Banner Corporation Fourth Quarter 2025 Earnings Call - Core earnings resilient, CRE payoffs weigh on loan growth

Lucy, Call Coordinator, Banner Corporation: Hello, everyone, and thank you for joining the Banner Corporation Fourth Quarter 2025 Conference Call and Webcast. My name is Lucy, and I’ll be coordinating your call today. During the presentation, you can register a question by pressing Star followed by 1 on your telephone keypad. If you change your mind, please press Star followed by 2. It is now my pleasure to hand over to President and CEO Mark Greschovich to begin. Please go ahead.

Mark Greschovich, President and CEO, Banner Corporation: Thank you, Lucy, and good morning and happy New Year, everyone. I would also like to welcome you to the Fourth Quarter and Full Year 2025 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?

Rich Arnold, Head of Investor Relations, Banner Corporation: 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 is available in the earnings press release that was released yesterday and the recently filed Form 10-Q for the quarter ended September 30, 2025. Forward-looking statements are effective only as of the day they are made, and Banner assumes no obligation to update information concerning its expectations. Mark.

Mark Greschovich, President and CEO, Banner Corporation: 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 Fourth Quarter and Full Year 2025 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 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 $51.2 million, or $1.49 per diluted share, for the quarter ended December 31, 2025. This compares to a net profit to common shareholders of $1.54 per share for the third quarter of 2025 and $1.34 per share for the fourth quarter of 2024.

For the full year ended December 31, 2025, Banner reported net income available to common shareholders of $195.4 million, or $5.64 per diluted share, compared to $168.9 million, or $4.88 per share for the year ended December 31, 2024. Our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve our operating performance have positioned the company well for the future. Rob will discuss these in more detail shortly. The strength of our balance sheet, coupled with a 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.

For the full year 2025, core earnings were $255 million compared to $223.2 million for the full year of 2024. Banner’s Fourth Quarter 2025 revenue from core operations was $170 million compared to $169 million for the prior quarter and $160 million for the fourth quarter of 2024. The full year 2025 core revenue was $661 million compared to $615 million for the full year of 2024, an increase of 8%. 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 1.24% for the fourth quarter of 2025. 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 14% from the same period last year, we announced a core dividend of $0.50 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 and one of the best banks in the world by Forbes.

Newsweek named Banner one of the most trustworthy companies in America and the world again this year, and just recently again named Banner one of the best regional banks in the country. J.D. Power and Associates named Banner Bank the best bank in the Northwest for retail client satisfaction. Our company was also recently certified by Great Place to Work, and S&P Global Market Intelligence ranked Banner’s financial performance among the top 50 public banks with more than $10 billion in assets. Additionally, as we’ve noted previously, Banner Bank 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.

Jill Rice, Chief Credit Officer, Banner Corporation: Thank you, Mark, and good morning, everyone. In spite of the solid level of loan originations, up 9% compared to the linked quarter and 8% compared to the quarter ending 12/31/2024, we experienced negligible loan growth during the quarter. Loan production was offset by higher-than-expected affordable housing tax credit paydowns, a small number of both CRE and Shared National Credit payoffs, and significantly lower C&I line utilization, down 3% in the quarter and 4% year over year. Year over year, portfolio loan balances increased 3.2%. Within the commercial real estate portfolio, we reported solid growth year over year, with investor CRE increasing 5% and owner-occupied CRE increasing 11%. This growth was diversified both in product type and geography and was granular in nature, with our small business teams providing nearly 40% of the owner-occupied originations by dollar. As mentioned earlier, the fourth quarter results were impacted by prepayments.

The decline year over year in the multifamily portfolio is primarily the result of stabilized properties moving to the secondary market. Looking at the construction portfolios, construction lending has long been a core competency at Banner, and it continues to be a source of strength. In aggregate, it remains well-balanced at 15% of total loans. The growth in commercial construction, one-to-four family construction, and land and land development reported in the quarter reflects the continued funding of previously approved projects. The decline reflected in the multifamily construction was primarily driven by the affordable housing tax credit paydowns mentioned earlier. In spite of the housing affordability crisis, our residential construction portfolio, at 5% of the total, continues to perform well. It remains geographically dispersed and is diversified by product mix and price point, with levels of completed inventory continuing to be manageable.

Sales activity within the general market, as well as by submarkets, continues to be monitored closely. The decline reflected in C&I is driven largely by a continued reduction in line utilization, down 3% in the quarter and 4% when compared to last December. Additionally, the year-over-year decline includes the exiting of several classified relationships, the refinancing off-balance sheet of multiple shared national credits, as well as the payoff of certain relationships that we chose not to retain based on underwriting terms offered by others. The decline was offset in part by continued growth in the small business segment, up 8% year over year, which continues to be a focus of our community banking division. The modest increase in agricultural balances year over year is the result of expanding a select number of existing relationships.

The decline reflected in the one-to-four family portfolio year over year is the result of slightly lower mortgage rates as we closed out 2025, resulting in home refinances, and the growth in home equity lines of credit, both on the current quarter and year over year, represent new originations versus an increase in line utilization. As reported, our overall credit metrics remain strong. Delinquent loans increased modestly due primarily to a spike in the one-to-four family portfolio and now represent 0.54% of total loans, up 15 basis points from the linked quarter. This compares to 0.49% reported as of December 31, 2024. Adversely classified loans increased by $19 million in the quarter and now represent 1.65% of total loans, and total non-performing assets at $51.3 million continue to represent a modest 0.31% of total assets.

The net provision for credit losses for the quarter was $2.4 million, including a $1.5 million provision for loan losses and a $945,000 provision related to unfunded loan commitments. Loan losses in the quarter totaled $1.2 million and were offset in part by recoveries totaling $310,000, with net charge-offs for the year representing a nominal six basis points of average total loans. After the provision, the allowance for credit losses totals $160.3 million, providing 1.37% coverage of total loans consistent with prior quarters. I will close by again saying Banner’s moderate risk profile with stable and strong credit metrics, a solid reserve for loan losses, and robust capital levels continues to be a significant source of strength. We are well-positioned to manage through the balance of this economic cycle and the market uncertainty that comes with it. With that, I will hand the microphone over to Rob for his comments.

Rob.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thank you, Jill. We reported $1.49 per diluted share for the fourth quarter compared to $1.54 per diluted share for the prior quarter. For the full year 2025, we reported $5.64 per diluted share compared to $4.88 per diluted share for 2024. The decrease in earnings per share compared to the prior quarter was primarily due to a decrease in the valuation of financial instruments carrying fair value, a loss on the disposal of assets related to software no longer being used, as well as an increase in medical and IT expenses, partially offset by an increase in net interest income. Compared to 2024, the increase in the full year 2025 earnings per share was primarily due to an 8.5% increase in net interest income due to higher net interest margin and growth in earning assets.

Core pre-tax, pre-provision income for the current quarter increased 9%, or $5.5 million, compared to the quarter ended December 2024, while core pre-tax, pre-provision income for the current year increased 14%, or $32 million, compared to the prior year. Our performance metrics remain solid as we reported a return on tangible common equity for the current quarter of 13.11% and a return on tangible common equity for the full year 2025 of 13.16%. As Jill previously mentioned, loan growth was limited during the quarter as the increase in production was mostly offset by an increase in payoffs and reduced line utilization. The loan-to-deposit ratio ended the quarter at 86%, giving us ample capacity to continue to support existing clients and add new clients. Total securities decreased $13 million during the quarter as normal portfolio cash flows were partially offset by security purchases.

Deposits decreased by $273 million during the quarter, primarily due to normal seasonal activity as ag clients used deposits to pay down lines of credit and larger deposit clients started to deploy excess liquidity. Core deposits ended the quarter at 89% of total deposits. Total borrowings increased $40 million during the quarter as we continue to have a low reliance on wholesale borrowings. The tangible common equity ratio increased from 9.5% to 9.84%. As a reflection of our robust capital and strong liquidity positions, Banner repurchased approximately 250,000 shares during the quarter and declared a quarterly dividend of $0.50 per share. Net interest income increased $2.5 million from the prior quarter due to a five basis points increase in net interest margin, as well as average earning assets increasing $60 million during the quarter.

The increase in average earning assets was due to average loan balances increasing $115 million, partially offset by total average interest-bearing cash and investment balances decreasing $55 million. The tax equivalent net interest margin was 4.03% for the current quarter compared to 3.98% for the prior quarter. Earning asset yields decreased four basis points due to a seven basis point decrease in loan yields as floating rate loans repriced down as a result of the 75 basis point reduction in the Fed funds rate. The average rate on new loan production for the current quarter was 6.88% compared to 7.35% for the prior quarter. Funding costs decreased 10 basis points due to average borrowings decreasing $137 million and deposit costs decreasing 7 basis points as deposit pricing was reduced due to the reduction in the Fed funds rate. Non-interest-bearing deposits ended the quarter at 33% of total deposits.

Total non-interest income increased $5.5 million or decreased $5.5 million from the prior quarter, primarily due to recording a loss of $1.4 million on the disposal of assets, which included the write-off of $1 million for software no longer being used, as compared to a $1.4 million gain on the sale of assets in the prior quarter. In addition, the current quarter had a fair value decrease of $2 million on financial instruments carried at fair value. Total non-interest expense was $2.1 million higher than the prior quarter, with increases in medical claims, software expense, and legal expense, as well as lower capitalized loan origination costs. Our strong capital and liquidity levels position us well for 2026. This concludes my prepared comments. Now I’ll turn it back to Mark. Mark.

Mark Greschovich, President and CEO, Banner Corporation: Thank you, Jill and Rob, for your comments on the operating performance of Banner. That concludes our prepared remarks, and Lucy, we will now open the call and welcome questions.

Lucy, Call Coordinator, Banner Corporation: Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Jeff Rulis of DA Davidson. Your line is now open. Please go ahead.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thanks. Good morning. I appreciate the detail on the loan front. Sounds like some payoffs and line utilization impact. Jill, thinking about 2026 and the outlook, payoffs are tough to gauge, but you’re thinking on kind of net growth in the coming year?

Jill Rice, Chief Credit Officer, Banner Corporation: Yeah, Jeff, certainly payoffs are tough to gauge, and I would expect that the commercial real estate payoffs are likely to continue to be a headwind this next year. Still, our pipelines are again building. You saw decent growth this last quarter. We’ve seen positive impact from new bankers hired in the last two years. So all in, if the economy holds up, I’m going to say we would expect to grow our loan book in the mid-single digits again over the course of this next year.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Jill, just kind of the competitive landscape, it seems like the production side is originations pretty strong. Is that much of a headwind, if you will? I mean, that sounds pretty positive if you just want to kind of check in on the competitive environment.

Jill Rice, Chief Credit Officer, Banner Corporation: It’s always been competitive in the spaces that we engage in, Jeff, so I mean, certainly some banks, as I indicated, we lost over the course of the year some credits because we just weren’t going to stretch on some of the terms that people are offering to expand their loan book, but all in, I think we compete well both in the product offering suite we have and in pricing.

Rob Butterfield, Chief Financial Officer, Banner Corporation: I appreciate it. Maybe a similar question for Rob on the margin and that outlook as you top 4%. Some deposit fluctuations into the year, but your expectations for margin ahead?

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah, thanks, Jeff. So I mean, what I’d say is ultimately, I think it’s going to be largely influenced by the level of action from the Federal Reserve. We’ve talked about in the past that if there’s no Fed action in a quarter, then we’d likely expect some NIM expansion as adjustable rate loans continue to reprice up. And even at this point, new production is coming on at higher rates than the average rate of the overall portfolio. If there’s one 25 basis points cut in a quarter or just at the end of a quarter before a quarter, then we would expect that NIM would be more of a flat scenario as deposit repricing would mostly offset the impacts of the floating rates, and we’d also have the benefit of the adjustable rates.

If you get multiple rate cuts in a quarter, then that’s where we would expect that we would see some net interest margin compression. We use Moody’s for our interest rate forecasting. Most recently, in January, they had three rate cuts really in the first half of the year, March, June, and July. If that’s correct, that would suggest somewhat of a flat first half of the year, potentially down a bit in the third quarter and expansion in the fourth quarter. But I think the Fed actions is there’s a lot of uncertainty around that right now because the most recent market stuff I saw, the market is expecting no rate cuts next year. So somewhere between no rate cuts, which would suggest higher net interest margin expansion, and three rate cuts, which would suggest more of a flattish type environment.

So I’ll let everybody pick their own Fed scenario there.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Got it. Thanks, Rob. Appreciate it. I’ll step back.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thanks, Jeff.

Lucy, Call Coordinator, Banner Corporation: The next question comes from Matthew Clark of Piper Sandler. Your line is now open. Please go ahead.

Rob Butterfield, Chief Financial Officer, Banner Corporation: On deposits at the end of December and the average margin in the month of December?

Rob Butterfield, Chief Financial Officer, Banner Corporation: Matthew, could you repeat the question? Good morning, by the way. Glad to have you on the call. I don’t think we came through.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Sure. Just looking for the spot rate on deposits at the end of the year, either interest bearing or total, and then if you had the average margin in the month of December.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah. Matthew, it’s Rob. So spot deposit costs for the month of December were 139. Margin for December was essentially the same as the quarter, right around 403.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Okay. And the 139 is for the month of December, not year-end?

Rob Butterfield, Chief Financial Officer, Banner Corporation: That’s correct. That’s the average for the month, yes.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Got it. Okay. Thank you. And then just on expenses, a couple of unusual items there this quarter. It also seemed like there might have been some transitory expenses. How do you think about that kind of core run rate going into the first quarter?

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah, sure. So it’s not a, I just say in general, it’s not unusual for expenses to bounce around a little bit quarter to quarter. And we saw some of those. We saw an increase in IT expenses as the new loan and deposit origination system was fully rolled out early in the fourth quarter. And then we also saw higher medical claims, which isn’t unusual for the fourth quarter, but I’d just say they were even for the first nine months of the year on medical expenses. They were running lower than typical. And then the fourth quarter kind of made up the difference. So probably medical expenses for the full year were kind of as expected. It was just more back-end loaded than normal. And then we had some higher legal expenses during the current quarter as well.

We had one legal matter that concluded this quarter, and then the capitalized loan costs were down a little bit. As I think about that, going into 2025 or 2026, I would look at the full year 2025 expenses, and then above that for 2026, I would just expect normal inflationary, whatever you want to call that, in that 3% range as far as total expenses in 2026 compared to 2025.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Okay. Great. Last one for me. On special mention and substandard, it looked like about a 55 basis points increase. Can you give us some color on what drove those changes this quarter?

Jill Rice, Chief Credit Officer, Banner Corporation: Sure, Matthew. When you look at special mention, the largest drivers in the increase were related to downgrading a couple of alcoholic beverage-related enterprises due to declining cash flows. Within that category, the largest relationship is approximately $25 million, and the average special mention loan size is modest at $2 million. If we shift over to substandard, we saw a modest increase up $19 million. Within the commercial and construction segments, downgrades continue to be idiosyncratic, and the largest substandard relationship has approximately $19 million outstanding. The average substandard loan remains well under $1 million. There is nothing screaming about a certain industry or segment that we should be worried about.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Okay. Perfect. Thank you.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thank you, Matthew.

Lucy, Call Coordinator, Banner Corporation: Thank you. The next question comes from Andrew Terrell from Stephens. Your line is open. Please go ahead.

Andrew Terrell, Analyst, Stephens: Hey, good morning.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Morning, Andrew.

Andrew Terrell, Analyst, Stephens: If I could go just quickly to capital, obviously still in a very good capital position. Just hoping you could refresh us. I think you still got a million or so shares or maybe a little more on the buyback authorization. You’ve been somewhat active. Just with the valuations at today, talk about the appetite for buyback or potentially increasing the buyback, and then just any update on how you’re approaching M&A right now?

Rob Butterfield, Chief Financial Officer, Banner Corporation: Sure, Andrew. So I’ll start with the capital aspect of it. So I mean, I think as you saw over the last couple of quarters, we’ve taken a number of capital actions middle of the year, repaying the $100 million sub debt, and then increasing the core dividend last quarter. Then as you mentioned, we have repurchased around 250,000 shares for the last two quarters in a row. And we still have about 1.2 million shares that are available under the repurchase authorization right now. We think if you look at the last two quarters, we’ve repurchased the shares right around that $63 level. And so we think that’s an attractive point to be repurchasing shares. So based on where we ended the day yesterday, it’s a little bit above that. We still think that is attractive.

So ultimately, what we’ll be doing during the first quarter here is really monitoring market activity and market conditions, and then also the price of the stock to see if it makes sense to continue to do that. But I think if you look at our capital levels right now, we think the capital—we target capital more of in a range than a specific number, but we’re probably still on that upper end of capital right now. And so that would suggest that if the market conditions are right, we would continue to look at repurchasing shares. Yes, Andrew, and this is Mark. As it relates to M&A, our posture has not changed. We continue to have conversations with parties that we think would be a great combination for Banner.

And given the strong capital position we have, the strong core earnings power of the company, and our market reputation, we think we would continue to be an excellent partner. So as you know, those are a matter of timing. When things work out appropriately, it’s not necessarily something that you can force. So we continue to have very good dialogue with folks that we think would be great partners for Banner.

Andrew Terrell, Analyst, Stephens: Yep. Okay. I appreciate it. And then, Rob, just on the margin, I guess the question is, what’s kind of driving some of the conservatism around your reference? Getting successive rate cuts could lead to margin down. But when I look at fourth quarter of this year, your margin was up when we digested most of the cuts. And then same for Q of 2024, we had a lot of cuts in that quarter, and your margin was still up in that quarter. So I guess what’s kind of driving the conservatism? Are you trying to kind of imply that maybe there’s some lag to the loan repricing on a monthly basis and we should expect some margin headwinds in the first quarter? Just wanted to unpack that maybe a little bit more.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah. So I wouldn’t expect some headwinds against margin necessarily in the first quarter. If you think about it, we did get the Fed rate cut in December. That’s not fully baked in necessarily to the run rate in the first quarter. But I think if you think about it, the one thing that we’re looking at is those adjustable rate loans that have been repricing through the cycle, and then also the new loans coming out at a higher yield. The backlog of those adjustable rate loans that have been repricing is coming down. At one point, I think you look at a year and a half ago, we might have been getting nine basis points a quarter from that. And at this point, it’s maybe a benefit of four basis points a quarter.

And then also, the average new loan yield compared to the average yield of the portfolio is also kind of narrowing as well. So I think the repricing aspect of the loan portfolio, even under a flat rate environment, I think it’s more, you can call it four basis points a quarter at this point. So if the Fed’s on pause and we’re able to maintain funding costs where they’re at right now and we get that backlog, then you’re looking at maybe four basis points a quarter of expansion while the Fed’s on pause. But I’ve gone through the other scenarios. It’s just different once the Fed starts to cut rates because we still have 30% of the book that’s floating rate. And of that 30%, 10% are on their floors right now. So 90% of that continues to reprice down 25 basis points as the Fed cuts.

So that’s just the way we’re looking at it at a high level.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Got it. Okay. Thanks for taking the questions.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thank you, Andrew.

Lucy, Call Coordinator, Banner Corporation: The next question is from Kelly Motter of KBW. Your line is now open. Please go ahead.

Jill Rice, Chief Credit Officer, Banner Corporation: Hey, good morning. Thanks for the question. I apologize if this has been asked earlier. I joined a little late, but just on the tax rate, it looked a bit lower in the fourth quarter, understanding there can sometimes be catch-ups or adjustments for the full year. Maybe Rob, if you could provide what you’re expecting here for the tax rate next year as a normalized number.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah. Thanks, Kelly. So on that one, you are correct. So the fourth quarter, we just had some annual year-end true-up of some of the tax items there. But the rate that we’re expecting is right around 19%. I think that’s what we were for the first nine months of the year. So I think if you’re looking at 2026, it’s probably right around 19%.

Jill Rice, Chief Credit Officer, Banner Corporation: Got it. That’s helpful. And then in terms of it looks like there was some noise too in other fees. I know there was some building lease exit costs that ran through. Was there anything else of note that we should keep in mind as we kind of start to think about a normalized fee rate? Thank you.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Yeah. So the other item in there, so we had a total of $1.4 million loss on the disposal of assets. And part of that was building-related, which we adjusted out of our core numbers to get to the 155 earnings per share for the quarter. But it also included a million-dollar write-off of software-related assets that we’re no longer using. And that’s not typically an item that we back out of our core number. So that’s a million-dollar non-recurring item in there that I wouldn’t expect to see going forward.

Jill Rice, Chief Credit Officer, Banner Corporation: Got it. Thanks for the color. Maybe last one, and I apologize again if this was taken, but for Jill, it seems like payoffs in the move of construction to permanent financing weighed on some growth this quarter. What’s your expectation there? I know that’s been something you’ve been talking about for a while. Is this a continued potential headwind here as we look to 2026?

Yeah, Kelly, I did note that I do expect that commercial real estate payoffs will continue to be a headwind as we move into this next year, so we’re going to project that we’re going to grow our loan book as long as the economy holds up in the mid-single digits over 2026 as well, given the kind of numbers that we’re showing in production, the strength of the new relationship managers we’ve brought on, and the activity they’re bringing to the table as well.

Got it. Appreciate it. I’ll step back. Thank you very much.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thanks, Kelly.

Lucy, Call Coordinator, Banner Corporation: As a reminder, to ask a question, please press star followed by one on your telephone keypad now. The next question comes from Liam Cahill of Raymond James. Your line is now open. Please go ahead.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Hi, good morning, guys. This is Liam on for David.

Rich Arnold, Head of Investor Relations, Banner Corporation: Good morning, Liam.

Rob Butterfield, Chief Financial Officer, Banner Corporation: So just to take it at a higher level, you’ve noted the core deposit seasonality in your prepared remarks, but deposits have increased year-on-year across all of your geographies. Could you discuss some of the key drivers behind that year-on-year growth, and could we maybe expect some similar core deposit growth in 2026 given the new banker ads?

Rich Arnold, Head of Investor Relations, Banner Corporation: Yeah, Liam, it’s Rob. So yeah, I think if you look at it, there’s always some seasonality to deposits. At our core, we are a relationship bank. So as we’re bringing in new clients, we expect those clients not only to come with the loan relationship, but also the deposit relationship. And then also, we’ve been heavily focused on building our small business relationships, and small businesses typically are deposit-rich in nature, where oftentimes their deposits are larger than the loans that we’re giving them. So I think that’s part of the success. And Jill talked about it earlier, the bankers that we’ve added over the last two years starting to get some traction there, and then also seeing some traction on the small business side.

Rob Butterfield, Chief Financial Officer, Banner Corporation: I appreciate it. Thank you. And just one more for me. How are you thinking about deposit betas in 2026, given your already low-cost core deposit base?

Rich Arnold, Head of Investor Relations, Banner Corporation: Yeah, it’s Rob again. So we’ve been modeling 28% for the deposit beta. And that’s essentially, I think, what we’ve seen through the cycle, specifically here in the fourth quarter and the activity that we saw there. We do think that over time, that will start to trend down some. At this point, we’ve been able to take that 28% deposit beta by really taking even the full 25 basis points on some of the exception price clients and also on CDs and then a higher amount even on some of our high-yield savings accounts. But as time goes by, we think that’ll continue to narrow some. So we might get that full 28% on the next cut or two, but I see it trending down in 2026, depending on the level of effective activity.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thank you for the color. I’ll step back.

Rich Arnold, Head of Investor Relations, Banner Corporation: Thanks, Liam.

Jill Rice, Chief Credit Officer, Banner Corporation: Thank you. We have no further questions at this time, so I’d like to hand back to Mark for closing remarks.

Rob Butterfield, Chief Financial Officer, Banner Corporation: Thank you, Lucy. As I’ve stated, we are very proud of the Banner team and our full year 2025 performance, a significant improvement over 2024. Thank you again for your interest in Banner and for joining the call today. We look forward to reporting our results again to you in the future. Have a great day, everyone. Thank you for attending.

Lucy, Call Coordinator, Banner Corporation: This concludes today’s call. Thank you all for joining. You may now disconnect your line.