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 income on mortgage-backed and investment securities. While maturities and scheduled amortization of loans and mortgage-backed 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 years ended December 31, 2025 and 2024, our loan originations, including originations of loans held for sale, exceeded our loan repayments by $852.6 million and $984.7 million, respectively. There were $10.9 million of loans purchased during the year ended December 31, 2025, and $4.7 million loans purchased during the year ended December 31, 2024. During the years ended December 31, 2025 and 2024, we received proceeds of $492.3 million and $435.3 million, respectively, from the sale of loans. Securities purchased during the years ended December 31, 2025 and 2024 totaled $155.8 million and $63.2 million, respectively, and securities repayments, maturities and sales in those same periods were $381.7 million and $369.9 million, respectively.

Our primary funding source is deposits. Total deposits increased by $228.7 million during the year ended December 31, 2025, with core deposits increasing $196.1 million and certificates of deposit increasing $32.6 million. At December 31, 2025, core deposits totaled $12.21 billion, or 89%, of total deposits, compared with $12.01 billion, or 89% of total deposits at December 31, 2024. The increase in core deposits compared to the prior year end primarily reflects increases in interest-bearing transaction and savings accounts. 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 December 31, 2025, certificates of deposit totaled $1.53 billion, or 11% of our total deposits, including $1.48 billion which were scheduled to mature within one year.

We had $150.0 million of FHLB advances at December 31, 2025, compared to $290.0 million at December 31, 2024. Other borrowings at December 31, 2025, decreased $17.5 million to $107.7 million from December 31, 2024. Both the FHLB advances and other borrowings outstanding at December 31, 2025, are scheduled to mature during 2026.

We must maintain an adequate level of liquidity to ensure the availability of sufficient funds to accommodate deposit withdrawals, support loan growth, satisfy financial commitments and take advantage of investment opportunities. We use our sources of funds primarily to fund loan growth and deposit outflows. At December 31, 2025, we had outstanding loan commitments totaling $4.0 billion, primarily 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. At December 31, 2025, we had $25.1 million of purchase obligations under contracts with our key vendors to provide services, mainly information technology related contracts. In addition, at December 31, 2025, we had $12.6 million of commitments under operating lease agreements in the next 12 months.

We generally maintain sufficient cash and readily marketable securities to meet short-term liquidity needs; however, our primary liquidity management practice to supplement deposits is to increase or decrease short-term borrowings, including FHLB advances and Federal Reserve Bank of San Francisco (FRBSF) borrowings. We maintain credit facilities with the FHLB, subject to collateral requirements and a sufficient level of ownership of FHLB stock. At December 31, 2025, under these credit facilities based on pledged collateral, the Bank had $3.65 billion of available credit capacity. Advances under these credit facilities totaled $150.0 million at December 31, 2025. In addition, the Bank has been approved for participation in the FRBSF’s Borrower-In-Custody program. Under this program, based on pledged collateral, the Bank had available lines of credit of approximately $1.55 billion as of December 31, 2025, subject to certain collateral requirements, namely the collateral type and risk rating of eligible pledged loans. We had no funds borrowed from the FRBSF at December 31, 2025 or 2024. At December 31, 2025, the Bank also had uncommitted federal funds line of credit agreements with other financial institutions totaling $125.0 million. No balances were outstanding under these agreements as of December 31, 2025 or 2024. Availability of lines is subject to federal funds balances available for loan and continued borrower eligibility. These lines are intended to support short-term liquidity needs and the agreements may restrict consecutive day usage. Management believes it has adequate resources and funding potential to meet our foreseeable liquidity 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.

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 is $0.50 per share, as approved by our Board of Directors, which we believe is a dividend rate per share that 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 quarterly dividend payments during 2026 at this rate of $0.50 per share, our average total dividend paid each quarter would be approximately $17.0 million based on the number of outstanding shares at December 31, 2025. At December 31, 2025, Banner (on an unconsolidated basis) had liquid assets of $69.0 million.

During the year ended December 31, 2025, total shareholders’ equity increased $172.0 million to $1.95 billion, representing 11.90% of total assets. At December 31, 2025, tangible common shareholders’ equity, a non-GAAP financial measure which excludes goodwill and other intangible assets, was $1.57 billion, or 9.84% of tangible assets. See “Executive Overview - Non-GAAP Financial Measures” above for a reconciliation of total shareholders’ equity to tangible common shareholders’ equity.