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BANNER CORP

BANR
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Business Summary

Banner Corporation is a bank holding company headquartered in Walla Walla, Washington, that wholly owns one subsidiary bank, Banner Bank, a Washington-chartered commercial bank. As of December 31, 2025, the Bank operated 135 branch offices and 15 loan production offices located in Washington, Oregon, California, Idaho, Utah and Nevada. The Bank is a regional bank offering a wide variety of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. The Company's overall strategy is focused on delivering clients—including middle market and small businesses, business owners, their families and employees—a compelling value proposition by providing the financial sophistication and breadth of products of a regional bank while retaining the appeal, responsiveness, and superior service level of a community bank, a model it describes as its "super community bank model."

The Company faces significant competition both in attracting deposits and in originating loans, with its most direct competition coming from other commercial and savings banks, savings associations and credit unions with offices in its market areas, as well as from securities firms, insurance companies, money market and mutual funds, and other investment vehicles, including online banks and financial technology companies. The Company competes by offering a broad range of deposit products and financial services, including electronic banking capabilities, with competitive rates and terms, convenient locations and hours, and a high level of personal service and expertise, and by developing long-term client relationships and delivering a relationship-based banking model tailored to local markets. The Company continues to invest in technology and digital delivery channels to enhance client experience and remain competitive.

The Company generates revenue primarily through net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of loans and investment securities, and interest expense on interest-bearing liabilities, composed primarily of client deposits and supplemented by Federal Home Loan Bank of Des Moines advances, other borrowings, and junior subordinated debentures. Net income is also affected by the level of non-interest income, including deposit fees and other service charges, results of mortgage banking operations—which includes gains and losses on the sale of loans and servicing fees—gains and losses on the sale of securities, as well as non-interest expenses and provisions for credit losses and income taxes. The Company's operating results depend primarily on its net interest income, and its business is that of a traditional banking institution—accepting deposits and originating loans in locations surrounding its offices.

The Company's lending activities are primarily directed toward the origination of commercial real estate and business loans. As of December 31, 2025, the net loan portfolio totaled $11.72 billion , compared to $11.35 billion at December 31, 2024. The loan portfolio is diversified by product type, borrower and geographic location within the market area and includes commercial real estate loans (owner-occupied, investment properties, and small balance CRE), multifamily real estate loans, construction, land and land development loans (commercial construction, multifamily construction, one- to four-family construction, and land and land development), commercial business loans (commercial business and small business scored), agricultural business loans, one- to four-family residential loans, and consumer loans (home equity revolving lines of credit and other). At December 31, 2025, commercial real estate loans totaled $4.05 billion , or 35% of total loans; multifamily real estate loans totaled $850.8 million , or 7%; construction, land and land development loans totaled $1.71 billion , or 15%; commercial business loans totaled $2.41 billion , or 21%; agricultural business loans totaled $353.2 million , or 3%; one- to four-family residential loans totaled $1.57 billion , or 13%; and consumer loans totaled $768.5 million , or 6%.

The Company also engages in mortgage banking operations through the origination and sale of one- to four-family residential loans, typically selling most newly originated loans into the secondary market, with net gains on sales and loan servicing fees recognized as mortgage banking revenue. The Company sells one- to four-family residential loans on both a servicing-retained and a servicing-released basis. At December 31, 2025, the Company was servicing $3.14 billion of loans for others. The Company also originates and sells the guaranteed portion of SBA loans, and records SBA servicing rights at fair value. The Company offers a variety of deposit instruments, including non-interest-bearing checking accounts, interest-bearing checking accounts, money market deposit accounts, regular savings accounts, certificates of deposit, treasury management services and retirement savings plans. At December 31, 2025, core deposits (non-interest-bearing checking accounts and interest-bearing transaction and savings accounts) represented 89% of total deposits.

During the year ended December 31, 2025, the Company repurchased 499,975 shares of common stock under a share repurchase program authorized on July 24, 2025, which authorized the repurchase of up to 1,729,199 shares over the subsequent 12 months. The outstanding balance of the Company's subordinated notes was fully repaid during the second quarter of 2025. The Company continued its Flexible Workplace Program, and as of December 31, 2025, approximately 39% of its workforce was working hybrid or remote. The Company hired 337 new employees in 2025, and its voluntary employee turnover rate was 14.6% . The Company earned Great Place to Work certification with an overall engagement score of 86% .

For the year ended December 31, 2025, net income was $195.4 million , or $5.64 per diluted share, compared to net income of $168.9 million , or $4.88 per diluted share for the prior year. Revenues (net interest income and non-interest income) were $660.7 million for the year ended December 31, 2025, compared to $608.6 million for the prior year. Net interest income was $587.9 million for the year ended December 31, 2025, compared to $541.7 million for the prior year. The net interest margin on a tax equivalent basis was 3.96% compared to 3.75% in the prior year. Return on average assets was 1.21% for the year ended December 31, 2025, compared to 1.07% for the prior year. Total assets increased to $16.35 billion at December 31, 2025, compared to $16.20 billion at December 31, 2024. Total deposits were $13.74 billion at December 31, 2025, compared to $13.51 billion a year ago. Total shareholders' equity was $1.95 billion at December 31, 2025, compared to $1.77 billion at December 31, 2024.

Business Outlook

The Company's longer term strategic initiatives continue to focus on originating high quality assets and client acquisition, which management believes will continue to generate strong revenue while maintaining the Company's moderate risk profile. The Company continues to invest in its delivery platform across the franchise with a primary emphasis on strengthening its presence in the higher growth regions of its markets. The Company also focuses on expanding its product offerings and investing in marketing campaigns designed to significantly increase brand awareness for the Bank, which management considers a significant element in its strategy to grow client relationships and increase market presence. The Company's strategic initiatives also relate to efficiency, talent retention and technology improvements.

The Company continues to improve the efficiency of its branch delivery channel by making investments in streamlining the origination of new loan and deposit accounts while simultaneously enhancing its digital service and account origination capabilities. The Company anticipates that the shift in client service delivery channel preference toward mobile and digital banking will continue and it strives to provide digital tools that support its clients' banking needs. The Company is currently undertaking, or may in the future undertake, significant system conversions and technology upgrades to enhance its operational efficiency, client service capabilities, or regulatory compliance, including the implementation of new loan and deposit origination platforms and digital banking solutions.The filing does not contain specific operational outlook statements regarding supply chain, manufacturing capacity, or headcount strategy beyond the historical data and ongoing initiatives described.

Cash dividends paid to shareholders were $1.94 per share for the year ended December 31, 2025, up from $1.92 per share paid in the prior year. The Company repurchased 499,975 shares of common stock during the year ended December 31, 2025, at an average price of $63.14 per share under a share repurchase program authorizing the repurchase of up to 1,729,199 shares.The Company's business may be adversely affected by downturns in the national economy and the regional economies on which it depends, with its client base highly concentrated in the Puget Sound region and Eastern Washington, and additional concentration risks as it expands into San Diego, Sacramento, and other parts of California. Broader economic factors such as inflation, unemployment, money supply fluctuations, changes in monetary policy, and volatility in interest rate markets may adversely affect profitability. Uncertainty regarding the timing, magnitude or pace of potential interest rate changes by the Federal Reserve may negatively affect borrowing demand, asset yields, deposit pricing, and economic activity in the Company's market areas. Trade disputes, tariffs, or shifts in trade policies could disrupt supply chains, increase costs for businesses, and reduce export opportunities for clients.

The Company's loan portfolio includes loans with a higher risk of loss, including construction and land loans totaling $1.71 billion or 15% of total loans at December 31, 2025, commercial and multifamily real estate loans totaling $4.90 billion or 42% of total loans, commercial business loans totaling $2.41 billion or 21% of total loans, agricultural loans totaling $353.2 million or 3% of total loans, and consumer loans totaling $768.5 million or 6% of total loans. The commercial real estate market has been affected by higher interest rates, tighter credit conditions, and changing economic and workplace dynamics, including the adoption of remote and hybrid work models, which could result in prolonged vacancies, declining rental income, refinancing challenges, and reduced property values. The Company's allowance for credit losses on loans may not be sufficient to absorb losses, and determination of the appropriate level involves a high degree of subjectivity and requires significant estimates of current credit risks and future trends.

Risk Factors

The Company's loan portfolio is concentrated in higher-risk categories, with construction and land loans of $1.71 billion (15% of total loans), commercial and multifamily real estate loans of $4.90 billion (42%), and commercial business loans of $2.41 billion (21%) at December 31, 2025. Non-performing assets increased to $51.2 million , or 0.31% of total assets, at December 31, 2025, from $39.6 million , or 0.24% of total assets, a year ago. The allowance for credit losses on loans of $160.3 million may not be sufficient to absorb losses, and determination of the appropriate level involves a high degree of subjectivity. The Company's business is significantly influenced by national and regional economic conditions, with its client base highly concentrated in the Puget Sound region and Eastern Washington, and additional concentration risks as it expands into California markets. The Company's net interest income is significantly affected by interest rates, and a rise in interest rates may lead to funding costs increasing faster than asset yields, compressing the net interest margin. The Company relies on dividends from the Bank for substantially all its revenue at the holding company level, and the Bank's ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements.

Management Priorities

Management's message emphasizes that Banner's successful execution of its super community bank model and strategic initiatives has delivered solid core operating results and profitability over the last several years. The Company's longer term strategic initiatives continue to focus on originating high quality assets and client acquisition, which management believes will continue to generate strong revenue while maintaining the Company's moderate risk profile. Management highlights that net interest margin on a tax equivalent basis was 3.96% compared to 3.75% in the prior year, revenues were $660.7 million compared to $608.6 million for the prior year, and net interest income was $587.9 million compared to $541.7 million for the prior year. The strategic priorities emphasized for the period ahead include strengthening the Company's presence in higher growth regions, improving the efficiency of the branch delivery channel, enhancing digital service and account origination capabilities, expanding product offerings, and investing in marketing campaigns to increase brand awareness.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 7, MD&A — Comparison of Financial Condition
  2. [2] Item 7, MD&A — Comparison of Financial Condition
  3. [3] Item 7, MD&A — Loans and Lending
  4. [4] Item 7, MD&A — Loans and Lending
  5. [5] Item 7, MD&A — Loans and Lending
  6. [6] Item 7, MD&A — Loans and Lending
  7. [7] Item 7, MD&A — Loans and Lending
  8. [8] Item 7, MD&A — Loans and Lending
  9. [9] Item 7, MD&A — Loans and Lending
  10. [10] Item 7, MD&A — Loan Servicing Portfolio
  11. [11] Item 7, MD&A — Comparison of Financial Condition
  12. [12] Item 5, Purchases of Equity Securities by the Issuer
  13. [13] Item 5, Purchases of Equity Securities by the Issuer
  14. [14] Item 1, Business — Personnel
  15. [15] Item 1, Business — Personnel
  16. [16] Item 1, Business — Personnel
  17. [17] Item 1, Business — Personnel
  18. [18] Item 7, MD&A — Executive Overview
  19. [19] Item 7, MD&A — Executive Overview
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  27. [27] Item 7, MD&A — Executive Overview
  28. [28] Item 7, MD&A — Executive Overview
  29. [29] Item 7, MD&A — Executive Overview
  30. [30] Item 7, MD&A — Comparison of Financial Condition
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  32. [32] Item 7, MD&A — Comparison of Financial Condition
  33. [33] Item 7, MD&A — Comparison of Financial Condition
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  35. [35] Item 7, MD&A — Comparison of Financial Condition
  36. [36] Item 7, MD&A — Executive Overview
  37. [37] Item 7, MD&A — Executive Overview
  38. [38] Item 5, Purchases of Equity Securities by the Issuer
  39. [39] Item 5, Purchases of Equity Securities by the Issuer
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  41. [41] Item 1A, Risk Factors — Risks Related to Credit and Lending
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  47. [47] Item 1A, Risk Factors — Risks Related to Credit and Lending
  48. [48] Item 1A, Risk Factors — Risks Related to Credit and Lending
  49. [49] Item 7, MD&A — Asset Quality
  50. [50] Item 7, MD&A — Asset Quality
  51. [51] Item 7, MD&A — Asset Quality
  52. [52] Item 7, MD&A — Asset Quality
  53. [53] Item 7, MD&A — Asset Quality
  54. [54] Item 7, MD&A — Executive Overview
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  68. [68] Item 7, MD&A — Comparison of Results of Operations
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  76. [76] Item 7, MD&A — Executive Overview
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  79. [79] Item 7, MD&A — Executive Overview
  80. [80] Item 7, MD&A — Selected Financial Data
  81. [81] Item 7, MD&A — Selected Financial Data
  82. [82] Item 7, MD&A — Comparison of Financial Condition
  83. [83] Item 7, MD&A — Comparison of Financial Condition
  84. [84] Item 7, MD&A — Executive Overview
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  86. [86] Item 7, MD&A — Executive Overview
  87. [87] Item 7, MD&A — Executive Overview
  88. [88] Item 7, MD&A — Provision and Allowance for Credit Losses
  89. [89] Item 7, MD&A — Provision and Allowance for Credit Losses
  90. [90] Item 7, MD&A — Executive Overview
  91. [91] Item 7, MD&A — Executive Overview
  92. [92] Item 7, MD&A — Executive Overview
  93. [93] Item 7, MD&A — Executive Overview
  94. [94] Item 7, MD&A — Comparison of Financial Condition
  95. [95] Item 7, MD&A — Comparison of Financial Condition
  96. [96] Item 7, MD&A — Comparison of Financial Condition
  97. [97] Item 7, MD&A — Comparison of Financial Condition

Analysis on 6/21/2026