Walla Walla, WA - October 19, 2022 - Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $49.1 million, or $1.43 per diluted share, for the third quarter of 2022, a 2% increase compared to $48.0 million, or $1.39 per diluted share, for the preceding quarter and a 2% decrease compared to $49.9 million, or $1.44 per diluted share, for the third quarter of 2021.  Banner’s third quarter 2022 results include $6.1 million of provision for credit losses, compared to $4.5 million of provision for credit losses in the preceding quarter and $8.6 million in recapture of provision for credit losses in the third quarter of 2021.  In addition, Banner recognized a $7.8 million gain related to the branch sale completed during the preceding quarter.  For the first nine months of 2022, net income was $141.0 million, or $4.09 per diluted share, compared to net income of $151.1 million, or $4.32 per diluted share for the same period a year earlier.  Banner’s first nine months of 2022 results include $3.7 million in provision for credit losses, compared to $28.1 million in recapture of provision for credit losses in the first nine months of 2021.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.44 per share.  The dividend will be payable November 10, 2022, to common shareholders of record on October 31, 2022.

“Banner’s third quarter operating results reflect the continued successful execution of our super community bank strategy, and the ongoing implementation of Banner Forward,” said Mark Grescovich, President and CEO.  “Our performance for the third 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 10% growth in loans, excluding PPP loans, compared to September 30, 2021.  We remain well positioned for rising interest rates with an asset sensitive position, which should further expand our net interest margin, and ample on-balance sheet liquidity to support loan demand and mitigate rising deposit costs.  Our goal of consistently delivering outstanding service and value to our clients, communities, colleagues and shareholders while meeting our performance objectives continues to guide our success.”

“During the third quarter of 2021 we began implementing Banner Forward, a bank-wide initiative to enhance revenue growth and reduce operating expense,” said Grescovich.  “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 revenue enhancements associated with Banner Forward are already starting to have a positive impact on earnings, and the implementation of the revenue initiatives are expected to continue ramping up over the fourth quarter and into 2023.  The remaining efficiency-related initiatives associated with Banner Forward are anticipated to be implemented during the fourth quarter, and we expect full implementation of Banner Forward by the end of next year.  During the third quarter of 2022, we incurred expenses of $411,000 related to Banner Forward.”

At September 30, 2022, Banner Corporation had $16.36 billion in assets, $9.69 billion in net loans and $14.23 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.

Third Quarter 2022 Highlights

•	Revenues increased 4% to $162.0 million, compared to $156.2 million in the preceding quarter, and increased 4% compared to $155.5 million in the third quarter a year ago.

•	Net interest income increased 14% to $146.4 million in the third quarter of 2022, compared to $129.0 million in the preceding quarter and increased 13%, compared to $130.1 million in the third quarter a year ago.

•	Net interest margin, on a tax equivalent basis, was 3.85%, compared to 3.44% in the preceding quarter and 3.47% in the third quarter a year ago.

•	Mortgage banking revenues decreased 97% to $105,000, compared to $4.0 million in the preceding quarter, and decreased 99% compared to $9.6 million in the third quarter a year ago.

•	Return on average assets was 1.18%, compared to 1.16% in the preceding quarter and 1.20% in the third quarter a year ago.

•	Net loans receivable increased 4% to $9.69 billion at September 30, 2022, compared to $9.33 billion at June 30, 2022, and increased 7% compared to $9.08 billion at September 30, 2021.

•	Non-performing assets decreased to $15.6 million, or 0.10% of total assets, at September 30, 2022, compared to $19.1 million, or 0.12% of total assets at June 30, 2022, and $29.7 million, or 0.18% of total assets, at September 30, 2021.

•	The allowance for credit losses - loans was $135.9 million, or 1.38% of total loans receivable, as of September 30, 2022, compared to $128.7 million, or 1.36% of total loans receivable as of June 30, 2022 and $139.9 million, or 1.52% of total loans receivable as of September 30, 2021.

•	Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased to $13.51 billion at September 30, 2022, compared to $13.46 billion at June 30, 2022, and $13.31 billion a year ago.  Core deposits represented 95% of total deposits at September 30, 2022.

•	Dividends to shareholders were $0.44 per share in the quarter ended September 30, 2022.

•	Common shareholders’ equity per share decreased 5% to $41.20 at September 30, 2022, compared to $43.46 at the preceding quarter end, and decreased 15% from $48.67 a year ago.

•	Tangible common shareholders’ equity per share* decreased 7% to $29.97 at September 30, 2022, compared to $32.20 at the preceding quarter end, and decreased 20% from $37.30 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 $146.4 million in the third quarter of 2022, compared to $129.0 million in the preceding quarter and $130.1 million in the third quarter a year ago.  Banner’s net interest margin on a tax equivalent basis was 3.85% for the third quarter of 2022, a 41 basis-point increase compared to 3.44% in the preceding quarter and a 38 basis-point increase compared to 3.47% in the third 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 3.97% for the third quarter of 2022 compared to 3.54% for the preceding quarter and increased 35 basis points compared to 3.62% in the third 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 300 basis points, including 150 basis points during the third quarter of 2022, to a range of 3.00% to 3.25%.  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 28 basis points to 4.82% compared to 4.54% in the preceding quarter and decreased six basis points compared to 4.88% 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 rising interest rates as well as increases in average loan balances.  The year-over-year decrease in average loan yields was primarily the result of a decline in the recognition of deferred loan fee income due to loan repayments from SBA PPP loan forgiveness compared to the prior year quarter.  Total deposit costs were 0.07% in the third quarter of 2022, which was a one basis-point increase compared to the preceding quarter and a one basis-point decrease compared to the third quarter a year ago.  The total cost of funding liabilities was 0.13% during the third quarter of 2022, a two basis-point increase compared to the preceding quarter and a three basis-point decrease compared to 0.16% in the third quarter a year ago.

Banner recorded a $6.1 million provision for credit losses in the current 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).  This compares to a $4.5 million provision for credit losses in the prior quarter (comprised of a $3.1 million provision for credit losses - loans, a $1.4 million provision for credit losses - unfunded loan commitments and a $4,000 provision for credit losses - held-to-maturity debt securities) and a $8.6 million recapture of provision for credit losses in the third quarter a year ago (comprised of an $8.9 million recapture of provision for credit losses - loans, a $218,000 provision for credit losses - unfunded loan commitments and a $6,000 recapture of 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 conditions and indicators utilized to estimate credit losses.

Total non-interest income was $15.6 million in the third quarter of 2022, compared to $27.2 million in the preceding quarter and $25.3 million in the third quarter a year ago.  The decrease in non-interest income during the current quarter, compared to the prior quarter was primarily due to a $7.8 million gain recognized on the branch sale completed during the prior quarter, as well as a $3.9 million decrease in mortgage banking revenues.  Deposit fees and other service charges were $11.4 million in the third quarter of 2022, compared to $11.0 million in the preceding quarter and $10.5 million in the third quarter a year ago.  The increase in deposit fees and other service charges from the third quarter a year ago primarily reflects increased deposit transaction account activity and the benefit from implementing Banner Forward initiatives.  Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $105,000 in the third quarter, compared to $4.0 million in the preceding quarter and $9.6 million in the third quarter a year ago.  The decrease from the preceding quarter and from the third 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 along with a negative fair market adjustment on multifamily held for sale loans.  The reduction in one-to four family loans sold primarily reflects a reduction in refinancing activity, as well as decreased purchase activity as interest rates increased during the current quarter.  Home purchase activity accounted for 88% of one- to four-family mortgage loan originations in the third quarter of 2022, compared to 82% in the preceding quarter and was 68% in the third quarter of 2021.  Mortgage banking revenue included a $2.2 million and $458,000 lower of cost or market downward adjustment recorded for the current quarter and preceding quarter, respectively, on multifamily held for sale loans due to increases in market interest rates this year.

Banner’s third quarter 2022 results included a $532,000 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 $6,000 net gain on the sale of securities.  In the preceding quarter, results included a $69,000 net gain for fair value adjustments and a $32,000 net gain on the sale of securities.  In the third quarter a year ago, results included a $1.8 million net gain for fair value adjustments and a $56,000 net gain on the sale of securities.

Total revenue increased 4% to $162.0 million for the third quarter of 2022, compared to $156.2 million in the preceding quarter, and increased 4% compared to $155.5 million in the third 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 $161.5 million in the third quarter of 2022, compared to $148.3 million in the preceding quarter and $153.6 million in the third quarter a year ago.  In the first nine months of the year, adjusted revenue* was $447.4 million, compared to $444.8 million in the first nine months of 2021.

Total non-interest expense was $95.0 million in the third quarter of 2022, compared to $92.1 million in the preceding quarter and $102.1 million in the third quarter of 2021.  The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an $807,000 increase in salary and employee benefits expenses, primarily due to an increase in bonus and commission expense, a $1.2 million decrease in capitalized loan origination costs, primarily due to decreases in production for one- to four-family residential and construction loans, and an $806,000 increase in information / computer data services expense, primarily due to an increase in computer software expenses, partially offset by a $1.3 million decrease in occupancy and equipment expense, primarily due to a reduction in building rent expense during the current quarter as the result of exiting a large lease agreement in the second quarter of 2022.  The year-over-year quarterly decrease in non-interest expense primarily reflects a decrease in professional and legal expenses, primarily due to a reduction in consultant expense, and a reduction in occupancy and equipment expense, due to the previously mentioned reduction in building rent expense, partially offset by an increase in salary and employee benefits expense and a decrease in capitalized loan origination costs.  Year-to-date, total non-interest expense was $278.3 million, compared to $288.3 million in the same period a year earlier.  Banner’s efficiency ratio was 58.65% for the second quarter, compared to 58.94% in the preceding quarter and 65.70% in same quarter a year ago.  Banner’s adjusted efficiency ratio* was 57.04% for the second quarter, compared to 59.46% in the preceding quarter and 59.65% in the year ago quarter.

For the third quarter of 2022, Banner had $11.8 million in state and federal income tax expense for an effective tax rate of 19.4%, reflecting the benefits from tax exempt income.  Banner’s statutory income tax rate is 23.6%, 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 slightly to $16.36 billion at September 30, 2022, compared to $16.39 billion at June 30, 2022, and decreased 2% when compared to $16.64 billion at September 30, 2021.  The total of securities and interest-bearing deposits held at other banks was $5.01 billion at September 30, 2022, compared to $5.45 billion at June 30, 2022 and $6.03 billion at September 30, 2021.  The average effective duration of Banner's securities portfolio was approximately 6.4 years at September 30, 2022, compared to 4.4 years at September 30, 2021.

Total loans receivable increased to $9.83 billion at September 30, 2022, compared to $9.46 billion at June 30, 2022, and $9.22 billion at September 30, 2021.  Excluding SBA PPP loans, total loans receivable increased $387.9 million from the preceding quarter and increased $905.5 million from the third quarter a year ago.  SBA PPP loans decreased 57% to $13.4 million at September 30, 2022, compared to $31.0 million at June 30, 2022, and decreased 96% when compared to $310.2 million at September 30, 2021.  One- to four-family residential loans increased to $1.03 billion at September 30, 2022, compared to $868.2 million at June 30, 2022, and $656.0 million a year ago.  The increase in one- to four-family residential loans from the preceding quarter was primarily the result of new production and one- to four-family construction loans converting to one- to four-family

portfolio loans as they matured during the third quarter of 2022.  Multifamily real estate loans increased 3% to $592.8 million at September 30, 2022, compared to $575.2 million at June 30, 2022, and increased 19% compared to $497.5 million a year ago.  Commercial real estate loans decreased slightly to $3.66 billion at September 30, 2022, compared to $3.67 billion at June 30, 2022 and decreased 3% when compared to $3.78 billion at September 30, 2021.  Commercial business loans increased 4% to $2.15 billion at September 30, 2022, compared to $2.07 billion at June 30, 2022, and increased 1% compared to $2.12 billion a year ago.  Excluding SBA PPP loans, commercial business loans increased 5% to $2.14 billion at September 30, 2022, compared to $2.04 billion at June 30, 2022, and increased 18% compared to $1.81 billion a year ago.  Agricultural business loans increased to $299.4 million at September 30, 2022, compared to $283.4 million at June 30, 2022, and increased from $281.1 million a year ago.  Total construction, land and land development loans were $1.44 billion at September 30, 2022, a 3% increase from $1.40 billion at June 30, 2022, and a 9% increase from $1.33 billion at September 30, 2021.  Consumer loans increased to $662.2 million at September 30, 2022, compared to $595.6 million at June 30, 2022, and increased from $561.2 million a year ago.  The increase in consumer loans was partially due to the purchase of a $25.6 million pool of consumer marine loans during the current quarter.

Loans held for sale were $84.4 million at September 30, 2022, compared to $69.2 million at June 30, 2022, and $63.7 million at September 30, 2021.  The volume of one- to four- family residential mortgage loans sold was $49.7 million in the current quarter, compared to $88.6 million in the preceding quarter and $232.2 million in the third quarter a year ago.  Banner sold $10.5 million of multifamily loans during the third quarter of 2022, compared to none in the preceding quarter and $96.1 million in the third quarter a year ago.

Total deposits increased slightly to $14.23 billion at September 30, 2022, compared to $14.21 billion at June 30, 2022, and $14.16 billion a year ago.  Non-interest-bearing account balances increased 2% to $6.51 billion at September 30, 2022, compared to $6.39 billion at June 30, 2022, and increased 2% compared to $6.40 billion a year ago.  Core deposits were 95% of total deposits at both September 30, 2022 and June 30, 2022 and were 94% of total deposits at September 30, 2021.  Certificates of deposit decreased to $721.9 million at September 30, 2022, compared to $756.3 million at June 30, 2022, and decreased 15% compared to $851.1 million a year earlier.  Banner had no FHLB borrowings at both September 30, 2022 and June 30, 2022, compared to $50.0 million a year ago.

At September 30, 2022, total common shareholders’ equity was $1.41 billion, or 8.61% of assets, compared to $1.49 billion or 9.07% of assets at June 30, 2022, and $1.67 billion or 10.02% of assets a year ago.  The decrease in total common shareholders’ equity during the current quarter was primarily due to a $113.3 million decrease in accumulated other comprehensive income related to an increase in the unrealized loss on available for sale securities reflecting the increase in market interest rates during the current quarter.  The decrease from the prior year, reflects a $384.1 million decrease in accumulated other comprehensive income and also includes the repurchase of 200,000 shares of common stock in the second quarter of 2022 at an average cost of $54.80 per share.  At September 30, 2022, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.02 billion, or 6.41% of tangible assets*, compared to $1.10 billion, or 6.88% of tangible assets, at June 30, 2022, and $1.28 billion, or 7.86% of tangible assets, a year ago.  Banner’s tangible book value per share* decreased to $29.97 at September 30, 2022, compared to $32.20 at June 30, 2022, and $37.30 per share a year ago.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.”  At September 30, 2022, Banner's common equity Tier 1 capital ratio was 11.27%, its Tier 1 leverage capital to average assets ratio was 9.06%, and its total capital to risk-weighted assets ratio was 13.85%.

* 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 $135.9 million at September 30, 2022, or 1.38% of total loans receivable and 895% of non-performing loans, compared to $128.7 million at June 30, 2022, or 1.36% of total loans receivable and 688% of non-performing loans, and $139.9 million at September 30, 2021, or 1.52% of total loans receivable and 485% 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 $14.0 million at September 30, 2022, compared to $14.2 million at June 30, 2022 and $10.1 million at September 30, 2021.  Net loan recoveries totaled $869,000 in the third quarter of 2022, compared to $87,000 in the preceding quarter and $756,000 in the third quarter a year ago.  Non-performing loans were $15.2 million at September 30, 2022, compared to $18.7 million at June 30, 2022, and $28.9 million a year ago.

Banner’s total substandard loans were $136.4 million at September 30, 2022, compared to $154.5 million at June 30, 2022, and $225.8 million a year ago.  The quarter over quarter decrease primarily reflects risk rating upgrades.

Banner’s total non-performing assets were $15.6 million, or 0.10% of total assets, at September 30, 2022, compared to $19.1 million, or 0.12% of total assets, at June 30, 2022, and $29.7 million, or 0.18% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday October 20, 2022, at 8:00 a.m. PDT, to discuss its third 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 664717 to participate in the call.  A replay will be available for one week at (866) 813-9403 using access code 067235 or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.36 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) uncertainty regarding the future of the London Interbank Offered Rate (LIBOR), and the transition away from 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, changes in market conditions;(19) the costs associated with Banner Forward and (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.

(1)	December 31, 2021 and September 30, 2021 loan balances were reclassified to match current period presentation.

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)