EX-99.1 2 banr-12312022xex991earning.htm EX-99.1 PRESS RELEASE OF BANNER CORPORATION DATED JANUARY 19, 2023
Exhibit 99.1

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

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
Walla Walla, WA - January 19, 2023 - 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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 2
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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 3
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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 4
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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 5
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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 6

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) |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 7

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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 8

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 | %

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 9
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 |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 10

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 |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 11

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 |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 12

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 |  |  |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 13

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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 14

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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 15

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.

BANR - Fourth Quarter 2022 Results
January 19, 2023
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 |

BANR - Fourth Quarter 2022 Results
January 19, 2023
Page 17

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 |  |  |