BANNER CORP

Maintaining a moderate risk profile by employing appropriate underwriting standards, avoiding excessive asset concentrations and aggressively managing troubled assets has been and will continue to be a primary focus for us. We actively engage with our borrowers to resolve adversely classified loans and other problem assets.

Non-Performing Assets: Non-performing assets totaled $60.5 million, or 0.36% of total assets, at June 30, 2026, compared to $51.2 million, or 0.31% of total assets, at December 31, 2025. Our allowance for credit losses - loans was $161.8 million, or 295% of non-performing loans, at June 30, 2026, compared to $160.3 million, or 351% of non-performing loans, at December 31, 2025.

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

For the six months ended June 30, 2026, interest income was reduced by $1.2 million as a result of nonaccrual loan activity, which included the reversal of $702,000 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, 2026.

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

The decrease in special mention loans during the six months ended June 30, 2026, was primarily due to risk rating upgrades to pass, loan payoffs and, to a lesser extent, downgrades to substandard. The increase in substandard loans during the six months ended June 30, 2026, was primarily due to loan risk rating downgrades, primarily in the commercial business loan segment. As of June 30, 2026, total substandard loans primarily consisted of loans within the commercial business and commercial real estate loan segments.