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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-08-05 · 226 added, 229 removed, 455 unchanged (50% of the section changed)

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Executive Overview

Banner is a bank holding company incorporated in the State of Washington, which wholly owns one 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 June 30, 2025, it had 135 branch offices and 13 loan production offices located in Washington, Oregon, California, Idaho and Utah.

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 September 30, 2025, it had 135 branch offices and 14 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 June 30, 2025, we had total consolidated assets of $16.44 billion, total loans of $11.69 billion, total deposits of $13.53 billion and total shareholders’ equity of $1.87 billion.

As of September 30, 2025, we had total consolidated assets of $16.56 billion, total loans of $11.70 billion, total deposits of $14.02 billion and total shareholders’ equity of $1.91 billion.

The 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.

The Bank’s primary business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding our offices in Washington, Oregon, California, Idaho and Utah.

The Bank’s primary business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding our offices.

The Bank is also an active participant in secondary loan markets, engaging in mortgage banking operations through the origination and sale of one- to four-family residential loans.

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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.

Second Quarter 2025 Financial Highlights

• Net interest margin, on a tax equivalent basis, was 3.92% for both the current and preceding quarters.

• Revenue was $162.2 million for the second quarter of 2025, compared to $160.2 million in the preceding quarter.

• Net interest income was $144.4 million in the second quarter of 2025, compared to $141.1 million in the preceding quarter.

• Mortgage banking operations revenue was $3.2 million for the second quarter of 2025, compared to $3.1 million in the preceding quarter.

Third Quarter 2025 Financial Highlights

• Net interest margin, on a tax equivalent basis, was 3.98% for current quarter, compared to 3.92% in the preceding quarter.

• Revenue was $170.7 million for the third quarter of 2025, compared to $162.2 million in the preceding quarter.

• Net interest income was $150.0 million in the third quarter of 2025, compared to $144.4 million in the preceding quarter.

• Mortgage banking operations revenue was $3.3 million for the third quarter of 2025, compared to $3.2 million in the preceding quarter.

• Return on average assets was 1.30%, compared to 1.13% in the preceding quarter.

• Net loans receivable increased 2% to $11.53 billion at June 30, 2025, compared to $11.28 billion at March 31, 2025.

• Non-performing assets were $49.8 million, or 0.30% of total assets, at June 30, 2025, compared to $42.7 million, or 0.26% of total assets at March 31, 2025.

• The allowance for credit losses - loans was $160.5 million, or 1.37% of total loans receivable, as of June 30, 2025, compared to $157.3 million, or 1.38% of total loans receivable, at March 31, 2025.

• Total deposits decreased to $13.53 billion at June 30, 2025, compared to $13.59 billion at March 31, 2025.

• Core deposits represented 89% of total deposits at June 30, 2025.

• Dividends paid to shareholders were $0.48 per share in the quarter ended June 30, 2025.

• Common shareholders’ equity per share increased 1% to $53.95 at June 30, 2025, compared to $53.16 at March 31, 2025.

• Tangible common shareholders’ equity per share* increased 2% to $43.09 at June 30, 2025, compared to $42.27 at March 31, 2025.

• Net loans receivable were $11.54 billion at September 30, 2025, compared to $11.53 billion at June 30, 2025.

• Total deposits increased to $14.02 billion at September 30, 2025, compared to $13.53 billion at June 30, 2025.

• Core deposits represented 89% of total deposits at September 30, 2025.

• Non-performing assets were $45.3 million, or 0.27% of total assets, at September 30, 2025, compared to $49.8 million, or 0.30% of total assets at June 30, 2025.

• The allowance for credit losses - loans was $159.7 million, or 1.36% of total loans receivable, as of September 30, 2025, compared to $160.5 million, or 1.37% of total loans receivable, at June 30, 2025.

• Dividends paid to shareholders were $0.48 per share in the quarter ended September 30, 2025.

• Common shareholders’ equity per share increased 3% to $55.71 at September 30, 2025, compared to $53.95 at June 30, 2025.

• Tangible common shareholders’ equity per share* increased 4% to $44.79 at September 30, 2025, compared to $43.09 at June 30, 2025.

• Repurchased 250,000 shares of Banner common stock during the third quarter of 2025 at an average price of $63.11 per share.

*Non-GAAP Financial Measures:

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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 (dollars in thousands except per share data).

Quarters Ended Six Months Ended June 30,

Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 2025 2024

Quarters Ended Nine Months Ended September 30,

Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 2025 2024

ADJUSTED REVENUE

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Total revenue (GAAP) 170,719 162,150 153,738 493,060 448,033

Net loss on sale of securities 3 — 562 3 5,465

Net (gain) loss on sale of securities (377) 3 — (374) 5,465

Net change in valuation of financial instruments carried at fair value (223) (88) (39) (626) 1,143

Losses incurred on building and lease exits 919 — — 919 —

(Gains) losses on building and lease exits (1,373) 919 — (454) —

Adjusted revenue (non-GAAP) $ 168,746 $ 162,984 $ 153,699 $ 491,606 $ 454,641

Quarters Ended Six Months Ended June 30,

Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 2025 2024

Quarters Ended Nine Months Ended September 30,

Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 2025 2024

ADJUSTED EARNINGS

Net income (GAAP) $ 53,502 $ 45,496 $ 45,153 $ 144,133 $ 122,507

Net loss on sale of securities 3 — 562 3 5,465

Net (gain) loss on sale of securities (377) 3 — (374) 5,465

Net change in valuation of financial instruments carried at fair value (223) (88) (39) (626) 1,143

Building and lease exit costs 1,753 — — 1,753 —

Related net tax (benefit) expense (401) 76 (180) (325) (1,595)

Building and lease exit costs, net (331) 1,753 — 1,422 —

Related net tax expense (benefit) 224 (401) 9 (101) (1,586)

Total adjusted earnings (non-GAAP) $ 52,795 $ 46,763 $ 45,123 $ 144,454 $ 127,529

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11.18 % 10.20 % 10.39 % 10.51 % 10.16 %

Quarters Ended Six Months Ended June 30,

Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 2025 2024

Quarters Ended Nine Months Ended September 30,

Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 2025 2024

ADJUSTED EFFICIENCY RATIO

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Total revenue (GAAP) 170,719 162,150 153,738 493,060 448,033

Net loss on sale of securities 3 — 562 3 5,465

Net (gain) loss on sale of securities (377) 3 — (374) 5,465

Net change in valuation of financial instruments carried at fair value (223) (88) (39) (626) 1,143

Losses incurred on building and lease exits 919 — — 919 —

(Gains) losses on building and lease exits (1,373) 919 — (454) —

Adjusted revenue (non-GAAP) $ 168,746 $ 162,984 $ 153,699 $ 491,606 $ 454,641

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TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS

June 30, 2025 March 31, 2025 December 31, 2024 June 30, 2024

September 30, 2025 June 30, 2025 December 31, 2024 September 30, 2024

Shareholders’ equity (GAAP) $ 1,912,892 $ 1,865,664 $ 1,774,326 $ 1,793,721

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TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE

June 30, 2025 March 31, 2025 December 31, 2024 June 30, 2024

September 30, 2025 June 30, 2025 December 31, 2024 September 30, 2024

Shareholders’ equity (GAAP) $ 1,912,892 $ 1,865,664 $ 1,774,326 $ 1,793,721

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Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Management believes that the allowance for credit losses and fair value measurements require significant judgements and assumptions which are susceptible to significant changes based on the current environment.

Management believes that the allowance for credit losses and fair value measurements require significant judgments and assumptions which are susceptible to significant changes based on the current environment.

There have been no significant changes in our application of critical accounting estimates since December 31, 2024.

Comparison of Financial Condition at June 30, 2025 and December 31, 2024

Total assets increased $237.1 million to $16.44 billion at June 30, 2025, from $16.20 billion at December 31, 2024.

The increase compared to year end was primarily due to loan growth, partially offset by a decrease in securities and interest-bearing deposits.

Comparison of Financial Condition at September 30, 2025 and December 31, 2024

Total assets increased $363.0 million to $16.56 billion at September 30, 2025, from $16.20 billion at December 31, 2024.

The increase compared to year end was primarily due to loan growth and an increase in cash, specifically our interest-bearing deposits in other banks, partially offset by a decrease in securities.

Loans and lending:

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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 June 30, 2025 was 87%.

Our loan to deposit ratio at September 30, 2025 was 84%.

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) increased $335.7 million at June 30, 2025, compared to December 31, 2024, reflecting increases across all loan categories except multifamily real estate loans and other consumer loans.

Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $347.9 million at September 30, 2025, compared to December 31, 2024, reflecting increases across all loan categories except small balance CRE, multifamily real estate loans, commercial business loans, one- to four-family residential loans and other consumer loans.

The following table sets forth the composition of the Company’s loans receivable by type of loan as of the dates indicated (dollars in thousands):

Percentage Change

Jun 30, 2025 Dec 31, 2024 Jun 30, 2024 Year End Prior Year Qtr.

Sep 30, 2025 Dec 31, 2024 Sep 30, 2024 Year End Prior Year Qtr.

Commercial real estate:

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Total loans receivable $ 11,702,538 $ 11,354,656 $ 11,224,606 3 % 4 %

Commercial real estate loans totaled $3.97 billion, or 34% of our loan portfolio, and multifamily real estate loans totaled $860.7 million, or 7% of our loan portfolio, at June 30, 2025.

Commercial real estate loans increased by $108.8 million during the first six months of 2025, primarily due to new production and transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by payoffs and paydowns, while multifamily real estate loans decreased by $33.7 million, primarily due to payoffs and paydowns exceeding new production.

Our construction, land and land development loans totaled $1.70 billion, or 15% of our loan portfolio, at June 30, 2025, compared to $1.52 billion at December 31, 2024.

Multifamily construction loans increased $54.4 million, or 11%, to $568.1 million at June 30, 2025, compared to December 31, 2024.

Multifamily construction represented 5% of our total loan portfolio at June 30, 2025.

Commercial real estate loans totaled $4.00 billion, or 34% of our loan portfolio, and multifamily real estate loans totaled $860.7 million, or 7% of our loan portfolio, at September 30, 2025.

Commercial real estate loans increased by $132.2 million during the first nine months of 2025, primarily due to new production and transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by payoffs and paydowns, while multifamily real estate loans decreased by $33.8 million, primarily due to payoffs and paydowns exceeding new production.

Our construction, land and land development loans totaled $1.74 billion, or 15% of our loan portfolio, at September 30, 2025, compared to $1.52 billion at December 31, 2024.

Multifamily construction loans increased $72.4 million, or 14%, to $586.1 million at September 30, 2025, compared to December 31, 2024.

Multifamily construction represented 5% of our total loan portfolio at September 30, 2025.

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 $36.9 million, or 30%, to $159.2 million at June 30, 2025, compared to $122.4 million at December 31, 2024, due to advances and new loan production, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase.

Land and land development loans increased $47.8 million, or 13%, to $417.5 million at June 30, 2025, compared to December 31, 2024, primarily due to new loan production, partially offset by payoffs and paydowns.

Commercial construction loans increased $21.8 million, or 18%, to $144.1 million at September 30, 2025, compared to $122.4 million at December 31, 2024, due to advances and new loan production, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase.

Land and land development loans increased $57.7 million, or 16%, to $427.3 million at September 30, 2025, compared to December 31, 2024, primarily due to new loan production, partially offset by payoffs and paydowns.

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 and agricultural business loans were $2.82 billion at June 30, 2025 and $2.76 billion at December 31, 2024.

Commercial and agricultural business loans represented 24% of our loan portfolio at June 30, 2025.

Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $226.8 million, or 2% of our loan portfolio, at June 30, 2025, compared to $227.4 million, or 2% of our loan portfolio, at December 31, 2024.

Our commercial business loans were $2.43 billion at September 30, 2025 and $2.42 billion at December 31, 2024.

Commercial business loans represented 21% of our loan portfolio at September 30, 2025.

Our agricultural business loans were $354.9 million at September 30, 2025 and $340.3 million at December 31, 2024.

Agricultural business loans represented 3% of our loan portfolio at September 30, 2025.

Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $215.1 million, or 2% of our loan portfolio, at September 30, 2025, compared to $227.4 million, or 2% of our loan portfolio, at December 31, 2024.

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 June 30, 2025, one- to four-family residential loans retained in our portfolio increased $18.9 million, to $1.61 billion, compared to $1.59 billion at December 31, 2024.

The increase in one- to four-family residential loans was primarily the result of one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction and new loan originations.

One- to four-family residential loans represented 14% of our loan portfolio at June 30, 2025.

At September 30, 2025, one- to four-family residential loans retained in our portfolio decreased $8.7 million, to $1.58 billion, compared to $1.59 billion at December 31, 2024.

The decrease was primarily the result of one- to four-family residential loan payoffs exceeding one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction and new loan originations.

One- to four-family residential loans represented 14% of our loan portfolio at September 30, 2025.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients.

At June 30, 2025, consumer loans, including home equity revolving lines of credit, increased $11.1 million to $732.5 million, compared to $721.4 million at December 31, 2024.

At September 30, 2025, consumer loans, including home equity revolving lines of credit, increased $18.9 million to $740.3 million, compared to $721.4 million at December 31, 2024.

The following table shows the commitment amount for loan origination activity (excluding loans held for sale) for the periods indicated (in thousands):

Three Months Ended Six Months Ended

Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 Jun 30, 2025 Jun 30, 2024

Three Months Ended Nine Months Ended

Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 Sep 30, 2025 Sep 30, 2024

Commercial real estate $ 118,354 $ 216,189 $ 114,372 $ 371,584 $ 283,992

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Total commitment amount for loan originations (excluding loans held for sale) $ 794,535 $ 966,625 $ 893,565 $ 2,296,994 $ 2,667,517

Loans held for sale increased to $37.7 million at June 30, 2025, compared to $32.0 million at December 31, 2024.

The increase was primarily the result of originations of one- to four- family residential mortgage loans held for sale outpacing loan sales during the period.

Originations of loans held for sale increased to $171.0 million for the six months ended June 30, 2025, compared to $107.2 million for the same period last year.

The volume of one- to four-family residential mortgage loans sold was $212.7 million during the six months ended June 30, 2025, compared to $160.7 million in the same period a year ago, which included a pooled loan sale of $19.8 million of one- to four-family residential mortgage loans.

Loans held for sale decreased to $20.3 million at September 30, 2025, compared to $32.0 million at December 31, 2024.

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 $265.0 million for the nine months ended September 30, 2025, compared to $197.7 million for the same period last year.

The volume of one- to four-family residential mortgage loans sold was $349.6 million during the nine months ended September 30, 2025, compared to $255.7 million in the same period a year ago.

The following table presents loans by geographic concentration at the dates indicated (dollars in thousands):

Jun 30, 2025 Dec 31, 2024 Jun 30, 2024 Percentage Change

Sep 30, 2025 Dec 31, 2024 Sep 30, 2024 Percentage Change

Amount Percentage Amount Amount Year End Prior Year Qtr.

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Investment Securities:

Total securities decreased $60.2 million to $3.05 billion at June 30, 2025, from $3.11 billion at December 31, 2024, primarily due to securities paydowns and maturities exceeding purchases during the six months ended June 30, 2025.

Purchases during the six months ended June 30, 2025, consisted primarily of state and local government obligations.

The average effective duration of the Company’s securities portfolio was 6.6 years at both June 30, 2025 and December 31, 2024.

Fair value adjustments for securities designated as available-for-sale increased $48.0 million for the six months ended June 30, 2025.

This increase, net of $11.5 million in associated tax expense, was recorded in other comprehensive income and reflected the impact of changes in market interest rates during the six months ended June 30, 2025.

Total securities decreased $115.9 million to $2.99 billion at September 30, 2025, from $3.11 billion at December 31, 2024, primarily due to securities paydowns and maturities exceeding purchases during the nine months ended September 30, 2025.

Purchases during the nine months ended September 30, 2025, consisted primarily of state and local government obligations.

The average effective duration of the Company’s securities portfolio was 6.4 years at both September 30, 2025 and December 31, 2024.

The fair value of securities designated as available-for-sale increased $80.2 million for the nine months ended September 30, 2025.

This increase, net of $19.3 million in associated tax expense, was recorded in other comprehensive income and reflected the impact of changes in market interest rates during the nine months ended September 30, 2025.

Deposits, client retail repurchase agreements and loan repayments are the major sources of our funds for lending and other investment purposes.

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This effort has been particularly directed towards emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts.

Despite rate sensitive deposits shifting out of non-interest-bearing deposits due to clients seeking higher yields on their deposits, our strategy of focusing on relationship banking remains intact.

The following table sets forth the Company’s deposits by type of deposit account as of the dates indicated (dollars in thousands):

Percentage Change

Jun 30, 2025 Dec 31, 2024 Jun 30, 2024 Year End Prior Year Qtr.

Sep 30, 2025 Dec 31, 2024 Sep 30, 2024 Year End Prior Year Qtr.

Non-interest-bearing $ 4,572,338 $ 4,591,543 $ 4,688,244 — % (2) %

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Total deposits $ 14,015,935 $ 13,514,398 $ 13,538,148 4 % 4 %

Total deposits increased $12.9 million at June 30, 2025, compared to December 31, 2024, with core deposits increasing $34.8 million and certificates of deposit decreasing $21.9 million.

The increase in core deposits primarily reflects increases in interest-bearing transaction and savings accounts.

We had $50.0 million of brokered deposits at June 30, 2025, compared to $50.3 million at December 31, 2024.

Core deposits represented 89% of total deposits at both June 30, 2025 and December 31, 2024.

Total deposits increased $501.5 million at September 30, 2025, compared to December 31, 2024, with core deposits increasing $460.8 million and certificates of deposit increasing $40.7 million.

The increase in core deposits primarily reflects increases in interest-bearing transaction and savings accounts, primarily from normal seasonal increases from agricultural clients.

We had $50.0 million of brokered deposits at September 30, 2025, compared to $50.3 million at December 31, 2024.

Core deposits represented 89% of total deposits at both September 30, 2025 and December 31, 2024.

Competition for deposits in our market areas remains strong.

The following table sets forth the number and average account balance of the Company’s deposit accounts as of the dates indicated (dollars in thousands):

Jun 30, 2025 Dec 31, 2024 Jun 30, 2024

Sep 30, 2025 Dec 31, 2024 Sep 30, 2024

Number of deposit accounts 449,087 460,004 459,127

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The following table presents deposits by geographic concentration at the dates indicated (dollars in thousands):

Jun 30, 2025 Dec 31, 2024 Jun 30, 2024 Percentage Change

Sep 30, 2025 Dec 31, 2024 Sep 30, 2024 Percentage Change

Amount Percentage Amount Amount Year End Prior Year Qtr.

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Total deposits $ 14,015,935 100 % $ 13,514,398 $ 13,538,148 4 % 4 %

We had $565.0 million of FHLB advances at June 30, 2025, compared to $290.0 million at December 31, 2024.

The increase was primarily used to fund loan growth.

Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $8.1 million to $117.1 million at June 30, 2025, compared to $125.3 million at December 31, 2024.

At June 30, 2025, the Company’s off-balance sheet liquidity included additional borrowing capacity of $2.74 billion at the FHLB, $1.62 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions.

Junior subordinated debentures totaled $73.4 million at June 30, 2025, compared to $67.5 million at December 31, 2024.

We had $100.0 million of FHLB advances at September 30, 2025, compared to $290.0 million at December 31, 2024 as deposits were used as the primary source of funding during the current period.

Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $4.7 million to $120.5 million at September 30, 2025, compared to $125.3 million at December 31, 2024.

At September 30, 2025, the Company’s off-balance sheet liquidity included additional borrowing capacity of $3.25 billion at the FHLB, $1.63 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions.

Junior subordinated debentures totaled $76.3 million at September 30, 2025, compared to $67.5 million at December 31, 2024.

The outstanding balance of the Company’s subordinated notes was fully repaid during the second quarter of 2025.

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Shareholders’ Equity:

Total shareholders’ equity increased $91.3 million to $1.87 billion, or 11.35% of total assets, at June 30, 2025, compared to $1.77 billion, or 10.95% of total assets, at December 31, 2024.

The increase was primarily due to a $57.0 million increase in retained earnings resulting from $90.6 million in net income, partially offset by the accrual of $33.6 million in cash dividends during the six months ended June 30, 2025.

Total shareholders’ equity increased $138.6 million to $1.91 billion, or 11.55% of total assets, at September 30, 2025, compared to $1.77 billion, or 10.95% of total assets, at December 31, 2024.

The increase was primarily due to a $93.7 million increase in retained earnings resulting from $144.1 million in net income, partially offset by the accrual of $50.4 million in cash dividends and the repurchase of 250,000 shares of Banner common stock in the third quarter of 2025 at an average price of $63.11 per share.

In addition, accumulated other comprehensive loss decreased by $56.5 million, primarily due to a decrease in unrealized losses on the available for sale securities portfolio.

There were no shares of common stock repurchased during the six months ended June 30, 2025.

Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $92.2 million to $1.49 billion, or 9.28% of tangible assets, at June 30, 2025, compared to $1.40 billion, or 8.84% of tangible assets at December 31, 2024.

A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above following “Second Quarter 2025 Financial Highlights.”

Comparison of Results of Operations for the Three Months Ended June 30, 2025 and March 31, 2025, and the Six Months Ended June 30, 2025 and 2024

For the quarter ended June 30, 2025, net income was $45.5 million, or $1.31 per diluted share, compared to $45.1 million, or $1.30 per diluted share, for the preceding quarter.

For the six months ended June 30, 2025, our net income was $90.6 million, or $2.61 per diluted share, compared to $77.4 million, or $2.24 per diluted share for the same period a year earlier.

The increase in net income for the current quarter compared to the preceding quarter was primarily due to an increase in net interest income, partially offset by a decrease in non-interest income as well as increases in non-interest expense and the provision for credit losses.

The increase in net income for the six months ended June 30, 2025 compared to the same period a year ago was primarily due to increases in net interest income and non-interest income, partially offset by increases in non-interest expense and the provision for credit losses.

The increase in net interest income compared to the preceding quarter reflects an increase in both the yield and average balance of interest-earning assets, partially offset by an increase in funding costs.

The increase in net interest income for the six months ended June 30, 2025 compared to the same period a year ago reflects an increase in both the yield and average balance of interest-earning assets.

We recorded a $4.8 million provision for credit losses for the quarter ended June 30, 2025, compared to a $3.1 million provision for credit losses in the preceding quarter.

The provision for credit losses recorded in the current quarter primarily reflected loan growth, as well as risk rating migration which increased the overall estimated reserve requirements.

We recorded a $7.9 million provision for credit losses for the six months ended June 30, 2025, compared to a $2.9 million provision for credit losses for the same period a year ago.

Total non-interest income decreased for the quarter ended June 30, 2025, compared to the preceding quarter and increased during the six months ended June 30, 2025, compared to the same period a year ago.

The decrease in non-interest income during the current quarter compared to the preceding quarter was primarily due to a decrease in miscellaneous income, primarily due to losses incurred on building and lease exits during the current quarter as the Company executed on an initiative to reduce excess facilities.

The increase in non-interest income during the six months ended June 30, 2025, compared to the same period last year was primarily due to a decrease in the net loss recognized on the sale of securities and an increase in the fair value adjustments on financial instruments carried at fair value during the current quarter.

Total non-interest expense increased slightly for the quarter ended June 30, 2025, compared to the preceding quarter and increased during the six months ended June 30, 2025, compared to the same period a year ago.

Non-interest expense for the current quarter reflects increases in salary and employee benefits, information and computer data services, and advertising and marketing expenses, offset by an increase in capitalized loan origination costs.

The increase in non-interest expense during the six months ended June 30, 2025, compared to the same period last year primarily reflects increases in salary and employee benefits, information and computer data services, and professional and legal expenses.

Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $139.8 million to $1.54 billion, or 9.50% of tangible assets, at September 30, 2025, compared to $1.40 billion, or 8.84% of tangible assets at December 31, 2024.

A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above following “Third Quarter 2025 Financial Highlights.”

Comparison of Results of Operations for the Three Months Ended September 30, 2025 and June 30, 2025, and the Nine Months Ended September 30, 2025 and 2024

For the quarter ended September 30, 2025, net income was $53.5 million, or $1.54 per diluted share, compared to $45.5 million, or $1.31 per diluted share, for the preceding quarter.

For the nine months ended September 30, 2025, our net income was $144.1 million, or $4.15 per diluted share, compared to $122.5 million, or $3.54 per diluted share, for the same period a year earlier.

The increase in net income for the comparable periods was primarily due to increases in net interest income and non-interest income.

Net interest income was $150.0 million in the third quarter of 2025, compared to $144.4 million in the preceding quarter, and $435.5 million for the nine months ended September 30, 2025, compared to $401.2 million for the comparable period a year ago.

The increases in net interest income for both periods reflect higher yields and an increase in the average balance of interest-earning assets.

The increase in net interest income for the nine months ended September 30, 2025 compared to the same period a year ago also reflects a decrease in funding costs.

We recorded a $2.7 million provision for credit losses for the quarter ended September 30, 2025, compared to a $4.8 million provision for credit losses in the preceding quarter.

The provision for credit losses in the current quarter was driven by changes in both portfolio mix and individually evaluated loans.

We recorded a $10.6 million provision for credit losses for the nine months ended September 30, 2025, compared to a $4.6 million provision for credit losses for the same period a year ago.

Total non-interest income increased for the quarter ended September 30, 2025, compared to the preceding quarter, and increased during the nine months ended September 30, 2025, compared to the same period a year ago.

The increase from the preceding quarter was primarily due to an increase in miscellaneous income, reflecting gains on the sale of assets during the current quarter, compared to losses on the disposal of assets related to building and lease exits during the prior quarter associated with Banner’s reduction of excess office space.

The increase in non-interest income during the nine months ended September 30, 2025, compared to the same period last year, was primarily due to a decrease in the net loss recognized on the sale of securities and positive fair value adjustments on financial instruments carried at fair value during the current period.

Total non-interest expense increased slightly for the quarter ended September 30, 2025, compared to the preceding quarter and increased for the nine months ended September 30, 2025, compared to the same period a year ago.

Non-interest expense for the current quarter reflects increases in miscellaneous expenses and advertising and marketing expenses, partially offset by a decrease in salary and employee benefits.

The increase in non-interest expense during the nine months ended September 30, 2025, compared to the same period last year primarily reflects increases in salary and employee benefits, information and computer data services expenses and professional and legal expenses.

OPERATING DATA:

Quarters Ended Six Months Ended

(In thousands) June 30, 2025 March 31, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Quarters Ended Nine Months Ended

(In thousands) September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Interest income $ 205,848 $ 200,259 $ 195,841 $ 599,975 $ 569,667

5 unchanged sentences

Mortgage banking operations 3,298 3,226 3,180 9,627 8,521

Net loss on sale of securities (3) — (562) (3) (5,465)

Net gain (loss) on sale of securities 377 (3) — 374 (5,465)

Net change in valuation of financial instruments carried at fair value

12 unchanged sentences

PER COMMON SHARE DATA:

Quarters Ended Six Months Ended

June 30, 2025 March 31, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Quarters Ended Nine Months Ended

September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Basic $ 1.55 $ 1.31 $ 1.31 $ 4.17 $ 3.56

1 unchanged sentence

Net Interest Income.

Net interest income increased for the quarter ended June 30, 2025, compared to the preceding quarter.

The $3.3 million increase was due to a $6.4 million increase in interest income, primarily attributable to a five basis point increase in average loan yields to 6.12% and an increase in average loan balances, partially offset by a $3.1 million increase in interest expense, reflecting a $221.4 million increase in the average balance of FHLB advances, with higher rates than core deposits.

Net interest margin on a tax equivalent basis was 3.92% for both the second quarter of 2025 and the preceding quarter.

Net interest income increased for the quarter ended September 30, 2025, compared to the preceding quarter.

The $5.6 million increase was due to an increase in interest income, primarily attributable to a five basis point increase in the average loan yield to 6.17% and an increase in average loan balances, while interest expense was essentially flat for the quarter.

Net interest margin on a tax equivalent basis was 3.98% for the third quarter of 2025, compared to 3.92% for the preceding quarter.

Net interest margin for the current quarter, compared to the preceding quarter, benefited from higher yields on interest-earning assets, primarily due to an increase in the average loan yield.

Despite higher funding costs, the Company maintained a stable net interest margin of 3.92%, reflecting the benefit of improved asset yields and favorable loan mix.

Net interest income increased by $20.0 million, or 8%, to $285.5 million for the six months ended June 30, 2025, compared to $265.5 million for the same period one year earlier, primarily due to an increase in the average yields on interest-earning assets and an increase in the balance of average earning assets.

Net interest income increased by $34.3 million, or 9%, to $435.5 million for the nine months ended September 30, 2025, compared to $401.2 million for the same period one year earlier.

The increase was primarily the result of a $30.3 million increase in interest income, reflecting both adjustable-rate loans repricing higher and new loans being originated at rates higher than the overall loan portfolio, and a $532.7 million increase in the average balance of loans.

The net interest margin on a tax equivalent basis increased to 3.92% for the six months ended June 30, 2025, compared to 3.72% for the same period in the prior year.

In addition, funding costs decreased by seven basis points for the nine months ended September 30, 2025 as compared to the same period in the prior year.

The net interest margin on a tax equivalent basis increased to 3.94% for the nine months ended September 30, 2025, compared to 3.72% for the same period in the prior year.

Interest Income.

Interest income for the quarter ended June 30, 2025 was $200.3 million, compared to $193.9 million for the preceding quarter.

The increase was primarily due to higher average loan yields and balances.

Average loan yields increased five basis points to 6.12%, while the average loan balance increased $223.2 million.

These increases were partially offset by a decline in interest income from investment securities, due to both lower average balances and yields.

Loan yields increased five basis points to 6.12% for the quarter ended June 30, 2025, from 6.07% in the preceding quarter, due to new loans being originated at higher interest rates and adjustable rate loans repricing higher.

The average balance of loans receivable for the quarter ended June 30, 2025 increased compared to the preceding quarter, primarily reflecting increases in the average balances of mortgage loans, specifically commercial real estate and construction loans.

The average balance of total investment securities decreased to $3.49 billion for the quarter ended June 30, 2025 (excluding the effect of fair value adjustments), compared to $3.52 billion for the preceding quarter.

The average yield on the combined portfolio decreased to 2.98% for the quarter ended June 30, 2025, from 3.02% for the preceding quarter.

Interest income for the six months ended June 30, 2025 was $394.1 million, compared to $373.8 million for the same period in the prior year, an increase of $20.3 million.

This increase reflects both an 18 basis point increase in the average yield on interest-earning assets, to 5.38%, primarily due to adjustable-rate loans repricing higher and new loans being originated at rates higher than the overall loan portfolio, and a $346.2 million increase in the average balance of those assets.

Loan growth was the primary contributor, with average balances up $583.7 million, from the prior year.

Interest income for the quarter ended September 30, 2025 was $205.8 million, compared to $200.3 million for the preceding quarter.

The increase was primarily due to higher average loan yields and balances, as well as increases in both the average balance and yield on interest-bearing deposits held at other banks.

The total average loan yield increased five basis points to 6.17%, while the total average loan balance increased $32.9 million.

Loan yields increased five basis points to 6.17% for the quarter ended September 30, 2025, from 6.12% in the preceding quarter, due to new loans being originated at higher interest rates and adjustable rate loans repricing higher.

The increase in average loan balances primarily reflected growth in real estate secured loans, particularly commercial real estate and construction loans, which together contributed the largest share of the quarterly increase in interest income.

The total investment securities average balance increased to $3.61 billion for the quarter ended September 30, 2025 (excluding the effect of fair value adjustments), compared to $3.49 billion for the preceding quarter.

The average yield on the combined portfolio increased to 3.06% for the quarter ended September 30, 2025, from 2.98% for the preceding quarter.

Interest income on interest-bearing deposits with banks also increased, reflecting both a higher average balance and an increase in yield to 4.16%, compared to 3.06% in the prior quarter.

Interest income for the nine months ended September 30, 2025 was $600.0 million, compared to $569.7 million for the same period in the prior year, an increase of $30.3 million.

This increase primarily reflected a 16 basis point increase in the average yield on interest-earning assets, to 5.40%, along with higher average balances.

Loan growth was the primary contributor, with the average loan balances increasing $532.7 million compared to the prior year, supported by growth in the commercial real estate and residential mortgage portfolios.

Interest Expense.

Interest expense for the quarter ended June 30, 2025 increased $3.1 million, or 6%, to $55.9 million compared to $52.8 million for the preceding quarter.

The increase was largely driven by a $184.1 million increase in average funding liabilities, primarily due to a $221.4 million increase in FHLB advances.

The average cost of funding liabilities also rose five basis points, to 1.60% for the quarter ended June 30, 2025.

Interest expense for the six months ended June 30, 2025 was $108.6 million, compared to $108.3 million for the same period in the prior year.

The increase in interest expense occurred as a result of a $243.5 million, or 2%, increase in average funding liabilities, which was mostly offset by a two basis-point decrease in the average cost of funds to 1.57% for the six months ended June 30, 2025, compared to 1.59% for the same period in the prior year.

The increase in the average balance of funding liabilities reflects increases in interest-bearing transaction and savings accounts, partially offset by decreases in non-interest-bearing deposits, money market accounts, FHLB advances and other borrowings.

Deposit interest expense for the quarter ended June 30, 2025 increased 1% to $49.3 million compared to $48.7 million for the preceding quarter.

The increase in deposit costs in the current quarter compared to the prior quarter was due to an increase in the average balance of interest-bearing deposits.

The average rate paid on total deposits, which includes non-interest-bearing deposits, was 1.47% for both the quarter ended June 30, 2025 and the preceding quarter.

The average rate paid on interest-bearing deposits decreased to 2.21% for the quarter ended June 30, 2025, compared to 2.22% in the preceding quarter.

The decrease in the rate paid on interest-bearing deposits compared to the preceding quarter reflects a decrease in the interest rate on certificates of deposit and shifts in the deposit mix.

Total average deposit balances, including non-interest-bearing deposits, decreased to $13.42 billion for the quarter ended June 30, 2025, from $13.45 billion for the preceding quarter.

Deposit interest expense for the six months ended June 30, 2025 increased $4.6 million to $98.1 million, compared to $93.5 million for the same period in the prior year.

Average deposit balances increased to $13.43 billion for the six months ended June 30, 2025, from $13.08 billion for the same period a year earlier and the average rate paid on deposits increased to 1.47% for the six months ended June 30, 2025 from 1.44% for the same period in the prior year.

The average rate paid on interest-bearing deposits decreased by three basis points to 2.21% for the six months ended June 30, 2025, compared to 2.24% in the same period a year earlier.

Interest expense was relatively flat for the quarter ended September 30, 2025 as compared to the preceding quarter.

Average funding liabilities increased by $124.8 million, primarily due to a $370.2 million increase in average deposit balances, partially offset by a $163.3 million decrease in average balance of FHLB advances.

The average cost of funding liabilities decreased three basis points, to 1.57% for the quarter ended September 30, 2025.

Interest expense for the nine months ended September 30, 2025 was $164.5 million, compared to $168.5 million for the same period in the prior year.

The decrease resulted from a seven basis-point decrease in the average cost of funds to 1.57% from 1.64%, partially offset by a $268.0 million, or 2%, increase in average funding liabilities.

Deposit interest expense for the quarter ended September 30, 2025 increased 6% to $52.3 million, compared to $49.3 million for the preceding quarter.

The increase was primarily due to increases in both the average balance and the average rate paid on interest-bearing deposits.

The average rate paid on total deposits, including non-interest-bearing deposits, was 1.50% for the quarter ended September 30, 2025 and 1.47% for the preceding quarter.

The average rate paid on interest-bearing deposits increased to 2.25% for the quarter ended September 30, 2025, compared to 2.21% in the preceding quarter.

The increase in the rate paid on interest-bearing deposits reflects higher average rates paid across all interest-bearing deposit categories, except certificates of deposit, as well as shifts in the deposit mix.

Total average deposit balances, including non-interest-bearing deposits, increased to $13.79 billion for the quarter ended September 30, 2025, from $13.42 billion for the preceding quarter.

Deposit interest expense for the nine months ended September 30, 2025 increased $3.1 million to $150.3 million, compared to $147.2 million for the same period in the prior year.

Average deposit balances increased to $13.55 billion for the nine months ended September 30, 2025, from $13.16 billion for the same period a year earlier, while the average rate paid on interest-bearing deposits decreased by eight basis points to 2.23% for the nine months ended September 30, 2025, compared to 2.31% in the same period a year earlier.

The decrease in the average rate paid on interest-bearing deposits was primarily the result of a 33 basis-point decrease in the cost of certificates of deposit.

Interest expense on total borrowings for the quarter ended June 30, 2025 increased 62%, to $6.5 million compared to $4.0 million for the prior quarter, primarily due to an increase in the average balance of total borrowings.

The average balance of total borrowings increased to $587.7 million for the quarter ended June 30, 2025, compared to $379.7 million for the preceding quarter, primarily due to a $221.4 million increase in the average balance of FHLB advances.

The average rate paid on total borrowings for the quarter ended June 30, 2025 increased to 4.47% from 4.32% for the preceding quarter, primarily due to the increase in the average balance of FHLB advances.

Interest expense on total borrowings for the six months ended June 30, 2025 decreased to $10.6 million from $14.9 million for the same period a year earlier due to a decrease in both the average balance of and rate paid on total borrowings.

Average total borrowings were $484.3 million for the six months ended June 30, 2025, compared to $594.8 million for the same period a year earlier.

The decrease was primarily due to a $49.7 million decrease in the average balance of FHLB advances and a $49.6 million decrease in the average balance of other borrowings.

The average rate paid on total borrowings for the six months ended June 30, 2025 decreased to 4.41% from 5.02% for the same period a year earlier.

Interest expense on total borrowings for the quarter ended September 30, 2025, decreased 45% to $3.6 million, compared to $6.5 million for the prior quarter, primarily due to decreases in both the average balance and the rate paid on total borrowings.

The average balance of total borrowings decreased to $342.3 million for the quarter ended September 30, 2025, compared to $587.7 million for the preceding quarter, primarily due to a $163.3 million decrease in the average balance of FHLB advances.

The average rate paid on total borrowings for the quarter ended September 30, 2025, decreased to 4.18% from 4.47% for the preceding quarter.

Interest expense on total borrowings for the nine months ended September 30, 2025 decreased to $14.2 million from $21.2 million for the same period a year earlier, due to decreases in both the average balance and rate paid on total borrowings.

Average total borrowings were $436.4 million for the nine months ended September 30, 2025, compared to $562.9 million for the same period a year earlier.

The decrease was primarily due to a $42.5 million decrease in the average balance of FHLB advances, a $46.3 million decrease in the average balance of other borrowings and a $37.7 million decrease in the average balance of junior subordinated debentures and subordinated notes.

The average rate paid on total borrowings for the nine months ended September 30, 2025 decreased to 4.35% from 5.04% for the same period a year earlier.

Analysis of Net Interest Spread .

2 unchanged sentences

ANALYSIS OF NET INTEREST SPREAD Quarters Ended

(rates / ratios annualized) Jun 30, 2025 Mar 31, 2025

(rates / ratios annualized) Sep 30, 2025 Jun 30, 2025

(dollars in thousands) Average Balance Interest and Dividends Yield / Cost (3)

2 unchanged sentences

Held for sale loans $ 32,109 $ 531 6.56 % $ 29,936 $ 503 6.74 %

Mortgage loans 9,565,357 143,909 6.03 % 9,366,213 137,724 5.96 %

Real estate secured loans 9,651,895 147,682 6.07 % 9,565,357 143,909 6.03 %

Commercial/agricultural loans 1,869,782 31,124 6.60 % 1,924,092 31,196 6.50 %

52 unchanged sentences

(3) Tax-exempt income is calculated on a tax equivalent basis.

The tax equivalent yield adjustment to interest earned on loans was $2.3 million and $2.2 million for the quarters ended June 30, 2025 and March 31, 2025, respectively.

The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.1 million and $1.0 million for the quarters ended June 30, 2025 and March 31, 2025, respectively.

The tax equivalent yield adjustment to interest earned on loans was $2.4 million and $2.3 million for the quarters ended September 30, 2025 and June 30, 2025, respectively.

The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.1 million for both the quarters ended September 30, 2025 and June 30, 2025.

(4) Represents non-GAAP financial measures.

See non-GAAP financial measure reconciliations presented above following Second Quarter 2025 Highlights.

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

See non-GAAP financial measure reconciliations presented above following Third Quarter 2025 Highlights.

Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024

Average Balance Interest and Dividends Yield / Cost (3)

2 unchanged sentences

Held for sale loans $ 28,203 $ 1,391 6.59 % $ 16,225 $ 826 6.80 %

Mortgage loans 9,466,335 281,633 6.00 % 8,949,709 254,514 5.72 %

Real estate secured loans 9,528,868 429,315 6.02 % 9,036,256 390,011 5.77 %

Commercial/agricultural loans 1,900,225 93,072 6.55 % 1,861,182 95,155 6.83 %

52 unchanged sentences

(3) Tax-exempt income is calculated on a tax equivalent basis.

The tax equivalent yield adjustment to interest earned on loans was $4.6 million and $4.2 million for the six months ended June 30, 2025 and 2024, respectively.

The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.1 million for both the six months ended June 30, 2025 and 2024.

The tax equivalent yield adjustment to interest earned on loans was $7.0 million and $6.5 million for the nine months ended September 30, 2025 and 2024, respectively.

The tax equivalent yield adjustment to interest earned on tax exempt securities was $3.1 million for both the nine months ended September 30, 2025 and 2024.

(4) Represents non-GAAP financial measures.

See non-GAAP financial measure reconciliations presented above following Second Quarter 2025 Highlights.

See non-GAAP financial measure reconciliations presented above following Third Quarter 2025 Highlights.

Provision and Allowance for Credit Losses .

4 unchanged sentences

Quarters Ended

Six Months Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - LOANS Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 Jun 30, 2025 Jun 30, 2024

Nine Months Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES – LOANS Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 Sep 30, 2025 Sep 30, 2024

Balance, beginning of period $ 160,501 $ 157,323 $ 152,848 $ 155,521 $ 149,643

2 unchanged sentences

Commercial real estate 36 53 65 146 1,552

Construction and land 725 — — 725 —

One- to four-family residential 13 58 14 259 47

2 unchanged sentences

Consumer 78 168 41 365 312

641 931 746 1,572 3,197

Total recoveries 1,050 641 734 2,622 3,931

Loans charged off:

Commercial real estate — — — — (347)

Construction and land (218) — (145) (218) (145)

One- to four-family residential — — — (13) —

2 unchanged sentences

Consumer (438) (410) (405) (1,212) (1,481)

(1,664) (3,678) (991) (5,342) (3,369)

Total charge-offs (3,228) (1,664) (964) (8,570) (4,333)

Net charge-offs (2,178) (1,023) (230) (5,948) (402)

3 unchanged sentences

The provision for credit losses - loans reflects the amount required to maintain the allowance for credit losses - loans at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves.

During the quarter ended June 30, 2025, we recorded a provision for credit losses - loans of $4.2 million, compared to a provision for credit losses - loans of $4.5 million during the preceding quarter.

The provision for credit losses recorded in the current quarter primarily reflected loan growth, as well as risk rating migration.

The provision for credit losses for the preceding quarter primarily reflected loan growth in the construction portfolio and to a lesser extent risk rating migration and qualitative adjustments applied to address economic uncertainty.

During the quarter ended September 30, 2025, we recorded a provision for credit losses - loans of $1.4 million, compared to a provision for credit losses - loans of $4.2 million during the preceding quarter.

The provision for credit losses in the quarter was driven by changes in both portfolio mix and individually evaluated loans.

The provision for credit losses for the preceding quarter primarily reflected loan growth, as well as risk rating migration.

Future provisions for credit losses will continue to be influenced by changes in the amount and composition of the loan portfolio, updates to the reasonable and supportable forecast of future economic conditions, revisions to qualitative factor assessments, and any necessary changes to the reversion period applied in estimating expected credit losses.

2 unchanged sentences

Quarters Ended

Six Months Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS Jun 30, 2025 Mar 31, 2025 Jun 30, 2024 Jun 30, 2025 Jun 30, 2024

Nine Months Ended

CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS Sep 30, 2025 Jun 30, 2025 Sep 30, 2024 Sep 30, 2025 Sep 30, 2024

Balance, beginning of period $ 12,750 $ 12,162 $ 14,027 $ 13,562 $ 14,484

1 unchanged sentence

Balance, end of period $ 14,040 $ 12,750 $ 13,765 $ 14,040 $ 13,765

The increase in the allowance for credit losses - unfunded loan commitments for the current quarter reflects an increase in unfunded loan commitments and risk rating migration primarily in the construction portfolio.

The increase in the allowance for credit losses - unfunded loan commitments for the current quarter reflects an increase in unfunded loan commitments, primarily in the construction portfolio.

Non-interest Income.

The following table presents the key components of non-interest income for the periods indicated (dollars in thousands):

Quarters Ended Six Months Ended

Jun 30, 2025 Mar 31, 2025 Change Amount Change Percent Jun 30, 2025 Jun 30, 2024 Change Amount Change Percent

Quarters Ended Nine Months Ended

Sep 30, 2025 Jun 30, 2025 Change Amount Change Percent Sep 30, 2025 Sep 30, 2024 Change Amount Change Percent

Deposit fees and other service charges $ 10,955 $ 10,835 $ 120 1 % $ 32,559 $ 32,353 $ 206 1 %

3 unchanged sentences

20,130 17,666 2,464 14 56,589 53,461 3,128 6

Net loss on sale of securities (3) — (3) nm (3) (5,465) 5,462 (100)

Net gain (loss) on sale of securities 377 (3) 380 nm 374 (5,465) 5,839 (107)

Net change in valuation of financial instruments carried at fair value 223 88 135 153 626 (1,143) 1,769 (155)

1 unchanged sentence

nm = not meaningful

The decrease in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $1.1 million, or 48%, decrease in miscellaneous income, which included $919,000 of losses incurred on building and lease exits during the second quarter.

The increase in non-interest income for the six months ended June 30, 2025, compared to the same period a year earlier was primarily due to a $5.5 million reduction in net losses on the sale of securities, as no material losses were recognized in the current period, compared to $5.5 million in strategic losses recorded during the first half of 2024 to mitigate rising interest rate risk in the securities portfolio.

In addition, the $1.6 million improvement in the fair value of financial instruments during the first six months of 2025, compared to a $1.2 million negative valuation change in the same period of 2024, contributed significantly to the increase.

The increase in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $2.0 million increase in miscellaneous income, which included gains recognized on asset disposals as part of the building and lease exits during the current quarter of $1.4 million, compared to $919,000 of losses incurred on asset disposals related to building and lease exits during the second quarter of 2025.

The increase in non-interest income for the nine months ended September 30, 2025, compared to the same period a year earlier, was primarily due to a $5.8 million reduction in net losses on the sale of securities.

A net gain of $374,000 was recognized in the current period, compared to $5.5 million in strategic losses recorded during the nine months ended September 30, 2024, which were taken to mitigate rising interest rate risk in the securities portfolio.

In addition, the $626,000 improvement in the fair value of financial instruments during the first nine months of 2025, compared to a $1.1 million negative valuation change in the same period of 2024, contributed to the increase.

These instruments primarily include limited partnership investments, which were positively impacted by current market valuations.

Revenue from mortgage banking operations increased $1.0 million for the six months ended June 30, 2025, compared to the same period a year earlier.

The volume of one- to four-family loans sold increased for the six months ended June 30, 2025, compared to the same period a year earlier.

Gains on sales of one- to four-family loans resulted in income of $4.3 million for the six months ended June 30, 2025, respectively, compared to $3.3 million for the six months ended June 30, 2024.

The increase for the six months ended June 30, 2025, compared to the same period a year earlier, was primarily due to a higher volume of one- to four-family loans sold.

Deposit fees and other service charges remained relatively unchanged, totaling $21.6 million for both six-month periods.

Revenue from mortgage banking operations increased $1.1 million for the nine months ended September 30, 2025, compared to the same period a year earlier.

This increase was the result of higher volumes of one- to four-family loans sold, with gains on these loan sales totaling $6.5 million, compared to $5.4 million in the prior-year period.

Miscellaneous income increased $1.2 million for the nine months ended September 30, 2025, compared to the same period a year earlier, primarily due to an increase in the gain on sale of SBA loans and higher income from back-to-back swaps.

Non-interest Expense.

The following table represents key elements of non-interest expense for the periods indicated (dollars in thousands):

Quarters Ended Six Months Ended

Jun 30, 2025 Mar 31, 2025 Change Amount Change Percent.

Jun 30, 2025 Jun 30, 2024 Change Amount Change Percent

Quarters Ended Nine Months Ended

Sep 30, 2025 Jun 30, 2025 Change Amount Change Percent.

Sep 30, 2025 Sep 30, 2024 Change Amount Change Percent

Salary and employee benefits $ 64,935 $ 65,486 $ (551) (1) % $ 195,278 $ 188,032 $ 7,246 4 %

7 unchanged sentences

State and municipal business and use taxes 1,655 1,416 239 17 4,525 4,130 395 10

Real estate operations, net 392 (61) 453 nm 331 77 254 330

Real estate operations, net 203 392 (189) (48) 534 180 354 197

Amortization of core deposit intangibles 341 455 (114) (25) 1,252 2,037 (785) (39)

2 unchanged sentences

nm = not meaningful

Non-interest expense was flat for the current quarter compared to the previous quarter.

In addition, the current quarter included $834,000 of building and lease exit costs.

The increase in non-interest expense for the six months ended June 30, 2025, compared to the same period a year earlier primarily reflects increases in salary and employee benefits, information and computer data services, and professional and legal expenses, partially offset by decreases in advertising and marketing expenses and amortization of core deposit intangibles.

Salary and employee benefits for the current quarter and the six months ended June 30, 2025 increased compared to the quarter ended March 31, 2025 and the six months ended June 30, 2024, primarily resulting from increased loan production-related commission expense and normal salary and wage increases.

In addition, capitalized loan origination costs increased $1.6 million, or 48%, compared to the prior quarter, and were relatively flat for the six months ended June 30, 2025 compared to the same period in 2024.

Information and computer data services for the current quarter and the six months ended June 30, 2025 increased from the comparable periods primarily due to increases in computer software expenses as the Company continued to invest in technology enhancements.

Professional and legal expense increased for the six months ended June 30, 2025, compared to the same period a year earlier, primarily due to one-time litigation settlement costs that occurred during the six months ended June 30, 2024.

Advertising and marketing expenses increased in the current quarter compared to the prior quarter due to the timing of campaign spending.

However, these expenses decreased $600,000, or 26%, for the six-month period due to lower spending compared to the prior year.

The increase in non-interest expense for the current quarter reflects increases in miscellaneous expenses and advertising and marketing expenses, partially offset by a decrease in salary and employee benefits.

In addition, the current quarter included $1.0 million of building and lease exit costs, compared to $834,000 of such costs in the previous quarter.

The increase in non-interest expense for the nine months ended September 30, 2025, compared to the same period a year earlier primarily reflects increases in salary and employee benefits, information and computer data services, and professional and legal expenses, partially offset by a decrease in the amortization of core deposit intangibles.

Salary and employee benefits decreased for the current quarter, compared to the quarter ended June 30, 2025, as a result of decreased medical premiums expense and payroll taxes, and increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily from increased loan production-related commission expense and normal salary and wage increases.

Information and computer data services for the nine months ended September 30, 2025 increased from the comparable period primarily due to increases in computer software expenses as the Company invested in technology enhancements.

Professional and legal expense increased for the nine months ended September 30, 2025, compared to the same period a year earlier, primarily due to one-time reductions in litigation settlement costs that occurred during the nine months ended September 30, 2024.

Advertising and marketing expenses increased in the current quarter compared to the prior quarter due to increases in direct mail marketing and community development expenses.

However, these expenses decreased $366,000, or 11%, for the nine-month period due to lower spending compared to the prior year.

Miscellaneous expenses increased in the current quarter compared to the prior quarter due to an increase in talent acquisition and other employee-related expenses.

Our efficiency ratio was 59.76% for the current quarter, compared to 62.50% in the preceding quarter.

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The improvement in the efficiency ratio and adjusted efficiency ratio for the current quarter reflects an increase in total revenues and adjusted revenues, respectively.

See non-GAAP financial measure reconciliations presented above under “Second Quarter 2025 Financial Highlights.”

See non-GAAP financial measure reconciliations presented above under “Third Quarter 2025 Financial Highlights.”

Income Taxes.

For the quarter ended June 30, 2025, we recognized $10.5 million in income tax expense for an effective tax rate of 18.8%, which reflects our blended statutory tax rate reduced by the effect of tax-exempt income, certain tax credits, and tax benefits related to restricted stock vesting.

For the quarter ended September 30, 2025, we recognized $12.5 million in income tax expense for an effective tax rate of 19.0%, which reflects our blended statutory tax rate reduced by the effect of tax-exempt income, certain tax credits, and tax benefits related to restricted stock vesting.

Our statutory income tax rate is 24.0%, representing a statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

For the quarter ended March 31, 2025, we recognized $10.7 million in income tax expense for an effective tax rate of 19.1%.

For the six months ended June 30, 2025, we recognized $21.2 million in income tax expense for an effective tax rate of 18.9%, compared to $18.3 million in income tax expense for an effective tax rate of 19.1% for the same period in the prior year.

For the quarter ended June 30, 2025, we recognized $10.5 million in income tax expense for an effective tax rate of 18.8%.

For the nine months ended September 30, 2025, we recognized $33.7 million in income tax expense for an effective tax rate of 18.9%, compared to $28.9 million in income tax expense for an effective tax rate of 19.1% for the same period in the prior year.

Asset Quality

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Non-Performing Assets:

Non-performing assets totaled $49.8 million, or 0.30% of total assets, at June 30, 2025, compared to $39.6 million, or 0.24% of total assets, at December 31, 2024.

Our allowance for credit losses - loans was $160.5 million, or 373% of non-performing loans, at June 30, 2025, compared to $155.5 million, or 421% of non-performing loans, at December 31, 2024.

Non-performing assets totaled $45.3 million, or 0.27% of total assets, at September 30, 2025, compared to $39.6 million, or 0.24% of total assets, at December 31, 2024.

Our allowance for credit losses - loans was $159.7 million, or 399% of non-performing loans, at September 30, 2025, compared to $155.5 million, or 421% of non-performing loans, at December 31, 2024.

The increase in non-performing assets was primarily due to a $6.6 million increase in nonaccrual one- to four-family residential loans.

In addition, loans more than 90 days past due and still on accrual increased to $2.5 million at June 30, 2025, primarily due to an increase in one- to four-family residential loans in this category.

The following table sets forth information with respect to our non-performing assets at the dates indicated (dollars in thousands):

June 30, 2025 December 31, 2024 June 30, 2024

September 30, 2025 December 31, 2024 September 30, 2024

Nonaccrual Loans:

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Secured by real estate:

Commercial 274 — 2,258

Construction and land — — 380

One- to four-family 834 369 961

Commercial business 166 — —

Consumer — 35 359

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Loans 30-89 days past due and on accrual $ 14,674 $ 26,824 $ 13,030

For the six months ended June 30, 2025, interest income was reduced by $870,000 as a result of nonaccrual loan activity, which included the reversal of $263,000 of accrued interest as of the date the loan was placed on nonaccrual.

There was no interest income recognized on nonaccrual loans for the six months ended June 30, 2025.

For the nine months ended September 30, 2025, interest income was reduced by $1.9 million as a result of nonaccrual loan activity, which included the reversal of $563,000 of accrued interest as of the date the loan was placed on nonaccrual.

There was no interest income recognized on nonaccrual loans for the nine months ended September 30, 2025.

The following table presents the Company’s portfolio of loans by risk grade at the dates indicated (in thousands):

June 30, 2025 December 31, 2024 June 30, 2024

September 30, 2025 December 31, 2024 September 30, 2024

Pass $ 11,491,485 $ 11,118,744 $ 11,022,014

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Total $ 11,702,538 $ 11,354,656 $ 11,224,606

As of June 30, 2025, total substandard loans primarily consisted of loans within the commercial business, commercial real estate and agricultural loan segments.

As of September 30, 2025, total substandard loans primarily consisted of loans within the commercial business, commercial real estate and agricultural business loan segments.

Liquidity and Capital Resources

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Our primary investing activity is the origination of loans and, in certain periods, the purchase of securities or loans.

During the six months ended June 30, 2025 and 2024, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $565.7 million and $501.2 million, respectively.

There were $10.8 million of loan purchases during the six months ended June 30, 2025, and $4.7 million of loan purchases during the six months ended June 30, 2024.

During the six months ended June 30, 2025 and 2024, we received proceeds of $235.9 million and $175.0 million, respectively, from the sale of loans.

Securities purchased during the six months ended June 30, 2025 and 2024 totaled $18.9 million and $19.3 million, respectively, and securities repayments, maturities and sales in those periods were $126.0 million and $202.7 million, respectively.

During the nine months ended September 30, 2025 and 2024, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $703.9 million and $744.9 million, respectively.

There were $10.8 million of loan purchases during the nine months ended September 30, 2025, and $4.7 million of loan purchases during the nine months ended September 30, 2024.

During the nine months ended September 30, 2025 and 2024, we received proceeds of $381.5 million and $276.8 million, respectively, from the sale of loans.

Securities purchased during the nine months ended September 30, 2025 and 2024 totaled $101.7 million and $53.2 million, respectively, and securities repayments, maturities and sales in those periods were $296.3 million and $284.4 million, respectively.

Our primary financing activity is gathering deposits.

Total deposits increased by $12.9 million during the six months ended June 30, 2025, primarily due to an increase in core deposits.

Core deposits were $12.05 billion at June 30, 2025, compared to $12.01 billion at December 31, 2024.

Total deposits increased by $501.5 million during the nine months ended September 30, 2025, primarily due to an increase in core deposits.

Core deposits were $12.48 billion at September 30, 2025, compared to $12.01 billion at December 31, 2024.

Certificates of deposit are generally more vulnerable to competition and more price sensitive than other retail deposits and our pricing of those deposits varies significantly based upon our liquidity management strategies at any point in time.

At June 30, 2025, certificates of deposit totaled $1.48 billion, or 11% of our total deposits, including $1.42 billion which were scheduled to mature within one year.

At September 30, 2025, certificates of deposit totaled $1.54 billion, or 11% of our total deposits, including $1.48 billion which were scheduled to mature within one year.

While no assurance can be given as to future periods, historically, we have been able to retain a significant amount of our certificates of deposit as they mature.

We had $565.0 million of FHLB advances at June 30, 2025, compared to $290.0 million at December 31, 2024.

The increase in FHLB advances were primarily used to fund loan growth.

Other borrowings decreased to $117.1 million at June 30, 2025 from $125.3 million at December 31, 2024.

We had $100.0 million of FHLB advances at September 30, 2025, compared to $290.0 million at December 31, 2024 as deposits were used as the primary source of funds during the period.

Other borrowings decreased to $120.5 million at September 30, 2025 from $125.3 million at December 31, 2024.

The balance of our outstanding subordinated notes was paid off during the second quarter of 2025.

Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024.

We must maintain an adequate level of liquidity to ensure the availability of sufficient funds to accommodate deposit withdrawals, to support loan growth, to satisfy financial commitments, and to take advantage of investment opportunities.

During the six months ended June 30, 2025, we used our sources of funds primarily to fund loan growth.

At June 30, 2025, we had outstanding loan commitments totaling $3.86 billion, relating to undisbursed loans in process and unused credit lines.

During the nine months ended September 30, 2025, we used our sources of funds primarily to fund loan growth.

At September 30, 2025, we had outstanding loan commitments totaling $3.91 billion, relating to undisbursed loans in process and unused credit lines.

While representing potential growth in the loan portfolio and lending activities, this level of commitments is proportionally consistent with our historical experience and does not represent a departure from normal operations.

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We maintain credit facilities with the FHLB, which provide for advances that in the aggregate would equal the lesser of 45% of the Bank’s assets or adjusted qualifying collateral (subject to a sufficient level of ownership of FHLB stock).

At June 30, 2025, under these credit facilities based on pledged collateral, the Bank had $2.74 billion of available credit capacity.

Advances under these credit facilities totaled $565.0 million at June 30, 2025.

At September 30, 2025, under these credit facilities based on pledged collateral, the Bank had $3.25 billion of available credit capacity.

Advances under these credit facilities totaled $100.0 million at September 30, 2025.

In addition, the Bank has been approved for participation in the FRBSF’s Borrower-In-Custody program.

Under this program, based on pledged collateral, the Bank had available lines of credit of approximately $1.62 billion as of June 30, 2025, subject to certain collateral requirements, namely the collateral type and risk rating of eligible pledged loans.

We had no funds borrowed from the FRBSF at June 30, 2025 or December 31, 2024.

At June 30, 2025, the Bank also had uncommitted federal funds line of credit agreements with other financial institutions totaling $125.0 million.

No balances were outstanding under these agreements as of June 30, 2025 or December 31, 2024.

Under this program, based on pledged collateral, the Bank had available lines of credit of approximately $1.63 billion as of September 30, 2025, subject to certain collateral requirements, namely the collateral type and risk rating of eligible pledged loans.

We had no funds borrowed from the FRBSF at September 30, 2025 or December 31, 2024.

At September 30, 2025, the Bank also had uncommitted federal funds line of credit agreements with other financial institutions totaling $125.0 million.

No balances were outstanding under these agreements as of September 30, 2025 or December 31, 2024.

Availability of lines is subject to federal funds balances available for loan and continued borrower eligibility.

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Banner is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity, and pay its own operating expenses and cash dividends.

At June 30, 2025, Banner (on an unconsolidated basis) had liquid assets of $66.9 million.

During 2024, Banner and the Bank entered into an intercompany loan agreement for $50.0 million.

This note was paid off during the second quarter of 2025.

At September 30, 2025, Banner (on an unconsolidated basis) had liquid assets of $60.2 million.

Banner’s primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends.

We currently expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice.

Our current quarterly common stock dividend rate is $0.48 per share, as approved by our Board of Directors, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders.

Assuming continued dividend payments during 2025 at this rate of $0.48 per share, our average total dividend paid each quarter would be approximately $16.6 million based on the number of outstanding shares at June 30, 2025.

Our current quarterly common stock dividend rate increased to $0.50 per share, up from $0.48 per share, for the dividend paid to shareholders in November 2025, as approved by our Board of Directors, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders.

Assuming continued dividend payments going forward at this new rate of $0.50 per share, our average total dividend paid each quarter would be approximately $17.2 million based on the number of outstanding shares at September 30, 2025.

As noted below, Banner Corporation and its subsidiary bank continued to maintain capital levels in excess of the requirements to be categorized as “Well-Capitalized” under applicable regulatory standards.

During the six months ended June 30, 2025, total shareholders’ equity increased $91.3 million, to $1.87 billion or 11.35% of total assets.

At June 30, 2025, tangible common shareholders’ equity, which excludes goodwill and other intangible assets, was $1.49 billion, or 9.28% of tangible assets.

During the nine months ended September 30, 2025, total shareholders’ equity increased $138.6 million, to $1.91 billion or 11.55% of total assets.

At September 30, 2025, tangible common shareholders’ equity, which excludes goodwill and other intangible assets, was $1.54 billion, or 9.50% of tangible assets.

Tangible common shareholders’ equity represents a non-GAAP financial measure.

See, non-GAAP financial measure reconciliations presented above under “Second Quarter 2025 Financial Highlights.”

See, non-GAAP financial measure reconciliations presented above under “Third Quarter 2025 Financial Highlights.”

Capital Requirements

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In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional common equity tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses.

At June 30, 2025, Banner and the Bank each exceeded all regulatory capital requirements to be “well capitalized.”

The actual regulatory capital ratios calculated for Banner Corporation and Banner Bank as of June 30, 2025, along with the minimum capital amounts and ratios, were as follows (dollars in thousands):

At September 30, 2025, Banner and the Bank each exceeded all regulatory capital requirements to be “well capitalized.”

The actual regulatory capital ratios calculated for Banner Corporation and Banner Bank as of September 30, 2025, along with the minimum capital amounts and ratios, were as follows (dollars in thousands):

Actual Minimum to be Categorized as “Adequately Capitalized” Minimum to be Categorized as “Well-Capitalized”

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis