Banner Corporation Reports Net Income of $45.2 Million, or $1.30 Per Diluted Share, for Third Quarter 2024; Declares Quarterly Cash Dividend of $0.48 Per Share

Banner Corporation (NASDAQ: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $45.2 million, or $1.30 per diluted share, for the third quarter of 2024, compared to $39.8 million, or $1.15 per diluted share, for the preceding quarter and $45.9 million, or $1.33 per diluted share, for the third quarter of 2023. Net interest income was $135.7 million in the third quarter of 2024, compared to $132.5 million in the preceding quarter and $141.8 million in the third quarter a year ago. The increase in net interest income compared to the preceding quarter reflects an increase in interest-earning assets and net interest margin. The decrease in net interest income compared to the prior year quarter reflects an increase in funding costs, partially offset by an increase in yields on earning assets. Banner’s results for the preceding quarter included a $562,000 net loss on the sale of securities and for the third quarter a year ago a $2.7 million net loss recorded on the sale of securities, compared to no gain or loss during the current quarter as no securities were sold during the third quarter of 2024. Third quarter 2024 results included a $1.7 million provision for credit losses, down from $2.4 million in the preceding quarter and $2.0 million in the third quarter of 2023.

Net income was $122.5 million, or $3.54 per diluted share, for the nine months ended September 30, 2024, compared to $141.0 million, or $4.09 per diluted share, for the nine months ended September 30, 2023. Results for the nine months ended September 30, 2024 included a $4.6 million provision for credit losses, a $5.5 million net loss on the sale of securities and a $1.1 million net decrease in the fair value adjustments on financial instruments carried at fair value, compared to an $8.3 million provision for credit losses, a $14.4 million net loss on the sale of securities and a $4.4 million net decrease in the fair value adjustments on financial instruments carried at fair value during the same period in 2023.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.48 per share payable November 15, 2024, to common shareholders of record on November 5, 2024.

“Banner’s third quarter operating results reflect the continued successful execution of our super community bank strategy, which emphasizes growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and sustaining a moderate risk profile,” said Mark Grescovich, President and CEO. “Our earnings for the third quarter of 2024 benefited from our solid year over year loan growth coupled with our expanded net interest margin. Additionally, Banner's credit metrics continue to be strong, our reserve for loan losses remained solid, and our capital base continues to be robust. We continue to benefit from a strong core deposit base that has been resilient in a highly competitive environment, with core deposits representing 89% of total deposits at quarter end. Banner has upheld its core values for the past 133 years, which are to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide consistent and reliable strength through all economic cycles and change events.”

At September 30, 2024, Banner, on a consolidated basis, had $16.19 billion in assets, $11.07 billion in net loans and $13.54 billion in deposits. Banner operates 135 full-service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Third Quarter 2024 Highlights

Revenue was $153.7 million for the third quarter of 2024, compared to $149.7 million in the preceding quarter and $154.4 million in the third quarter a year ago.
Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $153.7 million in the third quarter of 2024, compared to $150.5 million in the preceding quarter and $157.7 million in the third quarter a year ago.
Net interest income was $135.7 million in the third quarter of 2024, compared to $132.5 million in the preceding quarter and $141.8 million in the third quarter a year ago.
Net interest margin, on a tax equivalent basis, was 3.72%, compared to 3.70% in the preceding quarter and 3.93% in the third quarter a year ago.
Mortgage banking operations revenue was $3.2 million for the third quarter of 2024, compared to $3.0 million in the preceding quarter and $2.0 million in the third quarter a year ago.
Return on average assets was 1.13%, compared to 1.02% in the preceding quarter and 1.17% in the third quarter a year ago.
Net loans receivable increased 1% to $11.07 billion at September 30, 2024, compared to $10.99 billion at June 30, 2024, and increased 6% compared to $10.46 billion at September 30, 2023.
Non-performing assets were $45.2 million, or 0.28% of total assets, at September 30, 2024, compared to $33.3 million, or 0.21% of total assets, at June 30, 2024 and $26.8 million, or 0.17% of total assets, at September 30, 2023.
The allowance for credit losses - loans was $154.6 million, or 1.38% of total loans receivable, as of September 30, 2024, compared to $152.8 million, or 1.37% of total loans receivable, as of June 30, 2024 and $147.0 million, or 1.38% of total loans receivable, as of September 30, 2023.
Total deposits increased to $13.54 billion at September 30, 2024, compared to $13.08 billion at June 30, 2024 and $13.17 billion at September 30, 2023.
Core deposits represented 89% of total deposits at September 30, 2024.
Dividends paid to shareholders were $0.48 per share in the quarter ended September 30, 2024.
Common shareholders’ equity per share increased 6% to $52.06 at September 30, 2024, compared to $49.07 at the preceding quarter end, and increased 18% from $44.27 at September 30, 2023.
Tangible common shareholders’ equity per share* increased 8% to $41.12 at September 30, 2024, compared to $38.12 at the preceding quarter end, and increased 24% from $33.22 at September 30, 2023.

*Non-GAAP (Generally Accepted Accounting Principles) financial measure; See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Income Statement Review

Net interest income was $135.7 million in the third quarter of 2024, compared to $132.5 million in the preceding quarter and $141.8 million in the third quarter a year ago. Net interest margin on a tax equivalent basis increased two basis points to 3.72% for the third quarter of 2024, compared to 3.70% in the preceding quarter, and decreased compared to 3.93% in the third quarter a year ago. Net interest margin for the current quarter benefited from increased yields on loans due to new loans being originated at higher interest rates and adjustable rate loans repricing higher, partially offset by increased funding costs. On September 18, 2024, the Federal Open Market Committee of the Federal Reserve System decreased the target range for the federal funds rate by 50 basis points, and as the change occurred late in the third quarter of 2024, it had minimal impact on our current quarter net interest margin.

Average yields on interest-earning assets increased eight basis points to 5.33% for the third quarter of 2024, compared to 5.25% for the preceding quarter, and increased compared to 4.94% in the third quarter a year ago. Average loan yields increased eight basis points to 6.04%, compared to 5.96% in the preceding quarter, and increased compared to 5.65% in the third quarter a year ago. The increase in average yields, especially loans, during the current quarter reflects the benefit of originating new loans at higher interest rates as well as adjustable rate loans repricing higher.

Total deposit costs increased 11 basis points to 1.61% in the third quarter of 2024, compared to 1.50% in the preceding quarter, and increased compared to 0.94% in the third quarter a year ago. The increase in deposit costs was due to a larger percentage of growth in higher costing deposits during the quarter. The average rate paid on borrowings increased one basis-point to 5.08% in the third quarter of 2024, compared to 5.07% in the preceding quarter, and increased compared to 4.64% in the third quarter a year ago. The total cost of funding liabilities increased seven basis points to 1.73% during the third quarter of 2024, compared to 1.66% in the preceding quarter, and increased compared to 1.08% in the third quarter a year ago.

A $1.7 million provision for credit losses was recorded in the current quarter (comprised of a $2.0 million provision for credit losses - loans, a $262,000 recapture of provision for credit losses - unfunded loan commitments and a $13,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $2.4 million provision for credit losses in the prior quarter (comprised of a $2.0 million provision for credit losses - loans, a $430,000 provision for credit losses - unfunded loan commitments and a $14,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $2.0 million provision for credit losses in the third quarter a year ago (comprised of a $2.9 million provision for credit losses - loans, a $346,000 provision for credit losses - unfunded loan commitments, a $1.3 million recapture of provision for credit losses - available for sale securities and a $12,000 recapture of provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current quarter primarily reflected an increase in the reserve for non-performing collateral dependent loans.

Total non-interest income was $18.1 million in the third quarter of 2024, compared to $17.2 million in the preceding quarter and $12.7 million in the third quarter a year ago. The increase in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $562,000 decrease in the net loss recognized on the sale of securities. The increase in non-interest income during the current quarter compared to the prior year quarter was primarily due to a $1.1 million increase in mortgage banking operations revenue, a $2.7 million decrease in the net loss recognized on the sale of securities and a $693,000 decrease in the net loss recognized for fair value adjustments on financial instruments carried at fair value. Total non-interest income was $46.9 million for the nine months ended September 30, 2024, compared to $30.4 million for the same period a year earlier.

Mortgage banking operations revenue was $3.2 million in the third quarter of 2024, compared to $3.0 million in the preceding quarter and $2.0 million in the third quarter a year ago. The volume of one- to four-family loans sold during the current quarter increased compared to the preceding and prior year quarters, although overall volumes remained low due to reduced refinancing and purchase activity in the current rate environment. The increase in mortgage banking operations revenue from the preceding quarter was also impacted by increases in the pricing on the one- to four-family loans sold during the current quarter. Home purchase activity accounted for 88% of one- to four-family mortgage loan originations in the third quarter of 2024, 89% in the preceding quarter and 90% in the third quarter of 2023.

Total non-interest expense was $96.3 million in the third quarter of 2024, compared to $98.1 million in the preceding quarter and $95.9 million in the third quarter of 2023. The decrease in non-interest expense for the current quarter compared to the prior quarter reflects a $2.0 million decrease in salary and employee benefits, primarily resulting from decreased medical premiums expense and unemployment and workers compensation expense. The increase in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects increases in salary and employee benefits and real estate operations, net expenses, partially offset by a decrease in professional and legal expenses. For the nine months ended September 30, 2024, total non-interest expense was $292.1 million, compared to $285.9 million for the nine months ended September 30, 2023. Banner’s efficiency ratio was 62.63% for the third quarter of 2024, compared to 65.53% in the preceding quarter and 62.10% in the same quarter a year ago. Banner’s adjusted efficiency ratio, a non-GAAP financial measure, was 61.27% for the third quarter of 2024, compared to 63.60% in the preceding quarter and 59.00% in the year ago quarter. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Balance Sheet Review

Total assets increased to $16.19 billion at September 30, 2024, compared to $15.82 billion at June 30, 2024, and $15.51 billion at September 30, 2023. Securities and interest-bearing deposits held at other banks totaled $3.50 billion at September 30, 2024, compared to $3.27 billion at June 30, 2024 and $3.44 billion at September 30, 2023. The increase compared to the prior quarter was primarily due to an increase in interest-bearing deposit balances. The average effective duration of the securities portfolio was approximately 6.3 years at September 30, 2024, compared to 6.8 years at September 30, 2023.

Total loans receivable increased to $11.22 billion at September 30, 2024, compared to $11.14 billion at June 30, 2024, and $10.61 billion at September 30, 2023. One- to four-family residential loans decreased 2% to $1.58 billion at September 30, 2024, compared to $1.60 billion at June 30, 2024, and increased 9% compared to $1.44 billion at September 30, 2023. The decrease in one- to four-family residential loans from the prior quarter was primarily the result of the transfer of $47.5 million of one- to four-family residential loans from portfolio to held for sale. The increase in one- to four-family residential loans from the prior year was primarily the result of one- to four-family construction loans converting to one- to four-family portfolio loans upon the completion of the construction phase and new loan production. Multifamily real estate loans increased 24% to $889.9 million at September 30, 2024, compared to $717.1 million at June 30, 2024, and increased 16% compared to $766.6 million at September 30, 2023. The increase in multifamily real estate loans from June 30, 2024 and September 30, 2023 was primarily the result of the conversion of multifamily construction loans to the multifamily portfolio upon the completion of the construction phase. The increase from the prior year also reflects the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023, partially offset by the transfer of certain affordable housing loans to small balance commercial real estate loans. Construction, land and land development loans decreased 9% to $1.53 billion at September 30, 2024, compared to $1.68 billion at June 30, 2024, and increased 1% compared to $1.50 billion at September 30, 2023. The decrease in construction, land and land development loans was primarily the result of multifamily construction loans converting to multifamily portfolio loans upon the completion of the construction phase. Agricultural business loans increased 4% to $346.7 million at September 30, 2024, compared to $334.6 million at June 30, 2024 and increased 4% compared to $334.6 million at September 30, 2023, primarily due to advances on agricultural lines of credit.

Loans held for sale were $78.8 million at September 30, 2024, compared to $13.4 million at June 30, 2024 and $54.2 million at September 30, 2023. One- to four-family residential mortgage held for sale loans sold in the current quarter totaled $95.0 million, compared to $75.0 million in the preceding quarter and $87.3 million in the third quarter a year ago. The increase in loans held for sale was primarily the result of the transfer of $47.5 million of one- to four-family residential loans from portfolio to held for sale during the current quarter. The increase from the prior year was partially offset by the previously mentioned transfer of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023. There were no multifamily loans held for sale at September 30, 2024 or June 30, 2024.

Total deposits increased to $13.54 billion at September 30, 2024, compared to $13.08 billion at June 30, 2024 and $13.17 billion a year ago. Core deposits increased 4% to $12.02 billion at September 30, 2024, compared to $11.55 billion at June 30, 2024, and increased 3% compared to $11.72 billion at September 30, 2023. The increase in core deposits compared to the prior quarter primarily reflects normal seasonal increases primarily from agricultural clients. The increase in core deposits compared to the prior year quarter primarily reflects an increase in third-party insured sweep accounts. Core deposits were 89% of total deposits at September 30, 2024, compared to 88% of total deposits at June 30, 2024 and 89% of total deposits at September 30, 2023. Certificates of deposit decreased slightly to $1.52 billion at September 30, 2024, compared to $1.53 billion at June 30, 2024, and increased 4% compared to $1.46 billion a year earlier. The decrease in certificates of deposit during the current quarter compared to the preceding quarter was principally due to a $55.0 million decrease in brokered deposits. The increase in certificates of deposit during the current quarter compared to the third quarter a year ago was principally due to clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposits, partially offset by a $112.5 million decrease in brokered deposits.

FHLB advances were $230.0 million at September 30, 2024, compared to $398.0 million at June 30, 2024 and $140.0 million a year ago. At September 30, 2024, off-balance sheet liquidity included additional borrowing capacity of $3.23 billion at the FHLB and $1.53 billion at the Federal Reserve as well as federal funds line of credit agreements with other financial institutions of $125.0 million.

At September 30, 2024, total common shareholders’ equity was $1.79 billion, or 11.08% of total assets, compared to $1.69 billion or 10.69% of total assets at June 30, 2024, and $1.52 billion or 9.81% of total assets at September 30, 2023. The increase in total common shareholders’ equity at September 30, 2024 compared to June 30, 2024 was due to a $28.4 million increase in retained earnings as a result of $45.2 million in net income, partially offset by the accrual of $16.7 million of cash dividends during the third quarter of 2024, as well as a decrease in accumulated other comprehensive loss of $72.0 million as the result of an increase in the fair value of the security portfolio. At September 30, 2024, tangible common shareholders’ equity, a non-GAAP financial measure, was $1.42 billion, or 8.96% of tangible assets, compared to $1.31 billion, or 8.51% of tangible assets, at June 30, 2024, and $1.14 billion, or 7.54% of tangible assets, a year ago. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At September 30, 2024, Banner’s estimated common equity Tier 1 capital ratio was 12.30%, its estimated Tier 1 leverage capital to average assets ratio was 10.91%, and its estimated total capital to risk-weighted assets ratio was 14.92%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

Credit Quality

The allowance for credit losses - loans was $154.6 million, or 1.38% of total loans receivable and 359% of non-performing loans, at September 30, 2024, compared to $152.8 million, or 1.37% of total loans receivable and 498% of non-performing loans, at June 30, 2024, and $147.0 million, or 1.38% of total loans receivable and 560% of non-performing loans, at September 30, 2023. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $13.8 million at September 30, 2024, compared to $14.0 million at June 30, 2024, and $15.0 million at September 30, 2023. Net loan charge-offs totaled $230,000 in the third quarter of 2024, compared to $245,000 in the preceding quarter and $663,000 in the third quarter a year ago. Non-performing loans were $43.0 million at September 30, 2024, compared to $30.7 million at June 30, 2024, and $26.3 million a year ago.

An increase in adversely classified loans, offset in part by payoffs and paydowns, resulted in total substandard loans of $150.1 million as of September 30, 2024. This compares to $122.0 million as of June 30, 2024 and $124.5 million a year ago.

Total non-performing assets were $45.2 million, or 0.28% of total assets, at September 30, 2024, compared to $33.3 million, or 0.21% of total assets, at June 30, 2024, and $26.8 million, or 0.17% of total assets, a year ago.

Conference Call

Banner will host a conference call on Thursday, October 17, 2024, 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 (833) 470-1428 using access code 433614 to participate in the call. A replay of the call will be available at www.bannerbank.com.

About the Company

Banner Corporation is a $16.19 billion bank holding company operating a 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) 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 recession or slowed economic growth, or increased political instability due to acts of war; (2) changes in the interest rate environment, including increases or decreases in the Board of Governors of the Federal Reserve System (the “Federal Reserve”) benchmark rate and duration at which such interest rate levels are maintained, which could affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; (3) the impact of inflation and the current and future monetary policies of the Federal Reserve in response thereto; (4) the effects of any federal government shutdown; (5) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (6) expectations regarding key growth initiatives and strategic priorities; (7) 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; (8) 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; (9) competitive pressures among depository institutions; (10) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (11) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (12) fluctuations in real estate values; (13) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (14) the ability to access cost-effective funding; (15) 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; (16) changes in financial markets; (17) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (18) the costs, effects and outcomes of litigation; (19) 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; (20) changes in accounting principles, policies or guidelines; (21) future acquisitions by Banner of other depository institutions or lines of business; (22) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (23) effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; (24) environmental, social and governance goals and targets; (25) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (26) other risks detailed from time to time in Banner’s other reports filed with and furnished to the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

RESULTS OF OPERATIONS

Quarters Ended

Nine Months Ended

(in thousands except shares and per share data)

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Sep 30, 2024

Sep 30, 2023

INTEREST INCOME:

Loans receivable

168,338

161,191

149,254

486,004

423,359

Mortgage-backed securities

16,357

16,708

17,691

49,999

54,954

Securities and cash equivalents

11,146

11,239

12,119

33,664

39,521

Total interest income

195,841

189,138

179,064

569,667

517,834

INTEREST EXPENSE:

Deposits

53,785

48,850

31,001

147,248

60,784

Federal Home Loan Bank (FHLB) advances

2,263

3,621

2,233

8,856

8,654

Other borrowings

1,147

1,160

1,099

3,482

2,251

Subordinated debt

2,971

2,961

2,965

8,901

8,549

Total interest expense

60,166

56,592

37,298

168,487

80,238

Net interest income

135,675

132,546

141,766

401,180

437,596

PROVISION FOR CREDIT LOSSES

1,692

2,369

2,027

4,581

8,267

Net interest income after provision for credit losses

133,983

130,177

139,739

396,599

429,329

NON-INTEREST INCOME:

Deposit fees and other service charges

10,741

10,590

10,916

32,353

32,078

Mortgage banking operations

3,180

3,006

2,049

8,521

6,426

Bank-owned life insurance

2,445

2,367

2,062

7,049

6,636

Miscellaneous

1,658

1,988

942

5,538

4,010

18,024

17,951

15,969

53,461

49,150

Net loss on sale of securities

—

(562

)

(2,657

)

(5,465

)

(14,436

)

Net change in valuation of financial instruments carried at fair value

(190

)

(654

)

(1,143

)

(4,357

)

Total non-interest income

18,063

17,199

12,658

46,853

30,357

NON-INTEREST EXPENSE:

Salary and employee benefits

61,832

63,831

61,091

188,032

184,452

Less capitalized loan origination costs

(4,354

)

(4,639

)

(4,498

)

(12,669

)

(12,386

)

Occupancy and equipment

12,040

12,128

11,722

36,630

35,686

Information and computer data services

7,134

7,240

7,118

21,694

21,347

Payment and card processing services

5,346

5,691

5,172

16,747

14,459

Professional and legal expenses

2,102

1,201

3,042

4,833

7,563

Advertising and marketing

1,161

1,198

1,362

3,438

3,108

Deposit insurance

2,874

2,858

2,874

8,541

7,603

State and municipal business and use taxes

1,432

1,394

1,359

4,130

3,888

Real estate operations, net

103

297

(383

)

180

(585

)

Amortization of core deposit intangibles

590

724

857

2,037

2,898

Miscellaneous

6,031

6,205

6,175

18,467

17,884

Total non-interest expense

96,291

98,128

95,891

292,060

285,917

Income before provision for income taxes

55,755

49,248

56,506

151,392

173,769

PROVISION FOR INCOME TAXES

10,602

9,453

10,652

28,885

32,769

NET INCOME

45,153

39,795

45,854

122,507

141,000

Earnings per common share:

Basic

1.31

1.15

1.33

3.56

4.11

Diluted

1.30

1.15

1.33

3.54

4.09

Cumulative dividends declared per common share

0.48

1.44

Weighted average number of common shares outstanding:

Basic

34,498,830

34,488,163

34,379,865

34,459,662

34,331,458

Diluted

34,650,322

34,537,012

34,429,726

34,575,498

34,439,214

Increase in common shares outstanding

936

60,531

1,322

108,319

151,931

FINANCIAL CONDITION

Percentage Change

(in thousands except shares and per share data)

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Prior Qtr

Prior Yr Qtr

ASSETS

Cash and due from banks

226,568

195,163

209,634

207,171

Interest-bearing deposits

252,227

52,295

44,830

44,535

382

466

Total cash and cash equivalents

478,795

247,458

254,464

251,706

Securities – trading

—

25,268

(100

Securities - available for sale, amortized cost $2,523,968, $2,572,544, $2,729,980 and $2,774,972, respectively

2,237,939

2,197,693

2,373,783

2,287,993

Securities - held to maturity, fair value $879,278, $852,709, $907,514 and $853,653, respectively

1,013,903

1,023,028

1,059,055

1,082,156

Total securities

3,251,842

3,220,721

3,432,838

3,395,417

FHLB stock

19,751

27,311

24,028

15,600

(28

Loans held for sale

78,841

13,421

11,170

54,158

487

Loans receivable

11,224,606

11,143,848

10,810,455

10,611,417

Allowance for credit losses – loans

(154,585

)

(152,848

)

(149,643

)

(146,960

)

Net loans receivable

11,070,021

10,991,000

10,660,812

10,464,457

Accrued interest receivable

66,981

67,520

63,100

61,040

Property and equipment, net

125,256

126,465

132,231

136,504

Goodwill

373,121

—

Other intangibles, net

3,647

4,237

5,684

6,542

(14

(44

Bank-owned life insurance

310,400

307,948

304,366

303,347

Operating lease right-of-use assets

38,192

39,628

43,731

43,447

(12

Other assets

371,829

397,364

364,846

402,541

Total assets

16,188,676

15,816,194

15,670,391

15,507,880

LIABILITIES

Deposits:

Non-interest-bearing

4,688,244

4,537,803

4,792,369

5,197,854

(10

Interest-bearing transaction and savings accounts

7,328,051

7,016,327

6,759,661

6,518,385

Interest-bearing certificates

1,521,853

1,525,133

1,477,467

1,458,313

—

Total deposits

13,538,148

13,079,263

13,029,497

13,174,552

Advances from FHLB

230,000

398,000

323,000

140,000

(42

Other borrowings

154,533

165,956

182,877

188,440

(18

Subordinated notes, net

80,170

89,561

92,851

92,748

(10

(14

Junior subordinated debentures at fair value

66,257

66,831

66,413

66,284

—

Operating lease liabilities

42,318

44,056

48,659

48,642

(13

Accrued expenses and other liabilities

237,128

235,515

228,428

231,478

Deferred compensation

46,401

46,246

45,975

45,129

—

Total liabilities

14,394,955

14,125,428

14,017,700

13,987,273

SHAREHOLDERS’ EQUITY

Common stock

1,304,792

1,302,236

1,299,651

1,297,307

—

Retained earnings

714,472

686,079

642,175

616,215

Accumulated other comprehensive loss

(225,543

)

(297,549

)

(289,135

)

(392,915

)

(24

(43

Total shareholders’ equity

1,793,721

1,690,766

1,652,691

1,520,607

Total liabilities and shareholders’ equity

16,188,676

15,816,194

15,670,391

15,507,880

Common Shares Issued:

Shares outstanding at end of period

34,456,688

34,455,752

34,348,369

34,345,949

Common shareholders’ equity per share (1)

52.06

49.07

48.12

44.27

Common shareholders’ tangible equity per share (1) (2)

41.12

38.12

37.09

33.22

Common shareholders’ equity to total assets

11.08

10.69

10.55

9.81

Common shareholders’ tangible equity to tangible assets (2)

8.96

8.51

8.33

7.54

Consolidated Tier 1 leverage capital ratio

10.91

10.80

10.56

10.40

Not meaningful

(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 and tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

Percentage Change

LOANS

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Prior Qtr

Prior Yr Qtr

Commercial real estate (CRE):

Owner-occupied

990,516

950,922

915,897

911,540

Investment properties

1,583,863

1,536,142

1,541,344

1,530,087

Small balance CRE

1,218,822

1,234,302

1,178,500

1,169,828

Multifamily real estate

889,866

717,089

811,232

766,571

Construction, land and land development:

Commercial construction

124,051

173,296

170,011

168,061

(28

(26

Multifamily construction

524,108

663,989

503,993

453,129

(21

One- to four-family construction

507,350

490,237

526,432

536,349

Land and land development

370,690

352,184

336,639

346,362

Commercial business:

Commercial business

1,281,615

1,298,134

1,255,734

1,263,747

Small business scored

1,087,714

1,074,465

1,022,154

1,000,714

Agricultural business, including secured by farmland:

Agricultural business, including secured by farmland

346,686

334,583

331,089

334,626

One- to four-family residential

1,575,164

1,603,266

1,518,046

1,438,694

Consumer:

Consumer—home equity revolving lines of credit

622,615

611,739

588,703

579,836

Consumer—other

101,546

103,500

110,681

111,873

Total loans receivable

11,224,606

11,143,848

10,810,455

10,611,417

Loans 30 - 89 days past due and on accrual

13,030

11,850

19,744

6,108

Total delinquent loans (including loans on non-accrual), net

44,656

32,081

43,164

28,312

Total delinquent loans / Total loans receivable

0.40

0.29

0.40

0.27

LOANS BY GEOGRAPHIC LOCATION

Percentage Change

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Prior Qtr

Prior Yr Qtr

Amount

Percentage

Amount

Washington

5,203,637

5,182,378

5,095,602

5,046,028

—

California

2,796,965

2,787,190

2,670,923

2,570,175

—

Oregon

2,108,229

2,072,153

1,974,001

1,929,531

Idaho

652,148

641,209

610,064

600,648

Utah

85,316

80,295

68,931

57,711

Other

378,311

380,623

390,934

407,324

Total loans receivable

11,224,606

100

11,143,848

10,810,455

10,611,417

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

LOAN ORIGINATIONS

Quarters Ended

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Commercial real estate

114,372

102,258

62,337

Multifamily real estate

314

2,774

12,725

Construction and land

472,506

546,675

421,656

Commercial business

179,871

167,168

157,833

Agricultural business

5,877

22,255

17,466

One- to four-family residential

24,488

34,498

43,622

Consumer

96,137

120,470

70,043

Total loan originations (excluding loans held for sale)

893,565

996,098

785,682

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

Quarters Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES – LOANS

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Balance, beginning of period

152,848

151,140

144,680

Provision for credit losses – loans

1,967

1,953

2,943

Recoveries of loans previously charged off:

Commercial real estate

170

Construction and land

—

One- to four-family real estate

Commercial business

613

324

403

Agricultural business, including secured by farmland

195

Consumer

112

126

734

746

806

Loans charged off:

Commercial real estate

—

(347

)

—

Construction and land

(145

)

—

Commercial business

(414

)

(137

)

(616

)

Agricultural business, including secured by farmland

—

(564

)

Consumer

(405

)

(507

)

(289

)

(964

)

(991

)

(1,469

)

Net charge-offs

(230

)

(245

)

(663

)

Balance, end of period

154,585

152,848

146,960

Net charge-offs / Average loans receivable

(0.002

(0.006

ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES – LOANS

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Commercial real estate

40,040

39,064

44,016

Multifamily real estate

10,233

8,253

8,804

Construction and land

28,322

31,597

29,389

One- to four-family real estate

20,463

20,906

17,925

Commercial business

39,779

38,835

34,065

Agricultural business, including secured by farmland

5,340

4,045

3,718

Consumer

10,408

10,148

9,043

Total allowance for credit losses – loans

154,585

152,848

146,960

Allowance for credit losses - loans / Total loans receivable

1.38

1.37

1.38

Allowance for credit losses - loans / Non-performing loans

359

498

560

Quarters Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Balance, beginning of period

14,027

13,597

14,664

(Recapture) provision for credit losses - unfunded loan commitments

(262

)

430

346

Balance, end of period

13,765

14,027

15,010

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

NON-PERFORMING ASSETS

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Loans on non-accrual status:

Secured by real estate:

Commercial

2,127

2,326

2,677

1,365

Construction and land

4,286

3,999

3,105

5,538

One- to four-family

9,592

8,184

5,702

5,480

Commercial business

10,705

8,694

9,002

5,289

Agricultural business, including secured by farmland

7,703

1,586

3,167

3,170

Consumer

4,636

3,380

3,204

3,378

39,049

28,169

26,857

24,220

Loans more than 90 days delinquent, still on accrual:

Secured by real estate:

Commercial

2,258

—

Construction and land

380

—

1,138

—

One- to four-family

961

1,861

1,205

1,799

Commercial business

—

Consumer

359

692

401

245

3,958

2,553

2,745

2,044

Total non-performing loans

43,007

30,722

29,602

26,264

REO

2,221

2,564

526

546

Total non-performing assets

45,228

33,286

30,128

26,810

Total non-performing assets to total assets

0.28

0.21

0.19

0.17

LOANS BY CREDIT RISK RATING

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Pass

11,022,014

10,971,850

10,671,281

10,467,498

Special Mention

52,497

50,027

13,732

19,394

Substandard

150,095

121,971

125,442

124,525

Total

11,224,606

11,143,848

10,810,455

10,611,417

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

DEPOSIT COMPOSITION

Percentage Change

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Prior Qtr

Prior Yr Qtr

Non-interest-bearing

4,688,244

4,537,803

4,792,369

5,197,854

(10

Interest-bearing checking

2,344,561

2,208,742

2,098,526

2,006,866

Regular savings accounts

3,339,859

3,192,036

2,980,530

2,751,453

Money market accounts

1,643,631

1,615,549

1,680,605

1,760,066

Total interest-bearing transaction and savings accounts

7,328,051

7,016,327

6,759,661

6,518,385

Total core deposits

12,016,295

11,554,130

11,552,030

11,716,239

Interest-bearing certificates

1,521,853

1,525,133

1,477,467

1,458,313

—

Total deposits

13,538,148

13,079,263

13,029,497

13,174,552

GEOGRAPHIC CONCENTRATION OF DEPOSITS

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Percentage Change

Amount

Percentage

Amount

Prior Qtr

Prior Yr Qtr

Washington

7,413,414

7,171,699

7,247,392

7,241,341

Oregon

2,997,843

2,909,838

2,852,677

2,918,446

California

2,423,295

2,331,793

2,269,557

2,342,345

Idaho

703,596

665,933

659,871

672,420

Total deposits

13,538,148

100

13,079,263

13,029,497

13,174,552

INCLUDED IN TOTAL DEPOSITS

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Public non-interest-bearing accounts

141,541

149,012

169,058

Public interest-bearing transaction & savings accounts

246,332

250,136

188,831

Public interest-bearing certificates

28,144

29,101

46,349

Total public deposits

416,017

428,249

404,238

Collateralized public deposits

317,960

326,524

300,189

Total brokered deposits

50,333

105,309

162,856

AVERAGE ACCOUNT BALANCE PER DEPOSIT ACCOUNT

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Number of deposit accounts

459,127

460,107

466,159

Average account balance per account

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

ESTIMATED REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2024

Actual

Minimum to be

categorized as

"Adequately Capitalized"

Minimum to be

categorized as

"Well Capitalized"

Amount

Ratio

Amount

Ratio

Amount

Ratio

Banner Corporation-consolidated:

Total capital to risk-weighted assets

1,988,948

14.92

1,066,549

8.00

1,333,186

10.00

Tier 1 capital to risk-weighted assets

1,725,690

12.94

799,912

6.00

799,912

6.00

Tier 1 leverage capital to average assets

1,725,690

10.91

632,760

4.00

n/a

Common equity tier 1 capital to risk-weighted assets

1,639,190

12.30

599,934

4.50

n/a

Banner Bank:

Total capital to risk-weighted assets

1,862,242

13.95

1,067,758

8.00

1,334,697

10.00

Tier 1 capital to risk-weighted assets

1,698,984

12.73

800,818

6.00

1,067,758

8.00

Tier 1 leverage capital to average assets

1,698,984

10.74

632,851

4.00

791,063

5.00

Common equity tier 1 capital to risk-weighted assets

1,698,984

12.73

600,614

4.50

867,553

6.50

These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

(rates / ratios annualized)

ANALYSIS OF NET INTEREST SPREAD

Quarters Ended

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

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

26,954

453

6.69

11,665

206

7.10

56,697

765

5.35

Mortgage loans

9,207,468

135,497

5.85

9,006,857

129,230

5.77

8,596,705

118,285

5.46

Commercial/agricultural loans

1,879,215

32,547

6.89

1,874,039

31,761

6.82

1,826,907

29,894

6.49

Consumer and other loans

128,548

2,154

6.67

132,661

2,156

6.54

138,723

2,226

6.37

Total loans (1)

11,242,185

170,651

6.04

11,025,222

163,353

5.96

10,619,032

151,170

5.65

Mortgage-backed securities

2,623,399

16,498

2.50

2,672,187

16,850

2.54

2,863,345

17,834

2.47

Other securities

943,310

11,120

4.69

958,809

11,181

4.69

1,071,389

12,128

4.49

Interest-bearing deposits with banks

51,604

493

3.80

58,022

578

4.01

43,594

529

4.81

FHLB stock

16,664

412

9.84

21,080

365

6.96

16,443

385

9.29

Total investment securities

3,634,977

28,523

3.12

3,710,098

28,974

3.14

3,994,771

30,876

3.07

Total interest-earning assets

14,877,162

199,174

5.33

14,735,320

192,327

5.25

14,613,803

182,046

4.94

Non-interest-earning assets

981,290

926,411

932,364

Total assets

15,858,452

15,661,731

15,546,167

Deposits:

Interest-bearing checking accounts

2,295,723

9,497

1.65

2,156,214

7,621

1.42

1,971,179

4,190

0.84

Savings accounts

3,268,647

19,299

2.35

3,147,522

17,200

2.20

2,659,890

8,400

1.25

Money market accounts

1,611,543

9,184

2.27

1,659,327

9,124

2.21

1,793,953

6,639

1.47

Certificates of deposit

1,540,637

15,805

4.08

1,503,597

14,905

3.99

1,412,542

11,772

3.31

Total interest-bearing deposits

8,716,550

53,785

2.45

8,466,660

48,850

2.32

7,837,564

31,001

1.57

Non-interest-bearing deposits

4,601,755

—

4,634,738

—

5,316,023

—

Total deposits

13,318,305

53,785

1.61

13,101,398

48,850

1.50

13,153,587

31,001

0.94

Other interest-bearing liabilities:

FHLB advances

161,413

2,263

5.58

259,549

3,621

5.61

161,087

2,233

5.50

Other borrowings

159,439

1,147

2.86

175,518

1,160

2.66

194,659

1,099

2.24

Junior subordinated debentures and subordinated notes

179,075

2,971

6.60

179,178

2,961

6.65

182,678

2,965

6.44

Total borrowings

499,927

6,381

5.08

614,245

7,742

5.07

538,424

6,297

4.64

Total funding liabilities

13,818,232

60,166

1.73

13,715,643

56,592

1.66

13,692,011

37,298

1.08

Other non-interest-bearing liabilities (2)

311,803

294,794

296,578

Total liabilities

14,130,035

14,010,437

13,988,589

Shareholders’ equity

1,728,417

1,651,294

1,557,578

Total liabilities and shareholders’ equity

15,858,452

15,661,731

15,546,167

Net interest income/rate spread (tax equivalent)

139,008

3.60

135,735

3.59

144,748

3.86

Net interest margin (tax equivalent)

3.72

3.70

3.93

Reconciliation to reported net interest income:

Adjustments for taxable equivalent basis

(3,333

)

(3,189

)

(2,982

)

Net interest income and margin, as reported

135,675

3.63

132,546

3.62

141,766

3.85

Additional Key Financial Ratios:

Return on average assets

1.13

1.02

1.17

Adjusted return on average assets (4)

1.13

1.04

1.25

Return on average equity

10.39

9.69

11.68

Adjusted return on average equity (4)

10.39

9.83

12.51

Average equity/average assets

10.90

10.54

10.02

Average interest-earning assets/average interest-bearing liabilities

161.42

162.27

174.47

Average interest-earning assets/average funding liabilities

107.66

107.43

106.73

Non-interest income/average assets

0.45

0.44

0.32

Non-interest expense/average assets

2.42

2.52

2.45

Efficiency ratio

62.63

65.53

62.10

Adjusted efficiency ratio (4)

61.27

63.60

59.00

(1)

Average balances include loans accounted for on a nonaccrual basis and accruing 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 $2.3 million, $2.2 million and $1.9 million for the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million for both the quarters ended September 30, 2024 and June 30, 2024 and $1.1 million for the quarter ended September 30, 2023.

(4)

Represent non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

(rates / ratios annualized)

ANALYSIS OF NET INTEREST SPREAD

Nine Months Ended

Sep 30, 2024

Sep 30, 2023

Average

Balance

Interest and

Dividends

Yield/Cost (3)

Average

Balance

Interest and

Dividends

Yield/Cost (3)

Interest-earning assets:

Held for sale loans

16,225

826

6.80

55,157

2,174

5.27

Mortgage loans

9,036,256

390,011

5.77

8,427,034

337,282

5.35

Commercial/agricultural loans

1,861,182

95,155

6.83

1,768,685

82,803

6.26

Consumer and other loans

131,676

6,506

6.60

138,246

6,478

6.26

Total loans (1)

11,045,339

492,498

5.96

10,389,122

428,737

5.52

Mortgage-backed securities

2,674,555

50,424

2.52

2,971,124

55,386

2.49

Other securities

962,183

33,802

4.69

1,220,074

40,155

4.40

Interest-bearing deposits with banks

51,630

1,530

3.96

47,330

1,694

4.79

FHLB stock

18,931

986

6.96

18,772

632

4.50

Total investment securities

3,707,299

86,742

3.13

4,257,300

97,867

3.07

Total interest-earning assets

14,752,638

579,240

5.24

14,646,422

526,604

4.81

Non-interest-earning assets

950,588

930,934

Total assets

15,703,226

15,577,356

Deposits:

Interest-bearing checking accounts

2,185,796

23,834

1.46

1,874,518

7,427

0.53

Savings accounts

3,161,266

51,778

2.19

2,604,089

15,179

0.78

Money market accounts

1,648,208

26,696

2.16

1,971,514

16,445

1.12

Certificates of deposit

1,514,982

44,940

3.96

1,118,874

21,733

2.60

Total interest-bearing deposits

8,510,252

147,248

2.31

7,568,995

60,784

1.07

Non-interest-bearing deposits

4,649,297

—

5,571,896

—

Total deposits

13,159,549

147,248

1.49

13,140,891

60,784

0.62

Other interest-bearing liabilities:

FHLB advances

211,135

8,856

5.60

219,461

8,654

5.27

Other borrowings

171,838

3,482

2.71

203,932

2,251

1.48

Junior subordinated debentures and subordinated notes

179,941

8,901

6.61

186,964

8,549

6.11

Total borrowings

562,914

21,239

5.04

610,357

19,454

4.26

Total funding liabilities

13,722,463

168,487

1.64

13,751,248

80,238

0.78

Other non-interest-bearing liabilities (2)

303,367

289,558

Total liabilities

14,025,830

14,040,806

Shareholders’ equity

1,677,396

1,536,550

Total liabilities and shareholders’ equity

15,703,226

15,577,356

Net interest income/rate spread (tax equivalent)

410,753

3.60

446,366

4.03

Net interest margin (tax equivalent)

3.72

4.07

Reconciliation to reported net interest income:

Adjustments for taxable equivalent basis

(9,573

)

(8,770

)

Net interest income and margin, as reported

401,180

3.63

437,596

3.99

Additional Key Financial Ratios:

Return on average assets

1.04

1.21

Adjusted return on average assets (4)

1.08

1.34

Return on average equity

9.76

12.27

Adjusted return on average equity (4)

10.16

13.60

Average equity/average assets

10.68

9.86

Average interest-earning assets/average interest-bearing liabilities

162.60

179.07

Average interest-earning assets/average funding liabilities

107.51

106.51

Non-interest income/average assets

0.40

0.26

Non-interest expense/average assets

2.48

2.45

Efficiency ratio

65.19

61.10

Adjusted efficiency ratio (4)

62.84

57.19

(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 $6.5 million and $5.4 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.1 million and $3.4 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

(4)

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 earnings release contains certain non-GAAP financial measures. Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets, and references to adjusted revenue, adjusted earnings, the adjusted return on average assets, the adjusted return on average equity and the adjusted efficiency ratio represent non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

ADJUSTED REVENUE

Quarters Ended

Nine Months Ended

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Sep 30, 2024

Sep 30, 2023

Net interest income (GAAP)

135,675

132,546

141,766

401,180

437,596

Non-interest income (GAAP)

18,063

17,199

12,658

46,853

30,357

Total revenue (GAAP)

153,738

149,745

154,424

448,033

467,953

Exclude: Net loss on sale of securities

—

562

2,657

5,465

14,436

Net change in valuation of financial instruments carried at fair value

(39

)

190

654

1,143

4,357

Adjusted revenue (non-GAAP)

153,699

150,497

157,735

454,641

486,746

ADJUSTED EARNINGS

Quarters Ended

Nine Months Ended

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Sep 30, 2024

Sep 30, 2023

Net income (GAAP)

45,153

39,795

45,854

122,507

141,000

Exclude: Net loss on sale of securities

—

562

2,657

5,465

14,436

Net change in valuation of financial instruments carried at fair value

(39

)

190

654

1,143

4,357

Banner Forward expenses (1)

—

996

—

1,334

Related net tax expense (benefit)

(180

)

(1,033

)

(1,586

)

(4,830

)

Total adjusted earnings (non-GAAP)

45,123

40,367

49,128

127,529

156,297

Diluted earnings per share (GAAP)

1.30

1.15

1.33

3.54

4.09

Diluted adjusted earnings per share (non-GAAP)

1.30

1.17

1.43

3.69

4.54

Return on average assets

1.13

1.02

1.17

1.04

1.21

Adjusted return on average assets (2)

1.13

1.04

1.25

1.08

1.34

Return on average equity

10.39

9.69

11.68

9.76

12.27

Adjusted return on average equity (3)

10.39

9.83

12.51

10.16

13.60

(1)

Included in miscellaneous expenses in results of operations.

(2)

Adjusted earnings (non-GAAP) divided by average assets.

(3)

Adjusted earnings (non-GAAP) divided by average equity.

ADDITIONAL FINANCIAL INFORMATION

(dollars in thousands)

ADJUSTED EFFICIENCY RATIO

Quarters Ended

Nine Months Ended

Sep 30, 2024

Jun 30, 2024

Sep 30, 2023

Sep 30, 2024

Sep 30, 2023

Non-interest expense (GAAP)

96,291

98,128

95,891

292,060

285,917

Exclude: Banner Forward expenses (1)

—

(996

)

—

(1,334

)

CDI amortization

(590

)

(724

)

(857

)

(2,037

)

(2,898

)

State/municipal tax expense

(1,432

)

(1,394

)

(1,359

)

(4,130

)

(3,888

)

REO operations

(103

)

(297

)

383

(180

)

585

Adjusted non-interest expense (non-GAAP)

94,166

95,713

93,062

285,713

278,382

Net interest income (GAAP)

135,675

132,546

141,766

401,180

437,596

Non-interest income (GAAP)

18,063

17,199

12,658

46,853

30,357

Total revenue (GAAP)

153,738

149,745

154,424

448,033

467,953

Exclude: Net loss on sale of securities

—

562

2,657

5,465

14,436

Net change in valuation of financial instruments carried at fair value

(39

)

190

654

1,143

4,357

Adjusted revenue (non-GAAP)

153,699

150,497

157,735

454,641

486,746

Efficiency ratio (GAAP)

62.63

65.53

62.10

65.19

61.10

Adjusted efficiency ratio (non-GAAP) (2)

61.27

63.60

59.00

62.84

57.19

(1)

Included in miscellaneous expenses in results of operations.

(2)

Adjusted non-interest expense (non-GAAP) divided by adjusted revenue.

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS

Sep 30, 2024

Jun 30, 2024

Dec 31, 2023

Sep 30, 2023

Shareholders’ equity (GAAP)

1,793,721

1,690,766

1,652,691

1,520,607

Exclude goodwill and other intangible assets, net

376,768

377,358

378,805

379,663

Tangible common shareholders’ equity (non-GAAP)

1,416,953

1,313,408

1,273,886

1,140,944

Total assets (GAAP)

16,188,676

15,816,194

15,670,391

15,507,880

Exclude goodwill and other intangible assets, net

376,768

377,358

378,805

379,663

Total tangible assets (non-GAAP)

15,811,908

15,438,836

15,291,586

15,128,217

Common shareholders’ equity to total assets (GAAP)

11.08

10.69

10.55

9.81

Tangible common shareholders’ equity to tangible assets (non-GAAP)

8.96

8.51

8.33

7.54

TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE

Shareholders’ equity (GAAP)

1,793,721

1,690,766

1,652,691

1,520,607

Tangible common shareholders’ equity (non-GAAP)

1,416,953

1,313,408

1,273,886

1,140,944

Common shares outstanding at end of period

34,456,688

34,455,752

34,348,369

34,345,949

Common shareholders’ equity (book value) per share (GAAP)

52.06

49.07

48.12

44.27

Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)

41.12

38.12

37.09

33.22

View source version on businesswire.com: https://www.businesswire.com/news/home/20241016545160/en/

MARK J. GRESCOVICH, PRESIDENT & CEO ROBERT G. BUTTERFIELD, CFO (509) 527-3636

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