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Published: 2021-10-21 00:00:00 ET
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Exhibit 99.1
CONTACT:
MARK J. GRESCOVICH,
 
PRESIDENT & CEO
 
PETER J. CONNER, CFO
 
(509) 527-3636
 
NEWS RELEASE
       
       
       

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

Walla Walla, WA - October 20, 2021 - Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $49.9 million, or $1.44 per diluted share, for the third quarter of 2021, an 8% decrease compared to $54.4 million, or $1.56 per diluted share, for the second quarter of 2021 and a 36% increase compared to $36.5 million, or $1.03 per diluted share, for the third quarter of 2020.  Banner’s third quarter 2021 results include $8.6 million in recapture of provision for credit losses, compared to $10.3 million in recapture of provision for credit losses in the preceding quarter and $15.2 million in provision for credit losses in the third quarter of 2020.  The third quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic.  In the first nine months of 2021, net income was $151.1 million, or $4.32 per diluted share, compared to net income of $77.0 million, or $2.17 per diluted share for the same period a year earlier.  Banner’s first nine months of 2021 results include $28.1 million in recapture of provision for credit losses, compared to $67.3 million in provision for credit losses in the first nine months of 2020.
Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share.  The dividend will be payable November 12, 2021, to common shareholders of record on November 02, 2021.
“Our third quarter 2021 performance continues to demonstrate the success of our super community bank model, which is based on responsive service that generates client loyalty and attracts new client relationships,” said Mark Grescovich, President and CEO.  “We benefited from continued core deposit growth and an acceleration of SBA PPP loan fee income as a result of SBA PPP loan forgiveness.  The unprecedented level of market liquidity and our continued focus on building client relationships contributed to our core deposits increasing 18% compared to September 30, 2020.  Additionally, Banner had provided 13,293 SBA PPP loans totaling nearly $1.61 billion as of September 30, 2021.  As of quarter end, SBA forgiveness had been received for 10,548 SBA PPP loans totaling $1.23 billion.  Our essential onsite employees, such as those working in our branches, continue to serve clients in person.  In July 2021, we began to normalize our operations by returning additional groups of employees back to bank worksites; however, due to the recent increases in COVID-19 cases, we have currently suspended returning our remaining employees to bank worksites.”

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

“Due to improvements in economic forecasts and continued solid performance of the loan portfolio during the current quarter, we recorded an $8.6 million recapture to our provision for credit losses during the current quarter.  This compares to a $10.3 million recapture to our provision for credit losses during the preceding quarter and a $15.2 million provision for credit losses in the third quarter a year ago.  Our allowance for credit losses - loans remains strong at 1.52% of total loans and 485% of non-performing loans at September 30, 2021, compared to 1.53% of total loans and 481% of non-performing loans at June 30, 2021,” said Grescovich.
At September 30, 2021, Banner Corporation had $16.64 billion in assets, $9.08 billion in net loans and $14.16 billion in deposits.  Banner operates 150 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.



BANR - Third Quarter 2021 Results
October 20, 2021
Page 2

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

*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, Banner Forward expenses, amortization of core deposit intangibles, real estate owned operations and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP (Generally Accepted Accounting Principles) financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.
Significant Recent Initiatives and Events
In September 2021, Banner completed the consolidation of five branches as it continues to see migration of transactions to the digital space, reducing in-branch transactions.  During the past year, client adoption of mobile and digital banking accelerated, while physical branch transaction volume declined.  Banner anticipates this shift in client service delivery channel preference will continue after the COVID-19 pandemic related restrictions have ended.
Income Statement Review
Net interest income, before the recapture of provision for credit losses, was $130.1 million in the third quarter of 2021, compared to $127.6 million in the preceding quarter and $121.0 million in the third quarter a year ago.
Banner’s net interest margin on a tax equivalent basis was 3.47% for the third quarter of 2021, a five basis-point decrease compared to 3.52% in the preceding quarter and a 25 basis-point decrease compared to 3.72% in the third quarter a year ago.
“Higher core deposit balances, resulting in an increase in low yielding short term investments, adversely affected our net interest margin during the quarter.  This impact was partly offset by higher interest income, primarily as a result of the decline in low yielding SBA PPP loans and a corresponding acceleration of the recognition of deferred loan fee income due to loan repayments from SBA loan forgiveness,” said Grescovich.  “Additionally, the ongoing low interest rate environment continues to place downward pressure on loan yields.”  Acquisition accounting adjustments added three basis points to the net interest margin in both the current and preceding quarter and seven basis points in the third quarter a year ago.  The total purchase discount for acquired loans was $11.5 million at September 30, 2021, compared to $12.5 million at June 30, 2021, and $17.9 million at

BANR - Third Quarter 2021 Results
October 20, 2021
Page 3
September 30, 2020.  In the first nine months of 2021, Banner’s net interest margin on a tax equivalent basis was 3.48% compared to 3.93% in the first nine months of 2020.
Average interest-earning asset yields decreased six basis points to 3.62% in the third quarter compared to 3.68% for the preceding quarter and decreased 36 basis points compared to 3.98% in the third quarter a year ago.  Average loan yields increased 18 basis points to 4.88% compared to 4.70% in the preceding quarter and increased 41 basis points compared to 4.47% in the third quarter a year ago.  The increase in average loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in the average balance of low yielding SBA PPP loans due to loan repayments from SBA loan forgiveness during the last two quarters, partially offset by lower rates on new originations and adjustable-rate loans resetting to lower current market rates.  Loan discount accretion added five basis points to average loan yields in both the current and preceding quarter and nine basis points in the third quarter a year ago.  Deposit costs were 0.08% in the third quarter of 2021, a one basis-point decrease compared to the preceding quarter and a nine basis-point decrease compared to the third quarter a year ago.  The year-over-year decrease in quarterly deposit costs was primarily the result of decreases in market interest rates during 2020.  The total cost of funds was 0.16% during the third quarter of 2021, a one basis-point decrease compared to the preceding quarter and an 11 basis-point decrease compared to the third quarter a year ago.
Banner recorded an $8.6 million recapture of provision for credit losses in the current quarter (comprised of an $8.9 million recapture of credit losses - loans and a $218,000 provision for credit losses - unfunded loan commitments).  This recapture compares to a $10.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.1 million recapture of provision for credit losses - loans and a $2.2 million recapture of provision for credit losses - unfunded loan commitments) and a $15.2 million provision for credit losses in the third quarter a year ago (comprised of a $13.6 million provision for credit losses - loans and a $1.5 million recapture of provision for credit losses - unfunded loan commitments).  The recapture of provision for credit losses for the current and preceding quarters primarily reflects improvement in forecasted economic indicators and a decrease in adversely classified loans.  The provision for credit losses recorded in the third quarter a year ago primarily reflected expected lifetime credit losses based upon the economic conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of September 30, 2020.
Total non-interest income was $25.3 million in the third quarter of 2021, compared to $22.3 million in the preceding quarter and $28.2 million in the third quarter a year ago.  Deposit fees and other service charges were $10.5 million in the third quarter of 2021, compared to $9.8 million in the preceding quarter and $8.7 million in the third quarter a year ago.  The increase in deposit fees and other service charges from the third quarter a year ago is primarily a result of increased transaction deposit account activity and higher fees on certain transactions.  Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, increased to $9.8 million in the third quarter, compared to $7.5 million in the preceding quarter and decreased compared to $16.6 million in the third quarter of 2020.  The higher mortgage banking revenue quarter-over-quarter primarily reflects an increase in the gain on sale margin on one- to four-family held-for-sale loans and higher gains on the sale of multifamily held-for-sale loans.  The decrease compared to the third quarter of 2020 was primarily due to a decrease in the gain on sale margin on one- to four-family held-for-sale loans, partially offset by higher gains on the sale of multifamily held-for-sale loans as well as a reduction in the volume of one- to four-family loans sold.  Home purchase activity accounted for 68% of one- to four-family mortgage loan originations in the third quarter of 2021, compared to 66% in the prior quarter and 56% in the third quarter of 2020.  In the first nine months of 2021, total non-interest income decreased 4% to $71.9 million, compared to $75.1 million in the first nine months of 2020.
Banner’s third quarter 2021 results included a $1.8 million net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading, and a $56,000 net gain on the sale of securities.  In the preceding quarter, results included a $58,000 net gain for fair value adjustments and a $77,000 net gain on the sale of securities.  In the third quarter a year ago, results included a $37,000 net gain for fair value adjustments and a $644,000 net gain on the sale of securities.
Total revenue increased 4% to $155.5 million for the third quarter of 2021, compared to $149.9 million in the preceding quarter, and increased 4% compared to $149.2 million in the third quarter a year ago.  Year-to-date, total revenues increased 3% to $447.3 million compared to $435.0 million for the same period one year earlier.  Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $153.6 million in the third quarter of 2021, compared to $149.8 million in the preceding quarter and $148.6 million in the third quarter of 2020.  In the first nine months of the year, adjusted revenue* was $444.8 million, compared to $436.5 million in the first nine months of 2020.
Total non-interest expense was $102.1 million in the third quarter of 2021, compared to $92.6 million in the preceding quarter and $90.0 million in the third quarter of 2020.  The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an $8.0 million increase in professional and legal expenses, primarily due to increased consultant expense, which included $5.8 million of expense related to the Banner Forward initiative in the current quarter, compared to $1.5 million in the prior quarter, as well as a $4.0 million accrual recorded related to pending litigation during the current quarter.  Additionally, payment and card processing services expense increased $1.2 million primarily reflecting an increase in fraud related losses.  These increases for the current quarter were partially offset by a $2.1 million decrease from the preceding quarter in salary and employee benefits expense related to a reduction in staffing.  The year-over-year quarterly increase in non-interest expense also reflects increases in payment and card processing services expense, professional and legal expenses, and miscellaneous non-interest expense.  The year-over-


BANR - Third Quarter 2021 Results
October 20, 2021
Page 4

year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19 expenses.  COVID-19 expenses were $44,000 for the third quarter of 2021, compared to $117,000 for the preceding quarter and $778,000 in the third quarter a year ago.  Year-to-date, total non-interest expense was $288.3 million, compared to $274.0 million in the same period a year earlier.  Banner’s efficiency ratio was 65.70% for the current quarter, compared to 61.79% in the preceding quarter and 60.32% in the year ago quarter.  Banner’s adjusted efficiency ratio* was 59.65% for the current quarter, compared to 58.50% in the preceding quarter and 58.02% in the year ago quarter.
For the third quarter of 2021, Banner had $12.1 million in state and federal income tax expense for an effective tax rate of 19.5%, reflecting the benefits from tax exempt income.  Banner’s statutory income tax rate is 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review
Total assets increased to $16.64 billion at September 30, 2021, compared to $16.18 billion at June 30, 2021, and increased 14% when compared to $14.64 billion at September 30, 2020.  The total of securities and interest-bearing deposits held at other banks was $6.03 billion at September 30, 2021, compared to $5.19 billion at June 30, 2021 and $2.63 billion at September 30, 2020.  The average effective duration of Banner's securities portfolio was approximately 4.4 years at September 30, 2021, compared to 4.0 years at September 30, 2020.
Net loans receivable decreased 4% to $9.08 billion at September 30, 2021, compared to $9.51 billion at June 30, 2021, and decreased 9% when compared to $10.00 billion at September 30, 2020.  The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans.  SBA PPP loans decreased 62% to $310.2 million at September 30, 2021, compared to $825.1 million at June 30, 2021, and decreased 73% when compared to $1.15 billion at September 30, 2020.  The decrease in SBA PPP loans was  partially offset by increases in commercial real estate, multifamily real estate and one- to four-family loans.  Commercial real estate and multifamily real estate loans increased 2% to $4.24 billion at September 30, 2021, compared to $4.14 billion at June 30, 2021, and increased 4% compared to $4.07 billion a year ago.  Commercial business loans decreased 21% to $2.12 billion at September 30, 2021, compared to $2.68 billion at June 30, 2021, and decreased 32% compared to $3.11 billion a year ago, primarily due to SBA PPP loans forgiven.  Excluding PPP loans, commercial business loans decreased 3% to $1.82 billion at September 30, 2021, compared to $1.87 billion at June 30, 2021, and decreased 7% compared to $1.96 billion a year ago.  Agricultural business loans increased to $287.5 million at September 30, 2021, compared to $265.4 million three months earlier and decreased from $326.2 million a year ago.  Total construction, land and land development loans were $1.33 billion at September 30, 2021, a 3% decrease from $1.37 billion at June 30, 2021, and a 5% increase compared to $1.27 billion a year earlier.  Consumer loans increased slightly to $561.2 million at September 30, 2021, compared to $560.7 million at June 30, 2021, and decreased from $622.8 million a year ago.  One- to four-family loans increased to $682.4 million at September 30, 2021, compared to $637.7 million at June 30, 2021, and decreased from $771.4 million a year ago.  The year over year decrease primarily reflects held for investment loans being refinanced and sold as held for sale loans.
Loans held for sale were $63.7 million at September 30, 2021, compared to $71.7 million at June 30, 2021, and $185.9 million at September 30, 2020.  The volume of one- to four- family residential mortgage loans sold was $232.2 million in the current quarter, compared to $266.7 million in the preceding quarter and $327.7 million in the third quarter a year ago.  During the third quarter of 2021, Banner sold $96.1 million in multifamily loans, compared to $83.9 million in the preceding quarter and $108.6 million in the third quarter a year ago.
Total deposits increased 4% to $14.16 billion at September 30, 2021, compared to $13.64 billion at June 30, 2021, and increased 16% when compared to $12.22 billion a year ago.  The year-over-year increase in total deposits was due primarily to SBA PPP loan funds deposited into client accounts and an increase in general client liquidity due to reduced business investment and consumer spending during the COVID-19 pandemic.  Non-interest-bearing account balances increased 5% to $6.40 billion at September 30, 2021, compared to $6.09 billion at June 30, 2021, and increased 18% compared to $5.41 billion a year ago.  Core deposits were 94% of total deposits at both September 30, 2021 and June 30, 2021 and increased 18% compared to a year ago.  Certificates of deposit decreased to $851.1 million at September 30, 2021, compared to $873.0 million at June 30, 2021, and decreased 7% compared to $915.4 million a year earlier.  FHLB borrowings decreased to $50.0 million at September 30, 2021, compared to $100.0 million at June 30, 2021 and decreased from $150.0 million a year ago.
At September 30, 2021, total common shareholders’ equity was $1.67 billion, or 10.02% of assets, compared to $1.67 billion or 10.32% of assets at June 30, 2021, and $1.65 billion or 11.25% of assets a year ago.  At September 30, 2021, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 7.86% of tangible assets*, compared to $1.28 billion, or 8.09% of tangible assets, at June 30, 2021, and $1.25 billion, or 8.78% of tangible assets, a year ago.  Banner’s tangible book value per share* increased to $37.30 at September 30, 2021, compared to $35.56 per share a year ago.
Banner and its subsidiary bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.”  At September 30, 2021, Banner's common equity Tier 1 capital ratio was 11.25%, its Tier 1 leverage capital to average assets ratio was 8.79%, and its total capital to risk-weighted assets ratio was 14.55%.


BANR - Third Quarter 2021 Results
October 20, 2021
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Credit Quality
The allowance for credit losses - loans was $139.9 million at September 30, 2021, or 1.52% of total loans receivable outstanding and 485% of non-performing loans, compared to $148.0 million at June 30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, and $168.0 million at September 30, 2020, or 1.65% of total loans receivable outstanding and 482% of non-performing loans.  In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $10.1 million at September 30, 2021, compared to $9.9 million at June 30, 2021 and $12.1 million at September 30, 2020.  Net loan recoveries totaled $756,000 in the third quarter of 2021, compared to net loan recoveries of $55,000 in the preceding quarter and $2.0 million of net loan charge-offs in the third quarter a year ago.  Non-performing loans were $28.9 million at September 30, 2021, compared to $30.8 million at June 30, 2021, and $34.8 million a year ago.  Real estate owned and other repossessed assets were $869,000 at September 30, 2021, compared to $780,000 at June 30, 2021, and $1.8 million a year ago.
Banner’s total substandard loans were $225.8 million at September 30, 2021, compared to $272.8 million at June 30, 2021, and $423.2 million a year ago.  The quarter over quarter decrease reflects the payoff of substandard loans as well as risk rating upgrades as certain industries impacted by the COVID-19 pandemic have begun to stabilize.
Banner’s total non-performing assets were $29.7 million, or 0.18% of total assets, at September 30, 2021, compared to $31.5 million, or 0.19% of total assets, at June 30, 2021, and $36.7 million, or 0.25% of total assets, a year ago.
At September 30, 2021, Banner had 41 mortgage loans totaling $12.4 million operating under forbearance agreements due to COVID-19.  Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings pursuant to applicable accounting and regulatory guidance.
Conference Call
Banner will host a conference call on Thursday, October 21, 2021, at 8:00 a.m. PDT, to discuss its third quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10160533, or at www.bannerbank.com.
About the Company
Banner Corporation is a $16.64 billion bank holding company operating one commercial bank in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.
Forward-Looking Statements
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “potential,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner’s operating and stock price performance.
The COVID-19, pandemic is adversely affecting us, our clients, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1)  the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on client behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to


BANR - Third Quarter 2021 Results
October 20, 2021
Page 6

technological changes to meet clients’ needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; (16) the costs associated with Banner Forward and (17) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.



BANR - Third Quarter 2021 Results
October 20, 2021
Page 7

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




BANR - Third Quarter 2021 Results
October 20, 2021
Page 8

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

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



BANR - Third Quarter 2021 Results
October 20, 2021
Page 9

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

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




BANR - Third Quarter 2021 Results
October 20, 2021
Page 10


ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)

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


BANR - Third Quarter 2021 Results
October 20, 2021
Page 11
ADDITIONAL FINANCIAL INFORMATION
  
 
  
 
  
 
(dollars in thousands)
  
 
  
 
  
 
 
  
  Quarters Ended
CHANGE IN THE
  
Sep 30, 2021
  
Jun 30, 2021
  
Sep 30, 2020
ALLOWANCE FOR CREDIT LOSSES - LOANS
  
 
  
 
  
 
Balance, beginning of period
  
$
148,009 
    
$
156,054 
    
$
156,352 
  
(Recapture)/provision for credit losses - loans
  
(8,850)
    
(8,100)
    
13,641 
  
Recoveries of loans previously charged off:
            
Commercial real estate
  
923 
    
147 
    
23 
  
One- to four-family real estate
  
19 
    
20 
    
94 
  
Commercial business
  
230 
    
321 
    
246 
  
Agricultural business, including secured by farmland
  
17 
    
8 
    
— 
  
Consumer
  
227 
    
97 
    
82 
  
 
  
1,416 
    
593 
    
445 
  
Loans charged off:
            
Commercial real estate
  
— 
    
(3)
    
(379)
  
One- to four-family real estate
  
— 
    
— 
    
(72)
  
Commercial business
  
(362)
    
(123)
    
(1,297)
  
Agricultural business, including secured by farmland
  
(179)
    
(2)
    
(492)
  
Consumer
  
(119)
    
(410)
    
(233)
  
 
  
(660)
    
(538)
    
(2,473)
  
Net recoveries (charge-offs)
  
756 
    
55 
    
(2,028)
  
Balance, end of period
  
$
139,915 
    
$
148,009 
    
$
167,965 
  
Net recoveries (charge-offs) / Average loans receivable
  
0.008 
%
  
0.001 
%
  
(0.019)
%

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

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


BANR - Third Quarter 2021 Results
October 20, 2021
Page 12
ADDITIONAL FINANCIAL INFORMATION
              
(dollars in thousands)
              
 
Sep 30, 2021
  
Jun 30, 2021
  
Dec 31, 2020
  
Sep 30, 2020
NON-PERFORMING ASSETS
    
 
  
 
  
 
Loans on non-accrual status:
    
 
  
 
  
 
Secured by real estate:
    
 
  
 
  
 
Commercial
$
14,931 
    
$
17,427 
    
$
18,199 
    
$
7,824 
  
Construction and land
354 
    
541 
    
936 
    
937 
  
One- to four-family
3,182 
    
4,007 
    
3,556 
    
2,978 
  
Commercial business
2,700 
    
3,673 
    
5,407 
    
14,867 
  
Agricultural business, including secured by farmland
1,022 
    
1,200 
    
1,743 
    
2,066 
  
Consumer
1,850 
    
1,799 
    
2,719 
    
2,896 
  
 
24,039 
    
28,647 
    
32,560 
    
31,568 
  
Loans more than 90 days delinquent, still on accrual:
    
 
  
 
  
 
Secured by real estate:
    
 
  
 
  
 
Commercial
3,955 
    
911 
    
— 
    
— 
  
One- to four-family
772 
    
579 
    
1,899 
    
2,649 
  
Commercial business
61 
    
495 
    
1,025 
    
425 
  
Consumer
34 
    
131 
    
130 
    
181 
  
 
4,822 
    
2,116 
    
3,054 
    
3,255 
  
Total non-performing loans
28,861 
    
30,763 
    
35,614 
    
34,823 
  
REO
852 
    
763 
    
816 
    
1,795 
  
Other repossessed assets
17 
    
17 
    
51 
    
37 
  
Total non-performing assets
$
29,730 
    
$
31,543 
    
$
36,481 
    
$
36,655 
  
Total non-performing assets to total assets
0.18 
%
  
0.19 
%
  
0.24 
%
  
0.25 
%

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

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

BANR - Third Quarter 2021 Results
October 20, 2021
Page 13

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

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

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


             
BANR - Third Quarter 2021 Results
October 20, 2021
Page 14
ADDITIONAL FINANCIAL INFORMATION
                        
(dollars in thousands)
                        
   
Actual
  
Minimum to be
categorized as
"Adequately Capitalized"
  
Minimum to be
categorized as
"Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2021
  
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
                         
Banner Corporation-consolidated:
  
 
  
 
          
 
  
 
      Total capital to risk-weighted assets
  
$
1,635,458 
    
14.55 
%
  
$
899,302 
    
8.00 
%
  
$
1,124,128 
    
10.00 
%
      Tier 1 capital to risk-weighted assets
  
1,407,993 
    
12.53 
%
  
674,477 
    
6.00 
%
  
674,477 
    
6.00 
%
      Tier 1 leverage capital to average assets
  
1,407,993 
    
8.79 
%
  
640,528 
    
4.00 
%
  
n/a
  
n/a
      Common equity tier 1 capital to risk-weighted assets
  
1,264,493 
    
11.25 
%
  
505,857 
    
4.50 
%
  
n/a
  
n/a
Banner Bank:
  
 
  
 
          
 
  
 
      Total capital to risk-weighted assets
  
1,524,897 
    
13.57 
%
  
898,803 
    
8.00 
%
  
1,123,504 
    
10.00 
%
      Tier 1 capital to risk-weighted assets
  
1,397,432 
    
12.44 
%
  
674,102 
    
6.00 
%
  
898,803 
    
8.00 
%
      Tier 1 leverage capital to average assets
  
1,397,432 
    
8.73 
%
  
640,385 
    
4.00 
%
  
800,482 
    
5.00 
%
      Common equity tier 1 capital to risk-weighted assets
  
1,397,432 
    
12.44 
%
  
505,577 
    
4.50 
%
  
730,278 
    
6.50 
%



BANR - Third Quarter 2021 Results
October 20, 2021
Page 15

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


BANR - Third Quarter 2021 Results
October 20, 2021
Page 16

(1)
Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2)
Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)
Tax-exempt income is calculated on a tax equivalent basis.  The tax equivalent yield adjustment to interest earned on loans was $1.3 million, $1.3 million, and $1.4 million for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.  The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, $1.0 million, and $976,000 for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.
(4)
Non-interest expense divided by the total of net interest income and non-interest income.
(5)
Adjusted non-interest expense divided by adjusted revenue.  These represent non-GAAP financial measures.  See the non-GAAP Financial Measures on the final two pages of the press release tables.


BANR - Third Quarter 2021 Results
October 20, 2021
Page 17

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




BANR - Third Quarter 2021 Results
October 20, 2021
Page 18

(1)
Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2)
Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)
Tax-exempt income is calculated on a tax equivalent basis.  The tax equivalent yield adjustment to interest earned on loans was $3.8 million and $3.6 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.  The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.0 million and $2.5 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.
(4)
Non-interest expense divided by the total of net interest income and non-interest income.
(5)
Adjusted non-interest expense divided by adjusted revenue.  These represent non-GAAP financial measures.  See the non-GAAP Financial Measures on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
                  
(dollars in thousands)
                  
                   
* Non-GAAP Financial Measures
                  
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.  However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
                   
ADJUSTED REVENUE
Quarters Ended
  
Nine Months Ended
 
Sep 30, 2021
  
Jun 30, 2021
  
Sep 30, 2020
  
Sep 30, 2021
  
Sep 30, 2020
Net interest income
$
130,146 
    
$
127,554 
    
$
121,026 
    
$
375,361 
    
$
359,864 
  
Total non-interest income
25,334 
    
22,336 
    
28,222 
    
71,942 
    
75,107 
  
Total revenue (GAAP)
155,480 
    
149,890 
    
149,248 
    
447,303 
    
434,971 
  
Exclude net gain on sale of securities
(56)
    
(77)
    
(644)
    
(618)
    
(815)
  
Exclude net change in valuation of financial instruments carried at fair value
(1,778)
    
(58)
    
(37)
    
(1,895)
    
2,360 
  
Adjusted revenue (non-GAAP)
$
153,646 
    
$
149,755 
    
$
148,567 
    
$
444,790 
    
$
436,516 
  

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


BANR - Third Quarter 2021 Results
October 20, 2021
Page 19

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

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