BANNER CORP — Call Transcript 2026

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Banner Corporation First Quarter 2026 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Mark Grescovich, President and Chief Executive Officer of Banner Corporation. Mark, please go ahead. Thank you, Tiffany, and good morning everyone. I would also like to welcome you to the first quarter 2026 earnings call for Banner Corporation. Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer, Jill Rice, our Chief Credit Officer, and Rich Arnold, our Head of Investor Relations. Rich, would you please read our forward-looking safe harbor statement? Sure Mark. Good morning. Our presentation today discusses Banner's business outlook and will include forward-looking statements. These statements include descriptions of management's plans, objectives, or goals for future operations, products or services, forecasts of financial or other performance measures, and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question and answer period following management's discussion. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available in the earnings press release that was released yesterday and a recently filed Form 10-K for the year ended December 31st, 2025. Forward-looking statements are effective only as of the date they are made, and Banner assumes no obligation to update information concerning its expectations. Mark? Thank you, Rich. As is customary, today we will cover four primary items with you. First, I will provide you high level comments on Banner's first quarter 2026 performance. Second, the actions Banner continues to take to support all of our stakeholders, including our Banner team, our clients, our communities, and our shareholders. Third, Jill Rice will provide comments on the current status of our loan portfolio. And finally, Rob Butterfield will provide more detail on our operating performance for the quarter, as well as comments on our balance sheet. Before I get started, I wanted to thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and our communities. Banner has lived our core values, summed up as doing the right thing, for the past 135 years. Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company and our shareholders, and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events. I am pleased to report again to you that is exactly what we continue to do. I am very proud of the entire Banner team that are living our core values. Now, let me turn to an overview of our performance. As announced, Banner Corporation reported a net profit available to common shareholders of $54.7 million, or $1.60 per diluted share for the quarter ended March 31st, 2026. This compares to a net profit to common shareholders of $1.30 per share for the first quarter of 2025, and $1.49 per share for the fourth quarter of 2025. Our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve operating performance have positioned the company well for the future. Rob will discuss these items in more detail shortly. The strength of our balance sheet, coupled with the strong reputation we maintain in our markets, will allow us to manage through the current market uncertainty. To illustrate the core earnings power of Banner, I would direct your attention to pre-tax, pre-provision earnings, excluding gains and losses on the sale of securities, changes in fair value of financial instruments, and building and lease exit costs. Our first quarter 2026 core earnings were $66.3 million, compared to $58.6 million for the first quarter of 2025. Banner's first quarter 2026 revenue from core operations was $169 million, compared to $160 million for the first quarter of 2025, an increase of nearly 6%. We continue to benefit from a strong core deposit base that has proved to be resilient and loyal to Banner, a very good net interest margin, and core expense control. Overall, this resulted in a return on average assets of 1.37% for the first quarter of 2026. Once again, our core performance reflects continued execution on our super community bank strategy. That is growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and demonstrating our safety and soundness through all economic cycles and change events. To that point, our core deposits continue to represent 89% of total deposits. Reflective of this performance, coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced a core dividend increase of 4% to $0.52 per common share. Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition. Banner was again named one of America's 100 best banks, as well as one of the best banks in the world by Forbes. Newsweek named Banner Bank one of the most trustworthy companies both in America and the world again this year. Just recently, again named Banner one of the best regional banks in the country. Additionally, J.D. Power and Associates named Banner Bank the best bank in the Northwest for retail client satisfaction for 2025. Our company was certified by Great Place to Work. S&P Global Market Intelligence ranked Banner's financial performance among the top 50 public banks with more than $10 billion in assets. As we've noted previously, Banner Bank again received an outstanding CRA rating. Let me now turn the call over to Jill to discuss trends in our loan portfolio and her comments on Banner's credit quality. Jill? Thank you, Mark, and good morning, everyone. As detailed in our press release, we again had a strong quarter of loan originations in line with that reported in the fourth quarter and 61% higher than that reported in the first quarter of 2025. Still, significant commercial real estate payoffs coupled with expected paydowns within the ag portfolio offset production such that portfolio loans decreased $14 million when compared to December 31st, 2025. Year-over-year loan growth was modest at 2.4%. Production within the commercial real estate portfolio continued to be meaningful, with owner-occupied CRE up 3% in the quarter and 15% year-over-year, and investor real estate up 1% in the quarter and nearly 8% year-over-year. Those increases, however, were almost entirely offset by the significant commercial real estate paydowns within the multifamily portfolio, down 6% in the quarter and 9% year-over-year as stabilized properties moved into the secondary market. Within the construction portfolios, the 12% increase quarter-over-quarter in commercial construction reflects the continued funding of previously approved projects. In addition to the multifamily payoffs noted previously, we had two large land development projects pay off, which resulted in a 7.5% decrease in balances this quarter. We are continuing to see an elongation of the days on market within the for sale one to four family construction portfolio, given the elevated interest rate environment and general economic uncertainty. Still, the level of completed and unsold inventory remains within historical norms, and the builders continue to have strong balance sheets and profit margins to work with. In total, the one to four family construction portfolio continues to represent a modest 5% of the loan portfolio, and the total construction portfolio, including land and land development, continues to be acceptable at 14% of the loan book. After declining 3% last quarter, C&I line utilization moved closer to normal, increasing 2% this quarter. In total, commercial loans were up a modest 1% both in the quarter and year-over-year. Agricultural balances, as expected, were down 6% in the quarter as crop proceeds reduced line balances, and the decline reported year-over-year reflects the collection and payoff of multiple classified ag balances. Shifting to credit quality, our credit metrics remain strong. Delinquent loans increased two basis points and now represent 0.56% of total loans, which compares to 0.63% reported as of March 31st, 2025. Adversely classified loans increased by $42 million in the quarter, representing 2% of total loans, and total non-performing assets at $51.7 million represent a modest 0.32% of total assets. The increase in adversely classified assets is centered in three relationships operating in manufacturing, residential construction, and wholesale agricultural supplies. As of March 31st, the allowance for credit losses totaled $160.4 million, providing 1.37% coverage of total loans, consistent with prior quarters. Loan losses in the quarter totaled $1.5 million and were offset in part by recoveries totaling $253,000. The risk rating migration discussed previously, coupled with the net charge-offs, resulted in a provision of $1.3 million to the reserve for credit losses loans. This was offset by a release from the reserve for unfunded commitments of $2.1 million for a net provision recapture of $796,000. The first quarter of 2026 continued to be impacted by economic uncertainty given persistent inflation, the higher for longer interest rate environment, and increasing geopolitical issues. Through this, we have maintained consistent underwriting standards, which include a focus on strong sponsors, properly margined collateral. Seasoned repayment sources, and in the vast majority of cases, personal guarantees. We continue our practice of robust quarterly portfolio reviews in order to identify any emerging issues early. We remain well-positioned to weather the uncertain economic environment ahead. With that, I will hand the microphone over to Rob for his comments. Rob? Thank you, Jill. We reported $1.60 per diluted share for the fourth quarter, compared to $1.49 per diluted share for the prior quarter. The increase in earnings per share compared to the prior quarter was primarily due to the current quarter having lower expenses, a recapture of provision for credit losses. In addition, the prior quarter included a decrease in the valuation of financial instruments carried at fair value and a loss on the disposal of assets. Core pre-tax, pre-provision income for the current quarter increased 13%, or $7.7 million compared to the quarter ending March 31st, 2025. Our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 14% and return on average assets of 1.37%. As Jill previously mentioned, loan balances were essentially flat during the quarter as the good loan production was offset by an increase in payoffs. The loan-to-deposit ratio ended the quarter at 85%, giving us ample capacity to continue to support existing clients and to add new clients. Total security balances were relatively flat as normal portfolio cash flows were mostly offset by security purchases. Deposits increased by $97 million during the quarter due to core deposits increasing $165 million or 5.5% on an annualized basis. The increase in core deposits was partially offset by time deposits decreasing $67 million, mostly due to $50 million of brokered CDs maturing during the quarter, ending the quarter with no brokered deposits. Core deposits ended the quarter at 89% of total deposits. Total borrowings decreased to $142 million during the quarter, ending the quarter with no outstanding FHLB advances. The tangible common equity ratio increased from 9.84%-9.97%. As a reflection of our robust capital and strong liquidity positions, Banner repurchased 250,000 shares during the quarter and declared an increase in the quarterly dividend of $0.52 per share. Net interest income decreased $2.3 million from the prior quarter due to a combination of lower earning assets and two fewer interest-earning days in the current quarter, partially offset by an 8 basis points increase in net interest margin. The decrease in average earning assets was primarily due to average interest-earning cash and security balances decreasing $153 million. Tax-equivalent net interest margin was 4.11% for the current quarter, compared to 4.03% for the prior quarter. Funding cost decreased 9 basis points due to deposit costs decreasing 8 basis points. Deposit costs benefited from a full quarter of the deposit pricing reductions implemented in the fourth quarter of last year. We also benefited from an improved earning asset mix as lower yielding cash and security balances were a smaller percentage of earning assets. The improved earning asset mix offset the three basis points decline in loan yields. The average rate on new loan production for the current quarter was 6.69%, compared to 6.88% for the prior quarter. Non-interest bearing deposits ended the quarter at 33% of total deposits. Total non-interest income increased $3.9 million from the prior quarter, primarily due to the prior quarter including a loss of $1.4 million on the disposal of assets and a fair value decrease of $2 million on financial instruments carried at fair value. While the current quarter had a $1.7 million fair value increase on financial instruments carried at fair value, partially offset by a loss of $1.2 million on the sale of securities. Total non-interest expense was $1.5 million lower than the prior quarter, with decreases in occupancy and equipment, marketing, and legal expense, which being partially offset by an increase in salary and benefits. Our strong capital and liquidity levels continue to position us well to support our existing clients and to add new clients. This concludes my prepared comments. Now I will turn it back to Mark. Mark? Thank you, Jill and Rob, for your comments. That concludes our prepared remarks. Tiffany, we will now open the call and welcome questions. At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jeff Rulis with D.A. Davidson. Please go ahead. Good morning. This is Ryan Payne on for Jeff Rulis. Morning. Just starting on the margin. Had some deposit fluctuations and lower CD balances this quarter benefiting the NIM, just trying to gauge your thoughts on expectations for the margin ahead. Yeah, sure. This is Rob. We typically see an increase in funding costs during the second quarter as clients start to use deposit balances to make tax payments early in the quarter, and we supplement that temporary decline in deposit balances with some FHLB advances. We think that this should be mostly offset by an increase in loan yields as adjustable rate loans continue to reprice up and the new loans coming on are still coming on at higher yields than the average overall portfolio yield. Which suggests that NIM would be relatively flat probably in the second quarter, which is similar to what we saw last year where the Q2 NIM was flat compared to the first quarter. We could see some expansion in NIM in the third quarter due to funding costs coming back down as FHLB advances are replaced by deposit increases in the typical seasonality we see in the third quarter. In addition, we would expect that loan yields would increase in the third quarter as well as long as the Fed remains on pause. We would expect some net interest margin expansion in the second half of the year. Helpful. Thank you. With the loan production impacted by payoffs this quarter, where do you see payoffs trending from here and maybe your overall expectations for growth? Sure, Ryan. We had anticipated that the headwind of commercial real estate payoffs would potentially offset growth into 2026. I expect that they will slow. I'm not prepared to tell you that they're done coming in, but I think that the rate of payoffs will slow down. Still, the loan production volumes, which were solid and indicative of future loan growth, the strong backlog of construction fundings we have is meaningful and our pipelines are strong. We're still sticking with the mid-single-digit growth rate for 2026. Got it. Thanks. Last from me, capital priorities. We had the dividend increase and buyback. What's your appetite for continued buybacks here, and where would you see M&A on the list of priorities? Yeah. It's Rob again. As you know, we did increase the core dividend by 4% this quarter, which was the second increase we've done in the last three quarters. Our goal from a dividend perspective is to pay out 35%-40% of earnings as a core dividend. In addition, we did do those share repurchases again in the first quarter. That's the third quarter in a row that we've done that. As we think about capital priorities, we always look at the different opportunities we have there, which certainly include additional share repurchases that we could consider in the second quarter. Ultimately, it's really dependent on market conditions, on where the stock price is trading and other things as we evaluate the best use of our capital. As always, we just continue to look at different ways we can deploy capital. Mark, as far as M&A, do you have any? Yeah. Thanks for the question, Ryan. Our position on M&A hasn't changed since I've been here, which is we look and try to partner with folks that would be a great fit for Banner, add additional density to our market, and be very good core deposit franchises. It has to be very opportunistic. We're very selective on the M&A front. We feel very good about our organic opportunities to continue to grow the bank and improve profitability. If an opportunity exists in which we can add additional density with a good core deposit franchise and a strong bank, we certainly would look to do that. Awesome. Thanks, guys. Your next question comes from the line of Matthew Clark with Piper Sandler. Please go ahead. Hey, good morning. Morning, Matt. Good morning. On the funding side of the equation for the margin outlook on the deposit side, if you had the spot rate on deposits at the end of March, and then how are you thinking about deposit pricing going forward with the Fed on hold? Do you think you'll just be managing as best you can to hold that level, or do you feel like there are opportunities to trim exception-based pricing and CD rates? Sure. Thanks, Matthew. It's Rob. The spot price of the cost of deposits for March was the same as the quarter. It was pretty much across the board at that 135 basis points. Early in the quarter in January, we did make some additional rate reductions really in response to the December Fed rate cut that we saw, and we did that in early January, so really the whole quarter benefited from that. As we think about going forward while the Fed's on pause, I don't think you're going to see much change in our core deposit pricing for our core products. Where we might get a little bit of benefit is on the CD pricing side of it, just because the cost of our CD book, we would expect to continue to trend down for the next few quarters as the lag effect of the rate cuts that we saw the Fed do in the fourth quarter. The average rate of the new CDs coming on is around 3% right now. The CDs rolling off are around 3.30%. Approximately 40% of our CD book matures in the second quarter. We would expect some there. What I'd say is what happened is now that the expectation is the Fed will be on pause through the remainder of the year, maybe seeing a rate cut late in the year, fourth quarter or something like that. We are seeing some additional pressure on deposit pricing right now where we are seeing some competitors start to increase some of their promotion specials on deposits right now. I'll caveat it with that as we ultimately will have to respond to what the market's doing. Okay, great. On the service charges and fees line this quarter up pretty nicely in a quarter with two less days. Did you do anything? Did you change your product pricing there at all? Or what can you attribute that to, and is that sustainable? Yeah. We didn't change any of our pricing there. We did renegotiate our Mastercard contract, so we're seeing a little bit of benefit from that from the first quarter. Otherwise, I think if you looked at the trending there, the first quarter is probably a pretty good trending when you look at that. Okay. On the non-interest expense run rate, down nicely, pretty broad-based, outside of the seasonal increase in comp. Anything unusual there? Is that more partly a seasonal decline relative to the fourth quarter? I'm just trying to get a sense for that run rate going forward. Yeah, there certainly is some seasonality to that. Typically, the first quarter, we have lower advertising and marketing expense in the first quarter. The campaigns that we run throughout the year start to ramp up, so that's a bit lower. The fourth quarter did have kind of a legal settlement charge in there of around $1 million that didn't carry forward into the first quarter. If you think about the remainder of the year, we've talked about expecting normal inflationary increases in 2026 compared to 2025. I think if you look at the full year, that's still my expectation. Q2 will be higher from a salary standpoint and benefits just because we do our annual salary increases really in mid-March. So you didn't really see that impact in the first quarter. I would expect expenses to be a bit higher as we move throughout the year. Okay. Thank you. Last one from me, just back to M&A. Have you seen or heard of an increase among sellers maybe being more willing to talk? Just trying to get a sense for a change relative to last quarter. Matthew, this is Mark. Thank you for the question. I don't think that there's been a change in behavior. I think there are a number of folks that are trying to strategically figure out what the best next step is. As you might suspect, given my earlier comments about who we think would be a good partner with Banner in which we could leverage our balance sheet to service their clients in a more robust way. The universe is still fairly limited on the West Coast. We know that the partners that would make a lot of sense for Banner. I wouldn't suggest that there's been an increase in conversations, but I wouldn't be surprised if folks, as they go through and are delivering on their first quarter strategic plan, are trying to figure out what the best thing to do for their organizations are. Okay, great. Thanks for the color. Thanks, Matthew. Your next question comes from the line of David Feaster with Raymond James. Please go ahead. Hi. Good morning, everybody. Morning, David. I wanted to maybe touch on, I guess two things. From the loan growth side, originations have held up pretty well. How is demand? Have you seen any, obviously there's a lot of macro uncertainty. I'm curious if that has impacted demand and pipelines at all from your standpoint. I was hoping you could give some color on the payoffs and pay downs that you're seeing. What's driving that? Is it de-leveraging asset sales, competition and losing some deals? Just kind of curious on those two fronts. In terms of pipelines, David, everybody is telling me that they're busy, they're having good conversations and moving things forward, whether it's early on in the discussions or whether it's my credit team busy working through deals. Demand is out there. I can't say that the level of economic uncertainty doesn't give some pause, but there is still demand. As we move through them, we certainly see pricing being pushed and multiple banks going for these same deals. It's tough out there, I guess I would say, in terms of getting to the close. I feel good about what we have been pulling through in terms of originations and what that means for our future growth. As to what was the second part? Driving the payoff? The payoffs and pay downs, yeah. Yeah. If you think about it, they're just delayed. Many of these loans we ultimately expected to pay off. We expected them to pay off 18 months ago. They sat waiting for what was going to be the lower rate environment in those mini-perm loans that we offer at the end of a construction and, or as they were stabilizing and getting stronger. It is delayed payoff, not losing because we don't want them or to competition, but to the secondary market that offer terms that most regional banks don't offer. Long-term interest only, non-recourse, those sorts of things. Again, expected. They just are lumpy because of the delay from 18 months ago. Okay. That's helpful. There's been a lot of disruption across your footprint over the past 12-18 months, really from top to bottom, right? I wanted to get a sense of how you've been capitalizing on that. Your appetite for new hires potentially coming out of some of those deals or just hires in general, and what markets or segments you might be interested in adding talent to. I'll start and then if Mark or Rob want to jump in behind me. If you think back to the last several quarters, we've talked about the personnel we've added because of the disruption across the footprint. Really, when we find good, strong bankers in the markets, we want to add them. This last quarter, we've added a commercial banking center manager. We've added multiple portfolio managers and some treasury management personnel. It isn't about one business line or one market. When we find the right people, we're adding to improve our talent. Okay. David, I would just follow up with that. This is Mark. That it's been across the geography, so it's not specific to any particular area. I think we've done a very good job of adding talent into the organization. As you've heard me say before, we tend to do this as a rifle shot, not a shotgun shot, right? That we end up doing this because we know who the good bankers are. We court them over time, and when the timing's right, because there is disruption, we find that we are a good source for them to join our organization. Okay. Mark, maybe just another higher level one. I'm curious how you and your team are thinking about technology. I think investors, when I have conversations and there's a lot of conversations around AI and stablecoin, or digital deposits in general. I'm just kind of curious, how are you thinking about those two issues today and what are some of the things that you're working on and how do you see this kind of playing out for Banner? Thank you for the question, David. I'm going to ask Rob to answer that because we've made a series of investments, but at the same time, we've set up a governance structure, I think, that will help guide us as a lot of this technology and AI infrastructure is evolving. Rob? Yeah. Thanks for the question, David. As Mark mentioned, we do have a Fintech council committee that we have internally that evaluates all the different kind of new AI type technology or even different technology products that are being offered by Fintechs out there. We try to stay on top of what the current pulse is on that stuff. We have started to adopt some AI technology. At this point, it's more turning on AI within existing software platforms. Of course, we've made some significant investments that we've talked about recently with the new loan and deposit origination system that went fully live last year. We also have a lot of conversations around tokenized deposits, stablecoin, that type of stuff as well. As part of our annual strategic planning process, we've brought in different experts in those fields to talk to our executive committee to make sure we understand what's out there. While we haven't necessarily had any plans to roll that out in the short term, we're really staying on top of what all the different kind of payment channels are out there and keeping our pulse on that kind of stuff. David, just to follow up on that. When you think about AI, regional banks like us, we want to be very cautious and make sure that we're protecting the data integrity of our clients. Examples of AI would be BSA, AML, in which you can really utilize some of the tools there. Certainly the call center which will allow you to be more responsive to your client base over a 24/7 period of time. Those are the kinds of things I think when you think of regional banks, the investments that we'll be making in AI. That's terrific. Thanks, everybody. Thanks, David. Your next question comes from the line of Andrew Terrell with Stephens Inc. Please go ahead. Hey, good morning. Morning, Andrew. Most of mine were addressed already, but just on the margin, and you guys have kind of consistently been outperforming the kind of margin expectations you lay out. I know in the past we've talked about no rate cuts better for kind of the near medium term margin trajectory. It seems like kind of the backdrop we're getting now, but still sounds like relatively flattish in 2Q and maybe some back half expansion opportunities. I guess the question is why not more constructive on the margin and can you walk us through the puts and takes and specifically kind of the limiting factors for the margin near term? Yeah. Thanks, Andrew. It's Rob. If you think about the second quarter, and I talked about it a little bit. I'm just looking at normal seasonality there. We always see deposit outflows early in the quarter. You have to supplement those with FHLB advances. Typically, the second quarter's been a little bit better for us from a loan growth standpoint as well, and we're going to be funding those loans with FHLB advances. I think just naturally you're going to see funding cost increase in the second quarter. Some of that will be offset by the repricing of loan portfolio. That's why I'm thinking more flat for the second quarter. If you look at last year, it's the same seasonality we saw last year. First quarter last year, we saw a net interest margin expansion. Second quarter was flat. Third quarter is typically one of the better margin expansion quarters for us. I think that's where you're going to see some additional expansion, again, would be in the third quarter because funding costs will come back down as deposits flow in. We'll pay off FHLB advances. We'll get the benefit of the asset growth that we saw in the second quarter. Then in addition, naturally, you're going to see loan yields also increase in the third quarter. I think the third quarter will probably be the strongest quarter for the remainder of the year from an interest margin expansion standpoint. If Fed's on pause, then we would expect some additional margin expansion in the fourth quarter. I don't think you're going to see the benefit on the funding side at that point. What you're going to see is just the loan yield continuing to reprice up, which is repricing up about 3 basis points a quarter right now while the Fed's on pause. All right. Great. No, I really appreciate it. Last question from me. I guess looking back, last time you were generating a comparable 130-ish ROA consistently was back in 2018, 2019. Your stock was trading 4 times higher on an earnings multiple, call it 40%-50% higher on tangible book value multiple then. Your capital's 200+ basis points better today. Your allowance is 30 basis points higher. The growth environment feels a little bit slower than then. I guess with that as a backdrop, why not get more aggressive on the buyback here? I think anytime you look at the capital priorities, we're weighing all the different options there, Andrew. We've certainly had the conversations around the level of share repurchases and where they should be. Where we repurchased shares at last quarter, the earn back on that is attractive. The multiple is attractive. We're just trying to balance the different ones. To your point, if we think about the TCE ratio right now approaching 10%, that's above where we'd like it to be. We will have to address that over time as we think about different capital actions. Ideally, we'd like that to be about 100 basis points lower than it is today. We're continuing to have those conversations and think about the best use. Okay. Thanks for taking the questions. Thank you, Andrew. Your next question comes from the line of Charlie Driscoll with KBW. Please go ahead. Hi, this is Charlie on for Kelly. Most of mine have been answered. Just kind of want to give you guys the opportunity to take a step back on credit here and talk about what you're seeing. It feels like NPA has kind of stabilized here, but just any color you can give us on what's in that portfolio, any areas of concern if things do take a downturn. Just high level here. Thanks. I'll just start by saying that when the portfolio is as clean as it is, you're going to see fits and starts of things moving in and out of adversely classified and NPAs. When you look at the non-performing loans, relatively flat this quarter, but centered in consumer and small business and the ag-related businesses. Average loan size of non-accrual loans less than $250,000. The largest loan is approximately $3 million. Nothing that is extremely worrisome in terms of that portfolio. In the substandard, we're early to downgrade. We work them as fast as we can. Some of them may sit there a little longer because we're slower to move them on up and out. We don't want them bouncing around. When you think about that portfolio, the changes when they've gone in there, it's idiosyncratic. There's no one industry that's raising alarms. We just are beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations. Great. That's it for me. Thanks for the call today, guys. Thanks, Charlie. That concludes our question and answer session. I will now turn the call back over to Mark Grescovich for closing remarks. Great. Thank you, Tiffany. Thank you all for your questions and your attention today. As I stated, we're very proud of the Banner team and our first quarter 2026 performance. It's been a strong kickoff to the full year. Thank you for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future. Thank you again, everyone, and have a wonderful day. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Speaker 7: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Banner Corporation First Quarter 2026 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Mark Grescovich, President and Chief Executive Officer of Banner Corporation. Mark, please go ahead. Hello, and thank you for standing by. hello and thank you for standing by My name is Tiffany, and I will be your conference operator today. my name is tiffany and i will be your conference operator today At this time, I would like to welcome everyone to the Banner Corporation First Quarter 2026 Conference Call and Webcast. at this time i would like to welcome everyone to the banner corporation first quarter 2026 conference call and webcast All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speaker's remarks, there will be a question and answer session. after the speaker's remarks there will be a question and answer session If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. if you would like to ask a question during that time simply press star then the number one on your telephone keypad I would now like to turn the call over to Mark Grescovich, President and Chief Executive Officer of Banner Corporation. i would now like to turn the call over to mark grescovich president and chief executive officer of banner corporation Mark, please go ahead. mark please go ahead

Speaker 5: Thank you, Tiffany, and good morning everyone. I would also like to welcome you to the first quarter 2026 earnings call for Banner Corporation. Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer, Jill Rice, our Chief Credit Officer, and Rich Arnold, our Head of Investor Relations. Rich, would you please read our forward-looking safe harbor statement? Thank you, Tiffany, and good morning everyone. thank you tiffany and good morning everyone I would also like to welcome you to the first quarter 2026 earnings call for Banner Corporation. i would also like to welcome you to the first quarter 2026 earnings call for banner corporation Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer, Jill Rice, our Chief Credit Officer, and Rich Arnold, our Head of Investor Relations. joining me on the call today is rob butterfield banner corporation's chief financial officer jill rice our chief credit officer and rich arnold our head of investor relations Rich, would you please read our forward-looking safe harbor statement? rich would you please read our forward-looking safe harbor statement

Speaker 8: Sure Mark. Good morning. Our presentation today discusses Banner's business outlook and will include forward-looking statements. These statements include descriptions of management's plans, objectives, or goals for future operations, products or services, forecasts of financial or other performance measures, and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question and answer period following management's discussion. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available in the earnings press release that was released yesterday and a recently filed Form 10-K for the year ended December 31st, 2025. Forward-looking statements are effective only as of the date they are made, and Banner assumes no obligation to update information concerning its expectations. Mark? Sure Mark. sure mark Good morning. good morning Our presentation today discusses Banner's business outlook and will include forward-looking statements. our presentation today discusses banner's business outlook and will include forward-looking statements These statements include descriptions of management's plans, objectives, or goals for future operations, products or services, forecasts of financial or other performance measures, and statements about Banner's general outlook for economic and other conditions. these statements include descriptions of management's plans objectives or goals for future operations products or services forecasts of financial or other performance measures and statements about banner's general outlook for economic and other conditions We also may make other forward-looking statements in the question and answer period following management's discussion. we also may make other forward-looking statements in the question and answer period following management's discussion These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. these forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today Information on the risk factors that could cause actual results to differ are available in the earnings press release that was released yesterday and a recently filed Form 10-K for the year ended December 31st, 2025. information on the risk factors that could cause actual results to differ are available in the earnings press release that was released yesterday and a recently filed form 10-k for the year ended december 31st 2025 Forward-looking statements are effective only as of the date they are made, and Banner assumes no obligation to update information concerning its expectations. forward-looking statements are effective only as of the date they are made and banner assumes no obligation to update information concerning its expectations Mark? mark

Speaker 5: Thank you, Rich. As is customary, today we will cover four primary items with you. First, I will provide you high level comments on Banner's first quarter 2026 performance. Second, the actions Banner continues to take to support all of our stakeholders, including our Banner team, our clients, our communities, and our shareholders. Third, Jill Rice will provide comments on the current status of our loan portfolio. And finally, Rob Butterfield will provide more detail on our operating performance for the quarter, as well as comments on our balance sheet. Before I get started, I wanted to thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and our communities. Banner has lived our core values, summed up as doing the right thing, for the past 135 years. Thank you, Rich. thank you rich As is customary, today we will cover four primary items with you. as is customary today we will cover four primary items with you First, I will provide you high level comments on Banner's first quarter 2026 performance. first i will provide you high level comments on banner's first quarter 2026 performance Second, the actions Banner continues to take to support all of our stakeholders, including our Banner team, our clients, our communities, and our shareholders. second the actions banner continues to take to support all of our stakeholders including our banner team our clients our communities and our shareholders Third, Jill Rice will provide comments on the current status of our loan portfolio. third jill rice will provide comments on the current status of our loan portfolio And finally, Rob Butterfield will provide more detail on our operating performance for the quarter, as well as comments on our balance sheet. and finally rob butterfield will provide more detail on our operating performance for the quarter as well as comments on our balance sheet Before I get started, I wanted to thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and our communities. before i get started i wanted to thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and our communities Banner has lived our core values, summed up as doing the right thing, for the past 135 years. banner has lived our core values summed up as doing the right thing for the past 135 years Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company and our shareholders, and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events. I am pleased to report again to you that is exactly what we continue to do. I am very proud of the entire Banner team that are living our core values. Now, let me turn to an overview of our performance. As announced, Banner Corporation reported a net profit available to common shareholders of $54.7 million, or $1.60 per diluted share for the quarter ended March 31st, 2026. This compares to a net profit to common shareholders of $1.30 per share for the first quarter of 2025, and $1.49 per share for the fourth quarter of 2025. Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company and our shareholders, and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events. our overarching goal continues to be to do the right thing for our clients our communities our colleagues our company and our shareholders and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events I am pleased to report again to you that is exactly what we continue to do. i am pleased to report again to you that is exactly what we continue to do I am very proud of the entire Banner team that are living our core values. i am very proud of the entire banner team that are living our core values Now, let me turn to an overview of our performance. now let me turn to an overview of our performance As announced, Banner Corporation reported a net profit available to common shareholders of $54.7 million, or $1.60 per diluted share for the quarter ended March 31st, 2026. as announced banner corporation reported a net profit available to common shareholders of $54.7 million or $1.60 per diluted share for the quarter ended march 31st 2026 This compares to a net profit to common shareholders of $1.30 per share for the first quarter of 2025, and $1.49 per share for the fourth quarter of 2025. this compares to a net profit to common shareholders of $1.30 per share for the first quarter of 2025 and $1.49 per share for the fourth quarter of 2025 Our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve operating performance have positioned the company well for the future. Rob will discuss these items in more detail shortly. The strength of our balance sheet, coupled with the strong reputation we maintain in our markets, will allow us to manage through the current market uncertainty. To illustrate the core earnings power of Banner, I would direct your attention to pre-tax, pre-provision earnings, excluding gains and losses on the sale of securities, changes in fair value of financial instruments, and building and lease exit costs. Our first quarter 2026 core earnings were $66.3 million, compared to $58.6 million for the first quarter of 2025. Our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve operating performance have positioned the company well for the future. our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve operating performance have positioned the company well for the future Rob will discuss these items in more detail shortly. rob will discuss these items in more detail shortly The strength of our balance sheet, coupled with the strong reputation we maintain in our markets, will allow us to manage through the current market uncertainty. the strength of our balance sheet coupled with the strong reputation we maintain in our markets will allow us to manage through the current market uncertainty To illustrate the core earnings power of Banner, I would direct your attention to pre-tax, pre-provision earnings, excluding gains and losses on the sale of securities, changes in fair value of financial instruments, and building and lease exit costs. to illustrate the core earnings power of banner i would direct your attention to pre-tax pre-provision earnings excluding gains and losses on the sale of securities changes in fair value of financial instruments and building and lease exit costs Our first quarter 2026 core earnings were $66.3 million, compared to $58.6 million for the first quarter of 2025. our first quarter 2026 core earnings were $66.3 million compared to $58.6 million for the first quarter of 2025 Banner's first quarter 2026 revenue from core operations was $169 million, compared to $160 million for the first quarter of 2025, an increase of nearly 6%. We continue to benefit from a strong core deposit base that has proved to be resilient and loyal to Banner, a very good net interest margin, and core expense control. Overall, this resulted in a return on average assets of 1.37% for the first quarter of 2026. Once again, our core performance reflects continued execution on our super community bank strategy. That is growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and demonstrating our safety and soundness through all economic cycles and change events. To that point, our core deposits continue to represent 89% of total deposits. Banner's first quarter 2026 revenue from core operations was $169 million, compared to $160 million for the first quarter of 2025, an increase of nearly 6%. banner's first quarter 2026 revenue from core operations was $169 million compared to $160 million for the first quarter of 2025 an increase of nearly 6% We continue to benefit from a strong core deposit base that has proved to be resilient and loyal to Banner, a very good net interest margin, and core expense control. we continue to benefit from a strong core deposit base that has proved to be resilient and loyal to banner a very good net interest margin and core expense control Overall, this resulted in a return on average assets of 1.37% for the first quarter of 2026. overall this resulted in a return on average assets of 1.37% for the first quarter of 2026 Once again, our core performance reflects continued execution on our super community bank strategy. That is growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and demonstrating our safety and soundness through all economic cycles and change events. once again our core performance reflects continued execution on our super community bank strategy. that is growing new client relationships maintaining our core funding position promoting client loyalty and advocacy through our responsive service model and demonstrating our safety and soundness through all economic cycles and change events To that point, our core deposits continue to represent 89% of total deposits. to that point our core deposits continue to represent 89% of total deposits Reflective of this performance, coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced a core dividend increase of 4% to $0.52 per common share. Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition. Banner was again named one of America's 100 best banks, as well as one of the best banks in the world by Forbes. Newsweek named Banner Bank one of the most trustworthy companies both in America and the world again this year. Just recently, again named Banner one of the best regional banks in the country. Additionally, J.D. Power and Associates named Banner Bank the best bank in the Northwest for retail client satisfaction for 2025. Reflective of this performance, coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced a core dividend increase of 4% to $0.52 per common share. reflective of this performance coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 11% from the same period last year we announced a core dividend increase of 4% to $0.52 per common share Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition. finally i'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition Banner was again named one of America's 100 best banks, as well as one of the best banks in the world by Forbes. banner was again named one of america's 100 best banks as well as one of the best banks in the world by forbes Newsweek named Banner Bank one of the most trustworthy companies both in America and the world again this year. newsweek named banner bank one of the most trustworthy companies both in america and the world again this year Just recently, again named Banner one of the best regional banks in the country. just recently again named banner one of the best regional banks in the country Additionally, J.D. additionally j.d Power and Associates named Banner Bank the best bank in the Northwest for retail client satisfaction for 2025. power and associates named banner bank the best bank in the northwest for retail client satisfaction for 2025 Our company was certified by Great Place to Work. S&P Global Market Intelligence ranked Banner's financial performance among the top 50 public banks with more than $10 billion in assets. As we've noted previously, Banner Bank again received an outstanding CRA rating. Let me now turn the call over to Jill to discuss trends in our loan portfolio and her comments on Banner's credit quality. Jill? Our company was certified by Great Place to Work. our company was certified by great place to work S&P Global Market Intelligence ranked Banner's financial performance among the top 50 public banks with more than $10 billion in assets. s&p global market intelligence ranked banner's financial performance among the top 50 public banks with more than $10 billion in assets As we've noted previously, Banner Bank again received an outstanding CRA rating. as we've noted previously banner bank again received an outstanding cra rating Let me now turn the call over to Jill to discuss trends in our loan portfolio and her comments on Banner's credit quality. let me now turn the call over to jill to discuss trends in our loan portfolio and her comments on banner's credit quality Jill? jill

Speaker 4: Thank you, Mark, and good morning, everyone. As detailed in our press release, we again had a strong quarter of loan originations in line with that reported in the fourth quarter and 61% higher than that reported in the first quarter of 2025. Still, significant commercial real estate payoffs coupled with expected paydowns within the ag portfolio offset production such that portfolio loans decreased $14 million when compared to December 31st, 2025. Year-over-year loan growth was modest at 2.4%. Production within the commercial real estate portfolio continued to be meaningful, with owner-occupied CRE up 3% in the quarter and 15% year-over-year, and investor real estate up 1% in the quarter and nearly 8% year-over-year. Those increases, however, were almost entirely offset by the significant commercial real estate paydowns within the multifamily portfolio, down 6% in the quarter and 9% year-over-year as stabilized properties moved into the secondary market. Thank you, Mark, and good morning, everyone. thank you mark and good morning everyone As detailed in our press release, we again had a strong quarter of loan originations in line with that reported in the fourth quarter and 61% higher than that reported in the first quarter of 2025. as detailed in our press release we again had a strong quarter of loan originations in line with that reported in the fourth quarter and 61% higher than that reported in the first quarter of 2025 Still, significant commercial real estate payoffs coupled with expected paydowns within the ag portfolio offset production such that portfolio loans decreased $14 million when compared to December 31st, 2025. still significant commercial real estate payoffs coupled with expected paydowns within the ag portfolio offset production such that portfolio loans decreased $14 million when compared to december 31st 2025 Year-over-year loan growth was modest at 2.4%. year-over-year loan growth was modest at 2.4% Production within the commercial real estate portfolio continued to be meaningful, with owner-occupied CRE up 3% in the quarter and 15% year-over-year, and investor real estate up 1% in the quarter and nearly 8% year-over-year. production within the commercial real estate portfolio continued to be meaningful with owner-occupied cre up 3% in the quarter and 15% year-over-year and investor real estate up 1% in the quarter and nearly 8% year-over-year Those increases, however, were almost entirely offset by the significant commercial real estate paydowns within the multifamily portfolio, down 6% in the quarter and 9% year-over-year as stabilized properties moved into the secondary market. those increases however were almost entirely offset by the significant commercial real estate paydowns within the multifamily portfolio down 6% in the quarter and 9% year-over-year as stabilized properties moved into the secondary market Within the construction portfolios, the 12% increase quarter-over-quarter in commercial construction reflects the continued funding of previously approved projects. In addition to the multifamily payoffs noted previously, we had two large land development projects pay off, which resulted in a 7.5% decrease in balances this quarter. We are continuing to see an elongation of the days on market within the for sale one to four family construction portfolio, given the elevated interest rate environment and general economic uncertainty. Still, the level of completed and unsold inventory remains within historical norms, and the builders continue to have strong balance sheets and profit margins to work with. In total, the one to four family construction portfolio continues to represent a modest 5% of the loan portfolio, and the total construction portfolio, including land and land development, continues to be acceptable at 14% of the loan book. Within the construction portfolios, the 12% increase quarter-over-quarter in commercial construction reflects the continued funding of previously approved projects. within the construction portfolios the 12% increase quarter-over-quarter in commercial construction reflects the continued funding of previously approved projects In addition to the multifamily payoffs noted previously, we had two large land development projects pay off, which resulted in a 7.5% decrease in balances this quarter. in addition to the multifamily payoffs noted previously we had two large land development projects pay off which resulted in a 7.5% decrease in balances this quarter We are continuing to see an elongation of the days on market within the for sale one to four family construction portfolio, given the elevated interest rate environment and general economic uncertainty. we are continuing to see an elongation of the days on market within the for sale one to four family construction portfolio given the elevated interest rate environment and general economic uncertainty Still, the level of completed and unsold inventory remains within historical norms, and the builders continue to have strong balance sheets and profit margins to work with. still the level of completed and unsold inventory remains within historical norms and the builders continue to have strong balance sheets and profit margins to work with In total, the one to four family construction portfolio continues to represent a modest 5% of the loan portfolio, and the total construction portfolio, including land and land development, continues to be acceptable at 14% of the loan book. in total the one to four family construction portfolio continues to represent a modest 5% of the loan portfolio and the total construction portfolio including land and land development continues to be acceptable at 14% of the loan book After declining 3% last quarter, C&I line utilization moved closer to normal, increasing 2% this quarter. In total, commercial loans were up a modest 1% both in the quarter and year-over-year. Agricultural balances, as expected, were down 6% in the quarter as crop proceeds reduced line balances, and the decline reported year-over-year reflects the collection and payoff of multiple classified ag balances. Shifting to credit quality, our credit metrics remain strong. Delinquent loans increased two basis points and now represent 0.56% of total loans, which compares to 0.63% reported as of March 31st, 2025. Adversely classified loans increased by $42 million in the quarter, representing 2% of total loans, and total non-performing assets at $51.7 million represent a modest 0.32% of total assets. The increase in adversely classified assets is centered in three relationships operating in manufacturing, residential construction, and wholesale agricultural supplies. After declining 3% last quarter, C&I line utilization moved closer to normal, increasing 2% this quarter. after declining 3% last quarter c&i line utilization moved closer to normal increasing 2% this quarter In total, commercial loans were up a modest 1% both in the quarter and year-over-year. in total commercial loans were up a modest 1% both in the quarter and year-over-year Agricultural balances, as expected, were down 6% in the quarter as crop proceeds reduced line balances, and the decline reported year-over-year reflects the collection and payoff of multiple classified ag balances. agricultural balances as expected were down 6% in the quarter as crop proceeds reduced line balances and the decline reported year-over-year reflects the collection and payoff of multiple classified ag balances Shifting to credit quality, our credit metrics remain strong. shifting to credit quality our credit metrics remain strong Delinquent loans increased two basis points and now represent 0.56% of total loans, which compares to 0.63% reported as of March 31st, 2025. delinquent loans increased two basis points and now represent 0.56% of total loans which compares to 0.63% reported as of march 31st 2025 Adversely classified loans increased by $42 million in the quarter, representing 2% of total loans, and total non-performing assets at $51.7 million represent a modest 0.32% of total assets. adversely classified loans increased by $42 million in the quarter representing 2% of total loans and total non-performing assets at $51.7 million represent a modest 0.32% of total assets The increase in adversely classified assets is centered in three relationships operating in manufacturing, residential construction, and wholesale agricultural supplies. the increase in adversely classified assets is centered in three relationships operating in manufacturing residential construction and wholesale agricultural supplies As of March 31st, the allowance for credit losses totaled $160.4 million, providing 1.37% coverage of total loans, consistent with prior quarters. Loan losses in the quarter totaled $1.5 million and were offset in part by recoveries totaling $253,000. The risk rating migration discussed previously, coupled with the net charge-offs, resulted in a provision of $1.3 million to the reserve for credit losses loans. This was offset by a release from the reserve for unfunded commitments of $2.1 million for a net provision recapture of $796,000. The first quarter of 2026 continued to be impacted by economic uncertainty given persistent inflation, the higher for longer interest rate environment, and increasing geopolitical issues. Through this, we have maintained consistent underwriting standards, which include a focus on strong sponsors, properly margined collateral. Seasoned repayment sources, and in the vast majority of cases, personal guarantees. As of March 31st, the allowance for credit losses totaled $160.4 million, providing 1.37% coverage of total loans, consistent with prior quarters. as of march 31st the allowance for credit losses totaled $160.4 million providing 1.37% coverage of total loans consistent with prior quarters Loan losses in the quarter totaled $1.5 million and were offset in part by recoveries totaling $253,000. loan losses in the quarter totaled $1.5 million and were offset in part by recoveries totaling $253,000 The risk rating migration discussed previously, coupled with the net charge-offs, resulted in a provision of $1.3 million to the reserve for credit losses loans. the risk rating migration discussed previously coupled with the net charge-offs resulted in a provision of $1.3 million to the reserve for credit losses loans This was offset by a release from the reserve for unfunded commitments of $2.1 million for a net provision recapture of $796,000. this was offset by a release from the reserve for unfunded commitments of $2.1 million for a net provision recapture of $796,000 The first quarter of 2026 continued to be impacted by economic uncertainty given persistent inflation, the higher for longer interest rate environment, and increasing geopolitical issues. the first quarter of 2026 continued to be impacted by economic uncertainty given persistent inflation the higher for longer interest rate environment and increasing geopolitical issues Through this, we have maintained consistent underwriting standards, which include a focus on strong sponsors, properly margined collateral. Seasoned repayment sources, and in the vast majority of cases, personal guarantees. through this we have maintained consistent underwriting standards which include a focus on strong sponsors properly margined collateral. seasoned repayment sources and in the vast majority of cases personal guarantees We continue our practice of robust quarterly portfolio reviews in order to identify any emerging issues early. We remain well-positioned to weather the uncertain economic environment ahead. With that, I will hand the microphone over to Rob for his comments. Rob? We continue our practice of robust quarterly portfolio reviews in order to identify any emerging issues early. we continue our practice of robust quarterly portfolio reviews in order to identify any emerging issues early We remain well-positioned to weather the uncertain economic environment ahead. we remain well-positioned to weather the uncertain economic environment ahead With that, I will hand the microphone over to Rob for his comments. with that i will hand the microphone over to rob for his comments Rob? rob

Speaker 9: Thank you, Jill. We reported $1.60 per diluted share for the fourth quarter, compared to $1.49 per diluted share for the prior quarter. The increase in earnings per share compared to the prior quarter was primarily due to the current quarter having lower expenses, a recapture of provision for credit losses. In addition, the prior quarter included a decrease in the valuation of financial instruments carried at fair value and a loss on the disposal of assets. Core pre-tax, pre-provision income for the current quarter increased 13%, or $7.7 million compared to the quarter ending March 31st, 2025. Our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 14% and return on average assets of 1.37%. As Jill previously mentioned, loan balances were essentially flat during the quarter as the good loan production was offset by an increase in payoffs. Thank you, Jill. thank you jill We reported $1.60 per diluted share for the fourth quarter, compared to $1.49 per diluted share for the prior quarter. we reported $1.60 per diluted share for the fourth quarter compared to $1.49 per diluted share for the prior quarter The increase in earnings per share compared to the prior quarter was primarily due to the current quarter having lower expenses, a recapture of provision for credit losses. the increase in earnings per share compared to the prior quarter was primarily due to the current quarter having lower expenses a recapture of provision for credit losses In addition, the prior quarter included a decrease in the valuation of financial instruments carried at fair value and a loss on the disposal of assets. in addition the prior quarter included a decrease in the valuation of financial instruments carried at fair value and a loss on the disposal of assets Core pre-tax, pre-provision income for the current quarter increased 13%, or $7.7 million compared to the quarter ending March 31st, 2025. core pre-tax pre-provision income for the current quarter increased 13% or $7.7 million compared to the quarter ending march 31st 2025 Our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 14% and return on average assets of 1.37%. our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 14% and return on average assets of 1.37% As Jill previously mentioned, loan balances were essentially flat during the quarter as the good loan production was offset by an increase in payoffs. as jill previously mentioned loan balances were essentially flat during the quarter as the good loan production was offset by an increase in payoffs The loan-to-deposit ratio ended the quarter at 85%, giving us ample capacity to continue to support existing clients and to add new clients. Total security balances were relatively flat as normal portfolio cash flows were mostly offset by security purchases. Deposits increased by $97 million during the quarter due to core deposits increasing $165 million or 5.5% on an annualized basis. The increase in core deposits was partially offset by time deposits decreasing $67 million, mostly due to $50 million of brokered CDs maturing during the quarter, ending the quarter with no brokered deposits. Core deposits ended the quarter at 89% of total deposits. Total borrowings decreased to $142 million during the quarter, ending the quarter with no outstanding FHLB advances. The tangible common equity ratio increased from 9.84%-9.97%. The loan-to-deposit ratio ended the quarter at 85%, giving us ample capacity to continue to support existing clients and to add new clients. the loan-to-deposit ratio ended the quarter at 85% giving us ample capacity to continue to support existing clients and to add new clients Total security balances were relatively flat as normal portfolio cash flows were mostly offset by security purchases. total security balances were relatively flat as normal portfolio cash flows were mostly offset by security purchases Deposits increased by $97 million during the quarter due to core deposits increasing $165 million or 5.5% on an annualized basis. deposits increased by $97 million during the quarter due to core deposits increasing $165 million or 5.5% on an annualized basis The increase in core deposits was partially offset by time deposits decreasing $67 million, mostly due to $50 million of brokered CDs maturing during the quarter, ending the quarter with no brokered deposits. the increase in core deposits was partially offset by time deposits decreasing $67 million mostly due to $50 million of brokered cds maturing during the quarter ending the quarter with no brokered deposits Core deposits ended the quarter at 89% of total deposits. core deposits ended the quarter at 89% of total deposits Total borrowings decreased to $142 million during the quarter, ending the quarter with no outstanding FHLB advances. total borrowings decreased to $142 million during the quarter ending the quarter with no outstanding fhlb advances The tangible common equity ratio increased from 9.84%-9.97%. the tangible common equity ratio increased from 9.84%-9.97% As a reflection of our robust capital and strong liquidity positions, Banner repurchased 250,000 shares during the quarter and declared an increase in the quarterly dividend of $0.52 per share. Net interest income decreased $2.3 million from the prior quarter due to a combination of lower earning assets and two fewer interest-earning days in the current quarter, partially offset by an 8 basis points increase in net interest margin. The decrease in average earning assets was primarily due to average interest-earning cash and security balances decreasing $153 million. Tax-equivalent net interest margin was 4.11% for the current quarter, compared to 4.03% for the prior quarter. Funding cost decreased 9 basis points due to deposit costs decreasing 8 basis points. Deposit costs benefited from a full quarter of the deposit pricing reductions implemented in the fourth quarter of last year. As a reflection of our robust capital and strong liquidity positions, Banner repurchased 250,000 shares during the quarter and declared an increase in the quarterly dividend of $0.52 per share. as a reflection of our robust capital and strong liquidity positions banner repurchased 250,000 shares during the quarter and declared an increase in the quarterly dividend of $0.52 per share Net interest income decreased $2.3 million from the prior quarter due to a combination of lower earning assets and two fewer interest-earning days in the current quarter, partially offset by an 8 basis points increase in net interest margin. net interest income decreased $2.3 million from the prior quarter due to a combination of lower earning assets and two fewer interest-earning days in the current quarter partially offset by an 8 basis points increase in net interest margin The decrease in average earning assets was primarily due to average interest-earning cash and security balances decreasing $153 million. the decrease in average earning assets was primarily due to average interest-earning cash and security balances decreasing $153 million Tax-equivalent net interest margin was 4.11% for the current quarter, compared to 4.03% for the prior quarter. tax-equivalent net interest margin was 4.11% for the current quarter compared to 4.03% for the prior quarter Funding cost decreased 9 basis points due to deposit costs decreasing 8 basis points. funding cost decreased 9 basis points due to deposit costs decreasing 8 basis points Deposit costs benefited from a full quarter of the deposit pricing reductions implemented in the fourth quarter of last year. deposit costs benefited from a full quarter of the deposit pricing reductions implemented in the fourth quarter of last year We also benefited from an improved earning asset mix as lower yielding cash and security balances were a smaller percentage of earning assets. The improved earning asset mix offset the three basis points decline in loan yields. The average rate on new loan production for the current quarter was 6.69%, compared to 6.88% for the prior quarter. Non-interest bearing deposits ended the quarter at 33% of total deposits. Total non-interest income increased $3.9 million from the prior quarter, primarily due to the prior quarter including a loss of $1.4 million on the disposal of assets and a fair value decrease of $2 million on financial instruments carried at fair value. While the current quarter had a $1.7 million fair value increase on financial instruments carried at fair value, partially offset by a loss of $1.2 million on the sale of securities. We also benefited from an improved earning asset mix as lower yielding cash and security balances were a smaller percentage of earning assets. we also benefited from an improved earning asset mix as lower yielding cash and security balances were a smaller percentage of earning assets The improved earning asset mix offset the three basis points decline in loan yields. the improved earning asset mix offset the three basis points decline in loan yields The average rate on new loan production for the current quarter was 6.69%, compared to 6.88% for the prior quarter. the average rate on new loan production for the current quarter was 6.69% compared to 6.88% for the prior quarter Non-interest bearing deposits ended the quarter at 33% of total deposits. non-interest bearing deposits ended the quarter at 33% of total deposits Total non-interest income increased $3.9 million from the prior quarter, primarily due to the prior quarter including a loss of $1.4 million on the disposal of assets and a fair value decrease of $2 million on financial instruments carried at fair value. total non-interest income increased $3.9 million from the prior quarter primarily due to the prior quarter including a loss of $1.4 million on the disposal of assets and a fair value decrease of $2 million on financial instruments carried at fair value While the current quarter had a $1.7 million fair value increase on financial instruments carried at fair value, partially offset by a loss of $1.2 million on the sale of securities. while the current quarter had a $1.7 million fair value increase on financial instruments carried at fair value partially offset by a loss of $1.2 million on the sale of securities Total non-interest expense was $1.5 million lower than the prior quarter, with decreases in occupancy and equipment, marketing, and legal expense, which being partially offset by an increase in salary and benefits. Our strong capital and liquidity levels continue to position us well to support our existing clients and to add new clients. This concludes my prepared comments. Now I will turn it back to Mark. Mark? Total non-interest expense was $1.5 million lower than the prior quarter, with decreases in occupancy and equipment, marketing, and legal expense, which being partially offset by an increase in salary and benefits. total non-interest expense was $1.5 million lower than the prior quarter with decreases in occupancy and equipment marketing and legal expense which being partially offset by an increase in salary and benefits Our strong capital and liquidity levels continue to position us well to support our existing clients and to add new clients. our strong capital and liquidity levels continue to position us well to support our existing clients and to add new clients This concludes my prepared comments. this concludes my prepared comments Now I will turn it back to Mark. now i will turn it back to mark Mark? mark

Speaker 5: Thank you, Jill and Rob, for your comments. That concludes our prepared remarks. Tiffany, we will now open the call and welcome questions. Thank you, Jill and Rob, for your comments. thank you jill and rob for your comments That concludes our prepared remarks. that concludes our prepared remarks Tiffany, we will now open the call and welcome questions. tiffany we will now open the call and welcome questions

Speaker 7: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jeff Rulis with D.A. Davidson. Please go ahead. At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. at this time if you would like to ask a question press star then the number one on your telephone keypad To withdraw your question, simply press star one again. to withdraw your question simply press star one again We will pause for just a moment to compile the Q&A roster. we will pause for just a moment to compile the q&a roster Your first question comes from the line of Jeff Rulis with D.A. your first question comes from the line of jeff rulis with d.a Davidson. davidson Please go ahead. please go ahead

Speaker 10: Good morning. This is Ryan Payne on for Jeff Rulis. Good morning. good morning This is Ryan Payne on for Jeff Rulis. this is ryan payne on for jeff rulis

Speaker 5: Morning. Morning. morning

Speaker 10: Just starting on the margin. Had some deposit fluctuations and lower CD balances this quarter benefiting the NIM, just trying to gauge your thoughts on expectations for the margin ahead. Just starting on the margin. just starting on the margin Had some deposit fluctuations and lower CD balances this quarter benefiting the NIM, just trying to gauge your thoughts on expectations for the margin ahead. had some deposit fluctuations and lower cd balances this quarter benefiting the nim just trying to gauge your thoughts on expectations for the margin ahead

Speaker 9: Yeah, sure. This is Rob. We typically see an increase in funding costs during the second quarter as clients start to use deposit balances to make tax payments early in the quarter, and we supplement that temporary decline in deposit balances with some FHLB advances. We think that this should be mostly offset by an increase in loan yields as adjustable rate loans continue to reprice up and the new loans coming on are still coming on at higher yields than the average overall portfolio yield. Which suggests that NIM would be relatively flat probably in the second quarter, which is similar to what we saw last year where the Q2 NIM was flat compared to the first quarter. Yeah, sure. yeah sure This is Rob. this is rob We typically see an increase in funding costs during the second quarter as clients start to use deposit balances to make tax payments early in the quarter, and we supplement that temporary decline in deposit balances with some FHLB advances. We think that this should be mostly offset by an increase in loan yields as adjustable rate loans continue to reprice up and the new loans coming on are still coming on at higher yields than the average overall portfolio yield. we typically see an increase in funding costs during the second quarter as clients start to use deposit balances to make tax payments early in the quarter and we supplement that temporary decline in deposit balances with some fhlb advances. we think that this should be mostly offset by an increase in loan yields as adjustable rate loans continue to reprice up and the new loans coming on are still coming on at higher yields than the average overall portfolio yield Which suggests that NIM would be relatively flat probably in the second quarter, which is similar to what we saw last year where the Q2 NIM was flat compared to the first quarter. which suggests that nim would be relatively flat probably in the second quarter which is similar to what we saw last year where the q2 nim was flat compared to the first quarter We could see some expansion in NIM in the third quarter due to funding costs coming back down as FHLB advances are replaced by deposit increases in the typical seasonality we see in the third quarter. In addition, we would expect that loan yields would increase in the third quarter as well as long as the Fed remains on pause. We would expect some net interest margin expansion in the second half of the year. We could see some expansion in NIM in the third quarter due to funding costs coming back down as FHLB advances are replaced by deposit increases in the typical seasonality we see in the third quarter. we could see some expansion in nim in the third quarter due to funding costs coming back down as fhlb advances are replaced by deposit increases in the typical seasonality we see in the third quarter In addition, we would expect that loan yields would increase in the third quarter as well as long as the Fed remains on pause. in addition we would expect that loan yields would increase in the third quarter as well as long as the fed remains on pause We would expect some net interest margin expansion in the second half of the year. we would expect some net interest margin expansion in the second half of the year

Speaker 10: Helpful. Thank you. With the loan production impacted by payoffs this quarter, where do you see payoffs trending from here and maybe your overall expectations for growth? Helpful. helpful Thank you. thank you With the loan production impacted by payoffs this quarter, where do you see payoffs trending from here and maybe your overall expectations for growth? with the loan production impacted by payoffs this quarter where do you see payoffs trending from here and maybe your overall expectations for growth

Speaker 4: Sure, Ryan. We had anticipated that the headwind of commercial real estate payoffs would potentially offset growth into 2026. I expect that they will slow. I'm not prepared to tell you that they're done coming in, but I think that the rate of payoffs will slow down. Still, the loan production volumes, which were solid and indicative of future loan growth, the strong backlog of construction fundings we have is meaningful and our pipelines are strong. We're still sticking with the mid-single-digit growth rate for 2026. Sure, Ryan. sure ryan We had anticipated that the headwind of commercial real estate payoffs would potentially offset growth into 2026. we had anticipated that the headwind of commercial real estate payoffs would potentially offset growth into 2026 I expect that they will slow. i expect that they will slow I'm not prepared to tell you that they're done coming in, but I think that the rate of payoffs will slow down. i'm not prepared to tell you that they're done coming in but i think that the rate of payoffs will slow down Still, the loan production volumes, which were solid and indicative of future loan growth, the strong backlog of construction fundings we have is meaningful and our pipelines are strong. still the loan production volumes which were solid and indicative of future loan growth the strong backlog of construction fundings we have is meaningful and our pipelines are strong We're still sticking with the mid-single-digit growth rate for 2026. we're still sticking with the mid-single-digit growth rate for 2026

Speaker 10: Got it. Thanks. Last from me, capital priorities. We had the dividend increase and buyback. What's your appetite for continued buybacks here, and where would you see M&A on the list of priorities? Got it. got it Thanks. thanks Last from me, capital priorities. last from me capital priorities We had the dividend increase and buyback. we had the dividend increase and buyback What's your appetite for continued buybacks here, and where would you see M&A on the list of priorities? what's your appetite for continued buybacks here and where would you see m&a on the list of priorities

Speaker 9: Yeah. It's Rob again. As you know, we did increase the core dividend by 4% this quarter, which was the second increase we've done in the last three quarters. Our goal from a dividend perspective is to pay out 35%-40% of earnings as a core dividend. In addition, we did do those share repurchases again in the first quarter. That's the third quarter in a row that we've done that. As we think about capital priorities, we always look at the different opportunities we have there, which certainly include additional share repurchases that we could consider in the second quarter. Ultimately, it's really dependent on market conditions, on where the stock price is trading and other things as we evaluate the best use of our capital. As always, we just continue to look at different ways we can deploy capital. Yeah. yeah It's Rob again. it's rob again As you know, we did increase the core dividend by 4% this quarter, which was the second increase we've done in the last three quarters. as you know we did increase the core dividend by 4% this quarter which was the second increase we've done in the last three quarters Our goal from a dividend perspective is to pay out 35%-40% of earnings as a core dividend. our goal from a dividend perspective is to pay out 35%-40% of earnings as a core dividend In addition, we did do those share repurchases again in the first quarter. in addition we did do those share repurchases again in the first quarter That's the third quarter in a row that we've done that. that's the third quarter in a row that we've done that As we think about capital priorities, we always look at the different opportunities we have there, which certainly include additional share repurchases that we could consider in the second quarter. as we think about capital priorities we always look at the different opportunities we have there which certainly include additional share repurchases that we could consider in the second quarter Ultimately, it's really dependent on market conditions, on where the stock price is trading and other things as we evaluate the best use of our capital. ultimately it's really dependent on market conditions on where the stock price is trading and other things as we evaluate the best use of our capital As always, we just continue to look at different ways we can deploy capital. as always we just continue to look at different ways we can deploy capital Mark, as far as M&A, do you have any? Mark, as far as M&A, do you have any? mark as far as m&a do you have any

Speaker 5: Yeah. Thanks for the question, Ryan. Our position on M&A hasn't changed since I've been here, which is we look and try to partner with folks that would be a great fit for Banner, add additional density to our market, and be very good core deposit franchises. It has to be very opportunistic. We're very selective on the M&A front. We feel very good about our organic opportunities to continue to grow the bank and improve profitability. If an opportunity exists in which we can add additional density with a good core deposit franchise and a strong bank, we certainly would look to do that. Yeah. yeah Thanks for the question, Ryan. thanks for the question ryan Our position on M&A hasn't changed since I've been here, which is we look and try to partner with folks that would be a great fit for Banner, add additional density to our market, and be very good core deposit franchises. our position on m&a hasn't changed since i've been here which is we look and try to partner with folks that would be a great fit for banner add additional density to our market and be very good core deposit franchises It has to be very opportunistic. it has to be very opportunistic We're very selective on the M&A front. we're very selective on the m&a front We feel very good about our organic opportunities to continue to grow the bank and improve profitability. we feel very good about our organic opportunities to continue to grow the bank and improve profitability If an opportunity exists in which we can add additional density with a good core deposit franchise and a strong bank, we certainly would look to do that. if an opportunity exists in which we can add additional density with a good core deposit franchise and a strong bank we certainly would look to do that

Speaker 10: Awesome. Thanks, guys. Awesome. awesome Thanks, guys. thanks guys

Speaker 7: Your next question comes from the line of Matthew Clark with Piper Sandler. Please go ahead. Your next question comes from the line of Matthew Clark with Piper Sandler. your next question comes from the line of matthew clark with piper sandler Please go ahead. please go ahead

Speaker 6: Hey, good morning. Hey, good morning. hey good morning

Speaker 9: Morning, Matt. Morning, Matt. morning matt

Speaker 6: Good morning. On the funding side of the equation for the margin outlook on the deposit side, if you had the spot rate on deposits at the end of March, and then how are you thinking about deposit pricing going forward with the Fed on hold? Do you think you'll just be managing as best you can to hold that level, or do you feel like there are opportunities to trim exception-based pricing and CD rates? Good morning. good morning On the funding side of the equation for the margin outlook on the deposit side, if you had the spot rate on deposits at the end of March, and then how are you thinking about deposit pricing going forward with the Fed on hold? on the funding side of the equation for the margin outlook on the deposit side if you had the spot rate on deposits at the end of march and then how are you thinking about deposit pricing going forward with the fed on hold Do you think you'll just be managing as best you can to hold that level, or do you feel like there are opportunities to trim exception-based pricing and CD rates? do you think you'll just be managing as best you can to hold that level or do you feel like there are opportunities to trim exception-based pricing and cd rates

Speaker 9: Sure. Thanks, Matthew. It's Rob. The spot price of the cost of deposits for March was the same as the quarter. It was pretty much across the board at that 135 basis points. Early in the quarter in January, we did make some additional rate reductions really in response to the December Fed rate cut that we saw, and we did that in early January, so really the whole quarter benefited from that. As we think about going forward while the Fed's on pause, I don't think you're going to see much change in our core deposit pricing for our core products. Sure. sure Thanks, Matthew. thanks matthew It's Rob. it's rob The spot price of the cost of deposits for March was the same as the quarter. the spot price of the cost of deposits for march was the same as the quarter It was pretty much across the board at that 135 basis points. it was pretty much across the board at that 135 basis points Early in the quarter in January, we did make some additional rate reductions really in response to the December Fed rate cut that we saw, and we did that in early January, so really the whole quarter benefited from that. early in the quarter in january we did make some additional rate reductions really in response to the december fed rate cut that we saw and we did that in early january so really the whole quarter benefited from that As we think about going forward while the Fed's on pause, I don't think you're going to see much change in our core deposit pricing for our core products. as we think about going forward while the fed's on pause i don't think you're going to see much change in our core deposit pricing for our core products Where we might get a little bit of benefit is on the CD pricing side of it, just because the cost of our CD book, we would expect to continue to trend down for the next few quarters as the lag effect of the rate cuts that we saw the Fed do in the fourth quarter. The average rate of the new CDs coming on is around 3% right now. The CDs rolling off are around 3.30%. Approximately 40% of our CD book matures in the second quarter. We would expect some there. What I'd say is what happened is now that the expectation is the Fed will be on pause through the remainder of the year, maybe seeing a rate cut late in the year, fourth quarter or something like that. Where we might get a little bit of benefit is on the CD pricing side of it, just because the cost of our CD book, we would expect to continue to trend down for the next few quarters as the lag effect of the rate cuts that we saw the Fed do in the fourth quarter. where we might get a little bit of benefit is on the cd pricing side of it just because the cost of our cd book we would expect to continue to trend down for the next few quarters as the lag effect of the rate cuts that we saw the fed do in the fourth quarter The average rate of the new CDs coming on is around 3% right now. the average rate of the new cds coming on is around 3% right now The CDs rolling off are around 3.30%. the cds rolling off are around 3.30% Approximately 40% of our CD book matures in the second quarter. approximately 40% of our cd book matures in the second quarter We would expect some there. we would expect some there What I'd say is what happened is now that the expectation is the Fed will be on pause through the remainder of the year, maybe seeing a rate cut late in the year, fourth quarter or something like that. what i'd say is what happened is now that the expectation is the fed will be on pause through the remainder of the year maybe seeing a rate cut late in the year fourth quarter or something like that We are seeing some additional pressure on deposit pricing right now where we are seeing some competitors start to increase some of their promotion specials on deposits right now. I'll caveat it with that as we ultimately will have to respond to what the market's doing. We are seeing some additional pressure on deposit pricing right now where we are seeing some competitors start to increase some of their promotion specials on deposits right now. we are seeing some additional pressure on deposit pricing right now where we are seeing some competitors start to increase some of their promotion specials on deposits right now I'll caveat it with that as we ultimately will have to respond to what the market's doing. i'll caveat it with that as we ultimately will have to respond to what the market's doing

Speaker 6: Okay, great. On the service charges and fees line this quarter up pretty nicely in a quarter with two less days. Did you do anything? Did you change your product pricing there at all? Or what can you attribute that to, and is that sustainable? Okay, great. okay great On the service charges and fees line this quarter up pretty nicely in a quarter with two less days. on the service charges and fees line this quarter up pretty nicely in a quarter with two less days Did you do anything? did you do anything Did you change your product pricing there at all? did you change your product pricing there at all Or what can you attribute that to, and is that sustainable? or what can you attribute that to and is that sustainable

Speaker 9: Yeah. We didn't change any of our pricing there. We did renegotiate our Mastercard contract, so we're seeing a little bit of benefit from that from the first quarter. Otherwise, I think if you looked at the trending there, the first quarter is probably a pretty good trending when you look at that. Yeah. yeah We didn't change any of our pricing there. we didn't change any of our pricing there We did renegotiate our Mastercard contract, so we're seeing a little bit of benefit from that from the first quarter. we did renegotiate our mastercard contract so we're seeing a little bit of benefit from that from the first quarter Otherwise, I think if you looked at the trending there, the first quarter is probably a pretty good trending when you look at that. otherwise i think if you looked at the trending there the first quarter is probably a pretty good trending when you look at that

Speaker 6: Okay. On the non-interest expense run rate, down nicely, pretty broad-based, outside of the seasonal increase in comp. Anything unusual there? Is that more partly a seasonal decline relative to the fourth quarter? I'm just trying to get a sense for that run rate going forward. Okay. okay On the non-interest expense run rate, down nicely, pretty broad-based, outside of the seasonal increase in comp. on the non-interest expense run rate down nicely pretty broad-based outside of the seasonal increase in comp Anything unusual there? anything unusual there Is that more partly a seasonal decline relative to the fourth quarter? is that more partly a seasonal decline relative to the fourth quarter I'm just trying to get a sense for that run rate going forward. i'm just trying to get a sense for that run rate going forward

Speaker 9: Yeah, there certainly is some seasonality to that. Typically, the first quarter, we have lower advertising and marketing expense in the first quarter. The campaigns that we run throughout the year start to ramp up, so that's a bit lower. The fourth quarter did have kind of a legal settlement charge in there of around $1 million that didn't carry forward into the first quarter. If you think about the remainder of the year, we've talked about expecting normal inflationary increases in 2026 compared to 2025. I think if you look at the full year, that's still my expectation. Q2 will be higher from a salary standpoint and benefits just because we do our annual salary increases really in mid-March. So you didn't really see that impact in the first quarter. Yeah, there certainly is some seasonality to that. yeah there certainly is some seasonality to that Typically, the first quarter, we have lower advertising and marketing expense in the first quarter. typically the first quarter we have lower advertising and marketing expense in the first quarter The campaigns that we run throughout the year start to ramp up, so that's a bit lower. the campaigns that we run throughout the year start to ramp up so that's a bit lower The fourth quarter did have kind of a legal settlement charge in there of around $1 million that didn't carry forward into the first quarter. the fourth quarter did have kind of a legal settlement charge in there of around $1 million that didn't carry forward into the first quarter If you think about the remainder of the year, we've talked about expecting normal inflationary increases in 2026 compared to 2025. if you think about the remainder of the year we've talked about expecting normal inflationary increases in 2026 compared to 2025 I think if you look at the full year, that's still my expectation. i think if you look at the full year that's still my expectation Q2 will be higher from a salary standpoint and benefits just because we do our annual salary increases really in mid-March. q2 will be higher from a salary standpoint and benefits just because we do our annual salary increases really in mid-march So you didn't really see that impact in the first quarter. so you didn't really see that impact in the first quarter I would expect expenses to be a bit higher as we move throughout the year. I would expect expenses to be a bit higher as we move throughout the year. i would expect expenses to be a bit higher as we move throughout the year

Speaker 6: Okay. Thank you. Last one from me, just back to M&A. Have you seen or heard of an increase among sellers maybe being more willing to talk? Just trying to get a sense for a change relative to last quarter. Okay. okay Thank you. thank you Last one from me, just back to M&A. last one from me just back to m&a Have you seen or heard of an increase among sellers maybe being more willing to talk? have you seen or heard of an increase among sellers maybe being more willing to talk Just trying to get a sense for a change relative to last quarter. just trying to get a sense for a change relative to last quarter

Speaker 5: Matthew, this is Mark. Thank you for the question. I don't think that there's been a change in behavior. I think there are a number of folks that are trying to strategically figure out what the best next step is. As you might suspect, given my earlier comments about who we think would be a good partner with Banner in which we could leverage our balance sheet to service their clients in a more robust way. The universe is still fairly limited on the West Coast. We know that the partners that would make a lot of sense for Banner. I wouldn't suggest that there's been an increase in conversations, but I wouldn't be surprised if folks, as they go through and are delivering on their first quarter strategic plan, are trying to figure out what the best thing to do for their organizations are. Matthew, this is Mark. matthew this is mark Thank you for the question. thank you for the question I don't think that there's been a change in behavior. i don't think that there's been a change in behavior I think there are a number of folks that are trying to strategically figure out what the best next step is. i think there are a number of folks that are trying to strategically figure out what the best next step is As you might suspect, given my earlier comments about who we think would be a good partner with Banner in which we could leverage our balance sheet to service their clients in a more robust way. as you might suspect given my earlier comments about who we think would be a good partner with banner in which we could leverage our balance sheet to service their clients in a more robust way The universe is still fairly limited on the West Coast. the universe is still fairly limited on the west coast We know that the partners that would make a lot of sense for Banner. we know that the partners that would make a lot of sense for banner I wouldn't suggest that there's been an increase in conversations, but I wouldn't be surprised if folks, as they go through and are delivering on their first quarter strategic plan, are trying to figure out what the best thing to do for their organizations are. i wouldn't suggest that there's been an increase in conversations but i wouldn't be surprised if folks as they go through and are delivering on their first quarter strategic plan are trying to figure out what the best thing to do for their organizations are

Speaker 6: Okay, great. Thanks for the color. Okay, great. okay great Thanks for the color. thanks for the color

Speaker 5: Thanks, Matthew. Thanks, Matthew. thanks matthew

Speaker 7: Your next question comes from the line of David Feaster with Raymond James. Please go ahead. Your next question comes from the line of David Feaster with Raymond James. your next question comes from the line of david feaster with raymond james Please go ahead. please go ahead

Speaker 3: Hi. Good morning, everybody. Hi. hi Good morning, everybody. good morning everybody

Speaker 5: Morning, David. Morning, David. morning david

Speaker 3: I wanted to maybe touch on, I guess two things. From the loan growth side, originations have held up pretty well. How is demand? Have you seen any, obviously there's a lot of macro uncertainty. I'm curious if that has impacted demand and pipelines at all from your standpoint. I was hoping you could give some color on the payoffs and pay downs that you're seeing. What's driving that? Is it de-leveraging asset sales, competition and losing some deals? Just kind of curious on those two fronts. I wanted to maybe touch on, I guess two things. i wanted to maybe touch on i guess two things From the loan growth side, originations have held up pretty well. from the loan growth side originations have held up pretty well How is demand? how is demand Have you seen any, obviously there's a lot of macro uncertainty. have you seen any obviously there's a lot of macro uncertainty I'm curious if that has impacted demand and pipelines at all from your standpoint. i'm curious if that has impacted demand and pipelines at all from your standpoint I was hoping you could give some color on the payoffs and pay downs that you're seeing. i was hoping you could give some color on the payoffs and pay downs that you're seeing What's driving that? what's driving that Is it de-leveraging asset sales, competition and losing some deals? is it de-leveraging asset sales competition and losing some deals Just kind of curious on those two fronts. just kind of curious on those two fronts

Speaker 4: In terms of pipelines, David, everybody is telling me that they're busy, they're having good conversations and moving things forward, whether it's early on in the discussions or whether it's my credit team busy working through deals. Demand is out there. I can't say that the level of economic uncertainty doesn't give some pause, but there is still demand. As we move through them, we certainly see pricing being pushed and multiple banks going for these same deals. It's tough out there, I guess I would say, in terms of getting to the close. I feel good about what we have been pulling through in terms of originations and what that means for our future growth. As to what was the second part? Driving the payoff? In terms of pipelines, David, everybody is telling me that they're busy, they're having good conversations and moving things forward, whether it's early on in the discussions or whether it's my credit team busy working through deals. in terms of pipelines david everybody is telling me that they're busy they're having good conversations and moving things forward whether it's early on in the discussions or whether it's my credit team busy working through deals Demand is out there. demand is out there I can't say that the level of economic uncertainty doesn't give some pause, but there is still demand. i can't say that the level of economic uncertainty doesn't give some pause but there is still demand As we move through them, we certainly see pricing being pushed and multiple banks going for these same deals. as we move through them we certainly see pricing being pushed and multiple banks going for these same deals It's tough out there, I guess I would say, in terms of getting to the close. it's tough out there i guess i would say in terms of getting to the close I feel good about what we have been pulling through in terms of originations and what that means for our future growth. i feel good about what we have been pulling through in terms of originations and what that means for our future growth As to what was the second part? as to what was the second part Driving the payoff? driving the payoff

Speaker 3: The payoffs and pay downs, yeah. The payoffs and pay downs, yeah. the payoffs and pay downs yeah

Speaker 4: Yeah. If you think about it, they're just delayed. Many of these loans we ultimately expected to pay off. We expected them to pay off 18 months ago. They sat waiting for what was going to be the lower rate environment in those mini-perm loans that we offer at the end of a construction and, or as they were stabilizing and getting stronger. It is delayed payoff, not losing because we don't want them or to competition, but to the secondary market that offer terms that most regional banks don't offer. Long-term interest only, non-recourse, those sorts of things. Again, expected. They just are lumpy because of the delay from 18 months ago. Yeah. yeah If you think about it, they're just delayed. if you think about it they're just delayed Many of these loans we ultimately expected to pay off. many of these loans we ultimately expected to pay off We expected them to pay off 18 months ago. we expected them to pay off 18 months ago They sat waiting for what was going to be the lower rate environment in those mini-perm loans that we offer at the end of a construction and, or as they were stabilizing and getting stronger. they sat waiting for what was going to be the lower rate environment in those mini-perm loans that we offer at the end of a construction and or as they were stabilizing and getting stronger It is delayed payoff, not losing because we don't want them or to competition, but to the secondary market that offer terms that most regional banks don't offer. it is delayed payoff not losing because we don't want them or to competition but to the secondary market that offer terms that most regional banks don't offer Long-term interest only, non-recourse, those sorts of things. long-term interest only non-recourse those sorts of things Again, expected. again expected They just are lumpy because of the delay from 18 months ago. they just are lumpy because of the delay from 18 months ago

Speaker 3: Okay. That's helpful. There's been a lot of disruption across your footprint over the past 12-18 months, really from top to bottom, right? I wanted to get a sense of how you've been capitalizing on that. Your appetite for new hires potentially coming out of some of those deals or just hires in general, and what markets or segments you might be interested in adding talent to. Okay. okay That's helpful. that's helpful There's been a lot of disruption across your footprint over the past 12-18 months, really from top to bottom, right? there's been a lot of disruption across your footprint over the past 12-18 months really from top to bottom right I wanted to get a sense of how you've been capitalizing on that. i wanted to get a sense of how you've been capitalizing on that Your appetite for new hires potentially coming out of some of those deals or just hires in general, and what markets or segments you might be interested in adding talent to. your appetite for new hires potentially coming out of some of those deals or just hires in general and what markets or segments you might be interested in adding talent to

Speaker 4: I'll start and then if Mark or Rob want to jump in behind me. If you think back to the last several quarters, we've talked about the personnel we've added because of the disruption across the footprint. Really, when we find good, strong bankers in the markets, we want to add them. This last quarter, we've added a commercial banking center manager. We've added multiple portfolio managers and some treasury management personnel. It isn't about one business line or one market. When we find the right people, we're adding to improve our talent. I'll start and then if Mark or Rob want to jump in behind me. i'll start and then if mark or rob want to jump in behind me If you think back to the last several quarters, we've talked about the personnel we've added because of the disruption across the footprint. if you think back to the last several quarters we've talked about the personnel we've added because of the disruption across the footprint Really, when we find good, strong bankers in the markets, we want to add them. really when we find good strong bankers in the markets we want to add them This last quarter, we've added a commercial banking center manager. this last quarter we've added a commercial banking center manager We've added multiple portfolio managers and some treasury management personnel. we've added multiple portfolio managers and some treasury management personnel It isn't about one business line or one market. it isn't about one business line or one market When we find the right people, we're adding to improve our talent. when we find the right people we're adding to improve our talent

Speaker 3: Okay. Okay. okay

Speaker 5: David, I would just follow up with that. This is Mark. That it's been across the geography, so it's not specific to any particular area. I think we've done a very good job of adding talent into the organization. As you've heard me say before, we tend to do this as a rifle shot, not a shotgun shot, right? That we end up doing this because we know who the good bankers are. We court them over time, and when the timing's right, because there is disruption, we find that we are a good source for them to join our organization. David, I would just follow up with that. david i would just follow up with that This is Mark. this is mark That it's been across the geography, so it's not specific to any particular area. that it's been across the geography so it's not specific to any particular area I think we've done a very good job of adding talent into the organization. i think we've done a very good job of adding talent into the organization As you've heard me say before, we tend to do this as a rifle shot, not a shotgun shot, right? as you've heard me say before we tend to do this as a rifle shot not a shotgun shot right That we end up doing this because we know who the good bankers are. that we end up doing this because we know who the good bankers are We court them over time, and when the timing's right, because there is disruption, we find that we are a good source for them to join our organization. we court them over time and when the timing's right because there is disruption we find that we are a good source for them to join our organization

Speaker 3: Okay. Mark, maybe just another higher level one. I'm curious how you and your team are thinking about technology. I think investors, when I have conversations and there's a lot of conversations around AI and stablecoin, or digital deposits in general. I'm just kind of curious, how are you thinking about those two issues today and what are some of the things that you're working on and how do you see this kind of playing out for Banner? Okay. okay Mark, maybe just another higher level one. mark maybe just another higher level one I'm curious how you and your team are thinking about technology. i'm curious how you and your team are thinking about technology I think investors, when I have conversations and there's a lot of conversations around AI and stablecoin, or digital deposits in general. i think investors when i have conversations and there's a lot of conversations around ai and stablecoin or digital deposits in general I'm just kind of curious, how are you thinking about those two issues today and what are some of the things that you're working on and how do you see this kind of playing out for Banner? i'm just kind of curious how are you thinking about those two issues today and what are some of the things that you're working on and how do you see this kind of playing out for banner

Speaker 5: Thank you for the question, David. I'm going to ask Rob to answer that because we've made a series of investments, but at the same time, we've set up a governance structure, I think, that will help guide us as a lot of this technology and AI infrastructure is evolving. Rob? Thank you for the question, David. thank you for the question david I'm going to ask Rob to answer that because we've made a series of investments, but at the same time, we've set up a governance structure, I think, that will help guide us as a lot of this technology and AI infrastructure is evolving. i'm going to ask rob to answer that because we've made a series of investments but at the same time we've set up a governance structure i think that will help guide us as a lot of this technology and ai infrastructure is evolving Rob? rob

Speaker 9: Yeah. Thanks for the question, David. As Mark mentioned, we do have a Fintech council committee that we have internally that evaluates all the different kind of new AI type technology or even different technology products that are being offered by Fintechs out there. We try to stay on top of what the current pulse is on that stuff. We have started to adopt some AI technology. At this point, it's more turning on AI within existing software platforms. Of course, we've made some significant investments that we've talked about recently with the new loan and deposit origination system that went fully live last year. We also have a lot of conversations around tokenized deposits, stablecoin, that type of stuff as well. Yeah. yeah Thanks for the question, David. thanks for the question david As Mark mentioned, we do have a Fintech council committee that we have internally that evaluates all the different kind of new AI type technology or even different technology products that are being offered by Fintechs out there. as mark mentioned we do have a fintech council committee that we have internally that evaluates all the different kind of new ai type technology or even different technology products that are being offered by fintechs out there We try to stay on top of what the current pulse is on that stuff. we try to stay on top of what the current pulse is on that stuff We have started to adopt some AI technology. we have started to adopt some ai technology At this point, it's more turning on AI within existing software platforms. at this point it's more turning on ai within existing software platforms Of course, we've made some significant investments that we've talked about recently with the new loan and deposit origination system that went fully live last year. of course we've made some significant investments that we've talked about recently with the new loan and deposit origination system that went fully live last year We also have a lot of conversations around tokenized deposits, stablecoin, that type of stuff as well. we also have a lot of conversations around tokenized deposits stablecoin that type of stuff as well As part of our annual strategic planning process, we've brought in different experts in those fields to talk to our executive committee to make sure we understand what's out there. While we haven't necessarily had any plans to roll that out in the short term, we're really staying on top of what all the different kind of payment channels are out there and keeping our pulse on that kind of stuff. As part of our annual strategic planning process, we've brought in different experts in those fields to talk to our executive committee to make sure we understand what's out there. as part of our annual strategic planning process we've brought in different experts in those fields to talk to our executive committee to make sure we understand what's out there While we haven't necessarily had any plans to roll that out in the short term, we're really staying on top of what all the different kind of payment channels are out there and keeping our pulse on that kind of stuff. while we haven't necessarily had any plans to roll that out in the short term we're really staying on top of what all the different kind of payment channels are out there and keeping our pulse on that kind of stuff

Speaker 5: David, just to follow up on that. When you think about AI, regional banks like us, we want to be very cautious and make sure that we're protecting the data integrity of our clients. Examples of AI would be BSA, AML, in which you can really utilize some of the tools there. Certainly the call center which will allow you to be more responsive to your client base over a 24/7 period of time. Those are the kinds of things I think when you think of regional banks, the investments that we'll be making in AI. David, just to follow up on that. david just to follow up on that When you think about AI, regional banks like us, we want to be very cautious and make sure that we're protecting the data integrity of our clients. when you think about ai regional banks like us we want to be very cautious and make sure that we're protecting the data integrity of our clients Examples of AI would be BSA, AML, in which you can really utilize some of the tools there. examples of ai would be bsa aml in which you can really utilize some of the tools there Certainly the call center which will allow you to be more responsive to your client base over a 24/7 period of time. certainly the call center which will allow you to be more responsive to your client base over a 24/7 period of time Those are the kinds of things I think when you think of regional banks, the investments that we'll be making in AI. those are the kinds of things i think when you think of regional banks the investments that we'll be making in ai

Speaker 3: That's terrific. Thanks, everybody. That's terrific. that's terrific Thanks, everybody. thanks everybody

Speaker 5: Thanks, David. Thanks, David. thanks david

Speaker 7: Your next question comes from the line of Andrew Terrell with Stephens Inc. Please go ahead. Your next question comes from the line of Andrew Terrell with Stephens Inc. Please go ahead. your next question comes from the line of andrew terrell with stephens inc please go ahead

Speaker 1: Hey, good morning. Hey, good morning. hey good morning

Speaker 5: Morning, Andrew. Morning, Andrew. morning andrew

Speaker 1: Most of mine were addressed already, but just on the margin, and you guys have kind of consistently been outperforming the kind of margin expectations you lay out. I know in the past we've talked about no rate cuts better for kind of the near medium term margin trajectory. It seems like kind of the backdrop we're getting now, but still sounds like relatively flattish in 2Q and maybe some back half expansion opportunities. I guess the question is why not more constructive on the margin and can you walk us through the puts and takes and specifically kind of the limiting factors for the margin near term? Most of mine were addressed already, but just on the margin, and you guys have kind of consistently been outperforming the kind of margin expectations you lay out. most of mine were addressed already but just on the margin and you guys have kind of consistently been outperforming the kind of margin expectations you lay out I know in the past we've talked about no rate cuts better for kind of the near medium term margin trajectory. i know in the past we've talked about no rate cuts better for kind of the near medium term margin trajectory It seems like kind of the backdrop we're getting now, but still sounds like relatively flattish in 2Q and maybe some back half expansion opportunities. it seems like kind of the backdrop we're getting now but still sounds like relatively flattish in 2q and maybe some back half expansion opportunities I guess the question is why not more constructive on the margin and can you walk us through the puts and takes and specifically kind of the limiting factors for the margin near term? i guess the question is why not more constructive on the margin and can you walk us through the puts and takes and specifically kind of the limiting factors for the margin near term

Speaker 9: Yeah. Thanks, Andrew. It's Rob. If you think about the second quarter, and I talked about it a little bit. I'm just looking at normal seasonality there. We always see deposit outflows early in the quarter. You have to supplement those with FHLB advances. Typically, the second quarter's been a little bit better for us from a loan growth standpoint as well, and we're going to be funding those loans with FHLB advances. I think just naturally you're going to see funding cost increase in the second quarter. Some of that will be offset by the repricing of loan portfolio. That's why I'm thinking more flat for the second quarter. If you look at last year, it's the same seasonality we saw last year. First quarter last year, we saw a net interest margin expansion. Second quarter was flat. Yeah. yeah Thanks, Andrew. thanks andrew It's Rob. it's rob If you think about the second quarter, and I talked about it a little bit. if you think about the second quarter and i talked about it a little bit I'm just looking at normal seasonality there. i'm just looking at normal seasonality there We always see deposit outflows early in the quarter. we always see deposit outflows early in the quarter You have to supplement those with FHLB advances. you have to supplement those with fhlb advances Typically, the second quarter's been a little bit better for us from a loan growth standpoint as well, and we're going to be funding those loans with FHLB advances. typically the second quarter's been a little bit better for us from a loan growth standpoint as well and we're going to be funding those loans with fhlb advances I think just naturally you're going to see funding cost increase in the second quarter. i think just naturally you're going to see funding cost increase in the second quarter Some of that will be offset by the repricing of loan portfolio. some of that will be offset by the repricing of loan portfolio That's why I'm thinking more flat for the second quarter. that's why i'm thinking more flat for the second quarter If you look at last year, it's the same seasonality we saw last year. if you look at last year it's the same seasonality we saw last year First quarter last year, we saw a net interest margin expansion. first quarter last year we saw a net interest margin expansion Second quarter was flat. second quarter was flat Third quarter is typically one of the better margin expansion quarters for us. I think that's where you're going to see some additional expansion, again, would be in the third quarter because funding costs will come back down as deposits flow in. We'll pay off FHLB advances. We'll get the benefit of the asset growth that we saw in the second quarter. Then in addition, naturally, you're going to see loan yields also increase in the third quarter. I think the third quarter will probably be the strongest quarter for the remainder of the year from an interest margin expansion standpoint. If Fed's on pause, then we would expect some additional margin expansion in the fourth quarter. I don't think you're going to see the benefit on the funding side at that point. Third quarter is typically one of the better margin expansion quarters for us. third quarter is typically one of the better margin expansion quarters for us I think that's where you're going to see some additional expansion, again, would be in the third quarter because funding costs will come back down as deposits flow in. i think that's where you're going to see some additional expansion again would be in the third quarter because funding costs will come back down as deposits flow in We'll pay off FHLB advances. we'll pay off fhlb advances We'll get the benefit of the asset growth that we saw in the second quarter. we'll get the benefit of the asset growth that we saw in the second quarter Then in addition, naturally, you're going to see loan yields also increase in the third quarter. then in addition naturally you're going to see loan yields also increase in the third quarter I think the third quarter will probably be the strongest quarter for the remainder of the year from an interest margin expansion standpoint. i think the third quarter will probably be the strongest quarter for the remainder of the year from an interest margin expansion standpoint If Fed's on pause, then we would expect some additional margin expansion in the fourth quarter. if fed's on pause then we would expect some additional margin expansion in the fourth quarter I don't think you're going to see the benefit on the funding side at that point. i don't think you're going to see the benefit on the funding side at that point What you're going to see is just the loan yield continuing to reprice up, which is repricing up about 3 basis points a quarter right now while the Fed's on pause. What you're going to see is just the loan yield continuing to reprice up, which is repricing up about 3 basis points a quarter right now while the Fed's on pause. what you're going to see is just the loan yield continuing to reprice up which is repricing up about 3 basis points a quarter right now while the fed's on pause

Speaker 1: All right. Great. No, I really appreciate it. Last question from me. I guess looking back, last time you were generating a comparable 130-ish ROA consistently was back in 2018, 2019. Your stock was trading 4 times higher on an earnings multiple, call it 40%-50% higher on tangible book value multiple then. Your capital's 200+ basis points better today. Your allowance is 30 basis points higher. The growth environment feels a little bit slower than then. I guess with that as a backdrop, why not get more aggressive on the buyback here? All right. all right Great. great No, I really appreciate it. no i really appreciate it Last question from me. last question from me I guess looking back, last time you were generating a comparable 130-ish ROA consistently was back in 2018, 2019. i guess looking back last time you were generating a comparable 130-ish roa consistently was back in 2018 2019 Your stock was trading 4 times higher on an earnings multiple, call it 40%-50% higher on tangible book value multiple then. your stock was trading 4 times higher on an earnings multiple call it 40%-50% higher on tangible book value multiple then Your capital's 200+ basis points better today. your capital's 200+ basis points better today Your allowance is 30 basis points higher. your allowance is 30 basis points higher The growth environment feels a little bit slower than then. the growth environment feels a little bit slower than then I guess with that as a backdrop, why not get more aggressive on the buyback here? i guess with that as a backdrop why not get more aggressive on the buyback here

Speaker 9: I think anytime you look at the capital priorities, we're weighing all the different options there, Andrew. We've certainly had the conversations around the level of share repurchases and where they should be. Where we repurchased shares at last quarter, the earn back on that is attractive. The multiple is attractive. We're just trying to balance the different ones. To your point, if we think about the TCE ratio right now approaching 10%, that's above where we'd like it to be. We will have to address that over time as we think about different capital actions. Ideally, we'd like that to be about 100 basis points lower than it is today. We're continuing to have those conversations and think about the best use. I think anytime you look at the capital priorities, we're weighing all the different options there, Andrew. i think anytime you look at the capital priorities we're weighing all the different options there andrew We've certainly had the conversations around the level of share repurchases and where they should be. we've certainly had the conversations around the level of share repurchases and where they should be Where we repurchased shares at last quarter, the earn back on that is attractive. where we repurchased shares at last quarter the earn back on that is attractive The multiple is attractive. the multiple is attractive We're just trying to balance the different ones. we're just trying to balance the different ones To your point, if we think about the TCE ratio right now approaching 10%, that's above where we'd like it to be. to your point if we think about the tce ratio right now approaching 10% that's above where we'd like it to be We will have to address that over time as we think about different capital actions. we will have to address that over time as we think about different capital actions Ideally, we'd like that to be about 100 basis points lower than it is today. ideally we'd like that to be about 100 basis points lower than it is today We're continuing to have those conversations and think about the best use. we're continuing to have those conversations and think about the best use

Speaker 1: Okay. Thanks for taking the questions. Okay. okay Thanks for taking the questions. thanks for taking the questions

Speaker 5: Thank you, Andrew. Thank you, Andrew. thank you andrew

Speaker 7: Your next question comes from the line of Charlie Driscoll with KBW. Please go ahead. Your next question comes from the line of Charlie Driscoll with KBW. your next question comes from the line of charlie driscoll with kbw Please go ahead. please go ahead

Speaker 2: Hi, this is Charlie on for Kelly. Most of mine have been answered. Just kind of want to give you guys the opportunity to take a step back on credit here and talk about what you're seeing. It feels like NPA has kind of stabilized here, but just any color you can give us on what's in that portfolio, any areas of concern if things do take a downturn. Just high level here. Thanks. Hi, this is Charlie on for Kelly. hi this is charlie on for kelly Most of mine have been answered. most of mine have been answered Just kind of want to give you guys the opportunity to take a step back on credit here and talk about what you're seeing. just kind of want to give you guys the opportunity to take a step back on credit here and talk about what you're seeing It feels like NPA has kind of stabilized here, but just any color you can give us on what's in that portfolio, any areas of concern if things do take a downturn. it feels like npa has kind of stabilized here but just any color you can give us on what's in that portfolio any areas of concern if things do take a downturn Just high level here. just high level here Thanks. thanks

Speaker 4: I'll just start by saying that when the portfolio is as clean as it is, you're going to see fits and starts of things moving in and out of adversely classified and NPAs. When you look at the non-performing loans, relatively flat this quarter, but centered in consumer and small business and the ag-related businesses. Average loan size of non-accrual loans less than $250,000. The largest loan is approximately $3 million. Nothing that is extremely worrisome in terms of that portfolio. In the substandard, we're early to downgrade. We work them as fast as we can. Some of them may sit there a little longer because we're slower to move them on up and out. We don't want them bouncing around. When you think about that portfolio, the changes when they've gone in there, it's idiosyncratic. There's no one industry that's raising alarms. I'll just start by saying that when the portfolio is as clean as it is, you're going to see fits and starts of things moving in and out of adversely classified and NPAs. i'll just start by saying that when the portfolio is as clean as it is you're going to see fits and starts of things moving in and out of adversely classified and npas When you look at the non-performing loans, relatively flat this quarter, but centered in consumer and small business and the ag-related businesses. when you look at the non-performing loans relatively flat this quarter but centered in consumer and small business and the ag-related businesses Average loan size of non-accrual loans less than $250,000. average loan size of non-accrual loans less than $250,000 The largest loan is approximately $3 million. the largest loan is approximately $3 million Nothing that is extremely worrisome in terms of that portfolio. nothing that is extremely worrisome in terms of that portfolio In the substandard, we're early to downgrade. in the substandard we're early to downgrade We work them as fast as we can. we work them as fast as we can Some of them may sit there a little longer because we're slower to move them on up and out. some of them may sit there a little longer because we're slower to move them on up and out We don't want them bouncing around. we don't want them bouncing around When you think about that portfolio, the changes when they've gone in there, it's idiosyncratic. when you think about that portfolio the changes when they've gone in there it's idiosyncratic There's no one industry that's raising alarms. there's no one industry that's raising alarms We just are beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations. We just are beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations. we just are beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations

Speaker 2: Great. That's it for me. Thanks for the call today, guys. Great. great That's it for me. that's it for me Thanks for the call today, guys. thanks for the call today guys

Speaker 5: Thanks, Charlie. Thanks, Charlie. thanks charlie

Speaker 7: That concludes our question and answer session. I will now turn the call back over to Mark Grescovich for closing remarks. That concludes our question and answer session. that concludes our question and answer session I will now turn the call back over to Mark Grescovich for closing remarks. i will now turn the call back over to mark grescovich for closing remarks

Speaker 5: Great. Thank you, Tiffany. Thank you all for your questions and your attention today. As I stated, we're very proud of the Banner team and our first quarter 2026 performance. It's been a strong kickoff to the full year. Thank you for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future. Thank you again, everyone, and have a wonderful day. Great. great Thank you, Tiffany. thank you tiffany Thank you all for your questions and your attention today. thank you all for your questions and your attention today As I stated, we're very proud of the Banner team and our first quarter 2026 performance. as i stated we're very proud of the banner team and our first quarter 2026 performance It's been a strong kickoff to the full year. it's been a strong kickoff to the full year Thank you for your interest in Banner and for joining our call today. thank you for your interest in banner and for joining our call today We look forward to reporting our results to you again in the future. we look forward to reporting our results to you again in the future Thank you again, everyone, and have a wonderful day. thank you again everyone and have a wonderful day

Speaker 7: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect. Ladies and gentlemen, this concludes today's call. ladies and gentlemen this concludes today's call Thank you all for joining. thank you all for joining You may now disconnect. you may now disconnect