Banner Corporation · NASDAQ:BANR
Banner — D.A. Davidson & Co. conference (May 2011)
22 slides from Banner's conference presentation, May 13, 2011
Slide 1: Building Value at Banner
NNER CORPORATION Building Value at Banner mua) DA. Davidson & Co. May 12, 2011
Slide 2: Disclosure Statement
kee 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 mea
Slide 3: Today's Discussion of Banner
€- Today’s Discussion of Banner * Banner has a scalable franchise with a long history in stable markets. ¢ Banner is well positioned in robust markets to generate organic growth. ¢- Banner has improved performance by executing on its strategic priorities, continuing to drive shareholder value. ¢- Ba
Slide 4: A Good Place to Be... Since 1890
<<; | Good Place to Be... Since 1890 Assets $4.3B* Deposits 3.5B Loans 3.3B Offices 89 Employees 1,047 * 3rd Jargest franchise headquartered in Washington
Slide 5: Markets, branches, loans, deposits and share
Market Branches} Loans |Deposits|Share| Columbia Basin} 26 |$0.9B|$ 1.3B] 17% E. Washington 19 |$0.5B/$0.6B| 9% Puget Sound 29 |$1.2B/$1.2B| 2% {Portland 9 |$0.5B/$0.3B) 1% $0.2B|/$0.1B| 2% 27 new branches since 2005 —— Building Value at Banner ————————
Slide 6: Strategy and Opportunity
ies Strategy and Opportunity Strengthen Foundation Optimize Franchise 9-12 Month Strategy liquidity to weather storm and grow organically 2. Aggressively identify problem assets and improve resolution 3. Lower funding costs and grow core earnings base i 4. Prepare for impact from failed institutions
Slide 7: Maximizing Shareholder Value
bes Maximizing Shareholder Value + Establish executive risk management committee Achieve a moderate + Reduce nonperforming loans and OREO risk profile + Reduce construction and land development concentration + Limit concentration risks + Maximize relationship profitability + Execute robust prospecti
Slide 8: Achieving a Moderate Risk Profile
kes Achieving a Moderate Risk Profile Improve capital and loss reserve ratios 03/31/2011 | 12/31/2009 Total capital to 0 a risk-weighted assets 17.14% 12.73% Tier 1 capital to 6 6 risk-weighted assets 13.87% DLAs Tier 1 leverage capital to 12.50% 9.62% average assets Tangible common equity to 8.79%
Slide 9: Achieving a Moderate Risk Profile: Earning Asset Mix
Achieving a Moderate Risk Profile Improve Earning Asset Mix 03/31/2011 12/31/2009 Securities, 14%, Securities 18% Const/ Dev ~ Const/ Dev — Building Value at Banner ———————_ 9
Slide 10: Achieving a Moderate Risk Profile: Construction Concentration
kes Achieving a Moderate Risk Profile Residential Const & Land Dev All Other Loans Billions PL LS SN PP IP PS LOL SL SL SM oy Reduce residential construction and land development concentration 03/31/2011 |$ 299m 9% 12/31/2009 |$ 523m| 14% Peak $ 1,075m| 32% —— Building Value at Banner ———————_ 10
Slide 11: Achieving a Moderate Risk Profile: Nonperforming Loans and OREO
Achieving a Moderate Risk Profile == ALLL Millions is Kd FF PS Py STF FC KK SF Reduce nonperforming loans and OREO Date Balance | Percent Nonperforming Loans 03/31/2011 $ 132M 3.8% 12/31/2009 $ 214 5.5% Peak $ 243M 6.2% Other Real Estate Owned 03/31/2011 $ 95M 2.8% 12/31/2009 $ 78M 2.0% Peak $ 107m
Slide 12: Grow core revenue
Millions Net Interest Income OtherIncome Grow core revenue Date Amount Quarter Ending 03/31/2011 $ 47m 4.1% 12/31/2009 $ 45m 5.8% Twelve Months Ending 03/31/2011 $ 191M 6.5% 12/31/2009 $ 177m -0.6% —— Building Value at Banner
Slide 13: Improve net interest margin
Asset Yields Funding Costs Improve net interest margin Date Amount | Percent Quarter Ending 03/31/2011 $ 40m 3.94% 12/31/2009 $ 38M 3.49% Twelve Months Ending 03/31/2011 $ 160m 3.75% 12/31/2009 $ 145m 3.33% —— Building Value at Banner 13
Slide 14: Building Sustainable Profitability: Reduce deposit costs
4- Building Sustainable Profitability Loan Yields Loan-Deposit Deposit Costs =—_— Spread Reduce deposit costs Date Amount | Percent Quarter Ending 03/31/2011 $ 7.8 0.89% 12/31/2009 $17.7" 1.83% Twelve Months Ending 03/31/2011 $ 44.3 1.20% 12/31/2009 $ 83.2 2.21% —— Building Value at Banner 14
Slide 15: Building Sustainable Profitability: Grow deposit fees
4- Building Sustainable Profitability Millions 12 Deposit Fees Mortgage Bnkg Other Fees Grow deposit fees Date Amount Quarter Ending 03/31/2011 $ 5.3m 2.1% 12/31/2009 $ 5.3m 1.6% Twelve Months Ending 03/31/2011 $ 22.1Mm 2.3% 12/31/2009 $ 21.4 -0.7% —— Building Value at Banner ———————_ 15
Slide 16: Remaining Core Funded
Remaining Core Funded Improve Funding Mix 03/31/2011 12/31/2009 terest FHLB & Other FHLB & Other —— Building Value at Banner 16
Slide 17: Maintain loan-to-deposit ratio of 90-95%
115% 4.5 ‘ Loans L/D Ratio— Deposits 110% 4.0 105% | r 3.5 100% | ; 3.0 95% | - 2.5 90% | ; 2.0 85% | 1.5 80% — 1.0 FF SF Sf 2 FPF FF KF FH SK Billions Maintain loan-to- deposit ratio of 90-95% Date Percent 03/31/2011 94% 12/31/2009 98% Peak 108% —— Building Value at Banner ———————— 17
Slide 18: Improving Operating Leverage
€- Improving Operating Leverage ¢ Focused value proposition: Reorganize around “Super Community Bank” model to further develop commercial bank attributes — Broad and appropriate product offerings to serve middle market, small business and consumer client base — Decision making as close to client as
Slide 19: Improving Operating Leverage: Core Deposits
4- Improving Operating Leverage 5 Improve funding mix with lower cost core deposits Noncore Deposits Core Deposits Billions 03/31/2011 |$ 2,083 m 59% 12/31/2009 |$ 1,924 50% —— Building Value at Banner ———————_ 19
Slide 20: Control core operating expense
Millions Control core operating expense Date Amount | Yt Quarter Ending 03/31/2011 $ 33M 2.4% 12/31/2009 $ 31m | -10.0% Twelve Months Ending 03/31/2011 $ 129M 0.9% 12/31/2009 $ 129 -2.6% —— Building Value at Banner 20
Slide 21: Reduce OREO and collection costs
g 8° ‘additions oreo [oa Reduce OREO and 2 50 _Dispositions _425 2 collection costs = 'W/D and Loss = = 40 100 = Cycle-to-Date 30 75 Begin $ 2m Additions 244m 20 50 Dispositions 127m 405 a= Write-downs 21m Bo rs Loss on Sale 3M “10 r End $ 95m -20 -30 SS OP OE LS LY FFF KF FEE —— Building Value at B
Slide 22: Banner has a scalable franchise with a long history
* Banner has a scalable franchise with a long history in stable markets. ¢ Banner is well positioned in robust markets to generate organic growth. ¢- Banner has improved performance by executing on its strategic priorities, continuing to drive shareholder value. ¢- Banner's “Super Community Bank” mo