Banner Corporation (NASDAQ: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $42.6 million, or $1.24 per diluted share, for the fourth quarter of 2023, a 7% decrease compared to $45.9 million, or $1.33 per diluted share, for the preceding quarter and a 22% decrease compared to $54.4 million, or $1.58 per diluted share, for the fourth quarter of 2022. Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago. The decrease in net interest income compared to the preceding quarter and prior year quarter reflects an increase in funding costs, partially offset by an increase in yields on earning assets. Banner’s fourth quarter 2023 results include a $4.8 million net loss on the sale of securities, compared to a $2.7 million net loss on the sale of securities in the preceding quarter and a $3.7 million net loss on the sale of securities in the fourth quarter of 2022. Banner’s fourth quarter 2023 results also include a $2.5 million provision for credit losses, compared to a $2.0 million provision for credit losses in the preceding quarter and a $6.7 million provision for credit losses in the fourth quarter of 2022. Net income was $183.6 million, or $5.33 per diluted share, for the year ended December 31, 2023, compared to net income of $195.4 million, or $5.67 per diluted share, for the year ended December 31, 2022. Banner’s results for the year ended 2023 include a $10.8 million provision for credit losses, a $19.2 million net loss on the sale of securities and a $4.2 million net decrease in the fair value adjustments on financial instruments carried at fair value, compared to a $10.4 million provision for credit losses, a $3.2 million net loss on the sale of securities and an $807,000 net increase in the fair value adjustments on financial instruments carried at fair value during the same period in 2022.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.48 per share. The dividend will be payable February 16, 2024, to common shareholders of record on February 7, 2024.

“Our super community bank business strategy of emphasizing a moderate risk profile and strong relationship banking, continues to provide stable operating performance and has positioned the Company well to weather recent market headwinds,” said Mark Grescovich, President and CEO. “Banner’s performance for the fourth quarter of 2023 benefited from strong loan growth and higher yields on interest-earning assets. However, the continued higher interest rate environment and its effect on funding costs resulted in moderate compression in our net interest margin during the quarter. We continue to maintain very strong credit quality metrics and a solid reserve for potential loan losses. Additionally, we continue to benefit from a strong core deposit base, with core deposits representing 89% of total deposits at quarter end. Banner’s overarching goals continue to be to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events.”

At December 31, 2023, Banner, on a consolidated basis, had $15.67 billion in assets, $10.66 billion in net loans and $13.03 billion in deposits. Banner operates 135 full service branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Fourth Quarter 2023 Highlights

• Revenues were $152.5 million for the fourth quarter of 2023, compared to $154.4 million in the preceding quarter, and $172.1 million in the fourth quarter a year ago.
• Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.1 million in the fourth quarter of 2023, compared to $157.7 million in the preceding quarter and $175.7 million in the fourth quarter a year ago.
• Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago.
• Net interest margin, on a tax equivalent basis, was 3.83%, compared to 3.93% in the preceding quarter and 4.23% in the fourth quarter a year ago.
• Mortgage banking operations revenue was $5.4 million for the fourth quarter of 2023, compared to $2.0 million in the preceding quarter and $2.3 million in the fourth quarter a year ago.
• Return on average assets was 1.09%, compared to 1.17% in the preceding quarter and 1.34% in the fourth quarter a year ago.
• Net loans receivable increased 2% to $10.66 billion at December 31, 2023, compared to $10.46 billion at September 30, 2023, and increased 7% compared to $10.01 billion at December 31, 2022.
• Non-performing assets were $30.1 million, or 0.19% of total assets, at December 31, 2023, compared to $26.8 million, or 0.17% of total assets at September 30, 2023, and $23.4 million, or 0.15% of total assets, at December 31, 2022.
• The allowance for credit losses - loans was $149.6 million, or 1.38% of total loans receivable, as of December 31, 2023, compared to $147.0 million, or 1.38% of total loans receivable as of September 30, 2023 and $141.5 million, or 1.39% of total loans receivable as of December 31, 2022.
• Total deposits decreased to $13.03 billion at December 31, 2023, compared to $13.17 billion at September 30, 2023 and $13.62 billion at December 31, 2022. Core deposits represented 89% of total deposits at December 31, 2023.
• Banner Bank’s estimated uninsured deposits were approximately 31% of total deposits at both December 31, 2023 and September 30, 2023.
• Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and affiliate deposits, were approximately 28% of total deposits at both December 31, 2023 and September 30, 2023.
• Available borrowing capacity was $4.65 billion at December 31, 2023, compared to $4.62 billion at September 30, 2023.
• On-balance sheet liquidity was $2.93 billion at December 31, 2023, compared to $2.86 billion at September 30, 2023.
• Dividends paid to shareholders were $0.48 per share in the quarter ended December 31, 2023.
• Common shareholders’ equity per share increased 9% to $48.12 at December 31, 2023, compared to $44.27 at the preceding quarter end, and increased 13% from $42.59 at December 31, 2022.
• Tangible common shareholders’ equity per share* increased 12% to $37.09 at December 31, 2023, compared to $33.22 at the preceding quarter end, and increased 18% from $31.41 at December 31, 2022.

*Non-GAAP (Generally Accepted Accounting Principles) measure; See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Income Statement Review

Net interest income was $138.4 million in the fourth quarter of 2023, compared to $141.8 million in the preceding quarter and $159.1 million in the fourth quarter a year ago. Net interest margin on a tax equivalent basis was 3.83% for the fourth quarter of 2023, a ten basis-point decrease compared to 3.93% in the preceding quarter and a 40 basis-point decrease compared to 4.23% in the fourth quarter a year ago. Net interest margin for the current quarter was impacted by an increase in funding costs due to an increase in the percentage of deposits being interest bearing and a large mix of higher cost retail CDs, partially offset by a decrease in FHLB advances and increased yields on loans due to the benefit of variable rate interest-earning loans repricing for the first time since the start of the rising rate environment.

Average yields on interest-earning assets increased 12 basis points to 5.06% for the fourth quarter of 2023, compared to 4.94% for the preceding quarter and increased 66 basis points compared to 4.40% in the fourth quarter a year ago. Average loan yields increased 12 basis points to 5.77% compared to 5.65% in the preceding quarter and increased 63 basis points compared to 5.14% in the fourth quarter a year ago. The increase in average yields on interest-earning assets, particularly loans, during the current quarter reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. Total deposit costs were 1.18% in the fourth quarter of 2023, which was a 24 basis-point increase compared to the preceding quarter and a 108 basis-point increase compared to the fourth quarter a year ago. The increase in the costs of deposits was due to an increase in the mix of higher cost retail CDs as well as a larger percentage of core deposits being in interest bearing accounts. The average rate paid on borrowings was 4.77% in the fourth quarter of 2023, a 13 basis-point increase compared to 4.64% in the preceding quarter and a 223 basis-point increase compared to 2.54% in the fourth quarter a year ago. The total cost of funding liabilities was 1.31% during the fourth quarter of 2023, a 23 basis-point increase compared to 1.08% in the preceding quarter and a 113 basis-point increase compared to 0.18% in the fourth quarter a year ago.

A $2.5 million provision for credit losses was recorded in the current quarter (comprised of a $3.8 million provision for credit losses - loans, a $526,000 recapture of provision for credit losses - unfunded loan commitments, a $750,000 recapture of provision for credit losses - available for sale securities and a $23,000 recapture of provision for credit losses - held-to-maturity debt securities). This compares to a $2.0 million provision for credit losses in the prior quarter (comprised of a $2.9 million provision for credit losses - loans, a $346,000 provision for credit losses - unfunded loan commitments, a $1.3 million recapture of provision for credit losses - available for sale securities and a $12,000 recapture of provision for credit losses - held-to-maturity debt securities) and a $6.7 million provision for credit losses in the fourth quarter a year ago (comprised of a $6.0 million provision for credit losses - loans, a $680,000 provision for credit losses - unfunded loan commitments and a $19,000 recapture of provision for credit losses - held-to-maturity debt securities). The provision for credit losses for the current quarter primarily reflects the increasing loan balances and the higher net loan charge-offs, partially offset by an increase in the trading price of bank subordinated debt investments. The provision for credit losses for the preceding quarter primarily reflected increased loan balances and unfunded loan commitments, partially offset by an increase in the trading price on bank subordinated debt investments.

Total non-interest income was $14.1 million in the fourth quarter of 2023, compared to $12.7 million in the preceding quarter and $13.1 million in the fourth quarter a year ago. The increase in non-interest income during the current quarter compared to the preceding quarter was primarily due to a $3.3 million increase in mortgage banking operations revenue and a $793,000 increase in the fair value adjustments on financial instruments carried at fair value during the current quarter, partially offset by a $1.4 million decrease in deposit fees and other service charges and a $2.1 million increase in the net loss recognized on the sale of securities. The increase in non-interest income during the current quarter compared to the prior year quarter was primarily due to a $3.1 million increase in mortgage banking operations revenue, partially offset by a $1.3 million decrease in deposit fees and other service charges and a $1.1 million increase in the net loss recognized on the sale of securities. Total non-interest income was $44.4 million for the year ended December 31, 2023, compared to $75.3 million for the same period a year earlier.

Mortgage banking operations revenue, including gains on one- to four-family and multifamily loan sales and loan servicing fees, was $5.4 million in the fourth quarter of 2023, compared to $2.0 million in the preceding quarter and $2.3 million in the fourth quarter a year ago. The increase from the preceding quarter and the fourth quarter of 2022 primarily reflects the reversal of the lower of cost or market adjustment on multifamily loans held for sale recognized during the current period due to the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023. In addition, the volume of one- to four-family loans sold during the current quarter increased compared to the prior year quarter, although overall volumes remained low due to reduced refinancing and purchase activity amid rising interest rates. The increase in volume of one- to four-family loans sold during the current quarter compared to the prior year quarter was partially offset by a decrease in the gain on sale margin of one- to four-family loans sold. Home purchase activity accounted for 92% of one- to four-family mortgage loan originations in the fourth quarter of 2023, compared to 90% in both the preceding quarter and in the fourth quarter of 2022. For the fourth quarter of 2023, mortgage banking operations revenue included a $3.5 million lower of cost or market upward adjustment on multifamily loans held for sale, attributed to the transfer of $43.5 million of multifamily loans from held for sale to the held for investment portfolio. For the third quarter of 2023, we recorded a $456,000 lower of cost or market downward adjustment on multifamily loans held for sale, driven by increases in market interest rates. During the fourth quarter of 2022, a $723,000 lower of cost or market upward adjustment was recorded due to the transfer of a pool of multifamily loans held for sale to held for investment portfolio loans, partially offset by a negative fair value adjustment on multifamily loans held for sale.

Fourth quarter 2023 non-interest income included a $139,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading and limited partnership investments, and a $4.8 million net loss on the sale of securities. In the preceding quarter, non-interest income included a $654,000 net loss for fair value adjustments and a $2.7 million net loss on the sale of securities. In the fourth quarter a year ago, non-interest income included a $157,000 net gain for fair value adjustments and a $3.7 million net loss on the sale of securities.

Total revenue decreased 1% to $152.5 million for the fourth quarter of 2023, compared to $154.4 million in the preceding quarter, and decreased 11% compared to $172.1 million in the fourth quarter of 2022. Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $157.1 million in the fourth quarter of 2023, compared to $157.7 million in the preceding quarter and $175.7 million in the fourth quarter a year ago. Total revenue was $620.4 million for the year ended December 31, 2023, compared to $628.4 million for the year ended December 31, 2022. Adjusted revenue* was $643.9 million for the year ended December 31, 2023, compared to $623.1 million for the year ended December 31, 2022.

Total non-interest expense was $96.6 million in the fourth quarter of 2023, compared to $95.9 million in the preceding quarter and $99.0 million in the fourth quarter of 2022. The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $627,000 decrease in capitalized loan origination costs, a $478,000 increase in occupancy and equipment expense, a $916,000 increase in payment and card processing services expense, and a $430,000 increase in REO operations, partially offset by a $980,000 decrease in salary and employee benefits expense, primarily due to decreases in severance expenses, and a $775,000 decrease in professional and legal expense. The prior quarter included $996,000 of Banner Forward expenses related to the consolidation of two branch locations, as well as expenses related to the discontinuation of the Multifamily Originated for Sale business line due to the continued lack of an active secondary market for originated for sale multifamily loans. The decrease in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects decreases in occupancy and equipment expense and professional and legal expense, partially offset by a decrease in capitalized loan origination costs and increases in payment and card processing services expense and deposit insurance expense. The prior year quarter included a $3.5 million accrual related to a potential settlement of a pending litigation matter. For the year ended December 31, 2022, total non-interest expense was $382.5 million, compared to $377.3 million for the year ended December 31, 2022. Banner’s efficiency ratio was 63.37% for the fourth quarter of 2023, compared to 62.10% in the preceding quarter and 57.52% in the same quarter a year ago. Banner’s adjusted efficiency ratio* was 60.04% for the fourth quarter of 2023, compared to 59.00% in the preceding quarter and 54.43% in the year ago quarter.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a discussion and reconciliation of non-GAAP financial measures.

Federal and state income tax expense totaled $10.7 million for the fourth quarter of 2023 resulting in an effective tax rate of 20.1%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate for the quarter ended December 31, 2023, was 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased to $15.67 billion at December 31, 2023, compared to $15.51 billion at September 30, 2023, and decreased from $15.83 billion at December 31, 2022. The total of securities and interest-bearing deposits held at other banks totaled $3.48 billion at December 31, 2023, compared to $3.44 billion at September 30, 2023 and $4.28 billion at December 31, 2022. The decrease compared to the prior year quarter was primarily due to reverse repurchase agreements maturing during the first six months of 2023 and the sale of securities. The average effective duration of the securities portfolio was approximately 6.5 years at both December 31, 2023 and 2022.

Total loans receivable increased to $10.81 billion at December 31, 2023, compared to $10.61 billion at September 30, 2023, and $10.15 billion at December 31, 2022. One- to four-family residential loans increased 6% to $1.52 billion at December 31, 2023, compared to $1.44 billion at September 30, 2023, and increased 29% compared to $1.17 billion at December 31, 2022. The increase in one- to four-family residential loans was the result of one- to four-family construction loans converting to one- to four-family portfolio loans upon the completion of the construction phase and new production. Multifamily real estate loans increased 6% to $811.2 million at December 31, 2023, compared to $766.6 million at September 30, 2023, and increased 26% compared to $645.1 million at December 31, 2022. The increase in multifamily loans was the result of the transfer of $43.5 million of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023; when compared to the prior year quarter the primary driver for the increase was the conversion of affordable housing construction loans to the multifamily portfolio upon the completion of the construction phase. Agricultural business loans decreased 1% to $331.1 million at December 31, 2023, compared to $334.6 million at September 30, 2023, primarily due to operating line paydowns and increased 12% compared to $295.1 million at December 31, 2022, primarily due to new loan production and advances on agricultural lines of credit.

Loans held for sale were $11.2 million at December 31, 2023, compared to $54.2 million at September 30, 2023, and $56.9 million at December 31, 2022. One- to four- family residential mortgage loans sold totaled $65.6 million in the current quarter, compared to $87.3 million in the preceding quarter and $39.3 million in the fourth quarter a year ago. The decrease in loans held for sale during the current quarter was due to the previously mentioned transfer of multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023; there were no multifamily loans held for sale at December 31, 2023.

Total deposits decreased to $13.03 billion at December 31, 2023, compared to $13.17 billion at September 30, 2023 and $13.62 billion a year ago. The decline in deposits from a year ago was primarily due to interest rate sensitive clients shifting a portion of their non-operating deposit balances to higher yielding investments. Non-interest-bearing account balances decreased 8% to $4.79 billion at December 31, 2023, compared to $5.20 billion at September 30, 2023, and decreased 22% compared to $6.18 billion at December 31, 2022. Core deposits were 89% of total deposits at both December 31, 2023 and September 30, 2023 and were 95% of total deposits at December 31, 2022. Certificates of deposit increased 1% to $1.48 billion at December 31, 2023, compared to $1.46 billion at September 30, 2023, and increased 104% compared to $723.5 million a year earlier. The increase in certificates of deposit during the current quarter compared to the preceding quarter and fourth quarter a year ago was principally due to clients seeking higher yields moving funds from core deposit accounts to higher yielding certificates of deposit. The increase in certificates of deposit from the fourth quarter a year ago was also due to a $108.1 million increase in brokered deposits.

Banner Bank’s estimated uninsured deposits were $4.08 billion or 31% of total deposits at December 31, 2023, compared to $4.08 billion or 31% of total deposits at September 30, 2023. The uninsured deposit calculation includes $305.3 million and $300.2 million of collateralized public deposits at December 31, 2023 and September 30, 2023, respectively. Uninsured deposits also include cash held by the holding company of $108.2 million and $97.8 million at December 31, 2023 and September 30, 2023, respectively. Banner Bank’s estimated uninsured deposits, excluding collateralized public deposits and cash held at the holding company, were 28% of total deposits at both December 31, 2023 and September 30, 2023.

Banner had $323.0 million of FHLB borrowings at December 31, 2023, compared to $140.0 million at September 30, 2023 and $50.0 million a year ago. At December 31, 2023, Banner’s off-balance sheet liquidity included additional borrowing capacity of $2.97 billion at the FHLB and $1.56 billion at the Federal Reserve as well as federal funds line of credit agreements with other financial institutions of $125.0 million.

Subordinated notes, net of issuance costs, were $92.9 million at December 31, 2023 compared to $92.7 million at September 30, 2023 and $98.9 million at December 31, 2022. The decrease in subordinated notes from the prior year was due to Banner Bank’s purchase of $6.5 million of Banner’s subordinated debt during the second quarter of 2023.

At December 31, 2023, total common shareholders’ equity was $1.65 billion, or 10.55% of total assets, compared to $1.52 billion or 9.81% of total assets at September 30, 2023, and $1.46 billion or 9.20% of total assets at December 31, 2022. The increase in total common shareholders’ equity at December 31, 2023 compared to September 30, 2023 was primarily due to a $103.8 million decrease in accumulated other comprehensive loss, primarily due to an increase in the fair value of the security portfolio as a result of a decrease in market interest rates during the fourth quarter of 2023 and by a $26.0 million increase in retained earnings as a result of $42.6 million in net income, offset by the accrual of $16.7 million of cash dividends during the fourth quarter of 2023. The increase in total common shareholders’ equity from December 31, 2022 reflects a $116.9 million increase in retained earnings and a $73.6 million decrease in accumulated other comprehensive loss, primarily due to an increase in the fair value of the security portfolio as a result of a decrease in interest rates during the fourth quarter of 2023, and the sale of securities during 2023. At December 31, 2023, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.27 billion, or 8.33% of tangible assets*, compared to $1.14 billion, or 7.54% of tangible assets, at September 30, 2023, and $1.07 billion, or 6.95% of tangible assets, a year ago.

*Non-GAAP financial measures. See, “Additional Financial Information - Non-GAAP Financial Measures” on the final two pages of this press release for a reconciliation of non-GAAP financial measures.

Banner and Banner Bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At December 31, 2023, Banner’s estimated common equity Tier 1 capital ratio was 11.97%, its estimated Tier 1 leverage capital to average assets ratio was 10.56%, and its estimated total capital to risk-weighted assets ratio was 14.58%. These regulatory capital ratios are estimates, pending completion and filing of Banner’s regulatory reports.

Credit Quality

The allowance for credit losses - loans was $149.6 million, or 1.38% of total loans receivable and 506% of non-performing loans, at December 31, 2023, compared to $147.0 million, or 1.38% of total loans receivable and 560% of non-performing loans, at September 30, 2023, and $141.5 million, or 1.39% of total loans receivable and 615% of non-performing loans, at December 31, 2022. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $14.5 million at December 31, 2023, compared to $15.0 million at September 30, 2023, and $14.7 million at December 31, 2022. Net loan charge-offs totaled $1.1 million in the fourth quarter of 2023, compared to net loan charge-offs of $663,000 in the preceding quarter and net loan charge-offs of $496,000 in the fourth quarter a year ago. Non-performing loans were $29.6 million at December 31, 2023, compared to $26.3 million at September 30, 2023, and $23.0 million a year ago.

Substandard loans were $125.4 million at December 31, 2023, compared to $124.5 million at September 30, 2023, and $137.2 million a year ago. The decrease from the comparable quarter a year ago primarily reflect risk rating upgrades as well as the payoff of substandard loans.

Total non-performing assets were $30.1 million, or 0.19% of total assets, at December 31, 2023, compared to $26.8 million, or 0.17% of total assets, at September 30, 2023, and $23.4 million, or 0.15% of total assets, a year ago.

Conference Call

Banner will host a conference call on Friday January 19, 2024, at 8:00 a.m. PDT, to discuss its fourth quarter results. Interested investors may listen to the call live at www.bannerbank.com. Investment professionals are invited to dial (833) 470-1428 using access code 238589 to participate in the call. A replay will be available for one week at (866) 813-9403 using access code 197139 or at www.bannerbank.com.

About the Company

Banner Corporation is a $15.67 billion bank holding company operating a commercial bank in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “potential,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner. Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner’s operating and stock price performance.

Factors that could cause Banner’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: (1) potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth, or increased political instability due to acts of war; (2) changes in the interest rate environment, including the recent increases in the Board of Governors of the Federal Reserve System (the “Federal Reserve”) benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; (3) the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; (4) the effects of any federal government shutdown; (5) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (6) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (7) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (8) competitive pressures among depository institutions; (9) the effect of inflation on interest rate movements and their impact on client behavior and net interest margin; (10) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (11) fluctuations in real estate values; (12) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (13) the ability to access cost-effective funding; (14) disruptions, security breaches or other adverse events, failures or interruptions in, or attacks on, information technology systems or on the third-party vendors who perform critical processing functions; (15) changes in financial markets; (16) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (17) the costs, effects and outcomes of litigation; (18) legislation or regulatory changes, including but not limited to changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (19) changes in accounting principles, policies or guidelines; (20) future acquisitions by Banner of other depository institutions or lines of business; (21) future goodwill impairment due to changes in Banner’s business or changes in market conditions; (22) effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; (23) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and (24) other risks detailed from time to time in Banner’s other reports filed with and furnished to the Securities and Exchange Commission including Banner’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.