REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2021

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

REGULATORY CAPITAL REQUIREMENTS

REGULATORY CAPITAL REQUIREMENTS

Banner Corporation is a bank holding company registered with the Federal Reserve.  Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended (BHCA), and the regulations of the Federal Reserve.  Banner Bank, as a state-chartered federally insured commercial bank, is subject to the capital requirements established by the FDIC.  The Federal Reserve requires Banner to maintain capital adequacy that generally parallels the FDIC requirements. On February 5, 2021, Islanders Bank, a subsidiary of Banner Corporation and a Washington-chartered commercial bank, was merged into Banner Bank. Banner Bank and Islanders Bank (the Banks), as a state-chartered federally insured commercial banks, were both subject to the capital requirements established by the FDIC at December 31, 2020.

The following table shows the regulatory capital ratios of the Company and the Bank and the minimum regulatory requirements (dollars in thousands):

	Actual				Minimum for Capital Adequacy Purposes				Minimum to be Categorized as “Well-Capitalized” Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2021:
The Company—consolidated:
Total capital to risk-weighted assets	$	1,663,943	14.71	%	$	904,633	8.00	%	$	1,130,791	10.00	%
Tier 1 capital to risk-weighted assets	1,440,694		12.74		678,474		6.00		678,474		6.00
Tier 1 capital to average leverage assets	1,440,694		8.76		658,091		4.00		n/a		n/a
Tier 1 common equity to risk-weighted assets	1,305,194		11.54		508,856		4.50		n/a		n/a
Banner Bank:
Total capital to risk- weighted assets	1,552,204		13.73		904,159		8.00		1,130,199		10.00
Tier 1 capital to risk- weighted assets	1,428,955		12.64		678,119		6.00		904,159		8.00
Tier 1 capital to average leverage assets	1,428,955		8.69		657,882		4.00		822,353		5.00
Tier 1 common equity to risk-weighted assets	1,428,955		12.64		508,589		4.50		734,629		6.50
December 31, 2020:
The Company—consolidated:
Total capital to risk-weighted assets	$	1,608,387	14.73	%	$	873,472	8.00	%	$	1,091,840	10.00	%
Tier 1 capital to risk-weighted assets	1,371,736		12.56		655,104		6.00		655,104		6.00
Tier 1 capital to average leverage assets	1,371,736		9.50		577,331		4.00		n/a		n/a
Tier 1 common equity to risk-weighted assets	1,228,236		11.25		491,328		4.50		n/a		n/a
Banner Bank:
Total capital to risk- weighted assets	1,438,012		13.39		859,260		8.00		1,074,075		10.00
Tier 1 capital to risk- weighted assets	1,303,590		12.14		644,445		6.00		859,260		8.00
Tier 1 capital to average leverage assets	1,303,590		9.22		565,620		4.00		707,025		5.00
Tier 1 common equity to risk-weighted assets	1,303,590		12.14		483,334		4.50		698,149		6.50
Islanders Bank:
Total capital to risk- weighted assets	29,333		15.65		14,997		8.00		18,747		10.00
Tier 1 capital to risk- weighted assets	26,983		14.39		11,248		6.00		14,997		8.00
Tier 1 capital to average leverage assets	26,983		7.87		13,720		4.00		17,150		5.00
Tier 1 common equity to risk-weighted assets	26,983		14.39		8,436		4.50		12,185		6.50

At December 31, 2021, Banner Corporation and the Bank each exceeded the requirements to be “well capitalized” and the fully phased-in capital conservation buffer requirement. There have been no conditions or events since December 31, 2021 that have materially adversely changed the Tier 1 or Tier 2 capital of the Company or the Bank.  However, events beyond the control of the Bank, such as weak or depressed economic conditions in areas where the Bank has most of its loans, could adversely affect future earnings and, consequently, the ability of the Bank to meet its respective capital requirements.  The Company may not declare or pay cash dividends on, or repurchase, any of its shares of common stock if the effect thereof would cause equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration and payment would otherwise violate regulatory requirements.

Banner Corporation and the Bank are subject to minimum required ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital, total capital and the leverage ratio and a required capital conservation buffer over the required capital ratios.

Under capital regulations, the minimum capital ratios are: (1) a CET1 capital ratio of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (3) a total risk-based capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio (the ratio of Tier 1 capital to average total consolidated assets) of 4.0%.  CET1 generally consists of common stock; retained earnings; accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital; and certain minority interests; all subject to applicable regulatory adjustments and deductions. Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for credit losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk-weighted from 0% to 1,250%, depending on the risk characteristics of the asset or item.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, Banner and each of the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.