12/19/2006: "Islanders Bank Sold To Off Island Group"

Banner Corporation (Nasdaq: BANR), the parent company of Banner Bank, today announced the signing of a definitive merger agreement with San Juan Financial Holding Company, the parent company of Islanders Bank, Friday Harbor, Washington, in a stock and cash transaction valued at approximately $40.8 million. In connection with the transaction, San Juan Financial Holding Company will merge into Banner Corporation. The merger will expand Banner's presence in the North Puget Sound region of Washington State.

Banner Corporation is the parent company of Banner Bank, a commercial bank that operates a total of 58 branch offices and 12 loan offices in 24 counties in Washington, Oregon and Idaho.

Richard Kneipp, president of the Islanders told The Island Guardian that the "Customer will not notice any changes in the bank; adding "The same staff will be here, the Board of Directors will remain; however there will be two new members added from Banner, but "the bank policy will remain the same as it is, and if any new policy is made, it will be made at the local level by the board"

Founded in 1981 in Friday Harbor, Islanders Bank is a state chartered commercial community bank with three full service branches, approximately $151.7 million in assets, $128.7 million in deposits, $109.1 million in loans and $17.8 million in shareholders' equity at September 30, 2006. Islanders Bank specializes in commercial and residential financing, serving small to medium-sized businesses, professionals and individuals in its local markets.

"Banner currently operates six branches and one loan office in the North Puget Sound region. This acquisition allows us to better serve our customers and complements our existing operation in that area of Washington," said D. Michael Jones, President and Chief Executive Officer of Banner Corporation. "We believe that Islanders Bank's experienced management team shares our dedication to delivering premium financial services to customers and is poised for continued excellent growth."

"We are very pleased to be joining the Banner team, which brings financial strength, additional management experience and new technological capabilities to our organization," stated Dick Kneipp, President and Chief Executive Officer of Islanders Bank. "Given Banner's operating philosophy and management style, we believe our two organizations will form an effective combination. We will now be able to offer a broader range of services to our customers, increased lending limits, and expanded branch and ATM networks. Both banks have long histories of community involvement and I am confident our employees and customers will feel very comfortable in joining with Banner."

"Given Islanders Bank's low-cost deposit structure and history of good earnings performance, along with Banner's ability to transfer loans now being participated with other banks to Islanders Bank, we expect this acquisition to modestly add to Banner's net income and earnings per share during the first year following acquisition and to provide further earnings accretion in subsequent years," noted Jones.

According to the terms of the definitive agreement, San Juan Financial Holding Company shareholders will receive 2.2503 shares of Banner Corporation common stock and $16.48 in cash for each San Juan Financial Holding Company share. The acquisition, which has been approved by the Boards of Directors of both companies, is subject to, among other contingencies, approval by regulators and San Juan Financial Holding Company shareholders. The transaction is expected to close during the second quarter of 2007.