WALLA WALLA, Wash., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM:BANR), the parent company of Banner Bank and Islanders Bank, today reported that year-over-year revenue growth contributed to solid third quarter and year-to-date 2017 operating results.  Net income in the third quarter of 2017 was $25.1 million, or $0.76 per diluted share, compared to $25.5 million, or $0.77 per diluted share, in the preceding quarter and increased 5% compared to $23.9 million, or $0.70 per diluted share, in the third quarter a year ago.  There were no acquisition-related expenses in the third quarter of 2017 or the preceding quarter.  In the third quarter a year ago, acquisition-related expenses totaled $1.7 million.  In the first nine months of 2017, net income increased 19% to $74.3 million, or $2.25 per diluted share, compared to $62.6 million, or $1.83 per diluted share, in the first nine months of 2016.  There were no acquisition-related costs in the first nine months of 2017, compared to $10.9 million in acquisition-related expenses in the first nine months of 2016.

“Our third quarter financial results were highlighted by strong loan and core deposit growth and solid net interest income reflecting earning asset expansion and our strong net interest margin,” stated Mark J. Grescovich, President and Chief Executive Officer.  “While we experienced a significant decrease in accretion income on loans acquired in merger transactions compared to recent quarters, strong business activity resulted in both loan and core deposit growth for the quarter and year to date, generating meaningful increases in contractual net interest income and deposit fees.  Earlier this year we crossed the threshold of $10.0 billion in total assets, incurring increased expenses related to enhanced infrastructure and regulatory compliance costs.  Although increasing regulatory costs are a significant headwind, we are continuing to successfully execute our strategies to deliver revenue growth, sustainable profitability and increasing value to our shareholders while still maintaining our moderate risk profile.”

At September 30, 2017, Banner Corporation had $10.44 billion in assets, $7.77 billion in net loans and $8.54 billion in deposits.  Banner operates 178 branch offices located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Third Quarter 2017 Highlights

• Net income was $25.1 million, compared to $25.5 million in the preceding quarter and increased 5% compared to $23.9 million in the third quarter of 2016.
• Return on average assets was 0.97% in the current quarter, compared to 1.01% in the preceding quarter and 0.96% in the same quarter a year ago.
• Revenues from core operations* were $120.8 million, compared to $122.9 million in the preceding quarter, and increased 3% compared to $117.5 million in the third quarter a year ago.
• Net interest margin was 4.22% for the current quarter, compared to 4.33% in the preceding quarter and 4.15% in the third quarter a year ago.
• Deposit fees and other service charges were $13.3 million, compared to $13.2 million in the preceding quarter and a 3% increase compared to $12.9 million in the third quarter a year ago.
• Provision for loan losses was $2.0 million, increasing the allowance for loan losses to $89.1 million or 1.15% of total loans.
• Net loans receivable increased 3% to $7.69 billion at September 30, 2017, compared to $7.46 billion at June 30, 2017, and increased 5% compared to $7.31 billion a year ago.
• Core deposits increased 2% during the current quarter and increased 6% compared to September 30, 2016.
• Core deposits represented 87% of total deposits at September 30, 2017.
• Quarterly dividends to shareholders were $0.25 per share.  In addition, Banner paid a special dividend of $1.00 per share on July 18, 2017.
• Common shareholders' tangible equity per share* was $31.79 at September 30, 2017, compared to $31.21 at the preceding quarter end and $31.14 a year ago.
• The ratio of tangible common shareholders' equity to tangible assets* remained strong at 10.39% at September 30, 2017, compared to 10.46% at the preceding quarter end and 11.03% a year ago.

*Revenues from core operations and non-interest income from core operations (both of which exclude fair value adjustments and gains and losses on the sale of securities), and references to tangible common shareholders' equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

Income Statement Review

Banner’s third quarter net interest income, before the provision for loan losses, increased modestly to $100.2 million, compared to $99.7 million in the preceding quarter and increased 7% compared to $93.7 million in the third quarter a year ago.  In the first nine months of 2017, net interest income, before the provision for loan losses, increased 6% to $294.8 million compared to $277.9 million in the first nine months of 2016.

“Our net interest margin decreased compared to the preceding quarter, largely reflecting decreased purchased loan discount accretion,” said Grescovich.  Banner's net interest margin was 4.22% for the third quarter of 2017, compared to 4.33% in the preceding quarter and reflected a seven basis point improvement compared to 4.15% in the third quarter a year ago.  Acquisition accounting adjustments, principally loan discount accretion, added 10 basis points to the net interest margin in the current quarter compared to 15 basis points in the preceding quarter and 11 basis points in the third quarter a year ago.  In the first nine months of 2017, Banner’s net interest margin improved 11 basis points to 4.27% compared to 4.16% in the first nine months of 2016.  Purchase accounting adjustments added 12 basis points to the net interest margin for the first nine months of 2017 compared to 14 basis points for the first nine months of 2016.  The total purchase discount for acquired loans was $23.4 million at September 30, 2017, down from $25.8 million at June 30, 2017 and $34.9 million a year ago due to discount accretion.

Average interest-earning asset yields decreased ten basis points to 4.43% compared to 4.53% for the preceding quarter and increased nine basis points compared to 4.34% in the third quarter a year ago.  Average loan yields decreased ten basis points to 4.88% compared to the preceding quarter and increased ten basis points from the third quarter a year ago.  Loan discount accretion added 12 basis points to loan yields in the third quarter, compared to 18 basis points in the preceding quarter and 15 basis points in the third quarter a year ago.  Deposit costs were 0.15% in the third quarter, the same as in the preceding quarter and a one basis point increase compared to the third quarter a year ago.  The total cost of funds increased one basis point to 0.23% during the third quarter compared to 0.22% for the preceding quarter and 0.19% for the third quarter a year ago.

“While our asset quality metrics remain strong, we modestly increased the loan loss allowance during the quarter and expect to continue adding to the allowance as we strive to maintain solid reserves and a moderate risk profile,” said Grescovich.  Largely as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio as well as net charge-offs, Banner recorded a $2.0 million provision for loan losses during the third quarter, the same as in the preceding quarter and the year ago quarter.

Deposit fees and other service charges were $13.3 million in the third quarter, a modest increase compared to $13.2 million in the preceding quarter and a 3% increase compared to $12.9 million in the third quarter a year ago.

Banner’s mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $4.5 million in the third quarter compared to $6.8 million in the preceding quarter and $8.1 million in the third quarter of 2016.  Sales of one- to four-family loans in the current quarter resulted in gains of $3.7 million compared to $4.4 million in the preceding quarter.  The decrease was due to a decline in spreads on one- to four-family loan originations and sales during the quarter.  Home purchase activity accounted for 77% of third quarter one- to four-family mortgage loan originations.  Sales of multifamily loans in the current quarter resulted in gains of $268,000, while sales of multifamily loans generated $1.8 million of gains in the preceding quarter.  The decline in multifamily gain on sale income was due to a combination of declining market spreads on sold loans in the current quarter and the transition to hedge accounting in previous quarter.

Third quarter 2017 results included a $493,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value that was partially offset by a $270,000 net gain on the sale of securities.  In the preceding quarter, results included a $650,000 net loss for fair value adjustments and a $54,000 net loss on the sale of securities.  In the third quarter a year ago, results included a $1.1 million net loss for fair value adjustments that was partially offset by an $891,000 net gain on the sale of securities.

Total revenues decreased slightly to $120.5 million for the third quarter of 2017, compared to $122.2 million in the preceding quarter but increased 3% compared to $117.2 million in the third quarter a year ago.  In the first nine months of 2017, total revenues increased 5% to $358.4 million, compared to $341.9 million in the first nine months of 2016.  Revenues from core operations* (revenues excluding gains and losses on the sale of securities and net change in valuation of financial instruments) decreased to $120.8 million in the third quarter of 2017, compared to $122.9 million in the preceding quarter, but increased 3% compared to $117.5 million in the third quarter of 2016.  In the first nine months of 2017, revenues from core operations* increased 5% to $360.0 million, compared to $342.8 million in the first nine months of 2016.

Total non-interest income, which includes the changes in the valuation of financial instruments carried at fair value and gains and losses on the sale of securities, was $20.3 million in the third quarter of 2017, compared to $22.5 million in the second quarter of 2017 and $23.5 million in the third quarter a year ago.  In the first nine months of 2017, total non-interest income was $63.7 million compared to $64.0 million in the first nine months of 2016.  Non-interest income from core operations,* which excludes gains and losses on sale of securities and net changes in the valuation of financial instruments, was $20.6 million in the third quarter of 2017, compared to $23.2 million for the second quarter of 2017 and $23.7 million in the third quarter a year ago.  In the first nine months of 2017, non-interest income from core operations* was $65.3 million, compared to $64.9 million in the first nine months of 2016.

Banner’s total non-interest expenses were $82.6 million in the third quarter of 2017, compared to $81.9 million in the preceding quarter and $79.1 million in the third quarter of 2016.  The current and preceding quarter's non-interest expenses included increased salary and employee benefits and elevated costs for professional services as compared to the third quarter a year ago largely due to enhanced regulatory requirements attributable to compliance and risk management infrastructure build-out as a result of crossing the $10 billion asset threshold.  There were no acquisition-related expenses in the current quarter or in the preceding quarter, compared to $1.7 million in the third quarter a year ago.  In the first nine months of 2017, non-interest expense was $242.6 million compared to $243.0 million in the first nine months of 2016.  The first nine months of 2016 included $10.9 million of acquisition-related expenses.  There were no acquisition-related expenses in the first nine months of 2017.

For the third quarter of 2017, Banner recorded $10.9 million in state and federal income tax expense for an effective tax rate of 30.3%, which reflects normal statutory tax rates reduced by the effect of tax-exempt income, certain tax credits and  a $1.3 million annual return to provision adjustment related to filing our federal and state income tax returns.

Balance Sheet Review

Banner’s total assets increased to $10.44 billion at September 30, 2017, from $10.20 billion at June 30, 2017 and $9.84 billion a year ago.  The total of securities and interest-bearing deposits held at other banks was $1.68 billion at September 30, 2017, compared to $1.66 billion at June 30, 2017 and $1.16 billion at December 31, 2016.  The increase in the securities portfolio during the year reflects Banner's leveraging strategy as it crossed the $10 billion in assets threshold in 2017.  In the third and fourth quarters of 2016, Banner reduced its holdings of securities and use of wholesale funding to ensure that it remained below $10 billion in total assets at December 31, 2016.  The average effective duration of Banner's securities portfolio was approximately 3.6 years at September 30, 2017, compared to 3.8 years at December 31, 2016 and 2.9 years at September 30, 2016.

“Net loans increased $222.4 million during the quarter and increased 5% year over year, with solid production in targeted loan types, including commercial business, commercial real estate, construction and development loans, residential real estate and consumer loans,” said Grescovich.  “We see significant potential for growth in our loan origination pipelines due to the robust economic activity in the markets that we serve, particularly in the Pacific Northwest.”

Net loans receivable increased 3% to $7.69 billion at September 30, 2017, compared to $7.46 billion at June 30, 2017, and increased 5% compared to $7.31 billion a year ago.  Commercial real estate and multifamily real estate loans increased slightly to $3.67 billion at September 30, 2017, compared to $3.62 billion at June 30, 2017, and increased 4% compared to $3.53 billion a year ago.  Commercial business loans increased 2% to $1.31 billion at September 30, 2017, compared to $1.29 billion three months earlier and increased 10% compared to $1.19 billion a year ago.  Agricultural business loans declined to $339.9 million at September 30, 2017, compared to $344.4 million three months earlier and $383.3 million a year ago.  Total construction, land and land development loans increased 8% to $878.4 million at September 30, 2017, compared to $811.5 million at June 30, 2017, and increased 10% compared to $797.3 million a year earlier.  Consumer loans increased to $701.2 million at September 30, 2017, compared to $687.8 million at June 30, 2017, and increased 7% compared to $657.2 million a year ago largely as a result of a successful second quarter campaign to generate additional home equity lines of credit.  One- to four-family loans increased $69.5 million during the quarter to $869.6 million as a result of an increase in the amount of loans originated for the portfolio compared to loans sold in the secondary market.

Loans held for sale increased to $71.9 million at September 30, 2017, compared to $66.2 million at June 30, 2017, but decreased compared to $123.1 million at September 30, 2016.  The volume of residential mortgage loans sold was $141.0 million in the current quarter compared to $131.0 million in the preceding quarter.  Banner sold $86.0 million of multifamily loans during the quarter ended September 30, 2017 and $114.8 million during the preceding quarter.  Loans held for sale at September 30, 2017 included $47.0 million of multifamily loans and $24.9 million of one- to four-family loans.

Total deposits were $8.54 billion at September 30, 2017, a modest increase compared to $8.48 billion at June 30, 2017, and a 5% increase compared to $8.11 billion a year ago, as strong core deposit growth was partially offset by continuing declines in certificates of deposit.  Non-interest-bearing account balances were $3.38 billion at September 30, 2017, compared to $3.25 billion at June 30, 2017 and increased 6% compared to $3.19 billion a year ago.  Interest-bearing transaction and savings accounts were $4.06 billion at September 30, 2017, compared to $4.02 billion at June 30, 2017 and increased 7% compared to $3.80 billion a year ago.  Certificates of deposit were $1.10 billion at September 30, 2017, compared to $1.21 billion at June 30, 2017 and $1.12 billion a year earlier.  Brokered deposits totaled $171.7 million at September 30, 2017, compared to $250.0 million at June 30, 2017 and $60.3 million a year ago.  The increase in brokered deposits compared to a year ago provided funding for the purchase of investment securities in connection with Banner's leveraging strategy subsequent to December 31, 2016.

Core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased 2% during the current quarter and increased 6% compared to September 30, 2016, reflecting additional account growth as well as increased balances from existing clients.  Core deposits represented 87% of total deposits September 30, 2017 compared to 86% of total deposits both at June 30, 2017 and a year earlier.  The average cost of deposits was 0.15% for the quarter ended September 30, 2017, the same as in the preceding quarter and a one basis point increase compared to the quarter ended September 30, 2016.

At September 30, 2017, total common shareholders' equity was $1.33 billion, or $39.90 per share, compared to $1.31 billion at June 30, 2017 and $1.33 billion a year ago.  At September 30, 2017, tangible common shareholders' equity*, which excludes goodwill and other intangible assets, was $1.06 billion, or 10.39% of tangible assets*, compared to $1.04 billion, or 10.46% of tangible assets, at June 30, 2017 and $1.05 billion, or 11.03% of tangible assets, a year ago.  Banner's tangible book value per share* increased to $31.79 at September 30, 2017, compared to $31.14 per share a year ago.

Banner Corporation and its subsidiary banks continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards.  At September 30, 2017, Banner Corporation's common equity Tier 1 capital ratio was 11.16%, its Tier 1 leverage capital to average assets ratio was 11.49%, and its total capital to risk-weighted assets ratio was13.52%.

Credit Quality

The allowance for loan losses was $89.1 million at September 30, 2017, or 1.15% of total loans outstanding and 296% of non-performing loans compared to $84.2 million at September 30, 2016, or 1.14% of total loans outstanding and 309% of non-performing loans.  Banner had net charge-offs of $1.5 million in the third quarter compared to net recoveries of $59,000 in the preceding quarter and net recoveries of $902,000 in the third quarter a year ago.  Primarily as a result of the addition of new loans and the renewal of acquired loans out of the discounted loan portfolio, as well as the net charge offs, Banner recorded a $2.0 million provision for loan losses in the current quarter which was the same amount as recorded in the prior quarter and in the year ago quarter.  Non-performing loans were $30.1 million at September 30, 2017, compared to $21.9 million at June 30, 2017 and $27.3 million a year ago.  Real estate owned and other repossessed assets were $1.6 million at September 30, 2017, compared to $2.6 million at June 30, 2017 and $4.9 million a year ago.

In accordance with acquisition accounting, loans acquired from AmericanWest Bank and Siuslaw Bank in 2015 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses.  Credit discounts are included in the determination of fair value, and as a result, no allowance for loan and lease losses is recorded for acquired loans at the acquisition date.  Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios, we believe it should be considered when comparing the current ratios to similar ratios in periods prior to the acquisitions of AmericanWest Bank and Siuslaw Bank.

Banner's non-performing assets were $31.7 million, or 0.30% of total assets, at September 30, 2017, compared to $24.5 million, or 0.24% of total assets, at June 30, 2017 and $32.2 million, or 0.33% of total assets, a year ago.  In addition to non-performing assets, purchased credit-impaired loans decreased to $23.2 million at September 30, 2017, compared to $26.3 million at June 30, 2017 and $38.7 million a year ago.

Subsequent Event

On October 6, 2017, Banner Bank completed the sale of its seven branches and related assets and liabilities in Utah to People’s Intermountain Bank, a banking subsidiary of People’s Utah Bancorp (NASDAQ:PUB).  Under the terms of the purchase and assumption agreement, the sale included approximately $255 million in loans and $160 million in deposits.  The deposit premium is estimated to be approximately $13.8 million based on average deposits at closing.

Conference Call

Banner will host a conference call on Thursday, October 26, 2017, at 8:00 a.m. PDT, to discuss its third quarter results.  To listen to the call on-line, go to www.bannerbank.com.  Investment professionals are invited to dial (866) 235-9915 to participate in the call.  A replay will be available for one week at (877) 344-7529 using access code 10112453, or at www.bannerbank.com.

About the Company

Banner Corporation is a $10.4 billion bank holding company operating two commercial banks in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner's operating and stock price performance.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets or impose restrictions or penalties with respect to Banner's activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner's business, changes in market conditions, or other factors and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF OPERATIONS		Quarters Ended												Nine months ended
(in thousands except shares and per share data)		Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
INTEREST INCOME:
Loans receivable		$	95,221			$	94,795			$	89,805			$	281,304			$	265,697
Mortgage-backed securities		6,644				6,239				4,803				17,529				15,467
Securities and cash equivalents		3,413				3,402				3,241				9,976				9,306
		105,278				104,436				97,849				308,809				290,470
INTEREST EXPENSE:
Deposits		3,189				3,182				2,784				9,162				8,501
Federal Home Loan Bank advances		569				301				256				1,142				874
Other borrowings		84				83				82				241				234
Junior subordinated debentures		1,226				1,164				1,019				3,494				2,962
		5,068				4,730				4,141				14,039				12,571
Net interest income before provision for loan losses		100,210				99,706				93,708				294,770				277,899
PROVISION FOR LOAN LOSSES		2,000				2,000				2,000				6,000				4,000
Net interest income		98,210				97,706				91,708				288,770				273,899
NON-INTEREST INCOME:
Deposit fees and other service charges		13,316				13,238				12,927				38,739				36,957
Mortgage banking operations		4,498				6,754				8,141				15,854				20,409
Bank owned life insurance		1,043				1,461				1,333				3,599				3,646
Miscellaneous		1,705				1,720				1,344				7,062				3,936
		20,562				23,173				23,745				65,254				64,948
Net gain (loss) on sale of securities		270				(54		)		891				230				531
Net change in valuation of financial instruments carried at fair value		(493		)		(650		)		(1,124		)		(1,831		)		(1,472		)
Total non-interest income		20,339				22,469				23,512				63,653				64,007
NON-INTEREST EXPENSE:
Salary and employee benefits		48,931				49,019				44,758				144,014				136,497
Less capitalized loan origination costs		(4,331		)		(4,598		)		(4,953		)		(13,245		)		(14,110		)
Occupancy and equipment		11,737				12,045				10,979				35,778				32,419
Information / computer data services		4,420				4,100				4,836				12,513				14,607
Payment and card processing services		5,839				5,792				5,878				16,651				16,164
Professional services		3,349				3,732				2,258				12,233				5,736
Advertising and marketing		2,130				1,766				2,282				5,225				6,489
Deposit insurance		1,101				1,071				890				3,438				3,539
State/municipal business and use taxes		780				279				956				1,857				2,564
Real estate operations		240				(363		)		(21		)		(1,089		)		513
Amortization of core deposit intangibles		1,542				1,624				1,724				4,790				5,339
Miscellaneous		6,851				7,463				7,785				20,432				22,311
		82,589				81,930				77,372				242,597				232,068
Acquisition related expenses		—				—				1,720				—				10,945
Total non-interest expense		82,589				81,930				79,092				242,597				243,013
Income before provision for income taxes		35,960				38,245				36,128				109,826				94,893
PROVISION FOR INCOME TAXES		10,883				12,791				12,277				35,502				32,312
NET INCOME		$	25,077			$	25,454			$	23,851			$	74,324			$	62,581
Earnings per share available to common shareholders:
Basic		$	0.76			$	0.77			$	0.70			$	2.25			$	1.84
Diluted		$	0.76			$	0.77			$	0.70			$	2.25			$	1.83
Cumulative dividends declared per common share		$	0.25			$	1.25			$	0.23			$	1.75			$	0.65
Weighted average common shares outstanding:
Basic		32,982,532				32,982,126				34,045,225				32,966,214				34,050,459
Diluted		33,079,099				33,051,527				34,124,611				33,061,172				34,104,875
(Decrease) increase in common shares outstanding		(23,247		)		125,167				(483,249		)		61,397				(374,944		)

FINANCIAL CONDITION																		Percentage Change
(in thousands except shares and per share data)		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016				Prior Qtr			Prior Yr Qtr
ASSETS
Cash and due from banks		$	192,278			$	196,178			$	177,083			$	161,710			(2.0	)%		18.9	%
Interest-bearing deposits		49,488				77,370				70,636				84,207				(36.0	)%		(41.2	)%
Total cash and cash equivalents		241,766				273,548				247,719				245,917				(11.6	)%		(1.7	)%
Securities - trading		23,466				24,950				24,568				30,889				(5.9	)%		(24.0	)%
Securities - available for sale		1,339,057				1,290,159				800,917				1,006,414				3.8	%		33.1	%
Securities - held to maturity		264,752				268,050				267,873				271,975				(1.2	)%		(2.7	)%
Federal Home Loan Bank stock		20,854				12,334				12,506				12,826				69.1	%		62.6	%
Loans held for sale		71,905				66,164				246,353				123,144				8.7	%		(41.6	)%
Loans receivable		7,774,449				7,551,563				7,451,148				7,398,637				3.0	%		5.1	%
Allowance for loan losses		(89,100		)		(88,586		)		(85,997		)		(84,220		)		0.6	%		5.8	%
Net loans		7,685,349				7,462,977				7,365,151				7,314,417				3.0	%		5.1	%
Accrued interest receivable		33,837				30,722				30,178				30,345				10.1	%		11.5	%
Real estate owned held for sale, net		1,496				2,427				11,081				4,717				(38.4	)%		(68.3	)%
Property and equipment, net		159,893				161,095				166,481				167,621				(0.7	)%		(4.6	)%
Goodwill		244,583				244,583				244,583				244,583				—	%		—	%
Other intangibles, net		25,219				26,813				30,162				31,934				(5.9	)%		(21.0	)%
Bank-owned life insurance		161,648				160,609				158,936				158,831				0.6	%		1.8	%
Other assets		169,261				175,389				187,160				197,415				(3.5	)%		(14.3	)%
Total assets		$	10,443,086			$	10,199,820			$	9,793,668			$	9,841,028			2.4	%		6.1	%
LIABILITIES
Deposits:
Non-interest-bearing		$	3,379,841			$	3,254,581			$	3,140,451			$	3,190,293			3.8	%		5.9	%
Interest-bearing transaction and savings accounts		4,058,435				4,022,909				3,935,630				3,798,668				0.9	%		6.8	%
Interest-bearing certificates		1,100,574				1,206,241				1,045,333				1,123,011				(8.8	)%		(2.0	)%
Total deposits		8,538,850				8,483,731				8,121,414				8,111,972				0.6	%		5.3	%
Advances from Federal Home Loan Bank at fair value		263,349				50,212				54,216				62,342				424.5	%		322.4	%
Customer repurchase agreements and other borrowings		103,713				116,455				105,685				108,911				(10.9	)%		(4.8	)%
Junior subordinated debentures at fair value		97,280				96,852				95,200				94,364				0.4	%		3.1	%
Accrued expenses and other liabilities		72,604				102,511				71,369				92,783				(29.2	)%		(21.7	)%
Deferred compensation		40,279				40,208				40,074				39,385				0.2	%		2.3	%
Total liabilities		9,116,075				8,889,969				8,487,958				8,509,757				2.5	%		7.1	%
SHAREHOLDERS' EQUITY
Common stock		1,215,482				1,215,316				1,213,837				1,243,205				—	%		(2.2	)%
Retained earnings		111,405				94,541				95,328				80,053				17.8	%		39.2	%
Other components of shareholders' equity		124				(6		)		(3,455		)		8,013				nm			(98.5	)%
Total shareholders' equity		1,327,011				1,309,851				1,305,710				1,331,271				1.3	%		(0.3	)%
Total liabilities and shareholders' equity		$	10,443,086			$	10,199,820			$	9,793,668			$	9,841,028			2.4	%		6.1	%
Common Shares Issued:
Shares outstanding at end of period		33,254,784				33,278,031				33,193,387				33,867,311
Common shareholders' equity per share (1)		$	39.90			$	39.36			$	39.34			$	39.31
Common shareholders' tangible equity per share (1) (2)		$	31.79			$	31.21			$	31.06			$	31.14
Common shareholders' tangible equity to tangible assets (2)		10.39		%		10.46		%		10.83		%		11.03		%
Consolidated Tier 1 leverage capital ratio		11.49		%		11.51		%		11.83		%		11.40		%

(1	)	Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2	)	Common shareholders' tangible equity excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. These ratios represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
																		Percentage Change
LOANS		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016				Prior Qtr			Prior Yr Qtr
Commercial real estate:
Owner occupied		$	1,369,130			$	1,358,094			$	1,352,999			$	1,340,577			0.8	%		2.1	%
Investment properties		1,993,144				1,975,075				1,986,336				1,918,639				0.9	%		3.9	%
Multifamily real estate		311,706				288,442				248,150				266,883				8.1	%		16.8	%
Commercial construction		157,041				144,092				124,068				135,487				9.0	%		15.9	%
Multifamily construction		136,532				111,562				124,126				105,669				22.4	%		29.2	%
One- to four-family construction		399,361				380,782				375,704				363,586				4.9	%		9.8	%
Land and land development:
Residential		158,384				147,149				170,004				162,029				7.6	%		(2.2	)%
Commercial		27,095				27,917				29,184				30,556				(2.9	)%		(11.3	)%
Commercial business		1,311,409				1,286,204				1,207,879				1,187,848				2.0	%		10.4	%
Agricultural business including secured by farmland		339,932				344,412				369,156				383,275				(1.3	)%		(11.3	)%
One- to four-family real estate		869,556				800,008				813,077				846,899				8.7	%		2.7	%
Consumer:
Consumer secured by one- to four-family real estate		535,300				527,623				493,211				497,643				1.5	%		7.6	%
Consumer-other		165,859				160,203				157,254				159,546				3.5	%		4.0	%
Total loans receivable		$	7,774,449			$	7,551,563			$	7,451,148			$	7,398,637			3.0	%		5.1	%
Restructured loans performing under their restructured terms		$	12,744			$	13,531			$	18,907			$	17,649
Loans 30 - 89 days past due and on accrual (1)		$	9,619			$	15,564			$	11,571			$	12,668
Total delinquent loans (including loans on non-accrual), net (2)		$	34,792			$	32,961			$	30,553			$	39,543
Total delinquent loans / Total loans outstanding		0.45		%		0.44		%		0.41		%		0.53		%

⁽¹⁾ Includes $1.0 million of purchased credit-impaired loans at September 30, 2017 compared to $835,000 at June 30, 2017, $470,000 at December 31, 2016 and $486,000 at September 30, 2016.
⁽²⁾ Delinquent loans include $2.9 million of delinquent purchased credit-impaired loans September 30, 2017 compared to $2.5 million at June 30, 2017, $1.7 million at December 31, 2016 and $3.6 million at September 30, 2016.

LOANS BY GEOGRAPHIC LOCATION		Sep 30, 2017							Jun 30, 2017							Dec 31, 2016							Sep 30, 2016
		Amount				Percentage			Amount				Percentage			Amount				Percentage			Amount				Percentage
Washington		$	3,515,881			45.2	%		$	3,425,627			45.3	%		$	3,433,617			46.1	%		$	3,415,413			46.2	%
Oregon		1,561,723				20.1	%		1,532,460				20.3	%		1,505,369				20.2	%		1,466,845				19.8	%
California		1,381,572				17.8	%		1,304,194				17.3	%		1,239,989				16.6	%		1,204,273				16.3	%
Idaho		495,041				6.4	%		487,378				6.5	%		495,992				6.7	%		517,607				7.0	%
Utah		304,740				3.9	%		294,467				3.9	%		283,890				3.8	%		292,088				3.9	%
Other		515,492				6.6	%		507,437				6.7	%		492,291				6.6	%		502,411				6.8	%
Total loans		$	7,774,449			100.0	%		$	7,551,563			100.0	%		$	7,451,148			100.0	%		$	7,398,637			100.0	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended												Nine months ended
CHANGE IN THE		Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period		$	88,586			$	86,527			$	81,318			$	85,997			$	78,008
Provision for loan losses		2,000				2,000				2,000				6,000				4,000
Recoveries of loans previously charged off:
Commercial real estate		19				264				34				353				98
Multifamily real estate		—				11				—				11				—
Construction and land		73				1,024				673				1,180				1,268
One- to four-family real estate		8				109				482				262				1,052
Commercial business		577				171				433				921				1,775
Agricultural business, including secured by farmland		1				19				(138		)		133				39
Consumer		98				101				73				293				529
		776				1,699				1,557				3,153				4,761
Loans charged off:
Commercial real estate		(584		)		(47		)		—				(631		)		(180		)
One- to four-family real estate		—				—				(92		)		—				(126		)
Commercial business		(491		)		(1,169		)		(333		)		(3,286		)		(643		)
Agricultural business, including secured by farmland		(1,001		)		(104		)		—				(1,264		)		(567		)
Consumer		(186		)		(320		)		(230		)		(869		)		(1,033		)
		(2,262		)		(1,640		)		(655		)		(6,050		)		(2,549		)
Net (charge-offs) recoveries		(1,486		)		59				902				(2,897		)		2,212
Balance, end of period		$	89,100			$	88,586			$	84,220			$	89,100			$	84,220
Net recoveries (charge-offs) / Average loans outstanding		(0.019		)%		0.001		%		0.012		%		(0.038		)%		0.030		%

ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016
Specific or allocated loss allowance:
Commercial real estate		$	23,431			$	24,232			$	20,993			$	19,846
Multifamily real estate		1,625				1,562				1,360				1,436
Construction and land		29,422				27,312				34,252				33,803
One- to four-family real estate		2,040				2,010				2,238				2,190
Commercial business		18,657				19,126				16,533				16,507
Agricultural business, including secured by farmland		3,949				3,808				2,967				2,833
Consumer		4,016				3,987				4,104				3,934
Total allocated		83,140				82,037				82,447				80,549
Unallocated		5,960				6,549				3,550				3,671
Total allowance for loan losses		$	89,100			$	88,586			$	85,997			$	84,220
Allowance for loan losses / Total loans outstanding		1.15		%		1.17		%		1.15		%		1.14		%
Allowance for loan losses / Non-performing loans		296		%		405		%		381		%		309		%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	11,632			$	6,267			$	8,237			$	12,776
Multifamily	—				—				—				30
Construction and land	1,726				1,726				1,748				1,747
One- to four-family	2,878				2,955				2,263				3,414
Commercial business	7,144				7,037				3,074				2,765
Agricultural business, including secured by farmland	4,285				1,456				3,229				3,755
Consumer	1,462				1,494				1,875				1,385
	29,127				20,935				20,426				25,872
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	53				—				701				—
Multifamily	—				—				147				147
One- to four-family	722				754				1,233				852
Commercial business	51				77				—				—
Consumer	101				108				72				425
	927				939				2,153				1,424
Total non-performing loans	30,054				21,874				22,579				27,296
Real estate owned (REO)	1,496				2,427				11,081				4,717
Other repossessed assets	145				181				166				164
Total non-performing assets	$	31,695			$	24,482			$	33,826			$	32,177
Total non-performing assets to total assets	0.30		%		0.24		%		0.35		%		0.33		%
Purchased credit-impaired loans, net	$	23,221			$	26,267			$	32,322			$	38,674

	Quarters Ended												Nine months ended
REAL ESTATE OWNED	Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
Balance, beginning of period	$	2,427			$	3,040			$	6,147			$	11,081			$	11,627
Additions from loan foreclosures	—				46				156				46				534
Additions from acquisitions	—				—				—				—				400
Additions from capitalized costs	—				54				—				54				—
Proceeds from dispositions of REO	(961		)		(1,228		)		(1,699		)		(11,382		)		(8,021		)
Gain on sale of REO	30				721				281				1,953				981
Valuation adjustments in the period	—				(206		)		(168		)		(256		)		(804		)
Balance, end of period	$	1,496			$	2,427			$	4,717			$	1,496			$	4,717

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION																		Percentage Change
		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016				Prior Qtr			Prior Yr
Non-interest-bearing		$	3,379,841			$	3,254,581			$	3,140,451			$	3,190,293			3.8	%		5.9	%
Interest-bearing checking		955,486				953,227				914,484				853,594				0.2	%		11.9	%
Regular savings accounts		1,577,292				1,530,517				1,523,391				1,387,123				3.1	%		13.7	%
Money market accounts		1,525,657				1,539,165				1,497,755				1,557,951				(0.9	)%		(2.1	)%
Total interest-bearing transaction and savings accounts		4,058,435				4,022,909				3,935,630				3,798,668				0.9	%		6.8	%
Interest-bearing certificates		1,100,574				1,206,241				1,045,333				1,123,011				(8.8	)%		(2.0	)%
Total deposits		$	8,538,850			$	8,483,731			$	8,121,414			$	8,111,972			0.6	%		5.3	%

GEOGRAPHIC CONCENTRATION OF DEPOSITS		Sep 30, 2017							Jun 30, 2017							Dec 31, 2016							Sep 30, 2016
		Amount				Percentage			Amount				Percentage			Amount				Percentage			Amount				Percentage
Washington		$	4,654,406			54.6	%		$	4,615,284			54.5	%		$	4,347,644			53.6	%		$	4,283,522			52.8	%
Oregon		1,811,459				21.2	%		1,806,639				21.3	%		1,708,973				21.0	%		1,737,754				21.4	%
California		1,442,727				16.9	%		1,445,621				17.0	%		1,469,748				18.1	%		1,491,903				18.4	%
Idaho		465,104				5.4	%		416,933				4.9	%		447,019				5.5	%		435,090				5.4	%
Utah		165,154				1.9	%		199,254				2.3	%		148,030				1.8	%		163,703				2.0	%
Total deposits		$	8,538,850			100.0	%		$	8,483,731			100.0	%		$	8,121,414			100.0	%		$	8,111,972			100.0	%

INCLUDED IN TOTAL DEPOSITS		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016
Public non-interest-bearing accounts		$	86,262			$	85,760			$	92,789			$	86,207
Public interest-bearing transaction & savings accounts		108,257				124,075				128,976				115,458
Public interest-bearing certificates		26,543				30,496				25,650				26,734
Total public deposits		$	221,062			$	240,331			$	247,415			$	228,399
Total brokered deposits		$	171,718			$	250,001			$	34,074			$	60,290

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Actual							Minimum to be categorized as "Adequately Capitalized"							Minimum to be categorized as "Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2017		Amount				Ratio			Amount				Ratio			Amount				Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,239,520			13.52	%		$	733,633			8.00	%		$	917,041			10.00	%
Tier 1 capital to risk-weighted assets		1,147,971				12.52	%		550,224				6.00	%		550,224				6.00	%
Tier 1 leverage capital to average assets		1,147,971				11.49	%		399,595				4.00	%		n/a				n/a
Common equity tier 1 capital to risk-weighted assets		1,023,702				11.16	%		412,668				4.50	%		n/a				n/a
Banner Bank:
Total capital to risk-weighted assets		1,089,048				12.14	%		717,580				8.00	%		896,974				10.00	%
Tier 1 capital to risk-weighted assets		999,815				11.15	%		538,185				6.00	%		717,580				8.00	%
Tier 1 leverage capital to average assets		999,815				10.30	%		388,308				4.00	%		485,385				5.00	%
Common equity tier 1 capital to risk-weighted assets		999,815				11.15	%		403,639				4.50	%		583,033				6.50	%
Islanders Bank:
Total capital to risk-weighted assets		31,690				16.35	%		15,507				8.00	%		19,384				10.00	%
Tier 1 capital to risk-weighted assets		29,375				15.15	%		11,630				6.00	%		15,507				8.00	%
Tier 1 leverage capital to average assets		29,375				10.66	%		11,018				4.00	%		13,773				5.00	%
Common equity tier 1 capital to risk-weighted assets		29,375				15.15	%		8,723				4.50	%		12,600				6.50	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	September 30, 2017									June 30, 2017									September 30, 2016
	Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)			Average Balance			Interest and Dividends			Yield / Cost(3)
Interest-earning assets:
Mortgage loans	$	6,086,554		$	75,020		4.89	%		$	5,987,295		$	74,459		4.99	%		$	5,843,381		$	70,223		4.78	%
Commercial/agricultural loans	1,520,946			17,992			4.69	%		1,503,548			18,179			4.85	%		1,495,611			17,373			4.62	%
Consumer and other loans	140,758			2,209			6.23	%		138,724			2,157			6.24	%		142,977			2,209			6.15	%
Total loans(1)	7,748,258			95,221			4.88	%		7,629,567			94,795			4.98	%		7,481,969			89,805			4.78	%
Mortgage-backed securities	1,129,256			6,644			2.33	%		1,067,255			6,239			2.34	%		920,560			4,803			2.08	%
Other securities	473,808			3,192			2.67	%		471,894			3,192			2.71	%		472,159			3,050			2.57	%
Interest-bearing deposits with banks	51,607			159			1.22	%		54,051			139			1.03	%		86,868			98			0.45	%
FHLB stock	16,961			62			1.45	%		14,472			71			1.97	%		16,413			93			2.25	%
Total investment securities	1,671,632			10,057			2.39	%		1,607,672			9,641			2.41	%		1,496,000			8,044			2.14	%
Total interest-earning assets	9,419,890			105,278			4.43	%		9,237,239			104,436			4.53	%		8,977,969			97,849			4.34	%
Non-interest-earning assets	888,388									896,136									913,991
Total assets	$	10,308,278								$	10,133,375								$	9,891,960
Deposits:
Interest-bearing checking accounts	$	946,585		218			0.09	%		$	927,375		210			0.09	%		$	837,930		188			0.09	%
Savings accounts	1,557,475			538			0.14	%		1,553,019			527			0.14	%		1,371,911			449			0.13	%
Money market accounts	1,534,867			653			0.17	%		1,534,551			689			0.18	%		1,564,906			749			0.19	%
Certificates of deposit	1,151,725			1,780			0.61	%		1,200,435			1,756			0.59	%		1,173,630			1,398			0.47	%
Total interest-bearing deposits	5,190,652			3,189			0.24	%		5,215,380			3,182			0.24	%		4,948,377			2,784			0.22	%
Non-interest-bearing deposits	3,300,185			—			—	%		3,158,727			—			—	%		3,120,279			—			—	%
Total deposits	8,490,837			3,189			0.15	%		8,374,107			3,182			0.15	%		8,068,656			2,784			0.14	%
Other interest-bearing liabilities:
FHLB advances	165,586			569			1.36	%		103,848			301			1.16	%		152,198			256			0.67	%
Other borrowings	116,297			84			0.29	%		116,513			83			0.29	%		111,016			82			0.29	%
Junior subordinated debentures	140,212			1,226			3.47	%		140,212			1,164			3.33	%		140,212			1,019			2.89	%
Total borrowings	422,095			1,879			1.77	%		360,573			1,548			1.72	%		403,426			1,357			1.34	%
Total funding liabilities	8,912,932			5,068			0.23	%		8,734,680			4,730			0.22	%		8,472,082			4,141			0.19	%
Other non-interest-bearing liabilities(2)	67,918									56,175									68,566
Total liabilities	8,980,850									8,790,855									8,540,648
Shareholders' equity	1,327,428									1,342,520									1,351,312
Total liabilities and shareholders' equity	$	10,308,278								$	10,133,375								$	9,891,960
Net interest income/rate spread				$	100,210		4.20	%					$	99,706		4.31	%					$	93,708		4.15	%
Net interest margin							4.22	%								4.33	%								4.15	%
Additional Key Financial Ratios:
Return on average assets							0.97	%								1.01	%								0.96	%
Return on average equity							7.49	%								7.60	%								7.02	%
Average equity/average assets							12.88	%								13.25	%								13.66	%
Average interest-earning assets/average interest-bearing liabilities							167.83	%								165.66	%								167.76	%
Average interest-earning assets/average funding liabilities							105.69	%								105.75	%								105.97	%
Non-interest income/average assets							0.78	%								0.89	%								0.95	%
Non-interest expense/average assets							3.18	%								3.24	%								3.18	%
Efficiency ratio(4)							68.51	%								67.06	%								67.47	%
Adjusted efficiency ratio(5)							66.26	%								65.42	%								63.61	%

(1	)	Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2	)	Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3	)	Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4	)	Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5	)	Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of core deposit intangibles (CDI), real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Nine months ended
	September 30, 2017									September 30, 2016
	Average Balance			Interest and Dividends			Yield/Cost(3)			Average Balance			Interest and Dividends			Yield/Cost(3)
Interest-earning assets:
Mortgage loans	$	6,059,476		$	222,028		4.90	%		$	5,755,988		$	207,881		4.82	%
Commercial/agricultural loans	1,496,549			52,717			4.71	%		1,490,757			51,213			4.59	%
Consumer and other loans	139,181			6,559			6.30	%		141,570			6,603			6.23	%
Total loans(1)	7,695,206			281,304			4.89	%		7,388,315			265,697			4.80	%
Mortgage-backed securities	1,013,913			17,529			2.31	%		976,267			15,467			2.12	%
Other securities	466,572			9,420			2.70	%		450,142			8,752			2.60	%
Interest-bearing deposits with banks	46,022			392			1.14	%		95,406			300			0.42	%
FHLB stock	15,666			164			1.40	%		17,614			254			1.93	%
Total investment securities	1,542,173			27,505			2.38	%		1,539,429			24,773			2.15	%
Total interest-earning assets	9,237,379			308,809			4.47	%		8,927,744			290,470			4.35	%
Non-interest-earning assets	902,435									903,957
Total assets	$	10,139,814								$	9,831,701
Deposits:
Interest-bearing checking accounts	$	923,757		627			0.09	%		$	853,818		570			0.09	%
Savings accounts	1,556,075			1,588			0.14	%		1,336,259			1,303			0.13	%
Money market accounts	1,530,675			1,994			0.17	%		1,587,500			2,421			0.20	%
Certificates of deposit	1,147,387			4,953			0.58	%		1,248,781			4,207			0.45	%
Total interest-bearing deposits	5,157,894			9,162			0.24	%		5,026,358			8,501			0.23	%
Non-interest-bearing deposits	3,203,033			—			—	%		2,980,027			—			—	%
Total deposits	8,360,927			9,162			0.15	%		8,006,385			8,501			0.14	%
Other interest-bearing liabilities:
FHLB advances	133,365			1,142			1.14	%		178,468			874			0.65	%
Other borrowings	113,664			241			0.28	%		108,632			234			0.29	%
Junior subordinated debentures	140,212			3,494			3.33	%		140,212			2,962			2.82	%
Total borrowings	387,241			4,877			1.68	%		427,312			4,070			1.27	%
Total funding liabilities	8,748,168			14,039			0.21	%		8,433,697			12,571			0.20	%
Other non-interest-bearing liabilities(2)	60,895									64,825
Total liabilities	8,809,063									8,498,522
Shareholders' equity	1,330,751									1,333,179
Total liabilities and shareholders' equity	$	10,139,814								$	9,831,701
Net interest income/rate spread				$	294,770		4.26	%					$	277,899		4.15	%
Net interest margin							4.27	%								4.16	%
Additional Key Financial Ratios:
Return on average assets							0.98	%								0.85	%
Return on average equity							7.47	%								6.27	%
Average equity/average assets							13.12	%								13.56	%
Average interest-earning assets/average interest-bearing liabilities							166.59	%								163.70	%
Average interest-earning assets/average funding liabilities							105.59	%								105.86	%
Non-interest income/average assets							0.84	%								0.87	%
Non-interest expense/average assets							3.20	%								3.30	%
Efficiency ratio(4)							67.68	%								71.08	%
Adjusted efficiency ratio(5)							65.84	%								65.23	%

(1	)	Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due.  Amortization of net deferred loan fees/costs is included with interest on loans.
(2	)	Average other non-interest-bearing liabilities include fair value adjustments related to FHLB advances and junior subordinated debentures.
(3	)	Yields and costs have not been adjusted for the effect of tax-exempt interest.
(4	)	Non-interest expense divided by the total of net interest income (before provision for loan losses) and non-interest income.
(5	)	Adjusted non-interest expense divided by adjusted revenue.  Adjusted revenue excludes net gain (loss) on sale of securities and fair value adjustments.  Adjusted non-interest expense excludes acquisition related costs, amortization of CDI, real estate operations expense, and state/municipal business and use taxes.  These represent non-GAAP financial measures.  See also Non-GAAP Financial Measures reconciliation tables on the last two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
* Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.
REVENUE FROM CORE OPERATIONS	Quarters Ended												Nine months ended
	Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
Net interest income before provision for loan losses	$	100,210			$	99,706			$	93,708			$	294,770			$	277,899
Total non-interest income	20,339				22,469				23,512				63,653				64,007
Total GAAP revenue	120,549				122,175				117,220				358,423				341,906
Exclude net (gain) loss on sale of securities	(270		)		54				(891		)		(230		)		(531		)
Exclude change in valuation of financial instruments carried at fair value	493				650				1,124				1,831				1,472
Revenue from core operations (non-GAAP)	$	120,772			$	122,879			$	117,453			$	360,024			$	342,847

NON-INTEREST INCOME FROM CORE OPERATIONS		Quarters Ended												Nine months ended
		Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
Total non-interest income (GAAP)		$	20,339			$	22,469			$	23,512			$	63,653			$	64,007
Exclude net (gain) loss on sale of securities		(270		)		54				(891		)		(230		)		(531		)
Exclude change in valuation of financial instruments carried at fair value		493				650				1,124				1,831				1,472
Non-interest income from core operations (non-GAAP)		$	20,562			$	23,173			$	23,745			$	65,254			$	64,948

EARNINGS FROM CORE OPERATIONS		Quarters Ended												Nine months ended
		Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
Net income (GAAP)		$	25,077			$	25,454			$	23,851			$	74,324			$	62,581
Exclude net (gain) loss on sale of securities		(270		)		54				(891		)		(230		)		(531		)
Exclude change in valuation of financial instruments carried at fair value		493				650				1,124				1,831				1,472
Exclude acquisition-related costs		—				—				1,720				—				10,945
Exclude related tax benefit		(80		)		(253		)		(703		)		(576		)		(4,261		)
Total earnings from core operations (non-GAAP)		$	25,220			$	25,905			$	25,101			$	75,349			$	70,206
Diluted earnings per share (GAAP)		$	0.76			$	0.77			$	0.70			$	2.25			$	1.83
Diluted core earnings per share (non-GAAP)		$	0.76			$	0.78			$	0.74			$	2.28			$	2.06

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended												Nine months ended
		Sep 30, 2017				Jun 30, 2017				Sep 30, 2016				Sep 30, 2017				Sep 30, 2016
Non-interest expense (GAAP)		$	82,589			$	81,930			$	79,092			$	242,597			$	243,013
Exclude acquisition-related costs		—				—				(1,720		)		—				(10,945		)
Exclude CDI amortization		(1,542		)		(1,624		)		(1,724		)		(4,790		)		(5,339		)
Exclude state/municipal tax expense		(780		)		(279		)		(956		)		(1,857		)		(2,564		)
Exclude REO (loss) gain		(240		)		363				21				1,089				(513		)
Adjusted non-interest expense (non-GAAP)		$	80,027			$	80,390			$	74,713			$	237,039			$	223,652
Net interest income before provision for loan losses (GAAP)		$	100,210			$	99,706			$	93,708			$	294,770			$	277,899
Non-interest income (GAAP)		20,339				22,469				23,512				63,653				64,007
Total revenue		120,549				122,175				117,220				358,423				341,906
Exclude net (gain) loss on sale of securities		(270		)		54				(891		)		(230		)		(531		)
Exclude net change in valuation of financial instruments carried at fair value		493				650				1,124				1,831				1,472
Adjusted revenue (non-GAAP)		$	120,772			$	122,879			$	117,453			$	360,024			$	342,847
Efficiency ratio (GAAP)		68.51		%		67.06		%		67.47		%		67.68		%		71.08		%
Adjusted efficiency ratio (non-GAAP)		66.26		%		65.42		%		63.61		%		65.84		%		65.23		%

TANGIBLE COMMON SHAREHOLDERS' EQUITY TO TANGIBLE ASSETS		Sep 30, 2017				Jun 30, 2017				Dec 31, 2016				Sep 30, 2016
Shareholders' equity (GAAP)		$	1,327,011			$	1,309,851			$	1,305,710			$	1,331,271
Exclude goodwill and other intangible assets, net		269,802				271,396				274,745				276,517
Tangible common shareholders' equity (non-GAAP)		$	1,057,209			$	1,038,455			$	1,030,965			$	1,054,754
Total assets (GAAP)		$	10,443,086			$	10,199,820			$	9,793,668			$	9,841,028
Exclude goodwill and other intangible assets, net		269,802				271,396				274,745				276,517
Total tangible assets (non-GAAP)		$	10,173,284			$	9,928,424			$	9,518,923			$	9,564,511
Common shareholders' equity to total assets (GAAP)		12.71		%		12.84		%		13.33		%		13.53		%
Tangible common shareholders' equity to tangible assets (non-GAAP)		10.39		%		10.46		%		10.83		%		11.03		%
TANGIBLE COMMON SHAREHOLDERS' EQUITY PER SHARE
Tangible common shareholders' equity		$	1,057,209			$	1,038,455			$	1,030,965			$	1,054,754
Common shares outstanding at end of period		33,254,784				33,278,031				33,193,387				33,867,311
Common shareholders' equity (book value) per share (GAAP)		$	39.90			$	39.36			$	39.34			$	39.31
Tangible common shareholders' equity (tangible book value) per share (non-GAAP)		$	31.79			$	31.21			$	31.06			$	31.14

 

CONTACT: MARK J. GRESCOVICH,
PRESIDENT & CEO
LLOYD W. BAKER, CFO
(509) 527-3636