Q - BANNER

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

General: Total assets increased $237.1 million to $16.44 billion at June 30, 2025, from $16.20 billion at December 31, 2024. The increase compared to year end was primarily due to loan growth, partially offset by a decrease in securities and interest-bearing deposits.

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 June 30, 2025 was 87%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of real estate and commercial loans. Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $335.7 million at June 30, 2025, compared to December 31, 2024, reflecting increases across all loan categories except multifamily real estate loans and other consumer loans.

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 $3.97 billion, or 34% of our loan portfolio, and multifamily real estate loans totaled $860.7 million, or 7% of our loan portfolio, at June 30, 2025. Commercial real estate loans increased by $108.8 million during the first six months of 2025, primarily due to new production and transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by payoffs and paydowns, while multifamily real estate loans decreased by $33.7 million, primarily due to payoffs and paydowns exceeding new production.

Our construction, land and land development loans totaled $1.70 billion, or 15% of our loan portfolio, at June 30, 2025, compared to $1.52 billion at December 31, 2024. Multifamily construction loans increased $54.4 million, or 11%, to $568.1 million at June 30, 2025, compared to December 31, 2024. Multifamily construction represented 5% of our total loan portfolio at June 30, 2025. Multifamily construction loans were comprised primarily of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. Commercial construction loans increased $36.9 million, or 30%, to $159.2 million at June 30, 2025, compared to $122.4 million at December 31, 2024, due to advances and new loan production, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase. Land and land development loans increased $47.8 million, or 13%, to $417.5 million at June 30, 2025, compared to December 31, 2024, primarily due to new loan production, partially offset by payoffs and paydowns.

Our commercial business lending is directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agribusiness borrowers operating in our primary market areas. Our commercial and agricultural business loans were $2.82 billion at June 30, 2025 and $2.76 billion at December 31, 2024. Commercial and agricultural business loans represented 24% of our loan portfolio at June 30, 2025. Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $226.8 million, or 2% of our loan portfolio, at June 30, 2025, compared to $227.4 million, or 2% of our loan portfolio, at December 31, 2024.

We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California, Idaho and Utah. Most of the one- to four-family residential loans we originate in normal market conditions are sold in secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking operations. At June 30, 2025, one- to four-family residential loans retained in our portfolio increased $18.9 million, to $1.61 billion, compared to $1.59 billion at December 31, 2024. The increase in one- to four-family residential loans was primarily the result of one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction and new loan originations. One- to four-family residential loans represented 14% of our loan portfolio at June 30, 2025.

Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients. At June 30, 2025, consumer loans, including home equity revolving lines of credit, increased $11.1 million to $732.5 million, compared to $721.4 million at December 31, 2024.

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 increased to $37.7 million at June 30, 2025, compared to $32.0 million at December 31, 2024. The increase was primarily the result of originations of one- to four- family residential mortgage loans held for sale outpacing loan sales during the period. Originations of loans held for sale increased to $171.0 million for the six months ended June 30, 2025, compared to $107.2 million for the same period last year. The volume of one- to four-family residential mortgage loans sold was $212.7 million during the six months ended June 30, 2025, compared to $160.7 million in the same period a year ago, which included a pooled loan sale of $19.8 million of one- to four-family residential mortgage loans.

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

Investment Securities: Total securities decreased $60.2 million to $3.05 billion at June 30, 2025, from $3.11 billion at December 31, 2024, primarily due to securities paydowns and maturities exceeding purchases during the six months ended June 30, 2025. Purchases during the six months ended June 30, 2025, consisted primarily of state and local government obligations. The average effective duration of the Company’s securities portfolio was 6.6 years at both June 30, 2025 and December 31, 2024. Fair value adjustments for securities designated as available-for-sale increased $48.0 million for the six months ended June 30, 2025. This increase, net of $11.5 million in associated tax expense, was recorded in other comprehensive income and reflected the impact of changes in market interest rates during the six months ended June 30, 2025.

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

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

Total deposits increased $12.9 million at June 30, 2025, compared to December 31, 2024, with core deposits increasing $34.8 million and certificates of deposit decreasing $21.9 million. The increase in core deposits primarily reflects increases in interest-bearing transaction and savings accounts. We had $50.0 million of brokered deposits at June 30, 2025, compared to $50.3 million at December 31, 2024. Core deposits represented 89% of total deposits at both June 30, 2025 and December 31, 2024. Competition for deposits in our market areas remains strong.

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

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

Borrowings: We had $565.0 million of FHLB advances at June 30, 2025, compared to $290.0 million at December 31, 2024. The increase was primarily used to fund loan growth. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $8.1 million to $117.1 million at June 30, 2025, compared to $125.3 million at December 31, 2024. At June 30, 2025, the Company’s off-balance sheet liquidity included additional borrowing capacity of $2.74 billion at the FHLB, $1.62 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions. Junior subordinated debentures totaled $73.4 million at June 30, 2025, compared to $67.5 million at December 31, 2024. The outstanding balance of the Company’s subordinated notes was fully repaid during the second quarter of 2025. Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024.

Shareholders’ Equity: Total shareholders’ equity increased $91.3 million to $1.87 billion, or 11.35% of total assets, at June 30, 2025, compared to $1.77 billion, or 10.95% of total assets, at December 31, 2024. The increase was primarily due to a $57.0 million increase in retained earnings resulting from $90.6 million in net income, partially offset by the accrual of $33.6 million in cash dividends during the six months ended June 30, 2025. In addition, accumulated other comprehensive loss decreased by $32.9 million, primarily due to a decrease in unrealized losses on the available for sale securities portfolio. There were no shares of common stock repurchased during the six months ended June 30, 2025.

Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $92.2 million to $1.49 billion, or 9.28% of tangible assets, at June 30, 2025, compared to $1.40 billion, or 8.84% of tangible assets at December 31, 2024. A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above following “Second Quarter 2025 Financial Highlights.”