Slide 1: Second Quarter 2020
NNER ‘CORPORATION Second 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: Pandemic response at Banner
INNER Pandemic response at Banner ca Clients Reduced branch lobby access; drive-up facilities and ATMs remain accessible to serve clients Funded 8,655 SBA Payroll Protection Program loans totaling $1.128 as of June 30th Deferred payments or waived interest on 3,314 loans with $1.108 in balances as o
Slide 4: Pandemic risk: Early impact exposure
Pandemic risk: Early impact exposure (NNER Total loan portfolio at 06/30/20: $10,284* (millions) Early Impact at Risk $836 9% by Industry by State 4 WA $516 oR $237 cA $258 1D $82 $36 Other $88 $44 fy Health Care Facilities $302 Health Care aaa Practioners Hotel & Accomodation S230 Restaurants & Foo
Slide 5: Pandemic risk: Investment properties
(NNER Pandemic risk: Investment properties sae Total loan portfolio at 06/30/20: $10,284* (millions) Secured by investment properties: $ 2,018 Investment Properties Retail $545 $2,018 20% Office $550 = by Collateral => Industrial Medical/Assisted Living Hotel/Motel Mini Storage * Includes $1,122 in
Slide 6: Pandemic risk: Loan pool by industry
Pandemic risk: Loan pool by industry INNER $ Millions HealthCare HealthCare Hotel Restaurents@ Recreation@ | Early Fuwre Industry: Fadlities Practioners Accomodation FoodServces Leisure Impact Impact Total Commercial real estate Owneroccupied 248 139 25 239 556 1207 9047 1027.4 Investment properties
Slide 7: CECL impact and Allowance for Credit Losses
INNER CECL impact and Allowance for Credit Losses “J § Millions Allowance for Credit Losses Build ~ Allowance for Credit Losses 142.0 on 1033] _ue2) ay o1 me = ome 12/3y2019 ov/at/2020 ow 31/2020 06/30/2020 Loans slUnfunded Loan Commitments HTM Securities + Provision expense for Q2 2020 of $29.5Mm r
Slide 8: Pandemic risk: PPP response
Pandemic risk: PPP response PPP Loans by Industry (As of 6/30/20, $ in millions) SBA Paycheck Protection Program ue one Funded 8,655 applications through June i Funded $1.18 of loans through June Aer 90% existing Banner clients; 10% new clients lealth Care 12% Retail Trade PPP Loans by Geography 6%
Slide 9: Pandemic risk: Deferrals and modifications
Pandemic risk: Deferrals and modifications ia Deferred payments or waived interest on 3,314 loans with $1.108 in balances through June 30° Commercial deferrals on 2,478 loans with $984.6mm in balances Mortgage forbearance on 282 loans with $86.0MM in balances Consumer deferrals on 554 loans with $32
Slide 10: 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 11: Building value at Banner
Building value at Banner Building value for stakeholders ... by focusing on core banking competency ... that is sustainable through change events ... and scalable with acquisition growth Banner Corporation ~ a Assets $14.48 Recent Additions Deposits $12.08 2018 24 20154 2015a1 2014 a2 Loans $10.58 B
Slide 12: 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 13: Growing revenue
Growing revenue shington ‘Oregon Tdaho country. California Region United States 330.0 3498 6% Strong Population Growth Forecast 2010to 2020 2020 to 2030 United States Rank: 9'h Washingt /ashington a ath Oregon Aa ae ae Idaho zon 26m California 0% 5% 10% 15% 20% 25% Source: U.S. Census Bureau Moody's
Slide 14: 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 15: 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 14
Slide 16: Growing revenue
Growing revenue Guard and improve reputation Tbes Recognized by Forbes (4** consecutive year) WORLD'S BEST. Forbes 2020 "World's Best Banks” and 2017-2019 “Top 100 US Banks” Highest Retail Banking Client Satisfaction in the Northwest JD Power 2017-2019, 2012-2013 U.S. Retail Banking Satisfaction Stu
Slide 17: Growing revenue
Growing revenue Grow transaction deposit accounts Non-interest Bearing Interest Bearing Quarter. ————_=____ —__________ Ending Number YOYA Number YOYA 06/30/20 309,780 3.5% 152.411 1.1%" 12/31/09 71478 8.0% 50,955 11% + Excluding all acquisitions, the number of trans- action deposit accounts has gro
Slide 18: Growing revenue
Growing revenue Grow core revenue INNER Grow deposit fees! amace Quarter uM ‘oiiarixe Quarter LT Ending Amount YOYA Amount OYA. Ending Amount YOYA Amount, 06/30/20 $ 145m 3.9% S$ 565m 42% 0e/30/20 § 75m -463% $ 373m ~ 12/309 § 45m 5.8% SAM -0.6% i309 § 53m 16% $ 214m _, 150 2 Other Income Net Intere
Slide 19: 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 20: Protecting net interest margin
INNER Protecting net interest margin aa Improve Earning Asset Mix 12/31/2009 06/30/2020 Securities Securities Coml & Ag SBillions 12/0 Securities Comleag “CREQwner 05 13_ “CREInvestor 0.9 33_ ResConstiDev 0.5 07 Res Const/Dev _ResMortgage 0.7 0.8 Consumer 0.3 Res Const/Dev CRE Investor Total 44 126
Slide 21: Protecting net interest margin
Protecting net interest margin Grow core deposits Redluce deposit costs INNER Quarter Quarter Quarter ETM Panis, palonce _YOYA ‘of Tota Ending Amount Rate Amount Rate 06/30/20 $10,974m 33.5% 91% 06/30/20 $ 67M 0. $ 35.4m 0.34% sos 1924m 168% 60% wos S718 220% 2 so o% 212 1 noncore Deposts Loan Yield
Slide 22: Protecting net interest margin
Protecting net interest margin Maintain 90-95% loan-to-depositratio Quarter Ending _ Ratio 06/30/20 88% 12/31/09 98% 50% Net Noncore Funding Dependence — Banner 40% 30% 20% Peer Median 10% Peer source: Group 1 (S108 and over), Bank Holding Company Performance Report (BHCPR] Nationalinformation Cente
Slide 23: Protecting net interest margin
INNER Protecting net interest margin aa Maintain top quartile net interest margin Guaner Quarter L™ Ending Amount Rate Amount _ Rate 06/30/20 $119M 3.90% $475m 4.17% 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
Slide 24: 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 23
Slide 25: Control core operating expense
INNER Control core operating expense yw 100 ott 100% “ fa ther Quarter Quarter _LTM__ Informagion Ending Amount YOYA Amount YOY A = 0% Comp: ‘al 06/30/20 $ 87M 11% $357m 3.4% 80 12/31/09 § 31m 10.1% $132M_-2.5% ae Efficiency Ratio 60 10% — Banner — Efficiency Ratio 60% 40 40% 20 30% Peer Top Quartil
Slide 26: 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 27: Maintaining a moderate risk profile
Maintaining a moderate risk profile INNER Minimize nonperforming assets y 350 fa Quarter ___NPLs___OREO__ g Ending Amount %ofTA Amount % of TA = = 300 06/30/20 $ 37M 0.35% § 2m 0.02% 12/31/09 $214m 553% § 78M 2.01% 250 ACLL to Total Loans — Banner 200 Peer Top Quartile 150 100 Peer Median 50 Peer so
Slide 28: Maintaining a moderate risk profile
Peer source: Group 1 ($108 and oven) Bank Holding Company PerformanceReport (BHCPR] Nationalinformation Center, Federal Reserve System, Division of Banking Supervisionand Regulation i ini i 1 NNER Maintaining a moderate risk profile pas oo ae - 20% Maintain appropriate risk capital preter la 2 Quart
Slide 29: 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 30: Maintain premium to tangible book value
Maintain premium to tangible book value Maintain favorable stock price to TBV and EPS. Quarter Stock Price) EPS PIE Ending Price? TEV Tey LTM__ Ratio 06/30/20 $3538 $3489 101% § 324 109% 06/30/10 $15.07 $29.03 52% $-806 nlm 2.0% Return on Wverage Assets — Banner 48% Peer Top | Ouartile | 1.0% A asx
Slide 31: 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 30