Banner Corporation · NASDAQ:BANR
Banner — Sandler O'Neill + Partners West Coast Financial Services Conference 2015
29 slides from Banner's conference presentation, Mar 10, 2015
Slide 1: Building Value at Banner
NNER CORPORATION Building Value at Banner SANDLER O'NEILL + PARTNERS West Coast Financial Services Conference March 10-11, 2015 Phoenix, Arizona
Slide 2: Disclosure Statement
‘wes 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 me
Slide 3: A Good Place to Be ... Since 1890
A Good Place to Be ... Since 1890 Seattle ‘ Spokane Columbia Basin \ Assets Deposits Loans Offices $4.78 3.98 3.8B 94 Employees 1,100
Slide 4: Market branches, loans, deposits and share
Market Branches) Loans |Deposits/Share| ColumbiaBasin| 26 |$ 0.88/$ 1.38] 14% E. Washington | 18 |$0.58|$0.68| 8% Puget Sound 30 |$1.68/$1.38| 1% W. Oregon 14 |$0.78|$0.58| 1% Boise $0.26|$0.28| 2% since 2005 34 new branches —— Building Value at Banner
Slide 5: Growing with Siuslaw Financial Group
Growing with fm STUSLAW. FINANCIAL GROUP ‘* Adds over $300 million in low cost deposits * Provides entry into attractive Willamette Valley 1-5 corridor with ten branches and meaningful market share in Lane County + Complements existing Portland operations and six branches recently acquired in Wester
Slide 6: Transforming with AmericanWest Bank
A ii ith AmericanWest Transforming with Bank Adds over $3.6 billion in low cost deposits * Raises deposit market share among regional banks to 3” in Washington and 4" in Oregon + Extends footprint into California and Utah ‘* Combines experienced integrators + Management teams have successfully execu
Slide 7: Building on Strengths
4- Building on Strengths Growing sustainable revenue: + Geographic advantage + Improved reputation + Expanding revenue channels * Gaining market share —— Building Value at Banner
Slide 8: Economically Ideal Geography
4- Economically Ideal Geography Powerful and diverse economic drivers Technology | Microsoft (inte) amazon guicron @expedia Manufacturing 0) SOEINE (intel) PACCAR Consumer | amazon CosTco ER GE NORDSTROM = ~_ lectin Po tie Tacéma_Expeditors’ @Port or porriann Forest A products ‘Weyerhaeuser Fisherie
Slide 9: Economically Ideal Geography: population growth
4- Economically Ideal Geography | Strong population united States 2003 watts growth forecast 2013 to 2030 fl 2013 Estimate (Thousands) rank: 42th Washington ‘zu | (United States | 316,129 Washington 6,971 ‘Spi a Oregon | 3,930 | Idaho 1,612 Region | 12,513 ‘Wa offee of Financial Management 0% 5% 10%
Slide 10: Building on Improved Reputation
4- 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” for two most recent years: | SBA Seattle/Spokane District - Small Business Awards Rele
Slide 11: Expanding Revenue Channels
4- 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 12: Expanding Revenue Channels: core revenue
Expanding Revenue Channels Net Interest Income Grow core revenue Other Income | oe Date Amount | YOYA Quarter Ending 12/31/14] $ 59m | 14.2% 12/31/09| $ 45m | 5.8% Twelve Months Ending 12/31/14] $ 224m | 7.5% 12/31/09| $ 177m | -0.6% 10 7 oO re » s vee * —— Building Value at Banner ———————_ a
Slide 13: Expanding Revenue Channels: deposit fees
4- Expanding Revenue Channels ;~ Deposit Fees Other Fees Grow deposit fees 2. | Mortgage Bnkg = Date Amount | YOYA 10 Quarter Ending ‘ 12/31/14] $ 8.3m | 24.7% 12/31/09| $¢ 5.3m | 1.6% ‘6 Twelve Months Ending a | 12/31/14] $ 30.6m | 14.9% 12/31/09| $ 21.4m | -0.7% 2 oO SPP —— Building Value at Banne
Slide 14: Gaining Market Share
4- Gaining Market Share g Non-Int Bearing Interest Bearing —— Building Value at Banner Grow transaction deposit accounts Quarter Ending | Number | YovA Non-Interest Bearing Accounts 12/31/14| 140,107 | 5.5%* 12/31/09 71,178 | 8.0% Interest Bearing Accounts 12/31/14 74,886 | 2.3%*| 12/31/09 50,955 |
Slide 15: Maintaining Earnings Momentum
nes 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 14
Slide 16: Protecting Net Interest Margins
8% Protecting Net Interest Margins Asset Yields Funding Costs —om —— Building Value at Banner Maintain solid terest margin nei Date Amount | Percent Quarter Ending 12/31/14| $ 47m | 4.08% 12/31/09| $ 38m | 3.49% Twelve Months Ending 12/31/14] $ 180m | 4.07% 12/31/09| $ 145m | 3.33% 15
Slide 17: Protecting Net Interest Margins: deposit costs
8% Protecting Net Interest Margins Loan Yields Loan-Deposit Deposit Costs —— Building Value at Banner Reduce deposit costs Date Amount | Percent Quarter Ending 12/31/14] $ 1.84 | 0.18% 12/31/09| $17.7m | 1.83% Twelve Months Ending 12/31/14] $ 7.6m | 0.20% 12/31/09 | $ 83.2m | 2.21% 16
Slide 18: Protecting Net Interest Margins: core deposits
Protecting Net Interest Margins Noncore Deposits Core Deposits 3 2 a4 | ° Ce er y v oS wv» yy vw W ® . Improve funding mix with lower cost core deposits Quar Ending 12/31/14 | $ 3,128m | 12/31/09 | $ 1,924m | Balance | Percent 80% 50% —— Building Value at Banner ———————_ 5
Slide 19: Protecting Net Interest Margins: loan-to-deposit ratio
* Protecting Net Interest Margins [115% 45 i ioane PEE Maintain loan-to- L/D Ratio _peposits & deposit ratio of pen eed 90-95% 105% 35 Bain | Percent 100% 3.0 12/31/14 98% 12/31/09 | 98% 95% 25 Fae oe 90% 2.0 85% a 1.0 —— Building Value at Banner ——————__ ig
Slide 20: Protecting Net Interest Margins: peer comparison
nes Protecting Net Interest Margins 5.0% ———_______ Net Interest Margin Peer 75° Percentile 4.5% 3.5% 3.0% Maintain solid net interest margin Quarter Peer Ending | B8MMer | 755 peti 12/31/14 | 4.08% 09/30/14} 4.07% | 4.04% 12/31/09 | 3.53% 3.99% —— Building Value at Banner source: ‘Bank Holding Comp
Slide 21: Improving Operating Efficiency
4- Improving Operating Efficiency Other Efficiency Ratio Control core Personnel 95% operating expense Millions Date | Amount | YoYA Quarter Ending 12/31/14; $ 38M | 8.9% 12/31/09| $ 31M | -10.0% 75% | | Twelve Months Ending 12/31/14} $ 149m | 6.9% 65% | | 12/31/09| $ 132m | -2.6% 85% 55% —— Building
Slide 22: Maintaining Moderate Credit Risk
Maintaining Moderate Credit Risk | gare au 300 250 | 200 | 150 | 100 50 | I | litm FoF of Rand Reduce nonperforming loans and OREO Quarter Ending Balance | Percent ‘Nonperforming Loans 12/31/14| $ 17M | 0.4% 12/31/09 $ 214m | 5.5% Peak | $ 243m | 6.2% Other Real Estate Owned —— Building Value at Ban
Slide 23: Maintaining Moderate Credit Risk: earning asset mix
nes Maintaining Moderate Credit Risk Improved Earning Asset Mix 12/31/2014 12/31/2009 Securities 14% Res Const/Dev Building Value at Banner = 2
Slide 24: Maintaining Moderate Credit Risk: loan loss reserves
Maintaining Moderate Credit Risk 3.5% 3.0% 2.5% ~ 2.0% ALLL to Loans Peer 75° Percentile —— Building Value at Banner Maintain appropriate loan loss reserves Peer 75% Potl ALLL to Loans Quarter Ending Banner 12/31/14 | 1.98% 09/30/14 | 1.95% | 1.56% 12/31/09 | 2.51% | 2.66% source Bank Holding Compan
Slide 25: Retaining Risk-Appropriate Capital
: Retaining Risk-Appropriate Capital 20% Maintain solid capital position Tier 1 Leverage Ratio Total TCE/Tangible Assets Capital Quarter ier 1 Ending | Leverage 12/31/14 | 13.41% 12/31/09 | 9.62% | 5.87% Low 8.80% 5.82% — TCE/TA 10% —— Building Value at Banner 2a
Slide 26: Retaining Risk-Appropriate Capital: TCE to tangible assets
ns Retaining Risk-Appropriate Capital 20% a TCE to Tangible Assets aa capital Peer 75" Percentile prudently Quarter Peer 15% Ending | Banner | yon pce TCE to Tangible Assets 12/31/14 | 12.30% 09/30/14 | 12.00% | 10.38% 12/31/09 | 5.87% | 8.28% 10% 5% _ apcecnnums - ais an Ss ’ —— Building Value at B
Slide 27: Enhancing Shareholder Value: tangible book value
4- Enhancing Shareholder Value 50 . F TBV/ Share Attain premium to Steuk Price tangible book value 40 Quarter | Stock Ending | Pricex | TSV Per Share > Eee 12/31/14 | $ 40.88 | $ 29.68 Cee) 06/30/10 | $ 15.07 | $ 29.03 a0 Stock Price/ TBV 12/31/14 138% 10 06/30/10] 52% * Average closing price for th
Slide 28: Enhancing Shareholder Value: earnings multiple
4- Enhancing Shareholder Value a a Attain solid multiple TT™ EPS TBV/ Share Giese = F Stock Price 9 4.00 40 Quarter | Stock Ending | Price* | Earnings Per Share | 3.00 30 are 12/31/14| $ 40.88 | $ 2.79 Gon eet: 06/30/10 | $ 15.07 | $ -8.06 2.00 20 Stock Price/ TTM Earnings | 12/31/14 14.7x 1.00 10 |
Slide 29: Increasing Return to Shareholders
4- Increasing Return to Shareholders + Banner has a scalable franchise with a long history in robust, desirable markets. + Banner is one of the largest remaining banking franchises based in Washington. + Banner has the management depth, organizational model and operational skill to sustain earnings
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