BANNER CORP

Our primary sources of funds are deposits, borrowings, proceeds from loan principal and interest payments and sales of loans, and the maturity of and interest payments on mortgage-backed and investment securities. While maturities and scheduled amortization of loans and securities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, competition and our pricing strategies.

Our primary investing activity is the origination of loans and, in certain periods, the purchase of securities or loans. During the three months ended March 31, 2026 and 2025, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $112.0 million and $186.2 million, respectively. There were no loan purchases during the three months ended March 31, 2026, and $10.8 million of loan purchases during the three months ended March 31, 2025. During the three months ended March 31, 2026 and 2025, we received proceeds of $137.4 million and $120.7 million, respectively, from the sale of loans. Securities purchased during the three months ended March 31, 2026 and 2025 totaled $104.4 million and $9.8 million, respectively, and securities repayments, maturities and sales in those periods were $97.4 million and $52.9 million, respectively.

Our primary financing activity is gathering deposits. Total deposits increased by $97.2 million during the three months ended March 31, 2026, primarily due to an increase in core deposits. Core deposits were $12.38 billion at March 31, 2026, compared to $12.21 billion at December 31, 2025. 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 March 31, 2026, certificates of deposit totaled $1.46 billion, or 11% of our total deposits, including $1.42 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 no FHLB advances at March 31, 2026, compared to $150.0 million at December 31, 2025, as the increase in core deposits was used to pay off FHLB advances during the period. Other borrowings increased to $115.7 million at March 31, 2026, from $107.7 million at December 31, 2025.

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 three months ended March 31, 2026, we used our sources of funds to pay off higher costing FHLB advances. At March 31, 2026, we had outstanding loan commitments totaling $4.10 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.

We generally maintain sufficient cash and readily marketable securities to meet short-term liquidity needs; however, our primary liquidity management practice is to supplement deposits through short-term borrowings, including FHLB advances and Federal Reserve Bank of San Francisco (FRBSF) borrowings. We maintain credit facilities with the FHLB, which provide for advances secured by eligible collateral and subject to applicable borrowing capacity limitations, including required ownership of FHLB stock. At March 31, 2026, based on pledged collateral, the Bank had approximately $3.76 billion of available borrowing capacity under these facilities, and no outstanding advances. The Bank is also approved for participation in the FRBSF Borrower-in-Custody program. As of March 31, 2026, the Bank had approximately $1.74 billion of available borrowing capacity under this program, subject to eligible collateral requirements, including the type and risk rating of pledged loans. No borrowings were outstanding under this facility at March 31, 2026 or December 31, 2025. In addition, the Bank maintains uncommitted federal funds lines of credit with other financial institutions totaling $125.0 million, subject to availability of federal funds balances and continued counterparty eligibility. These lines are intended to support short-term liquidity needs and may restrict consecutive-day usage. No amounts were outstanding under these arrangements at March 31, 2026 or December 31, 2025. Management believes the Bank maintains adequate liquidity resources and borrowing capacity to meet its current and foreseeable funding requirements.

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 March 31, 2026, Banner (on an unconsolidated basis) had liquid assets of $88.6 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 increased to $0.52 per share, up from $0.50 per share, for the dividend paid to shareholders in May 2026, as approved by our Board of Directors. Our quarterly common stock dividend 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 $0.52 per share, our average total dividend paid each quarter would be approximately $17.6 million based on the number of outstanding shares at March 31, 2026.

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 three months ended March 31, 2026, total shareholders’ equity increased $20.3 million, to $1.97 billion or 12.03% of total assets. At March 31, 2026, tangible common shareholders’ equity, which excludes goodwill and other intangible assets, was $1.59 billion, or 9.97% of tangible assets. Tangible common shareholders’ equity represents a non-GAAP financial measure. See, non-GAAP financial measure reconciliations presented above under “First Quarter 2026 Financial Highlights.”