What changed in this filing

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Item 1. Business

2021-02-23 compared with 2020-02-21 · 361 added, 189 removed, 585 unchanged (48% of the section changed)

Item 1 – Business

Item 1 – Business General

Banner Corporation (the Company) is a bank holding company incorporated in the State of Washington.

We are primarily engaged in the business of planning, directing and coordinating the business activities of our wholly-owned subsidiaries, Banner Bank and Islanders Bank.

On February 5, 2021, Islanders Bank was merged into Banner Bank.

Banner Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington and, as of December 31, 2020, its 152 branch offices located in Washington, Oregon, California and Idaho.

Banner Bank also has 18 loan production offices located in Washington, Oregon, California, Idaho and Utah.

Islanders Bank is also a Washington-chartered commercial bank that conducts business from three branch offices in San Juan County, Washington.

Islanders Bank is also a Washington-chartered commercial bank that, as of December 31, 2020, conducted business from three branch offices in San Juan County, Washington.

Banner Corporation is subject to regulation by the Federal Reserve.

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Banner Bank is also an active participant in the secondary market, engaging in mortgage banking operations largely through the origination and sale of one- to four-family and multifamily residential loans.

Lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one- to four-family residential loans, small business administration (SBA) loans and consumer loans.

We continue to invest significantly in our delivery platform across the franchise with a primary emphasis on strengthening our presence in the higher growth regions of our markets including Puget Sound, greater Portland, Boise, Sacramento and Southern California.

Lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one- to four-family and multifamily residential loans, small business administration (SBA) loans and consumer loans.

We continue to invest in our delivery platform across the franchise with a primary emphasis on strengthening our presence in the higher growth regions of our markets.

In 2019 we acquired AltaPacific, the holding company for AltaPacific Bank, which expanded the Company’s presence by adding density within our existing California geographic footprint.

The acquisition of AltaPacific, which closed on November 1, 2019, included six branches and approximately $425.7 million in assets, $332.4 million in loans and $313.4 million in deposits.

In addition to our expansion efforts, we continue to improve the efficiency of our branch delivery channel with on-going branch consolidations and relocations and investments in streamlining the origination of new loan and deposit accounts.

In addition to bank acquisitions, relocations and consolidations, we also have focused on expanding our product offerings and invested heavily in marketing campaigns designed to significantly increase the brand awareness for Banner Bank.

These investments have been significant elements in our strategy to grow customer relationships and increase our market presence, while allowing us to better serve existing and future customers.

In addition to our expansion efforts, we continue to improve the efficiency of our branch delivery channel with on-going branch consolidations and investments in streamlining the origination of new loan and deposit accounts while simultaneously enhancing in our digital service and account origination capabilities.

During last four months of 2020, Banner Bank completed the consolidation of 21 branches.

As a result, we recorded expenses associated with these branch consolidations of $2.1 million, during the year ended December 31, 2020.

Client adoption of mobile and digital banking accelerated beginning in the second quarter of 2020 and has continued since, while physical branch transaction volume declined.

Banner anticipates this shift in client service delivery channel preference will continue after the COVID-19 pandemic social distancing related restrictions have ended.

In addition to bank acquisitions, relocations and consolidations, prior to 2020 we also focused on expanding our product offerings and invested heavily in marketing campaigns designed to significantly increase the brand awareness for Banner Bank.

During 2020, as a result of the COVID-19 pandemic some of our marketing campaigns were cut back.

These investments have been significant elements in our strategy to grow client relationships and increase our market presence, while allowing us to better serve existing and future clients.

We believe our branch network, broad product line and heightened brand awareness have created a franchise that is well positioned for growth and to successfully execute on our super community bank model.

Our strategy is focused on delivering customers, including middle market and small businesses, business owners, their families and employees, a compelling value proposition by providing the financial sophistication and breadth of products of a regional bank while retaining the appeal, responsiveness, and superior service level of a community bank.

Banner Corporation's successful execution of its strategic initiatives and its super community bank model has delivered sustainable growth and solid profitability.

We have made substantial progress on our goals to achieve and maintain the Company's moderate risk profile as well as to continue our strong earnings growth momentum.

Highlights of this success have included continued strong asset quality, organic client growth, significantly increased non-interest-bearing deposit balances and strong revenue generation.

For the year ended December 31, 2019 , our net income increased to $146.3 million , or $4.18 earnings per diluted share, compared to $136.5 million , or $4.15 earnings per diluted share, for the prior year.

Both the current year and prior year results were positively impacted by growth in interest-earnings assets, partially offset by acquisition-related expenses of $7.5 million in 2019 and $ 5.6 million in 2018.

Our operating results depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, consisting of loans and investment securities, and interest expense on interest-bearing liabilities, composed primarily of customer deposits, Federal Home Loan Bank of Des Moines (FHLB) advances, other borrowings and junior subordinated debentures.

Our strategy is focused on delivering clients, including middle market and small businesses, business owners, their families and employees, a compelling value proposition by providing the financial sophistication and breadth of products of a regional bank while retaining the appeal, responsiveness, and superior service level of a community bank.

Banner Corporation’s successful execution of its super community bank model and strategic initiatives have delivered solid core operating results and profitability over the last several years.

Despite the impact of the COVID-19 pandemic during 2020, Banner’s longer term strategic initiatives continue to focus on originating high quality assets and client acquisition, which resulted in and we believe will continue to result in increased core deposit balances and strong revenue generation while maintaining the Company’s moderate risk profile.

For the year ended December 31, 2020, our net income was $115.9 million, or $3.26 earnings per diluted share, compared to $146.3 million, or $4.18 earnings per diluted share, for the prior year.

Our financial results for the year ended December 31, 2020 reflect the impact of the COVID-19 pandemic which resulted in a substantial reduction in business activity in all the states in which Banner operates.

The current year results include an increase in the provision for credit losses due to the economic impacts of the COVID-19 pandemic as well as a decrease in the yield on earnings-assets as a result of the decline in market interest rates.

Both the current year and prior year results were positively impacted by growth in interest-earnings assets, partially offset by increases in salary and employee benefits expense as well as merger and acquisition-related expenses of $2.1 million in 2020 and $7.5 million in 2019.

Banner is continuing to offer payment and financial relief programs for borrowers impacted by COVID-19.

These programs include initial loan payment deferrals or interest-only payments for up to 90 days, waived late fees, and, on a more limited basis, waived interest and temporarily suspended foreclosure proceedings.

Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or may be eligible for an additional deferral period for up to 90 days.

In addition, Banner Bank has entered into payment forbearance agreements with other clients for periods of up to six months.

At December 31, 2020, Banner Bank had 158 loans totaling $75.4 million still on deferral.

Of the loans still on deferral, 26 loans totaling $33.9 million have received a second deferral.

these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings through December 31, 2020 pursuant to applicable accounting and regulatory guidance.

On December 27, 2020, the CAA was signed into law.

Among other purposes, this Act provides additional coronavirus emergency response and relief, including extending relief offered under the CARES Act related to troubled debt restructuring as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

In addition, the U.S.

Small Business Administration (SBA) provides assistance to small businesses impacted by COVID-19 through the Paycheck Protection Program (PPP), which was designed to provide near-term relief to help small businesses sustain operations.

The deadline for PPP loan applications to the SBA was August 8, 2020.

Under this program the Company funded 9,103 applications totaling $1.15 billion of loans in its service area and began processing applications for loan forgiveness in the fourth quarter of 2020.

As of December 31, 2020, 595 of these PPP loans had been granted forgiveness totaling $112.3 million resulting in a remaining PPP loan balance of $1.04 billion.

The CAA also renewed and extended the PPP until March 31, 2021 by authorizing an additional $284.5 billion for the program.

As a result in January 2021, Banner Bank began accepting and processing loan applications under this second PPP program.

We have begun taking steps to resume more normal branch activities with specific guidelines in place to help safeguard the safety of its clients and personnel.

To further the well-being of staff and clients, we implemented measures to allow employees to work from home to the extent practicable.

To facilitate this approach, we allocated additional computer equipment to staff and enhanced our network capabilities with several upgrades.

These expenses, plus other expenses incurred in response to the COVID-19 pandemic, resulted in $3.5 million of related costs during the year ended December 31, 2020.

Our operating results depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of loans and investment securities, and interest expense on interest-bearing liabilities, composed primarily of client deposits, FHLB advances, other borrowings, subordinated notes, and junior subordinated debentures.

Net interest income is primarily a function of our interest rate spread, which is the difference between the yield earned on interest-earning assets and the rate paid on interest-bearing liabilities, as well as a function of the average balances of interest-earning assets, interest-bearing liabilities and non-interest-bearing funding sources including non-interest-bearing deposits.

Our net interest income before provision for loan losses increased 9% to $468.9 million for the year ended December 31, 2019 , compared to $431.0 million for the year ended December 31, 2018 .

The increase in net interest income in 2019 was driven by growth in average interest-earning assets, due to the acquisitions of Skagit Bancorp, Inc.

(Skagit) on November 1, 2018 and AltaPacific as well as organic growth.

Our net income also is affected by the level of our non-interest income, including deposit fees and service charges, results of mortgage banking operations, which includes loan origination and servicing fees and gains and losses on the sale of one- to four-family and multifamily loans, and gains and losses on the sale of securities, as well as our non-interest expenses, provisions for loan losses and income tax provisions.

Our net interest income before provision for credit losses increased 3% to $481.3 million for the year ended December 31, 2020, compared to $468.9 million for the year ended December 31, 2019.

The increase in net interest income in 2020 is a result of growth in total loans receivable and core deposits, partially offset by lower yields on interest-earning assets.

The growth in total loans receivable and core deposits was largely as the result of the origination of the PPP loans during the second and third quarters of 2020, as well as, an increase in general client liquidity due to reduced business investment and consumer spending.

In addition, net income is affected by the net change in the value of certain financial instruments carried at fair value.

Our total revenues (net interest income before the provision for loan losses plus non-interest income) for 2019 increased $35.9 million , or 7% , to $550.9 million , compared to $515.0 million for 2018 .

Our total revenues (net interest income before the provision for credit losses plus non-interest income) for 2020 increased $29.1 million, or 5%, to $579.9 million, compared to $550.9 million for 2019.

Our total non-interest income, which is a component of total revenue, was $98.6 million for the year ended December 31, 2020, compared to $81.9 million for the year ended December 31, 2019.

The decrease in non-interest income during 2019 is the result of Banner becoming subject to the Durbin Amendment to the Dodd-Frank Act regarding limits on debit card interchange fees on July 1, 2019, which reduced interchange fee income by approximately $7 million during the second half of 2019 .

Although our credit quality metrics continue to reflect our moderate risk profile, we recorded a $10.0 million provision for loan losses in the year ended December 31, 2019 , primarily due to organic growth in the loan portfolio, the increase in non-performing loans, the renewal and migration of acquired loans out of the discounted loan portfolio and increased net charge-offs, compared to an $8.5 million provision recorded in 2018 .

Non-performing loans increased to $39.6 million at December 31, 2019 , compared to $15.7 million a year earlier.

Net charge-offs increased to $5.9 million for the year ended December 31, 2019, compared to net charge-offs of $1.0 million for the prior year.

Our allowance for loan losses at December 31, 2019 was $100.6 million , or 1.08% of total loans outstanding and 254% of non-performing loans.

(See Note 5, Loans Receivable and the Allowance for Loan Losses, of the Notes to the Consolidated Financial Statements as well as “Asset Quality” below.)

The increase in non-interest income during 2020 is primarily the result of increased mortgage banking income due to increased production of one- to four-family held for sale loans related to refinance activity as well as an increase in the gain on sale spreads on one- to four-family held for sale loans, partially offset by lower gains on the sale of multifamily held for sale loans.

The increase in mortgage banking income was partially offset by lower deposit fees and service charges due to a combination of fee waivers and reduced transaction volume as a result of the COVID-19 pandemic and reduced interchange fee income from the first full year impacts of the fee limitations of the Durbin Amendment.

We recorded a $64.3 million provision for credit losses - loans in the year ended December 31, 2020, primarily reflecting an increase in the expected lifetime credit losses due to the COVID-19 pandemic based upon the financial conditions and economic outlook that existed as of December 31, 2020, compared to a $10.0 million provision recorded in 2019.

The allowance for credit losses - loans at December 31, 2020 was $167.3 million, representing 470% of non-performing loans compared to $100.6 million, or 254% of non-performing loans at December 31, 2019.

In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $13.3 million at December 31, 2020 compared to $2.7 million at December 31, 2019.

Non-performing loans were $35.6 million at December 31, 2020, compared to $39.6 million at December 31, 2019.

Net charge-offs decreased to $5.4 million for the year ended December 31, 2020, compared to net charge-offs of $5.9 million for the prior year.

(See Note 5, Loans Receivable and the Allowance for Credit Losses, of the Notes to the Consolidated Financial Statements as well as “Asset Quality” below.)

Our non-interest expense increased 4% to $373.1 million for the year ended December 31, 2020, compared to $357.7 million for the year ended December 31, 2019.

The year-over-year increase in non-interest expense was largely attributable to increased salary and employee benefits as compared to a year ago largely due to inclusion of the acquired Skagit operations for a full year and the AltaPacific operations for the last two months of 2019, partially offset by increases in capitalized loan origination costs.

The year-over-year increase in non-interest expense was largely attributable to increased salary and employee benefits expense principally related to the operations acquired in the November 2019 acquisition of AltaPacific Bank which was partially offset by increased capitalized loan origination costs, primarily related to PPP loan originations.

Recent Developments and Significant Events

Merger of Islanders Bank into Banner Bank

On July 22, 2020, Banner announced plans to merge Islanders Bank into Banner Bank.

Regulatory approvals for the merger were received in October 2020, and the merger was completed on February 5, 2021.

Since both banks were wholly owned subsidiaries of Banner, there was no change in the consolidated assets or liabilities of Banner.

Acquisition of AltaPacific Bancorp

Effective November 1, 2019, the Company acquired 100% of the outstanding common shares of AltaPacific and its wholly-owned subsidiary, AltaPacific Bank, a California State chartered bank headquartered in Santa Rosa, California, with six branches within California.

On that date, AltaPacific merged with and into Banner and AltaPacific Bank merged with and into Banner Bank.

On that date, AltaPacific merged with and into Banner.

Pursuant to the previously announced terms of the merger, the equity holders of AltaPacific received an aggregate of 1.6 million shares of Banner voting common stock, plus cash in lieu of fractional shares for a total consideration paid of $87.6 million.

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See Note 3 of the Notes to the Consolidated Financial Statements for additional information.

Acquisition of Skagit Bancorp, Inc.

Effective November 1, 2018, the Company acquired 100% of the outstanding common shares of Skagit and its wholly-owned subsidiary, Skagit Bank, a Washington State chartered commercial bank headquartered in Burlington, Washington, with 11 branches serving markets along the I-5 corridor from Seattle to the Canadian border.

On that date, Skagit merged with and into Banner and Skagit Bank merged with and into Banner Bank.

Pursuant to the previously announced terms of the merger, the equity holders of Skagit received an aggregate of 3.1 million shares of Banner voting common stock, plus cash in lieu of fractional shares and to buy out Skagit stock options for a total consideration paid of $180.0 million.

The acquisition provided $915.8 million in assets, $632.4 million in loans and $810.2 million in deposits.

See Note 3 of the Notes to the Consolidated Financial Statements for additional information.

Lending Activities

All of our lending activities are conducted through Banner Bank, its subsidiary, Community Financial Corporation, a residential construction lender located in Portland, Oregon, and Islanders Bank.

We offer a wide range of loan products to meet the demands of our customers and our loan portfolio is very diversified by product type, borrower and geographic location within our market area.

We offer a wide range of loan products to meet the demands of our clients and our loan portfolio is very diversified by product type, borrower and geographic location within our market area.

We originate loans for our own loan portfolio and for sale in the secondary market.

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As part of this effort, we offer a variety of floating or adjustable interest rate products that correlate more closely with our cost of interest-bearing funds, particularly loans for commercial business and real estate, agricultural business, and construction and development purposes.

However, in response to customer demand, we continue to originate fixed-rate loans, including fixed interest rate mortgage loans with terms of up to 30 years.

However, in response to client demand, we continue to originate fixed-rate loans, including fixed interest rate mortgage loans with terms of up to 30 years.

The relative amount of fixed-rate loans and adjustable-rate loans that can be originated at any time is largely determined by the demand for each in a competitive environment.

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In recent years, our commercial business lending has also included participation in certain national syndicated loans.

Reflecting the expanding economy of the western United States, demand for commercial business loans has strengthened and our production levels have increased in recent periods.

Our residential mortgage loan originations have been relatively

strong in recent years, as sustained periods of low interest rates have supported demand for loans to refinance existing debt as well as loans to finance home purchases.

Prior to 2020, reflecting the expanding economy of the western United States, demand for commercial business loans had strengthened and our production levels had increased from prior periods.

As a result of COVID-19, commercial business loan originations declined in 2020, however, the decline was more than offset by the origination of PPP loans.

Our residential mortgage loan originations have been very strong in recent years, as sustained periods of low interest rates have supported demand for loans to refinance existing debt as well as loans to finance home purchases.

Most of the one- to four-family loans that we originate are sold in the secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit customers.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients.

For additional information concerning our loan portfolio, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of Financial Condition at December 31, 2020 and 2019—Loans and Lending” including Tables 4 and 5, which sets forth the composition and geographic concentration of our loan portfolio, and Tables 6 and 7, which contain information regarding the loans maturing in our portfolio.

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We offer fixed- and adjustable-rate mortgages (ARMs) at rates and terms competitive with market conditions, primarily with the intent of selling these loans into the secondary market.

Fixed-rate loans generally are offered on a fully amortizing basis for terms ranging from 10 to 30 years at interest rates and fees that reflect current secondary market pricing.

Fixed-rate loans generally are offered on a fully amortizing basis for terms ranging from ten to 30 years at interest rates and fees that reflect current secondary market pricing.

Most ARM products offered adjust annually after an initial period ranging from one to five years, subject to a limitation on the annual adjustment and a lifetime rate cap.

For a small portion of the portfolio, where the initial period exceeds one year, the first interest rate change may exceed the annual limitation on subsequent adjustments.

Our ARM products most frequently adjust based upon the average yield on Treasury securities adjusted to a constant maturity of one year or certain London Interbank Offered Rate (LIBOR) indices plus a margin or spread above the index.

Our ARM products most frequently adjust based upon the average yield on Treasury securities adjusted to a constant maturity

of one year or certain London Interbank Offered Rate (LIBOR) indices plus a margin or spread above the index.

ARM loans held in our portfolio may allow for interest-only payments for an initial period up to five years but do not provide for negative amortization of principal and carry no prepayment restrictions.

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On a more limited basis, we also make land loans to developers, builders and individuals to finance the acquisition and/or development of improved lots or unimproved land.

In making land loans, we follow more conservative underwriting policies but disbursement and monitoring procedures similar to those for construction loans.

In making land loans, we follow more conservative underwriting policies than those for construction loans but maintain disbursement and monitoring procedures that are similar.

The initial term on land loans is typically one to three years with interest only payments, payable monthly, and provisions for principal reduction as lots are sold and released from the lien of the mortgage.

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Commercial real estate loans are made for both owner-occupied and investor-owned properties.

At December 31, 2019 , our loan portfolio included $2.31 billion in non-owner-occupied commercial real estate loans, $1.58 billion in owner-occupied commercial real estate loans and $473.2 million in multifamily loans which in aggregate comprised 47% of our total loans.

At December 31, 2020, our loan portfolio included $1.96 billion in non-owner-occupied commercial real estate loans, $1.08 billion in owner-occupied commercial real estate loans, $573.8 million of small balance CRE loans and $428.2 million in multifamily loans which in aggregate comprised 41% of our total loans.

Multifamily and commercial real estate lending affords us an opportunity to receive interest at rates higher than those generally available from one- to four-family residential lending.

In originating multifamily and commercial real estate loans, we consider the location, marketability

and overall attractiveness of the properties.

In originating multifamily and commercial real estate loans, we consider the location, marketability and overall attractiveness of the properties.

Our underwriting guidelines for multifamily and commercial real estate loans require an appraisal from a qualified independent appraiser and an economic analysis of each property with regard to the annual revenue and expenses, debt service coverage and fair value to determine the maximum loan amount.

In the approval process we assess the borrower’s willingness and ability to manage the property and repay the loan and the adequacy of the collateral in relation to the loan amount.

While a portion of our multifamily loan originations are held for investment, the majority of multifamily loan originations are sold with the gain recognized as mortgage banking income.

For information concerning the risks associated with commercial and multifamily real estate lending, see Item 1A., “Risk Factors—Our loan portfolio includes loans with a higher risk of loss.”

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Commercial Business Lending:

We are active in small- to medium-sized business lending and are engaged in agricultural lending primarily by providing crop production loans.

Our commercial bankers are focused on local markets and devote a great deal of effort to developing customer relationships and providing these types of borrowers with a full array of products and services delivered in a thorough and responsive manner.

Our experienced commercial bankers and senior credit staff help us meet our commitment to small business lending while also focusing on corporate lending opportunities for borrowers with credit needs generally in a $3 million to $25 million range.

We are active in small- to medium-sized business lending.

Our commercial bankers are focused on local markets and devote a great deal of effort to developing client relationships and providing these types of borrowers with a full array of products and services delivered in a thorough and responsive manner.

Our experienced commercial bankers and senior credit staff help us

meet our commitment to small business lending while also focusing on corporate lending opportunities for borrowers with credit needs generally in a $3 million to $25 million range.

In addition to providing earning assets, commercial business lending has helped us increase our deposit base.

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Quick Step business loans are available up to $1.0 million, business lines of credit are available up to $500,000 and owner-occupied real estate loans are available up to $1.0 million.

Commercial business loans may entail greater risk than other types of loans.

Commercial business loans generally provide higher yields or related revenue opportunities than many other types of loans but also require more administrative and management attention.

Beginning in the second quarter of 2020, we began to offer PPP loans which are fully guaranteed by the SBA, to existing and new clients as a result of the COVID-19 pandemic.

The SBA guarantees 100% of the PPP loans made to eligible borrowers.

The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA if the borrower meets the PPP conditions.

We expect that the great majority of our PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

We earn 1% interest on PPP loans as well as a fee from the SBA to cover processing costs, which is amortized over the life of the loan.

The maturity date of the PPP loan is either two or five years from the date of loan origination.

The balance of unamortized net deferred fees on PPP loans was $24.1 million at December 31, 2020.

Commercial business loans, other than PPP loans, may entail greater risk than other types of loans.

Conventional commercial business loans generally provide higher yields or related revenue opportunities than many other types of loans but also require more administrative and management attention.

Loan terms, including the fixed or adjustable interest rate, the loan maturity and the collateral considerations, vary significantly and are negotiated on an individual loan basis.

For information concerning the risks associated with commercial business lending, see Item 1A., “Risk Factors—Our loan portfolio includes loans with a higher risk of loss.”

We underwrite our commercial business loans on the basis of the borrower’s cash flow and ability to service the debt from earnings rather than on the basis of the underlying collateral value.

We underwrite our conventional commercial business loans on the basis of the borrower’s cash flow and ability to service the debt from earnings rather than on the basis of the underlying collateral value.

We seek to structure these loans so that they have more than one source of repayment.

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Adjustable- or floating-rate loans are primarily tied to various prime rate or LIBOR indices.

At December 31, 2019 , commercial business loans totaled $1.69 billion , or 18% of our total loans receivable, including $190.8 million of shared national credits.

At December 31, 2020, commercial business loans totaled $2.18 billion, or 22% of our total loans receivable, including $1.04 billion of PPP loans and $122.2 million of shared national credits.

Agricultural Lending:

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Collateral generally consists of cash crops produced by the farm, such as milk, grains, fruit, grass seed, peas, sugar beets, mint, onions, potatoes, corn and alfalfa or livestock.

In addition to considering cash flow and obtaining a blanket security

interest in the farm’s cash crop, we may also collateralize an operating loan with the farm’s operating equipment, breeding stock, real estate and federal agricultural program payments to the borrower.

In addition to considering cash flow and obtaining a blanket security interest in the farm’s cash crop, we may also collateralize an operating loan with the farm’s operating equipment, breeding stock, real estate and federal agricultural program payments to the borrower.

We also originate loans to finance the purchase of farm equipment.

Loans to purchase farm equipment are made for terms of up to seven years.

On occasion, we also originate agricultural real estate loans secured primarily by first liens on farmland and improvements thereon located in our market areas, although generally only to service the needs of our existing customers.

Loans are written in amounts ranging from 50% to 75% of the tax assessed or appraised value of the property for terms of five to 20 years.

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Fixed-rate loans are granted on terms usually not to exceed five years.

In originating agricultural real estate loans, we consider the debt service coverage of the borrower’s cash flow, the appraised value of the underlying property, the experience and knowledge of the borrower, and the borrower’s past performance with us and/or the market area.

These loans normally are not made to start-up businesses and are reserved for existing customers with substantial equity and a proven history.

performance with us and/or the market area.

These loans normally are not made to start-up businesses and are reserved for existing clients with substantial equity and a proven history.

Among the more common risks to agricultural lending can be weather conditions and disease.

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We originate a variety of consumer loans, including home equity lines of credit, automobile, boat and recreational vehicle loans and loans secured by deposit accounts.

While consumer lending has traditionally been a small part of our business, with loans made primarily to accommodate our existing customer base, it has received consistent emphasis in recent years.

While consumer lending has traditionally been a small part of our business, with loans made primarily to accommodate our existing client base, it has received consistent emphasis in recent years.

Part of this emphasis includes a Banner Bank-owned credit card program.

Similar to other consumer loan programs, we focus this credit card program on our existing customer base to add to the depth of our customer relationships.

Similar to other consumer loan programs, we focus this credit card program on our existing client base to add to the depth of our client relationships.

In addition to earning balances, credit card accounts produce non-interest revenues through interchange fees and other activity-based revenues.

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Loan Solicitation and Processing:

We originate real estate loans in our market areas by direct solicitation of real estate brokers, builders, developers, depositors, walk-in customers and visitors to our Internet website.

We originate real estate loans in our market areas by direct solicitation of real estate brokers, builders, developers, depositors, walk-in clients and visitors to our Internet website.

One- to four-family residential loan applications are taken by our mortgage loan officers or through our Internet website and are processed in branch or regional locations.

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In addition to commercial real estate loans, our commercial bankers solicit commercial and agricultural business loans through call programs focused on local businesses and farmers.

While commercial bankers are delegated reasonable commitment authority based upon their qualifications, credit decisions on significant commercial and agricultural loans are made by senior loan officers or in certain instances by the Board of Directors of Banner Bank and Islanders Bank.

We originate consumer loans and small business (including Quick Step) commercial business loans through various marketing efforts directed primarily toward our existing deposit and loan customers.

We originate consumer loans and small business (including Quick Step) commercial business loans through various marketing efforts directed primarily toward our existing deposit and loan clients.

Consumer loans and Quick Step commercial business loan applications are primarily underwritten and documented by centralized administrative personnel.

Loan Originations, Sales and Purchases

While we originate a variety of loans, our ability to originate each type of loan is dependent upon the relative customer demand and competition in each market we serve.

While we originate a variety of loans, our ability to originate each type of loan is dependent upon the relative client demand and competition in each market we serve.

For the years ended December 31, 2020 and 2019, we originated loans, net of repayments, including our participation in syndicated loans and loans held for sale of $2.02 billion and $1.40 billion, respectively.

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We sell many of our newly originated one- to four-family residential mortgage loans and multifamily loans to secondary market purchasers as part of our interest rate risk management strategy.

Originations of loans for sale increased to $1.09 billion for the year ended December 31, 2019 from $896.5 million during 2018 .

Originations of loans for sale increased to $1.46 billion for the year ended December 31, 2020 from $1.09 billion during 2019.

Originations of loans for sale included $234.0 million and $340.0 million of multifamily held for sale loan production for the years ended December 31, 2020 and December 31, 2019, respectively.

Sales of loans generally are beneficial to us because these sales may generate income at the time of sale, provide funds for additional lending and other investments, increase liquidity or reduce interest rate risk.

During the year ended December 31, 2019 , we sold $1.07 billion of loans held for sale compared to $781.9 million for the year ended December 31, 2018 .

During the year ended December 31, 2020, we received proceeds of $1.47 billion from the sale of loans held for sale compared to $1.07 billion for the year ended December 31, 2019.

The held for sale loans sold in 2020 and 2019 included $241.8 million and $332.7 million, respectively, of multifamily loans held for sale.

We sell one- to four-family mortgage loans on both a servicing-retained and a servicing-released basis.

All loans are sold without recourse.

All loans are sold without recourse but subject to standard representations and warranties.

The decision to hold or sell loans is based on asset liability management goals, strategies and policies and on market conditions.

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The Credit Policy Division approves all recommendations for new classified loans or, in the case of smaller-balance homogeneous loans including residential real estate and consumer loans, it has approved policies governing such classifications, or changes in classifications, and develops and monitors action plans to resolve the problems associated with the assets.

The Credit Policy Division also approves recommendations for establishing the appropriate level of the allowance for loan losses.

The Credit Policy Division also approves recommendations for establishing the appropriate level of the allowance for credit losses.

Significant problem loans are transferred to Banner Bank’s Special Assets Department for resolution or collection activities.

The Banks’ and Banner Corporation’s Boards of Directors are given a detailed report on classified assets and asset quality at least quarterly.

For additional information regarding asset quality and non-performing loans, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2019 and 2018 —Asset Quality,” and Table 12 contained therein.

Allowance for Loan Losses:

For additional information regarding asset quality and non-performing loans, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2020 and 2019—Asset Quality,” and Tables 12 and 13 contained therein.

Allowance for Credit Losses:

In originating loans, we recognize that losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan.

As a result, we maintain an allowance for loan losses consistent with U.S.

As a result, we maintain an allowance for credit losses consistent with U.S.

generally accepted accounting principles (GAAP) guidelines.

We increase our allowance for loan losses by charging provisions for probable loan losses against our income.

The allowance for loan losses is maintained at a level which, in management’s judgment, is sufficient to provide for probable losses based on evaluating known and inherent risks in the loan portfolio and upon continuing analysis of the factors underlying the quality of the loan portfolio.

We increase our allowance for credit losses by charging provision for credit losses against our income.

The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio and forecasted economic conditions.

In June 2016, Financial Accounting Standards Board issued ASU No.

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For additional information on CECL see Note 2, Accounting Standards Recently Issued or Adopted, of the Notes to the Consolidated Financial Statements.

For additional information concerning our allowance for loan losses, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Results of Operations for the Years Ended December 31, 2019 and 2018 —Provision and Allowance for Loan Losses,” and Tables 16 and 17 contained therein.

For additional information concerning our allowance for credit losses, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Results of Operations for the Years Ended December 31, 2020 and 2019—Provision and Allowance for Credit Losses,” and Tables 17 and 18 contained therein.

Real Estate Owned:

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Investment levels may be increased or decreased in order to manage balance sheet liquidity, interest rate risk, market risk and provide appropriate risk adjusted returns.

Securities sales, paydowns and maturities during the year ended December 31, 2019 exceeded purchases slightly as the Company maintained the level of its securities portfolio consistent with its liquidity needs.

Securities purchases exceeded sales, paydowns and maturities during the year ended December 31, 2020 as we deployed excess balance sheet liquidity and market spreads for certain securities widened.

For detailed information on our investment securities, see Item 7, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2020 and 2019—Investments,” and Tables 1 and 2 contained therein.

The Company, through its Banner Bank subsidiary, is party to various derivative instruments that are used for asset and liability management and customer financing needs.

The Company, through its Banner Bank subsidiary, is party to various derivative instruments that are used for asset and liability management and client financing needs.

Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require no net investment and allow for the net settlement of positions.

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Our predominant derivative and hedging activities involve interest rate swaps related to certain term loans, interest rate lock commitments to borrowers, and forward sales contracts associated with mortgage banking activities.

Generally, these instruments help us manage exposure to market risk and meet customer financing needs.

Generally, these instruments help us manage exposure to market risk and meet client financing needs.

Market risk represents the possibility that economic value or net interest income will be adversely affected by fluctuations in external factors such as market-driven interest rates and prices or other economic factors.

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Interest Rate Swaps:

Banner Bank uses an interest rate swap program for commercial loan customers, in which we provide the client with a variable rate loan and enter into an interest rate swap in which the client receives a fixed rate payment in exchange for a variable rate payment.

Banner Bank uses an interest rate swap program for commercial loan clients, in which we provide the client with a variable rate loan and enter into an interest rate swap in which the client receives a fixed rate payment in exchange for a variable rate payment.

We offset our risk exposure by entering into an offsetting interest rate swap with a dealer counterparty for the same notional amount and length of term as the client interest rate swap providing the dealer counterparty with a fixed rate payment in exchange for a variable rate payment.

At December 31, 2019 , Banner Bank had $372.0 million in notional amounts of these customer interest rate swaps outstanding that were not designated in hedge relationships, with an equal amount of offsetting third party swaps also in place.

At December 31, 2020, Banner Bank had $451.8 million in notional amounts of these client interest rate swaps outstanding that were not designated in hedge relationships, with an equal amount of offsetting third party swaps also in place.

These swaps do not qualify as designated hedges;

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In connection with the interest rate swaps between Banner Bank and the dealer counterparties, the agreements contain a provision such that if Banner Bank fails to maintain its status as a well/adequately capitalized institution, then the counterparty could terminate the derivative positions and Banner Bank would be required to settle its obligations.

Similarly, we could be required to settle our obligations under certain of these agreements if specific regulatory events occur, such as a publicly issued prompt corrective action directive, cease and desist order, or a capital maintenance agreement that required Banner Bank to maintain a specific capital level.

If we had breached any of these provisions at December 31,

2019 or 2018 , we could have been required to settle our obligations under the agreements at the termination value.

We generally post collateral against derivative liabilities in the form of government agency-issued bonds, mortgage-backed securities, or commercial mortgage-backed securities.

a capital maintenance agreement that required Banner Bank to maintain a specific capital level.

If we had breached any of these provisions at December 31, 2020 or 2019, we could have been required to settle our obligations under the agreements at the termination value.

We generally post collateral against derivative liabilities in the form of cash, government agency-issued bonds, mortgage-backed securities, or commercial mortgage-backed securities.

Derivative assets and liabilities are recorded at fair value on the balance sheet.

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Under a prior program that is now discontinued we hedged our exposure to changes in the fair value of certain fixed-rate loans through the use of interest rate swaps.

As of December 31, 2019 , Banner Bank was a party to $3.6 million in notional amounts of interest rate swaps designated in a hedge relationship.

As of December 31, 2020, Banner Bank was a party to $338,000 in notional amounts of interest rate swaps designated in a hedge relationship.

For a qualifying fair value hedge, changes in the value of the derivatives are recognized in current period earnings along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged.

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There is strong competition for transaction balances and savings deposits from commercial banks, credit unions and non-bank corporations, such as securities brokerage companies, mutual funds and other diversified companies, some of which have nationwide networks of offices.

Much of the focus of our acquisitions, branch relocations and renovation and advertising and marketing campaigns has been directed toward attracting additional deposit customer relationships and balances.

In addition, our electronic and digital banking activities including debit card and automated teller machine (ATM) programs, on-line Internet banking services and, most recently, customer remote deposit and mobile banking capabilities are all directed at providing products and services that enhance customer relationships and result in growing deposit balances as well as fee income.

Much of the focus of our acquisitions, branch relocations and renovation and advertising and marketing campaigns has been directed toward attracting additional deposit client relationships and balances.

In addition, our electronic and digital banking activities including debit card and automated teller machine (ATM) programs, on-line Internet banking services and client remote deposit and mobile banking capabilities are all directed at providing products and services that enhance client relationships and result in growing deposit balances as well as fee income.

Core deposits (non-interest-bearing checking and interest-bearing transaction and savings accounts) are a fundamental element of our business strategy.

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Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors.

In determining the terms of deposit accounts, we consider current market interest rates, profitability to us, matching deposit and loan products and customer preferences and concerns.

In determining the terms of deposit accounts, we consider current market interest rates, profitability to us, matching deposit and loan products and client preferences and concerns.

At December 31, 2020, we had $12.57 billion of deposits.

For additional information concerning our deposit accounts, see Item 7 in this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2019 and 2018 —Deposit Accounts,” including Table 8 contained therein, which sets forth the balances of deposits in the various types of accounts, and Table 9, which sets forth the amount of our certificates of deposit greater than $100,000 by time remaining until maturity as of December 31, 2019 .

For additional information concerning our deposit accounts, see Item 7 in this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2020 and 2019—Deposit Accounts,” including Table 8 contained therein, which sets forth the balances of deposits in the various types of accounts, and Table 9, which sets forth the amount of our certificates of deposit in excess of the FDIC insurance limit by time remaining until maturity as of December 31, 2020.

In addition, see Note 8, Deposits of the Notes to the Consolidated Financial Statements.

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At December 31, 2020, we had $150.0 million of borrowings from the FHLB.

At that date, Banner Bank was authorized by the FHLB to borrow up to $5.31 billion under a blanket floating lien security agreement, while Islanders Bank was approved to borrow up to $132.7 million under a similar agreement.

At that date, based on pledged collateral, Banner Bank had $2.28 billion of available credit capacity and Islanders Bank had $32.5 million of available credit capacity with the FHLB.

The Federal Reserve Bank serves as an additional source of borrowing capacity.

The Federal Reserve Bank provides credit based upon acceptable loan collateral, which includes certain loan types not eligible for pledging to the FHLB.

At December 31, 2019 , based upon our available unencumbered collateral, Banner Bank was eligible to borrow $1.19 billion from the Federal Reserve Bank, although at that date we had no funds borrowed under this arrangement.

At December 31, 2020, based upon our available unencumbered collateral, Banner Bank was eligible to borrow $958.7 million from the Federal Reserve Bank, although at that date we had no funds borrowed under this arrangement.

Although eligible to participate, Islanders Bank has not applied for approval to borrow from the Federal Reserve Bank.

For additional information concerning our borrowings, see Item 7 in this report, “Management’s Discussion and Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2019 and 2018 —Borrowings,” and Table 11 contained therein, as well as Note 9, Advances from Federal Home Loan Bank of Des Moines and Note 10, Other Borrowings of the Notes to the Consolidated Financial Statements.

Additionally, the Federal Reserve recently established the Paycheck Protection Program Liquidity Facility (PPPLF) to bolster the effectiveness of the PPP.

Banner Bank may utilize the PPPLF, pursuant to which it will pledge PPP loans at face value as collateral to obtain FRB non-recourse advances.

Although Banner Bank utilized and repaid outstanding advances from the PPPLF during the current year, there were no borrowings outstanding under this program at December 31, 2020.

For additional information concerning our borrowings, see Item 7 in this report, “Management’s Discussion and

Analysis of Financial Condition—Comparison of Financial Condition at December 31, 2020 and 2019—Borrowings,” and Table 11 contained therein, as well as Note 9, Advances from Federal Home Loan Bank of Des Moines and Note 10, Other Borrowings of the Notes to the Consolidated Financial Statements.

At December 31, 2020, Banner Bank had uncommitted federal funds line of credit agreements with other financial institutions totaling $125.0 million, while Islanders Bank had an uncommitted federal funds line of credit agreement with another financial institution totaling $5.0 million.

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These lines are intended to support short-term liquidity needs and the agreements may restrict consecutive day usage.

We issue retail repurchase agreements, generally due within 90 days, as an additional source of funds, primarily in connection with treasury management services provided to our larger deposit customers.

At December 31, 2020, we had issued retail repurchase agreements totaling $184.8 million.

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See Note 11, Junior Subordinated Debentures and Mandatorily Redeemable Trust Preferred Securities, of the Notes to the Consolidated Financial Statements.

As of December 31, 2019 , we had 2,198 full time equivalent employees.

Banner Corporation has no employees except for those who are also employees of Banner Bank, its subsidiaries, and Islanders Bank.

The employees are not represented by a collective bargaining unit.

On June 30, 2020, Banner also issued and sold in an underwritten offering $100.0 million aggregate principal amount of 5.000% Fixed-to-Floating Rate Subordinated Notes due 2030 (Subordinated Notes) at a public offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and offering expenses, of approximately $98.1 million.

As of December 31, 2020 the Subordinated Notes, qualified as Tier II regulatory capital.

Human Capital

Strategic Priority:

Retain, develop and attract talented people.

At Banner, we seek to provide a work environment that retains, develops and attracts top talent by offering our employees an engaging work experience that allows for career growth and opportunities for meaningful community involvement.

Our employees contribute to our commitment to social responsibility through personal volunteerism and active engagement in the communities in which they live and work.

As our business grows and evolves, the demand for qualified candidates continues to grow.

Meanwhile, the pool of experienced candidates continues to tighten across the financial industry, making it increasingly challenging to compete for top candidates.

To address this challenge, we have developed and continue to enhance a robust and comprehensive company-wide talent management program.

The program spans from talent acquisition and selection to performance coaching, career development and retention of our top talent and ultimately to succession planning.

Diversity and Inclusion (D&I).

Our commitment to diversity starts with our Board of Directors, which oversees our culture and holds management accountable to build and maintain a diverse and inclusive environment.

Within this scope, our Board and its committees:

oversee our human capital management strategies, programs and practices, including the progress on our diversity and inclusion goals;

oversee our establishment, maintenance and administration of appropriately designed compensation programs and plans;

and review our employee engagement and exit survey results.

Banner Bank’s Board of Directors formally recognized the importance of these initiatives with the appointment of the Bank’s Executive Vice President, Human Resources, as Chief Diversity Officer of Banner Bank.

We aim to maintain a work environment where every employee is treated with dignity and respect, is free from discrimination and harassment and is allowed to devote their full attention and best efforts to performing their job to the best of their ability.

Employing the best talent — including individuals who possess a broad range of experiences, backgrounds and skills — enables us to anticipate and meet the needs of our business and those of our clients.

Two of our six named executive officers for 2020 were women (33%) and currently, five of our broader team of 16 executive officers are women (31%).

We have a strong team of men and women who are collectively capable of professionally operating the business and fulfilling our vision.

The following table illustrates our employees’ gender diversity by level as of December 31, 2020:

Level Female % Male %

Individual Contributor 71 % 29 %

Manager 64 % 36 %

Director 44 % 56 %

Executive 33 % 67 %

Total 68 % 32 %

Talent Acquisition.

To cultivate and recruit hard-to-fill positions, we partner closely with several colleges and universities with well-known programs relevant to our business.

We also utilize talent assessment tools to identify candidates who we believe would thrive in our culture and be well-suited to a particular opportunity.

Our employment application and hiring processes do not solicit compensation information from candidates during our hiring process.

This helps ensure our new hire compensation is based on individual qualifications and roles, rather than how a candidate may have been previously compensated.

During 2020, we hired 302 employees.

Talent Engagement.

We utilize anonymous employee surveys to seek valuable feedback on key initiatives and leverage the results to improve current programs as well as develop new programs.

To drive employee engagement, we share the results with our employees.

Additionally, senior leadership analyzes areas of progress or opportunities for improvement and prioritizes responsive actions and activities.

Our management and cross-functional teams also work in close coordination to evaluate human capital management issues such as retention, training, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks.

Total Rewards (Compensation and Benefits).

We provide robust compensation and benefits programs, in addition to base pay, to help meet the needs of our employees.

These programs include, subject to eligibility policies, annual incentives, stock awards, a 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family care resources, flexible work schedules, employee assistance programs and tuition assistance, among many others.

We grant long-term incentive awards in the form of restricted stock and performance-based stock to a select group of senior leaders who we believe will play critical roles in the Company’s future.

We offer comprehensive health insurance coverage, including telehealth services, to employees working an average of 20 hours or more each week and includes coverage for domestic partners.

We provide up to 12 days of accrued paid sick time based on hours worked annually;

employees are permitted to use sick time for themselves or family members in need of care.

Newly hired employees are automatically enrolled in our 401(k) plan, which includes an employer match up to 4% of eligible earnings.

As of December 31, 2020, over 94% of employees were participating in our 401(k) plan.

In addition to our traditional health insurance coverage, we offer employees a suite of mental health-related programs and benefits, including text-based and telehealth services.

These include Talkspace, 98point6, Doctor on Demand, a 24-hour nurse line and an employee assistance program.

Moreover, in 2020 we implemented Care@Work, providing employees with subsidized child, adult or senior care planning services.

This benefit includes up to 10 days of subsidized backup care services each year.

Health, Safety and Well-being.

The success of our business is fundamentally connected to the well-being of our employees.

We provide employees and their families with access to a variety of innovative, flexible and convenient health and well-being programs.

Also offered are benefits that support their physical and mental health by providing tools and resources to help employees improve or maintain their health status and encourage healthy behaviors.

Finally, we offer choices and options, when possible, to enable employees to customize benefits to meet their own needs and the needs of their families.

Encouraging Volunteerism.

We strive to be a good corporate citizen by encouraging employees to be engaged in the communities where they live and work.

To help remove roadblocks to volunteering, we offer Community Connections, a program that offers employees paid time off to volunteer at non-profit organizations of their choice (16 hours for full-time and 8 hours for part time).

We also encourage employees to serve in leadership roles in these organizations as part of their professional development.

We are proud to support many local community organizations through financial contributions and employee-driven volunteerism, including Junior Achievement, United Way and hundreds of other organizations.

Incentive Compensation Risk Management.

We strive to align incentives with the risk and performance frameworks of the Company.

The Company’s “pay for performance” philosophy connects individual, operating unit and Company results to compensation, providing employees with opportunities to share in the Company’s overall growth and success.

We develop, execute and govern all incentive compensation plans that discourage imprudent or excessive risk-taking and balance financial reward in a manner that supports our clients, employees and Company.

Talent Development.

We invest significant resources developing the talent needed to be an employer of choice.

We deliver a variety of training opportunities, use leading-edge methodologies to manage performance and provide frequent performance and development feedback rather than relying solely on annual reviews.

Our talent development programs provide employees with the resources they need to help achieve their career goals, build management skills and lead their teams.

We believe in a multi-dimensional approach to learning and development, specifically the 70-20-10 development framework that encompasses on-the-job development or experiential learning;

social learning through relationships, networks and mentoring;

and formal education.

We leverage best-in-class industry associations such as the

American Bankers Association, Washington Bankers Association and the Pacific Coast Banking School to provide continuing education courses relevant to the banking industry and job functions.

To encourage advancement and growth within our organization, we provide information and guides so individuals can design their own career paths.

In fact, in 2020 we filled 25.8% of all open positions with internal candidates.

Succession Planning.

Because our Board of Directors recognizes the importance of succession planning for our CEO and other key executives, the Board is actively involved in monitoring our efforts surrounding this initiative.

The Board annually reviews our succession plans for senior leadership roles, with the goal of ensuring we will continue to have the right leadership talent in place to execute the organization’s long-term strategic plans.

During these reviews, the Board discusses:

Our succession process and pipeline, including diversity, inclusion and goals for building future senior leaders;

Potential successors to the CEO in the event of an emergency or retirement;

The CEO’s recommendations for potential successors for top executive roles, along with a review of any development plans for these individuals.

Human Capital Metrics.

We capture critical metrics regarding human capital management and report them to the Board on an annual basis.

As of December 31, 2020, we employed 2,116 full- and part-time employees across our four-state footprint, which equates to 2,061 full-time equivalent employees.

All Banner Corporation employees are also employees of the Company’s subsidiaries, including the Banks.

Our employees are not represented by a collective bargaining agreement.

As of December 31, 2020, 62% of our employees reside in Washington State.

We also have employees in Oregon (19%), California (13%) and other states (6%).

As of December 31, 2020, five generations of employees were represented in our workplace with Millennials being our largest generation (35%), followed by Gen X (34%) and Boomers (26%).

Our overall turnover rate has declined for four consecutive years and in 2020 our voluntary turnover rate was 14.2%.

Tax-Sharing Agreement

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Washington Taxation:

We are subject to a Business and Occupation (B&O) tax which is imposed under Washington on gross receipts.

We are subject to a Business and Occupation (B&O) tax which is imposed by the State of Washington on gross receipts.

Interest received on loans secured by mortgages or deeds of trust on residential properties, residential mortgage-backed securities, and certain U.S.

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Corporations with nexus in the states of California, Oregon, Idaho, Montana and Utah are subject to a corporate level income tax.

If a large percentage of our income were to come from these states the state income tax provision would have an increasing effect on our effective tax rate and results of operations.

In 2020, the state of Oregon implemented a tax on Oregon corporate revenue.

If a large percentage of our income were to come from these states, our state income tax provision would have an increased effect on our effective tax rate and results of operations.

We encounter significant competition both in attracting deposits and in originating loans.

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We cannot predict the nature or the extent of the effects on our business and earnings that any fiscal or monetary policies or new federal or state legislation may have in the future.

For additional information, see Item 1A., “Risk Factors—We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that are expected to increase our costs of operation.” We may also be affected by changes in accounting standards.

See "2018 Reforms" below.

The following is a summary discussion of certain laws and regulations applicable to Banner and the Banks which is qualified in its entirety by reference to the actual laws and regulations.

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As a Washington state-chartered commercial bank with branches in the States of Washington, Oregon, Idaho and California, Banner Bank is subject not only to the applicable provisions of Washington law and regulations, but is also subject to Oregon, Idaho and California law and regulations.

These state laws and regulations govern Banner Bank's ability to take deposits and pay interest thereon, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its customers and to establish branch offices.

These state laws and regulations govern Banner Bank’s ability to take deposits and pay interest thereon, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its clients and to establish branch offices.

In a similar fashion, Washington state laws and regulations for state-chartered commercial banks also apply to Islanders Bank.

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Under the FDIC’s rules the assessment base for a bank is equal to its total average consolidated assets less average tangible capital.

As of December 31, 2019, assessment rates ranged from 3 to 30 basis points for all institutions, subject to adjustments for unsecured debt issued by the institution, unsecured debt issued by other FDIC-insured institutions, and brokered deposits held by the institution.

As of December 31, 2020, assessment rates ranged from three basis points to 30 basis points for all institutions, subject to adjustments for unsecured debt issued by the institution, unsecured debt issued by other FDIC-insured institutions, and brokered deposits held by the institution.

Under the current rules, when the reserve ratio for the prior assessment period reaches, or is greater than 2.0% and less than 2.5%, assessment rates will range from two basis points to 28 basis points and when the reserve ratio for the prior assessment period is greater than 2.5%, assessment rates will range from one basis point to 25 basis points (in each case subject to adjustments as described above for current rates).

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Each insured depository institution must implement a comprehensive written information security program that includes administrative, technical, and physical safeguards appropriate to the institution’s size and complexity and the nature and scope of its activities.

The information security program must be designed to ensure the security and confidentiality of customer information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer, and ensure the proper disposal of customer and consumer information.

Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to customer information in customer information systems.

The information security program must be designed to ensure the security and confidentiality of client information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any client, and ensure the proper disposal of client and consumer information.

Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to client information in client information systems.

If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance.

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Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock.

Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for loan and lease losses up to 1.25% of assets.

Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for credit losses up to 1.25% of assets.

Total capital is the sum of Tier 1 and Tier 2 capital.

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An institution’s category depends upon where its capital levels are in relation to relevant capital measures.

The well-capitalized category is described above.

The well-capitalized category is

described above.

An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on the rates it can offer on its deposits generally.

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Federal Reserve System:

The Federal Reserve requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits.

The Federal Reserve has the authority to establish reserve requirements on transaction accounts or non-personal time deposits.

These reserves may be in the form of cash or non-interest-bearing deposits with the regional Federal Reserve Bank.

Interest-bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank.

At December 31, 2019 , the Banks' deposits with the Federal Reserve Bank and vault cash exceeded their reserve requirements.

In response to the COVID-19 pandemic, the Federal Reserve reduced requirements to zero percent effective on March 26, 2020, to support lending to households and businesses.

Affiliate Transactions:

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These regulations require the Banks to disclose their privacy policy, including informing consumers of their information sharing practices and informing consumers of their rights to opt out of certain practices.

Anti-Money Laundering and Customer Identification:

In addition, other state cybersecurity and data privacy laws and regulations may expose Banner Bank to risk and result in certain risk management costs.

Notably, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives California residents the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of personal information, and the right not to be discriminated against for exercising these rights.

The CCPA also created a private right of action with statutory damages for data security breaches, thereby increasing potential liability associated with a data breach, which has triggered a number of class actions against other companies since January 1, 2020.

Although Banner Bank may enjoy several fairly broad exemptions from the CCPA's privacy requirements, those exemptions do not extend to the private right of action for a data security breach.

The CCPA, including any amendments thereto or final regulations implemented thereunder, as well as other similar state data privacy laws and regulations, may require the establishment by Banner Bank of certain regulatory compliance and risk management controls.

Anti-Money Laundering and Client Identification:

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was signed into law on October 26, 2001.

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Treasury’s Office of Financial Crimes Enforcement Network.

These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts, and, effective in 2018, the beneficial owners of accounts.

These rules require financial institutions to establish procedures for identifying and verifying the identity of clients seeking to open new financial accounts, and the beneficial owners of accounts.

Bank regulators are directed to consider an institution’s effectiveness in combating money laundering when ruling on Bank Holding Company Act and Bank Merger Act applications.

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While the list set forth below is not exhaustive, these include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfers Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with clients when taking deposits, making loans, collecting loans, and providing other services.

Failure to comply with these laws and regulations can subject the Banks to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights.

In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”) was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).

While the Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion.

In addition, the Economic Growth Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

It is difficult at this time to predict when or how any new standards under the Economic Growth Act will ultimately be applied to us or what specific impact the Economic Growth Act and the yet-to-be-written implementing rules and regulations implementing the Economic Growth Act will have.

The Financial Accounting Standards Board (FASB) has adopted a new accounting standard, referred to as Current Expected Credit Loss, or CECL, which became effective for Banner on January 1, 2020.

Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.

For additional information on CECL see Note 2, Accounting Standards Recently Issued or Adopted, of the Notes to the Consolidated Financial Statements.

In 2018, the federal banking regulators (the Federal Reserve, the OCC and the FDIC) adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

CARES Act and CAA.

In response to the COVID-19 pandemic, Congress, through the enactment of the CARES Act, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures including, among others, the following:

• The CARES Act allows banks to elect to suspend requirements under GAAP for loan modifications related to the COVID-19 pandemic (for loans that were not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a TDR, including impairment for accounting purposes, until the earlier of 60 days after the termination date of the national emergency or December 31, 2020.

The CAA extended the relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

The suspension of GAAP is applicable for the entire term of the modification.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 by providing that short-term modifications made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification is implemented is not a TDR.

We are applying this guidance to qualifying COVID-19 related loan modifications.

For additional information concerning our COVID-19 related loan modifications, see Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Comparison of Financial Condition at December 31, 2020 and 2019-Asset Quality”.

• The CARES Act amended the SBA’s loan program, in which Banner Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

The loans are provided through participating financial institutions, such as Banner Bank, that process loan applications and service the loans and are eligible for SBA repayment and loan forgiveness if the borrower meets the PPP conditions.

The application period for a PPP loan closed on August 8, 2020.

The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders on October 2, 2020.

The CAA which was signed into law on December 27, 2020, renews and extends the PPP until March 31, 2021.

As a participating lender, Banner Bank began originating PPP loans again in January 2021 and will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

• Concurrent with enactment of the CARES Act, federal banking agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.

The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

The changes in the final rule apply only to those banking organizations that elect the CECL transition relief provided under the rule.

Banner elected this option.

As the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that Congress will enact supplementary COVID-19 response legislation.

We will continue to assess the impact of the CARES Act, CAA and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

Banner Corporation

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Under the BHCA, Banner Corporation is supervised by the Federal Reserve.

The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.

The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not

conduct its operations in an unsafe or unsound manner.

In addition, the Dodd-Frank Act provides that a bank holding company must serve as a source of financial strength to its subsidiary banks.

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providing tax planning and preparation services;

and, subject to certain limitations, providing securities brokerage services for customers.

and, subject to certain limitations, providing securities brokerage services for clients.

Federal Securities Laws:

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The Dodd-Frank Act:

On July 21, 2010, the Dodd-Frank Act was signed into law.

The Dodd-Frank Act imposes various restrictions and an expanded framework of regulatory oversight for financial institutions, including depository institutions, and implements certain capital regulations applicable to Banner Corporation and the Banks that are discussed above under the section entitled “Capital Requirements.”

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Banner Corporation is continuously reviewing its investment portfolio to determine if changes in its investment strategies are in compliance with the various provisions of the Volcker Rule regulations.

For certain of these changes, the implementing regulations have not been promulgated, so the full impact of the Dodd-Frank Act on public companies cannot be determined at this time.

For information on the Economic Growth Act, which amended the Dodd-Frank Act, see "2018 Reforms" above.

Sarbanes-Oxley Act of 2002:

As a public company that files periodic reports with the SEC, under the Securities Exchange Act of 1934, Banner Corporation is subject to the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), which addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information.

The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

Our policies and procedures are designed to comply with the requirements of the Sarbanes-Oxley Act.

Interstate Banking and Branching:

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The Federal Reserve policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

As described above under “Capital Requirements,” the capital conversion buffer requirement can also restrict Banner Corporation’s and the Banks’ ability to pay dividends.

As described above under “Capital

Requirements,” the capital conversion buffer requirement can also restrict Banner Corporation’s and the Banks’ ability to pay dividends.

Further, under Washington law, Banner Corporation is prohibited from paying a dividend if, after making such dividend payment, it would be unable to pay its debts as they become due in the usual course of business, or if its total liabilities, plus the amount that would be needed in the event Banner Corporation were to be dissolved at the time of the dividend payment, to satisfy preferential rights on dissolution of holders of preferred stock ranking senior in right of payment to the capital stock on which the applicable distribution is to be made, exceed our total assets.

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The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve.

During the year ended December 31, 2019 , Banner Corporation repurchased 1.0 million shares of its common stock at an average price of $53.90 per share.

During the year ended December 31, 2020, Banner Corporation repurchased 624,780 shares of its common stock at an average price of $50.84 per share.

For additional information regarding share repurchases and authorizations, see Item 5 of this report, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”.

Management Personnel

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The following table sets forth information with respect to the executive officers of Banner Corporation and Banner Bank as of December 31, 2020:

Position with Banner Corporation

Position with Banner Bank

President, Chief Executive Officer,

President, Chief Executive Officer, Director

Executive Vice President,

Chief Credit Officer

Executive Vice President

Name Age Position with Banner Corporation Position with Banner Bank

Grescovich 56 President, Chief Executive Officer,

Director President, Chief Executive Officer, Director

Brown 53 Executive Vice President,

Chief Information Officer

Conner 55 Executive Vice President

Chief Financial Officer

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Chief Financial Officer

Executive Vice President,

Garcia 61 Executive Vice President,

Chief Audit Executive

Executive Vice President

Johnson 58 Executive Vice President

Kohler 48 Executive Vice President

Human Resources

Executive Vice President,

Chief Diversity Officer*

Larsen 51 Executive Vice President,

Mortgage Banking

Executive Vice President,

McLean 56 Executive Vice President,

Commercial Real Estate Lending Division

Executive Vice President

General Counsel

Executive Vice President

General Counsel

Executive Vice President,

Craig Miller 69 Executive Vice President

General Counsel, Ethics Officer

Secretary Executive Vice President

General Counsel, Secretary

Purcell 63 Executive Vice President,

Retail Banking and Administration

Executive Vice President,

Commercial Executive

Executive Vice President,

Commercial Banking West

Kirk Quillin 58 Executive Vice President,

Chief Commercial Executive

58 Executive Vice President,

Commercial Banking North

Rice 55 Executive Vice President,

Chief Credit Officer

Rust 73 Executive Vice President,

Chief Information Officer**

Executive Vice President

Steiner 58 Executive Vice President

Chief Risk Officer

Executive Vice President,

Wagers 60 Executive Vice President,

Retail Products and Services

Executive Vice President,

Western*** 65 Executive Vice President,

Commercial Banking South

Kohler was appointed as Chief Diversity Officer of Banner Bank in January 2021

Rust is transitioning his responsibilities to Ms.

Brown, who joined Banner Bank in December 2020

Western retired as of December 31, 2020

Biographical Information

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Grescovich is President and Chief Executive Officer, and a director, of Banner Corporation and Banner Bank.

Grescovich joined Banner Bank in April 2010 and became Chief Executive Officer in August 2010 following an extensive banking career specializing in finance, credit administration and risk management.

Grescovich joined Banner Bank in April 2010 and became Chief Executive Officer in August 2010 following an extensive banking career specializing in

finance, credit administration and risk management.

Under his leadership, Banner has grown from $4.7 billion in assets in 2010 to more than $15 billion today through organic growth as well as selective acquisition.

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Grescovich was the Executive Vice President and Chief Corporate Banking Officer for Akron, Ohio-based FirstMerit Corporation and FirstMerit Bank N.A., a commercial bank with $14.5 billion in assets and over 200 branch offices in three states.

He assumed the role and responsibility for FirstMerit’s commercial and regional line of business in 2007,

having served since 1994 in various commercial and corporate banking positions, including that of Chief Credit Officer.

He assumed responsibility for FirstMerit’s commercial and regional line of business in 2007, having served since 1994 in various commercial and corporate banking positions, including that of Chief Credit Officer.

Prior to joining FirstMerit, Mr.

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He has a Bachelor of Business Administration degree in finance from Miami University and a Master of Business Administration degree, also in finance, from The University of Akron.

Barton joined Banner Bank in 2002 as Chief Credit Officer.

Barton’s banking career began in 1972 with Seafirst Bank and Bank of America, where he served in a variety of commercial lending and credit risk management positions.

In his last positions at Bank of America before joining Banner Bank, he served as the senior real estate risk management executive for the Pacific Northwest and as the credit risk management executive for the west coast home builder division.

Brown joined Banner Bank in December 2020 as Chief Information Officer.

She provides direction and oversight for information technology and security across Banner Bank, including existing and emerging initiatives.

Prior to joining the Company, Ms.

Brown’s career included more than 25 years of information technology experience.

She has specific expertise leading large, complex projects and technology environments.

Brown served as Vice President of Governance & Infrastructure Shared Services at Epiq Global, a worldwide provider of legal services, in the Seattle, WA office from November 2018 through October 2020.

In June 2018, Epiq Global purchased Garden City Group, where Ms.

Brown had served as Senior Vice President and Chief Information Officer since September 2016 (also in Seattle, WA).

From March 2014 to September 2016, Ms.

Brown was Vice President, Information Technology Applications for Premera (Mountlake Terrace, WA), where she had previously served as Information Technology Director, Strategic Services.

Brown attended Washington State University and served eight years in the U.S.

Marine Corps.

She is a Desert Storm Veteran.

Brown is an active volunteer in several children’s welfare and development causes in the Puget Sound area and abroad.

Conner joined Banner Bank in 2015 upon the acquisition of AmericanWest Bank (AmericanWest).

Prior to joining Banner, Mr.

Conner was the Chief Financial Officer for SKBHC LLC, the holding company for Starbuck Bancshares, Inc.

Prior to joining the Company, Mr.

Conner was the Chief Financial Officer for SKBHC LLC in Seattle, WA the holding company for Starbuck Bancshares, Inc.

(Starbuck), the holding company for AmericanWest, and AmericanWest from 2010 until he joined Banner Bank in 2015.

Conner has 30 years of experience in executive finance positions at Wells Fargo Bank as well as regional community banks.

Conner has over 30 years of experience in financial services, including 20 years in executive financial positions at Wells Fargo Bank as well as regional community banks.

Additionally, he spent time as a managing director for FSI Group, where he evaluated and placed equity fund investments in community banks.

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He has more than 42 years of experience in the financial services in dustry.

Prior to joining Banner in 2017, Mr.

Garcia served for 16 years at the Bank of Hawaii, most recently as Executive Vice President and Chief Audit Executive, with prior positions as Vice President and Senior Audit Manager.

Prior to joining the Company in 2017, Mr.

Garcia served for 16 years at the Bank of Hawaii in Honolulu, HI, most recently as Executive Vice President and Chief Audit Executive, with prior positions as Vice President and Senior Audit Manager.

Garcia also has 24 years of experience at Bank of America where he held several positions in consumer and commercial operations management and audit, including that of Audit Director.

Garcia earned his bachelor’s degree in management from St.

Mary's College of California and is a graduate of the School of Mortgage Banking.

Marys’ College of California and is a graduate of the School of Mortgage Banking.

He is a Certified Bank Auditor (CBA), holds a Certification in Risk Management Assurance (CRMA) and is a Certified Information Systems Auditor (CISA).

Johnson has over 32 years of banking experience.

Prior to joining Skagit Bank in 2015, Mr.

He joined Banner Bank as Executive Vice President, Operations, in connection with Banner’s merger with Skagit Bank in November 2018.

Prior to joining Skagit Bank in Burlington, WA in 2015, Mr.

Johnson held various executive positions with Chemical Financial Corporation, including production oversight of commercial, mortgage, consumer and deposit generation.

In addition, while at Chemical, he served nine years as Executive Vice President, Director of Bank Operations, responsible for nine business units including the branch system, information technology, corporate marketing, loan operations, deposit operations, electronic banking, facilities/purchasing, card services, and customer care centers.

Prior to Chemical, he held leadership roles in retail banking and operations at Shoreline Bank and as Vice President, Zone Manager for Michigan National Bank.

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He is also a graduate of Stonier Graduate School of Banking.

Kohler joined Banner Bank in 2016 as Executive Vice President of Human Resources.

Kohler joined Banner Bank in 2016 as Executive Vice President of Human Resources and, in January 2021, was also appointed as the Bank’s Chief Diversity Officer.

Kohler’s focus is on driving organizational design priorities at Banner Bank including:

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Prior to joining Banner, Ms.

Kohler served 20 years in progressive human resource leadership roles for Plum Creek Timber Company, now Weyerhaeuser.

Kohler served 20 years in progressive human resource leadership roles for Plum Creek Timber Company, now Weyerhaeuser, in Seattle, WA.

She holds bachelors’ degrees in Marketing as well as Business Management from Northwest Missouri State University and a master’s in Organizational Management from the University of Phoenix.

Through continuing education, she maintains her certifications as a Senior Professional in Human Resources or SPHR and a Society of Human Resources Management Senior Certified Professional or SHRM-SCP.

Through continuing education, she maintains her certifications as a Senior Professional in Human Resources (SPHR) and a Society of Human Resources Management Senior Certified Professional or (SHRM-SCP).

Larsen joined Banner Bank in 2005 as the Real Estate Administration Manager and was promoted to Mortgage Banking Director in 2010.

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Larsen began his career at Action Mortgage/Sterling Savings, later moving to Peoples Bank of Lynden where he managed the mortgage banking operation.

Larsen also served as the 90th President of the Seattle Mortgage Bankers Association.

Larsen also served as the 90th President of the

Seattle Mortgage Bankers Association.

Formerly he was the Chairman of the Washington Mortgage Bankers Association and currently serves as a commissioner on the Washington State Housing Finance Commission.

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Craig Miller is the Executive Vice President and General Counsel for Banner Corporation and Banner Bank.

He joined Banner in 2016 and is responsible for overseeing the company’s legal functions, and he serves also as Corporate Secretary and Ethics Officer for the company.

Miller had previously served as senior litigation partner at Davis Wright Tremaine LLP in Seattle.

He joined Banner in 2016 and is responsible for overseeing the Company’s legal functions, and he also serves as Corporate Secretary and Ethics Officer for the company.

Miller had previously served as senior litigation partner at Davis Wright Tremaine LLP in Seattle, WA.

Miller earned his B.A.

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degree from the University of Southern California Law School.

His community involvement includes board service with

the YMCA of Greater Seattle, Childhaven (past board president), King County Sexual Assault Resource Center, and the Meany Center for the Performing Arts (past board president).

Purcell is the Executive Vice President for Retail Banking and Administration.

His community involvement has included board service with the YMCA of Greater Seattle, Childhaven (past board president), King County Sexual Assault Resource Center, and the Meany Center for the Performing Arts (past board president).

Purcell is Banner Bank’s Executive Vice President for Retail Banking and Administration.

Purcell is responsible for leading the Retail Banking business line including Branch Banking, Mortgage Banking, Business Banking and Digital delivery channels, as well as oversight of administrative and support functions for Banner Bank.

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She has also taught banking courses throughout her career, including the ABA Graduate School of Bank Investments and Financial Management, the Northwest Intermediate Banking School, and the Oregon Bankers Association Directors College.

Kirk Quillin joined Banner Bank’s commercial banking group in 2002 as a Senior Vice President and commercial banking manager for the Spokane, Washington, and Idaho markets.

He was named the East Region Commercial Banking Executive in July 2012, responsible for commercial and specialty banking for all locations in Eastern Washington, Eastern Oregon and Idaho.

Currently, he is overseeing a project that addresses both efficiency and scalability for Banner Bank.

Kirk Quillin joined Banner Bank’s commercial banking group in 2002 and now serves as Chief Commercial Banking Executive.

Quillin began his career in the banking industry in 1984 with Idaho First National Bank, which is now U.S.

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in Finance and Economics from Boise State University and was certified by the Pacific Coast Banking School and Northwest Intermediate Commercial Lending School.

joined Towne Bank (now Banner Bank) as a Vice President and Commercial Branch Manager in July 1995 and was named as West Region Commercial Executive, later identified as North Region Commercial Banking Executive, in July 2012.

He is responsible for Commercial Banking in Western Washington, Western Oregon, the Columbia Basin, and Spokane markets as well as Treasury Management and Specialty Banking Services.

Reed began his banking career with Rainier Bank, which later became Security Pacific Bank and later still West One Bank.

He earned a Bachelor of Arts in Interdisciplinary Arts and Sciences from the University of Washington and earned certificates from Pacific Coast Banking School, Northwest Intermediate Banking School and Northwest Intermediate Commercial Lending School.

Currently, Mr.

Reed is a member of the University of Washington Bothell Advisory Board and the Association of Washington Business Board of Directors.

Rust joined Banner Bank in October 2005 as Senior Vice President and Chief Information Officer and was named to his current position as Executive Vice President and Chief Information Officer in September 2007.

Rust has over 39 years of relevant industry experience prior to joining Banner Bank and was founder and President of InfoSoft Technology, through which he worked for nine years as a technology consultant and interim Chief Information Officer for banks and insurance companies.

As a dedicated, civic-minded community member, Mr.

Quillin was active in Rotary for over 20 years, and for eight years served as a Fire Commissioner.

began his banking career in 1985 and joined Banner Bank in 1998.

Since then he has held several leadership positions with progressive responsibilities within the Commercial Banking division.

Today, as Executive Vice President, Commercial Banking, Mr.

Reed leads the teams that focus on commercial banking relationship management and business development.

Reed earned his bachelor’s degree from the University of Washington and is a graduate of Pacific Coast Banking School.

Reed’s community involvement includes serving on the Association of Washington Businesses Executive Board as well as a member of the University of Washington Bothell Advisory Board.

Rice joined Banner Bank in 2002 as a Regional Credit Risk Manager, later promoted to Senior Credit Officer overseeing the commercial banking credit function in 2008, and promoted to Chief Credit Officer in 2020.

Rice has more than 30 years of credit-related experience, including time as a Senior Bank Examiner with the FDIC.

Rice earned her bachelor’s degree from Western Washington University, is a graduate of the Pacific Coast Banking School, and has held the RMA Credit Risk Certification since 2009.

For more than 11 years Ms.

Rice has been actively engaging with LifeWire, a domestic violence prevention organization, including serving seven years on the board of directors, two of which she was the board president.

Rust joined Banner Bank in October 2005 as Senior Vice President and Chief Information Officer and was named as Executive Vice President and Chief Information Officer in September 2007.

Rust is transitioning his responsibilities to Ms.

Brown, who joined Banner Bank in December 2020.

Rust has more than 40 years of relevant industry experience and was founder and President of InfoSoft Technology, through which he worked for nine years as a technology consultant and interim Chief Information Officer for banks and insurance companies.

He also worked 19 years with US Bank/West One Bancorp as Senior Vice President & Manager of Information Systems.

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Prior to joining Banner, Ms.

Steiner spent 25 years with FirstMerit Corporation in executive leadership positions including Executive Vice President & Chief Risk Officer, Secretary, and General Counsel.

Steiner spent 25 years with FirstMerit Corporation in Akron, OH in executive leadership positions including Executive Vice President & Chief Risk Officer, Secretary, and General Counsel.

Steiner earned her bachelor’s degree from the University of Akron and her Juris Doctor degree (JD) from the Case Western Reserve University School of Law.

Wagers joined Banner Bank as Senior Vice President, Consumer Lending Administration in 2002 and was named to his current position in Retail Products and Services in January 2008.

Wagers joined Banner Bank as Senior Vice President, Consumer Lending Administration in 2002 and was named to his current position as Executive Vice President, Retail Products and Services in January 2008.

Wagers began his banking career in 1982 at Idaho First National Bank.

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He is also a graduate of the ABA’s Stonier School of Banking.

Western is Executive Vice President, Commercial Banking South for Banner Bank, joining Banner upon the merger of AmericanWest and Banner Bank.

Western was Executive Vice President, Commercial Banking South for Banner Bank, until his retirement on December 31, 2020.

Western joined Banner upon the merger of AmericanWest and Banner Bank.

Prior to the merger, Mr.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business