Banner Corporation Reports Net Income of $54.4 Million, or $1.58 Per Diluted Share, for Fourth Quarter 2022; Earns $195.4 Million in Net Income, or $5.67 Per Diluted Share, for 2022; Declares Increased Quarterly Cash Dividend of $0.48 Per Share

Rhea-AI Summary

Banner Corporation (NASDAQ: BANR) reported Q4 2022 net income of $54.4 million ($1.58/share), up 11% from Q3 2022 and 9% year-over-year. For the year, net income decreased 3% to $195.4 million ($5.67/share). Revenue rose 6% to $172.1 million, bolstered by a 9% increase in net interest income. The Board announced a 9% increase in the quarterly cash dividend to $0.48, payable on February 13, 2023. The company reported a provision for credit losses of $6.7 million in Q4 and an allowance of $141.5 million, or 1.39% of total loans. Non-performing assets rose to $23.4 million.

Positive

• Net income increased 11% quarter-over-quarter and 9% year-over-year.
• Revenue grew 6% to $172.1 million, with net interest income up 9%.
• Quarterly cash dividend increased by 9% to $0.48 per share.

Negative

• Yearly net income decreased 3% compared to 2021.
• Provision for credit losses increased to $6.7 million in Q4 2022.
• Non-performing assets rose to $23.4 million.

WALLA WALLA, Wash., Jan. 19, 2023 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $54.4 million, or $1.58 per diluted share, for the fourth quarter of 2022, an 11% increase compared to $49.1 million, or $1.43 per diluted share, for the preceding quarter and a 9% increase compared to $49.9 million, or $1.44 per diluted share, for the fourth quarter of 2021. Banner’s fourth quarter 2022 results include $6.7 million of provision for credit losses, compared to $6.1 million of provision for credit losses in the preceding quarter and $5.2 million in recapture of provision for credit losses in the fourth quarter of 2021. In addition, the current quarter included an accrual of $3.5 million of legal expense in relation to a potential settlement of a pending litigation matter. For the year ended December 31, 2022, net income decreased 3% to $195.4 million, or $5.67 per diluted share, compared to net income of $201.0 million, or $5.76 per diluted share for the prior year. Full year 2022 results include $10.4 million in provision for credit losses, compared to $33.4 million in recapture of provision for credit losses in 2021. In addition, Banner recognized a $7.8 million gain related to the branch sale completed during the second quarter of 2022.

Banner announced that its Board of Directors increased its regular quarterly cash dividend by 9% to $0.48 per share. The dividend will be payable February 13, 2023, to common shareholders of record on February 02, 2023.

“Banner’s 2022 operating results reflect the continued successful execution of our super community bank strategy, and the benefits of implementing Banner Forward initiatives,” said Mark Grescovich, President and CEO. “Our performance for the fourth quarter of 2022 benefited from solid loan growth and higher yields on interest-earning assets that led to net interest margin expansion. Our continued focus on fostering new client relationships contributed to our 13% growth in loans, excluding PPP loans, compared to 2021. Our asset sensitive balance sheet contributed to the expansion of our net interest margin. As we continue to grow, we remain true to our values and guiding principle: Do the right thing for our clients, communities, employees, and shareholders through all economic cycles.”

“During the fourth quarter of 2022, we published our inaugural Environmental, Social and Governance Highlights Report,” said Grescovich. “This report identifies ongoing practices and recent accomplishments in the areas of environmental risk and impact management, social responsibility (including diversity, equity and inclusion) and governance. While we’ve been engaged in ESG activities and practices for a very long time, creating this report makes it easier to share more examples and greater detail with interested stakeholders in a single, dedicated document.” The report can be found on our website, bannerbank.com/esg.

“Banner Forward, our bank-wide initiative to enhance revenue growth and reduce operating expense, is having a meaningful impact on earnings,” said Grescovich. “Beginning during the third quarter of 2021, Banner Forward is focused on accelerating growth in commercial banking, deepening relationships with retail clients, and advancing technology strategies to enhance our digital service channels, while streamlining underwriting and back office processes. The implementation of the revenue initiatives benefited the second half of 2022 and are expected to continue ramping up in 2023. The efficiency-related initiatives associated with Banner Forward have largely been completed. During the fourth quarter of 2022, we incurred expenses of $838,000 related to Banner Forward.”

At December 31, 2022, Banner Corporation had $15.83 billion in assets, $10.01 billion in net loans and $13.62 billion in deposits. Banner operates 137 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Fourth Quarter 2022 Highlights

• Revenues increased 6% to $172.1 million, compared to $162.0 million in the preceding quarter, and increased 18% compared to $146.0 million in the fourth quarter a year ago.
• Net interest income increased 9% to $159.1 million in the fourth quarter of 2022, compared to $146.4 million in the preceding quarter and increased 31%, compared to $121.5 million in the fourth quarter a year ago.
• Net interest margin, on a tax equivalent basis, was 4.23%, compared to 3.85% in the preceding quarter and 3.17% in the fourth quarter a year ago.
• Mortgage banking revenues increased to $2.3 million, compared to $105,000 in the preceding quarter, and decreased 59% compared to $5.6 million in the fourth quarter a year ago.
• Return on average assets was 1.34%, compared to 1.18% in both the preceding quarter and fourth quarter a year ago.
• Net loans receivable increased 3% to $10.01 billion at December 31, 2022, compared to $9.69 billion at September 30, 2022, and increased 12% compared to $8.95 billion at December 31, 2021.
• Non-performing assets increased to $23.4 million, or 0.15% of total assets, at December 31, 2022, compared to $15.6 million, or 0.10% of total assets at September 30, 2022, and decreased slightly compared to $23.7 million, or 0.14% of total assets, at December 31, 2021.
• The allowance for credit losses - loans was $141.5 million, or 1.39% of total loans receivable, as of December 31, 2022, compared to $135.9 million, or 1.38% of total loans receivable as of September 30, 2022 and $132.1 million, or 1.45% of total loans receivable as of December 31, 2021.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) decreased to $12.90 billion at December 31, 2022, compared to $13.51 billion at September 30, 2022, and $13.49 billion a year ago. Core deposits represented 95% of total deposits at December 31, 2022.
• Dividends paid to shareholders were $0.44 per share in the quarter ended December 31, 2022.
• Common shareholders’ equity per share increased 3% to $42.59 at December 31, 2022, compared to $41.20 at the preceding quarter end, and decreased 14% from $49.35 a year ago.
• Tangible common shareholders’ equity per share* increased 5% to $31.41 at December 31, 2022, compared to $29.97 at the preceding quarter end, and decreased 17% from $38.02 a year ago.

*Non-GAAP (Generally Accepted Accounting Principles) measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.

Income Statement Review

Net interest income was $159.1 million in the fourth quarter of 2022, compared to $146.4 million in the preceding quarter and $121.5 million in the fourth quarter a year ago. Banner’s net interest margin on a tax equivalent basis was 4.23% for the fourth quarter of 2022, a 38 basis-point increase compared to 3.85% in the preceding quarter and a 106 basis-point increase compared to 3.17% in the fourth quarter a year ago. “Rising market interest rates during the quarter produced higher yields on loans and investment securities which improved our net interest margin. Our net interest margin was also enhanced by increases in average loan balances during the quarter,” said Grescovich.

Average yields on interest-earning assets increased 43 basis points to 4.40% for the fourth quarter of 2022, compared to 3.97% for the preceding quarter and increased 111 basis points compared to 3.29% in the fourth quarter a year ago. Since March 2022, in response to inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve System has increased the target range for the federal funds rate by 425 basis points, including 125 basis points during the fourth quarter of 2022, to a range of 4.25% to 4.50%. The increase in average yields on interest-earning assets during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. Average loan yields increased 32 basis points to 5.14% compared to 4.82% in the preceding quarter and increased 57 basis points compared to 4.57% in the fourth quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding and prior year quarters was primarily the result of rising interest rates. The year-over-year increase in average loan yields was partially offset by a decline in the recognition of deferred loan fee income due to loan repayments from U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan forgiveness compared to the prior year quarter. Total deposit costs were 0.10% in the fourth quarter of 2022, which was a three basis-point increase compared to both the preceding quarter and fourth quarter a year ago. The total cost of funding liabilities was 0.18% during the fourth quarter of 2022, a five basis-point increase compared to 0.13% in both the preceding quarter and fourth quarter a year ago.

Banner recorded a $6.7 million provision for credit losses in the current quarter (comprised of a $6.0 million provision for credit losses - loans, a $680,000 provision for credit losses - unfunded loan commitments and a $19,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $6.1 million provision for credit losses in the prior quarter (comprised of a $6.3 million provision for credit losses - loans, a $205,000 recapture of provision for credit losses - unfunded loan commitments and a $55,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $5.2 million recapture of provision for credit losses in the fourth quarter a year ago (comprised of an $8.1 million recapture of provision for credit losses - loans, a $2.3 million provision for credit losses - unfunded loan commitments and a $579,000 provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current and preceding quarter primarily reflects loan growth and, to a lesser extent, a deterioration in forecasted economic indicators utilized to estimate credit losses.

Total non-interest income was $13.1 million in the fourth quarter of 2022, compared to $15.6 million in the preceding quarter and $24.5 million in the fourth quarter a year ago. The decrease in non-interest income during the current quarter, compared to the prior quarter was primarily due to a $628,000 decrease in deposit fees and other service charges and a $3.7 million net loss on the sale of securities recorded during the current quarter, partially offset by a $2.2 million increase in mortgage banking revenues. The decrease in non-interest income during the current quarter, compared to the prior year quarter was primarily due to a $3.3 million decrease in mortgage banking revenues, a $3.3 million decrease in miscellaneous non-interest income primarily due to a valuation adjustment recognized on the SBA servicing asset and higher gains related to SBA loans sold during the fourth quarter a year ago, and the previously mentioned net loss recognized on the sale of securities during the current quarter, partially offset by a $917,000 increase in bank-owned life insurance income. Deposit fees and other service charges were $10.8 million in the fourth quarter of 2022, compared to $11.4 million in the preceding quarter and $10.3 million in the fourth quarter a year ago.

Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, were $2.3 million in the fourth quarter, compared to $105,000 in the preceding quarter and $5.6 million in the fourth quarter a year ago. The increase from the preceding quarter primarily reflects a negative fair value adjustment recognized in the previous quarter on multifamily held for sale loans. The decrease from the fourth quarter of 2021 primarily reflects a reduction in the volume and a decrease in the gain on sale margin for one- to four-family loans sold. The reduction in the volume of one-to four family loans sold primarily reflects reduced refinancing activity, as well as decreased purchase activity as interest rates increased during the current year. Home purchase activity accounted for 90% of one- to four-family mortgage loan originations in the fourth quarter of 2022, compared to 88% in the preceding quarter and was 64% in the fourth quarter of 2021. Mortgage banking revenue included a $723,000 lower of cost or market upward adjustment for the current quarter due to the transfer of multifamily held for sale loans to held for investment portfolio loans, partially offset by a negative fair value adjustment on multifamily held for sale loans. This compares to a $2.2 million lower of cost or market downward adjustment recorded during the preceding quarter on multifamily held for sale loans due to increases in market interest rates this year.

Fourth quarter 2022 non-interest income also included a $157,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and limited partnership investments, and a $3.7 million net loss on the sale of securities. In the preceding quarter, results included a $532,000 net gain for fair value adjustments and a $6,000 net gain on the sale of securities. In the fourth quarter a year ago, results included a $2.7 million net gain for fair value adjustments and a $136,000 net loss on the sale of securities.

Total revenue increased 6% to $172.1 million for the fourth quarter of 2022, compared to $162.0 million in the preceding quarter, and increased 18% compared to $146.0 million in the fourth quarter of 2021. Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities, the net change in valuation of financial instruments, and the gain on sale of branches) was $175.7 million in the fourth quarter of 2022, compared to $161.5 million in the preceding quarter and $143.4 million in the fourth quarter a year ago. For the year ended December 31, 2022, total revenue was $628.4 million compared to $593.3 million during 2021, with adjusted revenue* totaling $623.1 million for the year ended December 31, 2022, compared to $588.2 million in 2021.

Total non-interest expense was $99.0 million in the fourth quarter of 2022, compared to $95.0 million in the preceding quarter and $91.8 million in the fourth quarter of 2021. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $1.1 million decrease in capitalized loan origination costs, primarily due to decreases in production for construction and land loans, a $1.5 million increase in occupancy and equipment expenses, primarily reflecting increased building rent expense due to lease buyouts during the quarter as well as weather related increases in building maintenance expense, and a $3.7 million increase in professional and legal expenses, primarily due to a $3.5 million accrual during the current quarter in relation to a potential settlement of a pending litigation matter, partially offset by a $1.3 million decrease in salary and employee benefits expense, primarily due to a decrease in commission expense. The increase in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects an increase in salary and employee benefits expense, a decrease in capitalized loan origination costs and an increase in professional and legal expenses, partially offset by a $2.3 million loss on extinguishment of debt as a result of the redemption of $8.2 million of junior subordinated debentures during fourth quarter of 2021. For the year ended December 31, 2022, total non-interest expense was $377.3 million, compared to $380.1 million in the prior year. Banner’s efficiency ratio was 57.52% for the fourth quarter, compared to 58.65% in the preceding quarter and 62.88% in same quarter a year ago. Banner’s adjusted efficiency ratio* was 54.43% for the fourth quarter, compared to 57.04% in the preceding quarter and 59.71% in the year ago quarter.

Federal and state income tax expense totaled $12.0 million for the fourth quarter of 2022 resulting in an effective tax rate of 18.1%, reflecting the benefits from tax exempt income as well as some adjustments related to filing its annual tax returns. 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.

* Non-GAAP measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.

Balance Sheet Review

Total assets decreased 3% to $15.83 billion at December 31, 2022, compared to $16.36 billion at September 30, 2022, and decreased 6% when compared to $16.80 billion at December 31, 2021. The total of securities and interest-bearing deposits held at other banks was $4.28 billion at December 31, 2022, compared to $5.01 billion at September 30, 2022 and $6.26 billion at December 31, 2021. The decreases compared to the prior quarter and the prior year quarter were primarily due to a decrease in interest-bearing deposits. The average effective duration of Banner's securities portfolio was approximately 6.5 years at December 31, 2022, compared to 4.6 years at December 31, 2021.

Total loans receivable increased to $10.15 billion at December 31, 2022, compared to $9.83 billion at September 30, 2022, and $9.08 billion at December 31, 2021. Excluding SBA PPP loans, total loans receivable increased $325.1 million from the preceding quarter and increased $1.19 billion from the fourth quarter a year ago. SBA PPP loans decreased 41% to $7.9 million at December 31, 2022, compared to $13.4 million at September 30, 2022, and decreased 94% to $133.9 million at December 31, 2021. One- to four-family residential loans increased to $1.17 billion at December 31, 2022, compared to $1.03 billion at September 30, 2022, and $657.5 million a year ago. The increase in one- to four-family residential loans from the preceding quarter was primarily the result of one- to four-family construction loans converting to one- to four-family portfolio loans as construction was completed and new production during the fourth quarter of 2022. Multifamily real estate loans increased 9% to $645.1 million at December 31, 2022, compared to $592.8 million at September 30, 2022, and increased 22% compared to $530.9 million a year ago. The current quarter increase in multifamily loans was due to transferring $54.0 million of multifamily held for sale loans to held for investment portfolio loans. Commercial real estate loans decreased slightly to $3.64 billion at December 31, 2022, compared to $3.66 billion at September 30, 2022 and decreased 4% when compared to $3.79 billion at December 31, 2021. Commercial business loans increased 4% to $2.23 billion at December 31, 2022, compared to $2.15 billion at September 30, 2022, and increased 14% compared to $1.96 billion a year ago. Excluding SBA PPP loans, commercial business loans increased 4% to $2.22 billion at December 31, 2022, compared to $2.14 billion at September 30, 2022, and increased 21% compared to $1.83 billion a year ago. Agricultural business loans decreased to $295.1 million at December 31, 2022, compared to $299.4 million at September 30, 2022, and increased from $280.6 million a year ago. Total construction, land and land development loans were $1.49 billion at December 31, 2022, a 3% increase from $1.44 billion at September 30, 2022, and a 14% increase from $1.31 billion at December 31, 2021, primarily due to an increase in multifamily construction loans. Consumer loans increased to $680.9 million at December 31, 2022, compared to $662.2 million at September 30, 2022, and increased from $555.9 million a year ago. The year-over-year increase in consumer loans was partially due to the purchase of a $25.6 million pool of consumer marine loans during the prior quarter.

Loans held for sale were $56.9 million at December 31, 2022, compared to $84.4 million at September 30, 2022, and $96.5 million at December 31, 2021. The volume of one- to four- family residential mortgage loans sold was $39.3 million in the current quarter, compared to $49.7 million in the preceding quarter and $245.9 million in the fourth quarter a year ago. No multifamily loans were sold during the fourth quarter of 2022, compared to $10.5 million sold in the preceding quarter and none sold in the fourth quarter a year ago.

Total deposits decreased to $13.62 billion at December 31, 2022, compared to $14.23 billion at September 30, 2022, and $14.33 billion a year ago. Non-interest-bearing account balances decreased 5% to $6.18 billion at December 31, 2022, compared to $6.51 billion at September 30, 2022, and 3% compared to $6.39 billion a year ago. Core deposits were 95% of total deposits at both December 31, 2022 and September 30, 2022 and 94% of total deposits at December 31, 2021. Certificates of deposit increased to $723.5 million at December 31, 2022, compared to $721.9 million at September 30, 2022, and decreased 14% compared to $838.6 million a year earlier. Banner had $50.0 million of FHLB borrowings at December 31, 2022, compared to none at September 30, 2022 and $50.0 million a year ago.

At December 31, 2022, total common shareholders’ equity was $1.46 billion, or 9.20% of assets, compared to $1.41 billion or 8.61% of assets at September 30, 2022, and $1.69 billion or 10.06% of assets a year ago. The increase in total common shareholders’ equity at December 31, 2022 compared to September 30, 2022 was primarily due to a $39.1 million increase in retained earnings as a result of $54.4 million in net income, partially offset by the payment of cash dividends during the quarter. The decrease in total common shareholders’ equity from December 31, 2021 reflects a $363.0 million decrease in accumulated other comprehensive income, primarily due to an increase in the unrealized loss on the security portfolio as a result of an increase in interest rates, the repurchase of 200,000 shares of common stock in the second quarter of 2022 at an average cost of $54.80 per share, and the payment of cash dividends, partially offset by a $134.5 million increase in retained earnings. At December 31, 2022, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.07 billion, or 6.95% of tangible assets*, compared to $1.02 billion, or 6.41% of tangible assets, at September 30, 2022, and $1.30 billion, or 7.93% of tangible assets, a year ago.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At December 31, 2022, Banner's estimated common equity Tier 1 capital ratio was 11.44%, its estimated Tier 1 leverage capital to average assets ratio was 9.45%, and its estimated total capital to risk-weighted assets ratio was 14.04%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

* Non-GAAP measure; see the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.

Credit Quality

The allowance for credit losses - loans was $141.5 million, or 1.39% of total loans receivable and 615% of non-performing loans, at December 31, 2022, compared to $135.9 million, or 1.38% of total loans receivable and 895% of non-performing loans, at September 30, 2022, and $132.1 million, or 1.45% of total loans receivable and 578% of non-performing loans, at December 31, 2021. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $14.7 million at December 31, 2022, compared to $14.0 million at September 30, 2022 and $12.4 million at December 31, 2021. Net loan charge-offs totaled $496,000 in the fourth quarter of 2022, compared to net loan recoveries of $869,000 in the preceding quarter and $311,000 in the fourth quarter a year ago. Non-performing loans were $23.0 million at December 31, 2022, compared to $15.2 million at September 30, 2022, and $22.8 million a year ago.

Banner’s total substandard loans were $137.2 million at December 31, 2022, compared to $136.4 million at September 30, 2022, and $198.4 million a year ago. The year over year decrease primarily reflects the payoff of substandard loans as well as risk rating upgrades during the current year.

Banner’s total non-performing assets were $23.4 million, or 0.15% of total assets, at December 31, 2022, compared to $15.6 million, or 0.10% of total assets, at September 30, 2022, and $23.7 million, or 0.14% of total assets, a year ago.

Conference Call

Banner will host a conference call on Friday January 20, 2023, at 8:00 a.m. PST, to discuss its fourth quarter results. Interested investors may listen to the call live at www.bannerbank.com. Investment professionals are invited to dial (844) 200-6205 using access code 188909 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 733055 or at www.bannerbank.com.

About the Company

Banner Corporation is a $15.83 billion bank holding company operating one commercial bank in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

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

Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing oil prices and supply chain disruptions, and any governmental or societal responses to the COVID-19 pandemic, including the possibility of new COVID-19 variants; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (3) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (4) competitive pressures among depository institutions; (5) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (6) the transition away from the London Interbank Offered Rate (LIBOR) toward new interest rate benchmarks; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (10) the ability to access cost-effective funding; (11) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (12) changes in financial markets; (13) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular, including the risk of inflation; (14) the costs, effects and outcomes of litigation; (15) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) future acquisitions by Banner of other depository institutions or lines of business; (18) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (19) the costs associated with Banner Forward; (20) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (21) other risks detailed from time to time in Banner’s filings with the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

RESULTS OF OPERATIONS	Quarters Ended												Years Ended
(in thousands except shares and per share data)	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
INTEREST INCOME:
Loans receivable	$	129,450			$	116,610			$	104,929			$	450,916			$	445,731
Mortgage-backed securities		19,099				17,558				13,220				67,585				45,723
Securities and cash equivalents		17,009				16,951				8,397				54,068				29,046
		165,558				151,119				126,546				572,569				520,500
INTEREST EXPENSE:
Deposits		3,623				2,407				2,384				10,124				11,770
Federal Home Loan Bank advances		198				—				348				489				2,592
Other borrowings		132				81				109				377				467
Subordinated debt		2,534				2,188				2,175				8,400				8,780
		6,487				4,676				5,016				19,390				23,609
Net interest income		159,071				146,443				121,530				553,179				496,891
PROVISION (RECAPTURE) FOR CREDIT LOSSES		6,704				6,087				(5,243	)			10,364				(33,388	)
Net interest income after provision (recapture) for credit losses		152,367				140,356				126,773				542,815				530,279
NON-INTEREST INCOME:
Deposit fees and other service charges		10,821				11,449				10,341				44,459				39,495
Mortgage banking operations		2,311				105				5,643				10,834				33,948
Bank-owned life insurance		2,120				1,804				1,203				7,794				5,000
Miscellaneous		1,382				1,689				4,702				6,805				12,875
		16,634				15,047				21,889				69,892				91,318
Net (loss) gain on sale of securities		(3,721	)			6				(136	)			(3,248	)			482
Net change in valuation of financial instruments carried at fair value		157				532				2,721				807				4,616
Gain on sale of branches, including related deposits		—				—				—				7,804				—
Total non-interest income		13,070				15,585				24,474				75,255				96,416
NON-INTEREST EXPENSE:
Salary and employee benefits		60,309				61,639				57,798				242,266				244,351
Less capitalized loan origination costs		(4,877	)			(5,984	)			(7,647	)			(24,313	)			(34,401	)
Occupancy and equipment		13,506				12,008				13,885				52,018				52,850
Information and computer data services		6,535				6,803				6,441				25,986				24,356
Payment and card processing services		5,109				5,508				5,062				21,195				20,544
Professional and legal expenses		6,328				2,619				2,251				14,005				22,274
Advertising and marketing		1,350				1,326				2,071				3,959				6,036
Deposit insurance		1,739				1,946				1,340				6,649				5,583
State and municipal business and use taxes		1,304				1,223				976				4,693				4,343
Real estate operations, net		28				68				49				(104	)			(22	)
Amortization of core deposit intangibles		1,215				1,215				1,574				5,279				6,571
Loss on extinguishment of debt		—				—				2,284				793				2,284
Miscellaneous		6,467				6,663				5,594				24,869				24,236
		99,013				95,034				91,678				377,295				379,005
COVID-19 expenses		—				—				127				—				436
Merger and acquisition-related expenses		—				—				—				—				660
Total non-interest expense		99,013				95,034				91,805				377,295				380,101
Income before provision for income taxes		66,424				60,907				59,442				240,775				246,594
PROVISION FOR INCOME TAXES		12,044				11,837				9,515				45,397				45,546
NET INCOME	$	54,380			$	49,070			$	49,927			$	195,378			$	201,048
Earnings per common share:
Basic	$	1.59			$	1.43			$	1.46			$	5.70			$	5.81
Diluted	$	1.58			$	1.43			$	1.44			$	5.67			$	5.76
Cumulative dividends declared per common share	$	0.44			$	0.44			$	0.41			$	1.76			$	1.64
Weighted average number of common shares outstanding:
Basic		34,226,162				34,224,640				34,292,967				34,264,322				34,610,056
Diluted		34,437,151				34,416,017				34,575,607				34,459,922				34,919,188
Increase (decrease) in common shares outstanding		2,259				429				641				(58,614	)			(906,568	)

FINANCIAL CONDITION													Percentage Change
(in thousands except shares and per share data)	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Prior Qtr			Prior Yr Qtr
ASSETS
Cash and due from banks	$	198,154			$	273,052			$	358,461			(27.4	)%		(44.7	)%
Interest-bearing deposits		44,908				548,869				1,775,839			(91.8	)%		(97.5	)%
Total cash and cash equivalents		243,062				821,921				2,134,300			(70.4	)%		(88.6	)%
Securities - trading		28,694				28,383				26,981			1.1	%		6.3	%
Securities - available for sale		2,789,031				2,996,173				3,638,993			(6.9	)%		(23.4	)%
Securities - held to maturity		1,117,588				1,132,852				520,922			(1.3	)%		114.5	%
Total securities		3,935,313				4,157,408				4,186,896			(5.3	)%		(6.0	)%
Federal Home Loan Bank (FHLB) stock		12,000				10,000				12,000			20.0	%		—	%
Securities purchased under agreements to resell		300,000				300,000				300,000			—	%		—	%
Loans held for sale		56,857				84,358				96,487			(32.6	)%		(41.1	)%
Loans receivable		10,146,724				9,827,096				9,084,763			3.3	%		11.7	%
Allowance for credit losses – loans		(141,465	)			(135,918	)			(132,099	)		4.1	%		7.1	%
Net loans receivable		10,005,259				9,691,178				8,952,664			3.2	%		11.8	%
Accrued interest receivable		57,284				50,689				42,916			13.0	%		33.5	%
Real estate owned (REO) held for sale, net		340				340				852			—	%		(60.1	)%
Property and equipment, net		138,754				141,280				148,759			(1.8	)%		(6.7	)%
Goodwill		373,121				373,121				373,121			—	%		—	%
Other intangibles, net		9,440				10,655				14,855			(11.4	)%		(36.5	)%
Bank-owned life insurance		297,565				295,443				244,156			0.7	%		21.9	%
Operating lease right-of-use assets		49,283				51,908				55,257			(5.1	)%		(10.8	)%
Other assets		355,153				372,508				242,609			(4.7	)%		46.4	%
Total assets	$	15,833,431			$	16,360,809			$	16,804,872			(3.2	)%		(5.8	)%
LIABILITIES
Deposits:
Non-interest-bearing	$	6,176,998			$	6,507,523			$	6,385,177			(5.1	)%		(3.3	)%
Interest-bearing transaction and savings accounts		6,719,531				7,004,799				7,103,125			(4.1	)%		(5.4	)%
Interest-bearing certificates		723,530				721,944				838,631			0.2	%		(13.7	)%
Total deposits		13,620,059				14,234,266				14,326,933			(4.3	)%		(4.9	)%
Advances from FHLB		50,000				—				50,000			—	%		—	%
Other borrowings		232,799				234,006				264,490			(0.5	)%		(12.0	)%
Subordinated notes, net		98,947				98,849				98,564			0.1	%		0.4	%
Junior subordinated debentures at fair value		74,857				73,841				119,815			1.4	%		(37.5	)%
Operating lease liabilities		55,205				58,031				59,756			(4.9	)%		(7.6	)%
Accrued expenses and other liabilities		200,839				209,226				148,303			(4.0	)%		35.4	%
Deferred compensation		44,293				43,931				46,684			0.8	%		(5.1	)%
Total liabilities		14,376,999				14,952,150				15,114,545			(3.8	)%		(4.9	)%
SHAREHOLDERS’ EQUITY
Common stock		1,293,959				1,291,741				1,299,381			0.2	%		(0.4	)%
Retained earnings		525,242				486,108				390,762			8.1	%		34.4	%
Accumulated other comprehensive (loss) income		(362,769	)			(369,190	)			184			(1.7	)%		nm
Total shareholders’ equity		1,456,432				1,408,659				1,690,327			3.4	%		(13.8	)%
Total liabilities and shareholders’ equity	$	15,833,431			$	16,360,809			$	16,804,872			(3.2	)%		(5.8	)%
Common Shares Issued:
Shares outstanding at end of period		34,194,018				34,191,759				34,252,632
Common shareholders’ equity per share (1)	$	42.59			$	41.20			$	49.35
Common shareholders’ tangible equity per share (1) (2)	$	31.41			$	29.97			$	38.02
Common shareholders’ tangible equity to tangible assets (2)		6.95	%			6.41	%			7.93	%
Consolidated Tier 1 leverage capital ratio		9.45	%			9.06	%			8.76	%

(1	)	Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2	)	Common shareholders’ tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
													Percentage Change
LOANS (1)	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Prior Qtr			Prior Yr Qtr
Commercial real estate (CRE):
Owner-occupied	$	845,320			$	862,792			$	831,623			(2.0	)%		1.6	%
Investment properties		1,589,975				1,604,881				1,674,027			(0.9	)%		(5.0	)%
Small balance CRE		1,200,251				1,188,351				1,281,863			1.0	%		(6.4	)%
Multifamily real estate		645,071				592,834				530,885			8.8	%		21.5	%
Construction, land and land development:
Commercial construction		184,876				171,029				167,998			8.1	%		10.0	%
Multifamily construction		325,816				275,488				259,116			18.3	%		25.7	%
One- to four-family construction		647,329				666,350				568,753			(2.9	)%		13.8	%
Land and land development		328,475				329,459				313,454			(0.3	)%		4.8	%
Commercial business:
Commercial business		1,275,813				1,229,490				1,038,206			3.8	%		22.9	%
SBA PPP		7,594				13,060				132,574			(41.9	)%		(94.3	)%
Small business scored		947,092				906,647				792,310			4.5	%		19.5	%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland		294,743				299,056				279,224			(1.4	)%		5.6	%
SBA PPP		334				344				1,354			(2.9	)%		(75.3	)%
One- to four-family residential		1,173,112				1,025,143				657,474			14.4	%		78.4	%
Consumer:
Consumer—home equity revolving lines of credit		566,291				545,807				458,533			3.8	%		23.5	%
Consumer—other		114,632				116,365				97,369			(1.5	)%		17.7	%
Total loans receivable	$	10,146,724			$	9,827,096			$	9,084,763			3.3	%		11.7	%
Restructured loans performing under their restructured terms	$	4,241			$	4,352			$	5,309
Loans 30 - 89 days past due and on accrual	$	17,186			$	15,208			$	11,558
Total delinquent loans (including loans on non-accrual), net	$	32,371			$	21,728			$	18,688
Total delinquent loans / Total loans receivable		0.32	%			0.22	%			0.21	%

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

LOANS BY GEOGRAPHIC LOCATION													Percentage Change
	Dec 31, 2022						Sep 30, 2022			Dec 31, 2021			Prior Qtr			Prior Yr Qtr
	Amount			Percentage			Amount			Amount
Washington	$	4,777,546		47.1	%		$	4,648,124		$	4,264,590		2.8	%		12.0	%
California		2,484,980		24.5	%			2,323,740			2,138,340		6.9	%		16.2	%
Oregon		1,826,743		18.0	%			1,765,254			1,652,364		3.5	%		10.6	%
Idaho		565,586		5.6	%			588,498			525,141		(3.9	)%		7.7	%
Utah		75,967		0.7	%			95,250			74,913		(20.2	)%		1.4	%
Other		415,902		4.1	%			406,230			429,415		2.4	%		(3.1	)%
Total loans receivable	$	10,146,724		100.0	%		$	9,827,096		$	9,084,763		3.3	%		11.7	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)

LOAN ORIGINATIONS	Quarters Ended									Years Ended
	Dec 31, 2022			Sep 30, 2022			Dec 31, 2021			Dec 31, 2022			Dec 31, 2021
Commercial real estate	$	117,787		$	92,062		$	196,350		$	418,635		$	565,809
Multifamily real estate		8,881			4,603			25,933			37,612			110,640
Construction and land		301,804			444,365			522,081			1,935,476			1,975,664
Commercial business:
Commercial business		298,396			218,044			203,549			1,034,950			731,315
SBA PPP		—			—			—			—			485,077
Agricultural business		24,314			9,879			13,061			89,655			61,997
One-to four-family residential		83,491			92,701			52,251			358,976			206,662
Consumer		102,502			126,940			101,365			545,254			465,213
Total loan originations (excluding loans held for sale)	$	937,175		$	988,594		$	1,114,590		$	4,420,558		$	4,602,377

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Quarters Ended												Years Ended
CHANGE IN THE	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
ALLOWANCE FOR CREDIT LOSSES – LOANS
Balance, beginning of period	$	135,918			$	128,702			$	139,915			$	132,099			$	167,279
Provision (recapture) for credit losses – loans		6,043				6,347				(8,127	)			8,158				(33,112	)
Recoveries of loans previously charged off:
Commercial real estate		88				88				635				392				1,729
Construction and land		—				—				—				384				100
One- to four-family real estate		18				25				47				181				199
Commercial business		616				924				267				1,923				1,797
Agricultural business, including secured by farmland		91				252				5				475				30
Consumer		153				85				140				566				760
		966				1,374				1,094				3,921				4,615
Loans charged off:
Commercial real estate		—				—				(1	)			(2	)			(3,767	)
Multifamily real estate		—				—				(59	)			—				(59	)
Construction and land		—				(25	)			—				(30	)			—
Commercial business		(1,231	)			(138	)			(488	)			(1,699	)			(1,762	)
Agricultural business, including secured by farmland		—				(42	)			—				(42	)			(181	)
Consumer		(231	)			(300	)			(235	)			(940	)			(914	)
		(1,462	)			(505	)			(783	)			(2,713	)			(6,683	)
Net (charge-offs) recoveries		(496	)			869				311				1,208				(2,068	)
Balance, end of period	$	141,465			$	135,918			$	132,099			$	141,465			$	132,099
Net (charge-offs) recoveries / Average loans receivable	(0.005		)%			0.009	%			0.003	%			0.013	%		(0.021		)%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES – LOANS	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021
Specific or allocated credit loss allowance:
Commercial real estate	$	44,086			$	44,365			$	52,995
Multifamily real estate		7,734				7,114				7,043
Construction and land		29,171				27,985				27,294
One- to four-family real estate		14,729				12,394				8,205
Commercial business		33,299				31,854				26,421
Agricultural business, including secured by farmland		3,475				3,455				3,190
Consumer		8,971				8,751				6,951
Total allowance for credit losses – loans	$	141,465			$	135,918			$	132,099
Allowance for credit losses - loans / Total loans receivable		1.39	%			1.38	%			1.45	%
Allowance for credit losses - loans / Non-performing loans		615	%			895	%			578	%

	Quarters Ended										Years Ended
CHANGE IN THE	Dec 31, 2022			Sep 30, 2022				Dec 31, 2021			Dec 31, 2022			Dec 31, 2021
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period	$	14,041		$	14,246			$	10,127		$	12,432		$	13,297
Provision/(recapture) for credit losses - unfunded loan commitments		680			(205	)			2,305			2,289			(865	)
Balance, end of period	$	14,721		$	14,041			$	12,432		$	14,721		$	12,432

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	3,683			$	6,997			$	14,159
Construction and land		181				299				479
One- to four-family		5,236				2,381				2,711
Commercial business		9,886				1,462				2,156
Agricultural business, including secured by farmland		594				594				1,022
Consumer		2,126				1,779				1,754
		21,706				13,512				22,281
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
One- to four-family		1,023				1,556				436
Commercial business		—				64				2
Consumer		264				61				117
		1,287				1,681				555
Total non-performing loans		22,993				15,193				22,836
REO		340				340				852
Other repossessed assets		17				17				17
Total non-performing assets	$	23,350			$	15,550			$	23,705
Total non-performing assets to total assets		0.15	%			0.10	%			0.14	%

	Dec 31, 2022			Sep 30, 2022			Dec 31, 2021
LOANS BY CREDIT RISK RATING
Pass	$	10,000,493		$	9,672,473		$	8,874,468
Special Mention		9,081			18,251			11,932
Substandard		137,150			136,372			198,363
Total	$	10,146,724		$	9,827,096		$	9,084,763

	Quarters Ended									Years Ended
REAL ESTATE OWNED	Dec 31, 2022			Sep 30, 2022			Dec 31, 2021			Dec 31, 2022				Dec 31, 2021
Balance, beginning of period	$	340		$	340		$	852		$	852			$	816
Additions from loan foreclosures		—			—			—			—				512
Proceeds from dispositions of REO		—			—			—			(864	)			(783	)
Gain on sale of REO		—			—			—			352				307
Balance, end of period	$	340		$	340		$	852		$	340			$	852

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION										Percentage Change
	Dec 31, 2022			Sep 30, 2022			Dec 31, 2021			Prior Qtr			Prior Yr Qtr
Non-interest-bearing	$	6,176,998		$	6,507,523		$	6,385,177		(5.1)	%		(3.3)	%
Interest-bearing checking		1,811,153			1,856,244			1,947,414		(2.4)	%		(7.0)	%
Regular savings accounts		2,710,090			2,824,711			2,784,716		(4.1)	%		(2.7)	%
Money market accounts		2,198,288			2,323,844			2,370,995		(5.4)	%		(7.3)	%
Total interest-bearing transaction and savings accounts		6,719,531			7,004,799			7,103,125		(4.1)	%		(5.4)	%
Total core deposits		12,896,529			13,512,322			13,488,302		(4.6)	%		(4.4)	%
Interest-bearing certificates		723,530			721,944			838,631		0.2	%		(13.7)	%
Total deposits	$	13,620,059		$	14,234,266		$	14,326,933		(4.3)	%		(4.9)	%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
	Dec 31, 2022						Sep 30, 2022			Dec 31, 2021			Percentage Change
	Amount			Percentage			Amount			Amount			Prior Qtr			Prior Yr Qtr
Washington	$	7,563,056		55.6	%		$	7,845,755		$	7,952,376		(3.6)	%		(4.9)	%
Oregon		2,998,572		22.0	%			3,148,520			3,067,054		(4.8)	%		(2.2)	%
California		2,331,524		17.1	%			2,493,977			2,524,296		(6.5)	%		(7.6)	%
Idaho		726,907		5.3	%			746,014			783,207		(2.6)	%		(7.2)	%
Total deposits	$	13,620,059		100.0	%		$	14,234,266		$	14,326,933		(4.3)	%		(4.9)	%

INCLUDED IN TOTAL DEPOSITS	Dec 31, 2022			Sep 30, 2022			Dec 31, 2021
Public non-interest-bearing accounts	$	212,533		$	192,742		$	193,917
Public interest-bearing transaction & savings accounts		180,326			172,567			159,957
Public interest-bearing certificates		26,810			33,787			39,961
Total public deposits	$	419,669		$	399,096		$	393,835

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ESTIMATED REGULATORY CAPITAL RATIOS AS OF DECEMBER 31, 2022	Actual						Minimum to be categorized as "Adequately Capitalized"						Minimum to be categorized as "Well Capitalized"
	Amount			Ratio			Amount			Ratio			Amount			Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets	$	1,769,064		14.04	%		$	1,008,232		8.00	%		$	1,260,290		10.00	%
Tier 1 capital to risk-weighted assets		1,528,694		12.13	%			756,174		6.00	%			756,174		6.00	%
Tier 1 leverage capital to average assets		1,528,694		9.45	%			647,345		4.00	%		n/a			n/a
Common equity tier 1 capital to risk-weighted assets		1,442,194		11.44	%			567,130		4.50	%		n/a			n/a
Banner Bank:
Total capital to risk-weighted assets		1,684,766		13.38	%			1,007,325		8.00	%			1,259,156		10.00	%
Tier 1 capital to risk-weighted assets		1,544,396		12.27	%			755,494		6.00	%			1,007,325		8.00	%
Tier 1 leverage capital to average assets		1,544,396		9.55	%			646,935		4.00	%			808,668		5.00	%
Common equity tier 1 capital to risk-weighted assets		1,544,396		12.27	%			566,620		4.50	%			818,452		6.50	%

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

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Dec 31, 2022									Sep 30, 2022									Dec 31, 2021
	Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)
Interest-earning assets:
Held for sale loans	$	45,654		$	527		4.58	%		$	68,608		$	676		3.91	%		$	73,101		$	601		3.26	%
Mortgage loans		8,175,281			103,478		5.02	%			7,841,018			94,581		4.79	%			7,362,363			83,059		4.48	%
Commercial/agricultural loans		1,742,517			24,727		5.63	%			1,670,595			20,418		4.85	%			1,460,486			14,966		4.07	%
SBA PPP loans		9,347			224		9.51	%			21,943			613		11.08	%			209,776			5,845		11.05	%
Consumer and other loans		140,801			2,125		5.99	%			120,583			1,824		6.00	%			119,658			1,749		5.80	%
Total loans(1)		10,113,600			131,081		5.14	%			9,722,747			118,112		4.82	%			9,225,384			106,220		4.57	%
Mortgage-backed securities		3,187,557			19,244		2.40	%			3,183,837			17,704		2.21	%			2,838,759			13,344		1.86	%
Other securities		1,628,553			15,945		3.88	%			1,671,305			13,578		3.22	%			1,550,383			8,466		2.17	%
Interest-bearing deposits with banks		245,538			2,126		3.44	%			778,196			4,406		2.25	%			1,901,165			731		0.15	%
FHLB stock		10,773			76		2.80	%			10,000			75		2.98	%			12,000			135		4.46	%
Total investment securities		5,072,421			37,391		2.92	%			5,643,338			35,763		2.51	%			6,302,307			22,676		1.43	%
Total interest-earning assets		15,186,021			168,472		4.40	%			15,366,085			153,875		3.97	%			15,527,691			128,896		3.29	%
Non-interest-earning assets		927,585									1,100,313									1,306,437
Total assets	$	16,113,606								$	16,466,398								$	16,834,128
Deposits:
Interest-bearing checking accounts	$	1,818,907			566		0.12	%		$	1,862,887			429		0.09	%		$	1,875,097			289		0.06	%
Savings accounts		2,761,323			866		0.12	%			2,822,153			481		0.07	%			2,773,597			400		0.06	%
Money market accounts		2,256,867			1,337		0.24	%			2,378,851			769		0.13	%			2,367,861			559		0.09	%
Certificates of deposit		709,974			854		0.48	%			740,014			728		0.39	%			840,920			1,136		0.54	%
Total interest-bearing deposits		7,547,071			3,623		0.19	%			7,803,905			2,407		0.12	%			7,857,475			2,384		0.12	%
Non-interest-bearing deposits		6,402,297			—		—	%			6,458,749			—		—	%			6,523,149			—		—	%
Total deposits		13,949,368			3,623		0.10	%			14,262,654			2,407		0.07	%			14,380,624			2,384		0.07	%
Other interest-bearing liabilities:
FHLB advances		19,337			198		4.06	%			—			—		—	%			50,000			348		2.76	%
Other borrowings		238,217			132		0.22	%			242,658			81		0.13	%			266,559			109		0.16	%
Junior subordinated debentures and subordinated notes		189,178			2,534		5.31	%			189,178			2,188		4.59	%			246,510			2,175		3.50	%
Total borrowings		446,732			2,864		2.54	%			431,836			2,269		2.08	%			563,069			2,632		1.85	%
Total funding liabilities		14,396,100			6,487		0.18	%			14,694,490			4,676		0.13	%			14,943,693			5,016		0.13	%
Other non-interest-bearing liabilities(2)		292,480									257,058									216,940
Total liabilities		14,688,580									14,951,548									15,160,633
Shareholders’ equity		1,425,026									1,514,850									1,673,495
Total liabilities and shareholders’ equity	$	16,113,606								$	16,466,398								$	16,834,128
Net interest income/rate spread (tax equivalent)				$	161,985		4.22	%					$	149,199		3.84	%					$	123,880		3.16	%
Net interest margin (tax equivalent)							4.23	%								3.85	%								3.17	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(2,914	)								(2,756	)								(2,350	)
Net interest income and margin, as reported				$	159,071		4.16	%					$	146,443		3.78	%					$	121,530		3.11	%
Additional Key Financial Ratios:
Return on average assets							1.34	%								1.18	%								1.18	%
Return on average equity							15.14	%								12.85	%								11.84	%
Average equity/average assets							8.84	%								9.20	%								9.94	%
Average interest-earning assets/average interest-bearing liabilities							189.97	%								186.58	%								184.40	%
Average interest-earning assets/average funding liabilities							105.49	%								104.57	%								103.91	%
Non-interest income/average assets							0.32	%								0.38	%								0.58	%
Non-interest expense/average assets							2.44	%								2.29	%								2.16	%
Efficiency ratio(4)							57.52	%								58.65	%								62.88	%
Adjusted efficiency ratio(5)							54.43	%								57.04	%								59.71	%

(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 $1.6 million, $1.5 million and $1.3 million for the quarters ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.3 million for both the quarters ended December 31, 2022 and September 30, 2022 and $1.1 million for the quarter ended December 31, 2021.
(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 discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Years Ended
	Dec 31, 2022										Dec 31, 2021
	Average Balance			Interest and Dividends				Yield/Cost(3)			Average Balance			Interest and Dividends				Yield/Cost(3)
Interest-earning assets:
Held for sale loans	$	82,030		$	2,973			3.62	%		$	94,252		$	3,066			3.25	%
Mortgage loans		7,731,195			364,499			4.71	%			7,225,860			328,115			4.54	%
Commercial/agricultural loans		1,617,191			77,309			4.78	%			1,498,808			62,479			4.17	%
SBA PPP loans		41,167			4,677			11.36	%			770,041			49,854			6.47	%
Consumer and other loans		123,667			7,332			5.93	%			122,520			7,298			5.96	%
Total loans(1)		9,595,250			456,790			4.76	%			9,711,481			450,812			4.64	%
Mortgage-backed securities		3,130,124			68,148			2.18	%			2,451,110			46,199			1.88	%
Other securities		1,625,250			48,278			2.97	%			1,336,974			30,114			2.25	%
Equity securities		—			—			—	%			429			—			—	%
Interest-bearing deposits with banks		969,952			9,633			0.99	%			1,392,619			1,955			0.14	%
FHLB stock		10,628			357			3.36	%			13,966			592			4.24	%
Total investment securities		5,735,954			126,416			2.20	%			5,195,098			78,860			1.52	%
Total interest-earning assets		15,331,204			583,206			3.80	%			14,906,579			529,672			3.55	%
Non-interest-earning assets		1,169,271										1,268,348
Total assets	$	16,500,475									$	16,174,927
Deposits:
Interest-bearing checking accounts	$	1,890,917			1,557			0.08	%		$	1,755,293			1,188			0.07	%
Savings accounts		2,810,264			2,053			0.07	%			2,652,018			1,833			0.07	%
Money market accounts		2,364,122			3,143			0.13	%			2,305,814			2,670			0.12	%
Certificates of deposit		764,255			3,371			0.44	%			876,509			6,079			0.69	%
Total interest-bearing deposits		7,829,558			10,124			0.13	%			7,589,634			11,770			0.16	%
Non-interest-bearing deposits		6,434,670			—			—	%			6,132,875			—			—	%
Total deposits		14,264,228			10,124			0.07	%			13,722,509			11,770			0.09	%
Other interest-bearing liabilities:
FHLB advances		15,285			489			3.20	%			97,945			2,592			2.65	%
Other borrowings		249,681			377			0.15	%			240,817			467			0.19	%
Junior subordinated debentures and subordinated notes		189,870			8,400			4.42	%			247,583			8,780			3.55	%
Total borrowings		454,836			9,266			2.04	%			586,345			11,839			2.02	%
Total funding liabilities		14,719,064			19,390			0.13	%			14,308,854			23,609			0.16	%
Other non-interest-bearing liabilities(2)		253,983										206,774
Total liabilities		14,973,047										14,515,628
Shareholders’ equity		1,527,428										1,659,299
Total liabilities and shareholders’ equity	$	16,500,475									$	16,174,927
Net interest income/rate spread (tax equivalent)				$	563,816			3.67	%					$	506,063			3.39	%
Net interest margin (tax equivalent)								3.68	%									3.39	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(10,637	)									(9,172	)
Net interest income and margin, as reported				$	553,179			3.61	%					$	496,891			3.33	%
Additional Key Financial Ratios:
Return on average assets								1.18	%									1.24	%
Return on average equity								12.79	%									12.12	%
Average equity/average assets								9.26	%									10.26	%
Average interest-earning assets/average interest-bearing liabilities								185.06	%									182.32	%
Average interest-earning assets/average funding liabilities								104.16	%									104.18	%
Non-interest income/average assets								0.46	%									0.60	%
Non-interest expense/average assets								2.29	%									2.35	%
Efficiency ratio(4)								60.04	%									64.06	%
Adjusted efficiency ratio(5)								57.99	%									60.22	%

(1)	Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans.
(2)	Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)	Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $5.9 million and $5.1 million for the years ended December 31, 2022 and December 31, 2021, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.8 million and $4.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.
(4)	Non-interest expense divided by the total of net interest income and non-interest income.
(5)	Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the discussion and reconciliation of Non-GAAP Financial Measures beginning on page 16.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
* Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments, net gain (loss) on the sale of securities and gain on sale of branches from the total of net interest income and total non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations, loss on extinguishment of debt and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP 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												Years Ended
	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
Net interest income (GAAP)	$	159,071			$	146,443			$	121,530			$	553,179			$	496,891
Non-interest income (GAAP)		13,070				15,585				24,474				75,255				96,416
Total revenue (GAAP)		172,141				162,028				146,004				628,434				593,307
Exclude net loss (gain) on sale of securities		3,721				(6	)			136				3,248				(482	)
Exclude net change in valuation of financial instruments carried at fair value		(157	)			(532	)			(2,721	)			(807	)			(4,616	)
Exclude gain on sale of branches		—				—				—				(7,804	)			—
Adjusted revenue (non-GAAP)	$	175,705			$	161,490			$	143,419			$	623,071			$	588,209

ADJUSTED EARNINGS	Quarters Ended												Years Ended
	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
Net income (GAAP)	$	54,380			$	49,070			$	49,927			$	195,378			$	201,048
Exclude net loss (gain) on sale of securities		3,721				(6	)			136				3,248				(482	)
Exclude net change in valuation of financial instruments carried at fair value		(157	)			(532	)			(2,721	)			(807	)			(4,616	)
Exclude merger and acquisition-related expenses		—				—				—				—				660
Exclude COVID-19 expenses		—				—				127				—				436
Exclude gain on sale of branches		—				—				—				(7,804	)			—
Exclude Banner Forward expenses		838				411				1,157				5,293				11,604
Exclude loss on extinguishment of debt		—				—				2,284				793				2,284
Exclude related net tax (benefit) expense		(1,057	)			31				(236	)			(174	)			(2,373	)
Total adjusted earnings (non-GAAP)	$	57,725			$	48,974			$	50,674			$	195,927			$	208,561
Diluted earnings per share (GAAP)	$	1.58			$	1.43			$	1.44			$	5.67			$	5.76
Diluted adjusted earnings per share (non-GAAP)	$	1.68			$	1.42			$	1.47			$	5.69			$	5.97

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO	Quarters Ended												Years Ended
	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
Non-interest expense (GAAP)	$	99,013			$	95,034			$	91,805			$	377,295			$	380,101
Exclude merger and acquisition-related expenses		—				—				—				—				(660	)
Exclude COVID-19 expenses		—				—				(127	)			—				(436	)
Exclude Banner Forward expenses		(838	)			(411	)			(1,157	)			(5,293	)			(11,604	)
Exclude CDI amortization		(1,215	)			(1,215	)			(1,574	)			(5,279	)			(6,571	)
Exclude state/municipal tax expense		(1,304	)			(1,223	)			(976	)			(4,693	)			(4,343	)
Exclude REO operations		(28	)			(68	)			(49	)			104				22
Exclude loss on extinguishment of debt		—				—				(2,284	)			(793	)			(2,284	)
Adjusted non-interest expense (non-GAAP)	$	95,628			$	92,117			$	85,638			$	361,341			$	354,225
Net interest income (GAAP)	$	159,071			$	146,443			$	121,530			$	553,179			$	496,891
Non-interest income (GAAP)		13,070				15,585				24,474				75,255				96,416
Total revenue (GAAP)		172,141				162,028				146,004				628,434				593,307
Exclude net loss (gain) on sale of securities		3,721				(6	)			136				3,248				(482	)
Exclude net change in valuation of financial instruments carried at fair value		(157	)			(532	)			(2,721	)			(807	)			(4,616	)
Exclude gain on sale of branches		—				—				—				(7,804	)			—
Adjusted revenue (non-GAAP)	$	175,705			$	161,490			$	143,419			$	623,071			$	588,209
Efficiency ratio (GAAP)		57.52	%			58.65	%			62.88	%			60.04	%			64.06	%
Adjusted efficiency ratio (non-GAAP)		54.43	%			57.04	%			59.71	%			57.99	%			60.22	%

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS	Dec 31, 2022				Sep 30, 2022				Dec 31, 2021
Shareholders’ equity (GAAP)	$	1,456,432			$	1,408,659			$	1,690,327
Exclude goodwill and other intangible assets, net		382,561				383,776				387,976
Tangible common shareholders’ equity (non-GAAP)	$	1,073,871			$	1,024,883			$	1,302,351
Total assets (GAAP)	$	15,833,431			$	16,360,809			$	16,804,872
Exclude goodwill and other intangible assets, net		382,561				383,776				387,976
Total tangible assets (non-GAAP)	$	15,450,870			$	15,977,033			$	16,416,896
Common shareholders’ equity to total assets (GAAP)		9.20	%			8.61	%			10.06	%
Tangible common shareholders’ equity to tangible assets (non-GAAP)		6.95	%			6.41	%			7.93	%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
Tangible common shareholders’ equity (non-GAAP)	$	1,073,871			$	1,024,883			$	1,302,351
Common shares outstanding at end of period		34,194,018				34,191,759				34,252,632
Common shareholders’ equity (book value) per share (GAAP)	$	42.59			$	41.20			$	49.35
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)	$	31.41			$	29.97			$	38.02

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

FAQ

What is the net income reported by Banner Corporation for Q4 2022?

Banner Corporation reported a net income of $54.4 million for Q4 2022.

What is the quarterly cash dividend amount for Banner Corporation?

Banner Corporation's quarterly cash dividend is $0.48 per share.

When is the dividend payable for Banner Corporation?

The dividend is payable on February 13, 2023.

How much did the provision for credit losses increase in Q4 2022?

The provision for credit losses increased to $6.7 million in Q4 2022.

What was the increase in non-performing assets for Banner Corporation?

Non-performing assets rose to $23.4 million in Q4 2022.