Banner Corporation · NASDAQ:BANR
Banner — Q4 2020 Earnings Presentation
30 slides from Banner's earnings presentation, Jan 21, 2021
Slide 1: Fourth Quarter 2020
NNER ‘CORPORATION Fourth Quarter 2020
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 $15.08 Recent Additions Deposits $12.68 2018 44 20154 20151 2014 a2 Loans $10.18 Ban
Slide 4: Community, Diversity & Sustainability
INNER Community, Diversity & Sustainability aa Community Meetingthe needs of low and moderate income businesses and consumers in our footprint + Provided financial literacy through first time home buyer education classes (120 classes in 2019 with over 980 attendees, and over 1,600 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 Population Estimate imitions) Growth jashington 77 ‘87 Oregon 4347 Teaho country. California Region &% United States 330.0 3498 6% Strong Population Growth Forecast 2010to 2020 2020 to 2030 United States wasn Rank: 9% Washingt Jashington a 5 1 reg
Slide 7: Growing revenue ... in an ideal geography
INNER Growing revenue ... in an ideal geography aa Powerful and diverse economic drivers From Banner's Pacific Northwest base to ... California From Apple 4 to @ zoomerang, Technology Microsoft (ed amazon a#icron Gexpedia from Silicon Valley to Manufacturing Qscenc (inteD PACCAR = the Central Valley
Slide 8: Growing revenue: Offer super community bank value proposition
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 fy WORLD'S BEST. Recognized by Forbes (4* consecutive year) Forbes 2020 "World's Best Banks" and 2017-2019 "Top 100 US Banks” Highest Retail Banking Client Sat
Slide 10: Growing revenue: Grow transaction deposit accounts
Growing revenue Grow transaction deposit accounts Non-Interest Quarter Beating Ending Number YOYA Interest Bearing Number YOY A 12/31/20 311,558 2.4% 12/31/09 71178 8.0% 151,062 0.4% 50,955 11% + Excluding all acquisitions, the number of trans- action deposit accounts has grown ~116% since 2009, abo
Slide 11: Growing revenue: Grow core revenue and deposit fees
Growing revenue INNER Grow core revenue Grow deposit fees! Ending Amount YOYA Amount__-YOYa Ending Amount YOY Amount YOY 12/320 $§ 143M 2.4% $ 579M 5.2% 12/320 $ 8.3m -13.9% $ 344m -263 12/309 $ 45m 5.8% $ 177m 70.6% 12/309 $ 5.3m 16% $ 214m -07% 150 20% z Other Income Other Fees Net Interest Income
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 aa Improve Earning Asset Mix 12/31/2009 12/31/2020 4 Securities Securities & Other ce ag mL Ag Com! 8 Ag Investments SBillions Securities Comleag CREOwner 0.514 CREInvestor 0.952 ResConst/Dev 05 0.8 ‘onsumer Res Mortgage Res Mortgage jage CRE Investor 9 ‘Consumer
Slide 14: Protecting net interest margin: Grow core deposits
Protecting net interest margin Grow core deposits INNER Redluce deposit costs Quarter Quarter Quarter ETM Ending Balance YOYA_%of Total Ending Amount Rate Amount Rate 12/31/20 $11.652m 30.5% 12/320 $ 44m 0.14% 25.0m 0. wisil09 $1924 168% 50% wisuos§ 7m S$ a82m 2.21% 100 8% Noncore Deposits Loan Yiel
Slide 15: Maintain 90-95% loan-to-deposit ratio
Protecting net interest margin Maintain 90-95% loan-to-depositratio Quarter Ending __ Ratio 12/31/20 80% 12/31/09 98% 50% Net Noncore Funding Dependence — Banner 40% 30% 20% Peer Median 10% 0% “10% Peer source: Group 1 (S108 and over), Bank Holding Company Performance Report (BHCPR] Nationalinformat
Slide 16: Maintain top quartile net interest margin
Protecting net interest margin Maintain top quartile net interest margin Guaner Quarter L™ Ending Amount Rate Amount _ Rate 12/31/20 $121M 3.62% $481M 3.85% 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: 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 16
Slide 18: Spending carefully: Control core operating expense
Spending carefully Control core operating expense auarter Quarter LTM Ending Amount YOYA Amount YOYA 12/31/20 $ 96M 7.7% $368M 5.1% 12/31/09 § 31M -10.1% $132Mm_—-2.5% Efficiency Ratio = Banner 80% yoy | PeerMedian Peer Top Quartile Peer source: Group 1 ($108 and oven) Bank Holding Company Performan
Slide 19: Merging Islanders Bank into Banner Bank
Merging Islanders Bank into Banner Bank Combining to ... Expand offerings to Islanders’ clients Leverage growing presence of Banner name in the North Sound Improve corporate operating efficiencies | S | an ders Expect 1-year payback on $2M merger costs BANK Islanders Bank Assets $ 0.38 Deposits S$ 0
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: Minimize nonperforming assets
Maintaining a moderate risk profile Minimize nonperforming assets y 350 fa Quarter ___NPLs___OREO__ g Ending Amount %ofTA Amount % of TA = = 300 12/31/20 $ 36M 035% § 1m 0.01% 12/31/09 $214m 553% § 78M 2.01% 250 ACLL to Total Loans 35% — Banner 200 3. Peer Top Quartile ° 150 25% 2.0% 100 Peer Median
Slide 22: Pandemic risk: Industry by loan pool
INNER Pandemic risk: Industry by loan pool aa —— 6 a 297 rs1 | 2158630 | 30765 investment properties 20001993 219 227 | 54334007 | «19557 smal baton GE a8 na 225 13 ssn 47 | 528 vulofaryees estate ou oa oo oo os a7 aaa Commerdal constuction 220 122 123 na na as7s aaa ———— oo oo oo oo oo 3055 | 2055
Slide 23: Pandemic risk: PPP response
INNER Pandemic risk: PPP response pos PPP Loans by Industry ‘Other (As of 12/31/20, $ in millions) Const SBA Paycheck Protection Program noieate sans Funded 9,103 applications and $1.158 in loans Trade 90% existing Banner clients; 10% new clients “aN Forgiveness processed for 595 loans for $112.3MM
Slide 24: Pandemic risk: Deferrals and modifications
Pandemic risk: Deferrals and modifications Active deferred payments or waived interest on 158 loans with $75.4MM in balances through December 31° Active Commercial deferrals on 35 loans with $43.8MM in balances Active Mortgage forbearance on 116 loans with $31.6MM in balances Active Consumer forbear
Slide 25: Allowance for credit losses
Allowance for credit losses Fisses Gi Day1 CECLadjustments Change assessment: ier mm Portfolio %ACL-Loans see excludingPPP = Economicfactors 169% Changesto allowance: i Net charge-offs ae = lei Provision | 3150 116% a7 % 4 4 8 4 % B eo % Ye % 4 } % % & % & 3 AcL-Loans sms 78| (02 23, 04 217 2005] (a
Slide 26: Maintain appropriate risk capital
Peer source: Group 1 ($108 and oven) Bank Holding Company PerformanceReport (BHCPR] Nationalinformation Center, Federal Reserve System, Division of Banking Supervisionand Regulation 25 i ae . a INNER Maintaining a moderate risk profile aan aa a - pn Maintain appropriate risk capital Total Capital 16
Slide 27: 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 28: Maintain premium to tangible book value
Maintain premium to tangible book value Earnings per Share LTM Banner Stock Price Maintain favorable stock price to TBV andEPS $5.00 Quarter Stock Price) EPS IE Ending Price? = TBV = tpy. LTM__ Ratio 12/320 $50.33 $3617 139% $ 3.28 15.4x O6/30/10 $15.07 $29.03 52% $-8.06 nim $4.99 2.0% Return on Ave
Slide 29: 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 Exc
Slide 30: 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 29