SECURITIES AND EXCHANGE COMMISSION

                         WASHINGTON, D.C. 20549


                                FORM 8-K

                             CURRENT REPORT

                 PURSUANT TO SECTION 13 OR 15 (d) OF THE

                     SECURITIES EXCHANGE ACT OF 1934

     Date of Report (Date of earliest event reported): December 18, 2006

                             Banner Corporation
             ----------------------------------------------------
            (Exact name of registrant as specified in its charter)

     Washington                    0-26584                 91-1691604
- ----------------------------     -----------            ------------------
State or other jurisdiction      Commission             (I.R.S. Employer
of incorporation                 File Number            Identification No.)

10 S. First Avenue, Walla Walla, Washington                    99362
- -------------------------------------------                  --------
(Address of principal executive offices)                    (Zip Code)

     Registrant's telephone number (including area code)  (509) 527-3636

                                 Not Applicable
          ------------------------------------------------------------
          (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions.

[X]  Written communications pursuant to Rule 425 under the Securities Act
     (17 CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
     CFR 240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))





Item 1.01 Entry into a Material Definitive Agreement.

     On December 18, 2006, Banner Corporation, a Washington corporation
("Banner") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with San Juan Financial Holding Company of Friday Harbor,
Washington ("San Juan").  Under the terms of the Merger Agreement, San Juan
will be merged with and into Banner, with Banner being the surviving
institution. San Juan's subsidiary financial institution, Islanders Bank, a
state chartered commercial community bank, will remain independent as a
subsidiary of Banner.

     Under the terms of the Merger Agreement, which has been unanimously
approved by the Boards of Directors of Banner and San Juan, each share of San
Juan common stock will be converted into 2.2503 shares of Banner common stock
and $16.48 in cash, subject to certain conditions and assuming 364,078 shares
of San Juan common stock are outstanding at the closing of the transaction.
Based upon the closing price for Banner's common stock on December 18, 2006 of
$42.43 per share, the consideration is equivalent to $111.96 per share of San
Juan common stock. In addition to the foregoing, additional consideration will
be paid by Banner to the San Juan shareholders in the event the transaction
has not closed by March 31, 2007 and the failure to close is not a result of
San Juan's failure to perform or observe the covenants and agreements of San
Juan set forth in the Merger Agreement.  The additional consideration will be
equal to the amount of any dividends paid to Banner shareholders with a record
date on or after March 31, 2007, but before the closing date of the
transaction, that would have been payable on the Banner common stock issued
and outstanding if the closing of the transaction had occurred on March 31,
2007.  Furthermore, a special distribution may be paid by San Juan to its
shareholders that consists of the net after tax proceeds from San Juan's
disposal, by the close of the transaction and pursuant to the terms of the
Merger Agreement, of its interests in San Juan Title LLC.  The amount received
by San Juan from the disposal of San Juan Title LLC will be subject to
verification by Banner.

     The transaction, which is valued at approximately $40.8 million, is
expected to close in the second quarter of 2007, pending San Juan shareholder
and regulatory approval and the satisfaction of other customary closing
conditions.  San Juan has agreed to pay a termination fee in the event the
Merger Agreement is terminated under certain conditions. All of the directors
and certain officers of San Juan have entered into voting agreements pursuant
to which they have agreed to vote their shares in favor of the transaction.

     For additional information regarding the terms of the proposed
transaction, reference is made to the Merger Agreement, which is attached
hereto as Exhibit 2.1 and incorporated herein by reference.

Additional Information and Where to Find it

     Banner intends to file with the Securities and Exchange Commission a
registration statement on Form S-4, and San Juan expects to mail a proxy
statement/prospectus to its security holders, containing information about the
transaction.  Investors and security holders of Banner and San Juan are urged
to read the proxy statement/prospectus and other relevant materials when they
become available because they will contain important information about Banner,
San Juan and the proposed merger.  In addition to the registration statement
to be filed by Banner and the proxy statement/prospectus to be mailed to the
security holders of San Juan, Banner files annual, quarterly and current
reports, proxy statements and other information with the Securities and





Exchange Commission.  Investors and security holders may obtain a free copy of
the proxy statement/prospectus and other relevant documents (when they become
available) and any other documents filed with the Securities and Exchange
Commission at its website at www.sec.gov.  The documents filed by Banner, may
also be obtained free of charge from Banner by requesting them in writing at
Banner Corporation, 10 South First Avenue, Walla Walla, WA  99362, or by
telephone at (509) 527-3636.  In addition, investors and security holders may
access copies of the documents filed with the Securities and Exchange
Commission by Banner on its website at www.bannerbank.com.

Item 8.01    Other Events.

     On December 19, 2006, Banner and  San Juan issued a joint press release
announcing the execution by and between Banner and San Juan of an Agreement
and Plan of Merger, dated as of December 19, 2006.

     Attached as Exhibit 99.1 and incorporated herein by reference, is a copy
of the joint press release issued by Banner on December 190, 2006, announcing
the signing of the merger agreement. A presentation that Banner is presenting
to investors on December 20, 2006 is included as Exhibit 99.2 to this report
in a pdf file, which will be formally filed in a separate Form 8-K Current
Report.

Forward-looking Statements

     This Form 8-K and the exhibits hereto may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 concerning future performance, developments or events, expectations
for earnings, growth and market forecasts, and other guidance on future
periods (including, among others, statements regarding the benefits of the
acquisition of San Juan by Banner), which  forward-looking statements are
subject to a number of risks and uncertainties that are beyond the Company's
control and might cause actual results to differ materially from stated
objectives.  These factors include but are not limited to:  competition in the
financial services market for both deposits and loans as well as regional and
general economic conditions; and Banner's ability to successfully complete
consolidation and conversion activities, incorporate acquisitions into its
operations, retain key employees, increase its customer base, achieve cost
savings and successfully generate commercial, consumer and real estate loans.
Additional factors that may affect future results are contained in Banner
filings with the SEC, which are available at the SEC  web site
http://www.sec.gov, including in Banner  Annual Report on Form 10-K for the
year ended December 31, 2005, under the heading  "Risk Factors."  Banner
undertakes no responsibility to update or revise any forward-looking
statements.

Item 9.01  Financial Statements and Exhibits

     (d)  Exhibits

          2.1    Agreement and Plan of Merger dated December 18, 2006 by and
                 among Banner Corporation and San Juan Financial Holding
                 Company.

          99.1   Press Release dated December 19, 2006.

          99.2   Presentation of Banner dated December 19, 2006 (filed as a
                 pdf file to this Form 8-K and to be formally filed in a
                 separate Form 8-K Current Report).






                                SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.

                                   BANNER CORPORATION



                                    /s/D. Michael Jones
Date: December 19, 2006         By: -----------------------------------
                                    D. Michael Jones
                                    President and Chief Executive Officer





                              Exhibit  2.1

          Agreement and Plan of Merger dated December 18, 2006
   by and among Banner Corporation and San Juan Financial Holding Company




                       AGREEMENT AND PLAN OF MERGER

                              by and between

                    SAN JUAN FINANCIAL HOLDING COMPANY

                                   and

                            BANNER CORPORATION


                          _____________________


                      DATED AS OF DECEMBER 18, 2006



                            TABLE OF CONTENTS
                                                                        Page

                                ARTICLE I

                                THE MERGER

1.1    The Merger.....................................................   1
1.2    Effective Time.................................................   2
1.3    Effects of the Merger..........................................   2
1.4    Conversion of San Juan Financial Common Stock..................   2
1.5    Stock Options and Other Stock-Based Awards.....................   5
1.6    Additional Consideration.......................................   6
1.7    Articles of Incorporation of Banner............................   6
1.8    By-laws of Banner .............................................   6
1.9    Tax Consequences...............................................   6

                                ARTICLE II

                     DELIVERY OF MERGER CONSIDERATION

2.1    Exchange Agent.................................................   6
2.2    Deposit of Merger Consideration................................   7
2.3    Delivery of Merger Consideration...............................   7

                               ARTICLE III

           REPRESENTATIONS AND WARRANTIES OF SAN JUAN FINANCIAL

3.1    Corporate Organization.........................................   9
3.2    Capitalization.................................................  11
3.3    Authority; No Violation........................................  12
3.4    Consents and Approvals.........................................  13
3.5    Reports; Regulatory Matters....................................  14
3.6    Financial Statements...........................................  15
3.7    Broker's Fees..................................................  16
3.8    Absence of Certain Changes or Events...........................  16
3.9    Legal Proceedings..............................................  17
3.10   Taxes and Tax Returns..........................................  17
3.11   Employee Matters. .............................................  18
3.12   Compliance with Applicable Law.................................  22
3.13   Certain Contracts .............................................  23
3.14   Risk Management Instruments ...................................  24
3.15   Investment Securities..........................................  25
3.16   Loan Portfolio.................................................  25
3.17   Property.......................................................  27


                                       -i-





3.18   Intellectual Property..........................................  27
3.19   Environmental Liability .......................................  28
3.20   State Takeover Laws............................................  28
3.21   Reorganization; Approvals......................................  28
3.22   Opinions.......................................................  28
3.23   San Juan Financial Information.................................  29

                                ARTICLE IV

                 REPRESENTATIONS AND WARRANTIES OF BANNER

4.1    Corporate Organization.........................................  29
4.2    Capitalization.................................................  30
4.3    Authority; No Violation........................................  31
4.4    Consents and Approvals.........................................  31
4.5    Reports; Regulatory Matters....................................  32
4.6    Financial Statements...........................................  33
4.7    Broker's Fees..................................................  34
4.8    Absence of Certain Changes or Events...........................  34
4.9    Legal Proceedings..............................................  35
4.10   Taxes and Tax Returns..........................................  35
4.11   Compliance with Applicable Law.................................  35
4.12   Intellectual Property..........................................  36
4.13   Risk Management Instruments....................................  36
4.14   Investment Securities .........................................  36
4.15   Property.......................................................  37
4.16   Environmental Liability .......................................  37
4.17   Loan Portfolio.................................................  38
4.18   Reorganization; Approvals......................................  39
4.19   Banner Information.............................................  39

                                ARTICLE V

                COVENANTS RELATING TO CONDUCT OF BUSINESS

5.1    Conduct of Businesses Prior to the Effective Time..............  39
5.2    San Juan Financial Forbearances ...............................  39
5.3    Banner Forbearances............................................  42

                                ARTICLE VI

                          ADDITIONAL AGREEMENTS

6.1    Regulatory Matters.............................................  43
6.2    Access to Information..........................................  44
6.3    Shareholder Approval...........................................  45
6.4    Affiliates.....................................................  45


                                     -ii-





6.5    Nasdaq Listing.................................................  45
6.6    Employee Matters...............................................  45
6.7    Indemnification; Directors' and Officers' Insurance............  46
6.8    Additional Agreements..........................................  47
6.9    Advice of Changes..............................................  48
6.10   Exemption from Liability Under Section 16(b)...................  48
6.11   No Solicitation................................................  48
6.12   Special Distribution...........................................  50

                               ARTICLE VII

                           CONDITIONS PRECEDENT

7.1   Conditions to Each Party's Obligation to Effect the Merger......  50
7.2   Conditions to Obligations of Banner.............................  51
7.3   Conditions to Obligations of San Juan Financial.................  52

                               ARTICLE VIII

                        TERMINATION AND AMENDMENT
8.1   Termination.....................................................  53
8.2   Effect of Termination...........................................  55
8.3   Fees and Expenses; Termination Fees.............................  55
8.4   Amendment.......................................................  56
8.5   Extension; Waiver...............................................  56

                                ARTICLE IX

                            GENERAL PROVISIONS

9.1   Closing.........................................................  56
9.2   Nonsurvival of Representations, Warranties and Agreements.......  56
9.3   Notices.........................................................  57
9.4   Interpretation..................................................  58
9.5   Counterparts....................................................  58
9.6   Entire Agreement................................................  58
9.7   Governing Law; Jurisdiction.....................................  58
9.8   Publicity.......................................................  59
9.9   Assignment; Third Party Beneficiaries...........................  59


                                     -iii-

                     INDEX OF DEFINED TERMS


                                                                   Section
                                                                   -------

Additional Consideration........................................      1.6
Agency (Agencies)...............................................    3.16(d)
Aggregate Consideration.........................................     1.4(d)
Agreement.......................................................   Preamble
Alternative Proposal ...........................................    6.11(a)
Alternative Transaction.........................................    6.11(a)
Anticipated Closing Date........................................     1.4(d)
Articles of Merger .............................................       1.2
Average Closing Price...........................................     1.4(d)
Banner..........................................................   Preamble
Banner Articles.................................................     4.1(b)
Banner Benefit Plan.............................................     6.6(b)
Banner By-laws..................................................     4.1(b)
Banner Capitalization Date......................................     4.2(a)
Banner Common Stock.............................................     1.4(a)
Banner Disclosure Schedule......................................    Art. IV
Banner Fill Option..............................................     8.1(h)
Banner Leased Properties........................................     4.15
Banner Loans....................................................     4.17(a)
Banner Owned Properties.........................................     4.15
Banner Preferred Stock..........................................     4.2(a)
Banner Real Property............................................     4.15
Banner Regulatory Agencies......................................     4.5(a)
Banner Regulatory Agreement.....................................     4.5(b)
Banner Requisite Regulatory Approvals...........................     7.2(d)
Banner Restricted Share Right...................................     1.5(b)
Banner SEC Reports..............................................     4.5(c)
Banner Starting Price...........................................     8.1(g)
Banner Stock Plans..............................................     4.2(a)
Banner Subsidiary...............................................     4.1(a)
BHC Act.........................................................     3.1(b)
Business Day....................................................     1.4(d)
Certificate.....................................................     1.4(f)
Change in control Event.........................................     1.4(d)
Claim...........................................................     6.7(a)
Closing.........................................................      9.1
Closing Date....................................................      9.1
Code ...........................................................   Recitals
Confidentiality Agreements .....................................     6.2(b)
Controlled Group Liability......................................   3.11
Covered Employees...............................................     6.6(a)
Derivative Transactions.........................................     3.14(a)
Determination Date..............................................     1.4(d)

                                      -iv-




Disposition.....................................................     6.12
Disposition Proceeds............................................     6.12
Dissenting Shares...............................................     1.4(h)
Effective Time..................................................      1.2
Employment Agreement............................................     3.11
ERISA...........................................................     3.11
Exchange Act....................................................     3.13(a)
Exchange Agent..................................................      2.1
Exchange Agent Agreement........................................      2.1
Exchange Fund...................................................      2.2
Fairness Opinion ...............................................     3.22
FDIC............................................................     3.1(e)
Federal Reserve Board...........................................      3.4
Form S-4 .......................................................      3.4
GAAP ...........................................................     3.1(c)
Governmental Entity.............................................      3.4
Indebtedness....................................................     3.13(a)
Indemnified Parties. ...........................................     6.7(a)
Injunction......................................................     7.1(d)
Insurance Amount................................................     6.7(c)
Intellectual Property...........................................     3.18
IRS.............................................................    3.10(a)
Letter of Transmittal...........................................     2.3(a)
Liens...........................................................     3.2(b)
Loans...........................................................    3.16(a)
Lower Ceiling Price.............................................     1.4(d)
Lower Floor Price...............................................     1.4(d)
Material Adverse Effect.........................................     3.1(a)
Materially Burdensome Regulatory Condition......................     6.1(b)
Merger..........................................................   Recitals
Merger Consideration............................................     1.4(d)
Multiemployer Plan..............................................    3.11
Multiple Employer Plan..........................................    3.11(f)
Nasdaq..........................................................     1.4(d)
Other Regulatory Approvals......................................     3.4
Per Share Additional Consideration..............................     1.6
Per Share Cash Consideration....................................     1.4(d)
Per Share Stock Consideration...................................     1.4(d)
Permitted Encumbrances..........................................     3.17
Plan............................................................     3.11
Policies, Practices and Procedures..............................    3.15(b)
Proxy Statement.................................................     3.4
Qualified Plans.................................................     3.11
RCW.............................................................     1.3
San Juan Financial..............................................   Preamble
San Juan Financial Articles.....................................     3.1(b)

                                       -v-





San Juan Financial Balance Sheet................................     3.6(a)
San Juan Financial Bank.........................................     3.1(c)
San Juan Financial Benefit Plan.................................     3.11
San Juan Financial By-laws......................................     3.1(b)
San Juan Financial Capitalization Date..........................     3.2(a)
San Juan Financial Common Stock.................................     1.4(b)
San Juan Financial Confidentiality Agreement....................     6.2(b)
San Juan Financial Contract.....................................    3.13(a)
San Juan Financial Criticized Assets............................    3.14(c)
San Juan Financial Disclosure Schedule..........................   Art. III
San Juan Financial ERISA Affiliate..............................     3.11
San Juan Financial Fill Option..................................     8.1(h)
San Juan Financial Financial Statements.........................     3.6(a)
San Juan Financial Leased Properties............................     3.17
San Juan Financial Options......................................     1.5(a)
San Juan Financial Owned Properties.............................     3.17
San Juan Financial Pool.........................................    3.16(g)
San Juan Financial Real Property................................     3.17
San Juan Financial Recommendation...............................     6.3
San Juan Financial Regulatory Agencies..........................     3.5(a)
San Juan Financial Regulatory Agreement.........................     3.5(b)
San Juan Financial Requisite Regulatory Approvals...............     7.3(d)
San Juan Financial Restricted Shares............................     1.5(b)
San Juan Financial Shareholders' Meeting........................     6.3
San Juan Financial Stock Plans..................................     1.5(a)
San Juan Financial Subsidiary...................................     3.1(c)
Sarbanes-Oxley Act..............................................     4.5(c)
SEC.............................................................     3.4
Securities Act..................................................     3.2(a)
Subsidiary......................................................     3.1(c)
Surviving Corporation...........................................   Recitals
Takeover Statutes...............................................     3.20
Tax Return......................................................    3.10(c)
Tax(es).........................................................    3.10(b)
Termination Fee.................................................    8.3(b)(i)
Total Cash Amount...............................................    1.4(d)
Total Stock Amount..............................................    1.4(d)
Unaudited San Juan Financial Balance Sheet......................    3.6(a)
Upper Ceiling Price.............................................    1.4(d)
Upper Floor Price...............................................    1.4(d)
Voting Debt.....................................................    3.2(a)
WBCA............................................................    1.1(a)
WDFI............................................................    3.5(a)
Withdrawal Liability............................................    3.11


                                       -vi-





                         AGREEMENT AND PLAN OF MERGER

     AGREEMENT AND PLAN OF MERGER, dated as of December 18, 2006 (this
"Agreement"), by and between SAN JUAN FINANCIAL HOLDING COMPANY, a Washington
corporation ("San Juan Financial") and BANNER CORPORATION, a Washington
corporation ("Banner").

                             W I T N E S S E T H:

     WHEREAS, the Boards of Directors of San Juan Financial and Banner have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the strategic business combination
transaction provided for in this Agreement in which San Juan Financial will,
on the terms and subject to the conditions set forth in this Agreement, merge
with and into Banner (the "Merger"), so that Banner is the surviving
corporation in the Merger (sometimes referred to in such capacity as the
"Surviving Corporation");

     WHEREAS, for federal income Tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
is intended to be and is adopted as a "plan of reorganization" for purposes of
Sections 354 and 361 of the Code; and

     WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.

     NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
agree as follows:
                                  ARTICLE I

                                 THE MERGER

     1.1   The Merger.  (a)  Subject to the terms and conditions of this
Agreement, in accordance with the Washington Business Corporation Act (the
"WBCA"), at the Effective Time, San Juan Financial shall merge with and into
Banner.  Banner shall be the Surviving Corporation in the Merger, and shall
continue its corporate existence under the laws of the State of Washington.
As of the Effective Time, the separate corporate existence of San Juan
Financial shall cease.

     (b)   Banner may, with San Juan Financial's consent (which shall not be
unreasonably withheld), at any time change the method or structure of
effecting the combination (including by providing for the merger of San Juan
Financial and a wholly owned subsidiary of Banner); provided, however, that no
such change shall (i) alter or change the amount or kind of the Merger
Consideration provided for in this Agreement, (ii) adversely affect the Tax
treatment of the Merger with respect to San Juan Financial's shareholders or
(iii) materially impede or delay consummation of the transactions contemplated
by this Agreement.  This Agreement and






any related documents will be appropriately amended in order to reflect any
such changed method or structure.

     1.2   Effective Time.  The Merger shall become effective at the time set
forth in the articles of merger that shall be filed with the Secretary of
State of the State of Washington (the "Articles of Merger") on the Closing
Date, in the form attached hereto as Exhibit A.  The term "Effective Time"
shall be the date and time when the Merger becomes effective as set forth in
the Articles of Merger.

     1.3   Effects of the Merger.  At and after the Effective Time, the Merger
shall have the effects set forth in Revised Code of Washington ("RCW")
23B.11.060 and other applicable law.

     1.4   Conversion of San Juan Financial Common Stock.  At the Effective
Time, by virtue of the Merger and without any action on the part of Banner,
San Juan Financial or the holder of any of the following securities:

     (a)   Each share of common stock, par value $0.01 per share, of Banner
(the "Banner Common Stock") issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and shall not be affected
by the Merger.

     (b)    All shares of common stock, par value $1.00 per share, of San Juan
Financial (the "San Juan Financial Common Stock") issued and outstanding
immediately prior to the Effective Time that are beneficially owned by Banner
or any Subsidiary of San Juan Financial (other than shares of San Juan
Financial Common Stock held in trust accounts, managed accounts and the like,
or otherwise held in a fiduciary or agency capacity, that are beneficially
owned by third parties and other than shares of San Juan Financial Common
Stock held, directly or indirectly, by Banner or a Subsidiary of San Juan
Financial in respect of a debt previously contracted) shall be cancelled and
shall cease to exist and no stock of Banner or other consideration shall be
delivered in exchange therefor.

     (c)   Except as provided in clause (b) above, and subject to adjustments
as set forth in clauses (e) and (g) below, each share of San Juan Financial
Common Stock issued and outstanding immediately before the Merger (other than
Dissenting Shares) shall be converted into the right to receive (i) the Per
Share Cash Consideration, (ii) the Per Share Stock Consideration, and (iii)
the Per Share Additional Consideration, if any.

     (d)   As used in this Agreement, the following terms shall have the
meanings set forth below:

     "Aggregate Consideration" means the aggregate value of the Merger
Consideration.

     "Anticipated Closing Date" means the date first mutually agreed by the
parties to be the date on which the parties expect that the conditions set
forth in Article VI would have been satisfied and the Closing would occur.

                                    -2-





     "Average Closing Price" of the Banner Common Stock shall mean the
arithmetic mean of the daily closing sales prices per share of Banner Common
Stock reported on the The Nasdaq Stock Market (the "Nasdaq") (as reported by
the Wall Street Journal or, if not reported thereby, another authoritative
source) for the ten (10) consecutive Nasdaq trading days ending at the close
of trading on the Determination Date.

     "Business Day" means Monday through Friday of each week, except a legal
holiday recognized as such by the U.S. Government or any day on which banking
institutions in the State of Washington are authorized or obligated to close.

     A "Change in Control Event" shall be deemed to have occurred if, between
the date of this Agreement and the Determination Date, a proposal shall have
been publicly announced for (A) a merger, consolidation or other business
combination involving Banner in connection with which Banner would not be the
surviving corporation (unless shareholders of Banner immediately prior to such
transaction own at least a majority of the surviving corporation or its
ultimate parent company), or which, if consummated, would result in any person
(or "group" of persons, as "group" is defined in Rule 13d under the Exchange
Act) acquiring securities of Banner or a Subsidiary representing 50 percent or
more, in the aggregate, of the voting power of Banner; (B) a transaction
pursuant to which any person (or group of persons) directly or indirectly,
acquires or would acquire more than 50 percent of the outstanding equity
securities of Banner, whether pursuant to a tender offer, share exchange,
exchange offer or otherwise, (C) a transaction pursuant to which any person
(or group of persons) acquires or would acquire (by purchase, lease, exchange
or otherwise) assets of Banner or any of its banking Subsidiaries representing
more than 50 percent of the consolidated assets of Banner and its
Subsidiaries.

     "Determination Date" means a date that is ten (10) Business Days prior to
the Anticipated Closing Date.

     "Lower Ceiling Price" means $46.

     "Lower Floor Price" means $36.

     "Merger Consideration" means the aggregate Per Share Stock Consideration
and Per Share Cash Consideration payable or issuable in connection with the
Merger.

     "Per Share Cash Consideration" means cash in an amount equal to the
quotient, rounded to the nearest cent, obtained by dividing the Total Cash
Amount by the total number of shares of San Juan Financial Common Stock issued
and outstanding immediately prior to the Effective Time.

     "Per Share Stock Consideration" means the quotient, rounded to the
nearest ten-thousandth, obtained by dividing the Total Stock Amount by the
total number of shares of San Juan Financial Common Stock issued and
outstanding immediately prior to the Effective Time.

                                      -3-





     "Total Cash Amount" means an amount equal to $6,000,000, as such amount
may be adjusted pursuant to the provisions of this Agreement.

     "Total Stock Amount" means 819,277 shares of Banner Common Stock, as such
amount may be adjusted pursuant to the provisions of this Agreement.

     "Upper Ceiling Price" means $50.

     "Upper Floor Price" means $38.

     (e)   In the event that (i) the Average Closing Price is less than the
Upper Floor Price but greater than or equal to the Lower Floor Price, then the
Merger Consideration shall be increased by an amount that represents the
difference between the Upper Floor Price and the Average Closing Price,
multiplied by the Total Stock Amount; or (ii) the Average Closing Price is
greater than the Lower Ceiling Price but less than or equal to the Upper
Ceiling Price, and no Change of Control Event has occurred, then the Aggregate
Consideration shall be reduced by an amount that represents the difference
between the Lower Ceiling Price and the Average Closing Price, multiplied by
the Total Stock Amount.  Any increase or decrease in the Aggregate
Consideration contemplated by this clause may be effected by an increase in
the Per Share Cash Consideration, the Per Share Stock Consideration or a
combination thereof, at Banner's discretion, provided that in no event shall
the proportions of cash and Banner Common Stock issued in the Merger be
adjusted so as to prevent the Merger from qualifying as a reorganization
pursuant to Section 368(a) of the Code.  If the amount of Aggregate
Consideration is adjusted pursuant to this clause, the definitions of Per
Share Cash Consideration and Per Share Stock Consideration herein shall be
deemed to have been adjusted accordingly.

     If, between the date of this Agreement and the Effective Time, the
outstanding shares of Banner Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares
or securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization, appropriate adjustments shall be made to the
Lower Floor Price, the Lower Ceiling Price, the Upper Floor Price and the
Upper Ceiling Price.

     (f)   All of the shares of San Juan Financial Common Stock converted into
the right to receive the Merger Consideration pursuant to this Article I shall
no longer be outstanding and shall automatically be cancelled and shall cease
to exist as of the Effective Time, and each certificate previously
representing any such shares of San Juan Financial Common Stock (each, a
"Certificate") shall thereafter represent only the right to receive the Merger
Consideration, Additional Consideration (if any) and/or cash in lieu of
fractional shares, into which the shares of San Juan Financial Common Stock
represented by such Certificate have been converted pursuant to this Section
1.4 and Section 2.3(f), as well as any dividends to which holders of San Juan
Financial Common Stock become entitled in accordance with Section 2.3(c).

                                       -4-





     (g)   If, between the date of this Agreement and the Effective Time, the
outstanding shares of Banner Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares
or securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization, an appropriate and proportionate adjustment
shall be made to the Total Stock Amount.

     (h)   Notwithstanding any other provision contained in this Agreement, no
shares of San Juan Financial Common Stock that are issued and outstanding as
of the Effective Time and that are held by a shareholder who has properly
exercised such shareholder's appraisal rights (any such shares being referred
to herein as "Dissenting Shares") under RCW 23B.13.210 and RCW 23B.13.230
shall be converted into the right to receive the Merger Consideration as
provided in Section 1.4(c) and instead shall be entitled to such rights (but
only such rights) as are granted by RCW Chapter 23B.13 (unless and until such
shareholder shall have failed to perfect, or shall have effectively withdrawn
or lost, such shareholder's right to dissent from the Merger under the WBCA)
and to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to and subject to the requirements of the
WBCA.  If any such shareholder shall have failed to perfect or shall have
effectively withdrawn or lost such right, each of such holder's shares of San
Juan Financial Common Stock shall thereupon be deemed to have been converted
into and to have become, as of the Effective Time, the right to receive the
Merger Consideration and the Additional Consideration (if any) in accordance
with the applicable provisions of this Agreement.  San Juan Financial shall
give Banner (i) prompt notice of any notice or demand for appraisal or payment
for shares of San Juan Financial Common Stock received by San Juan Financial
and (ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demand or notices.  San Juan Financial
shall not, without the prior written consent of Banner, make any payment with
respect to, or settle, offer for settle or otherwise negotiate any such
demands.

     1.5   Stock Options and Other Stock-Based Awards. (a)  As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, each option to purchase shares of San Juan Financial
Common Stock granted to employees or directors of San Juan Financial or any of
its Subsidiaries under the San Juan Financial 2001 Stock Option Plan, as
amended and the award agreements thereunder (collectively, the "San Juan
Financial Stock Plans") that is outstanding immediately prior to the Effective
Time (collectively, the "San Juan Financial Options") regardless of whether or
not vested, shall be cancelled and shall only entitle the holder thereof the
right to receive, as soon as reasonably practicable following the Effective
Time, a lump sum cash payment, without interest, equal to the product of (x)
the number of shares subject to such San Juan Financial Option and (y) the
excess, if any, of (i) the Per Share Cash Consideration plus the value of the
Per Share Stock Consideration over (ii) the exercise price per share of such
San Juan Financial Option; provided, however, that Banner shall be entitled to
deduct and withhold such amounts as may be required to be deducted and
withheld under the Code and any applicable state or local Tax law.

     (b)   As of the Effective Time, each restricted share of San Juan
Financial Common Stock granted to any employee or director of San Juan

                                     -5-




Financial under a San Juan Financial Stock Plan that is outstanding
immediately prior to the Effective Time (collectively, the "San Juan Financial
Restricted Shares") shall, by virtue of the Merger and without any action on
the part of the holder thereof, be cancelled and converted into the right to
receive (the "Banner Restricted Share Right"), on the same terms and
conditions as applied to each such San Juan Financial Restricted Share
immediately prior to the Effective Time (including the same transfer
restrictions), the Merger Consideration determined in accordance with Section
1.4 of this Agreement, and treating such San Juan Financial Restricted Shares
in the same manner as all other shares of San Juan Financial Common Stock for
such purposes; provided, however, that Banner shall be entitled to deduct and
withhold such amounts as may be required to be deducted and withheld under the
Code and any applicable state or local Tax law.

     1.6   Additional Consideration.  If, as of March 31, 2007, the Closing
has not occurred (and the failure of the Closing to occur by such date is not
due to San Juan Financial's failure to perform or observe the covenants and
agreements of San Juan Financial set forth in this Agreement) and this
Agreement has not been terminated pursuant to Section 8.1, the holders of San
Juan Financial Common Stock issued and outstanding immediately before the
Effective Time shall be entitled to receive additional consideration as set
forth in this Section and in Section 1.4(c)(iii).  The "Additional
Consideration" shall equal any dividends or distributions declared by the
Board of Directors of Banner on the Banner Common Stock with a record date on
or after March 31, 2007, but before the Closing Date, that would have been
payable with respect to the Banner Common Stock included in the Merger
Consideration, after giving effect to any adjustments provided for herein, if
such Banner Common Stock had been issued and outstanding as of such record
date.  The "Per Share Additional Consideration" shall be equal to the quotient
obtained by dividing the Additional Consideration by the total number of
shares of San Juan Financial Common Stock issued and outstanding immediately
prior to the Effective Time.

     1.7   Articles of Incorporation of Banner.  At the Effective Time, the
articles of incorporation of Banner, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law.

     1.8   By-laws of Banner.  At the Effective Time, the by-laws of Banner,
as in effect immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until thereafter amended in accordance with
applicable law.

     1.9   Tax Consequences.  It is intended that the Merger shall constitute
a "reorganization" within the meaning of Section 368(a) of the Code, and that
this Agreement shall constitute a "plan of reorganization" for purposes of
Sections 354 and 361 of the Code.

                                  ARTICLE II

                       DELIVERY OF MERGER CONSIDERATION

     2.1   Exchange Agent.  Prior to the Effective Time, Banner shall appoint
a bank or trust company selected by Banner and reasonably acceptable to San
Juan Financial (the

                                      -6-





"Exchange Agent"), pursuant to an agreement (the "Exchange Agent Agreement"),
to act as exchange agent hereunder.

     2.2   Deposit of Merger Consideration.  At or prior to the Effective
Time, Banner shall deposit, or shall cause to be deposited, with the Exchange
Agent, (i) certificates representing the number of shares of Banner Common
Stock sufficient to deliver, and Banner shall instruct the Exchange Agent to
timely deliver, the Total Stock Amount, and (ii) immediately available funds
equal to the Total Cash Amount (together with, to the extent then
determinable, any cash payable in lieu of fractional shares pursuant to
Section 2.3(f)) (collectively, the "Exchange Fund") and the Additional
Consideration (if any) and Banner shall instruct the Exchange Agent to timely
pay or deliver the Merger Consideration, the Additional Consideration (if any)
and such cash in lieu of fractional shares, in accordance with this Agreement.

     2.3   Delivery of Merger Consideration.  (a)  As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of Certificate(s) which immediately prior to the Effective
Time represented outstanding shares of San Juan Financial Common Stock whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 1.4 and any cash in lieu of fractional shares of Banner
Common Stock to be issued or paid in consideration therefor (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to Certificate(s) shall pass, only upon delivery of
Certificate(s) (or affidavits of loss in lieu of such Certificate(s))) (the
"Letter of Transmittal") to the Exchange Agent and shall be substantially in
such form and have such other provisions as shall be prescribed by the
Exchange Agent Agreement and (ii) instructions for use in surrendering
Certificate(s) in exchange for the Merger Consideration, the Additional
Consideration (if any) and any cash in lieu of fractional shares of Banner
Common Stock to be issued or paid in consideration therefor in accordance with
Section 2.3(f) upon surrender of such Certificate and any dividends or
distributions to which such holder is entitled pursuant to Section 2.3(c).

     (b)   Upon surrender to the Exchange Agent of its Certificate(s),
accompanied by a properly completed Letter of Transmittal, a holder of San
Juan Financial Common Stock will be entitled to receive, promptly after the
Effective Time, the Merger Consideration (with the aggregate Cash
Consideration paid to each such holder rounded to the nearest cent), the
Additional Consideration to which such holder is entitled (if any) and any
cash in lieu of fractional shares of Banner Common Stock to be issued or paid
in consideration therefor in respect of the shares of San Juan Financial
Common Stock represented by its Certificate(s).  Until so surrendered, each
such Certificate shall represent after the Effective Time, for all purposes,
only the right to receive, without interest, the Merger Consideration, the
Additional Consideration (if any) and any cash in lieu of fractional shares of
Banner Common Stock to be issued or paid in consideration therefor upon
surrender of such Certificate in accordance with, and any dividends or
distributions to which such holder is entitled pursuant to, this Article II.

     (c)   No dividends or other distributions with respect to Banner Common
Stock shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Banner Common Stock represented thereby, in each case
unless and until the surrender of such Certificate in accordance with this
Article II.  Subject to the effect of applicable abandoned


                                       -7-





property, escheat or similar laws, following surrender of any such Certificate
in accordance with this Article II the record holder thereof shall be entitled
to receive, without interest, (i) the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to the whole shares of Banner Common Stock represented by such
Certificate and not paid and/or (ii) at the appropriate payment date, the
amount of dividends or other distributions payable with respect to shares of
Banner Common Stock represented by such Certificate with a record date after
the Effective Time (but before such surrender date) and with a payment date
subsequent to the issuance of the Banner Common Stock issuable with respect to
such Certificate.

     (d)   In the event of a transfer of ownership of a Certificate
representing San Juan Financial Common Stock that is not registered in the
stock transfer records of San Juan Financial, the proper amount of cash and/or
shares of Banner Common Stock shall be paid or issued in exchange therefor to
a person other than the person in whose name the Certificate so surrendered is
registered if the Certificate formerly representing such San Juan Financial
Common Stock shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment or issuance shall pay any
transfer or other similar Taxes required by reason of the payment or issuance
to a person other than the registered holder of the Certificate or establish
to the satisfaction of Banner that the Tax has been paid or is not applicable.
The Exchange Agent (or, subsequent to the first anniversary of the Effective
Time, Banner) shall be entitled to deduct and withhold from the cash portion
of the Merger Consideration, any cash in lieu of fractional shares of Banner
Common Stock, any Additional Consideration to which the holder is entitled,
and cash dividends or distributions payable pursuant to Section 2.4(c) hereof
and any other cash amounts otherwise payable pursuant to this Agreement to any
holder of San Juan Financial Common Stock such amounts as the Exchange Agent
or Banner, as the case may be, is required to deduct and withhold under the
Code, or any provision of state, local or foreign Tax law, with respect to the
making of such payment. To the extent the amounts are so withheld by the
Exchange Agent or Banner, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of shares of San Juan Financial Common Stock in respect of whom such deduction
and withholding was made by the Exchange Agent or Banner, as the case may be.

     (e)   After the Effective Time, there shall be no transfers on the stock
transfer books of San Juan Financial of any shares of San Juan Financial
Common Stock that were issued and outstanding immediately prior to the
Effective Time other than to settle transfers of San Juan Financial Common
Stock that occurred prior to the Effective Time.  If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for the Merger
Consideration, the Additional Consideration (if any) and any cash in lieu of
fractional shares of Banner Common Stock to be issued or paid in consideration
therefor in accordance with the procedures set forth in this Article II.

     (f)   Notwithstanding anything to the contrary contained in this
Agreement, no certificates or scrip representing fractional shares of Banner
Common Stock shall be issued upon the surrender of Certificates for exchange,
no dividend or distribution with respect to Banner Common Stock shall be
payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights
of a shareholder of Banner.  In lieu of the issuance of any such fractional
share, Banner shall pay to each former

                                       -8-




shareholder of San Juan Financial who otherwise would be entitled to receive
such fractional share, an amount in cash (rounded to the nearest cent)
determined by multiplying (i) the Average Closing Price by (ii) the fraction
of a share (after taking into account all shares of San Juan Financial Common
Stock held by such holder at the Effective Time and rounded to the nearest one
thousandth when expressed in decimal form) of Banner Common Stock to which
such holder would otherwise be entitled to receive pursuant to Section 1.4.

    (g)    Any portion of the Exchange Fund and any Additional Consideration
that remains unclaimed by the shareholders of San Juan Financial as of the
first anniversary of the Effective Time shall be paid to Banner.  Any former
shareholders of San Juan Financial who have not theretofore complied with this
Article II shall thereafter look only to Banner with respect to the Merger
Consideration and the Additional Consideration, any cash in lieu of any
fractional shares and any unpaid dividends and distributions on the Banner
Common Stock deliverable in respect of each share of San Juan Financial Common
Stock such shareholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon.  Notwithstanding the foregoing, none of
Banner, San Juan Financial, the Exchange Agent or any other person shall be
liable to any former holder of shares of San Juan Financial Common Stock for
any amount delivered in good faith to a public official pursuant to applicable
abandoned property, escheat or similar laws.

     (h)   In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if reasonably required
by Banner or the Exchange Agent, the posting by such person of a bond in such
amount as Banner may determine is reasonably necessary as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and Additional Consideration deliverable
in respect thereof pursuant to this Agreement.

                                  ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF SAN JUAN FINANCIAL

     Except as disclosed in the disclosure schedule (the "San Juan Financial
Disclosure Schedule") delivered by San Juan Financial to Banner prior to the
execution of this Agreement (which schedule sets forth, among other things,
items, the disclosure of which is necessary or appropriate, either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this
Article III, or to one or more of San Juan Financial's covenants, provided,
however, that disclosure in any section of such San Juan Financial Disclosure
Schedule shall apply only to the indicated Section of this Agreement except to
the extent that it is reasonably apparent that such disclosure is relevant to
another section of this Agreement), San Juan Financial hereby represents and
warrants to Banner as follows:

     3.1   Corporate Organization.  (a)  San Juan Financial is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Washington.  San Juan Financial has the corporate power and authority
to own or lease all of its properties and

                                       -9-




assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business, in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified have not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on San Juan Financial.  As used in this
Agreement, the term "Material Adverse Effect" means, with respect to Banner,
San Juan Financial or the Surviving Corporation, as the case may be, a
material adverse effect on (i) the business, results of operations or
financial condition of such party and its Subsidiaries taken as a whole
(provided, however, that, with respect to this clause (i), Material Adverse
Effect shall not be deemed to include effects to the extent resulting from (A)
changes, after the date hereof, in generally accepted accounting principles or
regulatory accounting requirements applicable to banks or savings associations
and their holding companies generally, (B) changes, after the date hereof, in
laws, rules or regulations of general applicability or interpretations thereof
by courts or Governmental Entities, (C) changes, after the date hereof, in
global or national political conditions or in general economic or market
conditions affecting banks or their holding companies generally except to the
extent that any such changes have a disproportionate adverse effect on such
party, (D) any change, effect, event or occurrence arising out of the public
announcement of this Agreement and the transactions contemplated hereby,
including any expenses reasonably incurred in connection herewith, (E) changes
in national or international political or social conditions including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military
or terrorist attack upon or within the United States, or any of its
territories, possessions or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States, except to
the extent such changes affect San Juan Financial disproporationately as
compared to banks or savings associations and their holding companies
generally, and (F) actions or omissions of San Juan Financial or Banner taken
with the prior written consent of the other party in contemplation of the
transactions contemplated hereby), or (ii) the ability of such party to timely
consummate the transactions contemplated by this Agreement.

     (b)   San Juan Financial is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC Act") and is
a financial holding company pursuant to Section 4(l) of the BHC Act and meets
the applicable requirements for qualification as such.  True, complete and
correct copies of the Articles of Incorporation of San Juan Financial, as
amended (the "San Juan Financial Articles"), and the By-laws of San Juan
Financial (the "San Juan Financial By-laws"), as in effect as of the date of
this Agreement, have previously been made available to Banner.

     (c)   Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on San Juan Financial, each of
Islanders Bank (the "San Juan Financial Bank") and San Juan Title, LLC (i) is
duly organized and validly existing (and in the case of San Juan Financial
Bank, as a state-chartered bank) under the laws of the State of Washington,
(ii) is duly licensed or qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership
or leasing of property or the conduct of its business requires it to be so
licensed or qualified and (iii) has all requisite corporate power or other
power and authority to own or lease its properties and assets and to carry on
its business as now conducted.  The articles of incorporation and by-laws of
each San

                                   -10-





Juan Financial Subsidiary, copies of which have previously been made available
to Banner, are true, complete and correct copies of such documents as of the
date of this Agreement.  As used in this Agreement, the word "Subsidiary" when
used with respect to either party, means any bank, corporation, partnership,
limited liability company or other organization, whether incorporated or
unincorporated, that is now or was for any fiscal year ending after December
31, 2004, consolidated with such party for financial reporting purposes under
U.S. generally accepted accounting principles ("GAAP").  The term "San Juan
Financial Subsidiary" shall mean any direct or indirect Subsidiary of San Juan
Financial.  San Juan Financial has no Subsidiaries other than San Juan
Financial Bank.

     (d)   As of September 30, 2006, San Juan Financial Bank is "well
capitalized" and "well managed" as a matter of U.S. federal banking law.  San
Juan Financial Bank has at least a "satisfactory" rating under the U.S.
Community Reinvestment Act.

     (e)   The deposit accounts of San Juan Financial Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") through the Bank Insurance
Fund to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid when due.

     (f)   The minute books of San Juan Financial and San Juan Financial Bank
previously made available to Banner contain true, complete and correct minutes
of all meetings and memoranda of all other corporate actions held or taken
since December 31, 2002, of their respective shareholders and Boards of
Directors (including committees of their respective Boards of Directors).

     3.2   Capitalization.  (a)  The authorized capital stock of San Juan
Financial consists of 1,000,000 shares of San Juan Financial Common Stock, of
which, as of December 1, 2006 (the "San Juan Financial Capitalization Date"),
364,078 shares were issued and outstanding.  As of the date hereof, no shares
of San Juan Financial Common Stock were reserved for issuance except for 750
shares of San Juan Financial Common Stock reserved for issuance upon the
exercise of San Juan Financial Options pursuant to San Juan Financial Stock
Plans.  All of the issued and outstanding shares of San Juan Financial Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.  As of the date of this Agreement, no
bonds, debentures, notes or other indebtedness having the right to vote on any
matters on which shareholders may vote ("Voting Debt") of San Juan Financial
are issued or outstanding.  As of the date of this Agreement, except pursuant
to this Agreement and San Juan Financial Stock Plans, San Juan Financial does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, rights, commitments or agreements of any character calling for the
purchase or issuance of, or the payment of any amount based on, any shares of
San Juan Financial Common Stock, Voting Debt or any other equity securities of
San Juan Financial or any securities representing the right to purchase or
otherwise receive any shares of San Juan Financial Common Stock, Voting Debt
or any other equity securities of San Juan Financial or any San Juan Financial
Subsidiary.  As of the date of this Agreement, there are no contractual
obligations of San Juan Financial or any San Juan Financial Subsidiary (x) to
repurchase, redeem or otherwise acquire any shares of capital stock of San
Juan Financial or any

                                     -11-




equity security of San Juan Financial or any San Juan Financial Subsidiary or
any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of San Juan Financial or
any San Juan Financial Subsidiary or (y) pursuant to which San Juan Financial
or any San Juan Financial Subsidiary is or could be required to register
shares of San Juan Financial capital stock or other securities under the
Securities Act of 1933, as amended (the "Securities Act").  Section 3.2 of the
San Juan Financial Disclosure Schedule sets forth a true, complete and correct
list of the number of shares of San Juan Financial Common Stock issuable upon
the exercise of each San Juan Financial Option outstanding under San Juan
Financial Stock Plans as of the San Juan Financial Capitalization Date, the
names of the holders thereof, the status as vested or unvested and the
exercise price for each such San Juan Financial Option. Since the San Juan
Financial Capitalization Date through the date hereof, San Juan Financial has
not (A) issued or repurchased any shares of San Juan Financial Common Stock,
Voting Debt or other equity securities of San Juan Financial other than the
issuance of shares of San Juan Financial Common Stock in connection with the
exercise of San Juan Financial Options to purchase San Juan Financial Common
Stock granted under San Juan Financial Stock Plans that were outstanding on
the San Juan Financial Capitalization Date or (B) issued or awarded any
options, warrants, restricted shares or any other equity-based awards under
any of San Juan Financial Stock Plans.

     (b)   All of the issued and outstanding shares of capital stock or other
equity ownership interests of each San Juan Financial Subsidiary are owned
directly by San Juan Financial, free and clear of any material liens, pledges,
charges and security interests and similar encumbrances ("Liens"), and all of
such shares or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable (subject to RCW Section 30.12.180)
and free of preemptive rights.  No such San Juan Financial Subsidiary has or
is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary.

     3.3   Authority; No Violation.  (a)  San Juan Financial has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.  The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly, validly and unanimously approved by the Board of Directors of
San Juan Financial.  The Board of Directors of San Juan Financial has
determined that this Agreement and the transactions contemplated hereby are
advisable and in the best interests of San Juan Financial and its
shareholders, has directed that this Agreement be submitted to San Juan
Financial's shareholders for approval and adoption at a duly held meeting of
such shareholders, has determined to recommend such approval and has adopted a
resolution to the foregoing effect.  The affirmative vote required for the
approval and adoption of the Agreement by the shareholders of San Juan
Financial is two-thirds of the votes entitled to be cast thereon.  Except for
the approval and adoption of this Agreement by the affirmative vote of the
holders of two-thirds of the outstanding shares of San Juan Financial Common
Stock entitled to vote at such meeting, no other corporate proceedings on the
part of San Juan Financial are necessary to approve this Agreement or to
consummate the transactions contemplated hereby.  This Agreement has been duly
and validly executed and delivered by San Juan Financial and (assuming due
authorization, execution and delivery by Banner) constitutes the valid and
binding

                                      -12-




obligation of San Juan Financial, enforceable against San Juan Financial in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity).

     (b)   Neither the execution and delivery of this Agreement by San Juan
Financial nor the consummation by San Juan Financial of the transactions
contemplated hereby, nor compliance by San Juan Financial with any of the
terms or provisions of this Agreement, will (i) violate any provision of San
Juan Financial Articles or San Juan Financial By-laws or (ii) assuming that
the consents, approvals and filings referred to in Section 3.4 are duly
obtained and/or made, (A) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or Injunction applicable to San Juan
Financial, any of its Subsidiaries or any of their respective properties or
assets or (B) except as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on San Juan Financial, violate,
conflict with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of San Juan Financial or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which San Juan Financial or any of its Subsidiaries is a party
or by which any of them or any of their respective properties or assets is
bound.

     3.4   Consents and Approvals.  Except for (i) the filing of applications
and notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (ii) the filing of any required applications,
filings or notices with any state banking or insurance authorities and
approval of such applications, filings and notices (the "Other Regulatory
Approvals"), (iii) the filing with the Securities and Exchange Commission (the
"SEC") of a Proxy Statement in definitive form relating to the meetings of San
Juan Financial's shareholders to be held in connection with this Agreement and
the transactions contemplated by this Agreement (the "Proxy Statement") and of
a registration statement on Form S-4 (the "Form S-4") in which the Proxy
Statement will be included as a prospectus, and declaration of effectiveness
of the Form S- 4, (iv) the filing of the Articles of Merger, (v) any consents,
authorizations, approvals, filings or exemptions required under consumer
finance, mortgage banking and other similar laws, and (vi) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
Banner Common Stock pursuant to this Agreement and approval of listing of such
Banner Common Stock on the Nasdaq, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") are
necessary in connection with the consummation by San Juan Financial of the
Merger and the other transactions contemplated by this Agreement.  No consents
or approvals of or filings or registrations with any Governmental Entity are
necessary in connection with the execution and delivery by San Juan Financial
of this Agreement.

                                      -13-





     3.5   Reports; Regulatory Matters.  (a)  San Juan Financial and each San
Juan Financial Subsidiary has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since January 1, 2003 with (i) the
Federal Reserve Board, (ii) the FDIC, and (iii) the State of Washington
Department of Financial Institutions ("WDFI," and collectively, "San Juan
Financial Regulatory Agencies") and with each other applicable Governmental
Entity, and all other reports and statements required to be filed by them
since January 1, 2003, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, any state,
any foreign entity, or any San Juan Financial Regulatory Agency or other
Governmental Entity, and have paid all fees and assessments due and payable in
connection therewith.  Except for normal examinations conducted by a San Juan
Financial Regulatory Agency or other Governmental Entity in the ordinary
course of the business of San Juan Financial and its Subsidiaries, no San Juan
Financial Regulatory Agency or other Governmental Entity has initiated since
January 1, 2003 or has pending any proceeding, enforcement action or, to the
knowledge of San Juan Financial, investigation into the business, disclosures
or operations of San Juan Financial or any San Juan Financial Subsidiary.
Since January 1, 2003, no San Juan Financial Regulatory Agency or other
Governmental Entity has resolved any proceeding, enforcement action or, to the
knowledge of San Juan Financial, investigation into the business, disclosures
or operations of San Juan Financial or any San Juan Financial Subsidiary.
There is no unresolved violation or exception by any San Juan Financial
Regulatory Agency or other Governmental Entity with respect to any report or
statement relating to any examinations or inspections of San Juan Financial or
any San Juan Financial Subsidiary.  Except for normal examinations conducted
by a San Juan Financial Regulatory Agency or other Governmental Entity in the
ordinary course of the business of San Juan Financial and San Juan Financial
Bank, since January 1, 2003, there has been no formal or informal inquiries
by, or disagreements or disputes with, any San Juan Financial Regulatory
Agency or other Governmental Entity with respect to the business, operations,
policies or procedures of San Juan Financial or any San Juan Financial
Subsidiary.

     (b)   Neither San Juan Financial nor any San Juan Financial Subsidiary is
subject to any cease-and-desist or other order or enforcement action issued
by, or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been a
recipient of any supervisory letter from, or has been ordered to pay any civil
money penalty by, or has adopted any policies, procedures or board resolutions
at the request or suggestion of, any San Juan Financial Regulatory Agency or
other Governmental Entity that currently restricts in any material respect the
conduct of its business or that in any material manner relates to its capital
adequacy, its ability to pay dividends, its credit, risk management or
compliance policies, its internal controls, its management or its business,
other than those of general application that apply to similarly situated bank
holding companies or their Subsidiaries (each, a "San Juan Financial
Regulatory Agreement"), nor has San Juan Financial or any of its Subsidiaries
been advised since January 1, 2003 by any San Juan Financial Regulatory Agency
or other Governmental Entity that it is considering issuing, initiating,
ordering, or requesting any such San Juan Financial Regulatory Agreement.

     (c)   San Juan Financial has previously made available to Banner an
accurate and complete copy of (i) all documents provided or made available by
or on behalf of San Juan Financial to its shareholders or prospective
investors and (ii) each communication mailed by San

                                       -14-




Juan Financial to its shareholders, in each case since January 1, 2003 and
prior to the date of this Agreement.  No such San Juan Financial
communication, at the time filed, furnished or communicated, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date (but before the date of
this Agreement) shall be deemed to modify information as of an earlier date.

     3.6   Financial Statements.  (a)  Section 3.6(a) of the San Juan
Financial Disclosure Schedule contains true and correct copies of (i) the
audited consolidated balance sheets of San Juan Financial as of December 31,
2005 (the "San Juan Financial Balance Sheet"), December 31, 2004 and December
31, 2003, and the related audited consolidated statements of income, changes
in shareholders' equity and cash flows for the fiscal years ended December 31,
2005, December 31, 2004 and December 31, 2003 and (ii) the unaudited
consolidated balance sheets of San Juan Financial as of September 30, 2006
(the "Unaudited San Juan Financial Balance Sheet") and September 30, 2005, and
the related unaudited consolidated statements of income, changes in
shareholders' equity and cash flows for the three months and nine months ended
September 30, 2006 and September 30, 2005 (including the related notes, where
applicable) (all such balance sheets and financial statements and related
notes, the "San Juan Financial Financial Statements").

    (b)    The San Juan Financial Financial Reports (i) fairly present in all
material respects the consolidated results of operations, cash flows, changes
in shareholders' equity and consolidated financial position of San Juan
Financial and its Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth (subject in the case of unaudited
statements to recurring year-end audit adjustments normal in nature and
amount), and (ii) have been prepared in accordance with GAAP consistently
applied during the periods involved, except, in each case, as indicated in
such statements or in the notes thereto.  The books and records of San Juan
Financial and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with any applicable legal and accounting
requirements and reflect only actual transactions, and the books and records
of San Juan Financial and San Juan Financial Bank since January 1, 2005 have
been, and are being, maintained in all material respects in accordance with
GAAP.  David Christensen CPA & Consultant, PLCC, did not resign and was not
dismissed as independent public accountants of San Juan Financial as a result
of or in connection with any disagreements with San Juan Financial on a matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.  Moss Adams LLP has not resigned or been
dismissed as independent public accountants of San Juan Financial as a result
of or in connection with any disagreements with San Juan Financial on a matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.

     (c)   Neither San Juan Financial nor any San Juan Financial Subsidiary
has any material liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except for
those liabilities that are reflected or reserved against on the Unaudited San
Juan Financial Balance Sheet and for liabilities incurred in the ordinary
course of business consistent with past practice since September 30, 2006 or
in connection with this Agreement and the transactions contemplated hereby.

                                     -15-





     (d)   The records, systems, controls, data and information of San Juan
Financial and its Subsidiaries are recorded, stored, maintained and operated
under means (including any electronic, mechanical or photographic process,
whether computerized or not) that are under the exclusive ownership and direct
control of San Juan Financial or its Subsidiaries or accountants (including
all means of access thereto and therefrom), except for any non-exclusive
ownership and non-direct control that would not reasonably be expected to have
a Material Adverse Effect on San Juan Financial.  San Juan Financial maintains
accounting records which fairly and accurately reflect, in all material
respects, its transactions, and San Juan Financial has devised and maintains
accounting controls sufficient to provide reasonable assurances that such
transactions are (i) executed in accordance with management's general or
specific authorization, and (ii) recorded as necessary to permit the
preparation of financial statements in accordance with GAAP.

     (e)   Since December 31, 2005, (i) through the date hereof, neither San
Juan Financial nor any of its Subsidiaries nor, to the knowledge of the
officers of San Juan Financial, any director, officer, employee, auditor,
accountant or representative of San Juan Financial or any of its Subsidiaries
has received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of San
Juan Financial or any of its Subsidiaries or their respective internal
accounting controls, including any material complaint, allegation, assertion
or claim that San Juan Financial or any of its Subsidiaries has engaged in
questionable accounting or auditing practices, and (ii) no attorney
representing San Juan Financial or any of its Subsidiaries, whether or not
employed by San Juan Financial or any of its Subsidiaries, has reported
evidence of a material violation of securities laws, breach of fiduciary duty
or similar violation by San Juan Financial or any of its officers, directors,
employees or agents to the Board of Directors of San Juan Financial or any
committee thereof or to any director or officer of San Juan Financial.

     3.7   Broker's Fees.  Neither San Juan Financial nor any San Juan
Financial Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the Merger or related
transactions contemplated by this Agreement, other than McAdams Wright Ragen,
Inc. pursuant to a letter agreement between San Juan Financial and McAdams
Wright Ragen, Inc., a true, complete and correct copy of which has been
previously delivered to Banner.

     3.8   Absence of Certain Changes or Events.  (a)  Since December 31,
2005, no event or events have occurred that have had or are reasonably likely
to have, either individually or in the aggregate, a Material Adverse Effect on
San Juan Financial.

     (b)   Since December 31, 2005, through and including the date of this
Agreement, San Juan Financial and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course of
business consistent with their past practice.

     (c)   Since December 31, 2005, neither San Juan Financial nor any San
Juan Financial Subsidiary has (i) except for (A) normal increases for
non-executive officer employees made in the ordinary course of business
consistent with past practice, or (B) as required by applicable law, increased
the wages, salaries, compensation, pension, or other fringe benefits or

                                     -16-




perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 2005 (which amounts have been
previously made available to Banner), granted any severance or termination
pay, entered into any contract to make or grant any severance or termination
pay (except as required under the terms of agreements or severance plans
listed on Section 3.11 of the San Juan Financial Disclosure Schedule, as in
effect as of the date hereof), or paid any bonus other than the customary
year-end bonuses in amounts consistent with past practice, (ii) granted any
options to purchase shares of San Juan Financial Common Stock, any restricted
shares of San Juan Financial Common Stock or any right to acquire any shares
of its capital stock to any executive officer, director or employee other than
grants to employees made in the ordinary course of business consistent with
past practice under San Juan Financial Stock Plans, (iii) made, changed or
revoked any material Tax election or changed any Tax or financial accounting
methods, principles or practices of San Juan Financial or its Subsidiaries
affecting, its assets, liabilities or businesses, including any reserving,
renewal or residual method, practice or policy or (iv) suffered any strike,
work stoppage, slow-down, or other labor disturbance.

     3.9   Legal Proceedings.  (a)  Neither San Juan Financial nor any San
Juan Financial Subsidiary is a party to any, and there are no pending or, to
the best of San Juan Financial's knowledge, threatened, material legal,
administrative, arbitral or other material proceedings, claims, actions or
governmental or regulatory investigations of any nature against San Juan
Financial or any of its Subsidiaries.

     (b)   There is no Injunction, judgment, or regulatory restriction (other
than those of general application that apply to bank holding companies or
their Subsidiaries) imposed upon San Juan Financial, any of its Subsidiaries
or the assets of San Juan Financial or any of its Subsidiaries.

     3.10  Taxes and Tax Returns.  (a)  Each of San Juan Financial and its
Subsidiaries has duly and timely filed, or will duly and timely file,
(including all applicable extensions) all material Tax Returns required to be
filed by or with respect to San Juan Financial or its Subsidiaries on or prior
to the Effective Time (all such returns being accurate and complete in all
material respects), has paid, or will pay, all Taxes with respect to the
periods covered by such Tax Returns and has duly paid or made provision for,
or will duly pay or make provision for, the payment of all material Taxes that
have been incurred or are due or claimed to be due from it by federal, state,
foreign or local taxing authorities other than Taxes that are not yet
delinquent or are being contested in good faith, have not been finally
determined and, in each case, have been adequately reserved against.  With
respect to any income Tax returns of San Juan Financial or its Subsidiaries
that have been audited by the Internal Revenue Service (the "IRS") or any
other applicable Tax authorities for any year from and including 2002, any
liability with respect to deficiencies asserted as a result of such audit has
been satisfied or is covered by reserves that are adequate under GAAP.  There
are no material disputes pending, or claims asserted, for Taxes or assessments
upon or with respect to San Juan Financial or any of its Subsidiaries.
Neither San Juan Financial nor any of its Subsidiaries is a party to or is
bound by any Tax sharing, allocation or indemnification agreement or
arrangement (other than such an agreement or arrangement exclusively between
or among San Juan Financial and its Subsidiaries) or is liable for any Tax
imposed on any person other than San Juan Financial and its Subsidiaries as a
result of the application of Treasury Regulation Section 1.1502-6 (and any


                                      -17-





comparable provision of state, local or foreign law).  All Taxes that San Juan
Financial or any of its Subsidiaries is required to withhold from amounts
owing to any employee, creditor or third party have been properly withheld
and, to the extent payable, timely paid over to the proper Governmental
Entity.  No extensions or waivers of statutes of limitation have been given
by, or requested with respect to any Taxes of, San Juan Financial or any of
its Subsidiaries, and neither San Juan Financial nor any of its Subsidiaries
has requested an extension of time to file any Tax Return.  Neither San Juan
Financial nor any of its Subsidiaries has executed a closing agreement
pursuant to Section 7121 of the Code or any similar provision of state or
local law.  Neither San Juan Financial nor any of its Subsidiaries has taken
or agreed to take any action that would, or would be reasonably expected to,
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.  Neither San Juan Financial nor any of
its Subsidiaries has been a party to any distribution occurring during the
two-year period prior to the date of this Agreement, or otherwise as part of a
plan (or series of related transactions) of which the Merger is a part, in
which the parties to such distribution treated the distribution as one to
which Section 355 of the Code applied.  Neither San Juan Financial nor any
of its Subsidiaries has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.  Neither San Juan
Financial nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code or any corresponding
provision of state or local law, no such adjustment has been proposed by the
IRS and no pending request for permission to change any accounting method has
been submitted by San Juan Financial or any of its Subsidiaries.  The
aggregate balance of the reserve for bad debts described in Section
593(g)(4)(A)(ii) of the Code and any similar provision under state or local
laws and regulations of San Juan Financial and its Subsidiaries as of December
31, 2005 is zero.  Neither San Juan Financial nor any of its Subsidiaries has
participated in a "reportable transaction" within the meaning of Treasury
Regulation section 1.6011-4(b).

     (b)   As used in this Agreement, the term "Tax" or "Taxes" means (i) any
and all federal, state, local, and foreign income, excise, gross receipts,
gross income, ad valorem, profits, gains, property, capital, sales, transfer,
use, payroll, employment, severance, withholding, duties, intangibles,
franchise, backup withholding, and other taxes, charges, levies or like
assessments together with all penalties and additions to tax and interest
thereon and (ii) any liability for any items described in clause (i) above
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as successor or transferee, by contract or otherwise.

    (c)    As used in this Agreement, the term "Tax Return" means any report,
return or other information (including any amendments, schedules or
attachments thereto) required to be supplied to a Governmental Entity with
respect to Taxes including, where permitted or required, combined, unitary or
consolidated returns for any group of entities that includes San Juan
Financial or any of its Subsidiaries.

     3.11  Employee Matters.  For purposes hereof, the following terms shall
have the following meaning:

     "Controlled Group Liability" means any and all liabilities (i) under
Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412
and 4971 of the Code, (iv) as a

                                      -18-





result of a failure to comply with the continuation coverage requirements of
Section 601 et seq. of ERISA and Section 4980B of the Code, and (v) under
corresponding or similar provisions of foreign laws or regulations.

     A "San Juan Financial Benefit Plan" means any compensation or employee
benefit plan, program, policy, practice, agreement or other arrangement
providing compensation or benefits to any current or former employee, officer
or director of San Juan Financial or any of its Subsidiaries or any
beneficiary or dependent thereof that is sponsored or maintained by San Juan
Financial or any of its Subsidiaries or to which San Juan Financial or any of
its Subsidiaries contributes or is obligated to contribute, whether or not
written, including without limitation any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, any employee pension benefit plan within
the meaning of Section 3(2) of ERISA (whether or not such plan is subject to
ERISA) and any bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
benefit plan, program or policy.

     "San Juan Financial ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is, or was at the
relevant time, a member of a group described in Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA that includes or included the
first entity, trade or business, or that is, or was at the relevant time, a
member of the same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.

     "Employment Agreement" means a contract, offer letter or agreement of San
Juan Financial or any of its Subsidiaries with or addressed to any individual
who is rendering or has rendered services thereto as an employee or consultant
pursuant to which San Juan Financial or any of its Subsidiaries has any actual
or contingent liability or obligation to provide compensation and/or benefits
in consideration for past, present or future services.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.

     "Multiemployer Plan" means any "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.

     "Plan" means any San Juan Financial Benefit Plan other than a
Multiemployer Plan.

     "Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
those terms are defined in Part I of Subtitle E of Title IV of ERISA.

     (a)   Section 3.11(a) of the San Juan Financial Disclosure Schedule
includes a complete list and description of all material San Juan Financial
Benefit Plans and all Employment Agreements.

     (b)   With respect to each Plan, San Juan Financial has delivered to
Banner a true, correct and complete copy of: (i) each writing constituting a
part of such Plan, including

                                     -19-




without limitation all plan documents, material employee communications,
benefit schedules, trust agreements, and insurance contracts and other funding
vehicles; (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (iii) the current summary plan description and
any material modifications thereto, if any (in each case, whether or not
required to be furnished under ERISA); (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; and (vi) the
most recent determination letter from the IRS, if any. San Juan Financial has
delivered or made available to Banner a true, correct and complete copy of
each Employment Agreement.  Except as specifically provided in the foregoing
documents delivered to Banner, there are no amendments to any Plan or
Employment Agreement that have been adopted or approved nor has San Juan
Financial or any of its Subsidiaries undertaken to make any such amendments or
to adopt or approve any new Plan or Employment Agreement.

     (c)   All contributions required to be made to any Plan by applicable law
or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Plan, for any period through the date hereof have been timely made or paid in
full or, to the extent not required to be made or paid on or before the date
hereof, have been fully reflected on the financial statements.  Each San Juan
Financial Benefit Plan that is an employee welfare benefit plan under Section
3(1) of ERISA either (i) is funded through an insurance company contract and
is not a "welfare benefit fund" within the meaning of Section 419 of the Code
or (ii) is unfunded.

     (d)   With respect to each San Juan Financial Benefit Plan, San Juan
Financial and its Subsidiaries have complied, and are now in compliance, in
all material respects, with all provisions of ERISA, the Code and all laws and
regulations applicable to such San Juan Financial Benefit Plans. Each Plan has
been administered in all material respects in accordance with its terms. There
is not now, nor do any circumstances exist that could give rise to, any
requirement for the posting of security with respect to a Plan or the
imposition of any lien on the assets of San Juan Financial or any of its
Subsidiaries under ERISA or the Code.  Section 3.11(d) of the San Juan
Financial Disclosure Schedule identifies each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code
("Qualified Plans").  The Internal Revenue Service has issued a favorable
determination letter with respect to each Qualified Plan and the related trust
that has not been revoked, and there are no existing circumstances and no
events have occurred that could adversely affect the qualified status of any
Qualified Plan or the related trust.  No trust funding any Plan is intended to
meet the requirements of Code Section 501(c)(9).  None of San Juan Financial
and its Subsidiaries nor any other person, including any fiduciary, has
engaged in any "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA), which could subject any of the San Juan
Financial Benefit Plans or their related trusts, San Juan Financial, any of
its Subsidiaries or any person that San Juan Financial or any of its
Subsidiaries has an obligation to indemnify, to any material Tax or penalty
imposed under Section 4975 of the Code or Section 502 of ERISA.

     (e)   With respect to each Plan that is subject to Title IV or Section
302 of ERISA or Section 412 or 4971 of the Code:  (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code
or Section 302 of ERISA, whether or not waived; (ii) the fair market value of
the assets of such Plan equals or exceeds the actuarial present value of all
accrued benefits under such Plan (whether or not vested) on a termination

                                  -20-



basis; (iii) no reportable event within the meaning of Section 4043(c) of
ERISA for which the 30-day notice requirement has not been waived has
occurred, and the consummation of the transactions contemplated by this
agreement will not result in the occurrence of any such reportable event; (iv)
all premiums to the Pension Benefit Guaranty Corporation have been timely paid
in full; (v) no liability (other than for premiums to the PBGC) under Title IV
of ERISA has been or is expected to be incurred by San Juan Financial or any
of its Subsidiaries; and (vi) the PBGC has not instituted proceedings to
terminate any such Plan and, to San Juan Financial's knowledge, no condition
exists that presents a risk that such proceedings will be instituted or which
would constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any such Plan.

     (f)   Except as set forth in Section 3.11(g) of the San Juan Financial
Disclosure Schedule:  (i) no San Juan Financial Benefit Plan is a
Multiemployer Plan or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"); (ii) none of San Juan Financial,
and its Subsidiaries nor any of their respective San Juan Financial ERISA
Affiliates has, at any time during the last six years, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan;
and (iii) none of San Juan Financial, and its Subsidiaries nor any San Juan
Financial ERISA Affiliates has incurred any Withdrawal Liability that has not
been satisfied in full.  There does not now exist, nor do any circumstances
exist that could result in, any Controlled Group Liability that would be a
liability of San Juan Financial or any of its Subsidiaries following the
Closing.  Without limiting the generality of the foregoing, neither San Juan
Financial nor any of its Subsidiaries, nor any of their respective San Juan
Financial ERISA Affiliates, has engaged in any transaction described in
Section 4069 or Section 4204 or 4212 of ERISA.

     (g)   Except for any such benefits described in Section 3.11(g) of the
San Juan Financial Disclosure Schedule with respect to the individuals listed
thereon, San Juan Financial and its Subsidiaries have no liability for life,
health, medical or other welfare benefits to former employees or beneficiaries
or dependents thereof, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA and at no expense to
San Juan Financial and its Subsidiaries.  San Juan Financial and  each of its
Subsidiaries has reserved the right to amend, terminate or modify at any time
all plans or arrangements providing for retiree health or life insurance
coverage.

     (h)   Section 3.11(h) of the San Juan Financial Disclosure Schedule sets
forth an accurate and complete description of each provision of any Plan or
Employment Agreement under which the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby could (either
along or in conjunction with any other event) result in, cause the accelerated
vesting, funding or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer or director of San Juan Financial
or any of its Subsidiaries, or could limit the right of San Juan Financial or
any of its Subsidiaries to amend, merge, terminate or receive a reversion of
assets from any San Juan Financial Benefit Plan or related trust or any
Employment Agreement or related trust.  San Juan Financial has delivered to
Banner true, correct and complete copies of all Plans and Employment
Agreements described in Section 3.11(h) of the San Juan Financial Disclosure
Schedule.

                                 -21-



     (i)   No labor organization or group of employees of San Juan Financial
or any of its Subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened
to be brought or filed, with the National Labor Relations Board or any other
labor relations tribunal or authority.  Each of San Juan Financial and its
Subsidiaries is in compliance with all applicable laws and collective
bargaining agreements respecting employment and employment practices, terms
and conditions of employment, wages and hours and occupational safety and
health.

     (j)   Each individual who renders services to San Juan Financial or any
of its Subsidiaries who is classified by San Juan Financial or such
Subsidiary, as applicable, as having the status of an independent contractor
or other non-employee status for any purpose (including for purposes of
taxation and Tax reporting and under San Juan Financial Benefit Plans) is
properly so characterized.  San Juan Financial, its Subsidiaries and each
member of their respective business enterprises has complied with the Worker
Adjustment and Retraining Notification Act and all similar state, local and
foreign laws.

     (k)   No San Juan Financial Benefit Plan is subject to the laws of any
jurisdiction outside of the United States.

     3.12  Compliance with Applicable Law.  (a)  San Juan Financial and each
San Juan Financial Subsidiary holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its respective
businesses under and pursuant to each, and have complied in all respects with
and are not in default in any material respect under any, applicable law,
statute, order, rule, regulation, policy or guideline of any Governmental
Entity relating to San Juan Financial or any of its Subsidiaries, except where
the failure to hold such licenses, franchises, permits and authorizations, or
such non-compliance or default, has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on San Juan Financial or any of its Subsidiaries.

     (b)   Except as has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on San Juan
Financial:  San Juan Financial and each San Juan Financial Subsidiary has
properly administered all accounts for which it acts as a fiduciary, including
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance
with the terms of the governing documents, applicable state and federal law
and regulation and common law; and none of San Juan Financial, any San Juan
Financial Subsidiary, or any director, officer or employee of San Juan
Financial or of any San Juan Financial Subsidiary has committed any breach of
trust or fiduciary duty with respect to any such fiduciary account and the
accountings for each such fiduciary account are true and correct and
accurately reflect the assets of such fiduciary account.

     (c)   Section 3.12(c) of San Juan Financial Disclosure Schedule sets
forth, as of the date hereof, a schedule of all officers and directors of San
Juan Financial who have outstanding loans from San Juan Financial or San Juan
Financial Bank, and there has been no default on, or forgiveness or waiver of,
in whole or in part, any such loan during the two years immediately preceding
the date hereof.

                                 -22-




     3.13  Certain Contracts.  (a)  Neither San Juan Financial nor any San
Juan Financial Subsidiary is a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral) (i) with respect to the
employment of any directors, officers, employees or consultants, other than in
the ordinary course of business consistent with past practice, (ii) which,
upon execution of this Agreement or consummation or shareholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due from Banner, San Juan
Financial, the Surviving Corporation, or any of their respective Subsidiaries
to any officer or employee of San Juan Financial or any Subsidiary thereof,
(iii) that is or includes any non-competition, non-solicitation or exclusive
dealing agreement or obligation, or any other agreement or obligation that
purports to limit or restrict in any respect (A) the ability of San Juan
Financial or any of its Subsidiaries to solicit customers or employees or (B)
the manner in which, or the localities in which, all or any portion of the
business and operations of San Juan Financial or its Subsidiaries or,
following consummation of the Merger, the business and operations of Banner
and its Subsidiaries, is or could be conducted, (iv) that relates to the
incurrence of Indebtedness (other than deposit liabilities, advances and loans
from a Federal Home Loan Bank, and sales of securities subject to repurchase,
in each case in the ordinary course of business) in the principal amount of
$50,000 or more, (v) that grants any person a right of first refusal, right of
first offer or similar right with respect to any material properties, assets
or businesses of San Juan Financial or its Subsidiaries, (vi) that is a
consulting agreement or service contract (including data processing, software
programming and licensing contracts and outsourcing contracts for the
provision of collection and other services in connection with the business and
operations of San Juan Financial and its Subsidiaries) involving the payment
of annual fees of $50,000 or more, or (vii) that would be a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC and assuming San Juan Financial has securities registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) to be
performed after the date of this Agreement that has not been disclosed under
the preceding clauses (i) through (vi).  As used herein, "Indebtedness" of a
person shall mean (i) all obligations of such person for borrowed money, (ii)
all obligations of such person evidenced by bonds, debentures, notes and
similar instruments, (iii) all leases of such person capitalized in accordance
with GAAP, and (iv) all obligations of such person under sale-and-lease back
transactions, agreements to repurchase securities sold and other similar
financing transactions.  Each contract, arrangement, commitment or
understanding of the type described in this Section 3.13, whether or not set
forth in San Juan Financial Disclosure Schedule, is referred to as a
"San Juan Financial Contract," and neither San Juan Financial nor any of its
Subsidiaries knows of, or has received notice of, any violation of any San
Juan Financial Contract by any of the other parties thereto.  Section 3.13(a)
of the San Juan Financial Disclosure Schedule accurately categorizes each of
the San Juan Financial Contracts specified in clauses (ii), (iii) and (v)
above according to the applicable clause(s) of the definition of Company
Material Contracts.  San Juan Financial has made available true and complete
copies of each (i) San Juan Financial Contract and (ii) each contract or
agreement that involved payments by San Juan Financial or its Subsidiaries in
fiscal year 2005 of more than $50,000 or which could reasonably be expected to
involve payments during fiscal year 2006 or 2007 of more than $50,000 other
than where such contract or agreement was or is terminable at will on 60 days
or less notice without payment of a penalty in excess of $25,000.

                                  -23-



     (b)   Each San Juan Financial Contract is valid and binding on San Juan
Financial or its applicable Subsidiary and is in full force and effect.
Except as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on San Juan Financial, (i) San Juan
Financial and each San Juan Financial Subsidiary has in all material respects
performed all obligations required to be performed by it to date under each
San Juan Financial Contract, and (ii) no event or condition exists that
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of San Juan Financial or any of its Subsidiaries
under any such San Juan Financial Contract.

     3.14  Risk Management Instruments.  (a)  "Derivative Transactions" means
any swap transaction, option, warrant, forward purchase or sale transaction,
futures transaction, cap transaction, floor transaction or collar transaction
relating to one or more currencies, commodities, bonds, equity securities,
loans, interest rates, events or conditions (credit-related or otherwise) or
any indexes, or any other similar transaction or combination of any of these
transactions, and any collateralized debt obligations or other similar
instruments or any debt or equity instruments evidencing or embedding any such
types of transactions, and any related credit support, collateral or other
similar arrangements related to such transactions; provided that, for the
avoidance of doubt, the term "Derivative Transactions" shall not include any
San Juan Financial Option.

     (b)   Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on San Juan Financial, (i) all
Derivative Transactions, whether entered into for the account of San Juan
Financial or any San Juan Financial Subsidiary or for the account of a
customer of San Juan Financial or any San Juan Financial Subsidiary, were duly
authorized by San Juan Financial or the applicable San Juan Financial
Subsidiary and entered into in the ordinary course of business consistent with
past practice and in accordance with prudent banking practice and applicable
laws, rules, regulations and policies of any Regulatory Authority and in
accordance with the investment, securities, commodities, risk management and
other policies, practices and procedures employed by San Juan Financial and
its Subsidiaries, and with counterparties believed at the time to be
financially responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks of such Derivative
Transactions; (ii) all of such Derivative Transactions are legal, valid and
binding obligations of San Juan Financial or a San Juan Financial Subsidiary
enforceable against it in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and subject to general principles
of equity), and are in full force and effect; and (iii) San Juan Financial and
each applicable San Juan Financial Subsidiary have duly performed their
obligations under the Derivative Transactions to the extent that such
obligations to perform have accrued and, to the knowledge of San Juan
Financial, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.

     (c)   Except as set forth in Section 3.14(c) of the San Juan Financial
Disclosure Schedule, as of October 31, 2006, no Derivative Transaction, were
it to be a Loan held by San Juan Financial or any San Juan Financial
Subsidiary, would be classified as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", or words of similar import
("San Juan Financial Criticized Assets").  The financial position of San Juan
Financial and its Subsidiaries on a consolidated basis under or with respect
to such Derivative

                                 -24-



Transaction has been reflected in the books and records of San Juan Financial
and such San Juan Financial Subsidiary in accordance with GAAP consistently
applied, and as of the date hereof, no open exposure of San Juan Financial and
of any San Juan Financial Subsidiary with respect to any such instrument (or
with respect to multiple instruments with respect to any single counterparty)
exceeds $100,000.

     3.15  Investment Securities.  (a)  Each of San Juan Financial and each
San Juan Financial Subsidiary has good title to all securities owned by it
(except those sold under repurchase agreements or held in any fiduciary or
agency capacity), free and clear of any Lien, except to the extent such
securities are pledged in the ordinary course of business to secure
obligations of San Juan Financial or its Subsidiaries.  Such securities are
valued on the books of San Juan Financial in accordance with GAAP in all
material respects.

     (b)   San Juan Financial and its Subsidiaries have made copies of their
respective written investment, securities, risk management and other policies,
practices and procedures (the "Policies, Practices and Procedures") available
to Banner.

     3.16  Loan Portfolio.  (a)  Section 3.16(a) of the San Juan Financial
Disclosure Schedule sets forth the aggregate outstanding principal amount, as
of December 31, 2005, of all written or oral loan agreements, notes or
borrowing arrangements (including leases, credit enhancements, commitments,
guarantees and interest-bearing assets) payable to San Juan Financial or its
Subsidiaries (collectively, "Loans").  As of December 31, 2005, neither San
Juan Financial nor its Subsidiaries had any "non-accrual" Loans.  As of
December 31, 2005, San Juan Financial and its Subsidiaries, taken as a whole,
did not have outstanding Loans and assets classified as "Other Real Estate
Owned."  Section 3.16(a) of the San Juan Financial Disclosure Schedule sets
forth (A) a summary of San Juan Financial Criticized Assets as of December 31,
2005, by category of Loan (e.g., commercial, consumer, etc.), together with
the aggregate principal amount of such Loans by category and the amount of
specific reserves with respect to each such category of Loan and the amount of
reserves with respect to each such category of Loans and (B) each asset of San
Juan Financial or any of its Subsidiaries that, as of December 31, 2005, is
classified as "Other Real Estate Owned" and the book value thereof.

     (b)   Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on San Juan Financial, each Loan
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity).  Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on San Juan Financial, all Loans
originated by San Juan Financial or its Subsidiaries, and all such Loans
purchased, administered or serviced by San Juan Financial or its Subsidiaries
(including Loans held for resale to investors), were made or purchased and are
administered or serviced, as applicable, in accordance with customary lending
standards of San Juan Financial or its Subsidiaries, as applicable (and in the
case of Loans held for resale to investors, the lending standards, if any, of
such investors) and in accordance with applicable federal, state and local
laws, regulations and

                                 -25-



rules.  All such Loans (and any related guarantees) and payments due
thereunder are, and on the Closing Date will be, free and clear of any Lien,
and San Juan Financial or its Subsidiaries has complied in all material
respects, and on the Closing Date will have complied in all material
respects, with all laws and regulations relating to such Loans.

     (c)   None of the agreements pursuant to which San Juan Financial or any
of its Subsidiaries has sold Loans or pools of Loans or participations in
Loans or pools of Loans contains any obligation to repurchase such Loans or
interests therein solely on account of a payment default by the obligor on any
such Loan.

     (d)   Each of San Juan Financial and each San Juan Financial Subsidiary,
as applicable, is approved by and is in good standing (i) as a supervised
mortgagee by the Department of Housing and Urban Development to originate and
service Title I FHA mortgage loans; (ii) as a GNMA I and II Issuer by the
Government National Mortgage Association; (iii) by the Department of Veteran's
Affairs to originate and service VA loans; and (iv) as a seller/servicer by
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation to originate and service conventional residential mortgage Loans
(each such entity being referred to herein as an "Agency" and, collectively,
the "Agencies").

     (e)   None of San Juan Financial or any of its Subsidiaries is now nor
has it ever been since December 31, 2003 subject to any material fine,
suspension, settlement or other agreement or other administrative agreement or
sanction by, or any material reduction in any loan purchase commitment from
any Agency or any federal or state agency relating to the origination, sale or
servicing of mortgage or consumer Loans.  Neither San Juan Financial nor any
of its Subsidiaries has received any notice, nor does it have any reason to
believe, that any Agency proposes to limit or terminate the underwriting
authority of San Juan Financial or any of its Subsidiaries or to increase the
guarantee fees payable to any such Agency.

     (f)   Each of San Juan Financial and its Subsidiaries is in compliance in
all material respects with all applicable federal, state and local laws, rules
and regulations, including the Truth-In-Lending Act and Regulation Z, the
Equal Credit Opportunity Act and Regulation B, the Real Estate Settlement
Procedures Act and Regulation X, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act and all Agency and other investor and
mortgage insurance company requirements relating to the origination, sale and
servicing of mortgage and consumer Loans.

     (g)   To the knowledge of San Juan Financial, each Loan included in a
pool of Loans originated, acquired or serviced by San Juan Financial or any of
its Subsidiaries (a "San Juan Financial Pool") meets all eligibility
requirements (including all applicable requirements for obtaining mortgage
insurance certificates and loan guaranty certificates) for inclusion in such
San Juan Financial Pool.  All such San Juan Financial Pools have been finally
certified or, if required, recertified in accordance with all applicable laws,
rules and regulations, except where the time for certification or
recertification has not yet expired.  To the knowledge of San Juan Financial,
no San Juan Financial Pools have been improperly certified, and no Loan has
been bought out of a San Juan Financial Pool without all required approvals of
the applicable investors.

                                  -26-


     3.17  Property.  Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on San Juan
Financial, San Juan Financial or a San Juan Financial Subsidiary (a) has good
and marketable title to all the properties and assets reflected in the latest
audited balance sheet included in San Juan Financial Financial Statements as
being owned by San Juan Financial or a San Juan Financial Subsidiary or
acquired after the date thereof (except properties sold or otherwise disposed
of since the date thereof in the ordinary course of business) (the "San Juan
Financial Owned Properties"), free and clear of all Liens of any nature
whatsoever, except (i) statutory Liens securing payments not yet due, (ii)
Liens for real property Taxes not yet due and payable, (iii) easements, rights
of way, and other similar encumbrances that do not materially affect the use
of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iv) such
imperfections or irregularities of title or Liens as do not materially affect
the use of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties
(collectively, "Permitted Encumbrances"), and (b) is the lessee of all
leasehold estates reflected in the latest audited San Juan Financial Financial
Statements or acquired after the date thereof (except for leases that have
expired by their terms since the date thereof) (the "San Juan Financial Leased
Properties" and, collectively with the San Juan Financial Owned Properties,
the "San Juan Financial Real Property"), free and clear of all Liens of any
nature whatsoever, except for Permitted Encumbrances, and is in possession of
the properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to San Juan Financial's
knowledge, the lessor.  The San Juan Financial Real Property is in material
compliance with all applicable zoning laws and building codes, and the
buildings and improvements located on the San Juan Financial Real Property are
in good operating condition and in a state of good working order, ordinary
wear and tear excepted.  There are no pending or, to the knowledge of San Juan
Financial, threatened condemnation proceedings against the San Juan Financial
Real Property.  San Juan Financial and its Subsidiaries are in compliance with
all applicable health and safety related requirements for the San Juan
Financial Real Property, including those under the Americans with Disabilities
Act of 1990 and the Occupational Health and Safety Act of 1970.

     3.18  Intellectual Property.  Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on San
Juan Financial, (a) San Juan Financial and each of its Subsidiaries owns, or
is licensed to use (in each case, free and clear of any Liens), all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted; (b) the use of any Intellectual Property by San Juan
Financial and its Subsidiaries does not, to the knowledge of San Juan
Financial, infringe on or otherwise violate the rights of any person and is in
accordance with any applicable license pursuant to which San Juan Financial or
any San Juan Financial Subsidiary acquired the right to use any Intellectual
Property; (c) neither San Juan Financial nor any of its Subsidiaries has
received notice that any person is challenging, infringing on or otherwise
violating any right of San Juan Financial or any of its Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to San Juan
Financial or its Subsidiaries; (d) neither San Juan Financial nor any San Juan
Financial Subsidiary has received any written notice of any pending claim with
respect to any Intellectual Property used by San Juan Financial or any San
Juan Financial Subsidiary and, to San Juan Financial's knowledge, no
Intellectual Property owned and/or licensed by San Juan Financial or any San
Juan Financial Subsidiary is being used or enforced in a manner that would be
expected to result in the abandonment, cancellation or unenforceability of
such Intellectual Property.  For

                                   -27-


purposes of this Agreement, "Intellectual Property" means trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not,
in any jurisdiction; and registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; and
any similar intellectual property or proprietary rights.

     3.19  Environmental Liability.  Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on San Juan Financial, (a) there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action or notices with respect
to any environmental, health or safety matters or any private or governmental
environmental, health or safety investigations or remediation activities of
any nature seeking to impose, or that are reasonably likely to result in, any
liability or obligation of San Juan Financial or any of its Subsidiaries
arising under common law or under any local, state or federal environmental,
health or safety statute, regulation or ordinance, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
pending or, to San Juan Financial's knowledge, threatened against San Juan
Financial or any of its Subsidiaries; (b) to the knowledge of San Juan
Financial, there is no reasonable basis for, or circumstances that are
reasonably likely to give rise to, any such proceeding, claim, action,
investigation or remediation by any Governmental Entity or any third party
that would give rise to any liability or obligation on the part of San Juan
Financial or any of its Subsidiaries; and  ) neither San Juan Financial nor
any of its Subsidiaries is subject to any agreement, order, judgment, decree,
letter or memorandum by or with any Governmental Entity or third party
imposing any liability or obligation with respect to any of the foregoing.

     3.20  State Takeover Laws.  The Board of Directors of San Juan Financial
has unanimously approved this Agreement and the transactions contemplated
hereby as required to render inapplicable to this Agreement and the
transactions contemplated hereby, the restrictions on "business combinations"
set forth in Chapter 23B.19 of the RCW and all other "moratorium," "control
share", "fair price," "takeover" or "interested shareholder" law (any such
laws, "Takeover Statutes").

     3.21  Reorganization; Approvals.  As of the date of this Agreement, San
Juan Financial (a) is not aware of any fact or circumstance that could
reasonably be expected to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code, and (b)
knows of no reason why all regulatory approvals from any Governmental Entity
required for the consummation of the transactions contemplated by this
Agreement should not be obtained on a timely basis.

     3.22  Opinions.  Prior to the execution of this Agreement, San Juan
Financial has received an opinion from McAdams Wright Ragen, Inc. to the
effect that as of the date of

                                  -28-


such opinion and based upon and subject to the matters set forth in such
opinion, the Merger Consideration is fair to the shareholders of San Juan
Financial from a financial point of view (the "Fairness Opinion").  The
Fairness Opinion has not been amended or rescinded as of the date of this
Agreement.  San Juan Financial has provided Banner with a true, correct and
complete copy of the Fairness Opinion for informational purposes.

     3.23  San Juan Financial Information.  The information relating to San
Juan Financial and its Subsidiaries that is provided by San Juan Financial or
its representatives for inclusion in the Proxy Statement and the Form S-4, or
in any other document filed with any other Regulatory Agency or Governmental
Entity in connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading.

                             ARTICLE IV

               REPRESENTATIONS AND WARRANTIES OF BANNER

     Except as disclosed in the disclosure schedule (the "Banner Disclosure
Schedule") delivered by Banner to San Juan Financial prior to the execution of
this Agreement (which schedule sets forth, among other things, items, the
disclosure of which is necessary or appropriate, either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this
Article IV, or to one or more of Banner's covenants, provided, however, that
disclosure in any section of such Banner Disclosure Schedule shall apply only
to the indicated Section of this Agreement except to the extent that it is
reasonably apparent that such disclosure is relevant to another section of
this Agreement), Banner hereby represents and warrants to San Juan Financial
as follows:

     4.1   Corporate Organization.  (a)  Banner is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Washington.  Banner has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business, in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Banner.
The term "Banner Subsidiary" shall mean any direct or indirect Subsidiary of
Banner.

     (b)   Banner is duly registered as a bank holding company under the BHC
Act and meets the applicable requirements for qualification as such.  True,
complete and correct copies of the Restated Articles of Incorporation, as
amended (the "Banner Articles"), and Amended Restated By-laws of Banner, as
amended (the "Banner By-laws"), as in effect as of the date of this Agreement,
have previously been made available to San Juan Financial.

     (c)   Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Banner, each Banner Subsidiary
(i) is duly incorporated

                                  -29-


or duly formed, as applicable to each such Subsidiary, and validly existing
under the laws of its jurisdiction of organization, (ii) is duly licensed or
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property
or the conduct of its business requires it to be so licensed or qualified, and
(iii) has all requisite corporate power or other power and authority to own or
lease its properties and assets and to carry on its business as now conducted.

     (d)   As of September 30, 2006, each of Banner's banking subsidiaries is
"well capitalized" and "well managed" as a matter of U.S. federal banking law.

     (e)   The deposit accounts of each of Banner's banking subsidiaries are
insured by the FDIC through the Bank Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due.

     (f)   The minute books of Banner and each of its Subsidiaries previously
made available to San Juan Financial contain minutes or memoranda of all
meetings and other corporate actions held or taken since December 31, 2004, of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors).

     4.2   Capitalization.  (a)  The authorized capital stock of Banner
consists of 25,000,000 shares of Banner Common Stock, of which, as of November
30, 2006 (the "Banner Capitalization Date"), 12,311,230 shares were issued and
outstanding (including 301,786 shares held by the employee stock ownership
plan that have not been released, committed to be released, or allocated to
participant accounts), and 500,000 shares of preferred stock, par value
$0.01 per share (the "Banner Preferred Stock"), of which, as of the Banner
Capitalization Date, no shares were issued and outstanding.  As of the Banner
Capitalization Date, no shares of Banner Common Stock were held in Banner's
treasury.  As of the Banner Capitalization Date, no shares of Banner Common
Stock or Banner Preferred Stock were reserved for issuance, except for (i)
770,467 shares of Banner Common Stock reserved for issuance upon exercise of
options issued pursuant to employee and director stock plans of Banner in
effect as of the date of this Agreement (the "Banner Stock Plans") and (ii)
1,000,000 shares of Banner Common Stock reserved for issuance pursuant to the
Banner Corporation Dividend Reinvestment and Direct Stock Purchase And Sale
Plan.  All of the issued and outstanding shares of Banner Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof.  As of the date of this Agreement, no Voting Debt of Banner
is issued or outstanding.  As of the Banner Capitalization Date, except
pursuant to this Agreement, the Banner Stock Plans, and stock repurchase plans
entered into by Banner from time to time, Banner does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, rights,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Banner Common Stock, Voting Debt or any other equity
securities of Banner or any securities representing the right to purchase or
otherwise receive any shares of Banner Common Stock, Voting Debt or other
equity securities of Banner.  The shares of Banner Common Stock to be
issued pursuant to the Merger will be duly authorized and validly issued and,
at the Effective Time, all such shares will be fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof.

                                  -30-


     (b)   Except for director qualifying shares, all of the issued and
outstanding shares of capital stock or other equity ownership interests of
each Banner Subsidiary are owned by Banner, directly or indirectly, free and
clear of any Liens, and all of such shares or equity ownership interests are
duly authorized and validly issued and are fully paid, nonassessable
(subject to RCW 30.12.180) and free of preemptive rights.  No such Banner
Subsidiary has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.

     4.3   Authority; No Violation.  (a)  Banner has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.  The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly, validly and unanimously approved by the Board of Directors of
Banner.  The Board of Directors of Banner has determined that this Agreement
and the transactions contemplated hereby are advisable and in the best
interests of Banner and its shareholders.  No other corporate proceedings on
the part of Banner are necessary to approve this Agreement or to consummate
the transactions contemplated hereby.  This Agreement has been duly and
validly executed and delivered by Banner and (assuming due authorization,
execution and delivery by San Juan Financial) constitutes the valid and
binding obligation of Banner, enforceable against Banner in accordance with
its terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity).

     (b)   Neither the execution and delivery of this Agreement by Banner, nor
the consummation by Banner of the transactions contemplated hereby, nor
compliance by Banner with any of the terms or provisions of this Agreement,
will (i) violate any provision of the Banner Articles or the Banner By-laws,
or (ii) assuming that the consents, approvals and filings referred to in
Section 4.4 are duly obtained and/or made, (A) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or Injunction
applicable to Banner, any Banner Subsidiary or any of their respective
properties or assets or (B) except as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Banner,
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon any of the
respective properties or assets of Banner or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Banner or any of its Subsidiaries is a party or by which
any of them or any of their respective properties or assets is bound.

     4.4   Consents and Approvals.  Except for (i) the filing of applications
and notices, as applicable, with the Federal Reserve Board under the BHC Act
and approval of such applications and notices, (ii) the Other Regulatory
Approvals, (iii) the filing with the SEC of the Proxy Statement and the filing
and declaration of effectiveness of the Form S-4, (iv) the filing of the
Articles of Merger, (v) any consents, authorizations, approvals, filings or
exemptions required under consumer finance, mortgage banking and other similar
laws, and (vi) such filings

                                  -31-


and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the
shares of Banner Common Stock pursuant to this Agreement and approval of
listing of such Banner Common Stock on the Nasdaq, no consents or approvals of
or filings or registrations with any Governmental Entity are necessary in
connection with the consummation by Banner of the Merger and the other
transactions contemplated by this Agreement.  No consents or approvals of or
filings or registrations with any Governmental Entity are necessary in
connection with the execution and delivery by Banner of this Agreement.

     4.5   Reports; Regulatory Matters.  (a)  Banner and each Banner
Subsidiary has timely filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that it
was required to file since January 1, 2003 with (i) the Federal Reserve Board,
(ii) the FDIC, (iii) the WDFI, (iv) the NASD and any other self-regulatory
organization, (v) the SEC, (vi) any foreign regulatory authority (the  "Banner
Regulatory Agencies") or any other Governmental Entity, and all other reports
and statements required to be filed by them since January 1, 2003, including
any report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any foreign entity, or any Banner
Regulatory Agency or other Governmental Entity, and have paid all fees and
assessments due and payable in connection therewith.  Except for normal
examinations conducted by a Banner Regulatory Agency or other Governmental
Entity in the ordinary course of the business of Banner and its Subsidiaries,
no Regulatory Agency or other Governmental Entity has initiated since January
1, 2003 or has pending any proceeding, enforcement action or, to the knowledge
of Banner, investigation into the business, disclosures or operations of
Banner or any of its Subsidiaries.  Since January 1, 2003, no Banner
Regulatory Agency or other Governmental Entity has resolved any proceeding,
enforcement action or, to the knowledge of Banner, investigation into the
business, disclosures or operations of Banner or any of its Subsidiaries.
There is no unresolved violation or exception by any Banner Regulatory Agency
or Governmental Entity with respect to any report or statement relating to any
examinations or inspections of Banner or any of its Subsidiaries.  Except for
normal examinations conducted by a Banner Regulatory Agency or other
Governmental Entity in the ordinary course of the business of Banner and its
Subsidiaries, since January 1, 2003, there has been no formal or informal
inquiries by, or disagreements or disputes with, any Banner Regulatory Agency
with respect to the business, operations, policies or procedures of Banner or
any of its Subsidiaries.

     (b)   Neither Banner nor any Banner Subsidiary is subject to any
cease-and-desist or other order or enforcement action issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has been a recipient of any
supervisory letter from, or has been ordered to pay any civil money penalty
by, or has adopted any policies, procedures or board resolutions at the
request or suggestion of, any Banner Regulatory Agency or other Governmental
Entity that currently restricts in any material respect the conduct of its
business or that in any material manner relates to its capital adequacy, its
ability to pay dividends, its credit, risk management or compliance policies,
its internal controls, its management or its business, other than those of
general application that apply to similarly situated bank holding companies or
their Subsidiaries (each, a "Banner Regulatory Agreement"), nor has Banner or
any of its Subsidiaries been advised since January 1, 2003, by any Banner

                                  -32-


Regulatory Agency or other Governmental Entity that it is considering issuing,
initiating, ordering or requesting any such Banner Regulatory Agreement.

     (c)   Banner has previously made available to San Juan Financial an
accurate and complete copy of each (i) final registration statement,
prospectus, report, schedule and definitive proxy statement filed with or
furnished to the SEC by Banner since January 1, 2003 pursuant to the
Securities Act or the Exchange Act and prior to the date of this Agreement
(the "Banner SEC Reports") and (ii) communication mailed by Banner to its
shareholders, in each case since January 1, 2003 and prior to the date of this
Agreement.  No such Banner SEC Report or communication, at the time filed,
furnished or communicated (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of the relevant
meetings, respectively), contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances in
which they were made, not misleading.  As of their respective dates, all
Banner SEC Reports complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto.  No executive
officer of Banner has failed in any respect to make the certifications
required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act").

     4.6   Financial Statements.  (a)  The financial statements of Banner and
its Subsidiaries included (or incorporated by reference) in the Banner SEC
Reports (including the related notes, where applicable) (i) fairly present in
all material respects the consolidated results of operations, cash flows,
changes in shareholders' equity and consolidated financial position of
Banner and its Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth (subject in the case of unaudited
statements to recurring year-end audit adjustments normal in nature and
amount), (ii) complied as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, and
(iii) have been prepared in accordance with GAAP consistently applied during
the periods involved, except, in each case, as indicated in such statements or
in the notes thereto.  The books and records of Banner and its Subsidiaries
have been, and are being, maintained in all material respects in accordance
with GAAP and any other applicable legal and accounting requirements and
reflect only actual transactions.  Moss Adams LLP has not resigned or been
dismissed as independent public accountants of Banner as a result of or in
connection with any disagreements with Banner on a matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.

     (b)   Neither Banner nor any Banner Subsidiary has any material liability
of any nature whatsoever (whether absolute, accrued, contingent or otherwise
and whether due or to become due), except for those liabilities that are
reflected or reserved against on the consolidated balance sheet of Banner
included in its Quarterly Report on Form 10-Q for the period ended September
30, 2006 (including any notes thereto) and for liabilities incurred in the
ordinary course of business consistent with past practice since September 30,
2006 or in connection with this Agreement and the transactions contemplated
hereby.

     (c)   The records, systems, controls, data and information of Banner and
its Subsidiaries are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process, whether
computerized or not) that are under the

                                 -33-


exclusive ownership and direct control of Banner or its Subsidiaries or
accountants (including all means of access thereto and therefrom), except for
any non-exclusive ownership and non-direct control that would not reasonably
be expected to have a material adverse effect on the system of internal
accounting controls described below in this Section 4.6(c).  Banner (x) has
implemented and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) to ensure that material information
relating to Banner, including its consolidated Subsidiaries, is made known to
the chief executive officer and the chief financial officer of Banner by
others within those entities, and (y) has disclosed, based on its most recent
evaluation prior to the date hereof, to Banner's outside auditors and the
audit committee of Banner's Board of Directors (i) any significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) which are reasonably likely to adversely affect Banner's ability
to record, process, summarize and report financial information and (ii) any
fraud, whether or not material, that involves management or other employees
who have a significant role in Banner's internal controls over financial
reporting.  These disclosures were made in writing by management to Banner's
auditors and audit committee and a copy has previously been made available to
San Juan Financial.  As of the date hereof, there is no reason to believe that
its outside auditors and its chief executive officer and chief financial
officer will not be able to give the certifications and attestations required
pursuant to the rules and regulations adopted pursuant to Section 404 of the
Sarbanes-Oxley Act, without qualification, when next due.

     (d)   Since December 31, 2005, (i) through the date hereof, neither
Banner nor any of its Subsidiaries nor, to the knowledge of the officers of
Banner, any director, officer, employee, auditor, accountant or representative
of Banner or any of its Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Banner or any of its Subsidiaries or
their respective internal accounting controls, including any material
complaint, allegation, assertion or claim that Banner or any of its
Subsidiaries has engaged in questionable accounting or auditing practices, and
(ii) no attorney representing Banner or any of its Subsidiaries, whether or
not employed by Banner or any of its Subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by Banner or any of its officers, directors, employees
or agents to the Board of Directors of Banner or any committee thereof or to
any director or officer of Banner.

     4.7   Broker's Fees.  Neither Banner nor any Banner Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement, other than Sandler O'Neill & Partners, L.P.

     4.8   Absence of Certain Changes or Events.  (a)  Since December 31,
2005, no event or events have occurred that have had or are reasonably likely
to have, either individually or in the aggregate, a Material Adverse Effect on
Banner.

     (b)   Since December 31, 2005, through and including the date of this
Agreement, except as publicly disclosed by Banner in the Banner SEC Reports
filed or furnished

                                  -34-


prior to the date hereof, Banner and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course of
business consistent with their past practice.

     4.9   Legal Proceedings.  (a)  Neither Banner nor any Banner Subsidiary
is a party to any, and there are no pending or, to the best of Banner's
knowledge, threatened, material legal, administrative, arbitral or other
material proceedings, claims, actions or governmental or regulatory
investigations of any nature against Banner or any of its Subsidiaries.

     (b)   There is no Injunction, judgment, or regulatory restriction (other
than those of general application that apply to bank holding companies or
their Subsidiaries) imposed upon Banner, any of its Subsidiaries or the assets
of Banner or any of its Subsidiaries.

     4.10  Taxes and Tax Returns.  Each of Banner and its Subsidiaries has
duly and timely filed, or will duly and timely file, (including all applicable
extensions) all material Tax Returns required to be filed by or with respect
to Banner and its Subsidiaries on or prior to the Effective Time (all such
returns being accurate and complete in all material respects), has paid, or
will pay, all Taxes with respect to the periods covered by such Tax Returns
and has duly paid or made provision for, or will duly pay or make provision
for, the payment of all material Taxes that have been incurred or are due or
claimed to be due from it by federal, state, foreign or local taxing
authorities other than Taxes that are not yet delinquent or are being
contested in good faith, have not been finally determined and, in each case,
have been adequately reserved against.  There are no material disputes
pending, or claims asserted, for Taxes or assessments upon Banner or any of
its Subsidiaries for which Banner does not have reserves that are adequate
under GAAP.  Neither Banner nor any of its Subsidiaries has taken or agreed to
take any action that would, or would be reasonably expected to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.

     4.11  Compliance with Applicable Law.  (a)  Banner and each Banner
Subsidiary hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are not in
default in any material respect under any, applicable law, statute,
order, rule, regulation, policy or guideline of any Governmental Entity
relating to Banner or any of its Subsidiaries, except where the failure to
hold such licenses, franchises, permits and authorizations, or such
non-compliance or default, has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Banner.

     (b)   Except as has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Banner:  Banner
and each Banner Subsidiary has properly administered all accounts for which it
acts as a fiduciary, including accounts for which it serves as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents, applicable
state and federal law and regulation and common law.  None of Banner, any
Banner Subsidiary, or any director, officer or employee of Banner or of any
Banner Subsidiary has committed any breach of trust or fiduciary duty with
respect to any such fiduciary account and the accountings for each such
fiduciary account are true and correct and accurately reflect the assets of
such fiduciary account.

                                   -35-


     (c)   Since the enactment of the Sarbanes-Oxley Act, Banner has been and
is in compliance in all material respects with (i) the applicable provisions
of the Sarbanes-Oxley Act and (ii) the applicable listing and corporate
governance rules and regulations of the Nasdaq.  Section 4.11(c) of the Banner
Disclosure Schedule sets forth, as of the date hereof, a schedule of all
officers and directors of Banner who have outstanding loans from Banner, and
there has been no default on, or forgiveness or waiver of, in whole or in
part, any such loan during the two years immediately preceding the date
hereof.

     4.12  Intellectual Property.  Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Banner, (a) Banner and each of Banner Subsidiary owns, or is licensed to use
(in each case, free and clear of any Liens), all Intellectual Property used in
or necessary for the conduct of its business as currently conducted; (b) the
use of any Intellectual Property by Banner and each Banner Subsidiary does
not, to the knowledge of Banner, infringe on or otherwise violate the rights
of any person and is in accordance with any applicable license pursuant to
which Banner or any Banner Subsidiary acquired the right to use any
Intellectual Property; (c) no person is challenging, infringing on or
otherwise violating any right of Banner or any Banner Subsidiary with respect
to any Intellectual Property owned by and/or licensed to Banner or its
Subsidiaries; and (d) neither Banner nor any Banner Subsidiary has received
any written notice of any pending claim with respect to any Intellectual
Property used by Banner or any Banner Subsidiary and no Intellectual Property
owned and/or licensed by Banner or any Banner Subsidiary is being used or
enforced in a manner that would be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property.

     4.13  Risk Management Instruments.  Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Banner, (a) all Derivative Transactions (which for the avoidance of doubt
shall not include any Banner stock option), whether entered into for the
account of Banner or any Banner Subsidiary or for the account of a customer of
Banner or any Banner Subsidiary, were duly authorized and entered into
in the ordinary course of business consistent with past practice and in
accordance with prudent banking practice and applicable laws, rules,
regulations and policies of any Regulatory Authority and in accordance with
the investment, securities, commodities, risk management and other policies,
practices and procedures employed by Banner and its Subsidiaries, and with
counterparties believed at the time to be financially responsible and able to
understand (either alone or in consultation with their advisers) and to bear
the risks of such Derivative Transactions; (b) all of such Derivative
Transactions are legal, valid and binding obligations of Banner or a Banner
Subsidiary enforceable against it in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity), and are in full force and effect; and (c)
Banner and each applicable Banner Subsidiary have duly performed their
obligations under the Derivative Transactions to the extent that such
obligations to perform have accrued and, to Banner's knowledge, there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.

     4.14  Investment Securities.  (a)  Each of Banner and each Banner
Subsidiary has good title to all securities owned by it (except those sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any Lien, except to the extent such

                                  -36-


securities are pledged in the ordinary course of business to secure
obligations of Banner or its Subsidiaries.  Such securities are valued on the
books of Banner in accordance with GAAP in all material respects.

     (b)   Banner and its Subsidiaries and their respective businesses employ
Policies, Practices and Procedures which Banner believes are prudent and
reasonable in the context of such businesses.  Prior to the date hereof,
Banner has made available to San Juan Financial in writing the material
Policies, Practices and Procedures.

     4.15  Property.  Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Banner, Banner
or a Banner Subsidiary (a) has good and marketable title to all the properties
and assets reflected in the latest audited balance sheet included in the
Banner SEC Reports as being owned by Banner or a Banner Subsidiary or acquired
after the date thereof (except properties sold or otherwise disposed of since
the date thereof in the ordinary course of business) (the  "Banner Owned
Properties"), free and clear of all Liens of any nature whatsoever, except
Permitted Encumbrances, and (b) is the lessee of all leasehold estates
reflected in the latest audited financial statements included in such Banner
SEC Reports or acquired after the date thereof (except for leases that have
expired by their terms since the date thereof) (the "Banner Leased Properties"
and, collectively with the Banner Owned Properties, the "Banner Real
Property"), free and clear of all Liens of any nature whatsoever, except for
Permitted Encumbrances, and is in possession of the properties purported to be
leased thereunder, and each such lease is valid without default thereunder by
the lessee or, to the Banner knowledge, the lessor.  The Banner Real Property
is in material compliance with all applicable zoning laws and building codes,
and the buildings and improvements located on the Banner Real Property are in
good operating condition and in a state of good working order, ordinary wear
and tear excepted.  There are no pending or, to the knowledge of San Juan
Financial, threatened condemnation proceedings against the Banner Real
Property.  Banner and its Subsidiaries are in compliance with all applicable
health and safety related requirements for the Banner Real Property, including
those under the Americans with Disabilities Act of 1990 and the Occupational
Health and Safety Act of 1970.

     4.16  Environmental Liability.  Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Banner, (a) there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action or notices with respect to any
environmental, health or safety matters or any private or governmental
environmental, health or safety investigations or remediation activities of
any nature seeking to impose, or that are reasonably likely to result in, any
liability or obligation of Banner or any of its Subsidiaries arising under
common law or under any local, state or federal environmental, health
or safety statute, regulation or ordinance, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
pending or threatened against Banner or any of its Subsidiaries; (b) to the
knowledge of Banner, there is no reasonable basis for, or circumstances that
are reasonably likely to give rise to, any such proceeding, claim, action,
investigation or remediation by any Governmental Entity or any third party
that would give rise to any liability or obligation on the part of Banner or
any of its Subsidiaries; and (c) neither Banner nor any of its Subsidiaries is
subject to any agreement, order, judgment, decree,

                                  -37-


letter or memorandum by or with any Governmental Entity or third party
imposing any liability or obligation with respect to any of the foregoing.

     4.17  Loan Portfolio.  (a)  Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Banner, each loan, borrowing arrangement, lease, credit enhancement,
commitment, guarantee and other interest bearing asset payable to Banner or
any of its Subsidiaries ("Banner Loans") (i) is evidenced by notes, agreements
or other evidences of indebtedness which are true, genuine and what they
purport to be, (ii) to the extent secured, has been secured by valid liens and
security interests which have been perfected and (iii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance
with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity).  Except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Banner, all Banner Loans originated by Banner or its
Subsidiaries, and all such Banner Loans purchased, administered or serviced by
Banner or its Subsidiaries (including Banner Loans held for resale to
investors), were made or purchased and are administered or serviced, as
applicable, in accordance with customary lending standards of Banner or its
Subsidiaries, as applicable (and in the case of Banner Loans held for resale
to investors, the lending standards, if any, of such investors) and in
accordance with applicable federal, state and local laws, regulations and
rules.  All such Banner Loans (and any related guarantees) and payments due
thereunder are, and on the Closing Date will be, free and clear of any Lien,
and Banner and its Subsidiaries have complied in all material respects, and
on the Closing Date will have complied in all material respects, with all laws
and regulations relating to such Banner Loans.

     (b)   None of the agreements pursuant to which Banner or any of its
Subsidiaries has sold Banner Loans or pools of Banner Loans or participations
in Banner Loans or pools of Banner Loans contains any obligation to repurchase
such Banner Loans or interests therein solely on account of a payment default
by the obligor on any such Banner Loan.

     (c)   Banner and each of its Subsidiaries is approved by and is in good
standing (i) as a supervised mortgagee by the Department of Housing and Urban
Development to originate and service Title I FHA mortgage loans; (ii) as a
GNMA I and II Issuer by the Government National Mortgage Association; (iii) by
the Department of Veteran's Affairs to originate and service VA loans; and
(iv) as a seller/servicer by the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation to originate and service
conventional residential mortgage Loans.

     (d)   None of Banner or any of its Subsidiaries is now nor has it ever
been since December 31, 2003 subject to any material fine, suspension,
settlement or other agreement or other administrative agreement or sanction
by, or any material reduction in any loan purchase commitment from any Agency
or any federal or state agency relating to the origination, sale or servicing
of mortgage or consumer Banner Loans.  Neither Banner nor any of its
Subsidiaries has received any notice, nor does it have any reason to believe,
that any Agency proposes to limit or terminate the underwriting authority of
Banner or its Subsidiaries or to increase the guarantee fees payable to any
such Agency.


                                 -38-





     (e)   Each of Banner and its Subsidiaries is in compliance in all
material respects with all applicable federal, state and local laws, rules and
regulations, including the Truth-In-Lending Act and Regulation Z, the Equal
Credit Opportunity Act and Regulation B, the Real Estate Settlement Procedures
Act and Regulation X, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act and all Agency and other investor and mortgage insurance company
requirements relating to the origination, sale and servicing of mortgage and
consumer Banner Loans.

     4.18   Reorganization; Approvals.  As of the date of this Agreement,
Banner (a) is not aware of any fact or circumstance that could reasonably be
expected to prevent the Merger from qualifying as a "reorganization" within
the meaning of Section 368(a) of the Code, and (b) knows of no reason why all
regulatory approvals from any Governmental Entity required for the
consummation of the transactions contemplated by this Agreement should not be
obtained on a timely basis.

     4.19   Banner Information.  The information relating to Banner and its
Subsidiaries that is provided by Banner or its representatives for inclusion
in the Proxy Statement and the Form S-4, or in any other document filed with
any other Regulatory Agency or Governmental Entity in connection with the
transactions contemplated by this Agreement, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading.  The portions of the Proxy Statement relating to Banner
and other portions within the reasonable control of Banner will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.  The Form S-4 will comply in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.

                                 ARTICLE V

                  COVENANTS RELATING TO CONDUCT OF BUSINESS

     5.1   Conduct of Businesses Prior to the Effective Time.  Except as
expressly contemplated by or permitted by this Agreement or with the prior
written consent of the other party, during the period from the date of this
Agreement to the Effective Time, each of San Juan Financial and Banner shall,
and shall cause each of its respective Subsidiaries to, (a) conduct its
business in the ordinary course in all material respects, (b) use reasonable
best efforts to maintain and preserve intact its business organization and
advantageous business relationships and retain the services of its key
officers and key employees and (c) take no action that is intended to or would
reasonably be expected to adversely affect or materially delay the ability of
either San Juan Financial or Banner to obtain any necessary approvals of any
San Juan Financial Regulatory Agency, Banner Regulatory Agency or other
Governmental Entity required for the transactions contemplated hereby or to
perform its covenants and agreements under this Agreement or to consummate the
transactions contemplated hereby or thereby.

     5.2   San Juan Financial Forbearances.  During the period from the date
of this Agreement to the Effective Time, except as set forth in the San Juan
Financial Disclosure Schedule and except as expressly contemplated or
permitted by this Agreement, San Juan

                                      -39-





Financial shall not, and shall not permit any of its Subsidiaries to, without
the prior written consent of Banner (which consent shall not be unreasonably
withheld or delayed):

     (a)   other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make any
loan or advance or capital contribution to, or investment in, any person (it
being understood and agreed that incurrence of indebtedness in the ordinary
course of business consistent with past practice shall include the creation of
deposit liabilities, purchases of Federal funds, securitizations, sales of
certificates of deposit and entering into repurchase agreements);

     (b)  (i)  adjust, split, combine or reclassify any of its capital  stock;

          (ii)  make, declare or pay any dividend, or make any other
   distribution on, or directly or indirectly redeem, purchase or otherwise
   acquire, any shares of its capital stock or any securities or obligations
   convertible (whether currently convertible or convertible only after the
   passage of time or the occurrence of certain events) into or exchangeable
   for any shares of its capital stock (except (A) dividends paid by any of
   the Subsidiaries of San Juan Financial to San Juan Financial or to any of
   its wholly owned Subsidiaries, (B) distributions, if any, pursuant to
   Section 6.12 and (C) the acceptance of shares of San Juan Financial
   Common Stock in payment of the exercise price or withholding taxes
   incurred by any employee or director in connection with the exercise of
   San Juan Financial Options or the vesting of San Juan Financial
   Restricted Shares granted under a San Juan Financial Stock Plan, in each
   case in accordance with past practice and the terms of the applicable San
   Juan Financial Stock Plan and related award agreements);

          (iii)  grant any stock options, restricted shares or other equity-
   based award with respect to shares of San Juan Financial Common Stock under
   any of San Juan Financial Stock Plans or otherwise (whether such awards are
   settled in cash, San Juan Financial Common Stock or otherwise), or grant
   any individual, corporation or other entity any right to acquire any shares
   of its capital stock, other than grants of stock options to newly hired
   employees of San Juan Financial in the ordinary course of business
   consistent with past practice under the San Juan Financial Stock Plans; or

          (iv)  issue any additional shares of capital stock or other
   securities except pursuant to the exercise of San Juan Financial Options
   granted under a San Juan Financial Stock Plan that are outstanding as of
   the San Juan Financial Capitalization Date or granted thereafter in
   compliance with this Agreement;

     (c)   except as required by applicable law, (i) increase the wages,
salaries, or incentive compensation or incentive compensation opportunities of
any director or employee of San Juan Financial or any San Juan Financial
Subsidiaries other

                                      -40-





than normal increases in annual base salary in the ordinary course of business
consistent with past practice for employees who are not (x) executive officers
(y) directors, or (z) employees of San Juan Financial or San Juan Financial
Subsidiaries who are party to change of control or severance agreements,
increase or accelerate the accrual rate, vesting or timing of payment or
funding of, any compensation, benefits or other rights of any director or
employee of San Juan Financial or any San Juan Financial Subsidiaries or
otherwise pay any amount to which any director or employee of San Juan
Financial or any San Juan Financial Subsidiary is not entitled, (ii)
establish, adopt, or become a party to any new employee benefit or
compensation plan, program, commitment or agreement or amend, suspend or
terminate any San Juan Financial Benefit Plan other than amendments required
to be made to comply with Section 409A of the Code, (iii) modify any San Juan
Financial Option or other equity-based award, (iv) make any discretionary
contributions or payments to any trust or other funding vehicle or pay any
discretionary premiums in respect of benefits under any San Juan Financial
Benefit Plan or Employment Agreement, (v) establish, adopt or enter into any
collective bargaining agreement or (vi) hire, terminate the employment or
otherwise change the status of employment of any executive officer or director
or employee of San Juan Financial or any San Juan Financial Subsidiaries who
are party to change of control or severance agreements;

     (d)   except as permitted by Section 6.12, sell, transfer, mortgage,
encumber or otherwise dispose of any material amount of its properties or
assets to any individual, corporation or other entity other than a Subsidiary
or cancel, release or assign any material amount of indebtedness to any such
person or any claims held by any such person, in each case other than in the
ordinary course of business consistent with past practice or pursuant to
contracts in force at the date of this Agreement;

     (e)   enter into any new line of business or change in any material
respect its lending, investment, underwriting, risk and asset liability
management and other banking and operating, securitization and servicing
policies, except as required by applicable law, regulation or policies imposed
by any Governmental Entity;

     (f)   except for transactions in the ordinary course of business
consistent with past practice, make any material investment either by purchase
of stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation or
other entity;

     (g)   take any action, or knowingly fail to take any action, which action
or failure to act is reasonably likely to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code;

     (h)   amend its articles of incorporation or by-laws, or otherwise take
any action to exempt any person or entity (other than Banner or its
Subsidiaries) or any action taken by any person or entity from any Takeover
Statute or similarly restrictive provisions of its organizational documents or
terminate, amend or waive any provisions of any confidentiality or standstill
agreements in place with any third parties;

                                      -41-





     (i)   restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;

     (j)   commence or settle any material claim, action or proceeding,
except in the ordinary course of business consistent with past practice
(provided that no such settlement shall include any restrictions on the
operation or conduct of business by San Juan Financial or its Subsidiaries
without the prior written consent of Banner);

     (k)   take any action or fail to take any action that is intended or may
reasonably be expected to result in any of the conditions to the Merger set
forth in Article VII not being satisfied;

     (l)   implement or adopt any change in its Tax accounting or financial
accounting principles, practices or methods, other than as may be required by
applicable law, GAAP or regulatory guidelines;

     (m)   file any application to establish, or to relocate or terminate the
operations of, any banking office of San Juan Financial or any San Juan
Financial Subsidiary;

     (n)   file or amend any Tax Return other than in the ordinary course of
business, make, change or revoke any material Tax election, agree to an
extension of the statute of limitations with respect to the assessment or
collection of material Taxes, make or surrender any claim for a material
refund of Taxes, or settle or compromise any material Tax liability;

     (o)   create, renew, amend, terminate or cancel any San Juan Financial
Contract other than in the ordinary course of business consistent with past
practice; provided, that neither San Juan Financial nor any of its
Subsidiaries shall enter into any contract or agreement of the type addressed
in clause (ii) or (iii) of the definition of San Juan Financial Contracts; or

     (p)   agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 5.2.

     5.3   Banner Forbearances.  Except as expressly permitted by this
Agreement or with the prior written consent of San Juan Financial, during the
period from the date of this Agreement to the Effective Time, Banner shall
not, and shall not permit any Banner Subsidiary to, (a) amend, repeal or
otherwise modify any provision of the Banner Articles or the Banner By- laws
in a manner that would adversely affect San Juan Financial or the transactions
contemplated by this Agreement, (b) take any action, or knowingly fail to take
any action, which action or failure to act is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code, (c) take any action, or fail to take any action, which
action or failure to act is intended or may reasonably be expected to result
in any of the conditions to the Merger set forth in Article VII not being
satisfied, or (d) agree to take, make

                                      -42-





any commitment to take, or adopt any resolutions of its board of directors in
support of, any of the actions prohibited by this Section 5.3.

                                ARTICLE VI

                           ADDITIONAL AGREEMENTS

     6.1   Regulatory Matters.  (a)  Banner shall promptly prepare and file
with the SEC the Form S-4, in which the Proxy Statement will be included as a
prospectus.  Banner shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing, and San Juan Financial shall thereafter mail or deliver the Proxy
Statement to its shareholders.  San Juan Financial acknowledges that Banner is
required to file the opinion described in Section 7.3(c) with the Form S-4 or
with a post-effective amendment thereto, and agrees to obtain such consents to
such filing as may be necessary. Banner shall also use its reasonable best
efforts to obtain all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement, and San Juan Financial shall furnish all information concerning San
Juan Financial and the holders of San Juan Financial Common Stock as may be
reasonably requested in connection with any such action.

     (b)   The parties shall cooperate with each other and use their
respective reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities that are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including the Merger), and to comply with the terms and conditions
of all such permits, consents, approvals and authorizations of all such third
parties, San Juan Financial Regulatory Agencies, Banner Regulatory Agencies or
other Governmental Entities.  San Juan Financial and Banner shall have the
right to review in advance, and, to the extent practicable, each will consult
the other on, in each case subject to applicable laws relating to the
confidentiality of information, all the information relating to San Juan
Financial or Banner, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement.  In exercising the foregoing
right, each of the parties shall act reasonably and as promptly as
practicable.  The parties shall consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated by this Agreement.  Notwithstanding the foregoing, nothing
contained herein shall be deemed to require Banner to take any action, or
commit to take any action, or agree to any condition or restriction, in
connection with obtaining the foregoing permits, consents, approvals and
authorizations of Governmental Entities, that would reasonably be expected to
have a material adverse effect (measured on a scale relative to San Juan
Financial) on either Banner or San Juan Financial (a "Materially Burdensome
Regulatory Condition").

     (c)   Each of Banner and San Juan Financial shall, upon request, furnish
to the other all information concerning itself, its Subsidiaries, directors,
officers and shareholders and

                                      -43-





such other matters as may be reasonably necessary or advisable in connection
with the Proxy Statement, the Form S-4 or any other statement, filing, notice
or application made by or on behalf of Banner, San Juan Financial or any of
their respective Subsidiaries to any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement.

     (d)   Each of Banner and San Juan Financial shall promptly advise the
other upon receiving any communication from any San Juan Financial Regulatory
Agency, Banner Regulatory Agency or other Governmental Entity consent or
approval of which is required for consummation of the transactions
contemplated by this Agreement that causes such party to believe that there is
a reasonable likelihood that any Banner Requisite Regulatory Approval or San
Juan Financial Requisite Regulatory Approval, respectively, will not be
obtained or that the receipt of any such approval may be materially delayed.

     (e)   San Juan Financial shall cooperate with such reasonable requests as
may be made by Banner with respect to any post-Closing reorganization of
Banner's and San Juan Financial's Subsidiaries, including filing prior to the
Closing such applications with Regulatory Agencies or Governmental Entities as
may be necessary or desirable in connection with any such reorganization.

     6.2   Access to Information.  (a)  Upon reasonable notice and subject to
applicable laws relating to the confidentiality of information, each of San
Juan Financial and Banner shall, and shall cause each of its Subsidiaries to,
afford to the officers, employees, accountants, counsel, advisors, agents and
other representatives of the other party, reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records, and, during such
period, such party shall, and shall cause its Subsidiaries to, make available
to the other party (i) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking or
insurance laws (other than reports or documents that such party is not
permitted to disclose under applicable law) and (ii) all other information
concerning its business, properties and personnel as the other party may
reasonably request (in the case of a request by San Juan Financial,
information concerning Banner that is reasonably related to the prospective
value of Banner Common Stock or to Banner's ability to consummate the
transactions contemplated hereby).  Neither San Juan Financial nor Banner, nor
any of their respective Subsidiaries, shall be required to provide access to
or to disclose information where such access or disclosure would jeopardize
the attorney-client privilege of such party or its Subsidiaries or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement.  The parties shall
make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.

     (b)   All information and materials provided pursuant to this Agreement
shall be subject to the provisions of the Confidentiality Agreement entered
into by San Juan Financial in favor of Banner as of November 7, 2006 (the "San
Juan Financial Confidentiality Agreement"), and the Confidentiality Agreement
entered into by Banner in favor of San Juan Financial as of July 19, 2006
(collectively with the San Juan Financial Confidentiality Agreement, the
"Confidentiality Agreements").

                                      -44-





     (c)   No investigation by a party hereto or its representatives shall
affect the representations and warranties of the other party set forth in this
Agreement.

     6.3   Shareholder Approval.  San Juan Financial shall call a meeting of
its shareholders (the "San Juan Financial Shareholders' Meeting") to be held
as soon as reasonably practicable for the purpose of obtaining the requisite
shareholder approvals required in connection with this Agreement and the
Merger.  The Board of Directors of San Juan Financial shall recommend to San
Juan Financial's shareholders the approval and adoption of this Agreement and
the Merger (the "San Juan Financial Recommendation"); provided, however, that
San Juan Financial's Board of Directors shall not be required to make such San
Juan Financial Recommendation to the extent provided in Section 6.11.
Notwithstanding any change in the San Juan Financial Recommendation, unless
otherwise directed in writing by Banner, this Agreement and the Merger shall
be submitted to the shareholders of San Juan Financial at the San Juan
Financial Shareholders' Meeting for the purpose of approving the Agreement and
the Merger and nothing contained herein shall be deemed to relieve San Juan
Financial of such obligation; provided, however, that if the Board of
Directors of San Juan Financial shall have effected a change in San Juan
Financial Recommendation in accordance with this Agreement, then in submitting
this Agreement to San Juan Financial's shareholders, the Board of Directors of
San Juan Financial may submit this Agreement to San Juan Financial's
shareholders without recommendation (although the resolutions adopting this
Agreement and the Plan of Merger as of the date hereof may not be rescinded or
amended), in which event the Board of Directors of San Juan Financial may
communicate the basis for its lack of a recommendation to San Juan Financial's
shareholders in the Proxy Statement or an appropriate amendment or supplement
thereto to the extent required by law.

     6.4   Affiliates.  San Juan Financial shall use its reasonable best
efforts to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act) of San Juan
Financial to deliver to Banner, as soon as practicable after the date of this
Agreement, and prior to the date of the meeting of San Juan Financial
shareholders to be held pursuant to Section 6.3, a written agreement, in the
form of Exhibit B.

     6.5   Nasdaq Listing.  Banner shall cause the shares of Banner Common
Stock to be issued in the Merger to be approved for listing on the Nasdaq,
subject to official notice of issuance, prior to the Effective Time.

     6.6   Employee Matters.  (a)  For the one year period following the
Effective Time, the employees of San Juan Financial who are employed by the
Surviving Corporation or any of its Subsidiaries as of the Effective Time (the
"Covered Employees") and who remain employed with the Surviving Corporation or
any of its Subsidiaries during such period will continue to be offered
participation and coverage under employee benefit plans that are no less
favorable in the aggregate than the San Juan Financial Benefit Plans as in
effect immediately prior to the Effective Time; provided, that Covered
Employees shall be eligible to participate in Banner's employee stock
ownership plan.

     (b)   To the extent permitted by applicable law or the terms of any
applicable insurance policies, Banner shall cause each employee benefit plan
of Banner (each a "Banner Benefit Plan") in which Covered Employees are
eligible to participate to take into account for

                                      -45-





purposes of eligibility, vesting and benefit accruals under the Banner Benefit
Plans the service of such employees with San Juan Financial and its
Subsidiaries (and any predecessor entities) to the same extent as such service
was credited for such purpose by San Juan Financial and its Subsidiaries;
provided, however, that such service shall not be recognized for purposes of
benefit accruals under any defined benefit pension plan, to the extent that
such recognition would result in a duplication of benefits with respect to the
same period of service, or with respect to newly implemented plans for which
prior service is not taken into account.  Nothing herein shall limit the
ability of Banner or the Surviving Corporation to amend or terminate any of
the San Juan Financial Benefit Plans or Banner Benefits Plans in accordance
with their terms at any time.

     (c)   If Covered Employees become eligible to participate in a medical,
dental, health or disability insurance plan of Banner or its Subsidiaries,
Banner shall cause each such plan to (i) waive any preexisting condition
limitations to the extent such conditions are covered under the applicable
medical, health, dental or disability insurance plans of Banner, (ii) honor
under such plans any deductible, co-payment and out-of-pocket expenses
incurred by such employees and their beneficiaries during the portion of the
calendar year prior to such participation and (iii) waive any waiting period
limitation or evidence of insurability requirement which would otherwise be
applicable to such employee on or after the Effective Time for the year in
which the Effective Time occurs, in each case to the extent such employee had
satisfied any similar limitation or requirement under an analogous medical,
dental, health or disability insurance plan of San Juan Financial prior to the
Effective Time for the year in which the Effective Time or participation in
such medical, dental or health plan of Banner, as applicable, occurs.

     (d)   From and after the Effective Time, Banner and its Subsidiaries will
honor in accordance with their terms as in effect immediately prior to the
Effective Time all Employment Agreements entered into prior to the date
hereof; provided that such Employment Agreements shall be subject to any
amendment or termination thereof that may be permitted by their terms.  At the
Effective Time, Banner shall take the actions set forth in Section 6.6(d) of
the Banner Disclosure Schedule.

     (e)   Without limiting the generality of the final sentence of Section
9.9, nothing in this Section 6.6, express or implied, is intended to or shall
confer upon any other person including without limitation any Covered
Employee, any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, and no provision of this Section 6.6 shall
constitute an amendment of any compensation or benefit plan, program, policy,
agreement or other arrangement.

     6.7   Indemnification; Directors' and Officers' Insurance.  (a)  In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative (a "Claim"),
including any such Claim in which any individual who is now, or has been at
any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director or officer of San Juan Financial or any San Juan
Financial Subsidiary or who is or was serving at the request of San Juan
Financial or any San Juan Financial Subsidiary as a director or officer of
another person (the "Indemnified Parties"), is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director or officer of San Juan
Financial or any of its Subsidiaries prior to

                                      -46-





the Effective Time or (ii) this Agreement or any of the transactions
contemplated by this Agreement, whether asserted or arising before or after
the Effective Time, the parties shall cooperate and use their best efforts to
defend against and respond thereto.  All rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to
the Effective Time now existing in favor of any Indemnified Party as provided
in their respective certificates or articles of incorporation or by-laws (or
comparable organizational documents), and any existing indemnification
agreements set forth in Section 6.7 of San Juan Financial Disclosure Schedule,
shall survive the Merger and shall continue in full force and effect in
accordance with their terms, it being understood that nothing in this sentence
shall require any amendment to the articles of incorporation or by-laws of the
Surviving Corporation.

     (b)   From and after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted by applicable law, indemnify, defend and hold
harmless, and provide advancement of expenses to, each Indemnified Party
against all losses, claims, damages, costs, expenses, liabilities or judgments
or amounts that are paid in settlement of or in connection with any Claim
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director or officer of San Juan Financial or any
Subsidiary of San Juan Financial, and pertaining to any matter existing or
occurring, or any acts or omissions occurring, at or prior to the Effective
Time, whether asserted or claimed prior to, or at or after, the Effective Time
(including matters, acts or omissions occurring in connection with the
approval of this Agreement and the consummation of the transactions
contemplated hereby) or taken at the request of Banner pursuant to Section 6.8
hereof.

     (c)   Banner shall cause the individuals serving as officers and
directors of San Juan Financial or any of its Subsidiaries immediately prior
to the Effective Time to be covered for a period of six years from the
Effective Time by the directors' and officers' liability insurance policy
maintained by San Juan Financial (provided that Banner may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions that are not less advantageous than such policy) with respect to
acts or omissions occurring prior to the Effective Time that were committed by
such officers and directors in their capacity as such; provided that in no
event shall Banner be required to expend annually in the aggregate an amount
in excess of 200% of the annual premiums currently paid by San Juan Financial
(which current amount is set forth in Section 6.7 of the San Juan Financial
Disclosure Schedule) for such insurance (the "Insurance Amount"), and provided
further that if Banner is unable to maintain such policy (or such substitute
policy) as a result of the preceding proviso, Banner shall obtain as much
comparable insurance as is available for the Insurance Amount.

     (d)   The provisions of this Section 6.7 shall survive the Effective Time
and are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.

     6.8   Additional Agreements.  (a)  Subject to the terms and conditions of
this Agreement, each of San Juan Financial and Banner agree to cooperate fully
with each other and to use reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective, at the time and in the
manner contemplated by this Agreement, the Merger.

                                      -47-





     (b)   In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement (including
any merger between a Subsidiary of Banner, on the one hand, and a Subsidiary
of San Juan Financial, on the other) or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either party to the Merger, the proper officers and directors of
each party and their respective Subsidiaries shall, at Banner's sole expense,
take all such necessary action as may be reasonably requested by Banner.

     6.9   Advice of Changes.  Each of Banner and San Juan Financial shall
promptly advise the other of any change or event (i) having or reasonably
likely to have a Material Adverse Effect on it or (ii) that it believes would
or would be reasonably likely to cause or constitute a material breach of any
of its representations, warranties or covenants contained in this Agreement;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement; provided further that a failure to comply with this Section 6.9
shall not constitute a breach of this Agreement or the failure of any
condition set forth in Article VII to be satisfied unless the underlying
Material Adverse Effect or material breach would independently result in the
failure of a condition set forth in Article VII to be satisfied.

     6.10   Exemption from Liability Under Section 16(b).  Prior to the
Effective Time, Banner shall take all such steps as may be necessary or
appropriate to cause any disposition of shares of San Juan Financial Common
Stock or conversion of any derivative securities in respect of such shares of
San Juan Financial Common Stock in connection with the consummation of the
transactions contemplated by this Agreement to be exempt under Rule 16b-3
promulgated under the Exchange Act, including any such actions specified in
the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden,
Arps, Slate, Meagher & Flom, LLP.

     6.11   No Solicitation.  (a)  San Juan Financial, each San Juan Financial
Subsidiary and each of their respective officers or directors shall not, and
shall not knowingly permit any employee, agent or representative (including
any investment banker, financial advisor, attorney, accountant or other
retained representative) of San Juan Financial or any of its Subsidiaries
shall to, directly or indirectly (i) solicit, initiate, encourage, facilitate
(including by way of furnishing information) or take any other action designed
to facilitate any inquiries or proposals regarding any merger, share exchange,
consolidation, sale of assets, sale of shares of capital stock (including,
without limitation, by way of a tender offer) or similar transactions
involving San Juan Financial or any of its Subsidiaries that, if consummated,
would constitute an Alternative Transaction (any of the foregoing inquiries or
proposals, including any indication of an intention to propose any of the
foregoing, being referred to herein as an "Alternative Proposal"), (ii)
participate in any discussions or negotiations regarding an Alternative
Transaction or (iii) enter into any agreement regarding any Alternative
Transaction.  Notwithstanding the foregoing, the Board of Directors of San
Juan Financial shall be permitted, prior to the meeting of San Juan Financial
shareholders to be held pursuant to Section 6.3, and subject to compliance
with the other terms of this Section 6.11 and to first entering into an
agreement with the person proposing such Alternative Proposal on terms
substantially similar to, and no less favorable to San Juan Financial than,
those contained in the San Juan Financial

                                      -48-





Confidentiality Agreement, to (A) consider and participate in discussions with
respect to a bona fide Alternative Proposal received in writing by San Juan
Financial, and (B) withdraw, modify or qualify the San Juan Financial
Recommendation, in each case if and only to the extent that the Board of
Directors of San Juan Financial reasonably determines in good faith after
consultation with outside legal counsel that failure to do so could reasonably
cause it to violate its fiduciary duties.

     As used in this Agreement, "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) (other than
Banner or its affiliates) directly or indirectly, acquires or would acquire
more than 30% of the outstanding shares of San Juan Financial or its
Subsidiaries or outstanding voting power or of any new series or new class of
preferred stock that would be entitled to a class or series vote with respect
to a merger of San Juan Financial or any of its Subsidiaries whether from San
Juan Financial or any of its Subsidiaries or pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger, share exchange, consolidation or
other business combination involving San Juan Financial or any of its
Subsidiaries (other than the Merger and other than a merger, share exchange,
consolidation or other business combination solely involving San Juan
Financial and one or more of its Subsidiaries), or (iii) any transaction
pursuant to which any person (or group of persons) (other than Banner or its
affiliates) acquires or would acquire assets (including for this purpose the
outstanding equity securities of Subsidiaries of San Juan Financial and
securities of the entity surviving any merger or business combination
including any of San Juan Financial's Subsidiaries) of San Juan Financial, or
any of its Subsidiaries representing more than 25% of the fair market value of
all the assets of San Juan Financial and its Subsidiaries, taken as a whole,
immediately prior to such transaction.

     (b)   San Juan Financial shall notify Banner promptly (but in no event
later than 48 hours) after receipt of any Alternative Proposal, or any
material modification of or material amendment to any Alternative Proposal, or
any request for nonpublic information relating to San Juan Financial or any of
its Subsidiaries or for access to the properties, books or records of San Juan
Financial or any Subsidiary by any person or entity that informs the Board of
Directors of San Juan Financial or any Subsidiary that it is considering
making, or has made, an Alternative Proposal.  Such notice to Banner shall be
made orally and in writing, and shall indicate the identity of the person
making the Alternative Proposal or intending to make or considering making an
Alternative Proposal or requesting non-public information or access to the
books and records of San Juan Financial or any Subsidiary (other than San Juan
Title, LLC), and the material terms of any such Alternative Proposal or
modification or amendment to an Alternative Proposal.  San Juan Financial
shall keep Banner fully informed of any material changes in the status and any
material changes or modifications in the terms of any such Alternative
Proposal, indication or request.  San Juan Financial shall also promptly, and
in any event within 48 hours, notify Banner, orally and in writing, if it
enters into discussions or negotiations concerning any Alternative Proposal in
accordance with Section 6.11(a).

     (c)   San Juan Financial and its Subsidiaries shall immediately cease and
cause to be terminated any existing discussions or negotiations with any
persons conducted heretofore with respect to any of the foregoing, and shall
use reasonable best efforts to cause all persons other than Banner who have
been furnished confidential information regarding San Juan Financial or its
Subsidiaries in connection with the solicitation of or discussions regarding
an

                                      -49-





Alternative Proposal within the 12 months prior to the date hereof promptly to
return or destroy such information.  San Juan Financial agrees not to, and to
cause its Subsidiaries not to, release any third party from the
confidentiality and standstill provisions of any agreement to which San Juan
Financial or any of its Subsidiaries is or may become a party, and shall
immediately take all steps necessary to terminate any approval that may have
been heretofore given under any such provisions authorizing any person to make
an Alternative Proposal.

     (d)   San Juan Financial shall ensure that the officers, directors,
investment bankers, financial advisors, attorneys and accountants of San Juan
Financial or its Subsidiaries are aware of the restrictions described in this
Section 6.11 as reasonably necessary to avoid violations thereof.

     (e)   For the avoidance of doubt, it is understood by the parties that,
for purposes of this Section 6.11, San Juan Title, LLC is not a Subsidiary of
San Juan Financial.

     6.12   Special Distribution.  San Juan Financial shall use reasonable
best efforts to dispose of its interest in San Juan Title LLC (the
"Disposition") prior to the Effective Time.  If the Disposition is consummated
prior to or contemporaneously with the Effective Time, San Juan Financial
shall inform Banner of the amount, net of any Taxes paid or payable by San
Juan Financial with respect to the Disposition, realized as a result of the
Disposition (the "Disposition Proceeds") and, subject to Banner's reasonable
verification of the amount of Disposition Proceeds, shall be permitted to pay
to the shareholders of San Juan Financial a special distribution equal the
Disposition Proceeds prior to the Effective Time.

                                  ARTICLE VII

                              CONDITIONS PRECEDENT

     7.1   Conditions to Each Party's Obligation to Effect the Merger.  The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:

     (a)   Shareholder Approval.  This Agreement shall have been approved and
adopted by the requisite affirmative vote of the holders of San Juan Financial
Common Stock entitled to vote thereon.

     (b)   Nasdaq Listing.  The shares of Banner Common Stock to be issued to
the holders of San Juan Financial Common Stock upon consummation of the Merger
shall have been authorized for listing on the Nasdaq, subject to official
notice of issuance.

     (c)   Form S-4.  The Form S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the Form S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.

     (d)   No Injunctions or Restraints; Illegality.  No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the

                                      -50-





other transactions contemplated by this Agreement shall be in effect.  No
statute, rule, regulation, order, Injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity that
prohibits or makes illegal consummation of the Merger.

     7.2   Conditions to Obligations of Banner.  The obligation of Banner to
effect the Merger is also subject to the satisfaction, or waiver by Banner, at
or prior to the Effective Time, of the following conditions:

     (a)   Representations and Warranties.  The representations and warranties
of San Juan Financial set forth in Section 3.2 of this Agreement shall be true
and correct (other than for such failures to be true and correct as are de
minimis in effect), and the remaining representations and warranties of San
Juan Financial set forth in this Agreement shall be true and correct (for this
purpose disregarding any qualification or limitation as to materiality or
Material Adverse Effect), in each case as of the date of this Agreement and as
of the Closing Date as though made on such date, except to the extent such
representations and warranties are expressly made only as of an earlier date,
in which case as of such earlier date; provided that, if any of such
representations and warranties (other than the representations and warranties
contained in Section 3.2, which shall be true and correct other than for such
failures to be true and correct as are de minimis in effect) shall not be true
and correct (for this purpose disregarding any qualification or limitation as
to materiality or Material Adverse Effect), then the condition stated in this
clause (a) shall be deemed satisfied unless the cumulative effect of all
inaccuracies of such representations and warranties (for this purpose
disregarding any qualification or limitation as to materiality or Material
Adverse Effect) shall be or have a Material Adverse Effect on San Juan
Financial; and Banner shall have received a certificate signed on behalf of
San Juan Financial by its Chief Executive Officer or Chief Financial Officer
to the foregoing effect.

     (b)   Performance of Obligations of San Juan Financial.  San Juan
Financial shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time; and Banner shall have received a certificate signed on behalf
of San Juan Financial by the Chief Executive Officer or the Chief Financial
Officer of San Juan Financial to such effect.

     (c)   Federal Tax Opinion.  Banner shall have received the opinion of its
counsel, Wachtell, Lipton, Rosen & Katz, dated the Closing Date, to the effect
that, on the basis of facts, representations and assumptions set forth or
referred to in such opinion, the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code.  In rendering such opinion,
counsel may require and rely upon customary representations contained in
certificates of officers of San Juan Financial and Banner.

     (d)   Regulatory Approvals.  All regulatory approvals set forth in
Section 4.4 required to consummate the transactions contemplated by this
Agreement, including the Merger, shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such waiting
periods being referred as the "Banner Requisite

                                      -51-





Regulatory Approvals"), and no such regulatory approval shall have resulted in
the imposition of any Materially Burdensome Regulatory Condition.

     7.3   Conditions to Obligations of San Juan Financial.  The obligation of
San Juan Financial to effect the Merger is also subject to the satisfaction or
waiver by San Juan Financial at or prior to the Effective Time of the
following conditions:

     (a)   Representations and Warranties.  The representations and warranties
of Banner set forth in the last sentence of Section 4.2 of this Agreement
shall be true and correct (other than for such failures to be true and correct
as are de minimis in effect), and the remaining representations and warranties
of Banner set forth in this Agreement shall be true and correct (for this
purpose disregarding any qualification or limitation as to materiality or
Material Adverse Effect), in each case as of the date of this Agreement and as
of the Closing Date as though made on such date, except to the extent such
representations and warranties are expressly made only as of an earlier date,
in which case as of such earlier date; provided that, if any of such
representations and warranties (other than the representations and warranties
contained in the last sentence of Section 4.2, which shall be true and correct
other than for such failures to be true and correct as are de minimis in
effect) shall not be true and correct (for this purpose disregarding any
qualification or limitation as to materiality or Material Adverse Effect),
then the condition stated in this clause (a) shall be deemed satisfied unless
the cumulative effect of all inaccuracies of such representations and
warranties (for this purpose disregarding any qualification or limitation as
to materiality or Material Adverse Effect) shall be or have a Material Adverse
Effect on Banner; and San Juan Financial shall have received a certificate
signed on behalf of Banner by its Chief Executive Officer or Chief Financial
Officer to the foregoing effect.

     (b)   Performance of Obligations of Banner.  Banner shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and San Juan Financial shall
have received a certificate signed on behalf of Banner by the Chief Executive
Officer or the Chief Financial Officer of Banner to such effect.

     (c)   Federal Tax Opinion.  San Juan Financial shall have received the
opinion of its counsel, Davis Wright Tremaine LLP, dated the Closing Date, to
the effect that, on the basis of facts, representations and assumptions set
forth or referred to in such opinion, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code.  In rendering
such opinion, counsel may require and rely upon customary representations
contained in certificates of officers of San Juan Financial and Banner.

     (d)   Regulatory Approvals.  All regulatory approvals set forth in
Section 3.4 required to consummate the transactions contemplated by this
Agreement, including the Merger, shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such waiting
periods being referred as the "San Juan Financial Requisite Regulatory
Approvals").

                                      -52-





                               ARTICLE VIII

                         TERMINATION AND AMENDMENT

     8.1   Termination.  This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of San Juan Financial or
Banner:

     (a)   by mutual consent of San Juan Financial and Banner in a written
instrument authorized by the boards of directors of San Juan Financial and
Banner, as determined by a vote of a majority of the members of each
respective entire board of directors;

     (b)   by either San Juan Financial or Banner, if any Governmental Entity
that must grant a Banner Requisite Regulatory Approval or a San Juan Financial
Requisite Regulatory Approval has denied approval of the Merger and such
denial has become final and nonappealable or any Governmental Entity of
competent jurisdiction shall have issued a final and nonappealable order
permanently enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement;

     (c)   by either San Juan Financial or Banner, if the Merger shall not
have been consummated on or before July 31, 2007, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth in this Agreement;

     (d)   by either Banner or San Juan Financial (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), if there shall have
been a breach of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of San
Juan Financial, in the case of a termination by Banner, or Banner, in the case
of a termination by San Juan Financial, which breach, either individually or
in the aggregate, would result in, if occurring or continuing on the Closing
Date, the failure of the conditions set forth in Section 7.2 or 7.3, as the
case may be, and which is not cured within 45 days following written notice to
the party committing such breach or by its nature or timing cannot be cured
within such time period;

     (e)   by Banner, if (i) San Juan Financial shall have materially and
willfully breached its obligations under Section 6.3 or Section 6.11, or (ii)
the Board of Directors of San Juan Financial shall have (A) failed to
recommend in the Proxy Statement the adoption of the agreement of merger set
forth in this Agreement, (B) publicly withdrawn or modified, or publicly
announced its intention to withdraw or modify, in any manner adverse to
Banner, its recommendation that its shareholders approve or adopt this
Agreement or (C) recommended any Alternative Proposal or failed to recommend
against any Alternative Proposal that constitutes a tender offer within the 10
Business Day period specified in Rule 14e-2(a) under the Exchange Act (or, in
the

                                      -53-





case of clause (ii), resolved to take any such action), whether or not
permitted by the terms hereof;

     (f)   by either San Juan Financial or Banner if any approval of the
shareholders of San Juan Financial contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote at the
San Juan Financial Shareholders' Meeting or at any adjournment or postponement
of such meeting;

     (g)   automatically, on a date that is five Business Days after the
Determination Date (or on such later date, not later than 20 Business Days
after the Determination Date, as the parties may agree) in the event that, as
of the Determination Date, the Average Closing Price shall be less than the
Lower Floor Price, unless (i) the Board of Directors of San Juan Financial
determines by the unanimous vote of its members that the Agreement should not
be automatically terminated pursuant to this Section 8.1(g) and gives written
notice of such determination to Banner not later than four (4) Business Days
after the Determination Date (or on such later date, not later than 19
Business Days after the Determination Date, as the parties may agree) or (ii)
Banner gives notice to San Juan Financial on or prior to the fifth Business
Day after the date on which automatic termination would occur that it intends
to exercise the Banner Fill Option; or

     (h)   by Banner, if the Board of Directors of Banner so determines by the
vote of a majority of all of its members, and if no Change of Control Event
has occurred, by giving written notice to San Juan Financial not later than
the end of the second Business Day next following the Determination Date, in
the event that, as of the Determination Date, the Average Closing Price shall
be more than the Upper Ceiling Price, unless San Juan Financial gives notice
to Banner within five Business Days after its receipt of such notice that it
intends to exercise the San Juan Financial Fill Option.

     "Banner Fill Option" means an increase in the Aggregate Consideration by
an amount that represents the difference between the Lower Floor Price and the
Average Closing Price, multiplied by the Total Stock Amount; and "San Juan
Financial Fill Option" means a decrease in the Aggregate Consideration by an
amount that represents the difference between the Upper Ceiling Price and the
Average Closing Price, multiplied by the Total Stock Amount.  If the Banner
Fill Option or the San Juan Financial Fill Option is exercised, this Agreement
shall not terminate, and any increase or decrease in the Aggregate
Consideration contemplated by this clause may be effected by an adjustment to
the Per Share Cash Consideration, the Per Share Stock Consideration or a
combination thereof, at Banner's discretion, provided that in no event shall
the proportions of cash and Banner Common Stock issued in the Merger be
adjusted so as to prevent the Merger from qualifying as a reorganization
pursuant to Section 368(a) of the Code.  If the amount of Aggregate
Consideration is adjusted pursuant to Section 8.1(g) or 8.1(h), the
definitions of Per Share Cash Consideration and Per Share Stock Consideration
herein shall be deemed to have been adjusted accordingly.

     The party desiring to terminate this Agreement pursuant to any clause of
this Section 8.1 (other than clause (a)) shall give written notice of such
termination to the other party

                                      -54-





in accordance with Section 9.3, specifying the provision or provisions hereof
pursuant to which such termination is effected.

     8.2   Effect of Termination.  In the event of termination of this
Agreement by either San Juan Financial or Banner as provided in Section 8.1,
this Agreement shall forthwith become void and have no effect, and none of San
Juan Financial, Banner, any of their respective Subsidiaries or any of the
officers or directors of any of them shall have any liability of any nature
whatsoever under this Agreement, or in connection with the transactions
contemplated by this Agreement, except that (i) Sections 6.2(b), 8.2, 8.3 and
9.2 through and including 9.9 shall survive any termination of this Agreement,
and (ii) neither San Juan Financial nor Banner shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.

     8.3   Fees and Expenses; Termination Fees.

     (a)   Except (i) as provided in this Section 8.3 and (ii) with respect to
costs and expenses of printing and mailing the Proxy Statement and all filing
and other fees paid to the SEC in connection with the Merger, which shall be
borne equally by San Juan Financial and Banner, all fees and expenses incurred
in connection with the Merger, this Agreement, and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.

     (b)   San Juan Financial shall pay to Banner, by wire transfer of
immediately available funds to such accounts as Banner may designate, the fee
provided below in the event that this Agreement is terminated as follows:

          (i)   if Banner shall terminate this Agreement pursuant to Section
   8.1(e), then San Juan Financial shall pay an amount equal to $1,000,000
   (the "Termination Fee") within ten (10) Business Days following such
   termination;

          (ii)   if (A) either party shall terminate this Agreement pursuant
   to Section 8.1(f) due to the failure to obtain the required San Juan
   Financial shareholder approval, (B) an Alternative Proposal shall have been
   publicly announced or otherwise communicated generally to the San Juan
   Financial shareholders or made known to the senior management or Board of
   Directors of San Juan Financial prior to the San Juan Financial Shareholder
   Meeting, and (C) San Juan Financial or San Juan Financial Bank enters into
   a definitive agreement with respect to, or consummates, an Alternative
   Transaction within twelve months of the date of such termination of this
   Agreement, then San Juan Financial shall pay a Termination Fee upon the
   date of such execution or consummation, whichever is earlier; and

          (iii)   if (A) Banner shall terminate this Agreement as a result of
   a failure to consummate the Merger prior to the date set forth in Section
   8.1(c) caused by a material and willful breach of this Agreement by San
   Juan Financial, or Banner shall terminate this Agreement pursuant to
   Section 8.1(d) as a result of

                                      -55-





   a material and willful breach of this Agreement by San Juan Financial, and
   (B) San Juan Financial or San Juan Financial Bank enters into a definitive
   agreement with respect to, or consummates, an Alternative Transaction
   within twelve months of the date of such termination of this Agreement,
   then San Juan Financial shall pay a Termination Fee upon the date of such
   execution or consummation, whichever is earlier.

     (c)   In the event either party fails to pay when due any amount payable
under this Section 8.3 and the other party commences a suit that results in a
judgment for a Termination Fee, then the prevailing party shall reimburse the
other party for all costs and expenses (including disbursements and reasonable
fees of counsel) incurred in connection with such suit.

     8.4    Amendment.  This Agreement may be amended by the parties, by
action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with
Merger by the shareholders of San Juan Financial and Banner; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the shareholders of San Juan Financial or Banner, as the case may
be, there may not be, without further approval of such shareholders, any
amendment of this Agreement that requires such further approval under
applicable law.  This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.

     8.5   Extension; Waiver.  At any time prior to the Effective Time, the
parties, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or (c) waive compliance with any of the agreements or conditions contained in
this Agreement.  Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.

                                  ARTICLE IX

                             GENERAL PROVISIONS

     9.1   Closing.  On the terms and subject to the conditions set forth in
this Agreement, the closing of the Merger (the "Closing") shall take place at
10:00 a.m. on a date and at a place to be specified by the parties, which date
shall be no later than five Business Days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set forth
in Article VII (other than those conditions that by their nature are to be
satisfied or waived at the Closing) and any periods required to pass prior to
the Closing under Section 8.1(g) have passed, unless extended by mutual
agreement of the parties (the "Closing Date").

     9.2   Nonsurvival of Representations, Warranties and Agreements.  None of
the representations, warranties, covenants and agreements set forth in this
Agreement or in any

                                      -56-





instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained in this Agreement
that by their terms apply or are to be performed in whole or in part after the
Effective Time.

     9.3   Notices.  All notices and other communications in connection with
this Agreement shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt requested),
delivered by an express courier (with confirmation) or sent via electronic
mail (with confirmation delivered personally, by mail or by express courier)
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

               if to San Juan Financial, to:

               San Juan Financial Holding Company
               225 Blair Avenue
               Friday Harbor, WA  98250
               Attention:  Richard W. Kneipp, President/CEO

               e-mail:  kneipp@rockisland.com

               with a copy to:

               Davis Wright Tremaine LLP
               10500 NE Eighth Street
               Bellevue, WA  98004-4300
               Attention:  Sandra Gallagher-Alford, Esq.

               e-mail:  sgallagheralford@dwt.com

               and

               Davis Wright Tremaine LLP
               1300 SW Fifth Avenue, Suite 2300
               Portland, OR  97201
               Attention:  Anne L. Barragar, Esq.

               e-mail:  annebarragar@dwt.com

               and

                                      -57-





               if to Banner, to:

               Banner Corporation
               10 South First Avenue
               Walla Walla, WA 99362
               Attention:  D. Michael Jones, President & Chief Executive
                            Officer
                           Lloyd W. Baker, Chief Financial Officer
               Facsimile:  (509) 526-8873

               with a copy to:

               Wachtell, Lipton, Rosen & Katz
               51 W. 52nd Street
               New York, NY 10019
               Attention:  Adam D. Chinn, Esq.
                           Nicholas G. Demmo, Esq.

               e-mail:     ADChinn@wlrk.com
               and
               e-mail:     NGDemmo@wlrk.com

     9.4   Interpretation.  When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an
Article or Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated.  The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.  Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."  The San Juan Financial
Disclosure Schedule and the Banner Disclosure Schedule, as well as all other
schedules and all exhibits hereto, shall be deemed part of this Agreement and
included in any reference to this Agreement.  This Agreement shall not be
interpreted or construed to require any person to take any action, or fail to
take any action, if to do so would violate any applicable law.

     9.5   Counterparts.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the
parties and delivered to the other party, it being understood that each party
need not sign the same counterpart.

     9.6   Entire Agreement.  This Agreement (including the documents and the
instruments referred to in this Agreement), together with the Confidentiality
Agreements, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and the Confidentiality
Agreements.

     9.7   Governing Law; Jurisdiction.  This Agreement shall be governed and
construed in accordance with the internal laws of the State of Washington
applicable to contracts made and wholly-performed within such state, without
regard to any applicable conflicts of law

                                      -58-





principles, except to the extent that the application of federal securities
laws is mandatory.  The parties hereto agree that any suit, action or
proceeding brought by either party to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in any federal or state
court located in the State of Washington.  Each of the parties hereto submits
to the jurisdiction of any such court in any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of, or
in connection with, this Agreement or the transactions contemplated hereby and
hereby irrevocably waives the benefit of jurisdiction derived from present or
future domicile or otherwise in such action or proceeding.  Each party hereto
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.

     9.8   Publicity.  Neither San Juan Financial nor Banner shall, and
neither San Juan Financial nor Banner shall permit any of its Subsidiaries to,
issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the prior
consent (which consent shall not be unreasonably withheld) of Banner, in the
case of a proposed announcement or statement by San Juan Financial, or San
Juan Financial, in the case of a proposed announcement or statement by Banner;
provided, however, that either party may, without the prior consent of the
other party (but after prior consultation with and opportunity for review by
the other party to the extent practicable under the circumstances) issue or
cause the publication of any press release or other public announcement to the
extent required by law or by the rules and regulations of the Nasdaq.

     9.9   Assignment; Third Party Beneficiaries.  Neither this Agreement nor
any of the rights, interests or obligations under this Agreement shall be
assigned by either of the parties (whether by operation of law or otherwise)
without the prior written consent of the other party.  Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by each of the parties and their respective successors
and assigns.  Except as otherwise specifically provided in Section 6.7, this
Agreement (including the documents and instruments referred to in this
Agreement) is not intended to and does not confer upon any person other than
the parties hereto any rights or remedies under this Agreement.

                    Remainder of Page Intentionally Left Blank

                                      -59-





     IN WITNESS WHEREOF, San Juan Financial and Banner have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.

                              SAN JUAN FINANCIAL HOLDING COMPANY


                              By:/s/Richard W. Kneipp
                                 ------------------------------------------
                                 Name:  Richard W. Kneipp
                                 Title: President & Chief Executive Officer


                              BANNER CORPORATION

                              By:/s/D. Michael Jones
                                 ------------------------------------------
                                 Name:  D. Michael Jones
                                 Title: President & Chief Executive Officer






               Signature Page to Agreement and Plan of Merger





                                                                    Exhibit A
                                                                    ---------

                              ARTICLES OF MERGER
                              ------------------

                      SAN JUAN FINANCIAL HOLDING COMPANY

                                     AND

                              BANNER CORPORATION

                            [______________], 2007

     Pursuant to the provisions of RCW 23B.11.050, the following Articles of
Merger are executed for the purpose of merging SAN JUAN FINANCIAL HOLDING
COMPANY, a Washington corporation ("San Juan Financial"), into BANNER
CORPORATION, a Washington corporation ("Banner").

     1.   The Merger.  Pursuant to an Agreement and Plan of Merger dated as of
December 18, 2006 (the "Agreement"), San Juan Financial and Banner have
adopted the following plan of merger (the "Plan"):

          1.1  General.  Subject to the terms and conditions of this
Agreement, in accordance with the Washington Business Corporation Act (the
"WBCA"), effective at _________ p.m. on _________, 2007 (the "Effective
Time"), San Juan Financial shall merge (the "Merger") with and into Banner.
Banner shall be the surviving corporation in the Merger (the "Surviving
Corporation"), and shall continue its corporate existence under the laws of
the State of Washington.  As of the Effective Time, the separate corporate
existence of San Juan Financial shall cease.

          1.2  Effects of the Merger.  At and after the Effective Time, the
Merger shall have the effects set forth in Revised Code of Washington ("RCW")
23B.11.060 and other applicable law.

          1.3  Conversion of San Juan Financial Common Stock.  At the
Effective Time, by virtue of the Merger and without any action on the part of
Banner, San Juan Financial or the holder of any of the following securities:

          (a)  Each share of common stock, par value $0.01 per share, of
    Banner (the "Banner Common Stock") issued and outstanding immediately
    prior to the Effective Time shall remain issued and outstanding and shall
    not be affected by the Merger.

          (b)  All shares of common stock, par value $1.00 per share, of San
    Juan Financial (the "San Juan Financial Common Stock") issued and
    outstanding immediately prior to the Effective Time that are beneficially
    owned by Banner or any Subsidiary of San Juan Financial (other than shares
    of San Juan Financial Common Stock held in trust accounts, managed
    accounts and the like, or otherwise held in a fiduciary or agency
    capacity, that are beneficially owned by third parties and other than
    shares of San Juan

                                   A-1




    Financial Common Stock held, directly or indirectly, by Banner or a
    Subsidiary of San Juan Financial in respect of a debt previously
    contracted) shall be cancelled and shall cease to exist and no stock of
    Banner or other consideration shall be delivered in exchange therefor.

          (c)   Except as provided in clause (b) above, each share of San Juan
    Financial Common Stock issued and outstanding immediately before the
    Merger (other than Dissenting Shares) shall be converted into the right to
    receive (i) $________ (the "Per Share Cash Consideration"), (ii) _________
    shares of Banner Common Stock (the "Per Share Stock Consideration"), and
    (iii) the Per Share Additional Consideration, if any.

          (d)   All of the shares of San Juan Financial Common Stock converted
    into the right to receive the Merger Consideration pursuant to the Plan
    shall no longer be outstanding and shall automatically be cancelled and
    shall cease to exist as of the Effective Time, and each certificate
    previously representing any such shares of San Juan Financial Common Stock
    (each, a "Certificate") shall thereafter represent only the right to
    receive the Merger Consideration, Additional Consideration (if any) and/or
    cash in lieu of fractional shares, into which the shares of San Juan
    Financial Common Stock represented by such Certificate have been converted
    pursuant to this Section 1.3 and Section 1.9(h), as well as any dividends
    to which holders of San Juan Financial Common Stock become entitled in
    accordance with Section 1.9(e).

          (e)   Notwithstanding any other provision contained in the
    Agreement, no shares of San Juan Financial Common Stock that are issued
    and outstanding as of the Effective Time and that are held by a
    shareholder who has properly exercised such shareholder's appraisal rights
    (any such shares being referred to herein as "Dissenting Shares") under
    RCW 23B.13.210 and RCW 23B.13.230 shall be converted into the right to
    receive the Merger Consideration as provided in Section 1.3 (c) and
    instead shall be entitled to such rights (but only such rights) as are
    granted by RCW Chapter 23B.13 (unless and until such shareholder shall
    have failed to perfect, or shall have effectively withdrawn or lost, such
    shareholder's right to dissent from the Merger under the WBCA) and to
    receive such consideration as may be determined to be due with respect to
    such Dissenting Shares pursuant to and subject to the requirements of the
    WBCA.  If any such shareholder shall have failed to perfect or shall have
    effectively withdrawn or lost such right, each of such holder's shares of
    San Juan Financial Common Stock shall thereupon be deemed to have been
    converted into and to have become, as of the Effective Time, the right to
    receive the Merger Consideration and the Additional Consideration (if any)
    in accordance with the applicable provisions of the Agreement.

          1.4   Stock Options and Other Stock-Based Awards.

          (a)   As of the Effective Time, by virtue of the Merger and without
    any action on the part of the holders thereof, each option to purchase
    shares of San Juan Financial Common Stock granted to employees or
    directors of San Juan Financial or any of its Subsidiaries under the San
    Juan Financial 2001 Stock Option Plan, as amended and the award agreements
    thereunder (collectively, the "San Juan Financial Stock Plans") that is
    outstanding immediately prior to the Effective Time (collectively, the
    "San Juan

                                       A-2





    Financial Options") regardless of whether or not vested, shall be
    cancelled and shall only entitle the holder thereof the right to receive,
    as soon as reasonably practicable following the Effective Time, a lump sum
    cash payment, without interest, equal to the product of (x) the number of
    shares subject to such San Juan Financial Option and (y) the excess, if
    any, of (i) the Per Share Cash Consideration plus the value of the Per
    Share Stock Consideration over (ii) the exercise price per share of such
    San Juan Financial Option; provided, however, that Banner shall be
    entitled to deduct and withhold such amounts as may be required to be
    deducted and withheld under the Code and any applicable state or local Tax
    law.
          (b)   As of the Effective Time, each restricted share of San Juan
    Financial Common Stock granted to any employee or director of San Juan
    Financial under a San Juan Financial Stock Plan that is outstanding
    immediately prior to the Effective Time (collectively, the "San Juan
    Financial Restricted Shares") shall, by virtue of the Merger and without
    any action on the part of the holder thereof, be cancelled and converted
    into the right to receive (the "Banner Restricted Share Right"), on the
    same terms and conditions as applied to each such San Juan Financial
    Restricted Share immediately prior to the Effective Time (including the
    same transfer restrictions), the Merger Consideration determined in
    accordance with Section 1.3, and treating such San Juan Financial
    Restricted Shares in the same manner as all other shares of San Juan
    Financial Common Stock for such purposes; provided, however, that Banner
    shall be entitled to deduct and withhold such amounts as may be required
    to be deducted and withheld under the Code and any applicable state or
    local Tax law.

          1.5  If, as of March 31, 2006, the Effective Time has not occurred,
the holders of San Juan Financial Common Stock issued and outstanding
immediately before the Effective Time shall be entitled to receive additional
consideration as set forth in this Section and in Section 1.3(c)(iii).  The
"Additional Consideration" shall equal any dividends or distributions declared
by the Board of Directors of Banner on the Banner Common Stock with a record
date on or after March 31, 2007, but before the Effective Time, that would
have been payable with respect to the Banner Common Stock included in the
Merger Consideration, after giving effect to any adjustments provided for
herein, if such Banner Common Stock had been issued and outstanding as of such
record date.  The "Per Share Additional Consideration" shall be equal to the
quotient obtained by dividing the Additional Consideration by the total number
of shares of San Juan Financial Common Stock issued and outstanding
immediately prior to the Effective Time.

          1.6   Articles of Incorporation of Banner.  At the Effective Time,
the articles of incorporation of Banner, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law.

          1.7  By-laws of Banner.  At the Effective Time, the by-laws of
Banner, as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended in accordance
with applicable law.

                                     A-3






          1.8   Tax Consequences.  It is intended that the Merger shall
constitute a "reorganization" within the meaning of Section 368(a) of the
Code, and that the Agreement shall constitute a "plan of reorganization" for
purposes of Sections 354 and 361 of the Code.

          1.9   Exchange Procedures.
                -------------------

          (a)   Banner has appointed, in compliance with the terms of the
    Agreement, __________________ (the "Exchange Agent"), pursuant to an
    agreement (the "Exchange Agent Agreement"), to act as exchange agent
    hereunder.

          (b)   Banner has deposited, or has caused to be deposited, with the
    Exchange Agent, (i) certificates representing the number of shares of
    Banner Common Stock sufficient to deliver, and Banner shall instruct the
    Exchange Agent to timely deliver, the Total Stock Amount, and (ii)
    immediately available funds equal to the Total Cash Amount (together with,
    to the extent then determinable, any cash payable in lieu of fractional
    shares pursuant to Section 1.9(h) (collectively, the "Exchange Fund") and
    the Additional Consideration (if any) and Banner shall instruct the
    Exchange Agent to timely pay or deliver the Merger Consideration, the
    Additional Consideration (if any) and such cash in lieu of fractional
    shares, in accordance with this Agreement.

          (c)   As soon as reasonably practicable after the Effective Time,
    the Exchange Agent shall mail to each holder of record of Certificate(s)
    which immediately prior to the Effective Time represented outstanding
    shares of San Juan Financial Common Stock whose shares were converted into
    the right to receive the Merger Consideration pursuant to Section 1.3 and
    any cash in lieu of fractional shares of Banner Common Stock to be issued
    or paid in consideration therefor (i) a letter of transmittal (which shall
    specify that delivery shall be effected, and risk of loss and title to
    Certificate(s) shall pass, only upon delivery of Certificate(s) (or
    affidavits of loss in lieu of such Certificate(s))) (the "Letter of
    Transmittal") to the Exchange Agent and shall be substantially in such
    form and have such other provisions as shall be prescribed by the Exchange
    Agent Agreement and (ii) instructions for use in surrendering
    Certificate(s) in exchange for the Merger Consideration, the Additional
    Consideration (if any) and any cash in lieu of fractional shares of Banner
    Common Stock to be issued or paid in consideration therefor in accordance
    with Section 1.9(h) upon surrender of such Certificate and any dividends
    or distributions to which such holder is entitled pursuant to Section
    1.9(e).

          (d)   Upon surrender to the Exchange Agent of its Certificate(s),
    accompanied by a properly completed Letter of Transmittal, a holder of San
    Juan Financial Common Stock will be entitled to receive, promptly after
    the Effective Time, the Merger Consideration (with the aggregate Cash
    Consideration paid to each such holder rounded to the nearest cent), the
    Additional Consideration to which such holder is entitled (if any) and any
    cash in lieu of fractional shares of Banner Common Stock to be issued or
    paid in consideration therefor in respect of the shares of San Juan
    Financial Common Stock represented by its Certificate(s).  Until so
    surrendered, each such Certificate shall represent after the Effective
    Time, for all purposes, only the right to receive, without interest, the
    Merger Consideration, the Additional Consideration (if any) and any cash
    in lieu of fractional shares of Banner Common Stock to be issued or paid
    in consideration

                                      A-4





    therefor upon surrender of such Certificate in accordance with, and any
    dividends or distributions to which such holder is entitled pursuant to,
    the Agreement and these Articles.

          (e)   No dividends or other distributions with respect to Banner
    Common Stock shall be paid to the holder of any unsurrendered Certificate
    with respect to the shares of Banner Common Stock represented thereby, in
    each case unless and until the surrender of such Certificate in accordance
    with these Articles of Merger.  Subject to the effect of applicable
    abandoned property, escheat or similar laws, following surrender of any
    such Certificate in accordance with the Agreement and these Articles of
    Merger the record holder thereof shall be entitled to receive, without
    interest, (i) the amount of dividends or other distributions with a record
    date after the Effective Time theretofore payable with respect to the
    whole shares of Banner Common Stock represented by such Certificate and
    not paid and/or (ii) at the appropriate payment date, the amount of
    dividends or other distributions payable with respect to shares of Banner
    Common Stock represented by such Certificate with a record date after the
    Effective Time (but before such surrender date) and with a payment date
    subsequent to the issuance of the Banner Common Stock issuable with
    respect to such Certificate.

          (f)   In the event of a transfer of ownership of a Certificate
    representing San Juan Financial Common Stock that is not registered in the
    stock transfer records of San Juan Financial, the proper amount of cash
    and/or shares of Banner Common Stock shall be paid or issued in exchange
    therefor to a person other than the person in whose name the Certificate
    so surrendered is registered if the Certificate formerly representing such
    San Juan Financial Common Stock shall be properly endorsed or otherwise be
    in proper form for transfer and the person requesting such payment or
    issuance shall pay any transfer or other similar Taxes required by reason
    of the payment or issuance to a person other than the registered holder of
    the Certificate or establish to the satisfaction of Banner that the Tax
    has been paid or is not applicable.  The Exchange Agent (or, subsequent to
    the first anniversary of the Effective Time, Banner) shall be entitled to
    deduct and withhold from the cash portion of the Merger Consideration, any
    cash in lieu of fractional shares of Banner Common Stock, any Additional
    Consideration to which the holder is entitled, and cash dividends or
    distributions payable pursuant to Section 1.9(e) hereof and any other cash
    amounts otherwise payable pursuant to this Agreement to any holder of
    San Juan Financial Common Stock such amounts as the Exchange Agent or
    Banner, as the case may be, is required to deduct and withhold under the
    Code, or any provision of state, local or foreign Tax law, with respect to
    the making of such payment. To the extent the amounts are so withheld by
    the Exchange Agent or Banner, as the case may be, such withheld amounts
    shall be treated for all purposes of this Agreement as having been paid
    to the holder of shares of San Juan Financial Common Stock in respect of
    whom such deduction and withholding was made by the Exchange Agent or
    Banner, as the case may be.

          (g)   After the Effective Time, there shall be no transfers on the
    stock transfer books of San Juan Financial of any shares of San Juan
    Financial Common Stock that were issued and outstanding immediately prior
    to the Effective Time other than to settle transfers of San Juan Financial
    Common Stock that occurred prior to the Effective Time.

                                       A-5





    If, after the Effective Time, Certificates representing such shares are
    presented for transfer to the Exchange Agent, they shall be cancelled and
    exchanged for the Merger Consideration, the Additional Consideration (if
    any) and any cash in lieu of fractional shares of Banner Common Stock to
    be issued or paid in consideration therefor in accordance with the
    procedures set forth in the Agreement and these Articles of Merger.

          (h)   Notwithstanding anything to the contrary contained in the
    Agreement, no certificates or scrip representing fractional shares of
    Banner Common Stock shall be issued upon the surrender of Certificates for
    exchange, no dividend or distribution with respect to Banner Common Stock
    shall be payable on or with respect to any fractional share, and such
    fractional share interests shall not entitle the owner thereof to vote or
    to any other rights of a shareholder of Banner.  In lieu of the issuance
    of any such fractional share, Banner shall pay to each former shareholder
    of San Juan Financial who otherwise would be entitled to receive such
    fractional share, an amount in cash (rounded to the nearest cent)
    determined by multiplying (i) the Average Closing Price by (ii) the
    fraction of a share (after taking into account all shares of San Juan
    Financial Common Stock held by such holder at the Effective Time and
    rounded to the nearest one thousandth when expressed in decimal form) of
    Banner Common Stock to which such holder would otherwise be entitled to
    receive pursuant to Section 1.3.

          (i)   Any portion of the Exchange Fund and any Additional
    Consideration that remains unclaimed by the shareholders of San Juan
    Financial as of the first anniversary of the Effective Time shall be paid
    to Banner.  Any former shareholders of San Juan Financial who have not
    theretofore complied with the Agreement and these Articles of Merger shall
    thereafter look only to Banner with respect to the Merger Consideration
    and the Additional Consideration, any cash in lieu of any fractional
    shares and any unpaid dividends and distributions on the Banner Common
    Stock deliverable in respect of each share of San Juan Financial Common
    Stock such shareholder holds as determined pursuant to this Agreement, in
    each case, without any interest thereon.  Notwithstanding the foregoing,
    none of Banner, San Juan Financial, the Exchange Agent or any other
    person shall be liable to any former holder of shares of San Juan
    Financial Common Stock for any amount delivered in good faith to a public
    official pursuant to applicable abandoned property, escheat or similar
    laws.

          (j)   In the event any Certificate shall have been lost, stolen or
    destroyed, upon the making of an affidavit of that fact by the person
    claiming such Certificate to be lost, stolen or destroyed and, if
    reasonably required by Banner or the Exchange Agent, the posting by such
    person of a bond in such amount as Banner may determine is reasonably
    necessary as indemnity against any claim that may be made against it with
    respect to such Certificate, the Exchange Agent will issue in exchange for
    such lost, stolen or destroyed Certificate the Merger Consideration and
    Additional Consideration deliverable in respect thereof pursuant to the
    Agreement and these Articles of Merger.

          1.10   Definitions.  In addition to terms defined elsewhere in these
Articles of Merger, as used in these Articles of Merger, the following terms
shall have the meanings set forth below:

                                    A-6







          "Code" means the Internal Revenue Code of 1986, as amended.

          "Merger Consideration" means the aggregate Per Share Stock
Consideration and Per Share Cash Consideration payable or issuable in
connection with the Merger.

          "Subsidiary" means any bank, corporation, partnership, limited
liability company or other organization, whether incorporated or
unincorporated, that is now or was for any fiscal year ending after December
31, 2004, consolidated with San Juan Financial for financial reporting
purposes under U.S. generally accepted accounting principles.

          "Tax" or "Taxes" means (i) any and all federal, state, local, and
foreign income, excise, gross receipts, gross income, ad valorem, profits,
gains, property, capital, sales, transfer, use, payroll, employment,
severance, withholding, duties, intangibles, franchise, backup withholding,
and other taxes, charges, levies or like assessments together with all
penalties and additions to tax and interest thereon and (ii) any liability for
any items described in clause (i) above under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as
successor or transferee, by contract or otherwise.

          "Total Cash Amount" means $                  .
                                     ------------------

          "Total Stock Amount" means           shares of Banner Common Stock.
                                     ---------

     2.   The Agreement and the Plan were duly approved by the shareholders of
San Juan Financial pursuant to RCW 23B.11.030.

     3.   Approval of the Agreement and the Plan by the shareholders of the
Banner was not required pursuant to RCW 23B.11.030.

                                   BANNER CORPORATION


                                   By:
                                      ---------------------------------------
                                      Name:
                                      Title:


                                    A-7





                                                                    Exhibit B
                                                                    ---------

                             Form of Affiliate Letter
                             ------------------------

Banner Corporation
10 South First Avenue
Walla Walla, WA 99362

Ladies and Gentlemen:

     I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of San Juan Financial Holding Company, a Washington corporation
("San Juan Financial"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act").  I have been further
advised that pursuant to the terms of the Agreement and Plan of Merger dated
as of December 18, 2006 (the "Merger Agreement"), by and between Banner
Corporation, a Washington corporation ("Banner"), and San Juan Financial, San
Juan Financial shall be merged with and into Banner (the "Merger").  All terms
used in this letter but not defined herein shall have the meanings ascribed
thereto in the Merger Agreement.

     I represent, warrant and covenant to Banner that in the event I receive
any Banner Common Stock as a result of the Merger:

     I shall not make any sale, transfer or other disposition of Banner Common
Stock in violation of the Act or the Rules and Regulations.

     I have carefully read this letter and the Merger Agreement and discussed
its requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of Banner Common Stock to the extent I believed
necessary with my counsel or counsel for San Juan Financial.

     I have been advised that the issuance of Banner Common Stock to me
pursuant to the Merger will be registered with the Commission under the Act on
a Registration Statement on Form S-4.  However, I have also been advised that,
since at the time the Merger will be submitted for a vote of the shareholders
of San Juan Financial I may be deemed to have been an affiliate of San Juan
Financial and the distribution by me of Banner Common Stock has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
Banner Common Stock issued to me in the Merger unless (i) such sale, transfer
or other disposition has been registered under the Act, (ii) such sale,
transfer or other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to Banner, such sale, transfer
or other disposition is otherwise exempt from registration under the Act.

     I understand that Banner is under no obligation to register the sale,
transfer or other disposition of Banner Common Stock by me or on my behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.

                                      B-1





     I also understand that stop transfer instructions will be given to
Banner's transfer agents with respect to Banner Common Stock and that there
will be placed on the certificates for Banner Common Stock issued to me, or
any substitutions therefor, a legend stating in substance:

     "The securities represented by this certificate have been issued in a
     transaction to which Rule 145 promulgated under the Securities Act of
     1933 applies and may only be sold or otherwise transferred in compliance
     with the requirements of Rule 145 or pursuant to a registration
     statement under said act or an exemption from such registration."

     I also understand that unless the transfer by me of my Banner Common
Stock has been registered under the Act or is a sale made in conformity with
the provisions of Rule 145, Banner reserves the right to put the following
legend on the certificates issued to my transferee:

     "The shares represented by this certificate have not been registered
     under the Securities Act of 1933 and were acquired from a person who
     received such shares in a transaction to which Rule 145 promulgated
     under the Securities Act of 1933 applies.  The shares have been
     acquired by the holder not with a view to, or for resale in connection
     with, any distribution thereof within the meaning of the Securities Act
     of 1933 and may not be sold, pledged or otherwise transferred except in
     accordance with an exemption from the registration requirements of the
     Securities Act of 1933."

     It is understood and agreed that the legends set forth above shall be
removed by delivery of substitute certificates without such legend, and/or the
issuance of a letter to Banner's transfer agent removing such stop transfer
instructions, and the above restrictions on sale will cease to apply, if (A)
one year (or such other period as may be required by Rule 145(d)(2) under the
Securities Act or any successor thereto) shall have elapsed from the Closing
Date and the provisions of such Rule are then available to me; or (B) if two
years (or such other period as may be required by Rule 145(d)(3) under the
Securities Act or any successor thereto) shall have elapsed from the Effective
Date and the provisions of such Rule are then available to me; or (C) I shall
have delivered to Banner (i) a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Banner, or other evidence reasonably satisfactory to Banner,
to the effect that such legend and/or stop transfer instructions are not
required for purposes of the Securities Act or (ii) reasonably satisfactory
evidence or representations that the securities represented by such
certificates are being or have been transferred in a transaction made in
conformity with the provisions of Rule 145 under the Securities Act or
pursuant to an effective registration under the Securities Act.

     I recognize and agree that the foregoing provisions also apply to (i) my
spouse, (ii) any relative of mine or my spouse occupying my home, (iii) any
trust or estate in which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as trustee, executor or in
any similar capacity and (iv) any corporate or other organization in which I,
my spouse or any such relative owns at least 10% of any class of equity
securities or of the equity interest.

                                      B-2





     It is understood and agreed that this Letter Agreement shall terminate
and be of no further force and effect if the Merger Agreement is terminated in
accordance with its terms.

     Execution of this letter should not be construed as an admission on my
part that I am an "affiliate" of San Juan Financial as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.

                              Very truly yours,


                              By:
                                 ----------------------------------
                                 Name:
Accepted this [___] day of
[__________], 200_

BANNER CORPORATION


By:
   -------------------------------
   Name:
   Title:

                                      B-3






                               Exhibit 99.1

                   Press Release dated December 19, 2006.





                                             Contact:   D. Michael Jones,
                                                        President and CEO
                                                        Lloyd W. Baker, CFO
                                                             (509) 527-3636

                                                                  News Release
==============================================================================

                 BANNER CORPORATION SIGNS DEFINITIVE AGREEMENT
                 TO ACQUIRE SAN JUAN FINANCIAL HOLDING COMPANY

Walla Walla, WA - December 19, 2006 - Banner Corporation (Nasdaq: BANR), the
parent company of Banner Bank, today announced the signing of a definitive
merger agreement with San Juan Financial Holding Company, the parent company
of Islanders Bank, Friday Harbor, Washington, in a stock and cash transaction
valued at approximately $40.8 million.  In connection with the transaction,
San Juan Financial Holding Company will merge into Banner Corporation.  The
merger will expand Banner's presence in the North Puget Sound region of
Washington State.  A conference call and investor presentation regarding the
merger will be held tomorrow at 8:00 a.m. PST.

Founded in 1981, Islanders Bank is a state chartered commercial community bank
with three full service branches, approximately $151.7 million in assets,
$128.7 million in deposits, $109.1 million in loans and $17.8 million in
shareholders' equity at September 30, 2006.  Islanders Bank specializes in
commercial and residential financing, serving small to medium-sized
businesses, professionals and individuals in its local markets.

"Banner currently operates six branches and one loan office in the North Puget
Sound region.  This acquisition allows us to better serve our customers and
complements our existing operation in that area of Washington," said D.
Michael Jones, President and Chief Executive Officer of Banner Corporation.
"We believe that Islanders Bank's experienced management team shares our
dedication to delivering premium financial services to customers and is poised
for continued excellent growth."

"We are very pleased to be joining the Banner team, which brings financial
strength, additional management experience and new technological capabilities
to our organization," stated Dick Kneipp, President and Chief Executive
Officer of Islanders Bank.  "Given Banner's operating philosophy and
management style, we believe our two organizations will form an effective
combination.  We will now be able to offer a broader range of services to our
customers, increased lending limits, and expanded branch and ATM networks.
Both banks have long histories of community involvement and I am confident our
employees and customers will feel very comfortable in joining with Banner."

"Given Islanders Bank's low-cost deposit structure and history of good
earnings performance, along with Banner's ability to transfer loans now being
participated with other banks to Islanders Bank, we expect this acquisition to
modestly add to Banner's net income and earnings per share during the first
year following acquisition and to provide further earnings accretion in
subsequent years," noted Jones.

According to the terms of the definitive agreement, San Juan Financial Holding
Company shareholders will receive 2.2503 shares of Banner Corporation common
stock and $16.48 in cash for each San Juan Financial Holding Company share.
The acquisition, which has been approved by the Boards of Directors of both
companies, is subject to, among other contingencies, approval by regulators
and San Juan Financial Holding Company shareholders.  The transaction is
expected to close during the second quarter of 2007.

Conference Call
The Company will host a conference call tomorrow, Wednesday, December 20,
2006, at 8:00 a.m. PST, to discuss the acquisition.  The conference call can
be accessed live by telephone at 303-262-2139.  To view a slideshow
presentation and to listen to the call online, go to the Company's website at
www.bannerbank.com.  Institutional investors may access the call via the
subscriber-only site, www.streetevents.com.  An archived recording of the call
can be accessed by dialing 303-590-3000, passcode 11079465# until Wednesday,
December 27, 2006 or via the Internet at www.fulldisclosure.com.

Banner Corporation is the parent company of Banner Bank, a commercial bank
that operates a total of 58 branch offices and 12 loan offices in 24 counties
in Washington, Oregon and Idaho.  Banner Bank serves the Pacific Northwest
region with a full range of deposit services and business, commercial real
estate, construction, residential, agricultural and consumer loans.  Visit
Banner Bank on the Web at www.bannerbank.com.

                                 (more)





BANR Acquisition
December 19, 2006
Page 2


ADDITIONAL INFORMATION AND WHERE TO FIND IT
- -------------------------------------------

Banner Corporation intends to file with the Securities and Exchange Commission
a registration statement on Form S-4, and San Juan Financial Holding Company
expects to mail a proxy statement/prospectus to its security holders,
containing information about the transaction.  Investors and security holders
of Banner Corporation and San Juan Financial Holding Company are urged to read
the proxy statement/prospectus and other relevant materials when they become
available because they will contain important information about Banner
Corporation, San Juan Financial Holding Company and the proposed merger.  In
addition to the registration statement to be filed by Banner Corporation and
the proxy statement/prospectus to be mailed to the security holders of San
Juan Financial Holding Company, Banner Corporation files annual, quarterly and
current reports, proxy statements and other information with the Securities
and Exchange Commission.  Investors and security holders may obtain a free
copy of the proxy statement/prospectus and other relevant documents (when they
become available) and any other documents filed with the Securities and
Exchange Commission at its website at www.sec.gov.  The documents filed by
Banner Corporation may also be obtained free of charge from Banner Corporation
by requesting them in writing at Banner Corporation, 10 South First Avenue,
Walla Walla, WA  99362, or by telephone at (509) 527-3636.  In addition,
investors and security holders may access copies of the documents filed with
the Securities and Exchange Commission by Banner Corporation on its website at
www.bannerbank.com.

The directors, executive officers, and certain other members of management and
employees of San Juan Financial Holding Company are participants in the
solicitation of proxies in favor of the merger from the shareholders of San
Juan Financial Holding Company.  Information about the directors and executive
officers of San Juan Financial Holding Company will be included in the proxy
statement/prospectus.  Additional information regarding the interests of such
participants will be included in the proxy statement/prospectus and the other
relevant documents filed with the SEC when they become available.

FORWARD-LOOKING STATEMENTS
- --------------------------

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning future
performance, developments or events, expectations for earnings, growth and
market forecasts, and other guidance on future periods (including, among
others, statements regarding the benefits of the acquisition of San Juan
Financial Holding Company by Banner), which  forward-looking statements are
subject to a number of risks and uncertainties that are beyond the Company's
control and might cause actual results to differ materially from stated
objectives.  These factors include but are not limited to:  competition in the
financial services market for both deposits and loans as well as regional and
general economic conditions; and Banner's ability to successfully complete
consolidation and conversion activities, incorporate acquisitions into its
operations, retain key employees, increase its customer base, achieve cost
savings and successfully generate commercial, consumer and real estate loans.
Additional factors that may affect future results are contained in Banner's
filings with the SEC, which are available at the SEC's web site
http://www.sec.gov, including in Banner's Annual Report on Form 10-K for the
year ended December 31, 2005, under the heading "Risk Factors." Banner
undertakes no responsibility to update or revise any forward-looking
statements.

                                      # # #






                                Exhibit 99.2

                Presentation of Banner dated December 19, 2006