Banner Corporation · NASDAQ:BANR
Banner — Q1 2021 Earnings Presentation
27 slides from Banner's earnings presentation, Apr 21, 2021
Slide 1: First Quarter 2021
NNER ‘CORPORATION First Quarter 2021
Slide 2: Disclosure Statement
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, forecast of financial or other performance measure
Slide 3: Building value at Banner
Building value at Banner aa Building value for stakeholders ... by focusing on core banking competency ... that is sustainable through change events ... and scalable with acquisition growth Banner Corporation Assets $16.18 Deposits $13.58 Loans $10.18 Sone Offices 155 $0.48 $0.38 $0.28 10 6 Employee
Slide 4: Community, Diversity & Sustainability
INNER Community, Diversity & Sustainability aa Community Meeting the needs of low and moderate income businesses and consumersin our footprint + Provided financial literacy through first time home buyer education classes (120 classes in 2019 with over 980 attendees, and over 1,800 online attendees t
Slide 5: Building value at Banner: Growing revenue
Building value at Banner €- Core banking competency Growing revenue Protecting net interest margin Spending carefully Maintaining a moderate risk profile Employing capital wisely Growing revenue Take advantage of ideal geography Offer super community bank value proposition Guard and improve reputati
Slide 6: Growing revenue ... in a good place since 1890
Growing revenue ... in a good place since 1890 pases ulation Estimate tmittions) 030_Growth jashington 77 86 1 Oregon 4346 (8% Taho 18 21 16 country. lifornia 39.6 407 Region 5345! United States 329.5 346.1 Strong Population Growth Forecast 2010to 2020, 2020 to 2030 United States Rank: oth Washingto
Slide 7: Growing revenue ... in an ideal geography
Growing revenue ... in an ideal geography Powerful and diverse economic drivers From Banner's Pacific Northwest base to ... Technology Microsoft (ted amazon a#icron Géxpedia Manufacturing 75 gamer (intel) PACCAR Consumer amazon €OsTcO ® BE norvstrom Natural A — Resources Weyerhaeuser a = Agriculture
Slide 8: Growing revenue
Growing revenue Offer super community bank value proposition Broad product offerings serving middle market, small business and consumer client base Decision making as close to client as possible Delivery channels aligned to maximize tactical execution of strategic plan Community investment
Slide 9: Growing revenue: Guard and improve reputation
INNER Growing revenue ae Guard and improve reputation Residential Diversity and Inclusion Leadership Award Mortgage Bankers Association 2020 Forbes Recognized by Forbes (5'" consecutive year) WORLD'SBEST 2017-2021 "America’s 100 Best Banks" and 2020 “World's Best Banks” Best Regional Bank in the Pac
Slide 10: Growing revenue: Grow transaction deposit accounts
Growing revenue Grow transaction deposit accounts Non-Interest Bearing Quarter, —— AS —__ Ending Number YOYA Number YOYA Interest Bearing 03/31/21 321,973 3.0% 157,469 2.0% 12/31/09 71178 8.0% 50,955 11% + Excluding all acquisitions, the number of trans- action deposit accounts has grown ~120% since
Slide 11: Grow core revenue; Grow noninterest income
INNER Grow core revenue Grow Noninterest income! ouarter Quarter uM uarter Quarter uM Ending Amount YOYA Amount YOYA Ending Amount YOYA Amount YOYA os/su2t§ Wim -11% —«S S7BM «3.2% os/s2l S$ 237m 02% S$ 983M 124% 12/31/09 § 45m 58% § Im -0.6% q/suog«§ 66m 40% $ Mdm 74% 150 230 28% 2 Other income z o
Slide 12: Building value at Banner: Protecting net interest margin
Building value at Banner Core banking competency Growing revenue Protecting net interest margin Spending carefully Maintaining a moderate risk profile Employing capital wisely Protecting net interest margin Improve earning asset mix Improve funding mix Reduce deposit costs Maintain loan-to-deposit r
Slide 13: Protecting net interest margin: Earning asset and funding mix
INNER Protecting net interest margin — Improve Earning Asset Mix 12/31/2009 03/31/2021 Securities, securities & Other Investments _SBillions 12/09 03/2 “Comigag 0934 Res Const/Dev os Coml § Ag Com! 8 Ag Consumer Res Mortgage CRE ¢ ResMortgage 0.7 0.7 Consumer Consumer 0.30.6 Res Const/Dev CRE Invest
Slide 14: Protecting net interest margin: Core deposits and deposit costs
Protecting net interest margin Grow core deposits Reduce deposit costs Quarter Quarter —__Guarter__ ETM Ending Balance YOY %of Total Ending Amount Rate Amount ‘Rate os/si21 _St2642m 362° ossvel § 36m Ot: wisii09 S924 168% 50% q/3uo9 S$ WM 14 100% 8% g Noncore Deposits Loan Yield s Core Deposits 90%
Slide 15: Protecting net interest margin
Protecting net interest margin 50% 40% Net Noncore Funding Dependence 30% — Banner 20% Peer Median 10% Peer Top Quartile Peer source: Group 1 (S108 and over), Bank Holding Company Performance Report (BHCPR] Nationalinformation Center, Federal Reserve System, Division of Banking Supervisionand Regula
Slide 16: Maintain top quartile net interest margin
Protecting net interest margin Maintain top quartile net interest margin Quaner Quarter L™ Ending Amount Rate Amount _ Rate 03/31/21 $118M 3.44% $480M 3.66% 12/31/09 $ 39M 3.53% $146m 3.36% Net Interest Margin — Banner Peer Top Quartile Peer Median Peer source: Group 1 ($108 and oven) Bank Holding C
Slide 17: Conservative investment portfolio
Conservative investment portfolio INNER Investment Portfolio Composition ($3.46 billion) Quarterly New Purchases: Yields (As of 3/31/21, SMM) AgRrEY. SES. aps com Suzi. see 1B Bs St ‘ther $3. 85% of Investments are Agency om MBS/CMO or AAA rated Less than 8% non-rated investments, principally CRA Ma
Slide 18: Building value at Banner: Spending carefully
Building value at Banner €- Core banking competency Growing revenue Protecting net interest margin Spending carefully Maintaining a moderate risk profile Employing capital wisely Spending carefully Benefit from scale Control core operating expense 17
Slide 19: Spending carefully: Control core operating expense
Spending carefully Control core operating expense auarter Quarter LTM Ending Amount YOYA Amount YOYA 03/31/21 $ 92m -2.0% $366M 2.9% 12/31/09 § 31M -10.1% $132M_— -2.5% Efficiency Ratio — Banner 80% 70% 60% Peer Top Quartile 50% Peer source: Group 1 ($108 and oven) Bank Holding Company PerformanceRe
Slide 20: Building value at Banner: Maintaining a moderate risk profile
Building value at Banner Core banking competency Growing revenue Protecting net interest margin Spending carefully Maintaining a moderate risk profile Employing capital wisely Maintaining a moderate risk profile Embrace effective enterprise risk management Minimize nonperforming assets Maintain appr
Slide 21: Maintaining a moderate risk profile: Minimize nonperforming assets
Maintaining a moderate risk profile aa INNER Minimize nonperforming assets ‘Quarter NPLs OREO Ending Amount %ofTA Amount % of TA 03/31/21 $ 37M 0.36% $ OM 0.00% 12/31/09 $214mM 5.53% § 78M 2.01% ACLL to Total Loans Banner Peer Top Quartile Peer Median Peer source: Group 1 ($108 and oven) Bank Holdin
Slide 22: Pandemic risk: PPP response
Pandemic risk: PPP response INNER (As of 3/31/21) SBA Paycheck Protection Program PPP Loans by Industry ‘Other 12% Wholesale Trade Initially funded 9,103 applications and $1.158 in loans Funded 4,107 applications and $410.8MM in second round 3% Admin Srv 4% Other sve 90% existing Banner clients; 10%
Slide 23: Allowance for credit losses
Allowance for credit losses pres Change assessment ME Portfolio Changes to allowance uding PPP = 7 o-----4 MBE Net charge-offs h foo 1.16% ! Te : | 1 : t % 4 4% 4 % %, %, % % %, ACL-Loans 78 (8.0) 66.9 (7.5) (3.2) (8.0): ‘156.1 ACL- Unfunded Commitments 7.0 02 33 (24) 00 (2.2); Ra /ACL-HTM Securi o1
Slide 24: Maintaining a moderate risk profile: Maintain appropriate risk capital
INNER Maintaining a moderate risk profile aa aa a - 20% Maintain appropriate risk capital Total Capital Total = Total Capital Ratio Quarter Capital TCE/TA > TCE/ Tangible Assets Ending _ Ratio 03/1/21 14.74% 7.80% 16% 12/31/09 12.73% 5.87% 18% Tier 1 Leverage 12% 18% — Banner 14% 8% 12% 10% 4% Peer
Slide 25: Building value at Banner: Employing capital wisely
Building value at Banner Core banking competency Growing revenue Protecting net interest margin Spending carefully Maintaining a moderate risk profile Employing capital wisely Employing capital wisely Maintain premium to tangible book value Pay appropriate dividends Prepare for future opportunities
Slide 26: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures $ Thousands Income before provision for income taxes (GAAP) (Recapture)/Provision for credit losses Pretax pre provision earnings (non-GAAP) Exclude net gain on sale of securities Exclude net change in valuation for financial instruments carried at fair value Excl
Slide 27: Building value at Banner
Building value at Banner Building value for ... Shareholders by delivering top quartile financial performance Clients by delivering super community bank service and products Employees by offering opportunity and reward Communities by providing capital and staying involved 26