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 Groskovich, 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 of 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 the actual results to differ are available in the earnings press release that was released yesterday and are recently filed form 10k 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 in 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, the intercorporation reported a net profit available to common shareholders of $54.7 million or $1.60 per diluted share for the quarter ended March 31, 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 dollars compared to 58.6 million dollars for the first quarter of 2025. Banner's first quarter 2026 revenue from core operations was 169 million dollars compared to 160 million dollars for the first quarter of 2025 an increase of nearly six percent. 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 percent 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 capita. I'm pleased to say that we 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. And Newsweek named Banner Bank one of the most trustworthy companies both in America and the world again this year. And just recently again named Banner one of the best regional banks in the country. Additionally, J.D. Power & 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. And 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 egg portfolio offset production such that portfolio loans decreased $14 million when compared to December 31, 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 multi-family 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 five percent 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, CNI 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 percent of total loans which compares to to 0.63 percent reported as of march 31st 2025. adversely classified loans increased by 42 million in the quarter representing two percent of total loans and total non-performing assets at 51.7 million represent a modest 0.32 percent 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 totals 160.4 million providing 1.37 percent coverage of total loans consistent with prior quarters. Loan On 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-off, 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, and 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, the increase in earnings due to the current quarter having lower expenses decision 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 core pre-tax pre-provisioned income for the current quarter increased 13 percent or 7.7 million compared to the quarter ending March 30. Our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 14 percent and return on average assets of one. As Jill previously mentioned, Loan balances were essentially flat during the quarter as the good loan production, the loan-to-deposit ratio into 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, increased by $97 million during the quarter due to core deposits increasing $165 million, or 5.5% on increasing core deposits was partially offset by time deposits decreasing $67 million, mostly due to $50 million of brokered CDEs 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 FHLV advances. The tangible common equity ratio increased from 9.84% to 9.97%. As a reflection of our robust capital and strong liquidity positions, Banner repurchased 250,000 shares during the quarter and the quarterly dividend of 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 eight basis point increase in net interest margin. The decrease in average earning assets was primarily due to average interest burning cash and security balances. Tax equivalent net interest margin was 4.11 percent for the current quarter compared to 4.03 percent. Funding cost decreased nine basis points due to deposit cost. Deposit cost benefited from a full quarter of the deposit pricing reductions implemented in the fourth. We also benefited from an improved earning asset mix as lower yielding cash and security balances were a smaller percentage. The improved earning asset mix offset the three basis points. The average rate on new loan production for the current quarter was 6.69 percent compared to 6.88 percent for the prior quarter. Non-interest bearing deposits into the quarter at 33 percent. 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 on financial instruments while the current quarter had a fair value increase. Total non-interest expense was $1.5 million lower than the prior quarter, with decreases in occupancy and equipment, marketing, and being partially offset by an increase. Our strong capital and liquidity levels continue to position as well to support our existing clients and to add new clients. This concludes my prepared comments, and now we'll turn it back to Mark.

Thank you, Jill and Rob, for your comments.

That concludes our prepared 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 DA Davidson. Please go ahead.

Good morning. This is Ryan Payton from Jeff Rulis.

Good morning. just starting on the margin uh had some deposit fluctuations and lower cd balances this quarter uh benefiting the nim but just trying to gauge your thoughts on expectations for the margin ahead yeah sure this is this is rob so uh so 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 balance we think that this should be mostly offset by an increase in price up in the new which suggests that it would be relatively flat probably in the second quarter which is similar to what we mentioned in them in the third quarter due to funding costs coming back down as fhlb advances or replaced by deposit increases in addition we would expect something with the loan production impacted by payoffs this

quarter. Where do you see payoffs trending from here and maybe your overall expense?

Sure, Ryan. So we had anticipated that the headwind of commercial real estate payoffs would potentially offset growth into effect 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 so we're still sticking with the mid single digit growth rate for 2026. thanks um last for me capital priorities oh we have dividend increase and buyback um 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. So, you know, 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% to 40% of earnings as a core dividend. And 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. But ultimately, it's really depending on market conditions on where the stock price is trading and other things as we evaluate the best. And 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. And, you know, our position on M&A hasn't changed since I've been here, which is try to partner with folks that would be a great fit 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.

Your next question comes from the line of Matthew Clark with Piper Chandler. Please go ahead.

Hey, good morning.

Good 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 a 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. So the spot price is early in the quarter in January. We did make some additional rate reductions really in response. We think about going so we saw the fit.

Okay, great. And then on the service charges and fees flying 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 So what can you attribute that to, and is that sustainable?

Yeah, so we didn't change any of our pricing there. We did renegotiate our master from that from the first time.

And then on the non-interest expense run rate, down nicely, pretty broad-based, you know, outside of the seasonal increase in comp. Anything unusual there? Is that more, you know, 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. The quarter did have kind of a legal settlement charge in there of around a million dollars that Q2 will...

Thank you. Last one for me, just back to M&A. have there have there been have you seen or heard of an increase in among sellers you know more maybe being more willing to to talk just trying to get a sense for a change in relative to last quarter i i don't matthew this is mark thank you for the question i i don't think that their partner with banner their clients on the west coast so i i wouldn't suggest that there's been

an increase i wouldn't be surprised strategic plan or trying to figure out what the best great thanks for the color thanks your next your next question comes from the line of david beaster with raymond james please go ahead hey good morning everybody morning david um i wanted to to maybe touch on i guess two things you know from on the loan growth side you know originations have held up pretty well um how is demand like have you seen any i mean obviously there's a lot of macro uncertainty um i'm curious if that has impacted demand and pipelines at all from your standpoint and then just i was hoping you'd give some color on the payoffs and paydowns that you're seeing like what what's driving that is it deleveraging asset sales you know competition and losing some deals just kind of curious on those two two fronts so in terms of pipelines David everybody is telling me that they're busy they're having good conversations and moving things forward you know whether it's early on in the

discussions or whether it's my credit team busy you know working through deals so demand is out there I can't say that you know the level of economic uncertainty doesn't cause you know give some pause but there is still demand and And as we move through them, we certainly see pricing being pushed and, you know, multiple banks going for these same deals. So it's tough out there, I guess I would say, in terms of, you know, getting to the close. And I feel good about what we have been pulling through in terms of origination and what that means for our future growth. As to what was the second part driving the payoff? The payoff and paydown, yeah.

Yeah.

So 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, and 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. So it is delayed payoff, not losing because we don't want them or to competition, but to the secondary market that, you know, offer terms that most regional banks don't offer, long-term interest only, non-recourse, those sorts of things. So, again, expected. They just are lumpy because of the delay from 18 months ago.

Okay. That's helpful. And then, you know, there's been a lot of disruption across your footprint. I mean, over the past 12, 18 months, I mean, 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.

So I'll start and then if Mark or Rob want to jump in behind me, you know, if you think back to the last several quarters, we've talked about the personnel we've added because of the disruption in the, you know, across the footprint and 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 so it it isn't about one business line or one market when we find the right people you know we're adding to you know improve our talent okay David, I would just follow up with that.

This is Mark. 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. And as you've heard me say before, we tend to do this as a rifle shot, not a shotgun shot, right? So 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 to join our organization.

Okay. Okay. And Mark, maybe just another higher level one. You know, 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 some a series of investments but at the same time we're great we've set up a governance structure i think that will help guide us uh as with a lot of this technology and ai infrastructure a fintech

fully live last year and and then we also have a lot of conversation tokenized just to follow up

on that when you think about a you know you know regional banks like us have to we want to be very cautious of our clients those are the kinds of that's terrific thanks everybody your next question

comes from the line of andrew terrell with stephen zinc please go ahead hey good morning morning andrew uh most of mine were were addressed already but you know just on 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 you know no rate cuts better for kind of the the near medium term margin trajectory um it seems like kind of the backdrop we're getting now but still sounds like you know relatively flattish and 2q and maybe some back half expansion opportunities i guess the question is why not more constructive on the margin and can you

you know walk us through the puts and takes and specifically kind of the limiting factors for the margin near term yeah thanks thanks andrew it's rob so if you think about the second quarter and i talked about it a little bit i'm just looking at normal seasonality there typically i think just naturally you're going some of that will be off and if you look at last year it's the same seasonality we saw last year first quarter last year third quarter is typically one of the better i think third quarter will probably be the strongest quarter if fed's on pause all right

great now. I really appreciate it. And then, you know, last question for me, just, I guess, looking back last time you were generating, you know, a comparable 130 ish ROA consistently was back in 2018, 2019. Your stock was trading four times higher on an earnings multiple called 40, 50% higher on tangible book value multiple. Then your capital's 200 plus basis points better today. your allowance is 30 base 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?

You know, I mean, 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, you know, the level of share repurchases and where they should be, where we repurchase shares at last quarter, you know the earn back on that is is attractive uh the multiple uh is is attractive so we're just trying to balance the different ones but you know to your point if we think about the tce ratio right now approaching 10 that's above where we'd like it to be so we will have to address that over time as we think about different capital we're continuing to have those conversations and

think about the best okay uh 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 um most amount 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 mpa is 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 um just high level here thanks so i'll just start by saying that when the portfolio

is as clean as it is you know you're going to see fits and starts of things moving in and out of adversely classified and mpas you know when you look at the non-performing loans relatively flat this quarter uh but you know centered in consumer and small business and ag related businesses average loan size of non-accrual loans less than 250 000 and the largest loan is approximately three million so nothing that you know is extremely worrisome in terms of that portfolio and in the substandard we're early to downgrade we work them as fast as we can and so 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. But 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. And we just are beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations.

That's it for me. Thanks for the call today, guys. Thanks, Charlie.

That concludes our question and answer session. I will now turn to call back over to Mark Greskovich for closing remarks.

Great. Thank you, Tiffany, and thank you all for your questions and your attention today. As I stated, we're very proud of the Banner team in our first quarter, 2026 performance. It's been a strong kickoff to the full year. Thank you for your interest in Banner 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.