BANR - First Quarter Results
April 28, 2005
Page 2

As a result of Banner's expansion strategy and its increased size, other operating expense was $21.3 million for the quarter ended March 31, 2005, compared to $18.8 million for the first quarter a year ago and $20.4 million for the fourth quarter of 2004. The ratio of other operating expense (expense ratio) to average assets was 2.95% for the first quarter, compared to 2.85% for the fourth quarter of 2004 and 2.88% for the first quarter of 2004.

"We have added to our Puget Sound-area presence with new branches in Kent, Everett, Edmonds, Lynnwood and Mercer Island, Washington. These branches are in the heart of Puget Sound, a thriving business community with ties to aerospace, computer software, biomedical research, medical technology and international business. This franchise expansion has already added to our balance sheet, with new loans and deposits. While these new locations will increase our overhead expenses and temporarily decrease our short-term profitability, over time they should help reduce our dependence on borrowed funds and improve our net interest margin," said Jones.

"Our loan portfolio continued to grow at double-digit rates," said Jones. "Our lending personnel have generated steady growth in commercial and multifamily real estate loans, construction and land loans, and commercial and agricultural business loans, which combined now account for 82% of the loan portfolio." Net loans increased 20%, to $2.13 billion at March 31, 2005, from $1.77 billion a year ago. Assets reached a record $2.97 billion, a 10% increase from $2.71 billion a year earlier.

"Our deposit growth was solid this quarter, in part reflecting some of our new locations, but also resulting from continued success at many of our existing branches," added Jones. Total deposits grew 14%, to $1.99 billion, compared to $1.75 billion at March 31, 2004. Non-interest bearing deposits increased 26% at March 31, 2005 compared to March 31, 2004, and increased 10% compared to the quarter ended December 31, 2004. Transaction and savings accounts grew 28% during the twelve months ending March 31, 2005, while certificates of deposit increased only 4% as Banner continues to change its funding mix. Book value per share was $18.55 at March 31, 2005, compared to $18.81 a year earlier. Tangible book value per share was $15.40 at March 31, 2005, compared to $15.53 a year earlier.

"Compared to a year earlier, our key credit quality ratios improved as a result of a 36% reduction in non-performing assets," said Jones. Non-performing assets were $18.9 million, or 0.64% of total assets, at March 31, 2005, compared to $29.6 million, or 1.09% of total assets, at March 31, 2004. The provision for loan losses for the first quarter was $1.2 million, compared to $1.5 million in the same quarter of 2004. Net loan charge-offs in the first quarter of 2005 were 0.05% of average loans outstanding. At March 31, 2005, the allowance for loan losses totaled $29.7 million, representing 1.38% of total loans outstanding.

The Company will host a conference call today, Thursday, April 28, 2005, at 8:00 a.m. PDT, to discuss first quarter results. The conference call can be accessed live by telephone at 303-262-2211. To listen to the call online, go to the Company's website at www.bannerbank.com or to www.fulldisclosure.com. Institutional investors may access the call via the subscriber-only site, www.streetevents.com. An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11027824# until Thursday, May 5, 2005 or via the Internet at www.fulldisclosure.com.

Banner Corporation is the parent company of Banner Bank, a commercial bank, which operates a total of 51 branch offices and 13 loan offices in 23 counties in Washington, Oregon and Idaho. Banner Bank serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

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