets were $1.8 million at September30, 2020, compared to $2.4 million at June 30, 2020, and $343,000 a year ago.

In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net purchase discount to the loans contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for credit losses is recorded for acquired loans at the acquisition date. At September30, 2020, the total purchase discount for acquired loans was $17.9 million.

Banners total substandard loans were $423.2 million at September30, 2020, compared to $359.8 million at June 30, 2020, and $113.2 million a year ago. The increase in substandard loans during the most recent quarters primarily reflects Banner proactively downgrading loans in industries most at risk due to COVID-19.

Banners total non-performing assets were $36.7 million, or 0.25% of total assets, at September30, 2020, compared to $39.9 million, or 0.28% of total assets, at June 30, 2020, and $18.6 million, or 0.15% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday, October 22, 2020, at 8:00 a.m. PDT, to discuss its third quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one week at (877) 344-7529 using access code 10147897, or at www.bannerbank.com.

About the Company

Banner Corporation is a $14.64 billion bank holding company operating two commercial banks in four Western states through a network of branches offering 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.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the SEC), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases may, believe, will, will likely result, are expected to, will continue, is anticipated, estimate, project, plans, potential, or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner. Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banners operating and stock price performance.

The COVID-19, pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banners activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banners business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF Quarters Ended Nine Months EndedOPERATIONS(in thousands June 30,except shares and Sep 30, 2020 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019per share data) INTEREST INCOME: Loans receivable $ 116,716 $ 115,173 $ 118,096 $ 350,815 $ 350,558 Mortgage-backed 7,234 7,983 9,415 24,354 29,716 securitiesSecurities and cash 5,631 5,591 3,925 14,824 11,996 equivalents 129,581 128,747 131,436 389,993 392,270 INTEREST EXPENSE: Deposits 5,179 6,694 10,014 20,623 27,680 Federal Home Loan 988 984 3,107 4,036 9,953 Bank advancesOther borrowings 128 238 82 482 209 Junior subordinateddebentures and 2,260 1,251 1,612 4,988 5,008 subordinated notes 8,555 9,167 14,815 30,129 42,850 Net interest incomebefore provision 121,026 119,580 116,621 359,864 349,420 for credit lossesPROVISION FOR 13,641 29,528 2,000 64,917 6,000 CREDIT LOSSESNet interest income 107,385 90,052 114,621 294,947 343,420 NON-INTEREST INCOME:Deposit fees andother service 8,742 7,546 10,331 26,091 36,995 chargesMortgage banking 16,562 14,138 6,616 40,891 15,967 operationsBank-owned life 1,286 2,317 1,076 4,653 3,475 insuranceMiscellaneous 951 1,427 2,914 5,017 5,431 27,541 25,428 20,937 76,652 61,868 Net gain (loss) on 644 93 (2 ) 815 (29 )sale of securitiesNet change invaluation offinancial 37 2,199 (69 ) (2,360 ) (172 )instruments carriedat fair valueTotal non-interest 28,222 27,720 20,866 75,107 61,667 incomeNON-INTEREST EXPENSE:Salary and employee 61,171 63,415 59,090 184,494 169,359 benefitsLess capitalizedloan origination (8,517 ) (11,110 ) (7,889 ) (25,433 ) (20,137 )costsOccupancy and 13,022 12,985 12,566 39,114 39,013 equipmentInformation /computer data 6,090 6,084 5,657 17,984 16,256 servicesPayment and card 4,044 3,851 4,330 12,135 12,355 processing servicesProfessional and 2,368 2,163 2,704 6,450 7,474 legal expensesAdvertising and 1,105 652 2,221 3,584 5,815 marketingDeposit insurance 1,628 1,705 (1,604 ) 4,968 1,232 expenseState/municipalbusiness and use 1,196 1,104 1,011 3,284 2,963 taxesReal estate (11 ) 4 126 93 263 operationsAmortization ofcore deposit 1,864 2,002 1,985 5,867 6,090 intangiblesProvision/(recapture) forcredit losses - 1,539 (905 ) ? 2,356 ? unfunded loancommitmentsMiscellaneous 5,285 5,199 6,435 16,841 20,230 90,784 87,149 86,632 271,737 260,913 COVID-19 expenses 778 2,152 ? 3,169 ? Acquisition-related 5 336 676 1,483 3,125 expensesTotal non-interest 91,567 89,637 87,308 276,389 264,038 expenseIncome beforeprovision for 44,040 28,135 48,179 93,665 141,049 income taxesPROVISION 7,492 4,594 8,602 16,694 28,426 FORINCOME TAXESNET INCOME $ 36,548 $ 23,541 $ 39,577 $ 76,971 $ 112,623 Earnings per shareavailable to common shareholders:Basic $ 1.04 $ 0.67 $ 1.15 $ 2.18 $ 3.24 Diluted $ 1.03 $ 0.67 $ 1.15 $ 2.17 $ 3.23 Cumulativedividends declared $ 0.41 $ ? $ 0.41 $ 0.82 $ 1.23 per common shareWeighted averagecommon shares outstanding:Basic 35,193,109 35,189,260 34,407,462 35,285,567 34,760,607 Diluted 35,316,679 35,283,690 34,497,994 35,524,771 34,850,006 Increase (decrease)in common shares 669 55,440 (400,286 ) (593,008 ) (1,009,415 )outstanding

FINANCIALCONDITION Percentage Change(in thousands except Prior Yrshares and per share Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019 Prior Qtr Qtrdata) ASSETS Cash and due from $ 289,144 $ 291,036 $ 234,359 $ 250,671 (0.7 ) % 15.3 %banksInterest-bearing 416,394 128,938 73,376 73,785 222.9 % 464.3 %depositsTotal cash and cash 705,538 419,974 307,735 324,456 68.0 % 117.5 %equivalentsSecurities - trading 23,276 23,239 25,636 25,672 0.2 % (9.3 ) %Securities - 1,758,384 1,706,781 1,551,557 1,539,908 3.0 % 14.2 %available for saleSecurities - held to 429,033 441,075 236,094 230,056 (2.7 ) % 86.5 %maturityTotal securities 2,210,693 2,171,095 1,813,287 1,795,636 1.8 % 23.1 %Equity securities 450,255 340,052 ? ? 32.4 % nmFederal Home Loan 16,363 16,363 28,342 25,623 ? % (36.1 ) %Bank stockLoans held for sale 185,938 258,700 210,447 244,889 (28.1 ) % (24.1 ) %Loans receivable 10,163,917 10,283,999 9,305,357 8,835,368 (1.2 ) % 15.0 %Allowance for credit (167,965 ) (156,352 ) (100,559 ) (97,801 ) 7.4 % 71.7 %losses - loansNet loans receivable 9,995,952 10,127,647 9,204,798 8,737,567 (1.3 ) % 14.4 %Accrued interest 48,321 48,806 37,962 40,033 (1.0 ) % 20.7 %receivableReal estate owned 1,795 2,400 814 228 (25.2 ) % 687.3 %held for sale, netProperty and 171,576 173,360 178,008 171,279 (1.0 ) % 0.2 %equipment, netGoodwill 373,121 373,121 373,121 339,154 ? % 10.0 %Other intangibles, 23,291 25,155 29,158 26,610 (7.4 ) % (12.5 ) %netBank-owned life 191,755 190,468 192,088 179,076 0.7 % 7.1 %insuranceOther assets 267,477 258,466 228,271 213,291 3.5 % 25.4 %Total assets $ 14,642,075 $ 14,405,607 $ 12,604,031 $ 12,097,842 1.6 % 21.0 %LIABILITIES Deposits: Non-interest-bearing $ 5,412,570 $ 5,281,559 $ 3,945,000 $ 3,885,210 2.5 % 39.3 %Interest-bearingtransaction and 5,887,419 5,692,715 4,983,238 4,624,970 3.4 % 27.3 %savings accountsInterest-bearing 915,352 1,042,006 1,120,403 1,218,591 (12.2 ) % (24.9 ) %certificatesTotal deposits 12,215,341 12,016,280 10,048,641 9,728,771 1.7 % 25.6 %Advances fromFederal Home Loan 150,000 150,000 450,000 382,000 ? % (60.7 ) %BankCustomer repurchaseagreements and other 176,983 166,084 118,474 120,014 6.6 % 47.5 %borrowingsSubordinated notes, 98,114 98,140 ? ? ? % nmnetJunior subordinateddebentures at fair 109,821 109,613 119,304 113,417 0.2 % (3.2 ) %valueAccrued expenses and 200,038 194,964 227,889 181,351 2.6 % 10.3 %other liabilitiesDeferred 45,249 45,423 45,689 41,354 (0.4 ) % 9.4 %compensationTotal liabilities 12,995,546 12,780,504 11,009,997 10,566,907 1.7 % 23.0 %SHAREHOLDERS? EQUITY Common stock 1,347,612 1,345,096 1,373,940 1,286,711 0.2 % 4.7 %Retained earnings 222,959 201,448 186,838 203,704 10.7 % 9.5 %Other components of 75,958 78,559 33,256 40,520 (3.3 ) % 87.5 %shareholders? equityTotal shareholders? 1,646,529 1,625,103 1,594,034 1,530,935 1.3 % 7.6 %equityTotal liabilitiesand shareholders? $ 14,642,075 $ 14,405,607 $ 12,604,031 $ 12,097,842 1.6 % 21.0 %equityCommon Shares Issued:Shares outstanding 35,158,568 35,157,899 35,751,576 34,173,357 at end of periodCommon shareholders?equity per share ^ $ 46.83 $ 46.22 $ 44.59 $ 44.80 (1)Common shareholders?tangible equity per $ 35.56 $ 34.89 $ 33.33 $ 34.10 share ^(1) (2)Common shareholders?tangible equity to 8.78 % 8.76 % 9.77 % 9.93 % tangible assets ^(2)Consolidated Tier 1leverage capital 9.56 % 9.83 % 10.71 % 10.70 % ratio

(1) Calculation is based on number of common shares outstanding at the end of the period rather than weighted average sharesoutstanding. Common shareholders? tangible equity excludes goodwill and other intangible assets.Tangible assets exclude goodwill and other intangible(2) assets.These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final two pages of the press release tables.

ADDITIONALFINANCIAL INFORMATION(dollars in thousands) Percentage ChangeLOANS Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019 Prior Prior Yr Qtr Qtr Commercial real estate:Owner-occupied $ 1,049,877 $ 1,027,399 $ 980,021 $ 883,233 2.2 % 18.9 %Investment 1,991,258 2,017,789 2,024,988 1,867,593 (1.3 ) % 6.6 %propertiesSmall balance 597,971 624,726 613,484 609,620 (4.3 ) % (1.9 ) %CREMultifamily 426,659 437,201 388,388 314,447 (2.4 ) % 35.7 %real estateConstruction,land and land development:Commercial 220,285 215,860 210,668 190,532 2.0 % 15.6 %constructionMultifamily 291,105 256,335 233,610 214,878 13.6 % 35.5 %constructionOne- tofour-family 518,085 528,966 544,308 507,674 (2.1 ) % 2.1 %constructionLand and land 240,803 235,602 245,530 250,681 2.2 % (3.9 ) %developmentCommercial business:Commercial 2,343,619 2,372,216 1,364,650 1,277,089 (1.2 ) % 83.5 %businessSmall business 763,824 779,678 772,657 769,538 (2.0 ) % (0.7 ) %scoredAgriculturalbusiness,including 326,169 328,077 337,271 355,994 (0.6 ) % (8.4 ) %secured byfarmlandOne- tofour-family 771,431 817,787 925,531 908,988 (5.7 ) % (15.1 ) %residentialConsumer: Consumer?homeequityrevolving 504,523 515,603 519,336 534,876 (2.1 ) % (5.7 ) %lines ofcreditConsumer?other 118,308 126,760 144,915 150,225 (6.7 ) % (21.2 ) %Total loans $ 10,163,917 $ 10,283,999 $ 9,305,357 $ 8,835,368 (1.2 ) % 15.0 %receivableRestructuredloansperforming $ 5,790 $ 6,391 $ 6,466 $ 6,721 under theirrestructuredtermsLoans 30 - 89days past due $ 18,158 $ 20,807 $ 20,178 $ 11,496 and on accrualTotaldelinquentloans(including $ 37,464 $ 36,269 $ 38,322 $ 26,830 loans onnon-accrual),netTotaldelinquentloans/ 0.37 % 0.35 % 0.41 % 0.30 % Total loansreceivable

LOANS BYGEOGRAPHIC Percentage ChangeLOCATION Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019 Prior Qtr Prior Yr Qtr Amount Percentage Amount Amount Amount Washington $ 4,767,113 46.8 % $ 4,787,550 $ 4,364,764 $ 4,313,972 (0.4 ) % 10.5 %California 2,316,739 22.8 % 2,359,703 2,129,789 1,729,208 (1.8 ) % 34.0 %Oregon 1,858,465 18.3 % 1,899,933 1,650,704 1,615,192 (2.2 ) % 15.1 %Idaho 576,983 5.7 % 592,515 530,016 552,523 (2.6 ) % 4.4 %Utah 76,314 0.8 % 67,929 60,958 62,197 12.3 % 22.7 %Other 568,303 5.6 % 576,369 569,126 562,276 (1.4 ) % 1.1 %Totalloans $ 10,163,917 100.0 % $ 10,283,999 $ 9,305,357 $ 8,835,368 (1.2 ) % 15.0 %receivable

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands)

The following table shows loan originations (excluding loans held for sale) activity for the quarters ending September30, 2020, June 30, 2020, and September30, 2019.

LOAN ORIGINATIONS Quarters Ended Sep 30, 2020 June 30, 2020 Sep 30, 2019Commercial real estate $ 74,400 $ 111,765 $ 106,690 Multifamily real estate 2,664 6,384 27,522 Construction and land 412,463 290,955 303,151 Commercial business 153,577 1,318,438 208,277 Agricultural business 16,990 16,293 10,993 One-to four-family residential 32,733 24,537 27,184 Consumer 132,100 126,653 99,823 Total loan originations $ 824,927 $ 1,895,025 $ 783,640 (excluding loans held for sale)

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands) Quarters EndedCHANGE IN THE Sep 30, June 30, Sep 30, 2020 2020 2019ALLOWANCE FOR CREDIT LOSSES - LOANS Balance, beginning of period $ 156,352 $ 130,488 $ 98,254 Provision for credit losses - loans 13,641 29,524 2,000 Recoveries of loans previously charged off:Commercial real estate 23 54 107 Construction and land ? 105 156 One- to four-family real estate 94 31 129 Commercial business 246 370 162 Agricultural business, including secured ? 22 2 by farmlandConsumer 82 60 154 445 642 710 Loans charged off: Commercial real estate (379) ? (314) Construction and land ? (100) ? One- to four-family real estate (72) ? (86) Commercial business (1,297) (3,553) (1,599) Agricultural business, including secured (492) (62) (741) by farmlandConsumer (233) (587) (423) (2,473) (4,302) (3,163) Net (charge-offs)/recoveries (2,028) (3,660) (2,453) Balance, end of period $ 167,965 $ 156,352 $ 97,801 Net (charge-offs)/recoveries / Average (0.019) % (0.036) % (0.027) %loans receivable

ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES - LOANS Sep 30, June 30, Sep 30, 2020 2020 2019Specific or allocated credit loss allowance:Commercial real estate $ 59,705 $ 53,166 $ 28,515 Multifamily real estate 3,256 3,504 4,283 Construction and land 39,477 36,916 22,569 One- to four-family real estate 12,868 12,746 4,569 Commercial business 35,369 33,870 21,147 Agricultural business, including 5,051 4,517 3,895 secured by farmlandConsumer 12,239 11,633 8,441 Total allocated 167,965 156,352 93,419 Unallocated ? ? 4,382 Total allowance for credit losses - $ 167,965 $ 156,352 $ 97,801 loansAllowance for credit losses - loans / 1.65 % 1.52 % 1.11 %Total loans receivableAllowance for credit losses - loans / 482 % 418 % 536 %Non-performing loans

Quarters EndedCHANGE IN THE Sep 30, June 30, Sep 30, 2020 2020 2019ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTSBalance, beginning of period $ 10,555 $ 11,460 $ 2,599 Provision/(recapture) for credit losses - 1,539 (905) ? unfunded loan commitmentsBalance, end of period $ 12,094 $ 10,555 $ 2,599

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Sep 30, June 30, Dec 31, Sep 30, 2020 2020 2019 2019NON-PERFORMING ASSETS Loans on non-accrual status: Secured by real estate: Commercial $ 7,824 $ 10,845 $ 5,952 $ 5,092 Multifamily ? ? 85 87 Construction and land 937 732 1,905 1,318 One- to four-family 2,978 2,942 3,410 3,007 Commercial business 14,867 18,486 23,015 3,035 Agricultural business, 2,066 433 661 757 including secured by farmlandConsumer 2,896 2,412 2,473 2,473 31,568 35,850 37,501 15,769 Loans more than 90 days delinquent, still on accrual:Secured by real estate: Commercial ? ? 89 89 Construction and land ? ? 332 1,141 One- to four-family 2,649 472 877 652 Commercial business 425 1 401 358 Agricultural business, ? 1,061 ? ? including secured by farmlandConsumer 181 36 398 247 3,255 1,570 2,097 2,487 Total non-performing loans 34,823 37,420 39,598 18,256 Real estate owned (REO) 1,795 2,400 814 228 Other repossessed assets 37 47 122 115 Total non-performing assets $ 36,655 $ 39,867 $ 40,534 $ 18,599 Total non-performing assetsto 0.25 % 0.28 % 0.32 % 0.15 %total assets

Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019LOANS BY CREDIT RISK RATING Pass $ 9,699,098 $ 9,869,917 $ 9,130,662 $ 8,702,171 Special Mention 41,575 54,291 61,189 19,989 Substandard 423,244 359,791 113,448 113,150 Doubtful ? ? 58 58 Total $ 10,163,917 $ 10,283,999 $ 9,305,357 $ 8,835,368

Quarters Ended Nine Months EndedREAL ESTATE OWNED Sep 30, June 30, Sep 30, Sep 30, Sep 30, 2020 2020 2019 2020 2019Balance, beginning of $ 2,400 $ 2,402 $ 2,513 $ 814 $ 2,611 periodAdditions from loan ? ? 48 1,588 109 foreclosuresProceeds from (707 ) (98 ) (2,333 ) (805 ) (2,483 )dispositions of REOGain (loss) on sale of 120 96 ? 216 (9 )REOValuation adjustments (18 ) ? ? (18 ) ? in the periodBalance, end of period $ 1,795 $ 2,400 $ 228 $ 1,795 $ 228

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) DEPOSIT COMPOSITION Percentage Change Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019 Prior Qtr Prior Yr Qtr Non-interest-bearing $ 5,412,570 $ 5,281,559 $ 3,945,000 $ 3,885,210 2.5 % 39.3 %Interest-bearing 1,434,224 1,399,593 1,280,003 1,209,826 2.5 % 18.5 %checkingRegular savings 2,332,287 2,197,790 1,934,041 1,863,839 6.1 % 25.1 %accountsMoney market 2,120,908 2,095,332 1,769,194 1,551,305 1.2 % 36.7 %accountsTotalinterest-bearing 5,887,419 5,692,715 4,983,238 4,624,970 3.4 % 27.3 %transaction andsavings accountsTotal core deposits 11,299,989 10,974,274 8,928,238 8,510,180 3.0 % 32.8 %Interest-bearing 915,352 1,042,006 1,120,403 1,218,591 (12.2 ) % (24.9 ) %certificatesTotal deposits $ 12,215,341 $ 12,016,280 $ 10,048,641 $ 9,728,771 1.7 % 25.6 %

GEOGRAPHICCONCENTRATION OF DEPOSITS Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019 Percentage Change Amount Percentage Amount Amount Amount Prior Prior Qtr Yr QtrWashington $ 6,820,329 55.8 % $ 6,765,186 $ 5,861,809 $ 5,833,547 0.8 % 16.9 %Oregon 2,486,760 20.4 % 2,440,617 2,006,163 1,990,155 1.9 % 25.0 %California 2,254,681 18.4 % 2,224,477 1,698,289 1,429,939 1.4 % 57.7 %Idaho 653,571 5.4 % 586,000 482,380 475,130 11.5 % 37.6 %Total $ 12,215,341 100.0 % $ 12,016,280 $ 10,048,641 $ 9,728,771 1.7 % 25.6 %deposits

INCLUDED IN TOTAL Sep 30, June 30, Dec 31, Sep 30,DEPOSITS 2020 2020 2019 2019Publicnon-interest-bearing $ 142,415 $ 139,133 $ 111,015 $ 114,879 accountsPublic interest-bearingtransaction & savings 117,514 136,039 133,403 119,729 accountsPublic interest-bearing 54,219 56,609 35,184 26,609 certificatesTotal public deposits $ 314,148 $ 331,781 $ 279,602 $ 261,217 Total brokered deposits $ ? $ 119,399 $ 202,884 $ 299,496

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Minimum to be Minimum to be Actual categorized as categorized as "Adequately "Well Capitalized" Capitalized"REGULATORY CAPITAL RATIOS Amount Ratio Amount Ratio Amount RatioAS OF SEPTEMBER 30, 2020 Banner Corporation-consolidated:Total capital to $ 1,574,737 14.65 % $ 859,979 8.00 % $ 1,074,974 10.00 %risk-weighted assetsTier 1 capital to 1,340,173 12.47 % 644,985 6.00 % 644,985 6.00 %risk-weighted assetsTier 1 leverage capital 1,340,173 9.56 % 560,816 4.00 % n/a n/ato average assetsCommon equity tier 1capital to risk-weighted 1,196,673 11.13 % 483,738 4.50 % n/a n/aassets Banner Bank: Total capital to 1,409,158 13.34 % 845,076 8.00 % 1,056,344 10.00 %risk-weighted assetsTier 1 capital to 1,276,928 12.09 % 633,807 6.00 % 845,076 8.00 %risk-weighted assetsTier 1 leverage capital 1,276,928 9.31 % 548,867 4.00 % 686,083 5.00 %to average assetsCommon equity tier 1capital to risk-weighted 1,276,928 12.09 % 475,355 4.50 % 686,624 6.50 %assets Islanders Bank: Total capital to 29,516 15.14 % 15,594 8.00 % 19,493 10.00 %risk-weighted assetsTier 1 capital to 27,077 13.89 % 11,696 6.00 % 15,594 8.00 %risk-weighted assetsTier 1 leverage capital 27,077 8.15 % 13,289 4.00 % 16,611 5.00 %to average assetsCommon equity tier 1capital to risk-weighted 27,077 13.89 % 8,772 4.50 % 12,671 6.50 %assets

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands) (rates / ratios annualized) ANALYSIS OF NET INTEREST SPREAD Quarters Ended September 30, 2020 June 30, 2020 September 30, 2019 Average Interest and Yield / Average Interest and Yield / Average Interest and Yield / Balance Dividends Cost^(3) Balance Dividends Cost^(3) Balance Dividends Cost^(3)Interest-earning assets: Held for sale loans $ 161,385 $ 1,535 3.78 % $ 152,636 $ 1,451 3.82 % $ 154,529 $ 1,607 4.13 %Mortgage loans 7,339,181 88,011 4.77 % 7,314,125 87,172 4.79 % 6,872,426 90,268 5.21 %Commercial/agricultural loans 2,862,291 26,396 3.67 % 2,599,878 25,200 3.90 % 1,809,397 24,319 5.33 %Consumer and other loans 140,493 2,195 6.22 % 152,438 2,361 6.23 % 173,342 2,791 6.39 %Total loans^(1)(3) 10,503,350 118,137 4.47 % 10,219,077 116,184 4.57 % 9,009,694 118,985 5.24 %Mortgage-backed securities 1,250,759 7,333 2.33 % 1,286,223 8,083 2.53 % 1,358,448 9,484 2.77 %Other securities 884,916 6,036 2.71 % 787,957 5,859 2.99 % 414,994 3,378 3.23 %Equity securities 379,483 186 0.19 % 114,349 123 0.43 % ? ? ? %Interest-bearing deposits with 171,894 123 0.28 % 212,502 172 0.33 % 82,836 489 2.34 %banksFHLB stock 16,363 163 3.96 % 16,620 300 7.26 % 29,400 378 5.10 %Total investment securities ^(3) 2,703,415 13,841 2.04 % 2,417,651 14,537 2.42 % 1,885,678 13,729 2.89 %Total interest-earning assets 13,206,765 131,978 3.98 % 12,636,728 130,721 4.16 % 10,895,372 132,714 4.83 %Non-interest-earning assets 1,259,816 1,245,626 1,078,621 Total assets $ 14,466,581 $ 13,882,354 $ 11,973,993 Deposits: Interest-bearing checking accounts $ 1,413,085 321 0.09 % $ 1,376,710 374 0.11 % $ 1,194,633 621 0.21 %Savings accounts 2,251,294 813 0.14 % 2,108,896 998 0.19 % 1,854,967 2,244 0.48 %Money market accounts 2,096,037 1,224 0.23 % 1,979,419 1,565 0.32 % 1,542,264 2,944 0.76 %Certificates of deposit 966,028 2,821 1.16 % 1,117,547 3,757 1.35 % 1,155,710 4,205 1.44 %Total interest-bearing deposits 6,726,444 5,179 0.31 % 6,582,572 6,694 0.41 % 5,747,574 10,014 0.69 %Non-interest-bearing deposits 5,340,688 ? ? % 4,902,992 ? ? % 3,786,143 ? ? %Total deposits 12,067,132 5,179 0.17 % 11,485,564 6,694 0.23 % 9,533,717 10,014 0.42 %Other interest-bearing liabilities: FHLB advances 150,000 988 2.62 % 156,374 984 2.53 % 476,435 3,107 2.59 %Other borrowings 177,628 128 0.29 % 285,735 238 0.34 % 122,035 82 0.27 %Junior subordinated debentures and 247,944 2,260 3.63 % 149,043 1,251 3.38 % 140,212 1,612 4.56 %subordinated notesTotal borrowings 575,572 3,376 2.33 % 591,152 2,473 1.68 % 738,682 4,801 2.58 %Total funding liabilities 12,642,704 8,555 0.27 % 12,076,716 9,167 0.31 % 10,272,399 14,815 0.57 %Other non-interest-bearing 193,256 188,369 163,809 liabilities^(2)Total liabilities 12,835,960 12,265,085 10,436,208 Shareholders? equity 1,630,621 1,617,269 1,537,785 Total liabilities and shareholders? $ 14,466,581 $ 13,882,354 $ 11,973,993 equityNet interest income/rate spread $ 123,423 3.71 % $ 121,554 3.85 % $ 117,899 4.26 %(tax equivalent)Net interest margin (tax 3.72 % 3.87 % 4.29 %equivalent)Reconciliation to reported net interest income:Adjustments for taxable equivalent (2,397 ) (1,974 ) (1,278 ) basisNet interest income and margin, as $ 121,026 3.65 % $ 119,580 3.81 % $ 116,621 4.25 %reportedAdditional Key Financial Ratios: Return on average assets 1.01 % 0.68 % 1.31 %Return on average equity 8.92 % 5.85 % 10.21 %Average equity/average assets 11.27 % 11.65 % 12.84 %Average interest-earning assets/average interest-bearing 180.86 % 176.15 % 167.98 %liabilitiesAverage interest-earning assets/ 104.46 % 104.64 % 106.06 %average funding liabilitiesNon-interest income/average assets 0.78 % 0.80 % 0.69 %Non-interest expense/average assets 2.52 % 2.60 % 2.89 %Efficiency ratio^(4) 61.35 % 60.85 % 63.50 %Adjusted efficiency ratio^(5) 59.05 % 57.95 % 60.71 %

Average balances include loans accounted for on a nonaccrual basis and(1) loans 90 days or more past due. Amortization of net deferred loan fees/ costs is included with interest on loans.(2) Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures. Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million, $1.0 million, and $889,000 for the three months ended September30, 2020,(3) June 30, 2020, and September30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $976,000, $963,000, and $389,000 for the three months ended September30, 2020, June 30, 2020, and September30, 2019, respectively.(4) Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income. Adjusted non-interest expense divided by adjusted revenue. These represent(5) non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands)(rates / ratios annualized)ANALYSIS OF NET Nine Months EndedINTEREST SPREAD September 30, 2020 September 30, 2019 Average Interest and Yield/ Average Interest and Yield/ Balance Dividends Cost^(3) Balance Dividends Cost^(3)Interest-earning assets:Held for sale loans $ 155,571 $ 4,506 3.87 % $ 100,273 $ 3,295 4.39 %Mortgage loans 7,321,206 268,244 4.89 % 6,835,861 269,588 5.27 %Commercial/ 2,450,234 74,555 4.06 % 1,761,222 72,086 5.47 %agricultural loansConsumer and other 151,968 7,151 6.29 % 178,792 8,545 6.39 %loansTotal loans^(1)(3) 10,078,979 354,456 4.70 % 8,876,148 353,514 5.32 %Mortgage-backed 1,297,020 24,652 2.54 % 1,368,081 29,785 2.91 %securitiesOther securities 710,967 15,205 2.86 % 449,030 10,894 3.24 %Equity securities 165,395 309 0.25 % ? ? ? %Interest-bearing 159,065 688 0.58 % 60,655 1,118 2.46 %deposits with banksFHLB stock 19,822 785 5.29 % 30,679 1,031 4.49 %Total investment 2,352,269 41,639 2.36 % 1,908,445 42,828 3.00 %securities^(3)Totalinterest-earning 12,431,248 396,095 4.26 % 10,784,593 396,342 4.91 %assetsNon-interest-earning 1,232,997 1,053,180 assetsTotal assets $ 13,664,245 $ 11,837,773 Deposits: Interest-bearing $ 1,352,369 1,164 0.11 % $ 1,175,521 1,660 0.19 %checking accountsSavings accounts 2,133,780 3,566 0.22 % 1,853,671 6,283 0.45 %Money market 1,940,096 5,228 0.36 % 1,510,293 7,851 0.70 %accountsCertificates of 1,069,145 10,665 1.33 % 1,171,363 11,886 1.36 %depositTotalinterest-bearing 6,495,390 20,623 0.42 % 5,710,848 27,680 0.65 %depositsNon-interest-bearing 4,738,559 ? ? % 3,682,047 ? ? %depositsTotal deposits 11,233,949 20,623 0.25 % 9,392,895 27,680 0.39 %Otherinterest-bearing liabilities:FHLB advances 236,949 4,036 2.28 % 508,247 9,953 2.62 %Other borrowings 195,977 482 0.33 % 120,847 209 0.23 %Junior subordinateddebentures and 181,886 4,988 3.66 % 140,212 5,008 4.78 %subordinated notesTotal borrowings 614,812 9,506 2.07 % 769,306 15,170 2.64 %Total funding 11,848,761 30,129 0.34 % 10,162,201 42,850 0.56 %liabilitiesOthernon-interest-bearing 197,912 155,771 liabilities^(2)Total liabilities 12,046,673 10,317,972 Shareholders? equity 1,617,572 1,519,801 Total liabilitiesand shareholders? $ 13,664,245 $ 11,837,773 equityNet interest income/rate spread (tax $ 365,966 3.92 % $ 353,492 4.35 %equivalent)Net interest margin 3.93 % 4.38 %(tax equivalent)Reconciliation toreported net interest income:Adjustments fortaxable equivalent (6,102 ) (4,072 ) basisNet interest incomeand margin, as $ 359,864 3.87 % $ 349,420 4.33 %reportedAdditional Key Financial Ratios:Return on average 0.75 % 1.27 %assetsReturn on average 6.36 % 9.91 %equityAverage equity/ 11.84 % 12.84 %average assetsAverageinterest-earningassets/average ' 174.84 % 166.42 %interest-bearingliabilitiesAverageinterest-earning 104.92 % 106.12 %assets/averagefunding liabilitiesNon-interest income/ 0.73 % 0.70 %average assetsNon-interest expense 2.70 % 2.98 %/average assetsEfficiency ratio^(4) 63.54 % 64.23 %Adjusted efficiency 60.13 % 61.17 %ratio^(5)

Average balances include loans accounted for on a nonaccrual basis and(1) loans 90 days or more past due. Amortization of net deferred loan fees/ costs is included with interest on loans.(2) Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures. Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $3.6 million and $3.0 million for the nine months ended September30, 2020 and(3) September30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.5 million and $1.1 million for the nine months ended September30, 2020 and September30, 2019, respectively.(4) Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income. Adjusted non-interest expense divided by adjusted revenue. These represent(5) non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables.

ADDITIONALFINANCIAL INFORMATION(dollars in thousands) * Non-GAAPFinancial MeasuresIn addition to results presented in accordance with generally acceptedaccounting principles in the United States of America (GAAP), this pressrelease contains certain non-GAAP financial measures. Management has presentedthese non-GAAP financial measures in this earnings release because it believesthat they provide useful and comparative information to assess trends inBanner?s core operations reflected in the current quarter?s results andfacilitate the comparison of our performance with the performance of our peers.However, these non-GAAP financial measures are supplemental and are not asubstitute for any analysis based on GAAP. Where applicable, comparableearnings information using GAAP financial measures is also presented. Becausenot all companies use the same calculations, our presentation may not becomparable to other similarly titled measures as calculated by other companies.For a reconciliation of these non-GAAP financial measures, see the tablesbelow: ADJUSTED Quarters Ended Nine Months EndedREVENUE Sep 30, June 30, Sep 30, Sep 30, Sep 30, 2020 2020 2019 2020 2019Net interestincomebefore $ 121,026 $ 119,580 $ 116,621 $ 359,864 $ 349,420 provisionfor creditlossesTotalnon-interest 28,222 27,720 20,866 75,107 61,667 incomeTotal GAAP 149,248 147,300 137,487 434,971 411,087 revenueExclude net(gain) loss (644 ) (93 ) 2 (815 ) 29 on sale ofsecuritiesExclude netchange invaluation offinancial (37 ) (2,199 ) 69 2,360 172 instrumentscarried atfair valueAdjustedrevenue $ 148,567 $ 145,008 $ 137,558 $ 436,516 $ 411,288 (non-GAAP)

ADJUSTED EARNINGS Quarters Ended Nine Months Ended Sep 30, June 30, Sep 30, Sep 30, Sep 30, 2020 2020 2019 2020 2019Net income (GAAP) $ 36,548 $ 23,541 $ 39,577 $ 76,971 $ 112,623 Exclude net (gain)loss on sale of (644) (93) 2 (815) 29 securitiesExclude net changein valuation offinancial (37) (2,199) 69 2,360 172 instruments carriedat fair valueExcludeacquisition-related 5 336 676 1,483 3,125 expensesExclude COVID-19 778 2,152 ? 3,169 ? expensesExclude related net (24) (47) (49) (1,476) (668) tax benefitTotal adjusted $ 36,626 $ 23,690 $ 40,275 $ 81,692 $ 115,281 earnings (non-GAAP) Diluted earnings $ 1.03 $ 0.67 $ 1.15 $ 2.17 $ 3.23 per share (GAAP)Diluted adjustedearnings per share $ 1.04 $ 0.67 $ 1.17 $ 2.30 $ 3.31 (non-GAAP)



ADDITIONALFINANCIAL INFORMATION(dollars in thousands) ADJUSTED EFFICIENCY Quarters Ended Nine Months EndedRATIO Sep 30, June 30, Sep 30, Sep 30, Sep 30, 2020 2020 2019 2020 2019Non-interest $ 91,567 $ 89,637 $ 87,308 $ 276,389 $ 264,038 expense (GAAP)Excludeacquisition-related (5) (336) (676) (1,483) (3,125) expensesExclude COVID-19 (778) (2,152) ? (3,169) ? expensesExclude CDI (1,864) (2,002) (1,985) (5,867) (6,090) amortizationExclude state/municipal tax (1,196) (1,104) (1,011) (3,284) (2,963) expenseExclude REO 11 (4) (126) (93) (263) operationsAdjustednon-interest $ 87,735 $ 84,039 $ 83,510 $ 262,493 $ 251,597 expense (non-GAAP) Net interest incomebefore provision $ 121,026 $ 119,580 $ 116,621 $ 359,864 $ 349,420 for credit losses(GAAP)Non-interest income 28,222 27,720 20,866 75,107 61,667 (GAAP)Total revenue 149,248 147,300 137,487 434,971 411,087 Exclude net (gain)loss on sale of (644) (93) 2 (815) 29 securitiesExclude net changein valuation offinancial (37) (2,199) 69 2,360 172 instruments carriedat fair valueAdjusted revenue $ 148,567 $ 145,008 $ 137,558 $ 436,516 $ 411,288 (non-GAAP) Efficiency ratio 61.35 % 60.85 % 63.50 % 63.54 % 64.23 %(GAAP)Adjusted efficiency 59.05 % 57.95 % 60.71 % 60.13 % 61.17 %ratio (non-GAAP)

TANGIBLECOMMONSHAREHOLDERS? Sep 30, 2020 June 30, 2020 Dec 31, 2019 Sep 30, 2019EQUITY TOTANGIBLEASSETSShareholders? $ 1,646,529 $ 1,625,103 $ 1,594,034 $ 1,530,935 equity (GAAP)Excludegoodwill andother 396,412 398,276 402,279 365,764 intangibleassets, netTangiblecommonshareholders? $ 1,250,117 $ 1,226,827 $ 1,191,755 $ 1,165,171 equity(non-GAAP) Total assets $ 14,642,075 $ 14,405,607 $ 12,604,031 $ 12,097,842 (GAAP)Excludegoodwill andother 396,412 398,276 402,279 365,764 intangibleassets, netTotaltangible $ 14,245,663 $ 14,007,331 $ 12,201,752 $ 11,732,078 assets(non-GAAP)Commonshareholders?equity to 11.25 % 11.28 % 12.65 % 12.65 %total assets(GAAP)Tangiblecommonshareholders?equity to 8.78 % 8.76 % 9.77 % 9.93 %tangibleassets(non-GAAP) TANGIBLECOMMONSHAREHOLDERS? EQUITY PERSHARETangiblecommonshareholders? $ 1,250,117 $ 1,226,827 $ 1,191,755 $ 1,165,171 equity(non-GAAP)Common sharesoutstanding 35,158,568 35,157,899 35,751,576 34,173,357 at end ofperiodCommonshareholders?equity (book $ 46.83 $ 46.22 $ 44.59 $ 44.80 value) pershare (GAAP)Tangiblecommonshareholders?equity $ 35.56 $ 34.89 $ 33.33 $ 34.10 (tangiblebook value)per share(non-GAAP)

CONTACT: MARK J. GRESCOVICH, PRESIDENT & CEO PETER J. CONNER, CFO (509) 527-3636