Banner Corporation Reports Net Income of $23.5 Million, or $0.67 Per Diluted Share, in Second Quarter 2020; Declares Quarterly Cash Dividend of $0.41 Per Share; Provides Update to Pandemic Relief and Community Support Actions

WALLA WALLA, Wash., July 22, 2020 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) ("Banner"), the parent company of Banner Bank and Islanders Bank, today reported net income of $23.5 million, or $0.67 per diluted share, for the second quarter 2020, compared to $16.9 million, or $0.47 per diluted share, in the preceding quarter and $39.7 million, or $1.14 per diluted share, in the second quarter of 2019. Banner's second quarter earnings reflect the continuing impact of the COVID-19 pandemic in all the western states that Banner operates. Second quarter of 2020 results also include $336,000 of acquisition-related expenses, compared to $1.1 million of acquisition-related expenses in the preceding quarter and $301,000 in the second quarter of 2019. In the first six months of 2020, net income was $40.4 million, or $1.14 per diluted share, compared to $73.0 million, or $2.09 per diluted share, in the first six months a year ago. The results for the first six months of 2020 include $1.5 million of acquisition-related expenses, compared to $2.4 million of acquisition-related expenses in the first six months of 2019.

Banner also announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be payable August 13, 2020, to common shareholders of record on August 4, 2020.

“With strong loan and deposit growth, Banner’s core operating performance generated solid revenue growth with increases in both net interest income and non-interest income compared to both the preceding quarter and the same quarter last year. However; second quarter earnings were impacted by a number of items, including the anticipated impact of the COVID-19 pandemic on the economy, and subsequently, the increase in our allowance for credit losses,” said Mark Grescovich, President and CEO. “To provide support for our clients, we have made available several assistance programs. Banner has provided SBA paycheck protection funds totaling nearly $1.12 billion for 8,655 businesses and provided deferred payments or waived interest on 3,314 loans totaling $1.1 billion as of June 30, 2020. We will continue to do the right thing for our clients, our communities, our colleagues, our company and our shareholders while providing a consistent and reliable source of commerce and capital through all economic cycles and changing events. I am very proud of our more than 2,100 colleagues that are working extremely hard to assist our clients and communities during these difficult times."

“We have proactively downgraded certain modified loans and other loans we consider at risk due to the COVID-19 induced economic slowdown. As a result, along with recent further deterioration in economic conditions, we increased the allowance for credit losses to $156.4 million with the addition of $29.5 million in credit loss provisions during the quarter ended June 30, 2020,” Grescovich added. "This provision compares to a $21.7 million provision for credit losses during the preceding quarter and a $2.0 million provision for loan losses in the second quarter a year ago. The allowance for credit losses - loans was 1.52% of total loans and 418% of non-performing loans at the end of the second quarter of 2020."

At June 30, 2020, Banner Corporation had $14.41 billion in assets, $10.13 billion in net loans and $12.02 billion in deposits. Banner operates 176 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

COVID-19 Pandemic Update

• SBA Paycheck Protection Program. The U.S. Small Business Administration (SBA) provides assistance to small businesses impacted by COVID-19 through the Paycheck Protection Program (PPP), which was designed to provide near-term relief to help small businesses sustain operations. As of June 30, 2020, Banner had funded 8,655 applications totaling $1.12 billion of loans in its service area through the PPP program. The deadline for PPP loan applications to the SBA has been extended to August 8, 2020. Banner is continuing to accept new PPP applications based on this extended deadline and is assisting small businesses with other borrowing options as they become available, including the Main Street Lending Program and other government sponsored lending programs, as appropriate.
  
• Loan Accommodations. Banner is continuing to offer payment and financial relief programs for borrowers impacted by COVID-19. These programs include initial loan payment deferrals or interest-only payments for up to 90 days, waived late fees, and, on a more limited basis, waived interest and temporarily suspended foreclosure proceedings. Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or could be eligible for an additional deferral period for up to 90 days. In addition, Banner has entered into payment forbearance agreements with other customers for periods of up to six months. Banner had deferred payment or waived interest on 3,314 loans totaling $1.1 billion through June 30, 2020. Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings through June 30, 2020 pursuant to applicable accounting and regulatory guidance. As of June 30, 2020, the deferral period had ended for approximately 62% of these loans.
  
• Allowance for Credit Losses - Loans. Banner recorded a provision for credit losses of $29.5 million for the second quarter of 2020, compared to a $21.7 million provision in the preceding quarter and a $2.0 million provision in the second quarter a year ago. The provisions for the current and preceding quarters reflect expected lifetime credit losses based upon the conditions and economic outlook that existed as of June 30, 2020 and March 31, 2020, respectively.
• Branch Operations, IT Changes and One-Time Expenses. Banner has taken various steps to help protect customers and staff by limiting branch activities to appointment only and use of drive-up facilities, and by encouraging the use of digital and electronic banking channels. In select markets on a test basis, Banner has begun taking steps to resume more normal branch activities with specific guidelines in place to ensure the safety of our clients and our personnel. To further the well-being of staff and customers, Banner implemented measures to allow employees to work from home to the extent practicable. To facilitate this approach, Banner allocated additional computer equipment to staff and enhanced Banner's network capabilities with several upgrades. These expenses plus other expenses incurred in response to the COVID-19 pandemic resulted in $2.2 million of related costs during the second quarter of 2020, compared to $239,000 of related costs in the first quarter of 2020.
• Capital Management. At June 30, 2020, the tangible common shareholders' equity to tangible assets* ratio was 8.76% and Banner’s capital was well in excess of all regulatory requirements. On June 30, 2020, Banner issued and sold in an underwritten offering $100.0 million aggregate principal amount of 5.000% Fixed-to-Floating Rate Subordinated Notes due 2030 (Notes) at a public offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately $98.1 million. During the preceding quarter, prior to the COVID-19 pandemic outbreak, Banner repurchased 624,780 shares of its common stock. To preserve capital, Banner has discontinued any additional repurchase of shares under its stock repurchase program until further notice and will closely monitor capital levels going forward.

Second Quarter 2020 Highlights

• Revenues increased to $147.3 million, compared to $138.4 million in the preceding quarter, and increased 6% when compared to $139.4 million in the second quarter a year ago.
  
• Net interest income, before the provision for credit losses, was $119.5 million in the second quarter of 2020, compared to $119.3 million in the preceding quarter and $116.7 million in the second quarter a year ago.
  
• Net interest margin as reported was 3.84%, compared to 4.19% in the preceding quarter and 4.38% in the second quarter a year ago.
  
• Net interest margin on a tax equivalent basis was 3.90%, compared to 4.25% in the preceding quarter and 4.44% in the second quarter a year ago.
• Mortgage banking revenues increased 39% to $14.1 million, compared to $10.2 million in the preceding quarter, and increased 138% compared to $5.9 million in the second quarter a year ago, reflecting strong refinance demand and higher margins due to decreasing market interest rates.
• Return on average assets was 0.68%, compared to 0.54% in the preceding quarter and 1.36% in the second quarter a year ago.
• Net loans receivable increased to $10.13 billion at June 30, 2020, compared to $9.16 billion at March 31, 2020, and increased 17% when compared to $8.65 billion at June 30, 2019.
  
• Non-performing assets decreased to $39.9 million, or 0.28% of total assets, at June 30, 2020, compared to $46.1 million, or 0.36% of total assets in the preceding quarter, and increased from $21.0 million, or 0.18% of total assets, at June 30, 2019.
  
• Provision for credit losses - loans was $29.5 million, and the allowance for credit losses - loans was $156.4 million, or 1.52% of total loans receivable, as of June 30, 2020, compared to $130.5 million, or 1.41% of total loans receivable as of March 31, 2020 and $98.3 million or 1.12% of total loans receivable as of June 30, 2019.
  
• A $905,000 recapture of provision for credit losses - unfunded loan commitments was recorded and the allowance for credit losses - unfunded loan commitments was $10.6 million as of June 30, 2020, compared to $11.5 million as of March 31, 2020.
  
• Core deposits increased 18% to $10.97 billion at June 30, 2020, compared to $9.28 billion at March 31, 2020, and increased 34% compared to $8.22 billion a year ago. Core deposits represented 91% of total deposits at June 30, 2020.
  
• Common shareholders’ equity per share increased 1% to $46.22 at June 30, 2020, compared to $45.63 at the preceding quarter end, and increased 5% from $43.99 a year ago.
  
• Tangible common shareholders' equity per share* increased 2% to $34.89 at June 30, 2020, compared to $34.23 at the preceding quarter end, and increased 5% from $33.36 a year ago.

*Tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income before provision for loan losses and non-interest income) and the adjusted efficiency ratio (which excludes acquisition-related expenses, COVID-19 expenses, amortization of core deposit intangibles, real estate owned gain (loss), Federal Home Loan Bank (FHLB) prepayment penalties and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in 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 June 30, 2020, Banner issued and sold in an underwritten offering the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately $98.1 million. Banner intends to use the net proceeds of the offering for general corporate purposes, which may include providing capital to support its growth organically or through strategic acquisitions, repayment or redemption of outstanding indebtedness, the payment of dividends, financing investments and capital expenditures, repurchasing shares of its common stock, and for investments in the Banks as regulatory capital.

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

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

Adoption of New Accounting Standard

In June 2016, Financial Accounting Standards Board issued Accounting Standard Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). GAAP prior to ASU 2016-13 required an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 became effective for Banner on January 1, 2020. The adoption of ASU No. 2016-13 resulted in a $7.8 million increase to its allowance for credit losses - loans and a $7.0 million increase to its allowance for credit losses - unfunded loan commitments. The combined increases were recorded net of tax as an $11.2 million reduction to retained earnings as of the adoption date.

Income Statement Review

Net interest income, before the provision for credit losses, was $119.5 million in the second quarter of 2020, compared to $119.3 million in the preceding quarter and $116.7 million in the second quarter a year ago.

Banner's net interest margin on a tax equivalent basis was 3.90% for the second quarter of 2020, a 35 basis-point decrease compared to 4.25% in the preceding quarter and a 54 basis-point decrease compared to 4.44% in the second quarter a year ago. “As expected, the 150 basis-point decrease in the fed funds target rate that occurred in March 2020, the full effect of the lower interest rate environment combined with the impact of the low loan yields of the SBA PPP loan portfolio, and growth in core deposit liquidity impacted our net interest margin during the quarter,” added Grescovich. Acquisition accounting adjustments added seven basis points to the net interest margin in the current quarter compared to ten basis points in the preceding quarter and seven basis points in the second quarter a year ago. The total purchase discount for acquired loans was $20.2 million at June 30, 2020, compared to $22.2 million at March 31, 2020, and $22.6 million at June 30, 2019. In the first six months of the year, Banner’s net interest margin on a tax equivalent basis was 4.07% compared to 4.43% in the first six months of 2019.

Average interest-earning asset yields decreased 50 basis points to 4.19% in the second quarter compared to 4.69% for the preceding quarter and decreased 78 basis points compared to 4.97% in the second quarter a year ago. Average loan yields decreased 51 basis points to 4.57% compared to 5.08% in the preceding quarter and decreased 82 basis points compared to 5.39% in the second quarter a year ago. Loan discount accretion added eight basis points to loan yields in the second quarter of 2020, compared to 12 basis points in the preceding quarter and nine basis points in the second quarter a year ago. Deposit costs were 0.23% in the second quarter of 2020, a 12 basis-point decrease compared to the preceding quarter and a 16 basis-point decrease compared to the second quarter a year ago. The decrease in deposit costs during the current quarter compared to the preceding quarter was the result of recent decreases in market interest rates; however, changes in the average rate paid on interest-bearing deposits tend to lag changes in market interest rates. The total cost of funds was 0.31% during the second quarter of 2020, a 15 basis-point decrease compared to the preceding quarter and a 25 basis-point decrease compared to the second quarter a year ago.

Banner recorded a $29.5 million provision for credit losses in the current quarter, compared to $21.7 million in the prior quarter and $2.0 million in the same quarter a year ago as calculated under the prior incurred loss methodology. The provisions for the current and preceding quarters reflect expected lifetime credit losses based upon the current conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of June 30, 2020 and March 31, 2020, respectively.

Total non-interest income was $27.8 million in the second quarter of 2020, compared to $19.2 million in the preceding quarter and $22.7 million in the second quarter a year ago. Deposit fees and other service charges were $7.5 million in the second quarter of 2020, compared to $9.8 million in the preceding quarter and $14.0 million in the second quarter a year ago. The decrease in deposit fees and other service charges from the second quarter a year ago is primarily a result of Banner becoming subject to the Durbin Amendment on July 1, 2019, as well as pandemic related fee waivers and reduced transaction deposit account activity since the start of the COVID-19 pandemic. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, increased to $14.1 million in the second quarter, compared to $10.2 million in the preceding quarter and $5.9 million in the second quarter of 2019. The higher mortgage banking revenue quarter-over-quarter primarily reflects an increase in the gain on sale spread on one- to four-family held for sale loans. The increases compared to the second quarter of 2019 were primarily due to increased production of one- to four-family held-for-sale loans primarily due to increased refinance activity. Home purchase activity accounted for 42% of one- to four-family mortgage loan originations in the second quarter of 2020, compared to 54% in the prior quarter and 77% in the second quarter of 2019. In the first six months of 2020, total non-interest income increased 15% to $47.0 million, compared to $40.8 million in the first six months of 2019.

Banner’s second quarter 2020 results included a $2.2 million net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading as a result of the tightening of market spreads during the quarter, and a $93,000 net gain on the sale of securities. In the preceding quarter, results included a $4.6 million net loss for fair value adjustments and a $78,000 net gain on the sale of securities. In the second quarter a year ago, results included an $114,000 net loss for fair value adjustments and a $28,000 net loss on the sale of securities.

Banner's total revenue increased 6% to $147.3 million for the second quarter of 2020, compared to $138.4 million in the preceding quarter, and increased 6% compared to $139.4 million in the second quarter a year ago. Year-to-date, total revenues increased 4% to $285.7 million compared to $273.6 million for the same period one year earlier. Adjusted revenue* (the total of net interest income before provision for credit losses and total non-interest income excluding the net gain and loss on the sale of securities and the net change in valuation of financial instruments) was $145.0 million in the second quarter of 2020, compared to $142.9 million in the preceding quarter and $139.5 million in the second quarter of 2019. In the first six months of the year, adjusted revenue* was $287.9 million, compared to $273.7 million in the first six months of 2019.

Total non-interest expense was $89.6 million in the second quarter of 2020, compared to $95.2 million in the preceding quarter and $86.7 million in the second quarter of 2019. The decrease in non-interest expense during the second quarter of 2020 reflects an increase in capitalized loan origination costs, primarily related to the origination of PPP loans during the current quarter. A reduction in acquisition-related expenses also contributed to the decrease compared to the prior quarter as acquisition-related expenses were $336,000 for the second quarter of 2020, compared to $1.1 million for the preceding quarter and $301,000 in the second quarter a year ago. The current quarter includes a $905,000 recapture of provision for credit losses - unfunded loan commitments compared to a $1.7 million provision for the prior quarter and no provision for the year ago quarter. The previously mentioned increase in COVID-19 expenses during the current quarter partially offset these decreases. Year-to-date, total non-interest expense was $184.8 million, compared to $176.7 million in the same period a year earlier. Banner’s efficiency ratio was 60.85% for the current quarter, compared to 68.76% in the preceding quarter and 62.22% in the year ago quarter. Banner’s adjusted efficiency ratio* was 57.95% for the current quarter, compared to 63.47% in the preceding quarter and 59.56% in the year ago quarter.

For the second quarter of 2020, Banner had $4.6 million in state and federal income tax expense for an effective tax rate of 16.3%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate is 23.5%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased 13% to $14.41 billion at June 30, 2020, compared to $12.78 billion at March 31, 2020, and increased 22% when compared to $11.85 billion at June 30, 2019. The total of securities and interest-bearing deposits held at other banks was $2.30 billion at June 30, 2020, compared to $2.15 billion at March 31, 2020 and $1.85 billion at June 30, 2019. The average effective duration of Banner's securities portfolio was approximately 4.0 years at June 30, 2020, compared to 2.6 years at June 30, 2019.

Net loans receivable increased 11% to $10.13 billion at June 30, 2020, compared to $9.16 billion at March 31, 2020, and increased 17% when compared to $8.65 billion at June 30, 2019. The increase in net loans compared to the prior quarter primarily reflects the origination of SBA PPP loans during the current quarter, which totaled $1.12 billion outstanding as of June 30, 2020. The year-over-year increase in net loans included $332.4 million of portfolio loans acquired in the AltaPacific acquisition during the fourth quarter of 2019. Commercial real estate and multifamily real estate loans increased to $4.11 billion at June 30, 2020, compared to $4.02 billion at March 31, 2020, and increased 13% compared to $3.62 billion a year ago. Commercial business loans increased 46% to $3.15 billion at June 30, 2020, compared to $2.17 billion at March 31, 2020, and increased 56% compared to $2.02 billion a year ago. Agricultural business loans decreased to $328.1 million at June 30, 2020, compared to $330.3 million three months earlier and $345.8 million a year ago. Total construction, land and land development loans were $1.24 billion at June 30, 2020, a small increase from $1.22 billion at March 31, 2020, and a 9% increase compared to $1.14 billion a year earlier. Consumer loans decreased to $642.4 million at June 30, 2020, compared to $661.8 million at March 31, 2020, and $698.3 million a year ago. One- to four-family loans decreased to $817.8 million at June 30, 2020, compared to $881.4 million at March 31, 2020, and $918.2 million a year ago.

Loans held for sale were $258.7 million at June 30, 2020, compared to $182.4 million at March 31, 2020, and $170.7 million at June 30, 2019. The volume of one- to four- family residential mortgage loans sold was $292.4 million in the current quarter, compared to $204.0 million in the preceding quarter and $139.0 million in the second quarter a year ago. During the second quarter of 2020, Banner sold $3.1 million in multifamily loans compared to $119.7 million in the preceding quarter and none in the second quarter a year ago. The current quarter reflects a temporary disruption in the secondary market for multifamily loans as a results of the COVID-19 pandemic.

Total deposits increased 15% to $12.02 billion at June 30, 2020, compared to $10.45 billion at March 31, 2020, and increased 29% when compared to $9.29 billion a year ago. The increase in total deposits from the preceding quarter was due primarily to SBA PPP loan funds deposited into customer accounts and an increase in customer deposits accounts due changes in spending habits during the COVID-19 pandemic. The year-over-year increase in deposits included $313.4 million in deposits acquired in the AltaPacific acquisition during the fourth quarter of 2019. Non-interest-bearing account balances increased 29% to $5.28 billion at June 30, 2020, compared to $4.11 billion at March 31, 2020, and increased 44% compared to $3.67 billion a year ago. Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 18% from the prior quarter and increased 34% compared to a year ago and represented 91% of total deposits at June 30, 2020. Certificates of deposit decreased 11% to $1.04 billion at June 30, 2020, compared to $1.17 billion at March 31, 2020, and decreased slightly compared to $1.07 billion a year earlier. The decrease in certificates of deposit during the second quarter of 2020 primarily reflects the decrease in brokered deposits to $119.4 million at June 30, 2020, compared to $251.0 million at March 31, 2020 and $138.4 million a year ago. FHLB borrowings totaled $150.0 million at June 30, 2020, compared to $247.0 million at March 31, 2020, and $606.0 million a year earlier.

At June 30, 2020, total common shareholders' equity was $1.63 billion, or 11.28% of assets, compared to $1.60 billion or 12.53% of assets at March 31, 2020, and $1.52 billion or 12.84% of assets a year ago. At June 30, 2020, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, net, was $1.23 billion, or 8.76% of tangible assets*, compared to $1.20 billion, or 9.70% of tangible assets, at March 31, 2020, and $1.15 billion, or 10.05% of tangible assets, a year ago. Banner's tangible book value per share* increased to $34.89 at June 30, 2020, compared to $33.36 per share a year ago.

Banner and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At June 30, 2020, Banner's common equity Tier 1 capital ratio was 10.66%, its Tier 1 leverage capital to average assets ratio was 9.83%, and its total capital to risk-weighted assets ratio was 14.14%.

Credit Quality

The allowance for credit losses - loans was $156.4 million at June 30, 2020, or 1.52% of total loans receivable outstanding and 418% of non-performing loans, compared to $130.5 million at March 31, 2020, or 1.41% of total loans receivable outstanding and 299% of non-performing loans, and $98.3 million at June 30, 2019, or 1.12% of total loans receivable outstanding and 534% 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 $10.6 million at June 30, 2020, compared to $11.5 million at March 31, 2020 and $2.6 million at June 30, 2019. Net loan charge-offs totaled $3.7 million in the second quarter of 2020, compared to net loan recoveries of $404,000 in the preceding quarter and $1.1 million of net charge-offs in the second quarter a year ago. Banner recorded a $29.5 million provision for credit losses in the current quarter, compared to $21.7 million in the prior quarter and $2.0 million in the year ago quarter primarily due to the further deterioration in economic variables, as a result of the COVID-19 pandemic, utilized to forecast credit losses. Non-performing loans were $37.4 million at June 30, 2020, compared to $43.7 million at March 31, 2020, and $18.4 million a year ago. Real estate owned and other repossessed assets were $2.4 million at June 30, 2020, compared to $2.4 million at March 31, 2020, and $2.6 million a year ago.

In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net purchase discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for credit losses is recorded for acquired loans at the acquisition date. At June 30, 2020, the total purchase discount for acquired loans was $20.2 million.

Banner's total non-performing assets were $39.9 million, or 0.28% of total assets, at June 30, 2020, compared to $46.1 million, or 0.36% of total assets, at March 31, 2020, and $21.0 million, or 0.18% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday, July 23, 2020, at 8:00 a.m. PDT, to discuss its second quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one week at (877) 344-7529 using access code 10145372, or at www.bannerbank.com.

About the Company

Banner Corporation is a $14.41 billion bank holding company operating two commercial banks in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

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

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

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RESULTS OF OPERATIONS		Quarters Ended		Six Months Ended
(in thousands except shares and per share data)		Jun 30, 2020		Mar 31, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
INTEREST INCOME:
50%; width:50%; min-width:50%;">Loans receivable	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">115,173	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">118,926	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">117,007	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">234,099	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">232,462	1%; width:1%; min-width:1%;">
Mortgage-backed securities		7,983			9,137			9,794			17,120			20,301
Securities and cash equivalents		5,468			3,602			4,037			9,070			8,071
		128,624			131,665			130,838			260,289			260,834
INTEREST EXPENSE:
Deposits		6,694			8,750			9,023			15,444			17,666
Federal Home Loan Bank advances		984			2,064			3,370			3,048			6,846
Other borrowings		238			116			67			354			127
Junior subordinated debentures and subordinated notes		1,251			1,477			1,683			2,728			3,396
		9,167			12,407			14,143			21,574			28,035
Net interest income before provision for credit losses		119,457			119,258			116,695			238,715			232,799
PROVISION FOR CREDIT LOSSES		29,528			21,748			2,000			51,276			4,000
Net interest income		89,929			97,510			114,695			187,439			228,799
NON-INTEREST INCOME:
Deposit fees and other service charges		7,546			9,803			14,046			17,349			26,664
Mortgage banking operations		14,138			10,191			5,936			24,329			9,351
Bank-owned life insurance		2,317			1,050			1,123			3,367			2,399
Miscellaneous		1,550			2,639			1,713			4,189			2,517
		25,551			23,683			22,818			49,234			40,931
Net gain (loss) on sale of securities		93			78			(28	)		171			(27	)
Net change in valuation of financial instruments carried at fair value		2,199			(4,596	)		(114	)		(2,397	)		(103	)
Total non-interest income		27,843			19,165			22,676			47,008			40,801
NON-INTEREST EXPENSE:
Salary and employee benefits		63,415			59,908			55,629			123,323			110,269
Less capitalized loan origination costs		(11,110	)		(5,806	)		(7,399	)		(16,916	)		(12,248	)
Occupancy and equipment		12,985			13,107			12,681			26,092			26,447
Information / computer data services		6,084			5,810			5,273			11,894			10,599
Payment and card processing services		3,851			4,240			4,041			8,091			8,025
Professional and legal expenses		2,163			1,919			2,336			4,082			4,770
Advertising and marketing		652			1,827			2,065			2,479			3,594
Deposit insurance expense		1,705			1,635			1,418			3,340			2,836
State/municipal business and use taxes		1,104			984			1,007			2,088			1,952
Real estate operations		4			100			260			104			137
Amortization of core deposit intangibles		2,002			2,001			2,053			4,003			4,105
(Recapture) / provision for credit losses - unfunded loan commitments		(905	)		1,722			—			817			—
Miscellaneous		5,199			6,357			7,051			11,556			13,795
		87,149			93,804			86,415			180,953			174,281
COVID-19 expenses		2,152			239			—			2,391			—
Acquisition-related expenses		336			1,142			301			1,478			2,449
Total non-interest expense		89,637			95,185			86,716			184,822			176,730
Income before provision for income taxes		28,135			21,490			50,655			49,625			92,870
PROVISION FOR INCOME TAXES		4,594			4,608			10,955			9,202			19,824
NET INCOME		$	23,541			$	16,882			$	39,700			$	40,423			$	73,046
Earnings per share available to common shareholders:
Basic		$	0.67			$	0.48			$	1.14			$	1.14			$	2.09
Diluted		$	0.67			$	0.47			$	1.14			$	1.14			$	2.09
Cumulative dividends declared per common share		$	—			$	0.41			$	0.41			$	0.41			$	0.82
Weighted average common shares outstanding:
Basic		35,189,260			35,463,541			34,831,047			35,326,401			34,940,106
Diluted		35,283,690			35,640,463			34,882,359			35,545,086			35,028,881
Increase (decrease) in common shares outstanding		55,440			(649,117	)		(579,103	)		(593,677	)		(609,129	)

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FINANCIAL CONDITION									Percentage Change
(in thousands except shares and per share data)	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019		Prior Qtr		Prior Yr Qtr
ASSETS
47%; width:47%; min-width:47%;">Cash and due from banks	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">291,036	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">211,013	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">234,359	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">187,043	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">37.9	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">55.6	1%; width:1%; min-width:1%;">%
Interest-bearing deposits	128,938			83,988			73,376			59,753			53.5	%		115.8	%
Total cash and cash equivalents	419,974			295,001			307,735			246,796			42.4	%		70.2	%
Securities - trading	23,239			21,040			25,636			25,741			10.5	%		(9.7	)%
Securities - available for sale	1,706,781			1,608,224			1,551,557			1,561,009			6.1	%		9.3	%
Securities - held to maturity	441,075			437,846			236,094			203,222			0.7	%		117.0	%
Total securities	2,171,095			2,067,110			1,813,287			1,789,972			5.0	%		21.3	%
Equity securities	340,052			—			—			—			nm		nm
Federal Home Loan Bank stock	16,363			20,247			28,342			34,583			(19.2	)%		(52.7	)%
Loans held for sale	258,700			182,428			210,447			170,744			41.8	%		51.5	%
Loans receivable	10,283,999			9,285,744			9,305,357			8,746,550			10.8	%		17.6	%
Allowance for credit losses - loans	(156,352	)		(130,488	)		(100,559	)		(98,254	)		19.8	%		59.1	%
Net loans receivable	10,127,647			9,155,256			9,204,798			8,648,296			10.6	%		17.1	%
Accrued interest receivable	48,806			40,732			37,962			40,238			19.8	%		21.3	%
Real estate owned held for sale, net	2,400			2,402			814			2,513			(0.1	)%		(4.5	)%
Property and equipment, net	173,360			175,235			178,008			171,233			(1.1	)%		1.2	%
Goodwill	373,121			373,121			373,121			339,154			—	%		10.0	%
Other intangibles, net	25,155			27,157			29,158			28,595			(7.4	)%		(12.0	)%
Bank-owned life insurance	190,468			193,140			192,088			178,922			(1.4	)%		6.5	%
Other assets	258,466			249,121			228,271			196,328			3.8	%		31.7	%
Total assets	$	14,405,607			$	12,780,950			$	12,604,031			$	11,847,374			12.7	%		21.6	%
LIABILITIES
Deposits:
Non-interest-bearing	$	5,281,559			$	4,107,262			$	3,945,000			$	3,671,995			28.6	%		43.8	%
Interest-bearing transaction and savings accounts	5,692,715			5,175,969			4,983,238			4,546,202			10.0	%		25.2	%
Interest-bearing certificates	1,042,006			1,166,306			1,120,403			1,070,770			(10.7	)%		(2.7	)%
Total deposits	12,016,280			10,449,537			10,048,641			9,288,967			15.0	%		29.4	%
Advances from Federal Home Loan Bank	150,000			247,000			450,000			606,000			(39.3	)%		(75.2	)%
Customer repurchase agreements and other borrowings	166,084			128,764			118,474			118,370			29.0	%		40.3	%
Subordinated notes, net	98,140			—			—			—			nm		nm
Junior subordinated debentures at fair value	109,613			99,795			119,304			113,621			9.8	%		(3.5	)%
Accrued expenses and other liabilities	194,964			208,753			227,889			159,131			(6.6	)%		22.5	%
Deferred compensation	45,423			45,401			45,689			40,230			—	%		12.9	%
Total liabilities	12,780,504			11,179,250			11,009,997			10,326,319			14.3	%		23.8	%
SHAREHOLDERS' EQUITY
Common stock	1,345,096			1,343,699			1,373,940			1,306,888			0.1	%		2.9	%
Retained earnings	201,448			177,922			186,838			178,257			13.2	%		13.0	%
Other components of shareholders' equity	78,559			80,079			33,256			35,910			(1.9	)%		118.8	%
Total shareholders' equity	1,625,103			1,601,700			1,594,034			1,521,055			1.5	%		6.8	%
Total liabilities and shareholders' equity	$	14,405,607			$	12,780,950			$	12,604,031			$	11,847,374			12.7	%		21.6	%
Common Shares Issued:
Shares outstanding at end of period	35,157,899			35,102,459			35,751,576			34,573,643
Common shareholders' equity per share (1)	$	46.22			$	45.63			$	44.59			$	43.99
Common shareholders' tangible equity per share (1) (2)	$	34.89			$	34.23			$	33.33			$	33.36
Common shareholders' tangible equity to tangible assets (2)	8.76	%		9.70	%		9.77	%		10.05	%
Consolidated Tier 1 leverage capital ratio	9.83	%		10.45	%		10.71	%		10.83	%

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(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.

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
									Percentage Change
LOANS	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019		Prior Qtr		Prior Yr Qtr
Commercial real estate:
47%; width:47%; min-width:47%;">Owner-occupied	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">1,027,399	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">1,024,089	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">980,021	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">854,812	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">0.3	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">20.2	1%; width:1%; min-width:1%;">%
Investment properties	2,017,789			2,007,537			2,024,988			1,832,054			0.5	%		10.1	%
Small balance CRE	624,726			591,783			613,484			619,695			5.6	%		0.8	%
Multifamily real estate	437,201			400,206			388,388			316,274			9.2	%		38.2	%
Construction, land and land development:
Commercial construction	215,860			205,476			210,668			172,931			5.1	%		24.8	%
Multifamily construction	256,335			250,410			233,610			189,160			2.4	%		35.5	%
One- to four-family construction	528,966			534,956			544,308			502,897			(1.1	)%		5.2	%
Land and land development	235,602			232,506			245,530			273,546			1.3	%		(13.9	)%
Commercial business:
Commercial business	2,372,216			1,357,817			1,364,650			1,253,137			74.7	%		89.3	%
Small business scored	779,678			807,539			772,657			769,702			(3.5	)%		1.3	%
Agricultural business, including secured by farmland	328,077			330,257			337,271			345,817			(0.7	)%		(5.1	)%
One- to four-family residential	817,787			881,387			925,531			918,212			(7.2	)%		(10.9	)%
Consumer:
Consumer—home equity revolving lines of credit	515,603			521,618			519,336			542,968			(1.2	)%		(5.0	)%
Consumer—other	126,760			140,163			144,915			155,345			(9.6	)%		(18.4	)%
Total loans receivable	$	10,283,999			$	9,285,744			$	9,305,357			$	8,746,550			10.8	%		17.6	%
Restructured loans performing under their restructured terms	$	6,391			$	6,423			$	6,466			$	6,594
Loans 30 - 89 days past due and on accrual	$	20,807			$	39,974			$	20,178			$	17,923
Total delinquent loans (including loans on non-accrual), net	$	36,269			$	61,101			$	38,322			$	34,749
Total delinquent loans / Total loans receivable	0.35	%		0.66	%		0.41	%		0.40	%

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LOANS BY GEOGRAPHIC LOCATION											Percentage Change
	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019		Prior Qtr		Prior Yr Qtr
	Amount		Percentage		Amount		Amount		Amount
39%; width:39%; min-width:39%;">Washington	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,787,550	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">46.5%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,350,273	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,364,764	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,293,854	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">10.1	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">11.5	1%; width:1%; min-width:1%;">%
California	2,359,703			22.9%		2,140,895			2,129,789			1,659,326			10.2	%		42.2	%
Oregon	1,899,933			18.5%		1,664,652			1,650,704			1,628,102			14.1	%		16.7	%
Idaho	592,515			5.8%		524,663			530,016			548,189			12.9	%		8.1	%
Utah	67,929			0.7%		52,747			60,958			62,944			28.8	%		7.9	%
Other	576,369			5.6%		552,514			569,126			554,135			4.3	%		4.0	%
Total loans receivable	$	10,283,999			100.0%		$	9,285,744			$	9,305,357			$	8,746,550			10.8	%		17.6	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)

The following table shows loan originations (excluding loans held for sale) activity for the quarters ending June 30, 2020, March 31, 2020, and June 30, 2019.

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LOAN ORIGINATIONS	Quarters Ended
	Jun 30, 2020		Mar 31, 2020		Jun 30, 2019
62%; width:62%; min-width:62%;">Commercial real estate	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">111,765	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">76,359	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">64,999	1%; width:1%; min-width:1%;">
Multifamily real estate	6,384			10,171			19,834
Construction and land	290,955			369,613			368,224
Commercial business	1,318,438			199,873			266,768
Agricultural business	16,293			31,261			18,194
One-to four-family residential	24,537			31,041			23,363
Consumer	126,653			67,357			117,869
Total loan originations (excluding loans held for sale)	$	1,895,025			$	785,675			$	879,251

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Jun 30, 2020		Mar 31, 2020		Jun 30, 2019
ALLOWANCE FOR CREDIT LOSSES - LOANS
61%; width:61%; min-width:61%;">Balance, beginning of period	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">130,488	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">100,559	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">97,308	1%; width:1%; min-width:1%;">
Beginning balance adjustment for adoption of ASC 326		—			7,812			—
Provision for credit losses - loans		29,524			21,713			2,000
Recoveries of loans previously charged off:
Commercial real estate		54			167			149
Construction and land		105			—			30
One- to four-family real estate		31			148			230
Commercial business		370			205			215
Agricultural business, including secured by farmland		22			1,750			35
Consumer		60			96			223
		642			2,366			882
Loans charged off:
Commercial real estate		—			(100	)		(393	)
Multifamily real estate		—			(66	)		—
Construction and land		(100	)		—			—
One- to four-family real estate		—			(64	)		—
Commercial business		(3,553	)		(1,384	)		(802	)
Agricultural business, including secured by farmland		(62	)		—			(162	)
Consumer		(587	)		(348	)		(579	)
		(4,302	)		(1,962	)		(1,936	)
Net (charge-offs)/recoveries		(3,660	)		404			(1,054	)
Balance, end of period		$	156,352			$	130,488			$	98,254
Net (charge-offs)/recoveries / Average loans receivable		(0.036	)%		0.004	%		(0.012	)%

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ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES - LOANS		Jun 30, 2020		Mar 31, 2020		Jun 30, 2019
Specific or allocated credit loss allowance:
61%; width:61%; min-width:61%;">Commercial real estate	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">53,166	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">29,339	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">26,730	1%; width:1%; min-width:1%;">
Multifamily real estate		3,504			2,805			4,344
Construction and land		36,916			34,217			23,554
One- to four-family real estate		12,746			11,884			4,701
Commercial business		33,870			31,648			19,557
Agricultural business, including secured by farmland		4,517			4,513			3,691
Consumer		11,633			16,082			8,452
Total allocated		156,352			130,488			91,029
Unallocated		—			—			7,225
Total allowance for credit losses - loans		$	156,352			$	130,488			$	98,254
Allowance for credit losses - loans / Total loans receivable		1.52	%		1.41	%		1.12	%
Allowance for credit losses - loans / Non-performing loans		418	%		299	%		534	%

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Quarters Ended

CHANGE IN THE

Jun 30, 2020

Mar 31, 2020

Jun 30, 2019

ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS

61%; width:61%; min-width:61%;">Balance, beginning of period

1%; width:1%; min-width:1%;">

1%; width:1%; min-width:1%;">$

10%; width:10%; min-width:10%;">11,460

1%; width:1%; min-width:1%;">

1%; width:1%; min-width:1%;">

1%; width:1%; min-width:1%;">$

10%; width:10%; min-width:10%;">2,716

1%; width:1%; min-width:1%;">

1%; width:1%; min-width:1%;">

1%; width:1%; min-width:1%;">$

10%; width:10%; min-width:10%;">2,599

1%; width:1%; min-width:1%;">

Beginning balance adjustment for adoption of ASC 326

—

7,022

—

(Recapture) / provision for credit losses - unfunded loan commitments

(905

)

1,722

—

Balance, end of period

$

10,555

$

11,460

$

2,599

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
57%; width:57%; min-width:57%;">Commercial	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">10,845	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">8,512	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">5,952	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">4,603	1%; width:1%; min-width:1%;">
Multifamily	—			—			85			—
Construction and land	732			1,393			1,905			2,214
One- to four-family	2,942			3,045			3,410			2,665
Commercial business	18,486			25,027			23,015			2,983
Agricultural business, including secured by farmland	433			495			661			1,359
Consumer	2,412			1,812			2,473			3,230
	35,850			40,284			37,501			17,054
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	—			24			89			—
Construction and land	—			1,407			332			262
One- to four-family	472			1,089			877			995
Commercial business	1			77			401			1
Agricultural business, including secured by farmland	1,061			461			—			—
Consumer	36			320			398			97
	1,570			3,378			2,097			1,355
Total non-performing loans	37,420			43,662			39,598			18,409
Real estate owned (REO)	2,400			2,402			814			2,513
Other repossessed assets	47			47			122			112
Total non-performing assets	$	39,867			$	46,111			$	40,534			$	21,034
Total non-performing assets to total assets	0.28	%		0.36	%		0.32	%		0.18	%

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	Quarters Ended		Six Months Ended
REAL ESTATE OWNED	Jun 30, 2020		Mar 31, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
46%; width:46%; min-width:46%;">Balance, beginning of period	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">2,402	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">814	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">2,611	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">814	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">2,611	1%; width:1%; min-width:1%;">
Additions from loan foreclosures	—			1,588			61			1,588			61
Proceeds from dispositions of REO	(98	)		—			(150	)		(98	)		(150	)
Gain (loss) on sale of REO	96			—			(9	)		96			(9	)
Balance, end of period	$	2,400			$	2,402			$	2,513			$	2,400			$	2,513

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION										Percentage Change
		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019		Prior Qtr		Prior Yr Qtr
46%; width:46%; min-width:46%;">Non-interest-bearing	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">5,281,559	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,107,262	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">3,945,000	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">3,671,995	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">28.6	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">43.8	1%; width:1%; min-width:1%;">%
Interest-bearing checking		1,399,593			1,331,860			1,280,003			1,187,035			5.1	%		17.9	%
Regular savings accounts		2,197,790			1,997,265			1,934,041			1,848,048			10.0	%		18.9	%
Money market accounts		2,095,332			1,846,844			1,769,194			1,511,119			13.5	%		38.7	%
Total interest-bearing transaction and savings accounts		5,692,715			5,175,969			4,983,238			4,546,202			10.0	%		25.2	%
Total core deposits		10,974,274			9,283,231			8,928,238			8,218,197			18.2	%		33.5	%
Interest-bearing certificates		1,042,006			1,166,306			1,120,403			1,070,770			(10.7	)%		(2.7	)%
Total deposits		$	12,016,280			$	10,449,537			$	10,048,641			$	9,288,967			15.0	%		29.4	%

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GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019		Percentage Change
		Amount		Percentage		Amount		Amount		Amount		Prior Qtr		Prior Yr Qtr
37%; width:37%; min-width:37%;">Washington	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">6,765,186	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">56.3	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">6,037,864	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">5,861,809	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">5,503,280	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">12.0	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">22.9	1%; width:1%; min-width:1%;">%
Oregon		2,440,617			20.3	%		2,093,738			2,006,163			1,919,051			16.6	%		27.2	%
California		2,224,477			18.5	%		1,828,064			1,698,289			1,399,137			21.7	%		59.0	%
Idaho		586,000			4.9	%		489,871			482,380			467,499			19.6	%		25.3	%
Total deposits		$	12,016,280			100.0	%		$	10,449,537			$	10,048,641			$	9,288,967			15.0	%		29.4	%

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INCLUDED IN TOTAL DEPOSITS		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019
48%; width:48%; min-width:48%;">Public non-interest-bearing accounts	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">139,133	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">115,354	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">111,015	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">102,348	1%; width:1%; min-width:1%;">
Public interest-bearing transaction & savings accounts		136,039			130,958			133,403			121,262
Public interest-bearing certificates		56,609			48,232			35,184			28,656
Total public deposits		$	331,781			$	294,544			$	279,602			$	252,266
Total brokered deposits		$	119,399			$	250,977			$	202,884			$	138,395

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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 JUNE 30, 2020		Amount		Ratio		Amount		Ratio		Amount		Ratio
Banner Corporation-consolidated:
49%; width:49%; min-width:49%;">Total capital to risk-weighted assets	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">1,544,473	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">14.14	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">873,623	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">8.00	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">1,092,028	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	5%; width:5%; min-width:5%;">10.00	1%; width:1%; min-width:1%;">%
Tier 1 capital to risk-weighted assets		1,307,925			11.98	%		655,217			6.00	%		655,217			6.00	%
Tier 1 leverage capital to average assets		1,307,925			9.83	%		531,965			4.00	%		n/a		n/a
Common equity tier 1 capital to risk-weighted assets		1,164,425			10.66	%		491,413			4.50	%		n/a		n/a
Banner Bank:
Total capital to risk-weighted assets		1,366,305			12.73	%		858,690			8.00	%		1,073,363			10.00	%
Tier 1 capital to risk-weighted assets		1,232,095			11.48	%		644,018			6.00	%		858,690			8.00	%
Tier 1 leverage capital to average assets		1,232,095			9.47	%		520,183			4.00	%		650,229			5.00	%
Common equity tier 1 capital to risk-weighted assets		1,232,095			11.48	%		483,013			4.50	%		697,686			6.50	%
Islanders Bank:
Total capital to risk-weighted assets		28,579			15.08	%		15,164			8.00	%		18,955			10.00	%
Tier 1 capital to risk-weighted assets		26,207			13.83	%		11,373			6.00	%		15,164			8.00	%
Tier 1 leverage capital to average assets		26,207			8.62	%		12,160			4.00	%		15,200			5.00	%
Common equity tier 1 capital to risk-weighted assets		26,207			13.83	%		8,530			4.50	%		12,321			6.50	%

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	June 30, 2020		March 31, 2020		June 30, 2019
	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:
35%; width:35%; min-width:35%;">Held for sale loans	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">152,636	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">1,451	1%; width:1%; min-width:1%;">	4%; width:4%; min-width:4%;">3.82	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">152,627	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">1,520	1%; width:1%; min-width:1%;">	4%; width:4%; min-width:4%;">4.01	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">47,663	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">567	1%; width:1%; min-width:1%;">	4%; width:4%; min-width:4%;">4.77	1%; width:1%; min-width:1%;">%
Mortgage loans	7,314,125		87,172		4.79	%		7,310,115		93,061		5.12	%		6,800,802		90,258		5.32	%
Commercial/agricultural loans	2,599,878		25,200		3.90	%		1,884,006		22,959		4.90	%		1,769,603		24,466		5.55	%
Consumer and other loans	152,438		2,361		6.23	%		163,098		2,595		6.40	%		179,693		2,834		6.33	%
Total loans(1)(3)	10,219,077		116,184		4.57	%		9,509,846		120,135		5.08	%		8,797,761		118,125		5.39	%
Mortgage-backed securities	1,286,223		8,083		2.53	%		1,354,585		9,236		2.74	%		1,354,048		9,794		2.90	%
Other securities	787,957		5,859		2.99	%		458,116		3,310		2.91	%		448,721		3,663		3.27	%
Interest-bearing deposits with banks	212,502		172		0.33	%		92,659		393		1.71	%		53,955		340		2.53	%
FHLB stock	16,620		300		7.26	%		26,522		322		4.88	%		30,902		387		5.02	%
Total investment securities (3)	2,303,302		14,414		2.52	%		1,931,882		13,261		2.76	%		1,887,626		14,184		3.01	%
Total interest-earning assets	12,522,379		130,598		4.19	%		11,441,728		133,396		4.69	%		10,685,387		132,309		4.97	%
Non-interest-earning assets	1,359,975					1,193,256					1,048,811
Total assets	$	13,882,354					$	12,634,984					$	11,734,198
Deposits:
Interest-bearing checking accounts	$	1,376,710		374		0.11	%		$	1,266,647		469		0.15	%		$	1,177,534		564		0.19	%
Savings accounts	2,108,896		998		0.19	%		2,039,857		1,755		0.35	%		1,851,913		2,119		0.46	%
Money market accounts	1,979,419		1,565		0.32	%		1,743,118		2,439		0.56	%		1,497,717		2,656		0.71	%
Certificates of deposit	1,117,547		3,757		1.35	%		1,124,994		4,087		1.46	%		1,105,844		3,684		1.34	%
Total interest-bearing deposits	6,582,572		6,694		0.41	%		6,174,616		8,750		0.57	%		5,633,008		9,023		0.64	%
Non-interest-bearing deposits	4,902,992		—		—	%		3,965,380		—		—	%		3,652,096		—		—	%
Total deposits	11,485,564		6,694		0.23	%		10,139,996		8,750		0.35	%		9,285,104		9,023		0.39	%
Other interest-bearing liabilities:
FHLB advances	156,374		984		2.53	%		405,429		2,064		2.05	%		514,703		3,370		2.63	%
Other borrowings	285,735		238		0.34	%		124,771		116		0.37	%		122,455		67		0.22	%
Junior subordinated debentures and subordinated notes	149,043		1,251		3.38	%		147,944		1,477		4.02	%		140,212		1,683		4.81	%
Total borrowings	591,152		2,473		1.68	%		678,144		3,657		2.17	%		777,370		5,120		2.64	%
Total funding liabilities	12,076,716		9,167		0.31	%		10,818,140		12,407		0.46	%		10,062,474		14,143		0.56	%
Other non-interest-bearing liabilities(2)	188,369					212,162					151,436
Total liabilities	12,265,085					11,030,302					10,213,910
Shareholders' equity	1,617,269					1,604,682					1,520,288
Total liabilities and shareholders' equity	$	13,882,354					$	12,634,984					$	11,734,198
Net interest income/rate spread (tax equivalent)		$	121,431		3.88	%			$	120,989		4.23	%			$	118,166		4.41	%
Net interest margin (tax equivalent)			3.90	%				4.25	%				4.44	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis		(1,974	)				(1,731	)				(1,471	)
Net interest income and margin, as reported		$	119,457		3.84	%			$	119,258		4.19	%			$	116,695		4.38	%
Additional Key Financial Ratios:
Return on average assets			0.68	%				0.54	%				1.36	%
Return on average equity			5.85	%				4.23	%				10.47	%
Average equity/average assets			11.65	%				12.70	%				12.96	%
Average interest-earning assets/average interest-bearing liabilities			174.56	%				166.97	%				166.69	%
Average interest-earning assets/average funding liabilities			103.69	%				105.76	%				106.19	%
Non-interest income/average assets			0.81	%				0.61	%				0.78	%
Non-interest expense/average assets			2.60	%				3.03	%				2.96	%
Efficiency ratio(4)			60.85	%				68.76	%				62.22	%
Adjusted efficiency ratio(5)			57.95	%				63.47	%				59.56	%

⁽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 $1.0 million, $1.2 million, and $1.1 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $963,000, $522,000, and $353,000 for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively.
⁽⁴⁾ Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
⁽⁵⁾ Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP reconciliation tables above under "Executive Overview—Non-GAAP Financial Measures."

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Six Months Ended
	June 30, 2020		June 30, 2019
	Average Balance	Interest and Dividends	Yield/Cost(3)		Average Balance	Interest and Dividends	Yield/Cost(3)
Interest-earning assets:
57%; width:57%; min-width:57%;">Held for sale loans	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">152,631	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">2,971	1%; width:1%; min-width:1%;">	4%; width:4%; min-width:4%;">3.91	1%; width:1%; min-width:1%;">%	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">72,694	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">1,688	1%; width:1%; min-width:1%;">	4%; width:4%; min-width:4%;">4.68	1%; width:1%; min-width:1%;">%
Mortgage loans	7,312,120		180,233		4.96	%		6,817,276		179,320		5.30	%
Commercial/agricultural loans	2,241,942		48,159		4.32	%		1,736,735		47,767		5.55	%
Consumer and other loans	157,768		4,956		6.32	%		181,562		5,754		6.39	%
Total loans(1)(3)	9,864,461		236,319		4.82	%		8,808,267		234,529		5.37	%
Mortgage-backed securities	1,320,404		17,319		2.64	%		1,372,978		20,301		2.98	%
Other securities	623,036		9,169		2.96	%		466,330		7,516		3.25	%
Interest-bearing deposits with banks	152,581		565		0.74	%		49,382		629		2.57	%
FHLB stock	21,571		622		5.80	%		31,329		653		4.20	%
Total investment securities(3)	2,117,592		27,675		2.63	%		1,920,019		29,099		3.06	%
Total interest-earning assets	11,982,053		263,994		4.43	%		10,728,286		263,628		4.96	%
Non-interest-earning assets	1,276,615					1,040,248
Total assets	$	13,258,668					$	11,768,534
Deposits:
Interest-bearing checking accounts	$	1,321,679		843		0.13	%		$	1,165,807		1,039		0.18	%
Savings accounts	2,074,377		2,753		0.27	%		1,853,012		4,039		0.44	%
Money market accounts	1,861,268		4,004		0.43	%		1,494,042		4,907		0.66	%
Certificates of deposit	1,121,270		7,844		1.41	%		1,179,320		7,681		1.31	%
Total interest-bearing deposits	6,378,594		15,444		0.49	%		5,692,181		17,666		0.63	%
Non-interest-bearing deposits	4,434,186		—		—	%		3,629,136		—		—	%
Total deposits	10,812,780		15,444		0.29	%		9,321,317		17,666		0.38	%
Other interest-bearing liabilities:
FHLB advances	280,901		3,048		2.18	%		524,417		6,846		2.63	%
Other borrowings	205,253		354		0.35	%		120,243		127		0.21	%
Junior subordinated debentures and subordinated notes	148,494		2,728		3.69	%		140,212		3,396		4.88	%
Total borrowings	634,648		6,130		1.94	%		784,872		10,369		2.66	%
Total funding liabilities	11,447,428		21,574		0.38	%		10,106,189		28,035		0.56	%
Other non-interest-bearing liabilities(2)	200,265					151,685
Total liabilities	11,647,693					10,257,874
Shareholders' equity	1,610,975					1,510,660
Total liabilities and shareholders' equity	$	13,258,668					$	11,768,534
Net interest income/rate spread (tax equivalent)		$	242,420		4.05	%			$	235,593		4.40	%
Net interest margin (tax equivalent)			4.07	%				4.43	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis		(3,705	)				(2,794	)
Net interest income and margin, as reported		$	238,715		4.01	%			$	232,799		4.38	%
Additional Key Financial Ratios:
Return on average assets			0.61	%				1.25	%
Return on average equity			5.05	%				9.75	%
Average equity/average assets			12.15	%				12.84	%
Average interest-earning assets/average interest-bearing liabilities		`	170.85	%				165.64	%
Average interest-earning assets/average funding liabilities			104.67	%				106.16	%
Non-interest income/average assets			0.71	%				0.70	%
Non-interest expense/average assets			2.80	%				3.03	%
Efficiency ratio(4)			64.69	%				64.59	%
Adjusted efficiency ratio(5)			60.69	%				61.41	%

⁽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 $2.2 million and $2.1 million for the six months ended June 30, 2020 and June 30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $727,000 for the six months ended June 30, 2020 and June 30, 2019, respectively.
⁽⁴⁾ Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
⁽⁵⁾ Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP reconciliation tables above under "Executive Overview—Non-GAAP Financial Measures."

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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		Six Months Ended
	Jun 30, 2020		Mar 31, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
46%; width:46%; min-width:46%;">Net interest income before provision for loan losses	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">119,457	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">119,258	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">116,695	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">238,715	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">232,799	1%; width:1%; min-width:1%;">
Total non-interest income	27,843			19,165			22,676			47,008			40,801
Total GAAP revenue	147,300			138,423			139,371			285,723			273,600
Exclude net gain (loss) on sale of securities	(93	)		(78	)		28			(171	)		27
Exclude net change in valuation of financial instruments carried at fair value	(2,199	)		4,596			114			2,397			103
Adjusted revenue (non-GAAP)	$	145,008			$	142,941			$	139,513			$	287,949			$	273,730

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ADJUSTED EARNINGS	Quarters Ended		Six Months Ended
	Jun 30, 2020		Mar 31, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
46%; width:46%; min-width:46%;">Net income (GAAP)	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">23,541	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">16,882	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">39,700	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">40,423	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">73,046	1%; width:1%; min-width:1%;">
Exclude net gain (loss) on sale of securities	(93	)		(78	)		28			(171	)		27
Exclude net change in valuation of financial instruments carried at fair value	(2,199	)		4,596			114			2,397			103
Exclude acquisition-related expenses	336			1,142			301			1,478			2,449
Exclude COVID-19 expenses	2,152			239			—			2,391			—
Exclude related net tax benefit	(47	)		(1,405	)		(106	)		(1,452	)		(619	)
Total adjusted earnings (non-GAAP)	$	23,690			$	21,376			$	40,037			$	45,066			$	75,006
Diluted earnings per share (GAAP)	$	0.67			$	0.47			$	1.14			$	1.14			$	2.09
Diluted adjusted earnings per share (non-GAAP)	$	0.67			$	0.60			$	1.15			$	1.27			$	2.14

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO	Quarters Ended		Six Months Ended
	Jun 30, 2020		Mar 31, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
46%; width:46%; min-width:46%;">Non-interest expense (GAAP)	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">89,637	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">95,185	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">86,716	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">184,822	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">176,730	1%; width:1%; min-width:1%;">
Exclude acquisition-related expenses	(336	)		(1,142	)		(301	)		(1,478	)		(2,449	)
Exclude COVID-19 expenses	(2,152	)		(239	)		—			(2,391	)		—
Exclude CDI amortization	(2,002	)		(2,001	)		(2,053	)		(4,003	)		(4,105	)
Exclude state/municipal tax expense	(1,104	)		(984	)		(1,007	)		(2,088	)		(1,952	)
Exclude REO operations	(4	)		(100	)		(260	)		(104	)		(137	)
Adjusted non-interest expense (non-GAAP)	$	84,039			$	90,719			$	83,095			$	174,758			$	168,087
Net interest income before provision for loan losses (GAAP)	$	119,457			$	119,258			$	116,695			$	238,715			$	232,799
Non-interest income (GAAP)	27,843			19,165			22,676			47,008			40,801
Total revenue	147,300			138,423			139,371			285,723			273,600
Exclude net gain (loss) on sale of securities	(93	)		(78	)		28			(171	)		27
Exclude net change in valuation of financial instruments carried at fair value	(2,199	)		4,596			114			2,397			103
Adjusted revenue (non-GAAP)	$	145,008			$	142,941			$	139,513			$	287,949			$	273,730
Efficiency ratio (GAAP)	60.85	%		68.76	%		62.22	%		64.69	%		64.59	%
Adjusted efficiency ratio (non-GAAP)	57.95	%		63.47	%		59.56	%		60.69	%		61.41	%

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TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Jun 30, 2019
57%; width:57%; min-width:57%;">Shareholders' equity (GAAP)	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">1,625,103	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">1,601,700	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">1,594,034	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">1,521,055	1%; width:1%; min-width:1%;">
Exclude goodwill and other intangible assets, net	398,276			400,278			402,279			367,749
Tangible common shareholders' equity (non-GAAP)	$	1,226,827			$	1,201,422			$	1,191,755			$	1,153,306
Total assets (GAAP)	$	14,405,607			$	12,780,950			$	12,604,031			$	11,847,374
Exclude goodwill and other intangible assets, net	398,276			400,278			402,279			367,749
Total tangible assets (non-GAAP)	$	14,007,331			$	12,380,672			$	12,201,752			$	11,479,625
Common shareholders' equity to total assets (GAAP)	11.28	%		12.53	%		12.65	%		12.84	%
Tangible common shareholders' equity to tangible assets (non-GAAP)	8.76	%		9.70	%		9.77	%		10.05	%
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
Tangible common shareholders' equity (non-GAAP)	$	1,226,827			$	1,201,422			$	1,191,755			$	1,153,306
Common shares outstanding at end of period	35,157,899			35,102,459			35,751,576			34,573,643
Common shareholders' equity (book value) per share (GAAP)	$	46.22			$	45.63			$	44.59			$	43.99
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)	$	34.89			$	34.23			$	33.33			$	33.36

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8%; width:8%; min-width:8%;">CONTACT:	92%; width:92%; min-width:92%;">MARK J. GRESCOVICH,
	PRESIDENT & CEO
	PETER J. CONNER, CFO
	(509) 527-3636