GlobeNewswire Inc | Jan 21, 2021 04:00PM EST

January 21, 2021

WALLA WALLA, Wash., Jan. 21, 2021 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (Banner), the parent company of Banner Bank and Islanders Bank, today reported net income of $39.0 million, or $1.10 per diluted share, for the fourth quarter 2020, a 7% increase compared to $36.5 million, or $1.03 per diluted share, in the preceding quarter and a 16% increase compared to $33.7 million, or $0.95 per diluted share, in the fourth quarter of 2019. Net income for 2020 was $115.9 million, or $3.26 per diluted share, compared to $146.3 million, or $4.18 per diluted share for 2019. Full year 2020 results include $64.3 million in provision for credit losses primarily resulting from the COVID-19 pandemic, compared to $10.0 million in provision for credit losses in 2019. The 2020 results also include $2.1 million of merger and acquisition-related expenses, compared to $7.5 million of merger and acquisition-related expenses for 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 February 16, 2021, to common shareholders of record on February 4, 2021.

The historic events of 2020 brought serious economic, health and personal challenges to everyone in our footprint and beyond, and our team of professional bankers rose to meet those challenges to support our clients and the communities we serve, said Mark Grescovich, President and CEO. Our core performance for the fourth quarter and for the year reflects the continued execution of our super community bank strategy. That strategy supports growing new client relationships, adding to our core funding position by growing core deposits, and promoting client loyalty and advocacy through our responsive service model.

To provide support for our clients, we have made available several assistance programs, continued Grescovich. During the year, Banner committed $1.5million to selected Community Development Financial Institutions in support of minority-owned small businesses as well as businesses located in economically disadvantaged rural and urban communities. Additionally, we funded SBA Paycheck Protection Program or PPP loans totaling nearly $1.15 billion to 9,103 businesses as of year-end, and we are actively participating in the latest SBA PPP loan program that opened in mid-January 2021. Further, Banner provided deferred payments, or waived interest, for borrowers that were the most impacted by the COVID-19 pandemic. We will continue to live by our core values, summed up as doing the right thing for our clients, our communities, our colleagues, our company and our shareholders while providing a consistent and reliable source of capital through all economic cycles and changing events.

Due to the decrease in loan balances as well as an improvement in the forecasted economic indicators utilized during the current quarter, we recorded a $601,000 recapture to our provision for credit losses during the current quarter. This compares to a $13.6 million provision for credit losses during the preceding quarter and a $4.0 million provision for loan losses in the fourth quarter a year ago, said Grescovich. The allowance for credit losses - loans was 1.69% of total loans and 470% of non-performing loans at December31, 2020, compared to 1.65% of total loans and 482% of non-performing loans at September 30, 2020.

At December31, 2020, Banner Corporation had $15.03 billion in assets, $9.70 billion in net loans and $12.57 billion in deposits. Banner operates 155 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. The deadline for PPP loan applications to the SBA under the original PPP was August 8, 2020. Under this program Banner funded 9,103 applications totaling $1.15 billion of loans in its service area and began processing applications for loan forgiveness in the fourth quarter of 2020. As of December31, 2020, Banner had received SBA forgiveness for 595 PPP loans totaling $112.3million. In January, Banner began accepting and processing loan applications under the second PPP program enacted in December 2020. -- 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. At December31, 2020, Banner had 158 loans totaling $75.4million still on deferral. Of the loans still on deferral, 26 loans totaling $33.9million 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 December31, 2020 pursuant to applicable accounting and regulatory guidance. -- Allowance for Credit Losses - Loans. Banner recorded a recapture of provision for credit losses of $601,000 for the fourth quarter of 2020. This compares to a $13.6 million provision for credit losses recorded in the preceding quarter and a $4.0 million provision for loan losses recorded in the fourth quarter a year ago. The recapture of provision for the current quarter primarily reflects the decrease in loan balances while the provision for credit losses recorded in the preceding quarter primarily reflected the deterioration in forecasted economic indicators as a result of the COVID-19 pandemic and for both periods the economic outlook that existed at their respective quarter end. -- Branch Operations, IT Changes and One-Time Expenses. Banner has begun taking steps to resume more normal branch activities with specific guidelines in place to help safeguard 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 $333,000 of related costs during the fourth quarter of 2020, compared to $778,000 of related costs in the third quarter of 2020. The COVID-19 pandemic response expenses for 2020 were $3.5 million. -- Capital Management. At December31, 2020, the tangible common shareholders equity to tangible assets* ratio was 8.69% 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. On December 21, 2020, Banner announced that its Board of Directors authorized the repurchase of up to 1,757,781 shares of Banners common stock, which is equivalent to approximately 5% of its common stock.

Fourth Quarter 2020 Highlights

-- Revenues decreased to $144.9 million, compared to $149.2 million in the preceding quarter, and increased 4% when compared to $139.8 million in the fourth quarter a year ago. -- Net interest income, before the provision for credit losses, increased to $121.4 million in the fourth quarter of 2020, compared to $121.0 million in the preceding quarter and $119.5 million in the fourth quarter a year ago. -- Net interest margin was 3.57%, compared to 3.65% in the preceding quarter and 4.20% in the fourth quarter a year ago. -- Net interest margin on a tax equivalent basis was 3.64%, compared to 3.72% in the preceding quarter and 4.26% in the fourth quarter a year ago. -- Mortgage banking revenues decreased 35% to $10.7 million, compared to $16.6 million in the preceding quarter, and increased 71% compared to $6.2 million in the fourth quarter a year ago. -- Return on average assets was 1.04%, compared to 1.01% in the preceding quarter and 1.07% in the fourth quarter a year ago. -- Net loans receivable decreased to $9.70 billion at December31, 2020, compared to $10.00 billion at September 30, 2020, and increased 5% when compared to $9.20 billion at December31, 2019. -- Non-performing assets decreased to $36.5 million, or 0.24% of total assets, at December31, 2020, compared to $36.7 million, or 0.25% of total assets in the preceding quarter, and decreased from $40.5 million, or 0.32% of total assets, at December31, 2019. -- The allowance for credit losses - loans was $167.3 million, or 1.69% of total loans receivable, as of December31, 2020, compared to $168.0 million, or 1.65% of total loans receivable as of September 30, 2020 and $100.6 million or 1.08% of total loans receivable as of December31, 2019. -- A $1.2 million provision for credit losses - unfunded loan commitments was recorded and the allowance for credit losses - unfunded loan commitments was $13.3 million as of December31, 2020, compared to $12.1 million as of September 30, 2020 and $2.7 million as of December31, 2019. -- Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 3% to $11.65 billion at December31, 2020, compared to $11.30 billion at September 30, 2020, and increased 31% compared to $8.93 billion a year ago. Core deposits represented 93% of total deposits at December31, 2020. -- Dividends to shareholders were $0.41 per share in the quarter ended December31, 2020. -- Common shareholders equity per share increased 1% to $47.39 at December31, 2020, compared to $46.83 at the preceding quarter end, and increased 6% from $44.59 a year ago. -- Tangible common shareholders equity per share* increased 2% to $36.17 at December31, 2020, compared to $35.56 at the preceding quarter end, and increased 9% from $33.33 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 credit and non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, amortization of core deposit intangibles, real estate owned gain (loss), Federal Home Loan Bank (FHLB) prepayment penalties, state/municipal taxes and provision for credit losses - unfunded loan commitments 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 December 11, 2020, Banner completed the consolidation of 15 branches and on September 25, 2020, Banner completed the consolidation of six branches. As a result, Banner recorded expenses associated with these branch consolidations of $1.7million and $2.1million, during the fourth quarter of 2020 and year ended December 31, 2020, respectively. Client adoption of mobile and digital banking accelerated beginning in the second quarter and has continued since, while physical branch transaction volume declined. Banner anticipates this shift in client service delivery channel preference will continue after the COVID-19 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 during 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 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 $121.4 million in the fourth quarter of 2020, compared to $121.0 million in the preceding quarter and $119.5 million in the fourth quarter a year ago.

Banners net interest margin on a tax equivalent basis was 3.64% for the fourth quarter of 2020, a 8 basis-point decrease compared to 3.72% in the preceding quarter and a 62 basis-point decrease compared to 4.26% in the fourth quarter a year ago.

The low interest rate environment continues to put downward pressure on loan yields. Additionally, the impact of growth in core deposits, resulting in significant growth in low yielding short term investments, adversely impacted our net interest margin, said Grescovich. Acquisition accounting adjustments added five basis points to the net interest margin in the current quarter, seven basis points in the preceding quarter and eight basis points in the fourth quarter a year ago. The total purchase discount for acquired loans was $16.1 million at December31, 2020, compared to $17.9 million at September 30, 2020, and $25.0 million at December31, 2019. For the year ended December31, 2020, Banners net interest margin on a tax equivalent basis was 3.85% compared to 4.35% in 2019.

Average interest-earning asset yields decreased 11 basis points to 3.87% in the fourth quarter compared to 3.98% for the preceding quarter and decreased 88 basis points compared to 4.75% in the fourth quarter a year ago. Average loan yields increased six basis points to 4.53% compared to 4.47% in the preceding quarter and decreased 65 basis points compared to 5.18% in the fourth quarter a year ago. The increase in loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in low yielding SBA PPP loans due to loan repayments from SBA loan forgiveness commencing in the fourth quarter. Loan discount accretion added seven basis points to loan yields in the fourth quarter of 2020, compared to nine basis points in the preceding quarter and 11 basis points in the fourth quarter a year ago. Deposit costs were 0.14% in the fourth quarter of 2020, a three basis-point decrease compared to the preceding quarter and a 26 basis-point decrease compared to the fourth 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 0.24% during the fourth quarter of 2020, a three basis-point decrease compared to the preceding quarter and a 28 basis-point decrease compared to the fourth quarter a year ago.

Banner recorded a $601,000 recapture to its provision for credit losses in the current quarter, compared to a $13.6 million provision for credit losses in the prior quarter and a $4.0 million provision for loan losses in the fourth quarter a year ago, as calculated under the prior incurred loss methodology. The recapture of provision for the current quarter primarily reflects the decrease in loan balances while the provision for credit losses recorded in the preceding quarter primarily reflected the deterioration in forecasted economic indicators as a result of the COVID-19 pandemic and for both periods the economic outlook that existed at their respective quarter end.

Total non-interest income was $23.5 million in the fourth quarter of 2020, compared to $28.2 million in the preceding quarter and $20.3 million in the fourth quarter a year ago. Deposit fees and other service charges were $8.3 million in the fourth quarter of 2020, compared to $8.7 million in the preceding quarter and $9.6 million in the fourth quarter a year ago. The decrease in deposit fees and other service charges from the fourth 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, decreased to $10.7 million in the fourth quarter, compared to $16.6 million in the preceding quarter and increased from $6.2 million in the fourth quarter of 2019. The lower mortgage banking revenue quarter-over-quarter primarily reflects seasonal volume decreases as well as a decrease in the gain on sale spread on one- to four-family held for sale loans along with lower multifamily loan sales. The increases compared to the fourth 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 an increase in the gain on sale spreads on one- to four-family held for sale loans partially offset by lower gains on the sale of multifamily held-for-sale loans. Home purchase activity accounted for 51% of one- to four-family mortgage loan originations in the fourth quarter of 2020, compared to 56% in both the prior quarter and in the fourth quarter of 2019. For the year ended December31, 2020, total non-interest income increased 20% to $98.6 million, compared to $81.9 million in 2019.

Banners fourth quarter 2020 results included a $1.7 million 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 $197,000 net gain on the sale of securities. In the preceding quarter, results included a $37,000 net gain for fair value adjustments and a $644,000 net gain on the sale of securities, primarily as a result of the gain recognized on the sale of Visa Class B shares held by Banner. In the fourth quarter a year ago, results included a $36,000 net loss for fair value adjustments and a $62,000 net gain on the sale of securities.

Banners total revenue decreased 3% to $144.9 million for the fourth quarter of 2020, compared to $149.2 million in the preceding quarter, and increased 4% compared to $139.8 million in the fourth quarter a year ago. For the year, total revenues increased 5% to $579.9 million compared to $550.9 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 $143.0 million in the fourth quarter of 2020, compared to $148.6 million in the preceding quarter and $139.7 million in the fourth quarter of 2019. For the year ended December31, 2020, adjusted revenue* was $579.6 million, compared to $551.0 million for the year ended December31, 2019.

Total non-interest expense was $96.8 million in the fourth quarter of 2020, compared to $91.6 million in the preceding quarter and $93.7 million in the fourth quarter of 2019. The increase in non-interest expense for the current quarter compared to the prior quarter and the fourth quarter a year ago reflects expenses associated with branch consolidations, primarily included in the salary and employee benefits and occupancy and equipment expense categories. The increase in non-interest expense for the current quarter compared to the prior quarter and the same quarter a year ago also reflects a $2.5 million accrual related to pending litigation as well as an increase in advertising and marketing expenses. The year-over-year quarterly 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 $1.2 million of provision for credit losses - unfunded loan commitments compared to a $1.5 million provision for the prior quarter and no provision for the year ago quarter. The year-over-year quarterly increase also reflects increased salary and employee benefits expense, partially offset by increased capitalized loan origination costs and lower miscellaneous non-interest expense as the fourth quarter of 2019 included $735,000 of expense related to the prepayment of $150 million of FHLB advances. The year-over-year quarterly decrease in merger and acquisition-related expenses partially offset these increases. Merger and acquisition-related expenses were $579,000 for the fourth quarter of 2020, compared to $5,000 for the preceding quarter and $4.4 million in the fourth quarter a year ago. For the year, total non-interest expense was $373.1 million, compared to $357.7 million for the year 2019. Banners efficiency ratio was 66.76% for the current quarter, compared to 61.35% in the preceding quarter and 67.03% in the year ago quarter. Banners adjusted efficiency ratio* was 64.31% for the current quarter, compared to 58.02% in the preceding quarter and 61.19% in the year ago quarter.

For the fourth quarter of 2020, Banner had $9.8 million in state and federal income tax expense for an effective tax rate of 20.2%, reflecting the benefits from tax exempt income. Banners statutory income tax rate is 23.7%, 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 3% to $15.03 billion at December31, 2020, compared to $14.64 billion at September 30, 2020, and increased 19% when compared to $12.60 billion at December31, 2019. The total of securities and interest-bearing deposits held at other banks was $3.69 billion at December31, 2020, compared to $2.63 billion at September 30, 2020 and $1.89 billion at December31, 2019. The average effective duration of Banner's securities portfolio was approximately 3.6 years at December31, 2020, compared to 3.5 years at December31, 2019.

Net loans receivable decreased 3% to $9.70 billion at December31, 2020, compared to $10.00 billion at September 30, 2020, and increased 5% when compared to $9.20 billion at December31, 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 December31, 2020. Commercial real estate and multifamily real estate loans decreased to $4.03 billion at December31, 2020, compared to $4.07 billion at September 30, 2020, and increased 1% compared to $4.01 billion a year ago. Commercial business loans decreased 6% to $2.92 billion at December31, 2020, primarily reflecting SBA repayments from the forgiveness of SBA PPP loans during the quarter, compared to $3.11 billion at September 30, 2020, and increased 37% compared to $2.14 billion a year ago primarily due to SBA PPP loans. Agricultural business loans decreased to $299.9 million at December31, 2020, compared to $326.2 million three months earlier and $337.3 million a year ago. Total construction, land and land development loans were $1.29 billion at December31, 2020, a 2% increase from $1.27 billion at September 30, 2020, and a 5% increase compared to $1.23 billion a year earlier. Consumer loans decreased to $605.8 million at December31, 2020, compared to $622.8 million at September 30, 2020, and $664.3 million a year ago. One- to four-family loans decreased to $717.9 million at December31, 2020, reflecting held for investment loans being refinanced and sold as held for sale loans, compared to $771.4 million at September 30, 2020, and $925.5 million a year ago.

Loans held for sale were $243.8 million at December31, 2020, compared to $185.9 million at September 30, 2020, and $210.4 million at December31, 2019. The volume of one- to four- family residential mortgage loans sold was $356.6 million in the current quarter, compared to $327.7 million in the preceding quarter and $268.1 million in the fourth quarter a year ago. During the fourth quarter of 2020, Banner sold $10.4 million in multifamily loans compared to $108.6 million in the preceding quarter and $103.4 million in the fourth quarter a year ago.

Total deposits increased 3% to $12.57 billion at December31, 2020, compared to $12.22 billion at September 30, 2020, and increased 25% when compared to $10.05 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 general client liquidity due to reduced business investment and consumer spending. Non-interest-bearing account balances increased 1% to $5.49 billion at December31, 2020, compared to $5.41 billion at September 30, 2020, and increased 39% compared to $3.95 billion a year ago. Core deposits increased 3% from the prior quarter and increased 31% compared to a year ago and represented 93% of total deposits at both December31, 2020 and September 30, 2020. Certificates of deposit decreased slightly to $915.3 million at December31, 2020, compared to $915.4 million at September 30, 2020, and decreased 18% compared to $1.12 billion a year earlier. Banner had no brokered deposits at December31, 2020 or September 30, 2020, compared to $202.9 million a year ago. FHLB borrowings totaled $150.0 million at both December31, 2020 and September 30, 2020, and $450.0 million a year ago.

At December31, 2020, total common shareholders equity was $1.67 billion, or 11.09% of assets, compared to $1.65 billion or 11.25% of assets at September 30, 2020, and $1.59 billion or 12.65% of assets a year ago. At December31, 2020, tangible common shareholders equity*, which excludes goodwill and other intangible assets, net, was $1.27 billion, or 8.69% of tangible assets*, compared to $1.25 billion, or 8.78% of tangible assets, at September 30, 2020, and $1.19 billion, or 9.77% of tangible assets, a year ago. Banners tangible book value per share* increased to $36.17 at December31, 2020, compared to $33.33 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 December31, 2020, Banner's common equity Tier 1 capital ratio was 11.25%, its Tier 1 leverage capital to average assets ratio was 9.50%, and its total capital to risk-weighted assets ratio was 14.73%.

Credit Quality

The allowance for credit losses - loans was $167.3 million at December31, 2020, or 1.69% of total loans receivable outstanding and 470% of non-performing loans, compared to $168.0 million at September 30, 2020, or 1.65% of total loans receivable outstanding and 482% of non-performing loans, and $100.6 million at December31, 2019, or 1.08% of total loans receivable outstanding and 254% 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 $13.3 million at December31, 2020, compared to $12.1 million at September 30, 2020 and $2.7 million at December31, 2019. Net loan charge-offs totaled $93,000 in the fourth quarter of 2020, compared to net loan charge-offs of $2.0 million in the preceding quarter and $1.2 million of net charge-offs in the fourth quarter a year ago. Banner recorded a $601,000 recapture of provision for credit losses in the current quarter, compared to a $13.6 million provision for credit losses in the prior quarter and a $4.0 million provision for loan losses in the year ago quarter. The recapture of provision for the current quarter primarily reflects the decrease in loan balances while the provision for credit losses recorded in the preceding quarter primarily reflected the deterioration in forecasted economic indicators, as a result of the COVID-19 pandemic, and for both periods the economic outlook that existed at their respective quarter end. Non-performing loans were $35.6 million at December31, 2020, compared to $34.8 million at September 30, 2020, and $39.6 million a year ago. Real estate owned and other repossessed assets were $867,000 at December31, 2020, compared to $1.8 million at September 30, 2020, and $936,000 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 December31, 2020, the total purchase discount for acquired loans was $16.1 million.

Banners total substandard loans were $340.2 million at December31, 2020, compared to $423.2 million at September 30, 2020, and $113.4 million a year ago. The quarter over quarter decrease reflects the payoff of substandard loans as well as risk rating upgrades as certain industries impacted by the COVID-19 pandemic have begun to stabilize.

Banners total non-performing assets were $36.5 million, or 0.24% of total assets, at December31, 2020, compared to $36.7 million, or 0.25% of total assets, at September 30, 2020, and $40.5 million, or 0.32% of total assets, a year ago.

Conference Call

Banner will host a conference call on Friday, January 22, 2021, at 8:00 a.m. PST, to discuss its fourth quarter and 2020 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 10150695, or at www.bannerbank.com.

About the Company

Banner Corporation is a $15.03 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 Twelve Months EndedOPERATIONS(in thousandsexcept shares and Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019per share data) INTEREST INCOME: Loans receivable $ 115,545 $ 116,716 $ 120,915 $ 466,360 $ 471,473 Mortgage-backed 7,438 7,234 8,924 31,792 38,640 securitiesSecurities and cash 6,170 5,631 3,570 20,994 15,574 equivalents 129,153 129,581 133,409 519,146 525,687 INTEREST EXPENSE: Deposits 4,392 5,179 9,950 25,015 37,630 Federal Home Loan 987 988 2,281 5,023 12,234 Bank advancesOther borrowings 121 128 121 603 330 Junior subordinateddebentures and 2,216 2,260 1,566 7,204 6,574 subordinated notes 7,716 8,555 13,918 37,845 56,768 Net interest incomebefore (recapture)/ 121,437 121,026 119,491 481,301 468,919 provision forcredit losses(RECAPTURE)/PROVISION FOR (601 ) 13,641 4,000 64,316 10,000 CREDIT LOSSESNet interest income 122,038 107,385 115,491 416,985 458,919 NON-INTEREST INCOME:Deposit fees andother service 8,293 8,742 9,637 34,384 46,632 chargesMortgage banking 10,690 16,562 6,248 51,581 22,215 operationsBank-owned life 1,319 1,286 1,170 5,972 4,645 insuranceMiscellaneous 1,306 951 3,201 6,323 8,624 21,608 27,541 20,256 98,260 82,116 Net gain on sale of 197 644 62 1,012 33 securitiesNet change invaluation offinancial 1,704 37 (36 ) (656 ) (208 ) instruments carriedat fair valueTotal non-interest 23,509 28,222 20,282 98,616 81,941 incomeNON-INTEREST EXPENSE:Salary and employee 60,906 61,171 57,050 245,400 226,409 benefitsLess capitalizedloan origination (9,415 ) (8,517 ) (8,797 ) (34,848 ) (28,934 ) costsOccupancy and 14,248 13,022 13,377 53,362 52,390 equipmentInformation /computer data 6,402 6,090 6,202 24,386 22,458 servicesPayment and card 3,960 4,044 4,638 16,095 16,993 processing servicesProfessional and 5,643 2,368 2,262 12,093 9,736 legal expensesAdvertising and 2,828 1,105 2,021 6,412 7,836 marketingDeposit insurance 1,548 1,628 1,608 6,516 2,840 expenseState/municipalbusiness and use 1,071 1,196 917 4,355 3,880 taxesReal estate (283 ) (11 ) 40 (190 ) 303 operationsAmortization ofcore deposit 1,865 1,864 2,061 7,732 8,151 intangiblesProvision forcredit losses - 1,203 1,539 ? 3,559 ? unfunded loancommitmentsMiscellaneous 5,871 5,285 7,892 22,712 28,122 95,847 90,784 89,271 367,584 350,184 COVID-19 expenses 333 778 ? 3,502 ? Merger andacquisition-related 579 5 4,419 2,062 7,544 expensesTotal non-interest 96,759 91,567 93,690 373,148 357,728 expenseIncome beforeprovision for 48,788 44,040 42,083 142,453 183,132 income taxesPROVISION 9,831 7,492 8,428 26,525 36,854 FORINCOME TAXESNET INCOME $ 38,957 $ 36,548 $ 33,655 $ 115,928 $ 146,278 Earnings per shareavailable to common shareholders:Basic $ 1.11 $ 1.04 $ 0.96 $ 3.29 $ 4.20 Diluted $ 1.10 $ 1.03 $ 0.95 $ 3.26 $ 4.18 Cumulativedividends declared $ 0.41 $ 0.41 $ 1.41 $ 1.23 $ 2.64 per common shareWeighted averagecommon shares outstanding:Basic 35,200,769 35,193,109 35,188,399 35,264,252 34,868,434 Diluted 35,425,810 35,316,679 35,316,736 35,528,848 34,967,684 Increase (decrease)in common shares 632 669 1,578,219 (592,376 ) 568,804 outstanding

FINANCIAL CONDITION Percentage Change(in thousands except Prior Yrshares and per share Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Prior Qtr Qtrdata) ASSETS Cash and due from $ 311,899 $ 289,144 $ 234,359 7.9 % 33.1 %banksInterest-bearing 922,284 416,394 73,376 121.5 % 1,156.9 %depositsTotal cash and cash 1,234,183 705,538 307,735 74.9 % 301.1 %equivalentsSecurities - trading 24,980 23,276 25,636 7.3 % (2.6 ) %Securities - 2,322,593 1,758,384 1,551,557 32.1 % 49.7 %available for saleSecurities - held to 421,713 429,033 236,094 (1.7 ) % 78.6 %maturityTotal securities 2,769,286 2,210,693 1,813,287 25.3 % 52.7 %Equity securities ? 450,255 ? (100.0 ) % nmFederal Home Loan 16,358 16,363 28,342 ? % (42.3 ) %Bank stockLoans held for sale 243,795 185,938 210,447 31.1 % 15.8 %Loans receivable 9,870,982 10,163,917 9,305,357 (2.9 ) % 6.1 %Allowance for credit (167,279 ) (167,965 ) (100,559 ) (0.4 ) % 66.3 %losses - loansNet loans receivable 9,703,703 9,995,952 9,204,798 (2.9 ) % 5.4 %Accrued interest 46,617 48,321 37,962 (3.5 ) % 22.8 %receivableReal estate owned 816 1,795 814 (54.5 ) % 0.2 %held for sale, netProperty and 164,556 171,576 178,008 (4.1 ) % (7.6 ) %equipment, netGoodwill 373,121 373,121 373,121 ? % ? %Other intangibles, 21,426 23,291 29,158 (8.0 ) % (26.5 ) %netBank-owned life 191,830 191,755 192,088 ? % (0.1 ) %insuranceOther assets 265,932 267,477 228,271 (0.6 ) % 16.5 %Total assets $ 15,031,623 $ 14,642,075 $ 12,604,031 2.7 % 19.3 %LIABILITIES Deposits: Non-interest-bearing $ 5,492,924 $ 5,412,570 $ 3,945,000 1.5 % 39.2 %Interest-bearingtransaction and 6,159,052 5,887,419 4,983,238 4.6 % 23.6 %savings accountsInterest-bearing 915,320 915,352 1,120,403 ? % (18.3 ) %certificatesTotal deposits 12,567,296 12,215,341 10,048,641 2.9 % 25.1 %Advances fromFederal Home Loan 150,000 150,000 450,000 ? % (66.7 ) %BankCustomer repurchaseagreements and other 184,785 176,983 118,474 4.4 % 56.0 %borrowingsSubordinated notes, 98,201 98,114 ? 0.1 % nmnetJunior subordinateddebentures at fair 116,974 109,821 119,304 6.5 % (2.0 ) %valueAccrued expenses and 202,643 200,038 227,889 1.3 % (11.1 ) %other liabilitiesDeferred 45,460 45,249 45,689 0.5 % (0.5 ) %compensationTotal liabilities 13,365,359 12,995,546 11,009,997 2.8 % 21.4 %SHAREHOLDERS? EQUITY Common stock 1,349,879 1,347,612 1,373,940 0.2 % (1.8 ) %Retained earnings 247,316 222,959 186,838 10.9 % 32.4 %Other components of 69,069 75,958 33,256 (9.1 ) % 107.7 %shareholders? equityTotal shareholders? 1,666,264 1,646,529 1,594,034 1.2 % 4.5 %equityTotal liabilitiesand shareholders? $ 15,031,623 $ 14,642,075 $ 12,604,031 2.7 % 19.3 %equityCommon Shares Issued:Shares outstanding 35,159,200 35,158,568 35,751,576 at end of periodCommon shareholders?equity per share ^ $ 47.39 $ 46.83 $ 44.59 (1)Common shareholders?tangible equity per $ 36.17 $ 35.56 $ 33.33 share ^(1) (2)Common shareholders?tangible equity to 8.69 % 8.78 % 9.77 % tangible assets ^(2)Consolidated Tier 1leverage capital 9.50 % 9.56 % 10.71 % 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 assets. These(2) 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 Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Prior Prior Yr Qtr Qtr Commercial real estate:Owner-occupied $ 1,076,467 $ 1,049,877 $ 980,021 2.5 % 9.8 %Investment 1,955,684 1,991,258 2,024,988 (1.8 ) % (3.4 ) %propertiesSmall balance 573,849 597,971 613,484 (4.0 ) % (6.5 ) %CREMultifamily 428,223 426,659 388,388 0.4 % 10.3 %real estateConstruction,land and land development:Commercial 228,937 220,285 210,668 3.9 % 8.7 %constructionMultifamily 305,527 291,105 233,610 5.0 % 30.8 %constructionOne- tofour-family 507,810 518,085 544,308 (2.0 ) % (6.7 ) %constructionLand and land 248,915 240,803 245,530 3.4 % 1.4 %developmentCommercial business:Commercial 2,178,461 2,343,619 1,364,650 (7.0 ) % 59.6 %businessSmall business 743,451 763,824 772,657 (2.7 ) % (3.8 ) %scoredAgriculturalbusiness,including 299,949 326,169 337,271 (8.0 ) % (11.1 ) %secured byfarmlandOne- tofour-family 717,939 771,431 925,531 (6.9 ) % (22.4 ) %residentialConsumer: Consumer?homeequityrevolving 491,812 504,523 519,336 (2.5 ) % (5.3 ) %lines ofcreditConsumer?other 113,958 118,308 144,915 (3.7 ) % (21.4 ) %Total loans $ 9,870,982 $ 10,163,917 $ 9,305,357 (2.9 ) % 6.1 %receivableRestructuredloansperforming $ 6,673 $ 5,790 $ 6,466 under theirrestructuredtermsLoans 30 - 89days past due $ 12,291 $ 18,158 $ 20,178 and on accrualTotaldelinquentloans(including $ 36,131 $ 37,464 $ 38,322 loans onnon-accrual),netTotaldelinquentloans / Total 0.37 % 0.37 % 0.41 % loansreceivable

LOANS BYGEOGRAPHIC Percentage ChangeLOCATION Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Prior Qtr Prior Yr Qtr Amount Percentage Amount Amount Washington $ 4,647,553 47.0 % $ 4,767,113 $ 4,364,764 (2.5 ) % 6.5 %California 2,279,749 23.1 % 2,316,739 2,129,789 (1.6 ) % 7.0 %Oregon 1,792,156 18.2 % 1,858,465 1,650,704 (3.6 ) % 8.6 %Idaho 537,996 5.5 % 576,983 530,016 (6.8 ) % 1.5 %Utah 80,704 0.8 % 76,314 60,958 5.8 % 32.4 %Other 532,824 5.4 % 568,303 569,126 (6.2 ) % (6.4 ) %Totalloans $ 9,870,982 100.0 % $ 10,163,917 $ 9,305,357 (2.9 ) % 6.1 %receivable

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands)

The following table shows loan originations (excluding loans held for sale) activity for the quarters ending December31, 2020, September 30, 2020, and December31, 2019 and the twelve months ending December31, 2020 and December31, 2019 (in thousands).

LOAN Quarters Ended Twelve Months EndedORIGINATIONS Dec 31, Sep 30, Dec 31, 2019 Dec 31, 2020 Dec 31, 2019 2020 2020Commercial $ 93,838 $ 74,400 $ 165,064 $ 356,361 $ 428,936 real estateMultifamily 7,900 2,664 20,035 27,119 71,124 real estateConstruction 515,280 412,463 530,193 1,588,311 1,433,313 and landCommercial business:Commercial 133,112 128,729 228,050 628,981 840,237 businessSBA PPP ? 24,848 ? 1,176,018 ? Agricultural 11,552 16,990 25,993 76,096 85,663 businessOne-tofour-family 28,402 32,733 30,432 116,713 112,165 residentialConsumer 97,416 132,100 70,539 423,526 350,601 Total loanoriginations(excluding $ 887,500 $ 824,927 $ 1,070,306 $ 4,393,125 $ 3,322,039 loans heldfor sale)

ADDITIONALFINANCIAL INFORMATION(dollars in thousands) Quarters Ended Twelve Months EndedCHANGE IN Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019THEALLOWANCEFOR CREDIT LOSSES -LOANSBalance,beginning of $ 167,965 $ 156,352 $ 97,801 $ 100,559 $ 96,485 periodBeginningbalanceadjustment ? ? ? 7,812 ? for adoptionof ASC 326(Recapture)/provisionfor credit (593 ) 13,641 4,000 64,285 10,000 losses -loansRecoveriesof loans previouslycharged off:Commercial 31 23 199 275 476 real estateConstruction ? ? ? 105 208 and landOne- tofour-family 194 94 159 467 561 real estateCommercial 2,444 246 225 3,265 625 businessAgriculturalbusiness,including 51 ? 10 1,823 47 secured byfarmlandConsumer 90 82 61 328 548 2,810 445 654 6,263 2,465 Loans charged off:Commercial (1,375 ) (379 ) ? (1,854 ) (1,138 ) real estateMultifamily ? ? ? (66 ) ? real estateConstruction ? ? (45 ) (100 ) (45 ) and landOne- tofour-family ? (72 ) ? (136 ) (86 ) real estateCommercial (1,019 ) (1,297 ) (1,180 ) (7,253 ) (4,171 ) businessAgriculturalbusiness,including (37 ) (492 ) (4 ) (591 ) (911 ) secured byfarmlandConsumer (472 ) (233 ) (667 ) (1,640 ) (2,040 ) (2,903 ) (2,473 ) (1,896 ) (11,640 ) (8,391 ) Net (93 ) (2,028 ) (1,242 ) (5,377 ) (5,926 ) charge-offsBalance, end $ 167,279 $ 167,965 $ 100,559 $ 167,279 $ 100,559 of periodNetcharge-offs/ Average (0.001 ) % (0.019 ) % (0.013 ) % (0.053 ) (0.066 ) %loansreceivable

ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES - LOANS Dec 31, Sep 30, Dec 31, 2020 2020 2019Specific or allocated credit loss allowance:Commercial real estate $ 57,791 $ 59,705 $ 30,591 Multifamily real estate 3,893 3,256 4,754 Construction and land 41,295 39,477 22,994 One- to four-family real estate 9,913 12,868 4,136 Commercial business 35,007 35,369 23,370 Agricultural business, including 4,914 5,051 4,120 secured by farmlandConsumer 14,466 12,239 8,202 Total allocated 167,279 167,965 98,167 Unallocated ? ? 2,392 Total allowance for credit losses - $ 167,279 $ 167,965 $ 100,559 loansAllowance for credit losses - loans / 1.69 % 1.65 % 1.08 %Total loans receivableAllowance for credit losses - loans / 470 % 482 % 254 %Non-performing loans

Quarters Ended Twelve Months EndedCHANGE IN THE Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2020 2020 2019 2020 2019ALLOWANCE FORCREDIT LOSSES - UNFUNDED LOANCOMMITMENTSBalance,beginning of $ 12,094 $ 10,555 $ 2,599 $ 2,716 $ 2,599 periodBeginningbalanceadjustment for ? ? ? 7,022 ? adoption of ASC326Provision forcredit losses - 1,203 1,539 ? 3,559 ? unfunded loancommitmentsAdditionsthrough ? ? 117 ? 117 acquisitionsBalance, end of $ 13,297 $ 12,094 $ 2,716 $ 13,297 $ 2,716 period

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands) Dec 31, Sep 30, Dec 31, 2020 2020 2019NON-PERFORMING ASSETS Loans on non-accrual status: Secured by real estate: Commercial $ 18,199 $ 7,824 $ 5,952 Multifamily ? ? 85 Construction and land 936 937 1,905 One- to four-family 3,556 2,978 3,410 Commercial business 5,407 14,867 23,015 Agricultural business, including secured 1,743 2,066 661 by farmlandConsumer 2,719 2,896 2,473 32,560 31,568 37,501 Loans more than 90 days delinquent, still on accrual:Secured by real estate: Commercial ? ? 89 Construction and land ? ? 332 One- to four-family 1,899 2,649 877 Commercial business 1,025 425 401 Consumer 130 181 398 3,054 3,255 2,097 Total non-performing loans 35,614 34,823 39,598 Real estate owned (REO) 816 1,795 814 Other repossessed assets 51 37 122 Total non-performing assets $ 36,481 $ 36,655 $ 40,534 Total non-performing assetsto total 0.24 % 0.25 % 0.32 %assets

Dec 31, 2020 Sep 30, 2020 Dec 31, 2019LOANS BY CREDIT RISK RATING Pass $ 9,494,147 $ 9,699,098 $ 9,130,662 Special Mention 36,598 41,575 61,189 Substandard 340,237 423,244 113,448 Doubtful ? ? 58 Total $ 9,870,982 $ 10,163,917 $ 9,305,357

Quarters Ended Twelve Months EndedREAL ESTATE Dec 31, Sep 30, Dec 31, Dec 31, Dec 31,OWNED 2020 2020 2019 2020 2019Balance,beginning of $ 1,795 $ 2,400 $ 228 $ 814 $ 2,611 periodAdditions fromloan ? ? ? 1,588 109 foreclosuresAdditions from ? ? 650 ? 650 acquisitionsProceeds fromdispositions (1,555 ) (707 ) (105 ) (2,360 ) (2,588 ) of REOGain (loss) on 603 120 41 819 32 sale of REOValuationadjustments in (27 ) (18 ) ? (45 ) ? the periodBalance, end $ 816 $ 1,795 $ 814 $ 816 $ 814 of period

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) DEPOSIT COMPOSITION Percentage Change Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Prior Prior Yr Qtr Qtr Non-interest-bearing $ 5,492,924 $ 5,412,570 $ 3,945,000 1.5 % 39.2 %Interest-bearing 1,569,435 1,434,224 1,280,003 9.4 % 22.6 %checkingRegular savings 2,398,482 2,332,287 1,934,041 2.8 % 24.0 %accountsMoney market 2,191,135 2,120,908 1,769,194 3.3 % 23.8 %accountsTotalinterest-bearing 6,159,052 5,887,419 4,983,238 4.6 % 23.6 %transaction andsavings accountsTotal core deposits 11,651,976 11,299,989 8,928,238 3.1 % 30.5 %Interest-bearing 915,320 915,352 1,120,403 ? % (18.3 ) %certificatesTotal deposits $ 12,567,296 $ 12,215,341 $ 10,048,641 2.9 % 25.1 %

GEOGRAPHICCONCENTRATION OF DEPOSITS Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Percentage Change Amount Percentage Amount Amount Prior Qtr Prior Yr QtrWashington $ 7,058,404 56.2 % $ 6,820,329 $ 5,861,809 3.5 % 20.4 %Oregon 2,604,908 20.7 % 2,486,760 2,006,163 4.8 % 29.8 %California 2,237,949 17.8 % 2,254,681 1,698,289 (0.7 ) % 31.8 %Idaho 666,035 5.3 % 653,571 482,380 1.9 % 38.1 %Total $ 12,567,296 100.0 % $ 12,215,341 $ 10,048,641 2.9 % 25.1 %deposits

INCLUDED IN TOTAL DEPOSITS Dec 31, Sep 30, Dec 31, 2020 2020 2019Public non-interest-bearing accounts $ 175,352 $ 142,415 $ 111,015 Public interest-bearing transaction & 127,523 117,514 133,403 savings accountsPublic interest-bearing certificates 59,127 54,219 35,184 Total public deposits $ 362,002 $ 314,148 $ 279,602 Total brokered deposits $ ? $ ? $ 202,884

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Minimum to be categorized Minimum to be Actual as "Adequately categorized as Capitalized" "Well Capitalized"REGULATORY CAPITAL RATIOS Amount Ratio Amount Ratio Amount RatioAS OF DECEMBER 31, 2020 Banner Corporation-consolidated:Total capital to $ 1,608,387 14.73 % $ 873,472 8.00 % $ 1,091,840 10.00 %risk-weighted assetsTier 1 capital to 1,371,736 12.56 % 655,104 6.00 % 655,104 6.00 %risk-weighted assetsTier 1 leverage capital 1,371,736 9.50 % 577,331 4.00 % n/a n/ato average assetsCommon equity tier 1capital to risk-weighted 1,228,236 11.25 % 491,328 4.50 % n/a n/aassetsBanner Bank: Total capital to 1,438,012 13.39 % 859,260 8.00 % 1,074,075 10.00 %risk-weighted assetsTier 1 capital to 1,303,590 12.14 % 644,445 6.00 % 859,260 8.00 %risk-weighted assetsTier 1 leverage capital 1,303,590 9.22 % 565,620 4.00 % 707,025 5.00 %to average assetsCommon equity tier 1capital to risk-weighted 1,303,590 12.14 % 483,334 4.50 % 698,149 6.50 %assetsIslanders Bank: Total capital to 29,333 15.65 % 14,997 8.00 % 18,747 10.00 %risk-weighted assetsTier 1 capital to 26,983 14.39 % 11,248 6.00 % 14,997 8.00 %risk-weighted assetsTier 1 leverage capital 26,983 7.87 % 13,720 4.00 % 17,150 5.00 %to average assetsCommon equity tier 1capital to risk-weighted 26,983 14.39 % 8,436 4.50 % 12,185 6.50 %assets

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands) (rates / ratios annualized) ANALYSIS OF NET INTEREST SPREAD Quarters Ended December 31, 2020 September 30, 2020 December 31, 2019 Average Interest Yield / Average Interest Yield / Average Interest Yield / Balance and Cost^(3) Balance and Cost^(3) Balance and Cost^(3) Dividends Dividends DividendsInterest-earning assets: Held for sale loans $ 110,414 $ 976 3.52 % $ 161,385 $ 1,535 3.78 % $ 202,686 $ 2,048 4.01 %Mortgage loans 7,251,101 84,634 4.64 % 7,339,181 88,011 4.77 % 7,134,231 93,653 5.21 %Commercial/agricultural loans 2,752,352 29,145 4.21 % 2,862,291 26,396 3.67 % 1,853,447 23,829 5.10 %Consumer and other loans 135,498 2,057 6.04 % 140,493 2,195 6.22 % 169,197 2,685 6.30 %Total loans^(1)(3) 10,249,365 116,812 4.53 % 10,503,350 118,137 4.47 % 9,359,561 122,215 5.18 %Mortgage-backed securities 1,429,635 7,536 2.10 % 1,250,759 7,333 2.33 % 1,371,438 9,024 2.61 %Other securities 975,166 6,634 2.71 % 884,916 6,036 2.71 % 418,767 3,032 2.87 %Equity securities 234,822 64 0.11 % 379,483 186 0.19 % ? ? ? %Interest-bearing deposits with 611,234 219 0.14 % 171,894 123 0.28 % 107,959 531 1.95 %banksFHLB stock 16,361 162 3.94 % 16,363 163 3.96 % 26,036 376 5.73 %Total investment securities ^(3) 3,267,218 14,615 1.78 % 2,703,415 13,841 2.04 % 1,924,200 12,963 2.67 %Total interest-earning assets 13,516,583 131,427 3.87 % 13,206,765 131,978 3.98 % 11,283,761 135,178 4.75 %Non-interest-earning assets 1,349,055 1,259,816 1,152,751 Total assets $ 14,865,638 $ 14,466,581 $ 12,436,512 Deposits: Interest-bearing checking accounts $ 1,483,183 315 0.08 % $ 1,413,085 321 0.09 % $ 1,228,936 564 0.18 %Savings accounts 2,375,015 691 0.12 % 2,251,294 813 0.14 % 1,999,656 2,027 0.40 %Money market accounts 2,165,960 1,047 0.19 % 2,096,037 1,224 0.23 % 1,607,954 2,842 0.70 %Certificates of deposit 916,286 2,339 1.02 % 966,028 2,821 1.16 % 1,189,530 4,517 1.51 %Total interest-bearing deposits 6,940,444 4,392 0.25 % 6,726,444 5,179 0.31 % 6,026,076 9,950 0.66 %Non-interest-bearing deposits 5,499,240 ? ? % 5,340,688 ? ? % 3,959,097 ? ? %Total deposits 12,439,684 4,392 0.14 % 12,067,132 5,179 0.17 % 9,985,173 9,950 0.40 %Other interest-bearing liabilities:FHLB advances 150,000 987 2.62 % 150,000 988 2.62 % 387,435 2,281 2.34 %Other borrowings 187,560 121 0.26 % 177,628 128 0.29 % 126,782 121 0.38 %Junior subordinated debentures and 247,944 2,216 3.56 % 247,944 2,260 3.63 % 145,339 1,566 4.27 %subordinated notesTotal borrowings 585,504 3,324 2.26 % 575,572 3,376 2.33 % 659,556 3,968 2.39 %Total funding liabilities 13,025,188 7,716 0.24 % 12,642,704 8,555 0.27 % 10,644,729 13,918 0.52 %Other non-interest-bearing 195,965 193,256 189,682 liabilities^(2)Total liabilities 13,221,153 12,835,960 10,834,411 Shareholders? equity 1,644,485 1,630,621 1,602,101 Total liabilities and $ 14,865,638 $ 14,466,581 $ 12,436,512 shareholders? equityNet interest income/rate spread $ 123,711 3.63 % $ 123,423 3.71 % $ 121,260 4.23 %(tax equivalent)Net interest margin (tax 3.64 % 3.72 % 4.26 %equivalent)Reconciliation to reported net interest income:Adjustments for taxable equivalent (2,274 ) (2,397 ) (1,769 ) basisNet interest income and margin, as $ 121,437 3.57 % $ 121,026 3.65 % $ 119,491 4.20 %reportedAdditional Key Financial Ratios: Return on average assets 1.04 % 1.01 % 1.07 %Return on average equity 9.42 % 8.92 % 8.33 %Average equity/average assets 11.06 % 11.27 % 12.88 %Average interest-earning assets/average interest-bearing 179.60 % 180.86 % 168.78 %liabilitiesAverage interest-earning assets/ 103.77 % 104.46 % 106.00 %average funding liabilitiesNon-interest income/average assets 0.63 % 0.78 % 0.65 %Non-interest expense/average 2.59 % 2.52 % 2.99 %assetsEfficiency ratio^(4) 66.76 % 61.35 % 67.03 %Adjusted efficiency ratio^(5) 64.31 % 58.02 % 61.19 %

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 $1.3 million, $1.4 million, and $1.3 million for the three months ended December31,(3) 2020, September 30, 2020, and December31, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $976,000, and $469,000 for the three months ended December31, 2020, September 30, 2020, and December31, 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 Twelve Months EndedINTEREST SPREAD December 31, 2020 December 31, 2019 Average Interest Yield/ Average Interest Yield/ Balance and Cost^(3) Balance and Cost^(3) Dividends DividendsInterest-earning assets:Held for sale loans $ 144,220 $ 5,482 3.80 % $ 126,086 $ 5,343 4.24 %Mortgage loans 7,303,584 352,878 4.83 % 6,911,067 363,241 5.26 %Commercial/ 2,526,177 103,700 4.11 % 1,784,468 95,915 5.37 %agricultural loansConsumer and other 147,827 9,208 6.23 % 176,373 11,230 6.37 %loansTotal loans^(1)(3) 10,121,808 471,268 4.66 % 8,997,994 475,729 5.29 %Mortgage-backed 1,330,355 32,188 2.42 % 1,368,927 38,809 2.83 %securitiesOther securities 777,378 21,839 2.81 % 441,402 13,926 3.15 %Equity securities 182,846 373 0.20 % 169 8 4.73 %Interest-bearing 272,725 907 0.33 % 72,579 1,649 2.27 %deposits with banksFHLB stock 18,952 947 5.00 % 29,509 1,407 4.77 %Total investment 2,582,256 56,254 2.18 % 1,912,586 55,799 2.92 %securities^(3)Totalinterest-earning 12,704,064 527,522 4.15 % 10,910,580 531,528 4.87 %assetsNon-interest-earning 1,262,170 1,078,108 assetsTotal assets $ 13,966,234 $ 11,988,688 Deposits: Interest-bearing $ 1,385,252 1,479 0.11 % $ 1,188,985 2,224 0.19 %checking accountsSavings accounts 2,194,418 4,257 0.19 % 1,890,467 8,310 0.44 %Money market 1,996,870 6,275 0.31 % 1,534,909 10,693 0.70 %accountsCertificates of 1,030,722 13,004 1.26 % 1,175,942 16,403 1.39 %depositTotalinterest-bearing 6,607,262 25,015 0.38 % 5,790,303 37,630 0.65 %depositsNon-interest-bearing 4,929,768 ? ? % 3,751,878 ? ? %depositsTotal deposits 11,537,030 25,015 0.22 % 9,542,181 37,630 0.39 %Otherinterest-bearing liabilities:FHLB advances 215,093 5,023 2.34 % 477,796 12,234 2.56 %Other borrowings 193,862 603 0.31 % 122,343 330 0.27 %Junior subordinateddebentures and 198,490 7,204 3.63 % 141,504 6,574 4.65 %subordinated notesTotal borrowings 607,445 12,830 2.11 % 741,643 19,138 2.58 %Total funding 12,144,475 37,845 0.31 % 10,283,824 56,768 0.55 %liabilitiesOthernon-interest-bearing 197,422 164,318 liabilities^(2)Total liabilities 12,341,897 10,448,142 Shareholders? equity 1,624,337 1,540,546 Total liabilitiesand shareholders? $ 13,966,234 $ 11,988,688 equityNet interest income/rate spread (tax $ 489,677 3.84 % $ 474,760 4.32 %equivalent)Net interest margin 3.85 % 4.35 %(tax equivalent)Reconciliation toreported net interest income:Adjustments fortaxable equivalent (8,376 ) (5,841 ) basisNet interest incomeand margin, as $ 481,301 3.79 % $ 468,919 4.30 %reportedAdditional Key Financial Ratios:Return on average 0.83 % 1.22 %assetsReturn on average 7.14 % 9.50 %equityAverage equity/ 11.63 % 12.85 %average assetsAverageinterest-earningassets/average 176.09 % 167.03 %interest-bearingliabilitiesAverageinterest-earning 104.61 % 106.09 %assets/averagefunding liabilitiesNon-interest income/ 0.71 % 0.68 %average assetsNon-interest expense 2.67 % 2.98 %/average assetsEfficiency ratio^(4) 64.35 % 64.94 %Adjusted efficiency 60.76 % 61.18 %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 $4.9 million and $4.3 million for the twelve months ended December31, 2020 and(3) December31, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.5 million and $1.6 million for the twelve months ended December31, 2020 and December31, 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 Twelve Months EndedREVENUE Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019Net interestincomebefore $ 121,437 $ 121,026 $ 119,491 $ 481,301 $ 468,919 provisionfor creditlossesTotalnon-interest 23,509 28,222 20,282 98,616 81,941 incomeTotal GAAP 144,946 149,248 139,773 579,917 550,860 revenueExclude netgain on sale (197 ) (644 ) (62 ) (1,012 ) (33 ) ofsecuritiesExclude netchange invaluation offinancial (1,704 ) (37 ) 36 656 208 instrumentscarried atfair valueAdjustedrevenue $ 143,045 $ 148,567 $ 139,747 $ 579,561 $ 551,035 (non-GAAP)

ADJUSTED EARNINGS Quarters Ended Twelve Months Ended Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019Net income (GAAP) $ 38,957 $ 36,548 $ 33,655 $ 115,928 $ 146,278 Exclude net gain on (197 ) (644 ) (62 ) (1,012 ) (33 ) sale of securitiesExclude net changein valuation offinancial (1,704 ) (37 ) 36 656 208 instruments carriedat fair valueExclude merger andacquisition-related 579 5 4,419 2,062 7,544 expensesExclude COVID-19 333 778 ? 3,502 ? expensesExclude related nettax expense 237 (24 ) (1,074 ) (1,239 ) (1,741 ) (benefit)Exclude FHLBprepayment ? ? 735 ? 735 penaltiesTotal adjusted $ 38,205 $ 36,626 $ 37,709 $ 119,897 $ 152,991 earnings (non-GAAP) Diluted earnings $ 1.10 $ 1.03 $ 0.95 $ 3.26 $ 4.18 per share (GAAP)Diluted adjustedearnings per share $ 1.08 $ 1.04 $ 1.07 $ 3.37 $ 4.38 (non-GAAP)

ADDITIONALFINANCIAL INFORMATION(dollars in thousands)ADJUSTED EFFICIENCY Quarters Ended Twelve Months EndedRATIO Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019Non-interest $ 96,759 $ 91,567 $ 93,690 $ 373,148 $ 357,728 expense (GAAP)Exclude merger andacquisition-related (579 ) (5 ) (4,419 ) (2,062 ) (7,544 ) expensesExclude COVID-19 (333 ) (778 ) ? (3,502 ) ? expensesExclude CDI (1,865 ) (1,864 ) (2,061 ) (7,732 ) (8,151 ) amortizationExclude state/municipal tax (1,071 ) (1,196 ) (917 ) (4,355 ) (3,880 ) expenseExclude REO 283 11 (40 ) 190 (303 ) operationsExclude FHLBprepayment ? ? (735 ) ? (735 ) penaltiesExclude provisionfor credit losses - (1,203 ) (1,539 ) ? (3,559 ) ? unfunded loancommitmentsAdjustednon-interest $ 91,991 $ 86,196 $ 85,518 $ 352,128 $ 337,115 expense (non-GAAP) Net interest incomebefore provision $ 121,437 $ 121,026 $ 119,491 $ 481,301 $ 468,919 for credit losses(GAAP)Non-interest income 23,509 28,222 20,282 98,616 81,941 (GAAP)Total revenue 144,946 149,248 139,773 579,917 550,860 Exclude net gain on (197 ) (644 ) (62 ) (1,012 ) (33 ) sale of securitiesExclude net changein valuation offinancial (1,704 ) (37 ) 36 656 208 instruments carriedat fair valueAdjusted revenue $ 143,045 $ 148,567 $ 139,747 $ 579,561 $ 551,035 (non-GAAP) Efficiency ratio 66.76 % 61.35 % 67.03 % 64.35 % 64.94 %(GAAP)Adjusted efficiency 64.31 % 58.02 % 61.19 % 60.76 % 61.18 %ratio (non-GAAP)

TANGIBLE COMMONSHAREHOLDERS? EQUITY TO Dec 31, 2020 Sep 30, 2020 Dec 31, 2019TANGIBLE ASSETSShareholders? equity (GAAP) $ 1,666,264 $ 1,646,529 $ 1,594,034 Exclude goodwill and other 394,547 396,412 402,279 intangible assets, netTangible commonshareholders? equity $ 1,271,717 $ 1,250,117 $ 1,191,755 (non-GAAP) Total assets (GAAP) $ 15,031,623 $ 14,642,075 $ 12,604,031 Exclude goodwill and other 394,547 396,412 402,279 intangible assets, netTotal tangible assets $ 14,637,076 $ 14,245,663 $ 12,201,752 (non-GAAP)Common shareholders? equity 11.09 % 11.25 % 12.65 %to total assets (GAAP)Tangible commonshareholders? equity to 8.69 % 8.78 % 9.77 %tangible assets (non-GAAP) TANGIBLE COMMONSHAREHOLDERS? EQUITY PER SHARETangible commonshareholders? equity $ 1,271,717 $ 1,250,117 $ 1,191,755 (non-GAAP)Common shares outstanding at 35,159,200 35,158,568 35,751,576 end of periodCommon shareholders? equity(book value) per share $ 47.39 $ 46.83 $ 44.59 (GAAP)Tangible commonshareholders? equity $ 36.17 $ 35.56 $ 33.33 (tangible book value) pershare (non-GAAP)



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