BANNER CORP

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

General: Total assets increased $1.73 billion to $18.08 billion at September 30, 2026, from $16.35 billion at December 31, 2025, primarily due to assets acquired from the Pacific Financial acquisition and organic loan growth. The Pacific Financial acquisition increased total assets by $1.29 billion on September 1, 2026.

Loans and lending: Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a total loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan to deposit ratio at September 30, 2026, was 85%. 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 $1.27 billion at September 30, 2026, compared to December 31, 2025. The increase in loans was primarily the result of loans acquired from the Pacific Financial acquisition, which increased total loans $765.5 million on September 1, 2026, and organic loan growth. Organic loan growth was primarily driven by increases in commercial business loans, commercial real estate loans, consumer loans, and commercial construction 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):

Commercial real estate loans totaled $4.61 billion, or 35% of our loan portfolio, and multifamily real estate loans totaled $913.3 million, or 7% of our loan portfolio, at September 30, 2026. Commercial real estate loans increased by $554.6 million during the first nine months of 2026, primarily due to loans acquired from Pacific Financial and new loan production. Multifamily real estate loans increased by $62.5 million, primarily due to loans acquired from Pacific Financial and transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by loan payoffs.

Our construction, land and land development loans totaled $1.80 billion, or 14% of our loan portfolio, at September 30, 2026, compared to $1.71 billion at December 31, 2025. Multifamily construction represented 4% of our total loan portfolio at September 30, 2026. Multifamily construction loans were comprised primarily of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. Commercial construction loans increased $64.0 million, or 41%, to $220.0 million at September 30, 2026, compared to $156.0 million at December 31, 2025, primarily due to new production and advances, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase and loan payoffs. Land and land development loans decreased $17.3 million, or 4%, to $416.4 million at September 30, 2026, compared to December 31, 2025, primarily due to payoffs and paydowns, partially offset by new loan originations. Construction loans across our footprint were concentrated primarily in Washington, California and Oregon at September 30, 2026, with the majority of multifamily construction projects expected to convert to permanent loans within the next 12 to 24 months as construction phases are completed.

Our commercial business lending is directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agribusiness borrowers operating in our primary market areas. Our commercial business loans were $2.73 billion at September 30, 2026, and $2.41 billion at December 31, 2025, an increase of $321.0 million. Commercial business loans represented 21% of our loan portfolio at September 30, 2026. Our agricultural business loans were $389.2 million at September 30, 2026, and $353.2 million at December 31, 2025. Agricultural business loans represented 3% of our loan portfolio at September 30, 2026. Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $223.4 million, or 2% of our loan portfolio, at September 30, 2026, compared to $195.6 million, or 2% of our loan portfolio, at December 31, 2025.

We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California, Idaho and Utah. Most of the one- to four-family residential loans we originate in normal market conditions are sold in secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking operations. At September 30, 2026, one- to four-family residential loans retained in our portfolio increased $46.9 million, to $1.62 billion, compared to $1.57 billion at December 31, 2025. The increase was primarily the result of loans acquired from Pacific Financial, new loan originations, and one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction, partially offset by one- to four-family residential loan payoffs. One- to four-family residential loans represented 13% of our loan portfolio at September 30, 2026.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients. At September 30, 2026, consumer loans, including home equity revolving lines of credit, increased $161.3 million to $929.8 million, compared to $768.5 million at December 31, 2025. The increase was primarily due loans acquired from Pacific Financial and growth in home equity revolving lines of credit.

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

Loans held for sale decreased to $32.7 million at September 30, 2026, compared to $42.9 million at December 31, 2025. The decrease was primarily the result of increased sales of one- to four- family residential mortgage loans held for sale, with loan sales outpacing originations during the period. Originations of loans held for sale increased to $285.8 million for the nine months ended September 30, 2026, compared to $265.0 million for the same period last year. The volume of one- to four-family residential mortgage loans sold was $370.4 million during the nine months ended September 30, 2026, compared to $349.6 million in the same period a year ago.

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

Investment Securities: Total securities were $3.10 billion at September 30, 2026, an increase from $2.98 billion at December 31, 2025. Available-for-sale securities increased $168.0 million to $2.18 billion at September 30, 2026, compared to $2.02 billion at December 31, 2025. In connection with the Pacific Financial acquisition, the Company acquired $322.9 million of investment securities, which were sold throughout the month of September to reposition the acquired portfolio consistent with the Company’s investment strategy and interest rate risk, resulting in a $2.1 million loss on sale. The Company purchased $505.5 million of securities during the nine months ended September 30, 2026, consisting of agency residential mortgage-backed securities, agency commercial mortgage-backed securities, corporate securities and collateralized loan obligations. Held-to-maturity securities decreased $42.3 million to $918.9 million, compared to $961.2 million at December 31, 2025, reflecting maturities and paydowns during the period. The average effective duration of the Company’s securities portfolio was 6.0 years at September 30, 2026, compared to 6.6 years at December 31, 2025, primarily reflecting purchases of shorter-duration and floating-rate securities. Net unrealized losses on available-for-sale securities increased $102.1 million during the nine months ended September 30, 2026, reflecting higher market interest rates. The change, net of the associated $24.5 million tax benefit, was recorded in other comprehensive income.

Deposits: Deposits, client retail repurchase agreements and loan repayments are the major sources of our funds for lending and other investment purposes. We compete with other financial institutions and financial intermediaries in attracting deposits and we generally attract deposits within our primary market areas. Much of the focus of our branch strategy and marketing efforts over the last several years has been directed toward attracting additional deposit client relationships and balances. This effort has been particularly directed towards emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts.

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

Total deposits increased $1.65 billion at September 30, 2026, compared to December 31, 2025, with core deposits increasing $1.57 billion and certificates of deposit increasing $82.9 million. The increase in deposits was primarily the result of the Pacific Financial acquisition, which added total deposits of $1.14 billion on September 1, 2026, consisting of non-interest-bearing accounts of $410.3 million and interest-bearing transaction and savings accounts of $586.8 million. The increase in core deposits reflected the core deposit base acquired from Pacific Financial. The increase in interest-bearing transaction and savings accounts also reflected organic growth. Core deposits represented 90% and 89% of total deposits at September 30, 2026, and December 31, 2025, respectively. Competition for deposits in our market areas remains strong. The increase in interest-bearing certificates of deposits was due to the Pacific Financial acquisition. We had no brokered deposits at September 30, 2026, compared to $50.0 million at December 31, 2025.

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):

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

Borrowings: There were no FHLB advances at September 30, 2026, compared to $150.0 million at December 31, 2025. All outstanding advances were repaid during the third quarter as deposits continued to serve as the Company’s primary source of funds. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $2.5 million to $105.2 million at September 30, 2026, compared to $107.7 million at December 31, 2025. At September 30, 2026, the Company’s off-balance sheet liquidity included additional borrowing capacity of $3.82 billion at the FHLB, $1.56 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions. Junior subordinated debentures totaled $87.1 million at September 30, 2026, compared to $79.2 million at December 31, 2025, which increased due to the two additional junior subordinated debentures assumed from Pacific Financial.

Shareholders’ Equity: Total shareholders’ equity increased $187.6 million to $2.13 billion, or 11.80% of total assets, at September 30, 2026, compared to $1.95 billion, or 11.90% of total assets, at December 31, 2025. The increase was primarily due to the stock compensation of $185.9 million in the Pacific Financial acquisition, a $98.2 million increase in retained earnings resulting from $151.3 million in net income, partially offset by the accrual of $53.1 million in cash dividends and the repurchase of 450,000 shares of Banner common stock during the nine months ended September 30, 2026, at an average price of $67.44 per share. In addition, accumulated other comprehensive loss increased by $71.2 million, primarily due to an increase in unrealized losses on the available for sale securities portfolio.

Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $99.0 million to $1.67 billion, or 9.48% of tangible assets, at September 30, 2026, compared to $1.57 billion, or 9.84% of tangible assets at December 31, 2025. A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above under the heading “Reconciliation of Non-GAAP Financial Measures.”