• Banner Corporation Reports Net Income of $45.9 Million, or $1.33 Per Diluted Share, for Third Quarter 2023; Declares Quarterly Cash Dividend of $0.48 Per Share

    Source: Nasdaq GlobeNewswire / 18 Oct 2023 15:00:01   America/Chicago

    WALLA WALLA, Wash., Oct. 18, 2023 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $45.9 million, or $1.33 per diluted share, for the third quarter of 2023, a 16% increase compared to $39.6 million, or $1.15 per diluted share, for the preceding quarter and a 7% decrease compared to $49.1 million, or $1.43 per diluted share, for the third quarter of 2022.  Net interest income was $141.8 million in the third quarter of 2023, compared to $142.5 million in the preceding quarter and $146.4 million in the third quarter a year ago.  The decrease in net interest income compared to the preceding and prior year quarters reflects an increase in funding costs, partially offset by an increase in yields on earning assets.  Banner’s third quarter 2023 results include a $2.0 million provision for credit losses, compared to a $6.8 million provision for credit losses in the preceding quarter and a $6.1 million provision for credit losses in the third quarter of 2022.  Net income was $141.0 million, or $4.09 per diluted share, for both the nine months ended September 30, 2023 and 2022.  Banner’s results for the first nine months of 2023 include an $8.3 million provision for credit losses, compared to a $3.7 million provision for credit losses the same period in 2022.

    Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.48 per share.  The dividend will be payable November 13, 2023, to common shareholders of record on November 3, 2023.

    “Our super community bank business model, which emphasizes a moderate risk profile and strong relationship banking, continues to serve us well and we are well positioned to manage the uncertainties of these economic times,” said Mark Grescovich, President and CEO.  “Our performance for the third quarter of 2023 benefited from loan growth and higher yields on interest-earning assets.  However, the higher interest rate environment and its effect on funding costs resulted in moderate compression in our net interest margin during the quarter.  Due to solid loan growth, we continue to build reserves while maintaining very strong credit quality metrics.  Our continued focus on growing client relationships is serving us well, with core deposits representing 89% of total deposits at quarter end.  Banner’s overarching goals continue to be to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events,” concluded Grescovich.

    At September 30, 2023, Banner, on a consolidated basis, had $15.51 billion in assets, $10.46 billion in net loans and $13.17 billion in deposits.  Banner operates 135 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

    Third Quarter 2023 Highlights

    • Revenues increased 2% to $154.4 million, compared to $150.9 million in the preceding quarter, and decreased 5% compared to $162.0 million in the third quarter a year ago.
    • Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.7 million in the third quarter of 2023, compared to $158.6 million in the preceding quarter and $161.5 million in the third quarter a year ago.
    • Net interest income decreased 1% to $141.8 million in the third quarter of 2023, compared to $142.5 million in the preceding quarter and decreased 3% compared to $146.4 million in the third quarter a year ago.
    • Net interest margin, on a tax equivalent basis, was 3.93%, compared to 4.00% in the preceding quarter and 3.85% in the third quarter a year ago.
    • Mortgage banking operations revenue increased to $2.0 million, compared to $1.7 million in the preceding quarter, and compared to $105,000 in the third quarter a year ago.
    • Return on average assets was 1.17%, compared to 1.02% in the preceding quarter and 1.18% in the third quarter a year ago.
    • Net loans receivable increased 1% to $10.46 billion at September 30, 2023, compared to $10.33 billion at June 30, 2023, and increased 8% compared to $9.69 billion at September 30, 2022.
    • Non-performing assets decreased to $26.8 million, or 0.17% of total assets, at September 30, 2023, compared to $28.7 million, or 0.18% of total assets at June 30, 2023, and increased compared to $15.6 million, or 0.10% of total assets, at September 30, 2022.
    • The allowance for credit losses - loans was $147.0 million, or 1.38% of total loans receivable, as of September 30, 2023, compared to $144.7 million, or 1.38% of total loans receivable as of June 30, 2023 and $135.9 million, or 1.38% of total loans receivable as of September 30, 2022.
    • Total deposits increased to $13.17 billion at September 30, 2023, compared to $13.10 billion at June 30, 2023, and decreased compared to $14.23 billion at September 30, 2022.
    • Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) decreased to $11.72 billion at September 30, 2023, compared to $11.74 billion at June 30, 2023 and $13.51 billion at September 30, 2022.  Core deposits represented 89% of total deposits at September 30, 2023.
    • Banner Bank’s estimated uninsured deposits were approximately 31% of total deposits at both September 30, 2023 and June 30, 2023.
    • Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and affiliate deposits, were approximately 28% of total deposits at both September 30, 2023 and June 30, 2023.
    • Available borrowing capacity was $4.62 billion at September 30, 2023, compared to $4.02 billion at June 30, 2023.
    • On-balance sheet liquidity was $2.86 billion at September 30, 2023, compared to $3.07 billion at June 30, 2023.
    • Dividends paid to shareholders were $0.48 per share in the quarter ended September 30, 2023.
    • Common shareholders’ equity per share decreased 1% to $44.27 at September 30, 2023, compared to $44.91 at the preceding quarter end, and increased 7% from $41.20 at September 30, 2022.
    • Tangible common shareholders’ equity per share* decreased 2% to $33.22 at September 30, 2023, compared to $33.83 at the preceding quarter end, and increased 11% from $29.97 at September 30, 2022.

    *Non-GAAP (Generally Accepted Accounting Principles) measure; See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

    Income Statement Review

    Net interest income was $141.8 million in the third quarter of 2023, compared to $142.5 million in the preceding quarter and $146.4 million in the third quarter a year ago.  Net interest margin on a tax equivalent basis was 3.93% for the third quarter of 2023, a seven basis-point decrease compared to 4.00% in the preceding quarter and an eight basis-point increase compared to 3.85% in the third quarter a year ago.  Net interest margin for the current quarter was impacted by an increase in funding costs due to an increase in the mix of higher cost retail CDs and the lag effect of prior market rate increases on current period deposit costs, partially offset by a decrease in FHLB advances and increased yields on loans due to the rising interest rates during the quarter.

    Average yields on interest-earning assets increased 14 basis points to 4.94% for the third quarter of 2023, compared to 4.80% for the preceding quarter and increased 97 basis points compared to 3.97% in the third quarter a year ago.  Since March 2022, in response to inflation, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 525 basis points, including 25 basis points during the third quarter of 2023, to a range of 5.25% to 5.50%.  The increase in average yields on interest-earning assets during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates.  Average loan yields increased 14 basis points to 5.65% compared to 5.51% in the preceding quarter and increased 83 basis points compared to 4.82% in the third quarter a year ago.  The increase in average loan yields during the current quarter compared to the preceding and prior year quarters was primarily the result of rising interest rates and the lag effect of some adjustable-rate loans repricing for the first time since the start of the rising rate environment.  Total deposit costs were 0.94% in the third quarter of 2023, which was a 30 basis-point increase compared to the preceding quarter and an 87 basis-point increase compared to the third quarter a year ago.  The increase in the costs of deposits was due to an increase in the mix of higher cost retail CDs as well as a larger percentage of core deposits being in interest bearing accounts.  The average rate paid on FHLB advances was 5.50% in the third quarter of 2023, which was a 21 basis-point increase compared to 5.29% in the preceding quarter.  There were no FHLB advances during the third quarter a year ago.  The average rate paid on other borrowings in the third quarter of 2023 was 2.24%, which was a 60 basis-point increase compared to 1.64% in the preceding quarter and a 211 basis-point increase compared to 0.13% in the third quarter a year ago.  The total cost of funding liabilities was 1.08% during the third quarter of 2023, a 22 basis-point increase compared to 0.86% in the preceding quarter and a 95 basis-point increase compared to 0.13% in the third quarter a year ago.

    A $2.0 million provision for credit losses was recorded in the current quarter (comprised of a $2.9 million provision for credit losses - loans, a $346,000 provision for credit losses - unfunded loan commitments, a $1.3 million recapture of provision for credit losses - available for sale securities and a $12,000 recapture of provision for credit losses - held-to-maturity debt securities).  This compares to a $6.8 million provision for credit losses in the prior quarter (comprised of a $3.6 million provision for credit losses - loans, a $1.2 million provision for credit losses - unfunded loan commitments, a $2.0 million provision for credit losses - available for sale securities and a $16,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $6.1 million provision for credit losses in the third quarter a year ago (comprised of a $6.3 million provision for credit losses - loans, a $205,000 recapture of provision for credit losses - unfunded loan commitments and a $55,000 recapture of provision for credit losses - held-to-maturity debt securities).  The provision for credit losses for the current quarter primarily reflects increased loan balances and unfunded loan commitments, partially offset by an increase in the trading price on bank subordinated debt investments.  The provision for credit losses for the preceding quarter primarily reflected increased loan balances and unfunded loan commitments, a deterioration in forecasted economic conditions and rating downgrades on bank subordinated debt investments.

    Total non-interest income was $12.7 million in the third quarter of 2023, compared to $8.4 million in the preceding quarter and $15.6 million in the third quarter a year ago.  The increase in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $1.9 million reduction in the net loss recognized on the sale of securities as well as a $2.5 million reduction in the net loss for fair value adjustments on financial instruments carried at fair value during the current quarter.  The decrease in non-interest income during the current quarter compared to the prior year quarter was primarily due to a $2.7 million net loss recognized on the sale of securities during the current quarter and a $654,000 net loss for fair value adjustments on financial instruments carried at fair value in the current quarter, partially offset by a $1.9 million increase in mortgage banking operations revenues.  Total non-interest income was $30.4 million for the nine months ended September 30, 2023, compared to $62.2 million for the same period a year earlier.

    Mortgage banking operations revenue, including gains on one- to four-family and multifamily loan sales and loan servicing fees, was $2.0 million in the third quarter of 2023, compared to $1.7 million in the preceding quarter and $105,000 in the third quarter a year ago.  The increase from the preceding quarter and from the third quarter of 2022 primarily reflects a reduction in the lower of cost or market adjustment on multifamily held for sale loans recognized during the current period compared to the prior periods.  In addition, the volume of one- to four-family loans sold during the current quarter increased compared to the prior year quarter; however, volumes remain low primarily due to reduced refinancing activity, as well as decreased purchase activity as interest rates increased.  The increase in volume of one- to four-family loans sold during the current quarter compared to the prior year quarter was partially offset by a decrease in the gain on sale margin of one- to four-family loans sold.  Home purchase activity accounted for 90% of one- to four-family mortgage loan originations in the third quarter of 2023, compared to 93% in the preceding quarter and 88% in the third quarter of 2022.  For the third and second quarters of 2023, respectively, mortgage banking operations revenue included a $456,000 and $757,000 lower of cost or market downward adjustment on multifamily held for sale loans due to increases in market interest rates during those quarters.  There were no multifamily loans sold during the third and second quarters of 2023.  During the third quarter of 2022, a $2.2 million lower of cost or market downward adjustment was recorded due to increases in market rates.  There were $10.5 million of multifamily loans sold at a gain of $58,000 during the third quarter of 2022.

    Third quarter 2023 non-interest income also included a $654,000 net loss 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 limited partnership investments, and a $2.7 million net loss on the sale of securities.  In the preceding quarter, results included a $3.2 million net loss for fair value adjustments and a $4.5 million net loss on the sale of securities.  In the third quarter a year ago, the results included a $532,000 net gain for fair value adjustments and a $6,000 net gain on the sale of securities.

    Total revenue increased 2% to $154.4 million for the third quarter of 2023, compared to $150.9 million in the preceding quarter, and decreased 5% compared to $162.0 million in the third quarter of 2022.  Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.7 million in the third quarter of 2023, compared to $158.6 million in the preceding quarter and $161.5 million in the third quarter a year ago.  Total revenue was $468.0 million for the nine months ended September 30, 2023, compared to $456.3 million for the same period a year earlier.  In the first nine months of the year, adjusted revenue* was $486.7 million, compared to $447.4 million in the first nine months of 2022.

    Total non-interest expense was $95.9 million in the third quarter of 2023, compared to $95.4 million in the preceding quarter and $95.0 million in the third quarter of 2022.  The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $503,000 increase in payment and card processing services expense, a $642,000 increase in professional and legal expenses and a $504,000 increase in miscellaneous expense, partially offset by an $881,000 decrease in salary and employee benefits expense.  The increase in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects a decrease in capitalized loan origination costs and an increase in deposit insurance expense, partially offset by decreases in salary and employee benefits expense and miscellaneous expense.  The current quarter included $996,000 of Banner forward expenses related to the consolidation of two branch locations, as well as expenses related to the discontinuation of the Multifamily Originated for Sale business line due to the continued lack of an active secondary market for originated loans.  Year-to-date, total non-interest expense was $285.9 million, compared to $278.3 million in the same period a year earlier.  Banner’s efficiency ratio was 62.10% for the third quarter, compared to 63.21% in the preceding quarter and 58.65% in the same quarter a year ago.  Banner’s adjusted efficiency ratio* was 59.00% for the third quarter, compared to 58.58% in the preceding quarter and 57.04% in the year ago quarter.

    Federal and state income tax expense totaled $10.7 million for the third quarter of 2023 resulting in an effective tax rate of 18.9%, reflecting the benefits from tax exempt income.  Banner’s statutory income tax rate for the quarter ended September 30, 2023, was 23.5%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

    *Non-GAAP financial measures.  See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

    Balance Sheet Review

    Total assets decreased to $15.51 billion at September 30, 2023, compared to $15.58 billion at June 30, 2023, and decreased 5% from $16.36 billion at September 30, 2022.  The total of securities and interest-bearing deposits held at other banks totaled $3.44 billion at September 30, 2023, compared to $3.64 billion at June 30, 2023 and $5.01 billion at September 30, 2022.  The decrease compared to the prior quarter was primarily due to the sale of securities and a decrease in the fair value of securities - available for sale.  The decrease compared to the prior year quarter was primarily due to reverse repurchase agreements maturing during the first six months of 2023, the sale of securities and a reduction in interest bearing cash balances.  The average effective duration of the securities portfolio was approximately 6.8 years at September 30, 2023, compared to 6.4 years at September 30, 2022.

    Total loans receivable increased to $10.61 billion at September 30, 2023, compared to $10.47 billion at June 30, 2023, and $9.83 billion at September 30, 2022.  One- to four-family residential loans increased 7% to $1.44 billion at September 30, 2023, compared to $1.34 billion at June 30, 2023, and increased 40% compared to $1.03 billion at September 30, 2022.  The increase in one- to four-family residential loans was primarily the result of one- to four-family construction loans converting to one- to four-family portfolio loans upon the completion of the construction phase and new production.  Multifamily real estate loans increased 10% to $766.6 million at September 30, 2023, compared to $699.8 million at June 30, 2023, and increased 29% compared to $592.8 million at September 30, 2022.  The increase in multifamily loans compared to the prior quarter was primarily the result of multifamily affordable housing construction loans converting to multifamily portfolio loans upon the completion of the construction phase.  The increase in multifamily loans compared to a year ago also reflects the transfer of $54.0 million of multifamily held for sale loans to the held for investment loan portfolio during the fourth quarter of 2022.  Commercial business loans decreased to $2.26 billion at September 30, 2023, compared to $2.30 billion at June 30, 2023, primarily due to paydowns and payoffs exceeding new loan production, and increased 5% compared to $2.15 billion a year ago, primarily due to new loan production.  Agricultural business loans increased 8% to $334.6 million at September 30, 2023, compared to $310.1 million at June 30, 2023, and increased 12% compared to $299.4 million at September 30, 2022, primarily due to new loan production and advances on agricultural lines of credit.

    Loans held for sale were $54.2 million at September 30, 2023, compared to $60.6 million at June 30, 2023, and $84.4 million at September 30, 2022.  One- to four- family residential mortgage loans sold totaled $87.3 million in the current quarter, compared to $62.6 million in the preceding quarter and $49.7 million in the third quarter a year ago.  There were no multifamily loans sold during the third quarter of 2023 or the preceding quarter and $10.5 million sold in the third quarter a year ago.

    Total deposits increased to $13.17 billion at September 30, 2023, compared to $13.10 billion at June 30, 2023, primarily due to increases in interest-bearing deposit accounts and normal seasonal increases following outflows for tax payments during the second quarter of 2023, and decreased compared to $14.23 billion a year ago.  The decline in deposits from the third quarter a year ago was primarily due to interest rate sensitive clients shifting a portion of their non-operating deposit balances to higher yielding investments.  Non-interest-bearing account balances decreased 3% to $5.20 billion at September 30, 2023, compared to $5.37 billion at June 30, 2023, and 20% compared to $6.51 billion at September 30, 2022.  Core deposits were 89% of total deposits at September 30, 2023, 90% of total deposits at June 30, 2023 and 95% of total deposits at September 30, 2022.  Certificates of deposit increased 7% to $1.46 billion at September 30, 2023, compared to $1.36 billion at June 30, 2023, and increased 102% compared to $721.9 million a year earlier.  The increase in certificates of deposit during the current quarter compared to the preceding quarter and third quarter a year ago was principally due to clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposit.  The increase in certificates of deposit from the third quarter a year ago was also due to a $162.9 million increase in brokered deposits.

    Banner Bank’s estimated uninsured deposits were $4.07 billion or 31% of total deposits at September 30, 2023, compared to $4.06 billion or 31% of total deposits at June 30, 2023.  The uninsured deposit calculation includes $300.2 million and $309.7 million of collateralized public deposits at September 30, 2023 and June 30, 2023, respectively.  Uninsured deposits also include cash held by the holding company of $97.8 million and $95.0 million at September 30, 2023 and June 30, 2023, respectively.  Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and cash held at the holding company, were 28% of deposits at both September 30, 2023 and June 30, 2023.

    Banner had $140.0 million of FHLB borrowings at September 30, 2023, compared to $270.0 million at June 30, 2023 and none a year ago.  At September 30, 2023, Banner’s off-balance sheet liquidity included additional borrowing capacity of $2.98 billion at the FHLB and $1.52 billion at the Federal Reserve as well as federal funds line of credit agreements with other financial institutions of $125.0 million.

    Subordinated notes, net of issuance costs, were $92.7 million at September 30, 2023 compared to $92.6 million at June 30, 2023 and $98.8 million at September 30, 2022.  The decrease in subordinated notes was due to Banner Bank’s purchase of $6.5 million of Banner’s subordinated debt during the second quarter of 2023.

    At September 30, 2023, total common shareholders’ equity was $1.52 billion, or 9.81% of assets, compared to $1.54 billion or 9.90% of assets at June 30, 2023, and $1.41 billion or 8.61% of assets at September 30, 2022.  The decrease in total common shareholders’ equity at September 30, 2023 compared to June 30, 2023 was primarily due to a $53.5 million increase in accumulated other comprehensive loss, primarily due to a decrease in the fair value of the security portfolio as a result of an increase in interest rates during the third quarter of 2023, partially offset by a $29.2 million increase in retained earnings as a result of $45.9 million in net income, offset by the accrual of $16.7 million of cash dividends during the third quarter of 2023.  The increase in total common shareholders’ equity from September 30, 2022 reflects a $130.1 million increase in retained earnings, partially offset by an $23.7 million increase in accumulated other comprehensive loss, primarily due to a decrease in the fair value of the security portfolio as a result of an increase in interest rates during 2022.  At September 30, 2023, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.14 billion, or 7.54% of tangible assets*, compared to $1.16 billion, or 7.64% of tangible assets, at June 30, 2023, and $1.02 billion, or 6.41% of tangible assets, a year ago.

    *Non-GAAP financial measures.  See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

    Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.”  At September 30, 2023, Banner’s estimated common equity Tier 1 capital ratio was 11.75%, its estimated Tier 1 leverage capital to average assets ratio was 10.40%, and its estimated total capital to risk-weighted assets ratio was 14.34%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

    Credit Quality

    The allowance for credit losses - loans was $147.0 million, or 1.38% of total loans receivable and 560% of non-performing loans, at September 30, 2023, compared to $144.7 million, or 1.38% of total loans receivable and 513% of non-performing loans, at June 30, 2023, and $135.9 million, or 1.38% of total loans receivable and 895% of non-performing loans, at September 30, 2022.  In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $15.0 million at September 30, 2023, compared to $14.7 million at June 30, 2023, and $14.0 million at September 30, 2022.  Net loan charge-offs totaled $663,000 in the third quarter of 2023, compared to net loan charge-offs of $336,000 in the preceding quarter and net loan recoveries of $869,000 in the third quarter a year ago.  Non-performing loans were $26.3 million at September 30, 2023, compared to $28.2 million at June 30, 2023, and $15.2 million a year ago.

    Substandard loans were $124.5 million at September 30, 2023, compared to $145.0 million at June 30, 2023, and $136.4 million a year ago.  The decreases from the prior quarter and the comparable quarter a year ago primarily reflect risk rating upgrades as well as the payoff and sale of substandard loans.

    Total non-performing assets were $26.8 million, or 0.17% of total assets, at September 30, 2023, compared to $28.7 million, or 0.18% of total assets, at June 30, 2023, and $15.6 million, or 0.10% of total assets, a year ago.

    Conference Call

    Banner will host a conference call on Thursday October 19, 2023, at 8:00 a.m. PDT, to discuss its third quarter results.  Interested investors may listen to the call live at www.bannerbank.com.  Investment professionals are invited to dial (833) 470-1428 using access code 535380 to participate in the call.  A replay will be available for one week at (866) 813-9403 using access code 970585 or at www.bannerbank.com.

    About the Company

    Banner Corporation is a $15.51 billion bank holding company operating a 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 Banner’s operating and stock price performance.

    Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth, or increased political instability due to acts of war; (2) changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; (3) the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; (4) the effects of any federal government shutdown; (5) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (6) 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; (7) 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 Banner’s activities; (8) competitive pressures among depository institutions; (9) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (10) the transition away from the London Interbank Offered Rate (LIBOR) toward new interest rate benchmarks; (11) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (12) fluctuations in real estate values; (13) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (14) the ability to access cost-effective funding; (15) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (16) changes in financial markets; (17) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (18) the costs, effects and outcomes of litigation; (19) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (20) changes in accounting principles, policies or guidelines; (21) future acquisitions by Banner of other depository institutions or lines of business; (22) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (23) the costs associated with Banner Forward; (24) effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; (25) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (26) other risks detailed from time to time in Banner’s other reports filed with and furnished to the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

         
    RESULTS OF OPERATIONS Quarters Ended Nine Months Ended
    (in thousands except shares and per share data) Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
    INTEREST INCOME:          
    Loans receivable $149,254  $140,848  $116,610  $423,359  $321,466 
    Mortgage-backed securities  17,691   18,285   17,558   54,954   48,486 
    Securities and cash equivalents  12,119   12,676   16,951   39,521   37,059 
    Total interest income  179,064   171,809   151,119   517,834   407,011 
    INTEREST EXPENSE:          
    Deposits  31,001   20,539   2,407   60,784   6,501 
    Federal Home Loan Bank (FHLB) advances  2,233   5,157      8,654   291 
    Other borrowings  1,099   771   81   2,251   245 
    Subordinated debt  2,965   2,824   2,188   8,549   5,866 
    Total interest expense  37,298   29,291   4,676   80,238   12,903 
    Net interest income  141,766   142,518   146,443   437,596   394,108 
    PROVISION FOR CREDIT LOSSES  2,027   6,764   6,087   8,267   3,660 
    Net interest income after provision for credit losses  139,739   135,754   140,356   429,329   390,448 
    NON-INTEREST INCOME:          
    Deposit fees and other service charges  10,916   10,600   11,449   32,078   33,638 
    Mortgage banking operations  2,049   1,686   105   6,426   8,523 
    Bank-owned life insurance  2,062   2,386   1,804   6,636   5,674 
    Miscellaneous  942   1,428   1,689   4,010   5,423 
       15,969   16,100   15,047   49,150   53,258 
    Net (loss) gain on sale of securities  (2,657)  (4,527)  6   (14,436)  473 
    Net change in valuation of financial instruments carried at fair value  (654)  (3,151)  532   (4,357)  650 
    Gain on sale of branches, including related deposits              7,804 
    Total non-interest income  12,658   8,422   15,585   30,357   62,185 
    NON-INTEREST EXPENSE:          
    Salary and employee benefits  61,091   61,972   61,639   184,452   181,957 
    Less capitalized loan origination costs  (4,498)  (4,457)  (5,984)  (12,386)  (19,436)
    Occupancy and equipment  11,722   11,994   12,008   35,686   38,512 
    Information and computer data services  7,118   7,082   6,803   21,347   19,451 
    Payment and card processing services  5,172   4,669   5,508   14,459   16,086 
    Professional and legal expenses  3,042   2,400   2,619   7,563   7,677 
    Advertising and marketing  1,362   940   1,326   3,108   2,609 
    Deposit insurance  2,874   2,839   1,946   7,603   4,910 
    State and municipal business and use taxes  1,359   1,229   1,223   3,888   3,389 
    Real estate operations, net  (383)  75   68   (585)  (132)
    Amortization of core deposit intangibles  857   991   1,215   2,898   4,064 
    Loss on extinguishment of debt              793 
    Miscellaneous  6,175   5,671   6,663   17,884   18,402 
    Total non-interest expense  95,891   95,405   95,034   285,917   278,282 
    Income before provision for income taxes  56,506   48,771   60,907   173,769   174,351 
    PROVISION FOR INCOME TAXES  10,652   9,180   11,837   32,769   33,353 
    NET INCOME $45,854  $39,591  $49,070  $141,000  $140,998 
    Earnings per common share:          
    Basic $1.33  $1.15  $1.43  $4.11  $4.11 
    Diluted $1.33  $1.15  $1.43  $4.09  $4.09 
    Cumulative dividends declared per common share $0.48  $0.48  $0.44  $1.44  $1.32 
    Weighted average number of common shares outstanding:          
    Basic  34,379,865   34,373,434   34,224,640   34,331,458   34,277,182 
    Diluted  34,429,726   34,409,024   34,416,017   34,439,214   34,499,246 
    Increase (decrease) in common shares outstanding  1,322   36,087   429   151,931   (60,873)
                         


    FINANCIAL  CONDITION         Percentage Change
    (in thousands except shares and per share data) Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022 Prior Qtr Prior Yr Qtr
    ASSETS            
    Cash and due from banks $207,171  $229,918  $198,154  $273,052  (9.9)% (24.1)%
    Interest-bearing deposits  44,535   51,407   44,908   548,869  (13.4)% (91.9)%
    Total cash and cash equivalents  251,706   281,325   243,062   821,921  (10.5)% (69.4)%
    Securities - trading  25,268   25,659   28,694   28,383  (1.5)% (11.0)%
    Securities - available for sale, amortized cost $2,774,972, $2,879,179, $3,218,777 and $3,433,541, respectively  2,287,993   2,465,960   2,789,031   2,996,173  (7.2)% (23.6)%
    Securities - held to maturity, fair value $853,653, $933,116, $942,180 and $947,416, respectively  1,082,156   1,098,570   1,117,588   1,132,852  (1.5)% (4.5)%
    Total securities  3,395,417   3,590,189   3,935,313   4,157,408  (5.4)% (18.3)%
    FHLB stock  15,600   20,800   12,000   10,000  (25.0)% 56.0%
    Securities purchased under agreements to resell        300,000   300,000  nm  (100.0)%
    Loans held for sale  54,158   60,612   56,857   84,358  (10.6)% (35.8)%
    Loans receivable  10,611,417   10,472,407   10,146,724   9,827,096  1.3% 8.0%
    Allowance for credit losses – loans  (146,960)  (144,680)  (141,465)  (135,918) 1.6% 8.1%
    Net loans receivable  10,464,457   10,327,727   10,005,259   9,691,178  1.3% 8.0%
    Accrued interest receivable  61,040   57,007   57,284   50,689  7.1% 20.4%
    Property and equipment, net  136,504   135,414   138,754   141,280  0.8% (3.4)%
    Goodwill  373,121   373,121   373,121   373,121  % %
    Other intangibles, net  6,542   7,399   9,440   10,655  (11.6)% (38.6)%
    Bank-owned life insurance  303,347   301,260   297,565   295,443  0.7% 2.7%
    Operating lease right-of-use assets  43,447   45,812   49,283   51,908  (5.2)% (16.3)%
    Other assets  402,541   384,070   355,493   372,848  4.8% 8.0%
    Total assets $15,507,880  $15,584,736  $15,833,431  $16,360,809  (0.5)% (5.2)%
    LIABILITIES            
    Deposits:            
    Non-interest-bearing $5,197,854  $5,369,187  $6,176,998  $6,507,523  (3.2)% (20.1)%
    Interest-bearing transaction and savings accounts  6,518,385   6,373,269   6,719,531   7,004,799  2.3% (6.9)%
    Interest-bearing certificates  1,458,313   1,356,600   723,530   721,944  7.5% 102.0%
    Total deposits  13,174,552   13,099,056   13,620,059   14,234,266  0.6% (7.4)%
    Advances from FHLB  140,000   270,000   50,000     (48.1)% nm 
    Other borrowings  188,440   193,019   232,799   234,006  (2.4)% (19.5)%
    Subordinated notes, net  92,748   92,646   98,947   98,849  0.1% (6.2)%
    Junior subordinated debentures at fair value  66,284   67,237   74,857   73,841  (1.4)% (10.2)%
    Operating lease liabilities  48,642   51,234   55,205   58,031  (5.1)% (16.2)%
    Accrued expenses and other liabilities  231,478   223,565   200,839   209,226  3.5% 10.6%
    Deferred compensation  45,129   45,466   44,293   43,931  (0.7)% 2.7%
    Total liabilities  13,987,273   14,042,223   14,376,999   14,952,150  (0.4)% (6.5)%
    SHAREHOLDERS’ EQUITY            
    Common stock  1,297,307   1,294,934   1,293,959   1,291,741  0.2% 0.4%
    Retained earnings  616,215   587,027   525,242   486,108  5.0% 26.8%
    Accumulated other comprehensive loss  (392,915)  (339,448)  (362,769)  (369,190) 15.8% 6.4%
    Total shareholders’ equity  1,520,607   1,542,513   1,456,432   1,408,659  (1.4)% 7.9%
    Total liabilities and shareholders’ equity $15,507,880  $15,584,736  $15,833,431  $16,360,809  (0.5)% (5.2)%
    Common Shares Issued:            
    Shares outstanding at end of period  34,345,949   34,344,627   34,194,018   34,191,759     
    Common shareholders’ equity per share(1) $44.27  $44.91  $42.59  $41.20     
    Common shareholders’ tangible equity per share(1) (2) $33.22  $33.83  $31.41  $29.97     
    Common shareholders’ tangible equity to tangible assets(2)  7.54%  7.64%  6.95%  6.41%    
    Consolidated Tier 1 leverage capital ratio  10.40%  10.22%  9.45%  9.06%    


    (1)Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
    (2)Common shareholders’ tangible equity and tangible assets exclude goodwill and other intangible assets.  These ratios represent non-GAAP financial measures.  See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.


    ADDITIONAL FINANCIAL INFORMATION            
    (dollars in thousands)            
              Percentage Change
    LOANS Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022 Prior Qtr Prior Yr Qtr
                 
    Commercial real estate (CRE):            
    Owner-occupied $911,540  $894,876  $845,320  $862,792  1.9% 5.7%
    Investment properties  1,530,087   1,558,176   1,589,975   1,604,881  (1.8)% (4.7)%
    Small balance CRE  1,169,828   1,172,825   1,200,251   1,188,351  (0.3)% (1.6)%
    Multifamily real estate  766,571   699,830   645,071   592,834  9.5% 29.3%
    Construction, land and land development:            
    Commercial construction  168,061   183,765   184,876   171,029  (8.5)% (1.7)%
    Multifamily construction  453,129   433,868   325,816   275,488  4.4% 64.5%
    One- to four-family construction  536,349   547,200   647,329   666,350  (2.0)% (19.5)%
    Land and land development  346,362   345,053   328,475   329,459  0.4% 5.1%
    Commercial business:            
    Commercial business  1,263,747   1,313,226   1,283,407   1,242,550  (3.8)% 1.7%
    Small business scored  1,000,714   982,283   947,092   906,647  1.9% 10.4%
    Agricultural business, including secured by farmland:            
    Agricultural business, including secured by farmland  334,626   310,120   295,077   299,400  7.9% 11.8%
    One- to four-family residential  1,438,694   1,340,126   1,173,112   1,025,143  7.4% 40.3%
    Consumer:            
    Consumer—home equity revolving lines of credit  579,836   577,725   566,291   545,807  0.4% 6.2%
    Consumer—other  111,873   113,334   114,632   116,365  (1.3)% (3.9)%
    Total loans receivable $10,611,417  $10,472,407  $10,146,724  $9,827,096  1.3% 8.0%
    Loans 30 - 89 days past due and on accrual $6,108  $6,259  $17,186  $15,208     
    Total delinquent loans (including loans on non-accrual), net $28,312  $29,135  $32,371  $21,728     
    Total delinquent loans  /  Total loans receivable  0.27%  0.28%  0.32%  0.22%    


    LOANS BY GEOGRAPHIC LOCATION           Percentage Change
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022 Prior Qtr Prior Yr Qtr
      Amount Percentage Amount Amount Amount    
                   
    Washington $5,046,028 47.6% $4,945,074 $4,777,546 $4,648,124 2.0% 8.6%
    California  2,570,175 24.2%  2,537,121  2,484,980  2,323,740 1.3% 10.6%
    Oregon  1,929,531 18.2%  1,913,929  1,826,743  1,765,254 0.8% 9.3%
    Idaho  600,648 5.7%  595,065  565,586  588,498 0.9% 2.1%
    Utah  57,711 0.5%  62,720  75,967  95,250 (8.0)% (39.4)%
    Other  407,324 3.8%  418,498  415,902  406,230 (2.7)% 0.3%
    Total loans receivable $10,611,417 100.0% $10,472,407 $10,146,724 $9,827,096 1.3% 8.0%
                          


    ADDITIONAL FINANCIAL INFORMATION 
    (dollars in thousands) 
      
    LOAN ORIGINATIONSQuarters Ended
     Sep 30, 2023 Jun 30, 2023 Sep 30, 2022
    Commercial real estate$62,337 $94,640 $92,062
    Multifamily real estate 12,725  3,441  4,603
    Construction and land 421,656
      488,980  444,365
    Commercial business 157,833  128,404  218,044
    Agricultural business 17,466  28,367  9,879
    One-to four-family residential 43,622  52,618  92,701
    Consumer 70,043  112,555  126,940
    Total loan originations (excluding loans held for sale)$785,682
     $909,005 $988,594


    ADDITIONAL FINANCIAL INFORMATION      
    (dollars in thousands)      
      Quarters Ended
    CHANGE IN THE Sep 30, 2023 Jun 30, 2023 Sep 30, 2022
    ALLOWANCE FOR CREDIT LOSSES – LOANS      
    Balance, beginning of period $144,680  $141,457  $128,702 
    Provision for credit losses – loans  2,943   3,559   6,347 
    Recoveries of loans previously charged off:      
    Commercial real estate  170   74   88 
    Construction and land  29       
    One- to four-family real estate  59   36   25 
    Commercial business  403   524   924 
    Agricultural business, including secured by farmland  19   2   252 
    Consumer  126   117   85 
       806   753   1,374 
    Loans charged off:      
    Construction and land     (156)  (25)
    One- to four-family real estate     (4)   
    Commercial business  (616)  (566)  (138)
    Agricultural business, including secured by farmland  (564)     (42)
    Consumer  (289)  (363)  (300)
       (1,469)  (1,089)  (505)
    Net (charge-offs) recoveries  (663)  (336)  869 
    Balance, end of period $146,960  $144,680  $135,918 
    Net (charge-offs) recoveries / Average loans receivable (0.006             )% (0.003             )%  0.009%


           
    ALLOCATION OF      
    ALLOWANCE FOR CREDIT LOSSES – LOANS Sep 30, 2023 Jun 30, 2023 Sep 30, 2022
    Commercial real estate $44,016  $43,636  $44,365 
    Multifamily real estate  8,804   8,039   7,114 
    Construction and land  29,389   29,844   27,985 
    One- to four-family real estate  17,925   16,737   12,394 
    Commercial business  34,065   33,880   31,854 
    Agricultural business, including secured by farmland  3,718   3,573   3,455 
    Consumer  9,043   8,971   8,751 
    Total allowance for credit losses – loans $146,960  $144,680  $135,918 
    Allowance for credit losses - loans / Total loans receivable  1.38%  1.38%  1.38%
    Allowance for credit losses - loans / Non-performing loans  560%  513%  895%


      Quarters Ended
    CHANGE IN THE Sep 30, 2023 Jun 30, 2023 Sep 30, 2022
    ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS      
    Balance, beginning of period $14,664 $13,443 $14,246 
    Provision (recapture) for credit losses - unfunded loan commitments  346  1,221  (205)
    Balance, end of period $15,010 $14,664 $14,041 


    ADDITIONAL FINANCIAL INFORMATION       
    (dollars in thousands)       
    NON-PERFORMING ASSETS       
     Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022
    Loans on non-accrual status:       
    Secured by real estate:       
    Commercial$1,365  $2,478  $3,683  $6,997 
    Construction and land 5,538   2,280   181   299 
    One- to four-family 5,480   7,605   5,236   2,381 
    Commercial business 5,289   8,439   9,886   1,462 
    Agricultural business, including secured by farmland 3,170   3,997   594   594 
    Consumer 3,378   3,272   2,126   1,779 
      24,220   28,071   21,706   13,512 
    Loans more than 90 days delinquent, still on accrual:       
    Secured by real estate:       
    One- to four-family 1,799   60   1,023   1,556 
    Commercial business          64 
    Consumer 245   49   264   61 
      2,044   109   1,287   1,681 
    Total non-performing loans 26,264   28,180   22,993   15,193 
    REO 546   546   340   340 
    Other repossessed assets       17   17 
    Total non-performing assets$26,810  $28,726  $23,350  $15,550 
    Total non-performing assets to total assets 0.17%  0.18%  0.15%  0.10%


    LOANS BY CREDIT RISK RATING       
     Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022
    Pass$10,467,498 $10,315,687 $10,000,493 $9,672,473
    Special Mention 19,394  11,745  9,081  18,251
    Substandard 124,525  144,975  137,150  136,372
    Total$10,611,417 $10,472,407 $10,146,724 $9,827,096


    ADDITIONAL FINANCIAL INFORMATION            
    (dollars in thousands)            
                 
    DEPOSIT COMPOSITION         Percentage Change
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022 Prior Qtr Prior Yr Qtr
    Non-interest-bearing $5,197,854 $5,369,187 $6,176,998 $6,507,523 (3.2)% (20.1)%
    Interest-bearing checking  2,006,866  1,908,402  1,811,153  1,856,244 5.2% 8.1%
    Regular savings accounts  2,751,453  2,588,298  2,710,090  2,824,711 6.3% (2.6)%
    Money market accounts  1,760,066  1,876,569  2,198,288  2,323,844 (6.2)% (24.3)%
    Total interest-bearing transaction and savings accounts  6,518,385  6,373,269  6,719,531  7,004,799 2.3% (6.9)%
    Total core deposits  11,716,239  11,742,456  12,896,529  13,512,322 (0.2)% (13.3)%
    Interest-bearing certificates  1,458,313  1,356,600  723,530  721,944 7.5% 102.0%
    Total deposits $13,174,552 $13,099,056 $13,620,059 $14,234,266 0.6% (7.4)%


    GEOGRAPHIC CONCENTRATION OF DEPOSITS         
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022 Percentage Change 
      Amount Percentage Amount Amount Amount Prior Qtr Prior Yr Qtr 
    Washington $7,241,341 55.0% $7,255,731 $7,563,056 $7,845,755 (0.2)% (7.7)%
    Oregon  2,918,446 22.1%  2,914,267  2,998,572  3,148,520 0.1% (7.3)%
    California  2,342,345 17.8%  2,257,247  2,331,524  2,493,977 3.8% (6.1)%
    Idaho  672,420 5.1%  671,811  726,907  746,014 0.1% (9.9)%
    Total deposits $13,174,552 100.0% $13,099,056 $13,620,059 $14,234,266 0.6% (7.4)%


    INCLUDED IN TOTAL DEPOSITS        
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022
    Public non-interest-bearing accounts $169,058 $191,591 $212,533 $192,742
    Public interest-bearing transaction & savings accounts  188,831  189,140  180,326  172,567
    Public interest-bearing certificates  46,349  45,840  26,810  33,787
    Total public deposits $404,238 $426,571 $419,669 $399,096
    Collateralized public deposits $300,189 $309,665 $304,244 $301,853
    Total brokered deposits $162,856 $203,649 $ $
             
    AVERAGE ACCOUNT BALANCE PER DEPOSIT ACCOUNT        
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022
    Number of deposit accounts  466,159  467,490  471,140  477,082
    Average account balance per account $28 $28 $29 $30


    ADDITIONAL FINANCIAL INFORMATION            
    (dollars in thousands)            
    ESTIMATED REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2023 Actual Minimum to be categorized as “Adequately Capitalized” Minimum to be
    categorized as
    “Well Capitalized”
      Amount Ratio Amount Ratio Amount Ratio
                 
    Banner Corporation-consolidated:            
    Total capital to risk-weighted assets $1,873,419 14.34% $1,045,239 8.00% $1,306,548 10.00%
    Tier 1 capital to risk-weighted assets  1,621,146 12.41%  783,929 6.00%  783,929 6.00%
    Tier 1 leverage capital to average assets  1,621,146 10.40%  623,306 4.00% n/a n/a
    Common equity tier 1 capital to risk-weighted assets  1,534,646 11.75%  587,947 4.50% n/a n/a
    Banner Bank:            
    Total capital to risk-weighted assets  1,768,801 13.54%  1,045,221 8.00%  1,306,526 10.00%
    Tier 1 capital to risk-weighted assets  1,616,528 12.37%  783,916 6.00%  1,045,221 8.00%
    Tier 1 leverage capital to average assets  1,616,528 10.38%  623,184 4.00%  778,980 5.00%
    Common equity tier 1 capital to risk-weighted assets  1,616,528 12.37%  587,937 4.50%  849,242 6.50%
                       

    These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

    ADDITIONAL FINANCIAL INFORMATION                 
    (dollars in thousands)                 
    (rates / ratios annualized)                 
    ANALYSIS OF NET INTEREST SPREADQuarters Ended
     Sep 30, 2023 Jun 30, 2023 Sep 30, 2022
     Average Balance Interest and Dividends Yield / Cost(3) Average Balance Interest and Dividends Yield / Cost(3) Average Balance Interest and Dividends Yield / Cost(3)
    Interest-earning assets:                 
    Held for sale loans$56,697 $765  5.35% $56,073 $738  5.28% $68,608 $676  3.91%
    Mortgage loans 8,596,705  118,285  5.46%  8,413,392  112,097  5.34%  7,841,018  94,581  4.79%
    Commercial/agricultural loans 1,822,609  29,866  6.50%  1,763,264  27,616  6.28%  1,670,595  20,418  4.85%
    SBA PPP loans 4,298  28  2.58%  5,247  67  5.12%  21,943  613  11.08%
    Consumer and other loans 138,723  2,226  6.37%  138,902  2,137  6.17%  120,583  1,824  6.00%
    Total loans(1) 10,619,032  151,170  5.65%  10,376,878  142,655  5.51%  9,722,747  118,112  4.82%
    Mortgage-backed securities 2,863,345  17,834  2.47%  2,958,700  18,429  2.50%  3,183,837  17,704  2.21%
    Other securities 1,071,389  12,128  4.49%  1,184,503  12,932  4.38%  1,671,305  13,578  3.22%
    Interest-bearing deposits with banks 43,594  529  4.81%  44,922  557  4.97%  778,196  4,406  2.25%
    FHLB stock 16,443  385  9.29%  25,611  157  2.46%  10,000  75  2.98%
    Total investment securities 3,994,771  30,876  3.07%  4,213,736  32,075  3.05%  5,643,338  35,763  2.51%
    Total interest-earning assets 14,613,803  182,046  4.94%  14,590,614  174,730  4.80%  15,366,085  153,875  3.97%
    Non-interest-earning assets 932,364      939,100      1,100,313    
    Total assets$15,546,167     $15,529,714     $16,466,398    
    Deposits:                 
    Interest-bearing checking accounts$1,971,179  4,190  0.84% $1,870,605  2,331  0.50% $1,862,887  429  0.09%
    Savings accounts 2,659,890  8,400  1.25%  2,536,713  4,895  0.77%  2,822,153  481  0.07%
    Money market accounts 1,793,953  6,639  1.47%  1,957,553  6,007  1.23%  2,378,851  769  0.13%
    Certificates of deposit 1,412,542  11,772  3.31%  1,126,647  7,306  2.60%  740,014  728  0.39%
    Total interest-bearing deposits 7,837,564  31,001  1.57%  7,491,518  20,539  1.10%  7,803,905  2,407  0.12%
    Non-interest-bearing deposits 5,316,023    %  5,445,960    %  6,458,749    %
    Total deposits 13,153,587  31,001  0.94%  12,937,478  20,539  0.64%  14,262,654  2,407  0.07%
    Other interest-bearing liabilities:                 
    FHLB advances 161,087  2,233  5.50%  390,705  5,157  5.29%      %
    Other borrowings 194,659  1,099  2.24%  188,060  771  1.64%  242,658  81  0.13%
    Junior subordinated debentures and subordinated notes 182,678  2,965  6.44%  185,096  2,824  6.12%  189,178  2,188  4.59%
    Total borrowings 538,424  6,297  4.64%  763,861  8,752  4.60%  431,836  2,269  2.08%
    Total funding liabilities 13,692,011  37,298  1.08%  13,701,339  29,291  0.86%  14,694,490  4,676  0.13%
    Other non-interest-bearing liabilities(2) 296,578      279,232      257,058    
    Total liabilities 13,988,589      13,980,571      14,951,548    
    Shareholders’ equity 1,557,578      1,549,143      1,514,850    
    Total liabilities and shareholders’ equity$15,546,167     $15,529,714     $16,466,398    
    Net interest income/rate spread (tax equivalent)  $144,748  3.86%   $145,439  3.94%   $149,199  3.84%
    Net interest margin (tax equivalent)    3.93%     4.00%     3.85%
    Reconciliation to reported net interest income:                 
    Adjustments for taxable equivalent basis   (2,982)      (2,921)      (2,756)  
    Net interest income and margin, as reported  $141,766  3.85%   $142,518  3.92%   $146,443  3.78%
    Additional Key Financial Ratios:                 
    Return on average assets    1.17%     1.02%     1.18%
    Return on average equity    11.68%     10.25%     12.85%
    Average equity/average assets    10.02%     9.98%     9.20%
    Average interest-earning assets/average interest-bearing liabilities    174.47%     176.74%     186.58%
    Average interest-earning assets/average funding liabilities    106.73%     106.49%     104.57%
    Non-interest income/average assets    0.32%     0.22%     0.38%
    Non-interest expense/average assets    2.45%     2.46%     2.29%
    Efficiency ratio(4)    62.10%     63.21%     58.65%
    Adjusted efficiency ratio(5)    59.00%     58.58%     57.04%

    (1) Average balances include loans accounted for on a nonaccrual basis and accruing 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.
    (3)  Tax-exempt income is calculated on a tax equivalent basis.  The tax equivalent yield adjustment to interest earned on loans was $1.9 million, $1.8 million and $1.5 million for the quarters ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.  The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.1 million for both the quarters ended September 30, 2023 and June 30, 2023 and $1.3 million for the quarter September 30, 2022.
    (4)  Non-interest expense divided by the total of net interest income and non-interest income.
    (5)  Adjusted non-interest expense divided by adjusted revenue.  Represent non-GAAP financial measures.  See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.


    ADDITIONAL FINANCIAL INFORMATION           
    (dollars in thousands)           
    (rates / ratios annualized)           
    ANALYSIS OF NET INTEREST SPREADNine Months Ended
     Sep 30, 2023 Sep 30, 2022
     Average Balance Interest and Dividends Yield/Cost(3) Average Balance Interest and Dividends Yield/Cost(3)
    Interest-earning assets:           
    Held for sale loans$55,157 $2,174  5.27% $94,289 $2,446  3.47%
    Mortgage loans 8,427,034  337,282  5.35%  7,581,540  261,021  4.60%
    Commercial/agricultural loans 1,763,248  82,658  6.27%  1,574,957  52,582  4.46%
    SBA PPP loans 5,437  145  3.57%  51,890  4,453  11.47%
    Consumer and other loans 138,246  6,478  6.26%  117,892  5,207  5.91%
    Total loans(1) 10,389,122  428,737  5.52%  9,420,568  325,709  4.62%
    Mortgage-backed securities 2,971,124  55,386  2.49%  3,110,769  48,904  2.10%
    Other securities 1,220,074  40,155  4.40%  1,624,138  32,333  2.66%
    Interest-bearing deposits with banks 47,330  1,694  4.79%  1,214,076  7,507  0.83%
    FHLB stock 18,772  632  4.50%  10,579  281  3.55%
    Total investment securities 4,257,300  97,867  3.07%  5,959,562  89,025  2.00%
    Total interest-earning assets 14,646,422  526,604  4.81%  15,380,130  414,734  3.61%
    Non-interest-earning assets 930,934      1,250,719    
    Total assets$15,577,356     $16,630,849    
    Deposits:           
    Interest-bearing checking accounts$1,874,518  7,427  0.53% $1,915,184  991  0.07%
    Savings accounts 2,604,089  15,179  0.78%  2,826,757  1,187  0.06%
    Money market accounts 1,971,514  16,445  1.12%  2,400,267  1,806  0.10%
    Certificates of deposit 1,118,874  21,733  2.60%  782,548  2,517  0.43%
    Total interest-bearing deposits 7,568,995  60,784  1.07%  7,924,756  6,501  0.11%
    Non-interest-bearing deposits 5,571,896    %  6,445,579    %
    Total deposits 13,140,891  60,784  0.62%  14,370,335  6,501  0.06%
    Other interest-bearing liabilities:           
    FHLB advances 219,461  8,654  5.27%  13,919  291  2.80%
    Other borrowings 203,932  2,251  1.48%  253,545  245  0.13%
    Junior subordinated debentures and subordinated notes 186,964  8,549  6.11%  190,103  5,866  4.13%
    Total borrowings 610,357  19,454  4.26%  457,567  6,402  1.87%
    Total funding liabilities 13,751,248  80,238  0.78%  14,827,902  12,903  0.12%
    Other non-interest-bearing liabilities(2) 289,558      241,010    
    Total liabilities 14,040,806      15,068,912    
    Shareholders’ equity 1,536,550      1,561,937    
    Total liabilities and shareholders’ equity$15,577,356     $16,630,849    
    Net interest income/rate spread (tax equivalent)  $446,366  4.03%   $401,831  3.49%
    Net interest margin (tax equivalent)    4.07%     3.49%
    Reconciliation to reported net interest income:           
    Adjustments for taxable equivalent basis   (8,770)      (7,723)  
    Net interest income and margin, as reported  $437,596  3.99%   $394,108  3.43%
    Additional Key Financial Ratios:           
    Return on average assets    1.21%     1.13%
    Return on average equity    12.27%     12.07%
    Average equity/average assets    9.86%     9.39%
    Average interest-earning assets/average interest-bearing liabilities    179.07%     183.48%
    Average interest-earning assets/average funding liabilities    106.51%     103.72%
    Non-interest income/average assets    0.26%     0.50%
    Non-interest expense/average assets    2.45%     2.24%
    Efficiency ratio(4)    61.10%     60.99%
    Adjusted efficiency ratio(5)    57.19%     59.39%

    (1) Average balances include loans accounted for on a nonaccrual basis and 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.
    (3) Tax-exempt income is calculated on a tax equivalent basis.  The tax equivalent yield adjustment to interest earned on loans was $5.4 million and $4.2 million for the years ended September 30, 2023 and September 30, 2022, respectively.  The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.4 million and $3.5 million for the years ended September 30, 2023 and September 30, 2022, respectively.
    (4) Non-interest expense divided by the total of net interest income and non-interest income.
    (5) Adjusted non-interest expense divided by adjusted revenue.  These represent non-GAAP financial measures.  See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.


    ADDITIONAL FINANCIAL INFORMATION         
    (dollars in thousands)         
              
    * Non-GAAP Financial Measures         
    In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets, and references to adjusted revenue, adjusted earnings and the adjusted efficiency ratio represent non-GAAP 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 Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.  However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
              
    ADJUSTED REVENUEQuarters Ended Nine Months Ended
     Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
    Net interest income (GAAP)$141,766 $142,518 $146,443  $437,596 $394,108 
    Non-interest income (GAAP) 12,658  8,422  15,585   30,357  62,185 
    Total revenue (GAAP) 154,424  150,940  162,028   467,953  456,293 
    Exclude: Net loss (gain) on sale of securities 2,657  4,527  (6)  14,436  (473)
    Net change in valuation of financial instruments carried at fair value 654  3,151  (532)  4,357  (650)
    Gain on sale of branches          (7,804)
    Adjusted revenue (non-GAAP)$157,735 $158,618 $161,490  $486,746 $447,366 


    ADJUSTED EARNINGSQuarters Ended Nine Months Ended
     Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
    Net income (GAAP)$45,854  $39,591  $49,070  $141,000  $140,998 
    Exclude: Net loss (gain) on sale of securities 2,657   4,527   (6)  14,436   (473)
    Net change in valuation of financial instruments carried at fair value 654   3,151   (532)  4,357   (650)
    Gain on sale of branches             (7,804)
    Banner Forward expenses(1) 996   195   411   1,334   4,455 
    Loss on extinguishment of debt             793 
    Related net tax (benefit) expense (1,033)  (1,890)  31   (4,830)  883 
    Total adjusted earnings (non-GAAP)$49,128  $45,574  $48,974  $156,297  $138,202 
              
    Diluted earnings per share (GAAP)$1.33  $1.15  $1.43  $4.09  $4.09 
    Diluted adjusted earnings per share (non-GAAP)$1.43  $1.32  $1.42  $4.54  $4.01 

    (1)  Included in miscellaneous expenses in results of operations.


    ADDITIONAL FINANCIAL INFORMATION          
    (dollars in thousands)          
    ADJUSTED EFFICIENCY RATIO Quarters Ended Nine Months Ended
      Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
    Non-interest expense (GAAP) $95,891  $95,405  $95,034  $285,917  $278,282 
    Exclude: Banner Forward expenses(1)  (996)  (195)  (411)  (1,334)  (4,455)
    CDI amortization  (857)  (991)  (1,215)  (2,898)  (4,064)
    State/municipal tax expense  (1,359)  (1,229)  (1,223)  (3,888)  (3,389)
    REO operations  383   (75)  (68)  585   132 
    Loss on extinguishment of debt              (793)
    Adjusted non-interest expense (non-GAAP) $93,062  $92,915  $92,117  $278,382  $265,713 
               
    Net interest income (GAAP) $141,766  $142,518  $146,443  $437,596  $394,108 
    Non-interest income (GAAP)  12,658   8,422   15,585   30,357   62,185 
    Total revenue (GAAP)  154,424   150,940   162,028   467,953   456,293 
    Exclude: Net loss (gain) on sale of securities  2,657   4,527   (6)  14,436   (473)
    Net change in valuation of financial instruments carried at fair value  654   3,151   (532)  4,357   (650)
    Gain on sale of branches              (7,804)
    Adjusted revenue (non-GAAP) $157,735  $158,618  $161,490  $486,746  $447,366 
               
    Efficiency ratio (GAAP)  62.10%  63.21%  58.65%  61.10%  60.99%
    Adjusted efficiency ratio (non-GAAP)  59.00%  58.58%  57.04%  57.19%  59.39%

    (1)         Included in miscellaneous expenses in results of operations.


    TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS        
      Sep 30, 2023 Jun 30, 2023 Dec 31, 2022 Sep 30, 2022
    Shareholders’ equity (GAAP) $1,520,607  $1,542,513  $1,456,432  $1,408,659 
    Exclude goodwill and other intangible assets, net  379,663   380,520   382,561   383,776 
    Tangible common shareholders’ equity (non-GAAP) $1,140,944  $1,161,993  $1,073,871  $1,024,883 
             
    Total assets (GAAP) $15,507,880  $15,584,736  $15,833,431  $16,360,809 
    Exclude goodwill and other intangible assets, net  379,663   380,520   382,561   383,776 
    Total tangible assets (non-GAAP) $15,128,217  $15,204,216  $15,450,870  $15,977,033 
    Common shareholders’ equity to total assets (GAAP)  9.81%  9.90%  9.20%  8.61%
    Tangible common shareholders’ equity to tangible assets (non-GAAP)  7.54%  7.64%  6.95%  6.41%
             
    TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE        
    Tangible common shareholders’ equity (non-GAAP) $1,140,944  $1,161,993  $1,073,871  $1,024,883 
    Common shares outstanding at end of period  34,345,949   34,344,627   34,194,018   34,191,759 
    Common shareholders’ equity (book value) per share (GAAP) $44.27  $44.91  $42.59  $41.20 
    Tangible common shareholders’ equity (tangible book value) per share (non-GAAP) $33.22  $33.83  $31.41  $29.97 


    CONTACT:MARK J. GRESCOVICH,
     PRESIDENT & CEO
     ROBERT G. BUTTERFIELD, CFO
     (509) 527-3636

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