Banner Corporation Reports Net Income of $44.0 Million, or $1.27 Per Diluted Share, for First Quarter 2022; Declares Quarterly Cash Dividend of $0.44 Per Share

WALLA WALLA, Wash., April 20, 2022 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $44.0 million, or $1.27 per diluted share, for the first quarter of 2022, a 12% decrease compared to $49.9 million, or $1.44 per diluted share, for the preceding quarter and a 6% decrease compared to $46.9 million, or $1.33 per diluted share, for the first quarter of 2021. Banner’s first quarter 2022 results include $7.0 million in recapture of provision for credit losses, compared to $5.2 million in recapture of provision for credit losses in the preceding quarter and $9.3 million in recapture of provision for credit losses in the first quarter of 2021.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.44 per share. The dividend will be payable May 13, 2022, to common shareholders of record on May 3, 2022.

“Banner’s core operating performance during the first quarter reflects the resilience of our super community bank strategy, and the ongoing implementation of Banner Forward, launched in the third quarter of 2021,” said Mark Grescovich, President and CEO. “Our performance for the first quarter benefited from lower operating expense, continued core deposit growth and the branch consolidations we completed during the current quarter. The unprecedented level of market liquidity and our continued focus on generating new client relationships contributed to our core deposits increasing 9% compared to March 31, 2021. We believe Banner remains well positioned for rising interest rates with a low-cost granular core deposit base and ample on-balance sheet liquidity to support renewed loan demand. Our approach of consistently delivering outstanding service and value to our clients, communities, colleagues, company and shareholders while holding fast to our performance objectives continues to guide our success.”

“During the third quarter of 2021 we began implementing Banner Forward, a bank-wide initiative to enhance revenue growth and reduce operating expense,” said Grescovich. “The remaining efficiency-related initiatives are anticipated to be implemented sequentially over the next two quarters with implementation of the revenue initiatives ramping up in the second half of the year. Full implementation is expected by 2023, with the goal of delivering sequential improvements in operating performance over the course of the next five quarters while staying true to our mission and values. Banner Forward is focused on accelerating growth in commercial banking, deepening relationships with retail clients, and advancing technology strategies to enhance our digital service channels, while streamlining underwriting and back office processes. During the first quarter of 2022, we incurred expenses of $2.5 million related to Banner Forward.”

At March 31, 2022, Banner Corporation had $16.78 billion in assets, $8.98 billion in net loans and $14.52 billion in deposits. Banner operates 141 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

First Quarter 2022 Highlights

• Revenues decreased 5% to $138.1 million, compared to $146.0 million in the preceding quarter, and decreased 3% when compared to $141.9 million in the first quarter a year ago.
• Net interest income decreased to $118.7 million in the first quarter of 2022, compared to $121.5 million in the preceding quarter and increased compared to $117.7 million in the first quarter a year ago.
• Net interest margin on a tax equivalent basis was 3.18%, compared to 3.17% in the preceding quarter and 3.44% in the first quarter a year ago.
• Mortgage banking revenues decreased 21% to $4.4 million, compared to $5.6 million in the preceding quarter, and decreased 61% compared to $11.3 million in the first quarter a year ago.
• Return on average assets was 1.06%, compared to 1.18% in the preceding quarter and 1.24% in the first quarter a year ago.
• Net loans receivable increased to $8.98 billion at March 31, 2022, compared to $8.95 billion at December 31, 2021, and decreased 8% compared to $9.79 billion at March 31, 2021.
• Asset quality improved with non-performing assets decreasing to $19.1 million, or 0.11% of total assets, at March 31, 2022, compared to $23.7 million, or 0.14% of total assets in the preceding quarter, and decreasing from $37.0 million, or 0.23% of total assets, at March 31, 2021.
• The allowance for credit losses - loans was $125.5 million, or 1.38% of total loans receivable, as of March 31, 2022, compared to $132.1 million, or 1.45% of total loans receivable as of December 31, 2021 and $156.1 million, or 1.57% of total loans receivable as of March 31, 2021.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 2% to $13.72 billion at March 31, 2022, compared to $13.49 billion at December 31, 2021, and increased 9% compared to $12.64 billion a year ago. Core deposits represented 94% of total deposits at March 31, 2022.
• Dividends to shareholders were $0.44 per share in the quarter ended March 31, 2022.
• Common shareholders’ equity per share decreased 8% to $45.49 at March 31, 2022, compared to $49.35 at the preceding quarter end, and decreased 2% from $46.60 a year ago.
• Tangible common shareholders’ equity per share* decreased 10% to $34.25 at March 31, 2022, compared to $38.02 at the preceding quarter end, and decreased 3% from $35.29 a year ago.

*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and total non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations, loss on extinguishment of debt 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 Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

Significant Recent Initiatives and Events

On February 18, 2022, Banner Bank completed the consolidation of seven branches and entered into a purchase and assumption agreement with Spokane Teachers Credit Union, Spokane, Washington (“STCU”) with respect to the sale to STCU of four Banner Bank branches located in Hayden, Idaho, and in Chewelah, Colville, and Kettle Falls, Washington, subject to certain regulatory approvals and customary closing conditions.

The sale includes deposit accounts with an approximate balance of $212 million. Banner Bank will receive a 5.0% premium in relation to the core deposits. The sale also includes all related branch premises and equipment.

Banner anticipates that these sale transactions will help to further shape the Bank’s service footprint, while contributing to our capital, reducing excess liquidity, and improving our operating efficiency. The transactions are expected to support the Banner Forward initiative by improving management’s focus on key operations and markets, and providing capital to reinvest in profitability enhancement initiatives. Banner’s goal is that the combined impact of these sales and Banner Forward initiatives will be positive to future annual operating earnings.

Income Statement Review

Net interest income was $118.7 million in the first quarter of 2022, compared to $121.5 million in the preceding quarter and $117.7 million in the first quarter a year ago, primarily reflecting the on-going low interest rate environment and loan forgiveness under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”).

Banner’s net interest margin on a tax equivalent basis was 3.18% for the first quarter of 2022, a one basis-point increase compared to 3.17% in the preceding quarter and a 26 basis-point decrease compared to 3.44% in the first quarter a year ago.

“Higher core deposit balances resulted in a decrease in the cost of funding liabilities which positively affected our net interest margin during the quarter. This impact was partially offset by lower interest income during the quarter, primarily as a result of the decline in the acceleration of the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness,” said Grescovich. Acquisition accounting adjustments added three basis points to the net interest margin in the current quarter and five basis points in both the preceding quarter and in the first quarter a year ago. The total purchase discount for acquired loans was $8.5 million at March 31, 2022, compared to $9.7 million at December 31, 2021, and $13.9 million at March 31, 2021.

Average yields on interest-earning assets were 3.29% for both the first quarter of 2022 and the preceding quarter and decreased 35 basis points compared to 3.64% in the first quarter a year ago. The year over year decreases in average yield on interest-earning assets primarily reflects decreases in the average yield on investment securities and increases in the average balance of interest-bearing deposits, as excess liquidity was invested in low yielding short term investments. Average loan yields decreased seven basis points to 4.50% compared to 4.57% in the preceding quarter and increased seven basis points compared to 4.43% in the first quarter a year ago. The decrease in average loan yields during the current quarter compared to the preceding quarter was primarily the result of a decline in the acceleration of the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness during the quarter. Loan discount accretion added five basis points to average loan yields in the current quarter, eight basis points in the preceding quarter and seven basis points in the first quarter a year ago. Deposit costs were 0.06% in the first quarter of 2022, a one basis-point decrease compared to the preceding quarter and a five basis-point decrease compared to the first 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 as well as an increase in the average balance of core deposits. The total cost of funding liabilities was 0.12% during the first quarter of 2022, a one basis-point decrease compared to the preceding quarter and a nine basis-point decrease compared to 0.21% in the first quarter a year ago.

Banner recorded a $7.0 million recapture of provision for credit losses in the current quarter (comprised of a $7.4 million recapture of provision for credit losses - loans, a $428,000 provision for credit losses - unfunded loan commitments and a $13,000 recapture of provision for credit losses - held-to-maturity debt securities). This recapture compares to a $5.2 million recapture of provision for credit losses in the prior quarter (comprised of an $8.1 million recapture of provision for credit losses - loans, a $2.3 million provision for credit losses - unfunded loan commitments and a $579,000 provision for credit losses - held-to-maturity debt securities) and a $9.3 million recapture of provision for credit losses in the first quarter a year ago (comprised of an $8.0 million recapture of provision for credit losses - loans, a $1.2 million recapture of provision for credit losses - unfunded loan commitments and a $4,000 provision for credit losses - held-to-maturity debt securities). The recapture of provision for credit losses for the current and preceding quarters primarily reflects improvement in the level of adversely classified loans, as well as in the economic indicators utilized to calculate credit losses.

Total non-interest income was $19.4 million in the first quarter of 2022, compared to $24.5 million in the preceding quarter and $24.3 million in the first quarter a year ago. Deposit fees and other service charges were $11.2 million in the first quarter of 2022, compared to $10.3 million in the preceding quarter and $8.9 million in the first quarter a year ago. The increase in deposit fees and other service charges from the first quarter a year ago is primarily a result of increased deposit transaction account activity. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.4 million in the first quarter, compared to $5.6 million in the preceding quarter and $11.3 million in the first quarter of 2021. The decrease from the prior quarter and from the first quarter of 2021 primarily reflects a reduction in the volume of one- to four-family loans sold, as well as a decrease in the gain on sale margin on one- to four-family held-for-sale loans. The reduction in volumes reflects a reduction in refinancing activity as interest rates increased during the current quarter. Home purchase activity accounted for 64% of one- to four-family mortgage loan originations in both the first quarter of 2022 and in the prior quarter and was 54% in the first quarter of 2021. The lower mortgage banking revenue for the current quarter compared to the prior quarter is also due in part to a $603,000 lower of cost or market downward adjustment recorded on multifamily held for sale loans due to increases in market interest rates, partially offset by $340,000 of gain recognized on the sale of multifamily loans as compared to none in the prior quarter. Miscellaneous non-interest income decreased to $1.7 million in the first quarter of 2022, compared to $4.7 million in the preceding quarter and $2.1 million in the first quarter a year ago. The decrease in miscellaneous non-interest income from the prior quarter is primarily a result of a valuation adjustment on the SBA servicing asset and higher gains recognized in the prior quarter related to both SBA loans sold and the disposition of closed branch locations.

Banner’s first quarter 2022 results included a $49,000 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 limited partnership investments, and a $435,000 net gain on the sale of securities. In the preceding quarter, results included a $2.7 million net gain for fair value adjustments and a $136,000 net loss on the sale of securities. In the first quarter a year ago, results included a $59,000 net gain for fair value adjustments and a $485,000 net gain on the sale of securities.

Total revenue decreased 5% to $138.1 million for the first quarter of 2022, compared to $146.0 million in the preceding quarter, and decreased 3% compared to $141.9 million in the first quarter a year ago. 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 $137.6 million in the first quarter of 2022, compared to $143.4 million in the preceding quarter and $141.4 million in the first quarter of 2021.

Total non-interest expense was $91.2 million in the first quarter of 2022, compared to $91.8 million in the preceding quarter and $93.5 million in the first quarter of 2021. The decrease in non-interest expense for the current quarter compared to the prior quarter reflects a $665,000 decrease in occupancy and equipment expenses, a $1.6 million decrease in advertising and marketing expenses and a $1.5 million decrease in loss on extinguishment of debt, partially offset by a $1.7 million increase in salary and employee benefits expenses primarily due to severance costs and typical higher payroll taxes in the first quarter of a year partially offset by lower salary expense and a $1.4 million decrease in capitalized loan origination costs. Banner recorded a $793,000 loss on extinguishment of debt as a result of the redemption of $50.5 million of junior subordinated debentures during the first quarter of 2022, compared to a $2.3 million loss as a result of the redemption of $8.2 million of junior subordinated debentures during the prior quarter. The year-over-year quarterly decrease in non-interest expense primarily reflects decreases in salary and employee benefits expense, primarily due to a reduction in staffing, and professional and legal expenses, primarily due to a reduction in consultant expense. The year-over-year quarterly decreases in non-interest expense were partially offset by a decrease in capitalized loan origination costs and the previously mentioned loss on extinguishment of debt. Banner’s efficiency ratio was 66.04% for the current quarter, compared to 62.88% in the preceding quarter and 65.90% in same quarter a year ago. Banner’s adjusted efficiency ratio* was 62.09% for the current quarter, compared to 59.71% in the preceding quarter and 63.18% in the year ago quarter.

For the first quarter of 2022, Banner had $9.9 million in state and federal income tax expense for an effective tax rate of 18.4%, reflecting the benefits from tax exempt income and an adjustment to the deferred tax asset during the quarter. Banner’s statutory income tax rate is 23.6%, 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 decreased to $16.78 billion at March 31, 2022, compared to $16.80 billion at December 31, 2021, and increased 4% when compared to $16.12 billion at March 31, 2021. The total of securities and interest-bearing deposits held at other banks was $6.06 billion at March 31, 2022, compared to $6.26 billion at December 31, 2021 and $4.81 billion at March 31, 2021. During the current quarter, Banner transferred $458.6 million of securities from available for sale to securities held to maturity to limit the impact that potential future interest rates changes would have on its accumulated other comprehensive income. The average effective duration of Banner's securities portfolio was approximately 6.2 years at March 31, 2022, compared to 5.2 years at March 31, 2021.

Total loans receivable increased to $9.11 billion at March 31, 2022, compared to $9.08 billion at December 31, 2021, and decreased when compared to $9.95 billion at March 31, 2021. The decrease in total loans receivable compared to the first quarter a year ago primarily reflects the forgiveness of SBA PPP loans. Excluding SBA PPP loans, total loans receivable increased $100.5 million during the current quarter and increased $420.2 million from the first quarter a year ago. SBA PPP loans decreased 56% to $58.6 million at March 31, 2022, compared to $133.9 million at December 31, 2021, and decreased 96% when compared to $1.32 billion at March 31, 2021. The decrease in SBA PPP loans was offset by increases in multifamily real estate and one- to four-family loans. Multifamily real estate loans increased 13% to $598.6 million at March 31, 2022, compared to $530.9 million at December 31, 2021, and increased 52% compared to $394.8 million a year ago. Commercial real estate loans decreased 2% to $3.71 billion at March 31, 2022, compared to $3.79 billion at December 31, 2021, and increased slightly compared to $3.69 billion a year ago. Commercial business loans were $1.96 billion at both March 31, 2022 and December 31, 2021, and decreased 37% compared to $3.09 billion a year ago, primarily due to SBA PPP loans forgiven. Excluding SBA PPP loans, commercial business loans increased 4% to $1.90 billion at March 31, 2022, compared to $1.83 billion at December 31, 2021, and increased 5% compared to $1.81 billion a year ago. Agricultural business loans decreased to $245.3 million at March 31, 2022, compared to $280.6 million at December 31, 2021 and decreased from $255.7 million a year ago. Total construction, land and land development loans were $1.33 billion at March 31, 2022, a 1% increase from $1.31 billion at both December 31, 2021, and March 31, 2021. Consumer loans increased to $567.6 million at March 31, 2022, compared to $555.9 million at December 31, 2021, and decreased from $570.7 million a year ago. One- to four-family loans increased to $708.1 million at March 31, 2022, compared to $657.5 million at December 31, 2021, and increased from $629.4 million a year ago.

Loans held for sale were $101.0 million at March 31, 2022, compared to $96.5 million at December 31, 2021, and $135.3 million at March 31, 2021. The volume of one- to four- family residential mortgage loans sold was $210.4 million in the current quarter, compared to $245.9 million in the preceding quarter and $300.3 million in the first quarter a year ago. Banner sold $15.8 million of multifamily loans during the first quarter of 2022, compared to none in the preceding quarter and $107.7 million in the first quarter a year ago.

Total deposits increased 1% to $14.52 billion at March 31, 2022, compared to $14.33 billion at December 31, 2021, and increased 7% when compared to $13.55 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 to $6.49 billion at March 31, 2022, compared to $6.39 billion at December 31, 2021, and increased 8% compared to $5.99 billion a year ago. Core deposits were 94% of total deposits at both March 31, 2022 and December 31, 2021 and 93% of total deposits a year ago. Certificates of deposit decreased to $800.4 million at March 31, 2022, compared to $838.6 million at December 31, 2021, and decreased 12% compared to $907.0 million a year earlier. Banner had no FHLB borrowings at March 31, 2022, compared to $50.0 million at December 31, 2021 and $100.0 million a year ago.

At March 31, 2022, total common shareholders’ equity was $1.56 billion, or 9.32% of assets, compared to $1.69 billion or 10.06% of assets at December 31, 2021, and $1.62 billion or 10.04% of assets a year ago. The decrease in total common shareholders’ equity during the current quarter was primarily due to a $154.3 million decrease in accumulated other comprehensive income related to an increase in the unrealized loss on available for sale securities reflecting the increase in market interest rates during the current quarter. At March 31, 2022, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.18 billion, or 7.18% of tangible assets*, compared to $1.30 billion, or 7.93% of tangible assets, at December 31, 2021, and $1.23 billion, or 7.80% of tangible assets, a year ago. Banner’s tangible book value per share* decreased to $34.25 at March 31, 2022, compared to $35.29 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 March 31, 2022, Banner's common equity Tier 1 capital ratio was 11.39%, its Tier 1 leverage capital to average assets ratio was 8.58%, and its total capital to risk-weighted assets ratio was 14.05%.

Credit Quality

The allowance for credit losses - loans was $125.5 million at March 31, 2022, or 1.38% of total loans receivable and 674% of non-performing loans, compared to $132.1 million at December 31, 2021, or 1.45% of total loans receivable and 578% of non-performing loans, and $156.1 million at March 31, 2021, or 1.57% of total loans receivable and 426% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $12.9 million at March 31, 2022, compared to $12.4 million at December 31, 2021 and $12.1 million at March 31, 2021. Net loan recoveries totaled $748,000 in the first quarter of 2022, compared to $311,000 in the preceding quarter and $3.2 million of net loan charge-offs in the first quarter a year ago. Non-performing loans were $18.6 million at March 31, 2022, compared to $22.8 million at December 31, 2021, and $36.6 million a year ago. Real estate owned and other repossessed assets were $446,000 at March 31, 2022, compared to $869,000 at December 31, 2021, and $377,000 a year ago.

Banner’s total substandard loans were $178.4 million at March 31, 2022, compared to $198.4 million at December 31, 2021, and $311.6 million a year ago. The quarter over quarter decrease primarily reflects the payoff of substandard loans as well as balance paydowns and risk rating upgrades.

Banner’s total non-performing assets were $19.1 million, or 0.11% of total assets, at March 31, 2022, compared to $23.7 million, or 0.14% of total assets, at December 31, 2021, and $37.0 million, or 0.23% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday April 21, 2022, at 8:00 a.m. PDT, to discuss its first quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (844) 200-6205 using access code 982074 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 681359, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.78 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 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) the effect of the COVID-19 pandemic, including on Banner’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate clients, including economic activity, employment levels and market liquidity; (2) 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; (3) 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; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on client behavior and net interest margin; (6) uncertainty regarding the future of the London Interbank Offered Rate (LIBOR), and the potential transition away from LIBOR toward new interest rate benchmarks; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (10) the ability to access cost-effective funding; (11) 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; (12) changes in financial markets; (13) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (14) the costs, effects and outcomes of litigation; (15) 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 including as a result of COVID -19 and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) future acquisitions by Banner of other depository institutions or lines of business; (18) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; (19) the costs associated with Banner Forward and (20) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (21) other risks detailed from time to time in Banner’s filings with 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
(in thousands except shares and per share data)		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
INTEREST INCOME:
Loans receivable		$	100,350			$	104,929			$	108,924
Mortgage-backed securities			14,109				13,220				9,371
Securities and cash equivalents			8,432				8,397				6,226
			122,891				126,546				124,521
INTEREST EXPENSE:
Deposits			2,086				2,384				3,609
Federal Home Loan Bank advances			291				348				934
Other borrowings			84				109				109
Junior subordinated debentures and subordinated notes			1,776				2,175				2,208
			4,237				5,016				6,860
Net interest income			118,654				121,530				117,661
RECAPTURE OF PROVISION FOR CREDIT LOSSES			(6,961	)			(5,243	)			(9,251	)
Net interest income after recapture of provision for credit losses			125,615				126,773				126,912
NON-INTEREST INCOME:
Deposit fees and other service charges			11,189				10,341				8,939
Mortgage banking operations			4,440				5,643				11,347
Bank-owned life insurance			1,631				1,203				1,307
Miscellaneous			1,683				4,702				2,135
			18,943				21,889				23,728
Net gain (loss) on sale of securities			435				(136	)			485
Net change in valuation of financial instruments carried at fair value			49				2,721				59
Total non-interest income			19,427				24,474				24,272
NON-INTEREST EXPENSE:
Salary and employee benefits			59,486				57,798				64,819
Less capitalized loan origination costs			(6,230	)			(7,647	)			(9,696	)
Occupancy and equipment			13,220				13,885				12,989
Information / computer data services			6,651				6,441				6,203
Payment and card processing services			4,896				5,062				4,326
Professional and legal expenses			2,180				2,251				3,328
Advertising and marketing			461				2,071				1,263
Deposit insurance expense			1,524				1,340				1,533
State/municipal business and use taxes			1,162				976				1,065
Real estate operations			(79	)			49				(242	)
Amortization of core deposit intangibles			1,424				1,574				1,711
Loss on extinguishment of debt			793				2,284				—
Miscellaneous			5,707				5,594				5,509
			91,195				91,678				92,808
COVID-19 expenses			—				127				148
Merger and acquisition-related expenses			—				—				571
Total non-interest expense			91,195				91,805				93,527
Income before provision for income taxes			53,847				59,442				57,657
PROVISION FOR INCOME TAXES			9,884				9,515				10,802
NET INCOME		$	43,963			$	49,927			$	46,855
Earnings per share available to common shareholders:
Basic		$	1.28			$	1.46			$	1.34
Diluted		$	1.27			$	1.44			$	1.33
Cumulative dividends declared per common share		$	0.44			$	0.41			$	0.41
Weighted average common shares outstanding:
Basic			34,300,742				34,292,967				34,973,383
Diluted			34,598,436				34,575,607				35,303,483
Increase (decrease) in common shares outstanding			120,152				641				(423,857	)

FINANCIAL  CONDITION														Percentage Change
(in thousands except shares and per share data)		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021				Prior Qtr		Prior Yr Qtr
ASSETS
Cash and due from banks		$	414,780			$	358,461			$	296,184			15.7%		40.0%
Interest-bearing deposits			1,573,608				1,775,839				1,353,743			(11.4)%		16.2%
Total cash and cash equivalents			1,988,388				2,134,300				1,649,927			(6.8)%		20.5%
Securities - trading			27,354				26,981				25,039			1.4%		9.2%
Securities - available for sale			3,147,547				3,638,993				2,989,760			(13.5)%		5.3%
Securities - held to maturity			1,015,522				520,922				441,857			94.9%		129.8%
Total securities			4,190,423				4,186,896				3,456,656			0.1%		21.2%
Federal Home Loan Bank stock			10,000				12,000				14,001			(16.7)%		(28.6)%
Securities purchased under agreements to resell			300,000				300,000				—			—%		nm
Loans held for sale			100,978				96,487				135,263			4.7%		(25.3)%
Loans receivable			9,109,869				9,084,763				9,947,697			0.3%		(8.4)%
Allowance for credit losses - loans			(125,471	)			(132,099	)			(156,054	)		(5.0)%		(19.6)%
Net loans receivable			8,984,398				8,952,664				9,791,643			0.4%		(8.2)%
Accrued interest receivable			41,827				42,916				49,214			(2.5)%		(15.0)%
Real estate owned (REO) held for sale, net			429				852				340			(49.6)%		26.2%
Property and equipment, net			142,594				148,759				161,268			(4.1)%		(11.6)%
Goodwill			373,121				373,121				373,121			—%		—%
Other intangibles, net			13,431				14,855				19,715			(9.6)%		(31.9)%
Bank-owned life insurance			294,556				244,156				191,388			20.6%		53.9%
Operating lease right-of-use assets			52,792				55,257				56,217			(4.5)%		(6.1)%
Other assets			283,234				242,609				221,039			16.7%		28.1%
Total assets		$	16,776,171			$	16,804,872			$	16,119,792			(0.2)%		4.1%
LIABILITIES
Deposits:
Non-interest-bearing		$	6,494,852			$	6,385,177			$	5,994,693			1.7%		8.3%
Interest-bearing transaction and savings accounts			7,228,558				7,103,125				6,647,196			1.8%		8.7%
Interest-bearing certificates			800,364				838,631				906,978			(4.6)%		(11.8)%
Total deposits			14,523,774				14,326,933				13,548,867			1.4%		7.2%
Advances from Federal Home Loan Bank			—				50,000				100,000			(100.0)%		(100.0)%
Customer repurchase agreements and other borrowings			266,778				264,490				216,260			0.9%		23.4%
Subordinated notes, net			98,658				98,564				98,290			0.1%		0.4%
Junior subordinated debentures at fair value			70,510				119,815				117,248			(41.2)%		(39.9)%
Operating lease liabilities			57,343				59,756				59,884			(4.0)%		(4.2)%
Accrued expenses and other liabilities			148,689				148,303				313,801			0.3%		(52.6)%
Deferred compensation			46,639				46,684				46,625			(0.1)%		—%
Total liabilities			15,212,391				15,114,545				14,500,975			0.6%		4.9%
SHAREHOLDERS’ EQUITY
Common stock			1,298,212				1,299,381				1,326,269			(0.1)%		(2.1)%
Retained earnings			419,659				390,762				279,582			7.4%		50.1%
Other components of shareholders’ equity			(154,091	)			184				12,966			nm		nm
Total shareholders’ equity			1,563,780				1,690,327				1,618,817			(7.5)%		(3.4)%
Total liabilities and shareholders’ equity		$	16,776,171			$	16,804,872			$	16,119,792			(0.2)%		4.1%
Common Shares Issued:
Shares outstanding at end of period			34,372,784				34,252,632				34,735,343
Common shareholders’ equity per share (1)		$	45.49			$	49.35			$	46.60
Common shareholders’ tangible equity per share (1) (2)		$	34.25			$	38.02			$	35.29
Common shareholders’ tangible equity to tangible assets (2)			7.18	%			7.93	%			7.80	%
Consolidated Tier 1 leverage capital ratio			8.58	%			8.76	%			9.10	%

(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 excludes goodwill and other intangible assets.  Tangible assets exclude goodwill and other intangible 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.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
														Percentage Change
LOANS (1)		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021				Prior Qtr		Prior Yr Qtr
Commercial real estate (CRE):
Owner-occupied		$	872,801			$	831,623			$	759,490			5.0%		14.9%
Investment properties			1,670,896				1,674,027				1,616,795			(0.2)%		3.3%
Small balance CRE			1,162,164				1,281,863				1,315,435			(9.3)%		(11.7)%
Multifamily real estate			598,588				530,885				394,787			12.8%		51.6%
Construction, land and land development:
Commercial construction			179,796				167,998				197,476			7.0%		(9.0)%
Multifamily construction			274,015				259,116				305,694			5.7%		(10.4)%
One- to four-family construction			556,347				568,753				542,840			(2.2)%		2.5%
Land and land development			317,560				313,454				266,730			1.3%		19.1%
Commercial business:
Commercial business			1,081,847				1,038,206				1,094,952			4.2%		(1.2)%
SBA PPP			57,854				132,574				1,280,291			(56.4)%		(95.5)%
Small business scored			817,065				792,310				717,502			3.1%		13.9%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland			244,580				279,224				219,335			(12.4)%		11.5%
SBA PPP			708				1,354				36,316			(47.7)%		(98.1)%
One- to four-family residential			708,096				657,474				629,357			7.7%		12.5%
Consumer:
Consumer—home equity revolving lines of credit			470,485				458,533				466,132			2.6%		0.9%
Consumer—other			97,067				97,369				104,565			(0.3)%		(7.2)%
Total loans receivable		$	9,109,869			$	9,084,763			$	9,947,697			0.3%		(8.4)%
Restructured loans performing under their restructured terms		$	5,279			$	5,309			$	6,424
Loans 30 - 89 days past due and on accrual		$	9,611			$	11,558			$	19,233
Total delinquent loans (including loans on non-accrual), net		$	19,231			$	18,688			$	42,444
Total delinquent loans  /  Total loans receivable			0.21	%			0.21	%			0.43	%

⁽¹⁾   December 31, 2021 and March 31, 2021 loan balances were reclassified to match current period presentation.

LOANS BY GEOGRAPHIC LOCATION													Percentage Change
		Mar 31, 2022					Dec 31, 2021			Mar 31, 2021			Prior Qtr		Prior Yr Qtr
		Amount			Percentage		Amount			Amount
Washington		$	4,233,162		46.5%		$	4,264,590		$	4,683,600		(0.7)%		(9.6)%
California			2,191,993		24.1%			2,138,340			2,320,384		2.5%		(5.5)%
Oregon			1,620,479		17.8%			1,652,364			1,801,104		(1.9)%		(10.0)%
Idaho			539,245		5.9%			525,141			539,061		2.7%		—%
Utah			84,720		0.9%			74,913			92,399		13.1%		(8.3)%
Other			440,270		4.8%			429,415			511,149		2.5%		(13.9)%
Total loans receivable		$	9,109,869		100.0%		$	9,084,763		$	9,947,697		0.3%		(8.4)%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)

LOAN ORIGINATIONS	Quarters Ended
	Mar 31, 2022			Dec 31, 2021			Mar 31, 2021
Commercial real estate	$	87,421		$	196,350		$	91,217
Multifamily real estate		21,169			25,933			12,878
Construction and land		545,475			522,081			447,369
Commercial business:
Commercial business		272,513			203,549			115,911
SBA PPP		—			—			428,180
Agricultural business		28,676			13,061			27,167
One-to four-family residential		55,821			52,251			57,731
Consumer		121,959			101,365			87,322
Total loan originations (excluding loans held for sale)	$	1,133,034		$	1,114,590		$	1,267,775

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
ALLOWANCE FOR CREDIT LOSSES – LOANS
Balance, beginning of period		$	132,099			$	139,915			$	167,279
Recapture of provision for credit losses – loans			(7,376	)			(8,127	)			(8,035	)
Recoveries of loans previously charged off:
Commercial real estate			87				635				24
Construction and land			384				—				100
One- to four-family real estate			40				47				113
Commercial business			149				267				979
Agricultural business, including secured by farmland			118				5				—
Consumer			216				140				296
			994				1,094				1,512
Loans charged off:
Commercial real estate			(2	)			(1	)			(3,763	)
Multifamily real estate			—				(59	)			—
Construction and land			(5	)			—				—
Commercial business			(82	)			(488	)			(789	)
Consumer			(157	)			(235	)			(150	)
			(246	)			(783	)			(4,702	)
Net recoveries (charge-offs)			748				311				(3,190	)
Balance, end of period		$	125,471			$	132,099			$	156,054
Net recoveries (charge-offs) / Average loans receivable			0.008	%			0.003	%			(0.032	)%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES – LOANS		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
Specific or allocated credit loss allowance:
Commercial real estate		$	47,264			$	52,995			$	59,411
Multifamily real estate			7,183				7,043				4,367
Construction and land			26,679				27,294				36,440
One- to four-family real estate			8,109				8,205				7,988
Commercial business			26,655				26,421				31,411
Agricultural business, including secured by farmland			2,586				3,190				4,617
Consumer			6,995				6,951				11,820
Total allowance for credit losses – loans		$	125,471			$	132,099			$	156,054
Allowance for credit losses - loans / Total loans receivable			1.38	%			1.45	%			1.57	%
Allowance for credit losses - loans / Non-performing loans			674	%			578	%			426	%

		Quarters Ended
CHANGE IN THE		Mar 31, 2022			Dec 31, 2021			Mar 31, 2021
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period		$	12,432		$	10,127		$	13,297
Provision/(recapture) for credit losses - unfunded loan commitments			428			2,305			(1,220	)
Balance, end of period		$	12,860		$	12,432		$	12,077

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	10,618			$	14,159			$	21,615
Construction and land		119				479				986
One- to four-family		2,199				2,711				4,456
Commercial business		1,845				2,156				4,194
Agricultural business, including secured by farmland		1,021				1,022				1,536
Consumer		2,123				1,754				2,244
		17,925				22,281				35,031
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
One- to four-family		210				436				1,524
Commercial business		351				2				37
Consumer		121				117				—
		682				555				1,561
Total non-performing loans		18,607				22,836				36,592
REO		429				852				340
Other repossessed assets		17				17				37
Total non-performing assets	$	19,053			$	23,705			$	36,969
Total non-performing assets to total assets		0.11	%			0.14	%			0.23	%

	Mar 31, 2022			Dec 31, 2021			Mar 31, 2021
LOANS BY CREDIT RISK RATING
Pass	$	8,924,598		$	8,874,468		$	9,584,429
Special Mention		6,908			11,932			51,692
Substandard		178,363			198,363			311,576
Total	$	9,109,869		$	9,084,763		$	9,947,697

	Quarters Ended
REAL ESTATE OWNED	Mar 31, 2022				Dec 31, 2021			Mar 31, 2021
Balance, beginning of period	$	852			$	852		$	816
Proceeds from dispositions of REO		(607	)			—			(783	)
Gain on sale of REO		184				—			307
Balance, end of period	$	429			$	852		$	340

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION											Percentage Change
		Mar 31, 2022			Dec 31, 2021			Mar 31, 2021			Prior Qtr		Prior Yr Qtr
Non-interest-bearing		$	6,494,852		$	6,385,177		$	5,994,693		1.7%		8.3%
Interest-bearing checking			1,971,936			1,947,414			1,722,085		1.3%		14.5%
Regular savings accounts			2,853,891			2,784,716			2,597,731		2.5%		9.9%
Money market accounts			2,402,731			2,370,995			2,327,380		1.3%		3.2%
Total interest-bearing transaction and savings accounts			7,228,558			7,103,125			6,647,196		1.8%		8.7%
Total core deposits			13,723,410			13,488,302			12,641,889		1.7%		8.6%
Interest-bearing certificates			800,364			838,631			906,978		(4.6)%		(11.8)%
Total deposits		$	14,523,774		$	14,326,933		$	13,548,867		1.4%		7.2%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Mar 31, 2022						Dec 31, 2021			Mar 31, 2021			Percentage Change
		Amount			Percentage			Amount			Amount			Prior Qtr		Prior Yr Qtr
Washington		$	8,067,253		55.5	%		$	7,952,376		$	7,504,389		1.4%		7.5%
Oregon			3,140,393		21.6	%			3,067,054			2,929,027		2.4%		7.2%
California			2,520,655		17.4	%			2,524,296			2,401,299		(0.1)%		5.0%
Idaho			795,473		5.5	%			783,207			714,152		1.6%		11.4%
Total deposits		$	14,523,774		100.0	%		$	14,326,933		$	13,548,867		1.4%		7.2%

INCLUDED IN TOTAL DEPOSITS		Mar 31, 2022			Dec 31, 2021			Mar 31, 2021
Public non-interest-bearing accounts		$	189,907		$	193,917		$	151,850
Public interest-bearing transaction & savings accounts			165,692			159,957			169,192
Public interest-bearing certificates			37,689			39,961			51,021
Total public deposits		$	393,288		$	393,835		$	372,063

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Actual					Minimum to be categorized as "Adequately Capitalized"					Minimum to be categorized as "Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF MARCH 31, 2022		Amount			Ratio		Amount			Ratio		Amount			Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,636,430		14.05%		$	931,972		8.00%		$	1,164,964		10.00%
Tier 1 capital to risk-weighted assets			1,412,895		12.13%			698,979		6.00%			698,979		6.00%
Tier 1 leverage capital to average assets			1,412,895		8.58%			658,360		4.00%		n/a			n/a
Common equity tier 1 capital to risk-weighted assets			1,326,395		11.39%			524,234		4.50%		n/a			n/a
Banner Bank:
Total capital to risk-weighted assets			1,567,914		13.47%			931,257		8.00%			1,164,071		10.00%
Tier 1 capital to risk-weighted assets			1,444,379		12.41%			698,442		6.00%			931,257		8.00%
Tier 1 leverage capital to average assets			1,444,379		8.78%			658,054		4.00%			822,568		5.00%
Common equity tier 1 capital to risk-weighted assets			1,444,379		12.41%			523,832		4.50%			756,646		6.50%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Mar 31, 2022										Dec 31, 2021										Mar 31, 2021
	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	$	130,221		$	1,115			3.47	%		$	73,101		$	601			3.26	%		$	119,341		$	925			3.14	%
Mortgage loans		7,347,662			81,032			4.47	%			7,362,363			83,059			4.48	%			7,144,770			80,580			4.57	%
Commercial/agricultural loans		1,479,216			15,011			4.12	%			1,460,486			14,966			4.07	%			1,519,062			15,919			4.25	%
SBA PPP loans		88,720			2,784			12.73	%			209,776			5,845			11.05	%			1,172,492			10,792			3.73	%
Consumer and other loans		115,881			1,700			5.95	%			119,658			1,749			5.80	%			127,469			1,947			6.19	%
Total loans(1)		9,161,700			101,642			4.50	%			9,225,384			106,220			4.57	%			10,083,134			110,163			4.43	%
Mortgage-backed securities		2,975,263			14,235			1.94	%			2,838,759			13,344			1.86	%			1,953,820			9,472			1.97	%
Other securities		1,573,834			8,429			2.17	%			1,550,383			8,466			2.17	%			1,048,856			6,687			2.59	%
Equity securities		—			—			—	%			—			—			—	%			1,742			—			—	%
Interest-bearing deposits with banks		1,697,545			820			0.20	%			1,901,165			731			0.15	%			1,032,138			262			0.10	%
FHLB stock		11,756			106			3.66	%			12,000			135			4.46	%			15,952			161			4.09	%
Total investment securities		6,258,398			23,590			1.53	%			6,302,307			22,676			1.43	%			4,052,508			16,582			1.66	%
Total interest-earning assets		15,420,098			125,232			3.29	%			15,527,691			128,896			3.29	%			14,135,642			126,745			3.64	%
Non-interest-earning assets		1,372,182										1,306,437										1,237,281
Total assets	$	16,792,280									$	16,834,128									$	15,372,923
Deposits:
Interest-bearing checking accounts	$	1,958,824			273			0.06	%		$	1,875,097			289			0.06	%		$	1,616,824			315			0.08	%
Savings accounts		2,816,774			354			0.05	%			2,773,597			400			0.06	%			2,486,820			521			0.08	%
Money market accounts		2,390,621			506			0.09	%			2,367,861			559			0.09	%			2,242,748			775			0.14	%
Certificates of deposit		825,028			953			0.47	%			840,920			1,136			0.54	%			913,053			1,998			0.89	%
Total interest-bearing deposits		7,991,247			2,086			0.11	%			7,857,475			2,384			0.12	%			7,259,445			3,609			0.20	%
Non-interest-bearing deposits		6,421,143			—			—	%			6,523,149			—			—	%			5,663,820			—			—	%
Total deposits		14,412,390			2,086			0.06	%			14,380,624			2,384			0.07	%			12,923,265			3,609			0.11	%
Other interest-bearing liabilities:
FHLB advances		42,222			291			2.80	%			50,000			348			2.76	%			144,444			934			2.62	%
Other borrowings		266,148			84			0.13	%			266,559			109			0.16	%			202,930			109			0.22	%
Junior subordinated debentures and subordinated notes		191,985			1,776			3.75	%			246,510			2,175			3.50	%			247,944			2,208			3.61	%
Total borrowings		500,355			2,151			1.74	%			563,069			2,632			1.85	%			595,318			3,251			2.21	%
Total funding liabilities		14,912,745			4,237			0.12	%			14,943,693			5,016			0.13	%			13,518,583			6,860			0.21	%
Other non-interest-bearing liabilities(2)		225,953										216,940										207,560
Total liabilities		15,138,698										15,160,633										13,726,143
Shareholders’ equity		1,653,582										1,673,495										1,646,780
Total liabilities and shareholders’ equity	$	16,792,280									$	16,834,128									$	15,372,923
Net interest income/rate spread (tax equivalent)				$	120,995			3.17	%					$	123,880			3.16	%					$	119,885			3.43	%
Net interest margin (tax equivalent)								3.18	%									3.17	%									3.44	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(2,341	)									(2,350	)									(2,224	)
Net interest income and margin, as reported				$	118,654			3.12	%					$	121,530			3.11	%					$	117,661			3.38	%
Additional Key Financial Ratios:
Return on average assets								1.06	%									1.18	%									1.24	%
Return on average equity								10.78	%									11.84	%									11.54	%
Average equity/average assets								9.85	%									9.94	%									10.71	%
Average interest-earning assets/average interest-bearing liabilities								181.59	%									184.40	%									179.96	%
Average interest-earning assets/average funding liabilities								103.40	%									103.91	%									104.56	%
Non-interest income/average assets								0.47	%									0.58	%									0.64	%
Non-interest expense/average assets								2.20	%									2.16	%									2.47	%
Efficiency ratio(4)								66.04	%									62.88	%									65.90	%
Adjusted efficiency ratio(5)								62.09	%									59.71	%									63.18	%

(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 $1.3 million for both the three months ended March 31, 2022 and December 31, 2021 and $1.2 million for the three months ended March 31, 2021. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $1.1 million and $1.0 million for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, 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 the non-GAAP Financial Measures on the final two pages of the press release tables.

 

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. 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 REVENUE	Quarters Ended
	Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
Net interest income	$	118,654			$	121,530			$	117,661
Total non-interest income		19,427				24,474				24,272
Total revenue (GAAP)		138,081				146,004				141,933
Exclude net (gain) loss on sale of securities		(435	)			136				(485	)
Exclude net change in valuation of financial instruments carried at fair value		(49	)			(2,721	)			(59	)
Adjusted revenue (non-GAAP)	$	137,597			$	143,419			$	141,389

ADJUSTED EARNINGS	Quarters Ended
	Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
Net income (GAAP)	$	43,963			$	49,927			$	46,855
Exclude net (gain) loss on sale of securities		(435	)			136				(485	)
Exclude net change in valuation of financial instruments carried at fair value		(49	)			(2,721	)			(59	)
Exclude merger and acquisition-related expenses		—				—				571
Exclude COVID-19 expenses		—				127				148
Exclude Banner Forward expenses		2,465				1,157				950
Exclude loss on extinguishment of debt		793				2,284				—
Exclude related net tax (benefit) expense		(666	)			(236	)			(270	)
Total adjusted earnings (non-GAAP)	$	46,071			$	50,674			$	47,710
Diluted earnings per share (GAAP)	$	1.27			$	1.44			$	1.33
Diluted adjusted earnings per share (non-GAAP)	$	1.33			$	1.47			$	1.35

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended
		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
Non-interest expense (GAAP)		$	91,195			$	91,805			$	93,527
Exclude merger and acquisition-related expenses			—				—				(571	)
Exclude COVID-19 expenses			—				(127	)			(148	)
Exclude Banner Forward expenses			(2,465	)			(1,157	)			(950	)
Exclude CDI amortization			(1,424	)			(1,574	)			(1,711	)
Exclude state/municipal tax expense			(1,162	)			(976	)			(1,065	)
Exclude REO operations			79				(49	)			242
Exclude loss on extinguishment of debt			(793	)			(2,284	)			—
Adjusted non-interest expense (non-GAAP)		$	85,430			$	85,638			$	89,324
Net interest income (GAAP)		$	118,654			$	121,530			$	117,661
Non-interest income (GAAP)			19,427				24,474				24,272
Total revenue			138,081				146,004				141,933
Exclude net (gain) loss on sale of securities			(435	)			136				(485	)
Exclude net change in valuation of financial instruments carried at fair value			(49	)			(2,721	)			(59	)
Adjusted revenue (non-GAAP)		$	137,597			$	143,419			$	141,389
Efficiency ratio (GAAP)			66.04	%			62.88	%			65.90	%
Adjusted efficiency ratio (non-GAAP)			62.09	%			59.71	%			63.18	%

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS		Mar 31, 2022				Dec 31, 2021				Mar 31, 2021
Shareholders’ equity (GAAP)		$	1,563,780			$	1,690,327			$	1,618,817
Exclude goodwill and other intangible assets, net			386,552				387,976				392,836
Tangible common shareholders’ equity (non-GAAP)		$	1,177,228			$	1,302,351			$	1,225,981
Total assets (GAAP)		$	16,776,171			$	16,804,872			$	16,119,792
Exclude goodwill and other intangible assets, net			386,552				387,976				392,836
Total tangible assets (non-GAAP)		$	16,389,619			$	16,416,896			$	15,726,956
Common shareholders’ equity to total assets (GAAP)			9.32	%			10.06	%			10.04	%
Tangible common shareholders’ equity to tangible assets (non-GAAP)			7.18	%			7.93	%			7.80	%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
Tangible common shareholders’ equity (non-GAAP)		$	1,177,228			$	1,302,351			$	1,225,981
Common shares outstanding at end of period			34,372,784				34,252,632				34,735,343
Common shareholders’ equity (book value) per share (GAAP)		$	45.49			$	49.35			$	46.60
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)		$	34.25			$	38.02			$	35.29

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