Hello everyone and welcome to the Banner Corporation Second Quarter 2025 Conference Call and webcast. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Mark Grescovich, President and CEO, to begin. Mark, please go. Thank you, Nadia, and good morning everyone. I would also like to welcome you to the second quarter 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, forecast 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 risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and a recently filed Form 10-Q for the quarter ended March 31, 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 second quarter 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. 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 want 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 $45.5 million, or $1.31 per diluted share for the quarter ended June 30, 2025. This compares to a net profit to common shareholders of $1.15 per share for the second quarter of 2024 and $1.30 per share for the first quarter of 2025. Our strategy to maintain a moderate risk profile and the investments we have made and continue to make in order to improve operating performance have positioned the company well for the future. 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. Rob will discuss a number of these items in more detail shortly. 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, building and lease exit costs, and changes in fair value of financial instruments. Our second quarter 2025 core earnings were $62 million compared to $52 million for the second quarter of 2024. Banner's second quarter 2025 revenue from core operations was $163 million compared to $150 million for the second quarter of 2024. 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 1.13% for the second 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. Further, we continued our solid organic growth with loans increasing 5% and core deposits increasing 4% over the same period last year. Reflective of this performance, coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 13% from the same period last year, we announced a core dividend of $0.48 per common share. Finally, I'm pleased to say that w'e 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 named Banner one of the best regional banks in the country. J.D. J.D. Power named Banner Bank the best bank in the Pacific Northwest for retail client satisfaction. Our company was recently certified by Great Places 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, the Kroll Bond Rating Agency affirmed all of Banner's investment-grade debt and deposit ratings, and as we have 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 T hank you, Mark, and good morning, everyone. As reflected in our earnings release, loan originations were strong. We reported solid loan growth across multiple product lines, and Banner's credit metrics remained stable. Loan originations increased 80% when compared to the linked quarter, with commercial real estate up 484%, C&I originations up 96%, and construction and land development increasing 43%, respectively, all while commercial and commercial real estate pipelines continue to build. This level of activity reflects a certain amount of business confidence in spite of the continuing higher rate environment and yet to be finalized trade negotiations. Loan outstandings grew by $252 million in the quarter, or 9% on an annualized basis, and are up 5% year over year in line with our year-to-date expectations. The primary drivers of the growth were owner-occupied commercial real estate up $104 million, C&I loans up $65 million, and the construction and development book with one to four family construction up $48 million, land development up $21 million, commercial construction up $13 million, partially offset by expected payoffs in the multifamily construction portfolio. The growth in owner-occupied commercial real estate is a mix of new middle market clients, expansion of existing relationships, and continued solid performance in new small business generations. The C&I story is similar, with growth coming from the expansion of existing relationships, increased line utilization, and meaningful small business originations. The residential construction portfolio at 5% of total loans continues to be diversified across markets and product mix, and the level of complete and unsold inventory remains below historical norms as builders have become more cautious with replacement starts in this extended high rate environment. The increase in land and land development reflects the builders' need to replenish finished lot inventory, with land development financing reserved for the strongest vertically integrated clients within the portfolio. Aggregating all business lines in the construction portfolio, the total remains balanced at 15% of total loans. Agricultural loans increased 3% in the quarter as both the size of operating line and line utilization increased to cover higher operating costs and normal seasonal activity. The growth in consumer one-to-four family secured loans reflects the strong home equity promotion that occurred in the second quarter. Circling back to Banner's credit metrics, delinquent loans declined to 0.41% of total loans as compared to 0.63% last quarter and 0.29% as of June 30, 2024. Adversely classified loans also declined in the quarter over quarter, down $8.3 million and represent 1.62% of total loans, an 11 basis point decrease when compared to March 31. In spite of the $7 million increase in the quarter, nonperforming assets remain modest at 0.30% of total assets. Nonperforming loans total $43 million, the majority of which are consumer related, primarily residential mortgage loans which involve prolonged resolution timelines given consumer protection regulations. REO balances total $6.8 million, up $3.3 million in the quarter as we completed the foreclosure on an industrial property and two small single family properties during the quarter. Loan losses in the quarter totaled $1.7 million and were offset in part by recoveries totaling $600,000. The net provision for credit losses for the quarter was $4.8 million, including a $4.2 million provision for loan losses and a $588,000 provision related to unfunded loan commitments. The provision was largely driven by the strong loan growth, with the reserve for credit losses providing coverage of 1.37% of total loans, which compares to 1.38% as of the linked quarter and 1.37% as of June 30, 2024. Last quarter I noted that the level of economic uncertainty coupled with the myriad of policy changes that were being implemented created a potential headwind that could negatively impact our clients and communities. To date that has largely not materialized, evidenced by the strong loan originations and growth in the quarter as the implementation of international tariffs were paused. With those policy changes again being suggested as imminent, I am compelled to reiterate that if adopted, they will almost certainly have a negative impact on the West Coast economies with the majority of the burden borne by the small business sector and further stressing the consumer. Still, in these uncertain times, Banner's super community delivery model coupled with a consistent approach to underwriting credit has enabled us to expand existing and grow new relationships while maintaining our moderate risk profile. Our strong balance sheet, robust capital base, and solid reserve for loan losses continue to serve us well. With that, I will hand the microphone over to Rob for his comments. Great. Thank you Jill. We reported $1.31 per diluted share for the second quarter compared to $1.30 per diluted share for the prior quarter. The $0.01 increase in earnings per share was primarily due to an increase in net interest income, partially offset by the current quarter including costs associated with consolidating back office space as well as a higher provision for credit losses due to growth in the loan balances. We experienced strong positive operating leverage during the quarter compared to both the prior quarter and the quarter ended June 30, 2024, as core tax pre-provision income increased 6.6% or $3.9 million compared to the prior quarter and increased 19% or $10 million compared to the year ago. Quarter total loans increased $265 million during the quarter with portfolio loans increasing $252 million or nearly 9% on an annualized basis, and held for sale loans increased $13 million. The loan to deposit ratio at the end of the quarter was 87%. Total securities decreased $55 million, primarily due to normal portfolio cash flows. Deposits decreased by $66 million during the quarter due to core deposits decreasing $40 million as a result of normal seasonal activity. Time deposits decreased $26 million due to a $25 million decrease in broker deposits. Core deposits at the end of the quarter were 89% of total deposits, same as the prior quarter. Total borrowings increased $309 million during the quarter as FHLB advances were used to temporarily fund loan growth. Banner's liquidity and capital profile continue to remain strong with a robust core funding base, a low reliance on wholesale borrowing, and significant off-balance sheet borrowing capacity as a reflection of our robust capital and strong liquidity positions. Banner called and repaid $100 million of subordinated notes at the end of the quarter. Net interest income increased $3.3 million from the prior quarter due to average interest earning assets increasing $188 million. One more interest earning day in the current quarter. The increase in average earning assets was due to average loan balances increasing $223 million, partially offset by total average interest bearing cash and investment balances decreasing $36 million. The earning asset yield continues to benefit from a remixing out of securities and into loans. Tax code on net interest margin was 3.92%, same as the last quarter. Earning asset yields increased 5 basis points due to a 5 basis point increase in loan yields as adjustable rate loans continue to reprice higher and new loans are being originated at rates higher than the average yield on the loan portfolio. The average rate on new loan production for the quarter was 7.27% compared to 8.01% for the prior quarter. The reduction was due to a higher percentage of production coming from owner occupied CRE and C&I. In the current quarter, funding cost increased 5 basis points as a result of using FHLB advances to temporarily fund loan growth and seasonal tax deposit declines. Deposit costs were 1.47% for the current quarter, which was consistent with the prior quarter. Noninterest bearing deposits ended the quarter at 33% of total deposits. Total noninterest income decreased $1.4 million from the prior quarter primarily due to a loss of $919,000 on the disposal of assets related to back office space consolidation and a $227,000 net difference in the fair value adjustments on financial instruments carried at fair value. Total noninterest expense was similar to the prior quarter with increases in salary and benefits, information technology, marketing, and REO expenses, which were offset by higher capitalized loan origination expense. The current quarter included $834,000 of lease termination costs associated with back office space consolidation. Our strong capital and liquidity levels position us well to continue to execute on our super community bank business model. This concludes my prepared comments. Now I'll turn it back to Mark. Thank you, Jill and Rob, for your comments. That concludes our prepared remarks, and Nadja will now open the call. We welcome your questions. Great. Thank you. If you would like to ask a question, please press Star followed by one on your telephone keypad. If you would like to remove your question, please press Star followed by two. When preparing to ask your question, please ensure your phone is muted locally. Our first question goes to David Feaster of Raymond James. David, please go ahead. Hey, good morning everybody. Good morning, David. I just wanted to follow up, maybe on Jill, you touched on it a bit about the improvement in originations. It is really an impressive increase, and I was just hoping you could elaborate maybe a bit more. From your standpoint, did anything change, or do you feel like your customers are more comfortable with the broader economy, or was there any kind of a timing issue? I'm just curious whether there's anything to read into that and just kind of how the pipelines are holding up, just given that increase in originations. The increase in originations certainly pulled some of the pipeline out, and they're rebuilding now. If you look back historically, I think what you would see, David, is that Q1 and Q3 are generally slower than Q2 and Q4. The tariff noise that happened at the end of Q1 certainly slowed things down there, and the policy changes that opened back up a little bit pulled some of that through. What was muted loan growth in Q1 came in, in Q2. At the end of the day, what I would say to you is that I'm still expecting us to hit that mid single digit growth rate for the year. I expect we'll see a little bit of a pullback in Q3. We had a 5% annualized year over year in Q1, we had a 5% annualized year- over year in Q2, and that's roughly what we're projecting for the year of 2025. Okay, that's helpful. Maybe just touching on the funding side a bit, you know, anecdotally we're hearing a lot more competition on the deposit side as growth has increased across the industry. Could you just maybe touch on, obviously there's some seasonality too, but just kind of curious what you're seeing on the core deposit front, some initiatives that you got in place to maybe drive core deposits, and maybe just how you think about funding that additional loan growth over the back half of the year. Yeah, David. Just from a. This is Rob Just from an overall pressure on deposits, we're not necessarily seeing competition heat up on deposits at this point. We're not seeing kind of competitive peer banks increasing rate specials right now. Everything seems to be a bit more static. Deposits are always highly competitive, so let's just keep that in mind. The ultra competitive environment that we experienced a year ago is not quite what we're seeing right now. Our whole philosophy all along has been relationship banking, and our expectation is that as we are bringing in new clients, we expect it to come with the total relationship, not only the loans, but also the deposits. We've also talked about that we're heavily focused on small business, and small business tend to be deposit rich in their relationships, so that tends to help as well. Okay. To the extent that loan growth continues to outpace deposits, would you expect to bridge that gap? Could you remind us the cash flows from the securities book? Would you expect to bridge the gap with, or plug it with, FHLB advances, or is there any shift in appetite to maybe look at repositioning securities or selling anything to free up some liquidity to fund the growth that you guys are seeing? Yes. David, on the security portfolio, first of all, it's about $60 million a quarter. The cash flows that are coming off right now, we're not currently planning any kind of repositioning, but we remain some flexibility there, just depending on if market conditions change. What was the first part of the question? I'm sorry, I'm trying to. To the extent. That again, growth exceeds core deposit growth. Is the FHLB advances kind of a plug, or just, you know, kind of curious how you think about funding your growth going forward? Yeah, it was a plug for this quarter, certainly. I think that's why we saw that increase in funding costs during the quarter. Deposit costs were flat, but funding costs were up because of the combination of two things: both the really strong loan growth that we had for the quarter, and also just normal seasonal deposit outflows that we experienced during the first two months of the quarter. That's why you saw FHLB advances increase. If normal seasonality returns, we would expect that we would see deposit growth happen in the third quarter. Deposit growth could very well outpace loan growth in the third quarter if historical trends come in line. Usually during the third quarter, that's when we see our ag clients, their crops come in, cash comes in from that. Historically, we've always seen increases in deposits during the third quarter. Okay, that's helpful. Thanks, everybody. Thanks, David. The next question, go to Andrew Terrell of Stephens. Andrew, please go ahead. Hey, good morning. Good morning. If I could just finish up kind of on the margin of funding there, the sub debt that was redeemed or paid off this quarter, do you have the rate on that or the cost of it? Just trying to get a sense for the rate of what's remaining? Yeah, the cost on that at the time, it was 5%. There was also amortization of some of the original debt issuance costs there. It was about $5.50 million was the all-in cost on that sub debt. We would expect some pickup reduction in funding costs, because now, effectively, if you move that from the $5.50 million to FHLB advances, at least temporarily, they're in the 4.50% range. Maybe we pick up 100 basis points on that. Yep, got it. Okay. I appreciate it. Maybe sticking with you, Rob, on just the expense base, you definitely had maybe a little bit of a benefit this quarter from the deferred origination costs. It sounds like maybe loan growth is a little bit slower in the 3Q. Just hoping to get a sense of kind of the puts and takes of the expense base into the back half of the year and if you have kind of an expected quarterly run rate. Yeah. So Andrew, on the expense side of the equation, we continue to go live with some of the different modules on the new deposit loan origination system. In the second half of the year, we would expect IT expenses to increase. What we're looking at is over the longer term offsetting a portion of that with consolidation of some additional back office space. I think you saw some of those nonrecurring expenses come through during the current quarter, but we would probably expect that we continue to see some nonrecurring expenses come through probably over the next three or four quarters related to that specific initiative. If you think about a run rate, what we talked about is the first quarter was probably a decent run rate that we would expect. If you layer in just normal inflationary changes as you go forward from there, as you mentioned, the second quarter was down and that was partially driven really by the higher capitalized loan cost, higher origination, just due to the higher originations. If you think about Q1, it was really low originations historically as well. We would expect capitalized loan costs to probably be somewhere in between those two. Got it. Okay, thank you. I just wanted to ask maybe for Mark, the M&A environment seems like it's maybe a little more amicable today and we've seen quite a few deals announced. Just curious if anything has changed in terms of your view on M&A, how palatable you see it being today. Also, any update on status of discussions or how M&A fits into the Banner strategy over the near to medium term? Thank you, Andrew, for the question. Clearly, there's been a number of transactions that have been announced. I think certainly the M&A environment has picked up and conversations have picked up. What I would remind you is that our organization is totally focused on our organic business operation. As you can see by the numbers that we put up, quarter over quarter and year over year, the organic business model and our execution, we're very focused on it and it's very successful. Opportunistic M&A is something we will continue to look at. I don't feel compelled that we have to do anything. It is simply something that, you know, I think the entire industry is going to continue to look to some consolidation to get additional efficiencies. We remain very focused on our organic business model. Great. Thank you for taking the questions. Thank you, Andrew. The next question goes to Jeff Rulis of D.A. Davidson. Jeff, please go ahead. Thanks. Good morning, Jill. I had a question about that. Morning, Mark, the loan growth comment you made about a pullback in the third quarter, was that a pullback from the 9% pace from 2Q or a net runoff? My guess is it's still positive. Correct? Yeah, it's a pullback from the 9% growth rate. If you look in our disclosures, right, if you just quarter over quarter, third quarter is generally a little slower than second quarter. Got it. Thanks for clarifying. Rob, on the back to the margin, you know, you got that the pickup or the reduction from the sub debt move as well as I guess if loan growth. Levels off or slows. Down a little bit and FHLB needs are somewhat reduced, and you get that maybe the seasonal pickup in deposits frames up a pretty good margin outlook. I guess if you think about the second half, absent any Fed moves expectations there, that sounds like that's. More I. Guess, tailwinds than headwinds on the margin. Yeah, I think that's right, Jeff. As long as the Fed is on pause, which, you know, we use Moody's. I think last forecast I saw from them, they were going to assuming no rate cut until September. That's a long time from now. We'll see what really happens and then an additional one in December. Under that scenario, we would expect loan yields to continue to increase 4 to 5 basis points a quarter. The third quarter we'd see that, you know, kind of the same clip that we experienced during the second quarter as far as loan yield expansion. The funding side is where, you know, there's probably a little less predictability. If we do assume that deposit costs would remain flat, where we could see the improvement in the funding costs would be that normal seasonal activity. If that third quarter seasonal increase comes in deposits, then we'd have lower reliance on FHLB advances, which would reduce the funding cost. Got it. Thank you. Last one for me was maybe on. The credit side where the risk rating downgrade. We assume, Jill, you're cautious on small business. Are those the areas that added to those balances this quarter? You kind of faded out on me, Jeff. The decrease in substandard this quarter was really a mix. We had several upgrades, a couple of payoffs, and then a handful of downgrades into substandard for that net change of $8.3 million. The agricultural sector has experienced more downgrades due to the pressure on commodities prices and input costs. We are seeing some continued pain in the ag sector. I'll remind you it's 3% of the loan portfolio, 50% operating lines and 50% real estate secured. I continue to watch the small business sector looking forward. We haven't seen real pain in it yet. The delinquencies are pretty static in that as well. It's just where I think the pain of the tariffs will ultimately land before they get pushed to the final consumer. Hopefully that answered your question as you were fading out on me, Jeff. If I didn't hit it all. Sorry. Okay, sorry, I think it was a headset thing. The little bump in nonperforming was mostly ag. No, that was substandard. Sorry, Jeff. The bump in nonperforming is almost exclusively one to four family residential properties due to that extended time period and, you know, the way we have to work with them with consumer protection laws, they take a long time to work their way through. Sure. Okay, that's good detail. Thank you. Thanks Jeff. Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. The next question goes to Kelly Motta of KBW. Kelly, please go ahead. Hey, good morning. Thanks for the question. Thought maybe I would start off by circling back on the margin. There's been a lot of moving parts, and I appreciate all the color thus far. Wondering particularly in light of the really strong loan growth, I know one of the drivers of margin ahead has been just the back book repricing of the loan book. Wondering how spreads are holding up, where new pricing is coming in, and if there's a lot of color on the deposit competition. Wondering how things are holding up on the loan side in terms of pricing and spreads. Thank you. Kelly, on the loan side, pricing on the term pieces are pretty, they are holding up there. There hasn't been a lot of change in that. Where we're going to see the change will be in the variable rate portfolio when the rates reset. If you look at the originations and see the dip in the yields quarter over quarter, it was really the different mix between the product type, less construction and more C&I and owner occupied commercial real estate. In general, the yields are holding up. Got it. I think, Rob, the commentary on prior calls has been like roughly a 5 basis point increase in loan yield to absent Fed cuts, which would cut into that. Wondering if that kind of rough rule of thumb still holds in terms of modeling from the NIM perspective. Yeah, I think that's right. I would say four to five basis points is what I would expect, and I think the modeling is showing that would continue as long as the Fed is on pause for the next handful of quarters. Over time, that backlog of adjustable rate loans that haven't repriced through the cycle kind of continues to dwindle. Over time, we expect that to trend down, but in the near term we would expect it in that four to five basis point range. Got it. That's helpful, maybe. Last question for me on loan growth. Obviously it was a really good quarter. Wondering, Jill, are you seeing any particular markets where there's been better opportunities or the activity is holding up a bit better? Just wondering if there's any sort of regional differences or color on that front that you could provide. Yeah, Kelly, I would say this past quarter, largely when you think of the more middle market space, it was more Pacific Northwest generated than California. I think when you look at the small business origination, both C&I and the owner occupied CRE, that's broad based across the footprint. I would add that I would expect to see some solid growth coming out of California as we've added several seasoned relationship managers recently to that market. I expect more growth coming in the California market in the near term. Got it. That's helpful. I'll step back. Thank you so much. Thank you, Kelly. It appears we have no further questions. I'll hand back to Mark for any closing comments. Thank you, Nadia. As I stated, we're very proud of the Banner team and our second quarter 2025 performance. Thank you for your interest in Banner and joining our call today. We look forward to reporting our results again to you in the future. Have a great day, everyone. Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.