BANR 10-K & 10-Q changes, risk factors and insider trading

Our operations are significantly affectedinfluenced by national and regional economic conditions. Weakness in the national economy, or the economies of the markets in which we operate, could have a material adverse effect on our financial condition, results of operations and prospects. We provide banking and financial services primarily to businesses and individuals in the states of Washington, Oregon, California and Idaho, with all of our branches and most of our deposit clients located in these four states.

Our client base is highly concentrated in the Puget Sound arearegion and easternEastern Washington. A deterioration in the business environment in these regions, or the financial challenges of one or more businesses with a large employee baseemployers in these areas, could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. As we expand into other areas, such asincluding San Diego, Sacramento, and throughoutother parts of California, we face additional concentration risks in thosethese markets. Furthermore, trade wars, tariffs, or shifts in trade policies between the United States and other nations could disrupt supply chains, increase costs for businesses, and reduce export opportunities for our clients. These developments may, in turn, negatively impact these businesses and, by extension, our operations and financial performance.

A downturn in economic conditions, be itwhether due to inflation, recessive trends, geopolitical conflicts, adverseor weather,environmental severeand fireclimate-related events such as wildfires, floods, or other natural disasters, or other factors, could have a material adverse effect on our business, financial condition, liquidityliquidity, and results of operations, including but not limited to:

A decline in local economic conditions could disproportionately affect our earnings and capital compared to larger financial institutions with more geographically diverse real estate loan portfolios. Because our loan portfolio is predominantly secured by real estate, deterioration in real estate markets could impair borrowers’ ability to repay loans and reduce the value of the underlying collateral. Real estate values are influenced by a range of factors, including economic conditions, interest rates, government policies, natural disastersdisasters, (e.g., fires, earthquakes, floodingconstruction and tornadoes),material availability, and trade-relatedother pressures affecting construction costsmarket or materialpolicy availability.factors. Liquidating significant collateral during a period of depressed real estate values could negatively impact our financial condition and profitability.

In addition to first-lien one- to four-family residential real estate lending, we originate construction andconstruction, land and land development loans, commercial and multifamily real estate loans, commercial business loans, agricultural mortgage and business loans, and consumer loans, primarily within our market areas. As of December 31, 2024,2025, we had $9.76$10.15 billion outstanding in these non-first-lien one- to four-family residential real estate loan categories, compared to $9.29$9.76 billion as of December 31, 2023.2024. These loans present risks distinct from those associated with first-lien one- to four-family residential real estate lending for a number of reasons, including the following:

•Construction and Land Loans. At December 31, 2024,2025, construction and land loans were $1.52$1.71 billion, or 14%15% of our total loan portfolio. This type of lending carries inherent uncertainties in estimating a property’s future value upon project completion and the overall cost (including interest) of the project. TheseSuch challenges arisecould result from difficulties in estimating construction costs, assessing marketthe value of the property upon project completion, andor accounting for theregulatory impact of government regulations on real property. Accurately evaluating the total funds required to complete a project and determining the loan-to-value ratio for the completed project is often challenging.impacts. If construction cost estimates are inaccurate, we may be required to advance funds beyond the original loan commitment to ensure project completion. Additionally, if the appraised value of the completed project is overstated, we may have inadequate security for loan repayment, resulting in potential losses. Other risks include disputes between borrowers and builders, the failure of builders to pay subcontractors, and the concentration of higher loan amounts among a limited number of builders. A downturn in housing or the real estate market could increase delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. Multiple loans to a single builder amplify these risks, as adverse developments in one loan or credit relationship could result in significant losses. At December 31, 2024,2025, non-performing construction and land loans totaled $4.0$6.4 million, or 11%14% of total non-performing loans.

Some construction loans include interest reserves, where accumulated interest is added to the loan principal rather than requiring borrower payments during the loan term. Rising market interest rates can rapidly deplete these reserves before project completion and increase borrowing costs for end-purchasers, potentially reducing their ability to finance the home or diminishing demand for the project. Properties under construction are also challenging to sell and typically need to be completed before a sale can occur, complicatingwhich could increase the managementrisk of problemloan constructionlosses loans.if Thisthe mayproperty requirecannot advancingbe additional fundssold or contractingcompleted withas another builder to complete the project, exposing us to market risks and potential losses on unpaid loan funds and associated costs.planned.

Our construction loans include both those secured by sales contracts or permanent loans for finished homes and speculative construction loans, where end-purchasers may not be identified during or after the construction period. Speculative construction loans present additional risks relatedbecause toend-purchasers findingmay buyersnot forbe completedidentified, projects. To mitigate this risk, we actively monitor the number ofand unsold homesinventory or market weakness could result in our construction loan portfolio and local housing markets to maintain a balance between home sales and new loan originations. We also limit the number of speculative construction loans approved for each builder based on factors such as financial capacity, market demand, and the ratio of sold to unsold inventory. Additionally, we diversify risk by working with a large number of small- to mid-sized builders across a broad geographic region, encompassing multiple sub-markets within our service area.losses.

•Commercial and Multifamily Real Estate Loans. At December 31, 2024,2025, commercial and multifamily real estate loans were $4.76$4.90 billion, or 42% of our total loan portfolio. Many of these loans involve higher principal amounts than other types of loans, and some commercial borrowers maintain multiple loans with us. Consequently, an adverse development with respect to a single loan or credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Repayment of these loans typically depends on the income generated from the property securing the loan, in amounts sufficient to cover operating expenses and debt service. This income may be adversely affected by changes in the economy or local market conditions. In addition, many of our commercial and multifamily real estate loans are not fully amortizing and include large balloon payments at maturity. These balloon payments may require the borrower to either sell or refinance the underlying property, potentiallyand increasingrefinancing may be difficult or unavailable due to elevated interest rates, tighter underwriting standards, declining property values, or reduced lender appetite, heightening the risk of default or non-payment. If we foreclose on a commercial or multifamily real estate loan, the holding period for the collateral is typically longer than for one- to four-family residential loans as a result of the smaller pool of potential buyers. In recent years, the commercial real estate market has experienced substantial growth, with increased competition contributing to historically low capitalization rates and rising property values. More recently, the commercial real estate market has been affected by higher interest rates, tighter credit conditions, and changing economic and workplace dynamics. The adoption of remote and hybrid work models has led many companies to re-evaluate their long-term real estate needs. Although certain employers have increased in-office requirements, others are downsizing or shifting to hybrid models, and demand for office space in certain markets has remained structurally lower than pre-pandemic levels, creating uncertainty in demand for office space and other commercial properties. This trend could result in prolonged vacancies, declining rental income, refinancing challenges, and reduced property values, particularly for certain property types or markets, adversely affecting the performance of our commercial real estate loan portfolio. Federal banking regulators have increased supervisory focus on commercial real estate exposures, particularly with respect to refinancing risk, collateral valuation, and borrower equity levels, which may subject us to heightened examination scrutiny, additional risk management expectations, or more conservative supervisory expectations. Failures in our risk management policies and controls could lead to higher delinquencies and losses, adversely affecting our business, financial condition, and results of operations. At December 31, 2024,2025, non-performing commercial and multifamily real estate loans totaled $2.2 million,$525,000, or 6%1% of total non-performing loans.

Lending money is a substantial part of our businessbusiness, and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assureensure repayment. This risk is affected by, among other things:

Determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergomaterially material changes.change. If our estimates are incorrect, the allowance for credit losses may not be sufficient to cover the expected losses in our loan portfolio, resulting in the need for increases in our allowance for credit losses through the provision for credit losses which is recorded as a charge against income. Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provision.

Bank regulatory agencies also periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different than those of Management. If charge-offs in future periods exceed the allowance for credit losses, we may need additional provision to increase the allowance for credit losses. Any increases in the allowance for credit losses will reduce net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.

We pursue aOur strategy of supplementing internal growth bythrough acquiringacquisitions of other financial companies or their assets and liabilities, which we believe will help us fulfill our strategic objectives and enhance our earnings. We maycould be adversely affected by risks associated with growth throughsuch acquisitions.

As part of our general growth strategy, we periodically expand our business through acquisitions. While our primary focus is organic growth, from time to timetime, we engage in discussions with potential acquisition targets as part of our ordinary business activities. There can be no assurance that we will successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired operations into our existing operations, or expand into new markets. Future acquisitions may dilute shareholder value or may have an adverse effect upon our operating results during the integration process. In addition, acquired operations may fail to achieve the profitability levels of our existing operations or meet performance expectations. Transaction-related expenses may also adversely affect our earnings, which could, in turn, negatively impact the value of our stock.

•we may be exposedexposure to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets, and liabilities we acquire. If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affectedacquire;

•topotentially financeincreased anleverage, acquisition, we may borrow funds, thereby increasing our leverage and diminishing ourdiminished liquidity, or raise additional capital,capital which could dilute the interests of our existing shareholdersrequirements;

•we have completed various acquisitions over the years that enhanced our rate of growth. We may not be ableunable to sustain our past growth rate of growth or to grow at all in the future; and

•to the extent our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition willmay generate goodwill that must be analyzed for impairment at least annually.

In accordance with generally accepted accounting principles (GAAP), we record assets acquired and liabilities assumed in a business combination at their fair value with the excess of the purchase consideration over the net assets acquired resulting in the recognition of goodwill. As a result, acquisitions typically result in recording goodwill. We perform a goodwill evaluation at least annually to test for goodwill impairment. Our test of goodwill for potential impairment is based on a qualitative assessment by Management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price. Our evaluation of the fair value of goodwill involves a substantial amount of judgment. If our judgment was incorrect, or if events or circumstances change, and an impairment of goodwill was deemed to exist, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist. Any such charge could have a material adverse effect on our results of operations.

Our net interest margin, the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities, can be adversely affected by interest rate changes. While yields on assets and costs of liabilities tend to move in the same direction, they may do so at different speeds, causing the margin to expand or contract. AsBecause our interest-bearing liabilities often have shorter durations than our interest-earning assets, a rise in interest rates may lead to funding costs increasing faster than asset yields, compressing our net interest margin. Periods of volatile, elevated, or declining rates may affect net interest income in multiple ways. For example, floating‑rate assets generally reprice more quickly than deposits, potentially reducing income in falling rate environments. Changes in borrower refinancing behavior, including increased loan prepayments and mortgage‑backed security redemptions, introduce reinvestment risk, as prepaid amounts may need to be reinvested at lower rates. Additionally, changes in the slopeshape of the yield curve, such as flattening or inversion, can furthercompress pressuremargins, ourparticularly marginsfor asinstitutions fundingwith costssignificant risefixed‑rate relative to asset yields. Conversely, falling rates can initially reduce our net interest income as our floating-rate assets tend to be more immediately responsive to changes in market rates than most deposit liabilities. In addition, a decline in market interest rates could increase loan prepayments, leading to reinvestment in lower-yielding assets, reducing income.assets.

InRising arates risingcan ratealso environment,increase retainingthe cost of deposits can become costlier. At December 31, 2024, we had $1.45 billion in certificates of deposit that mature within one year and $12.01other billionfunding in non-interest-bearing, negotiable order of withdrawal (NOW) checking, savings and money market accounts.sources. If deposit and borrowing rates rise faster than loan and investment yields, our net interest income and overall earnings could decline.

A substantial amount of our loans have adjustable interest rates, which may result in a higher rate of default in a rising interest rate environment. Additionally, a significant portion of our adjustable-rate loans include interest rate floors that prevent the loan’s contractual interest rate from falling below a specified level. AtThese Decemberfeatures 31, 2024, approximately 65% of our loan portfolio consisted of adjustable or floating-rate loans, and approximately $5.19 billion, or 70%, of those loans contained interest rate floors. The weighted average floor interest rate of these loans was 4.77%, and approximately $1.34 billion, or 26%, of these loans were at their floor interest rate. The presence of interest rate floors canmay increase income during periods of declining interest rates, as the rates on these loans cannot adjust downward below the floor.floor, but may limit income growth during periods of rising rates. However, this benefit is subject to the risk that borrowers may refinance these loans to take advantage of lower rates. Furthermore, when loans are at their floor interest rates, our interest income may not rise as quickly as our cost of funds during periods of increasing interest rates, which could materially and adversely affect our results of operations.

While we employ asset and liability management strategies to mitigate interest rate risk, unexpected,Unexpected, substantial, or prolonged rate changes could materially affect our financial condition and results of operations. Additionally, our interest rate risk models and assumptions may not fully capture the impact of actual rate changes on our balance sheet or projected operating results.

Decreases in the fair value of securities— available-for-sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity. Additionally, there is no assurance that the declines in market value will not result in credit losses, which would lead to additional provisions for credit losses that could materially affect our net income and capital levels.

NewRegulators may adopt new rules or proposedguidance FDICestablishing guidelinesor onmodifying corporate governance and risk management standards mayfor banks. Any such guidance could materially affect ourus profitability, capital adequacy, and reputation.by:

•Compliance with the guidelines may elevateIncreasing operational complexity and costs, potentially diminishing ourreducing net income and return on equity.equity;

•The guidelines may subjectSubjecting us to heightened regulatory oversightoversight, andpotentially enforcement actions, which could adversely affect ouraffecting reputation and market valuation.valuation;

•ThePotentially guidelines’affecting emphasisour on board responsibilities and independence may make it more challengingability to attract and retain qualified directors willingor tosenior serve on our board.management.

Additionally, actions by regulatory agencies or significant litigation against us may lead to penalties that materially affect us. These regulations, along with the current tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulations or legislation or change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator’s interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and of doing business and/or otherwise adversely affect us and our profitability. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent registered public accounting firm. Changes could materially impact, potentially even retroactively, how we report our financial condition and results of our operations, as could our interpretation of those changes. We cannot predict what restrictions may be imposed upon us withby future legislation.

The effects of climate change continue to raise significant concerns about the state of the environment. Federal and state policy approaches to climate change continue to evolve, and changes in legislative or regulatory priorities could alter the requirements and expectations placed on businesses, including banks, to address climate-related risks. The lack of empirical data regarding the financial and credit risks posed by climate change still makes it difficult to predict its specific impact on our financial condition and results of operations. However, the physical effects of climate change, such as more frequent and severe weather disasters, could directly affect us. For instance, such events may damage real property securing loans in our portfolios or reduce the value of that collateral. If our borrowers’ insurance is insufficient to cover these losses or if insurance becomes unavailable, the value of the collateral securing our loans could be negatively affected, potentially impacting our financial condition and results of operations. Moreover, climate change may adversely affect regional and local economic activity, harming our clients and the communities in which we operate. Regardless of changes in federal policy, the effects of climate change and theirits unknown long-term impacts could still have a material adverse effect on our financial condition and results of operations.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of clients seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions andor limit our ability to obtain regulatory approval of acquisitions. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations. Additionally, any perceived or actual failure to prevent money laundering or terrorist financing activities could significantly damage our reputation. These outcomes could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losseslosses, and our results of operations could be materially adversely affected.

Our security measures may not be sufficient to mitigate the risk of a cyber-attack. Communications and information systems are essential to our business operations, as we rely on these systems to manage our client relationships, maintain our general ledger, and support virtually all other aspects of our operations. Our business depends on the secure processing, storage, and transmission of confidential and other information through our computer systems and networks. Although we take protective measures and adapt them as circumstances evolve, ourOur systems, software, and networks may remain vulnerable to breaches, fraudulent or unauthorized access, denial or degradation of service attacks, misuse, computer viruses, malware, or other cyber threats. If any of these events occur, they could compromise our or our clients’ confidential information, disrupt operations, or harm our clients or counterparties.

We may incur significant expenses to investigate and remediate security vulnerabilities, enhance protective measures, or address the impact of a cyber-attack.cyber-attack, or enhance our systems. Such incidents could expose us to litigation, regulatory scrutiny, and financial losses not fully covered by insurance. They could also cause significant reputational damage, which may deter clients from using our services.

Cybersecurity risks are particularly acute in internetonline banking. Increases in criminal sophistication, advances in technology, or vulnerabilities in third-party systems (such as browsers and operating systems) could lead to breaches that compromise the security of data and transactions. A breach could discourage clients from using our online services, negatively impacting our business.

While we have developed and continue to invest in systems and processes to detect and prevent security breaches, no system is foolproof. Breaches could result in financial losses to us or our clients, reputational harm, additional compliance costs, business disruption, regulatory penalties, and potential legal liabilities. These outcomes could materially adversely affect our financial condition, results of operations, and ability to grow our online services. In addition, our security measures may not protect us from system failures or interruptions. Although we have policies and procedures to mitigate such risks, we cannot guarantee their effectiveness. We also rely on third-party providers for data processing and operational support. While we carefully select these providers, we do not control their actions. If a third-party vendor experiences disruptions,a cyber-attacks,disruption, or cyber-attack, or fails to meet our service standards, it could impair our ability to process transactions, deliver products and services, or conduct business. Transitioning to alternative vendors could involve significant delays and costs. Information security risks may also arise from the processing of client data by third-party vendors and their personnel. Breaches, system failures, or interruptions could occur and may not be adequately addressed. Insurance coverage may not fully protect against all losses from such events.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial Statements contained in Item IV of this Form 10-K.

Banner’s successful execution of its super community bank model and strategic initiatives has delivered solid core operating results and profitability over the last several years. The Company’s longer term strategic initiatives continue to focus on originating high-quality assets and client acquisition, which we believe will continue to generate strong revenue while maintaining the Company’s moderate risk profile. We strive to uphold our core values, which are to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide consistent and reliable strength through all economic cycles and change events.

•MortgageRevenues bankingwere revenue was $12.2$660.7 million for the year ended December 31, 2024,2025, compared to $11.8$608.6 million infor the prior year.

•IncomeAdjusted fromrevenue* deposit(the feestotal of net interest income and othertotal servicenon-interest chargesincome adjusted for the net gain or loss on the sale of securities, the net change in valuation of financial instruments, and gains or losses incurred on building and lease exits) was $43.4$661.5 million for the year ended December 31, 2024,2025, compared to $41.6$614.8 million for the prior year.

•Non-interestNet expenseinterest income was $391.5$587.9 million for the year ended December 31, 2024,2025, compared to $382.5$541.7 million for the prior year.

•ReturnMortgage onbanking average assetsrevenue was 1.07%$13.2 million for the year ended December 31, 2024,2025, compared to 1.18%$12.2 formillion in the prior year.

•TotalIncome depositsfrom weredeposit $13.51fees billionand atother service charges was $43.2 million for the year ended December 31, 2024,2025, compared to $13.03$43.4 billionmillion afor yearthe ago.prior year.

•TangibleReturn commonon shareholders’average equityassets perwas share*1.21% decreasedfor 1%year to $40.57 atended December 31, 2024,2025, compared to $37.091.07% afor yearthe ago.prior year.

(2)Calculated using common shares outstanding.outstanding at the end of the period.

(910)Non-performing loans consist of nonaccrual loans and loans 90 days or more past due loansand still accruing interest. Non-performing assets consist of non-performing loans and REO.

Management has presented non-GAAP financial measures in this discussion and analysis because it believes that they provide useful and comparative information to assess trends in our core operations and to facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental to, and are not a substitute forfor, any analysis based on GAAP. WhereThe applicable,most we have also presenteddirectly comparable earnings information using GAAP financial measures.measures are presented with equal or greater prominence. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, see the tables below. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.

Adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio are non-GAAP financial measures. To calculate the adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio, we make adjustments to our GAAP revenues and expenses as reported on our Consolidated Statements of Operations. Management believes that these non-GAAP financial measures provide information to investors that is useful in evaluating the operating performance and trends of financial services companies, including the Company.Company, by excluding certain items that Management considers not reflective of core operating performance. The following tables set forth reconciliations of these non-GAAP financial measures (dollars in thousands, except share and per share data):

The ratio of tangible common shareholders’ equity to tangible assets is a non-GAAP financial measure. We calculate tangible common equity by excluding goodwill and other intangible assets from shareholders’ equity. We calculate tangible assets by excluding the balance of goodwill and other intangible assets from total assets. We believe this is consistent with the treatment by our bankBank regulatory agencies,capital whichmeasures also exclude goodwill and othercertain intangible assets; fromhowever, thetangible calculationcommon ofequity risk-basedand tangible assets as presented here are non-GAAP financial measures and should not be considered substitutes for regulatory capital ratios. The following table sets forth the reconciliation of tangible equity and tangible assets (dollars in thousands, except share and per share data).

Allowance for Credit Losses: The allowance for credit losses reflects Management’s evaluation of our loans and unfunded loan commitments along with their estimated loss potential, as well as the risk inherent in various components of the portfolio. Significant judgmentjudgments and assumptions are applied in estimating the allowance for credit losses. These judgments, assumptions and estimates are susceptible to significant changes based on the current environment. Among the material estimates required to establish the allowance for credit losses are a reasonable and supportable forecast; a reasonable and supportable forecast period and the reversion period; value of collateral; strength of guarantors; the amount and timing of future cash flows for loans individually evaluated; and determination of the qualitative loss factors.

Management uses a scale to assign qualitative and environmental (QE) factor adjustments based on the level of estimated impact which requires a significant amount of judgment. Some QE factors impact all loan segments equally while others may impact some loan segments more or less than others. If Management’s judgment was different for a QE factor that impacts all loan segments equally, a five basis-point change in this QE factor would increase or decrease the allowance for credit losses by 3.7%approximately 4% as of December 31, 2024.2025.

General. Total assets increased to $16.35 billion at December 31, 2025, compared to $16.20 billion at December 31, 2024, compared to $15.67 billion at December 31, 2023. The increase in assets was primarily due to loan growth and an increase in interest-bearing deposits,growth, partially offset by the decreasedecreases in thecash securitiesand portfolio in 2024.securities.

Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $544.2$367.0 million, or 5%,3%, to $11.72 billion at December 31, 2025, from $11.35 billion at December 31, 2024, from $10.81 billion at December 31, 2023.2024. The increase in total loans receivable primarily reflects growth in multifamilycommercial real estate, commercialconstruction, business, commercial real estateland and one-land todevelopment, four-familyand residentialconsumer loan balances.

The aggregate of securities and interest-bearing cash deposits decreased $73.1$187.2 million, or 2%,5%, to $3.40$3.22 billion at December 31, 2024,2025, compared to $3.48$3.40 billion a year earlier, primarily due to a decreasedecreases in securities,available-for-sale partially offset by an increase in interest-bearing deposits.securities. Securities decreased to $2.98 billion at December 31, 2025, from $3.11 billion at December 31, 2024, from $3.43 billion at December 31, 2023, primarily due to normal security portfolio cash flows. Fair value adjustments for securities designated as available-for-sale reflected aan decreaseincrease of $5.0$99.3 million for the year ended December 31, 2024,2025, which was includedincluded, net of the associated tax benefitexpense, as a component of other comprehensive income. The average effective duration of our securities portfolio was approximately 6.2 years at December 31, 2025, compared to 6.6 years at December 31, 2024, compared to 6.5 years at December 31, 2023.2024.

Deposits increased $484.9$228.7 million, or 4%,2%, to $13.74 billion at December 31, 2025, from $13.51 billion at December 31, 2024, from $13.03 billion at December 31, 2023, with core deposits (which consist of non-interest-bearing checking accounts and interest-bearing transaction and savings accounts) increasing $462.7$196.1 million and certificates of deposit increasing $22.2$32.6 million. The increase in core deposits reflects increases in interest-bearing transaction and savings accounts.accounts, partially offset by a decrease in non-interest bearing deposits. Core deposits were 89% of total deposits at both December 31, 20242025 and 2023.2024. Non-interest-bearing deposits decreased by $200.8$101.7 million, or 4%,2%, to $4.59$4.49 billion from $4.79$4.59 billion at December 31, 2023,2024, while interest-bearing transaction and savings accounts increased by $663.5$297.8 million, or 10%,4%, to $7.72 billion at December 31, 2025, from $7.42 billion at December 31, 2024,2024. fromCertificates $6.76of deposit increased $32.6 million, or 2%, to $1.53 billion at December 31, 2023.2025, Certificates of deposit increased $22.2 million, or 2%, tofrom $1.50 billion at December 31, 2024, from $1.48 billion at December 31, 2023, primarily due to clients moving funds from core deposit accounts to higher yielding certificates of deposit,deposit. partially offset by a $57.7 million decrease in brokered deposits. We had $50.3 million of brokeredBrokered deposits attotaled December 31, 2024, compared to $108.1$50.0 million at December 31, 2023.2025, compared to $50.3 million at December 31, 2024.

We had $290.0$150.0 million and $323.0$290.0 million of FHLB advances at December 31, 20242025 and 2023,2024, respectively. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $57.6$17.5 million to $107.7 million at December 31, 2025, compared to $125.3 million at December 31, 2024,2024. comparedJunior subordinated debentures increased to $182.9$79.2 million at December 31, 2023.2025, Juniorcompared subordinated debentures totaledto $67.5 million at December 31, 2024, comparedprimarily toas $66.4a millionresult atof Decemberfair 31,value 2023.adjustments. The outstanding balance of the Company’s subordinated notes was fully repaid during the second quarter of 2025. Subordinated notes, net of issuance costs, weretotaled $80.3 million at December 31, 2024, compared to $92.9 million at December 31, 2023. The decrease was due to the Bank’s purchase of $13.0 million of Banner’s outstanding subordinated debt during 2024.

Total shareholders’ equity increased $121.6$172.0 million, to $1.95 billion at December 31, 2025, compared to $1.77 billion at December 31, 2024, compared to $1.65 billion at December 31, 2023.2024. The increase in shareholders’ equity primarily reflects $168.9$195.4 million of net income and ana $11.9$69.3 million increase in AOCI.AOCI, related primarily to unrealized gains on available-for-sale securities. This increase was partially offset by $67.0$67.7 million of cash dividends paid or accrued to common shareholders. ThereIn addition, there were no499,975 shares of common stock repurchased during the year ended December 31, 2024.2025, at an average price of $63.14 per share. Common shareholder’s equity to total assets was 10.95%11.90% and 10.55%10.95% at December 31, 20242025 and 2023,2024, respectively. Tangible common shareholders’ equity (a non-GAAP financial measure), which excludes goodwill and other intangible assets was $1.40$1.57 billion, or 8.84%9.84% of tangible assets at December 31, 2024,2025, compared to $1.27$1.40 billion, or 8.33%8.84% at December 31, 2023.2024. The increase in tangible common shareholders’ equity as a percentage of tangible assets was primarily due to the previously mentioned increase in AOCI and an increase in retained earnings. The Company’s book value per share was $51.49$57.08 at December 31, 2024,2025, compared to $48.12$51.49 per share a year ago, and its tangible book value per share (a non-GAAP financial measure) was $40.57$46.09 at December 31, 2024,2025, compared to $37.09$40.57 per share a year ago. See, “Executive Overview - Non-GAAP Financial Measures” above for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Investments. At December 31, 2024,2025, our securities portfolio totaled $3.11$2.98 billion, consisting principally of mortgage-backed and mortgage-related securities. Our investment levels may be increased or decreased depending upon Management’s projections as to the demand for funds to be used in our loan origination, deposit and other activities, and upon yields available on investment alternatives. During the year ended December 31, 2024,2025, our aggregate investment in securities decreased $326.8$128.6 million, primarily due to normal security portfolio cash flows and the sale of securities.flows. Mortgage-backed securities decreased $219.4$113.1 million and U.S. Government and agency obligations decreased $26.3$1.8 million, while municipal bonds decreasedincreased $6.8$11.7 million, corporate debt obligations decreased $23.1$7.5 million and asset-backed securities decreased $50.1$18.2 million.

U.S. Government and Agency Obligations: Our portfolio of U.S. Government and agency obligations had a carrying value of $8.2$6.4 million (with an amortized cost of $8.8$6.7 million) at December 31, 2024,2025, a weighted average contractual maturity of 1313.7 years and a weighted average coupon rate of 4.11%.3.83%. Many of thethese U.S. Government and agency obligations we own include call features which allow the issuing agency the right to call the securities at various dates prior to the final maturity.

Mortgage-Backed Obligations: At December 31, 2024,2025, our mortgage-backed and mortgage-related securities had a carrying value of $2.24$2.12 billion ($2.56$2.36 billion at amortized cost, with a net unrealized loss adjustment of $319.0$230.9 million). The weighted average coupon rate of these securities was 2.60% and the weighted average contractual maturity was 26approximately 27 years, although we receive principal payments on these securities each month resulting in a much shorter expected average life. As of December 31, 2024,2025, 97% of the mortgage-backed and mortgage-related securities pay interest at a fixed rate.

The following tablestable setsets forth certain information regarding carrying values and percentage of total carrying values of our portfolio of securities—tradingavailable-for-sale and securities—available-for-sale, bothsecurities, carried at estimated fair market value, and securities—held-to-maturity,held-to-maturity securities, carried at amortized cost, net of the allowance for credit losses - securities, as of December 31, 2024,2025, 20232024 and 20222023 (dollars in thousands):

One- to Four-Family Residential Lending: At December 31, 2024,2025, $1.59$1.57 billion, or 14%13% of our loan portfolio, consisted of permanent loans on one- to four-family residences. We are active originators of one- to four-family residential loans in the communities we serve. OurThe balance of loans for one- to four-family residences increaseddecreased by $73.2$18.1 million in 2024,2025, compared to the prior year. TheThis increasedecrease inreflects one-that topayoffs four-familyof residentialexisting permanent loans during 2024 was primarilyexceeded the resultcombination of anew higheroriginations percentageand conversions of one- to four-family construction loans converting to one-permanent to four-family residential loans and a larger percentage of new production being held in portfolio.loans.

Commercial and Multifamily Real Estate Lending: We originate loans secured by commercial and multifamily real estate. These loans include both fixed- and adjustable-rate loans with intermediate terms of generally five to 10 years. At December 31, 2024,2025, our loan portfolio included $3.86$4.05 billion of commercial real estate loans, or 34%35% of the total loan portfolio, and $894.4$850.8 million of multifamily real estate loans, or 8%7% of the total loan portfolio. The increase in commercial real estate loans was primarily thereflected resulta combination of new loan production and the conversion of commercial construction loans to the commercial real estate loansportfolio upon the completion of the construction phase. Our commercial real estate portfolio consists of loans on a variety of property types with no significant concentrations by property type, borrowers or locations. Approximately 12%13% of our commercial real estate portfolio was secured by retail property at December 31, 2024.2025. Within this portfolio, we have limited exposure to the office sector, with only 6%5% of total loans secured by office properties, nearly 55%45% of which are owner-occupied. The increasedecrease in multifamily real estate loans was theprimarily resultdue ofto payoffs and paydowns exceeding new production, partially offset by the conversion of multifamily construction loans to the multifamily real estate loansportfolio upon the completion of the construction phase.

Commercial Business Lending: Our commercial business lending is directed toward meeting the credit and related deposit needs of various small-to-medium-sized business and agribusiness borrowers operating in our primary market areas. In addition to providing earning assets, this type of lending has helped increase our deposit base. At December 31, 2024,2025, commercial business loans, including small business scored, totaled $2.42$2.41 billion, or 21% of total loans. Our commercial business loan portfolio at December 31, 2024 reflects an increase of 6% from December 31, 2023. Our commercial business lending, to a lesser extent, includes participation in certain syndicated loans, including shared national creditscredits, which totaled $227.4$195.6 million, or 2% of our loan portfolio, at December 31, 2024.2025.

Agricultural Lending: Agriculture is a major industry in our footprint. While agricultural loans are not a large part of our portfolio, we routinely make agricultural loans to borrowers with a strong capital base, sufficient management depth, proven ability to operate through agricultural cycles, reliable cash flows and adequate financial reporting. Payments on agricultural loans depend, to a large degree, on the results of operationoperations of the related farm entity. The repayment is also subject to other economic and weather conditions as well as market prices for agricultural products, which can be highly volatile at times. At December 31, 2024,2025, agricultural loans totaled $340.3$353.2 million, or 3% of the loan portfolio.

Consumer and Other Lending: Consumer lending has traditionally been a modest part of our business with loans made primarily to accommodate our existing client base. At December 31, 2024,2025, our consumer loans increased $22.0$47.1 million to $721.4$768.5 million, or 6% of our loan portfolio, compared to December 31, 2023.2024. As of December 31, 2024,2025, 87%88% of our consumer loans were secured by one- to four-family residences through home equity lines of credit. Credit card balances totaled $45.2 million at December 31, 2024.

Loan Servicing Portfolio: At December 31, 2024,2025, we were servicing $3.18$3.14 billion of loans for others and held $12.7$14.3 million in escrow for our portfolio of loans serviced for others. The loan servicing portfolio at December 31, 20242025, was comprised of $1.36$1.39 billion of Freddie Mac residential mortgage loans, $1.00$958.9 billionmillion of Fannie Mae residential mortgage loans, $430.7$403.5 million of Oregon Housing residential mortgage loans, $65.5$78.6 million of SBA loansloans, and $314.5$309.2 million of other loans serviced for a variety of investors. The portfolio included loans secured by property located primarily in the states of Washington, Oregon, IdahoIdaho, and California. For the years ended December 31, 20242025 and 2023,2024, we recognized $8.2$8.1 million and $7.8$8.2 million of loan servicing income in our results of operations, respectively.

The following table sets forth certain information at December 31, 2024 regarding2025, the dollar amount of loans maturing in our portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. Loan balances are net of unamortized premiums and discounts and exclude loans held for sale (in thousands):

The following table indicates the amount of the Bank’s certificates of deposit with balances in excess of the FDIC insurance limit by time remaining until maturity as of December 31, 20242025 (in thousands):

Borrowings. We had $290.0$150.0 million in FHLB advances at December 31, 2024.2025. At that date, based on pledged collateral, the Bank had $2.95$3.65 billion of available credit capacity with the FHLB. At December 31, 2024,2025, based upon our available unencumbered collateral, the Bank was eligible to borrow $1.52$1.55 billion from the Federal Reserve Bank,Bank; however, at that date we had no funds borrowed under this arrangement.

At December 31, 2024,2025, we had an aggregate of $86.5 million of junior subordinated debentures. This includes $75.0 million issued by us and $11.5 million acquired in our bank acquisitions. The junior subordinated debentures are carried at their estimated fair value of $67.5$79.2 million at December 31, 2024.2025. At December 31, 2024,2025, the junior subordinated debentures had a weighted average rate of 6.32%.5.67%. The outstanding balance of the Company’s subordinated notes was fully repaid during the second quarter of 2025. Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024, compared to $92.9 million at December 31, 2023, and a weighted average interest rate of 5.00%. The decrease was due to the Bank’s purchase of $13.0 million of Banner’s outstanding subordinated debt from third parties during the year ended December 31, 2024.

The increase in total non-performing loans was primarily due to increasesan increase in nonaccrual loans in the one- to four-family category and agriculturalan businessincrease loanin categoriesloans consisting90 days or more past due and still accruing in both the one- to four-family category and the construction and land category, primarily reflecting one- to four-family custom construction loans. The increases consisted of various borrowers with no meaningful concentrations.concentrations The increases in these categoriesand reflect loans transferred to nonaccrual, partially offset by payoffs of nonaccrual loans during 2024.2025 and loans past due and still accruing at December 31, 2025, that were not previously reported as past due.

There have been no material changes in the risk factors previously disclosed in Part 1, Item 1A of our 2025 Form 10-K.10-K, other than as set forth below.

Banner is a bank holding company incorporated in the State of Washington, which wholly owns its subsidiary bank, Banner Bank. The Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington, and as of MarchJune 31,30, 2026, it had 135 branch offices and 15 loan production offices located in Washington, Oregon, California, Idaho, Utah and Nevada. Banner is subject to regulation by the Federal Reserve. The Bank is subject to regulation by the Washington State Department of Financial Institutions – Division of Banks (the DFI) and the Federal Deposit Insurance Corporation (the FDIC). As of MarchJune 31,30, 2026, we had total consolidated assets of $16.34$16.59 billion, total loans of $11.71$11.99 billion, total deposits of $13.84$13.79 billion and total shareholders’ equity of $1.97$2.0 billion.

FirstSecond Quarter 2026 Financial Highlights

•Revenue was $169.3$172.0 million for the firstsecond quarter of 2026, compared to $167.7$169.3 million in the preceding quarter.

•Net interest income was $150.2$153.7 million in the firstsecond quarter of 2026, compared to $152.4$150.2 million in the preceding quarter.

•Mortgage banking operations revenue was $3.2$2.8 million for the firstsecond quarter of 2026, compared to $3.6$3.2 million in the preceding quarter.

•Net loans receivable were $11.83 billion at June 30, 2026, compared to $11.55 billion at March 31, 2026, compared to $11.56 billion at December 31, 2025.2026.

•Non-performingTotal assetsdeposits were $51.7$13.79 million,billion orat 0.32%June of30, total2026, assets,compared to $13.84 billion at March 31, 2026, compared to $51.2 million, or 0.31% of total assets at December 31, 2025.2026.

•TheNon-performing allowanceassets forwere credit losses - loans was $160.4$60.5 million, or 1.37%0.36% of total loansassets, receivable,at asJune of March 31,30, 2026, compared to $160.3$51.7 million, or 1.37%0.32% of total loans receivable,assets at DecemberMarch 31, 2025.2026.

•Dividends paid to shareholders were $0.50$0.52 per share in the quarter ended MarchJune 31,30, 2026.

•Tangible commonCommon shareholders’ equity per share* increased 2%to $58.83 at June 30, 2026, compared to $47.00$58.06 at March 31, 2026, compared to $46.09 at December 31, 2025.2026.

*Non-GAAP Financial Measures: Management has presented non-GAAP financial measures in this discussion and analysis because it believes these measures provide useful and comparative information to assess trends in our core operations and to facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, we have also presented comparable earnings information using GAAP financial measures. For a reconciliation of these non-GAAP financial measures, see the tables below. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

General: Total assets decreasedincreased $10.2$239.1 million to $16.34$16.59 billion at MarchJune 31,30, 2026, from $16.35 billion at December 31, 2025, primarily due to decreasesgrowth in both loans held for sale and loans receivable and a reduction in FHLB stock resulting from the repayment of FHLB advances,receivable, partially offset by growtha decrease in interest-bearing deposits held at other banks.securities.

Loans and lending: Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a total loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan to deposit ratio at MarchJune 31,30, 2026 was 85%.87%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of real estate and commercial loans. Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) decreasedincreased $14.1$272.7 million at MarchJune 31,30, 2026, compared to December 31, 2025. The net decrease was drivenincrease primarily byreflected payoffsgrowth in commercial business loans, commercial real estate loans, and paydowns in multifamily real estate, land and land development, and agricultural businessconsumer loans, partially offset by new productiondeclines in commercialconstruction, real estateland and commercialland development loans, agricultural business loans, and one- to four-family residential loans.

Commercial real estate loans totaled $4.11$4.14 billion, or 35%34% of our loan portfolio, and multifamily real estate loans totaled $798.2$855.9 million, or 7% of our loan portfolio, at MarchJune 31,30, 2026. Commercial real estate loans increased by $61.6$88.6 million during the first threesix months of 2026, primarily due to new productionproduction. andMultifamily real estate loans increased by $5.1 million, primarily due transfers to the permanent loan portfolio upon completion of the construction phase, whilepartially multifamily real estate loans decreasedoffset by $52.6loan million, primarily due to payoffs and paydowns.payoffs.

Our construction, land and land development loans totaled $1.70$1.69 billion, or 14% of our loan portfolio, at MarchJune 31,30, 2026, compared to $1.71 billion at December 31, 2025. Multifamily construction loans decreased $12.2$11.3 million, or 2%, to $502.2$503.1 million at MarchJune 31,30, 2026, compared to December 31, 2025. Multifamily construction represented 4% of our total loan portfolio at MarchJune 31,30, 2026. Multifamily construction loans were comprised primarily of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. Commercial construction loans increased $18.7$25.8 million, or 12%,17%, to $174.8$181.8 million at MarchJune 31,30, 2026, compared to $156.0 million at December 31, 2025, primarily due to new production and advances, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase.phase and loan payoffs. Land and land development loans decreased $32.7$55.5 million, or 8%,13%, to $401.0$378.2 million at MarchJune 31,30, 2026, compared to December 31, 2025, primarily due to payoffs and paydowns, partially offset by new loan production.originations. Construction loans across our footprint arewere concentrated primarily in Washington, California and Oregon,Oregon at June 30, 2026, with the majority of multifamily construction projects expected to convert to permanent loans within the next 12 to 24 months as construction phases are completed.

Our commercial business lending is directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agribusiness borrowers operating in our primary market areas. Our commercial business loans were $2.43$2.58 billion at MarchJune 31,30, 2026 and $2.41 billion at December 31, 2025. Commercial business loans represented 21%22% of our loan portfolio at MarchJune 31,30, 2026. Our agricultural business loans were $332.4$337.5 million at MarchJune 31,30, 2026 and $353.2 million at December 31, 2025. Agricultural business loans represented 3% of our loan portfolio at MarchJune 31,30, 2026. Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $168.1$222.2 million, or 1%2% of our loan portfolio, at MarchJune 31,30, 2026, compared to $195.6 million, or 2% of our loan portfolio, at December 31, 2025.

We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California, Idaho and Utah. Most of the one- to four-family residential loans we originate in normal market conditions are sold in secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking operations. At MarchJune 31,30, 2026, one- to four-family residential loans retained in our portfolio decreased $10.1$16.7 million, to $1.56 billion, compared to $1.57 billion at December 31, 2025. The decrease was primarily the result of one- to four-family residential loan payoffs exceeding new loan originations and one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction and new loan originations.construction. One- to four-family residential loans represented 13% of our loan portfolio at MarchJune 31,30, 2026.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients. At MarchJune 31,30, 2026, consumer loans, including home equity revolving lines of credit, increased $5.5$58.5 million to $774.0$827.0 million, compared to $768.5 million at December 31, 2025. The increase was primarily due to growth in home equity revolving lines of credit.

Loans held for sale decreased to $33.8$27.2 million at MarchJune 31,30, 2026, compared to $42.9 million at December 31, 2025. The decrease was primarily the result of increased sales of one- to four- family residential mortgage loans held for sale, with loan sales outpacing originations during the period. Originations of loans held for sale increased to $91.7$198.4 million for the threesix months ended MarchJune 31,30, 2026, compared to $75.2$171.0 million for the same period last year. The volume of one- to four-family residential mortgage loans sold was $132.6$267.1 million during the threesix months ended MarchJune 31,30, 2026, compared to $108.1$212.7 million in the same period a year ago.

Investment Securities: Total securities were $2.95 billion at June 30, 2026, decreased from $2.98 billion at March 31, 2026, essentially unchanged from December 31, 2025. Available-for-sale securities increasedwere $18.8flat millionat to $2.04$2.02 billion at MarchJune 31,30, 2026, compared to $2.02 billion at December 31, 2025, while held-to-maturity securities decreased $17.5$31.9 million to $943.7$929.3 million, compared to $961.2 million at December 31, 2025, reflecting maturities and paydowns during the period. Purchases during the threesix months ended MarchJune 31,30, 2026, consisted of agency commercial mortgage‑backed securities, corporate securities and collateralized loan obligations. The average effective duration of the Company’s securities portfolio was 6.1 years at MarchJune 31,30, 2026, compared to 6.6 years at December 31, 2025. The fair value of securities designated as available-for-sale decreased $5.2$3.7 million for the threesix months ended MarchJune 31,30, 2026. This decrease, net of $1.3 million$900,000 in associated tax benefit, was recorded in other comprehensive income and reflected the impact of changes in market interest rates during the threesix months ended MarchJune 31,30, 2026.

Total deposits increased $97.2$46.4 million at MarchJune 31,30, 2026, compared to December 31, 2025, with core deposits increasing $164.7$105.7 million, partially offset by certificates of deposit decreasing $67.5$59.3 million. The increase in core deposits primarily reflects increases in non-interest-bearing deposits and interest-bearing transaction and savings accounts. We had no brokered deposits at MarchJune 31,30, 2026, compared to $50.0 million at December 31, 2025. Core deposits represented 89% of total deposits at both MarchJune 31,30, 2026 and December 31, 2025. Competition for deposits in our market areas remains strong.

Borrowings: We had no$320.0 million FHLB advances at MarchJune 31,30, 2026, compared to $150.0 million at December 31, 2025, as theFHLB increaseadvances inwere core deposits wastemporarily used to pay off FHLB advances duringfund the currentsecond quarter.quarter loan growth. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, increased $8.0$6.8 million to $115.7$114.5 million at MarchJune 31,30, 2026, compared to $107.7 million at December 31, 2025. At MarchJune 31,30, 2026, the Company’s off-balance sheet liquidity included additional borrowing capacity of $3.76$3.45 billion at the FHLB, $1.74$1.64 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions. Junior subordinated debentures totaled $79.5$79.7 million at MarchJune 31,30, 2026, compared to $79.2 million at December 31, 2025.

Shareholders’ Equity: Total shareholders’ equity increased $20.3$53.0 million to $1.97$2.00 billion, or 12.03%12.05% of total assets, at MarchJune 31,30, 2026, compared to $1.95 billion, or 11.90% of total assets, at December 31, 2025. The increase was primarily due to a $37.4$68.4 million increase in retained earnings resulting from $54.7$103.6 million in net income, partially offset by the accrual of $17.3$35.2 million in cash dividends and the repurchase of 250,000 shares of Banner common stock in the thirdfirst quarter of 20252026 at an average price of $64.56 per share. In addition, accumulated other comprehensive loss increased by $2.9$1.5 million, primarily due to an increase in unrealized losses on the available for sale securities portfolio.

Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $20.6$53.5 million to $1.59$1.63 billion, or 9.97%10.02% of tangible assets, at MarchJune 31,30, 2026, compared to $1.57 billion, or 9.84% of tangible assets at December 31, 2025. A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above followingunder the heading “FirstReconciliation Quarterof 2026Non-GAAP Financial Highlights.Measures.”

Comparison of Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and DecemberMarch 31, 2025,2026, and the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025

For the quarter ended MarchJune 31,30, 2026, net income was $48.9 million, or $1.43 per diluted share, compared to $54.7 million, or $1.60 per diluted share, comparedfor tothe $51.2preceding quarter. For the six months ended June 30, 2026, our net income was $103.6 million, or $1.49$3.03 per diluted share, forcompared theto preceding quarter and $45.1$90.6 million, or $1.30$2.61 per diluted share,share for the threesame monthsperiod endeda Marchyear 31, 2025.earlier. The increasedecrease in net income compared to the preceding quarter was primarily due to an increase in the provision for credit losses and higher non-interest income,expense, partially offset by an increase in net interest income. The increase in net income for the six months ended June 30, 2026, compared to the same period a decreaseyear inago non-interestwas expenseprimarily due to higher net interest income and a recapture oflower provision for credit losses, partially offset by a decrease in net interest income. When compared to the same period a year ago, the increase in net income was primarily attributable to higher net interest income and the recapture of provision for credit losses, partially offset by increased non-interest expense.

Net interest income was $150.2$153.7 million in the firstsecond quarter of 2026, compared to $152.4$150.2 million in the preceding quarter, and $141.1$303.9 million for the six months ended June 30, 2026, compared to $285.5 million for the comparable period a year ago. The decreaseincrease in net interest income compared to the prior quarter primarily reflectsreflected twoone feweradditional calendar daysday in the current quarterquarter, asnet wellinterest asmargin aexpansion decreaseand growth in the average balance of interest-earning assets. This wasassets, partially offset by a reduction in overallhigher funding costs andassociated anwith improvementincreased inFHLB net interest margin.borrowings. The increase in net interest income for the threesix months ended MarchJune 31,30, 20262026, compared to the same period a year ago primarily reflectsreflected a decrease in overalllower funding costs and an increase in the average balance of interest-earning assets.

Total non-interest income increaseddecreased forin the quarter ended MarchJune 31,30, 2026, compared to the preceding quarter,quarter and increased slightlyduring the six months ended June 30, 2026, compared to the same period a year ago. The increasedecrease in non-interest income from the precedingprevious quarter was driven primarily due toby an unfavorable shift in fair value adjustments on financial instruments. In addition, net losses on the sale of securities were recognized in the preceding quarter. The increase in miscellaneousnon-interest income, primarily due to losses incurred on the disposition of assets recognizedincome during the priorsix quarter.months Inended addition,June 30, 2026, compared to the same period last year, primarily reflected higher deposit fees and other service charges and favorable fair value adjustments on financial instruments carried at fair value improved during the quarter,value, partially offset by a net loss recognized on the sale of securities during the current quarter. The increase in non-interest income during the three months ended March 31, 2026, compared to the same period last year, was primarily attributable to the increase in fair value adjustments on financial instruments carried at fair value, partially offset by the net loss recognized on the sale of securities during the current quarter.period.

Total non-interest expense decreasedincreased forin the quarter ended MarchJune 31,30, 2026, compared to the preceding quarter,quarter and increased during the six months ended June 30, 2026, compared to the same period a year ago. The decreaseincrease from the previous quarter reflected a decrease in occupancy and equipment costs, primarily due to lower rent expense as well as lower building repair and maintenance expenses, a decrease in professional and legal expenses, primarily due to expenses recognized on a pending legal settlement during the prior quarter, and a decrease in advertising and marketing expense, primarily due to decreases in direct mail marketing and community development expenses. This was partially offset by an increase in salary and employee benefits, resultingprimarily fromreflecting increased medicalloan premiumscommissions and payrollnormal taxsalary and wage increases, an increase in information and computer data services, primarily due to increased computer software expenses, an increase in professional and legal expenses, primarily reflecting increased legal fees, and an increase in advertising and marketing expense, primarily reflecting the timing of direct mail marketing, printed media, and radio and television expenses. These increases were partially offset by higher capitalized loan origination costs associated with increased loan origination activity, primarily in the construction, land and land development, and one- to four-family residential loan categories. The increase in non-interest expense during the threesix months ended MarchJune 31,30, 2026, compared to the same period last year primarily reflects increases in salary and employee benefits,benefits and information and computer data services, partially offset by aan decreaseincrease in occupancycapitalized andloan equipmentorigination costs.

Net Interest Income. Net interest income decreasedincreased $2.3$3.6 million during the quarter ended MarchJune 31,30, 2026, compared to the preceding quarter, due to aan decreaseincrease in interest income, primarily attributable to twoone feweradditional calendar daysday in the current quarter, net interest margin expansion and a slight decreasegrowth in average earninginterest-earning assets. This wasassets, partially offset by an improvement in nethigher interest margin.expense associated with increased FHLB borrowings.

Net interest margin on a tax equivalent basis was 4.11%4.13% for the firstsecond quarter of 2026, compared to 4.03%4.11% for the preceding quarter and 3.92% for the same period in the prior year.quarter. The net interest margin for the current quarter benefited from loan growth, a slight increase in loan yields, and lower fundingdeposit costscosts, whenpartially comparedoffset to bothby the precedingincreased quarteruse andof theFHLB same period in the prior year.advances.

Net interest income increased by $9.1$18.4 million, or 6% for the threesix months ended MarchJune 31,30, 2026, compared to the same period one year earlier. The increase was primarily the result of a $4.0$6.4 million increase in interest income, primarily reflecting an increase in the average balance of loans, as well as a $5.1$12.1 million decrease in interest expense reflecting aan 1718 basis-point reduction in the average cost of funding liabilities to 1.38%1.39% from 1.55%.1.57%. The net interest margin on a tax equivalent basis increased to 4.12% for the six months ended June 30, 2026, compared to 3.92% for the same period in the prior year.

Interest Income. Interest income for the quarter ended MarchJune 31,30, 2026 was $197.8$202.7 million, compared to $205.0$197.8 million for the preceding quarter and $193.9 million for the same period in the prior year.quarter. The decreaseincrease for the current quarter, compared to the preceding quarter, was primarily attributable to two fewer calendar days in the current quarter andreflects a decreasegrowth in average loan yieldsbalances and balances.a slight increase in average loan yields.

The total average loan yield decreasedincreased threetwo basis points to 6.07%6.09% for the quarter ended MarchJune 31,30, 2026, from 6.10%6.07% in the preceding quarter and was consistent compared to 6.07% in the same period in the prior year.quarter. The decreaseincrease in average loan balances for the current quarter, compared to the preceding quarter, primarily reflected a decreasegrowth in real estate secured loans and commercial and agricultural business loans.

The total investment securities average balance decreased for the quarter ended MarchJune 31,30, 2026 (excluding the effect of fair value adjustments),2026, compared to the preceding quarter and the same period in the prior year,quarter, reflecting paydowns and maturities that were not fully replaced by new purchases during the period. The average yield on the combined portfolio decreasedincreased to 3.01%3.03% for the quarter ended MarchJune 31,30, 2026, from 3.03%3.01% for the preceding quarter and 3.02% for the same period in the prior year.quarter. Interest income on interest-bearing deposits with banks decreased for the current quarter, compared to the preceding quarter, reflecting decreases in both the average balance and yield of interest-bearing deposits, and increased compared to the same period a year ago, reflecting increases in both the average balance and yield of interest-bearing deposits. The average yield on interest-bearing deposits with banks decreased to 3.34%,3.16%, compared to 3.77%3.34% in the prior quarter, and increased compared to 2.99% in the same period in the prior year.quarter.

Interest Expense. Interest expense decreasedincreased for the quarter ended MarchJune 31,30, 2026 as2026, compared to the preceding quarter. Average funding liabilities decreasedincreased by $202.5$122.0 million, primarily due to a $201.8$141.1 million increase in the average balance of FHLB advances, partially offset by a $23.6 million decrease in average deposit balances. The average cost of funding liabilities decreasedincreased nineone basis points,point, to 1.38%1.39% for the quarter ended MarchJune 31,30, 2026. Interest expense for the threesix months ended MarchJune 31,30, 2026 was $47.6$96.6 million, compared to $52.8$108.6 million for the same period in the prior year. The decrease primarily resulted from aan 1718 basis-point decrease in the average cost of funds to 1.38%1.39% from 1.55%.1.57%.

Deposit interest expense for the quarter ended MarchJune 31,30, 2026 decreased 10%slightly to $45.7$45.6 million, compared to $50.5$45.7 million for the preceding quarter and $48.7 million for the same period in the prior year. The decrease compared to the prior quarter was primarily due to decreases in both the average balance and the average rate paid on interest-bearing deposits. The decrease compared to the prior year period was primarily due to a decrease in the average rate paid on interest-bearing deposits, partially offset by an increase in the average balance of interest-bearing deposits.quarter. The average rate paid on total deposits, including non-interest-bearing deposits, was 1.35%1.33% for the quarter ended MarchJune 31,30, 2026, compared to 1.43%1.35% for the preceding quarter and 1.47% for the same period a year earlier.quarter. The average rate paid on interest-bearing deposits decreased to 1.99%1.98% for the quarter ended MarchJune 31,30, 2026, compared to 2.14%1.99% in the preceding quarter and 2.22% in the same period a year earlier.quarter. The decrease in the average rate paid on interest-bearing deposits, compared to both the preceding quarter and the same period a year ago, is attributable to lower rates paid acrosson all categoriescertificates of interest-bearingdeposit deposits.and money market accounts. The decrease in the average rate paid on interest-bearing deposits compared to the preceding quarter was also impacted by shifts in the deposit mix, primarily reflecting continued migration from higher-rate certificates of deposit into savingslower-cost and checkingdeposit accounts. Total average deposit balances, including non-interest-bearing deposits, decreased to $13.76$13.74 billion for the quarter ended MarchJune 31,30, 2026, compared to $13.97$13.76 billion for the preceding quarter and increased compared to $13.45 billion for the same period a year earlier.quarter.

Interest expense on total borrowings wasfor the quarter ended June 30, 2026 increased to $3.4 million from $2.0 million for both the quarter ended March 31, 2026 and the preceding quarter and was $4.0 million for the same period a year earlier,quarter, due to decreasesan increase in both the average balance and rate paid on total borrowings, primarily reflecting a $141.1 million increase in the repaymentaverage balance of $150.0FHLB advances. Average total borrowings were $350.5 million in FHLB advances andfor the maturityquarter ofended higher-rateJune subordinated30, debt2026, duringcompared 2025.to $204.8 million for the preceding quarter. The average rate paid on total borrowings for the quarter ended MarchJune 31,30, 2026, decreased to 3.90%,3.88%, from 3.93%3.90% for the preceding quarter, and decreased from 4.32% for the same period a year earlier.quarter.

(3)Tax-exempt income is calculated on a tax equivalent basis, which Banner believes provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice. The tax equivalent yield adjustment to interest earned on loans was $2.2 million and $2.4$2.3 million and $2.2 million for the quarters ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2025,2026, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.1 million for both the quarters ended MarchJune 31,30, 2026 and December 31, 2025 and $1.0 million for the quarter ended March 31, 2025.2026.