[Executive Summary](index=1&type=section&id=Executive%20Summary) This section provides a high-level overview of Banner Corporation's strong Q3 2025 financial results, dividend increase, strategic focus, and company profile [Q3 2025 Financial Performance](index=1&type=section&id=Q3%202025%20Financial%20Performance) Banner Corporation reported strong financial results for the third quarter of 2025, with significant increases in net income and net interest income compared to both the preceding quarter and the prior year. The provision for credit losses decreased quarter-over-quarter | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Net Income | $53.5 million | $45.5 million | $45.2 million | | Diluted EPS | $1.54 | $1.31 | $1.30 | | Net Interest Income | $150.0 million | $144.4 million | $135.7 million | | Provision for Credit Losses | $2.7 million | $4.8 million | $1.7 million | - Net interest income increased compared to the preceding quarter and prior year quarter due to higher yields and average balance of interest-earning assets, and a decrease in overall funding costs compared to the prior year quarter[2](index=2&type=chunk) [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) Banner's Board of Directors approved a 4% increase in the regular quarterly cash dividend | Dividend Type | Amount Per Share | Payable Date | Record Date | | :------------ | :--------------- | :----------- | :---------- | | Quarterly Cash Dividend | $0.50 (4% increase) | November 14, 2025 | November 4, 2025 | [CEO Commentary & Strategic Focus](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Focus) The CEO highlighted the continued strength of Banner's super community bank strategy, emphasizing client relationships, a strong funding base, exceptional service, and a moderate risk profile. The quarter's earnings benefited from solid loan growth and higher asset yields, supported by strong credit quality and a robust capital position - Banner's strategy focuses on building client relationships, preserving a strong funding base, and delivering exceptional service while sustaining a moderate risk profile[4](index=4&type=chunk) - Earnings benefited from solid year-over-year loan growth and higher yields on interest-earning assets[4](index=4&type=chunk) - The company maintains strong credit quality, supported by stable credit metrics, a well-funded reserve for loan losses, and a robust capital position[4](index=4&type=chunk) - Core deposits represented **89% of total deposits** at quarter-end, indicating a strong core deposit base[4](index=4&type=chunk) [Company Overview](index=1&type=section&id=Company%20Overview) Banner Corporation is a bank holding company operating Banner Bank across four Western states, providing a full range of banking services | Metric | Value (as of Sep 30, 2025) | | :----- | :------------------------- | | Total Assets | $16.56 billion | | Net Loans | $11.54 billion | | Total Deposits | $14.02 billion | | Branch Offices | 135 | | Operating States | Four Western states | [Financial Performance Review](index=2&type=section&id=Financial%20Performance%20Review) This section details Banner's Q3 2025 financial performance, including key highlights, income statement analysis, and drivers of net interest income, non-interest income, and expenses [Third Quarter 2025 Highlights](index=2&type=section&id=Third%20Quarter%202025%20Highlights) Key financial and operational metrics for Q3 2025 demonstrated improvements across profitability, asset quality, and capital strength, with notable increases in revenue, net interest margin, and shareholder equity | Metric | Q3 2025 | Q2 2025 | Q3 2024 | QoQ Change | YoY Change | | :---------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net Interest Margin (tax equivalent) | 3.98% | 3.92% | 3.72% | +6 bps | +26 bps | | Revenue | $170.7 million | $162.2 million | $153.7 million | +5% | +11% | | Adjusted Revenue* | $168.7 million | $163.0 million | $153.7 million | +3.5% | +9.8% | | Return on Average Assets | 1.30% | 1.13% | 1.13% | +0.17% | +0.17% | | Net Loans Receivable | $11.54 billion | $11.53 billion | $11.07 billion | +0.09% | +4% | | Total Deposits | $14.02 billion | $13.53 billion | $13.54 billion | +4% | +4% | | Core Deposits % of Total Deposits | 89% | 89% | 89% | 0% | 0% | | Non-Performing Assets % of Total Assets | 0.27% | 0.30% | 0.28% | -0.03% | -0.01% | | Allowance for Credit Losses - Loans % of Total Loans | 1.36% | 1.37% | 1.38% | -0.01% | -0.02% | | Common Shareholders' Equity Per Share | $55.71 | $53.95 | $52.06 | +3% | +7% | | Tangible Common Shareholders' Equity Per Share* | $44.79 | $43.09 | $41.12 | +4% | +9% | | Shares Repurchased (Q3 2025) | 250,000 shares | - | - | - | - | | Average Repurchase Price (Q3 2025) | $63.11 per share | - | - | - | - | [Income Statement Analysis](index=2&type=section&id=Income%20Statement%20Analysis) Banner's income statement showed robust growth in net interest income driven by higher asset yields and lower funding costs, while non-interest income also increased. Operating expenses saw controlled growth, contributing to an improved efficiency ratio [Net Interest Income and Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income and margin saw increases, driven by favorable asset yields and reduced funding costs | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Net Interest Income | $150.0 million | $144.4 million | $135.7 million | | Net Interest Margin (tax equivalent) | 3.98% | 3.92% | 3.72% | - Net interest margin increased by **6 basis points QoQ** and **26 basis points YoY**, benefiting from higher yields on interest-earning assets and lower funding costs[7](index=7&type=chunk) [Interest Income](index=2&type=section&id=Interest%20Income) Total interest income grew, primarily reflecting higher average yields on interest-earning assets and loans | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Total Interest Income | $205.8 million | $200.3 million | $195.8 million | | Average Yields on Interest-Earning Assets | 5.43% | 5.40% | 5.33% | | Average Loan Yields | 6.17% | 6.12% | 6.04% | - The increase in average loan yields primarily reflects new loans originated at higher interest rates and adjustable-rate loans repricing higher[8](index=8&type=chunk) [Interest Expense](index=2&type=section&id=Interest%20Expense) Total interest expense decreased year-over-year, driven by lower deposit costs and reduced borrowing rates and balances | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Total Interest Expense | $55.9 million | $55.9 million | $60.2 million | | Total Deposit Costs | 1.50% | 1.47% | 1.61% | | Average Rate Paid on Borrowings | 4.18% | 4.47% | 5.08% | | Total Cost of Funding Liabilities | 1.57% | 1.60% | 1.73% | - The decrease in deposit costs compared to the prior year quarter was primarily due to interest rate declines in the second half of 2024[9](index=9&type=chunk) - The decrease in the average rate paid on borrowings was primarily due to declines in both market interest rates and the average balance of borrowings[9](index=9&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased quarter-over-quarter, influenced by changes in portfolio mix and individually evaluated loans | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Total Provision for Credit Losses | $2.7 million | $4.8 million | $1.7 million | | Provision for Credit Losses - Loans | $1.4 million | $4.2 million | $2.0 million | | Provision for Credit Losses - Unfunded Loan Commitments | $1.3 million | $588,000 | ($262,000) recapture | - The provision for credit losses in the current quarter was driven by changes in both portfolio mix and individually evaluated loans[10](index=10&type=chunk) [Non-Interest Income](index=3&type=section&id=Non-Interest%20Income) Non-interest income increased, primarily due to higher miscellaneous income from asset sales, while mortgage banking revenue remained stable | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Total Non-Interest Income | $20.7 million | $17.8 million | $18.1 million | | Miscellaneous Income | $3.175 million | $1.221 million | $1.658 million | | Mortgage Banking Operations Revenue | $3.3 million | $3.2 million | $3.2 million | - The increase in non-interest income from the preceding quarter was primarily due to a **$2.0 million increase in miscellaneous income**, reflecting gains on asset sales compared to prior quarter losses on building and lease exits[12](index=12&type=chunk) - Home purchase activity accounted for **88% of one- to four-family mortgage loan originations** in Q3 2025[13](index=13&type=chunk) [Non-Interest Expense](index=3&type=section&id=Non-Interest%20Expense) Non-interest expense saw a slight quarter-over-quarter increase due to talent acquisition and marketing, with a larger year-over-year rise from salary and IT costs | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Total Non-Interest Expense | $102.0 million | $101.3 million | $96.3 million | | Miscellaneous Expense (QoQ change) | +$450,000 | - | - | | Advertising and Marketing Expenses (QoQ change) | +$308,000 | - | - | | Salary and Employee Benefits (QoQ change) | -$551,000 | - | - | | Building and Lease Exit Costs | $1.0 million | $834,000 | - | | Total Non-Interest Expense (Nine Months Ended Sep 30) | $304.6 million (2025) | - | $292.1 million (2024) | - The quarter-over-quarter increase in non-interest expense was primarily due to higher talent acquisition, other employee-related expenses, and advertising/marketing, partially offset by decreased medical premiums and payroll taxes[14](index=14&type=chunk) - The year-over-year increase was mainly due to higher salary and employee benefits, information and computer data services, and professional and legal expenses[14](index=14&type=chunk) [Efficiency Ratio](index=3&type=section&id=Efficiency%20Ratio) The efficiency ratio improved, reflecting stronger net interest margins and controlled operating expense growth | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :----- | :------ | :------ | :------ | | Efficiency Ratio (GAAP) | 59.76% | 62.50% | 62.63% | | Adjusted Efficiency Ratio (non-GAAP) | 58.54% | 60.28% | 61.27% | - The improvement in the efficiency ratio compared to both the preceding and prior year quarters primarily reflected stronger net interest margins, combined with controlled growth in operating expenses[15](index=15&type=chunk) [Financial Condition Review](index=3&type=section&id=Financial%20Condition%20Review) This section reviews Banner's financial condition, including balance sheet changes, loan portfolio composition, deposit and funding trends, and capital adequacy [Balance Sheet Overview](index=3&type=section&id=Balance%20Sheet%20Overview) Banner's total assets grew, primarily driven by an increase in interest-bearing deposits held at other banks, despite a decrease in securities | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----- | :----------- | :----------- | :----------- | | Total Assets | $16.56 billion | $16.44 billion | $16.19 billion | | Securities and Interest-Bearing Deposits at Other Banks | $3.47 billion | $3.29 billion | $3.50 billion | - The increase in total assets compared to the prior quarter was primarily due to an increase in interest-bearing deposits held at other banks, partially offset by decreases in securities[16](index=16&type=chunk) [Loan Portfolio](index=3&type=section&id=Loan%20Portfolio) The loan portfolio showed overall growth, particularly in commercial real estate and construction loans, while loans held for sale decreased due to strong sales activity | Loan Category | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Total Loans Receivable | $11.70 billion | $11.69 billion | $11.22 billion | +0.09% | +4% | | Commercial Real Estate Loans | $4.00 billion | $3.97 billion | $3.79 billion | +0.76% | +5% | | Construction, Land and Land Development Loans | $1.74 billion | $1.70 billion | $1.53 billion | +2% | +14% | | Commercial Business Loans | $2.43 billion | $2.47 billion | $2.37 billion | -2% | +3% | | Loans Held for Sale | $20.3 million | $37.7 million | $78.8 million | -46% | -74% | - The increase in commercial real estate loans was a combination of new loan production and conversion of commercial construction loans[17](index=17&type=chunk) - The decrease in loans held for sale was primarily the result of increased sales of one- to four-family residential mortgage loans, with sales outpacing originations[18](index=18&type=chunk) [Deposits and Funding](index=3&type=section&id=Deposits%20and%20Funding) Total deposits and core deposits experienced healthy growth, leading to a significant reduction in FHLB advances as deposits became the primary funding source | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :----- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total Deposits | $14.02 billion | $13.53 billion | $13.54 billion | +4% | +4% | | Core Deposits | $12.48 billion | $12.05 billion | $12.02 billion | +4% | +4% | | Core Deposits % of Total Deposits | 89% | 89% | 89% | 0% | 0% | | Certificates of Deposit | $1.54 billion | $1.48 billion | $1.52 billion | +4% | +1% | | FHLB Advances | $100.0 million | $565.0 million | $230.0 million | -82% | -57% | - The increase in core deposits primarily reflects increases in interest-bearing transaction and savings accounts[19](index=19&type=chunk) - FHLB advances decreased significantly as deposits were used as the primary source of funds during the current quarter[20](index=20&type=chunk) - Off-balance sheet liquidity included additional borrowing capacity of **$3.25 billion** at the FHLB and **$1.63 billion** at the Federal Reserve[20](index=20&type=chunk) [Capital Adequacy](index=4&type=section&id=Capital%20Adequacy) Shareholders' equity and capital ratios remained strong, exceeding 'well-capitalized' requirements, supported by retained earnings and share repurchases | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----- | :----------- | :----------- | :----------- | | Total Common Shareholders' Equity | $1.91 billion | $1.87 billion | $1.79 billion | | Common Shareholders' Equity % of Total Assets | 11.55% | 11.35% | 11.08% | | Tangible Common Shareholders' Equity (non-GAAP) | $1.54 billion | $1.49 billion | $1.42 billion | | Tangible Common Shareholders' Equity % of Tangible Assets (non-GAAP) | 9.50% | 9.28% | 8.96% | | Estimated Common Equity Tier 1 Capital Ratio | 12.78% | - | - | | Estimated Tier 1 Leverage Capital to Average Assets Ratio | 11.33% | - | - | | Estimated Total Capital to Risk-Weighted Assets Ratio | 14.66% | - | - | - The increase in common shareholders' equity was due to a **$36.7 million increase in retained earnings**, partially offset by cash dividends and share repurchases[21](index=21&type=chunk) - Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as 'well-capitalized'[22](index=22&type=chunk) [Credit Quality](index=4&type=section&id=Credit%20Quality) This section assesses Banner's credit quality, focusing on allowance for credit losses, non-performing assets, and loan risk ratings [Allowance for Credit Losses](index=4&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses on loans remained robust, providing strong coverage for non-performing loans, despite an increase in net loan charge-offs | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----- | :----------- | :----------- | :----------- | | Allowance for Credit Losses - Loans | $159.7 million | $160.5 million | $154.6 million | | ACL - Loans % of Total Loans Receivable | 1.36% | 1.37% | 1.38% | | ACL - Loans % of Non-Performing Loans | 399% | 373% | 359% | | Allowance for Credit Losses - Unfunded Loan Commitments | $14.0 million | $12.8 million | $13.8 million | | Net Loan Charge-offs (Q3) | $2.2 million | $1.0 million | $230,000 | [Non-Performing Assets and Loans](index=4&type=section&id=Non-Performing%20Assets%20and%20Loans) Non-performing loans and total non-performing assets decreased quarter-over-quarter, indicating an improvement in asset quality | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----- | :----------- | :----------- | :----------- | | Non-Performing Loans | $40.0 million | $43.0 million | $43.0 million | | Total Non-Performing Assets | $45.3 million | $49.8 million | $45.2 million | | Total Non-Performing Assets % of Total Assets | 0.27% | 0.30% | 0.28% | [Loan Credit Risk Ratings](index=4&type=section&id=Loan%20Credit%20Risk%20Ratings) Substandard loans decreased quarter-over-quarter but increased year-over-year, while special mention loans also saw a decrease | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----- | :----------- | :----------- | :----------- | | Substandard Loans | $174.0 million | $189.5 million | $150.1 million | | Special Mention Loans | $37.0 million | $68.4 million | $52.5 million | [Supplemental Financial Data](index=6&type=section&id=Supplemental%20Financial%20Data) This section provides detailed financial tables and reconciliations, offering in-depth insights into operations, balance sheet, loan and deposit specifics, capital, and non-GAAP metrics [Consolidated Results of Operations](index=6&type=section&id=Consolidated%20Results%20of%20Operations) Detailed breakdown of interest income, interest expense, non-interest income, and non-interest expense, leading to net income and earnings per share for the quarter and nine months ended September 30, 2025 and 2024 | RESULTS OF OPERATIONS (in thousands) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | Sep 30, 2025 (9M) | Sep 30, 2024 (9M) | | :----------------------------------- | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | INTEREST INCOME: | | | | | | | Loans receivable | $179,065 | $175,373 | $168,338 | $523,115 | $486,004 | | Total interest income | $205,848 | $200,259 | $195,841 | $599,975 | $569,667 | | INTEREST EXPENSE: | | | | | | | Deposits | $52,251 | $49,316 | $53,785 | $150,304 | $147,248 | | Total interest expense | $55,859 | $55,860 | $60,166 | $164,504 | $168,487 | | Net interest income | $149,989 | $144,399 | $135,675 | $435,471 | $401,180 | | PROVISION FOR CREDIT LOSSES | $2,670 | $4,795 | $1,692 | $10,604 | $4,581 | | NON-INTEREST INCOME: | | | | | | | Total non-interest income | $20,730 | $17,751 | $18,063 | $57,589 | $46,853 | | NON-INTEREST EXPENSE: | | | | | | | Total non-interest expense | $102,022 | $101,348 | $96,291 | $304,629 | $292,060 | | NET INCOME | $53,502 | $45,496 | $45,153 | $144,133 | $122,507 | | Earnings per common share: Diluted | $1.54 | $1.31 | $1.30 | $4.15 | $3.54 | | Cumulative dividends declared per common share | $0.48 | $0.48 | $0.48 | $1.44 | $1.44 | [Consolidated Financial Condition](index=7&type=section&id=Consolidated%20Financial%20Condition) Detailed balance sheet information showing assets, liabilities, and shareholders' equity at various quarter-ends, highlighting changes in key components | FINANCIAL CONDITION (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | Prior Qtr Change (%) | Prior Yr Qtr Change (%) | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | :------------------- | :-------------------- | | ASSETS: | | | | | | | | Total cash and cash equivalents | $672,863 | $483,348 | $501,858 | $478,795 | 39% | 41% | | Total securities | $2,990,128 | $3,045,893 | $3,106,075 | $3,251,842 | (2)% | (8)% | | Net loans receivable | $11,542,831 | $11,529,872 | $11,199,135 | $11,070,021 | — % | 4 % | | Total assets | $16,563,081 | $16,437,169 | $16,200,037 | $16,188,676 | 1 % | 2 % | | LIABILITIES: | | | | | | | | Total deposits | $14,015,935 | $13,527,291 | $13,514,398 | $13,538,148 | 4 % | 4 % | | Advances from FHLB | $100,000 | $565,000 | $290,000 | $230,000 | (82)% | (57)% | | Total liabilities | $14,650,189 | $14,571,505 | $14,425,711 | $14,394,955 | 1 % | 2 % | | SHAREHOLDERS' EQUITY: | | | | | | | | Total shareholders' equity | $1,912,892 | $1,865,664 | $1,774,326 | $1,793,721 | 3 % | 7 % | | Common shareholders' equity per share | $55.71 | $53.95 | $51.49 | $52.06 | | | | Common shareholders' tangible equity per share (non-GAAP) | $44.79 | $43.09 | $40.57 | $41.12 | | | | Common shareholders' equity to total assets | 11.55 % | 11.35 % | 10.95 % | 11.08 % | | | [Loan Portfolio Breakdown](index=8&type=section&id=Loan%20Portfolio%20Breakdown) Detailed breakdown of the loan portfolio by type and geographic location, showing growth in commercial real estate and construction loans, with Washington and California being the largest concentrations | LOANS (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | Prior Qtr Change (%) | Prior Yr Qtr Change (%) | | :------------------- | :----------- | :----------- | :----------- | :----------- | :------------------- | :-------------------- | | Commercial real estate | $4,857,607 | $4,809,427 | $4,759,315 | $4,682,001 | 1% | 4% | | Construction, land and land development | $1,735,705 | $1,698,560 | $1,519,951 | $1,502,199 | 2% | 15% | | Commercial business | $2,431,349 | $2,471,014 | $2,422,450 | $2,369,329 | (2)% | 3% | | Agricultural business | $354,884 | $345,742 | $340,280 | $346,686 | 3% | 2% | | One- to four-family residential | $1,582,605 | $1,610,133 | $1,591,260 | $1,575,164 | (2)% | — % | | Consumer | $740,288 | $732,497 | $721,400 | $724,161 | 1% | 2% | | Total loans receivable | $11,702,538 | $11,690,373 | $11,354,656 | $11,224,606 | — % | 4 % | | LOANS BY GEOGRAPHIC LOCATION (in thousands) | Sep 30, 2025 Amount | Sep 30, 2025 Percentage | Jun 30, 2025 Amount | Sep 30, 2024 Amount | Prior Qtr Change (%) | Prior Yr Qtr Change (%) | | :---------------------------------------- | :------------------ | :---------------------- | :------------------ | :------------------ | :------------------- | :-------------------- | | Washington | $5,407,327 | 46 % | $5,438,285 | $5,203,637 | (1)% | 4 % | | California | $3,064,993 | 26 % | $3,010,678 | $2,796,965 | 2 % | 10 % | | Oregon | $2,137,422 | 18 % | $2,141,185 | $2,108,229 | — % | 1 % | | Idaho | $668,949 | 6 % | $671,217 | $652,148 | — % | 3 % | | Utah | $79,697 | 1 % | $70,474 | $85,316 | 13 % | (7)% | | Other | $344,150 | 3 % | $358,534 | $378,311 | (4)% | (9)% | | Total loans receivable | $11,702,538 | 100 % | $11,690,373 | $11,224,606 | — % | 4 % | [Loan Originations](index=9&type=section&id=Loan%20Originations) Total loan originations (excluding loans held for sale) decreased quarter-over-quarter but remained substantial, with construction and land being the largest category | LOAN ORIGINATIONS (in thousands) | Q3 2025 | Q2 2025 | Q3 2024 | | :------------------------------- | :------ | :------ | :------ | | Commercial real estate | $118,354 | $216,189 | $114,372 | | Construction and land | $369,363 | $411,210 | $472,506 | | Commercial business | $167,627 | $203,656 | $179,871 | | Agricultural business | $7,681 | $14,414 | $5,877 | | One- to four-family residential | $6,817 | $5,491 | $24,488 | | Consumer | $122,193 | $102,600 | $96,137 | | Total loan originations (excluding loans held for sale) | $794,535 | $966,625 | $893,565 | [Allowance for Credit Losses Movement](index=10&type=section&id=Allowance%20for%20Credit%20Losses%20Movement) Detailed changes in the allowance for credit losses for loans and unfunded loan commitments, including provisions, recoveries, and charge-offs | CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES – LOANS (in thousands) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | | :------------------------------------------------- | :----------------- | :----------------- | :----------------- | | Balance, beginning of period | $160,501 | $157,323 | $152,848 | | Provision for credit losses – loans | $1,384 | $4,201 | $1,967 | | Recoveries of loans previously charged off | $1,050 | $641 | $734 | | Loans charged off | ($3,228) | ($1,664) | ($964) | | Net charge-offs | ($2,178) | ($1,023) | ($230) | | Balance, end of period | $159,707 | $160,501 | $154,585 | | Net charge-offs / average loans receivable | (0.019)% | (0.009)% | (0.002)% | | ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES – LOANS (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Commercial real estate | $41,191 | $41,036 | $40,830 | $40,040 | | Construction and land | $35,144 | $34,124 | $29,038 | $28,322 | | Commercial business | $37,646 | $38,591 | $38,611 | $39,779 | | Total allowance for credit losses – loans | $159,707 | $160,501 | $155,521 | $154,585 | | Allowance for credit losses - loans / Total loans receivable | 1.36 % | 1.37 % | 1.37 % | 1.38 % | | Allowance for credit losses - loans / Non-performing loans | 399 % | 373 % | 421 % | 359 % | | CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----------------------------------------------------------------- | :----------- | :----------- | :----------- | | Balance, beginning of period | $12,750 | $12,162 | $14,027 | | Provision (recapture) for credit losses - unfunded loan commitments | $1,290 | $588 | ($262) | | Balance, end of period | $14,040 | $12,750 | $13,765 | [Non-Performing Assets and Credit Risk Ratings](index=11&type=section&id=Non-Performing%20Assets%20and%20Credit%20Risk%20Ratings) Detailed breakdown of non-performing assets, including loans on non-accrual status and real estate owned (REO), along with the distribution of loans by credit risk rating | NON-PERFORMING ASSETS (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :----------------------------------- | :----------- | :----------- | :----------- | :----------- | | Loans on non-accrual status | $38,742 | $39,998 | $36,552 | $39,049 | | Loans more than 90 days delinquent, still on accrual | $1,274 | $2,976 | $404 | $3,958 | | Total non-performing loans | $40,016 | $42,974 | $36,956 | $43,007 | | REO | $5,272 | $6,801 | $2,367 | $2,221 | | Total non-performing assets | $45,288 | $49,775 | $39,623 | $45,228 | | Total non-performing assets to total assets | 0.27 % | 0.30 % | 0.24 % | 0.28 % | | LOANS BY CREDIT RISK RATING (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :--------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Pass | $11,491,485 | $11,432,456 | $11,118,744 | $11,022,014 | | Special Mention | $37,013 | $68,372 | $43,451 | $52,497 | | Substandard | $174,040 | $189,545 | $192,461 | $150,095 | | Total | $11,702,538 | $11,690,373 | $11,354,656 | $11,224,606 | [Deposit Composition and Geographic Concentration](index=12&type=section&id=Deposit%20Composition%20and%20Geographic%20Concentration) Detailed breakdown of deposit types and their geographic distribution, showing growth in interest-bearing transaction and savings accounts, with Washington being the largest deposit market | DEPOSIT COMPOSITION (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | Prior Qtr Change (%) | Prior Yr Qtr Change (%) | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | :------------------- | :-------------------- | | Non-interest-bearing | $4,572,338 | $4,504,491 | $4,591,543 | $4,688,244 | 2 % | (2)% | | Interest-bearing checking | $2,734,822 | $2,534,900 | $2,393,864 | $2,344,561 | 8 % | 17 % | | Regular savings accounts | $3,705,823 | $3,538,372 | $3,478,423 | $3,339,859 | 5 % | 11 % | | Money market accounts | $1,462,570 | $1,471,756 | $1,550,896 | $1,643,631 | (1)% | (11)% | | Total core deposits | $12,475,553 | $12,049,519 | $12,014,726 | $12,016,295 | 4 % | 4 % | | Interest-bearing certificates | $1,540,382 | $1,477,772 | $1,499,672 | $1,521,853 | 4 % | 1 % | | Total deposits | $14,015,935 | $13,527,291 | $13,514,398 | $13,538,148 | 4 % | 4 % | | GEOGRAPHIC CONCENTRATION OF DEPOSITS (in thousands) | Sep 30, 2025 Amount | Sep 30, 2025 Percentage | Jun 30, 2025 Amount | Sep 30, 2024 Amount | Prior Qtr Change (%) | Prior Yr Qtr Change (%) | | :------------------------------------------------ | :------------------ | :---------------------- | :------------------ | :------------------ | :------------------- | :-------------------- | | Washington | $7,648,527 | 55 % | $7,334,391 | $7,413,414 | 4 % | 3 % | | Oregon | $3,081,329 | 22 % | $3,029,712 | $2,997,843 | 2 % | 3 % | | California | $2,542,903 | 18 % | $2,486,514 | $2,423,295 | 2 % | 5 % | | Idaho | $743,176 | 5 % | $676,674 | $703,596 | 10 % | 6 % | | Total deposits | $14,015,935 | 100 % | $13,527,291 | $13,538,148 | 4 % | 4 % | | Total public deposits | $405,851 | - | $423,106 | $416,017 | - | - | | Total brokered deposits | $49,989 | - | $49,977 | $50,333 | - | - | | Average account balance per account | $31 | - | $30 | $30 | - | - | [Estimated Regulatory Capital Ratios](index=13&type=section&id=Estimated%20Regulatory%20Capital%20Ratios) Estimated regulatory capital ratios for Banner Corporation and Banner Bank, demonstrating compliance with 'well-capitalized' requirements | ESTIMATED REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2025 | Actual Ratio | Minimum for 'Adequately Capitalized' | Minimum for 'Well Capitalized' | | :------------------------------------------------- | :----------- | :----------------------------------- | :----------------------------- | | Banner Corporation-consolidated: | | | | | Total capital to risk-weighted assets | 14.66 % | 8.00 % | 10.00 % | | Tier 1 capital to risk-weighted assets | 13.41 % | 6.00 % | 6.00 % | | Tier 1 leverage capital to average assets | 11.33 % | 4.00 % | n/a | | Common equity tier 1 capital to risk-weighted assets | 12.78 % | 4.50 % | n/a | | Banner Bank: | | | | | Total capital to risk-weighted assets | 14.16 % | 8.00 % | 10.00 % | | Tier 1 capital to risk-weighted assets | 12.91 % | 6.00 % | 8.00 % | | Tier 1 leverage capital to average assets | 10.91 % | 4.00 % | 5.00 % | | Common equity tier 1 capital to risk-weighted assets | 12.91 % | 4.50 % | 6.50 % | - These regulatory capital ratios are estimates, pending completion and filing of Banner's regulatory reports[38](index=38&type=chunk) [Net Interest Spread Analysis](index=14&type=section&id=Net%20Interest%20Spread%20Analysis) Detailed analysis of average balances, interest income/expense, and yields/costs for interest-earning assets and funding liabilities, showing the calculation of net interest spread and margin for both quarterly and nine-month periods | ANALYSIS OF NET INTEREST SPREAD (in thousands, rates annualized) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | | :------------------------------------------------- | :----------------- | :----------------- | :----------------- | | Total interest-earning assets (Avg Balance) | $15,280,477 | $15,129,177 | $14,877,162 | | Total interest-earning assets (Yield) | 5.43 % | 5.40 % | 5.33 % | | Total funding liabilities (Avg Balance) | $14,133,850 | $14,009,090 | $13,818,232 | | Total funding liabilities (Cost) | 1.57 % | 1.60 % | 1.73 % | | Net interest income/rate spread (tax equivalent) | 3.86 % | 3.80 % | 3.60 % | | Net interest margin (tax equivalent) | 3.98 % | 3.92 % | 3.72 % | | Return on average assets | 1.30 % | 1.13 % | 1.13 % | | Efficiency ratio | 59.76 % | 62.50 % | 62.63 % | | ANALYSIS OF NET INTEREST SPREAD (in thousands, rates annualized) | Sep 30, 2025 (9M) | Sep 30, 2024 (9M) | | :------------------------------------------------- | :---------------- | :---------------- | | Total interest-earning assets (Avg Balance) | $15,118,343 | $14,752,638 | | Total interest-earning assets (Yield) | 5.40 % | 5.24 % | | Total funding liabilities (Avg Balance) | $13,990,458 | $13,722,463 | | Total funding liabilities (Cost) | 1.57 % | 1.64 % | | Net interest income/rate spread (tax equivalent) | 3.83 % | 3.60 % | | Net interest margin (tax equivalent) | 3.94 % | 3.72 % | | Return on average assets | 1.19 % | 1.04 % | | Efficiency ratio | 61.78 % | 65.19 % | [Non-GAAP Financial Measures Reconciliation](index=16&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) Reconciliation of GAAP to non-GAAP financial measures, including adjusted revenue, adjusted earnings, adjusted efficiency ratio, and tangible common shareholders' equity, providing additional insights into core operational performance - Non-GAAP financial measures are presented to provide useful and comparative information to assess trends in Banner's core operations and facilitate comparison with peers[41](index=41&type=chunk) | ADJUSTED REVENUE (in thousands) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | Sep 30, 2025 (9M) | Sep 30, 2024 (9M) | | :------------------------------ | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | Total revenue (GAAP) | $170,719 | $162,150 | $153,738 | $493,060 | $448,033 | | Adjusted revenue (non-GAAP) | $168,746 | $162,984 | $153,699 | $491,606 | $454,641 | | ADJUSTED EARNINGS (in thousands) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | Sep 30, 2025 (9M) | Sep 30, 2024 (9M) | | :------------------------------- | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | Net income (GAAP) | $53,502 | $45,496 | $45,153 | $144,133 | $122,507 | | Total adjusted earnings (non-GAAP) | $52,795 | $46,763 | $45,123 | $144,454 | $127,529 | | Diluted earnings per share (GAAP) | $1.54 | $1.31 | $1.30 | $4.15 | $3.54 | | Diluted adjusted earnings per share (non-GAAP) | $1.52 | $1.35 | $1.30 | $4.16 | $3.69 | | Return on average assets | 1.30 % | 1.13 % | 1.13 % | 1.19 % | 1.04 % | | Adjusted return on average assets (non-GAAP) | 1.28 % | 1.16 % | 1.13 % | 1.20 % | 1.08 % | | Return on average equity | 11.33 % | 9.92 % | 10.39 % | 10.49 % | 9.76 % | | Adjusted return on average equity (non-GAAP) | 11.18 % | 10.20 % | 10.39 % | 10.51 % | 10.16 % | | ADJUSTED EFFICIENCY RATIO (in thousands) | Sep 30, 2025 (Qtr) | Jun 30, 2025 (Qtr) | Sep 30, 2024 (Qtr) | Sep 30, 2025 (9M) | Sep 30, 2024 (9M) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | Non-interest expense (GAAP) | $102,022 | $101,348 | $96,291 | $304,629 | $292,060 | | Adjusted non-interest expense (non-GAAP) | $98,781 | $98,251 | $94,166 | $296,442 | $285,713 | | Efficiency ratio (GAAP) | 59.76 % | 62.50 % | 62.63 % | 61.78 % | 65.19 % | | Adjusted efficiency ratio (non-GAAP) | 58.54 % | 60.28 % | 61.27 % | 60.30 % | 62.84 % | | TANGIBLE COMMON SHAREHOLDERS' EQUITY (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | | Shareholders' equity (GAAP) | $1,912,892 | $1,865,664 | $1,774,326 | $1,793,721 | | Tangible common shareholders' equity (non-GAAP) | $1,537,965 | $1,490,396 | $1,398,147 | $1,416,953 | | Total assets (GAAP) | $16,563,081 | $16,437,169 | $16,200,037 | $16,188,676 | | Total tangible assets (non-GAAP) | $16,188,154 | $16,061,901 | $15,823,858 | $15,811,908 | | Tangible common shareholders' equity to tangible assets (non-GAAP) | 9.50 % | 9.28 % | 8.84 % | 8.96 % | | Tangible common shareholders' equity per share (non-GAAP) | $44.79 | $43.09 | $40.57 | $41.12 | [Corporate Information](index=4&type=section&id=Corporate%20Information) This section provides details on the upcoming conference call, a brief company overview, and important disclosures regarding forward-looking statements and associated risks [Conference Call](index=4&type=section&id=Conference%20Call) Banner Corporation will host a conference call to discuss its third-quarter results, with options for live listening and professional participation - A conference call will be held on Thursday, October 16, 2025, at 8:00 a.m. PDT[24](index=24&type=chunk) - Interested investors can listen live at www.bannerbank.com, and investment professionals can dial (833) 470-1428 using access code 613608[24](index=24&type=chunk) - A replay of the call will be available at www.bannerbank.com[24](index=24&type=chunk) [About the Company](index=4&type=section&id=About%20the%20Company) Banner Corporation is a bank holding company operating Banner Bank, providing a comprehensive range of financial services across four Western states - Banner Corporation is a **$16.56 billion** bank holding company[25](index=25&type=chunk) - It operates Banner Bank through a network of branches in four Western states[25](index=25&type=chunk) - Services include a full range of deposit services and various types of loans (business, commercial real estate, construction, residential, agricultural, and consumer)[25](index=25&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section provides a standard disclaimer regarding forward-looking statements, outlining the inherent risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are identified by words like 'may,' 'believe,' 'will,' 'expect,' 'anticipate,' 'estimate,' 'project,' 'plans,' or 'potential'[26](index=26&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which are based on information known at the time they are made[26](index=26&type=chunk) - Banner does not undertake any obligation to revise forward-looking statements to reflect future events or circumstances[26](index=26&type=chunk) - Key risk factors include adverse economic conditions, changes in interest rates, inflation, geopolitical developments, bank failures, credit risks, regulatory changes, technological advancements, and market volatility[27](index=27&type=chunk)

Core Insights - Wall Street analysts expect Banner (BANR) to report quarterly earnings of $1.41 per share, reflecting an 8.5% year-over-year increase, with revenues projected at $169.3 million, up 10.1% from the previous year [1] Earnings Estimates - Changes in earnings estimates are crucial for predicting investor reactions, with empirical studies showing a strong correlation between earnings estimate revisions and short-term stock performance [2] - Analysts' consensus on key metrics provides valuable insights into the company's performance [3] Key Metrics Forecast - The consensus for 'Net interest margin (tax equivalent)' is projected to reach 4.0%, up from 3.7% a year ago [4] - The 'Efficiency Ratio' is expected to improve to 59.8%, compared to 62.6% in the previous year [4] - 'Total non-interest income' is estimated at $19.40 million, an increase from $18.06 million year-over-year [4] - 'Net interest income' is projected to be $149.90 million, up from $135.68 million a year ago [5] Stock Performance - Banner's shares have decreased by 6.6% over the past month, contrasting with a 3.5% increase in the Zacks S&P 500 composite [5] - With a Zacks Rank of 4 (Sell), Banner is expected to underperform the overall market in the near future [5]

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Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $45.5 million or $1.31 per diluted share for Q2 2025, compared to $1.15 per share for Q2 2024 and $1.30 per share for Q1 2025 [5][6] - Core earnings for Q2 2025 were $62 million, up from $52 million in Q2 2024, with revenue from core operations increasing to $163 million from $150 million year-over-year [7][8] - Return on average assets was 1.13% for Q2 2025, reflecting strong core deposit base and net interest margin [7] Business Line Data and Key Metrics Changes - Loan originations increased by 80% compared to the linked quarter, with commercial real estate up 484%, C&I originations up 96%, and construction and land development increasing by 43% [11] - Total loans grew by $265 million during the quarter, with portfolio loans increasing by $252 million or nearly 9% on an annualized basis [17] - Core deposits represented 89% of total deposits, with a 4% increase year-over-year [8][18] Market Data and Key Metrics Changes - The agricultural loans sector saw a 3% increase in the quarter, driven by higher operating costs and seasonal activity [13] - Delinquent loans declined to 0.41% of total loans, down from 0.63% in the previous quarter [14] - Nonperforming assets remained modest at 0.3% of total assets, primarily related to consumer loans [14] Company Strategy and Development Direction - The company continues to focus on maintaining a moderate risk profile while investing in operating performance [6] - Banner's strategy emphasizes growing new client relationships and maintaining core funding positions through a super community bank model [8] - The company remains open to opportunistic M&A but is primarily focused on organic growth [46][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through current market uncertainties, citing a strong balance sheet and reputation [6] - There is an expectation of a slight pullback in loan growth in Q3, but management anticipates maintaining a mid-single-digit growth rate for the year [29] - The company is monitoring potential impacts from policy changes and tariffs on small businesses and consumers [15] Other Important Information - Banner was recognized as one of America's 100 Best Banks and received various accolades for trustworthiness and customer satisfaction [9][10] - The company has a strong capital and liquidity profile, allowing it to repay $100 million of subordinated notes [18] Q&A Session Summary Question: Improvement in loan originations - Management noted that the increase in originations pulled some of the pipeline out, with expectations of mid-single-digit growth for the year despite a potential pullback in Q3 [28][29] Question: Competition on the deposit side - Management indicated that they are not currently seeing increased competition for deposits, maintaining a focus on relationship banking to drive core deposits [32][33] Question: Funding loan growth - The company plans to use FHLB advances to bridge any gaps in funding due to seasonal deposit outflows, with expectations for deposit growth in Q3 [36][37] Question: M&A environment - Management acknowledged a more amicable M&A environment but emphasized a focus on organic growth rather than feeling compelled to pursue acquisitions [46][48] Question: Credit quality and risk ratings - Management reported a mix of upgrades and downgrades in credit quality, with particular attention to the agricultural sector experiencing more downgrades due to commodity price pressures [56][57]

Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $45.5 million or $1.31 per diluted share for Q2 2025, compared to $1.15 per share for Q2 2024 and $1.30 per share for Q1 2025 [5][6] - Core earnings for Q2 2025 were $62 million, up from $52 million in Q2 2024, with revenue from core operations increasing to $163 million from $150 million year-over-year [7][8] - Return on average assets was 1.13% for Q2 2025, reflecting strong core performance [8] Business Line Data and Key Metrics Changes - Loan originations increased by 80% compared to the linked quarter, with commercial real estate up 484%, C&I originations up 96%, and construction and land development increasing by 43% [12] - Total loans grew by $265 million during the quarter, with portfolio loans increasing by $252 million or nearly 9% on an annualized basis [19] - Core deposits represented 89% of total deposits, with a 4% year-over-year increase in core deposits [9][20] Market Data and Key Metrics Changes - The agricultural loans sector saw a 3% increase in the quarter, driven by higher operating costs and seasonal activity [14] - Delinquent loans decreased to 0.41% of total loans, down from 0.63% in the previous quarter [14][15] - Nonperforming assets remained modest at 0.3% of total assets, with nonperforming loans totaling $43 million, primarily related to consumer loans [15] Company Strategy and Development Direction - The company continues to focus on its super community bank strategy, emphasizing client relationships, core funding, and safety through economic cycles [8][9] - Banner Corporation aims to maintain a moderate risk profile while investing in operational improvements to enhance performance [6][9] - The company received multiple accolades, including being named one of America's 100 Best Banks and recognized for retail client satisfaction [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty has not significantly impacted loan growth, with strong originations and growth observed in Q2 [17] - The company expects a slight pullback in loan growth in Q3 but maintains a mid-single-digit growth rate projection for the year [30] - Management remains focused on organic growth while being open to opportunistic M&A, emphasizing the success of their current business model [49] Other Important Information - The company reported a core dividend of $0.48 per common share, reflecting strong financial performance [9] - Total securities decreased by $55 million primarily due to normal portfolio cash flows [19] - The company called and repaid $100 million of subordinated notes, reflecting strong capital and liquidity positions [20] Q&A Session Summary Question: Follow-up on loan originations and customer confidence - Management indicated that the increase in originations pulled some of the pipeline out, with expectations of mid-single-digit growth for the year despite potential pullbacks in Q3 [29][30] Question: Competition on the deposit side - Management noted that they are not currently seeing increased competition for deposits, maintaining a focus on relationship banking to drive core deposits [33][34] Question: Funding loan growth amid deposit growth - Management confirmed that FHLB advances were used to temporarily fund loan growth, with expectations for deposit growth to outpace loan growth in Q3 [37][38] Question: M&A environment and strategy - Management acknowledged an increase in M&A activity but emphasized a focus on organic growth, viewing opportunistic M&A as a secondary strategy [49] Question: Credit quality and loan performance - Management clarified that the increase in nonperforming loans was primarily due to residential properties, with agricultural loans experiencing more downgrades due to commodity pressures [61][62]

Financial Performance Highlights - Banner Corporation reported net income of $45.5 million for the second quarter of 2025, slightly up from $45.1 million in the previous quarter[7] - The return on average assets was 1.13%, and the return on average equity was 9.92%, compared to 1.15% and 10.17% respectively in the prior quarter[7] - Net interest margin (tax equivalent) remained steady at 3.92%[7] - The efficiency ratio (GAAP) decreased by 71 basis points to 62.50%, and the adjusted non-GAAP efficiency ratio decreased by 190 basis points to 60.28%[7] Loan Portfolio and Credit Quality - HFI Loan growth reached $547 million year-over-year (5%) and $252 million quarter-over-quarter (9% annualized)[7] - Total loan originations (excluding HFS) amounted to $967 million[7] - The allowance for credit losses was $4.8 million, driven by loan growth and risk rating downgrades; the allowance for credit losses to total loans was 1.37%[7] - Non-performing assets remained low at 0.30% of total assets, a slight increase of 4 basis points from the last quarter[7] Balance Sheet and Capital Management - As of the reporting period, Banner Corporation's assets totaled $16.4 billion, deposits were $13.5 billion, and loans amounted to $11.7 billion[9] - The company announced a dividend of $0.48 per share to be paid in August 2025[7] Strategic Focus and Market Position - Banner Corporation emphasizes its core banking competency, revenue growth, net interest margin protection, careful spending, and moderate risk profile[8, 10] - The company operates in a region with strong population growth, particularly in Idaho (20% projected growth)[11]

Core Insights - Banner (BANR) reported revenue of $162.15 million for the quarter ended June 2025, marking an 8.3% year-over-year increase, with EPS of $1.35 compared to $1.17 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $163.6 million by 0.89%, while the EPS exceeded the consensus estimate of $1.32 by 2.27% [1] Financial Performance Metrics - The efficiency ratio was reported at 62.5%, slightly above the average estimate of 61% [4] - The net interest margin (tax equivalent) was 3.9%, matching the average estimate [4] - Net charge-offs as a percentage of average loans receivable were reported at -0%, better than the average estimate of 0.1% [4] - Total non-interest income was $17.75 million, below the average estimate of $18.8 million [4] - Net interest income was reported at $144.4 million, slightly below the average estimate of $144.8 million [4] Stock Performance - Banner's shares have returned +9% over the past month, outperforming the Zacks S&P 500 composite's +4.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Banner Corporation reported strong financial results for the second quarter of 2025, with net income of $45.5 million, or $1.31 per diluted share. This represents a slight increase from the previous quarter and a significant increase from the same quarter last year. The performance was driven by a 9% year-over-year increase in net interest income, fueled by loan growth and higher asset yields. The company also saw a 5% year-over-year growth in net loans and maintained a strong core deposit base, which constituted 89% of total deposits Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $45.5 million | $45.1 million | $39.8 million | | Diluted EPS | $1.31 | $1.30 | $1.15 | | Net Interest Income | $144.4 million | $141.1 million | $132.5 million | | Revenue | $162.2 million | $160.2 million | $149.7 million | | Provision for Credit Losses | $4.8 million | $3.1 million | $2.4 million | - Net loans receivable grew to **$11.53 billion**, a **2% increase** from the prior quarter and a **5% increase** year-over-year[11](index=11&type=chunk) - Core deposits represented **89% of total deposits** at quarter-end, highlighting a strong funding base[4](index=4&type=chunk)[11](index=11&type=chunk) - Non-performing assets (NPAs) increased to **0.30% of total assets**, up from **0.26%** in the prior quarter and **0.21%** in the prior year quarter[11](index=11&type=chunk) [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) The Board of Directors declared a regular quarterly cash dividend, maintaining its commitment to shareholder returns - A quarterly cash dividend of **$0.48 per share** was declared, payable on August 15, 2025, to shareholders of record on August 5, 2025[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Mark Grescovich attributed the strong quarterly performance to the company's 'super community bank strategy,' which emphasizes client relationships, a solid funding base, and a moderate risk profile. He highlighted that earnings benefited from loan growth and higher asset yields, which offset increased funding costs. The company's credit metrics, reserve levels, and capital base are described as robust - The company's performance is credited to its 'super community bank strategy,' focusing on client relationships, a strong funding base, and exceptional service with a moderate risk profile[4](index=4&type=chunk) - Management noted that credit metrics remain strong, the reserve for loan losses is solid, and the capital base is robust[4](index=4&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=Detailed%20Financial%20Analysis) [Income Statement Review](index=2&type=section&id=Income%20Statement%20Review) The income statement review highlights a 9% year-over-year increase in net interest income to $144.4 million, with a stable net interest margin of 3.92%. The provision for credit losses increased to $4.8 million due to loan growth and risk rating migration. Non-interest income decreased quarter-over-quarter due to one-time building exit costs, while non-interest expenses remained flat, leading to an improved efficiency ratio of 62.50% [Net Interest Income and Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin) - Net interest income was **$144.4 million**, up from **$141.1 million** in Q1 2025 and **$132.5 million** in Q2 2024[7](index=7&type=chunk) - Net interest margin (tax equivalent) was stable at **3.92%** for the current and preceding quarters, an increase of **22 basis points** from **3.70%** in Q2 2024[7](index=7&type=chunk) - The increase in net interest income was driven by higher yields on interest-earning assets, with average loan yields rising to **6.12%** from **6.07%** in the prior quarter[8](index=8&type=chunk) - Total cost of funding liabilities increased by **5 basis points** to **1.60%** compared to the preceding quarter, mainly due to higher FHLB advances to fund loan growth[9](index=9&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) - A **$4.8 million** provision for credit losses was recorded in Q2 2025, compared to **$3.1 million** in Q1 2025 and **$2.4 million** in Q2 2024[10](index=10&type=chunk) - The provision primarily reflected loan growth and risk rating migration, which impacted estimated reserve requirements[10](index=10&type=chunk) [Non-Interest Income](index=3&type=section&id=Non-Interest%20Income) - Total non-interest income was **$17.8 million**, a decrease from **$19.1 million** in the prior quarter, primarily due to a **$1.1 million** decrease in miscellaneous income related to losses on building and lease exits[12](index=12&type=chunk) - Mortgage banking operations revenue was stable at **$3.2 million**, compared to **$3.1 million** in the preceding quarter[13](index=13&type=chunk) [Non-Interest Expense](index=3&type=section&id=Non-Interest%20Expense) - Total non-interest expense was flat at **$101.3 million** compared to the preceding quarter. Increases in salary and IT costs were offset by a **$1.6 million** increase in capitalized loan origination costs[14](index=14&type=chunk) - The efficiency ratio improved to **62.50%** from **63.21%** in the preceding quarter. The adjusted efficiency ratio also improved to **60.28%** from **62.18%**[14](index=14&type=chunk) [Balance Sheet Review](index=3&type=section&id=Balance%20Sheet%20Review) As of June 30, 2025, total assets grew to $16.44 billion, driven by a 2% quarterly increase in total loans to $11.69 billion. Deposits saw a slight decrease to $13.53 billion, but core deposits remained strong. The company increased FHLB advances significantly to fund loan growth and paid off its outstanding subordinated debt. Shareholders' equity increased, and all capital ratios remained well above 'well-capitalized' regulatory requirements [Assets, Loans, and Deposits](index=3&type=section&id=Assets%2C%20Loans%2C%20and%20Deposits) Balance Sheet Highlights (as of June 30, 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $16.44 billion | $16.17 billion | $15.82 billion | | Total Loans Receivable | $11.69 billion | $11.44 billion | $11.14 billion | | Total Deposits | $13.53 billion | $13.59 billion | $13.08 billion | - Commercial real estate loans increased by **4%** quarter-over-quarter to **$3.97 billion**, driven by new loan production and construction loan conversions[16](index=16&type=chunk) - Core deposits decreased slightly but remained strong at **$12.05 billion**, representing **89% of total deposits**[18](index=18&type=chunk) [Liquidity and Borrowings](index=3&type=section&id=Liquidity%20and%20Borrowings) - FHLB advances increased significantly to **$565.0 million** from **$168.0 million** in the prior quarter, primarily to fund loan growth[19](index=19&type=chunk) - The company paid off its outstanding subordinated debt during the second quarter of 2025[20](index=20&type=chunk) - At quarter-end, the company had additional off-balance sheet liquidity of **$2.74 billion** at the FHLB and **$1.62 billion** at the Federal Reserve[19](index=19&type=chunk) [Shareholders' Equity and Capital Ratios](index=4&type=section&id=Shareholders%27%20Equity%20and%20Capital%20Ratios) - Total common shareholders' equity increased to **$1.87 billion**, or **11.35% of total assets**, up from **$1.83 billion** at the end of the prior quarter[21](index=21&type=chunk) - Tangible common shareholders' equity per share (a non-GAAP measure) increased to **$43.09** from **$42.27** in the prior quarter[11](index=11&type=chunk)[21](index=21&type=chunk) - The company and Banner Bank continue to maintain capital levels in excess of 'well-capitalized' requirements, with an estimated common equity Tier 1 capital ratio of **12.63%**[22](index=22&type=chunk) [Credit Quality](index=4&type=section&id=Credit%20Quality) Credit quality metrics showed some weakening, with non-performing assets rising to 0.30% of total assets. However, the allowance for credit losses on loans remained stable at 1.37% of total loans receivable, providing strong coverage of non-performing loans at 373%. Net loan charge-offs decreased to $1.0 million from $2.7 million in the prior quarter Credit Quality Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Non-performing Assets (NPAs) | $49.8 million | $42.7 million | $33.3 million | | NPAs to Total Assets | 0.30% | 0.26% | 0.21% | | Allowance for Credit Losses (ACL) - Loans | $160.5 million | $157.3 million | $152.8 million | | ACL to Total Loans | 1.37% | 1.38% | 1.37% | | Net Loan Charge-offs | $1.0 million | $2.7 million | $0.2 million | - The allowance for credit losses on loans was **373%** of non-performing loans at June 30, 2025, down from **404%** at March 31, 2025[23](index=23&type=chunk) - Substandard loans decreased to **$189.5 million** from **$197.8 million** in the prior quarter but were up significantly from **$122.0 million** a year ago[23](index=23&type=chunk) [Additional Information](index=4&type=section&id=Additional%20Information) [Conference Call Information](index=4&type=section&id=Conference%20Call%20Information) Banner Corporation will host a conference call to discuss its second quarter 2025 results - The conference call is scheduled for Thursday, July 17, 2025, at **8:00 a.m. PDT**[24](index=24&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding future financial performance and strategic plans. These statements are subject to numerous risks and uncertainties, including economic conditions, interest rate changes, inflation, geopolitical developments, and regulatory changes, which could cause actual results to differ materially - The document includes a standard safe harbor statement, cautioning readers not to place undue reliance on forward-looking statements[26](index=26&type=chunk) - Key risk factors cited include adverse economic conditions, changes in interest rates, inflation, credit risks, competitive pressures, and regulatory changes[27](index=27&type=chunk) [Financial Tables](index=6&type=section&id=Financial%20Tables) [Results of Operations](index=6&type=section&id=Results%20of%20Operations) The detailed income statement shows a year-over-year increase in net income to $45.5 million for Q2 2025, driven by higher net interest income which rose to $144.4 million. For the six months ended June 30, 2025, net income was $90.6 million, up from $77.4 million in the same period of 2024 Income Statement Summary (in thousands) | Description | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Interest Income | $200,259 | $189,138 | $394,127 | $373,826 | | Total Interest Expense | $55,860 | $56,592 | $108,645 | $108,321 | | Net Interest Income | $144,399 | $132,546 | $285,482 | $265,505 | | Provision for Credit Losses | $4,795 | $2,369 | $7,934 | $2,889 | | Total Non-interest Income | $17,751 | $17,199 | $36,859 | $28,790 | | Total Non-interest Expense | $101,348 | $98,128 | $202,607 | $195,769 | | Net Income | $45,496 | $39,795 | $90,631 | $77,354 | [Financial Condition](index=7&type=section&id=Financial%20Condition) The balance sheet expanded, with total assets reaching $16.44 billion at June 30, 2025, a 4% increase from the prior year. This growth was supported by a 5% year-over-year increase in net loans. Total shareholders' equity grew 10% year-over-year to $1.87 billion Balance Sheet Summary (in thousands) | Description | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $16,437,169 | $16,170,812 | $15,816,194 | | Net Loans Receivable | $11,529,872 | $11,281,473 | $10,991,000 | | Total Deposits | $13,527,291 | $13,593,265 | $13,079,263 | | Total Liabilities | $14,571,505 | $14,337,359 | $14,125,428 | | Total Shareholders' Equity | $1,865,664 | $1,833,453 | $1,690,766 | [Loan Portfolio Analysis](index=8&type=section&id=Loan%20Portfolio%20Analysis) The loan portfolio grew to $11.69 billion, with notable year-over-year increases in owner-occupied commercial real estate (+18%), multifamily real estate (+20%), and land development (+19%). Loan originations in Q2 2025 totaled $966.6 million. Geographically, Washington and California remain the largest markets, accounting for 47% and 26% of the loan portfolio, respectively [Loan Composition and Growth](index=8&type=section&id=Loan%20Composition%20and%20Growth) Loan Composition (in thousands) as of June 30, 2025 | Loan Type | Amount | % Change YoY | | :--- | :--- | :--- | | Commercial Real Estate (CRE) | $3,973,727 | +7% | | Multifamily Real Estate | $860,700 | +20% | | Construction and Land | $1,696,560 | +5% | | Commercial Business | $2,471,014 | +4% | | One- to four-family residential | $1,610,133 | 0% | | **Total Loans Receivable** | **$11,690,373** | **+5%** | [Loan Originations](index=9&type=section&id=Loan%20Originations) - Total loan originations (excluding loans held for sale) were **$966.6 million** in Q2 2025, a significant increase from **$535.8 million** in Q1 2025 and slightly below **$996.1 million** in Q2 2024[33](index=33&type=chunk) - Construction and land loans represented the largest category of originations in Q2 2025 at **$411.2 million**[33](index=33&type=chunk) [Geographic Distribution](index=8&type=section&id=Geographic%20Distribution) Loans by Geographic Location as of June 30, 2025 | State | Amount (in thousands) | Percentage | | :--- | :--- | :--- | | Washington | $5,438,285 | 47% | | California | $3,010,678 | 26% | | Oregon | $2,141,185 | 17% | | Idaho | $671,217 | 6% | | Other | $429,008 | 4% | [Credit Quality Metrics](index=10&type=section&id=Credit%20Quality%20Metrics) The allowance for credit losses (ACL) on loans increased to $160.5 million, maintaining a stable ratio of 1.37% to total loans. Net charge-offs for the quarter were $1.0 million. Non-performing assets (NPAs) rose to $49.8 million, driven by increases in non-accrual one-to-four family and agricultural loans, and an increase in REO [Allowance for Credit Losses (ACL) Analysis](index=10&type=section&id=Allowance%20for%20Credit%20Losses%20(ACL)%20Analysis) - The ACL for loans increased to **$160.5 million** at the end of Q2 2025 from a beginning balance of **$157.3 million**, with a provision of **$4.2 million** and net charge-offs of **$1.0 million** during the quarter[34](index=34&type=chunk) - The ACL for unfunded loan commitments increased to **$12.8 million** from **$12.2 million** in the prior quarter[34](index=34&type=chunk) [Non-Performing Assets (NPA) Analysis](index=11&type=section&id=Non-Performing%20Assets%20(NPA)%20Analysis) Non-Performing Assets (in thousands) | Category | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total non-performing loans | $42,974 | $38,959 | $30,722 | | REO and other repossessed assets | $6,801 | $3,768 | $2,564 | | **Total non-performing assets** | **$49,775** | **$42,727** | **$33,286** | [Deposit Analysis](index=12&type=section&id=Deposit%20Analysis) Total deposits stood at $13.53 billion, a slight decrease from the prior quarter but up 3% year-over-year. Core deposits, comprising non-interest-bearing and interest-bearing transaction and savings accounts, made up 89% of the total. Geographically, Washington accounts for 55% of all deposits Deposit Composition (in thousands) as of June 30, 2025 | Deposit Type | Amount | % of Total | | :--- | :--- | :--- | | Non-interest-bearing | $4,504,491 | 33% | | Interest-bearing transaction and savings | $7,545,028 | 56% | | **Total Core Deposits** | **$12,049,519** | **89%** | | Interest-bearing certificates | $1,477,772 | 11% | | **Total Deposits** | **$13,527,291** | **100%** | - Total deposits are geographically concentrated in Washington (**55%**), Oregon (**22%**), and California (**18%**)[37](index=37&type=chunk) [Capital Adequacy](index=13&type=section&id=Capital%20Adequacy) As of June 30, 2025, both Banner Corporation and Banner Bank maintained capital ratios significantly exceeding the minimums required to be categorized as 'well-capitalized' by regulators Estimated Regulatory Capital Ratios (Banner Corporation) | Ratio | Actual | 'Well Capitalized' Minimum | | :--- | :--- | :--- | | Common equity tier 1 capital to risk-weighted assets | 12.63% | n/a | | Tier 1 capital to risk-weighted assets | 13.26% | 6.00% | | Total capital to risk-weighted assets | 14.51% | 10.00% | | Tier 1 leverage capital to average assets | 11.29% | n/a | [Non-GAAP Financial Measures](index=16&type=section&id=Non-GAAP%20Financial%20Measures) The company provides several non-GAAP financial measures, such as tangible common equity and adjusted efficiency ratio, to offer what it believes are useful and comparative insights into its core operations. These measures exclude items like goodwill, intangible assets, and certain one-time gains or losses - Management uses non-GAAP measures like adjusted revenue, adjusted earnings, and tangible book value per share to assess core operational trends and facilitate peer comparison[41](index=41&type=chunk) Tangible Common Shareholders' Equity Reconciliation | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Common shareholders' equity (book value) per share (GAAP) | $53.95 | $53.16 | $49.07 | | Tangible common shareholders' equity (tangible book value) per share (non-GAAP) | $43.09 | $42.27 | $38.12 | Adjusted Efficiency Ratio Reconciliation | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Efficiency ratio (GAAP) | 62.50% | 63.21% | 65.53% | | Adjusted efficiency ratio (non-GAAP) | 60.28% | 62.18% | 63.60% |

Core Insights - Banner (BANR) is positioned to potentially continue its earnings-beat streak in upcoming reports, having surpassed earnings estimates by an average of 6.95% in the last two quarters [1][5] Earnings Performance - For the most recent quarter, Banner reported earnings of $1.23 per share against an expectation of $1.29 per share, resulting in a surprise of 4.88%. In the previous quarter, the company exceeded the consensus estimate of $1.22 per share by reporting $1.33 per share, achieving a surprise of 9.02% [2] Earnings Estimates and Predictions - There has been a favorable change in earnings estimates for Banner, with a positive Earnings ESP (Expected Surprise Prediction) indicating a strong likelihood of an earnings beat, especially when combined with a solid Zacks Rank [5][8] - The current Earnings ESP for Banner is +1.52%, suggesting that analysts have recently become more optimistic about the company's earnings prospects [8] Statistical Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [6] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [7]

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Banner (BANR) due to higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2] Earnings Expectations - Banner is expected to report quarterly earnings of $1.32 per share, reflecting a year-over-year increase of +12.8% [3][18] - Revenues are projected to be $163.6 million, representing a 9.3% increase from the previous year [3][18] Estimate Revisions - The consensus EPS estimate has been revised 1.5% higher in the last 30 days, indicating a positive reassessment by analysts [4][19] - The Most Accurate Estimate for Banner is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +1.52% [12][19] Earnings Surprise Prediction - A positive Earnings ESP suggests a likelihood of beating the consensus EPS estimate, especially when combined with a Zacks Rank of 3 (Hold) [10][12] - Banner has a history of beating consensus EPS estimates, having done so in the last four quarters [14][19] Market Reaction - The upcoming earnings report on July 16 could lead to stock price movement depending on whether the results exceed or fall short of expectations [2][19] - Management's discussion of business conditions during the earnings call will be crucial for future earnings expectations [2]