Banner : Reports Increased Loan Demand, Strong Deposit Growth and Net Income of $54.4 Million, or $1.56 Per Diluted Share, for Second Quarter 2021; (Form 8-K)

Banner Corporation Reports Increased Loan Demand, Strong Deposit Growth and Net Income of $54.4 Million, or $1.56 Per Diluted Share, for Second Quarter 2021;

Declares Quarterly Cash Dividend of $0.41 Per Share

Walla Walla, WA - July 21, 2021 - Banner Corporation (NASDAQ GSM: BANR) ('Banner'), the parent company of Banner Bank, today reported net income of $54.4 million, or $1.56 per diluted share, for the second quarter of 2021, a 16% increase compared to $46.9 million, or $1.33 per diluted share, for the preceding quarter and a 131% increase compared to $23.5 million, or $0.67 per diluted share, for the second quarter of 2020. Banner's second quarter 2021 results include $10.3 million in recapture of provision for credit losses, compared to $28.6 million in provision for credit losses in the second quarter of 2020. The second quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic. In the first six months of 2021, net income was $101.2 million, or $2.88 per diluted share, compared to net income of $40.4 million, or $1.14 per diluted share for the same period a year earlier. Banner's first six months of 2021 results include $19.5 million in recapture of provision for credit losses, compared to $52.1 million in provision for credit losses in the first six 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 August 13, 2021, to common shareholders of record on August 3, 2021.

'Banner's second quarter 2021 performance continues to demonstrate the success of our super community bank model, even with the challenges of the COVID-19 pandemic,' said Mark Grescovich, President and CEO. 'We benefited from continued core deposit growth and an acceleration of PPP loan fee income as a result of SBA PPP loan forgiveness. The unprecedented level of market liquidity along with proceeds from new PPP loan originations, and our continued focus on building client relationships contributed to our core deposits increasing 16% compared to June 30, 2020.'

'Due to the ongoing improvement in forecasted economic conditions in our markets, coupled with continued reductions in our adversely classified loans, we recorded a $10.3 million recapture to our provision for credit losses during the current quarter. This compares to a $9.3 million recapture to our provision for credit losses during the preceding quarter and a $28.6 million provision for credit losses in the second quarter a year ago. Our allowance for credit losses - loans remains strong at 1.53% of total loans and 481% of non-performing loans at June 30, 2021, compared to 1.57% of total loans and 426% of non-performing loans at March 31, 2021,' said Grescovich. 'Banner has provided PPP loans totaling nearly $1.61 billion to 13,922 businesses as of June 30, 2021, and as of quarter end, we had received SBA forgiveness for 6,707 PPP loans totaling $822.3 million. Our essential onsite employees, such as those working in our branches, continue to serve clients in person. In addition, as a result of the accelerated distribution of the COVID-19 vaccine over the past several months and the progress made toward fully reopening businesses in the states we serve, we began to normalize our operations by returning additional groups of employees back to Bank worksites in July 2021.'

At June 30, 2021, Banner Corporation had $16.18 billion in assets, $9.51 billion in net loans and $13.64 billion in deposits. Banner operates 155 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

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Second Quarter 2021 Highlights

•	Revenues increased 6% to $149.9 million, compared to $141.9 million in the preceding quarter, and increased 2% when compared to $147.3 million in the second quarter a year ago.

•	Net interest income, before the recapture of provision for credit losses, increased to $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago.

•	Net interest margin on a tax equivalent basis was 3.52%, compared to 3.44% in the preceding quarter and 3.87% in the second quarter a year ago.

•	Mortgage banking revenues decreased 35% to $7.5 million, compared to $11.4 million in the preceding quarter, and decreased 47% compared to $14.1 million in the second quarter a year ago.

•	Return on average assets was 1.36%, compared to 1.24% in the preceding quarter and 0.68% in the second quarter a year ago.

•	Net loans receivable decreased to $9.51 billion at June 30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June 30, 2020.

•	Non-performing assets decreased to $31.5 million, or 0.19% of total assets, at June 30, 2021, compared to $37.0 million, or 0.23% of total assets in the preceding quarter, and decreased from $39.9 million, or 0.28% of total assets, at June 30, 2020.

•	The allowance for credit losses - loans was $148.0 million, or 1.53% of total loans receivable, as of June 30, 2021, compared to $156.1 million, or 1.57% of total loans receivable as of March 31, 2021 and $156.4 million or 1.52% of total loans receivable as of June 30, 2020.

•

Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 1% to $12.76 billion at June 30, 2021, compared to $12.64 billion at March 31, 2021, and increased 16% compared to $10.97 billion a year ago. Core deposits represented 94% of total deposits at June 30, 2021.

•	Dividends to shareholders were $0.41 per share in the quarter ended June 30, 2021.

•	Common shareholders' equity per share increased 4% to $48.31 at June 30, 2021, compared to $46.60 at the preceding quarter end, and increased 5% from $46.22 a year ago.

•	Tangible common shareholders' equity per share* increased 5% to $36.99 at June 30, 2021, compared to $35.29 at the preceding quarter end, and increased 6% from $34.89 a year ago.

•	Banner repurchased 250,000 shares of its common stock during the quarter at an average cost of $58.22 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, 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.

Income Statement Review

Net interest income, before the recapture of provision for credit losses, was $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago.

Banner's net interest margin on a tax equivalent basis was 3.52% for the second quarter of 2021, an eight basis-point increase compared to 3.44% in the preceding quarter and a 35 basis-point decrease compared to 3.87% in the second quarter a year ago.

'Interest income was higher, primarily as a result of the decline in low yielding PPP loans and a corresponding acceleration of deferred loan fee income due to loan repayments from SBA loan forgiveness, which positively affected our net interest margin during the quarter. Net interest margin was also impacted by the growth in core deposit balances, resulting in our deploying excess liquidity into low yielding short term investments,' said Grescovich. 'Additionally, the on-going low interest rate environment continues to put downward pressure on loan yields.' Acquisition accounting adjustments added three basis points to the net interest margin in the current quarter, five basis points in the preceding quarter and seven basis points in the second quarter a year ago. The total purchase discount for acquired loans was $12.5 million at June 30, 2021, compared to $13.9 million at March 31, 2021, and $20.2 million at June 30, 2020. In the first six months of 2021, Banner's net interest margin on a tax equivalent basis was 3.48% compared to 4.05% in the first six months of 2020.

Average interest-earning asset yields increased four basis points to 3.68% in the second quarter compared to 3.64% for the preceding quarter and decreased 48 basis points compared to 4.16% in the second quarter a year ago. Average loan yields increased 27 basis points to 4.70% compared to 4.43% in the preceding quarter and increased 13 basis points compared to 4.57% in the second quarter a year ago. The increase in average loan yields

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during the current quarter compared to the preceding quarter was primarily the result of the decline in low yielding SBA PPP loans due to loan repayments from SBA loan forgiveness during the quarter, 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 the second quarter of 2021, seven basis points in the preceding quarter and eight basis points in the second quarter a year ago. Deposit costs were 0.09% in the second quarter of 2021, a two basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second 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 0.17% during the second quarter of 2021, a four basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second quarter a year ago.

Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter (comprised of an $8.1 million recapture credit losses - loans and a $2.2 million recapture unfunded loan commitments). This recapture compares to a $9.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.0 million recapture credit losses - loans and $1.2 million recapture unfunded loan commitments) and a $28.6 million provision for credit losses in the second quarter a year ago (comprised of a $29.5 million provision for credit losses - loans and a $905,000 recapture unfunded loan commitments). The recapture of provision for credit losses for the current quarter primarily reflects improvement in forecasted economic indicators and a decrease in adversely classified loans since the preceding quarter end, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected a decrease in loan balances, excluding PPP loans, as well as improvement in the forecasted economic indicators. The provision for credit losses recorded in the second 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 June 30, 2020.

Total non-interest income was $22.3 million in the second quarter of 2021, compared to $24.3 million in the preceding quarter and $27.7 million in the second quarter a year ago. Deposit fees and other service charges were $9.8 million in the second quarter of 2021, compared to $8.9 million in the preceding quarter and $7.5 million in the second quarter a year ago. The increase in deposit fees and other service charges from the second quarter a year ago is primarily a result of increased transaction deposit account activity. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $7.5 million in the second quarter, compared to $11.4 million in the preceding quarter and $14.1 million in the second quarter of 2020. The lower mortgage banking revenue quarter-over-quarter primarily reflects a decrease in the gain on sale margin on one- to four-family held-for-sale loans and a reduction in the volume of one- to four-family loans sold reflecting a decrease in refinance activity. The decrease compared to the second 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. Home purchase activity accounted for 66% of one- to four-family mortgage loan originations in the second quarter of 2021, compared to 54% in the prior quarter and 42% in the second quarter of 2020. In the first six months of 2021, total non-interest income decreased 1% to $46.6 million, compared to $46.9 million in the first six months of 2020.

Banner's second quarter 2021 results included a $58,000 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 a $77,000 net gain on the sale of securities. In the preceding quarter, results included a $59,000 net gain for fair value adjustments and a $485,000 net gain on the sale of securities. In the second quarter a year ago, results included a $2.2 million net gain for fair value adjustments and a $93,000 net gain on the sale of securities.

Total revenue increased 6% to $149.9 million for the second quarter of 2021, compared to $141.9 million in the preceding quarter, and increased 2% compared to $147.3 million in the second quarter a year ago. Year-to-date, total revenues increased 2% to $291.8 million compared to $285.7 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 $149.8 million in the second quarter of 2021, compared to $141.4 million in the preceding quarter and $145.0 million in the second quarter of 2020. In the first six months of the year, adjusted revenue* was $291.1 million, compared to $287.9 million in the first six months of 2020.

Total non-interest expense was $92.6 million in the second quarter of 2021, compared to $93.5 million in the preceding quarter and $90.5 million in the second quarter of 2020. The decrease in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $2.9 million decrease in salary and employee benefits expense as the prior quarter included $1.3 million of severance expense related to a reduction in staffing and a $1.2 million adjustment recorded to increase the liability related to deferred compensation plans. These decreases in salary and employee benefits expense for the current quarter were partially offset by a $1.0 million increase in professional and legal expenses. The year-over-year quarterly increase in non-interest expense also reflects decreased capitalized loan origination costs, primarily related to the decline in the origination of PPP loans during the current quarter compared to the same quarter a year ago as well as increases in professional and legal expenses and miscellaneous non-interest expense. The year-over-year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19 expenses. Merger and acquisition-related expenses were $79,000 for the second quarter of 2021, compared to $571,000 for the preceding quarter and $336,000 in the second quarter a year ago. COVID-19 expenses were $117,000 for the second quarter of 2021, compared to $148,000 for the preceding quarter and $2.2 million in the second quarter a year ago. Year-to-date, total non-interest expense was $186.2 million, compared to $184.0 million in the same period a year earlier. Banner's efficiency ratio was 61.79% for the current quarter, compared to 65.90% in the preceding quarter and 61.47% in the year ago quarter. Banner's adjusted efficiency ratio* was 59.77% for the current quarter, compared to 63.85% in the preceding quarter and 58.58% in the year ago quarter.

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For the second quarter of 2021, Banner had $13.1 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 $16.18 billion at June 30, 2021, compared to $16.12 billion at March 31, 2021, and increased 12% when compared to $14.41 billion at June 30, 2020. The total of securities and interest-bearing deposits held at other banks was $5.19 billion at June 30, 2021, compared to $4.81 billion at March 31, 2021 and $2.30 billion at June 30, 2020. The average effective duration of Banner's securities portfolio was approximately 4.6 years at June 30, 2021, compared to 4.0 years at June 30, 2020.

Net loans receivable decreased 3% to $9.51 billion at June 30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June 30, 2020. The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans, partially offset by increases in commercial real estate, multifamily real estate and construction loans. Commercial real estate and multifamily real estate loans increased 2% to $4.14 billion at June 30, 2021, compared to $4.05 billion at March 31, 2021, and increased 1% compared to $4.11 billion a year ago. Commercial business loans decreased 14% to $2.68 billion at June 30, 2021 compared to $3.09 billion at March 31, 2021, and decreased 15% compared to $3.15 billion a year ago, primarily due to PPP loans forgiven. Agricultural business loans increased to $265.4 million at June 30, 2021, compared to $262.4 million three months earlier and decreased from $328.1 million a year ago. Total construction, land and land development loans were $1.37 billion at June 30, 2021, a 4% increase from $1.31 billion at March 31, 2021, and an 11% increase compared to $1.24 billion a year earlier. Consumer loans decreased to $560.7 million at June 30, 2021, compared to $570.7 million at March 31, 2021, and $642.4 million a year ago. One- to four-family loans decreased to $637.7 million at June 30, 2021, primarily reflecting held for investment loans being refinanced and sold as held for sale loans, compared to $655.6 million at March 31, 2021, and $817.8 million a year ago.

Loans held for sale were $71.7 million at June 30, 2021, compared to $135.3 million at March 31, 2021, and $258.7 million at June 30, 2020. The volume of one- to four- family residential mortgage loans sold was $266.7 million in the current quarter, compared to $300.3 million in the preceding quarter and $292.4 million in the second quarter a year ago. During the second quarter of 2021, Banner sold $83.9 million in multifamily loans, compared to $107.7 million in the preceding quarter and $3.1 million in the second quarter a year ago.

Total deposits increased 1% to $13.64 billion at June 30, 2021, compared to $13.55 billion at March 31, 2021, and increased 13% when compared to $12.02 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 2% to $6.09 billion at June 30, 2021, compared to $5.99 billion at March 31, 2021, and increased 15% compared to $5.28 billion a year ago. Core deposits increased 1% to 94% of total deposits at June 30, 2021, compared to 93% of total deposits at March 31, 2021 and increased 16% compared to a year ago. Certificates of deposit decreased to $873.0 million at June 30, 2021, compared to $907.0 million at March 31, 2021, and decreased 16% compared to $1.04 billion a year earlier. Banner had no brokered deposits at June 30, 2021 or March 31, 2021, compared to $119.4 million a year ago. FHLB borrowings totaled $100.0 million at both June 30, 2021 and March 31, 2021, compared to $150.0 million a year ago.

At June 30, 2021, total common shareholders' equity was $1.67 billion, or 10.32% of assets, compared to $1.62 billion or 10.04% of assets at March 31, 2021, and $1.63 billion or 11.28% of assets a year ago. At June 30, 2021, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 8.09% of tangible assets*, compared to $1.23 billion, or 7.80% of tangible assets, at March 31, 2021, and $1.23 billion, or 8.76% of tangible assets, a year ago. Banner's tangible book value per share* increased to $36.99 at June 30, 2021, compared to $34.89 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 June 30, 2021, Banner's common equity Tier 1 capital ratio was 11.21%, its Tier 1 leverage capital to average assets ratio was 8.86%, and its total capital to risk-weighted assets ratio was 14.62%.

Credit Quality

The allowance for credit losses - loans was $148.0 million at June 30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, compared to $156.1 million at March 31, 2021, or 1.57% of total loans receivable outstanding and 426% of non-performing loans, and $156.4 million at June 30, 2020, or 1.52% of total loans receivable outstanding and 418% 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 $9.9 million at June 30, 2021, compared to $12.1 million at March 31, 2021 and $10.6 million at June 30, 2020. Net loan recoveries totaled $55,000 in the second quarter of 2021, compared to net loan charge-offs of $3.2 million in the preceding quarter and $3.7 million of net loan charge-offs in the second quarter a year ago. Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter, compared to a $9.3 million recapture of provision for credit losses in the prior quarter and a $28.6 million provision for loan losses in the year ago quarter. The recapture of provision for credit losses for the current quarter primarily reflects an improvement in the forecasted economic indicators and a decrease in adversely classified loans, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected the decrease in loan balances, excluding the increase in PPP loans, as well as

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improvement in the forecasted economic indicators. The provision for credit losses recorded in the second quarter a year ago reflected deterioration as a result of the COVID-19 pandemic in the economic indicators utilized to forecast credit losses. Non-performing loans were $30.8 million at June 30, 2021, compared to $36.6 million at March 31, 2021, and $37.4 million a year ago. Real estate owned and other repossessed assets were $780,000 at June 30, 2021, compared to $377,000 at March 31, 2021, and $2.4 million a year ago.

In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net purchase discount to the loans' contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts were included in the determination of fair value, and as a result, no allowance for credit losses was recorded for loans acquired from acquisitions prior to January 1, 2020. At June 30, 2021, the total purchase discount for acquired loans was $12.5 million.

Banner's total substandard loans were $272.8 million at June 30, 2021, compared to $311.6 million at March 31, 2021, and $359.8 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 $31.5 million, or 0.19% of total assets, at June 30, 2021, compared to $37.0 million, or 0.23% of total assets, at March 31, 2021, and $39.9 million, or 0.28% of total assets, a year ago.

At June 30, 2021, Banner had 71 loans totaling $28.5 million remaining on loan payment deferral due to COVID-19 including 62 mortgage loans totaling $20.2 million operating under forbearance agreements. 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, July 22, 2021, at 8:00 a.m. PDT, to discuss its second quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial [phone] to participate in the call. A replay will be available for one week at [phone] using access code 10157551, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.18 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 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

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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; and (16) 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.

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RESULTS OF OPERATIONS		Quarters Ended		Six Months Ended
(in thousands except shares and per share data)		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
INTEREST INCOME:
Loans receivable		$	115,391			$	108,924			$	115,173			$	224,315			$	234,099
Mortgage-backed securities		11,437			9,371			7,983			20,808			17,120
Securities and cash equivalents		6,737			6,226			5,591			12,963			9,193
		133,565			124,521			128,747			258,086			260,412
INTEREST EXPENSE:
Deposits		3,028			3,609			6,694			6,637			15,444
Federal Home Loan Bank advances		655			934			984			1,589			3,048
Other borrowings		124			109			238			233			354
Junior subordinated debentures and subordinated notes		2,204			2,208			1,251			4,412			2,728
		6,011			6,860			9,167			12,871			21,574
Net interest income		127,554			117,661			119,580			245,215			238,838
(RECAPTURE)/PROVISION FOR CREDIT LOSSES		(10,256)			(9,251)			28,623			(19,507)			52,093
Net interest income after (recapture)/provision for credit losses		137,810			126,912			90,957			264,722			186,745
NON-INTEREST INCOME:
Deposit fees and other service charges		9,758			8,939			7,546			18,697			17,349
Mortgage banking operations		7,478			11,440			14,138			18,918			24,329
Bank-owned life insurance		1,245			1,307			2,317			2,552			3,367
Miscellaneous		3,720			2,042			1,427			5,762			4,066
		22,201			23,728			25,428			45,929			49,111
Net gain on sale of securities		77			485			93			562			171
Net change in valuation of financial instruments carried at fair value		58			59			2,199			117			(2,397)
Total non-interest income		22,336			24,272			27,720			46,608			46,885
NON-INTEREST EXPENSE:
Salary and employee benefits		61,935			64,819			63,415			126,754			123,323
Less capitalized loan origination costs		(8,768)			(9,696)			(11,110)			(18,464)			(16,916)
Occupancy and equipment		12,823			12,989			12,985			25,812			26,092
Information / computer data services		5,602			6,203			6,084			11,805			11,894
Payment and card processing services		4,975			4,326			3,851			9,301			8,091
Professional and legal expenses		4,371			3,328			2,163			7,699			4,082
Advertising and marketing		1,181			1,263			652			2,444			2,479
Deposit insurance expense		1,241			1,533			1,705			2,774			3,340
State/municipal business and use taxes		1,083			1,065			1,104			2,148			2,088
Real estate operations		118			(242)			4			(124)			104
Amortization of core deposit intangibles		1,711			1,711			2,002			3,422			4,003
Miscellaneous		6,156			5,509			5,199			11,665			11,556
		92,428			92,808			88,054			185,236			180,136
COVID-19 expenses		117			148			2,152			265			2,391
Merger and acquisition-related expenses		79			571			336			650			1,478
Total non-interest expense		92,624			93,527			90,542			186,151			184,005
Income before provision for income taxes		67,522			57,657			28,135			125,179			49,625
PROVISION FOR INCOME TAXES		13,140			10,802			4,594			23,942			9,202
NET INCOME		$	54,382			$	46,855			$	23,541			$	101,237			$	40,423
Earnings per share available to common shareholders:
Basic		$	1.57			$	1.34			$	0.67			$	2.90			$	1.14
Diluted		$	1.56			$	1.33			$	0.67			$	2.88			$	1.14
Cumulative dividends declared per common share		$	0.41			$	0.41			$	-			$	0.82			$	0.41
Weighted average common shares outstanding:
Basic		34,736,639			34,973,383			35,189,260			34,854,357			35,326,401
Diluted		34,933,714			35,303,483			35,283,690			35,149,986			35,545,086
(Decrease) increase in common shares outstanding		(184,455)			(423,857)			55,440			(608,312)			(593,677)

BANR - Second Quarter 2021 Results

July 21, 2021

Page 8

FINANCIAL CONDITION										Percentage Change
(in thousands except shares and per share data)		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020		Prior Qtr		Prior Yr Qtr
ASSETS
Cash and due from banks		$	329,359			$	296,184			$	311,899			$	291,036			11.2	%		13.2	%
Interest-bearing deposits		1,138,572			1,353,743			922,284			128,938			(15.9)	%		783.0	%
Total cash and cash equivalents		1,467,931			1,649,927			1,234,183			419,974			(11.0)	%		249.5	%
Securities - trading		25,097			25,039			24,980			23,239			0.2	%		8.0	%
Securities - available for sale		3,275,979			2,989,760			2,322,593			1,706,781			9.6	%		91.9	%
Securities - held to maturity		455,256			441,857			421,713			441,075			3.0	%		3.2	%
Total securities		3,756,332			3,456,656			2,769,286			2,171,095			8.7	%		73.0	%
Equity securities		-			-			-			340,052			nm		(100.0)	%
Federal Home Loan Bank stock		14,001			14,001			16,358			16,363			-	%		(14.4)	%
Securities purchased under agreements to resell		300,000			-			-			-			nm		nm
Loans held for sale		71,741			135,263			243,795			258,700			(47.0)	%		(72.3)	%
Loans receivable		9,654,181			9,947,697			9,870,982			10,283,999			(3.0)	%		(6.1)	%
Allowance for credit losses - loans		(148,009)			(156,054)			(167,279)			(156,352)			(5.2)	%		(5.3)	%
Net loans receivable		9,506,172			9,791,643			9,703,703			10,127,647			(2.9)	%		(6.1)	%
Accrued interest receivable		46,979			49,214			46,617			48,806			(4.5)	%		(3.7)	%
Real estate owned (REO) held for sale, net		763			340			816			2,400			124.4	%		(68.2)	%
Property and equipment, net		156,063			161,268			164,556			173,360			(3.2)	%		(10.0)	%
Goodwill		373,121			373,121			373,121			373,121			-	%		-	%
Other intangibles, net		18,004			19,715			21,426			25,155			(8.7)	%		(28.4)	%
Bank-owned life insurance		192,677			191,388			191,830			190,468			0.7	%		1.2	%
Operating lease right-of-use assets		55,287			56,217			55,367			57,667			(1.7)	%		(4.1)	%
Other assets		222,786			221,039			210,565			200,799			0.8	%		10.9	%
Total assets		$	16,181,857			$	16,119,792			$	15,031,623			$	14,405,607			0.4	%		12.3	%
LIABILITIES
Deposits:
Non-interest-bearing		$	6,090,063			$	5,994,693			$	5,492,924			$	5,281,559			1.6	%		15.3	%
Interest-bearing transaction and savings accounts		6,673,598			6,647,196			6,159,052			5,692,715			0.4	%		17.2	%
Interest-bearing certificates		873,047			906,978			915,320			1,042,006			(3.7)	%		(16.2)	%
Total deposits		13,636,708			13,548,867			12,567,296			12,016,280			0.6	%		13.5	%
Advances from Federal Home Loan Bank		100,000			100,000			150,000			150,000			-	%		(33.3)	%
Customer repurchase agreements and other borrowings		237,736			216,260			184,785			166,084			9.9	%		43.1	%
Subordinated notes, net		98,380			98,290			98,201			98,140			0.1	%		0.2	%
Junior subordinated debentures at fair value		117,520			117,248			116,974			109,613			0.2	%		7.2	%
Operating lease liabilities		59,117			59,884			59,343			61,390			(1.3)	%		(3.7)	%
Accrued expenses and other liabilities		216,399			313,801			143,300			133,574			(31.0)	%		62.0	%
Deferred compensation		46,786			46,625			45,460			45,423			0.3	%		3.0	%
Total liabilities		14,512,646			14,500,975			13,365,359			12,780,504			0.1	%		13.6	%
SHAREHOLDERS' EQUITY
Common stock		1,311,455			1,326,269			1,349,879			1,345,096			(1.1)	%		(2.5)	%
Retained earnings		319,505			279,582			247,316			201,448			14.3	%		58.6	%
Other components of shareholders' equity		38,251			12,966			69,069			78,559			195.0	%		(51.3)	%
Total shareholders' equity		1,669,211			1,618,817			1,666,264			1,625,103			3.1	%		2.7	%
Total liabilities and shareholders' equity		$	16,181,857			$	16,119,792			$	15,031,623			$	14,405,607			0.4	%		12.3	%
Common Shares Issued:
Shares outstanding at end of period		34,550,888			34,735,343			35,159,200			35,157,899
Common shareholders' equity per share (1)		$	48.31			$	46.60			$	47.39			$	46.22
Common shareholders' tangible equity per share (1) (2)		$	36.99			$	35.29			$	36.17			$	34.89
Common shareholders' tangible equity to tangible assets (2)		8.09	%		7.80	%		8.69	%		8.76	%
Consolidated Tier 1 leverage capital ratio		8.86	%		9.10	%		9.50	%		9.83	%

(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 - Second Quarter 2021 Results

July 21, 2021

Page 9

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
										Percentage Change
LOANS		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020		Prior Qtr		Prior Yr Qtr
Commercial real estate:
Owner-occupied		$	1,066,237			$	1,045,656			$	1,076,467			$	1,027,399			2.0	%		3.8	%
Investment properties		1,950,211			1,931,805			1,955,684			2,017,789			1.0	%		(3.3)	%
Small balance CRE		621,102			639,330			573,849			624,726			(2.9)	%		(0.6)	%
Multifamily real estate		504,445			433,775			428,223			437,201			16.3	%		15.4	%
Construction, land and land development:
Commercial construction		182,868			199,037			228,937			215,860			(8.1)	%		(15.3)	%
Multifamily construction		295,661			305,694			305,527			256,335			(3.3)	%		15.3	%
One- to four-family construction		603,895			542,840			507,810			528,966			11.2	%		14.2	%
Land and land development		290,404			266,730			248,915			235,602			8.9	%		23.3	%
Commercial business:
Commercial business		1,124,359			1,096,303			1,133,989			1,250,288			2.6	%		(10.1)	%
PPP		807,172			1,280,291			1,044,472			1,121,928			(37.0)	%		(28.1)	%
Small business scored		743,975			717,502			743,451			779,678			3.7	%		(4.6)	%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland		247,467			226,094			299,949			328,077			9.5	%		(24.6)	%
PPP		17,962			36,316			-			-			(50.5)	%		nm
One- to four-family residential		637,701			655,627			717,939			817,787			(2.7)	%		(22.0)	%
Consumer:
Consumer-home equity revolving lines of credit		458,915			466,132			491,812			515,603			(1.5)	%		(11.0)	%
Consumer-other		101,807			104,565			113,958			126,760			(2.6)	%		(19.7)	%
Total loans receivable		$	9,654,181			$	9,947,697			$	9,870,982			$	10,283,999			(3.0)	%		(6.1)	%
Restructured loans performing under their restructured terms		$	5,472			$	6,424			$	6,673			$	6,391
Loans 30 - 89 days past due and on accrual		$	5,656			$	19,233			$	12,291			$	20,807
Total delinquent loans (including loans on non-accrual), net		$	23,582			$	42,444			$	36,131			$	36,269
Total delinquent loans / Total loans receivable		0.24	%		0.43	%		0.37	%		0.35	%

LOANS BY GEOGRAPHIC LOCATION												Percentage Change
		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020		Prior Qtr		Prior Yr Qtr
		Amount		Percentage		Amount		Amount		Amount
Washington		$	4,541,792			47.0%		$	4,683,600			$	4,647,553			$	4,787,550			(3.0)	%		(5.1)	%
California		2,246,580			23.3%		2,320,384			2,279,749			2,359,703			(3.2)	%		(4.8)	%
Oregon		1,753,285			18.2%		1,801,104			1,792,156			1,899,933			(2.7)	%		(7.7)	%
Idaho		525,610			5.4%		539,061			537,996			592,515			(2.5)	%		(11.3)	%
Utah		92,103			1.0%		92,399			80,704			67,929			(0.3)	%		35.6	%
Other		494,811			5.1%		511,149			532,824			576,369			(3.2)	%		(14.2)	%
Total loans receivable		$	9,654,181			100.0%		$	9,947,697			$	9,870,982			$	10,283,999			(3.0)	%		(6.1)	%

BANR - Second Quarter 2021 Results

July 21, 2021

Page 10

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

LOAN ORIGINATIONS	Quarters Ended
	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020
Commercial real estate	$	103,415			$	91,217			$	111,765
Multifamily real estate	45,674			12,878			6,384
Construction and land	509,828			447,369			290,955
Commercial business:
Commercial business	181,996			115,911			167,268
SBA PPP	55,990			428,180			1,151,170
Agricultural business	12,546			27,167			16,293
One-to four-family residential	47,086			57,731			24,537
Consumer	131,424			87,322			126,653
Total loan originations (excluding loans held for sale)	$	1,087,959			$	1,267,775			$	1,895,025

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Page 11

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020
ALLOWANCE FOR CREDIT LOSSES - LOANS
Balance, beginning of period		$	156,054			$	167,279			$	130,488
(Recapture)/provision for credit losses - loans		(8,100)			(8,035)			29,524
Recoveries of loans previously charged off:
Commercial real estate		147			24			54
Construction and land		-			100			105
One- to four-family real estate		20			113			31
Commercial business		321			979			370
Agricultural business, including secured by farmland		8			-			22
Consumer		97			296			60
		593			1,512			642
Loans charged off:
Commercial real estate		(3)			(3,763)			-
Construction and land		-			-			(100)
Commercial business		(123)			(789)			(3,553)
Agricultural business, including secured by farmland		(2)			-			(62)
Consumer		(410)			(150)			(587)
		(538)			(4,702)			(4,302)
Net recoveries (charge-offs)		55			(3,190)			(3,660)
Balance, end of period		$	148,009			$	156,054			$	156,352
Net recoveries (charge-offs) / Average loans receivable		0.001	%		(0.032)	%		(0.036)	%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES - LOANS		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020
Specific or allocated credit loss allowance:
Commercial real estate		$	60,349			$	59,411			$	53,166
Multifamily real estate		5,807			4,367			3,504
Construction and land		30,899			36,440			36,916
One- to four-family real estate		9,800			7,988			12,746
Commercial business		30,830			31,411			33,870
Agricultural business, including secured by farmland		3,256			4,617			4,517
Consumer		7,068			11,820			11,633
Total allowance for credit losses - loans		$	148,009			$	156,054			$	156,352
Allowance for credit losses - loans / Total loans receivable		1.53	%		1.57	%		1.52	%
Allowance for credit losses - loans / Non-performing loans		481	%		426	%		418	%

		Quarters Ended
CHANGE IN THE		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period		$	12,077			$	13,297			$	11,460
Recapture for credit losses - unfunded loan commitments		(2,168)			(1,220)			(905)
Balance, end of period		$	9,909			$	12,077			$	10,555

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Page 12

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	17,427			$	21,615			$	18,199			$	10,845
Construction and land	541			986			936			732
One- to four-family	4,007			4,456			3,556			2,942
Commercial business	3,673			4,194			5,407			18,486
Agricultural business, including secured by farmland	1,200			1,536			1,743			433
Consumer	1,799			2,244			2,719			2,412
	28,647			35,031			32,560			35,850
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	911			-			-			-
One- to four-family	579			1,524			1,899			472
Commercial business	495			37			1,025			1
Agricultural business, including secured by farmland	-			-			-			1,061
Consumer	131			-			130			36
	2,116			1,561			3,054			1,570
Total non-performing loans	30,763			36,592			35,614			37,420
REO	763			340			816			2,400
Other repossessed assets	17			37			51			47
Total non-performing assets	$	31,543			$	36,969			$	36,481			$	39,867
Total non-performing assets to total assets	0.19	%		0.23	%		0.24	%		0.28	%

	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020
LOANS BY CREDIT RISK RATING
Pass	$	9,315,264			$	9,584,429			$	9,494,147			$	9,869,917
Special Mention	66,103			51,692			36,598			54,291
Substandard	272,814			311,576			340,237			359,791
Total	$	9,654,181			$	9,947,697			$	9,870,982			$	10,283,999

	Quarters Ended		Six Months Ended
REAL ESTATE OWNED	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Balance, beginning of period	$	340			$	816			$	2,402			$	816			$	814
Additions from loan foreclosures	423			-			-			423			1,588
Proceeds from dispositions of REO	-			(783)			(98)			(783)			(98)
Gain on sale of REO	-			307			96			307			96
Balance, end of period	$	763			$	340			$	2,400			$	763			$	2,400

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July 21, 2021

Page 13

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION										Percentage Change
		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020		Prior Qtr		Prior Yr Qtr
Non-interest-bearing		$	6,090,063			$	5,994,693			$	5,492,924			$	5,281,559			1.6	%		15.3	%
Interest-bearing checking		1,736,696			1,722,085			1,569,435			1,399,593			0.8	%		24.1	%
Regular savings accounts		2,646,302			2,597,731			2,398,482			2,197,790			1.9	%		20.4	%
Money market accounts		2,290,600			2,327,380			2,191,135			2,095,332			(1.6)	%		9.3	%
Total interest-bearing transaction and savings accounts		6,673,598			6,647,196			6,159,052			5,692,715			0.4	%		17.2	%
Total core deposits		12,763,661			12,641,889			11,651,976			10,974,274			1.0	%		16.3	%
Interest-bearing certificates		873,047			906,978			915,320			1,042,006			(3.7)	%		(16.2)	%
Total deposits		$	13,636,708			$	13,548,867			$	12,567,296			$	12,016,280			0.6	%		13.5	%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020		Percentage Change
		Amount		Percentage		Amount		Amount		Amount		Prior Qtr		Prior Yr Qtr
Washington		$	7,547,591			55.3	%		$	7,504,389			$	7,058,404			$	6,765,186			0.6	%		11.6	%
Oregon		2,939,667			21.6	%		2,929,027			2,604,908			2,440,617			0.4	%		20.4	%
California		2,417,387			17.7	%		2,401,299			2,237,949			2,224,477			0.7	%		8.7	%
Idaho		732,063			5.4	%		714,152			666,035			586,000			2.5	%		24.9	%
Total deposits		$	13,636,708			100.0	%		$	13,548,867			$	12,567,296			$	12,016,280			0.6	%		13.5	%

INCLUDED IN TOTAL DEPOSITS		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020
Public non-interest-bearing accounts		$	187,702			$	151,850			$	175,352			$	139,133
Public interest-bearing transaction & savings accounts		156,987			169,192			127,523			136,039
Public interest-bearing certificates		41,444			51,021			59,127			56,609
Total public deposits		$	386,133			$	372,063			$	362,002			$	331,781
Total brokered deposits		$	-			$	-			$	-			$	119,399

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July 21, 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 JUNE 30, 2021		Amount		Ratio		Amount		Ratio		Amount		Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,618,512			14.62	%		$	885,723			8.00	%		$	1,107,154			10.00	%
Tier 1 capital to risk-weighted assets		1,385,143			12.51	%		664,292			6.00	%		664,292			6.00	%
Tier 1 leverage capital to average assets		1,385,143			8.86	%		625,458			4.00	%		n/a		n/a
Common equity tier 1 capital to risk-weighted assets		1,241,643			11.21	%		498,219			4.50	%		n/a		n/a
Banner Bank:
Total capital to risk-weighted assets		1,505,250			13.60	%		885,354			8.00	%		1,106,693			10.00	%
Tier 1 capital to risk-weighted assets		1,371,881			12.40	%		664,016			6.00	%		885,354			8.00	%
Tier 1 leverage capital to average assets		1,371,881			8.78	%		625,305			4.00	%		781,632			5.00	%
Common equity tier 1 capital to risk-weighted assets		1,371,881			12.40	%		498,012			4.50	%		719,350			6.50	%

BANR - Second Quarter 2021 Results

July 21, 2021

Page 15

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Jun 30, 2021		Mar 31, 2021		Jun 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	$	69,908			$	544			3.12	%		$	119,341			$	925			3.14	%		$	152,636			$	1,451			3.82	%
Mortgage loans	7,147,733			80,673			4.53	%		7,144,770			80,580			4.57	%		7,314,125			87,172			4.79	%
Commercial/agricultural loans	2,625,149			33,614			5.14	%		2,691,554			26,711			4.02	%		2,599,878			25,200			3.90	%
Consumer and other loans	122,951			1,828			5.96	%		127,469			1,947			6.19	%		152,438			2,361			6.23	%
Total loans(1)(3)	9,965,741			116,659			4.70	%		10,083,134			110,163			4.43	%		10,219,077			116,184			4.57	%
Mortgage-backed securities	2,440,913			11,563			1.90	%		1,953,820			9,472			1.97	%		1,286,223			8,083			2.53	%
Other securities	1,250,417			7,088			2.27	%		1,048,856			6,687			2.59	%		787,957			5,859			2.99	%
Equity securities	-			-			-	%		1,742			-			-	%		114,349			123			0.43	%
Interest-bearing deposits with banks	1,139,749			376			0.13	%		1,032,138			262			0.10	%		212,502			172			0.33	%
FHLB stock	14,001			161			4.61	%		15,952			161			4.09	%		16,620			300			7.26	%
Total investment securities (3)	4,845,080			19,188			1.59	%		4,052,508			16,582			1.66	%		2,417,651			14,537			2.42	%
Total interest-earning assets	14,810,821			135,847			3.68	%		14,135,642			126,745			3.64	%		12,636,728			130,721			4.16	%
Non-interest-earning assets	1,227,167							1,237,281							1,245,626
Total assets	$	16,037,988							$	15,372,923							$	13,882,354
Deposits:
Interest-bearing checking accounts	$	1,754,363			302			0.07	%		$	1,616,824			315			0.08	%		$	1,376,710			374			0.11	%
Savings accounts	2,622,716			454			0.07	%		2,486,820			521			0.08	%		2,108,896			998			0.19	%
Money market accounts	2,288,638			668			0.12	%		2,242,748			775			0.14	%		1,979,419			1,565			0.32	%
Certificates of deposit	889,020			1,604			0.72	%		913,053			1,998			0.89	%		1,117,547			3,757			1.35	%
Total interest-bearing deposits	7,554,737			3,028			0.16	%		7,259,445			3,609			0.20	%		6,582,572			6,694			0.41	%
Non-interest-bearing deposits	6,057,884			-			-	%		5,663,820			-			-	%		4,902,992			-			-	%
Total deposits	13,612,621			3,028			0.09	%		12,923,265			3,609			0.11	%		11,485,564			6,694			0.23	%
Other interest-bearing liabilities:
FHLB advances	100,000			655			2.63	%		144,444			934			2.62	%		156,374			984			2.53	%
Other borrowings	240,229			124			0.21	%		202,930			109			0.22	%		285,735			238			0.34	%
Junior subordinated debentures and subordinated notes	247,944			2,204			3.57	%		247,944			2,208			3.61	%		149,043			1,251			3.38	%
Total borrowings	588,173			2,983			2.03	%		595,318			3,251			2.21	%		591,152			2,473			1.68	%
Total funding liabilities	14,200,794			6,011			0.17	%		13,518,583			6,860			0.21	%		12,076,716			9,167			0.31	%
Other non-interest-bearing liabilities(2)	199,619							207,560							188,369
Total liabilities	14,400,413							13,726,143							12,265,085
Shareholders' equity	1,637,575							1,646,780							1,617,269
Total liabilities and shareholders' equity	$	16,037,988							$	15,372,923							$	13,882,354
Net interest income/rate spread (tax equivalent)			$	129,836			3.51	%				$	119,885			3.43	%				$	121,554			3.85	%
Net interest margin (tax equivalent)					3.52	%						3.44	%						3.87	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis			(2,282)							(2,224)							(1,974)
Net interest income and margin, as reported			$	127,554			3.45	%				$	117,661			3.38	%				$	119,580			3.81	%
Additional Key Financial Ratios:
Return on average assets					1.36	%						1.24	%						0.68	%
Return on average equity					13.32	%						11.54	%						5.85	%
Average equity/average assets					10.21	%						10.71	%						11.65	%
Average interest-earning assets/average interest-bearing liabilities					181.89	%						179.96	%						176.15	%
Average interest-earning assets/average funding liabilities					104.30	%						104.56	%						104.64	%
Non-interest income/average assets					0.56	%						0.64	%						0.80	%
Non-interest expense/average assets					2.32	%						2.47	%						2.62	%
Efficiency ratio(4)					61.79	%						65.90	%						61.47	%
Adjusted efficiency ratio(5)					59.77	%						63.85	%						58.58	%

BANR - Second Quarter 2021 Results

July 21, 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, $1.2 million, and $1.0 million for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million for both the three months ended June 30, 2021 and March 31, 2021, compared to $963,000 for the three months ended June 30, 2020.

(4)	Non-interest expense divided by the total of net interest income and non-interest income.

(5)	Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables.

BANR - Second Quarter 2021 Results

July 21, 2021

Page 17

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Six Months Ended
	Jun 30, 2021		Jun 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	$	94,488			$	1,469			3.14	%		$	152,631			$	2,971			3.91	%
Mortgage loans	7,146,260			161,253			4.55	%		7,312,120			180,233			4.96	%
Commercial/agricultural loans	2,658,168			60,325			4.58	%		2,241,942			48,159			4.32	%
Consumer and other loans	125,197			3,775			6.08	%		157,768			4,956			6.32	%
Total loans(1)(3)	10,024,113			226,822			4.56	%		9,864,461			236,319			4.82	%
Mortgage-backed securities	2,198,712			21,035			1.93	%		1,320,404			17,319			2.64	%
Other securities	1,150,193			13,775			2.42	%		623,036			9,169			2.96	%
Equity securities	866			-			-	%		57,175			123			0.43	%
Interest-bearing deposits with banks	1,086,241			638			0.12	%		152,581			565			0.74	%
FHLB stock	14,971			322			4.34	%		21,571			622			5.80	%
Total investment securities(3)	4,450,983			35,770			1.62	%		2,174,767			27,798			2.57	%
Total interest-earning assets	14,475,096			262,592			3.66	%		12,039,228			264,117			4.41	%
Non-interest-earning assets	1,232,196							1,219,440
Total assets	$	15,707,292							$	13,258,668
Deposits:
Interest-bearing checking accounts	$	1,685,973			617			0.07	%		$	1,321,679			843			0.13	%
Savings accounts	2,555,144			975			0.08	%		2,074,377			2,753			0.27	%
Money market accounts	2,265,819			1,443			0.13	%		1,861,268			4,004			0.43	%
Certificates of deposit	900,970			3,602			0.81	%		1,121,270			7,844			1.41	%
Total interest-bearing deposits	7,407,906			6,637			0.18	%		6,378,594			15,444			0.49	%
Non-interest-bearing deposits	5,861,941			-			-	%		4,434,186			-			-	%
Total deposits	13,269,847			6,637			0.10	%		10,812,780			15,444			0.29	%
Other interest-bearing liabilities:
FHLB advances	122,100			1,589			2.62	%		280,901			3,048			2.18	%
Other borrowings	221,682			233			0.21	%		205,253			354			0.35	%
Junior subordinated debentures and subordinated notes	247,944			4,412			3.59	%		148,494			2,728			3.69	%
Total borrowings	591,726			6,234			2.12	%		634,648			6,130			1.94	%
Total funding liabilities	13,861,573			12,871			0.19	%		11,447,428			21,574			0.38	%
Other non-interest-bearing liabilities(2)	203,567							200,265
Total liabilities	14,065,140							11,647,693
Shareholders' equity	1,642,152							1,610,975
Total liabilities and shareholders' equity	$	15,707,292							$	13,258,668
Net interest income/rate spread (tax equivalent)			$	249,721			3.47	%				$	242,543			4.03	%
Net interest margin (tax equivalent)					3.48	%						4.05	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis			(4,506)							(3,705)
Net interest income and margin, as reported			$	245,215			3.42	%				$	238,838			3.99	%
Additional Key Financial Ratios:
Return on average assets					1.30	%						0.61	%
Return on average equity					12.43	%						5.05	%
Average equity/average assets					10.45	%						12.15	%
Average interest-earning assets/average interest-bearing liabilities			`		180.95	%						171.66	%
Average interest-earning assets/average funding liabilities					104.43	%						105.17	%
Non-interest income/average assets					0.60	%						0.71	%
Non-interest expense/average assets					2.39	%						2.79	%
Efficiency ratio(4)					63.79	%						64.40	%
Adjusted efficiency ratio(5)					61.75	%						60.41	%

BANR - Second Quarter 2021 Results

July 21, 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 $2.5 million and $2.2 million for the six months ended June 30, 2021 and June 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.0 million and $1.5 million for the six months ended June 30, 2021 and June 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		Six Months Ended
	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Net interest income	$	127,554			$	117,661			$	119,580			$	245,215			$	238,838
Total non-interest income	22,336			24,272			27,720			46,608			46,885
Total revenue (GAAP)	149,890			141,933			147,300			291,823			285,723
Exclude net gain on sale of securities	(77)			(485)			(93)			(562)			(171)
Exclude net change in valuation of financial instruments carried at fair value	(58)			(59)			(2,199)			(117)			2,397
Adjusted revenue (non-GAAP)	$	149,755			$	141,389			$	145,008			$	291,144			$	287,949

ADJUSTED EARNINGS		Quarters Ended		Six Months Ended
		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Net income (GAAP)		$	54,382			$	46,855			$	23,541			$	101,237			$	40,423
Exclude net gain on sale of securities		(77)			(485)			(93)			(562)			(171)
Exclude net change in valuation of financial instruments carried at fair value		(58)			(59)			(2,199)			(117)			2,397
Exclude merger and acquisition-related expenses		79			571			336			650			1,478
Exclude COVID-19 expenses		117			148			2,152			265			2,391
Exclude related net tax benefit		(15)			(42)			(47)			(57)			(1,452)
Total adjusted earnings (non-GAAP)		$	54,428			$	46,988			$	23,690			$	101,416			$	45,066
Diluted earnings per share (GAAP)		$	1.56			$	1.33			$	0.67			$	2.88			$	1.14
Diluted adjusted earnings per share (non-GAAP)		$	1.56			$	1.33			$	0.67			$	2.89			$	1.27

BANR - Second Quarter 2021 Results

July 21, 2021

Page 19

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended		Six Months Ended
		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Non-interest expense (GAAP)		$	92,624			$	93,527			$	90,542			$	186,151			$	184,005
Exclude merger and acquisition-related expenses		(79)			(571)			(336)			(650)			(1,478)
Exclude COVID-19 expenses		(117)			(148)			(2,152)			(265)			(2,391)
Exclude CDI amortization		(1,711)			(1,711)			(2,002)			(3,422)			(4,003)
Exclude state/municipal tax expense		(1,083)			(1,065)			(1,104)			(2,148)			(2,088)
Exclude REO operations		(118)			242			(4)			124			(104)
Adjusted non-interest expense (non-GAAP)		$	89,516			$	90,274			$	84,944			$	179,790			$	173,941
Net interest income (GAAP)		$	127,554			$	117,661			$	119,580			$	245,215			$	238,838
Non-interest income (GAAP)		22,336			24,272			27,720			46,608			46,885
Total revenue		149,890			141,933			147,300			291,823			285,723
Exclude net gain on sale of securities		(77)			(485)			(93)			(562)			(171)
Exclude net change in valuation of financial instruments carried at fair value		(58)			(59)			(2,199)			(117)			2,397
Adjusted revenue (non-GAAP)		$	149,755			$	141,389			$	145,008			$	291,144			$	287,949
Efficiency ratio (GAAP)		61.79	%		65.90	%		61.47	%		63.79	%		64.40	%
Adjusted efficiency ratio (non-GAAP)		59.77	%		63.85	%		58.58	%		61.75	%		60.41	%

TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Jun 30, 2020
Shareholders' equity (GAAP)		$	1,669,211			$	1,618,817			$	1,666,264			$	1,625,103
Exclude goodwill and other intangible assets, net		391,125			392,836			394,547			398,276
Tangible common shareholders' equity (non-GAAP)		$	1,278,086			$	1,225,981			$	1,271,717			$	1,226,827
Total assets (GAAP)		$	16,181,857			$	16,119,792			$	15,031,623			$	14,405,607
Exclude goodwill and other intangible assets, net		391,125			392,836			394,547			398,276
Total tangible assets (non-GAAP)		$	15,790,732			$	15,726,956			$	14,637,076			$	14,007,331
Common shareholders' equity to total assets (GAAP)		10.32	%		10.04	%		11.09	%		11.28	%
Tangible common shareholders' equity to tangible assets (non-GAAP)		8.09	%		7.80	%		8.69	%		8.76	%
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
Tangible common shareholders' equity (non-GAAP)		$	1,278,086			$	1,225,981			$	1,271,717			$	1,226,827
Common shares outstanding at end of period		34,550,888			34,735,343			35,159,200			35,157,899
Common shareholders' equity (book value) per share (GAAP)		$	48.31			$	46.60			$	47.39			$	46.22
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)		$	36.99			$	35.29			$	36.17			$	34.89