$150 Million Offering

of Common Stock

June 2010

Better ideas. Better banking.

Filed Pursuant to Rule 433

Issuer Free Writing Prospectus dated June 17, 2010

Relating to Preliminary Prospectus Supplement

dated June 17, 2010

Registration No. 333-164259

Registration No. 333-167597

2

Disclosure Statement

The Company proposes to issue the common shares pursuant to a prospectus supplement that will be filed as part of an existing shelf registration statement previously filed with the

Securities and Exchange Commission on Form S-3. The offering may be made only by means of a prospectus and related prospectus supplement. Before you invest, prospective

investors should read the prospectus in that registration statement, the preliminary prospectus supplement and the other documents incorporated by reference therein that the

Company has filed with the SEC for more complete information about the Company and the offering. Investors may obtain these documents without charge by visiting EDGAR on the

SEC website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement and the prospectus relating to the offering may be obtained from D.A. Davidson & Co., 8

Third Street North, Great Falls, MT 59401, 1-800-332-5915, Sandler O'Neill + Partners, L.P., 919 Third Avenue, 6th Floor, New York, NY 10022, 1-866-805-4128, and McAdams

Wright Ragen Incorporated, 925 Fourth Avenue, Suite 3900, Seattle, WA 98104, 1-888-567-6297.

The Private Securities Litigation Report Act of 1995 provides a "safe harbor" for certain forward-looking statements.  This presentation contains forward-looking statements with

respect to the Corporation's financial condition, results of operations, plans, objectives, future performance or business.  These forward-looking statements are subject to certain risks

and uncertainties, including those identified below, which could cause future results to differ materially from historical results or those anticipated.

The words "believe," "expect," "anticipate," "intend," "estimate," "goals,” "would," "could," "should" and other expressions which indicate future events and trends identify forward-

looking statements.  We caution readers not to place undue reliance on these forward-looking statements, which is based only on information known to the Corporation, speak only as

of their dates, and if no date is provided, then such statements speak only as of today.  There are a number of important factors that could cause future results to differ materially from

historical results or those anticipated, including, but 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; 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,

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 (the “Federal Reserve Board”) and of our bank subsidiaries by the Federal Deposit Insurance Corporation (the “FDIC”), the Washington State

Department of Financial Institutions, Division of Banks (the “Washington DFI”) 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 our bank subsidiaries 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, which could adversely affect our liquidity and earnings; the requirements

and restrictions that have been imposed upon Banner Corporation and Banner Bank under the memoranda of understanding with the Federal Reserve Bank of San Francisco (in the

case of Banner Corporation) and the FDIC and the Washington DFI (in the case of Banner Bank) and the possibility that Banner Corporation and Banner Bank will be unable to fully

comply with the memoranda of understanding, which could result in the imposition of additional requirements or restrictions; 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; our ability to attract and retain deposits; further 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, which estimates may prove

to be incorrect and result in significant declines in valuation; 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 and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges

related thereto; 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 and preferred 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; changes to the regulatory capital treatment of our Trust Preferred Securities;  other economic,

competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; future legislative or regulatory changes in the United States

Department of Treasury Troubled Asset Relief Program (“TARP”) Capital Purchase Program and the other risks described elsewhere in the preliminary prospectus supplement, the

accompanying prospectus and the documents incorporated therein by reference.

The Corporation does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking

statement is made.

3

Use of Non-GAAP Financial Measures

Tangible equity, tangible common equity and tangible common equity to tangible assets are non-

GAAP financial measures. We calculate tangible equity by excluding the balance of goodwill and other

intangible

assets

from

shareholders’

equity.

We

calculate

tangible

common

equity

by

excluding

preferred equity from tangible equity. We calculate tangible assets by excluding the balance of

goodwill and other intangible assets from total assets.  We believe that this is consistent with the

treatment by our bank regulatory agencies, which exclude goodwill and other intangible assets from

the calculation of risk-based capital ratios. Accordingly, management believes that these non-GAAP

financial measures provide information to investors that is useful in understanding the basis of our risk-

based

capital

ratios.

In

addition,

by

excluding

preferred

equity

(the

level

of

which

may

vary

from

company to company), it allows investors to more easily compare our capital adequacy to other

companies in the industry who also use this measure. We calculate normalized pre-tax, pre-provision

earnings by adding provision for loan losses to income before income taxes and exclude net change in

valuation of financial instruments carried at fair value, other-than-temporary impairment losses and

goodwill write-off.  Management believes normalized pre-tax, pre-provision earnings is useful in

assessing the Company's core performance and trends, particularly during times of economic stress.

These non-GAAP financial measures are supplemental and are not a substitute for any analysis based

on GAAP financial measures. Because not all companies use the same calculations of tangible

common equity, tangible assets and normalized pre-tax, pre-provision earnings, these presentations

may not be comparable to other similarly titled measures as calculated by other companies. 

Reconciliations of the non-GAAP financial measures are provided in Appendix D and in the “Summary

of

Selected

Consolidated

Financial

Information”

section

of

the

preliminary

prospectus

supplement.

4

Transaction Overview

Issuer:

Banner Corporation

Ticker / Exchange:

BANR / NASDAQ GSM

Type of Offering:

Follow-on Public Offering

Type of Security:

Common Stock

Transaction Size:

$150 million

Over-Allotment Option:

15%

Use of Proceeds:

Provide capital to Banner Bank to

strengthen the bank’s regulatory capital

ratios, to support managed growth

and for general working capital purposes

Book-Running Manager:

D.A. Davidson & Co.

Co-Managers:

Sandler O'Neill + Partners, L.P.

McAdams Wright Ragen Incorporated

5

Key Management Personnel

D.

Michael

Jones,

Chief

Executive

Officer

Mark

J.

Grescovich,

President

Lloyd

W.

Baker,

Executive

Vice

President

&

Chief

Financial

Officer

Richard

B.

Barton,

Executive

Vice

President

&

Chief

Lending/Credit

Officer

6

Presentation Contents

Demographic Information

C.

Non-Interest Income and Expense

B.

Loan Breakdown and Credit Metrics

A.

Reconciliation of Non-GAAP Financial Measures

D.

Funding

4.

Earnings Power

5.

Capital Position

3.

Appendix

Final Considerations

6.

Credit Quality

2.

Strategy and Opportunities

1.

7

1.

Strategy and Opportunities

8

Strategy and Opportunities

Banner Corporation (“Banner”

or “BANR”) is raising capital to allow it

to focus on three key areas

Core Strengths

–

continue to invest in those areas that have established

Banner as a strong franchise in its market areas

Areas for Attention

–

credit quality and improved deposit pricing

Growth Strategy

–

implement organic growth strategies to capitalize on

the current market disruption

9

Market Overview

While regional factors influence the market as a whole, BANR operates in distinct

markets with unique drivers

Stable base of rural markets

Strong platform in metropolitan areas will provide growth when recovery occurs

Boise/SW Idaho

Deposits: $182 million

Loans: $285 million

NPAs: $31 million

% of Total NPAs: 10.5%

# of Branches: 7

Eastern WA

Deposits: $628 million

Loans: $506 million

NPAs: $11 million

% of Total NPAs: 3.8%

# of Branches: 19

Puget Sound

Deposits: $1.2 billion

Loans: $1.4 billion

NPAs: $128 million

% of Total NPAs: 43.6%

# of Branches: 29

Portland

Deposits: $303 million

Loans: $602 million

NPAs: $90 million

% of Total NPAs: 30.6%

# of Branches: 9

Columbia Basin

Deposits: $1.5 billion

Loans: $914 million

NPAs: $29 million

% of Total NPAs: 9.9%

# of Branches: 25

Notes: All information is as of March 31, 2010

           $19 million of loans were outside of our core market, of which $5 million was non-performing (1.6% of total NPAs)

10

Banner Strategy and Opportunity

Internal Focus

Transitioning to

External Opportunities

1)

Improve capitalization to continue to

weather the storm

2)

Continue to focus on aggressive

problem asset resolution

3)

Lower funding costs and grow core

earnings base

4)

Prepare for impact from failed

institutions

5)

Look for small, strategic

opportunities

-

Customers

-

People/teams

-

Assets

1)

Market environment presents

opportunities

-

Improved pricing on assets

and liabilities

-

Reduced competition –

opportunity for market share

gains

2)

Find fill-in opportunities

-

Branches

-

Small assisted deals

9 to 18 month Strategy

18 to 36 month Strategy

11

Large, diversified financial institution with a mix of markets, each driven by diverse

economic factors

Over 55% of deposit customer base in stable, rural markets

Columbia Basin

Eastern WA (Spokane)

(2)

Platform in higher-growth, metropolitan markets

Puget Sound

Portland

Boise

Core Strengths

(1)

Includes $124 million issued to the U.S. Treasury under the Capital Purchase Program (TARP)

(2)

Eastern WA includes two branches in Lewiston, ID

Financial

Highlights

(3/31/2010):

Total Assets:

$4.6 billion

Total Loans:

$3.7 billion

Total Deposits:

$3.8 billion

Total Shareholders’

Equity

(1)

:  $407 million

Portland

7.9%

Boise/SW ID

4.7%

Columbia Basin

39.2%

Eastern WA (2)

16.3%

Puget Sound

31.9%

Deposits by Region

3/31/2010

12

Core Strengths

Diversified loan portfolio

(1)

Excludes goodwill impairment, OTTI losses, and net change in valuation of financial instruments carried at fair value (See Appendix D for details)

Stable pre-tax, pre-provision earnings

(1)

Stable trends in last three quarters

C&D

18.1%

Farm & Ag.

5.1%

Consumer

3.0%

C&I

16.7%

Non-Owner

Occ. CRE

15.1%

Owner Occ.

CRE

14.0%

Multi-Family

4.0%

1-4 Family

24.0%

$0

$2

$4

$6

$8

$10

$12

$14

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

PTPP Earnings

PTPP as % of Avg. Assets

Loan

Composition

–

Q1

2010

13

Areas for Attention

Continue to aggressively manage the

loan portfolio and resolve problem

assets

Stable trends over the last four quarters

Cost of Funds

Improve funding costs

Focus on core deposits

Improvement as branch network

matures

NPAs/Assets

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Most recent safety & soundness

FDIC exam completed

0%

1%

2%

3%

4%

5%

6%

7%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

14

2.

Credit Quality

15

Loan Review and Monitoring

Internal

Key staffing additions/changes have been made:

Hired new President with significant credit experience

Restructured Mortgage Lending Division and hired senior level workout officers

Added to Real Estate and Commercial Special Assets groups

Added to/strengthened commercial credit administration and credit examination

Policy guideline reviews and detailed individual loan stress testing

External

PCBB

has

been

engaged

since

2008

to

complete

quarterly

portfolio

stress

tests

FDIC exam concluded in September, 2009

Moss Adams audit concluded in March, 2010

Third party loan review (national accounting firm) concluded in April, 2010

957 loans that represent 56% of commercial loan balances

Recommended potential alternative rating of nonperforming for $28 million in commitments, or 0.9% of

outstanding commercial loan portfolio, all but $600 thousand were already rated substandard

Additional recommended potential alternative rating for new substandard (but accruing) commitments

of $44 million

There were no charge-off recommendations

16

Loan Composition is Improving

Problem assets are principally in C&D portfolio (75% of NPA’s)

Reduced C&D portfolio by approximately $557 million since 12/31/2007

Aggressive management includes

Early identification

Proactive management

Creative internal programs to facilitate problem resolution (Great Northwest Home Rush and Peace of Mind Home Loan programs)

Charge-offs and foreclosures

Q4 2007 ($3.8 billion)

Q1 2010 ($3.7 billion)

1-4 Family

14.8%

Multi-Family

4.4%

Owner Occ.

CRE

9.5%

Non-Owner

Occ. CRE

13.7%

C&I

18.3%

Consumer

2.5%

Farm & Ag.

4.9%

C&D

32.1%

C&D

18.1%

Farm & Ag.

5.1%

Consumer

3.0%

C&I

16.7%

Non-Owner

Occ. CRE

15.1%

Owner Occ.

CRE

14.0%

Multi-Family

4.0%

1-4 Family

24.0%

17

0%

1%

2%

3%

4%

5%

6%

7%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Early Problem Asset Recognition

Proactive credit management and problem

recognition

Commercial real estate portfolios are being

proactively managed including loan by loan stress

testing to identify potential problem assets

Nonaccrual loans as a % of total delinquent loans

is approximately 87%

Credit issues remain concentrated in 1-4 family

residential construction and land portfolios

LLR/NPLs

NCOs/Avg. Loans

NPAs/Assets

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Most recent safety &

soundness FDIC exam

completed

Most recent

safety &

soundness FDIC

exam completed

18

Positive Recent Credit Quality Trends

Credit quality began to stabilize late in 2009

Nonperforming loans decreased in the most

recent quarter

OREO has increased as Banner has taken

control of properties in order to move them

Surfacing of new problem loans has slowed

over the last 6 months

Nonaccrual Loan Composition History

(000s)

Nonaccrual Composition

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Commercial RE

3,273

$    

5,907

$    

6,368

$    

12,879

$  

15,180

$  

7,244

$    

8,073

$    

7,300

$    

6,801

$    

Multifamily RE

-

-

-

-

968

-

-

383

373

Construction & Land

44,192

70,340

98,108

154,823

175,794

180,989

193,281

159,264

138,245

1-4 Family RE

2,869

5,526

6,583

8,649

21,900

15,167

18,107

14,614

19,777

Commercial business

3,114

6,875

6,905

8,617

7,500

10,508

15,070

21,640

19,353

Agricultural business

386

265

265

1,880

2,176

7,478

5,868

6,277

8,013

Consumer

40

-

427

130

275

2,058

-

3,923

3,387

Total Nonaccrual Loans

53,874

$  

88,913

$  

118,656

$

186,978

$

223,793

$

223,444

$

240,399

$

213,401

$

195,949

$

% of Gross Loans

1.40%

2.24%

2.97%

4.72%

5.72%

5.71%

6.17%

5.63%

5.31%

Credit Quality History

(000s)

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Nonaccrual Loans

$53,874

$88,913

$118,656

$186,978

$223,793

$223,444

$240,399

$213,401

$195,949

Nonaccrual Securities

0

0

0

0

160

0

1,236

4,232

3,000

Restructured Loans

2,026

7,771

15,514

23,635

27,550

55,031

55,161

43,683

45,471

OREO & Repo'd Assets

7,579

11,397

10,153

21,886

39,109

57,197

53,765

77,802

95,167

30+ PD Loans

32,889

23,197

18,587

61,124

111,677

31,453

21,242

34,156

51,328

Noncurrent & Restructured Assets

$96,368

$131,278

$162,910

$293,623

$402,289

$367,125

$371,803

$373,274

$390,915

% Change

31.5%

36.2%

24.1%

80.2%

37.0%

-8.7%

1.3%

0.4%

4.7%

(1)

OREO includes real estate owned and repossessed assets held for sale

Note: All $’s in 000s

Nonperforming Asset Composition 3/31/2010

Commercial RE

2.3%

1-4 Family RE

6.7%

Agricultural business

2.7%

Securities on

nonaccrual

1.0%

Consumer

1.2%

Commercial

business

6.6%

Multifamily RE

0.1%

OREO

(1)

32.4%

Construction & Land

47.0%

19

Asset Resolution is Critical

Over the last 4 quarters

Approximately $50 million of OREO has been sold

OREO was sold at approximately 97% of carrying value

(000s)

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Balance, beginning of period

1,867

$   

7,572

$    

11,390

$  

10,147

$  

21,782

$  

38,951

$  

56,967

$  

53,576

$  

77,743

$  

New Foreclosures - Transfer in from loans

6,106

4,223

3,277

13,630

19,175

32,863

10,013

39,802

28,161

Additional investment in property values

55

137

229

227

1,039

1,624

1,689

1,712

752

Valuation adjustments (Provisions)

-

(368)

-

(455)

(50)

(63)

(1,466)

(64)

(1,067)

Proceeds from the Sale of OREO

(444)

(174)

(4,230)

(1,976)

(3,094)

(16,112)

(13,439)

(10,064)

(9,814)

Disposition - Transfer to PP&E

-

-

-

-

-

-

-

(7,030)

-

Gain (Loss) on Sale of OREO

(12)

-

(519)

209

99

(296)

(188)

(189)

(701)

Balance, end of period

7,572

$   

11,390

$  

10,147

$  

21,782

$  

38,951

$  

56,967

$  

53,576

$  

77,743

$  

95,074

$  

OREO Summary

20

3.

Capital Position

21

Capital is Critical to the Strategy

Provides cushion to sustain the Company through prolonged downturn

Strengthens balance sheet position when external opportunities present themselves

(1)

Pro forma

capital

ratios

do

not

assume

exercise

of

the

overallotment

option.

Assumes

6.0%

total

offering

costs

and

20%

blended

risk

weighting

on

new

capital

(2)

See Appendix D and prospectus supplement for reconciliation of non-GAAP financial measures

Risk Based Capital Ratios (Holding Company)

Before and

After

$150

million

Capital

Raise

(000s)

Actual

Pro Forma

Tang. Common Equity / Tang. Assets

(2)

6.1%

8.9%

Leverage Ratio

9.8%

12.5%

Tier 1 Ratio

11.7%

15.3%

Total Risk-Based Capital Ratio

12.9%

16.5%

Excess over 10% leverage

-

$                    

116,003

$       

Excess over 12% Total Risk Based Capital

35,198

$         

173,125

$       

At 3/31/2010

(1)

22

Stress Tests

SCAP

Loss scenario based on loss

rates used in the SCAP more

adverse stress test determined

over life of portfolio, computed

as of Q4 2008 on possible loss

estimates to certain loan

categories

Note: Loss % based on loss rates (midpoint of range) from the Board of Governors of the Federal Reserve System study: Supervisory Capital Assessment Program

Note: Loss rates for 2009 are Banner Bank & Community Financial Corporation (CFC), a wholly owned subsidiary of Banner Bank

Historical

Historical loss rate stress test

using 2009 Banner loss rates,

computed as of Q1 2010, and

then doubled to account for a

two-year period

(000s)

Balance

%

$ Amt.

First Lien 1-4 Family

612,692

$         

3.50%

(21,444)

$          

Closed-End Jr Lien 1-4  Family

50,669

$           

23.50%

(11,907)

$          

Revolving 1-4 Family (HE lines)

153,327

$         

9.50%

(14,566)

$          

Commercial & Industrial

623,455

$         

6.50%

(40,525)

$          

Ag Production

148,290

$         

6.50%

(9,639)

$            

Commercial Real Estate

1,015,717

$      

8.00%

(81,257)

$          

Farm Real Estate

55,764

$           

10.50%

(5,855)

$            

Multifamily Real Estate

151,815

$         

10.50%

(15,941)

$          

Construction & Development

1,047,055

$      

16.50%

(172,764)

$        

Credit Cards & Consumer LOC

22,605

$           

19.00%

(4,295)

$            

Other Consumer (excl rev)

68,752

$           

10.00%

(6,875)

$            

Other

18,372

$           

7.00%

(1,286)

$            

Total

3,968,513

$  

9.74%

(386,354)

$    

Asset Category (Q4 2008)

More Adverse Loss Scenario

(000s)

Balance

%

$ Amt.

First Lien 1-4 Family

717,310

$         

2.08%

(14,920)

$          

Closed-End Jr Lien 1-4  Family

44,341

$           

2.30%

(1,020)

$            

Revolving 1-4 Family (HE lines)

171,471

$         

2.08%

(3,567)

$            

Commercial & Industrial

570,676

$         

3.70%

(21,115)

$          

Ag Production

124,799

$         

3.88%

(4,842)

$            

Commercial Real Estate

1,074,526

$      

0.00%

-

$                

Farm Real Estate

62,272

$           

3.22%

(2,005)

$            

Multifamily Real Estate

148,152

$         

0.00%

-

$                

Construction & Development

685,616

$         

14.96%

(102,568)

$        

Credit Cards & Consumer LOC

21,435

$           

6.24%

(1,338)

$            

Other Consumer (excl rev)

59,272

$           

3.82%

(2,264)

$            

Other

20,535

$           

1.18%

(242)

$               

Total

3,700,405

$  

4.16%

(153,881)

$    

Asset Category (Q1 2010)

Historical Loss Scenario

23

Capital Cushion Provides Room for Additional Loan Stress

SCAP Loss Estimates

(000s)

More Adverse

(1)

Possible Loss

(386,000)

$                           

Excess Provision above 1.5%

40,000

Capital Impact

(346,000)

Future core earnings

(2)

68,000

DRIP / DPP proceeds

(3)

30,000

Net Charge-off Recapture

102,000

(4)

Pro Forma Capital Impact

(146,000)

$                           

Risk Based Capital Ratio @ 3/31/2010

12.9%

Adjusted RBC Ratio

9.4%

Capital needed to remain above "well capitalized" (10%)

20,000

$                              

Capital needed for 12% RBC ratio

93,000

$                              

Leverage Ratio @ 3/31/2010

9.8%

Adjusted Leverage Ratio

6.8%

Capital needed to remain above "well capitalized" (5%)

-

$                                        

Capital needed for 10% leverage ratio

142,000

$                            

(1)

Treasury’s SCAP loss estimates were computed as of December 31, 2008 for a two year period ending December 31, 2010.

      This analysis extends that termination point to December 31, 2011 (one year beyond the original termination point) given losses experienced to date.

(2)

Credit for future core earnings calculated through December 2011 using Q1 2010 pre-tax pre-provision earnings, excluding gain/loss on fair market value adjustments.  (See Appendix D for details)

(3)

Credit for DRIP/DPP proceeds calculated through December 2011 using Q1 2010 DRIP/DPP proceeds.

(4)

Includes impact of $102 million in NCOs over the past 5 quarters ended 3/31/2010.  

24

4.

Funding

25

Deposit Snapshot

Third largest WA-based commercial bank

ranked by deposits

Strong market share in stable, rural markets

Significant opportunities in higher growth,

metropolitan markets

Cost of Funds

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Deposit

Composition

–

Q1

2010

(1)

Deposit data as of 6/30/2009

Region

Total

Branches

in Region

Number of

BANR

Branches

in Region

Total

Deposits in

Region ($000)

Total BANR

Deposits

in Region

($000)

BANR

Regional

Market

Share

Columbia Basin

230

25

$9,102,925

$1,590,208

17.5%

Puget Sound

891

29

69,021,046

1,176,928

1.7%

Eastern Washington

176

19

9,126,924

597,084

6.5%

Portland

523

9

30,554,342

263,281

0.9%

Boise/SW Idaho

226

7

8,661,742

158,131

1.8%

Region Totals

2,046

89

$126,466,979

$3,785,632

3.0%

Regional Deposit Market Share

(1)

Jumbo CDs

26.9%

Transaction

23.8%

MMDA &

Savings

26.9%

Retail CDs

22.4%

26

Core Deposit Summary

Opportunities with immature branch network

27 branches less than five years old

3 acquisitions since 2006

Significant

improvement

in

non-CD

deposit

accounts

–

21.5%

growth

year-over-year

Low reliance on wholesale funding

(000s)

Q1 2009

Q1 2010

$ Change

% Change

Non-interest bearing

508,593

$               

549,291

$               

40,698

$    

8.0%

Interest bearing checking

307,741

366,786

59,045

19.2%

Regular savings accounts

490,239

577,704

87,465

17.8%

Money market accounts

301,857

459,811

157,954

52.3%

Total CDs

2,019,074

1,896,186

(122,888)

-6.1%

Total deposits

3,627,504

$            

3,849,778

$            

222,274

$  

6.1%

Total Non CD Deposits

1,608,430

$            

1,953,592

$            

345,162

$  

21.5%

Deposit Balances

Q1 2009 to Q1 2010

27

Area of Opportunity

Rate by Category

(1)

Interest bearing checking

0.56%

Savings

1.04%

Money market

1.27%

Retail CDs

2.52%

Jumbo CDs

2.51%

(1)

Weighted average rates for the last day of the month, ended March 31, 2010

Brokered Deposits

Public Funds

$1.6 billion in CDs maturing over next four

quarters

Cost of funds reduction of 173 bps over last

8 quarters ended 3/31/2010

Maturity

Total CDs

Maturity by Quarter

% of

Total

Weighted Avg Rate

by Quarter

Q2 2010

335,752,636

$          

17.7%

1.93%

Q3 2010

750,932,661

39.6%

2.70%

Q4 2010

263,328,917

13.9%

2.36%

Q1 2011

256,061,974

13.5%

2.47%

Q2 2011

75,661,294

4.0%

2.36%

Q3 2011

58,392,833

3.1%

2.61%

Q4 2011

29,092,568

1.5%

2.81%

Q1 2012

40,895,518

2.2%

2.42%

> Q1 2012

86,067,526

4.5%

3.74%

1,896,185,928

$       

100.0%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

$0

$50

$100

$150

$200

$250

$300

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

28

5.

Earnings Power

29

Core Earnings Strength

Net Interest Margin

Pre-tax, Pre-Provision Earnings

(1)

NIM improved consistently, up 36 bps over the last three quarters, despite continued drag from NPAs

Loan yields are stable and cost of funds continues to decline

Disciplined expense control

2.00%

2.50%

3.00%

3.50%

4.00%

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

(1)

Excludes goodwill impairment, OTTI losses, and net change in valuation of financial instruments carried at fair value (See Appendix D for details)

$0

$2

$4

$6

$8

$10

$12

$14

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

PTPP Earnings

PTPP as % of Avg. Assets

30

Performance Initiatives to Bolster Core Earnings

Comprehensive Portfolio Management

Continue

portfolio

review

process

to

quickly

detect

and

react

to

any

deteriorating

trends

Aggressively manage criticized and classified relationships

Aggressively

manage

NPAs

and

OREO

for

maximum

realization

of

asset

values

Systemic Revenue Enhancement

Maximize risk based pricing options for margin expansion

Enhance relationship profitability tools to improve client and banker revenue

contribution

Maximize product penetration and cross sell ratios through client relationship

strategies

Continuous product pricing/value review

Portfolio Mix Improvement and Market Share Expansion

Expand market share in newer/under penetrated markets with robust prospecting

and sales process for commercial and retail bankers

Expand market penetration with more wholesome C&I client relationships

Continue execution on core deposit growth initiatives

31

6.

Final Considerations

32

What has Changed Since December 2009 Roadshow

Two additional quarters of results that confirm:

Stabilization of credit quality

Improvement of core earnings

Further additions to the management team

Better visibility on regional economic conditions

$150 million capital raise provides significant cushion

33

Relative Valuation

(1)

See prospectus supplement for reconciliation of non-GAAP financial measures

(2)

Pre-tax, pre-provision earnings (PTPP) represent last twelve months results and exclude goodwill impairment, OTTI losses, and net change in valuation of financial instruments carried at fair value (see Appendix D for details). 

Negative results are displayed as NM

(3)

Peer Group A:  Publicly-traded banks in WA, OR, ID & MT with total assets above $1 billion who have raised over $40 million in equity capital recently

(4)

Peer Group B:  Other publicly-traded banks in WA, OR, ID & MT with assets above $1 billion

(5)

COLB results are adjusted for Q2 2010 offering

Source:  SNL Financial

Banner’s stock valuation

is well below both peer

groups on a price to

tangible book basis

Significant discount on

pre-tax, pre-provision

earnings multiple

Short interest of 17% of

total shares outstanding

has been an impediment

Mkt. Cap to

Current

Price as of

Mkt. Cap.

Price /

LTM PTPP

Dividend

Company Name

Ticker

State

6/16/2010

($M)

Tang. Book

(1)

Earnings

(2)

Yield

Peer Group A

(3)

Umpqua Holdings Corporation

UMPQ

OR

12.48

$        

1,429.1

$     

155.0%

10.7x

1.60%

Glacier Bancorp, Inc.

GBCI

MT

15.71

$        

1,129.7

$     

166.4%

7.1x

3.31%

Columbia Banking System, Inc.

(5)

COLB

WA

20.23

$        

794.5

$        

149.5%

12.9x

0.20%

First Interstate BancSystem, Inc.

FIBK

MT

15.81

$        

676.3

$        

138.3%

5.6x

2.85%

West Coast Bancorp

WCBO

OR

2.95

$          

276.5

$        

113.7%

NM

0.00%

Washington Banking Company

WBCO

WA

13.24

$        

202.6

$        

148.9%

10.4x

0.91%

Pacific Continental Corporation

PCBK

OR

10.59

$        

194.8

$        

134.2%

7.2x

0.38%

Heritage Financial Corporation

HFWA

WA

14.95

$        

165.7

$        

134.9%

8.3x

0.00%

Median

476.4

$        

143.6%

8.3x

0.65%

Peer Group B

(4)

PremierWest Bancorp

PRWT

OR

0.51

$          

51.2

$          

86.4%

3.8x

0.00%

Sterling Financial Corporation

STSA

WA

0.75

$          

39.2

$          

NM

0.7x

0.00%

Cascade Bancorp

CACB

OR

0.58

$          

16.3

$          

107.6%

NM

0.00%

Cascade Financial Corporation

CASB

WA

1.25

$          

15.3

$          

28.2%

1.0x

0.00%

AmericanWest Bancorporation

AWBC

WA

0.23

$          

4.0

$            

NM

NM

0.00%

Median

16.3

$          

86.4%

1.0x

0.00%

Banner Corporation

BANR

WA

3.64

$          

85.7

$          

29.9%

2.4x

1.10%

34

Key Considerations

Large, diversified platform with strong presence in stable markets and

opportunities in growth markets

Diversified loan portfolio with stable/improving credit quality trends

Opportunities to continue to grow core earnings through improving

funding mix and cost

Strong additions to management team

Capital provides cushion to weather prolonged downturn and fund

future growth at the appropriate time

35

A.

Loan Breakdown and Credit Metrics

36

Largest Lending Relationships

Balance

3/31/10

1

Coml

RE / Animal Feed Products

Pass

$38,563,481

$36,404,817

2

Homebuilder

Substandard

20,468,995

20,468,995

3

Investment Banking

Pass

20,000,000

-

4

Individual -

various investments

Pass

20,000,000

20,000,000

5

Operator of Skilled nursing facilities

Substandard

19,650,885

19,606,226

$96,480,038

6

Homebuilder and Res A&D

Substandard

19,201,635

19,201,635

7

Comml

RE -

multifamily and other

Pass

18,554,250

12,913,648

8

Homebuilder

Substandard

18,081,816

18,081,816

9

Coml

RE multifamily

Pass

17,370,525

17,370,525

10

Homebuilder

Substandard

16,551,095

12,144,760

$176,192,423

11

Comml

RE and Comml

A&D

Pass

16,138,771

15,932,381

12

Homebuilder

Pass

15,913,000

12,465,873

13

Comml

RE -

Office

Pass

15,898,818

15,898,818

14

Comml

RE retail grocery (owner occupied)

Pass

15,195,406

14,515,562

15

Comml

RE -

mini storage

Pass

15,154,893

13,335,489

$248,340,546

16

Hospital

Pass

15,119,276

15,119,276

17

Native Am. Casion

& associated hotel

Pass

15,000,000

13,255,813

18

Drilling contractor

Pass

13,507,962

9,695,314

19

Seafood Processing

Pass

13,437,500

11,950,165

20

Homebuilder and Res A&D

Substandard

13,380,918

12,759,461

$311,120,576

21

Comml

RE -

mixed use

Pass

13,357,490

11,179,279

22

Comml

RE -

mixed use

Pass

13,320,955

13,222,277

23

Comml

RE -

health club (owner occupied)

Pass

13,136,212

13,136,212

24

Homebuilder and Res A&D

Pass

12,788,288

7,306,931

25

Food Processing

Pass

12,000,000

1,298,824

$421,792,173

$357,264,097

Total Loan Portfolio

3,688,856,691

$  

Top 20 Relationships

represent 8.43% of all

loans

Top 25 Relationships

represent 9.68% of all

loans

Top 15 Relationships

represent 6.73% of all

loans

Top 25

Relationships

Top 5 Relationships

represent 2.62% of all

loans

Top 10 Relationships

represent 4.78% of all

loans

Business

Risk Rating

Commitment

Amount

37

Loan and Credit Quality Comparison

Note: Data as of March 31, 2010; Percentages in table are expressed as a percentage of the total loan portfolio balances.

54% of Q1 2010 NCOs were related to construction & development loans

(000s)

Loan Category

$

%

$

%

$

%

$

%

$

%

Commercial real estate owner occupied

515,542

$       

14.0%

30,609

$         

5.9%

3,663

$           

0.7%

-

$                    

0.0%

8,465

1.6%

Commercial real estate investment property

557,134

15.1%

36,842

6.6%

3,138

0.6%

92

0.0%

12,244

2.2%

Multifamily real estate

147,659

4.0%

840

0.6%

373

0.3%

-

0.0%

2,024

1.4%

Commercial construction

83,879

2.3%

9,622

11.5%

1,552

1.9%

-

0.0%

1,552

1.9%

Multifamily construction

61,924

1.7%

11,282

18.2%

11,283

18.2%

-

0.0%

11,282

18.2%

One- to four-family construction

213,438

5.8%

75,353

35.3%

32,241

15.1%

1,776

0.8%

34,525

16.2%

Residential land and land development

256,607

7.0%

126,991

49.5%

78,972

30.8%

5,361

2.1%

74,075

28.9%

Commercial land and land development

48,194

1.3%

17,347

36.0%

14,197

29.5%

200

0.4%

16,368

34.0%

Commercial business

616,396

16.7%

59,595

9.7%

19,353

3.1%

3,494

0.6%

27,928

4.5%

Agricultural business including secured by farmland

187,207

5.1%

14,505

7.7%

8,013

4.3%

2

0.0%

9,549

5.1%

One- to four-family real estate

697,565

18.9%

33,153

4.8%

19,777

2.8%

1,031

0.1%

19,598

2.8%

Consumer

303,312

8.2%

6,237

2.1%

3,448

1.1%

1,580

0.5%

7,939

2.6%

Total loans outstanding

3,688,857

$    

100.0%

422,376

$       

11.5%

196,010

$       

5.3%

13,536

$         

0.4%

225,549

$     

6.1%

Past Due

Balances

Classified

NPL

Q1 2010 NCOs

38

Breakdown –

Construction & Development

Highest priority is continuing to reduce this

portfolio

Creative loan programs have aided in

reducing this portfolio

Performing vs. Non-Performing

Net Charge-offs

Note: Information as of 3/31/2010; dollars in millions

Puget Sound

Loans: $217 million

NPLs:  $65 million

Portland

Loans: $238 million

NPLs:  $47 million

Columbia Basin

Loans: $100 million

NPLs:  $15 million

Eastern WA

Loans: $65 million

NPLs:  $7 million

Boise/SW Idaho

Loans: $44 million

NPLs:  $4 million

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

C&D Concentrations

Amount

% of Total

Residential A&D

$129

19%

Residential improved lots

77

12%

Residential unimproved

51

8%

Commercial A&D

9

1%

Improved land

20

3%

Unimproved land

19

3%

Commercial construction

84

13%

Multifamily construction

62

9%

1-4 family construction

213

32%

  Total

$664

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing Loans

Non-Accrual Loans

39

Breakdown –

Commercial Real Estate

Less than 15% of CRE portfolio matures in next

three years

Very

low

delinquency

rate

on

NOO

CRE

–

2.0%

Note: Information as of 3/31/2010; dollars in millions

Columbia Basin

Loans: $293 million

NPLs:  $4 million

Eastern WA

Loans: $242 million

NPLs:  $400 thousand

Boise/SW Idaho

Loans: $81 million

NPLs:  $0

Portland

Loans: $99 million

NPLs:  $300 thousand

Puget Sound

Loans: $506 million

NPLs:  $2 million

Net Charge-offs

Performing vs. Non-Performing

CRE Concentrations

Amount

% of Total

Amount

% of Total

Office

$86

17%

$151

21%

Retail

85

16%

120

17%

Warehouse/Industrial

131

26%

45

6%

Multifamily

0

0%

147

21%

Healthcare

52

10%

40

5%

Hotel/motel

0

0%

48

7%

C-Store/Service Station

42

8%

4

1%

Other

89

17%

82

12%

Islander's CRE

31

6%

68

10%

  Total

$516

$705

Owner Occupied

Non-Owner Occupied

$0

$200

$400

$600

$800

$1,000

$1,200

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing Loans

Non-Accrual Loans

($5)

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

40

Breakdown

–

Commercial

&

Industrial

Note: Information as of 3/31/2010; dollars in millions

$18 million of loans were outside of our core market, including $5 million of NPLs

Well diversified C&I portfolio, both by

geography and borrower type/size

Normal charge-off experience over the past

few years

Eastern WA

Loans: $122 million

NPLs:  $2 million

Boise/SW Idaho

Loans: $64 million

NPLs:  $700 thousand

Columbia Basin

Loans: $141 million

NPLs:  $700 thousand

Portland

Loans: $36 million

NPLs:  $400 thousand

Puget Sound

Loans: $235 million

NPLs:  $12 million

Net Charge-offs

Performing vs. Non-Performing

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

C&I Concentrations

Amount

% of Total

Manufacturing

$102

17%

RE, rental & leasing

94

15%

Construction

76

13%

Finance & Insurance

67

11%

Health care

49

8%

Wholesale Trade

50

8%

Retail Trade

42

7%

Transportation/Warehousin

24

3%

Other

112

18%

  Total

$616

$0

$100

$200

$300

$400

$500

$600

$700

$800

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing

Loans

Non-Accrual

Loans

41

Breakdown –

Residential Real Estate

Large portfolio provides some stability in

tough operating markets

Most of the NCOs are mark to market

charges associated with the Great N.W.

Home Rush

Note: Information as of 3/31/2010; dollars in millions

$1 million of loans were outside of our core market, including no NPLs

Eastern WA

Loans: $63 million

NPLs:  $2 million

Boise/SW Idaho

Loans: $37 million

NPLs:  $1 million

Columbia Basin

Loans: $220 million

NPLs:  $4 million

Portland

Loans: $221 million

NPLs:  $9 million

Puget Sound

Loans: $350 million

NPLs:  $6 million

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

1-4 Family Concentrations

Amount

% of Total

1-4 Family 1st liens

$698

78%

1-4 Family Jr. Liens

171

19%

1-4 Family Home Equity LOCs

23

3%

Total

$892

Net Charge-offs

Performing vs. Non-Performing

$0

$200

$400

$600

$800

$1,000

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing Loans

Non-Accrual Loans

42

Breakdown –

Farm & Agriculture

Diversified production agriculture portfolio –

geographically diversified in the Columbia

Basin and Southern Idaho

Overall good credit quality as industry

fundamentals have been strong –

substandard loans total $14.5 million

Note: Information as of 3/31/2010; dollars in millions

Ag Concentrations

Amount

% of Total

Field Crops

$57

30%

Grains

28

15%

Livestock

39

21%

Dairies

27

15%

Potato

14

7%

Wineries

5

3%

Other

17

9%

  Total

$187

Eastern WA

Loans: $3 million

NPLs:  $0

Boise/SW Idaho

Loans: $53 million

NPLs:  $6 million

Columbia Basin

Loans: $121 million

NPLs:  $2 million

Portland

Loans: $2 million

NPLs:  $0

Puget Sound

Loans: $8 million

NPLs:  $0

Performing vs. Non-Performing

Net Charge-offs

$0

$50

$100

$150

$200

$250

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing Loans

Non-Accrual Loans

($5)

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

43

Breakdown –

Consumer

Small portfolio of credit cards, car loans, and

boat & RV loans

Charge-offs are at low levels

Eastern WA

Loans: $11 million

NPLs:  $0

Boise/SW Idaho

Loans: $6 million

NPLs:  $0

Columbia Basin

Loans: $39 million

NPLs:  $0

Portland

Loans: $6 million

NPLs:  $100 thousand

Puget Sound

Loans: $47 million

NPLs:  $400 thousand

Note: Information as of 3/31/2010; dollars in millions

$0

$5

$10

$15

$20

$25

$30

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Cons. Concentrations

Amount

% of Total

Credit Cards

$17

16%

Other Cons Revolv

11

10%

Other Cons Loans

81

74%

  Total

$109

Net Charge-offs

Performing vs. Non-Performing

$0

$25

$50

$75

$100

$125

$150

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Performing Loans

Non-Accrual Loans

44

B.

Non-Interest Income and Expense

45

Other Revenue Opportunities

Account acquisition and retention yielding consistent service charge income

Core competency in mortgage banking

(000s)

$

%

Non-Interest Income

Q1 2009

Q1 2010

Change

Change

Deposit fees and other service charges

4,936

$     

5,169

$     

233

$      

4.7%

Net change in valuation of financial instruments

carried at fair value

(3,253)

677

3,930

NM

Mortgage banking operations

2,715

948

(1,767)

-65.1%

Loan servicing fees

(270)

313

583

NM

Miscellaneous

520

617

97

18.7%

Total non-interest income

4,648

$     

7,724

$     

3,076

$   

66.2%

46

Control Over Non-Interest Expense

Core non-interest

expense items decreased

5.1% in Q1 2010

Salary and employee

benefits declined by 3.4%,

partially due to a

decrease in headcount

Professional fees, FDIC

deposit insurance and

OREO costs increased by

$3.2 million in Q1 2010

(000s)

$

%

Non-Interest Expense

Q1 2009

Q1 2010

Change

Change

Core

non-interest

expense

items

Salary & employee benefits

15,485

$  

14,954

$  

(531)

$    

-3.4%

Occupancy & equipment

6,054

5,604

(450)

-7.4%

Information/computer data services

1,534

1,506

(28)

-1.8%

Payment and card processing expenses

1,453

1,424

(29)

-2.0%

Advertising and marketing

1,832

1,950

118

6.4%

State business and use taxes

540

480

(60)

-11.1%

Amortization of core deposit intangibles

690

644

(46)

-6.7%

Miscellaneous

2,891

2,376

(515)

-17.8%

Total core non-interest expense items

30,479

28,938

(1,541)

-5.1%

Other

non-interest

expense

items

Professional services

1,194

1,287

93

7.8%

FDIC deposit insurance

1,497

2,132

635

42.4%

Real estate operations

623

3,058

2,435

390.9%

Total other non-interest expense items

3,314

6,477

3,163

95.4%

Total non-interest expense

33,793

$  

35,415

$  

1,622

$  

4.8%

47

C.

Demographic Information

48

Demographics by Region

Population

Income

BANR operates in attractive regions; all of the regions BANR serves have higher projected

population and income growth rates than the national average

Source: SNL Financial as of May 5, 2010

Region

Avg. Median HH

Income 2009

Avg. HH Inc. Change

2000 - 2009

Avg. Projected

HH Inc. Change

2009 - 2014

Columbia Basin

$47,146

28.1%

5.3%

Puget Sound

60,253

29.5%

5.5%

Eastern WA

46,611

30.4%

6.3%

Portland

63,290

30.5%

5.2%

Boise / SW Idaho

52,579

35.1%

6.4%

US

$54,719

29.8%

4.1%

Region

Total Population

2009 (actual)

Avg. Population

Change

2000 - 2009

Avg. Projected

Pop. Change

2009 - 2014

Columbia Basin

783,768

11.8%

4.9%

Puget Sound

3,034,960

14.8%

6.6%

Eastern WA

528,589

7.0%

3.4%

Portland

2,074,245

17.2%

7.7%

Boise / SW Idaho

654,865

30.2%

13.0%

US

309,731,508

10.1%

4.6%

49

D.

Reconciliation of Non-GAAP Financial Measures

50

Reconciliation of Non-GAAP Financial Measures

Tangible Equity, Tangible Common Equity and Tangible Assets

Normalized Pre-Tax, Pre-Provision Earnings

(000s)

At March 31,

2010

Reconciliation of non-GAAP financial measures:

Stockholders' equity

$406,724

Goodwill

0

Other intangible assets, net

10,426

Tangible equity

$396,298

Preferred equity

117,805

Tangible common equity

$278,493

Total assets

$4,581,711

Goodwill

0

Other intangible assets, net

10,426

Tangible assets

$4,571,285

(000s)

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Income (Loss) Before Provision For Income Taxes

$5,343

($54,610)

($2,338)

($83,473)

($16,186)

($26,989)

($11,824)

($7,818)

($3,541)

ADD: Provision for Loan Losses

6,500

15,000

8,000

33,000

22,000

45,000

25,000

17,000

14,000

LESS: Net Change in Valuation Of Financial Instruments Carried At Fair Value

823

649

(6,056)

13,740

(3,253)

11,211

5,982

(1,411)

1,908

ADD: Other-Than-Temporary Impairment Losses

0

0

0

0

0

(162)

(1,349)

0

(1,231)

ADD: Goodwill Write-Off

0

50,000

0

71,121

0

0

0

0

0

Normalized Pre-Tax, Pre-Provision Earnings

$11,020

$9,741

$11,718

$6,908

$9,067

$6,962

$8,543

$10,593

$9,782