Banner Corporation Reports Net Income of $49.9 Million, or $1.44 Per Diluted Share, for Fourth Quarter 2021; Earns Record $201.0 Million in Net Income, or $5.76 Per Diluted Share, for 2021; Declares Increased Quarterly Cash Dividend of $0.44 Per Share

WALLA WALLA, Wash., Jan. 20, 2022 (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 fourth quarter of 2021, virtually unchanged from $49.9 million, or $1.44 per diluted share, for the third quarter of 2021 and compared to $39.0 million, or $1.10 per diluted share, for the fourth quarter of 2020. Banner’s fourth quarter 2021 results include $5.2 million in recapture of provision for credit losses, compared to $8.6 million in recapture of provision for credit losses in the preceding quarter and $602,000 in provision for credit losses in the fourth quarter of 2020. Net income for 2021 increased 73% to a record $201.0 million, or $5.76 per diluted share, compared to $115.9 million, or $3.26 per diluted share for 2020. Full year 2021 results include $33.4 million in recapture of provision for credit losses, compared to $67.9 million in provision for credit losses in 2020.

Banner announced that its Board of Directors increased its regular quarterly cash dividend by 7% to $0.44 per share. The dividend will be payable February 14, 2022, to common shareholders of record on February 3, 2022.

“Banner’s record 2021 operating results reflect the continued execution of our super community bank strategy including implementation of Banner Forward. We are generating new client relationships and adding to our core funding position by growing core deposits while maintaining a moderate risk profile,” said Mark Grescovich, President and CEO. “Our performance for the fourth quarter benefited from lower operating expense, 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 16% compared to December 31, 2020. We continue to live by our core values, summed up as doing the right thing for our clients, our communities, our colleagues, our company and our shareholders while providing a consistent and reliable source of capital through all economic cycles and changing events.”

“During the third quarter of 2021 we began implementing Banner Forward, a bank-wide initiative to drive revenue growth and reduce operating expense,” said Grescovich. “Full implementation is expected by 2023, with the goal of delivering sequential improvements in operating performance over the course of the next six quarters while staying true to our mission and value proposition of being connected, knowledgeable and responsive to our clients, communities and employees. Banner Forward is focused on accelerating growth in commercial banking, deepening relationships with retail clients, and advancing technology strategies to enhance our digital service channels, while streamlining underwriting and back office processes. During the fourth quarter of 2021, we incurred expenses of $1.2 million related to Banner Forward.”

At December 31, 2021, Banner Corporation had $16.80 billion in assets, $8.95 billion in net loans and $14.33 billion in deposits. Banner operates 150 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Fourth Quarter 2021 Highlights

• Revenues decreased 6% to $146.0 million, primarily due to a decline in SBA PPP loan forgiveness related interest income, compared to $155.5 million in the preceding quarter, and increased 1% when compared to $144.9 million in the fourth quarter a year ago.
• Net interest income decreased to $121.5 million in the fourth quarter of 2021, compared to $130.1 million in the preceding quarter and increased compared to $121.4 million in the fourth quarter a year ago.
• Net interest margin on a tax equivalent basis was 3.17%, compared to 3.47% in the preceding quarter and 3.64% in the fourth quarter a year ago.
• Mortgage banking revenues decreased 41% to $5.6 million, compared to $9.6 million in the preceding quarter, and decreased 47% compared to $10.6 million in the fourth quarter a year ago.
• Return on average assets was 1.18%, compared to 1.20% in the preceding quarter and 1.04% in the fourth quarter a year ago.
• Net loans receivable decreased to $8.95 billion at December 31, 2021, compared to $9.08 billion at September 30, 2021, and decreased 8% compared to $9.70 billion at December 31, 2020.
• Non-performing assets decreased to $23.7 million, or 0.14% of total assets, at December 31, 2021, compared to $29.7 million, or 0.18% of total assets in the preceding quarter, and decreased from $36.5 million, or 0.24% of total assets, at December 31, 2020.
• The allowance for credit losses - loans was $132.1 million, or 1.45% of total loans receivable, as of December 31, 2021, compared to $139.9 million, or 1.52% of total loans receivable as of September 30, 2021 and $167.3 million, or 1.69% of total loans receivable as of December 31, 2020.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 1% to $13.49 billion at December 31, 2021, compared to $13.31 billion at September 30, 2021, and increased 16% compared to $11.65 billion a year ago. Core deposits represented 94% of total deposits at December 31, 2021.
• Dividends to shareholders were $0.41 per share in the quarter ended December 31, 2021.
• Common shareholders’ equity per share increased 1% to $49.35 at December 31, 2021, compared to $48.67 at the preceding quarter end, and increased 4% from $47.39 a year ago.
• Tangible common shareholders’ equity per share* increased 2% to $38.02 at December 31, 2021, compared to $37.30 at the preceding quarter end, and increased 5% from $36.17 a year ago.

*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and total non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations, loss on extinguishment of debt and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

Significant Recent Initiatives and Events

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. In addition, Banner has made the decision to consolidate another seven branches in February 2022. 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 ends.

Income Statement Review

Net interest income was $121.5 million in the fourth quarter of 2021, compared to $130.1 million in the preceding quarter and $121.4 million in the fourth quarter a year ago.

Banner’s net interest margin on a tax equivalent basis was 3.17% for the fourth quarter of 2021, a 30 basis-point decrease compared to 3.47% in the preceding quarter and a 47 basis-point decrease compared to 3.64% in the fourth quarter a year ago.

“Lower interest income, primarily as a result of the decline in the acceleration of the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness, adversely affected our net interest margin during the quarter. This impact was partially offset by a decrease in the cost of funding liabilities,” said Grescovich. Acquisition accounting adjustments added five basis points to the net interest margin in the current quarter, three basis points in the preceding quarter and five basis points in the fourth quarter a year ago. The total purchase discount for acquired loans was $9.7 million at December 31, 2021, compared to $11.5 million at September 30, 2021, and $16.1 million at December 31, 2020. For the year ended December 31, 2021, Banner’s net interest margin on a tax equivalent basis was 3.39% compared to 3.85% in 2020.

Average yields on interest-earning assets decreased 33 basis points to 3.29% in the fourth quarter compared to 3.62% for the preceding quarter and decreased 58 basis points compared to 3.87% in the fourth quarter a year ago. These decreases in average yield between periods primarily reflects decreases in the average yield on investment securities and increases in the average balance of interest-bearing deposits, as excess liquidity was invested in low yielding short term investments. Average loan yields decreased 31 basis points to 4.57% compared to 4.88% in the preceding quarter and increased four basis points compared to 4.53% in the fourth quarter a year ago. The decrease in average loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in the acceleration of the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness during the quarter. Loan discount accretion added eight basis points to average loan yields in the current quarter, five basis points in the preceding quarter and seven basis points in the fourth quarter a year ago. Deposit costs were 0.07% in the fourth quarter of 2021, a one basis-point decrease compared to the preceding quarter and a seven basis-point decrease compared to the fourth 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 funding liabilities was 0.13% during the fourth quarter of 2021, a three basis-point decrease compared to the preceding quarter and an 11 basis-point decrease compared to the fourth quarter a year ago.

Banner recorded a $5.2 million recapture of provision for credit losses in the current quarter (comprised of an $8.1 million recapture 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). This recapture compares to an $8.6 million recapture of provision for credit losses in the prior quarter (comprised of an $8.9 million recapture of provision for credit losses - loans and a $218,000 provision for credit losses - unfunded loan commitments) and a $602,000 provision for credit losses in the fourth quarter a year ago (comprised of a $593,000 recapture of provision for credit losses - loans and a $1.2 million provision for credit losses - unfunded loan commitments). The recapture of provision for credit losses for the current and preceding quarters primarily reflects improvement in the level of adversely classified loans as well as in the forecasted economic indicators utilized to calculate credit losses.

Total non-interest income was $24.5 million in the fourth quarter of 2021, compared to $25.3 million in the preceding quarter and $23.5 million in the fourth quarter a year ago. Deposit fees and other service charges were $10.3 million in the fourth quarter of 2021, compared to $10.5 million in the preceding quarter and $8.3 million in the fourth quarter a year ago. The increase in deposit fees and other service charges from the fourth 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, decreased to $5.6 million in the fourth quarter, compared to $9.6 million in the preceding quarter and decreased compared to $10.6 million in the fourth quarter of 2020. The lower mortgage banking revenue for the current quarter compared to the prior quarter is primarily due to no multifamily loan sales or related gains during the current quarter compared to the prior quarter, which included $2.4 million of gain on the sale of multifamily loans. The decrease from the fourth quarter of 2020 reflects a reduction in the volume of one- to four-family loans sold as well as a decrease in the gain on sale margin on one- to four-family held-for-sale loans. Home purchase activity accounted for 64% of one- to four-family mortgage loan originations in the fourth quarter of 2021, compared to 68% in the prior quarter and 51% in the fourth quarter of 2020. Miscellaneous non-interest income increased to $4.7 million in the fourth quarter of 2021, compared to $2.2 million in the preceding quarter and $1.4 million in the fourth quarter a year ago. The increase in miscellaneous non-interest income from the prior quarter and fourth quarter a year ago is primarily a result of a valuation adjustment on the SBA servicing asset, higher gains related to SBA loans sold as well as gains related to the disposition of closed branch locations. For the year ended December 31, 2021, total non-interest income decreased 2% to $96.4 million, compared to $98.6 million in 2020.

Banner’s fourth quarter 2021 results included a $2.7 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 limited partnership investments, and a $136,000 net loss on the sale of securities. In the preceding quarter, results included a $1.8 million net gain for fair value adjustments and a $56,000 net gain on the sale of securities. In the fourth quarter a year ago, results included a $1.7 million net gain for fair value adjustments and a $197,000 net gain on the sale of securities.

Total revenue decreased 6% to $146.0 million for the fourth quarter of 2021, compared to $155.5 million in the preceding quarter, and increased 1% compared to $144.9 million in the fourth quarter a year ago. For the year, total revenues increased 2% to $593.3 million compared to $579.9 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 $143.4 million in the fourth quarter of 2021, compared to $153.6 million in the preceding quarter and $143.0 million in the fourth quarter of 2020. For the year ended December 31, 2021, adjusted revenue* was $588.2 million, compared to $579.6 million in 2020.

Total non-interest expense was $91.8 million in the fourth quarter of 2021, compared to $102.1 million in the preceding quarter and $95.6 million in the fourth quarter of 2020. The decrease in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $10.1 million decrease in professional and legal expenses. The decrease in professional and legal expenses was primarily due to $5.8 million of consultant expense related to the Banner Forward initiative and a $4.0 million accrual related to pending litigation recorded during the prior quarter. Additionally, salary and employee benefits expense decreased $2.0 million, primarily due to a reduction in staffing, and payment and card processing services expense decreased $1.1 million, primarily reflecting a decrease in fraud related losses. These decreases were 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 the current quarter. The year-over-year quarterly decrease in non-interest expense also primarily reflects decreases in salary and employee benefits expense, and professional and legal expenses. The year-over-year quarterly decreases in non-interest expense were partially offset by an increase in payment and card processing services expense, a decrease in capitalized loan origination costs and the previously mentioned loss on extinguishment of debt. COVID-19 expenses were $127,000 for the fourth quarter of 2021, compared to $44,000 for the preceding quarter and $333,000 in the fourth quarter a year ago. For the year, total non-interest expense was $380.1 million, compared to $369.6 million in the same period a year earlier. Banner’s efficiency ratio was 62.88% for the current quarter, compared to 65.70% in the preceding quarter and 65.93% in the year ago quarter. Banner’s adjusted efficiency ratio* was 59.71% for the current quarter, compared to 59.65% in the preceding quarter and 64.31% in the year ago quarter.

For the fourth quarter of 2021, Banner had $9.5 million in state and federal income tax expense for an effective tax rate of 16.0%, reflecting the benefits from tax exempt income and an adjustment to the deferred tax asset during the quarter. Banner’s statutory income tax rate is 23.7%, 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 $16.80 billion at December 31, 2021, compared to $16.64 billion at September 30, 2021, and increased 12% when compared to $15.03 billion at December 31, 2020. The total of securities and interest-bearing deposits held at other banks was $6.26 billion at December 31, 2021, compared to $6.03 billion at September 30, 2021 and $3.69 billion at December 31, 2020. The average effective duration of Banner's securities portfolio was approximately 4.6 years at December 31, 2021, compared to 3.6 years at December 31, 2020.

Total loans receivable decreased 1% to $9.08 billion at December 31, 2021, compared to $9.22 billion at September 30, 2021, and decreased 8% when compared to $9.87 billion at December 31, 2020. The decrease in total loans receivable compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans. Excluding SBA PPP loans, total loans receivable increased $42.6 million during the current quarter. SBA PPP loans decreased 57% to $133.9 million at December 31, 2021, compared to $310.2 million at September 30, 2021, and decreased 87% when compared to $1.04 billion at December 31, 2020. The decrease in SBA PPP loans was partially offset by increases in commercial real estate and multifamily real estate. Commercial real estate and multifamily real estate loans increased 1% to $4.28 billion at December 31, 2021, compared to $4.24 billion at September 30, 2021, and increased 6% compared to $4.03 billion a year ago. Commercial business loans decreased 7% to $1.96 billion at December 31, 2021, compared to $2.12 billion at September 30, 2021, and decreased 33% compared to $2.92 billion a year ago, primarily due to SBA PPP loans forgiven. Excluding SBA PPP loans, commercial business loans increased 1% to $1.83 billion at December 31, 2021, compared to $1.82 billion at September 30, 2021, and decreased 2% compared to $1.88 billion a year ago. Agricultural business loans decreased to $285.8 million at December 31, 2021, compared to $287.5 million at September 30, 2021 and decreased from $299.9 million a year ago. Total construction, land and land development loans were $1.31 billion at December 31, 2021, a 1% decrease from $1.33 billion at September 30, 2021, and a 2% increase compared to $1.29 billion a year earlier. Consumer loans decreased to $555.9 million at December 31, 2021, compared to $561.2 million at September 30, 2021, and decreased from $605.8 million a year ago. One- to four-family loans increased slightly to $683.3 million at December 31, 2021, compared to $682.4 million at September 30, 2021, and decreased from $717.9 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 $96.5 million at December 31, 2021, compared to $63.7 million at September 30, 2021, and $243.8 million at December 31, 2020. The volume of one- to four- family residential mortgage loans sold was $245.9 million in the current quarter, compared to $232.2 million in the preceding quarter and $356.6 million in the fourth quarter a year ago. Banner sold no multifamily loans during the fourth quarter of 2021, compared to $96.1 million in the preceding quarter and $10.4 million in the fourth quarter a year ago.

Total deposits increased 1% to $14.33 billion at December 31, 2021, compared to $14.16 billion at September 30, 2021, and increased 14% when compared to $12.57 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 decreased to $6.39 billion at December 31, 2021, compared to $6.40 billion at September 30, 2021, and increased 16% compared to $5.49 billion a year ago. Core deposits were 94% of total deposits at both December 31, 2021 and September 30, 2021. Certificates of deposit decreased to $838.6 million at December 31, 2021, compared to $851.1 million at September 30, 2021, and decreased 8% compared to $915.3 million a year earlier. FHLB borrowings were $50.0 million at both December 31, 2021 and September 30, 2021 and decreased from $150.0 million a year ago.

At December 31, 2021, total common shareholders’ equity was $1.69 billion, or 10.06% of assets, compared to $1.67 billion or 10.02% of assets at September 30, 2021, and $1.67 billion or 11.09% of assets a year ago. At December 31, 2021, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.30 billion, or 7.93% of tangible assets*, compared to $1.28 billion, or 7.86% of tangible assets, at September 30, 2021, and $1.27 billion, or 8.69% of tangible assets, a year ago. Banner’s tangible book value per share* increased to $38.02 at December 31, 2021, compared to $36.17 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 December 31, 2021, Banner's common equity Tier 1 capital ratio was 11.54%, its Tier 1 leverage capital to average assets ratio was 8.76%, and its total capital to risk-weighted assets ratio was 14.71%.

Credit Quality

The allowance for credit losses - loans was $132.1 million at December 31, 2021, or 1.45% of total loans receivable outstanding and 578% of non-performing loans, compared to $139.9 million at September 30, 2021, or 1.52% of total loans receivable outstanding and 485% of non-performing loans, and $167.3 million at December 31, 2020, or 1.69% of total loans receivable outstanding and 470% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $12.4 million at December 31, 2021, compared to $10.1 million at September 30, 2021 and $13.3 million at December 31, 2020. Net loan recoveries totaled $311,000 in the fourth quarter of 2021, compared to $756,000 in the preceding quarter and $93,000 of net loan charge-offs in the fourth quarter a year ago. Non-performing loans were $22.8 million at December 31, 2021, compared to $28.9 million at September 30, 2021, and $35.6 million a year ago. Real estate owned and other repossessed assets were $869,000 at both December 31, 2021 and September 30, 2021, compared to $867,000 a year ago.

Banner’s total substandard loans were $198.4 million at December 31, 2021, compared to $225.8 million at September 30, 2021, and $340.2 million a year ago. The quarter over quarter decrease primarily reflects the payoff of substandard loans as well as balance paydowns and risk rating upgrades.

Banner’s total non-performing assets were $23.7 million, or 0.14% of total assets, at December 31, 2021, compared to $29.7 million, or 0.18% of total assets, at September 30, 2021, and $36.5 million, or 0.24% of total assets, a year ago.

At December 31, 2021, Banner had 21 mortgage loans totaling $6.4 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 Friday, January 21, 2022, at 8:00 a.m. PST, to discuss its fourth quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (844) 200-6205 using access code 579750 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 905147, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.80 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) uncertainty regarding the future of the London Interbank Offered Rate (LIBOR), and the potential transition away from LIBOR toward new interest rate benchmarks; (6) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (7) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (9) the ability to access cost-effective funding; (10) 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; (11) changes in financial markets; (12) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (13) the costs, effects and outcomes of litigation; (14) 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; (15) changes in accounting principles, policies or guidelines; (16) future acquisitions by Banner of other depository institutions or lines of business; (17) 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; (18) the costs associated with Banner Forward and (19) 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												Twelve Months Ended
(in thousands except shares and per share data)		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
INTEREST INCOME:
Loans receivable		$	104,929			$	116,487			$	115,545			$	445,731			$	466,360
Mortgage-backed securities			13,220				11,695				7,438				45,723				31,792
Securities and cash equivalents			8,397				7,686				6,170				29,046				20,994
			126,546				135,868				129,153				520,500				519,146
INTEREST EXPENSE:
Deposits			2,384				2,749				4,392				11,770				25,015
Federal Home Loan Bank advances			348				655				987				2,592				5,023
Other borrowings			109				125				121				467				603
Junior subordinated debentures and subordinated notes			2,175				2,193				2,216				8,780				7,204
			5,016				5,722				7,716				23,609				37,845
Net interest income			121,530				130,146				121,437				496,891				481,301
(RECAPTURE)/PROVISION FOR CREDIT LOSSES			(5,243	)			(8,638	)			602				(33,388	)			67,875
Net interest income after (recapture)/provision for credit losses			126,773				138,784				120,835				530,279				413,426
NON-INTEREST INCOME:
Deposit fees and other service charges			10,341				10,457				8,293				39,495				34,384
Mortgage banking operations			5,643				9,613				10,586				33,948				51,083
Bank-owned life insurance			1,203				1,245				1,319				5,000				5,972
Miscellaneous			4,702				2,185				1,410				12,875				6,821
			21,889				23,500				21,608				91,318				98,260
Net (loss) gain on sale of securities			(136	)			56				197				482				1,012
Net change in valuation of financial instruments carried at fair value			2,721				1,778				1,704				4,616				(656	)
Total non-interest income			24,474				25,334				23,509				96,416				98,616
NON-INTEREST EXPENSE:
Salary and employee benefits			57,798				59,799				60,906				244,351				245,400
Less capitalized loan origination costs			(7,647	)			(8,290	)			(9,415	)			(34,401	)			(34,848	)
Occupancy and equipment			13,885				13,153				14,248				52,850				53,362
Information / computer data services			6,441				6,110				6,402				24,356				24,386
Payment and card processing services			5,062				6,181				3,960				20,544				16,095
Professional and legal expenses			2,251				12,324				5,643				22,274				12,093
Advertising and marketing			2,071				1,521				2,828				6,036				6,412
Deposit insurance expense			1,340				1,469				1,548				5,583				6,516
State/municipal business and use taxes			976				1,219				1,071				4,343				4,355
Real estate operations			49				53				(283	)			(22	)			(190	)
Amortization of core deposit intangibles			1,574				1,575				1,865				6,571				7,732
Loss on extinguishment of debt			2,284				—				—				2,284				—
Miscellaneous			5,594				6,977				5,871				24,236				22,712
			91,678				102,091				94,644				379,005				364,025
COVID-19 expenses			127				44				333				436				3,502
Merger and acquisition-related expenses			—				10				579				660				2,062
Total non-interest expense			91,805				102,145				95,556				380,101				369,589
Income before provision for income taxes			59,442				61,973				48,788				246,594				142,453
PROVISION FOR INCOME TAXES			9,515				12,089				9,831				45,546				26,525
NET INCOME		$	49,927			$	49,884			$	38,957			$	201,048			$	115,928
Earnings per share available to common shareholders:
Basic		$	1.46			$	1.45			$	1.11			$	5.81			$	3.29
Diluted		$	1.44			$	1.44			$	1.10			$	5.76			$	3.26
Cumulative dividends declared per common share		$	0.41			$	0.41			$	0.41			$	1.64			$	1.23
Weighted average common shares outstanding:
Basic			34,292,967				34,446,510				35,200,769				34,610,056				35,264,252
Diluted			34,575,607				34,669,492				35,425,810				34,919,188				35,528,848
Increase (decrease) in common shares outstanding			641				(298,897	)			632				(906,568	)			(592,376	)

FINANCIAL  CONDITION														Percentage Change
(in thousands except shares and per share data)		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Prior Qtr			Prior Yr Qtr
ASSETS
Cash and due from banks		$	358,461			$	392,035			$	311,899			(8.6)	%		14.9	%
Interest-bearing deposits			1,775,839				1,808,547				922,284			(1.8)	%		92.5	%
Total cash and cash equivalents			2,134,300				2,200,582				1,234,183			(3.0)	%		72.9	%
Securities - trading			26,981				26,875				24,980			0.4	%		8.0	%
Securities - available for sale			3,638,993				3,446,575				2,322,593			5.6	%		56.7	%
Securities - held to maturity			520,922				447,708				421,713			16.4	%		23.5	%
Total securities			4,186,896				3,921,158				2,769,286			6.8	%		51.2	%
Federal Home Loan Bank stock			12,000				12,000				16,358			—	%		(26.6)	%
Securities purchased under agreements to resell			300,000				300,000				—			—	%		nm
Loans held for sale			96,487				63,678				243,795			51.5	%		(60.4)	%
Loans receivable			9,084,763				9,218,384				9,870,982			(1.4)	%		(8.0)	%
Allowance for credit losses - loans			(132,099	)			(139,915	)			(167,279	)		(5.6)	%		(21.0)	%
Net loans receivable			8,952,664				9,078,469				9,703,703			(1.4)	%		(7.7)	%
Accrued interest receivable			42,916				43,644				46,617			(1.7)	%		(7.9)	%
Real estate owned (REO) held for sale, net			852				852				816			—	%		4.4	%
Property and equipment, net			148,759				151,503				164,556			(1.8)	%		(9.6)	%
Goodwill			373,121				373,121				373,121			—	%		—	%
Other intangibles, net			14,855				16,429				21,426			(9.6)	%		(30.7)	%
Bank-owned life insurance			244,156				192,950				191,830			26.5	%		27.3	%
Operating lease right-of-use assets			55,257				58,523				55,367			(5.6)	%		(0.2)	%
Other assets			242,609				224,970				210,565			7.8	%		15.2	%
Total assets		$	16,804,872			$	16,637,879			$	15,031,623			1.0	%		11.8	%
LIABILITIES
Deposits:
Non-interest-bearing		$	6,385,177			$	6,400,864			$	5,492,924			(0.2)	%		16.2	%
Interest-bearing transaction and savings accounts			7,103,125				6,912,759				6,159,052			2.8	%		15.3	%
Interest-bearing certificates			838,631				851,054				915,320			(1.5)	%		(8.4)	%
Total deposits			14,326,933				14,164,677				12,567,296			1.1	%		14.0	%
Advances from Federal Home Loan Bank			50,000				50,000				150,000			—	%		(66.7)	%
Customer repurchase agreements and other borrowings			264,490				247,358				184,785			6.9	%		43.1	%
Subordinated notes, net			98,564				98,472				98,201			0.1	%		0.4	%
Junior subordinated debentures at fair value			119,815				124,853				116,974			(4.0)	%		2.4	%
Operating lease liabilities			59,756				62,946				59,343			(5.1)	%		0.7	%
Accrued expenses and other liabilities			148,303				175,960				143,300			(15.7)	%		3.5	%
Deferred compensation			46,684				46,494				45,460			0.4	%		2.7	%
Total liabilities			15,114,545				14,970,760				13,365,359			1.0	%		13.1	%
SHAREHOLDERS’ EQUITY
Common stock			1,299,381				1,297,145				1,349,879			0.2	%		(3.7)	%
Retained earnings			390,762				355,035				247,316			10.1	%		58.0	%
Other components of shareholders’ equity			184				14,939				69,069			(98.8)	%		(99.7)	%
Total shareholders’ equity			1,690,327				1,667,119				1,666,264			1.4	%		1.4	%
Total liabilities and shareholders’ equity		$	16,804,872			$	16,637,879			$	15,031,623			1.0	%		11.8	%
Common Shares Issued:
Shares outstanding at end of period			34,252,632				34,251,991				35,159,200
Common shareholders’ equity per share (1)		$	49.35			$	48.67			$	47.39
Common shareholders’ tangible equity per share (1) (2)		$	38.02			$	37.30			$	36.17
Common shareholders’ tangible equity to tangible assets (2)			7.93	%			7.86	%			8.69	%
Consolidated Tier 1 leverage capital ratio			8.76	%			8.79	%			9.50	%

(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		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Prior Qtr			Prior Yr Qtr
Commercial real estate:
Owner-occupied		$	1,131,828			$	1,122,275			$	1,076,467			0.9	%		5.1	%
Investment properties			1,990,461				1,980,284				1,955,684			0.5	%		1.8	%
Small balance CRE			598,212				601,751				573,849			(0.6)	%		4.2	%
Multifamily real estate			564,100				532,760				428,223			5.9	%		31.7	%
Construction, land and land development:
Commercial construction			169,530				170,205				228,937			(0.4)	%		(25.9)	%
Multifamily construction			259,116				278,184				305,527			(6.9)	%		(15.2)	%
One- to four-family construction			568,753				571,431				507,810			(0.5)	%		12.0	%
Land and land development			313,454				308,164				248,915			1.7	%		25.9	%
Commercial business:
Commercial business			1,039,502				1,039,731				1,133,989			—	%		(8.3)	%
SBA PPP			132,574				306,976				1,044,472			(56.8)	%		(87.3)	%
Small business scored			792,310				775,554				743,451			2.2	%		6.6	%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland			284,399				284,255				299,949			0.1	%		(5.2)	%
SBA PPP			1,354				3,214				—			(57.9)	%		nm
One- to four-family residential			683,268				682,368				717,939			0.1	%		(4.8)	%
Consumer:
Consumer—home equity revolving lines of credit			458,533				462,819				491,812			(0.9)	%		(6.8)	%
Consumer—other			97,369				98,413				113,958			(1.1)	%		(14.6)	%
Total loans receivable		$	9,084,763			$	9,218,384			$	9,870,982			(1.4)	%		(8.0)	%
Restructured loans performing under their restructured terms		$	5,309			$	5,273			$	6,673
Loans 30 - 89 days past due and on accrual		$	11,558			$	6,911			$	12,291
Total delinquent loans (including loans on non-accrual), net		$	18,688			$	18,619			$	36,131
Total delinquent loans  /  Total loans receivable			0.21	%			0.20	%			0.37	%

LOANS BY GEOGRAPHIC LOCATION														Percentage Change
		Dec 31, 2021						Sep 30, 2021			Dec 31, 2020			Prior Qtr		Prior Yr Qtr
		Amount			Percentage			Amount			Amount
Washington		$	4,264,590		47.0%			$	4,319,008		$	4,647,553		(1.3)%		(8.2)%
California			2,138,340		23.5%				2,160,280			2,279,749		(1.0)%		(6.2)%
Oregon			1,652,364		18.2%				1,679,452			1,792,156		(1.6)%		(7.8)%
Idaho			525,141		5.8%				536,128			537,996		(2.0)%		(2.4)%
Utah			74,913		0.8%				89,620			80,704		(16.4)%		(7.2)%
Other			429,415		4.7%				433,896			532,824		(1.0)%		(19.4)%
Total loans receivable		$	9,084,763		100.0%			$	9,218,384		$	9,870,982		(1.4)%		(8.0)%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
LOAN ORIGINATIONS	Quarters Ended									Twelve Months Ended
	Dec 31, 2021			Sep 30, 2021			Dec 31, 2020			Dec 31, 2021			Dec 31, 2020
Commercial real estate	$	196,350		$	174,827		$	93,838		$	565,809		$	356,361
Multifamily real estate		25,933			26,155			7,900			110,640			27,119
Construction and land		522,081			496,386			515,280			1,975,664			1,588,311
Commercial business:
Commercial business		203,549			229,859			133,112			731,315			628,981
SBA PPP		—			907			—			485,077			1,176,018
Agricultural business		13,061			9,223			11,552			61,997			76,096
One-to four-family residential		52,251			49,594			28,402			206,662			116,713
Consumer		101,365			145,102			97,416			465,213			423,526
Total loan originations (excluding loans held for sale)	$	1,114,590		$	1,132,053		$	887,500		$	4,602,377		$	4,393,125

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended												Twelve Months Ended
CHANGE IN THE		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
ALLOWANCE FOR CREDIT LOSSES - LOANS
Balance, beginning of period		$	139,915			$	148,009			$	167,965			$	167,279			$	100,559
Beginning balance adjustment for adoption of ASC 326			—				—				—				—				7,812
(Recapture)/provision for credit losses - loans			(8,127	)			(8,850	)			(593	)			(33,112	)			64,285
Recoveries of loans previously charged off:
Commercial real estate			635				923				31				1,729				275
Construction and land			—				—				—				100				105
One- to four-family real estate			47				19				194				199				467
Commercial business			267				230				2,444				1,797				3,265
Agricultural business, including secured by farmland			5				17				51				30				1,823
Consumer			140				227				90				760				328
			1,094				1,416				2,810				4,615				6,263
Loans charged off:
Commercial real estate			(1	)			—				(1,375	)			(3,767	)			(1,854	)
Multifamily real estate			(59	)			—				—				(59	)			(66	)
Construction and land			—				—				—				—				(100	)
One- to four-family real estate			—				—				—				—				(136	)
Commercial business			(488	)			(362	)			(1,019	)			(1,762	)			(7,253	)
Agricultural business, including secured by farmland			—				(179	)			(37	)			(181	)			(591	)
Consumer			(235	)			(119	)			(472	)			(914	)			(1,640	)
			(783	)			(660	)			(2,903	)			(6,683	)			(11,640	)
Net recoveries (charge-offs)			311				756				(93	)			(2,068	)			(5,377	)
Balance, end of period		$	132,099			$	139,915			$	167,279			$	132,099			$	167,279
Net recoveries (charge-offs) / Average loans receivable			0.003	%			0.008	%			(0.001	)%			(0.021	)%			(0.053	)%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES - LOANS		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020
Specific or allocated credit loss allowance:
Commercial real estate		$	52,995			$	57,215			$	57,791
Multifamily real estate			7,043				6,657				3,893
Construction and land			27,294				29,342				41,295
One- to four-family real estate			8,205				9,460				9,913
Commercial business			26,421				26,873				35,007
Agricultural business, including secured by farmland			3,190				3,177				4,914
Consumer			6,951				7,191				14,466
Total allowance for credit losses - loans		$	132,099			$	139,915			$	167,279
Allowance for credit losses - loans / Total loans receivable			1.45	%			1.52	%			1.69	%
Allowance for credit losses - loans / Non-performing loans			578	%			485	%			470	%

		Quarters Ended									Twelve Months Ended
CHANGE IN THE		Dec 31, 2021			Sep 30, 2021			Dec 31, 2020			Dec 31, 2021				Dec 31, 2020
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period		$	10,127		$	9,909		$	12,094		$	13,297			$	2,716
Beginning balance adjustment for adoption of ASC 326			—			—			—			—				7,022
Provision/(recapture) for credit losses - unfunded loan commitments			2,305			218			1,203			(865	)			3,559
Balance, end of period		$	12,432		$	10,127		$	13,297		$	12,432			$	13,297

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Dec 31, 2021				Sep 30, 2021				Dec 31, 2020
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	14,159			$	14,931			$	18,199
Construction and land		479				354				936
One- to four-family		2,711				3,182				3,556
Commercial business		2,156				2,700				5,407
Agricultural business, including secured by farmland		1,022				1,022				1,743
Consumer		1,754				1,850				2,719
		22,281				24,039				32,560
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial		—				3,955				—
One- to four-family		436				772				1,899
Commercial business		2				61				1,025
Consumer		117				34				130
		555				4,822				3,054
Total non-performing loans		22,836				28,861				35,614
REO		852				852				816
Other repossessed assets		17				17				51
Total non-performing assets	$	23,705			$	29,730			$	36,481
Total non-performing assets to total assets		0.14	%			0.18	%			0.24	%

	Dec 31, 2021			Sep 30, 2021			Dec 31, 2020
LOANS BY CREDIT RISK RATING
Pass	$	8,874,468		$	8,956,604		$	9,494,147
Special Mention		11,932			36,001			36,598
Substandard		198,363			225,779			340,237
Total	$	9,084,763		$	9,218,384		$	9,870,982

	Quarters Ended										Twelve Months Ended
REAL ESTATE OWNED	Dec 31, 2021			Sep 30, 2021			Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
Balance, beginning of period	$	852		$	763		$	1,795			$	816			$	814
Additions from loan foreclosures		—			89			—				512				1,588
Proceeds from dispositions of REO		—			—			(1,555	)			(783	)			(2,360	)
Gain on sale of REO		—			—			603				307				819
Valuation adjustments in the period		—			—			(27	)			—				(45	)
Balance, end of period	$	852		$	852		$	816			$	852			$	816

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION											Percentage Change
		Dec 31, 2021			Sep 30, 2021			Dec 31, 2020			Prior Qtr			Prior Yr Qtr
Non-interest-bearing		$	6,385,177		$	6,400,864		$	5,492,924		(0.2)	%		16.2	%
Interest-bearing checking			1,947,414			1,799,657			1,569,435		8.2	%		24.1	%
Regular savings accounts			2,784,716			2,773,995			2,398,482		0.4	%		16.1	%
Money market accounts			2,370,995			2,339,107			2,191,135		1.4	%		8.2	%
Total interest-bearing transaction and savings accounts			7,103,125			6,912,759			6,159,052		2.8	%		15.3	%
Total core deposits			13,488,302			13,313,623			11,651,976		1.3	%		15.8	%
Interest-bearing certificates			838,631			851,054			915,320		(1.5)	%		(8.4)	%
Total deposits		$	14,326,933		$	14,164,677		$	12,567,296		1.1	%		14.0	%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Dec 31, 2021						Sep 30, 2021			Dec 31, 2020			Percentage Change
		Amount			Percentage			Amount			Amount			Prior Qtr			Prior Yr Qtr
Washington		$	7,952,376		55.5	%		$	7,877,919		$	7,058,404		0.9	%		12.7	%
Oregon			3,067,054		21.4	%			3,030,109			2,604,908		1.2	%		17.7	%
California			2,524,296		17.6	%			2,501,521			2,237,949		0.9	%		12.8	%
Idaho			783,207		5.5	%			755,128			666,035		3.7	%		17.6	%
Total deposits		$	14,326,933		100.0	%		$	14,164,677		$	12,567,296		1.1	%		14.0	%

INCLUDED IN TOTAL DEPOSITS		Dec 31, 2021			Sep 30, 2021			Dec 31, 2020
Public non-interest-bearing accounts		$	193,917		$	193,414		$	175,352
Public interest-bearing transaction & savings accounts			159,957			161,407			127,523
Public interest-bearing certificates			39,961			40,851			59,127
Total public deposits		$	393,835		$	395,672		$	362,002

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 DECEMBER 31, 2021		Amount			Ratio			Amount			Ratio			Amount			Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,663,943		14.71	%		$	904,633		8.00	%		$	1,130,791		10.00	%
Tier 1 capital to risk-weighted assets			1,440,694		12.74	%			678,474		6.00	%			678,474		6.00	%
Tier 1 leverage capital to average assets			1,440,694		8.76	%			658,091		4.00	%		n/a			n/a
Common equity tier 1 capital to risk-weighted assets			1,305,194		11.54	%			508,856		4.50	%		n/a			n/a
Banner Bank:
Total capital to risk-weighted assets			1,552,204		13.73	%			904,159		8.00	%			1,130,199		10.00	%
Tier 1 capital to risk-weighted assets			1,428,955		12.64	%			678,119		6.00	%			904,159		8.00	%
Tier 1 leverage capital to average assets			1,428,955		8.69	%			657,882		4.00	%			822,353		5.00	%
Common equity tier 1 capital to risk-weighted assets			1,428,955		12.64	%			508,589		4.50	%			734,629		6.50	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Dec 31, 2021										Sep 30, 2021										Dec 31, 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	$	73,101		$	601			3.26	%		$	114,938		$	996			3.44	%		$	110,414		$	976			3.52	%
Mortgage loans		7,362,363			83,059			4.48	%			7,245,962			83,803			4.59	%			7,251,101			84,634			4.64	%
Commercial/agricultural loans		1,460,486			14,966			4.07	%			1,534,978			15,776			4.08	%			1,626,508			19,143			4.68	%
SBA PPP loans		209,776			5,845			11.05	%			566,515			15,421			10.80	%			1,125,844			10,002			3.53	%
Consumer and other loans		119,658			1,749			5.80	%			120,112			1,774			5.86	%			135,498			2,057			6.04	%
Total loans(1)(3)		9,225,384			106,220			4.57	%			9,582,505			117,770			4.88	%			10,249,365			116,812			4.53	%
Mortgage-backed securities		2,838,759			13,344			1.86	%			2,560,027			11,820			1.83	%			1,429,635			7,536			2.10	%
Other securities		1,550,383			8,466			2.17	%			1,491,035			7,873			2.09	%			975,166			6,634			2.71	%
Equity securities		—			—			—	%			—			—			—	%			234,822			64			0.11	%
Interest-bearing deposits with banks		1,901,165			731			0.15	%			1,486,839			586			0.16	%			611,234			219			0.14	%
FHLB stock		12,000			135			4.46	%			13,957			135			3.84	%			16,361			162			3.94	%
Total investment securities (3)		6,302,307			22,676			1.43	%			5,551,858			20,414			1.46	%			3,267,218			14,615			1.78	%
Total interest-earning assets		15,527,691			128,896			3.29	%			15,134,363			138,184			3.62	%			13,516,583			131,427			3.87	%
Non-interest-earning assets		1,306,437										1,301,383										1,349,055
Total assets	$	16,834,128									$	16,435,746									$	14,865,638
Deposits:
Interest-bearing checking accounts	$	1,875,097			289			0.06	%		$	1,771,869			282			0.06	%		$	1,483,183			315			0.08	%
Savings accounts		2,773,597			400			0.06	%			2,721,028			458			0.07	%			2,375,015			691			0.12	%
Money market accounts		2,367,861			559			0.09	%			2,322,453			668			0.11	%			2,165,960			1,047			0.19	%
Certificates of deposit		840,920			1,136			0.54	%			863,971			1,341			0.62	%			916,286			2,339			1.02	%
Total interest-bearing deposits		7,857,475			2,384			0.12	%			7,679,321			2,749			0.14	%			6,940,444			4,392			0.25	%
Non-interest-bearing deposits		6,523,149			—			—	%			6,275,634			—			—	%			5,499,240			—			—	%
Total deposits		14,380,624			2,384			0.07	%			13,954,955			2,749			0.08	%			12,439,684			4,392			0.14	%
Other interest-bearing liabilities:
FHLB advances		50,000			348			2.76	%			98,370			655			2.64	%			150,000			987			2.62	%
Other borrowings		266,559			109			0.16	%			252,720			125			0.20	%			187,560			121			0.26	%
Junior subordinated debentures and subordinated notes		246,510			2,175			3.50	%			247,944			2,193			3.51	%			247,944			2,216			3.56	%
Total borrowings		563,069			2,632			1.85	%			599,034			2,973			1.97	%			585,504			3,324			2.26	%
Total funding liabilities		14,943,693			5,016			0.13	%			14,553,989			5,722			0.16	%			13,025,188			7,716			0.24	%
Other non-interest-bearing liabilities(2)		216,940										202,918										195,965
Total liabilities		15,160,633										14,756,907										13,221,153
Shareholders’ equity		1,673,495										1,678,839										1,644,485
Total liabilities and shareholders’ equity	$	16,834,128									$	16,435,746									$	14,865,638
Net interest income/rate spread (tax equivalent)				$	123,880			3.16	%					$	132,462			3.46	%					$	123,711			3.63	%
Net interest margin (tax equivalent)								3.17	%									3.47	%									3.64	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(2,350	)									(2,316	)									(2,274	)
Net interest income and margin, as reported				$	121,530			3.11	%					$	130,146			3.41	%					$	121,437			3.57	%
Additional Key Financial Ratios:
Return on average assets								1.18	%									1.20	%									1.04	%
Return on average equity								11.84	%									11.79	%									9.42	%
Average equity/average assets								9.94	%									10.21	%									11.06	%
Average interest-earning assets/average interest-bearing liabilities								184.40	%									182.82	%									179.60	%
Average interest-earning assets/average funding liabilities								103.91	%									103.99	%									103.77	%
Non-interest income/average assets								0.58	%									0.61	%									0.63	%
Non-interest expense/average assets								2.16	%									2.47	%									2.56	%
Efficiency ratio(4)								62.88	%									65.70	%									65.93	%
Adjusted efficiency ratio(5)								59.71	%									59.65	%									64.31	%

(1)		Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans.
(2)		Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)		Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.3 million for each of the three months ended December 31, 2021, September 30, 2021 and December 31, 2020. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.1 million for the three months ended December 31, 2021 and $1.0 million for both the three months ended September 30, 2021 and December 31, 2020.
(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	Twelve Months Ended
	Dec 31, 2021										Dec 31, 2020
	Average Balance			Interest and Dividends				Yield/Cost(3)			Average Balance			Interest and Dividends				Yield/Cost(3)
Interest-earning assets:
Held for sale loans	$	94,252		$	3,066			3.25	%		$	144,220		$	5,482			3.80	%
Mortgage loans		7,225,860			328,115			4.54	%			7,303,584			352,878			4.83	%
Commercial/agricultural loans		1,498,808			62,479			4.17	%			1,765,265			80,567			4.56	%
SBA PPP loans		770,041			49,854			6.47	%			760,912			23,133			3.04	%
Consumer and other loans		122,520			7,298			5.96	%			147,827			9,208			6.23	%
Total loans(1)(3)		9,711,481			450,812			4.64	%			10,121,808			471,268			4.66	%
Mortgage-backed securities		2,451,110			46,199			1.88	%			1,330,355			32,188			2.42	%
Other securities		1,336,974			30,114			2.25	%			777,378			21,839			2.81	%
Equity securities		429			—			—	%			182,846			373			0.20	%
Interest-bearing deposits with banks		1,392,619			1,955			0.14	%			272,725			907			0.33	%
FHLB stock		13,966			592			4.24	%			18,952			947			5.00	%
Total investment securities(3)		5,195,098			78,860			1.52	%			2,582,256			56,254			2.18	%
Total interest-earning assets		14,906,579			529,672			3.55	%			12,704,064			527,522			4.15	%
Non-interest-earning assets		1,268,348										1,262,170
Total assets	$	16,174,927									$	13,966,234
Deposits:
Interest-bearing checking accounts	$	1,755,293			1,188			0.07	%		$	1,385,252			1,479			0.11	%
Savings accounts		2,652,018			1,833			0.07	%			2,194,418			4,257			0.19	%
Money market accounts		2,305,814			2,670			0.12	%			1,996,870			6,275			0.31	%
Certificates of deposit		876,509			6,079			0.69	%			1,030,722			13,004			1.26	%
Total interest-bearing deposits		7,589,634			11,770			0.16	%			6,607,262			25,015			0.38	%
Non-interest-bearing deposits		6,132,875			—			—	%			4,929,768			—			—	%
Total deposits		13,722,509			11,770			0.09	%			11,537,030			25,015			0.22	%
Other interest-bearing liabilities:
FHLB advances		97,945			2,592			2.65	%			215,093			5,023			2.34	%
Other borrowings		240,817			467			0.19	%			193,862			603			0.31	%
Junior subordinated debentures and subordinated notes		247,583			8,780			3.55	%			198,490			7,204			3.63	%
Total borrowings		586,345			11,839			2.02	%			607,445			12,830			2.11	%
Total funding liabilities		14,308,854			23,609			0.16	%			12,144,475			37,845			0.31	%
Other non-interest-bearing liabilities(2)		206,774										197,422
Total liabilities		14,515,628										12,341,897
Shareholders’ equity		1,659,299										1,624,337
Total liabilities and shareholders’ equity	$	16,174,927									$	13,966,234
Net interest income/rate spread (tax equivalent)				$	506,063			3.39	%					$	489,677			3.84	%
Net interest margin (tax equivalent)								3.39	%									3.85	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(9,172	)									(8,376	)
Net interest income and margin, as reported				$	496,891			3.33	%					$	481,301			3.79	%
Additional Key Financial Ratios:
Return on average assets								1.24	%									0.83	%
Return on average equity								12.12	%									7.14	%
Average equity/average assets								10.26	%									11.63	%
Average interest-earning assets/average interest-bearing liabilities				`				182.32	%									176.09	%
Average interest-earning assets/average funding liabilities								104.18	%									104.61	%
Non-interest income/average assets								0.60	%									0.71	%
Non-interest expense/average assets								2.35	%									2.65	%
Efficiency ratio(4)								64.06	%									63.73	%
Adjusted efficiency ratio(5)								60.22	%									60.76	%

(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 $5.1 million and $4.9 million for the twelve months ended December 31, 2021 and December 31, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.1 million and $3.5 million for the twelve months ended December 31, 2021 and December 31, 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												Twelve Months Ended
	Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
Net interest income	$	121,530			$	130,146			$	121,437			$	496,891			$	481,301
Total non-interest income		24,474				25,334				23,509				96,416				98,616
Total revenue (GAAP)		146,004				155,480				144,946				593,307				579,917
Exclude net loss (gain) on sale of securities		136				(56	)			(197	)			(482	)			(1,012	)
Exclude net change in valuation of financial instruments carried at fair value		(2,721	)			(1,778	)			(1,704	)			(4,616	)			656
Adjusted revenue (non-GAAP)	$	143,419			$	153,646			$	143,045			$	588,209			$	579,561

ADJUSTED EARNINGS		Quarters Ended												Twelve Months Ended
		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
Net income (GAAP)		$	49,927			$	49,884			$	38,957			$	201,048			$	115,928
Exclude net loss (gain) on sale of securities			136				(56	)			(197	)			(482	)			(1,012	)
Exclude net change in valuation of financial instruments carried at fair value			(2,721	)			(1,778	)			(1,704	)			(4,616	)			656
Exclude merger and acquisition-related expenses			—				10				579				660				2,062
Exclude COVID-19 expenses			127				44				333				436				3,502
Exclude Banner Forward expenses			1,157				7,592				—				11,604				—
Exclude loss on extinguishment of debt			2,284				—				—				2,284				—
Exclude related net tax (benefit) expense			(236	)			(1,395	)			237				(2,373	)			(1,239	)
Total adjusted earnings (non-GAAP)		$	50,674			$	54,301			$	38,205			$	208,561			$	119,897
Diluted earnings per share (GAAP)		$	1.44			$	1.44			$	1.10			$	5.76			$	3.26
Diluted adjusted earnings per share (non-GAAP)		$	1.47			$	1.57			$	1.08			$	5.97			$	3.37

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended												Twelve Months Ended
		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
Non-interest expense (GAAP)		$	91,805			$	102,145			$	95,556			$	380,101			$	369,589
Exclude merger and acquisition-related expenses			—				(10	)			(579	)			(660	)			(2,062	)
Exclude COVID-19 expenses			(127	)			(44	)			(333	)			(436	)			(3,502	)
Exclude Banner Forward expenses			(1,157	)			(7,592	)			—				(11,604	)			—
Exclude CDI amortization			(1,574	)			(1,575	)			(1,865	)			(6,571	)			(7,732	)
Exclude state/municipal tax expense			(976	)			(1,219	)			(1,071	)			(4,343	)			(4,355	)
Exclude REO operations			(49	)			(53	)			283				22				190
Exclude loss on extinguishment of debt			(2,284	)			—				—				(2,284	)			—
Adjusted non-interest expense (non-GAAP)		$	85,638			$	91,652			$	91,991			$	354,225			$	352,128
Net interest income (GAAP)		$	121,530			$	130,146			$	121,437			$	496,891			$	481,301
Non-interest income (GAAP)			24,474				25,334				23,509				96,416				98,616
Total revenue			146,004				155,480				144,946				593,307				579,917
Exclude net loss (gain) on sale of securities			136				(56	)			(197	)			(482	)			(1,012	)
Exclude net change in valuation of financial instruments carried at fair value			(2,721	)			(1,778	)			(1,704	)			(4,616	)			656
Adjusted revenue (non-GAAP)		$	143,419			$	153,646			$	143,045			$	588,209			$	579,561
Efficiency ratio (GAAP)			62.88	%			65.70	%			65.93	%			64.06	%			63.73	%
Adjusted efficiency ratio (non-GAAP)			59.71	%			59.65	%			64.31	%			60.22	%			60.76	%

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS		Dec 31, 2021				Sep 30, 2021				Dec 31, 2020
Shareholders’ equity (GAAP)		$	1,690,327			$	1,667,119			$	1,666,264
Exclude goodwill and other intangible assets, net			387,976				389,550				394,547
Tangible common shareholders’ equity (non-GAAP)		$	1,302,351			$	1,277,569			$	1,271,717
Total assets (GAAP)		$	16,804,872			$	16,637,879			$	15,031,623
Exclude goodwill and other intangible assets, net			387,976				389,550				394,547
Total tangible assets (non-GAAP)		$	16,416,896			$	16,248,329			$	14,637,076
Common shareholders’ equity to total assets (GAAP)			10.06	%			10.02	%			11.09	%
Tangible common shareholders’ equity to tangible assets (non-GAAP)			7.93	%			7.86	%			8.69	%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
Tangible common shareholders’ equity (non-GAAP)		$	1,302,351			$	1,277,569			$	1,271,717
Common shares outstanding at end of period			34,252,632				34,251,991				35,159,200
Common shareholders’ equity (book value) per share (GAAP)		$	49.35			$	48.67			$	47.39
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)		$	38.02			$	37.30			$	36.17

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