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Section 1: S-4/A (S-4/A)


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As filed with the Securities and Exchange Commission on September 5, 2018

Registration No. 333-226991


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



BANNER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)



Washington
(State or other jurisdiction of
incorporation or organization)
  6022
(Primary Standard Industrial
Classification Code Number)
  91-1691604
(IRS Employer
Identification No.)

10 South First Avenue
Walla Walla, WA 99362
(509) 527-3636
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant's Principal Executive Offices)



Albert H. Marshall
Senior Vice President and Secretary
Banner Corporation
10 South First Avenue
Walla Walla, Washington 99362
(509) 527-3636
(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)



With copies to:

Matthew M. Guest, Esq.
Jacob A. Kling, Esq.
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
(212) 403-1000

 

Cheryl R. Bishop
Chief Executive Officer
Skagit Bancorp, Inc.
301 East Fairhaven Avenue
Burlington, Washington 98233
(360) 755-0411

 

Stephen M. Klein, Esq.
David G. Post, Esq.
Miller Nash Graham & Dunn LLP
2801 Alaskan Way, Suite 300
Seattle, Washington 98121
(206) 777-7506

Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this registration statement becomes effective and upon completion of the merger.

          If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.    o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

Emerging growth company o



          If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o

          If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

          Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)    o

          Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)    o



          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

   


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The information in this proxy statement/prospectus is not complete and may be changed. Banner Corporation may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and Banner Corporation is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY—SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 2018

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Shareholder of Skagit Bancorp, Inc.:

          On July 25, 2018, Skagit Bancorp, Inc., or "Skagit," and Banner Corporation, or "Banner," entered into an Agreement and Plan of Merger, which we refer to as the "merger agreement," under which Skagit will merge with and into Banner, which we refer to as the "merger." Immediately following the completion of the merger, Skagit Bank, the wholly owned subsidiary of Skagit, will merge with and into Banner Bank, a wholly owned bank subsidiary of Banner, with Banner Bank continuing as the surviving bank (which we refer to as the "bank merger").

          In the merger, each share of Skagit common stock will be converted into the right to receive 5.6664 shares (which we refer to as the "exchange ratio") of Banner common stock, subject to adjustment as provided in the merger agreement (which we refer to as the "merger consideration"). The merger consideration may be reduced, via a downward adjustment to the exchange ratio, on a dollar-for-dollar basis if Skagit's shareholders' equity, measured as of the month-end prior to the closing (or, if the closing is expected to occur in the first eight days of a month, the preceding month-end) and subject to certain adjustments (which we refer to as the "adjusted shareholders' equity") is less than $80 million, as described in this proxy statement/prospectus. If adjusted shareholders' equity is equal to or exceeds $80 million, there will be no adjustment to the exchange ratio, and Skagit may declare and pay a special cash dividend to shareholders immediately prior to the closing in an amount not to exceed such excess.

          Based on the closing price of $61.60 per share of Banner common stock on July 25, 2018, the last trading day before the announcement of the merger agreement, the merger consideration represented approximately $349.05 for each share of Skagit common stock and aggregate consideration of approximately $191.1 million, subject to adjustment as provided in the merger agreement. Based on Banner's closing price of $64.96 per share on September 4, 2018, the last practicable trading day before the date of the enclosed proxy statement/prospectus, and the number of shares of Skagit common stock outstanding as of such date, the merger consideration represented approximately $368.09 for each share of Skagit common stock and aggregate consideration of approximately $201.6 million, subject to adjustment as provided in the merger agreement. We encourage you to obtain current market quotations for the common stock of Banner before you vote. Banner common stock is currently quoted on the NASDAQ Global Select Market (which we refer to as the "NASDAQ") under the symbol "BANR."

          The number of shares of Banner common stock to be delivered to holders of shares of Skagit common stock upon completion of the merger is approximately 3,083,978 shares, based on the number of shares of Skagit common stock outstanding as of September 4, 2018.

          The merger cannot be completed unless Skagit shareholders holding at least two-thirds of the outstanding shares of Skagit common stock as of the close of business on September 4, 2018, the record date for the special meeting, vote in favor of the approval of the merger agreement at the special meeting.

          The special meeting of Skagit shareholders will be held on October 15, 2018, at 6:00 p.m., Pacific Time, at McIntyre Hall, located at 2501 E. College Way, Mount Vernon, Washington 98273.

          Your vote is very important, regardless of the number of shares of Skagit common stock you own. To ensure your representation at the special meeting, please take time to vote by following the instructions contained in this proxy statement/prospectus and on your proxy card. Please vote promptly whether or not you expect to attend the special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the special meeting.

          Skagit's board of directors unanimously recommends that Skagit shareholders vote "FOR" the proposal to approve the merger agreement and "FOR" the other matters to be considered at the special meeting.

          This proxy statement/prospectus describes the special meeting of Skagit shareholders, the merger, the documents relating to the merger and other related matters. Please read carefully the entire proxy statement/prospectus, including the section entitled "Risk Factors" beginning on page 34, for a discussion of the risks relating to the proposed merger, and the Annexes and documents incorporated by reference into the proxy statement/prospectus.

          If you have any questions regarding the accompanying proxy statement/prospectus, you may contact Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233, or by telephone at (360) 755-0411. We look forward to seeing you at the meeting.

Sincerely,

GRAPHIC

Cheryl R. Bishop
Chief Executive Officer

          NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER OR OTHER TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS OR THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER UNDER THE ACCOMPANYING PROXY STATEMENT/ PROSPECTUS NOR HAVE THEY DETERMINED IF THE ACCOMPANYING PROXY STATEMENT/ PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

          The accompanying proxy statement/prospectus is dated September 5, 2018 and is first being mailed to Skagit shareholders on or about September 12, 2018.


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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

Dear Shareholder of Skagit Bancorp, Inc.:

        You are cordially invited to attend a special meeting of Skagit shareholders. The special meeting will be held on October 15, 2018, at 6:00 p.m., Pacific Time, at McIntyre Hall, located at 2501 E. College Way, Mount Vernon, Washington 98273, to consider and vote upon the following matters:

        The record date for the special meeting is September 4, 2018. Only shareholders of record as of the close of business on September 4, 2018 are entitled to notice of, and to vote at, the special meeting. All shareholders of record as of that date are cordially invited to attend the special meeting in person. The approval of the merger proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Skagit common stock entitled to vote at the special meeting. The approval of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement requires the affirmative vote of a majority of the shares represented at the meeting and entitled to vote.

        Skagit's board of directors has unanimously adopted and approved the merger agreement and the transactions contemplated thereby, including the merger, has determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of Skagit and its shareholders, and unanimously recommends that Skagit shareholders vote "FOR" the proposal to approve the merger agreement and "FOR" the proposal to approve adjournment of the special meeting if there are insufficient votes at the time of the special meeting to approve the merger agreement. In considering the recommendation of the board of directors of Skagit, you should be aware that certain directors and executive officers of Skagit have interests in the merger that may be different from, or in addition to, the interests of Skagit shareholders generally. See the section entitled "The Merger—Interests of Directors and Executive Officers of Skagit in the Merger" beginning on page 68 of the accompanying proxy statement/prospectus.

        Skagit shareholders have a right to dissent from the merger and obtain payment of the fair value of their Skagit shares under Washington law, but only if they perfect their dissenters' rights and comply with the application provisions of Washington law. A copy of the applicable Washington statutory provisions regarding dissenters' rights is attached as Annex C to the accompanying proxy statement/prospectus. For details on your dissenters' rights and applicable procedures, please see the discussion "Dissenters' Rights" beginning on page 74.

        Your vote is very important, regardless of the number of shares of Skagit common stock that you own. We cannot complete the merger unless Skagit shareholders approve the merger agreement.

        Even if you plan to attend the special meeting in person, Skagit requests that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope prior to the special meeting to ensure that your shares of Skagit common stock will be represented at the special meeting if you are unable to attend. If you hold your shares in "street name" through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares. If you fail to submit a proxy or to attend the special meeting and vote in person or do not provide your bank, brokerage firm or other nominee with instructions as to how to vote your shares, as applicable, your shares of Skagit common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote "against" the approval of the merger agreement.


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        WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, REQUEST A REVOCATION OF YOUR SUBMITTED PROXY AND VOTE IN PERSON, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.

    By Order of the Board of Directors,

 

 


GRAPHIC
    Cheryl R. Bishop
Chief Executive Officer

Burlington, Washington
Dated: September 5, 2018


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REFERENCES TO ADDITIONAL INFORMATION

Banner

        This proxy statement/prospectus incorporates important business and financial information about Banner from other documents that Banner has filed with the U.S. Securities and Exchange Commission, which we refer to as the "SEC," and that are contained in or incorporated by reference into this proxy statement/prospectus. For a listing of Banner documents incorporated by reference into this proxy statement/prospectus, please see the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus. This information is available for you to review at the SEC's public reference room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC's website at www.sec.gov.

        You may request copies of this proxy statement/prospectus and any of the documents incorporated by reference into this proxy statement/prospectus or other information concerning Banner, without charge, by telephone or written request directed to:

        Banner Corporation

        Attn: Investor Relations

        10 South First Avenue

        Walla Walla, Washington 99362

        (509) 527-3636

        In order for you to receive timely delivery of the documents in advance of the special meeting of Skagit shareholders to be held on October 15, 2018, you must request the information no later than five business days prior to the date of the special meeting, or by October 5, 2018.

Skagit

        Skagit does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (which we refer to as the "Exchange Act"), is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and accordingly does not file documents and reports with the SEC.

        If you have questions about the merger or the special meeting, would like additional copies of this proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, you may contact Skagit at the following address and telephone number:

        Nancy K. Galbreath, Executive Assistant to the CEO

        Skagit Bancorp, Inc.

        301 East Fairhaven Avenue

        Burlington, Washington 98233

        (360) 755-0411


ABOUT THIS PROXY STATEMENT/PROSPECTUS

        This document, which forms part of a registration statement on Form S-4 filed with the SEC by Banner, constitutes a prospectus of Banner under Section 5 of the Securities Act of 1933, as amended, which we refer to as the "Securities Act," with respect to the shares of common stock, par value $0.01 per share, of Banner, which we refer to as "Banner common stock," to be issued pursuant to the Agreement and Plan of Merger, dated as of July 25, 2018, by and between Banner and Skagit, as it may be amended from time to time, which we refer to as the "merger agreement." This document also constitutes a proxy statement of Skagit and a notice of meeting with respect to the special meeting, at which Skagit shareholders will be asked to consider and vote upon the approval of the merger agreement.

        Banner has supplied all information contained or incorporated by reference into this proxy statement/prospectus relating to Banner, and Skagit has supplied all information contained or incorporated by reference into this proxy statement/prospectus relating to Skagit.


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        You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. Banner and Skagit have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus is dated September 5, 2018, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Skagit shareholders nor the issuance by Banner of shares of its common stock pursuant to the merger agreement will create any implication to the contrary.


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  Page

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

  1

SUMMARY

 
10

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BANNER

 
21

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SKAGIT

 
24

UNAUDITED COMPARATIVE PER COMMON SHARE DATA

 
28

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

 
29

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 
31

RISK FACTORS

 
34

INFORMATION ABOUT THE SPECIAL MEETING

 
40

THE PARTIES TO THE MERGER

 
45

THE MERGER

 
47

THE MERGER AGREEMENT

 
77

ADJOURNMENT OF THE SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES

 
99

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 
100

DESCRIPTION OF BANNER'S CAPITAL STOCK

 
103

COMPARISON OF SHAREHOLDERS' RIGHTS

 
105

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SKAGIT

 
117

EXPERTS

 
118

LEGAL MATTERS

 
118

SHAREHOLDER PROPOSALS

 
119

WHERE YOU CAN FIND MORE INFORMATION

 
120

Annex A  

Agreement and Plan of Merger, dated as of July 25, 2018, by and between Banner Corporation and Skagit Bancorp, Inc.

   

Annex B

 

Opinion of Sandler O'Neill & Partners, L.P.

 

 

Annex C

 

Dissenters' Rights Under the Washington Business Corporation Act, Chapter 13 of the Washington Business Corporation Act

   

Annex D

 

Form of Voting and Support Agreement

 

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

        The following questions and answers are intended to briefly address some commonly asked questions regarding the merger, the merger agreement and the special meeting. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this document.

Q:
Why am I receiving this proxy statement/prospectus and proxy card?

A:
Skagit has agreed to be acquired by Banner under the terms of the merger agreement that are described in this proxy statement/prospectus. Immediately following the merger, Skagit Bank, Skagit's banking subsidiary, will merge with and into Banner's banking subsidiary, Banner Bank, with Banner Bank being the surviving entity, which transaction is referred to as the "bank merger." In order for us to complete the transactions contemplated by the merger agreement, we need, among other things, certain approvals and/or waivers from the Board of Governors of the Federal Reserve System (which we refer to as the "Federal Reserve Board"), the Federal Deposit Insurance Corporation (which we refer to as the "FDIC") and the Washington State Department of Financial Institutions, Division of Banks (which we refer to as the "DFI"), as described in the section entitled "The Merger—Regulatory Approvals" beginning on page 72 of this proxy statement/prospectus, and the approval of the merger agreement by Skagit shareholders.
Q:
What am I being asked to vote on at the special meeting?

A:
Skagit is holding the special meeting to ask its shareholders to consider and vote upon a proposal to approve the merger agreement. Skagit shareholders are also being asked to consider and vote upon a proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Q:
Does my vote matter?

A:
Yes. The merger cannot be completed unless the merger agreement is approved by the Skagit shareholders. The Skagit board of directors, which we refer to as the "Skagit board," unanimously recommends that shareholders vote "FOR" the proposal to approve the merger agreement.

Q:
What is the vote required to approve each proposal at the special meeting?

A:
The approval of the merger agreement requires the affirmative vote of holders of two-thirds of the outstanding shares of Skagit common stock entitled to vote at the special meeting. If you fail to submit a proxy or vote in person at the special meeting, or vote to abstain, or you do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, this will have the same effect as a vote "AGAINST" the approval of the merger agreement.

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Q:
How does the Skagit board recommend that I vote at the special meeting?

A:
The Skagit board unanimously recommends that Skagit shareholders vote "FOR" the proposal to approve the merger agreement and "FOR" the proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. See the section entitled "The Merger—Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors" beginning on page 52 of this proxy statement/prospectus.

Q:
Am I entitled to dissenters' or appraisal rights?

A:
Under Washington law, holders of record of Skagit common stock at the record date who do not vote in favor of the approval of the merger agreement have the right to dissent from the merger and obtain payment for the fair value of their shares if the merger is completed, but only if they follow the procedures and satisfy the conditions prescribed by Chapter 23B.13 of the Washington Business Corporation Act, which we refer to as the "WBCA." A copy of the applicable statutes regarding dissenters' rights is attached as Annex C to this proxy statement/prospectus. For an explanation of your dissenters' rights and how to exercise them, please see the discussion under the heading "The Merger—Dissenters' Rights."

Q:
What will I receive if the merger is completed?

A:
If the merger is completed, each share of Skagit common stock outstanding immediately prior to the effective time of the merger, except for certain shares held by Banner or Skagit (in each case other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity or as a result of debts previously contracted) or by a Skagit shareholder who properly exercises dissenters' right when and in the manner required under Chapter 23B.13 of the WBCA, will be converted into the right to receive 5.6664 shares of Banner common stock, subject to adjustment as provided in the merger agreement, which we refer to as the "merger consideration." The merger consideration may be reduced, via a downward adjustment to the exchange ratio, on a dollar-for-dollar basis if Skagit's shareholders' equity, measured as of the month-end prior to the closing (or, if the closing is expected to occur in the first eight days of a month, the preceding month-end) and subject to certain adjustments (which we refer to as "adjusted shareholders' equity") is less than $80 million, as described in "The Merger Agreement—Merger Consideration—Potential Adjustment to Exchange Ratio." If adjusted shareholders' equity is equal to or exceeds $80 million, there will be no adjustment to the exchange ratio, and Skagit may declare and pay a special cash dividend to shareholders immediately prior to the closing in an amount not to exceed such excess. Throughout this proxy statement/prospectus,

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Q:
What is the exchange ratio?

A:
The exchange ratio is used to determine the number of shares of Banner common stock that Skagit shareholders will be entitled to receive for each share of Skagit common stock they hold. The exchange ratio is 5.6664, as set forth in the merger agreement, subject to adjustment as provided in the merger agreement as described above.

Q:
What is the value of the per share merger consideration?

A:
The value of the merger consideration will fluctuate as the market price of Banner common stock fluctuates before the completion of the merger. This price will not be known at the time of the special meeting and may be more or less than the current price of Banner common stock or the price of Banner common stock at the time of the special meeting. Based on the closing price of $61.60 per share of Banner common stock on July 25, 2018, the last trading day before the announcement of the merger agreement, the value of the merger consideration was approximately $349.05 per share of Skagit common stock. Based on Banner's closing price of $64.96 per share on September 4, 2018, the last practicable trading day before the date of the enclosed proxy statement/prospectus, the value of the merger consideration was approximately $368.09 per share of Skagit common stock. We urge you to obtain current market quotations for shares of Banner common stock. See the section entitled "The Merger Agreement—Merger Consideration" beginning on page 77.

Q:
What will happen to Skagit as a result of the merger?

A:
If the merger is completed, Skagit will be merged with and into Banner, with Banner surviving the merger as the surviving corporation.

Q:
What equity stake will Skagit shareholders hold in Banner immediately following the merger?

A:
Based on the number of issued and outstanding shares of Banner common stock and Skagit common stock as of September 4, 2018, we expect that Skagit shareholders as of immediately prior to the closing of the merger will hold, in the aggregate, approximately 8.7% of the issued and outstanding shares of Banner common stock immediately following the closing of the merger (without giving effect to any shares of Banner common stock held by Skagit shareholders prior to the merger or any potential adjustment to the exchange ratio).

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Q:
When do you expect the merger to be completed?

A:
Subject to the satisfaction or waiver of the closing conditions described under the section entitled, "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 94 of this proxy statement/prospectus, including the approval of the merger agreement by Skagit shareholders at the special meeting, Banner and Skagit expect that the merger will be completed in the fourth quarter of 2018. However, it is possible that factors outside the control of both companies, including whether or when the required regulatory approvals will be received, could result in the merger being completed at a different time or not at all.

Q:
What are the material U.S. federal income tax consequences of the merger to Skagit shareholders?

A:
The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (which we refer to as the "Code"), and it is a condition to the respective obligations of Skagit and Banner to complete the merger that each of Skagit and Banner receives an opinion of counsel to that effect. Accordingly, holders of Skagit common stock are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Skagit common stock for shares of Banner common stock in the merger, except with respect to any cash received instead of fractional shares of Banner common stock.
Q:
Are there any risks that I should consider in deciding whether to vote for the approval of the merger agreement?

A:
Yes. You should read and carefully consider the risk factors set forth in the section entitled "Risk Factors" beginning on page 34 of this proxy statement/prospectus. You also should read and carefully consider the risk factors of Banner contained in the documents that are incorporated by reference into this proxy statement/prospectus. See the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

Q:
Who can vote at the special meeting?

A:
All holders of record of Skagit common stock as of the close of business on September 4, 2018, the record date for the special meeting, which we refer to as the "record date," are entitled to receive notice of, and to vote at, the special meeting, or any postponement or adjournment of the special meeting scheduled in accordance with Washington law.

Q:
When and where is the special meeting?

A:
The special meeting will be held on October 15, 2018, at 6:00 p.m., Pacific Time, at McIntyre Hall, located at 2501 E. College Way, Mount Vernon, Washington 98273. For additional information about the special meeting, see the section entitled "Information About the Special Meeting" beginning on page 40 of this proxy statement/prospectus.

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Q:
How will I receive the merger consideration to which I am entitled?

A:
After the effective time of the merger, each record holder, as of immediately prior to the effective time of the merger, of shares of Skagit common stock that are converted into the right to receive the merger consideration will receive a letter of transmittal and instructions from the exchange agent describing the procedures for surrendering their certificate or certificates representing shares of Skagit common stock (which we refer to as a "Skagit certificate," which is deemed to include reference to book-entry accounts relating to the ownership of shares of Skagit common stock).
Q:
Will my shares of Banner common stock acquired in the merger receive a dividend?

A:
After the closing of the merger, as a holder of Banner common stock, you will receive the same dividends on shares of Banner common stock that all other holders of shares of Banner common stock will receive with any dividend record date that occurs after the merger is completed.
Q:
Do any of Skagit's directors or executive officers have interests in the merger that may differ from those of Skagit shareholders?

A:
Skagit's directors and executive officers have interests in the merger that may be different from, or in addition to, those of Skagit shareholders generally. The Skagit board of directors was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger, and in recommending that Skagit shareholders approve the merger agreement. For a description of these interests, refer to the section entitled "The Merger—Interests of Directors and Executive Officers of Skagit in the Merger" beginning on page 68 of this proxy statement/prospectus.

Q:
What is the difference between holding shares as a shareholder of record and as a beneficial owner?

A:
If your shares of Skagit common stock are registered directly in your name with the transfer agent of Skagit, Skagit Bank, you are considered the shareholder of record with respect to those shares. As the shareholder of record, you have the right to vote, or to grant a proxy for your vote directly to Skagit or to a third party to vote at the special meeting.

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Q:
If my shares of Skagit common stock are held in "street name" by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?

A:
Your bank, brokerage firm or other nominee will only be permitted to vote your shares of Skagit common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of Skagit common stock. Banks, brokerage firms and other nominees who hold shares of Skagit common stock in "street name" for their customers typically have authority to vote on "routine" proposals when they have not received voting instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to non-routine matters, such as the approval of the merger agreement and adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. As a result, absent specific voting instructions from the beneficial owner of such shares, banks, brokerage firms and other nominees are not empowered to vote such shares. A so-called "broker non-vote" results when banks, brokerage firms and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. The effect of not instructing your broker how you wish your shares to be voted will be the same as a vote "against" the approval of the merger agreement and will have no effect on the vote to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Q:
How many votes do I have?

A:
Each Skagit shareholder is entitled to one vote for each share of Skagit common stock held of record as of the record date. As of the close of business on the record date, there were 544,257 outstanding shares of Skagit common stock entitled to vote at the special meeting.

Q:
What constitutes a quorum for the special meeting?

A:
The presence, in person or represented by proxy, of shareholders who hold a majority of the shares entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting. Abstentions and broker non-votes, if any, are counted as present for purposes of establishing a quorum.

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Q:
What do I need to do now?

A:
Even if you plan to attend the special meeting in person, after carefully reading and considering the information contained in this proxy statement/prospectus, please vote promptly to ensure that your shares are represented at the special meeting.

Q:
How do I vote?

A:
Shareholder of Record.    If you are a shareholder of record, you may have your shares of Skagit common stock voted on the matters to be presented at the special meeting in the following ways:

by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

in person—you may attend the special meeting and cast your vote there.
Q:
Can I attend the special meeting and vote in person?

A:
Yes. All Skagit shareholders are invited to attend the special meeting. Shareholders of record of Skagit common stock as of the record date for the special meeting can vote in person at the special meeting.

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Q:
How can I change or revoke my vote?

A:
You have the right to revoke a proxy at any time before it is exercised, and your last vote is the vote that will be counted. If you are a Skagit shareholder of record, you can write to Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233, stating that you wish to revoke your proxy and requesting another proxy card. If you hold your shares through a broker, bank or other nominee, you can revoke your proxy by contacting the broker, bank or other nominee and asking for a new proxy card. If you attend the meeting, you must request a revocation of your submitted proxy and vote by ballot to revoke your proxy. Your attendance alone at the special meeting will not of itself constitute a revocation of your proxy.

Q:
If a shareholder gives a proxy, how are the shares of Skagit common stock voted?

A:
Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Skagit common stock in the way that you indicate. When completing the proxy card, you may specify whether your shares of Skagit common stock should be voted "for" or "against," or whether your shares should "abstain" from voting on, all, some or none of the specific items of business to come before the special meeting.
Q:
What should I do if I receive more than one set of voting materials?

A:
If you hold shares of Skagit common stock in "street name" and also directly as a record holder or otherwise or if you hold shares of Skagit common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the special meeting. Please complete, sign, date and return each proxy card or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your shares of Skagit common stock are voted. If you hold your shares in "street name" through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares.

Q:
What happens if I sell my shares of Skagit common stock before the special meeting?

A:
The record date is earlier than both the date of the special meeting and the effective time of the merger. If you transfer your shares of Skagit common stock after the record date but before the special meeting, you will, unless the transferee requests a proxy from you, retain your right to vote at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares at the effective time of the merger.

Q:
Who will solicit and pay the cost of soliciting proxies?

A:
Skagit's directors, officers and employees may solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies. Skagit will also request that brokerage houses and other custodians, nominees and fiduciaries forward these proxy materials to beneficial owners of Skagit common stock. Skagit will, upon request, reimburse such brokerage houses and custodians for their reasonable expenses in assisting with the solicitation of proxies.

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Q:
Should I send in my stock certificates now?

A:
No, please do NOT return your stock certificate(s) with your proxy now. After the effective time of the merger, each record holder, as of immediately prior to the effective time of the merger, of shares of Skagit common stock that are converted into the right to receive the merger consideration will receive a letter of transmittal and instructions from the exchange agent describing the procedures for surrendering their certificate or certificates representing shares of Skagit common stock.

Q:
Are there any voting agreements in place with Skagit shareholders?

A:
Each of the directors and executive officers of Skagit and/or their affiliates has entered into a voting and support agreement with Banner, in which each such person agreed, among other things, to vote in favor of the merger proposal and the proposal to adjourn or postpone the special meeting of the Skagit shareholders to a later date if there are not sufficient votes to approve the merger agreement, as well as certain other customary restrictions with respect to the voting and transfer of such person's shares of Skagit common stock.

Q:
What happens if the merger is not completed?

A:
If the merger is not completed, Skagit shareholders will not receive any consideration for their shares of Skagit common stock in connection with the merger. Instead, Skagit will remain an independent company. Under specified circumstances, Skagit may be required to pay Banner a fee with respect to the termination of the merger agreement, as described under the section entitled "The Merger Agreement—Termination Fee" beginning on page 97 of this proxy statement/prospectus.

Q:
Who can help answer any other questions I have?

A:
If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Skagit common stock, or need additional copies of this proxy statement/prospectus or the enclosed proxy card, please contact Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233, or at (360) 755-0411.

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SUMMARY

        The following summary highlights selected information in this proxy statement/prospectus and may not contain all the information that may be important to you as a Skagit shareholder. Accordingly, we encourage you to read carefully this entire proxy statement/prospectus, its annexes and the documents referred to in this proxy statement/prospectus. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

Parties to the Merger (page 45)

Skagit Bancorp, Inc.

        Skagit Bancorp, Inc. is a Washington corporation formed in 2006 for the purpose of acquiring the stock of Skagit Bank and becoming the holding company for Skagit Bank. Skagit has no substantial operations separate or apart from Skagit Bank.

        The principal offices of Skagit are located at 301 East Fairhaven Avenue, Burlington, Washington 98233.

        Skagit Bank is a Washington state-chartered commercial bank which commenced operations in 1958. Skagit Bank operates through its principal office in Burlington, Washington and 11 branch offices in Mount Vernon, Anacortes, Sedro-Wooley, Bellingham, Arlington, Lynden, and Seattle, Washington, as well as a loan production office in Everett, Washington. Skagit Bank's principal market area consists of the I-5 corridor from Seattle, Washington north to the Canadian border, including a significant presence in Skagit County, Washington.

        As of June 30, 2018, Skagit had total assets of approximately $922 million, total gross loans of approximately $599 million, total deposits of approximately $811 million and shareholders' equity of approximately $80 million.

Banner Corporation

        Banner is a bank holding company incorporated in the State of Washington. It is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly owned subsidiaries, Banner Bank and Islanders Bank. Banner Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington and, as of August 16, 2018, its 168 branch offices, including 79 branch offices located in Washington, 43 branch offices located in Oregon, 32 branch offices located in California and 14 branch offices located in Idaho. Islanders Bank is also a Washington-chartered commercial bank that conducts business from three locations in San Juan County, Washington. Banner is subject to regulation by the Federal Reserve Board.

        Banner Bank is a regional bank that offers a wide variety of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. Islanders Bank is a community bank that offers similar banking services to individuals, businesses and public entities located primarily in the San Juan Islands. Banner Bank's and Islanders Bank's primary

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business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding their offices in portions of Washington, Oregon and Idaho. Banner Bank is also an active participant in the secondary market, engaging in mortgage banking operations largely through the origination and sale of one- to four-family residential loans. Lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one- to four-family residential loans and consumer loans. A portion of Banner Bank's construction and mortgage lending activities are conducted through its subsidiary, Community Financial Corporation, which is located in the Lake Oswego area of Portland, Oregon.

        As of June 30, 2018, Banner had total consolidated assets of $10.38 billion, deposits of $8.53 billion and shareholders' equity of $1.3 billion.

        Banner common stock is listed on the NASDAQ under the symbol "BANR."

The Merger and the Merger Agreement (page 77)

        The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the merger.

        Pursuant to the merger agreement, Skagit will merge with and into Banner with Banner surviving the merger as the surviving corporation. Immediately thereafter, Skagit Bank, Skagit's banking subsidiary, will merge with and into Banner's banking subsidiary, Banner Bank, with Banner Bank continuing as the surviving entity.

Per Share Merger Consideration (page 77)

        If the merger is completed, each share of Skagit common stock outstanding immediately prior to the effective time of the merger, except for certain shares held by Banner or Skagit (in each case other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity or as a result of debts previously contracted) or by a Skagit shareholder who properly exercises dissenters' right when and in the manner required under Chapter 23B.13 of the WBCA, will be converted into the right to receive 5.6664 shares of Banner common stock, subject to adjustment as provided in the merger agreement. The merger consideration may be reduced, via a downward adjustment to the exchange ratio, on a dollar-for-dollar basis if Skagit's shareholders' equity, measured as of the month-end prior to the closing (or, if the closing is expected to occur in the first eight days of a month, the preceding month-end) and subject to certain adjustments (which we refer to as "adjusted shareholders' equity") is less than $80 million, as described in "The Merger Agreement—Merger Consideration—Potential Adjustment to Exchange Ratio" beginning on page 77. If adjusted shareholders' equity is equal to or exceeds $80 million, there will be no adjustment to the exchange ratio, and Skagit may declare and pay a special cash dividend to shareholders immediately prior to the closing in an amount not to exceed such excess.

        Based on the number of shares of Banner common stock and shares of Skagit common stock outstanding as of September 4, 2018, the last date before the date of this proxy statement/prospectus for which it was practicable to obtain this information, we expect that Skagit shareholders as of immediately prior to the closing of the merger will hold, in the aggregate, approximately 8.7% of the issued and outstanding shares of Banner common stock immediately following the closing of the merger (without giving effect to any shares of Banner common stock held by Skagit shareholders prior to the merger or any potential adjustment to the exchange ratio).

        Banner will not issue any fractional shares of Banner common stock in the merger. In lieu of the issuance of any such fractional share, Banner will pay to each Skagit shareholder who otherwise would be entitled to receive such fractional share an amount in cash (rounded to the nearest cent)

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determined by multiplying (i) the average closing price of Banner common stock on the NASDAQ for the consecutive period of the five (5) full trading days immediately preceding (but not including) the date that is the second (2nd) business day prior to the closing date, which we refer to as the "Banner average closing price" by (ii) the fraction of a share (after taking into account all shares of Skagit common stock held by such holder immediately prior to the effective time of the merger and rounded to the nearest one-thousandth when expressed in decimal form) of Banner common stock to which such holder would otherwise be entitled to receive pursuant to the merger agreement.

        The value of the merger consideration that a Skagit shareholder actually receives will be based on the actual closing price on the NASDAQ of Banner common stock upon completion of the merger, will not be known at the time of the special meeting and may be more or less than the current price of Banner common stock or the price of Banner common stock at the time of the special meeting.

Treatment of Skagit Stock Options (page 70)

        At the effective time of the merger, each Skagit option that is outstanding as of immediately prior to the effective time of the merger will fully vest and be canceled and converted into the right to receive a cash payment, without interest and less applicable withholding taxes, equal to the product of (i) the number of shares of Skagit common stock subject to the Skagit option as of immediately prior to the effective time of the merger and (ii) the excess, if any, of (1) the product of the exchange ratio and the Banner average closing price over (2) the exercise price per share of Skagit common stock subject to such Skagit option as of the effective time of the merger.

Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors (page 52)

        The Skagit board unanimously recommends that Skagit shareholders vote "FOR" the proposal to approve the merger agreement and "FOR" the proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. See the section entitled "The Merger—Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors" beginning on page 52 of this proxy statement/prospectus.

Opinion of Skagit's Financial Advisor (page 55)

        In connection with the merger, Skagit's financial advisor, Sandler O'Neill & Partners, L.P., which we refer to as "Sandler O'Neill," delivered a written opinion, dated July 25, 2018, to the Skagit board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio provided for in the merger agreement to the holders of Skagit common stock. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Sandler O'Neill in preparing the opinion, is attached as Annex B to this proxy statement/prospectus.

        Sandler O'Neill's opinion speaks only as of the date of the opinion. The opinion was directed to the Skagit board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of Skagit as to how such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement or the merger. The opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Skagit common stock and does not address the underlying business decision of Skagit to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Skagit or the effect of any other transaction in which Skagit might engage.

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Information About the Special Meeting (page 40)

Time, Place and Purpose of the Special Meeting (page 40)

        The special meeting to consider and vote upon the approval of the merger agreement, which we refer to as the "special meeting," will be held on October 15, 2018, at 6:00 p.m., Pacific Time, at McIntyre Hall, located at 2501 E. College Way, Mount Vernon, Washington 98273.

        At the special meeting, Skagit shareholders will be asked to consider and vote upon (i) a proposal to approve the merger agreement and (ii) a proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Record Date and Quorum (page 40)

        You are entitled to receive notice of, and to vote at, the special meeting if you are an owner of record of shares of Skagit common stock as of the close of business on September 4, 2018, the record date. As of the record date, there were 544,257 shares of Skagit common stock outstanding and entitled to vote. You will have one vote on all matters properly coming before the special meeting for each share of Skagit common stock that you owned as of the record date.

        The presence, in person or represented by proxy, of shareholders who hold a majority of the shares entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting. Abstentions and broker non-votes, if any, are considered for purposes of establishing a quorum.

        If a quorum is not present, a majority of the shares represented at the special meeting may adjourn the special meeting.

Vote Required (page 41)

        The approval of the merger agreement requires the affirmative vote of Skagit shareholders holding at least two-thirds of the outstanding shares of Skagit common stock entitled to vote at the special meeting. For the approval of the merger agreement, you may vote "FOR," "AGAINST" or "ABSTAIN." Votes to abstain will not be counted as votes cast in favor of the approval of the merger agreement, but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote in person at the special meeting or if you vote to abstain, or if your shares of Skagit common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of Skagit common stock, it will have the same effect as a vote "against" the approval of the merger agreement.

        The approval of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement requires the affirmative vote of the majority of the shares represented at the meeting and entitled to vote. If your shares of Skagit common stock are present at the special meeting but are not voted on the proposal, or if you vote to abstain on the proposal, your vote will be considered "against" the proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. If you fail to submit a proxy or vote in person at the special meeting or if your shares of Skagit common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of Skagit common stock, your shares of Skagit common stock will not be voted, and this will not have an effect on the vote to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

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        As of the record date, the directors and executive officers of Skagit and their affiliates beneficially owned and were entitled to vote approximately 130,630 shares of Skagit common stock representing approximately 24.0% of the shares of Skagit common stock outstanding on that date.

Proxies and Revocations (pages 42 and 43)

        Any shareholder of record entitled to vote at the special meeting may submit a proxy by returning the enclosed proxy card in the accompanying prepaid reply envelope or may vote in person by appearing at the special meeting. If your shares of Skagit common stock are held in "street name" through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Skagit common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or vote in person at the special meeting, or do not provide your bank, brokerage firm or other nominee with instructions as to how to vote your shares, as applicable, your shares of Skagit common stock will not be voted on the approval of the merger agreement, which will have the same effect as a vote "against" the approval of the merger agreement.

        You have the right to revoke a proxy at any time before it is exercised, and your last vote is the vote that will be counted. If you are a Skagit shareholder of record, you can write to Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233, stating that you wish to revoke your proxy and requesting another proxy card. If you hold your shares through a broker, bank or other nominee, you can revoke your proxy by contacting the broker, bank or other nominee and asking for a new proxy card. If you attend the meeting, you must request a revocation of your submitted proxy and vote by ballot to revoke your proxy. Your attendance alone at the special meeting will not of itself constitute a revocation of your proxy.

Interests of Directors and Executive Officers of Skagit in the Merger (page 68)

        Some of Skagit's directors and executive officers may have certain interests, including financial interests, in the merger that may be different from, or in addition to, interests of Skagit shareholders generally. These interests include, among others, the treatment of outstanding equity awards pursuant to the merger agreement, certain payments and benefits payable under change in control agreements entered into with executive officers, and rights to ongoing indemnification and insurance coverage by the surviving corporation for acts or omissions occurring prior to the merger. These interests also include Banner's agreement to invite Skagit's Chief Executive Officer to serve as a member of Banner's board effective immediately following the effective time of the merger. The Skagit board of directors was aware of these interests and considered them, among other matters, in reaching its decisions to approve the merger agreement and to recommend that Skagit shareholders vote in favor of approving the merger agreement. See the section entitled "The Merger—Interests of Directors and Executive Officers of Skagit in the Merger" beginning on page 68 of this proxy statement/prospectus for a more detailed description of these interests.

The Banner Board of Directors After the Merger (page 72)

        The merger agreement provides that effective immediately following the effective time of the merger, Banner will appoint Cheryl R. Bishop, Skagit's Chief Executive Officer, to serve on the Banner board of directors.

Regulatory Approvals (page 72)

        Completion of the merger and the bank merger are subject to the receipt of all approvals and/or waivers required to complete the transactions contemplated by the merger agreement, including from

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the Federal Reserve Board, the FDIC, and the DFI. Notifications and/or applications requesting approval may also be submitted to various other federal and state regulatory authorities and self-regulatory organizations. Banner, Skagit and/or their respective subsidiaries have filed, or are in the process of filing, applications and notifications to obtain these regulatory approvals. On August 16, 2018, Banner requested a waiver of the approval requirement with the Federal Reserve Board, and, on August 27, 2018, the Federal Reserve Board approved that waiver request.

        Although we currently believe that we should be able to obtain all required regulatory approvals and/or waivers in a timely manner, we cannot be certain when or if we will obtain them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to Banner after the completion of the merger or will contain a materially burdensome regulatory condition. The regulatory approvals to which completion of the merger is subject are described in more detail in the section entitled "The Merger—Regulatory Approvals" beginning on page 72 of this proxy statement/prospectus.

Exchange Procedures (page 81)

        After the effective time of the merger, each record holder, as of immediately prior to the effective time of the merger, of shares of Skagit common stock that are converted into the right to receive the merger consideration will receive a letter of transmittal and instructions from the exchange agent describing the procedures for surrendering the applicable certificates or book entry shares representing shares of Skagit common stock in exchange for the merger consideration.

        When you properly surrender your Skagit certificates or book entry shares to the exchange agent, accompanied by a properly completed and duly executed letter of transmittal and completed in accordance with its instructions, the exchange agent will promptly cancel the surrendered stock certificates and you will receive the merger consideration plus any cash payable in lieu of any fractional shares of Banner, and any dividends or distributions you have the right to receive pursuant to the merger agreement.

        You should not send in your certificates until you receive the letter of transmittal and instructions, which will be sent as soon as practicable after the effective time of the merger.

Closing and Effective Time of the Merger (page 81)

        The closing of the merger will take place at 10:00 a.m., Seattle time, on a date no later than three (3) business days after the satisfaction or waiver (subject to applicable law) of all of the conditions set forth in the merger agreement (other than those conditions that by their nature can only be satisfied at the closing, but subject to the satisfaction or waiver thereof), unless another date, time or place is agreed to in writing by Banner and Skagit. The date on which the closing occurs is referred to as the "closing date."

        On the closing date, the parties will execute and file articles of merger with the Secretary of State of the State of Washington and a plan of merger. The merger will become effective at such time as designated in the articles of merger and plan of merger, or if no time is designated, at the time of filing of the articles of merger and plan of merger.

        Skagit and Banner cannot assure you that the necessary shareholder and regulatory approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied. See "Risk Factors—Risks Relating to the Merger—Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could prevent the consummation of the merger or have an adverse effect on the combined company following the merger."

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Conditions to Completion of the Merger (page 94)

        Each party's obligation to complete the merger is subject to the satisfaction or waiver (to the extent permitted under applicable law) of a number of conditions, including: approval of the merger agreement at the special meeting by the requisite Skagit shareholder vote; receipt of all regulatory authorizations, consents, orders or approvals required to consummate the transactions contemplated by the merger agreement and expiration or termination of all statutory waiting periods in respect thereof, and in the case of Banner's obligation to effect the merger, no such requisite regulatory approval containing or resulting in, or being reasonably expected to result in, the imposition of any materially burdensome regulatory condition; non-objection by the NASDAQ to the listing of the shares of Banner common stock to be issued in the merger; effectiveness of a registration statement on Form S-4 for the shares of Banner common stock to be issued in the merger, of which this proxy statement/prospectus forms a part, and no stop order suspending the effectiveness of the registration statement having been issued and no proceedings for that purpose having been initiated or threatened by the SEC and not withdrawn; absence of any law, order, injunction or decree prohibiting or making illegal the completion of the transactions contemplated by the merger agreement; final determination of the amount of Skagit's adjusted shareholders' equity for purposes of determining any adjustment to the exchange ratio and the merger consideration; the receipt of a tax opinion from the applicable party's counsel to the effect that the merger will qualify as a "reorganization" within the meaning of Section 368(a) of the Code; the accuracy of the other party's representations and warranties, subject to certain qualifications and exceptions, as of the date of the merger agreement and as of the closing date, and performance of and compliance with in all material respects the other party's covenants, agreements and obligations under the merger agreement.

        Banner's obligation to complete the merger is also subject to the condition that holders of not more than 10% of the outstanding shares of Skagit common stock have exercised their dissenters' rights under Washington law.

        Neither Skagit nor Banner can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 94 of this proxy statement/prospectus.

No Solicitation (page 91)

        As more fully described in this proxy statement/prospectus and in the merger agreement, and subject to certain exceptions summarized below, Skagit has agreed not to (i) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals regarding, (ii) engage or participate in any negotiations concerning, (iii) disclose or provide confidential or nonpublic information to, or have or participate in any discussions with, or otherwise cooperate in any way with, any person relating to, or (iv) unless the merger agreement is terminated in accordance with its terms, approve or enter into any agreement in connection with an alternative acquisition proposal. Notwithstanding these restrictions, in the event Skagit receives an unsolicited bona fide written acquisition proposal after the date of the merger agreement that did not result from a breach of the non-solicitation and related provisions of the merger agreement, Skagit may furnish confidential or nonpublic information and participate in such negotiations or discussions with the person making the acquisition proposal if and only if the Skagit board determines in good faith (after consultation with its outside legal counsel and financial advisors) that such acquisition proposal constitutes or is reasonably likely to result in a superior proposal and that the failure to take such actions would reasonably be expected to be inconsistent with the directors' fiduciary duties under applicable law, subject to compliance with certain notice and other requirements. For a more complete summary of Skagit's non-solicitation obligations, see the section entitled "The Merger Agreement—No Solicitation" beginning on page 91 of this proxy statement/prospectus.

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Withdrawal of Recommendation (page 89)

        The merger agreement requires Skagit and its board of directors to use their reasonable best efforts to obtain from Skagit shareholders the vote necessary to approve the merger agreement, which we refer to as the "requisite Skagit shareholder vote," including by communicating to Skagit shareholders the Skagit board's recommendation that the Skagit shareholders adopt and approve the merger agreement. Skagit and its board of directors may not (i) withhold, withdraw, modify or qualify such recommendation in a manner adverse to Banner, (ii) fail to make the Skagit board recommendation in favor of the merger agreement in this proxy statement/prospectus, (iii) adopt, approve, recommend or endorse an acquisition proposal (as defined below) or publicly announce an intention to adopt, approve, recommend or endorse an acquisition proposal, (iv) fail to publicly, finally and without qualification (A) recommend against any acquisition proposal or (B) reaffirm the Skagit board recommendation, in each case within ten (10) business days after such acquisition proposal is made public or any request by Banner to do so (which request may be made once per acquisition proposal, and any material change thereto) (or such fewer number of days as remains prior to the Skagit shareholder meeting), or (v) publicly propose to do any of the foregoing (we refer to any of the foregoing as a "recommendation change").

        However, prior to the time the requisite Skagit shareholder vote is obtained, the Skagit board of directors may make a recommendation change if and only if (i) Skagit and its subsidiaries and their representatives have complied with certain non-solicitation and related obligations regarding acquisition proposals, (ii) an unsolicited bona fide written acquisition proposal is made to Skagit after the date of the merger agreement by a third party and is not withdrawn, (iii) the Skagit board has concluded in good faith (after consultation with its outside legal counsel and financial advisors) that such acquisition proposal constitutes a superior proposal, (iv) the Skagit board has concluded in good faith (after consultation with its outside legal counsel) that failure to make a recommendation change would reasonably be expected to be inconsistent with the directors' fiduciary duties under applicable law, (v) prior to effecting the recommendation change, three (3) business days have elapsed since Skagit has given written notice to Banner advising Banner that Skagit intends to take such action and specifying in reasonable detail the reasons for its change, (vi) during such three (3)-business day period, Skagit has considered, and engaged in good-faith discussions with Banner regarding, any adjustment or modification of the terms of the merger agreement proposed by Banner, and (vii) the Skagit board, following such three (3)-business day period, again reasonably determines in good faith (after consultation with its outside legal counsel and financial advisors, and taking into account any adjustment or modification of the terms of the merger agreement proposed by Banner and delivered to Skagit in writing) that such acquisition proposal nonetheless continues to constitute a superior proposal and that failure to make a recommendation change would reasonably be expected to be inconsistent with the directors' fiduciary duties under applicable law.

        For more information, see the section entitled "The Merger Agreement—Skagit Shareholder Meeting; Withdrawal of Recommendation; Restructuring" beginning on page 89 of this proxy statement/prospectus.

Termination; Termination Fee (page 95)

Termination

        Banner and Skagit may mutually agree to terminate the merger agreement and abandon the merger at any time. Subject to conditions and circumstances described in the merger agreement, the merger agreement may also be terminated as follows:

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Termination Fee

        Skagit will be required to pay Banner a termination fee of $7.75 million, which we refer to as the "termination fee," if the merger agreement is terminated under certain circumstances.

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        For more information, please see the sections entitled "The Merger Agreement—Termination of the Merger Agreement" and "The Merger Agreement—Termination Fee" beginning on pages 95 and 97, respectively, of this proxy statement/prospectus.

Dissenters' Rights (page 74)

        Under the Washington law, holders of record of Skagit common stock at the record date who do not vote in favor of the approval of the merger agreement have the right to dissent from the merger and obtain payment for the fair value of their shares if the merger is completed, but only if they follow the procedures and satisfy the conditions prescribed by Chapter 23B.13 of the WBCA. A copy of the applicable statutes regarding dissenters' rights is attached as Annex C to this proxy statement/prospectus. For an explanation of your dissenters' rights and how to exercise them, please see the discussion under the heading "The Merger—Dissenters' Rights."

Accounting Treatment (page 74)

        Banner prepares its financial statements in accordance with generally accepted accounting principles, which we refer to as "GAAP". The merger will be accounted for using the acquisition method of accounting. Banner will be treated as the acquirer for accounting purposes.

Voting and Support Agreements (pages 69 and 98)

        In connection with the execution of the merger agreement, Banner entered into voting and support agreements with the directors and executive officers of Skagit and/or their affiliates, in which each such person agreed, among other things, to vote the shares of Skagit common stock owned beneficially or of record by such person and over which such person has voting power in favor of the merger agreement and the proposal to adjourn or postpone the special meeting of the Skagit shareholders to a later date if there are not sufficient votes to approve the merger agreement, and against any alternative acquisition proposal or other action that would prevent, impede, interfere with, delay, postpone, discourage or frustrate the purposes of or adversely affect the consummation of the transactions contemplated by the merger agreement, as well as certain other restrictions with respect to the voting and transfer of such person's shares of Skagit common stock.

        The voting and support agreements also contain certain confidentiality, non-solicitation and, in the case of the voting and support agreements executed by independent directors of Skagit, non-competition covenants, which are applicable upon the closing of the merger and remain in effect for a period of two (2) years after the closing date.

        For more information regarding the voting and support agreements, see "The Merger Agreement—Voting and Support Agreements" beginning on page 98 and Annex D to this proxy statement/prospectus which contains a form of the Skagit voting and support agreement.

        A total of approximately 130,630 shares of Skagit common stock, or approximately 24.0% of the shares of Skagit common stock outstanding as of the record date for the special meeting, were subject to such voting and support agreements.

Material U.S. Federal Income Tax Consequences (page 100)

        The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Code, and it is a condition to the respective obligations of Skagit and Banner to complete the merger that each of Skagit and Banner receives an opinion of counsel to that effect. Accordingly, Skagit shareholders are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Skagit common stock for shares of Banner common stock in the merger, except with respect to any cash received instead of fractional shares of Banner common stock. For

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further information, please refer to "Material U.S. Federal Income Tax Consequences" beginning on page 100.

        The U.S. federal income tax consequences described above may not apply to all holders of Skagit common stock. The particular tax consequences to a holder of Skagit common stock will depend on his or her individual situation. Accordingly, holders of Skagit common stock should consult their tax advisors for a full understanding of the particular U.S. federal, state, local, foreign or other tax consequences of the merger to them.

Comparison of Shareholders' Rights (page 105)

        The rights of Skagit shareholders are governed by its articles of incorporation, as amended and restated, which we refer to as "Skagit's articles," its bylaws, as amended and restated, which we refer to as "Skagit's bylaws" and by Washington corporate law. Your rights as a shareholder of Banner will be governed by Banner's articles of incorporation, as amended, which we refer to as "Banner's articles," its bylaws, as amended and restated, which we refer to as "Banner's bylaws" and by Washington corporate law. Your rights under Banner's articles and bylaws will differ in some respects from your rights under Skagit's articles and bylaws. For more detailed information regarding a comparison of your rights as a shareholder of Skagit and Banner, see the section entitled "Comparison of Shareholders' Rights" beginning on page 105 of this proxy statement/prospectus.

Risk Factors (page 34)

        You should consider all the information contained in or incorporated by reference into this proxy statement/prospectus in deciding how to vote for the proposals presented in the proxy statement/prospectus. In particular, you should consider the factors described under "Risk Factors."

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BANNER

        The following table summarizes selected historical consolidated financial data of Banner for the periods and as of the dates indicated. This information has been derived from Banner's consolidated financial statements filed with the SEC. Historical financial data as of and for the six (6) months ended June 30, 2018 and June 30, 2017 are unaudited and include, in management's opinion, all normal recurring adjustments considered necessary to present fairly the results of operations and financial condition of Banner. You should not assume the results of operations for past annual periods or for the six (6) months ended June 30, 2018 and June 30, 2017 indicate results for any future period.

        You should read this information in conjunction with Banner's consolidated financial statements and related notes thereto included in Banner's Annual Report on Form 10-K as of and for the year ended December 31, 2017, and the unaudited condensed consolidated financial statements in Banner's Quarterly Report on Form 10-Q as of June 30, 2018 and for the six (6) months ended June 30, 2018, which are incorporated by reference into this proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

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Banner—Historical Financial Information
(Dollars in thousands, except per share data)

 
  As of and for the Six
Months Ended June 30,
  As of and for the Year Ended December 31,  
 
  2018   2017   2017   2016   2015   2014   2013  

Financial Condition Data:

                                           

Total assets

  $ 10,379,194   $ 10,199,820   $ 9,763,209   $ 9,739,668   $ 9,796,298   $ 4,723,163   $ 4,388,257  

Cash and securities(1)

    1,958,469     1,869,041     1,473,608     1,353,583     1,671,347     735,645     808,004  

Loans receivable, net

    7,590,857     7,462,977     7,509,856     7,365,151     7,236,496     3,755,127     3,341,453  

Deposits

    8,527,667     8,483,731     8,183,431     8,121,414     8,055,068     3,898,950     3,617,926  

Borrowings

    464,422     263,519     194,769     255,101     324,186     187,436     184,234  

Common shareholders' equity

    1,253,010     1,309,851     1,272,626     1,305,710     1,300,059     582,888     538,331  

Total shareholders' equity

    1,253,010     1,309,851     1,272,626     1,305,710     1,300,059     582,888     538,331  

Operating Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Interest income

  $ 217,243   $ 203,532   $ 412,284   $ 391,477   $ 254,433   $ 190,661   $ 179,712  

Interest expense

    12,807     8,972     19,250     16,408     12,154     10,789     12,996  

Net interest income before provision for loan losses

    204,436     194,560     393,034     375,069     242,279     179,872     166,716  

Provision for loan losses

    4,000     4,000     8,000     6,030              

Net interest income

    200,436     190,560     385,034     369,039     242,279     179,872     166,716  

Deposit fees and other service charges(2)           

    23,281     21,553     43,451     41,911     33,767     25,634     21,945  

Mortgage banking operations revenue

    9,507     11,357     20,880     25,552     17,720     10,249     11,170  

Other-than-temporary impairment recoveries

                            409  

Net change in valuation of financial instruments carried at fair value

    3,532     (1,338 )   (2,844 )   (2,620 )   (813 )   1,374     (2,278 )

All other non-interest income

    6,259     7,871     23,712     11,382     4,778     12,815     8,780  

Total non-interest income(2)

    42,579     39,443     85,199     76,225     55,452     50,072     40,026  

REO operations expense (recoveries), net           

    121     (1,329 )   (2,030 )   175     397     (446 )   (689 )

All other non-interest expense(2)

    164,222     157,466     320,999     315,449     229,363     149,268     137,028  

Total non-interest expense(2)

    164,343     156,137     318,969     315,624     229,760     148,822     136,339  

Income before provision for income tax expense

    78,672     73,866     151,264     129,640     67,971     81,122     70,403  

Provision for income tax expense

    17,458     24,619     90,488     44,255     22,749     27,052     24,189  

Net income

  $ 61,214   $ 49,247   $ 60,776   $ 85,385   $ 45,222   $ 54,070   $ 46,214  

Per Common Share Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Net income:

                                           

Basic

  $ 1.89   $ 1.49   $ 1.85   $ 2.52   $ 1.90   $ 2.79   $ 2.39  

Diluted

    1.89     1.49     1.84     2.52     1.89     2.79     2.38  

Common shareholders' equity per share(3)           

    38.67     39.36     38.89     39.34     37.97     29.78     27.59  

Common shareholders' tangible equity per share(3)(4)

    30.57     31.21     30.78     31.06     29.64     29.64     27.42  

Cash dividends

    1.20     1.50     2.00     0.88     0.72     0.72     0.54  

Dividend payout ratio (basic)

    N/A     N/A     108.11 %   34.92 %   37.89 %   25.78 %   22.62 %

Dividend payout ratio (diluted)

    N/A     N/A     108.70 %   34.92 %   38.10 %   25.84 %   22.67 %

(1)
Includes securities available-for-sale and held-to-maturity. Federal home loan bank stock is presented as included in cash and securities as of December 31, 2015, 2014 and 2013 to match presentation as of subsequent dates.

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(2)
Includes the effect in all periods shown of Banner's adoption of ASC 606 using the full retrospective method on January 1, 2018, which did not result in any changes in either timing or amount of recognized revenue in the periods shown, but resulted in a change to the presentation of certain costs associated with Banner's merchant services. Following the adoption of ASC 606, these costs are presented as being offset against deposit fees and other service charges in non-interest income, instead of being included in non-interest expense. Banner believes this change to presentation is not material.

(3)
Calculated using shares outstanding excluding unearned restricted shares held in ESOP.

(4)
Common shareholders' tangible equity per share is a non-GAAP financial measure. Banner calculates tangible common equity by excluding the balance of goodwill and other intangible assets from shareholders' equity. Banner believes that this is consistent with the treatment by its bank regulatory agencies, which exclude goodwill and other intangible assets from the calculation of risk-based capital ratios. Management believes that this non-GAAP financial measure provides information to investors that is useful in understanding the basis of Banner's capital position. However, this non-GAAP financial measure is supplemental and is not a substitute for any analysis based on GAAP. Because not all companies use the same calculation of tangible common equity, this presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of this non-GAAP measure, see table below.


Reconciliation of Common Shareholders' Tangible Equity Per Share with GAAP Measure
(Dollars in thousands, except per share data)

 
  As of June 30,   As of December 31,  
 
  2018   2017   2017   2016   2015   2014   2013  

Shareholders' equity (GAAP)

  $ 1,253,010   $ 1,309,851   $ 1,272,626   $ 1,305,710   $ 1,300,059   $ 582,888   $ 538,331  

Exclude goodwill and other intangible assets, net

    262,517     271,396     265,314     274,745     285,210     2,831     2,449  

Common shareholders' tangible equity (non-GAAP)

    990,493     1,038,455     1,007,312     1,030,965     1,014,849     580,057     535,882  

Common shares outstanding

    32,405,696     33,278,031     32,726,485     33,193,387     34,242,255     19,571,548     19,543,769  

Common shareholders' tangible equity per share (non-GAAP)

    30.57     31.21     30.78     31.06     29.64     29.64     27.42  

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SKAGIT

        The following table summarizes selected historical consolidated financial data of Skagit for the periods and as of the dates indicated. The annual historical information for Skagit set forth below is derived from its audited consolidated financial statements, which are available upon request. See the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus. The six-month period historical information for Skagit set forth below is derived from its unaudited consolidated historical financial statements as of and for the six (6) months ended June 30, 2018. Historical financial data as of and for the six (6) months ended June 30, 2018 and June 30, 2017 are unaudited and include, in management's opinion, all normal recurring adjustments considered necessary to present fairly the results of operations and financial condition of Skagit. You should not assume the results of operations for past annual periods or for the six (6) months ended June 30, 2018 and June 30, 2017 indicate results for any future period.

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Skagit—Selected Historical Financial Information
(Dollars in thousands, except share and per share data)

 
  As of and for the
Six Months
Ended June 30,
  As of and for the Year Ended December 31,  
 
  2018   2017   2017   2016   2015   2014   2013  

Statements of income:

                                           

Interest income

  $ 16,732   $ 15,957   $ 32,225   $ 28,210   $ 24,839   $ 23,875   $ 24,044  

Interest expense

    744     735     1,462     1,567     1,676     1,786     2,124  

Net interest income

    15,988     15,222     30,763     26,643     23,163     22,089     21,920  

Provision (benefit) for loan losses

    464     348     575         (111 )        

Net interest income after provision (benefit) for loan losses

    15,524     14,874     30,188     26,643     23,274     22,089     21,920  

Total non-interest income

    3,319     2,875     6,108     5,900     5,413     5,747     5,287  

Total non-interest expense

    12,929     12,737     25,855     24,049     21,543     20,397     18,715  

Income before provision for income taxes

    5,914     5,012     10,441     8,494     7,144     7,439     8,492  

Provision for income taxes

    729     1,167     3,276     1,983     1,718     1,750     1,978  

Net income

  $ 5,185   $ 3,845     7,165     6,511     5,426     5,689     6,514  

Basic earnings per share

  $ 9.53   $ 7.01   $ 13.12   $ 11.68   $ 9.76   $ 10.21   $ 11.52  

Diluted earnings per share

  $ 9.53   $ 7.01   $ 13.11   $ 11.67   $ 9.76   $ 10.21   $ 11.52  

Cash dividends declared per share

  $ 3.00   $ 2.75   $ 5.50   $ 5.50   $ 5.00   $ 5.00   $ 5.00  

Balance sheets:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Total assets

  $ 922,106   $ 903,466   $ 928,134   $ 894,673   $ 852,275   $ 810,340   $ 782,289  

Net loans

    592,275     546,730     553,426     518,428     449,849     396,281     366,030  

Total deposits

    810,663     804,718     831,291     797,794     755,268     713,767     693,660  

Other borrowings

    28,635     19,338     14,915     20,142     21,545     22,991     18,334  

Stockholders' equity

    80,002     76,952     78,548     74,449     73,503     71,497     68,322  

Investment securities

    275,144     301,056     307,928     313,761     284,212     228,340     289,235  

Key operating ratios:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Return on average stockholders' equity

    13.20 %   10.26 %   9.28 %   8.50 %   7.42 %   8.08 %   9.33 %

Return on average assets

    1.14 %   0.86 %   0.79 %   0.75 %   0.65 %   0.73 %   0.85 %

Net interest margin

    3.71 %   3.57 %   3.58 %   3.20 %   2.90 %   2.95 %   2.97 %

Average stockholders' equity to average assets

    8.64 %   8.37 %   8.53 %   8.81 %   8.80 %   9.00 %   9.08 %

Dividend pay-out ratio

    31.48 %   39.23 %   41.92 %   47.09 %   51.23 %   48.92 %   43.37 %

Book value per share

  $ 147.14   $ 142.12   $ 144.92   $ 133.96   $ 132.38   $ 128.71   $ 123.05  

        The consolidated balance sheets of Skagit and its subsidiary as of June 30, 2018 and December 31, 2017 and 2016, and the consolidated statements of income for Skagit and its subsidiary for the six (6) months ended June 30, 2018 and June 30, 2017 and each of the years ended December 31, 2017, 2016 and 2015 are set forth below. The consolidated balance sheets as of December 31, 2017 and 2016 and the consolidated statements of income for the years ended December 31, 2017, 2016 and 2015 are derived from Skagit's audited consolidated historical financial statements, which are available upon request. See the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus. The consolidated balance sheets as of June 30, 2018 and the consolidated statements of income for the six (6) months ended June 30, 2018 and June 30, 2017 are derived from Skagit's unaudited interim condensed consolidated historical financial statements. You

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should not assume the results of operations for past annual periods or for the six (6) months ended June 30, 2018 and June 30, 2017 indicate results for any future period.


SkagitConsolidated Balance Sheets
(Dollars in thousands, except share data)

 
  As of
June 30,
  December 31,  
 
  2018   2017   2016  

ASSETS

                   

Cash and due from banks

  $ 10,930   $ 14,633   $ 13,928  

Fed funds sold and interest-bearing bank balances

    4,082     12,533     18,983  

Cash and cash equivalents

    15,012     27,166     32,911  

Interest-bearing time deposits

    2,728     2,976     2,976  

Investment securities

    275,144     307,928     313,761  

Available-for-sale, at fair value

    169,064     193,302     202,088  

Held to maturity, at amortized cost

    106,080     114,626     111,673  

Loans held for sale

            822  

Loans

    598,570     559,298     524,120  

Allowance for loan loss

    (6,295 )   (5,872 )   (5,692 )

Net loans

    592,275     553,426     518,428  

Premises and equipment, net

    13,293     13,178     13,127  

Other real estate owned (OREO), net

    2,521     4,323     5,852  

Accrued interest receivable

    3,375     3,253     2,890  

Bank owned life insurance

    13,099     12,881      

Other assets

    4,659     3,003     3,906  

Total assets

    922,106     928,134     894,673  

LIABILITIES AND STOCKHOLDERS' EQUITY

   
 
   
 
   
 
 

Total deposits

  $ 810,663   $ 831,291   $ 797,794  

Interest-bearing

    619,898     627,348     626,027  

Non-interest-bearing

    190,765     203,943     171,767  

Other borrowings

    28,635     14,915     20,142  

Other liabilities

    2,806     3,380     2,288  

Total liabilities

    842,104     849,586     820,224  

Common stock

    12,596     12,232     12,453  

Accumulated other comprehensive loss, net of tax

    (4,644 )   (2,182 )   (3,641 )

Retained earnings

    72,050     68,498     65,637  

Equity

    80,002     78,548     74,449  

Total liabilities and stockholders' equity

    922,106     928,134     894,673  

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SkagitConsolidated Statements of Income
(dollars in thousands, except per share amounts)

 
  For the Six Months
Ended June 30,
  For the Year Ended
December 31,
 
 
  2018   2017   2017   2016   2015  

Interest and fees on loans

  $ 13,762   $ 12,926   $ 26,268   $ 22,541   $ 19,777  

Investment Securities

                               

Taxable

    1,703     1,930     3,673     4,018     4,182  

Exempt from federal income tax          

    1,181     969     2,016     1,306     584  

Federal funds sold, interest bearing bank balances & time deposits

    86     132     268     345     296  

Total interest income

    16,732     15,957     32,225     28,210     24,839  

Deposits

    677     712     1,416     1,523     1,610  

Other borrowings

    67     23     46     44     66  

Total interest expense

    744     735     1,462     1,567     1,676  

Net interest income

    15,988     15,222     30,763     26,643     23,163  

Provision (benefit) for loan losses

    464     348     575         (111 )

Net interest income after provision for loan losses

    15,524     14,874     30,188     26,643     23,274  

Service charges on deposits

    1,727     1,689     3,397     3,332     3,130  

Bank-owned life insurance income

    180     1     131          

Other

    1,051     1,018     2,100     2,047     2,064  

Gain on the sale of assets

    361     167     480     521     219  

Total non-interest income

    3,319     2,875     6,108     5,900     5,413  

Compensation and employee matters

    7,709     7,604     15,585     13,770     12,430  

Occupancy and equipment

    1,068     1,025     2,070     2,174     1,908  

Data processing

    1,126     1,008     2,066     1,953     1,839  

Provision for other real estate owned losses

            258     640     17  

B&O tax expense

    231     217     438     374     347  

Consulting and professional fees

    472     432     708     448     341  

Loan collection and OREO expenses

    46     77     176     220     193  

Advertising

    455     412     824     784     784  

Deposit insurance

    179     253     466     480     538  

Other

    1,643     1,709     3,264     3,206     3,146  

Total non-interest expense

    12,929     12,737     25,855     24,049     21,543  

Income before provision for income taxes

    5,914     5,012     10,441     8,494     7,144  

Total provision for income taxes

    729     1,167     3,276     1,983     1,718  

Net income

  $ 5,185   $ 3,845   $ 7,165   $ 6,511   $ 5,426  

Basic earnings per share

  $ 9.53   $ 7.01   $ 13.12   $ 11.68   $ 9.76  

Diluted earnings per share

  $ 9.53   $ 7.01   $ 13.11   $ 11.67   $ 9.76  

Dividends declared per share

  $ 3.00   $ 2.75   $ 5.50   $ 5.50   $ 5.00  

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UNAUDITED COMPARATIVE PER COMMON SHARE DATA

        We have summarized below the per share information for Banner and Skagit on a historical, pro forma combined and equivalent basis. Banner's information was derived from the Annual Report on Form 10-K for the fiscal year ended December 31, 2017, its Quarterly Report on Form 10-Q for the six (6) months ended June 30, 2018, and other documents that have been filed with the SEC, which should be read in conjunction with this information. Skagit's information was derived from its audited consolidated financial statements as of and for the year ended December 31, 2017, its unaudited interim condensed consolidated financial statements as of and for the six (6) months ended June 30, 2018, and related notes thereto. See "Where You Can Find More Information" on page 120.

        The pro forma calculations reflect that each outstanding share of Skagit common stock outstanding immediately prior to the effective time of the merger will be converted into the right to receive 5.6664 shares of Banner common stock, and do not give effect to any potential adjustment to the exchange ratio provided for in the merger agreement.

        We assume that the merger occurred as of the beginning of the fiscal year or period presented (or in the case of book value, as of the date specified). The information is presented for illustrative purposes only. You should not rely on the pro forma information as being indicative of the historical results that we would have had if we had been combined or the future results that we will experience after the merger. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.

 
  Banner   Skagit   Banner Pro Forma
Combined
  Per Equivalent
Skagit
Share(3)
 

Per Common Share Data:

                         

Basic Earnings

                         

Six months ended June 30, 2018          

  $ 1.89   $ 9.53   $ 1.88   $ 10.63  

Year ended December 31, 2017

    1.85     13.12     1.89     10.70  

Diluted Earnings

                         

Six months ended June 30, 2018

  $ 1.89   $ 9.53   $ 1.87   $ 10.60  

Year ended December 31, 2017

    1.84     13.11     1.88     10.67  

Cash Dividends Declared(1)

                         

Six months ended June 30, 2018          

  $ 1.20   $ 3.00   $ 1.20   $ 6.80  

Year ended December 31, 2017

    2.00     5.50     2.00     11.33  

Book Value(2)

                         

As of June 30, 2018

  $ 38.67   $ 147.14   $ 37.56   $ 212.85  

As of December 31, 2017

    38.89     144.92     37.73     213.82  

(1)
Banner pro forma combined dividends were based on Banner's historical amounts.

(2)
Banner pro forma combined book value is calculated based on pro forma combined equity and pro forma combined common shares outstanding as of the dates shown.

(3)
Skagit pro forma equivalent conversion ratio was computed by multiplying the Banner pro forma combined amounts by the exchange ratio of 5.6664.

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

        The following table sets forth the high and low reported trading prices per share of Banner common stock, and the cash dividends declared per share for the periods indicated. Banner common stock trades on the NASDAQ under the symbol "BANR."


Banner

Quarter Data
  High   Low   Dividend
Declared
 

First Quarter 2016 Fiscal Year

  $ 45.92   $ 35.39   $ 0.21  

Second Quarter 2016 Fiscal Year

    45.01     38.77     0.21  

Third Quarter 2016 Fiscal Year

    44.69     39.58     0.23  

Fourth Quarter 2016 Fiscal Year

    56.50     43.20     0.23  

First Quarter 2017 Fiscal Year

 
$

60.97
 
$

51.61
 
$

0.25
 

Second Quarter 2017 Fiscal Year

    59.66     52.07     1.25  

Third Quarter 2017 Fiscal Year

    61.50     52.42     0.25  

Fourth Quarter 2017 Fiscal Year

    62.75     53.92     0.25  

First Quarter 2018 Fiscal Year

 
$

59.10
 
$

52.20
 
$

0.35
 

Second Quarter 2018 Fiscal Year

    62.98     54.10     0.85  

Third Quarter 2018 Fiscal Year (through September 4, 2018)

    67.11     59.76      

        Skagit common stock is not actively traded on a securities exchange, there is no established trading market for Skagit common stock and no broker currently makes a market in Skagit common stock. The following table sets forth the cash dividends declared per share for Skagit common stock for the periods indicated.


Skagit

Quarter Data
  Dividend
Declared
 

First Quarter 2016 Fiscal Year

  $  

Second Quarter 2016 Fiscal Year

    2.50  

Third Quarter 2016 Fiscal Year

     

Fourth Quarter 2016 Fiscal Year

    3.00  

First Quarter 2017 Fiscal Year

 
$

 

Second Quarter 2017 Fiscal Year

    2.75  

Third Quarter 2017 Fiscal Year

     

Fourth Quarter 2017 Fiscal Year

    2.75  

First Quarter 2018 Fiscal Year

 
$

 

Second Quarter 2018 Fiscal Year

    3.00  

Third Quarter 2018 Fiscal Year (through September 4, 2018)

     

        As of the record date for the special meeting, there were approximately 759 registered holders of Skagit common stock.

        The following table presents the closing price of Banner common stock on July 25, 2018, the last trading day before the public announcement of the merger agreement, and September 4, 2018, the last practicable trading day prior to the mailing of this proxy statement/prospectus. Skagit common stock is not actively traded on a securities exchange, there is no established trading market for Skagit common stock and no broker currently makes a market in Skagit common stock. As a result, the closing sale

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prices of Skagit common stock on July 25, 2018, the last trading day before public announcement of the merger agreement, and September 4, 2018, the last practicable trading day prior to the mailing of this proxy statement/prospectus, are not available.

        The table also shows the estimated equivalent per share consideration with respect to each share of Skagit common stock on the relevant date.

Date
  Skagit
Closing Price
  Banner Closing Price   Exchange Ratio   Estimated Equivalent
Per Share Value
 

July 25, 2018

    N/A   $ 61.60     5.6664   $ 349.05  

September 4, 2018

    N/A     64.96     5.6664     368.09  

        The above table shows only historical comparisons. These comparisons may not provide meaningful information to Skagit shareholders in determining whether to approve the merger agreement. Skagit shareholders are urged to obtain current market quotations for shares of Banner common stock and to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus in considering whether to approve the merger agreement. The market price of Banner common stock will fluctuate between the date of this proxy statement/prospectus and the date of completion of the merger. No assurance can be given concerning the market price of Banner common stock before or after the effective time of the merger. Changes in the market price of Banner common stock prior to the completion of the merger will affect the market value of the merger consideration that Skagit shareholders will receive upon completion of the merger.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        When used in this proxy statement/prospectus or in other documents filed with or furnished to the Securities and Exchange Commission (which we refer to as the "SEC"), the words or phrases "may," "believe," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," "potential," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Investors and security holders are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements. Statements about the expected timing, completion and effects of the proposed merger and all other statements included or incorporated by reference in this proxy statement/prospectus other than historical facts constitute forward-looking statements.

        In addition to factors disclosed in Banner's SEC reports, important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:

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        Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

        Consequently, all of the forward-looking statements contained or incorporated by reference in this proxy statement/prospectus are qualified by factors, risks and uncertainties, including, but not limited to, those set forth above and those set forth under the heading "Risk Factors" beginning on page 34 of this proxy statement/prospectus and under the heading "Risk Factors" in Banner's annual and quarterly reports and other filings with the SEC that are incorporated by reference into this proxy statement/prospectus. See the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

        Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Banner and Skagit undertake no obligation to update or revise any forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized. As a result of these risks and others, actual results could vary significantly from those anticipated herein, and the financial condition and results of operations of Banner and/or Skagit could be materially adversely affected.

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RISK FACTORS

        In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the caption "Cautionary Statement Regarding Forward-Looking Statements" on page 31, you should carefully consider the following risk factors in deciding whether to vote to approve the merger agreement. Additional risks and uncertainties not presently known to Banner or Skagit that are not currently believed to be important to you, if they materialize, also may adversely affect the merger and Banner as the surviving corporation in the merger.

        In addition, you should read and consider the risks and uncertainties associated with the business of Banner because these risks will relate to the combined company. Description of some of these risks and uncertainties can be found in Banner's Annual Report on Form 10-K for the year ended December 31, 2017 and subsequent Quarterly Reports on Form 10-Q, each of which are incorporated by reference into this proxy statement/prospectus. See the section entitled "Where You Can Find More Information" beginning on page 120.

The exchange ratio will not be adjusted in the event of any change in Banner's stock price. Because the market price of Banner common stock may fluctuate, you cannot be certain of the precise value of the merger consideration you may receive in the merger.

        At the time the merger is completed, each issued and outstanding share of Skagit common stock, except for certain shares held by Banner or Skagit (other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity or as a result of debts previously contracted) or a Skagit shareholder who properly exercises dissenters' right when and in the manner required under Chapter 23B.13 of the WBCA, will be converted into the right to receive 5.6664 shares of Banner common stock, subject to adjustment as provided in the merger agreement.

        There will be a time lapse between each of the date of this proxy statement/prospectus, the date on which Skagit shareholders vote to approve the merger agreement at the special meeting, and the date on which Skagit shareholders entitled to receive shares of Banner common stock under the merger agreement actually receive such shares. The market value of Banner common stock may fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in Banner's businesses, operations and prospects and regulatory considerations. Many of these factors are outside of the control of Skagit and Banner. Consequently, at the time Skagit shareholders must decide whether to approve the merger agreement, they will not know the actual market value of the shares of Banner common stock they may receive when the merger is completed. This value will not be known at the time of the special meeting and may be more or less than the current price of Banner common stock or the price of Banner common stock at the time of the special meeting.

Skagit's adjusted shareholders' equity could be an amount that results in a reduction in the exchange ratio and the merger consideration.

        The exchange ratio and the merger consideration will be reduced in the event that Skagit's adjusted shareholders' equity, as finally determined pursuant to the merger agreement, is less than $80 million. As a result, the exchange ratio may be less than 5.6664. Any reduction in the exchange ratio will result in a decline in the number of shares of Banner common stock and the value of the merger consideration received by Skagit shareholders. Moreover, adjusted shareholders' equity is measured as of the month-end prior to the closing (or, if the closing is expected to occur in the first eight days of a month, the preceding month-end). As a result, adjusted shareholders' equity is not known as of the date of this proxy statement/prospectus and may not be known at the time of the special meeting, and could increase or decrease during the period between the date of this proxy statement/prospectus or the date of the special meeting and the shareholders' equity measuring date

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based on factors outside of the control of Skagit. See "The Merger Agreement—Merger Consideration—Potential Adjustment to Exchange Ratio" beginning on page 77.

Banner may be unable to successfully integrate Skagit's operations and may not realize the anticipated benefits of acquiring Skagit.

        Banner and Skagit have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on Banner's ability to successfully integrate Skagit's operations in a manner that results in various benefits, including, among other things, an expanded market reach and operating efficiencies and that does not materially disrupt existing customer relationships or result in decreased revenues due to loss of customers. The process of integrating operations could result in a loss of key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of the surviving bank's businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of Banner or Skagit to maintain relationships with customers and employees. The diversion of management's attention and any delays or difficulties encountered in connection with the merger and the integration of Skagit's operations could have an adverse effect on the business, financial condition, operating results and prospects of the surviving corporation after the merger.

        The success of the surviving corporation following the merger will depend in part on the ability of Banner to integrate the two businesses. If Banner experiences difficulties in the integration process, including those listed above, Banner may fail to realize the anticipated benefits of the merger in a timely manner or at all. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy and could have an adverse effect on the surviving corporation's business, financial condition, operating results and prospects.

        Among the factors considered by the boards of directors of Banner and Skagit in connection with their respective approvals of the merger agreement were the benefits that could result from the merger. We cannot give any assurance that these benefits will be realized within the time periods contemplated or at all.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could prevent the consummation of the merger or have an adverse effect on the combined company following the merger.

        Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals and/or waivers must be obtained from the bank regulatory and other governmental authorities, including the Federal Reserve Board, the FDIC and the DFI. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under "The Merger—Regulatory Approvals" on page 72. An adverse development in either party's regulatory standing or these factors could result in an inability to obtain one or more approvals or delay their receipt. These governmental entities may impose conditions, limitations or costs, require divestitures or place restrictions on the conduct of Banner after the closing as a condition to the granting of such approvals or require changes to the terms of the merger or the bank merger. Such conditions or changes and the process of obtaining regulatory approvals could prevent the consummation of the merger if they contain or result in materially burdensome regulatory conditions or could have the effect of delaying completion of the merger or of imposing additional costs or limitations on Banner following the merger, any of which might have an adverse effect on the surviving corporation following the merger. The regulatory approvals may not be received at any time, may not be received in a timely fashion, and may contain conditions on the completion of the merger that adversely affect the surviving corporation's business following the closing, or which are not anticipated or cannot be met.

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The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

        The merger agreement is subject to a number of conditions which must be satisfied or waived in order to complete the merger. For a summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 94 of this proxy statement/prospectus. These conditions to the closing of the merger may not be satisfied in a timely manner or at all, and, accordingly, the merger may be delayed or may not be completed.

        In addition, if the merger is not completed by April 25, 2019, either Banner or Skagit may choose not to proceed with the merger, and the parties can mutually decide to terminate the merger agreement at any time, before or after shareholder approval. In addition, Banner and Skagit may elect to terminate the merger agreement in certain other circumstances. If the merger agreement is terminated under certain circumstances, Skagit may be required to pay a termination fee of $7.75 million to Banner. See the section entitled "The Merger Agreement—Termination Fee" beginning on page 97 for a description of these circumstances.

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Skagit.

        If the merger is not completed for any reason, including as a result of Skagit shareholders declining to approve the merger agreement, the ongoing business of Skagit may be adversely affected and, without realizing any of the benefits of having completed the merger, Skagit would be subject to a number of risks, including the following:

        In addition to the above risks, if the merger agreement is terminated and the Skagit board of directors seeks another merger or business combination, Skagit shareholders cannot be certain that Skagit will be able to find a party willing to offer equivalent or more attractive consideration than the consideration Banner has agreed to provide in the merger. If the merger agreement is terminated under certain circumstances, Skagit may be required to pay a termination fee of $7.75 million to Banner. See the section entitled "The Merger Agreement—Termination Fee" beginning on page 97.

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Skagit will be subject to business uncertainties while the merger is pending, which could adversely affect its business.

        Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Skagit, and, consequently, the surviving corporation. These uncertainties may impair Skagit's ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with Skagit to seek to change their existing business relationships with Skagit. Employee retention at Skagit may be particularly challenging during the pendency of the merger, as employees may experience uncertainty about their roles with the surviving corporation following the merger. In addition, the merger agreement restricts Skagit from making certain acquisitions and taking other specified actions without the consent of Banner, and generally requires Skagit to continue its operations in the ordinary course, until the merger closes. These restrictions may prevent Skagit from pursuing attractive business opportunities that may arise prior to the completion of the merger. Please see the section entitled "The Merger Agreement—Conduct of Businesses of Skagit and Banner Prior to Completion of the Merger" beginning on page 85 for a description of the restrictive covenants to which Skagit is subject.

The merger agreement limits Skagit's ability to pursue alternatives to the merger.

        The merger agreement contains provisions that may discourage a third party from submitting an acquisition proposal to Skagit that might result in greater value to Skagit shareholders than the merger, or may result in a potential competing acquirer proposing to pay a lower per share price to acquire Skagit than it might otherwise have proposed to pay. These provisions include a general prohibition on Skagit soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the Skagit board, entering into discussions with any third party regarding, an acquisition proposal or offers for competing transactions. Skagit also has an unqualified obligation to submit the proposal to approve the merger agreement to a vote of its shareholders, even if Skagit receives an alternative acquisition proposal that its board of directors believes is superior to the merger. In addition, Skagit may be required to pay Banner a termination fee of $7.75 million in certain circumstances involving acquisition proposals for competing transactions. See the sections entitled "The Merger Agreement—Termination of the Merger Agreement" and "The Merger Agreement—Termination Fee" beginning on pages 95 and 97, respectively.

Directors and executive officers of Skagit may have interests in the merger that are different from, or in addition to, the interests of Skagit shareholders.

        Directors and executive officers of Skagit may have interests in the merger that are different from, or in addition to, the interests of Skagit shareholders generally. These interests include, among others, the treatment of outstanding equity awards pursuant to the merger agreement, certain payments and benefits payable under change in control agreements entered into with executive officers, and rights to ongoing indemnification and insurance coverage by the surviving corporation for acts or omissions occurring prior to the merger. These interests also include Banner's agreement to invite Skagit's Chief Executive Officer to serve as a member of Banner's board following the effective time of the merger. The Skagit board was aware of and considered those interests, among other matters, in reaching its decisions to approve and adopt the merger agreement and the transactions contemplated thereby, and to recommend the approval of the merger agreement to Skagit shareholders. See the section entitled "The Merger—Interests of Directors and Executive Officers of Skagit in the Merger" beginning on page 68 of this proxy statement/prospectus for a more detailed description of these interests.

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The market price for Banner common stock may be affected by factors different from those that historically have affected Skagit.

        Upon completion of the merger, Skagit shareholders who do not exercise dissenters' rights will become holders of Banner common stock. Banner's businesses differ from those of Skagit, and accordingly the results of operations of Banner will be affected by some factors that are different from those currently affecting the results of operations of Skagit. For a discussion of the businesses of Banner and Skagit, see the section entitled "The Parties to the Merger" beginning on page 45 of this proxy statement/prospectus and the documents incorporated by reference referred to under the section entitled "Where You Can Find More Information" beginning on page 120, including, in particular, in the section entitled "Risk Factors" in Banner's Annual Report on Form 10-K for the year ended December 31, 2017.

Shares of Banner common stock to be received by Skagit shareholders as a result of the merger will have rights different from the shares of Skagit common stock.

        Upon completion of the merger, the rights of former Skagit shareholders will be governed by the articles of incorporation and bylaws of Banner and Washington corporate law. The rights associated with Banner common stock are different from the rights associated with Skagit common stock, which are governed by the articles of incorporation and bylaws of Skagit. Please see the section entitled "Comparison of Shareholders' Rights" beginning on page 105 for a discussion of the different rights associated with Banner common stock.

Skagit shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

        Currently, Skagit shareholders have the right to vote in the election of the board of directors of Skagit and the power to approve or reject any matters requiring shareholder approval under Washington law and Skagit's articles of incorporation and bylaws. Upon the completion of the merger, Skagit shareholders will become shareholders of Banner with a percentage ownership of Banner that is smaller than the shareholder's current percentage ownership of Skagit. After the merger, Skagit shareholders in the aggregate are expected to become owners of approximately 8.7% of the outstanding shares of Banner common stock (without giving effect to any shares of Banner common stock held by Skagit shareholders prior to the merger or any adjustment to the exchange ratio). Even if all former Skagit shareholders voted together on all matters presented to Banner's shareholders, the former Skagit shareholders would exercise significantly less influence over Banner after the merger relative to their influence over Skagit prior to the merger, and thus would have a less significant impact on the approval or rejection of future Banner proposals submitted to a shareholder vote.

Banner will incur significant transaction and merger-related costs in connection with the merger.

        Banner expects to continue to incur a number of non-recurring costs associated with completing the merger, combining the operations of the two companies and achieving desired synergies. These fees and costs have been, and will continue to be, substantial.

        Banner will incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Banner continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies' businesses. Although Banner expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Banner to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. See the risk factor entitled "Banner may be unable to

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successfully integrate Skagit's operations and may not realize the anticipated benefits of acquiring Skagit" above.

        Other significant non-recurring transaction costs related to the merger include, but are not limited to, fees paid to legal, financial and accounting advisors, severance and benefit costs and filing fees. Each of Banner and Skagit has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the merger. The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial conditions and operating results of the surviving corporation following the closing of the merger. If the merger is not completed, Skagit and Banner would have to recognize these and other expenses without realizing the expected benefits of the merger.

The opinion received by the Skagit board of directors from Sandler O'Neill has not been, and is not expected to be, updated to reflect any changes in circumstances that may have occurred since the date of the opinion.

        The opinion delivered to the Skagit board of directors by Sandler O'Neill, financial advisor to Skagit, as to the fairness, from a financial point of view, of the exchange ratio provided for in the merger agreement to the holders of Skagit common stock speaks only as of July 25, 2018, the date of such opinion. Changes in the operations and prospects of Banner or Skagit, general market and economic conditions and other factors which may be beyond the control of Banner and Skagit may have altered the value of Banner or Skagit or the sale prices of shares of Banner common stock or Skagit common stock as of the date of this proxy statement/prospectus, or may alter such values and sale prices by the time the merger is completed. Sandler O'Neill does not have any obligation to update, revise or reaffirm its opinion to reflect subsequent developments and has not done so. Skagit does not currently anticipate asking Sandler O'Neill to update its opinion to address the fairness of the exchange ratio from a financial point of view at the time the merger is completed or as of any other date other than the date of its opinion. The Skagit board of directors' recommendation that Skagit shareholders vote "FOR" approval of the merger agreement, however, is made as of the date of this proxy statement/prospectus. See "The Merger—Opinion of Skagit's Financial Advisor" and Annex B to this proxy statement/prospectus.

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INFORMATION ABOUT THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

        This proxy statement/prospectus is being furnished to Skagit shareholders as part of the solicitation of proxies by the Skagit board for use at the special meeting to be held on October 15, 2018, at 6:00 p.m., Pacific Time, at McIntyre Hall, located at 2501 E. College Way, Mount Vernon, Washington 98273, or at any postponement or adjournment thereof.

        At the special meeting, Skagit shareholders will be asked to consider and vote upon (i) a proposal to approve the merger agreement and (ii) a proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

        Skagit shareholders must approve the merger agreement in order for the merger to occur. If Skagit shareholders fail to approve the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus, and you are encouraged to read the merger agreement carefully and in its entirety.

Recommendation of the Skagit Board of Directors

        On July 25, 2018, the Skagit board of directors unanimously determined that the merger, on the terms and conditions set forth in the merger agreement, is in the best interests of Skagit and its shareholders.

        Accordingly, the Skagit board of directors unanimously recommends that Skagit shareholders vote as follows:

        See the section entitled "The Merger—Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors" beginning on page 52 for a more detailed discussion of the recommendation of the Skagit board of directors.

        Skagit shareholders should carefully read this proxy statement/prospectus, including the annexes and any documents incorporated by reference, in their entirety for more detailed information concerning the merger and the transactions contemplated by the merger agreement.

Record Date and Quorum

        Skagit has set the close of business on September 4, 2018 as the record date for the special meeting, and only holders of record of Skagit common stock as of the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Skagit common stock as of the close of business on the record date. As of the record date, there were 544,257 shares of Skagit common stock outstanding and entitled to vote and, accordingly, 362,838 shares of Skagit common stock must vote to approve the merger agreement for the merger to occur. You will have one vote on all matters properly coming before the special meeting for each share of Skagit common stock that you owned as of the record date.

        The presence, in person or represented by proxy, of shareholders who hold a majority of the shares entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting. Abstentions and broker non-votes, if any, are counted as present for purposes of establishing a quorum.

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        If a quorum is not present, a majority of the shares represented at the special meeting may adjourn the special meeting.

Voting by Skagit's Directors and Executive Officers

        As of the record date, the directors and executive officers of Skagit and their affiliates beneficially owned and were entitled to vote approximately 130,630 shares of Skagit common stock representing approximately 24.0% of the shares of Skagit common stock outstanding on that date. Each of the directors and executive officers of Skagit and/or their affiliates has entered into a voting and support agreement with Banner, in which each such person agreed, among other things, to vote in favor of the merger proposal and the proposal to adjourn or postpone the special meeting of the Skagit shareholders to a later date if there are not sufficient votes to approve the merger agreement, as well as certain other customary restrictions with respect to the voting and transfer of such person's shares of Skagit common stock. For more information regarding the voting and support agreements, see "The Merger Agreement—Voting and Support Agreements" beginning on page 98 and Annex D to this proxy statement/prospectus which contains a form of the Skagit voting and support agreement.

        A total of approximately 130,630 shares of Skagit common stock, or approximately 24.0% of the shares of Skagit common stock outstanding on the record date for the special meeting, were subject to such voting and support agreements.

Vote Required

        The approval of the merger agreement requires the affirmative vote of Skagit shareholders holding at least two-thirds of the outstanding shares of Skagit common stock entitled to vote at the special meeting. For the approval of the merger agreement, you may vote "FOR," "AGAINST" or "ABSTAIN." If you fail to submit a proxy or to vote in person at the special meeting or if you vote to abstain, or if your shares of Skagit common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of Skagit common stock, it will have the same effect as a vote "against" the approval of the merger agreement.

        The approval of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement requires the affirmative vote of the majority of the shares represented at the meeting and entitled to vote. If your shares of Skagit common stock are present at the special meeting but are not voted on the proposal, or if you vote to abstain on the proposal, your vote will be considered "against" the proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. If you fail to submit a proxy or vote in person at the special meeting or if your shares of Skagit common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of Skagit common stock, your shares of Skagit common stock will not be voted, and this will not have an effect on the vote to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

        If your shares of Skagit common stock are registered directly in your name with the transfer agent of Skagit, Skagit Bank, you are considered, with respect to those shares of Skagit common stock, the shareholder of record. If you are a shareholder of record, this proxy statement/prospectus and the enclosed proxy card have been sent directly to you by Skagit.

        If your shares of Skagit common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Skagit common stock held in "street name." In that case, this proxy statement/prospectus has been forwarded to you by your bank, brokerage firm or

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other nominee who is considered, with respect to those shares of Skagit common stock, the shareholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.

        Banks, brokerage firms and other nominees who hold shares of Skagit common stock in "street name" for their customers typically have authority to vote on "routine" proposals when they have not received voting instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to non-routine matters, such as the approval of the merger agreement and adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. As a result, absent specific voting instructions from the beneficial owner of such shares, banks, brokerage firms and other nominees are not empowered to vote such shares. A so-called "broker non-vote" results when banks, brokerage firms and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares.

Proxies

        If you are a shareholder of record, you may have your shares of Skagit common stock voted on matters presented at the special meeting in the following ways:

        If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Skagit common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.

        If you submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be filed with the Secretary of Skagit by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. You will be provided at a later date a letter of transmittal and instructions regarding the surrender of your stock certificates. You should then send your Skagit stock certificates to the exchange agent, together with your completed and signed letter of transmittal.

        If you vote by proxy, the individuals named on the enclosed proxy card (each of them, with full power of substitution) will vote your shares of Skagit common stock in the way that you indicate. When completing the proxy card, you may specify whether your shares of Skagit common stock should be voted "for" or "against" or to "abstain" from voting on all, some or none of the specific items of business to come before the special meeting.

        If you properly sign your proxy card but do not mark the boxes showing how your shares of Skagit common stock should be voted on a matter, the shares of Skagit common stock represented by your properly signed proxy will be voted "FOR" the proposal to approve the merger agreement and "FOR" the proposal to approve adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

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Attending the Meeting; Voting in Person

        All Skagit shareholders are invited to attend the special meeting. Shareholders of record of Skagit common stock as of the record date for the special meeting can vote in person at the special meeting.

        If you plan to attend your meeting, you must hold your shares in your own name and bring evidence of your stock ownership, such as your most recent account statement, or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of government-issued personal photo identification with you to be admitted to the meeting.

        If your shares of Skagit common stock are held in "street name," then you are not the shareholder of record. In order for you to vote the shares that you beneficially own and that are held in "street name" in person at the special meeting, you must bring a legal proxy, executed in your favor, from the bank, brokerage firm or other nominee that was the record holder of your shares held in "street name" as of the record date (i) confirming that you were the beneficial owner of those shares as of the record date, (ii) stating the number of shares of which you were the beneficial owner that were held for your benefit at that time by that bank, brokerage firm or other nominee, and (iii) appointing you as the record holder's proxy to vote the shares covered by that proxy at the special meeting.

Revocations of Proxies

        You have the right to revoke a proxy at any time before it is exercised, and your last vote is the vote that will be counted. If you are a Skagit shareholder of record, you can write to Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233, stating that you wish to revoke your proxy and requesting another proxy card. If you hold your shares through a bank, brokerage firm or other nominee, you can revoke your proxy by contacting the bank, brokerage firm or other nominee and asking for a new proxy card. If you attend the meeting, you must request a revocation of your submitted proxy and vote by ballot to revoke your proxy. Your attendance alone at the special meeting will not of itself constitute a revocation of your proxy.

        If you have any questions or need assistance voting your shares, please contact Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233 or at (360) 755-0411.

        IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF SKAGIT COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE PRE-ADDRESSED POSTAGE-PAID ENVELOPE. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY REQUESTING A REVOCATION OF THEIR SUBMITTED PROXY AND VOTING IN PERSON.

Solicitation of Proxies; Payment of Solicitation Expenses

        Skagit's directors, officers and employees may solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies. Skagit will also request that brokerage houses and other custodians, nominees and fiduciaries forward these proxy materials to beneficial owners of Skagit common stock. Skagit will, upon request, reimburse such brokerage houses and custodians for their reasonable expenses in assisting with the solicitation of proxies.

        Skagit does not currently anticipate that it will engage an independent proxy solicitor to assist in the solicitation of proxies for the special meeting.

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Questions and Additional Information

        If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Skagit common stock or need additional copies of this proxy statement/prospectus or the enclosed proxy card, please contact Nancy K. Galbreath, Executive Assistant to the CEO, Skagit Bancorp, Inc., at 301 East Fairhaven Avenue, Burlington, Washington 98233 or at (360) 755-0411.

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THE PARTIES TO THE MERGER

Skagit Bancorp, Inc.

General

        Skagit Bancorp, Inc. is a Washington corporation formed in 2006 for the purpose of acquiring the stock of Skagit Bank and becoming the holding company for Skagit Bank. Skagit has no substantial operations separate or apart from Skagit Bank.

        The principal offices of Skagit are located at 301 East Fairhaven Avenue, Burlington, Washington 98233.

        Skagit Bank is a Washington state-chartered commercial bank which commenced operations in 1958. Skagit Bank operates through its principal office in Burlington, Washington and 11 branch offices in Mount Vernon, Anacortes, Sedro-Wooley, Bellingham, Arlington, Lynden, and Seattle, Washington, as well as a loan production office in Everett, Washington. Skagit Bank's principal market area consists of the I-5 corridor from Seattle, Washington north to the Canadian border, including a significant presence in Skagit County, Washington.

        As of June 30, 2018, Skagit had total assets of approximately $922 million, total gross loans of approximately $599 million, total deposits of approximately $811 million and shareholders' equity of approximately $80 million.

Lending Activities

        Skagit Bank's principal business is to accept deposits from the public and to make loans and other investments. To develop business, Skagit Bank relies to a great extent on the personalized approach of its officers and directors, who have extensive business and personal contacts in the communities served by Skagit Bank. Skagit Bank offers a variety of traditional loan products to its customers, primarily individual consumers and small to medium-sized businesses. For businesses, Skagit Bank provides term loans, lines of credit, loans for working capital, loans for business expansion and the purchase of equipment and machinery, construction and land development loans for builders and developers, and commercial real estate loans. Skagit Bank also offers home equity loans, automobile loans and various other consumer installment loans.

        As of June 30, 2018, Skagit Bank's total gross loan portfolio was approximately $599 million, representing approximately 65% of its total assets. As of such date, Skagit Bank's loan portfolio consisted of 19% 1-4 family real estate secured loans, 47% commercial real estate secured loans (excluding construction and land development loans), 10% real estate construction and land development loans, 11% commercial loans, 9% installment or consumer loans, 2% agricultural loans secured by farmland, and 2% loans to finance agricultural production.

Deposit and Banking Services

        Customers of Skagit Bank are provided with a full complement of traditional banking and deposit products. Skagit Bank is engaged in substantially all of the business operations customarily conducted by independent financial institutions in Washington, including the acceptance of checking accounts, savings accounts, money market accounts and a variety of certificates of deposit accounts.

        Skagit Bank does a substantial amount of business with individuals, as well as with customers in small to medium-sized businesses. The primary sources of core deposits are residents of Skagit Bank's

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primary market area and businesses and their employees located in that area. Skagit Bank also obtains deposits through personal solicitation by Skagit Bank's officers and directors and through local advertising. For the convenience of its customers, Skagit Bank offers drive-through banking facilities, internet and telephone banking, check/ATM cards, direct deposit, night depositories, personalized checks, and merchant bank card processing. Skagit Bank's services also include cashier's checks, travelers' checks, domestic wire transfers, account research, stop payments, and telephone and internet based transfers between accounts.

Banner Corporation

        Banner is a bank holding company incorporated in the State of Washington. It is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly owned subsidiaries, Banner Bank and Islanders Bank. Banner Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington and, as of August 16, 2018, its 168 branch offices, including 79 branch offices located in Washington, 43 branch offices located in Oregon, 32 branch offices located in California and 14 branch offices located in Idaho. Islanders Bank is also a Washington-chartered commercial bank that conducts business from three locations in San Juan County, Washington. Banner is subject to regulation by the Federal Reserve Board.

        Banner Bank is a regional bank that offers a wide variety of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. Islanders Bank is a community bank that offers similar banking services to individuals, businesses and public entities located primarily in the San Juan Islands. Banner Bank's and Islanders Bank's primary business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding their offices in portions of Washington, Oregon and Idaho. Banner Bank is also an active participant in the secondary market, engaging in mortgage banking operations largely through the origination and sale of one- to four-family residential loans. Lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one-to four-family residential loans and consumer loans. A portion of Banner Bank's construction and mortgage lending activities are conducted through its subsidiary, Community Financial Corporation, which is located in the Lake Oswego area of Portland, Oregon.

        As of June 30, 2018, Banner had total consolidated assets of $10.38 billion, deposits of $8.53 billion and shareholders' equity of $1.3 billion. Banner common stock is listed on the NASDAQ under the symbol "BANR." See "Comparative Per Share Market Price and Dividend Information" on page 29.

        Banner's executive offices are located at 10 South First Avenue, Walla Walla, Washington 99362. Banner's telephone number is (509) 527-3636 and its website is www.bannerbank.com. The information on Banner's website is not a part of this proxy statement/prospectus and the reference to Banner's website address does not constitute incorporation by reference of any information on that website into this proxy statement/prospectus.

        Additional information about Banner is included in documents incorporated by reference in this proxy statement/prospectus. See "Where You Can Find More Information" on page 120.

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THE MERGER

        The following discussion contains certain information about the merger. The description in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about Skagit or Banner. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings Banner makes with the SEC that are incorporated by reference into this document, as described in the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

Terms of the Merger

        The merger agreement provides that, subject to the terms and conditions therein, Skagit will merge with and into Banner with Banner surviving the merger as the surviving corporation. Immediately following the merger, Skagit Bank, Skagit's wholly owned bank subsidiary, will merge with and into Banner's wholly owned bank subsidiary, Banner Bank, with Banner Bank continuing as the surviving entity.

        In the merger, each outstanding share of Skagit common stock, other than certain shares held by Banner or Skagit (in each case other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity or as a result of debts previously contracted) or by a Skagit shareholder who properly exercises dissenters' right when and in the manner required under Chapter 23B.13 of the WBCA, will be converted into the right to receive 5.6664 shares of Banner common stock, subject to the adjustment described in the section entitled "The Merger Agreement—Merger Consideration."

Background of the Merger

        As part of its continuous effort to enhance long-term value for Skagit shareholders, the Skagit board of directors periodically evaluates the strategic direction and business objectives of Skagit. This process entails consideration of, among other things, the economic, regulatory and competitive conditions in which Skagit operates, trends in the financial services industry, as well as Skagit's history, long-term business strategy and objectives.

        As part of this evaluation, during the latter half of 2017, the Skagit board of directors identified a growing set of challenges facing the community banking industry in general and, in some cases, Skagit specifically. In particular, the Skagit board of directors recognized the need for increased scale to offset persistently high regulatory compliance costs, the industry-wide proliferation of technology that could not be economically accessed or implemented by Skagit at its then-existing scale or with its then-existing resources, and the continued, strong competition for customers from other banks, credit unions and financial technology companies. The Skagit board of directors also considered the relative illiquidity of Skagit common stock and the importance to Skagit's shareholder base of accessing a source of liquidity to monetize their investment in Skagit. The Skagit board of directors also monitored commercial bank valuations and noted the increase in stock market and M&A valuations across the industry since November, 2016.

        In late September, 2017, as part of Skagit management's normal practice of periodically receiving market updates from financial advisors, a representative of Sandler O'Neill met in-person with Cheryl R. Bishop, Skagit's Chief Executive Officer, and Ken Johnson, Skagit's President and Chief Operating Officer, to discuss trends in the community banking industry and Skagit's financial position and trajectory, including recent stock market and M&A valuations in the community banking industry.

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Following the meeting, Ms. Bishop and Mr. Johnson, based on discussion with members of the Skagit board of directors, invited Sandler O'Neill to discuss these topics with the Skagit board of directors at Skagit's regularly scheduled board of directors' meeting in December 2017.

        On December 19, 2017, Skagit's board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill participated in the meeting at the invitation of the board of directors. At the meeting, representatives of Sandler O'Neill led a discussion with the directors and members of Skagit's senior management team, regarding trends in the community banking industry, Skagit's financial position and potential strategic alternatives that Skagit could pursue, including continued stand-alone operations, an acquisition of a smaller target, a strategic merger with a similarly sized bank or a strategic business combination with a larger financial institution. The discussion included a general assessment of the viability and execution risk of each strategic alternative and the likely impact of each such strategic alternative on the value of Skagit common stock. Based on the discussion, including a review of potential business combination partners and acquisition candidates, the Skagit board of directors determined that an acquisition of a smaller target or strategic merger with a similarly sized bank was not a viable option at that time. As part of the discussion, representatives of Sandler O'Neill and members of the Skagit board of directors discussed a range of potential values Skagit might expect to receive in a strategic business combination transaction as compared to the range of potential future values and net present values if Skagit were to remain independent and achieve Skagit management's financial performance forecast. The Skagit board of directors also discussed with management the risks to Skagit of continuing to operate on a stand-alone basis. The Skagit board of directors also discussed with representatives of Sandler O'Neill the landscape of potential larger strategic business combination partners for Skagit and the potential effects of a business combination transaction on Skagit's employees, customers, communities and other constituents. The Skagit board of directors was of the view that, if executed successfully, a strategic business combination transaction between Skagit and a larger financial institution could maximize shareholder value while minimizing any adverse effects on Skagit's other constituents. At the conclusion of the meeting, the Skagit board of directors determined that further consideration of a strategic business combination transaction was appropriate, and invited Sandler O'Neill to provide a follow-up presentation at the next regularly scheduled board meeting in January 2018.

        On January 2, 2018, the Skagit board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill and Miller Nash Graham and Dunn LLP, which we refer to as "MNGD," corporate counsel to Skagit, participated in the meeting. At the meeting, representatives of MNGD provided the Skagit board of directors with an overview of their fiduciary duties, including in the context of a strategic business combination transaction. Sandler O'Neill led a more detailed discussion with the directors regarding the strategic alternative of a strategic business combination between Skagit and a larger strategic partner. The discussion included an overview of the timeline and due diligence requirements and key procedural steps in connection with a potential strategic business combination transaction, as well as the landscape of prospective strategic partners and a range of potential values that Skagit might expect to realize in such a transaction. At the conclusion of the meeting, the Skagit board of directors authorized Sandler O'Neill to reach out to select potential strategic partners to determine whether such potential partners had interest in Skagit, and if so, on what terms.

        On February 6, 2018, Skagit formally engaged Sandler O'Neill to act as its financial advisor in connection with Skagit's further exploration of strategic alternatives, including a potential strategic business combination transaction.

        Later in February 2018, as directed by the Skagit board of directors, Sandler O'Neill began contacting four financial institutions which were identified by Sandler O'Neill, senior management of Skagit and the Skagit board of directors as potential strategic partners that might be interested in pursuing a transaction with Skagit. Each party was invited to sign a confidentiality agreement and

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receive an introductory package of confidential information regarding Skagit's financial condition and operations. Skagit entered into confidentiality agreements with three bank holding companies that expressed interest in considering a potential strategic business combination transaction, including a confidentiality agreement with Banner that was entered into on March 29, 2018. The other two bank holding companies that entered into confidentiality agreements with Skagit are referred to as "Party A" and "Party B" respectively.

        On March 26, 2018, the Skagit board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. Representatives of Sandler O'Neill provided an update to the Skagit board of directors on the exploration of strategic alternatives, including a report of the contacts made and responses received. The Skagit board of directors instructed management to provide additional information and due diligence to interested parties and for Sandler O'Neill to proceed with soliciting non-binding indications of interest from interested parties.

        In March and April 2018, Skagit's management team held in-person meetings with each of the prospective acquirors who had signed a confidentiality agreement, including an in-person meeting with representatives of Banner on April 10, 2018. At the meeting with Banner, representatives of Skagit provided an overview of Skagit's operations, financial condition and strategy, and the representatives of Skagit and the representatives of Banner also discussed the cultures of the two companies and the complementary nature of their branch locations and strategies.

        In late March, 2018, Party A informed representatives of Sandler O'Neill that it would not proceed further with exploring a transaction with Skagit.

        Throughout April, 2018, representatives of Banner continued their due diligence review of Skagit and requested and received additional due diligence materials from Skagit.

        In mid-April, 2018, as directed by the Skagit board of directors, Sandler O'Neill requested that Banner and Party B submit written non-binding indications of interest for a potential strategic business combination transaction with Skagit. In late April, 2018, Party B indicated to Sandler O'Neill that, while it could potentially be interested in a strategic transaction with Skagit at some point in the future, it was focused on other priorities and was not in a position to submit an indication of interest at that time, and that it was uncertain when or if it would be able to submit an actionable proposal in the future.

        On April 29, 2018, Banner submitted an indication of interest, which provided a non-binding proposal for an all-stock transaction based on a fixed exchange ratio of 5.6634 shares of Banner common stock per share of Skagit common stock. The indication of interest described certain other terms of a proposed transaction, including the invitation for Ms. Bishop to join the Banner board of directors following closing of the transaction and a customary termination fee payable by Skagit under certain circumstances. The indication of interest was contingent on Skagit agreeing to a 60-day exclusivity period during which Skagit would not, among other things, solicit proposals from or provide confidential information to other potential strategic business combination partners.

        On May 1, 2018, Skagit's board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. MNGD provided a brief overview of directors' fiduciary duties. Representatives of Sandler O'Neill provided an update on the events since the prior Skagit board meeting on March 26, 2018, including an overview of the written indication of interest from Banner. Based on Banner's stock price at the time of the meeting, the merger consideration proposed in Banner's indication of interest was valued at approximately $329 per share of Skagit common stock, or $180 million in the aggregate. With the assistance of representatives of Sandler O'Neill and MNGD, the Skagit board of directors considered the Banner indication of interest and, based on publicly available information, analyzed Banner's stock valuation and prospects, including the

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risks to Banner's business. The Skagit board of directors discussed the valuation, risks and benefits of the Banner indication of interest, including, among other things, the active trading market and liquidity for Banner common stock and Banner's history of paying cash dividends. The Skagit board of directors also discussed the potential effect of a transaction with Banner on Skagit's employees, customers, communities and other constituencies. The Skagit board of directors determined that a merger with Banner had the potential to maximize value for Skagit shareholders and to be in the best interest of Skagit and its other constituents, and that it was in the best interest of Skagit and its shareholders to engage in negotiations with Banner with the goal of obtaining the highest merger consideration possible. At the conclusion of the meeting, the Skagit board of directors directed Sandler O'Neill to propose an exchange ratio of 6.0000 shares of Banner common stock per share of Skagit common stock and confirm certain of the non-financial terms in the Banner indication of interest.

        Following the board meeting, representatives of Sandler O'Neill contacted Peter Conner, Banner's Chief Financial Officer, and communicated the feedback from the Skagit board of directors requesting an increased exchange ratio of 6.0000 shares of Banner common stock per share of Skagit common stock. Banner responded with a revised indication of interest, which included an exchange ratio of 5.8195 shares of Banner common stock per share of Skagit common stock, which represented an implied value of approximately $337.94 per share of Skagit common stock based on Banner's stock price on April 27, 2018.

        On May 3, 2018, the Skagit board of directors held a regularly scheduled meeting to discuss Banner's revised indication of interest. Representatives of Sandler O'Neill participated in the meeting. After review of the updated Banner indication of interest and further discussion of the benefits and risks of a transaction with Banner as compared to Skagit's stand-alone prospects, the Skagit board of directors determined that given the strength of the Banner indication of interest, as well as the fact that none of the other potential counterparties contacted by Sandler O'Neill had expressed actionable interest in a strategic business combination transaction with Skagit, it was in the best interests of Skagit and its shareholders for Skagit to agree to negotiate exclusively with Banner based on the terms of the Banner indication of interest. The Skagit board of directors authorized Ms. Bishop to execute the indication of interest, which was executed later that day.

        Throughout May and June 2018, each of Banner and Skagit conducted due diligence on the other party, with the parties exchanging information concerning, among other things, their businesses, financial positions, strategies and operations. In addition to several conversations between individual members of management of the parties, the management teams of Banner and Skagit held in-person meetings to discuss due diligence topics.

        In late June, 2018, Banner's counsel, Wachtell, Lipton, Rosen & Katz, which we refer to as "Wachtell Lipton," distributed a draft of the merger agreement to MNGD. The draft merger agreement provided, among other things, for a restriction on Skagit's ability to pay any dividends between execution of the merger agreement and closing of the merger and a condition to the consummation of the merger that Skagit have a least a specified minimum amount of shareholders' equity as of the closing.

        On June 28, 2018, the Skagit board of directors held a special meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. At the meeting, the Skagit board of directors received an update on the process from Sandler O'Neill and an overview of the draft merger agreement provided by MNGD.

        On July 3, 2018, the Skagit board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. At the meeting, representatives of Sandler O'Neill led a discussion with the Skagit board of directors regarding due diligence and transaction negotiations, and representatives of MNGD led a discussion regarding the draft merger agreement. After discussion, questions and consideration, the Skagit board of directors authorized Skagit

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management, Sandler O'Neill and MNGD to continue negotiation of the merger agreement, but specifically instructed that management and the advisors pursue the following terms, among others: (i) Skagit would be permitted to pay its ordinary course semi-annual cash dividend prorated on a quarterly basis between execution of the merger agreement and closing of the merger; and (ii) the minimum equity condition would be removed from the merger agreement, or would be replaced with a symmetrical price adjustment mechanism based on Skagit's adjusted shareholders' equity at a specified time prior to closing. Following the meeting, MNGD returned to Wachtell Lipton a revised draft of the merger agreement.

        In mid-July, Mr. Conner contacted a representative of Sandler O'Neill and expressed Banner's continued desire to proceed with the transaction, but indicated that through due diligence, Banner had discovered that certain of its value assumptions underlying the exchange ratio in the Banner indication of interest were not supported. In order to compensate for this development, Banner proposed a revised exchange ratio of 5.5978 shares of Banner common stock per share of Skagit common stock. Thereafter, Wachtell Lipton returned a revised draft of the merger agreement to MNGD, which reflected the revised exchange ratio, accepted Skagit's proposal that Skagit be permitted to pay cash dividends between the execution of the merger agreement and closing of the merger and replaced the minimum equity condition with a price adjustment mechanism.

        On July 13, 2018 the Skagit board of directors held a special meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. At the meeting, representatives of Sandler O'Neill and MNGD led a discussion with the Skagit board of directors regarding the negotiations with Banner and the current draft of the merger agreement. The Skagit board of directors discussed Banner's due diligence findings and Banner's proposed revised terms. The Skagit board of directors also considered the relative merits of Skagit's stand-alone prospects and the proposed transaction with Banner at the revised exchange ratio. Following the discussion, the Skagit board of directors directed Sandler O'Neill to proceed with negotiation of the transaction terms but to propose an enhanced exchange ratio and insist that Skagit be entitled to pay a special dividend to its shareholders prior to closing in an amount equal to any excess of Skagit's shareholders' equity above a specified threshold, effectively making the purchase price adjustment symmetrical. Following the meeting, Daniel R. Peth, the Chairman of the Skagit board of directors, contacted Mr. Grescovich, Banner's President and Chief Executive Officer, to request that Banner consider an increased exchange ratio and representatives of Sandler O'Neill contacted Mr. Conner and provided further support for an increased exchange ratio.

        In the following days, Mr. Conner contacted a representative of Sandler O'Neill and informed him that Banner was prepared to agree to an exchange ratio of 5.6664 shares of Banner common stock per share of Skagit common stock and accept Skagit's proposal regarding the pre-closing special dividend.

        On July 17, 2018, the Skagit board of directors held a regularly scheduled meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. At the meeting, the Skagit board of directors received an update on the negotiations with Banner, including the revised exchange ratio of 5.6664 shares of Banner common stock per share of Skagit common stock. Based on Banner's then-current stock price, the 5.6664 exchange ratio was valued at approximately $346 per share of Skagit common stock, or approximately $190 million in the aggregate. Following discussion, the Skagit board of directors confirmed its desire to continue negotiation of a merger agreement incorporating the revised exchange ratio. Following the meeting, a representative of Sandler O'Neill contacted Mr. Conner and confirmed Skagit's acceptance of the revised exchange ratio of 5.6664 shares of Banner common stock per share of Skagit common stock and MNGD returned a revised draft of the merger agreement to WLRK, which reflected the revised exchange ratio and Skagit's right to pay a pre-closing special dividend.

        Between July 18, 2018 and July 24, 2018, Skagit and Banner, along with their financial and legal advisors, finalized the merger agreement and related documents.

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        On July 25, 2018, the Skagit board of directors held a special meeting. Representatives of Sandler O'Neill and MNGD participated in the meeting. Representatives of MNGD discussed with the directors, as they had previously done, the directors' fiduciary duties and legal obligations in the context of considering the transaction with Banner, reviewed the merger agreement and related documents and provided an updated report on legal due diligence findings with respect to Banner. Skagit management provided an updated report on its business due diligence with respect to Banner. A representative of Sandler O'Neill reviewed the financial aspects of the proposed merger, including discussing the various financial methodologies used in its analysis, and provided Sandler O'Neill's oral opinion to the Skagit board of directors, subsequently confirmed in writing, to the effect that, as of July 25, 2018, the exchange ratio provided in the merger agreement was fair to the holders of Skagit common stock from a financial point of view. The Skagit board of directors asked questions and discussed each of the reports and presentations, considered the relative merits of Skagit's stand-alone prospects and the proposed transaction with Banner on the terms provided in the merger agreement, and considered the effect of the proposed transaction with Banner on Skagit's employees, customers, communities and other constituencies. Following this discussion and the receipt of Sandler O'Neill's oral opinion, the Skagit board of directors unanimously (i) determined that the merger, on the terms and conditions set forth in the merger agreement, was in the best interests of Skagit and its shareholders, (ii) approved entering into the merger agreement and related agreements, (iii) directed that the merger agreement and the transactions contemplated thereby be submitted to the Skagit shareholders for approval at a meeting of the Skagit shareholders and (iv) determined to recommend that the Skagit shareholders approve the merger agreement and the transactions contemplated thereby.

        Later on July 25, 2018, the merger agreement and related documents were executed, and Banner and Skagit publicly announced the merger in a joint press release.

Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors

        At a meeting held on July 25, 2018, the Skagit board of directors unanimously determined that the merger, on the terms and conditions set forth in the merger agreement, was in the best interests of Skagit and its shareholders. In the course of reaching this determination and making the related decision to approve the merger agreement and recommend that Skagit shareholders vote "FOR" the proposal to approve the merger agreement, the board of directors evaluated the merger and the merger agreement in consultation with the management of Skagit and Skagit's financial advisor and legal counsel. In making its determination and reaching its decision to approve the merger agreement and recommend that Skagit shareholders vote "FOR" the proposal to approve the merger agreement, the Skagit board of directors considered a number of factors, including the following factors that the Skagit board of directors viewed as generally supporting its determination and decisions:

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        The Skagit board of directors also considered a number of uncertainties and risks in its deliberations concerning the transactions contemplated by the merger agreement, including the following:

        The foregoing discussion of the reasons that led the Skagit board of directors to approve the merger agreement and recommend that Skagit's shareholders vote in favor of the proposal to approve the merger agreement includes the material factors considered by the Skagit board of directors in connection with its evaluation of the merger, but is not intended to be exhaustive. In reaching its determination to approve and recommend the transaction, the Skagit board of directors based its determination on the totality of the information available to it and did not assign any relative or specific weights to the reasons considered in reaching that determination. Individual directors may have given differing weights to different reasons.

        After careful consideration, the Skagit board of directors unanimously determined that the merger, on the terms and conditions set forth in the merger agreement, was in the best interests of Skagit and its shareholders.

        The Skagit board of directors unanimously recommends that Skagit shareholders vote "FOR" the proposal to approve the merger agreement and "FOR" the proposal to approve adjournment of the

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special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Opinion of Skagit's Financial Advisor

        Skagit retained Sandler O'Neill, pursuant to an engagement letter dated February 6, 2018, to act as an independent financial advisor to the Skagit board of directors in connection with Skagit's consideration of a possible business combination. Sandler O'Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O'Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

        Sandler O'Neill acted as an independent financial advisor in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At the July 25, 2018 meeting at which the Skagit board of directors considered and discussed the terms of the merger agreement and the merger, Sandler O'Neill delivered to the Skagit board of directors its oral opinion, which was subsequently confirmed in writing, to the effect that, as of July 25, 2018, the exchange ratio provided for in the merger agreement was fair to the holders of Skagit common stock from a financial point of view. The full text of Sandler O'Neill's opinion is attached as Annex B to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O'Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Skagit common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

        Sandler O'Neill's opinion speaks only as of the date of the opinion. The opinion was directed to the Skagit board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of Skagit as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O'Neill's opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Skagit common stock and does not address the underlying business decision of Skagit to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Skagit or the effect of any other transaction in which Skagit might engage. Sandler O'Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of Skagit or Banner, or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder, including the exchange ratio to be received by the holders of Skagit common stock. Sandler O'Neill's opinion was approved by Sandler O'Neill's fairness opinion committee.

        In connection with its opinion, Sandler O'Neill reviewed and considered, among other things:

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        Sandler O'Neill also discussed with certain members of the management of Skagit and its representatives the business, financial condition, results of operations and prospects of Skagit and held similar discussions with certain members of the senior management of Banner and its representatives regarding the business, financial condition, results of operations and prospects of Banner.

        In performing its review, Sandler O'Neill relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Sandler O'Neill from public sources, that was provided to Sandler O'Neill by Skagit or Banner or their respective representatives or that was otherwise reviewed by Sandler O'Neill, and Sandler O'Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Sandler O'Neill relied on the assurances of the respective managements of Skagit and Banner that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Sandler O'Neill was not asked to and did not undertake an independent verification of any of such information and Sandler O'Neill did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O'Neill did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Skagit or Banner, or any of their respective subsidiaries, nor was Sandler O'Neill furnished with any such evaluations or appraisals. Sandler O'Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of Skagit or Banner. Sandler O'Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of Skagit or Banner or of the combined entity after the merger and Sandler O'Neill did not review any individual credit files relating to Skagit or Banner. Sandler O'Neill assumed, with Skagit's consent, that the respective allowances for loan losses for both Skagit and Banner were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

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        In preparing its analyses, Sandler O'Neill used certain internal financial projections for Skagit for the year ending December 31, 2018, as provided by the senior management of Skagit, as well as a long-term earnings per share growth rate and dividend payout ratio for the years thereafter, as directed by the senior management of Skagit. In addition, Sandler O'Neill used publicly available consensus analyst net income estimates for Banner for the second half of the year ending December 31, 2018 and the full year ending December 31, 2019, as well as a long-term earnings per share growth rate for the years thereafter and dividend payout ratio for the years ending December 31, 2018 through December 31, 2022, as directed by the senior management of Banner. Sandler O'Neill also received and used in its pro forma analyses certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as well as estimated revenue impacts following the closing of the merger, as directed by the senior management of Banner. With respect to the foregoing information, the respective senior managements of Skagit and Banner confirmed to Sandler O'Neill that such information reflected (or, in the case of the publicly available consensus analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of those respective managements as to the future financial performance of Skagit and Banner, respectively, and the other matters covered thereby, and Sandler O'Neill assumed that the future financial performance reflected in such information would be achieved. Sandler O'Neill expressed no opinion as to such information, or the assumptions on which such information was based. Sandler O'Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of Skagit or Banner since the date of the most recent financial statements made available to Sandler O'Neill. Sandler O'Neill assumed in all respects material to its analysis that Skagit and Banner would remain as going concerns for all periods relevant to Sandler O'Neill's analysis.

        Sandler O'Neill also assumed, with Skagit's consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Skagit, Banner or the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with Skagit's consent, Sandler O'Neill relied upon the advice that Skagit received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Sandler O'Neill expressed no opinion as to any such matters.

        Sandler O'Neill's opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Sandler O'Neill as of, the date thereof. Events occurring after the date thereof could materially affect Sandler O'Neill's opinion. Sandler O'Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O'Neill expressed no opinion as to the trading value of Banner common stock at any time or what the value of Banner common stock would be once it is actually received by the holders of Skagit common stock.

        In rendering its opinion, Sandler O'Neill performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler O'Neill's opinion or the presentation made by Sandler O'Neill to the Skagit board of directors, but is a summary of the material

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analyses performed and presented by Sandler O'Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O'Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O'Neill's comparative analyses described below is identical to Skagit or Banner and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Skagit and Banner and the companies to which they are being compared. In arriving at its opinion, Sandler O'Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O'Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O'Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler O'Neill made its determination as to the fairness of the exchange ratio from a financial point of view on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

        In performing its analyses, Sandler O'Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which are beyond the control of Skagit, Banner and Sandler O'Neill. The analyses performed by Sandler O'Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O'Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Skagit board of directors at its July 25, 2018 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O'Neill's analyses do not necessarily reflect the value of Skagit common stock or the prices at which Skagit common stock or Banner common stock may be sold at any time. The analyses of Sandler O'Neill and its opinion were among a number of factors taken into consideration by the Skagit board of directors in making its determination to approve the merger agreement and should not be viewed as determinative of the exchange ratio or the decision of the Skagit board of directors or management with respect to the fairness of the merger. The type and amount of consideration payable in the merger were determined through negotiation between Skagit and Banner.

Summary of Exchange Ratio and Implied Transaction Metrics

        Sandler O'Neill reviewed the financial terms of the proposed merger. Subject to certain adjustments and termination provisions, as more fully described in the section entitled "The Merger Agreement," at the effective time of the merger, each share of Skagit common stock issued an outstanding prior to the effective time of the merger, except for certain shares of Skagit common stock as specified in the merger agreement, will be converted into the right to receive 5.6664 shares of the common stock of Banner. Based on the closing price of Banner common stock on July 24, 2018 of $62.02, Sandler O'Neill calculated an implied transaction price per share of Skagit common stock of $351.43 and an aggregate implied transaction value of approximately $192.4 million in exchange for all Skagit common stock, restricted stock and options issued and outstanding as of July 24, 2018. Based upon historical financial information for Skagit as of or for the last twelve months (which we refer to

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as "LTM") ended June 30, 2018 and internal financial projections for Skagit for the year ended December 31, 2018, as provided by the senior management of Skagit, Sandler O'Neill calculated the following implied transaction metrics.

Transaction Price / Last Twelve Months Earnings Per Share of Skagit:

    22.5x  

Transaction Price / 2018 Estimated Earnings Per Share:

    18.5x  

Transaction Price / Book Value Per Share of Skagit:

    239 %

Transaction Price / Tangible Book Value Per Share of Skagit:

    239 %

Tangible Book Premium / Core Deposits(1):

    14.5 %

(1)
Core deposits defined as total deposits less time deposits greater than $250,000 and brokered deposits

Skagit Comparable Company Analyses

        Sandler O'Neill used publicly available information as of March 31, 2018, unless otherwise noted, and information provided by Skagit senior management as of June 30, 2018, to compare selected financial information for Skagit with a group of banks selected by Sandler O'Neill (which we refer to as the "Skagit Peer Group"). The Skagit Peer Group consisted of publicly-traded banks headquartered in the western region of the United States with total assets between $750 million and $1.5 billion, and a tangible common equity to tangible assets ratio of less than 12%, excluding announced merger targets. The Skagit Peer Group consisted of the following companies:

Pacific Mercantile Bancorp(1)   United Security Bancshares(1)
Bank of Commerce Holdings(1)   Community West Bancshares
First Northern Community Bancorp   Presidio Bank
CBB Bancorp, Inc.(1)   Avidbank Holdings, Inc.(1)
Oak Valley Bancorp(1)(2)   Coastal Financial Corporation
Seacoast Commerce Banc Holdings(1)(2)   Eagle Bancorp Montana, Inc.
California BanCorp   Citizens Bancorp
Pacific Financial Corporation   Plumas Bancorp(1)

(1)
Financial data as of or for the period ended June 30, 2018

(2)
Return on average tangible common equity calculated assuming amortization of core deposit intangible equal to prior quarter and zero goodwill impairment

        The analysis compared financial information as of June 30, 2018 for Skagit, as provided by Skagit senior management, with the corresponding publicly available data for the Skagit Peer Group as of

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March 31, 2018 or, if available, June 30, 2018, with pricing data as of July 24, 2018. The table below sets forth the data for Skagit and the high, low, mean and median data for the Skagit Peer Group.

 
   
  Skagit Peer Group  
 
  Skagit   High   Low   Mean   Median  

Total Assets (in millions)

  $ 922   $ 1,358   $ 765   $ 968   $ 890  

Market Value (in millions)

      $ 227   $ 103   $ 160   $ 155  

Price/Tangible Book Value

        251 %   122 %   181 %   175 %

Price/Annualized YTD Earnings Per Share

        43.5x     9.0x     17.3x     15.3x  

Current Dividend Yield

        3.4 %   0.0 %   1.0 %   1.2 %

1 Year Price Change

        51.7 %   –2.4 %   23.9 %   23.4 %

YTD Efficiency Ratio

    67.0 %   83.8 %   53.1 %   65.4 %   64.4 %

YTD Net Interest Margin

    3.71 %   5.67 %   3.58 %   4.16 %   4.13 %

YTD Return on Average Assets

    1.14 %   1.81 %   0.28 %   1.11 %   1.03 %

YTD Return on Average Tangible Common Equity

    13.2 %   23.4 %   2.9 %   12.2 %   11.3 %

Tangible Common Equity/Tangible Assets

    8.7 %   11.5 %   7.8 %   9.2 %   9.0 %

Loans/Deposits

    74 %   105 %   61 %   86 %   90 %

Non-performing Assets/Total Assets

    0.34 %   2.53 %   0.00 %   0.56 %   0.44 %

Skagit Net Present Value Analyses

        Sandler O'Neill performed an analysis that estimated the net present value per share of Skagit common stock assuming Skagit performed in accordance with internal financial projections for the year ending December 31, 2018, as provided by the senior management of Skagit, as well as a long-term earnings per share growth rate and dividend payout ratio for the years thereafter, as directed by the senior management of Skagit. To approximate the terminal value of a share of Skagit common stock at December 31, 2022, Sandler O'Neill applied price to 2022 earnings per share multiples ranging from 14.0x to 24.0x and price to December 31, 2022 tangible book value per share multiples ranging from 140% to 215%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 16.0% which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Skagit common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Skagit common stock of $202.45 to $415.73 when applying multiples of earnings per share and $178.55 to $328.56 when applying multiples of tangible book value per share.

 
  Earnings Per Share Multiples  
Discount Rate
  14.0x   16.0x   18.0x   20.0x   22.0x   24.0x  

10.0%

  $ 253.89   $ 286.26   $ 318.63   $ 351.00   $ 383.37   $ 415.73  

11.0%

  $ 244.25   $ 275.33   $ 306.40   $ 337.48   $ 368.56   $ 399.64  

12.0%

  $ 235.07   $ 264.92   $ 294.77   $ 324.61   $ 354.46   $ 384.31  

13.0%

  $ 226.32   $ 255.00   $ 283.68   $ 312.36   $ 341.03   $ 369.71  

14.0%

  $ 217.99   $ 245.55   $ 273.11   $ 300.68   $ 328.24   $ 355.80  

15.0%

  $ 210.04   $ 236.54   $ 263.04   $ 289.54   $ 316.04   $ 342.54  

16.0%

  $ 202.45   $ 227.94   $ 253.43   $ 278.92   $ 304.41   $ 329.89  

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  Tangible Book Value Per Share Multiples  
Discount Rate
  140%   155%   170%   185%   200%   215%  

10.0%

  $ 223.52   $ 244.53   $ 265.53   $ 286.54   $ 307.55   $ 328.56  

11.0%

  $ 215.09   $ 235.26   $ 255.43   $ 275.60   $ 295.77   $ 315.94  

12.0%

  $ 207.07   $ 226.44   $ 245.81   $ 265.18   $ 284.56   $ 303.93  

13.0%

  $ 199.43   $ 218.04   $ 236.65   $ 255.26   $ 273.87   $ 292.48  

14.0%

  $ 192.14   $ 210.02   $ 227.91   $ 245.80   $ 263.69   $ 281.58  

15.0%

  $ 185.19   $ 202.38   $ 219.58   $ 236.78   $ 253.98   $ 271.18  

16.0%

  $ 178.55   $ 195.10   $ 211.64   $ 228.18   $ 244.72   $ 261.26  

        Sandler O'Neill also considered and discussed with the Skagit board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to projected net income. To illustrate this impact, Sandler O'Neill performed a similar analysis assuming Skagit's net income varied from 15% above projections to 15% below projections. This analysis resulted in the following range of per share values for Skagit common stock, applying the price to 2022 earnings per share multiples range of 14.0x to 24.0x referred to above and a discount rate of 12.68%.

 
  Earnings Per
Share Multiples
 
Variance to Earnings
Per Share Projection
  14.0x   16.0x   18.0x   20.0x   22.0x   24.0x  

(15.0%)

  $ 198.58   $ 223.27   $ 247.96   $ 272.65   $ 297.34   $ 322.02  

(10.0%)

  $ 208.75   $ 234.89   $ 261.03   $ 287.17   $ 313.31   $ 339.45  

(5.0%)

  $ 218.91   $ 246.51   $ 274.10   $ 301.69   $ 329.29   $ 356.88  

0.0%

  $ 229.08   $ 258.12   $ 287.17   $ 316.21   $ 345.26   $ 374.31  

5.0%

  $ 239.24   $ 269.74   $ 300.24   $ 330.74   $ 361.24   $ 391.73  

10.0%

  $ 249.41   $ 281.36   $ 313.31   $ 345.26   $ 377.21   $ 409.16  

15.0%

  $ 259.58   $ 292.98   $ 326.38   $ 359.78   $ 393.19   $ 426.59  

        Sandler O'Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Analysis of Selected Merger Transactions

        Sandler O'Neill reviewed a group of selected merger and acquisition transactions involving U.S. banks (which we refer to as the "Nationwide Precedent Transactions"). The Nationwide Precedent Transactions group consisted of bank transactions in the United States announced between January 1, 2017 and July 24, 2018 with disclosed deal values, target assets between $750 million and $1.5 billion and a target tangible common equity to tangible assets ratio of less than 12%.

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        The Nationwide Precedent Transactions group was composed of the following transactions:

Acquiror   Target
Allegiance Bancshares, Inc. (TX)   Post Oak Bancshares, Inc. (TX)(1)
First Interstate BancSystem, Inc. (MT)   Northwest Bancorporation, Inc. (WA)
RBB Bancorp (CA)   First American International Corp. (NY)
BancorpSouth Bank (MS)   Icon Capital Corporation (TX)(1)
Meta Financial Group, Inc. (SD)   Crestmark Bancorp Inc. (MI)(1)
First Citizens BancShares, Inc. (NC)   HomeBancorp, Inc. (FL)(1)
Heartland Financial USA, Inc. (IA)   First Bank Lubbock Bancshares, Inc. (TX)
TriCo Bancshares (CA)   FNB Bancorp (CA)
Independent Bank Group, Inc. (TX)   Integrity Bancshares, Inc. (TX)
Byline Bancorp, Inc. (IL)   First Evanston Bancorp, Inc. (IL)
Ameris Bancorp (GA)   Atlantic Coast Financial Corporation (FL)(1)
Glacier Bancorp, Inc. (MT)   Inter-Mountain Bancorp., Inc. (MT)
Midland States Bancorp, Inc. (IL)   Alpine Bancorporation, Inc. (IL)
Howard Bancorp, Inc. (MD)   1st Mariner Bank (MD)
Pacific Premier Bancorp, Inc. (CA)   Plaza Bancorp (CA)
National Bank Holdings Corporation (CO)   Peoples, Inc. (KS)
Southside Bancshares, Inc. (TX)   Diboll State Bancshares, Inc. (TX)
Carolina Financial Corporation (SC)   First South Bancorp, Inc. (NC)
First Merchants Corporation (IN)   Independent Alliance Banks, Inc. (IN)
Heartland Financial USA, Inc. (IA)   Citywide Banks of Colorado, Inc. (CO)
First Busey Corporation (IL)   First Community Financial Partners, Inc. (IL)
Bryn Mawr Bank Corporation (PA)   Royal Bancshares of Pennsylvania, Inc. (PA)
Renasant Corporation (MS)   Metropolitan BancGroup, Inc. (MS)

(1)
Core deposits defined as total deposits less time deposits greater than $250,000 (for the purpose of calculating tangible book value premium to core deposits)

        Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler O'Neill reviewed the following transaction metrics: transaction price to LTM earnings per share, transaction price to book value per share, transaction price to tangible book value per share and tangible book value premium to core deposits. Sandler O'Neill compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of the Nationwide Precedent Transactions group.

 
   
  Nationwide Precedent Transactions  
 
  Skagit /
Banner
 
 
  High   Low   Mean   Median  

Transaction Price / LTM Earnings Per Share:

    22.5x     28.8x     7.2x     20.0x     20.3x  

Transaction Price / Book Value Per Share:

    239 %   356 %   154 %   203 %   187 %

Transaction Price / Tangible Book Value Per Share:

    239 %   404 %   116 %   212 %   200 %

Tangible Book Value Premium to Core Deposits(1):

    14.5 %   27.1 %   6.7 %   13.9 %   13.9 %

(1)
Tangible book value premium to core deposits calculated as deal value less tangible common equity, as a percentage of core deposits (defined as total deposits less time deposits with balances over $100,000), unless noted above.

Banner Comparable Company Analyses

        Sandler O'Neill used publicly available information as of March 31, 2018 unless otherwise noted, and information provided by Banner senior management as of June 30, 2018, to compare selected

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financial information for Banner with a group of banks selected by Sandler O'Neill (which we refer to as the "Banner Peer Group"). The Banner Peer Group consisted of selected major exchange-traded banks headquartered in the western region of the United States with assets between $5 billion and $20 billion, excluding announced merger targets and excluding Cathay General Bancorp, Hanmi Financial Corporation, Hope Bancorp Inc., HomeStreet, Inc., Luther Burbank Corporation and Washington Federal, Inc. due to lack of similarity in business models and/or operating strategies of these companies when compared with Banner. The Banner Peer Group consisted of the following companies:

Bank of Hawaii Corporation(1)   Pacific Premier Bancorp, Inc.(1)(2)
Columbia Banking System, Inc.   CVB Financial Corp.(1)(2)
First Interstate BancSystem, Inc.(2)   Opus Bank(1)
Glacier Bancorp, Inc.(1)   Central Pacific Financial Corp.
Banc of California, Inc.   Westamerica Bancorporation(1)

(1)
Financial data as of or for the period ended June 30, 2018

(2)
Financials not adjusted to reflect pending or recently completed acquisitions. Market value reflects shares issued in transactions which have closed since March 31, 2018

        The analysis compared financial information as of June 30, 2018 for Banner, as provided by Banner senior management, with corresponding publicly available data for the Banner Peer Group as of March 31, 2018, or if available, June 30, 2018, with pricing data as of July 24, 2018. The table below sets forth the data for Banner and the high, low, mean and median data for the Banner Peer Group.

 
   
  Banner Peer Group  
 
  Banner   High   Low   Mean   Median  

Total Assets (in millions)

  $ 10,379   $ 17,124   $ 5,578   $ 9,883   $ 9,244  

Market Value (in millions)

  $ 2,010   $ 3,721   $ 858   $ 2,213   $ 2,396  

Price/Tangible Book Value

    203 %   345 %   142 %   249 %   271 %

Price/Annualized YTD Earnings Per Share

    16.4x     22.3x     15.1x     18.1x     17.5x  

Price/Estimated 2018 Earnings Per Share

    17.4x     33.4x     14.1x     18.8x     17.5x  

Price/Estimated 2019 Earnings Per Share

    15.9x     20.2x     11.8x     15.3x     14.9x  

Current Dividend Yield

    2.3 %   2.9 %   0.0 %   2.3 %   2.5 %

1 Year Price Change

    10.5 %   25.7 %   –7.3 %   7.2 %   8.0 %

YTD Efficiency Ratio

    66.5 %   78.7 %   39.7 %   57.6 %   55.9 %

YTD Net Interest Margin

    4.37 %   4.99 %   2.94 %   3.60 %   3.45 %

YTD Return on Average Assets

    1.21 %   1.71 %   0.33 %   1.17 %   1.27 %

YTD Return on Average Tangible Common Equity

    12.3 %   18.0 %   2.2 %   13.8 %   14.9 %

Tangible Common Equity/Tangible Assets

    9.8 %   12.1 %   6.6 %   8.9 %   8.9 %

Loans/Deposits

    91 %   100 %   25 %   77 %   79 %

Non-performing Assets/Total Assets

    0.16 %   0.90 %   0.08 %   0.43 %   0.33 %

Banner Stock Trading History

        Sandler O'Neill reviewed the historical stock price performance of Banner common stock for the one-year and three-year periods ended July 24, 2018. Sandler O'Neill then compared the relationship between the stock price performance of Banner's common stock to movements in the Banner Peer Group (as described above) as well as certain stock indices.

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Banner One-Year Stock Price Performance

 
  Beginning
July 24, 2017
  Ending
July 24, 2018
 

Banner

    100.0 %   110.5 %

Banner Peer Group

    100.0 %   108.0 %

NASDAQ Bank

    100.0 %   113.3 %

S&P 500

    100.0 %   114.2 %


Banner Three-Year Stock Price Performance

 
  Beginning
July 24, 2015
  Ending
July 24, 2018
 

Banner

    100.0 %   131.9 %

Banner Peer Group

    100.0 %   131.3 %

NASDAQ Bank

    100.0 %   147.0 %

S&P 500

    100.0 %   135.6 %

Banner Net Present Value Analyses

        Sandler O'Neill performed an analysis that estimated the net present value per share of Banner common stock assuming that Banner performed in accordance with publicly available consensus analyst net income estimates for Banner for the second half of the year ending December 31, 2018 and the full year ending December 31, 2019, as well as a long-term earnings per share growth rate for the years thereafter and dividend payout ratio for the years ending December 31, 2018 through December 31, 2022, as directed by the senior management of Banner. To approximate the terminal value of Banner common stock at December 31, 2022, Sandler O'Neill applied price to 2022 earnings per share multiples ranging from 14.5x to 22.0x and price to December 31, 2022 tangible book value per share multiples ranging from 160% to 260%. The terminal values were then discounted to present values using different discount rates ranging from 7.0% to 13.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Banner common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Banner common stock of $46.71 to $84.50 when applying multiples of earnings per share and $45.35 to $86.98 when applying multiples of tangible book value per share.

 
  Earnings Per Share Multiples  
Discount Rate
  14.5x   16.0x   17.5x   19.0x   20.5x   22.0x  

7.0%

  $ 58.67   $ 63.83   $ 69.00   $ 74.17   $ 79.34   $ 84.50  

8.0%

  $ 56.42   $ 61.38   $ 66.33   $ 71.29   $ 76.24   $ 81.20  

9.0%

  $ 54.28   $ 59.04   $ 63.79   $ 68.55   $ 73.30   $ 78.06  

10.0%

  $ 52.25   $ 56.81   $ 61.38   $ 65.94   $ 70.50   $ 75.07  

11.0%

  $ 50.31   $ 54.69   $ 59.08   $ 63.46   $ 67.84   $ 72.22  

12.0%

  $ 48.47   $ 52.68   $ 56.89   $ 61.09   $ 65.30   $ 69.51  

13.0%

  $ 46.71   $ 50.75   $ 54.80   $ 58.84   $ 62.88   $ 66.93  

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  Tangible Book Value Per Share Multiples  
Discount Rate
  160%   180%   200%   220%   240%   260%  

7.0%

  $ 56.91   $ 62.92   $ 68.94   $ 74.95   $ 80.97   $ 86.98  

8.0%

  $ 54.74   $ 60.51   $ 66.27   $ 72.04   $ 77.81   $ 83.58  

9.0%

  $ 52.67   $ 58.20   $ 63.74   $ 69.27   $ 74.81   $ 80.34  

10.0%

  $ 50.70   $ 56.02   $ 61.33   $ 66.64   $ 71.95   $ 77.26  

11.0%

  $ 48.83   $ 53.93   $ 59.03   $ 64.13   $ 69.23   $ 74.33  

12.0%

  $ 47.05   $ 51.94   $ 56.84   $ 61.74   $ 66.64   $ 71.53  

13.0%

  $ 45.35   $ 50.05   $ 54.76   $ 59.46   $ 64.17   $ 68.87  

        Sandler O'Neill also considered and discussed with the Skagit board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O'Neill performed a similar analysis assuming Banner's net income varied from 15% above estimates to 15% below estimates. This analysis resulted in the following range of per share values for Banner common stock, applying the price to 2022 earnings per share multiples range of 14.5x to 22.0x referred to above and a discount rate of 9.69%.

 
  Earnings Per Share Multiples  
Variance to Net Income Estimate
  14.5x   16.0x   17.5x   19.0x   20.5x   22.0x  

(15.0%)

  $ 46.17   $ 50.10   $ 54.02   $ 57.95   $ 61.88   $ 65.81  

(10.0%)

  $ 48.40   $ 52.56   $ 56.72   $ 60.88   $ 65.04   $ 69.20  

(5.0%)

  $ 50.64   $ 55.03   $ 59.42   $ 63.81   $ 68.20   $ 72.59  

0.0%

  $ 52.87   $ 57.49   $ 62.11   $ 66.73   $ 71.36   $ 75.98  

5.0%

  $ 55.10   $ 59.96   $ 64.81   $ 69.66   $ 74.51   $ 79.37  

10.0%

  $ 57.34   $ 62.42   $ 67.50   $ 72.59   $ 77.67   $ 82.76  

15.0%

  $ 59.57   $ 64.89   $ 70.20   $ 75.52   $ 80.83   $ 86.15  

        Sandler O'Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis

        Sandler O'Neill analyzed certain potential pro forma effects of the merger. In performing this analysis, Sandler O'Neill utilized the following information and assumptions: (i) the merger closes on December 31, 2018; (ii) certain internal financial projections for Skagit for the year ending December 31, 2018, as provided by the senior management of Skagit, as well as a long-term earnings per share growth rate and dividend payout ratio for the years thereafter, as directed by the senior management of Skagit; (iii) publicly available consensus analyst net income estimates for Banner for the second half of the year ending December 31, 2018 and the full year ending December 31, 2019, as well as a long-term earnings per share growth rate for the years thereafter and dividend payout ratio for Banner for the years ending December 31, 2018 through December 31, 2022, as directed by the senior management of Banner; and (iv) certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as well as estimated revenue impacts following the closing of the merger, as directed by the senior management of Banner. The analysis indicated that the merger would be accretive to Banner's earnings per share (excluding one-time transaction costs and expenses) in the years ending December 31, 2019 through December 31, 2022, and dilutive to Banner's estimated tangible book at closing.

        In connection with this analysis, Sandler O'Neill considered and discussed with the Skagit board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted

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that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O'Neill's Relationship

        Sandler O'Neill acted as Skagit's financial advisor in connection with the merger and will receive a fee for its services in an amount equal to 1.25% of the aggregate purchase price, which fee at the time of announcement was approximately $2.4 million and is contingent upon consummation of the merger. Sandler O'Neill also received a fee of $300,000 for rendering its opinion, which fairness opinion fee will be credited in full towards the transaction fee becoming due and payable to Sandler O'Neill on the day of closing of the merger. Skagit has also agreed to indemnify Sandler O'Neill against certain claims and liabilities arising out of Sandler O'Neill's engagement and to reimburse Sandler O'Neill for certain of its out-of-pocket expenses incurred in connection with Sandler O'Neill's engagement. In the two years preceding the date of Sandler O'Neill's opinion, Sandler O'Neill did not provide any other investment banking services to Skagit nor did Sandler O'Neill provide any investment banking services to Banner in the two years preceding the date thereof. In the ordinary course of Sandler O'Neill's business as a broker-dealer, Sandler O'Neill may purchase securities from and sell securities to Banner and its affiliates. Sandler O'Neill may also actively trade the equity and debt securities of Banner and its affiliates for Sandler O'Neill's own account and for the accounts of Sandler O'Neill's customers.

Certain Banner and Skagit Unaudited Prospective Financial Information

        Banner and Skagit do not, as a matter of course, publicly disclose forecasts or internal projections as to future performance, revenues, earnings, financial condition or other results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates. However, this proxy statement/prospectus contains certain limited unaudited prospective financial information for Banner and Skagit (which we refer to as the "projections") to give Skagit shareholders access to certain information provided to Banner and Skagit and their boards of directors, respectively, and the parties' respective financial advisors in connection with the merger.

        The projections were not prepared with a view toward public disclosure. As a result, the inclusion of the projections in this proxy statement/prospectus should not be regarded as an indication that Banner, Skagit or any other recipient of the projections considered, or now considers, them to be necessarily predictive of actual future results, or that it should be construed as financial guidance, and it should not be relied on as such. This information was prepared solely for internal use and is subjective in many respects. While presented with numeric specificity, the projections reflect numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to Banner's and Skagit's businesses, all of which are difficult to predict and many of which are beyond Banner's and Skagit's control. In addition, since the projections cover multiple years, such information by its nature becomes subject to greater uncertainty with each successive year.

        The projections also reflect assumptions as to certain business decisions that are subject to change. The projections reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the projections constitute forward-looking information and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective information, including, but not limited to, Banner's performance, Skagit's performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in Banner's reports filed with the SEC. For other factors that could cause the actual results to differ from the results forecasted in the projections, please see the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in this proxy statement/prospectus.

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        The projections were not prepared with a view toward complying with GAAP, the guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of financial information. Neither Moss Adams LLP, which serves as Banner's current independent registered public accounting firm and as Skagit's independent auditor, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the projections included below, or expressed any opinion or any other form of assurance on such information or its achievability.

        Furthermore, the projections do not take into account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the merger agreement or the possible financial and other effects of the merger (other than with respect to certain projections related to the surviving corporation set forth under "—Pro Forma Financial Analysis" below), and do not attempt to predict or suggest future results of the surviving corporation of the merger or give effect to the merger, including the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with consummating the merger, the potential synergies that may be achieved by Banner as a result of the merger, the effect on Banner or Skagit of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Neither Banner nor Skagit can give any assurance that, had the projections been prepared either as of the date of the merger agreement or as of the date of this proxy statement/prospectus, similar estimates and assumptions would be used. Further, the projections do not take into account the effect of any possible failure of the merger to occur. None of Banner, Skagit, Sandler O'Neill, D.A. Davidson & Co., Banner's financial advisor, which we refer to as "Davidson," nor any of their affiliates intends to, and each of them disclaims any obligation to, update, revise or correct the projections if they are or become inaccurate (even in the short term). The inclusion of the projections herein should not be deemed an admission or representation by Banner or Skagit that they are viewed by Banner or Skagit as material information of Banner or Skagit, respectively, particularly in light of the inherent risks and uncertainties associated with such projections. None of Banner, Skagit, Sandler O'Neill, Davidson or their respective representatives has made, makes or is authorized in the future to make any representation to any shareholder of Banner or Skagit or other person regarding Banner's or Skagit's ultimate performance compared to the information contained in the projections or that the forecasted results will be achieved. The projections included below are being provided because they were made available to and considered by Sandler O'Neill and Davidson and Skagit and Banner and their respective boards of directors in connection with the merger.

        In light of the foregoing, and considering that the special meeting will be held several months after the projections were prepared, as well as the uncertainties inherent in any forecasted information, Skagit shareholders are cautioned not to place unwarranted reliance on such information, and Skagit shareholders are urged to review Banner's most recent SEC filings and other documents incorporated herein by reference for a description of Banner's reported financial results and the financial information of Skagit included in this proxy statement/prospectus. See "Where You Can Find More Information."

Certain Projections Regarding Skagit

        Skagit provided to Sandler O'Neill and Sandler O'Neill used in its analysis, and Skagit provided to Banner and Davidson, an estimated earnings per share for Skagit of $18.97 for the year ending December 31, 2018, as well as an assumed long-term earnings per share growth rate of 7% for the years ending December 31, 2019 through December 31, 2022.

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Certain Projections Regarding Banner

        Sandler O'Neill discussed with Banner and Skagit and used in its analysis an estimated net income for Banner of $55 million for the second half of the year ending December 31, 2018 and $125 million for the full year ending December 31, 2019, which consisted of consensus "street estimates," as well as an assumed long-term earnings per share growth rate of 7% for the years ending December 31, 2020 through December 31, 2022.

Pro Forma Financial Analysis

        Banner provided the following assumptions for purposes of a pro forma merger analysis to Skagit and Sandler O'Neill:

        Purchase Accounting Adjustment Assumptions:

        Pro Forma Capital Assumptions:

        Transaction Expense and Cost Savings Assumptions:

        Other Assumptions:

Closing and Effective Time of the Merger

        Unless the parties otherwise mutually agree, the closing of the merger will take place at 10:00 a.m. Seattle time on a date which will be no later than three (3) business days after satisfaction or waiver (subject to applicable law) of all of the conditions set forth in the merger agreement. See the section entitled "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 94 for a more complete description of the conditions that must be satisfied prior to closing. The date on which the closing occurs sometimes is referred to in this proxy statement/prospectus as the closing date.

        On the closing date, the parties will execute and file articles of merger with the Secretary of State of the State of Washington and a plan of merger. The merger will become effective at such time as designated in the articles of merger and plan of merger, or if no time is designated, at the time of filing of the articles of merger and plan of merger.

Interests of Directors and Executive Officers of Skagit in the Merger

        In considering the recommendation of the Skagit board of directors that you vote to approve the merger agreement, you should be aware that some of Skagit's directors and executive officers may have certain interests, including financial interests, in the merger that may be different from, or in addition

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to, those of Skagit shareholders generally. The Skagit board of directors was aware of these interests, and considered them, among other matters, in reaching its decisions to approve the merger agreement and to recommend that you vote in favor of approving the merger agreement. See the sections entitled "The Merger—Background of the Merger" and "The Merger—Skagit's Reasons for the Merger; Recommendation of the Skagit Board of Directors." These interests are described in more detail below, and certain of them are quantified in the narrative below.

Voting and Support Agreements

        In connection with the execution of the merger agreement, Banner entered into voting and support agreements with the directors and executive officers of Skagit and/or their affiliates, in which each such person agreed, among other things, to vote the shares of Skagit common stock owned beneficially or of record by such person and over which such person has voting power in favor of the merger agreement and the proposal to adjourn or postpone the special meeting of the Skagit shareholders to a later date if there are not sufficient votes to approve the merger agreement, and against any alternative acquisition proposal or other action that would prevent, impede, interfere with, delay, postpone, discourage or frustrate the purposes of or adversely affect the consummation of the transactions contemplated by the merger agreement, as well as certain other restrictions with respect to the voting and transfer of such person's shares of Skagit common stock. The voting and support agreements entered into by non-management directors also include non-competition provisions pursuant to which such persons agree, for a period of two years from the closing of the merger, not to become involved with or serve a competing business that has a branch office or other office in, or does materially business in, any county in the State of Washington in which Skagit Bank or any banking subsidiary of Banner had commercial banking offices as of July 25, 2018 (which we refer to as a "competing business") or in any manner otherwise become involved in the organization, pre-opening phases, or formation of a competing business (other than using services of a competing business that are generally available to the public). Each of the voting and support agreements also contains non-solicitation provisions pursuant to which the applicable director or executive officer agrees (i) not to solicit or hire any employees of Banner, Skagit or any of their subsidiaries to participate in a competing business or to resign or terminate their employment with Banner, Skagit or any of their subsidiaries and (ii) not to solicit customers of Banner, Skagit or any of their subsidiaries to transfer their business to a competing business or to cease conducting business with Banner, Skagit or any of their subsidiaries. The voting and support agreements also contain provisions relating to the non-disclosure of confidential information of Banner, Skagit or any of their subsidiaries obtained by the shareholder while serving as a director, officer, employee or shareholder of Skagit or any of its subsidiaries.

        The voting and support agreements entered into by Cheryl R. Bishop, Skagit's Chief Executive Officer, Ken Johnson, Skagit's President and Chief Operating Officer, Richard C. Humphreys, Skagit's Chief Credit Officer, and Carla F. Tucker, Skagit's Chief Financial Officer, do not contain the non-competition provisions described above but do contain the provisions relating to non-solicitation and confidentiality described above.

        For more information regarding the voting and support agreements, see "The Merger Agreement—Voting and Support Agreements" beginning on page 98 and Annex D to this proxy statement/prospectus which contains a form of the voting and support agreements.

        A total of approximately 130,630 shares of Skagit common stock, or approximately 24.0% of the shares of Skagit common stock outstanding as of the record date for the special meeting, were subject to such voting and support agreements.

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Treatment of Skagit Stock Options

        At the effective time of the merger, each Skagit option that is outstanding as of immediately prior to the effective time of the merger will fully vest and be canceled and converted into the right to receive a cash payment, without interest and less applicable withholding taxes, equal to the product of (i) the number of shares of Skagit common stock subject to the Skagit option as of immediately prior to the effective time of the merger and (ii) the excess, if any, of (1) the product of the exchange ratio and the Banner average closing price over (2) the exercise price per share of Skagit common stock subject to such Skagit option as of the effective time of the merger.

        None of Skagit's four executive officers is expected to hold any unvested equity awards as of the closing date.

Change in Control Agreements

        Skagit Bancorp and Skagit Bank (either and/or both being referred to as the "Company" for purposes of the following discussion) have previously entered into change in control severance agreements with each of Skagit's executive officers.

        The agreements provide that, if the Company terminates the executive officer's employment without "cause" or the executive officer resigns for "good reason" (each as defined in the applicable agreement) and, within 18 months thereafter, the Company enters into an agreement providing for a change in control or any party announces or is required to announce a prospective change in control, which change in control is consummated, then the Company will pay the executive officer a single cash payment in an amount equal to two times the greater of (a) the highest compensation received by the executive officer during any of the most recent three calendar years, and (b) 130% of the executive officer's base compensation as of the date of termination of employment.

        In addition, if a change in control is consummated while the executive officer is employed by the Company, then, upon the closing of such change in control (regardless of whether the executive officer continues his or her employment with the acquiring company), the Company will pay the executive officer a single cash payment in an amount equal to two times the greater of (a) the highest compensation received by the executive officer during any of the three most recent calendar years, and (b) 130% of the executive officer's base compensation as of the date on which the closing occurs.

        The agreements provide that, if payments under the agreements, together with any other payments or benefits received by the executive officer from the Company or the acquiring company, would cause such agreement payments to be "parachute payments" (within the meaning of the Code), then such agreement payments will be reduced so that no agreement payments constitute "parachute payments."

        Quantification of Payments.    The estimated aggregate amount that would be payable to Skagit's four executive officers if the effective time occurred on August 21, 2018 under their change in control severance agreements is $3,016,159.

Prorated Bonuses

        Under the merger agreement, Skagit Bank is entitled to pay prorated awards under the annual or quarterly cash incentive plans of Skagit Bank as of the closing for the 12-month or 3-month, respectively, period in which the closing occurs to the extent such amounts are accrued in the final closing statement delivered under the merger agreement and Skagit's financial statements in the ordinary course of business, consistent with past practice.

        Quantification of Payments.    The estimated aggregate amount that would be payable to Skagit's four executive officers (based on target performance) if the effective time were to occur on August 21, 2018 is $183,970.

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Prorated 401(k) Plan Contributions

        Under the merger agreement, Skagit Bank is entitled to make prorated matching and profit-sharing contributions to Skagit Bank's 401(k) plan for the year in which the closing occurs immediately prior to the closing for all participants in the plan to the extent such amounts are accrued in the final closing statement delivered under the merger agreement and Skagit's financial statements in the ordinary course of business, consistent with past practice.

        Quantification of Payments.    The estimated aggregate amount that would be contributed to Skagit Bank's 401(k) plan for the benefit of Skagit's four executive officers if the effective time were to occur on August 21, 2018 is $42,132.

Cheryl R. Bishop Service on Banner Board

        The merger agreement provides that effective immediately following the closing of the merger, Banner will take such actions as are necessary to appoint Cheryl R. Bishop to the board of directors of Banner.

Indemnification and Insurance

        As described under "The Merger Agreement—Indemnification and Insurance," the merger agreement provides that, for a period of six (6) years from and after the effective time of the merger, to the fullest extent permitted by applicable law, the surviving corporation will indemnify and hold harmless, to the extent such persons are indemnified as of July 25, 2018 by Skagit pursuant to Skagit's articles of incorporation and bylaws, or pursuant to certain indemnification agreements in effect on July 25, 2018, and will also advance expenses as incurred to the extent provided under Skagit's articles of incorporation and bylaws (or such indemnification agreements), each present and former director and officer of Skagit and its subsidiaries (in each case, when acting in such capacity) against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, whether arising before or after the effective time of the merger, arising out of the fact that such person is or was a director or officer of Skagit or any of its subsidiaries and pertaining to matters existing or occurring at or prior to the effective time of the merger, including the transactions contemplated by the merger agreement, subject to such person providing an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

        The merger agreement requires that, for a period of six (6) years after the effective time of the merger, the surviving corporation maintain Skagit's existing directors' and officers' liability insurance policies, or policies with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the insured, with respect to claims arising from facts or events which occurred at or before the effective time of the merger. However, the surviving corporation is not required to expend, on an annual basis, an amount in excess of 250% of the current annual premium paid as of July 25, 2018 by Skagit for such insurance, which we refer to as the "premium cap," and if such premiums for such insurance would at any time exceed that amount, then the surviving corporation will maintain policies of insurance which, in the surviving corporation's good faith determination, provide the maximum coverage available at an annual premium not exceeding the premium cap. In lieu of the foregoing, Banner or Skagit, in consultation with, but only upon the consent of Banner (which consent may not be unreasonably withheld, conditioned or delayed), may (and at the request of Banner, Skagit will) obtain at or prior to the effective time of the merger a six-year "tail" policy under Skagit's existing directors' and officers' liability insurance policy providing equivalent coverage to that described above, if and to the extent that the same may be obtained for an amount that, in the aggregate, does not exceed the premium cap.

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The Banner Board of Directors After the Merger

        The merger agreement provides that effective immediately following the effective time of the merger, Banner will appoint Cheryl R. Bishop, Skagit's Chief Executive Officer, to serve on the Banner board of directors.

        Ms. Bishop, 69, has been a director of Skagit and Skagit Bank since 2006 and 1991, respectively. She was appointed Chief Executive Officer of Skagit Bank in 2004 and Chief Executive Officer of Skagit in 2006. She also served as President of Skagit Bank from 2006 to 2015. Ms. Bishop began her career with Skagit Bank in September 1971 as Operations Officer and teller, and held a variety of positons with Skagit Bank prior to becoming Chief Executive Officer. Ms. Bishop provides extensive community banking experience and expertise. Ms. Bishop is active in the communities Skagit serves and has served on the boards of various banking professional associations. She currently serves on the board of the Washington Bankers Association.

Regulatory Approvals

        Completion of the merger and the bank merger are subject to the receipt of all approvals and/or waivers required to complete the transactions contemplated by the merger agreement, including from the Federal Reserve Board, the FDIC, and the DFI. Notifications and/or applications requesting approval may also be submitted to various other federal and state regulatory authorities and self-regulatory organizations.

        Although we currently believe that we should be able to obtain all required regulatory approvals and/or waivers in a timely manner, we cannot be certain when or if we will obtain them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to Banner after the completion of the merger or will constitute a materially burdensome regulatory condition for purposes of the merger agreement.

        On August 16, 2018, Banner requested a waiver of the approval requirement with the Federal Reserve Board, and, on August 27, 2018, the Federal Reserve Board approved that waiver request. On August 16, 2018, Banner Bank and Skagit Bank filed the required applications with the FDIC and the DFI.

        Federal Reserve Board.    Completion of the merger is subject, among other things, to approval by the Federal Reserve Board pursuant to Section 3 of the Bank Holding Company Act, which we refer to as the "BHC Act," unless the Federal Reserve Board waives that requirement. On August 16, 2018, Banner requested a waiver of this prior approval requirement using procedures outlined in applicable regulations to confirm that an application and approval is not required under Section 3 of the BHC Act. On August 27, 2018, the Federal Reserve Board approved that waiver request. Accordingly, no application to the Federal Reserve is required under Section 3 of the BHC Act.

        Federal Deposit Insurance Corporation.    The prior approval of the FDIC is required under the federal Bank Merger Act to merge Skagit Bank with and into Banner Bank. In evaluating an application filed under the Bank Merger Act, the FDIC generally considers: (i) the competitive impact of the transaction; (ii) financial and managerial resources of the banks party to the bank merger; (iii) the convenience and needs of the community to be served and the record of the banks under the Community Reinvestment Act of 1977, which we refer to as the "CRA," including their CRA performance ratings; (iv) the banks' effectiveness in combating money-laundering activities; and (v) the extent to which the bank merger would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. In connection with its review, the FDIC provides an opportunity for public comment on the application and is authorized to hold a public meeting or other proceeding if it determines that would be appropriate.

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        Banner Bank and Skagit Bank each received an overall "satisfactory" CRA performance rating in their most recent respective CRA performance examinations, as did Islanders Bank, another wholly owned banking subsidiary of Banner.

        The Bank Merger Act and FDIC regulations require published notice of, and the opportunity for public comment on, the application to the FDIC and authorize the FDIC to hold a public hearing or meeting if the FDIC determines that a hearing or meeting would be appropriate. The FDIC takes into account the views of third-party commenters, particularly on the subject of the merging parties' service to their communities, and any hearing, meeting or comments provided by third parties could prolong the period during which the application is under review by the FDIC.

        Transactions approved by the FDIC generally may not be completed until thirty (30) days after the approval of the FDIC is received, during which time the Department of Justice, which we refer to as the "DOJ," may challenge the transaction on antitrust grounds. With the approval of the FDIC and the concurrence of the DOJ, the waiting period may be reduced to no less than fifteen (15) days. The commencement of an antitrust action would stay the effectiveness of such an approval unless a court specifically ordered otherwise. In reviewing the merger, the DOJ could analyze the merger's effect on competition differently than the FDIC, and thus it is possible that the DOJ could reach a different conclusion than the FDIC does regarding the merger's effects on competition. A determination by the DOJ not to object to the merger may not prevent the filing of antitrust actions by private persons or state attorneys general.

        Washington State Department of Financial Institutions, Division of Banks.    The bank merger is subject to and must comply with the requirements of the Revised Code of Washington, which we refer to as the "RCW." Under Section 30A.49 of the RCW, notice of the bank merger must be provided to the DFI along with a copy of the Bank Merger Act application filed with the FDIC. Under Section 30A.49 of the RCW, the Director of the Banks shall approve the notice if it appears that: (1) the resulting state bank (which in this case would be Banner Bank) meets the requirements of state law as to the formation of a new state bank; and (2) the agreement between the banks (i) provides an adequate capital structure, (ii) is fair and (iii) is not contrary to the public interest. If the Director of Banks disapproves an agreement, then he or she shall state his or her objections and give an opportunity to the bank to amend the agreement to obviate such objections.

        Additional Regulatory Approvals and Notices.    Notifications and/or applications requesting approval of the merger and/or the bank merger may be submitted to various other federal and state regulatory authorities and self-regulatory organizations. However, Skagit and Banner are not currently aware of any other material governmental approvals or actions that are required prior to the parties' completion of the merger.

        Shareholders should note that the approval of any notice or application merely implies satisfaction of regulatory criteria for approval, and does not include review of the merger from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed merger.

        Skagit and Banner believe that the proposed merger does not raise substantial antitrust or other significant regulatory concerns and that we will be able to obtain all requisite regulatory approvals, although Skagit and Banner cannot provide any assurance as to whether the requisite regulatory approvals will be obtained, and, if obtained, as to the date of receipt of any of these approvals, the terms thereof or the absence of any litigation challenging them. There can be no assurance that the regulatory approvals discussed above will be received on a timely basis or at all, or as to the ability of Banner and Skagit to obtain the approvals on satisfactory terms or as to the absence of litigation challenging such approvals.

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Accounting Treatment

        Banner prepares its financial statements in accordance with GAAP. The merger will be accounted for using the acquisition method of accounting. Banner will be treated as the acquirer for accounting purposes.

NASDAQ Market Listing

        The shares of Banner common stock to be issued in the merger will be listed for trading on the NASDAQ.

Dividends/Distributions

        From and after July 25, 2018, the date of the merger agreement, Skagit may not, and may not permit its subsidiaries to, without the prior written consent of Banner, make, declare or pay or set a record date for any dividend or any other distribution on any shares of its capital stock or other equity or voting securities or certain other securities of Skagit or its subsidiaries other than (i) dividends paid by any subsidiary of Skagit to Skagit or by Skagit to any wholly owned subsidiary of Skagit, (ii) quarterly dividends at a rate not in excess of $1.50 per share of Skagit common stock, (iii) a special cash dividend that the board of directors of Skagit may declare and pay immediately prior to the closing in the event Skagit's adjusted shareholders' equity, as finally determined pursuant to the merger agreement, exceeds $80 million, in an amount not to exceed such excess and (iv) the acceptance of Skagit common stock as payment for the exercise price of Skagit options or for withholding taxes incurred in connection with the exercise of Skagit options or the vesting or settlement of Skagit equity awards outstanding as of July 25, 2018, in each case, in accordance with past practice and the terms of the applicable award agreements as in effect on July 25, 2018.

        No dividends or other distributions declared or made with respect to Banner common stock will be paid to the holder of any unsurrendered certificate or book entry share that evidenced ownership of shares of Skagit common stock until such holder properly surrenders such shares. See the section entitled "The Merger Agreement—Exchange and Payment Procedures" beginning on page 81 of this proxy statement/prospectus.

Dissenters' Rights

        In accordance with Chapter 13 of the WBCA, Skagit shareholders have the right to dissent from the merger and to receive payment in cash for the "fair value" of their Skagit common stock. Skagit shareholders should recognize that "fair value" of their Skagit common stock as determined pursuant to Chapter 13 of the WBCA could be higher, lower or the same as the merger consideration.

        Skagit shareholders electing to exercise dissenters' rights must comply with the provisions of Chapter 13 of the WBCA in order to perfect their rights. Skagit and Banner will require strict compliance with the statutory procedures. If a Skagit shareholder fails to meet any of the requirements for assertion of dissenters' rights, such shareholder will not be entitled to payment in cash for the "fair value" for such shareholder's shares under the WBCA. The following is intended as a brief summary of the material provisions of the Washington statutory procedures required to be followed by a Skagit shareholder in order to dissent from the merger and perfect the shareholder's dissenters' rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Chapter 13 of the WBCA, the full text of which is set forth in Annex C.

        A shareholder who wishes to assert dissenters' rights must (i) deliver to Skagit before the vote of Skagit shareholders is taken notice of the shareholder's intent to demand payment for the shareholder's shares if the merger is effected, and (ii) not vote such shares in favor of the approval of the merger

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agreement. A shareholder wishing to deliver such notice should hand deliver or mail such notice to Skagit at the following address prior to the special meeting:

Nancy K. Galbreath, Executive Assistant to the CEO
Skagit Bancorp, Inc.
301 East Fairhaven Avenue
Burlington, Washington 98233
(360) 755-0411

or deliver such notice at the special meeting prior to the vote being taken by Skagit shareholders.

        A shareholder who wishes to exercise dissenters' rights generally must dissent with respect to all the shares the shareholder owns or over which the shareholder has power to direct the vote. However, if a record shareholder is a nominee for multiple beneficial shareholders some of whom wish to dissent and some of whom do not, then the record holder may dissent with respect to all the shares beneficially owned by any one person by delivering to Skagit a notice of the name and address of each person on whose behalf the record shareholder asserts dissenters' rights. A beneficial shareholder may assert dissenters' rights directly by submitting to Skagit the record shareholder's written consent and by dissenting with respect to all the shares of which such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote.

        A shareholder who does not deliver to Skagit prior to the vote being taken by Skagit shareholders a notice of the shareholder's intent to demand payment for the "fair value" of the shares will lose the right to exercise dissenters' rights. In addition, any shareholder electing to exercise dissenters' rights must either vote against the approval of the merger agreement or abstain from voting. Submitting a properly signed proxy card that is received prior to the vote at the special meeting (and is not properly revoked) that does not direct how the shares of Skagit common stock represented by proxy are to be voted will constitute a vote in favor of the approval of the merger agreement and a waiver of such shareholder's statutory dissenters' rights.

        If the merger agreement is approved at the special meeting and the merger is effected, Banner as the surviving corporation will, within ten (10) days after the effective date of the merger, deliver a written notice to all shareholders who properly perfected their dissenters' rights in accordance with Chapter 13 of the WBCA. Such notice will: (i) state where the payment demand must be sent and where and when certificates for certificated shares must be deposited; (ii) inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (iii) supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed transaction and requires that the person asserting dissenters' rights certify whether or not the person acquired beneficial ownership of the shares before that date; (iv) set a date by which Banner must receive the payment demand, which date will be between thirty (30) and sixty (60) days after notice is delivered; and (v) be accompanied by a copy of Chapter 13 of the WBCA.

        A shareholder wishing to exercise dissenters' rights must timely file the payment demand, certify whether the shareholder acquired beneficial ownership of the shares before the date of the first announcement to news media or to shareholders of the merger, and deposit share certificates as required in the notice. Failure to do so will cause such person to lose his or her dissenters' rights.

        Within thirty (30) days after the effective time of the merger or receipt of the payment demand, whichever is later, Banner will pay each dissenter with properly perfected dissenters' rights Banner's estimate of the "fair value" of the shareholder's interest, plus accrued interest from the effective date of the merger. With respect to a dissenter who did not beneficially own Skagit shares before the date of the first announcement to news media or to shareholders of the merger, Banner is not required to make the payment until after the dissenter has agreed to accept the payment in full satisfaction of the

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dissenter's demands. "Fair value" means the value of the shares immediately before the effective date of the merger, excluding any appreciation or depreciation in anticipation of the merger unless such exclusion would be inequitable. The rate of interest is generally required to be the average rate currently paid by Banner on its principal bank loans or, if none, at a rate that is fair and equitable under the circumstances. Shareholders should note that investment banker opinions as to the fairness, from a financial point of view, of the consideration payable in a transaction such as the merger are not opinions as to, and do not address in any respect, fair value under Chapter 13 of the WBCA.

        A dissenter who is dissatisfied with Banner's estimate of the fair value or believes that interest due is incorrectly calculated may notify Banner of the dissenter's estimate of the fair value and amount of interest due within thirty (30) days after Banner makes or offers payment for the dissenter's shares. If Banner does not accept the dissenter's estimate and the parties do not otherwise settle on a fair value then Banner must, within sixty (60) days, petition a court to determine the fair value or pay each dissenter whose demand remains unsettled the amount demanded.

        Banner must make all dissenters whose demands remain unsettled parties to the proceeding. Each dissenter made a party to such proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of the dissenter's shares, plus interest, exceeds the amount paid by Banner, or the fair value, plus accrued interest, of the dissenter's after-acquired shares for which Banner elected to withhold payment.

        The court will determine all costs of such proceeding and will assess such costs against Banner, including the reasonable compensation and expenses of appraisers appointed by the court, except that the court may assess the costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Chapter 13 of the WBCA. The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:

        If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against Banner, the court may award to these counsel reasonable fees to be paid out of the amounts awarded to dissenters who were benefited.

        In view of the complexity of Chapter 13 of the WBCA and the requirement that shareholders must strictly comply with such statutory procedures, shareholders who wish to exercise dissenters' rights should consult their legal and financial advisors. There can be no assurance that "fair value" of any such shareholder's Skagit common stock as determined pursuant to Chapter 13 of the WBCA will be greater than or equal to the merger consideration.

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THE MERGER AGREEMENT

        This section describes the material terms of the merger agreement. The description in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. You are encouraged to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about Skagit or Banner. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings Banner makes with the SEC, as described in the section entitled "Where You Can Find More Information" beginning on page 120 of this proxy statement/prospectus.

Explanatory Note Regarding the Merger Agreement

        The merger agreement and this summary of terms are included to provide you with information regarding the terms of the merger agreement. Factual disclosures about Skagit and Banner contained in this proxy statement/prospectus or in the public reports of Banner filed with the SEC may supplement, update or modify the factual disclosures about Skagit and Banner contained in the merger agreement. The merger agreement contains representations and warranties by Skagit, on the one hand, and by Banner, on the other hand, made solely for the benefit of the other. The representations, warranties and covenants made in the merger agreement by Skagit and Banner were qualified and subject to important limitations agreed to by Skagit and Banner in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties also may be subject to a contractual standard of materiality different from that generally applicable to shareholders and reports and documents filed with the SEC, and some were qualified by the matters contained in the confidential disclosure schedules that Skagit and Banner each delivered in connection with the merger agreement and certain documents filed with the SEC. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement/prospectus, may have changed since the date of the merger agreement. Accordingly, the representations and warranties in the merger agreement should not be relied on by any persons as characterizations of the actual state of facts about Skagit or Banner at the time they were made or otherwise.

Merger Consideration

        At the effective time of the merger, each outstanding share of Skagit common stock, other than certain shares held by Banner or Skagit (in each case other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity or as a result of debts previously contracted) or by a Skagit shareholder who properly exercises dissenters' right when and in the manner required under Chapter 23B.13 of the WBCA, will be converted into the right to receive 5.6664 shares of Banner common stock, subject to the adjustment described below.

Potential Adjustment to Exchange Ratio

        Not later than five (5) days after each month-end during the period from the date of the merger agreement until the final closing statement is delivered to Banner as described below, Skagit will, in consultation with Banner and consistent with past practice, prepare in good faith and deliver to Banner

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(i) Skagit's consolidated financial statements presenting the financial condition of Skagit and its subsidiaries on a consolidated basis as of the close of business on the last day of such month-end and Skagit's and its subsidiaries' consolidated results of operations for the period from January 1, 2018 through the close of business on the last day of such month-end and (ii) a statement setting forth adjusted shareholders' equity as if such month-end were the shareholders' equity measuring date (each as defined below) (we refer to each such statement as an "interim closing statement"). Each interim closing statement will be prepared in accordance with GAAP and other applicable legal and accounting requirements, and reflect all period-end accruals and other adjustments and will also reflect accruals for all transaction costs or other liabilities incurred or expected to be incurred at any time at or prior to the closing, including in connection with the transactions contemplated by the merger agreement (whether or not doing so is in accordance with GAAP).

        Not later than five (5) days after the end of the month preceding the month that includes the anticipated closing date (as reasonably agreed in good faith by Banner and Skagit), Skagit will, in consultation with Banner, prepare in good faith and deliver to Banner an updated interim closing statement as of and through the close of business on the last day of the month-end immediately preceding the anticipated closing date prepared in a manner consistent with the interim closing statements (such statement as it may be adjusted in accordance with the merger agreement is referred to as the "final closing statement"); provided, however, that if the anticipated closing date is in the first eight (8) days of a calendar month, then the final closing statement will be prepared as of the month-end of the second month preceding the anticipated closing date (we refer to the date which the final closing statement is as of and through as the "shareholders' equity measuring date"). Skagit must also deliver to Banner a certificate of Skagit's chief financial officer, dated as of the closing date, to the effect that the financial statements set forth in the final closing statement continue to reflect accurately, as of the closing date, the financial condition of Skagit and its subsidiaries in all material respects and meet the requirements of the merger agreement.

        Banner will have the right to review, and have reasonable access to, all relevant books and records, work papers, schedules, memoranda and other documents prepared by Skagit or its subsidiaries or its and their respective accountants in connection with its preparation of the interim closing statements and the final closing statement, as well as to executive, finance and accounting personnel of Skagit and its subsidiaries and any other information which Banner may reasonably request in connection with its review, and Skagit and its subsidiaries and its and their accountants and other representatives will cooperate with and assist Banner and its accountants and other representatives in the review of the interim closing statements and the final closing statement. In the event Banner disputes the final closing statement (including adjusted shareholders' equity set forth therein), Banner will, no later than the later of (i) three (3) days after receiving the final closing statement and (ii) two (2) days prior to the anticipated closing date, give Skagit written notice of its objections, which we refer to as an "objection notice," describing the nature of the dispute in reasonable detail and specifying those items and amounts as to which Banner disagrees and, based on the information at its disposal, specifying Banner's proposed calculation of adjusted shareholders' equity. If Banner does not timely deliver an objection notice, adjusted shareholders' equity set forth in the final closing statement delivered by Skagit will be utilized for the calculation of the adjustment to the exchange ratio described below and will be final and binding on all the parties.

        If Banner timely delivers an objection notice, Banner and Skagit will cooperate in good faith to resolve such dispute, and if resolved, the final closing statement and adjusted shareholders' equity as determined by Banner and Skagit in writing will be utilized for calculation of the adjustment to the exchange ratio described below and will be final and binding on all the parties. If Banner and Skagit cannot resolve the dispute within five (5) days after the date of the objection notice, Banner and Skagit will appoint a mutually acceptable independent accounting firm of national or regional reputation, which we refer to as the "independent accounting firm," to promptly review the merger agreement and

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the disputed items in the objection notice and arbitrate the dispute and determine the final closing statement and adjusted shareholders' equity. The independent accounting firm will be given reasonable access to all records, work papers, schedules, memoranda and other documents relevant to such dispute and will be limited to addressing only the particular disputes referred to in the objection notice that have not been resolved by Banner and Skagit and will determine such disputed amounts, the final closing statement and adjusted shareholders' equity in accordance with the provisions of the merger agreement. Upon reaching its determination of the final closing statement and adjusted shareholders' equity based on its determination of the disputed items, the independent accounting firm will deliver a copy of its calculation of the final closing statement and adjusted shareholders' equity to Banner and Skagit. The determination of the independent accounting firm will be made within twenty (20) days after its engagement and will be final and binding on all the parties. No party or its affiliates may seek further recourse to courts, other tribunals or otherwise, other than to enforce the final decision of the independent accounting firm as to the determination of the final closing statement and adjusted shareholders' equity. The aggregate fees, expenses and costs of the independent accounting firm will be borne (i) by Banner, if the difference, in absolute value terms, between adjusted shareholders' equity as finally determined and adjusted shareholders' equity set forth in the objection notice is greater than the difference, in absolute value terms, between adjusted shareholders' equity as finally determined and adjusted shareholders' equity set forth in the final closing statement as delivered by Skagit to Banner and (ii) otherwise by Skagit, in the form of a reduction to adjusted shareholders' equity for purposes of calculating the adjustment to the exchange ratio described below.

        The merger consideration will be reduced, via a downward adjustment to the exchange ratio of 5.6664, on a dollar-for-dollar basis (based on the average closing price of Banner common stock on the NASDAQ for the consecutive period of the five (5) full trading days immediately preceding (but not including) the date that is the second (2nd) business day prior to the closing date, which we refer to as the "Banner average closing price"), if adjusted shareholders' equity is less than $80 million. Specifically, if adjusted shareholders' equity, as finally determined pursuant to the merger agreement, is less than $80 million (we refer to the difference between $80 million and such adjusted shareholders' equity as the "shareholders' equity shortfall"), the exchange ratio will be reduced by an amount, rounded to the ten-thousandth decimal point, equal to (i) the shareholders' equity shortfall divided by (ii) the number of shares of Skagit common stock issued and outstanding immediately prior to the effective time of the merger (other than certain shares held by Banner or Skagit which are not converted into the right to receive merger consideration), divided by (iii) the Banner average closing price. If adjusted shareholders' equity, as finally determined pursuant to the merger agreement, is equal to or exceeds $80 million, there will be no adjustment to the exchange ratio, and Skagit may declare and pay a special cash dividend to its shareholders immediately prior to the closing in an amount not to exceed such excess.

        For purposes of the merger agreement, "adjusted shareholders' equity" means the consolidated shareholders' equity of Skagit as set forth in the final closing statement prepared as of and through the shareholders' equity measuring date minus any declared but unpaid dividends as of the shareholders' equity measuring date (or thereafter declared), plus the sum of (i) all fees and expenses of all attorneys, accountants, investment bankers and other advisors and agents for Skagit for services rendered in connection with the transactions contemplated by the merger agreement, (ii) any employee severance, retention or change-in-control payments or expenses consistent with the terms of the merger agreement, (iii) any payment made or expense accrued for the purchase of a directors' and officers' liability insurance policy pursuant to the merger agreement, and (iv) other third-party costs, fees and expenses in an aggregate amount not to exceed $50,000, in each case of clauses (i)-(iv) specifically incurred or accrued by Skagit in connection with the transactions contemplated by the merger agreement, and in each case, paid by Skagit or payable by Skagit prior to the effective time of the merger to the extent reflected as accrued liabilities in the final closing statement.

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        Set forth below is a table showing the hypothetical exchange ratios and hypothetical implied values of the merger consideration based on a range of hypothetical adjusted shareholders' equity values, and assuming (i) a Banner average closing price of either (x) $61.60, the closing price per share of Banner common stock on July 25, 2018, the last trading day before the announcement of the merger agreement, or (y) $64.96, the closing price per share of Banner common stock on September 4, 2018, the last practicable trading day before the date of this proxy statement/prospectus and (ii) that the number of shares of Skagit common stock issued and outstanding immediately prior to the effective time of the merger (other than certain shares held by Banner or Skagit which are not converted into the right to receive merger consideration) is 544,257, the number of shares of Skagit common stock issued and outstanding as of July 25, 2018.

 
  Hypothetical Adjusted
Shareholders' Equity
  Hypothetical Banner
Average Closing Price
  Hypothetical
Exchange Ratio
  Hypothetical Implied Value of
Merger Consideration
 
    $ 80,000,000   $ 61.60     5.6664   $ 349.05  

    80,000,000     64.96     5.6664     368.09  

    77,500,000     61.60     5.5918     344.46  

    77,500,000     64.96     5.5957     363.50  

    75,000,000     61.60     5.5173     339.86  

    75,000,000     64.96     5.5250     358.90  

    72,500,000     61.60     5.4427     335.27  

    72,500,000     64.96     5.4543     354.31  

    70,000,000     61.60     5.3681     330.68  

    70,000,000     64.96     5.3836     349.72  

        If, prior to the effective time of the merger, the outstanding shares of Banner common stock or Skagit common stock are increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment will be made to the exchange ratio and the merger consideration to give Skagit shareholders and Banner the same economic effect as contemplated by the merger agreement prior to such event.

        Based on the number of shares of Banner common stock and shares of Skagit common stock outstanding as of September 4, 2018, the last date before the date of this proxy statement/prospectus for which it was practicable to obtain this information, we expect that Skagit shareholders as of immediately prior to the closing of the merger will hold, in the aggregate, approximately 8.7% of the issued and outstanding shares of Banner common stock immediately following the closing of the merger (without giving effect to any shares of Banner common stock held by Skagit shareholders prior to the merger or any potential adjustment to the exchange ratio).

Fractional Shares

        Banner will not issue any fractional shares of Banner common stock in the merger. In lieu of the issuance of any such fractional share, Banner will pay to each Skagit shareholder who otherwise would be entitled to receive such fractional share an amount in cash (rounded to the nearest cent) determined by multiplying (i) the Banner average closing price by (ii) the fraction of a share (after taking into account all shares of Skagit common stock held by such holder immediately prior to the effective time of the merger and rounded to the nearest one-thousandth when expressed in decimal form) of Banner common stock to which such holder would otherwise be entitled to receive pursuant to the merger agreement.

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Effect of the Merger; Effective Time of the Merger; Organizational Documents of the Surviving Corporation

Effect of the Merger

        The merger agreement provides for the merger of Skagit with and into Banner, with Banner surviving the merger as the surviving corporation. We sometimes refer to Banner following the merger as the "surviving corporation."

        As a result of the merger, Skagit shareholders will only participate in the surviving corporation's future earnings and potential growth through their ownership of Banner common stock. All of the other incidents of direct ownership of Skagit common stock, such as the right to vote on certain corporate decisions, to elect directors and to receive dividends and distributions from Skagit, will be extinguished upon completion of the merger. All of the properties, rights, privileges, powers and franchises of Skagit will vest in the surviving corporation, and all debts, duties and liabilities of Skagit will become the debts, liabilities and duties of the surviving corporation.

        Under the merger agreement, Banner is empowered to, at any time prior to the effective time of the merger, change the method or structure of effecting the combination of Skagit and Banner. However, that no such change or amendment may (i) alter or change the amount or kind of the merger consideration, (ii) adversely affect the tax treatment of the merger with respect to either party or its shareholders or (iii) impede or materially delay the consummation of the transaction or the receipt of the requisite regulatory approvals.

Closing; Effective Time of the Merger

        The closing of the merger will take place at 10:00 a.m. Seattle time, on a date no later than three (3) business days after the satisfaction or waiver (subject to applicable law) of all of the conditions set forth in the merger agreement (other than those conditions that by their nature can only be satisfied at the closing, but subject to the satisfaction or waiver thereof), unless another date, time or place is agreed to in writing by Banner and Skagit. The date on which the closing occurs is referred to as the "closing date."

        On the closing date, the parties will execute and file articles of merger with the Secretary of State of the State of Washington and a plan of merger. The merger will become effective at such time as designated in the articles of merger and plan of merger, or if no time is designated, at the time of filing of the articles of merger and plan of merger, which we refer to as the "effective time of the merger."

Organizational Documents of the Surviving Corporation

        The amended and restated articles of incorporation and bylaws of Banner, as in effect immediately prior to the effective time of the merger, will be the articles of incorporation and bylaws of the surviving corporation until duly amended in accordance with their respective terms and applicable law. The surviving corporation will continue to exist under the name "Banner Corporation."

Exchange and Payment Procedures

        At or prior to the effective time of the merger, Banner will deposit, or cause to be deposited, with an exchange agent designated by Banner and reasonably acceptable to Skagit, for the benefit of Skagit shareholders, Banner common stock and any cash in lieu of fractional shares to be delivered to Skagit shareholders pursuant to the merger agreement, which amounts we refer to as the "exchange fund." As promptly as practicable after the effective time of the merger, but in no event later than five (5) business days thereafter, Banner will cause the exchange agent to mail to each record holder, as of immediately prior to the effective time of the merger, of shares of Skagit common stock that are

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converted into the right to receive the merger consideration at the effective time of the merger, a letter of transmittal for use in connection with the exchange and instructions for use in surrendering the applicable certificates or book entry shares in exchange for the merger consideration. The letter of transmittal will specify that delivery will be effected, and risk of loss and title to certificates of Skagit common stock will pass, only upon proper delivery of the certificates to the exchange agent.

        You should not send in your certificates until you receive the letter of transmittal and instructions.

        Skagit shareholders who properly surrender their certificates or book entry shares to the exchange agent, accompanied by a properly completed and duly executed letter of transmittal will receive for each Skagit share the stock consideration plus any cash payable in lieu of any fractional shares of Banner, and any dividends or distributions such holder has the right to receive pursuant to the merger agreement. No interest will be paid or accrue on any merger consideration, dividends or distributions or cash in lieu of fractional shares.

Distributions with Respect to Unsurrendered Shares

        No dividends or other distributions declared with respect to Banner common stock will be paid to the holder of any unsurrendered certificate or book entry share that evidenced ownership of shares of Skagit common stock until such holder surrenders such shares. After such surrender, the record holder will be entitled to receive any dividends or other distributions, without interest, that have been become payable with respect to the holder's whole shares of Banner common stock.

Transfers Following the Effective Time of the Merger

        After the effective time of the merger, there will be no transfers on the stock transfer books of Skagit of the shares of Skagit common stock that were issued and outstanding immediately prior to the effective time of the merger. If, after the effective time of the merger, any such certificates or book entry shares are presented for transfer to the exchange agent, they will be canceled and exchanged for the merger consideration as provided in the merger agreement.

Termination of Exchange Fund

        Any portion of the exchange fund that remains unclaimed by Skagit shareholders for six (6) months after the effective time of the merger will be delivered to the surviving corporation. From and after such time, any former holders of Skagit common stock who have not exchanged their shares may thereafter look only to the surviving corporation for payment of the merger consideration, cash in lieu of any fractional shares and any unpaid dividends and distributions on the Banner common stock such holder has the right to receive pursuant to the merger agreement. None of Banner, Skagit, the surviving corporation nor the exchange agent, nor any other person, will be liable to any former holder of Skagit common stock for any amount delivered in good faith to a public official pursuant to abandoned property, escheat or similar laws.

Lost, Stolen or Destroyed Stock Certificates

        If any certificate representing shares of Skagit common stock is lost, stolen or destroyed, upon the making of an affidavit of such fact by the person claiming the certificate to be lost, stolen or destroyed and, if reasonably required by Banner or the exchange agent, the posting by such person of a bond in such amount as Banner or the exchange agent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate, the exchange agent will issue in exchange for such lost, stolen or destroyed certificate the merger consideration, any cash in lieu of fractional shares, and any dividends or distributions to which such holder is entitled pursuant to the merger agreement.

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Withholding Rights

        Banner will be entitled to deduct and withhold, or cause the exchange agent to deduct and withhold, from any amounts payable pursuant to the merger agreement to any holder of Skagit common stock or Skagit equity awards such amounts as it is required to deduct and withhold with respect to the making of such payment under applicable tax laws, and any such withheld amounts that are paid to the appropriate governmental authority will be treated for all purposes of the merger agreement as having been paid to the holder of Skagit common stock or equity awards from whom such amounts were deducted or withheld.

Treatment of Skagit Stock Options

        At the effective time of the merger, each Skagit option that is outstanding as of immediately prior to the effective time of the merger will fully vest and be canceled and converted into the right to receive a cash payment, without interest and less applicable withholding taxes, equal to the product of (i) the number of shares of Skagit common stock subject to the Skagit option as of immediately prior to the effective time of the merger and (ii) the excess, if any, of (1) the product of the exchange ratio and the Banner average closing price over (2) the exercise price per share of Skagit common stock subject to such Skagit option as of the effective time of the merger.

Dissenters' Rights

        All shares of Skagit common stock that are issued and outstanding immediately prior to the effective time of the merger and that are held by a Skagit shareholder who did not vote in favor of the merger agreement or the merger and who exercises dissenters' rights when and in the manner required under Chapter 23B.13 of the Washington Business Corporation Act, which we refer to as the "WBCA," will not be converted into or be exchangeable for the right to receive the merger consideration, but instead such holder will be entitled to only such rights as are granted with respect to the payment of the fair value of such shares under the applicable provisions of Chapter 23B.13 of the WBCA. At the effective time of the merger, such dissenting shares will no longer be outstanding and will automatically be canceled and will cease to exist, and such holder will cease to have any rights with respect thereto, except the rights provided for pursuant to the applicable provisions of the WBCA and the merger agreement, unless and until such holder has failed to perfect or has effectively withdrawn or lost rights to demand or receive the fair value of such shares of Skagit common stock under the WBCA.

        If any shareholder dissenting pursuant to the WBCA and the merger agreement has failed to perfect or has effectively withdrawn or lost any such right, such holder's shares of Skagit common stock will then be treated as if they had been converted into and become exchangeable for the right to receive, as of the effective time of the merger, the merger consideration for each such share of Skagit common stock, in accordance with the merger agreement, without any interest.

        Skagit will give Banner (i) prompt notice of any written notices Skagit receives from or on behalf of its shareholders to exercise dissenters' rights in respect of any shares of Skagit common stock, attempted withdrawals of such notices and any other instruments served pursuant to the WBCA and received by Skagit relating to shareholders' dissenters' rights and (ii) the opportunity to participate in negotiations and proceedings with respect to demands for fair value under the WBCA. Skagit may not, except with the prior written consent of Banner, make any payment with respect to, or settle, or offer or agree to settle, any such demand. Any merger consideration made available to the exchange agent to exchange for shares of Skagit common stock for which dissenters' rights have been perfected will be returned to Banner upon demand.

        See also "The Merger—Dissenters' Rights" on page 74.

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Representations and Warranties

        The merger agreement contains representations and warranties made by Skagit and Banner. These include, among other things, representations relating to:

        Banner also makes certain representations and warranties to Skagit in the merger agreement regarding its SEC filings.

        Skagit makes additional representations and warranties to Banner in the merger agreement relating to, among other things:

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        Some of the representations and warranties contained in the merger agreement are qualified by as to "materiality" or by a "material adverse effect" standard. For purposes of the merger agreement, a "material adverse effect" means, with respect to Banner, Skagit or the surviving corporation, as the case may be, any effect, change, event, circumstance, condition, occurrence or development that, either individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, properties, assets, liabilities, results of operations or condition (financial or otherwise) of such party and its subsidiaries taken as a whole or (ii) the ability of such party to consummate the transactions contemplated by the merger agreement.

        However, in the case of clause (i) above, a material adverse effect will not be deemed to include the impact of:

except, in the case of the first, second and third bullets above, to the extent that the effects of such changes are disproportionately adverse to such party and its subsidiaries, taken as a whole, as compared to other companies in the industries in which such party and its subsidiaries operate.

Conduct of Businesses of Skagit and Banner Prior to Completion of the Merger

        Under the merger agreement, Skagit has agreed to certain restrictions on its activities and the activities of its subsidiaries during the period from July 25, 2018 to the effective time of the merger. In general, subject to certain exceptions set forth in the merger agreement, Skagit is required to, and to

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cause its subsidiaries to, conduct its business in the ordinary course consistent with past practice in all material respects and use reasonable best efforts to maintain and preserve intact its business organization, employees and business relationships with customers, regulators and other persons and each of Skagit and Banner will, and will cause their respective subsidiaries to, take no action that would reasonably be expected to materially and adversely affect or materially delay the ability to obtain any necessary approvals of any regulatory agency or other governmental entity required for the merger or to perform its covenants and a