Banner Corporation · NASDAQ:BANR
Banner — American Banker 18th Best Practices in Retail Financial Services Symposium (March 2013)
39 slides from Banner's conference presentation, Mar 13, 2013
Slide 1: Best Practices in Retail Financial Services Symposium
.O-6 oo & SLSKES ESC SSS LSC x «> Oo. 4 ~ | Best Practices in |RETAIL ‘FINANCIAL SERVICES Symposium nese’ AMERICAN BANKER, 18th , OOO, OOOO ™*™KC OOO 6. nS _ @ @ @ @
Slide 2: Building Franchise Value During a Strategic Turnaround
RETAIL JEINANCIAL : SERVICES AMERICAN BANKER an NNER CORPORATION Building Franchise Value During a Strategic Turnaround Mark J. Grescovich President & CEO
Slide 3: Disclosure Statement
RETAIL JEINANCIAL :|SERVICES AMERICAN BANKER g... Disclosure Statement Today's presentation deals with Banner’s business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services,
Slide 4: A Good Place to Be ... Since 1890
?}RETAIL FINANCIAL SERVICES AMERICAN BANKER ... A Good Place to Be ... Since 1890 Assets $4.3B Deposits 3.5B Loans 3.2B Offices 88 Employees 1,050 —— Building Value at Banner 3
Slide 5: A Place to Grow
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 A Place to Grow Columbia Basin 26 $0.98 ls 1.3B | 17%} E. Washington 19 |$05B/$06B| 9% Puget Sound | 29 |$1.18/$1.28) 2%| Portland 8 |$058|$0.38| 1% [Boise | 6 |$028|/$0.18| 2% 28 new branches since 2005 iB —— Building Value at Banner 4
Slide 6: Facing a Significant Challenge
RETAIL JEINANCIAL 3|SERVICES AMERICAN BANKER gf... Facing a Significant Challenge ¢ Spring 2010 assessment — Troubled bank * In need of recapitalization * Operating under MOU — Good vital signs * Good footprint * Decent branding * Willing board
Slide 7: Choosing a Course of Action
ETAIL INANCIAL ERVICES AMER AN BANKER €- Choosing a Course of Action * Options — Do credit turnaround only * Explore strategic alternatives — Go beyond credit turnaround * Maximize franchise value Building Value at Banner 6
Slide 8: Going Beyond Credit
RETAIL FINANCIAL : SERVICES AMERICAN BANKER g... Going Beyond Credit ¢ What really matters — Future profitability ... dependent on acquiring more clients * Necessary focus — Client acquisition — Sales management — Reputation — Service levels and products
Slide 9: Maximizing Franchise Value: The plan
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER €- Maximizing Franchise Value The plan ... Building Value at Banner 8
Slide 10: Worth the Effort
RETAIL INANCIAL 3|SERVICES AMERICAN BANKER gf... Worth the Effort ¢ Banner has a scalable franchise with a long history in stable markets. ¢ Banner is well positioned in robust markets to generate organic growth. ¢ Banner can improve performance by executing on its strategic priorities to drive shar
Slide 11: Strategy and Opportunity
RETAIL INANCIAL ERVICES AMERICAN BANKER Strategy and Opportunity 1. Improve capitalization and 1. Exploit market environment liquidity to weather storm and opportunities grow organically g%° “| a) Improved risk-based pricing and profitability b) Market share gains through client acquisition c) Impro
Slide 12: Maximizing Franchise Value
:}}RETAIL FINANCIAL SERVICES AMERICAN BANKER 4 Maximizing Franchise Value + Establish executive risk management committee Achieve a moderate + Reduce nonperforming loans and OREO risk profile + Reduce construction and land development concentration + Limit concentration risks Build sustainable | + M
Slide 13: Maximizing Franchise Value: The hard work
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER €- Maximizing Franchise Value The hard work ... Building Value at Banner 12
Slide 14: Achieving a Moderate Risk Profile
RETAIL INANCIAL :|SERVICES AMERICAN BANKER 4 Achieving a Moderate Risk Profile Total capital to risk-weighted assets 16.96% 12.13% Tier 1 capital to risk-weighted assets 15.20% M41 Tier 1 leverage capital to 42.74% 9.62% average assets Tangible common equity to tangible assets 11.80% 5BOe Allowance
Slide 15: Achieving a Moderate Risk Profile
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Achieving a Moderate Risk Profile 12/31/2012 : 12/31/2009 CRE Investor 21% Investor 20% —— Building Value at Banner 14
Slide 16: Achieving a Moderate Risk Profile
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Achieving a Moderate Risk Profile a Residential Const & Land Dev Billions oS 123109 | $ 523m | 14% | | 123112 | $ 236m | 7% | | Peak | $ 1,075m | 32% 0 Aaa ) o A & 2 S nN av S = 9" s s" x is Ns PP PP PP er —— Building Value at Banner 15
Slide 17: Achieving a Moderate Risk Profile
RETAIL INANCIAL :|SERVICES AMERICAN BANKER 4 Achieving a Moderate Risk Profile 290 T OREO educe e 5 : ALLL é : : = 300 | z = | Aare 250 4 oo g : e [ Nonperforming Loans 12/31/12 $ 34m 1.1% 12/31/09 | $ 214m 5.5% | L Peak | $ 243m | 6.2% | Other Real Estate Owned | 12/31/12 $ 16M 0.5% | ou 2 ‘ z L sf
Slide 18: Building Sustainable Profitability
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Building Sustainable Profitability 2 3 ® iJ 2 Other Income i. nti 40 Milt | it | Quarter Ending i 12/31/12 $ 54M 7.8% 12/31/09 $ 45m | 5.8% 20 + - | Twelve Months Ending 12/31/12 $ 211M | 7.8% 10 4 | 12/3109 | $ 177m | -0.6% 0 a @ 2 RY AS xv a a ED —— Bu
Slide 19: Building Sustainable Profitability
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4- Building Sustainable Profitability 8% Asset Yields NIM 7% 4 6% 4 5% _| = Quarter Ending ; [ 12/1/12 $ 42m 4.09% “oy | 12/31/09 | $ 38m | 3.49% a) i | Twelve Months Ending 2% + i 12/31/12 | $ 168M | 4.17% % + i | 12/31/09 | $ 145m | 3.33% | 0% + : , ct o
Slide 20: Building Sustainable Profitability
RETAIL INANCIAL :|SERVICES AMERICAN BANKER 4- Building Sustainable Profitability 8% + —Toan Yields 7% H 6% -| 5% _| Quarter Ending ; | 12/3112 | $ 3.1m 0.35% “oy | | | 12109 | $17.7 | 1.83% sy) i | Twelve Months Ending 2% + i 12/31/12 | $ 15.1 | 0.44% % + - | 12/31/09 | $ 83.2M | 2.21% | oy {MEER ,
Slide 21: Building Sustainable Profitability
RETAIL INANCIAL :|SERVICES AMERICAN BANKER €- Building Sustainable Profitability 75 ——__________ § 150 |_ Interest Bearing - i Non-Interest Bearing Accounts 12/31/12 107,445 12.8% 12/31/09 71,178 8.0% 75 : 50 + Interest Bearing Accounts 25 || 123112 | 64,045 | 5.5% | 0 12/31/09 50,955 1.1% $ 2 2 s v
Slide 22: Building Sustainable Profitability
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4- Building Sustainable Profitability = & Millions a N Deposit Fees Other Fees 10 | - | Quarter Endin | 1g alt heal - | | zsi2 | s 64m | 9.1% 61 _ | | 12109 | $ 53m | 1.6% a) | Twelve Months Ending 12/31/12 | $ 25.3M | 10.0% 24 | | | | 12/31/09 $ 21.4M | -
Slide 23: Remaining Core Funded
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Remaining Core Funded 12/31/2012 12/31/2009 fe Bearin Non-Interest 7 14% Bearing f 26% Certificates of Deposit 45% A Certificates | of Deposit | 28% FHLB & Other —— Building Value at Banner 22 FHLB & Other
Slide 24: Remaining Core Funded
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Remaining Core Funded 15% A, L/D Ratio : $ 110% Deposits | 40 = Its a 105% Nepean 3.5 ltl 100% 3.0 123112 | 91% 95% — | 25 1213109 | 98% siti | 99 Peak | 108% 85% 4.5 80% WEEE | 46 A S 2 So nN ve PPP ae ah —— Building Value at Banner 23
Slide 25: Improving Operating Leverage
RETAIL JEINANCIAL 3|SERVICES AMERICAN BANKER g.... Improving Operating Leverage * Focused value proposition: Reorganize around “Super Community Bank” model to further develop commercial bank attributes — Broad and appropriate product offerings to serve middle market, small business and consumer clie
Slide 26: Improving Operating Leverage
RETAIL FINANCIAL SERVICES AMERICAN BANKER 4 Improving Operating Leverage a 1 Noncore Deposits 3 | 12/3112 |$ 2,529m| 71% | | 12/31/09 |$ 1,924m| 50% | | | —— Building Value at Banner 25 Billions oS
Slide 27: Improving Operating Leverage
RETAIL INANCIAL :|SERVICES AMERICAN BANKER 4 Improving Operating Leverage g Other Efficiency Ratio 240 - 95% = 30 - ry 85% Quarter Ending | 12/3112 | $ 34m 1.4% 20 4 Hy; 75% 12/31/09 | $ 31M -10.0% Twelve Months Ending 10 +) + 65% 12/31/12 | $ 136m 2.0% 12/31/09 | $ 132M -2.6% | Ow —! 55% oF oF oF a
Slide 28: Improving Operating Leverage
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Improving Operating Leverage 2 3 2” | Additions 850 Dispositions ___~“"*=~ | = WID and Loss = 40 r R 30 7 | | Begin $ 2m 20 | 0 | Additions + 299m D ti - 247M 0. Th 7 | ispositions 10 | a" | Write-downs - 38m -20 | Loss on Sale = Om -30 — |_ End $ 16M -4
Slide 29: Maximizing Franchise Value: The future
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER €- Maximizing Franchise Value The future ... Building Value at Banner 28
Slide 30: Moving Forward
RETAIL INANCIAL 3|SERVICES AMERICAN BANKER gf... Moving Forward ¢ Well positioned to deal with next banking paradigm ... whatever it is — Top quartile performer in several categories — Reputation restored * Broad strategic focus for 2013-2014 — Client engagement — Shareholder return * Doing right by
Slide 31: Protecting Net Interest Margins
RETAIL INANCIAL ERVICES AMERICAN BANKER Protecting Net Interest Margins ] Peer 75" Percentile 45% ~ er 40% ett OE 0% =e 3.5% +s 3.0% 5% - - Ss J 2 oO a v PP PP Pe —— Building Value at Banner 12/31/12 4.09% | os/ao/12 | 4.22% 4.08% | 12/s1j09 | 3.49% 3.99% Source: Bank Holding Company Performance Rep
Slide 32: Maintaining Moderate Credit Risk
RETAIL INANCIAL ERVICES AMERICAN BANKER 4 Maintaining Moderate Credit Risk 3.5% 5 Peer 75" Percentile 3.0% | aes 25% | a ALLL to Loans . 1231/12 | 2.30% | 2.0% - og/30/12 | 2.45% | 2.33% | 123109 | 2.51% | 2.66% | 1.5% 5 Source: 1.0% - - Bank Holding Company Performance Report s & ° © AS ” BHCPR — P
Slide 33: Maintaining Moderate Credit Risk
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Maintaining Moderate Credit Risk 250% ~ a Peer 75" Percentile 200% 44 — ‘i \ 150% ——— ALLL to NPLs \ | 12/31/12 | 225% 100% - 09/30/12 204% 131% | 12/31/09 45% 93% 50% - ail Source: 0% + 7 7 Bank Holding Company Performance Report s A s © nN xv BHCPR — P
Slide 34: Retaining Risk-Appropriate Capital
RETAIL INANCIAL ERVICES AMERICAN BANKER 4 Retaining Risk-Appropriate Capital 20% Peer 75" Percentile 15% ~——__________—g — dat ala 10% __fPaes~ 5% 0% | Sh J 2 CJ N v PP PP —— Building Value at Banner 12/31/12 | 12.74% | 09/30/12 | 14.29% 11.39% | 12/31/09 9.62% 10.17% Retired Perpetual Preferred Sto
Slide 35: Retaining Risk-Appropriate Capital
RETAIL INANCIAL :|SERVICES AMERICAN BANKER 4 Retaining Risk-Appropriate Capital 20% Peer 75" Percentile 15% 10% ee ae T= 5% 0% | Sh J 2 CJ N v PP PP —— Building Value at Banner 12/31/12 11.80% | 09/30/12 11.47% 10.50% | 12/31/09 5.87% 8.28% Source: Bank Holding Company Performance Report BHCPR — Pee
Slide 36: Building on Improved Reputation
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Building on Improved Reputation | Received highest ranking: = Retail banking customer satisfaction, Northwest Region J.D. Power and Associates’ 2012 Retail Banking Satisfaction Study™ Received highest rating: Bankrate.com SAFE & SOUND® Star Ratings Relea
Slide 37: Enhancing Shareholder Value: TBV/Share and Stock Price
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Enhancing Shareholder Value 405 “TBViShare 35 Stock Price 30 25 rs Capital Raise Tit Per Share | (2010 Q2) 20 | me : 1231/12 | $ 30.84 | $ 25.88 | 5 L 06/30/10 | $ 15.07 | $ 29.03 | +6 I Stock Price/ TBV 5 12/31/12 119% | 06/30/10 52% 0- S $ 2 SJ . Na *
Slide 38: Enhancing Shareholder Value
RETAIL FINANCIAL :|SERVICES AMERICAN BANKER 4 Enhancing Shareholder Value Pre Capital Raise (2010 @2) Building Value at Banner Per Share 1293112 | $ 30.84 | $ 3.15 06/30/10 | $ 15.07 | $ -8.06 Stock Price/ TTM Earnings 12/3112 | 9.8x 06/30/10 | n/m * Average closing price for the month following qua
Slide 39: Maximizing Franchise Value
RETAIL JEINANCIAL 3|SERVICES AMERICAN BANKER g.... Maximizing Franchise Value ¢ Banner has a scalable franchise with a long history in robust, desirable markets. ¢ Banner is one of the largest remaining franchises based in Washington. ¢ Banner has the management depth, organizational model and opera