Slide 1: Building Value at Banner
NNER [CORPORATION Building Value at Banner puso Davidson & Co. May 1B. 14, 2014
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: A Good Place to Be... Since 1890
¥<: A Good Place to Be... Since 1890 Assets Deposits Loans Offices $4.5B 3.7B 3.5B 88 Employees 1,050
Slide 4: Markets, branches, loans and deposits
Market Branches) Loans |Deposits|/Share ColumbiaBasin} 26 /|$0.98/$1.48| 17% E. Washington | 18 |$0.58|$0.68| 9% Puget Sound 30 |$1.48/$1.38) 2% .| Portland 8 |$0.5B/$0.3B; 1% Boise 6 |$0.2B/$0.1B; 2% ww 28 new branches = “i i since 2005 ee Fa Building Value at Banner
Slide 5: Building on Strengths
€- Building on Strengths Growing sustainable revenue: Geographic advantage Improved reputation Expanding revenue channels Gaining market share Building Value at Banner
Slide 6: Economically Ideal Geography
€- Economically Ideal Geography Powerful and diverse econ drivers Technology | Microsoft (intel) amazon gaicron @Expedia Manufacturing QseenNe (intel) PACCAR Consumer | amazon COSTCO ia. GE NORDSTROM Logistics Port Sa peg WE = 9 of Seattle. Tacoma Expeditors 2) PORT OF PORTLAND Forest A pros Weyerha
Slide 7: Economically Ideal Geography
€- Economically Ideal Geography 2003 to 2013 United States q 2013 to 203: ank: 12th Washington a Oregon Idaho ~_— a ‘0 0% 5% 10% 15% 20% 25% —— Building Value at Banner Strong population growth forecast United States | 316,129 Washington | 6,971 Oregon Idaho Region Sources: U.S. Census Bureau WA Off
Slide 8: Building on Improved Reputation
€- Building on Improved Reputation Included in Forbes 2014: “America’s 50 Most Trustworthy Financial Companies” Received highest rating: Bankrate.com SAFE & SOUND @ Star Ratings Named “Community Lender of the Year”: SBA Seattle/Spokane District (2013 Small Business Awards) Released from enhanced reg
Slide 9: Expanding Revenue Channels
€- Expanding Revenue Channels * Value proposition of “Super Community Bank” model: — Broad and appropriate product offerings to serve middle market, small business and consumer client base — Decision making as close to client as possible — Responsiveness through relationship banking — Alignment of d
Slide 10: Expanding Revenue Channels
Expanding Revenue Channels Net Interest Income Other Income —— Building Value at Banner Grow core revenue Date Quarter Ending Amount YoYyA 03/31/14) $ 5im 1.0% 12/31/09} $¢ 45m 5.8% Twelve Months Ending 03/31/14) $ 208M -1.6% 12/31/09 | $ 177M -0.6%
Slide 11: Expanding Revenue Channels
« * Expanding Revenue Channels ry B Deposit Fees Other Fees Mortgage Bnkg » N 10 —— Building Value at Banner Grow deposit fees Date Amoun Quarter Ending 03/31/14| $ 6.6m 4.8% 12/31/09| $ 5.3m 1.6% Twelve Months Ending 03/31/14 | $ 26.9M 4.6% 12/31/09| $ 21.4m -0.7% 10
Slide 12: Gaining Market Share
€- Gaining Market Share Thousands 200 Non-Int Bearing 175 Interest Bearing 150 —— Building Value at Banner Grow transaction deposit accounts Quarter Ending Number yoy A Non-Interest Bearing Accounts 03/31/14 | 122,927 | 10.4% 12/31/09| 71,178 8.0% Interest Bearing Accounts 03/31/14 68,881 5.1% 12/31
Slide 13: Maintaining Earnings Momentum
€- Maintaining Earnings Momentum Enhancing Shareholder Value: * Protecting net interest margins ¢ Improving operating efficiency « Maintaining moderate credit risk * Retaining risk-appropriate capital — Building Value at Banner - 12
Slide 14: Protecting Net Interest Margins
€- Protecting Net Interest Margins Asset Yields Funding Costs —— Building Value at Banner Maintain solid net interest margin Date Amount | Percen' Quarter Ending 03/31/14) $ 42m 4.07% 12/31/09| $ 38m 3.49% Twelve Months Ending 03/31/14) $ 168M 4.09% 12/31/09 $ 145 3.33% 13
Slide 15: Protecting Net Interest Margins
€- Protecting Net Interest Margins Loan Yields Loan-Deposit =—= Spread Deposit Costs Reduce deposit costs Date Amount | Percent Quarter Ending 03/31/14] $ 2.0m | 0.22% | 12/31/09 | $ 17.7m 1.83% Twelve Months Ending 03/31/14| $ 9.0m 0.25% 12/31/09 | $ 83.2m 2.21% — Building Value at Banner ————————
Slide 16: Protecting Net Interest Margins
€- Protecting Net Interest Margins Improve funding Rencore Deposits mix with lower cost Core Deposits core deposits Quarter Ending 03/31/14| $ 2,778m| 75% Balance | Percent 12/31/09 | $ 1,924m 50% —— Building Value at Banner ———————— 15
Slide 17: Loan-to-deposit ratio
115% ions’ | Maintain loan-to- L/D Ratio — Deposits deposit ratio of 4. 90-95% Quarter Ending 03/31/14 12/31/09 98% Peak 108% Percent —— Building Value at Banner ——————_— 16
Slide 18: Protecting Net Interest Margins
INNER Protecting Net Interest Margins 5.0% + Net Interest Margin Peer 75" Percentile 4.5% 4.0% 3.5% 3.0% — eS raed Pog Pog —— Building Value at Banner Maintain soli net interest margin Quarter Ending 03/31/14| 4.07% 12/31/13| 4.01% | 4.04% 12/31/09| 3.53% | 3.99% Source: Bank Holding Company Perform
Slide 19: Improving Operating Efficiency
4- Improving Operating Efficiency Other Efficiency Ratio Control core Personnel 95% operating expense Date Amount | YOYA Millions b ) Quarter Ending 03/31/14) $ 35M 3.5% 12/31/09} $ 31m | -10.0% Twelve Months Ending 03/31/14| $ 141m 4.0% 65% | | 12/31/09] $ 132m | -2.6% 85% 75% 55% FF PY os PPPS PS
Slide 20: Maintaining Moderate Credit Risk
“met Maintaining Moderate Credit Risk Millions Reduce nonperforming loans and OREO Quarter Balance reent Ending Nonperforming Loans 03/31/14) $ 23M 0.6% 12/31/09 | $ 214m 5.5% Peak $ 243M 6.2% Other Real Estate Owned 03/31/14 | $ 4m 0.1% 12/31/09} $ 78m 2.0% Peak $ 107M 3.0% —— Building Value at Ban
Slide 21: Maintaining Moderate Credit Risk
nvee Maintaining Moderate Credit Risk Improved Earning Asset Mix 03/31/2014 12/31/2009 Securities 17% Const/ Dev Const/Dev Building Value at Banner 20
Slide 22: Maintaining Moderate Credit Risk
INNER Maintaining Moderate Credit Risk 3.5% + ALLL to Loans Peer 75" Percentile 3.0% 2.5% 2.0% — 1.5% 1.0% : r r r s\ Sa 2 S s s > ~ POP OP —— Building Value at Banner Maintain appropriate loan loss reserves Quarter r Ending | Banner | 75% pet ALLL to Loans 03/31/14] 2.11% | 12/31/13| 2.17% | 1.87%
Slide 23: Capital position
20% 15% ~ 10% | 5% - 800 w Tier 1 Leverage Ratio Total 5 TCE/Tangible Assets Capital = = 600 400 200 o —— Building Value at Banner Maintain solid capital position Ending | Leverage | TCE/TA 03/31/14 | 13.53% | 12.16% 12/31/09 | 9.62% | 5.87% Low | 8.80% | 5.82% 22
Slide 24: Retaining Risk-Appropriate Capital
met Retaining Risk-Appropriate Capital 20% — = TCE to Tangible Assets Manage cayital Peer 75‘ Percentile prudently Quarter r 15% Ending Banner 75% Pctl TCE to Tangible Assets 03/31/14 | 12.16% 12/31/13 | 12.23% | 11.33% 12/31/09 | 5.87% 8.28% 10% 5% Source: Bank Holding Company Performance Report 0%
Slide 25: Enhancing Shareholder Value
€- Enhancing Shareholder Value 40 30 20 | 10 TBV/ Share Stock Price Quarter Stock Ending | Price* Per Share Attain premium to tangible book value TBV ees 03/31/14 | $ 40.04 $ 27.87 (2010 Q2) 06/30/10 | $ 15.07 $ 29.03 Stock Price/ TBV 03/31/14 144% 06/30/10 52% — Building Value at Banner ———————— *
Slide 26: Enhancing Shareholder Value
INNER Enhancing Shareholder Value 5.00 50 TBV/ Share THAERS Stock Price 4,00 40 3.00 30 Pre Capital Raise (2010 Q2) 2.00 + 20 1.00 10 0.00 r oO SJ 2 S » > &- SF SP SP ow os PP PP PP Building Value at Banner Attain solid multiple on earnings Stock T™ Price* | Earnings Per Share 03/31/14 | $ 40.04 | $
Slide 27: Increasing Return to Shareholders
€- Increasing Return to Shareholders ¢ 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 operational skill to sustain earnings momentum