Banner Corporation Reports Net Income of $49.9 Million, or $1.44 Per Diluted Share, for Third Quarter 2021; Announces Banner Forward; Declares Quarterly Cash Dividend of $0.41 Per Share

Rhea-AI Summary

Banner Corporation (NASDAQ: BANR) reported a net income of $49.9 million ($1.44 per diluted share) for Q3 2021, an 8% decrease from Q2 2021 but a 36% increase compared to Q3 2020. Total revenue rose 4% to $155.5 million. The company declared a quarterly cash dividend of $0.41 per share, payable on November 12, 2021. Credit loss provisions were recaptured at $8.6 million, with total assets growing to $16.64 billion. The implementation of the 'Banner Forward' initiative is aimed at enhancing revenue and reducing operational expenses.

Positive

• Net income rose 36% year-over-year to $49.9 million.
• Declared a quarterly cash dividend of $0.41 per share.
• Total revenue increased 4% to $155.5 million.
• Core deposits grew 18% compared to the previous year.

Negative

• Net income decreased 8% from the prior quarter.
• Net interest margin decreased to 3.47%, down from 3.72% a year ago.
• Total non-interest expense increased to $102.1 million, up from $90.0 million a year ago.

WALLA WALLA, Wash., Oct. 20, 2021 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $49.9 million, or $1.44 per diluted share, for the third quarter of 2021, an 8% decrease compared to $54.4 million, or $1.56 per diluted share, for the second quarter of 2021 and a 36% increase compared to $36.5 million, or $1.03 per diluted share, for the third quarter of 2020. Banner’s third quarter 2021 results include $8.6 million in recapture of provision for credit losses, compared to $10.3 million in recapture of provision for credit losses in the preceding quarter and $15.2 million in provision for credit losses in the third quarter of 2020. The third quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic. In the first nine months of 2021, net income was $151.1 million, or $4.32 per diluted share, compared to net income of $77.0 million, or $2.17 per diluted share for the same period a year earlier. Banner’s first nine months of 2021 results include $28.1 million in recapture of provision for credit losses, compared to $67.3 million in provision for credit losses in the first nine months of 2020.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be payable November 12, 2021, to common shareholders of record on November 02, 2021.

“Our third quarter 2021 performance continues to demonstrate the success of our super community bank model, which is based on responsive service that generates client loyalty and attracts new client relationships,” said Mark Grescovich, President and CEO. “We benefited from continued core deposit growth and an acceleration of SBA PPP loan fee income as a result of SBA PPP loan forgiveness. The unprecedented level of market liquidity and our continued focus on building client relationships contributed to our core deposits increasing 18% compared to September 30, 2020. Additionally, Banner had provided 13,293 SBA PPP loans totaling nearly $1.61 billion as of September 30, 2021. As of quarter end, SBA forgiveness had been received for 10,548 SBA PPP loans totaling $1.23 billion. Our essential onsite employees, such as those working in our branches, continue to serve clients in person. In July 2021, we began to normalize our operations by returning additional groups of employees back to bank worksites; however, due to the recent increases in COVID-19 cases, we have currently suspended returning our remaining employees to bank worksites.”

“After a comprehensive review of our business, we implemented Banner Forward, a bank-wide initiative to drive revenue growth and reduce operating expense,” said Grescovich. “Implementation of this plan commenced during the third quarter of 2021 with full implementation expected in 2023, with the goal of producing meaningful results in the near term while staying true to our mission and value proposition of being connected, knowledgeable and responsive to our clients, communities and employees. The focus of Banner Forward is to accelerate growth in commercial banking, deepen relationships with retail customers, advance technology strategies to enhance our digital service channels, while streamlining underwriting and back office processes. As part of Banner Forward, we have identified potential additional opportunities to rationalize our physical footprint. During the third quarter of 2021, we incurred expenses of $7.6 million related to Banner Forward.”

“Due to improvements in economic forecasts and continued solid performance of the loan portfolio during the current quarter, we recorded an $8.6 million recapture to our provision for credit losses during the current quarter. This compares to a $10.3 million recapture to our provision for credit losses during the preceding quarter and a $15.2 million provision for credit losses in the third quarter a year ago. Our allowance for credit losses - loans remains strong at 1.52% of total loans and 485% of non-performing loans at September 30, 2021, compared to 1.53% of total loans and 481% of non-performing loans at June 30, 2021,” said Grescovich.

At September 30, 2021, Banner Corporation had $16.64 billion in assets, $9.08 billion in net loans and $14.16 billion in deposits. Banner operates 150 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Third Quarter 2021 Highlights

• Revenues increased 4% to $155.5 million, compared to $149.9 million in the preceding quarter, and increased 4% when compared to $149.2 million in the third quarter a year ago.
• Net interest income, before the recapture of provision for credit losses, increased to $130.1 million in the third quarter of 2021, compared to $127.6 million in the preceding quarter and $121.0 million in the third quarter a year ago.
• Net interest margin on a tax equivalent basis was 3.47%, compared to 3.52% in the preceding quarter and 3.72% in the third quarter a year ago.
• Mortgage banking revenues increased 30% to $9.8 million, compared to $7.5 million in the preceding quarter, and decreased 41% compared to $16.6 million in the third quarter a year ago.
• Return on average assets was 1.20%, compared to 1.36% in the preceding quarter and 1.01% in the third quarter a year ago.
• Net loans receivable decreased to $9.08 billion at September 30, 2021, compared to $9.51 billion at June 30, 2021, and decreased 9% when compared to $10.00 billion at September 30, 2020.
• Non-performing assets decreased to $29.7 million, or 0.18% of total assets, at September 30, 2021, compared to $31.5 million, or 0.19% of total assets in the preceding quarter, and decreased from $36.7 million, or 0.25% of total assets, at September 30, 2020.
• The allowance for credit losses - loans was $139.9 million, or 1.52% of total loans receivable, as of September 30, 2021, compared to $148.0 million, or 1.53% of total loans receivable as of June 30, 2021 and $168.0 million or 1.65% of total loans receivable as of September 30, 2020.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 4% to $13.31 billion at September 30, 2021, compared to $12.76 billion at June 30, 2021, and increased 18% compared to $11.30 billion a year ago. Core deposits represented 94% of total deposits at September 30, 2021.
• Dividends to shareholders were $0.41 per share in the quarter ended September 30, 2021.
• Common shareholders’ equity per share increased 1% to $48.67 at September 30, 2021, compared to $48.31 at the preceding quarter end, and increased 4% from $46.83 a year ago.
• Tangible common shareholders’ equity per share* increased 1% to $37.30 at September 30, 2021, compared to $36.99 at the preceding quarter end, and increased 5% from $35.56 a year ago.
• Banner repurchased 300,000 shares of its common stock during the quarter at an average cost of $55.50 per share.
  

*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in 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

In September 2021, Banner completed the consolidation of five branches as it continues to see migration of transactions to the digital space, reducing in-branch transactions. During the past year, client adoption of mobile and digital banking accelerated, while physical branch transaction volume declined. Banner anticipates this shift in client service delivery channel preference will continue after the COVID-19 pandemic related restrictions have ended.

Income Statement Review

Net interest income, before the recapture of provision for credit losses, was $130.1 million in the third quarter of 2021, compared to $127.6 million in the preceding quarter and $121.0 million in the third quarter a year ago.

Banner’s net interest margin on a tax equivalent basis was 3.47% for the third quarter of 2021, a five basis-point decrease compared to 3.52% in the preceding quarter and a 25 basis-point decrease compared to 3.72% in the third quarter a year ago.

“Higher core deposit balances, resulting in an increase in low yielding short term investments, adversely affected our net interest margin during the quarter. This impact was partly offset by higher interest income, primarily as a result of the decline in low yielding SBA PPP loans and a corresponding acceleration of the recognition of deferred loan fee income due to loan repayments from SBA loan forgiveness,” said Grescovich. “Additionally, the ongoing low interest rate environment continues to place downward pressure on loan yields.” Acquisition accounting adjustments added three basis points to the net interest margin in both the current and preceding quarter and seven basis points in the third quarter a year ago. The total purchase discount for acquired loans was $11.5 million at September 30, 2021, compared to $12.5 million at June 30, 2021, and $17.9 million at September 30, 2020. In the first nine months of 2021, Banner’s net interest margin on a tax equivalent basis was 3.48% compared to 3.93% in the first nine months of 2020.

Average interest-earning asset yields decreased six basis points to 3.62% in the third quarter compared to 3.68% for the preceding quarter and decreased 36 basis points compared to 3.98% in the third quarter a year ago. Average loan yields increased 18 basis points to 4.88% compared to 4.70% in the preceding quarter and increased 41 basis points compared to 4.47% in the third quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in the average balance of low yielding SBA PPP loans due to loan repayments from SBA loan forgiveness during the last two quarters, partially offset by lower rates on new originations and adjustable-rate loans resetting to lower current market rates. Loan discount accretion added five basis points to average loan yields in both the current and preceding quarter and nine basis points in the third quarter a year ago. Deposit costs were 0.08% in the third quarter of 2021, a one basis-point decrease compared to the preceding quarter and a nine basis-point decrease compared to the third quarter a year ago. The year-over-year decrease in quarterly deposit costs was primarily the result of decreases in market interest rates during 2020. The total cost of funds was 0.16% during the third quarter of 2021, a one basis-point decrease compared to the preceding quarter and an 11 basis-point decrease compared to the third quarter a year ago.

Banner recorded an $8.6 million recapture of provision for credit losses in the current quarter (comprised of an $8.9 million recapture of credit losses - loans and a $218,000 provision for credit losses - unfunded loan commitments). This recapture compares to a $10.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.1 million recapture of provision for credit losses - loans and a $2.2 million recapture of provision for credit losses - unfunded loan commitments) and a $15.2 million provision for credit losses in the third quarter a year ago (comprised of a $13.6 million provision for credit losses - loans and a $1.5 million recapture of provision for credit losses - unfunded loan commitments). The recapture of provision for credit losses for the current and preceding quarters primarily reflects improvement in forecasted economic indicators and a decrease in adversely classified loans. The provision for credit losses recorded in the third quarter a year ago primarily reflected expected lifetime credit losses based upon the economic conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of September 30, 2020.

Total non-interest income was $25.3 million in the third quarter of 2021, compared to $22.3 million in the preceding quarter and $28.2 million in the third quarter a year ago. Deposit fees and other service charges were $10.5 million in the third quarter of 2021, compared to $9.8 million in the preceding quarter and $8.7 million in the third quarter a year ago. The increase in deposit fees and other service charges from the third quarter a year ago is primarily a result of increased transaction deposit account activity and higher fees on certain transactions. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, increased to $9.8 million in the third quarter, compared to $7.5 million in the preceding quarter and decreased compared to $16.6 million in the third quarter of 2020. The higher mortgage banking revenue quarter-over-quarter primarily reflects an increase in the gain on sale margin on one- to four-family held-for-sale loans and higher gains on the sale of multifamily held-for-sale loans. The decrease compared to the third quarter of 2020 was primarily due to a decrease in the gain on sale margin on one- to four-family held-for-sale loans, partially offset by higher gains on the sale of multifamily held-for-sale loans as well as a reduction in the volume of one- to four-family loans sold. Home purchase activity accounted for 68% of one- to four-family mortgage loan originations in the third quarter of 2021, compared to 66% in the prior quarter and 56% in the third quarter of 2020. In the first nine months of 2021, total non-interest income decreased 4% to $71.9 million, compared to $75.1 million in the first nine months of 2020.

Banner’s third quarter 2021 results included a $1.8 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, and a $56,000 net gain on the sale of securities. In the preceding quarter, results included a $58,000 net gain for fair value adjustments and a $77,000 net gain on the sale of securities. In the third quarter a year ago, results included a $37,000 net gain for fair value adjustments and a $644,000 net gain on the sale of securities.

Total revenue increased 4% to $155.5 million for the third quarter of 2021, compared to $149.9 million in the preceding quarter, and increased 4% compared to $149.2 million in the third quarter a year ago. Year-to-date, total revenues increased 3% to $447.3 million compared to $435.0 million for the same period one year earlier. Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $153.6 million in the third quarter of 2021, compared to $149.8 million in the preceding quarter and $148.6 million in the third quarter of 2020. In the first nine months of the year, adjusted revenue* was $444.8 million, compared to $436.5 million in the first nine months of 2020.

Total non-interest expense was $102.1 million in the third quarter of 2021, compared to $92.6 million in the preceding quarter and $90.0 million in the third quarter of 2020. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an $8.0 million increase in professional and legal expenses, primarily due to increased consultant expense, which included $5.8 million of expense related to the Banner Forward initiative in the current quarter, compared to $1.5 million in the prior quarter, as well as a $4.0 million accrual recorded related to pending litigation during the current quarter. Additionally, payment and card processing services expense increased $1.2 million primarily reflecting an increase in fraud related losses. These increases for the current quarter were partially offset by a $2.1 million decrease from the preceding quarter in salary and employee benefits expense related to a reduction in staffing. The year-over-year quarterly increase in non-interest expense also reflects increases in payment and card processing services expense, professional and legal expenses, and miscellaneous non-interest expense. The year-over-year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19 expenses. COVID-19 expenses were $44,000 for the third quarter of 2021, compared to $117,000 for the preceding quarter and $778,000 in the third quarter a year ago. Year-to-date, total non-interest expense was $288.3 million, compared to $274.0 million in the same period a year earlier. Banner’s efficiency ratio was 65.70% for the current quarter, compared to 61.79% in the preceding quarter and 60.32% in the year ago quarter. Banner’s adjusted efficiency ratio* was 59.65% for the current quarter, compared to 58.50% in the preceding quarter and 58.02% in the year ago quarter.

For the third quarter of 2021, Banner had $12.1 million in state and federal income tax expense for an effective tax rate of 19.5%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate is 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased to $16.64 billion at September 30, 2021, compared to $16.18 billion at June 30, 2021, and increased 14% when compared to $14.64 billion at September 30, 2020. The total of securities and interest-bearing deposits held at other banks was $6.03 billion at September 30, 2021, compared to $5.19 billion at June 30, 2021 and $2.63 billion at September 30, 2020. The average effective duration of Banner's securities portfolio was approximately 4.4 years at September 30, 2021, compared to 4.0 years at September 30, 2020.

Net loans receivable decreased 4% to $9.08 billion at September 30, 2021, compared to $9.51 billion at June 30, 2021, and decreased 9% when compared to $10.00 billion at September 30, 2020. The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans. SBA PPP loans decreased 62% to $310.2 million at September 30, 2021, compared to $825.1 million at June 30, 2021, and decreased 73% when compared to $1.15 billion at September 30, 2020. The decrease in SBA PPP loans was partially offset by increases in commercial real estate, multifamily real estate and one- to four-family loans. Commercial real estate and multifamily real estate loans increased 2% to $4.24 billion at September 30, 2021, compared to $4.14 billion at June 30, 2021, and increased 4% compared to $4.07 billion a year ago. Commercial business loans decreased 21% to $2.12 billion at September 30, 2021, compared to $2.68 billion at June 30, 2021, and decreased 32% compared to $3.11 billion a year ago, primarily due to SBA PPP loans forgiven. Excluding PPP loans, commercial business loans decreased 3% to $1.82 billion at September 30, 2021, compared to $1.87 billion at June 30, 2021, and decreased 7% compared to $1.96 billion a year ago. Agricultural business loans increased to $287.5 million at September 30, 2021, compared to $265.4 million three months earlier and decreased from $326.2 million a year ago. Total construction, land and land development loans were $1.33 billion at September 30, 2021, a 3% decrease from $1.37 billion at June 30, 2021, and a 5% increase compared to $1.27 billion a year earlier. Consumer loans increased slightly to $561.2 million at September 30, 2021, compared to $560.7 million at June 30, 2021, and decreased from $622.8 million a year ago. One- to four-family loans increased to $682.4 million at September 30, 2021, compared to $637.7 million at June 30, 2021, and decreased from $771.4 million a year ago. The year over year decrease primarily reflects held for investment loans being refinanced and sold as held for sale loans.

Loans held for sale were $63.7 million at September 30, 2021, compared to $71.7 million at June 30, 2021, and $185.9 million at September 30, 2020. The volume of one- to four- family residential mortgage loans sold was $232.2 million in the current quarter, compared to $266.7 million in the preceding quarter and $327.7 million in the third quarter a year ago. During the third quarter of 2021, Banner sold $96.1 million in multifamily loans, compared to $83.9 million in the preceding quarter and $108.6 million in the third quarter a year ago.

Total deposits increased 4% to $14.16 billion at September 30, 2021, compared to $13.64 billion at June 30, 2021, and increased 16% when compared to $12.22 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 5% to $6.40 billion at September 30, 2021, compared to $6.09 billion at June 30, 2021, and increased 18% compared to $5.41 billion a year ago. Core deposits were 94% of total deposits at both September 30, 2021 and June 30, 2021 and increased 18% compared to a year ago. Certificates of deposit decreased to $851.1 million at September 30, 2021, compared to $873.0 million at June 30, 2021, and decreased 7% compared to $915.4 million a year earlier. FHLB borrowings decreased to $50.0 million at September 30, 2021, compared to $100.0 million at June 30, 2021 and decreased from $150.0 million a year ago.

At September 30, 2021, total common shareholders’ equity was $1.67 billion, or 10.02% of assets, compared to $1.67 billion or 10.32% of assets at June 30, 2021, and $1.65 billion or 11.25% of assets a year ago. At September 30, 2021, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 7.86% of tangible assets*, compared to $1.28 billion, or 8.09% of tangible assets, at June 30, 2021, and $1.25 billion, or 8.78% of tangible assets, a year ago. Banner’s tangible book value per share* increased to $37.30 at September 30, 2021, compared to $35.56 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 September 30, 2021, Banner's common equity Tier 1 capital ratio was 11.25%, its Tier 1 leverage capital to average assets ratio was 8.79%, and its total capital to risk-weighted assets ratio was 14.55%.

Credit Quality

The allowance for credit losses - loans was $139.9 million at September 30, 2021, or 1.52% of total loans receivable outstanding and 485% of non-performing loans, compared to $148.0 million at June 30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, and $168.0 million at September 30, 2020, or 1.65% of total loans receivable outstanding and 482% 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 $10.1 million at September 30, 2021, compared to $9.9 million at June 30, 2021 and $12.1 million at September 30, 2020. Net loan recoveries totaled $756,000 in the third quarter of 2021, compared to net loan recoveries of $55,000 in the preceding quarter and $2.0 million of net loan charge-offs in the third quarter a year ago. Non-performing loans were $28.9 million at September 30, 2021, compared to $30.8 million at June 30, 2021, and $34.8 million a year ago. Real estate owned and other repossessed assets were $869,000 at September 30, 2021, compared to $780,000 at June 30, 2021, and $1.8 million a year ago.

Banner’s total substandard loans were $225.8 million at September 30, 2021, compared to $272.8 million at June 30, 2021, and $423.2 million a year ago. The quarter over quarter decrease reflects the payoff of substandard loans as well as risk rating upgrades as certain industries impacted by the COVID-19 pandemic have begun to stabilize.

Banner’s total non-performing assets were $29.7 million, or 0.18% of total assets, at September 30, 2021, compared to $31.5 million, or 0.19% of total assets, at June 30, 2021, and $36.7 million, or 0.25% of total assets, a year ago.

At September 30, 2021, Banner had 41 mortgage loans totaling $12.4 million operating under forbearance agreements due to COVID-19. Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings pursuant to applicable accounting and regulatory guidance.

Conference Call

Banner will host a conference call on Thursday, October 21, 2021, at 8:00 a.m. PDT, to discuss its third 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 10160533, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.64 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.

The COVID-19, pandemic is adversely affecting us, our clients, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on client behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; (16) the costs associated with Banner Forward and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF OPERATIONS		Quarters Ended												Nine Months Ended
(in thousands except shares and per share data)		Sep 30, 2021				Jun 30, 2021				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
INTEREST INCOME:
Loans receivable		$	116,487			$	115,391			$	116,716			$	340,802			$	350,815
Mortgage-backed securities		11,695				11,437				7,234				32,503				24,354
Securities and cash equivalents		7,686				6,737				5,631				20,649				14,824
		135,868				133,565				129,581				393,954				389,993
INTEREST EXPENSE:
Deposits		2,749				3,028				5,179				9,386				20,623
Federal Home Loan Bank advances		655				655				988				2,244				4,036
Other borrowings		125				124				128				358				482
Junior subordinated debentures and subordinated notes		2,193				2,204				2,260				6,605				4,988
		5,722				6,011				8,555				18,593				30,129
Net interest income		130,146				127,554				121,026				375,361				359,864
(RECAPTURE)/PROVISION FOR CREDIT LOSSES		(8,638		)		(10,256		)		15,180				(28,145		)		67,273
Net interest income after (recapture)/provision for credit losses		138,784				137,810				105,846				403,506				292,591
NON-INTEREST INCOME:
Deposit fees and other service charges		10,457				9,758				8,742				29,154				26,091
Mortgage banking operations		9,752				7,478				16,562				28,670				40,891
Bank-owned life insurance		1,245				1,245				1,286				3,797				4,653
Miscellaneous		2,046				3,720				951				7,808				5,017
		23,500				22,201				27,541				69,429				76,652
Net gain on sale of securities		56				77				644				618				815
Net change in valuation of financial instruments carried at fair value		1,778				58				37				1,895				(2,360		)
Total non-interest income		25,334				22,336				28,222				71,942				75,107
NON-INTEREST EXPENSE:
Salary and employee benefits		59,799				61,935				61,171				186,553				184,494
Less capitalized loan origination costs		(8,290		)		(8,768		)		(8,517		)		(26,754		)		(25,433		)
Occupancy and equipment		13,153				12,823				13,022				38,965				39,114
Information / computer data services		6,110				5,602				6,090				17,915				17,984
Payment and card processing services		6,181				4,975				4,044				15,482				12,135
Professional and legal expenses		12,324				4,371				2,368				20,023				6,450
Advertising and marketing		1,521				1,181				1,105				3,965				3,584
Deposit insurance expense		1,469				1,241				1,628				4,243				4,968
State/municipal business and use taxes		1,219				1,083				1,196				3,367				3,284
Real estate operations		53				118				(11		)		(71		)		93
Amortization of core deposit intangibles		1,575				1,711				1,864				4,997				5,867
Miscellaneous		6,977				6,156				5,285				18,642				16,841
		102,091				92,428				89,245				287,327				269,381
COVID-19 expenses		44				117				778				309				3,169
Merger and acquisition-related expenses		10				79				5				660				1,483
Total non-interest expense		102,145				92,624				90,028				288,296				274,033
Income before provision for income taxes		61,973				67,522				44,040				187,152				93,665
PROVISION FOR INCOME TAXES		12,089				13,140				7,492				36,031				16,694
NET INCOME		$	49,884			$	54,382			$	36,548			$	151,121			$	76,971
Earnings per share available to common shareholders:
Basic		$	1.45			$	1.57			$	1.04			$	4.35			$	2.18
Diluted		$	1.44			$	1.56			$	1.03			$	4.32			$	2.17
Cumulative dividends declared per common share		$	0.41			$	0.41			$	0.41			$	1.23			$	0.82
Weighted average common shares outstanding:
Basic		34,446,510				34,736,639				35,193,109				34,716,914				35,285,567
Diluted		34,669,492				34,933,714				35,316,679				35,012,228				35,524,771
(Decrease) increase in common shares outstanding		(298,897		)		(184,455		)		669				(907,209		)		(593,008		)

FINANCIAL CONDITION																						Percentage Change
(in thousands except shares and per share data)		Sep 30, 2021					Jun 30, 2021					Dec 31, 2020					Sep 30, 2020					Prior Qtr				Prior Yr Qtr
ASSETS
Cash and due from banks		$	392,035				$	329,359				$	311,899				$	289,144				19.0		%		35.6		%
Interest-bearing deposits		1,808,547					1,138,572					922,284					416,394					58.8		%		334.3		%
Total cash and cash equivalents		2,200,582					1,467,931					1,234,183					705,538					49.9		%		211.9		%
Securities - trading		26,875					25,097					24,980					23,276					7.1		%		15.5		%
Securities - available for sale		3,446,575					3,275,979					2,322,593					1,758,384					5.2		%		96.0		%
Securities - held to maturity		447,708					455,256					421,713					429,033					(1.7	)	%		4.4		%
Total securities		3,921,158					3,756,332					2,769,286					2,210,693					4.4		%		77.4		%
Equity securities		—					—					—					450,255					nm				(100.0	)	%
Federal Home Loan Bank stock		12,000					14,001					16,358					16,363					(14.3	)	%		(26.7	)	%
Securities purchased under agreements to resell		300,000					300,000					—					—					—		%		nm
Loans held for sale		63,678					71,741					243,795					185,938					(11.2	)	%		(65.8	)	%
Loans receivable		9,218,384					9,654,181					9,870,982					10,163,917					(4.5	)	%		(9.3	)	%
Allowance for credit losses - loans		(139,915		)			(148,009		)			(167,279		)			(167,965		)			(5.5	)	%		(16.7	)	%
Net loans receivable		9,078,469					9,506,172					9,703,703					9,995,952					(4.5	)	%		(9.2	)	%
Accrued interest receivable		43,644					46,979					46,617					48,321					(7.1	)	%		(9.7	)	%
Real estate owned (REO) held for sale, net		852					763					816					1,795					11.7		%		(52.5	)	%
Property and equipment, net		151,503					156,063					164,556					171,576					(2.9	)	%		(11.7	)	%
Goodwill		373,121					373,121					373,121					373,121					—		%		—		%
Other intangibles, net		16,429					18,004					21,426					23,291					(8.7	)	%		(29.5	)	%
Bank-owned life insurance		192,950					192,677					191,830					191,755					0.1		%		0.6		%
Operating lease right-of-use assets		58,523					55,287					55,367					58,114					5.9		%		0.7		%
Other assets		224,970					222,786					210,565					209,363					1.0		%		7.5		%
Total assets		$	16,637,879				$	16,181,857				$	15,031,623				$	14,642,075				2.8		%		13.6		%
LIABILITIES
Deposits:
Non-interest-bearing		$	6,400,864				$	6,090,063				$	5,492,924				$	5,412,570				5.1		%		18.3		%
Interest-bearing transaction and savings accounts		6,912,759					6,673,598					6,159,052					5,887,419					3.6		%		17.4		%
Interest-bearing certificates		851,054					873,047					915,320					915,352					(2.5	)	%		(7.0	)	%
Total deposits		14,164,677					13,636,708					12,567,296					12,215,341					3.9		%		16.0		%
Advances from Federal Home Loan Bank		50,000					100,000					150,000					150,000					(50.0	)	%		(66.7	)	%
Customer repurchase agreements and other borrowings		247,358					237,736					184,785					176,983					4.0		%		39.8		%
Subordinated notes, net		98,472					98,380					98,201					98,114					0.1		%		0.4		%
Junior subordinated debentures at fair value		124,853					117,520					116,974					109,821					6.2		%		13.7		%
Operating lease liabilities		62,946					59,117					59,343					61,869					6.5		%		1.7		%
Accrued expenses and other liabilities		175,960					216,399					143,300					138,169					(18.7	)	%		27.4		%
Deferred compensation		46,494					46,786					45,460					45,249					(0.6	)	%		2.8		%
Total liabilities		14,970,760					14,512,646					13,365,359					12,995,546					3.2		%		15.2		%
SHAREHOLDERS’ EQUITY
Common stock		1,297,145					1,311,455					1,349,879					1,347,612					(1.1	)	%		(3.7	)	%
Retained earnings		355,035					319,505					247,316					222,959					11.1		%		59.2		%
Other components of shareholders’ equity		14,939					38,251					69,069					75,958					(60.9	)	%		(80.3	)	%
Total shareholders’ equity		1,667,119					1,669,211					1,666,264					1,646,529					(0.1	)	%		1.3		%
Total liabilities and shareholders’ equity		$	16,637,879				$	16,181,857				$	15,031,623				$	14,642,075				2.8		%		13.6		%
Common Shares Issued:
Shares outstanding at end of period		34,251,991					34,550,888					35,159,200					35,158,568
Common shareholders’ equity per share (1)		$	48.67				$	48.31				$	47.39				$	46.83
Common shareholders’ tangible equity per share (1) (2)		$	37.30				$	36.99				$	36.17				$	35.56
Common shareholders’ tangible equity to tangible assets (2)		7.86			%		8.09			%		8.69			%		8.78			%
Consolidated Tier 1 leverage capital ratio		8.79			%		8.86			%		9.50			%		9.56			%

(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		Sep 30, 2021				Jun 30, 2021				Dec 31, 2020				Sep 30, 2020				Prior Qtr				Prior Yr Qtr
Commercial real estate:
Owner-occupied		$	1,122,275			$	1,066,237			$	1,076,467			$	1,049,877			5.3		%		6.9		%
Investment properties		1,980,284				1,950,211				1,955,684				1,991,258				1.5		%		(0.6	)	%
Small balance CRE		601,751				621,102				573,849				597,971				(3.1	)	%		0.6		%
Multifamily real estate		532,760				504,445				428,223				426,659				5.6		%		24.9		%
Construction, land and land development:
Commercial construction		170,205				182,868				228,937				220,285				(6.9	)	%		(22.7	)	%
Multifamily construction		278,184				295,661				305,527				291,105				(5.9	)	%		(4.4	)	%
One- to four-family construction		571,431				603,895				507,810				518,085				(5.4	)	%		10.3		%
Land and land development		308,164				290,404				248,915				240,803				6.1		%		28.0		%
Commercial business:
Commercial business		1,039,731				1,124,359				1,133,989				1,193,651				(7.5	)	%		(12.9	)	%
SBA PPP		306,976				807,172				1,044,472				1,149,968				(62.0	)	%		(73.3	)	%
Small business scored		775,554				743,975				743,451				763,824				4.2		%		1.5		%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland		284,255				247,467				299,949				326,169				14.9		%		(12.9	)	%
SBA PPP		3,214				17,962				—				—				(82.1	)	%		nm
One- to four-family residential		682,368				637,701				717,939				771,431				7.0		%		(11.5	)	%
Consumer:
Consumer—home equity revolving lines of credit		462,819				458,915				491,812				504,523				0.9		%		(8.3	)	%
Consumer—other		98,413				101,807				113,958				118,308				(3.3	)	%		(16.8	)	%
Total loans receivable		$	9,218,384			$	9,654,181			$	9,870,982			$	10,163,917			(4.5	)	%		(9.3	)	%
Restructured loans performing under their restructured terms		$	5,273			$	5,472			$	6,673			$	5,790
Loans 30 - 89 days past due and on accrual		$	6,911			$	5,656			$	12,291			$	18,158
Total delinquent loans (including loans on non-accrual), net		$	18,619			$	23,582			$	36,131			$	37,464
Total delinquent loans  /  Total loans receivable		0.20		%		0.24		%		0.37		%		0.37		%

LOANS BY GEOGRAPHIC LOCATION																					Percentage Change
		Sep 30, 2021							Jun 30, 2021				Dec 31, 2020				Sep 30, 2020				Prior Qtr				Prior Yr Qtr
		Amount				Percentage			Amount				Amount				Amount
Washington		$	4,319,008			46.9	%		$	4,541,792			$	4,647,553			$	4,767,113			(4.9	)	%		(9.4	)	%
California		2,160,280				23.4	%		2,246,580				2,279,749				2,316,739				(3.8	)	%		(6.8	)	%
Oregon		1,679,452				18.2	%		1,753,285				1,792,156				1,858,465				(4.2	)	%		(9.6	)	%
Idaho		536,128				5.8	%		525,610				537,996				576,983				2.0		%		(7.1	)	%
Utah		89,620				1.0	%		92,103				80,704				76,314				(2.7	)	%		17.4		%
Other		433,896				4.7	%		494,811				532,824				568,303				(12.3	)	%		(23.7	)	%
Total loans receivable		$	9,218,384			100.0	%		$	9,654,181			$	9,870,982			$	10,163,917			(4.5	)	%		(9.3	)	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
LOAN ORIGINATIONS	Quarters Ended
	Sep 30, 2021				Jun 30, 2021				Sep 30, 2020
Commercial real estate	$	174,827			$	103,415			$	74,400
Multifamily real estate	26,155				45,674				2,664
Construction and land	496,386				509,828				412,463
Commercial business:
Commercial business	229,859				181,996				128,729
SBA PPP	907				55,990				24,848
Agricultural business	9,223				12,546				16,990
One-to four-family residential	49,594				47,086				32,733
Consumer	145,102				131,424				132,100
Total loan originations (excluding loans held for sale)	$	1,132,053			$	1,087,959			$	824,927

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Sep 30, 2021					Jun 30, 2021					Sep 30, 2020
ALLOWANCE FOR CREDIT LOSSES - LOANS
Balance, beginning of period		$	148,009				$	156,054				$	156,352
(Recapture)/provision for credit losses - loans		(8,850		)			(8,100		)			13,641
Recoveries of loans previously charged off:
Commercial real estate		923					147					23
One- to four-family real estate		19					20					94
Commercial business		230					321					246
Agricultural business, including secured by farmland		17					8					—
Consumer		227					97					82
		1,416					593					445
Loans charged off:
Commercial real estate		—					(3		)			(379		)
One- to four-family real estate		—					—					(72		)
Commercial business		(362		)			(123		)			(1,297		)
Agricultural business, including secured by farmland		(179		)			(2		)			(492		)
Consumer		(119		)			(410		)			(233		)
		(660		)			(538		)			(2,473		)
Net recoveries (charge-offs)		756					55					(2,028		)
Balance, end of period		$	139,915				$	148,009				$	167,965
Net recoveries (charge-offs) / Average loans receivable		0.008			%		0.001			%		(0.019		)	%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES - LOANS		Sep 30, 2021				Jun 30, 2021				Sep 30, 2020
Specific or allocated credit loss allowance:
Commercial real estate		$	57,215			$	60,349			$	59,705
Multifamily real estate		6,657				5,807				3,256
Construction and land		29,342				30,899				39,477
One- to four-family real estate		9,460				9,800				12,868
Commercial business		26,873				30,830				35,369
Agricultural business, including secured by farmland		3,177				3,256				5,051
Consumer		7,191				7,068				12,239
Total allowance for credit losses - loans		$	139,915			$	148,009			$	167,965
Allowance for credit losses - loans / Total loans receivable		1.52		%		1.53		%		1.65		%
Allowance for credit losses - loans / Non-performing loans		485		%		481		%		482		%

		Quarters Ended
CHANGE IN THE		Sep 30, 2021				Jun 30, 2021					Sep 30, 2020
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period		$	9,909			$	12,077				$	10,555
Provision/(recapture) for credit losses - unfunded loan commitments		218				(2,168		)			1,539
Balance, end of period		$	10,127			$	9,909				$	12,094

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Sep 30, 2021				Jun 30, 2021				Dec 31, 2020				Sep 30, 2020
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	14,931			$	17,427			$	18,199			$	7,824
Construction and land	354				541				936				937
One- to four-family	3,182				4,007				3,556				2,978
Commercial business	2,700				3,673				5,407				14,867
Agricultural business, including secured by farmland	1,022				1,200				1,743				2,066
Consumer	1,850				1,799				2,719				2,896
	24,039				28,647				32,560				31,568
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	3,955				911				—				—
One- to four-family	772				579				1,899				2,649
Commercial business	61				495				1,025				425
Consumer	34				131				130				181
	4,822				2,116				3,054				3,255
Total non-performing loans	28,861				30,763				35,614				34,823
REO	852				763				816				1,795
Other repossessed assets	17				17				51				37
Total non-performing assets	$	29,730			$	31,543			$	36,481			$	36,655
Total non-performing assets to total assets	0.18		%		0.19		%		0.24		%		0.25		%

	Sep 30, 2021				Jun 30, 2021				Dec 31, 2020				Sep 30, 2020
LOANS BY CREDIT RISK RATING
Pass	$	8,956,604			$	9,315,264			$	9,494,147			$	9,699,098
Special Mention	36,001				66,103				36,598				41,575
Substandard	225,779				272,814				340,237				423,244
Total	$	9,218,384			$	9,654,181			$	9,870,982			$	10,163,917

	Quarters Ended													Nine Months Ended
REAL ESTATE OWNED	Sep 30, 2021				Jun 30, 2021				Sep 30, 2020					Sep 30, 2021					Sep 30, 2020
Balance, beginning of period	$	763			$	340			$	2,400				$	816				$	814
Additions from loan foreclosures	89				423				—					512					1,588
Proceeds from dispositions of REO	—				—				(707		)			(783		)			(805		)
Gain on sale of REO	—				—				120					307					216
Valuation adjustments in the period	—				—				(18		)			—					(18		)
Balance, end of period	$	852			$	763			$	1,795				$	852				$	1,795

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION																		Percentage Change
		Sep 30, 2021				Jun 30, 2021				Dec 31, 2020				Sep 30, 2020				Prior Qtr				Prior Yr Qtr
Non-interest-bearing		$	6,400,864			$	6,090,063			$	5,492,924			$	5,412,570			5.1		%		18.3		%
Interest-bearing checking		1,799,657				1,736,696				1,569,435				1,434,224				3.6		%		25.5		%
Regular savings accounts		2,773,995				2,646,302				2,398,482				2,332,287				4.8		%		18.9		%
Money market accounts		2,339,107				2,290,600				2,191,135				2,120,908				2.1		%		10.3		%
Total interest-bearing transaction and savings accounts		6,912,759				6,673,598				6,159,052				5,887,419				3.6		%		17.4		%
Total core deposits		13,313,623				12,763,661				11,651,976				11,299,989				4.3		%		17.8		%
Interest-bearing certificates		851,054				873,047				915,320				915,352				(2.5	)	%		(7.0	)	%
Total deposits		$	14,164,677			$	13,636,708			$	12,567,296			$	12,215,341			3.9		%		16.0		%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Sep 30, 2021							Jun 30, 2021				Dec 31, 2020				Sep 30, 2020				Percentage Change
		Amount				Percentage			Amount				Amount				Amount				Prior Qtr			Prior Yr Qtr
Washington		$	7,877,919			55.6	%		$	7,547,591			$	7,058,404			$	6,820,329			4.4	%		15.5	%
Oregon		3,030,109				21.4	%		2,939,667				2,604,908				2,486,760				3.1	%		21.8	%
California		2,501,521				17.7	%		2,417,387				2,237,949				2,254,681				3.5	%		10.9	%
Idaho		755,128				5.3	%		732,063				666,035				653,571				3.2	%		15.5	%
Total deposits		$	14,164,677			100.0	%		$	13,636,708			$	12,567,296			$	12,215,341			3.9	%		16.0	%

INCLUDED IN TOTAL DEPOSITS		Sep 30, 2021				Jun 30, 2021				Dec 31, 2020				Sep 30, 2020
Public non-interest-bearing accounts		$	193,414			$	187,702			$	175,352			$	142,415
Public interest-bearing transaction & savings accounts		161,407				156,987				127,523				117,514
Public interest-bearing certificates		40,851				41,444				59,127				54,219
Total public deposits		$	395,672			$	386,133			$	362,002			$	314,148

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 SEPTEMBER 30, 2021		Amount				Ratio			Amount				Ratio			Amount				Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,635,458			14.55	%		$	899,302			8.00	%		$	1,124,128			10.00	%
Tier 1 capital to risk-weighted assets		1,407,993				12.53	%		674,477				6.00	%		674,477				6.00	%
Tier 1 leverage capital to average assets		1,407,993				8.79	%		640,528				4.00	%		n/a				n/a
Common equity tier 1 capital to risk-weighted assets		1,264,493				11.25	%		505,857				4.50	%		n/a				n/a
Banner Bank:
Total capital to risk-weighted assets		1,524,897				13.57	%		898,803				8.00	%		1,123,504				10.00	%
Tier 1 capital to risk-weighted assets		1,397,432				12.44	%		674,102				6.00	%		898,803				8.00	%
Tier 1 leverage capital to average assets		1,397,432				8.73	%		640,385				4.00	%		800,482				5.00	%
Common equity tier 1 capital to risk-weighted assets		1,397,432				12.44	%		505,577				4.50	%		730,278				6.50	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Sep 30, 2021											Jun 30, 2021											Sep 30, 2020
	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	$	114,938			$	996			3.44	%		$	69,908			$	544			3.12	%		$	161,385			$	1,535			3.78	%
Mortgage loans	7,245,962				83,803				4.59	%		7,147,733				80,673				4.53	%		7,339,181				88,011				4.77	%
Commercial/agricultural loans	1,534,978				15,776				4.08	%		1,480,954				15,818				4.28	%		1,721,186				18,553				4.29	%
SBA PPP loans	566,515				15,421				10.80	%		1,144,195				17,796				6.24	%		1,141,105				7,843				2.73	%
Consumer and other loans	120,112				1,774				5.86	%		122,951				1,828				5.96	%		140,493				2,195				6.22	%
Total loans(1)(3)	9,582,505				117,770				4.88	%		9,965,741				116,659				4.70	%		10,503,350				118,137				4.47	%
Mortgage-backed securities	2,560,027				11,820				1.83	%		2,440,913				11,563				1.90	%		1,250,759				7,333				2.33	%
Other securities	1,491,035				7,873				2.09	%		1,250,417				7,088				2.27	%		884,916				6,036				2.71	%
Equity securities	—				—				—	%		—				—				—	%		379,483				186				0.19	%
Interest-bearing deposits with banks	1,486,839				586				0.16	%		1,139,749				376				0.13	%		171,894				123				0.28	%
FHLB stock	13,957				135				3.84	%		14,001				161				4.61	%		16,363				163				3.96	%
Total investment securities (3)	5,551,858				20,414				1.46	%		4,845,080				19,188				1.59	%		2,703,415				13,841				2.04	%
Total interest-earning assets	15,134,363				138,184				3.62	%		14,810,821				135,847				3.68	%		13,206,765				131,978				3.98	%
Non-interest-earning assets	1,301,383											1,227,167											1,259,816
Total assets	$	16,435,746										$	16,037,988										$	14,466,581
Deposits:
Interest-bearing checking accounts	$	1,771,869			282				0.06	%		$	1,754,363			302				0.07	%		$	1,413,085			321				0.09	%
Savings accounts	2,721,028				458				0.07	%		2,622,716				454				0.07	%		2,251,294				813				0.14	%
Money market accounts	2,322,453				668				0.11	%		2,288,638				668				0.12	%		2,096,037				1,224				0.23	%
Certificates of deposit	863,971				1,341				0.62	%		889,020				1,604				0.72	%		966,028				2,821				1.16	%
Total interest-bearing deposits	7,679,321				2,749				0.14	%		7,554,737				3,028				0.16	%		6,726,444				5,179				0.31	%
Non-interest-bearing deposits	6,275,634				—				—	%		6,057,884				—				—	%		5,340,688				—				—	%
Total deposits	13,954,955				2,749				0.08	%		13,612,621				3,028				0.09	%		12,067,132				5,179				0.17	%
Other interest-bearing liabilities:
FHLB advances	98,370				655				2.64	%		100,000				655				2.63	%		150,000				988				2.62	%
Other borrowings	252,720				125				0.20	%		240,229				124				0.21	%		177,628				128				0.29	%
Junior subordinated debentures and subordinated notes	247,944				2,193				3.51	%		247,944				2,204				3.57	%		247,944				2,260				3.63	%
Total borrowings	599,034				2,973				1.97	%		588,173				2,983				2.03	%		575,572				3,376				2.33	%
Total funding liabilities	14,553,989				5,722				0.16	%		14,200,794				6,011				0.17	%		12,642,704				8,555				0.27	%
Other non-interest-bearing liabilities(2)	202,918											199,619											193,256
Total liabilities	14,756,907											14,400,413											12,835,960
Shareholders’ equity	1,678,839											1,637,575											1,630,621
Total liabilities and shareholders’ equity	$	16,435,746										$	16,037,988										$	14,466,581
Net interest income/rate spread (tax equivalent)					$	132,462			3.46	%						$	129,836			3.51	%						$	123,423			3.71	%
Net interest margin (tax equivalent)									3.47	%										3.52	%										3.72	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(2,316		)									(2,282		)									(2,397		)
Net interest income and margin, as reported					$	130,146			3.41	%						$	127,554			3.45	%						$	121,026			3.65	%
Additional Key Financial Ratios:
Return on average assets									1.20	%										1.36	%										1.01	%
Return on average equity									11.79	%										13.32	%										8.92	%
Average equity/average assets									10.21	%										10.21	%										11.27	%
Average interest-earning assets/average interest-bearing liabilities									182.82	%										181.89	%										180.86	%
Average interest-earning assets/average funding liabilities									103.99	%										104.30	%										104.46	%
Non-interest income/average assets									0.61	%										0.56	%										0.78	%
Non-interest expense/average assets									2.47	%										2.32	%										2.48	%
Efficiency ratio(4)									65.70	%										61.79	%										60.32	%
Adjusted efficiency ratio(5)									59.65	%										58.50	%										58.02	%

(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, $1.3 million, and $1.4 million for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $1.0 million, and $976,000 for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, 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)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Nine Months Ended
	Sep 30, 2021											Sep 30, 2020
	Average Balance				Interest and Dividends				Yield/Cost(3)			Average Balance				Interest and Dividends				Yield/Cost(3)
Interest-earning assets:
Held for sale loans	$	101,380			$	2,465			3.25	%		$	155,571			$	4,506			3.87	%
Mortgage loans	7,179,859				245,056				4.56	%		7,321,206				268,244				4.89	%
Commercial/agricultural loans	1,511,723				47,513				4.20	%		1,811,854				61,424				4.53	%
SBA PPP loans	958,848				44,009				6.14	%		638,380				13,131				2.75	%
Consumer and other loans	123,483				5,549				6.01	%		151,968				7,151				6.29	%
Total loans(1)(3)	9,875,293				344,592				4.67	%		10,078,979				354,456				4.70	%
Mortgage-backed securities	2,320,474				32,855				1.89	%		1,297,020				24,652				2.54	%
Other securities	1,265,056				21,648				2.29	%		710,967				15,205				2.86	%
Equity securities	574				—				—	%		165,395				309				0.25	%
Interest-bearing deposits with banks	1,221,241				1,224				0.13	%		159,065				688				0.58	%
FHLB stock	14,629				457				4.18	%		19,822				785				5.29	%
Total investment securities(3)	4,821,974				56,184				1.56	%		2,352,269				41,639				2.36	%
Total interest-earning assets	14,697,267				400,776				3.65	%		12,431,248				396,095				4.26	%
Non-interest-earning assets	1,255,512											1,232,997
Total assets	$	15,952,779										$	13,664,245
Deposits:
Interest-bearing checking accounts	$	1,714,920			899				0.07	%		$	1,352,369			1,164				0.11	%
Savings accounts	2,611,046				1,433				0.07	%		2,133,780				3,566				0.22	%
Money market accounts	2,284,904				2,111				0.12	%		1,940,096				5,228				0.36	%
Certificates of deposit	888,502				4,943				0.74	%		1,069,145				10,665				1.33	%
Total interest-bearing deposits	7,499,372				9,386				0.17	%		6,495,390				20,623				0.42	%
Non-interest-bearing deposits	6,001,354				—				—	%		4,738,559				—				—	%
Total deposits	13,500,726				9,386				0.09	%		11,233,949				20,623				0.25	%
Other interest-bearing liabilities:
FHLB advances	114,103				2,244				2.63	%		236,949				4,036				2.28	%
Other borrowings	232,142				358				0.21	%		195,977				482				0.33	%
Junior subordinated debentures and subordinated notes	247,944				6,605				3.56	%		181,886				4,988				3.66	%
Total borrowings	594,189				9,207				2.07	%		614,812				9,506				2.07	%
Total funding liabilities	14,094,915				18,593				0.18	%		11,848,761				30,129				0.34	%
Other non-interest-bearing liabilities(2)	203,349											197,912
Total liabilities	14,298,264											12,046,673
Shareholders’ equity	1,654,515											1,617,572
Total liabilities and shareholders’ equity	$	15,952,779										$	13,664,245
Net interest income/rate spread (tax equivalent)					$	382,183			3.47	%						$	365,966			3.92	%
Net interest margin (tax equivalent)									3.48	%										3.93	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(6,822		)									(6,102		)
Net interest income and margin, as reported					$	375,361			3.41	%						$	359,864			3.87	%
Additional Key Financial Ratios:
Return on average assets									1.27	%										0.75	%
Return on average equity									12.21	%										6.36	%
Average equity/average assets									10.37	%										11.84	%
Average interest-earning assets/average interest-bearing liabilities					`				181.59	%										174.84	%
Average interest-earning assets/average funding liabilities									104.27	%										104.92	%
Non-interest income/average assets									0.60	%										0.73	%
Non-interest expense/average assets									2.42	%										2.68	%
Efficiency ratio(4)									64.45	%										63.00	%
Adjusted efficiency ratio(5)									60.39	%										59.59	%

(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 $3.8 million and $3.6 million for the nine months ended September 30, 2021 and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.0 million and $2.5 million for the nine months ended September 30, 2021 and September 30, 2020, 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															Nine Months Ended
		Sep 30, 2021					Jun 30, 2021					Sep 30, 2020					Sep 30, 2021					Sep 30, 2020
Net interest income		$	130,146				$	127,554				$	121,026				$	375,361				$	359,864
Total non-interest income		25,334					22,336					28,222					71,942					75,107
Total revenue (GAAP)		155,480					149,890					149,248					447,303					434,971
Exclude net gain on sale of securities		(56		)			(77		)			(644		)			(618		)			(815		)
Exclude net change in valuation of financial instruments carried at fair value		(1,778		)			(58		)			(37		)			(1,895		)			2,360
Adjusted revenue (non-GAAP)		$	153,646				$	149,755				$	148,567				$	444,790				$	436,516

ADJUSTED EARNINGS		Quarters Ended															Nine Months Ended
		Sep 30, 2021					Jun 30, 2021					Sep 30, 2020					Sep 30, 2021					Sep 30, 2020
Net income (GAAP)		$	49,884				$	54,382				$	36,548				$	151,121				$	76,971
Exclude net gain on sale of securities		(56		)			(77		)			(644		)			(618		)			(815		)
Exclude net change in valuation of financial instruments carried at fair value		(1,778		)			(58		)			(37		)			(1,895		)			2,360
Exclude merger and acquisition-related expenses		10					79					5					660					1,483
Exclude COVID-19 expenses		44					117					778					309					3,169
Exclude Banner Forward expenses		7,592					1,905					—					10,447					—
Exclude related net tax expense (benefit)		(1,395		)			(472		)			(24		)			(2,137		)			(1,476		)
Total adjusted earnings (non-GAAP)		$	54,301				$	55,876				$	36,626				$	157,887				$	81,692
Diluted earnings per share (GAAP)		$	1.44				$	1.56				$	1.03				$	4.32				$	2.17
Diluted adjusted earnings per share (non-GAAP)		$	1.57				$	1.60				$	1.04				$	4.51				$	2.30

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended															Nine Months Ended
		Sep 30, 2021					Jun 30, 2021					Sep 30, 2020					Sep 30, 2021					Sep 30, 2020
Non-interest expense (GAAP)		$	102,145				$	92,624				$	90,028				$	288,296				$	274,033
Exclude merger and acquisition-related expenses		(10		)			(79		)			(5		)			(660		)			(1,483		)
Exclude COVID-19 expenses		(44		)			(117		)			(778		)			(309		)			(3,169		)
Exclude Banner Forward expenses		(7,592		)			(1,905		)			—					(10,447		)			—
Exclude CDI amortization		(1,575		)			(1,711		)			(1,864		)			(4,997		)			(5,867		)
Exclude state/municipal tax expense		(1,219		)			(1,083		)			(1,196		)			(3,367		)			(3,284		)
Exclude REO operations		(53		)			(118		)			11					71					(93		)
Adjusted non-interest expense (non-GAAP)		$	91,652				$	87,611				$	86,196				$	268,587				$	260,137
Net interest income (GAAP)		$	130,146				$	127,554				$	121,026				$	375,361				$	359,864
Non-interest income (GAAP)		25,334					22,336					28,222					71,942					75,107
Total revenue		155,480					149,890					149,248					447,303					434,971
Exclude net gain on sale of securities		(56		)			(77		)			(644		)			(618		)			(815		)
Exclude net change in valuation of financial instruments carried at fair value		(1,778		)			(58		)			(37		)			(1,895		)			2,360
Adjusted revenue (non-GAAP)		$	153,646				$	149,755				$	148,567				$	444,790				$	436,516
Efficiency ratio (GAAP)		65.70			%		61.79			%		60.32			%		64.45			%		63.00			%
Adjusted efficiency ratio (non-GAAP)		59.65			%		58.50			%		58.02			%		60.39			%		59.59			%

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS		Sep 30, 2021					Jun 30, 2021					Dec 31, 2020					Sep 30, 2020
Shareholders’ equity (GAAP)		$	1,667,119				$	1,669,211				$	1,666,264				$	1,646,529
Exclude goodwill and other intangible assets, net		389,550					391,125					394,547					396,412
Tangible common shareholders’ equity (non-GAAP)		$	1,277,569				$	1,278,086				$	1,271,717				$	1,250,117
Total assets (GAAP)		$	16,637,879				$	16,181,857				$	15,031,623				$	14,642,075
Exclude goodwill and other intangible assets, net		389,550					391,125					394,547					396,412
Total tangible assets (non-GAAP)		$	16,248,329				$	15,790,732				$	14,637,076				$	14,245,663
Common shareholders’ equity to total assets (GAAP)		10.02			%		10.32			%		11.09			%		11.25			%
Tangible common shareholders’ equity to tangible assets (non-GAAP)		7.86			%		8.09			%		8.69			%		8.78			%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
Tangible common shareholders’ equity (non-GAAP)		$	1,277,569				$	1,278,086				$	1,271,717				$	1,250,117
Common shares outstanding at end of period		34,251,991					34,550,888					35,159,200					35,158,568
Common shareholders’ equity (book value) per share (GAAP)		$	48.67				$	48.31				$	47.39				$	46.83
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)		$	37.30				$	36.99				$	36.17				$	35.56

CONTACT:

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

FAQ

What was Banner Corporation's net income for Q3 2021?

Banner Corporation reported a net income of $49.9 million for Q3 2021.

What dividend did Banner Corporation declare for Q3 2021?

Banner Corporation declared a quarterly cash dividend of $0.41 per share.

When will the dividend be paid to shareholders?

The dividend will be payable on November 12, 2021, to shareholders of record on November 2, 2021.

How much did Banner's total revenue increase in Q3 2021?

Total revenue increased by 4% to $155.5 million in Q3 2021.

What is the current net interest margin for Banner Corporation?

The net interest margin for Q3 2021 is 3.47%.