GlobeNewswire Inc | Jul 21, 2021 04:00PM EDT

July 21, 2021

WALLA WALLA, Wash., July 21, 2021 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (Banner), the parent company of Banner Bank, today reported net income of $54.4 million, or $1.56 per diluted share, for the second quarter of 2021, a 16% increase compared to $46.9 million, or $1.33 per diluted share, for the preceding quarter and a 131% increase compared to $23.5 million, or $0.67 per diluted share, for the second quarter of 2020. Banners second quarter 2021 results include $10.3 million in recapture of provision for credit losses, compared to $28.6 million in provision for credit losses in the second quarter of 2020. The second quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic. In the first six months of 2021, net income was $101.2 million, or $2.88 per diluted share, compared to net income of $40.4 million, or $1.14 per diluted share for the same period a year earlier. Banners first six months of 2021 results include $19.5 million in recapture of provision for credit losses, compared to $52.1 million in provision for credit losses in the first six months of 2020.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be payable August 13, 2021, to common shareholders of record on August 3, 2021.

Banners second quarter 2021 performance continues to demonstrate the success of our super community bank model, even with the challenges of the COVID-19 pandemic, said Mark Grescovich, President and CEO. We benefited from continued core deposit growth and an acceleration of PPP loan fee income as a result of SBA PPP loan forgiveness. The unprecedented level of market liquidity along with proceeds from new PPP loan originations, and our continued focus on building client relationships contributed to our core deposits increasing 16% compared to June30, 2020.

Due to the ongoing improvement in forecasted economic conditions in our markets, coupled with continued reductions in our adversely classified loans, we recorded a $10.3 million recapture to our provision for credit losses during the current quarter. This compares to a $9.3 million recapture to our provision for credit losses during the preceding quarter and a $28.6 million provision for credit losses in the second quarter a year ago. Our allowance for credit losses - loans remains strong at 1.53% of total loans and 481% of non-performing loans at June30, 2021, compared to 1.57% of total loans and 426% of non-performing loans at March 31, 2021, said Grescovich. Banner has provided PPP loans totaling nearly $1.61 billion to 13,922 businesses as of June30, 2021, and as of quarter end, we had received SBA forgiveness for 6,707 PPP loans totaling $822.3million. Our essential onsite employees, such as those working in our branches, continue to serve clients in person. In addition, as a result of the accelerated distribution of the COVID-19 vaccine over the past several months and the progress made toward fully reopening businesses in the states we serve, we began to normalize our operations by returning additional groups of employees back to Bank worksites in July 2021.

At June30, 2021, Banner Corporation had $16.18 billion in assets, $9.51 billion in net loans and $13.64 billion in deposits. Banner operates 155 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Second Quarter 2021 Highlights

-- Revenues increased 6% to $149.9 million, compared to $141.9 million in the preceding quarter, and increased 2% when compared to $147.3 million in the second quarter a year ago. -- Net interest income, before the recapture of provision for credit losses, increased to $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago. -- Net interest margin on a tax equivalent basis was 3.52%, compared to 3.44% in the preceding quarter and 3.87% in the second quarter a year ago. -- Mortgage banking revenues decreased 35% to $7.5 million, compared to $11.4 million in the preceding quarter, and decreased 47% compared to $14.1 million in the second quarter a year ago. -- Return on average assets was 1.36%, compared to 1.24% in the preceding quarter and 0.68% in the second quarter a year ago. -- Net loans receivable decreased to $9.51 billion at June30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June30, 2020. -- Non-performing assets decreased to $31.5 million, or 0.19% of total assets, at June30, 2021, compared to $37.0 million, or 0.23% of total assets in the preceding quarter, and decreased from $39.9 million, or 0.28% of total assets, at June30, 2020. -- The allowance for credit losses - loans was $148.0 million, or 1.53% of total loans receivable, as of June30, 2021, compared to $156.1 million, or 1.57% of total loans receivable as of March 31, 2021 and $156.4 million or 1.52% of total loans receivable as of June30, 2020. -- Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 1% to $12.76 billion at June30, 2021, compared to $12.64 billion at March 31, 2021, and increased 16% compared to $10.97 billion a year ago. Core deposits represented 94% of total deposits at June30, 2021. -- Dividends to shareholders were $0.41 per share in the quarter ended June30, 2021. -- Common shareholders equity per share increased 4% to $48.31 at June30, 2021, compared to $46.60 at the preceding quarter end, and increased 5% from $46.22 a year ago. -- Tangible common shareholders equity per share* increased 5% to $36.99 at June30, 2021, compared to $35.29 at the preceding quarter end, and increased 6% from $34.89 a year ago. -- Banner repurchased 250,000 shares of its common stock during the quarter at an average cost of $58.22 per share.

*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 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 operations 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.

Income Statement Review

Net interest income, before the recapture of provision for credit losses, was $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago.

Banners net interest margin on a tax equivalent basis was 3.52% for the second quarter of 2021, an eight basis-point increase compared to 3.44% in the preceding quarter and a 35 basis-point decrease compared to 3.87% in the second quarter a year ago.

Interest income was higher, primarily as a result of the decline in low yielding PPP loans and a corresponding acceleration of deferred loan fee income due to loan repayments from SBA loan forgiveness, which positively affected our net interest margin during the quarter. Net interest margin was also impacted by the growth in core deposit balances, resulting in our deploying excess liquidity into low yielding short term investments, said Grescovich. Additionally, the on-going low interest rate environment continues to put downward pressure on loan yields. Acquisition accounting adjustments added three basis points to the net interest margin in the current quarter, five basis points in the preceding quarter and seven basis points in the second quarter a year ago. The total purchase discount for acquired loans was $12.5 million at June30, 2021, compared to $13.9 million at March 31, 2021, and $20.2 million at June30, 2020. In the first six months of 2021, Banners net interest margin on a tax equivalent basis was 3.48% compared to 4.05% in the first six months of 2020.

Average interest-earning asset yields increased four basis points to 3.68% in the second quarter compared to 3.64% for the preceding quarter and decreased 48 basis points compared to 4.16% in the second quarter a year ago. Average loan yields increased 27 basis points to 4.70% compared to 4.43% in the preceding quarter and increased 13 basis points compared to 4.57% in the second quarter a year ago. The increase in average 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 during the quarter, partially offset by lower rates on new originations and adjustable-rate loans resetting to lower current market rates. Loan discount accretion added five basis points to average loan yields in the second quarter of 2021, seven basis points in the preceding quarter and eight basis points in the second quarter a year ago. Deposit costs were 0.09% in the second quarter of 2021, a two basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second quarter a year ago. The year-over-year decrease in quarterly deposit costs was primarily the result of decreases in market interest rates during 2020. The total cost of funds was 0.17% during the second quarter of 2021, a four basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second quarter a year ago.

Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter (comprised of an $8.1 million recapture credit losses - loans and a $2.2 million recapture unfunded loan commitments). This recapture compares to a $9.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.0 million recapture credit losses - loans and $1.2 million recapture unfunded loan commitments) and a $28.6 million provision for credit losses in the second quarter a year ago (comprised of a $29.5 million provision for credit losses - loans and a $905,000 recapture unfunded loan commitments). The recapture of provision for credit losses for the current quarter primarily reflects improvement in forecasted economic indicators and a decrease in adversely classified loans since the preceding quarter end, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected a decrease in loan balances, excluding PPP loans, as well as improvement in the forecasted economic indicators. The provision for credit losses recorded in the second quarter a year ago primarily reflected expected lifetime credit losses based upon the economic conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of June 30, 2020.

Total non-interest income was $22.3 million in the second quarter of 2021, compared to $24.3 million in the preceding quarter and $27.7 million in the second quarter a year ago. Deposit fees and other service charges were $9.8 million in the second quarter of 2021, compared to $8.9 million in the preceding quarter and $7.5 million in the second quarter a year ago. The increase in deposit fees and other service charges from the second quarter a year ago is primarily a result of increased transaction deposit account activity. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $7.5 million in the second quarter, compared to $11.4 million in the preceding quarter and $14.1 million in the second quarter of 2020. The lower mortgage banking revenue quarter-over-quarter primarily reflects a decrease in the gain on sale margin on one- to four-family held-for-sale loans and a reduction in the volume of one- to four-family loans sold reflecting a decrease in refinance activity. The decrease compared to the second quarter of 2020 was primarily due to a decrease in the gain on sale margin on one- to four-family held-for-sale loans, partially offset by higher gains on the sale of multifamily held-for-sale loans. Home purchase activity accounted for 66% of one- to four-family mortgage loan originations in the second quarter of 2021, compared to 54% in the prior quarter and 42% in the second quarter of 2020. In the first six months of 2021, total non-interest income decreased 1% to $46.6 million, compared to $46.9 million in the first six months of 2020.

Banners second quarter 2021 results included a $58,000 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, and a $77,000 net gain on the sale of securities. In the preceding quarter, results included a $59,000 net gain for fair value adjustments and a $485,000 net gain on the sale of securities. In the second quarter a year ago, results included a $2.2 million net gain for fair value adjustments and a $93,000 net gain on the sale of securities.

Total revenue increased 6% to $149.9 million for the second quarter of 2021, compared to $141.9 million in the preceding quarter, and increased 2% compared to $147.3 million in the second quarter a year ago. Year-to-date, total revenues increased 2% to $291.8 million compared to $285.7 million for the same period one year earlier. Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $149.8 million in the second quarter of 2021, compared to $141.4 million in the preceding quarter and $145.0 million in the second quarter of 2020. In the first six months of the year, adjusted revenue* was $291.1 million, compared to $287.9 million in the first six months of 2020.

Total non-interest expense was $92.6 million in the second quarter of 2021, compared to $93.5 million in the preceding quarter and $90.5 million in the second quarter of 2020. The decrease in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $2.9 million decrease in salary and employee benefits expense as the prior quarter included $1.3million of severance expense related to a reduction in staffing and a $1.2million adjustment recorded to increase the liability related to deferred compensation plans. These decreases in salary and employee benefits expense for the current quarter were partially offset by a $1.0 million increase in professional and legal expenses. The year-over-year quarterly increase in non-interest expense also reflects decreased capitalized loan origination costs, primarily related to the decline in the origination of PPP loans during the current quarter compared to the same quarter a year ago as well as increases in professional and legal expenses and miscellaneous non-interest expense. The year-over-year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19 expenses. Merger and acquisition-related expenses were $79,000 for the second quarter of 2021, compared to $571,000 for the preceding quarter and $336,000 in the second quarter a year ago. COVID-19 expenses were $117,000 for the second quarter of 2021, compared to $148,000 for the preceding quarter and $2.2 million in the second quarter a year ago. Year-to-date, total non-interest expense was $186.2 million, compared to $184.0 million in the same period a year earlier. Banners efficiency ratio was 61.79% for the current quarter, compared to 65.90% in the preceding quarter and 61.47% in the year ago quarter. Banners adjusted efficiency ratio* was 59.77% for the current quarter, compared to 63.85% in the preceding quarter and 58.58% in the year ago quarter.

For the second quarter of 2021, Banner had $13.1 million in state and federal income tax expense for an effective tax rate of 19.5%, 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 to $16.18 billion at June30, 2021, compared to $16.12 billion at March 31, 2021, and increased 12% when compared to $14.41 billion at June30, 2020. The total of securities and interest-bearing deposits held at other banks was $5.19 billion at June30, 2021, compared to $4.81 billion at March 31, 2021 and $2.30 billion at June30, 2020. The average effective duration of Banner's securities portfolio was approximately 4.6 years at June30, 2021, compared to 4.0 years at June30, 2020.

Net loans receivable decreased 3% to $9.51 billion at June30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June30, 2020. The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans, partially offset by increases in commercial real estate, multifamily real estate and construction loans. Commercial real estate and multifamily real estate loans increased 2% to $4.14 billion at June30, 2021, compared to $4.05 billion at March 31, 2021, and increased 1% compared to $4.11 billion a year ago. Commercial business loans decreased 14% to $2.68 billion at June30, 2021 compared to $3.09 billion at March 31, 2021, and decreased 15% compared to $3.15 billion a year ago, primarily due to PPP loans forgiven. Agricultural business loans increased to $265.4 million at June30, 2021, compared to $262.4 million three months earlier and decreased from $328.1 million a year ago. Total construction, land and land development loans were $1.37 billion at June30, 2021, a 4% increase from $1.31 billion at March 31, 2021, and an 11% increase compared to $1.24 billion a year earlier. Consumer loans decreased to $560.7 million at June30, 2021, compared to $570.7 million at March 31, 2021, and $642.4 million a year ago. One- to four-family loans decreased to $637.7 million at June30, 2021, primarily reflecting held for investment loans being refinanced and sold as held for sale loans, compared to $655.6 million at March 31, 2021, and $817.8 million a year ago.

Loans held for sale were $71.7 million at June30, 2021, compared to $135.3 million at March 31, 2021, and $258.7 million at June30, 2020. The volume of one- to four- family residential mortgage loans sold was $266.7million in the current quarter, compared to $300.3million in the preceding quarter and $292.4million in the second quarter a year ago. During the second quarter of 2021, Banner sold $83.9million in multifamily loans, compared to $107.7million in the preceding quarter and $3.1million in the second quarter a year ago.

Total deposits increased 1% to $13.64 billion at June30, 2021, compared to $13.55 billion at March 31, 2021, and increased 13% when compared to $12.02 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 during the COVID-19 pandemic. Non-interest-bearing account balances increased 2% to $6.09 billion at June30, 2021, compared to $5.99 billion at March 31, 2021, and increased 15% compared to $5.28 billion a year ago. Core deposits increased 1% to 94% of total deposits at June30, 2021, compared to 93% of total deposits at March 31, 2021 and increased 16% compared to a year ago. Certificates of deposit decreased to $873.0 million at June30, 2021, compared to $907.0 million at March 31, 2021, and decreased 16% compared to $1.04 billion a year earlier. Banner had no brokered deposits at June30, 2021 or March 31, 2021, compared to $119.4 million a year ago. FHLB borrowings totaled $100.0 million at both June30, 2021 and March 31, 2021, compared to $150.0 million a year ago.

At June30, 2021, total common shareholders equity was $1.67 billion, or 10.32% of assets, compared to $1.62 billion or 10.04% of assets at March 31, 2021, and $1.63 billion or 11.28% of assets a year ago. At June30, 2021, tangible common shareholders equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 8.09% of tangible assets*, compared to $1.23 billion, or 7.80% of tangible assets, at March 31, 2021, and $1.23 billion, or 8.76% of tangible assets, a year ago. Banners tangible book value per share* increased to $36.99 at June30, 2021, compared to $34.89 per share a year ago.

Banner and its subsidiary bank continue to maintain capital levels in excess of the requirements to be categorized as well-capitalized. At June30, 2021, Banner's common equity Tier 1 capital ratio was 11.21%, its Tier 1 leverage capital to average assets ratio was 8.86%, and its total capital to risk-weighted assets ratio was 14.62%.

Credit Quality

The allowance for credit losses - loans was $148.0 million at June30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, compared to $156.1 million at March 31, 2021, or 1.57% of total loans receivable outstanding and 426% of non-performing loans, and $156.4 million at June30, 2020, or 1.52% of total loans receivable outstanding and 418% 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 $9.9 million at June30, 2021, compared to $12.1 million at March 31, 2021 and $10.6 million at June30, 2020. Net loan recoveries totaled $55,000 in the second quarter of 2021, compared to net loan charge-offs of $3.2 million in the preceding quarter and $3.7 million of net loan charge-offs in the second quarter a year ago. Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter, compared to a $9.3 million recapture of provision for credit losses in the prior quarter and a $28.6 million provision for loan losses in the year ago quarter. The recapture of provision for credit losses for the current quarter primarily reflects an improvement in the forecasted economic indicators and a decrease in adversely classified loans, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected the decrease in loan balances, excluding the increase in PPP loans, as well as improvement in the forecasted economic indicators. The provision for credit losses recorded in the second quarter a year ago reflected deterioration as a result of the COVID-19 pandemic in the economic indicators utilized to forecast credit losses. Non-performing loans were $30.8 million at June30, 2021, compared to $36.6 million at March 31, 2021, and $37.4 million a year ago. Real estate owned and other repossessed assets were $780,000 at June30, 2021, compared to $377,000 at March 31, 2021, and $2.4 million 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 were included in the determination of fair value, and as a result, no allowance for credit losses was recorded for loans acquired from acquisitions prior to January 1, 2020. At June30, 2021, the total purchase discount for acquired loans was $12.5 million.

Banners total substandard loans were $272.8 million at June30, 2021, compared to $311.6 million at March 31, 2021, and $359.8 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 $31.5 million, or 0.19% of total assets, at June30, 2021, compared to $37.0 million, or 0.23% of total assets, at March 31, 2021, and $39.9 million, or 0.28% of total assets, a year ago.

At June 30, 2021, Banner had 71 loans totaling $28.5million remaining on loan payment deferral due to COVID-19 including 62 mortgage loans totaling $20.2million operating under forbearance agreements. 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 pursuant to applicable accounting and regulatory guidance.

Conference Call

Banner will host a conference call on Thursday, July 22, 2021, at 8:00 a.m. PDT, to discuss its second 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 10157551, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.18 billion bank holding company operating one commercial bank 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 clients, 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. Deterioration in general business and economic conditions, including 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 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 client 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 clients 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 Six Months EndedOPERATIONS(in thousandsexcept shares and Jun 30, 2021 Mar 31, 2021 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020per share data) INTEREST INCOME: Loans receivable $ 115,391 $ 108,924 $ 115,173 $ 224,315 $ 234,099 Mortgage-backed 11,437 9,371 7,983 20,808 17,120 securitiesSecurities and cash 6,737 6,226 5,591 12,963 9,193 equivalents 133,565 124,521 128,747 258,086 260,412 INTEREST EXPENSE: Deposits 3,028 3,609 6,694 6,637 15,444 Federal Home Loan 655 934 984 1,589 3,048 Bank advancesOther borrowings 124 109 238 233 354 Junior subordinateddebentures and 2,204 2,208 1,251 4,412 2,728 subordinated notes 6,011 6,860 9,167 12,871 21,574 Net interest income 127,554 117,661 119,580 245,215 238,838 (RECAPTURE)/PROVISION FOR (10,256 ) (9,251 ) 28,623 (19,507 ) 52,093 CREDIT LOSSESNet interest incomeafter (recapture)/ 137,810 126,912 90,957 264,722 186,745 provision forcredit lossesNON-INTEREST INCOME:Deposit fees andother service 9,758 8,939 7,546 18,697 17,349 chargesMortgage banking 7,478 11,440 14,138 18,918 24,329 operationsBank-owned life 1,245 1,307 2,317 2,552 3,367 insuranceMiscellaneous 3,720 2,042 1,427 5,762 4,066 22,201 23,728 25,428 45,929 49,111 Net gain on sale of 77 485 93 562 171 securitiesNet change invaluation offinancial 58 59 2,199 117 (2,397 ) instruments carriedat fair valueTotal non-interest 22,336 24,272 27,720 46,608 46,885 incomeNON-INTEREST EXPENSE:Salary and employee 61,935 64,819 63,415 126,754 123,323 benefitsLess capitalizedloan origination (8,768 ) (9,696 ) (11,110 ) (18,464 ) (16,916 ) costsOccupancy and 12,823 12,989 12,985 25,812 26,092 equipmentInformation /computer data 5,602 6,203 6,084 11,805 11,894 servicesPayment and card 4,975 4,326 3,851 9,301 8,091 processing servicesProfessional and 4,371 3,328 2,163 7,699 4,082 legal expensesAdvertising and 1,181 1,263 652 2,444 2,479 marketingDeposit insurance 1,241 1,533 1,705 2,774 3,340 expenseState/municipalbusiness and use 1,083 1,065 1,104 2,148 2,088 taxesReal estate 118 (242 ) 4 (124 ) 104 operationsAmortization ofcore deposit 1,711 1,711 2,002 3,422 4,003 intangiblesMiscellaneous 6,156 5,509 5,199 11,665 11,556 92,428 92,808 88,054 185,236 180,136 COVID-19 expenses 117 148 2,152 265 2,391 Merger andacquisition-related 79 571 336 650 1,478 expensesTotal non-interest 92,624 93,527 90,542 186,151 184,005 expenseIncome beforeprovision for 67,522 57,657 28,135 125,179 49,625 income taxesPROVISION 13,140 10,802 4,594 23,942 9,202 FORINCOME TAXESNET INCOME $ 54,382 $ 46,855 $ 23,541 $ 101,237 $ 40,423 Earnings per shareavailable to common shareholders:Basic $ 1.57 $ 1.34 $ 0.67 $ 2.90 $ 1.14 Diluted $ 1.56 $ 1.33 $ 0.67 $ 2.88 $ 1.14 Cumulativedividends declared $ 0.41 $ 0.41 $ ? $ 0.82 $ 0.41 per common shareWeighted averagecommon shares outstanding:Basic 34,736,639 34,973,383 35,189,260 34,854,357 35,326,401 Diluted 34,933,714 35,303,483 35,283,690 35,149,986 35,545,086 (Decrease) increasein common shares (184,455 ) (423,857 ) 55,440 (608,312 ) (593,677 ) outstanding

FINANCIALCONDITION Percentage Change(in thousands except Prior Yrshares and per share Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020 Prior Qtr Qtrdata) ASSETS Cash and due from $ 329,359 $ 296,184 $ 311,899 $ 291,036 11.2 % 13.2 %banksInterest-bearing 1,138,572 1,353,743 922,284 128,938 (15.9 ) % 783.0 %depositsTotal cash and cash 1,467,931 1,649,927 1,234,183 419,974 (11.0 ) % 249.5 %equivalentsSecurities - trading 25,097 25,039 24,980 23,239 0.2 % 8.0 %Securities - 3,275,979 2,989,760 2,322,593 1,706,781 9.6 % 91.9 %available for saleSecurities - held to 455,256 441,857 421,713 441,075 3.0 % 3.2 %maturityTotal securities 3,756,332 3,456,656 2,769,286 2,171,095 8.7 % 73.0 %Equity securities ? ? ? 340,052 nm (100.0 ) %Federal Home Loan 14,001 14,001 16,358 16,363 ? % (14.4 ) %Bank stockSecurities purchasedunder agreements to 300,000 ? ? ? nm nmresellLoans held for sale 71,741 135,263 243,795 258,700 (47.0 ) % (72.3 ) %Loans receivable 9,654,181 9,947,697 9,870,982 10,283,999 (3.0 ) % (6.1 ) %Allowance for credit (148,009 ) (156,054 ) (167,279 ) (156,352 ) (5.2 ) % (5.3 ) %losses - loansNet loans receivable 9,506,172 9,791,643 9,703,703 10,127,647 (2.9 ) % (6.1 ) %Accrued interest 46,979 49,214 46,617 48,806 (4.5 ) % (3.7 ) %receivableReal estate owned(REO) held for sale, 763 340 816 2,400 124.4 % (68.2 ) %netProperty and 156,063 161,268 164,556 173,360 (3.2 ) % (10.0 ) %equipment, netGoodwill 373,121 373,121 373,121 373,121 ? % ? %Other intangibles, 18,004 19,715 21,426 25,155 (8.7 ) % (28.4 ) %netBank-owned life 192,677 191,388 191,830 190,468 0.7 % 1.2 %insuranceOperating lease 55,287 56,217 55,367 57,667 (1.7 ) % (4.1 ) %right-of-use assetsOther assets 222,786 221,039 210,565 200,799 0.8 % 10.9 %Total assets $ 16,181,857 $ 16,119,792 $ 15,031,623 $ 14,405,607 0.4 % 12.3 %LIABILITIES Deposits: Non-interest-bearing $ 6,090,063 $ 5,994,693 $ 5,492,924 $ 5,281,559 1.6 % 15.3 %Interest-bearingtransaction and 6,673,598 6,647,196 6,159,052 5,692,715 0.4 % 17.2 %savings accountsInterest-bearing 873,047 906,978 915,320 1,042,006 (3.7 ) % (16.2 ) %certificatesTotal deposits 13,636,708 13,548,867 12,567,296 12,016,280 0.6 % 13.5 %Advances fromFederal Home Loan 100,000 100,000 150,000 150,000 ? % (33.3 ) %BankCustomer repurchaseagreements and other 237,736 216,260 184,785 166,084 9.9 % 43.1 %borrowingsSubordinated notes, 98,380 98,290 98,201 98,140 0.1 % 0.2 %netJunior subordinateddebentures at fair 117,520 117,248 116,974 109,613 0.2 % 7.2 %valueOperating lease 59,117 59,884 59,343 61,390 (1.3 ) % (3.7 ) %liabilitiesAccrued expenses and 216,399 313,801 143,300 133,574 (31.0 ) % 62.0 %other liabilitiesDeferred 46,786 46,625 45,460 45,423 0.3 % 3.0 %compensationTotal liabilities 14,512,646 14,500,975 13,365,359 12,780,504 0.1 % 13.6 %SHAREHOLDERS? EQUITY Common stock 1,311,455 1,326,269 1,349,879 1,345,096 (1.1 ) % (2.5 ) %Retained earnings 319,505 279,582 247,316 201,448 14.3 % 58.6 %Other components of 38,251 12,966 69,069 78,559 195.0 % (51.3 ) %shareholders? equityTotal shareholders? 1,669,211 1,618,817 1,666,264 1,625,103 3.1 % 2.7 %equityTotal liabilitiesand shareholders? $ 16,181,857 $ 16,119,792 $ 15,031,623 $ 14,405,607 0.4 % 12.3 %equityCommon Shares Issued:Shares outstanding 34,550,888 34,735,343 35,159,200 35,157,899 at end of periodCommon shareholders?equity per share ^ $ 48.31 $ 46.60 $ 47.39 $ 46.22 (1)Common shareholders?tangible equity per $ 36.99 $ 35.29 $ 36.17 $ 34.89 share ^(1) (2)Common shareholders?tangible equity to 8.09 % 7.80 % 8.69 % 8.76 % tangible assets ^(2)Consolidated Tier 1leverage capital 8.86 % 9.10 % 9.50 % 9.83 % 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 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020 Prior Qtr Prior Yr Qtr Commercial real estate:Owner-occupied $ 1,066,237 $ 1,045,656 $ 1,076,467 $ 1,027,399 2.0 % 3.8 %Investment 1,950,211 1,931,805 1,955,684 2,017,789 1.0 % (3.3 ) %propertiesSmall balance 621,102 639,330 573,849 624,726 (2.9 ) % (0.6 ) %CREMultifamily 504,445 433,775 428,223 437,201 16.3 % 15.4 %real estateConstruction,land and land development:Commercial 182,868 199,037 228,937 215,860 (8.1 ) % (15.3 ) %constructionMultifamily 295,661 305,694 305,527 256,335 (3.3 ) % 15.3 %constructionOne- tofour-family 603,895 542,840 507,810 528,966 11.2 % 14.2 %constructionLand and land 290,404 266,730 248,915 235,602 8.9 % 23.3 %developmentCommercial business:Commercial 1,124,359 1,096,303 1,133,989 1,250,288 2.6 % (10.1 ) %businessPPP 807,172 1,280,291 1,044,472 1,121,928 (37.0 ) % (28.1 ) %Small business 743,975 717,502 743,451 779,678 3.7 % (4.6 ) %scoredAgriculturalbusiness,including secured byfarmland:Agriculturalbusiness,including 247,467 226,094 299,949 328,077 9.5 % (24.6 ) %secured byfarmlandPPP 17,962 36,316 ? ? (50.5 ) % nmOne- tofour-family 637,701 655,627 717,939 817,787 (2.7 ) % (22.0 ) %residentialConsumer: Consumer?homeequityrevolving 458,915 466,132 491,812 515,603 (1.5 ) % (11.0 ) %lines ofcreditConsumer?other 101,807 104,565 113,958 126,760 (2.6 ) % (19.7 ) %Total loans $ 9,654,181 $ 9,947,697 $ 9,870,982 $ 10,283,999 (3.0 ) % (6.1 ) %receivableRestructuredloansperforming $ 5,472 $ 6,424 $ 6,673 $ 6,391 under theirrestructuredtermsLoans 30 - 89days past due $ 5,656 $ 19,233 $ 12,291 $ 20,807 and on accrualTotaldelinquentloans(including $ 23,582 $ 42,444 $ 36,131 $ 36,269 loans onnon-accrual),netTotaldelinquentloans/ 0.24 % 0.43 % 0.37 % 0.35 % Total loansreceivable

LOANS BYGEOGRAPHIC Percentage ChangeLOCATION Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020 Prior Qtr Prior Yr Qtr Amount Percentage Amount Amount Amount Washington $ 4,541,792 47.0 % $ 4,683,600 $ 4,647,553 $ 4,787,550 (3.0 ) % (5.1 ) %California 2,246,580 23.3 % 2,320,384 2,279,749 2,359,703 (3.2 ) % (4.8 ) %Oregon 1,753,285 18.2 % 1,801,104 1,792,156 1,899,933 (2.7 ) % (7.7 ) %Idaho 525,610 5.4 % 539,061 537,996 592,515 (2.5 ) % (11.3 ) %Utah 92,103 1.0 % 92,399 80,704 67,929 (0.3 ) % 35.6 %Other 494,811 5.1 % 511,149 532,824 576,369 (3.2 ) % (14.2 ) %Totalloans $ 9,654,181 100.0 % $ 9,947,697 $ 9,870,982 $ 10,283,999 (3.0 ) % (6.1 ) %receivable

ADDITIONAL FINANCIALINFORMATION (dollars in thousands) LOAN ORIGINATIONS Quarters Ended Jun 30, 2021 Mar 31, 2021 Jun 30, 2020Commercial real estate $ 103,415 $ 91,217 $ 111,765 Multifamily real estate 45,674 12,878 6,384 Construction and land 509,828 447,369 290,955 Commercial business: Commercial business 181,996 115,911 167,268 SBA PPP 55,990 428,180 1,151,170 Agricultural business 12,546 27,167 16,293 One-to four-family 47,086 57,731 24,537 residentialConsumer 131,424 87,322 126,653 Total loan originations(excluding loans held for $ 1,087,959 $ 1,267,775 $ 1,895,025 sale)

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Quarters EndedCHANGE IN THE Jun 30, 2021 Mar 31, 2021 Jun 30, 2020ALLOWANCE FOR CREDIT LOSSES - LOANSBalance, beginning of period $ 156,054 $ 167,279 $ 130,488 (Recapture)/provision for (8,100 ) (8,035 ) 29,524 credit losses - loansRecoveries of loans previously charged off:Commercial real estate 147 24 54 Construction and land ? 100 105 One- to four-family real estate 20 113 31 Commercial business 321 979 370 Agricultural business, 8 ? 22 including secured by farmlandConsumer 97 296 60 593 1,512 642 Loans charged off: Commercial real estate (3 ) (3,763 ) ? Construction and land ? ? (100 ) Commercial business (123 ) (789 ) (3,553 ) Agricultural business, (2 ) ? (62 ) including secured by farmlandConsumer (410 ) (150 ) (587 ) (538 ) (4,702 ) (4,302 ) Net recoveries (charge-offs) 55 (3,190 ) (3,660 ) Balance, end of period $ 148,009 $ 156,054 $ 156,352 Net recoveries (charge-offs) / 0.001 % (0.032 ) % (0.036 ) %Average loans receivable

ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES - Jun 30, 2021 Mar 31, 2021 Jun 30, 2020LOANSSpecific or allocated credit loss allowance:Commercial real estate $ 60,349 $ 59,411 $ 53,166 Multifamily real estate 5,807 4,367 3,504 Construction and land 30,899 36,440 36,916 One- to four-family real estate 9,800 7,988 12,746 Commercial business 30,830 31,411 33,870 Agricultural business, 3,256 4,617 4,517 including secured by farmlandConsumer 7,068 11,820 11,633 Total allowance for credit $ 148,009 $ 156,054 $ 156,352 losses - loansAllowance for credit losses - 1.53 % 1.57 % 1.52 %loans / Total loans receivableAllowance for credit losses - 481 % 426 % 418 %loans / Non-performing loans

Quarters EndedCHANGE IN THE Jun 30, 2021 Mar 31, 2021 Jun 30, 2020ALLOWANCE FOR CREDITLOSSES - UNFUNDED LOAN COMMITMENTSBalance, beginning of $ 12,077 $ 13,297 $ 11,460 periodRecapture for creditlosses - unfunded loan (2,168 ) (1,220 ) (905 ) commitmentsBalance, end of period $ 9,909 $ 12,077 $ 10,555

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Jun 30, Mar 31, Dec 31, Jun 30, 2021 2021 2020 2020NON-PERFORMING ASSETS Loans on non-accrual status: Secured by real estate: Commercial $ 17,427 $ 21,615 $ 18,199 $ 10,845 Construction and land 541 986 936 732 One- to four-family 4,007 4,456 3,556 2,942 Commercial business 3,673 4,194 5,407 18,486 Agricultural business, 1,200 1,536 1,743 433 including secured by farmlandConsumer 1,799 2,244 2,719 2,412 28,647 35,031 32,560 35,850 Loans more than 90 days delinquent, still on accrual:Secured by real estate: Commercial 911 ? ? ? One- to four-family 579 1,524 1,899 472 Commercial business 495 37 1,025 1 Agricultural business, ? ? ? 1,061 including secured by farmlandConsumer 131 ? 130 36 2,116 1,561 3,054 1,570 Total non-performing loans 30,763 36,592 35,614 37,420 REO 763 340 816 2,400 Other repossessed assets 17 37 51 47 Total non-performing assets $ 31,543 $ 36,969 $ 36,481 $ 39,867 Total non-performing assetsto 0.19 % 0.23 % 0.24 % 0.28 %total assets

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020LOANS BYCREDIT RISK RATING Pass $ 9,315,264 $ 9,584,429 $ 9,494,147 $ 9,869,917 Special 66,103 51,692 36,598 54,291 MentionSubstandard 272,814 311,576 340,237 359,791 Total $ 9,654,181 $ 9,947,697 $ 9,870,982 $ 10,283,999

Quarters Ended Six Months EndedREAL ESTATE OWNED Jun 30, Mar 31, Jun 30, Jun 30, Jun 30, 2021 2021 2020 2021 2020Balance, beginning of $ 340 $ 816 $ 2,402 $ 816 $ 814 periodAdditions from loan 423 ? ? 423 1,588 foreclosuresProceeds from ? (783 ) (98 ) (783 ) (98 ) dispositions of REOGain on sale of REO ? 307 96 307 96 Balance, end of $ 763 $ 340 $ 2,400 $ 763 $ 2,400 period

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) DEPOSIT COMPOSITION Percentage Change Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020 Prior Qtr Prior Yr Qtr Non-interest-bearing $ 6,090,063 $ 5,994,693 $ 5,492,924 $ 5,281,559 1.6 % 15.3 %Interest-bearing 1,736,696 1,722,085 1,569,435 1,399,593 0.8 % 24.1 %checkingRegular savings 2,646,302 2,597,731 2,398,482 2,197,790 1.9 % 20.4 %accountsMoney market 2,290,600 2,327,380 2,191,135 2,095,332 (1.6 ) % 9.3 %accountsTotalinterest-bearing 6,673,598 6,647,196 6,159,052 5,692,715 0.4 % 17.2 %transaction andsavings accountsTotal core deposits 12,763,661 12,641,889 11,651,976 10,974,274 1.0 % 16.3 %Interest-bearing 873,047 906,978 915,320 1,042,006 (3.7 ) % (16.2 ) %certificatesTotal deposits $ 13,636,708 $ 13,548,867 $ 12,567,296 $ 12,016,280 0.6 % 13.5 %

GEOGRAPHICCONCENTRATION OF DEPOSITS Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020 Percentage Change Amount Percentage Amount Amount Amount Prior Prior Qtr Yr QtrWashington $ 7,547,591 55.3 % $ 7,504,389 $ 7,058,404 $ 6,765,186 0.6 % 11.6 %Oregon 2,939,667 21.6 % 2,929,027 2,604,908 2,440,617 0.4 % 20.4 %California 2,417,387 17.7 % 2,401,299 2,237,949 2,224,477 0.7 % 8.7 %Idaho 732,063 5.4 % 714,152 666,035 586,000 2.5 % 24.9 %Total $ 13,636,708 100.0 % $ 13,548,867 $ 12,567,296 $ 12,016,280 0.6 % 13.5 %deposits

INCLUDED IN TOTAL Jun 30, Mar 31, Dec 31, Jun 30,DEPOSITS 2021 2021 2020 2020Publicnon-interest-bearing $ 187,702 $ 151,850 $ 175,352 $ 139,133 accountsPublic interest-bearingtransaction & savings 156,987 169,192 127,523 136,039 accountsPublic interest-bearing 41,444 51,021 59,127 56,609 certificatesTotal public deposits $ 386,133 $ 372,063 $ 362,002 $ 331,781 Total brokered deposits $ ? $ ? $ ? $ 119,399

ADDITIONAL FINANCIAL INFORMATION(dollars in thousands) Minimum to be categorized Minimum to be Actual as "Adequately Capitalized" categorized as "Well Capitalized"REGULATORY CAPITAL RATIOS Amount Ratio Amount Ratio Amount RatioAS OF JUNE 30, 2021 Banner Corporation-consolidated:Total capital to $ 1,618,512 14.62 % $ 885,723 8.00 % $ 1,107,154 10.00 %risk-weighted assetsTier 1 capital to 1,385,143 12.51 % 664,292 6.00 % 664,292 6.00 %risk-weighted assetsTier 1 leverage capital 1,385,143 8.86 % 625,458 4.00 % n/a n/ato average assetsCommon equity tier 1capital to risk-weighted 1,241,643 11.21 % 498,219 4.50 % n/a n/aassetsBanner Bank: Total capital to 1,505,250 13.60 % 885,354 8.00 % 1,106,693 10.00 %risk-weighted assetsTier 1 capital to 1,371,881 12.40 % 664,016 6.00 % 885,354 8.00 %risk-weighted assetsTier 1 leverage capital 1,371,881 8.78 % 625,305 4.00 % 781,632 5.00 %to average assetsCommon equity tier 1capital to risk-weighted 1,371,881 12.40 % 498,012 4.50 % 719,350 6.50 %assets

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands) (rates / ratios annualized) ANALYSIS OF NET INTEREST SPREAD Quarters Ended Jun 30, 2021 Mar 31, 2021 Jun 30, 2020 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 $ 69,908 $ 544 3.12 % $ 119,341 $ 925 3.14 % $ 152,636 $ 1,451 3.82 %Mortgage loans 7,147,733 80,673 4.53 % 7,144,770 80,580 4.57 % 7,314,125 87,172 4.79 %Commercial/agricultural loans 2,625,149 33,614 5.14 % 2,691,554 26,711 4.02 % 2,599,878 25,200 3.90 %Consumer and other loans 122,951 1,828 5.96 % 127,469 1,947 6.19 % 152,438 2,361 6.23 %Total loans^(1)(3) 9,965,741 116,659 4.70 % 10,083,134 110,163 4.43 % 10,219,077 116,184 4.57 %Mortgage-backed securities 2,440,913 11,563 1.90 % 1,953,820 9,472 1.97 % 1,286,223 8,083 2.53 %Other securities 1,250,417 7,088 2.27 % 1,048,856 6,687 2.59 % 787,957 5,859 2.99 %Equity securities ? ? ? % 1,742 ? ? % 114,349 123 0.43 %Interest-bearing deposits with 1,139,749 376 0.13 % 1,032,138 262 0.10 % 212,502 172 0.33 %banksFHLB stock 14,001 161 4.61 % 15,952 161 4.09 % 16,620 300 7.26 %Total investment securities ^(3) 4,845,080 19,188 1.59 % 4,052,508 16,582 1.66 % 2,417,651 14,537 2.42 %Total interest-earning assets 14,810,821 135,847 3.68 % 14,135,642 126,745 3.64 % 12,636,728 130,721 4.16 %Non-interest-earning assets 1,227,167 1,237,281 1,245,626 Total assets $ 16,037,988 $ 15,372,923 $ 13,882,354 Deposits: Interest-bearing checking accounts $ 1,754,363 302 0.07 % $ 1,616,824 315 0.08 % $ 1,376,710 374 0.11 %Savings accounts 2,622,716 454 0.07 % 2,486,820 521 0.08 % 2,108,896 998 0.19 %Money market accounts 2,288,638 668 0.12 % 2,242,748 775 0.14 % 1,979,419 1,565 0.32 %Certificates of deposit 889,020 1,604 0.72 % 913,053 1,998 0.89 % 1,117,547 3,757 1.35 %Total interest-bearing deposits 7,554,737 3,028 0.16 % 7,259,445 3,609 0.20 % 6,582,572 6,694 0.41 %Non-interest-bearing deposits 6,057,884 ? ? % 5,663,820 ? ? % 4,902,992 ? ? %Total deposits 13,612,621 3,028 0.09 % 12,923,265 3,609 0.11 % 11,485,564 6,694 0.23 %Other interest-bearing liabilities:FHLB advances 100,000 655 2.63 % 144,444 934 2.62 % 156,374 984 2.53 %Other borrowings 240,229 124 0.21 % 202,930 109 0.22 % 285,735 238 0.34 %Junior subordinated debentures and 247,944 2,204 3.57 % 247,944 2,208 3.61 % 149,043 1,251 3.38 %subordinated notesTotal borrowings 588,173 2,983 2.03 % 595,318 3,251 2.21 % 591,152 2,473 1.68 %Total funding liabilities 14,200,794 6,011 0.17 % 13,518,583 6,860 0.21 % 12,076,716 9,167 0.31 %Other non-interest-bearing 199,619 207,560 188,369 liabilities^(2)Total liabilities 14,400,413 13,726,143 12,265,085 Shareholders? equity 1,637,575 1,646,780 1,617,269 Total liabilities and $ 16,037,988 $ 15,372,923 $ 13,882,354 shareholders? equityNet interest income/rate spread $ 129,836 3.51 % $ 119,885 3.43 % $ 121,554 3.85 %(tax equivalent)Net interest margin (tax 3.52 % 3.44 % 3.87 %equivalent)Reconciliation to reported net interest income:Adjustments for taxable equivalent (2,282 ) (2,224 ) (1,974 ) basisNet interest income and margin, as $ 127,554 3.45 % $ 117,661 3.38 % $ 119,580 3.81 %reportedAdditional Key Financial Ratios: Return on average assets 1.36 % 1.24 % 0.68 %Return on average equity 13.32 % 11.54 % 5.85 %Average equity/average assets 10.21 % 10.71 % 11.65 %Average interest-earning assets/average interest-bearing 181.89 % 179.96 % 176.15 %liabilitiesAverage interest-earning assets/ 104.30 % 104.56 % 104.64 %average funding liabilitiesNon-interest income/average assets 0.56 % 0.64 % 0.80 %Non-interest expense/average 2.32 % 2.47 % 2.62 %assetsEfficiency ratio^(4) 61.79 % 65.90 % 61.47 %Adjusted efficiency ratio^(5) 59.77 % 63.85 % 58.58 %

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, $1.2 million, and $1.0 million for the three months ended(3) June30, 2021, March 31, 2021, and June30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million for both the three months ended June30, 2021 and March 31, 2021, compared to $963,000 for the three months ended June30, 2020.(4) Non-interest expense divided by the total of net interest income and non-interest income. Adjusted non-interest expense divided by adjusted revenue. These(5) represent 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 Six Months EndedINTEREST SPREAD Jun 30, 2021 Jun 30, 2020 Average Interest Yield/ Average Interest Yield/ Balance and Cost^(3) Balance and Cost^(3) Dividends DividendsInterest-earning assets:Held for sale loans $ 94,488 $ 1,469 3.14 % $ 152,631 $ 2,971 3.91 %Mortgage loans 7,146,260 161,253 4.55 % 7,312,120 180,233 4.96 %Commercial/ 2,658,168 60,325 4.58 % 2,241,942 48,159 4.32 %agricultural loansConsumer and other 125,197 3,775 6.08 % 157,768 4,956 6.32 %loansTotal loans^(1)(3) 10,024,113 226,822 4.56 % 9,864,461 236,319 4.82 %Mortgage-backed 2,198,712 21,035 1.93 % 1,320,404 17,319 2.64 %securitiesOther securities 1,150,193 13,775 2.42 % 623,036 9,169 2.96 %Equity securities 866 ? ? % 57,175 123 0.43 %Interest-bearing 1,086,241 638 0.12 % 152,581 565 0.74 %deposits with banksFHLB stock 14,971 322 4.34 % 21,571 622 5.80 %Total investment 4,450,983 35,770 1.62 % 2,174,767 27,798 2.57 %securities^(3)Totalinterest-earning 14,475,096 262,592 3.66 % 12,039,228 264,117 4.41 %assetsNon-interest-earning 1,232,196 1,219,440 assetsTotal assets $ 15,707,292 $ 13,258,668 Deposits: Interest-bearing $ 1,685,973 617 0.07 % $ 1,321,679 843 0.13 %checking accountsSavings accounts 2,555,144 975 0.08 % 2,074,377 2,753 0.27 %Money market 2,265,819 1,443 0.13 % 1,861,268 4,004 0.43 %accountsCertificates of 900,970 3,602 0.81 % 1,121,270 7,844 1.41 %depositTotalinterest-bearing 7,407,906 6,637 0.18 % 6,378,594 15,444 0.49 %depositsNon-interest-bearing 5,861,941 ? ? % 4,434,186 ? ? %depositsTotal deposits 13,269,847 6,637 0.10 % 10,812,780 15,444 0.29 %Otherinterest-bearing liabilities:FHLB advances 122,100 1,589 2.62 % 280,901 3,048 2.18 %Other borrowings 221,682 233 0.21 % 205,253 354 0.35 %Junior subordinateddebentures and 247,944 4,412 3.59 % 148,494 2,728 3.69 %subordinated notesTotal borrowings 591,726 6,234 2.12 % 634,648 6,130 1.94 %Total funding 13,861,573 12,871 0.19 % 11,447,428 21,574 0.38 %liabilitiesOthernon-interest-bearing 203,567 200,265 liabilities^(2)Total liabilities 14,065,140 11,647,693 Shareholders? equity 1,642,152 1,610,975 Total liabilitiesand shareholders? $ 15,707,292 $ 13,258,668 equityNet interest income/rate spread (tax $ 249,721 3.47 % $ 242,543 4.03 %equivalent)Net interest margin 3.48 % 4.05 %(tax equivalent)Reconciliation toreported net interest income:Adjustments fortaxable equivalent (4,506 ) (3,705 ) basisNet interest incomeand margin, as $ 245,215 3.42 % $ 238,838 3.99 %reportedAdditional Key Financial Ratios:Return on average 1.30 % 0.61 %assetsReturn on average 12.43 % 5.05 %equityAverage equity/ 10.45 % 12.15 %average assetsAverageinterest-earningassets/average ' 180.95 % 171.66 %interest-bearingliabilitiesAverageinterest-earning 104.43 % 105.17 %assets/averagefunding liabilitiesNon-interest income/ 0.60 % 0.71 %average assetsNon-interest expense 2.39 % 2.79 %/average assetsEfficiency ratio^(4) 63.79 % 64.40 %Adjusted efficiency 61.75 % 60.41 %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 $2.5 million(3) and $2.2 million for the six months ended June30, 2021 and June30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.0 million and $1.5 million for the six months ended June30, 2021 and June30, 2020, respectively.(4) Non-interest expense divided by the total of net interest income and non-interest income. Adjusted non-interest expense divided by adjusted revenue. These(5) represent 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 Six Months EndedREVENUE Jun 30, 2021 Mar 31, 2021 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020Net interest $ 127,554 $ 117,661 $ 119,580 $ 245,215 $ 238,838 incomeTotalnon-interest 22,336 24,272 27,720 46,608 46,885 incomeTotalrevenue 149,890 141,933 147,300 291,823 285,723 (GAAP)Exclude netgain on sale (77 ) (485 ) (93 ) (562 ) (171 ) ofsecuritiesExclude netchange invaluation offinancial (58 ) (59 ) (2,199 ) (117 ) 2,397 instrumentscarried atfair valueAdjustedrevenue $ 149,755 $ 141,389 $ 145,008 $ 291,144 $ 287,949 (non-GAAP)

ADJUSTED EARNINGS Quarters Ended Six Months Ended Jun 30, 2021 Mar 31, 2021 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020Net income (GAAP) $ 54,382 $ 46,855 $ 23,541 $ 101,237 $ 40,423 Exclude net gain on (77 ) (485 ) (93 ) (562 ) (171 ) sale of securitiesExclude net changein valuation offinancial (58 ) (59 ) (2,199 ) (117 ) 2,397 instruments carriedat fair valueExclude merger andacquisition-related 79 571 336 650 1,478 expensesExclude COVID-19 117 148 2,152 265 2,391 expensesExclude related net (15 ) (42 ) (47 ) (57 ) (1,452 ) tax benefitTotal adjusted $ 54,428 $ 46,988 $ 23,690 $ 101,416 $ 45,066 earnings (non-GAAP) Diluted earnings $ 1.56 $ 1.33 $ 0.67 $ 2.88 $ 1.14 per share (GAAP)Diluted adjustedearnings per share $ 1.56 $ 1.33 $ 0.67 $ 2.89 $ 1.27 (non-GAAP)

ADDITIONALFINANCIAL INFORMATION(dollars in thousands)ADJUSTED EFFICIENCY Quarters Ended Six Months EndedRATIO Jun 30, 2021 Mar 31, 2021 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020Non-interest $ 92,624 $ 93,527 $ 90,542 $ 186,151 $ 184,005 expense (GAAP)Exclude merger andacquisition-related (79 ) (571 ) (336 ) (650 ) (1,478 ) expensesExclude COVID-19 (117 ) (148 ) (2,152 ) (265 ) (2,391 ) expensesExclude CDI (1,711 ) (1,711 ) (2,002 ) (3,422 ) (4,003 ) amortizationExclude state/municipal tax (1,083 ) (1,065 ) (1,104 ) (2,148 ) (2,088 ) expenseExclude REO (118 ) 242 (4 ) 124 (104 ) operationsAdjustednon-interest $ 89,516 $ 90,274 $ 84,944 $ 179,790 $ 173,941 expense (non-GAAP) Net interest income $ 127,554 $ 117,661 $ 119,580 $ 245,215 $ 238,838 (GAAP)Non-interest income 22,336 24,272 27,720 46,608 46,885 (GAAP)Total revenue 149,890 141,933 147,300 291,823 285,723 Exclude net gain on (77 ) (485 ) (93 ) (562 ) (171 ) sale of securitiesExclude net changein valuation offinancial (58 ) (59 ) (2,199 ) (117 ) 2,397 instruments carriedat fair valueAdjusted revenue $ 149,755 $ 141,389 $ 145,008 $ 291,144 $ 287,949 (non-GAAP) Efficiency ratio 61.79 % 65.90 % 61.47 % 63.79 % 64.40 %(GAAP)Adjusted efficiency 59.77 % 63.85 % 58.58 % 61.75 % 60.41 %ratio (non-GAAP)

TANGIBLECOMMONSHAREHOLDERS? Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Jun 30, 2020EQUITY TOTANGIBLEASSETSShareholders? $ 1,669,211 $ 1,618,817 $ 1,666,264 $ 1,625,103 equity (GAAP)Excludegoodwill andother 391,125 392,836 394,547 398,276 intangibleassets, netTangiblecommonshareholders? $ 1,278,086 $ 1,225,981 $ 1,271,717 $ 1,226,827 equity(non-GAAP) Total assets $ 16,181,857 $ 16,119,792 $ 15,031,623 $ 14,405,607 (GAAP)Excludegoodwill andother 391,125 392,836 394,547 398,276 intangibleassets, netTotaltangible $ 15,790,732 $ 15,726,956 $ 14,637,076 $ 14,007,331 assets(non-GAAP)Commonshareholders?equity to 10.32 % 10.04 % 11.09 % 11.28 %total assets(GAAP)Tangiblecommonshareholders?equity to 8.09 % 7.80 % 8.69 % 8.76 %tangibleassets(non-GAAP) TANGIBLECOMMONSHAREHOLDERS? EQUITY PERSHARETangiblecommonshareholders? $ 1,278,086 $ 1,225,981 $ 1,271,717 $ 1,226,827 equity(non-GAAP)Common sharesoutstanding 34,550,888 34,735,343 35,159,200 35,157,899 at end ofperiodCommonshareholders?equity (book $ 48.31 $ 46.60 $ 47.39 $ 46.22 value) pershare (GAAP)Tangiblecommonshareholders?equity $ 36.99 $ 35.29 $ 36.17 $ 34.89 (tangiblebook value)per share(non-GAAP)

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