Exhibit 99.1

    Contact: Mark J. Grescovich, President & CEO Lloyd W. Baker, CFO (509) 527-3636 News Release

Banner Corporation Earns $46.6 Million, or $2.40 Per Diluted Share for 2013, Including $11.6 Million,

or $0.60 Per Diluted Share, in Fourth Quarter 2013;

Highlighted by Strong Loan and Core Deposit Growth

Walla Walla, WA - January 22, 2014 - Banner Corporation (NASDAQ GSM: BANR), the parent company of Banner Bank and Islanders Bank, today reported net income available to common shareholders in the fourth quarter of 2013 of $11.6 million, or $0.60 per diluted share, compared to $11.7 million, or $0.60 per diluted share, in the preceding quarter and $13.3 million, or $0.69 per diluted share, in the fourth quarter a year ago.  For the full year 2013, Banner reported net income available to common shareholders of $46.6 million, or $2.40 per diluted share, compared to $59.1 million, or $3.16 per diluted share in 2012.  Banner’s results for 2012 were significantly augmented by a $24.8 million net tax benefit as a result of the reversal of its deferred tax asset valuation allowance, which was partially offset by a $16.5 million net loss for fair value adjustments.

“We are pleased with Banner’s 2013 performance and operating results, which reflect our positive momentum and the hard work of our employees, as we continue to successfully execute on our growth strategies and focus on priorities to deliver sustainable profitability to our shareholders,” said Mark J. Grescovich, President and Chief Executive Officer.  “Indeed, Banner’s 2013 results clearly demonstrate that our strategic plan is effective, and we continue to make strides in building shareholder value.  As expected, our fourth quarter results also reflect the difficult operating environment presented by continued very low interest rates and slow economic growth, which pressured net interest margin and reduced mortgage banking revenues.  Nevertheless, our strong balance sheet and improved operations have positioned us well to meet this difficult environment.  In the fourth quarter, our client acquisition strategies again resulted in significant core deposit and loan growth and, coupled with further improvements in asset quality, confirm that our value proposition and strategic execution are being well-received.  Banner’s solid financial metrics and market share gains, for both the fourth quarter and the full year 2013, provide strong evidence that our super community bank business model is effectively building franchise and shareholder value.”

Fourth Quarter 2013 Highlights (compared to fourth quarter 2012, except as noted)

•   Net income was $11.6 million, or $0.60 per diluted share.

•   Annualized return on average assets was 1.06%.

•   Annualized return on average equity was 8.52%.

•   Revenues from core operations* remained strong at $51.6 million, compared to $52.4 million in the preceding quarter and $54.5 million in the fourth quarter a year ago.

•   Net interest margin was 4.01%, compared to 4.09% in both the preceding quarter and in the fourth quarter a year ago.

•   Core deposits increased 9% and represent 76% of total deposits.

•   Deposit fees and other service charges increased 4% to $6.7 million.

•   Total loans increased $143.0 million during the quarter and increased 6% compared to a year ago.

•   Non-performing assets decreased to $28.9 million, or 0.66% of total assets, at December 31, 2013, a 3% decrease compared to three months earlier and a 42% decrease compared to a year earlier.

•   Common tangible equity per share increased to $27.50 at December 31, 2013 compared to $27.02 in the preceding quarter and $25.88 in the fourth quarter a year ago.

•   The ratio of tangible common equity to tangible assets increased to 12.23% at December 31, 2013.*

•   Banner paid a regular quarterly cash dividend of $0.15 per share.

BANR-Fourth Quarter 2013 Results

January 22, 2014

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*Earnings information excluding gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments and, in the current quarter and year, a termination fee related to a cancelled bank acquisition transaction (alternately referred to as other operating income from core operations or revenues from core operations) and the ratio of tangible common equity (which excludes other intangible assets) to tangible assets represent non-GAAP (Generally Accepted Accounting Principles) financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.  Where applicable, comparable earnings information using GAAP financial measures is also presented.

Income Statement Review

Fourth quarter net interest income, before the provision for loan losses, was $41.6 million, compared to $41.9 million in the preceding quarter and $41.5 million in the fourth quarter a year ago.  For the year ended December 31, 2013, net interest income, before the provision for loan losses, was $166.7 million compared to $167.6 million in the year ended December 31, 2012.  Growth in average earning assets for the quarter and year-to-date periods ended December 31, 2013, generally offset the negative effect on net interest income due to the decreases in net interest margin compared to the same periods a year earlier.

“Further pressure on asset yields led to margin compression during the fourth quarter.  However, our margin remains strong as a result of continuing reductions in our cost of funds and changes in our asset and liability mix,” said Grescovich.  Banner's net interest margin was 4.01% for the fourth quarter of 2013, compared to 4.09% for both the preceding quarter and in the fourth quarter a year ago.  For the year ended December 31, 2013, the net interest margin was 4.11% compared to 4.17% for the year ended December 31, 2012.

Earning asset yields decreased 10 basis points compared to the preceding quarter and decreased 19 basis points from the fourth quarter a year ago.  Loan yields decreased by 14 basis points compared to the preceding quarter and were 34 basis points lower than the fourth quarter a year ago.  Deposit costs decreased by two basis points in the fourth quarter of 2013 compared to the preceding quarter and 11 basis points compared to the fourth quarter a year ago.  Total cost of funds decreased two basis points in the fourth quarter compared to the preceding quarter and 12 basis points compared to the fourth quarter a year ago.

Banner’s mortgage banking activities declined during the quarter, as higher mortgage rates resulted in a reduction in refinance activity and home purchases from the robust pace of the previous few quarters.  Mortgage banking operations contributed $2.2 million to fourth quarter revenues compared to $2.6 million in the preceding quarter and $4.3 million in the fourth quarter of 2012.  In the fourth quarter of 2013, mortgage banking revenues were augmented by $300,000 as a result of reversal of the remaining valuation allowance for previously recorded impairment charges related to mortgage servicing rights.  Similar partial reversals of $600,000 and $400,000 were recognized in the second and third quarters of 2013.  In 2013, revenues from mortgage banking operations were $11.2 million compared to $13.8 million in 2012. 

Deposit fees and other service charges were $6.7 million in the fourth quarter of 2013, compared to $7.0 million in the preceding quarter, and increased 4% compared to $6.4 million the fourth quarter a year ago.  For year ended December 31, 2013, deposit fees increased 5% to $26.6 million compared to $25.3 million for the year ended December 31, 2012.  The increases in deposit fees and service charges continue to reflect additional client acquisition and growth in the number of deposit accounts as a result of successful marketing initiatives.

Revenues in the current quarter were augmented by nearly $3.0 million as a result of a termination fee received related to the cancellation of the proposed acquisition of Home Federal Bank.  Banner incurred approximately $550,000 of costs related to this cancelled transaction, which are also reflected in the current quarter and full year operating results.  Revenues from core operations* (revenues excluding gain on the sale of securities, fair value adjustments and the termination fee) were $51.6 million in the fourth quarter compared to $52.4 million in the third quarter of 2013 and $54.5 million in the fourth quarter of 2012.  For the year ended December 31, 2013, Banner's revenues from core operations* were $208.0 million compared to $211.4 million in 2012, with the reduction primarily the result of decreased mortgage banking revenues.

Banner's fourth quarter 2013 results included a $324,000 net loss for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value.  In the preceding quarter, Banner recorded a net loss of $352,000 for fair value

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January 22, 2014

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adjustments compared to a net gain of $386,000 in the fourth quarter a year ago.  In 2013, Banner's results included a net charge of $2.3 million for fair value adjustments compared to a net charge of $16.5 million in 2012.  The net charge in the prior year primarily reflected a change of $23.1 million in the estimated fair value of Banner's junior subordinated debentures, which was partially offset by increases in the estimated value of similar trust preferred securities owned by the Company.   Banner’s results for the year ended December 2013 also included a $1.0 million gain on the sale of securities and an OTTI recovery of $409,000, which resulted from the reversal of the same-sized OTTI charge in 2012.

Total other operating income, including the gain on sale of securities, changes in the valuation of financial instruments and the termination fee, was $12.6 million in the fourth quarter of 2013, compared to $10.1 million in the third quarter of 2013 and $13.3 million in the fourth quarter a year ago.  For the year ended December 31, 2013, other operating income increased to $43.3 million compared to $26.9 million during the year ended December 31, 2012, principally due to inclusion of the termination fee and the reduction in the net charge for fair value adjustments.  Other operating income from core operations* (excluding gain on the sale of securities, fair value adjustments and the termination fee) was $9.9 million for the fourth quarter of 2013, compared to $10.5 million for the preceding quarter and $12.9 million for the fourth quarter a year ago.  For the year 2013, other operating income from core operations* was $41.2 million compared to $43.8 million in 2012, with the decrease principally resulting from the decline in mortgage banking revenues.

Banner’s total other operating expenses (non-interest expenses) were $36.9 million in the fourth quarter of 2013, compared to $34.5 million in both the preceding quarter and the fourth quarter of 2012.  Operating expenses for the current quarter included approximately $550,000 related to the termination of the proposed acquisition of Home Federal Bank.  For fiscal 2013, total other operating expenses declined slightly to $141.0 million compared to $141.5 million in 2012, as increased compensation and payment and card processing expenses were generally offset by reduced deposit insurance charges and expenses related to real estate owned, as well as gains on the sale of real estate owned.

For the fourth quarter of 2013, Banner recorded $5.7 million in state and federal income tax expense for an effective tax rate of approximately 33.05%, which reflects normal marginal tax rates reduced by the impact of tax-exempt income and certain tax credits.  Banner's provision for income taxes for 2013 was $22.5 million compared to a net tax benefit of $24.8 million for the year ended December 31, 2012, as a result of the elimination of Banner's deferred tax asset valuation allowance which more than offset the accrual of tax expense on 2012's pre-tax income.

Credit Quality

"Banner's credit quality metrics remained strong in the current quarter and reflect our focused attention on maintaining a moderate risk profile.  Non-performing loan balances, real estate owned and other repossessed assets all declined modestly compared to the prior quarter and are significantly below the year ago levels," said Grescovich.  “Further, our reserve levels remain substantial, providing additional benefit in the current quarter's and year's earnings as no provision for loan losses was required during 2013.”   Banner's allowance for loan losses was 2.19% of total loans outstanding at December 31, 2013.  Net charge offs were $2.5 million in 2013, a $15.9 million or 86% decline as compared to 2012.  Net charge-offs in the fourth quarter of 2013 were $1.7 million, or 0.05% of average loans outstanding compared to $196,000, or 0.01% of average loans outstanding in the third quarter of 2013 and $2.3 million, or 0.07% of  average loans outstanding in the fourth quarter a year ago.  As a result, Banner did not record a provision for loan losses for the fourth quarter of 2013 or for the year 2013.  In 2012, Banner recorded a $1.0 million provision in the fourth quarter and a $13.0 million provision for the full year.  The allowance for loan losses was $75.0 million at December 31, 2013, representing 303% of non-performing loans.  Non-performing loans decreased slightly to $24.8 million at December 31, 2013, compared to $24.9 million at September 30, 2013, and decreased 28% when compared to $34.4 million a year earlier.

REO and repossessed assets decreased 16% to $4.2 million at December 30, 2013, compared to $4.9 million at September 30, 2013, and decreased 74% when compared to $15.9 million a year ago.

Banner's non-performing assets were 0.66% of total assets at December 31, 2013, compared to 0.70% at September 30, 2013 and 1.18% a year ago.  Non-performing assets decreased 3% to $28.9 million at December 31, 2013, compared to $29.8 million at September 30, 2013 and decreased 42% compared to $50.2 million a year ago.

Balance Sheet Review

“We had an outstanding quarter for loan growth, particularly with respect to targeted loan categories, and core deposits growth,” said Grescovich.  “Total loans outstanding increased 4% compared to the prior quarter end and increased 6% compared to a year

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ago.  Further, we remain encouraged by the potential for growth in our loan origination pipelines.  Non-certificate core deposits increased by 4% during the quarter and increased by nearly 9% compared to a year ago.  As a result, these core deposits represented 76% of total deposits at the end of the year, compared to 71% of total deposits a year earlier. ”

Net loans were $3.34 billion at December 31, 2013, compared to $3.20 billion at September 30, 2013, and $3.16 billion a year ago.  Commercial real estate and multifamily real estate loans increased 6% to $1.33 billion at December 31, 2013 compared to $1.26 billion at September 30, 2013 and increased 10% compared to $1.21 billion a year ago.  Commercial and agricultural business loans increased 6% to $910.5 million at December 31, 2013, compared to $858.8 million three months earlier and increased 7% compared to $848.1 million a year ago.  Total construction and development loans increased 2% to $340.2 million at December 31, 2013, compared to $333.6 million at September 30, 2013, and increased 12% compared to $304.6 million a year earlier.

The total of securities and interest-bearing deposits was $702.9 million at December 31, 2013, compared to $744.5 million at September 30, 2013, and $745.5 million a year ago.  The average effective duration of Banner's securities portfolio was approximately 3.4 years at December 31, 2013.

Total deposits increased modestly to $3.62 billion at December 31, 2013, compared to $3.54 billion at September 30, 2013 and $3.56 billion a year ago.  However, non-interest-bearing account balances increased 6% to $1.12 billion at December 31, 2013, compared to $1.05 billion at September 30, 2013, and increased 14% compared to $981.2 million a year ago.  Interest-bearing transaction and savings accounts increased 3% to $1.63 billion at December 31, 2013, compared to $1.58 billion at September 30, 2013 and increased 5% compared to $1.55 billion a year ago.  Certificates of deposit declined to $872.7 million at December 31, 2013, compared to $900.0 million at September 30, 2013 and $1.03 billion a year earlier.

“We continue to focus on enhancing our deposit franchise, which involves lowering our funding costs, adding new client relationships, and improving our core funding position,” said Grescovich.  “As a result, Banner's cost of deposits declined another two basis points to 0.24% for the quarter ended December 31, 2013 compared to 0.26% for the quarter ended September 30, 2013, and declined 11 basis points from 0.35% for the quarter ended December 31, 2012.”

Total assets increased 2% to $4.39 billion at December 31, 2013, compared to $4.28 billion at September 30, 2013 and increased 3% compared to $4.27 billion a year ago.  At December 31, 2013, total common stockholders' equity was $539.0 million, or $27.63 per share, compared to $506.9 million, or $26.10 per share, a year ago.  Banner had 19.5 million shares of common stock outstanding at December 31, 2013 compared to 19.4 million shares one year earlier.  At year end, tangible common stockholders' equity, which excludes other intangible assets, was $536.5 million, or 12.23% of tangible assets, compared to $527.1 million, or 12.32% of tangible assets, at September 30, 2013, and $502.7 million, or 11.80% of tangible assets, a year ago.  Banner's tangible book value per share increased to $27.50 at year end, compared to $25.88 per share a year ago.

Banner Corporation and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as “well-capitalized” under applicable regulatory standards.  Banner Corporation's Tier 1 leverage capital to average assets ratio was 13.64% and its total capital to risk-weighted assets ratio was 16.99% at December 31, 2013.

Conference Call

Banner will host a conference call on Thursday, January 23, 2014, at 8:00 a.m. PST, to discuss its fourth quarter results.  The conference call can be accessed live by telephone at (480) 629-9835 to participate in the call.  To listen to the call on-line, go to the Company's website at www.bannerbank.com.  A replay will be available at www.bannerbank.com.

About the Company

Banner Corporation is a $4.39 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho.  Banner 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.

This press release contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to the Company's financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information

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then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates and the relative differences between short and long-term interest rates, loan and deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and of our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or any of the Banks which could require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including changes related to Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets and liabilities, which estimates may prove to be incorrect and result in significant changes in valuations; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; the failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock and interest or principal payments on our junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed in Banner Corporation's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements whether as a result of new information, future events or otherwise. These risks could cause our actual results for 2013 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect our operating and stock price performance.

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RESULTS OF OPERATIONS	Quarters Ended									Year Ended
(in thousands except shares and per share data)	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012			Dec 31, 2013			Dec 31, 2012
INTEREST INCOME:
Loans receivable	$	41,470		$	41,953		$	42,341		$	167,204		$	174,322
Mortgage-backed securities	1,321			1,281			1,165			5,168			4,176
Securities and cash equivalents	1,804			1,803			2,019			7,340			8,664
	44,595			45,037			45,525			179,712			187,162
INTEREST EXPENSE:
Deposits	2,198			2,330			3,088			9,737			15,107
Federal Home Loan Bank advances	7			28			63			99			254
Other borrowings	41			44			64			192			758
Junior subordinated debentures	742			742			776			2,968			3,395
	2,988			3,144			3,991			12,996			19,514
Net interest income before provision for loan losses	41,607			41,893			41,534			166,716			167,648
PROVISION FOR LOAN LOSSES	—			—			1,000			—			13,000
Net interest income	41,607			41,893			40,534			166,716			154,648
OTHER OPERATING INCOME:
Deposit fees and other service charges	6,670			6,982			6,433			26,581			25,266
Mortgage banking operations	2,168			2,590			4,292			11,170			13,812
Miscellaneous	1,110			920			2,197			3,484			4,697
	9,948			10,492			12,922			41,235			43,775
Gain on sale of securities	2			2			3			1,022			51
Other-than-temporary impairment recovery (loss)	—			—			—			409			(409		)
Net change in valuation of financial instruments carried at fair value	(324		)	(352		)	386			(2,278		)	(16,515		)
Proposed acquisition termination fee	2,954			—			—			2,954			—
Total other operating income	12,580			10,142			13,311			43,342			26,902
OTHER OPERATING EXPENSE:
Salary and employee benefits	21,191			21,244			20,182			84,388			78,696
Less capitalized loan origination costs	(2,371		)	(2,915		)	(2,752		)	(11,227		)	(10,404		)
Occupancy and equipment	5,362			5,317			5,320			21,423			21,812
Information / computer data services	1,956			1,710			1,836			7,309			6,904
Payment and card processing services	2,586			2,530			2,263			9,870			8,604
Professional services	1,531			1,074			850			4,331			4,411
Advertising and marketing	2,033			1,556			1,602			6,885			7,215
Deposit insurance	502			564			715			2,329			3,685
State/municipal business and use taxes	478			461			574			1,941			2,289
Real estate operations	357			(601		)	91			(689		)	3,354
Amortization of core deposit intangibles	488			471			509			1,941			2,092
Miscellaneous	2,816			3,079			3,329			12,474			12,795
Total other operating expense	36,929			34,490			34,519			140,975			141,453
Income before provision for (benefit from) income taxes	17,258			17,545			19,326			69,083			40,097
PROVISION (BENEFIT) FOR INCOME TAXES	5,704			5,880			4,638			22,528			(24,785		)
NET INCOME	11,554			11,665			14,688			46,555			64,882
PREFERRED STOCK DIVIDEND AND ADJUSTMENTS:
Preferred stock dividend	—			—			611			—			4,938
Preferred stock discount accretion	—			—			1,174			—			3,298
Gain on repurchase and retirement of preferred stock	—			—			(401		)	—			(2,471		)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	11,554		$	11,665		$	13,304		$	46,555		$	59,117
Earnings per share available to common shareholders:
Basic	$	0.60		$	0.60		$	0.69		$	2.40		$	3.17
Diluted	$	0.60		$	0.60		$	0.69		$	2.40		$	3.16
Cumulative dividends declared per common share	$	0.15		$	0.15		$	0.01		$	0.54		$	0.04
Weighted average common shares outstanding:
Basic	19,344,174			19,338,564			19,312,761			19,361,411			18,650,336
Diluted	19,398,213			19,397,329			19,420,612			19,397,360			18,722,859
Common shares issued via restricted stock grants (net), DRIP and stock purchases	719			(10,139		)	86			88,804			1,901,493

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FINANCIAL  CONDITION
(in thousands except shares and per share data)	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012
ASSETS
Cash and due from banks	$	69,711		$	69,340		$	66,370
Federal funds and interest-bearing deposits	67,638			106,625			114,928
Securities - at fair value	62,472			63,887			71,232
Securities - available for sale	470,280			477,407			472,920
Securities - held to maturity	102,513			96,545			86,452
Federal Home Loan Bank stock	35,390			35,708			36,705
Loans receivable:
Held for sale	2,734			8,394			11,920
Held for portfolio	3,415,711			3,267,042			3,223,794
Allowance for loan losses	(74,990		)	(76,657		)	(77,491		)
	3,343,455			3,198,779			3,158,223
Accrued interest receivable	13,996			15,164			13,930
Real estate owned held for sale, net	4,044			4,818			15,778
Property and equipment, net	90,267			89,092			89,117
Other intangibles, net	2,449			2,937			4,230
Bank-owned life insurance	61,945			61,442			59,891
Other assets	64,006			60,809			75,788
	$	4,388,166		$	4,282,553		$	4,265,564
LIABILITIES
Deposits:
Non-interest-bearing	$	1,115,346		$	1,051,831		$	981,240
Interest-bearing transaction and savings accounts	1,629,885			1,583,430			1,547,271
Interest-bearing certificates	872,695			900,024			1,029,293
	3,617,926			3,535,285			3,557,804
Advances from Federal Home Loan Bank at fair value	27,250			20,258			10,304
Customer repurchase agreements	83,056			82,909			76,633
Junior subordinated debentures at fair value	73,928			73,637			73,063
Accrued expenses and other liabilities	30,592			24,830			26,389
Deferred compensation	16,442			15,642			14,452
	3,849,194			3,752,561			3,758,645
STOCKHOLDERS' EQUITY
Common stock	569,028			568,535			567,907
Retained earnings (accumulated deficit)	(25,073		)	(33,701		)	(61,102		)
Other components of stockholders' equity	(4,983		)	(4,842		)	114
	538,972			529,992			506,919
	$	4,388,166		$	4,282,553		$	4,265,564
Common Shares Issued:
Shares outstanding at end of period	19,543,769			19,543,050			19,454,965
Less unearned ESOP shares at end of period	34,340			34,340			34,340
Shares outstanding at end of period excluding unearned ESOP shares	19,509,429			19,508,710			19,420,625
Common stockholders' equity per share (1)	$	27.63		$	27.17		$	26.10
Common stockholders' tangible equity per share (1) (2)	$	27.50		$	27.02		$	25.88
Common stockholders' tangible equity to tangible assets (2)	12.23		%	12.32		%	11.80		%
Consolidated Tier 1 leverage capital ratio	13.64		%	13.63		%	12.74		%

(1)	Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding and excludes unallocated shares in the ESOP.
(2)	Common stockholders' tangible equity excludes preferred stock and other intangibles.  Tangible assets excludes other intangible assets.  These ratios represent non-GAAP financial measures.

BANR - Fourth Quarter 2013 Results

January 23, 2014

Page 8

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012
LOANS (including loans held for sale):
Commercial real estate:
Owner occupied	$	502,601		$	508,341		$	489,581
Investment properties	692,457			613,757			583,641
Multifamily real estate	137,153			133,770			137,504
Commercial construction	12,168			18,730			30,229
Multifamily construction	52,081			33,888			22,581
One- to four-family construction	189,807			194,187			160,815
Land and land development:
Residential	75,695			75,576			77,010
Commercial	10,450			11,231			13,982
Commercial business	682,169			635,658			618,049
Agricultural business including secured by farmland	228,291			223,187			230,031
One- to four-family real estate	540,551			543,263			581,670
Consumer:
Consumer secured by one- to four-family real estate	173,188			170,019			170,123
Consumer-other	121,834			113,829			120,498
Total loans outstanding	$	3,418,445		$	3,275,436		$	3,235,714
Restructured loans performing under their restructured terms	$	47,428		$	50,430		$	57,462
Loans 30 - 89 days past due and on accrual	$	8,784		$	9,313		$	11,685
Total delinquent loans (including loans on non-accrual)	$	22,010		$	27,804		$	45,300
Total delinquent loans  /  Total loans outstanding	0.64		%	0.85		%	1.40		%

GEOGRAPHIC CONCENTRATION OF LOANS AT
December 31, 2013	Washington			Oregon			Idaho			Other			Total
Commercial real estate:
Owner occupied	$	379,666		$	56,054		$	58,279		$	8,602		$	502,601
Investment properties	487,775			101,326			60,216			43,140			692,457
Multifamily real estate	108,121			19,108			9,765			159			137,153
Commercial construction	11,335			703			130			—			12,168
Multifamily construction	37,979			14,102			—			—			52,081
One- to four-family construction	101,305			86,850			1,652			—			189,807
Land and land development:
Residential	42,364			32,046			1,285			—			75,695
Commercial	5,156			3,364			1,930			—			10,450
Commercial business	405,275			85,676			68,853			122,365			682,169
Agricultural business including secured by farmland	118,569			59,020			50,702			—			228,291
One- to four-family real estate	340,871			175,285			21,805			2,590			540,551
Consumer:
Consumer secured by one- to four-family real estate	113,710			45,917			12,864			697			173,188
Consumer-other	83,724			32,322			5,742			46			121,834
Total loans outstanding	$	2,235,850		$	711,773		$	293,223		$	177,599		$	3,418,445
Percent of total loans	65.4		%	20.8		%	8.6		%	5.2		%	100.0		%

BANR - Fourth Quarter 2013 Results

January 22, 2014

Page 9

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Quarters Ended									Year Ended
CHANGE IN THE	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012			Dec 31, 2013			Dec 31, 2012
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period	$	76,657		$	76,853		$	78,783		$	77,491		$	82,912
Provision	—			—			1,000			—			13,000
Recoveries of loans previously charged off:
Commercial real estate	72			331			159			2,367			921
Construction and land	1,330			507			1,499			2,275			2,954
One- to four-family real estate	7			19			174			145			586
Commercial business	282			339			1,395			1,673			2,425
Agricultural business, including secured by farmland	85			265			4			697			49
Consumer	53			68			108			340			531
	1,829			1,529			3,339			7,497			7,466
Loans charged off:
Commercial real estate	(953		)	(850		)	(558		)	(2,569		)	(4,065		)
Construction and land	(967		)	—			(1,301		)	(1,821		)	(6,546		)
One- to four-family real estate	(879		)	(207		)	(1,748		)	(2,139		)	(5,328		)
Commercial business	(209		)	(246		)	(1,094		)	(1,782		)	(6,485		)
Agricultural business, including secured by farmland	—			(248		)	(155		)	(248		)	(456		)
Consumer	(488		)	(174		)	(775		)	(1,439		)	(3,007		)
	(3,496		)	(1,725		)	(5,631		)	(9,998		)	(25,887		)
Net charge-offs	(1,667		)	(196		)	(2,292		)	(2,501		)	(18,421		)
Balance, end of period	$	74,990		$	76,657		$	77,491		$	74,990		$	77,491
Net charge-offs / Average loans outstanding	0.05		%	0.01		%	0.07		%	0.08		%	0.57		%

ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012
Specific or allocated loss allowance:
Commercial real estate	$	16,759		$	15,618		$	15,322
Multifamily real estate	5,306			5,283			4,506
Construction and land	17,640			16,668			14,991
One- to four-family real estate	11,486			13,187			16,475
Commercial business	11,773			10,676			9,957
Agricultural business, including secured by farmland	2,841			3,411			2,295
Consumer	1,335			948			1,348
Total allocated	67,140			65,791			64,894
Estimated allowance for undisbursed commitments	630			717			758
Unallocated	7,220			10,149			11,839
Total allowance for loan losses	$	74,990		$	76,657		$	77,491
Allowance for loan losses / Total loans outstanding	2.19		%	2.34		%	2.39		%
Allowance for loan losses / Non-performing loans	303		%	308		%	225		%

BANR - Fourth Quarter 2013 Results

January 23, 2014

Page 10

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	6,287		$	4,762		$	6,579
Multifamily	—			333			—
Construction and land	1,193			1,660			3,673
One- to four-family	12,532			10,717			12,964
Commercial business	723			963			4,750
Consumer	1,173			1,634			3,395
	21,908			20,069			31,361
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Multifamily	—			1,701			—
Construction and land	—			242			—
One- to four-family	2,611			2,774			2,877
Commercial business	—			24			—
Agricultural business, including secured by farmland	105			—			—
Consumer	144			52			152
	2,860			4,793			3,029
Total non-performing loans	24,768			24,862			34,390
Real estate owned (REO) and repossessed assets	4,159			4,937			15,853
Total non-performing assets	$	28,927		$	29,799		$	50,243
Total non-performing assets  /  Total assets	0.66		%	0.70		%	1.18		%

DETAIL & GEOGRAPHIC CONCENTRATION OF
NON-PERFORMING ASSETS AT
December 31, 2013	Washington		Oregon		Idaho		Total
Secured by real estate:
Commercial	$	6,239	$	—	$	48	$	6,287
Construction and land:
One- to four-family construction	—		269		—		269
Residential land acquisition & development	—		750		—		750
Residential land improved lots	—		174		—		174
Total construction and land	—		1,193		—		1,193
One- to four-family	9,466		5,066		611		15,143
Commercial business	663		60		—		723
Agricultural business, including secured by farmland	105		—		—		105
Consumer	1,021		40		256		1,317
Total non-performing loans	17,494		6,359		915		24,768
Real estate owned (REO) and repossessed assets	2,026		1,628		505		4,159
Total  non-performing assets at end of the period	$	19,520	$	7,987	$	1,420	$	28,927

BANR - Fourth Quarter 2013 Results

January 23, 2014

Page 11

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Quarters Ended						Year Ended
REAL ESTATE OWNED	Dec 31, 2013			Dec 31, 2012			Dec 31, 2013			Dec 31, 2012
Balance, beginning of period	$	4,818		$	20,356		$	15,778		$	42,965
Additions from loan foreclosures	700			2,332			3,168			13,930
Additions from capitalized costs	4			69			347			300
Proceeds from dispositions of REO	(1,186		)	(7,357		)	(16,945		)	(40,965		)
Gain on sale of REO	3			1,104			2,481			4,725
Valuation adjustments in the period	(295		)	(726		)	(785		)	(5,177		)
Balance, end of period	$	4,044		$	15,778		$	4,044		$	15,778

REAL ESTATE OWNED- BY TYPE AND STATE
December 31, 2013	Washington		Oregon		Idaho		Total
Commercial real estate	$	—	$	—	$	175	$	175
Land development- residential	1,028		1,275		33		2,336
One- to four-family real estate	888		348		297		1,533
Total	$	1,916	$	1,623	$	505	$	4,044

BANR - Fourth Quarter 2013 Results

January 23, 2014

Page 12

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSITS & OTHER BORROWINGS
	Dec 31, 2013		Sep 30, 2013		Dec 31, 2012
DEPOSIT COMPOSITION
Non-interest-bearing	$	1,115,346	$	1,051,831	$	981,240
Interest-bearing checking	422,910		399,343		410,316
Regular savings accounts	798,764		775,260		727,957
Money market accounts	408,211		408,827		408,998
Interest-bearing transaction & savings accounts	1,629,885		1,583,430		1,547,271
Interest-bearing certificates	872,695		900,024		1,029,293
Total deposits	$	3,617,926	$	3,535,285	$	3,557,804
INCLUDED IN TOTAL DEPOSITS
Public non-interest-bearing accounts	$	21,699	$	20,630	$	22,081
Public interest-bearing transaction & savings accounts	65,822		49,840		57,874
Public interest-bearing certificates	51,465		51,562		60,518
Total public deposits	$	138,986	$	122,032	$	140,473
Total brokered deposits	$	4,291	$	4,531	$	15,702
OTHER BORROWINGS
Customer repurchase agreements / "Sweep accounts"	$	83,056	$	82,909	$	76,333

GEOGRAPHIC CONCENTRATION OF DEPOSITS AT
December 31, 2013	Washington		Oregon		Idaho		Total
	$	2,743,230	$	626,959	$	247,737	$	3,617,926
	75.9%		17.3%		6.8%		100.0%

					Minimum for Capital Adequacy
REGULATORY CAPITAL RATIOS AT	Actual				or "Well Capitalized"
December 31, 2013	Amount		Ratio		Amount		Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets	$	631,674	16.99	%	$	297,493	8.00	%
Tier 1 capital to risk-weighted assets	584,838		15.73	%	148,747		4.00	%
Tier 1 leverage capital to average assets	584,838		13.64	%	171,553		4.00	%
Banner Bank:
Total capital to risk-weighted assets	557,253		15.75	%	353,730		10.00	%
Tier 1 capital to risk-weighted assets	512,689		14.49	%	212,238		6.00	%
Tier 1 leverage capital to average assets	512,689		12.65	%	202,707		5.00	%
Islanders Bank:
Total capital to risk-weighted assets	34,795		18.73	%	18,574		10.00	%
Tier 1 capital to risk-weighted assets	32,469		17.48	%	11,144		6.00	%
Tier 1 leverage capital to average assets	32,469		13.60	%	11,941		5.00	%

BANR - Fourth Quarter 2013 Results

January 22, 2014

Page 13

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
	Quarters Ended									Year Ended
OPERATING PERFORMANCE	Dec 31, 2013			Sep 30, 2013			Dec 31, 2012			Dec 31, 2013			Dec 31, 2012
Average loans	$	3,343,494		$	3,291,950		$	3,201,389		$	3,275,767		$	3,223,777
Average securities	686,845			689,257			660,731			692,117			657,649
Average interest earning cash	85,335			79,607			175,441			85,178			138,179
Average non-interest-earning assets	196,035			190,621			227,728			204,077			199,561
Total average assets	$	4,311,709		$	4,251,435		$	4,265,289		$	4,257,139		$	4,219,166
Average deposits	$	3,573,607		$	3,496,194		$	3,507,202		$	3,515,493		$	3,447,905
Average borrowings	209,155			241,006			214,275			227,612			236,124
Average non-interest-bearing other liabilities (1)	(9,116		)	(13,016		)	(2,208		)	(11,970		)	(22,757		)
Total average liabilities	3,773,646			3,724,184			3,719,269			3,731,135			3,661,272
Total average stockholders' equity	538,063			527,251			546,020			526,004			557,894
Total average liabilities and equity	$	4,311,709		$	4,251,435		$	4,265,289		$	4,257,139		$	4,219,166
Interest rate yield on loans	4.92		%	5.06		%	5.26		%	5.10		%	5.41		%
Interest rate yield on securities	1.77		%	1.75		%	1.85		%	1.78		%	1.90		%
Interest rate yield on cash	0.26		%	0.22		%	0.26		%	0.25		%	0.24		%
Interest rate yield on interest-earning assets	4.30		%	4.40		%	4.49		%	4.43		%	4.66		%
Interest rate expense on deposits	0.24		%	0.26		%	0.35		%	0.28		%	0.44		%
Interest rate expense on borrowings	1.50		%	1.34		%	1.68		%	1.43		%	1.87		%
Interest rate expense on interest-bearing liabilities	0.31		%	0.33		%	0.43		%	0.35		%	0.53		%
Interest rate spread	3.99		%	4.07		%	4.06		%	4.08		%	4.13		%
Net interest margin	4.01		%	4.09		%	4.09		%	4.11		%	4.17		%
Other operating income / Average assets	1.16		%	0.95		%	1.24		%	1.02		%	0.64		%
Core operating income / Average assets (2)	0.92		%	0.98		%	1.21		%	0.97		%	1.04		%
Other operating expense / Average assets	3.40		%	3.22		%	3.22		%	3.31		%	3.35		%
Efficiency ratio (other operating expense / revenue)	68.15		%	66.28		%	62.94		%	67.11		%	72.71		%
Efficiency ratio (other operating expense / core operating revenue)(2)	70.56		%	65.84		%	63.39		%	67.53		%	66.91		%
Return on average assets	1.06		%	1.09		%	1.37		%	1.09		%	1.54		%
Return on average equity	8.52		%	8.78		%	10.70		%	8.85		%	11.63		%
Return on average tangible equity (3)	8.56		%	8.83		%	10.79		%	8.91		%	11.74		%
Average equity  /  Average assets	12.48		%	12.40		%	12.80		%	12.36		%	13.22		%

(1) Average non-interest-bearing liabilities include fair value adjustments related to FHLB advances and Junior Subordinated Debentures.

(2) Core operating income excluding gain on sale of securities, fair value and other-than-temporary impairment (OTTI) adjustments and, in the current quarter and year, a termination fee and expenses related to a cancelled bank acquisition transaction represents non-GAAP financial measures.

(3) Average tangible equity excludes other intangibles and represents a non-GAAP financial measure.