← Back to BANR filing summaryOriginal filing text · Part I
Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Banner Corporation · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
View complete filing on SEC EDGAR ↗This is the extracted source text from the SEC filing. Formatting may differ from the original document.
Market Risk and Asset/Liability Management 64
Sensitivity Analysis 65
Item 4 – Controls and Procedures 68
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings 69
Item 1A – Risk Factors 69
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 70
Item 3 – Defaults upon Senior Securities 70
Item 4 – Mine Safety Disclosures 70
Item 5 – Other Information 70
Item 6 – Exhibits 71
SIGNATURES 73
2
Table of Contents
All references to “Banner” refer to Banner Corporation and those to the “Bank” refer to its wholly-owned subsidiary, Banner Bank. As used throughout this report, the terms “we,” “our,” “us,” or the “Company” refer to Banner Corporation and its consolidated subsidiaries, unless the context otherwise requires.
Special Note Regarding Forward-Looking Statements
Certain matters in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance and projections of financial items, including statements about our financial condition, liquidity and results of operations. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements are inherently subject to numerous risks and uncertainties, including ongoing market volatility and evolving global conditions, which may cause actual results to differ materially from those expressed or implied. These factors include, but are not limited to:
•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 labor shortages, elevated inflation, recessionary pressures, or slowing economic growth;
•Changes in interest rate levels and volatility, and the timing and pace of such changes, including actions by the Federal Reserve, which could materially affect our net interest margin, funding costs, asset values, access to capital and liquidity;
•The impact of inflation and related monetary and fiscal policy responses, and their impact on consumer and business behavior;
•Geopolitical developments and international conflicts, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, commodity prices, or economic activity in specific industry sectors, including, but not limited to, agriculture-based lending;
•The effects of a federal government shutdown, a debt ceiling standoff, or other fiscal policy uncertainty;
•The impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry on investor and depositor sentiment;
•Expectations regarding our key growth initiatives and strategic priorities;
•Credit risks from 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 from both loans originated and loans acquired from other financial institutions;
•Results of examinations by regulatory authorities, which could result in the imposition of penalties, required changes to our business practices, or additional reserves;
•Competitive pressures among depository and non-depository institutions that may contribute to industry disintermediation or adversely affect pricing, market share, deposit flows or product offerings;
•Fluctuations in real estate values;
•The ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking platforms, and cybersecurity;
•Ability to access cost-effective funding and to control operating costs and expenses;
•Vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks;
•Market volatility or deterioration in capital markets affecting liquidity, valuations, or investor confidence;
•The costs, effects and outcomes of litigation or other legal proceedings involving the Company;
•Legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulation, tax laws, or consumer protection laws;
•Changes in accounting principles, policies or guidelines;
•The impact of pending and future acquisitions or business combinations, including related goodwill impairment risks and integration challenges;
•The effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets and liabilities, which estimates may prove to be inaccurate;
•Effects on loan collateral, operations, or compliance obligations from climate change, severe weather, natural disasters, pandemics, public health crises, acts of war or terrorism, civil unrest and other external events;
•Other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and
•Other risks detailed in our Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”), or in our reports filed with or furnished to the U.S. Securities and Exchange Commission (SEC), including this Form 10-Q.
3
Table of Contents
Further, statements about the potential effects of Banner’s proposed merger with Pacific Financial Corporation (“Pacific Financial”) on Banner’s business, financial results, and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in the forward-looking statements due to factors and future developments which are uncertain, unpredictable and in many cases beyond Banner’s control, including, but are not limited to the risk that: (1) the business of Pacific Financial may not be integrated with Banner’s business successfully or such integration may be more difficult, time-consuming or costly than expected; (2) any of the anticipated benefits of the merger may not be realized or may not be realized within the expected time period; (3) customer and employee relationships and business operations may be disrupted by the merger or the announcement of the merger, and the parties may be challenged in retaining key relationships both during the pendency of the merger and following the completion of the merger if that occurs; (4) the parties may not meet expectations regarding the timing of the merger; (5) required regulatory approvals or the approval of Pacific Financial shareholders may not be obtained or such approvals may be more difficult, time-consuming or costly than expected; (6) there may be challenges in satisfying the other conditions to completion of the merger or the merger may fail to close for any other reason; (7) management’s attention may be diverted from ongoing business operations and opportunities due to the merger; (8) there may be potential negative impacts caused by the dilution resulting from Banner’s issuance of shares of Banner Common Stock in connection with the merger; and (9) other factors detailed in Banner’s filings with the SEC.
Any forward-looking statements are based upon Management’s beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to update any forward-looking statements included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements.
4
Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1 - Financial Statements (unaudited)
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) (In thousands, except shares and per share amounts)
June 30, 2026 and December 31, 2025
ASSETS June 30, 2026 December 31, 2025
Cash and due from banks $ 215,508 $ 182,772
Interest-bearing deposits 219,944 239,868
Total cash and cash equivalents 435,452 422,640
Securities—available-for-sale, amortized cost $2,273,608 and $2,271,471, respectively 2,015,891 2,016,261
Securities—held-to-maturity, net of allowance for credit losses of $283 and $291, respectively 929,309 961,196
Total securities 2,945,200 2,977,457
Federal Home Loan Bank (FHLB) stock 24,209 16,476
Loans held for sale (includes $17,139 and $34,586, at fair value, respectively) 27,160 42,902
Loans receivable 11,994,410 11,721,687
Allowance for credit losses – loans (161,849) (160,276)
Net loans receivable 11,832,561 11,561,411
Accrued interest receivable 65,016 60,525
Property and equipment, net 108,247 111,522
Goodwill 373,121 373,121
Other intangibles, net 979 1,491
Bank-owned life insurance (BOLI) 324,164 319,347
Deferred tax assets, net 125,275 127,587
Operating lease right-of-use assets 29,534 32,736
Other assets 302,629 307,273
Total assets $ 16,593,547 $ 16,354,488
LIABILITIES
Deposits:
Non-interest-bearing $ 4,542,942 $ 4,489,839
Interest-bearing transaction and savings accounts 7,773,630 7,721,003
Interest-bearing certificates 1,473,021 1,532,304
Total deposits 13,789,593 13,743,146
Advances from FHLB 320,000 150,000
Other borrowings 114,497 107,715
Junior subordinated debentures at fair value (issued in connection with Trust Preferred Securities) 79,652 79,151
Operating lease liabilities 32,108 35,755
Accrued expenses and other liabilities 210,134 245,266
Deferred compensation 48,300 47,158
Total liabilities 14,594,284 14,408,191
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS’ EQUITY
Preferred stock - $0.01 par value per share, 500,000 shares authorized; no shares outstanding at June 30, 2026 and December 31, 2025 — —
Common stock and paid in capital - $0.01 par value per share, 50,000,000 shares authorized; 33,984,909 shares issued and outstanding at June 30, 2026; 34,097,856 shares issued and outstanding at December 31, 2025 1,268,527 1,282,505
Common stock (non-voting) and paid in capital - $0.01 par value per share, 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2026; no shares issued and outstanding at December 31, 2025 — —
Retained earnings 940,210 871,803
Carrying value of shares held in trust for stock-based compensation plans (5,682) (5,813)
Liability for common stock issued to stock related compensation plans 5,682 5,813
Accumulated other comprehensive loss (209,474) (208,011)
Total shareholders’ equity 1,999,263 1,946,297
Total liabilities and shareholders’ equity $ 16,593,547 $ 16,354,488
See Selected Notes to the Consolidated Financial Statements
5
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except shares and per share amounts)
For the Three and Six Months Ended June 30, 2026 and 2025
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
INTEREST INCOME:
Loans receivable $ 178,389 $ 175,373 $ 352,092 $ 344,050
Mortgage-backed securities 14,053 15,416 28,369 31,160
Securities and cash equivalents 10,244 9,470 20,043 18,917
Total interest income 202,686 200,259 400,504 394,127
INTEREST EXPENSE:
Deposits 45,554 49,316 91,232 98,053
FHLB advances 1,426 3,370 1,466 4,230
Other borrowings 732 675 1,429 1,369
Subordinated debt 1,234 2,499 2,468 4,993
Total interest expense 48,946 55,860 96,595 108,645
Net interest income 153,740 144,399 303,909 285,482
PROVISION FOR CREDIT LOSSES 3,818 4,795 3,022 7,934
Net interest income after provision for credit losses 149,922 139,604 300,887 277,548
NON-INTEREST INCOME:
Deposit fees and other service charges 11,728 10,835 23,119 21,604
Mortgage banking operations 2,792 3,226 6,004 6,329
BOLI 2,471 2,384 4,783 4,959
Miscellaneous 1,380 1,221 3,206 3,567
18,371 17,666 37,112 36,459
Net gain (loss) on sale of securities 8 (3) (1,234) (3)
Net change in valuation of financial instruments carried at fair value (157) 88 1,505 403
Total non-interest income 18,222 17,751 37,383 36,859
NON-INTEREST EXPENSE:
Salary and employee benefits 69,388 65,486 137,120 130,343
Less capitalized loan origination costs (5,283) (4,924) (9,169) (8,254)
Occupancy and equipment 10,936 12,256 21,633 24,353
Information and computer data services 10,322 8,199 18,635 15,827
Payment and card processing services 6,218 5,899 12,259 11,649
Professional and legal expenses 2,719 2,271 4,332 4,701
Advertising and marketing 1,982 1,087 2,655 1,677
Deposit insurance 2,819 2,800 5,536 5,597
State and municipal business and use taxes 1,773 1,416 3,593 2,870
Real estate operations, net 165 392 274 331
Amortization of core deposit intangibles 256 455 512 911
Miscellaneous 6,695 6,011 13,218 12,602
Total non-interest expense 107,990 101,348 210,598 202,607
Income before provision for income taxes 60,154 56,007 127,672 111,800
PROVISION FOR INCOME TAXES 11,268 10,511 24,070 21,169
NET INCOME $ 48,886 $ 45,496 $ 103,602 $ 90,631
Earnings per common share:
Basic $ 1.44 $ 1.31 $ 3.04 $ 2.62
Diluted $ 1.43 $ 1.31 $ 3.03 $ 2.61
Cumulative dividends declared per common share $ 0.52 $ 0.48 $ 1.02 $ 0.96
Weighted average number of common shares outstanding:
Basic 34,012,611 34,627,433 34,025,849 34,568,948
Diluted 34,129,173 34,738,948 34,197,096 34,761,044
See Selected Notes to the Consolidated Financial Statements
6
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
For the Three and Six Months Ended June 30, 2026 and 2025
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
NET INCOME $ 48,886 $ 45,496 $ 103,602 $ 90,631
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAXES:
Unrealized holding gain (loss) on securities—available-for-sale arising during the period 1,487 9,697 (3,749) 47,998
Income tax (expense) benefit related to securities—available-for-sale unrealized holding losses (357) (2,328) 900 (11,520)
Reclassification for net loss on securities—available-for-sale realized in earnings — 3 1,242 3
Income tax benefit related to securities—available-for-sale realized in earnings — (1) (298) (1)
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity 551 567 1,083 1,116
Income tax expense related to amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity (132) (136) (260) (268)
Changes in fair value of junior subordinated debentures related to instrument specific credit risk (180) (5,655) (501) (5,889)
Income tax benefit related to junior subordinated debentures 43 1,357 120 1,413
Other comprehensive income (loss) 1,412 3,504 (1,463) 32,852
COMPREHENSIVE INCOME $ 50,298 $ 49,000 $ 102,139 $ 123,483
See Selected Notes to the Consolidated Financial Statements
7
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited) (In thousands, except shares and per share amounts)
Common Stock and Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity
Shares Amount
Balance, January 1, 2025 34,459,832 $ 1,307,509 $ 744,091 $ (277,274) $ 1,774,326
Net income 45,135 45,135
Other comprehensive income, net of income tax 29,348 29,348
Accrual of dividends on common stock ($0.48/share) (16,814) (16,814)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 30,140 1,458 1,458
Balance, March 31, 2025 34,489,972 1,308,967 772,412 (247,926) 1,833,453
Net income 45,496 45,496
Other comprehensive income, net of income tax 3,504 3,504
Accrual of dividends on common stock ($0.48/share) (16,826) (16,826)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 94,022 37 37
Balance, June 30, 2025 34,583,994 1,309,004 801,082 (244,422) 1,865,664
Net income 53,502 53,502
Other comprehensive income, net of income tax 23,667 23,667
Accrual of dividends on common stock ($0.48/share) (16,758) (16,758)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 1,303 2,678 2,678
Repurchase of common stock (250,000) (15,861) (15,861)
Balance, September 30, 2025 34,335,297 1,295,821 837,826 (220,755) 1,912,892
Net income 51,249 51,249
Other comprehensive income, net of income tax 12,744 12,744
Accrual of dividends on common stock ($0.50/share) (17,272) (17,272)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 12,534 2,631 2,631
Repurchase of common stock (249,975) (15,947) (15,947)
Balance, December 31, 2025 34,097,856 1,282,505 871,803 (208,011) 1,946,297
Net income 54,716 54,716
Other comprehensive loss, net of income tax (2,875) (2,875)
Accrual of dividends on common stock ($0.50/share) (17,297) (17,297)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 27,242 1,941 1,941
Repurchase of common stock (250,000) (16,148) (16,148)
Balance, March 31, 2026 33,875,098 1,268,298 909,222 (210,886) 1,966,634
Net income 48,886 48,886
Other comprehensive income, net of income tax 1,412 1,412
Accrual of dividends on common stock ($0.52/share) (17,898) (17,898)
Amortization of stock-based compensation related to restricted stock grants, net of shares surrendered 109,811 229 229
Balance, June 30, 2026 33,984,909 $ 1,268,527 $ 940,210 $ (209,474) $ 1,999,263
See Selected Notes to the Consolidated Financial Statements
8
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
For the Six Months Ended June 30, 2026 and 2025
Six Months Ended June 30,
2026 2025
OPERATING ACTIVITIES:
Net income $ 103,602 $ 90,631
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation 7,080 8,474
Deferred income and expense, net of amortization (5,458) (4,817)
Capitalized loan servicing rights, net of amortization 207 225
Amortization of core deposit intangibles 512 911
Loss on sale of securities, net 1,234 3
Net change in valuation of financial instruments carried at fair value (1,505) (403)
Decrease in deferred taxes 2,774 1,941
Increase in current taxes payable/receivable, net (4,823) (4,348)
Stock-based compensation 5,657 4,913
Net change in cash surrender value of BOLI (4,783) (4,652)
Gain on sale of loans, excluding capitalized servicing rights (2,626) (3,051)
Loss on disposal of real estate held for sale and property and equipment, net 188 948
Provision for credit losses 3,022 7,934
Origination of loans held for sale (198,383) (171,026)
Proceeds from sales of loans held for sale 270,343 215,707
Net change in:
Other assets 11,853 16,642
Other liabilities (40,024) (47,943)
Net cash provided from operating activities 148,870 112,089
INVESTING ACTIVITIES:
Purchases of securities—available-for-sale (164,586) (18,896)
Principal repayments and maturities of securities—available-for-sale 145,188 105,638
Proceeds from sales of securities—available-for-sale 14,727 —
Principal repayments and maturities of securities—held-to-maturity 32,079 20,326
Loan originations, net of repayments (330,845) (394,673)
Purchases of loans and participating interest in loans — (10,780)
Proceeds from sales of other loans 7,170 20,189
Purchases of property and equipment (3,960) (4,398)
Proceeds from sale of real estate held for sale and sale of other property 2,453 1,875
Proceeds from FHLB stock repurchase program 50,985 112,775
Purchase of FHLB stock (58,717) (125,475)
Investment in BOLI (34) (39)
Other 1,442 873
Net cash used by investing activities (304,098) (292,585)
Continued on next page
9
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited) (In thousands)
For the Six Months Ended June 30, 2026 and 2025
Six Months Ended June 30,
2026 2025
FINANCING ACTIVITIES:
Increase in deposits, net $ 46,448 $ 12,893
Advances of overnight and short term FHLB borrowings, net 170,000 275,000
Increase (decrease) in other borrowings, net 6,783 (8,146)
Repayment of subordinated notes — (80,500)
Cash dividends paid (35,557) (33,843)
Cash paid to repurchase common stock (16,148) —
Taxes paid related to net share settlement of equity awards (3,486) (3,418)
Net cash provided by financing activities 168,040 161,986
NET CHANGE IN CASH AND CASH EQUIVALENTS 12,812 (18,510)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 422,640 501,858
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 435,452 $ 483,348
Six Months Ended June 30,
2026 2025
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash $ 100,855 $ 111,040
Tax paid 17,720 16,592
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Transfer of loans to real estate owned and other repossessed assets 2,609 4,671
Loans, held-for-sale, transferred from portfolio (53,592) (47,260)
See Selected Notes to the Consolidated Financial Statements
10
Table of Contents
BANNER CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements include the accounts of Banner Corporation (the Company or Banner), a bank holding company incorporated in the State of Washington and its wholly-owned subsidiary, Banner Bank (the Bank).
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (SEC). In preparing these financial statements, the Company has evaluated events and transactions subsequent to June 30, 2026, for potential recognition or disclosure. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. All significant intercompany transactions and balances have been eliminated.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.
The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Interim results are not necessarily indicative of results for a full year or any other interim period.
Note 2: ACCOUNTING STANDARDS RECENTLY ISSUED OR ADOPTED
Interim Reporting: Narrow-Scope Improvements (Subtopic 270-10)
In December 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this ASU clarify the applicability of Topic 270, enhance the navigability of interim reporting requirements, and consolidate existing interim disclosure guidance. The amendments specify the form and content of interim financial statements, provide a comprehensive list of required interim disclosures, and introduce a disclosure principle requiring entities to disclose events occurring after the most recent annual reporting period that have a material impact on the entity. The ASU does not change the fundamental nature or scope of interim reporting requirements.
This ASU is effective for all entities for interim periods within annual periods beginning after December 15, 2027, with early adoption permitted. The amendments may be applied either prospectively or retrospectively to any periods presented in the financial statements. The Company is currently evaluating this ASU but does not expect its adoption to have a material impact on the Company’s consolidated financial statements.
Derivatives and Hedging: Hedge Accounting Improvements (Subtopic 815-20)
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The amendments in this ASU are intended to clarify certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The update clarifies and expands guidance in several areas, including allowing groups of forecasted transactions to be hedged based on “similar” rather than “shared” risk exposure, offering greater flexibility in applying cash flow hedges. Overall, the amendments respond to stakeholder concerns following ASU 2017‑12 and address complexities arising from global reference‑rate reform, ultimately facilitating the achievement and maintenance of hedge accounting for highly effective hedging relationships.
This ASU is effective for all entities for annual reporting periods beginning after December 31, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this ASU. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.
Financial Instruments—Credit Losses: Purchased Loans (Topic 310-10):
In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. The amendments in this ASU are intended to simplify and improve the accounting for acquired loans by expanding the use of the gross‑up approach, previously limited to purchased credit‑deteriorated (PCD) assets, to a new category of purchased seasoned loans, which encompasses certain acquired non‑PCD loans. Under this approach, entities recognize an allowance for expected credit losses at the acquisition date with a corresponding increase to the asset’s amortized cost basis, eliminating day 1 credit loss expense and improving comparability across acquired loan portfolios.
This ASU is effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period if financial statements have not yet been issued or made available for issuance. Pending the acquisition of Pacific Financial, the Company expects to early adopt this ASU as it will apply to loans acquired following the adoption date.
11
Table of Contents
Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this ASU are intended to modernize the guidance for accounting for software costs under Subtopic 350-40 and remove all references to prescriptive and sequential software development stages. This increases the operability of the cost recognition guidance by considering different methods of software development. The ASU requires that an entity begin capitalizing software costs when both of the following conditions have been met: management has authorized and committed to funding the software project; and it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”). In addition, this ASU clarifies disclosure requirements for Internal-Use Software.
This ASU is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments may be applied using the prospective method, the modified transition approach, or retrospectively. The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in the ASU require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to:
•Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption.
•Include certain amounts that are already required to be disclosed under GAAP in the same disclosure as the other disaggregation requirements.
•Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.
•Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.
This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The amendments should be applied prospectively. The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.
Note 3: SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair value of securities at June 30, 2026 and December 31, 2025 are summarized as follows (in thousands):
June 30, 2026
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available-for-Sale:
U.S. Government and agency obligations $ 9,024 $ — $ (334) $ 8,690
Municipal bonds 180,084 978 (25,795) 155,267
Corporate bonds 129,089 4,601 (2,462) 131,228
Mortgage-backed or related securities 1,754,555 1,794 (236,782) 1,519,567
Asset-backed securities 200,856 288 (5) 201,139
$ 2,273,608 $ 7,661 $ (265,378) $ 2,015,891
June 30, 2026
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance for Credit Losses
Held-to-Maturity:
U.S. Government and agency obligations $ 221 $ — $ (1) $ 220 $ —
Municipal bonds 422,397 77 (52,930) 369,407 (137)
Corporate bonds 2,488 — — 2,342 (146)
Mortgage-backed or related securities 504,486 — (88,468) 416,018 —
$ 929,592 $ 77 $ (141,399) $ 787,987 $ (283)
12
Table of Contents
December 31, 2025
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available-for-Sale:
U.S. Government and agency obligations $ 6,454 $ — $ (311) $ 6,143
Municipal bonds 169,386 1,070 (26,999) 143,457
Corporate bonds 115,982 4,646 (2,839) 117,789
Mortgage-backed or related securities 1,827,227 2,313 (233,208) 1,596,332
Asset-backed securities 152,422 162 (44) 152,540
$ 2,271,471 $ 8,191 $ (263,401) $ 2,016,261
December 31, 2025
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance for Credit Losses
Held-to-Maturity:
U.S. Government and agency obligations $ 262 $ — $ (2) $ 260 $ —
Municipal bonds 430,571 34 (56,311) 374,149 (145)
Corporate bonds 2,544 — — 2,398 (146)
Mortgage-backed or related securities 528,110 — (90,249) 437,861 —
$ 961,487 $ 34 $ (146,562) $ 814,668 $ (291)
Accrued interest receivable on held-to-maturity debt securities was $4.0 million and $4.1 million at June 30, 2026 and December 31, 2025, and $8.9 million and $8.3 million on available-for-sale debt securities at June 30, 2026 and December 31, 2025, respectively. Accrued interest receivable on securities is reported in accrued interest receivable on the Consolidated Statements of Financial Condition and is excluded from the calculation of the allowance for credit losses.
At June 30, 2026 and December 31, 2025, gross unrealized losses and the fair value for securities available-for-sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position were as follows (in thousands):
June 30, 2026
Less Than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available-for-Sale:
U.S. Government and agency obligations $ 3,331 $ (7) $ 5,359 $ (327) $ 8,690 $ (334)
Municipal bonds 13,246 (50) 94,111 (25,745) 107,357 (25,795)
Corporate bonds 41,824 (458) 29,720 (2,004) 71,544 (2,462)
Mortgage-backed or related securities 73,622 (796) 1,306,968 (235,986) 1,380,590 (236,782)
Asset-backed securities 28,997 (5) — — 28,997 (5)
$ 161,020 $ (1,316) $ 1,436,158 $ (264,062) $ 1,597,178 $ (265,378)
December 31, 2025
Less Than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available-for-Sale:
U.S. Government and agency obligations $ — $ — $ 6,143 $ (311) $ 6,143 $ (311)
Municipal bonds — — 94,038 (26,999) 94,038 (26,999)
Corporate bonds 11,238 (31) 50,000 (2,808) 61,238 (2,839)
Mortgage-backed or related securities 50,803 (46) 1,395,325 (233,162) 1,446,128 (233,208)
Asset-backed securities 10,000 (44) — — 10,000 (44)
$ 72,041 $ (121) $ 1,545,506 $ (263,280) $ 1,617,547 $ (263,401)
13
Table of Contents
At June 30, 2026, there were 186 securities—available-for-sale with unrealized losses, compared to 175 at December 31, 2025. Management does not believe that any remaining individual unrealized loss as of June 30, 2026 or December 31, 2025 resulted from credit loss. The decline in fair market value of these securities was generally due to changes in interest rates and changes in market-desired spreads subsequent to their purchase. There were no securities—available-for-sale in a nonaccrual status at June 30, 2026 or December 31, 2025.
The following table presents gross gains and losses on sales and partial calls of securities available-for-sale (in thousands):
Three months ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Available-for-Sale:
Gross Gains $ — $ — $ 92 $ —
Gross Losses — (3) (1,334) (3)
Balance, end of the period $ — $ (3) $ (1,242) $ (3)
The following table presents the amortized cost and estimated fair value of securities at June 30, 2026, by contractual maturity and does not reflect any required periodic payments (in thousands). Expected maturities will differ from contractual maturities because some securities may be called or prepaid with or without call or prepayment penalties.
June 30, 2026
Available-for-Sale Held-to-Maturity
Amortized Cost Fair Value Amortized Cost Fair Value
Maturing within one year $ 6,013 $ 5,838 $ 2,015 $ 1,865
Maturing after one year through five years 178,802 164,527 10,826 10,617
Maturing after five years through ten years 269,400 259,318 44,518 42,917
Maturing after ten years 1,819,393 1,586,208 872,233 732,588
$ 2,273,608 $ 2,015,891 $ 929,592 $ 787,987
The following table presents, as of June 30, 2026, investment securities which were pledged to secure borrowings, public deposits or other obligations as permitted or required by law (in thousands):
June 30, 2026
Carrying Value Amortized Cost Fair Value
Purpose or beneficiary:
State and local governments public deposits $ 313,691 $ 325,805 $ 282,822
Interest rate swap counterparties 941 941 798
Repurchase transaction accounts 197,060 197,060 161,668
Other 2,475 2,475 2,226
Total pledged securities $ 514,167 $ 526,281 $ 447,514
14
Table of Contents
The Company monitors the credit quality of held-to-maturity debt securities through the use of credit ratings, which are reviewed and updated quarterly. The Company’s non-rated held-to-maturity debt securities are primarily United States government sponsored enterprise debentures carrying minimal to no credit risk. The non-rated corporate bonds primarily consist of Community Reinvestment Act related bonds secured by loan instruments from low to moderate income borrowers. The remaining non-rated held-to-maturity debt securities balance is comprised of local municipal debt from within the Company’s geographic footprint and is monitored through quarterly or annual financial review. This municipal debt is predominately essential service or unlimited general obligation backed debt. The following tables summarize the amortized cost of held-to-maturity debt securities by credit rating at June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
U.S. Government and agency obligations Municipal bonds Corporate bonds Mortgage-backed or related securities Total
AAA/AA/A $ — $ 414,885 $ 500 $ 15,840 $ 431,225
Not Rated 221 7,512 1,988 488,646 498,367
$ 221 $ 422,397 $ 2,488 $ 504,486 $ 929,592
December 31, 2025
U.S. Government and agency obligations Municipal bonds Corporate bonds Mortgage-backed or related securities Total
AAA/AA/A $ — $ 422,275 $ 500 $ 15,969 $ 438,744
Not Rated 262 8,296 2,044 512,141 522,743
$ 262 $ 430,571 $ 2,544 $ 528,110 $ 961,487
15
Table of Contents
Note 4: LOANS RECEIVABLE AND THE ALLOWANCE FOR CREDIT LOSSES - LOANS
The following table presents the loans receivable at June 30, 2026 and December 31, 2025 by class (dollars in thousands).
June 30, 2026 December 31, 2025
Amount Percent of Total Amount Percent of Total
Commercial real estate:
Owner-occupied $ 1,229,993 10 % $ 1,138,298 10 %
Investment properties 1,744,127 14 1,701,413 15
Small balance CRE 1,166,516 10 1,212,357 10
Multifamily real estate 855,862 7 850,789 7
Construction, land and land development:
Commercial construction 181,843 2 156,021 1
Multifamily construction 503,058 4 514,330 5
One- to four-family construction 631,183 5 607,447 5
Land and land development 378,172 3 433,678 4
Commercial business:
Commercial business 1,286,818 11 1,225,108 11
Small business scored 1,295,861 11 1,187,360 10
Agricultural business, including secured by farmland 337,487 3 353,152 3
One- to four-family residential 1,556,493 13 1,573,191 13
Consumer:
Consumer—home equity revolving lines of credit 744,546 6 679,489 5
Consumer—other 82,451 1 89,054 1
Total loans 11,994,410 100 % 11,721,687 100 %
Less allowance for credit losses – loans (161,849) (160,276)
Net loans $ 11,832,561 $ 11,561,411
Loan amounts are net of unearned loan fees in excess of unamortized costs of $17.6 million as of June 30, 2026, and $16.5 million as of December 31, 2025. Net loans include net discounts on acquired loans of $1.9 million and $2.4 million as of June 30, 2026 and December 31, 2025, respectively. Net loans does not include accrued interest receivable. Accrued interest receivable on loans was $52.1 million as of June 30, 2026 and $48.2 million as of December 31, 2025, and was reported in accrued interest receivable on the Consolidated Statements of Financial Condition.
The Company had pledged $8.2 billion of loans as collateral for FHLB and other borrowings at both June 30, 2026 and December 31, 2025, respectively.
16
Table of Contents
Troubled Loan Modifications. Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or any combination of these modifications. The following table presents the amortized cost basis and financial effect of loans at June 30, 2026 and June 30, 2025, that were both experiencing financial difficulty and modified during the six months ended June 30, 2026 and June 30, 2025, respectively (in thousands).
June 30, 2026
Term Extension Total
Land and land development 2,777 2,777
Total $ 2,777 $ 2,777
June 30, 2025
Term Extension Total
One- to four-family construction $ 2,055 $ 2,055
Land and land development 3,280 3,280
Total $ 5,335 $ 5,335
The Company had committed to lend no additional amounts to the borrowers included in the previous tables as of June 30, 2026, compared to commitments of $1.9 million at June 30, 2025. The Company closely monitors the performance of loans modified for borrowers experiencing financial difficulty to assess the effectiveness of its modification efforts.
We had no loans that had been modified in the previous 12 months that were past due or on nonaccrual status at June 30, 2026. The following table presents the performance at June 30, 2025 of loans that had been modified in the previous 12 months (in thousands):
June 30, 2025
30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Nonaccrual Total
Commercial business $ — $ — $ — $ 1,460 $ 1,460
Total $ — $ — $ — $ 1,460 $ 1,460
Loans are considered to be in payment default when they are 90 days or more past due. There were no loans that, within twelve months of the modification date, experienced a subsequent default during the six months ended June 30, 2026. The following tables present the amortized cost basis of modified loans that, within twelve months of the modification date, experienced a subsequent default during the six months ended June 30, 2025:
June 30, 2025
Term Extension Total
Commercial business $ 1,460 $ 1,460
Total $ 1,460 $ 1,460
The following table presents the financial effect of the loan modifications presented above for borrowers experiencing financial difficulty for the six months ended June 30, 2026 and June 30, 2025:
Six Months Ended June 30, 2026
Weighted-Average Term Extension (in months)
Land and land development 9
Six Months Ended June 30, 2025
Weighted-Average Term Extension (in months)
One- to four-family construction 21
Land and land development 9
17
Table of Contents
Credit Quality Indicators: To appropriately and effectively manage the ongoing credit quality of the Company’s loan portfolio, Management has implemented a risk-rating or loan grading system for its loans. The system is a tool to evaluate portfolio asset quality throughout each applicable loan’s life as an asset of the Company. Generally, loans are risk rated on an aggregate borrower/relationship basis with individual loans sharing similar ratings. There are some instances when specific situations relating to individual loans will provide the basis for different risk ratings within the aggregate relationship. Loans are graded on a scale of 1 to 9. A description of the general characteristics of these categories is shown below.
Overall Risk Rating Definitions: Risk-ratings contain both qualitative and quantitative measurements and take into account the financial strength of a borrower and the structure of the loan. Consequently, the definitions are to be applied in the context of each lending transaction and judgment must also be used to determine the appropriate risk rating, as it is not unusual for a loan to exhibit characteristics of more than one risk-rating category. Consideration for the final rating is centered on the borrower’s ability to repay, in a timely fashion, both principal and interest. The Company’s risk-rating and loan grading policies are reviewed and approved annually. There were no material changes in the risk-rating or loan grading system for the periods presented.
Risk Ratings 1-5: Pass
Credits with risk ratings of 1 to 5 meet the definition of a pass risk rating. The strength of credits varies within the pass risk ratings, ranging from a risk rated 1 being an exceptional credit to a risk rated 5 being an acceptable credit that requires a more than normal level of supervision.
Risk Rating 6: Special Mention
A credit with potential weaknesses that deserves Management’s close attention is risk rated a 6. If left uncorrected, these potential weaknesses will result in deterioration in the capacity to repay debt. A key distinction between Special Mention and Substandard is that in a Special Mention credit, there are identified weaknesses that pose potential risk(s) to the repayment sources, versus well defined weaknesses that pose risk(s) to the repayment sources. Assets in this category are expected to be in this category no more than 9-12 months as the potential weaknesses in the credit are resolved.
Risk Rating 7: Substandard
A credit with well-defined weaknesses that jeopardize the ability to repay in full is risk rated a 7. These credits are inadequately protected by either the sound net worth and payment capacity of the borrower or the value of pledged collateral. These are credits with a distinct possibility of loss. Loans headed for foreclosure and/or legal action due to deterioration are rated 7 or worse.
Risk Rating 8: Doubtful
A credit with an extremely high probability of loss is risk rated 8. These credits have all the same critical weaknesses that are found in a substandard loan; however, the weaknesses are elevated to the point that based upon current information, collection or liquidation in full is improbable. While some loss on doubtful credits is expected, pending events may make the amount and timing of any loss indeterminable. In these situations, taking the loss is inappropriate until the outcome of the pending event is clear.
Risk Rating 9: Loss
A credit that is considered to be currently uncollectible or of such little value that it is no longer a viable bank asset is risk rated 9. Losses should be taken in the accounting period in which the credit is determined to be uncollectible. Taking a loss does not mean that a credit has absolutely no recovery or salvage value but, rather, it is not practical or desirable to defer writing off the credit, even though partial recovery may occur in the future.
18
Table of Contents
The following tables present the Company’s portfolio of risk-rated loans by class and by grade as of June 30, 2026 and December 31, 2025 (in thousands). In addition, the tables include the gross charge-offs for the six months ended June 30, 2026 and for the year ended December 31, 2025. Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of origination. Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of the most recent renewal or extension.
June 30, 2026
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2026 2025 2024 2023 2022 Prior
Commercial real estate - owner occupied
Risk Rating
Pass $ 190,655 $ 174,626 $ 170,284 $ 151,973 $ 121,946 $ 326,602 $ 63,388 $ 1,199,474
Special Mention 2,794 — 553 62 — — — 3,409
Substandard — 12,294 — — 5,881 8,935 — 27,110
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial real estate - owner occupied $ 193,449 $ 186,920 $ 170,837 $ 152,035 $ 127,827 $ 335,537 $ 63,388 $ 1,229,993
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate - investment properties
Risk Rating
Pass $ 229,621 $ 263,570 $ 86,113 $ 125,469 $ 197,499 $ 763,090 $ 62,360 $ 1,727,722
Special Mention — — — — — 9,682 — 9,682
Substandard — — — 4,202 — 2,521 — 6,723
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial real estate - investment properties $ 229,621 $ 263,570 $ 86,113 $ 129,671 $ 197,499 $ 775,293 $ 62,360 $ 1,744,127
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Multifamily real estate
Risk Rating
Pass $ 64,514 $ 61,879 $ 79,511 $ 70,547 $ 194,669 $ 381,085 $ 1,656 $ 853,861
Special Mention — — — — — — — —
Substandard — — — — — 2,001 — 2,001
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Multifamily real estate $ 64,514 $ 61,879 $ 79,511 $ 70,547 $ 194,669 $ 383,086 $ 1,656 $ 855,862
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
19
Table of Contents
June 30, 2026
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2026 2025 2024 2023 2022 Prior
Commercial construction
Risk Rating
Pass $ 39,092 $ 60,934 $ 38,268 $ 20,099 $ 22,715 $ — $ — $ 181,108
Special Mention — — — — — — — —
Substandard — — — — — 735 — 735
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial construction $ 39,092 $ 60,934 $ 38,268 $ 20,099 $ 22,715 $ 735 $ — $ 181,843
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Multifamily construction
Risk Rating
Pass $ 126,773 $ 186,811 $ 135,664 $ 33,425 $ — $ — $ — $ 482,673
Special Mention — — — — — — — —
Substandard — 20,385 — — — — — 20,385
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Multifamily construction $ 126,773 $ 207,196 $ 135,664 $ 33,425 $ — $ — $ — $ 503,058
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
One- to four- family construction
Risk Rating
Pass $ 306,909 $ 269,183 $ 27,590 $ — $ — $ — $ 21,562 $ 625,244
Special Mention — — — — — — — —
Substandard — 5,201 — 738 — — — 5,939
Doubtful — — — — — — — —
Loss — — — — — — — —
Total One- to four- family construction $ 306,909 $ 274,384 $ 27,590 $ 738 $ — $ — $ 21,562 $ 631,183
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
20
Table of Contents
June 30, 2026
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2026 2025 2024 2023 2022 Prior
Land and land development
Risk Rating
Pass $ 95,842 $ 149,436 $ 43,966 $ 26,264 $ 21,548 $ 32,044 $ 3,789 $ 372,889
Special Mention — — — — — — — —
Substandard 2,777 — 468 182 1,004 852 — 5,283
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Land and land development $ 98,619 $ 149,436 $ 44,434 $ 26,446 $ 22,552 $ 32,896 $ 3,789 $ 378,172
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial business
Risk Rating
Pass $ 72,813 $ 204,304 $ 68,323 $ 74,586 $ 112,325 $ 297,541 $ 390,412 $ 1,220,304
Special Mention 1,849 452 — 43 339 — 3,996 6,679
Substandard 20,286 1,875 1,166 2,507 982 3,358 29,661 59,835
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial business $ 94,948 $ 206,631 $ 69,489 $ 77,136 $ 113,646 $ 300,899 $ 424,069 $ 1,286,818
Current period gross charge-offs $ — $ — $ — $ 5 $ 6 $ 7 $ 418 $ 436
Agricultural business, including secured by farmland
Risk Rating
Pass $ 14,591 $ 17,035 $ 9,413 $ 32,499 $ 20,056 $ 77,258 $ 134,845 $ 305,697
Special Mention — — — — — 1,373 — 1,373
Substandard — — — 2,467 8,310 10,874 8,766 30,417
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Agricultural business, including secured by farmland $ 14,591 $ 17,035 $ 9,413 $ 34,966 $ 28,366 $ 89,505 $ 143,611 $ 337,487
Current period gross charge-offs $ — $ — $ — $ 4 $ — $ — $ — $ 4
21
Table of Contents
December 31, 2025
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2025 2024 2023 2022 2021 Prior
Commercial real estate - owner occupied
Risk Rating
Pass $ 199,049 $ 205,626 $ 171,690 $ 105,779 $ 135,162 $ 226,813 $ 61,016 $ 1,105,135
Special Mention — 558 — 9,603 — 2,806 — 12,967
Substandard — — 288 8,534 — 11,374 — 20,196
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial real estate - owner occupied $ 199,049 $ 206,184 $ 171,978 $ 123,916 $ 135,162 $ 240,993 $ 61,016 $ 1,138,298
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate - investment properties
Risk Rating
Pass $ 296,157 $ 106,127 $ 131,328 $ 209,997 $ 241,372 $ 642,420 $ 63,376 $ 1,690,777
Special Mention — — — — — 6,652 — 6,652
Substandard — — — — — 3,984 — 3,984
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial real estate - investment properties $ 296,157 $ 106,127 $ 131,328 $ 209,997 $ 241,372 $ 653,056 $ 63,376 $ 1,701,413
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
Multifamily real estate
Risk Rating
Pass $ 44,775 $ 89,961 $ 89,370 $ 233,563 $ 168,171 $ 221,236 $ 1,671 $ 848,747
Special Mention — — — — — — — —
Substandard — — — — — 2,042 — 2,042
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Multifamily real estate $ 44,775 $ 89,961 $ 89,370 $ 233,563 $ 168,171 $ 223,278 $ 1,671 $ 850,789
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
22
Table of Contents
December 31, 2025
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2025 2024 2023 2022 2021 Prior
Commercial construction
Risk Rating
Pass $ 61,803 $ 36,567 $ 35,243 $ 21,666 $ — $ — $ — $ 155,279
Special Mention — — — — — — — —
Substandard — — — — 742 — — 742
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial construction $ 61,803 $ 36,567 $ 35,243 $ 21,666 $ 742 $ — $ — $ 156,021
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
Multifamily construction
Risk Rating
Pass $ 190,491 $ 180,871 $ 109,466 $ — $ — $ — $ 9,126 $ 489,954
Special Mention 5,100 — — — — — — 5,100
Substandard 19,276 — — — — — — 19,276
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Multifamily construction $ 214,867 $ 180,871 $ 109,466 $ — $ — $ — $ 9,126 $ 514,330
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
One- to four- family construction
Risk Rating
Pass $ 494,781 $ 82,237 $ — $ — $ — $ — $ 22,919 $ 599,937
Special Mention 2,381 — — — — — — 2,381
Substandard 4,391 — 738 — — — — 5,129
Doubtful — — — — — — — —
Loss — — — — — — — —
Total One- to four- family construction $ 501,553 $ 82,237 $ 738 $ — $ — $ — $ 22,919 $ 607,447
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
23
Table of Contents
December 31, 2025
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2025 2024 2023 2022 2021 Prior
Land and land development
Risk Rating
Pass $ 223,638 $ 104,496 $ 31,388 $ 23,470 $ 18,588 $ 16,033 $ 7,156 $ 424,769
Special Mention 4,472 — — — — — — 4,472
Substandard 638 468 1,338 1,286 99 608 — 4,437
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Land and land development $ 228,748 $ 104,964 $ 32,726 $ 24,756 $ 18,687 $ 16,641 $ 7,156 $ 433,678
Gross charge-offs for the year ended December 31, 2025 $ 218 $ — $ — $ — $ — $ — $ — $ 218
Commercial business
Risk Rating
Pass $ 206,830 $ 114,469 $ 82,152 $ 126,537 $ 68,700 $ 252,020 $ 290,225 $ 1,140,933
Special Mention — — — 213 — — 44,672 44,885
Substandard 17,131 2,648 2,498 1,264 901 3,357 11,491 39,290
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Commercial business $ 223,961 $ 117,117 $ 84,650 $ 128,014 $ 69,601 $ 255,377 $ 346,388 $ 1,225,108
Gross charge-offs for the year ended December 31, 2025 $ — $ 1,941 $ 908 $ — $ 18 $ 164 $ 567 $ 3,598
Agricultural business, including secured by farmland
Risk Rating
Pass $ 17,455 $ 12,989 $ 34,593 $ 20,096 $ 21,745 $ 58,558 $ 142,528 $ 307,964
Special Mention 388 — — 648 — 3,289 319 4,644
Substandard 6,289 74 4,445 8,424 1,560 11,565 8,187 40,544
Doubtful — — — — — — — —
Loss — — — — — — — —
Total Agricultural business, including secured by farmland $ 24,132 $ 13,063 $ 39,038 $ 29,168 $ 23,305 $ 73,412 $ 151,034 $ 353,152
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ 730 $ 361 $ — $ 1,325 $ — $ 2,416
24
Table of Contents
The following tables present the Company’s portfolio of non-risk-rated loans by class and delinquency status as of June 30, 2026 and December 31, 2025 (in thousands). In addition, the tables include the gross charge-offs for the six months ended June 30, 2026 and for the year ended December 31, 2025. Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of origination. Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of the most recent renewal or extension.
June 30, 2026
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2026 2025 2024 2023 2022 Prior
Small balance CRE
Past Due Category
Current $ 49,162 $ 97,261 $ 71,720 $ 82,933 $ 190,204 $ 673,018 $ — $ 1,164,298
30-59 Days Past Due — — — — — — — —
60-89 Days Past Due — — — — 881 — — 881
90 Days + Past Due — — 579 58 — 700 — 1,337
Total Small balance CRE $ 49,162 $ 97,261 $ 72,299 $ 82,991 $ 191,085 $ 673,718 $ — $ 1,166,516
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Small business scored
Past Due Category
Current $ 192,742 $ 212,450 $ 172,566 $ 130,795 $ 184,875 $ 252,527 $ 143,263 $ 1,289,218
30-59 Days Past Due — 269 99 1,559 906 162 496 3,491
60-89 Days Past Due — 26 178 308 — — 5 517
90 Days + Past Due — 11 46 1,045 1,142 391 — 2,635
Total Small business scored $ 192,742 $ 212,756 $ 172,889 $ 133,707 $ 186,923 $ 253,080 $ 143,764 $ 1,295,861
Current period gross charge-offs $ 54 $ 18 $ 46 $ 367 $ 167 $ 68 $ — $ 720
One- to four- family residential
Past Due Category
Current $ 72,829 $ 92,831 $ 178,489 $ 270,043 $ 480,219 $ 435,185 $ — $ 1,529,596
30-59 Days Past Due 75 — 104 — — 681 — 860
60-89 Days Past Due — 619 2,326 794 1,433 1,796 — 6,968
90 Days + Past Due — 1,316 2,390 3,328 5,608 6,427 — 19,069
Total One- to four- family residential $ 72,904 $ 94,766 $ 183,309 $ 274,165 $ 487,260 $ 444,089 $ — $ 1,556,493
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
25
Table of Contents
June 30, 2026
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2026 2025 2024 2023 2022 Prior
Consumer—home equity revolving lines of credit
Past Due Category
Current $ 3,558 $ 814 $ 1,498 $ 2,631 $ 6,719 $ 12,208 $ 710,795 $ 738,223
30-59 Days Past Due — 91 35 279 856 403 1,420 3,084
60-89 Days Past Due — — 45 95 — 292 — 432
90 Days + Past Due — — 311 566 298 1,632 — 2,807
Total Consumer—home equity revolving lines of credit $ 3,558 $ 905 $ 1,889 $ 3,571 $ 7,873 $ 14,535 $ 712,215 $ 744,546
Current period gross charge-offs $ — $ — $ — $ — $ — $ 45 $ — $ 45
Consumer-other
Past Due Category
Current $ 2,199 $ 9,920 $ 4,531 $ 3,373 $ 18,074 $ 23,219 $ 20,805 $ 82,121
30-59 Days Past Due 1 — — 4 44 54 120 223
60-89 Days Past Due — — 15 — — 47 45 107
90 Days + Past Due — — — — — — — —
Total Consumer-other $ 2,200 $ 9,920 $ 4,546 $ 3,377 $ 18,118 $ 23,320 $ 20,970 $ 82,451
Current period gross charge-offs $ — $ 38 $ 26 $ 56 $ 75 $ 174 $ 472 $ 841
26
Table of Contents
December 31, 2025
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2025 2024 2023 2022 2021 Prior
Small balance CRE
Past Due Category
Current $ 103,382 $ 72,801 $ 85,106 $ 198,097 $ 206,554 $ 543,983 $ — $ 1,209,923
30-59 Days Past Due — — — 1,283 — 113 — 1,396
60-89 Days Past Due — — — — — 513 — 513
90 Days + Past Due — — 66 — 459 — — 525
Total Small balance CRE $ 103,382 $ 72,801 $ 85,172 $ 199,380 $ 207,013 $ 544,609 $ — $ 1,212,357
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
Small business scored
Past Due Category
Current $ 228,509 $ 185,753 $ 146,606 $ 201,580 $ 125,471 $ 152,648 $ 140,156 $ 1,180,723
30-59 Days Past Due 53 122 122 2,394 195 1,403 167 4,456
60-89 Days Past Due 131 — 135 353 6 — 152 777
90 Days + Past Due — — 532 239 226 407 — 1,404
Total Small business scored $ 228,693 $ 185,875 $ 147,395 $ 204,566 $ 125,898 $ 154,458 $ 140,475 $ 1,187,360
Gross charge-offs for the year ended December 31, 2025 $ 75 $ 181 $ 862 $ 623 $ 149 $ 60 $ — $ 1,950
One- to four- family residential
Past Due Category
Current $ 111,613 $ 193,605 $ 281,207 $ 496,857 $ 225,148 $ 230,488 $ — $ 1,538,918
30-59 Days Past Due — 1,695 3,034 2,228 1,325 1,433 — 9,715
60-89 Days Past Due — 1,911 — 1,315 453 1,455 — 5,134
90 Days + Past Due 357 4,170 3,079 5,022 4,421 2,375 — 19,424
Total One- to four- family residential $ 111,970 $ 201,381 $ 287,320 $ 505,422 $ 231,347 $ 235,751 $ — $ 1,573,191
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ 13 $ — $ 13
27
Table of Contents
December 31, 2025
Term Loans by Year of Origination Revolving Loans Total Loans
By class: 2025 2024 2023 2022 2021 Prior
Consumer—home equity revolving lines of credit
Past Due Category
Current $ 3,526 $ 2,138 $ 2,781 $ 6,796 $ 2,719 $ 8,126 $ 646,536 $ 672,622
30-59 Days Past Due — — 360 908 536 160 1,853 3,817
60-89 Days Past Due — — 208 345 — 300 — 853
90 Days + Past Due — 100 669 345 — 1,083 — 2,197
Total Consumer—home equity revolving lines of credit $ 3,526 $ 2,238 $ 4,018 $ 8,394 $ 3,255 $ 9,669 $ 648,389 $ 679,489
Gross charge-offs for the year ended December 31, 2025 $ — $ — $ — $ — $ — $ — $ — $ —
Consumer-other
Past Due Category
Current $ 11,532 $ 5,810 $ 3,783 $ 20,899 $ 6,145 $ 19,294 $ 21,054 $ 88,517
30-59 Days Past Due — 6 45 31 — 94 151 327
60-89 Days Past Due — 11 10 — 10 17 77 125
90 Days + Past Due — — — 51 — 34 — 85
Total Consumer-other $ 11,532 $ 5,827 $ 3,838 $ 20,981 $ 6,155 $ 19,439 $ 21,282 $ 89,054
Gross charge-offs for the year ended December 31, 2025 $ 21 $ 18 $ 57 $ 89 $ 50 $ 189 $ 1,195 $ 1,619
28
Table of Contents
The following tables provide the amortized cost basis of collateral-dependent loans as of June 30, 2026 and December 31, 2025 (in thousands). Our collateral dependent loans presented in the tables below have no significant concentrations by property type or location.
June 30, 2026
Real Estate Equipment Inventory Total
Commercial real estate:
Owner-occupied $ 797 $ 49 $ 183 $ 1,029
Small balance CRE 1,047 — — 1,047
Construction, land and land development:
Multifamily construction 8,288 — — 8,288
One- to four-family construction 2,006 — — 2,006
Commercial business
Commercial business 715 — — 715
Small business scored 243 — — 243
Agricultural business, including secured by farmland 2,912 — — 2,912
One- to four-family residential 12,790 — — 12,790
Consumer:
Consumer—home equity revolving lines of credit 238 — — 238
Total $ 29,036 $ 49 $ 183 $ 29,268
December 31, 2025
Real Estate Equipment Inventory Total
Commercial real estate:
Small balance CRE $ 460 $ — $ — $ 460
Construction, land and land development:
One- to four-family construction 2,006 — — 2,006
Land and land development 1,970 — — 1,970
Commercial business
Commercial business 715 — 1,460 2,175
Small business scored 239 — — 239
Agricultural business, including secured by farmland 3,064 1,491 — 4,555
One- to four-family residential 12,466 — — 12,466
Consumer:
Consumer—home equity revolving lines of credit 252 — — 252
Total $ 21,172 $ 1,491 $ 1,460 $ 24,123
29
Table of Contents
The following tables provide additional detail on the age analysis of the Company’s past due loans as of June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Non-accrual with no Allowance Total Non-accrual (1) Loans 90 Days or More Past Due and Accruing
Commercial real estate:
Owner-occupied $ 2,336 $ 296 $ 1,030 $ 3,662 $ 1,226,331 $ 1,229,993 $ 1,029 $ 1,029 $ —
Investment properties — — — — 1,744,127 1,744,127 — — —
Small balance CRE — 881 1,337 2,218 1,164,298 1,166,516 1,045 1,103 234
Multifamily real estate 157 — — 157 855,705 855,862 — — —
Construction, land and land development:
Commercial construction — — — — 181,843 181,843 — — —
Multifamily construction — — 8,288 8,288 494,770 503,058 8,288 8,288 —
One- to four-family construction — 564 2,006 2,570 628,613 631,183 2,006 2,006 —
Land and land development — 492 1,969 2,461 375,711 378,172 — 2,354 —
Commercial business:
Commercial business 42 248 1,439 1,729 1,285,089 1,286,818 716 2,211 —
Small business scored 3,491 517 2,635 6,643 1,289,218 1,295,861 243 4,757 —
Agricultural business, including secured by farmland — — 55 55 337,432 337,487 — 2,967 —
One- to four-family residential 860 6,968 19,069 26,897 1,529,596 1,556,493 10,415 23,398 1,427
Consumer:
Consumer—home equity revolving lines of credit 3,084 432 2,807 6,323 738,223 744,546 238 4,784 265
Consumer—other 223 107 — 330 82,121 82,451 — — —
Total $ 10,193 $ 10,505 $ 40,635 $ 61,333 $ 11,933,077 $ 11,994,410 $ 23,980 $ 52,897 $ 1,926
(1) The Company did not recognize any interest income on non-accrual loans during the six months ended June 30, 2026.
30
Table of Contents
December 31, 2025
30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Non-accrual with no Allowance Total Non-accrual (1) Loans 90 Days or More Past Due and Accruing
Commercial real estate:
Owner-occupied $ 260 $ — $ — $ 260 $ 1,138,038 $ 1,138,298 $ — $ — $ —
Investment properties — — — — 1,701,413 1,701,413 — — —
Small balance CRE 1,396 513 525 2,434 1,209,923 1,212,357 459 525 —
Multifamily real estate — — — — 850,789 850,789 — — —
Construction, land and land development:
Commercial construction — — — — 156,021 156,021 — — —
Multifamily construction — — — — 514,330 514,330 — — —
One- to four-family construction 289 — 2,007 2,296 605,151 607,447 738 738 1,268
Land and land development 623 517 3,298 4,438 429,240 433,678 1,970 4,437 —
Commercial business:
Commercial business 992 — 2,813 3,805 1,221,303 1,225,108 716 3,390 —
Small business scored 4,456 777 1,404 6,637 1,180,723 1,187,360 239 3,361 —
Agricultural business, including secured by farmland — — 1,546 1,546 351,606 353,152 1,490 4,609 —
One-to four-family residential 9,715 5,134 19,424 34,273 1,538,918 1,573,191 10,272 19,855 2,698
Consumer:
Consumer—home equity revolving lines of credit 3,817 853 2,197 6,867 672,622 679,489 252 4,559 114
Consumer—other 327 125 85 537 88,517 89,054 — 51 34
Total $ 21,875 $ 7,919 $ 33,299 $ 63,093 $ 11,658,594 $ 11,721,687 $ 16,136 $ 41,525 $ 4,114
(1) The Company did not recognize any interest income on non-accrual loans during the year ended December 31, 2025.
31
Table of Contents
The following tables provide the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2026 and 2025 (in thousands):
For the Three Months Ended June 30, 2026
Commercial Real Estate Multifamily Real Estate Construction and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Total
Allowance for credit losses - loans:
Beginning balance $ 41,788 $ 9,201 $ 34,589 $ 39,452 $ 4,930 $ 19,640 $ 10,752 $ 160,352
Provision/(recapture) for credit losses 367 658 (2,470) 1,784 720 (174) 713 1,598
Recoveries 12 — 5 171 213 12 63 476
Charge-offs — — — (293) (4) — (280) (577)
Ending balance $ 42,167 $ 9,859 $ 32,124 $ 41,114 $ 5,859 $ 19,478 $ 11,248 $ 161,849
For the Six Months Ended June 30, 2026
Commercial Real Estate Multifamily Real Estate Construction and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Total
Allowance for credit losses - loans:
Beginning balance $ 41,599 $ 9,805 $ 35,508 $ 37,785 $ 5,567 $ 19,552 $ 10,460 $ 160,276
Provision/(recapture) for credit losses 545 54 (3,393) 4,233 79 (99) 1,471 2,890
Recoveries 23 — 9 252 217 25 203 729
Charge-offs — — — (1,156) (4) — (886) (2,046)
Ending balance $ 42,167 $ 9,859 $ 32,124 $ 41,114 $ 5,859 $ 19,478 $ 11,248 $ 161,849
32
Table of Contents
For the Three Months Ended June 30, 2025
Commercial Real Estate Multifamily Real Estate Construction and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Total
Allowance for credit losses - loans:
Beginning balance $ 40,076 $ 10,109 $ 32,042 $ 38,665 $ 5,641 $ 20,752 $ 10,038 $ 157,323
Provision/(recapture) for credit losses 907 (191) 2,082 457 936 107 (97) 4,201
Recoveries 53 — — 361 1 58 168 641
Charge-offs — — — (892) (362) — (410) (1,664)
Ending balance $ 41,036 $ 9,918 $ 34,124 $ 38,591 $ 6,216 $ 20,917 $ 9,699 $ 160,501
For the Six Months Ended June 30, 2025
Commercial Real Estate Multifamily Real Estate Construction and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Total
Allowance for credit losses - loans:
Beginning balance $ 40,830 $ 10,308 $ 29,038 $ 38,611 $ 5,727 $ 20,807 $ 10,200 $ 155,521
Provision/(recapture) for credit losses 96 (390) 5,086 3,255 840 (123) (14) 8,750
Recoveries 110 — — 918 11 246 287 1,572
Charge-offs — — — (4,193) (362) (13) (774) (5,342)
Ending balance $ 41,036 $ 9,918 $ 34,124 $ 38,591 $ 6,216 $ 20,917 $ 9,699 $ 160,501
33
Table of Contents
Note 5: GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS
Goodwill and Other Intangible Assets: At June 30, 2026, intangible assets are comprised of goodwill and core deposit intangibles (CDI) acquired in business combinations. Goodwill represents the excess of the purchase consideration paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination, and is not amortized but is reviewed at least annually for impairment. The Company has identified one reporting unit for the purpose of evaluating goodwill for impairment. The Company completed an assessment of qualitative factors as of December 31, 2025 and concluded that no further analysis was required as it was more likely than not that the fair value of the reporting unit exceeded the carrying value.
CDI represents the value of transaction-related deposits and the value of the client relationships associated with the deposits. The Company amortizes CDI assets over their estimated useful lives and reviews them at least annually for events or circumstances that could impair their value.
The following table summarizes the changes in the Company’s goodwill and other intangibles for the year ended December 31, 2025 and the six months ended June 30, 2026 (in thousands):
Goodwill CDI Total
Balance, December 31, 2024 $ 373,121 $ 3,058 $ 376,179
Amortization — (1,567) (1,567)
Balance, December 31, 2025 373,121 1,491 374,612
Amortization — (512) (512)
Balance, June 30, 2026 $ 373,121 $ 979 $ 374,100
The following table presents the estimated amortization expense with respect to CDI as of June 30, 2026, for the periods indicated (in thousands):
Estimated Amortization
Remainder of 2026 $ 392
2027 426
2028 126
2029 35
$ 979
Mortgage Servicing Rights: Mortgage and Small Business Administration (SBA) servicing rights are reported in other assets. SBA servicing rights are initially recorded and carried at fair value. Mortgage servicing rights are initially recognized at fair value and are amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are subsequently evaluated for impairment based upon the fair value of the rights compared to the amortized cost (remaining unamortized initial fair value). If the fair value is less than the amortized cost, a valuation allowance is created through an impairment charge to servicing fee income. However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value. The unpaid principal balance of loans for which mortgage and SBA servicing rights have been recognized totaled $2.75 billion and $2.77 billion at June 30, 2026 and December 31, 2025, respectively. Custodial accounts maintained in connection with this servicing totaled $19.9 million and $13.1 million at June 30, 2026 and December 31, 2025, respectively.
An analysis of the mortgage and SBA servicing rights for the three and six months ended June 30, 2026 and 2025 is presented below (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Balance, beginning of the period $ 12,412 $ 13,421 $ 12,602 $ 13,487
Additions—amounts capitalized 886 627 1,547 1,243
Additions—through purchase — — — 2
Amortization (1) (891) (867) (1,729) (1,636)
Fair value adjustments (2) (13) 84 (26) 169
Balance, end of the period $ 12,394 $ 13,265 $ 12,394 $ 13,265
(1) Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income within mortgage banking operations and any unamortized balance is fully amortized if the loan repays in full.
(2) Fair value adjustments relate to SBA servicing rights. These adjustments are estimated based on an independent dealer analysis by discounting estimated net future cash flows from servicing SBA loans.
34
Table of Contents
Note 6: DEPOSITS
Deposits consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026 December 31, 2025
Non-interest-bearing accounts $ 4,542,942 $ 4,489,839
Interest-bearing checking 2,623,149 2,609,080
Regular savings accounts 3,853,612 3,723,922
Money market accounts 1,296,869 1,388,001
Total interest-bearing transaction and savings accounts 7,773,630 7,721,003
Certificates of deposit:
Certificates of deposit greater than or equal to $250,000 516,042 528,102
Certificates of deposit less than $250,000 956,979 1,004,202
Total certificates of deposit 1,473,021 1,532,304
Total deposits $ 13,789,593 $ 13,743,146
Included in total deposits:
Public fund transaction and savings accounts $ 413,173 $ 373,529
Public fund interest-bearing certificates 34,794 34,431
Total public deposits $ 447,967 $ 407,960
Total brokered certificates of deposit $ — $ 50,002
Scheduled maturities and weighted average interest rates of certificates of deposit at June 30, 2026, are as follows (dollars in thousands):
June 30, 2026
Amount Weighted Average Rate
Maturing in one year or less $ 1,433,276 3.04 %
Maturing after one year through two years 28,945 2.07
Maturing after two years through three years 6,651 0.63
Maturing after three years through four years 1,750 0.91
Maturing after four years through five years 1,991 0.64
Maturing after five years 408 0.52
Total certificates of deposit $ 1,473,021 3.01 %
35
Table of Contents
Note 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents estimated fair values of the Company’s financial instruments as of June 30, 2026 and December 31, 2025, whether or not recognized or recorded in the Consolidated Statements of Financial Condition (dollars in thousands):
June 30, 2026 December 31, 2025
Level Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
Assets:
Cash and cash equivalents 1 $ 435,452 $ 435,452 $ 422,640 $ 422,640
Securities—available-for-sale 2 1,985,530 1,985,530 1,985,990 1,985,990
Securities—available-for-sale 3 30,361 30,361 30,271 30,271
Securities—held-to-maturity 2 924,293 783,000 955,459 808,965
Securities—held-to-maturity 3 5,016 4,987 5,737 5,703
Loans held for sale 2 27,160 27,203 42,902 43,062
Loans receivable, net 3 11,832,561 11,827,479 11,561,411 11,497,137
Equity securities 1 678 678 406 406
FHLB stock 3 24,209 24,209 16,476 16,476
Bank-owned life insurance 1 324,164 324,164 319,347 319,347
Mortgage servicing rights 3 11,316 37,538 11,498 34,862
SBA servicing rights 3 1,078 1,078 1,104 1,104
Investments in limited partnerships 3 16,105 16,105 15,566 15,566
Derivatives:
Interest rate swaps 2 8,531 8,531 9,978 9,978
Interest rate lock and forward sales commitments 2,3 301 301 333 333
Liabilities:
Demand, interest checking and money market accounts 2 8,462,960 8,462,960 8,486,920 8,486,920
Regular savings 2 3,853,612 3,853,612 3,723,922 3,723,922
Certificates of deposit 2 1,473,021 1,466,034 1,532,304 1,527,803
FHLB advances 2 320,000 320,000 150,000 150,000
Other borrowings 2 114,497 114,497 107,715 107,715
Junior subordinated debentures 3 79,652 79,652 79,151 79,151
Derivatives:
Interest rate swaps 2 19,007 19,007 19,207 19,207
Interest rate lock and forward sales commitments 2,3 180 180 151 151
Risk participation agreement 2 2 2 5 5
The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). When measuring fair value, Management will maximize the use of observable inputs and minimize the use of unobservable inputs whenever possible. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s estimates for market assumptions.
The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret available data and develop fair value estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values. In addition, reasonable comparability between financial institutions may be limited due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.
36
Table of Contents
Items Measured at Fair Value on a Recurring Basis:
The following tables present financial assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy of the fair value measurements for those assets and liabilities as of June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
Level 1 Level 2 Level 3 Total
Assets:
Securities—available-for-sale
U.S. Government and agency obligations $ — $ 8,690 $ — $ 8,690
Municipal bonds — 155,267 — 155,267
Corporate bonds — 100,867 30,361 131,228
Mortgage-backed or related securities — 1,519,567 — 1,519,567
Asset-backed securities — 201,139 — 201,139
— 1,985,530 30,361 2,015,891
Loans held for sale(1) — 17,139 — 17,139
Equity securities 678 — — 678
SBA servicing rights — — 1,078 1,078
Investment in limited partnerships — — 14,625 14,625
Derivatives
Interest rate swaps — 8,531 — 8,531
Interest rate lock and forward sales commitments — — 301 301
$ 678 $ 2,011,200 $ 46,365 $ 2,058,243
Liabilities:
Junior subordinated debentures $ — $ — $ 79,652 $ 79,652
Derivatives
Interest rate swaps — 19,007 — 19,007
Interest rate lock and forward sales commitments — 91 89 180
Risk participation agreement — 2 — 2
$ — $ 19,100 $ 79,741 $ 98,841
37
Table of Contents
December 31, 2025
Level 1 Level 2 Level 3 Total
Assets:
Securities—available-for-sale
U.S. Government and agency obligations $ — $ 6,143 $ — $ 6,143
Municipal bonds — 143,457 — 143,457
Corporate bonds — 87,518 30,271 117,789
Mortgage-backed or related securities — 1,596,332 — 1,596,332
Asset-backed securities — 152,540 — 152,540
— 1,985,990 30,271 2,016,261
Loans held for sale(1) — 34,586 — 34,586
Equity securities 406 — — 406
SBA servicing rights — — 1,104 1,104
Investment in limited partnerships — — 14,545 14,545
Derivatives
Interest rate swaps — 9,978 — 9,978
Interest rate lock and forward sales commitments — — 333 333
$ 406 $ 2,030,554 $ 46,253 $ 2,077,213
Liabilities:
Junior subordinated debentures $ — $ — $ 79,151 $ 79,151
Derivatives
Interest rate swaps — 19,207 — 19,207
Interest rate lock and forward sales commitments — 83 68 151
Risk participation agreement — 5 — 5
$ — $ 19,295 $ 79,219 $ 98,514
(1) The unpaid principal balance of residential mortgage loans held for sale carried at fair value on a recurring basis was $16.7 million and $33.6 million at June 30, 2026 and December 31, 2025, respectively.
The following methods were used to estimate the fair value of each class of financial instruments above:
Securities: The estimated fair values of investment securities and mortgage-backed securities are based on current active market quotes, when available, which are considered Level 1 measurements. For most of the portfolio, matrix pricing based on the securities’ relationship to other benchmark quoted prices is used, which is considered Level 2. Due to limited activity in the trust preferred securities (TPS) markets, which reduces the observability of market spreads for certain TPS securities included in Corporate Bonds, Management has classified these securities as Level 3. Management periodically reviews pricing information from third-party pricing services and validates the reported fair values against other sources.
Loans Held for Sale: Fair values for residential mortgage loans held for sale are determined by comparing actual loan rates to current secondary market prices for similar loans.
Equity Securities: Equity securities are invested in a publicly traded stock. Fair values are based on daily quoted market prices.
SBA Servicing Rights: Fair values are estimated based on an independent dealer analysis that discounts estimated net future cash flows from servicing. Key assumptions include prepayment speeds, delinquency and foreclosure rates, discount rates, servicing costs, and timing of cash flows. The SBA servicing portfolio is stratified by loan type, and fair value estimates are adjusted based on the serviced loan interest rates versus current rates on new originations since the most recent independent analysis.
Investments in Limited Partnerships: Fair values are estimated using the practical expedient method, based on the Company’s ownership interest in partners’ capital with a proportionate share of net assets attributed to the Company for each limited partnership.
Junior Subordinated Debentures: Fair values are estimated using an income approach. Significant inputs include a credit risk adjusted spread and the three-month SOFR (Secured Overnight Financing Rate). The credit-risk-adjusted spread reflects the nonperformance risk of the liability. The Company uses an external valuation firm to validate the reasonableness of this spread. The junior subordinated debentures are carried at fair value, representing the estimated amount that would be paid to transfer these liabilities in an orderly transaction among market participants. Due to limited activity in the TPS markets, which reduces the observability of market spreads, these instruments are classified as Level 3 measurements.
38
Table of Contents
Derivatives: Derivatives include interest rate swap agreements, interest rate lock commitments to originate loans held for sale, forward sales contracts to sell loans and securities related to mortgage banking activities and risk participation agreements. Fair values are generally based on dealer quotes and secondary market sources. Because interest rate lock commitments use a pull-through rate that is considered an unobservable input, these derivatives are classified as Level 3 measurements.
Off-Balance Sheet Items: Off-balance sheet financial instruments include unfunded commitments to extend credit, including standby letters of credit, and commitments to purchase investment securities. The fair value of these instruments is not considered to be material.
Limitations: The fair value estimates presented are based on information available to Management as of June 30, 2026 and December 31, 2025. The factors used in these estimates are subject to change after the measurement date, therefore, current fair value estimates may differ materially from the amounts presented.
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3):
The following table provides a description of the valuation techniques, unobservable inputs, and quantitative and qualitative information about the unobservable inputs used in the fair value measurements of the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and non-recurring basis at June 30, 2026 and December 31, 2025:
Weighted Average Rate or Range
Financial Instruments Valuation Technique Unobservable Inputs June 30, 2026 December 31, 2025
Corporate bonds (TPS) Discounted cash flows Discount rate 7.00 % 6.91 %
Junior subordinated debentures Discounted cash flows Discount rate 7.00 % 6.91 %
Loans individually evaluated Collateral valuations Discount to appraised value 8.75% to 10.00% 0% to 8.75%
Interest rate lock commitments Pricing model Pull-through rate 89.06 % 88.86 %
SBA servicing rights Discounted cash flows Constant prepayment rate 18.12 % 18.14 %
Trust preferred securities: Management believes that the credit -risk-adjusted spread used to develop the discount rate utilized in the fair value measurement of TPS is indicative of the risk premium a willing market participant would require under current market conditions for instruments with similar contractual rates, terms, conditions, credit risk profiles and expected probabilities of default. Management attributes the change in fair value of these instruments, compared to their par value, primarily to general market adjustments to the risk premiums for these types of assets subsequent to their issuance.
Junior subordinated debentures: Similar to the TPS discussed above, Management believes that the credit-risk-adjusted spread utilized in the fair value measurement of the junior subordinated debentures is indicative of the risk premium a willing market participant would require under current market conditions for an issuer with Banner’s credit risk profile. Management attributes the change in fair value of the junior subordinated debentures compared to their par value primarily to general market adjustments to the risk premiums for these types of liabilities subsequent to their issuance. Future contractions in the risk-adjusted spread relative to the spread currently used to estimate the fair value of the Company’s junior subordinated debentures at fair value as of June 30, 2026, or the passage of time, will result in negative fair value adjustments. At June 30, 2026, the discount rate utilized was based on a credit spread of 326 basis points and three-month SOFR of 373 basis points.
Interest rate lock commitments: The fair value of the interest rate lock commitments is based on secondary market sources adjusted for an estimated pull-through rate. The pull-through rate is based on historical loan closing rates for similar interest rate lock commitments. An increase or decrease in the pull-through rate would have a corresponding, positive or negative fair value adjustment.
SBA servicing asset: The constant prepayment rate (CPR) is set based on industry data. An increase in the CPR would result in a negative fair value adjustment, while a decrease in CPR would result in a positive fair value adjustment.
39
Table of Contents
The following tables provide a reconciliation of the assets and liabilities measured for which fair value is measured using significant unobservable inputs (Level 3) on a recurring basis during the three and six months ended June 30, 2026 and 2025 (in thousands):
Three Months Ended June 30, 2026
Level 3 Fair Value Inputs
TPS Securities Borrowings—Junior Subordinated Debentures Interest Rate Lock and Forward Sales Commitments Investments in Limited Partnerships SBA Servicing Asset
Beginning balance $ 30,314 $ 79,472 $ (55) $ 14,860 $ 1,091
Net change recognized in earnings 91 — 267 (325) (13)
Net change recognized in accumulated other comprehensive income (AOCI) (44) 180 — — —
Purchases, issuances and settlements — — — 90 —
Ending balance at June 30, 2026 $ 30,361 $ 79,652 $ 212 $ 14,625 $ 1,078
Six Months Ended June 30, 2026
Level 3 Fair Value Inputs
TPS Securities Borrowings—Junior Subordinated Debentures Interest Rate Lock and Forward Sales Commitments Investments in Limited Partnerships SBA Servicing Asset
Beginning balance $ 30,271 $ 79,151 $ 265 $ 14,545 $ 1,104
Net change recognized in earnings 178 — (53) (209) (26)
Net change recognized in AOCI (88) 501 — — —
Purchases, issuances and settlements — — — 289 —
Ending balance at June 30, 2026 $ 30,361 $ 79,652 $ 212 $ 14,625 $ 1,078
Three Months Ended June 30, 2025
Level 3 Fair Value Inputs
TPS Borrowings—Junior Subordinated Debentures Interest Rate Lock and Forward Sales Commitments Investments in Limited Partnerships SBA Servicing Asset
Beginning balance $ 25,756 $ 67,711 $ 305 $ 15,025 $ 954
Net change recognized in earnings 79 — 186 92 84
Net change recognized in AOCI 2,109 5,655 — — —
Purchases, issuances and settlements — — — 443 —
Ending balance at June 30, 2025 $ 27,944 $ 73,366 $ 491 $ 15,560 $ 1,038
Six Months Ended June 30, 2025
Level 3 Fair Value Inputs
TPS Securities Borrowings—Junior Subordinated Debentures Interest Rate Lock and Forward Sales Commitments Investments in Limited Partnerships SBA Servicing Asset
Beginning balance $ 25,685 $ 67,477 $ 108 $ 13,955 $ 869
Net change recognized in earnings 153 — 383 372 169
Net change recognized in AOCI 2,106 5,889 — — —
Purchases, issuances and settlements — — — 1,233 —
Ending balance at June 30, 2025 $ 27,944 $ 73,366 $ 491 $ 15,560 $ 1,038
Interest income, dividends and amortization related to TPS are recorded as a component of interest income. Interest expense related to the junior subordinated debentures is measured based on contractual interest rates and reported in interest expense. The change in fair value of the junior subordinated debentures, which represents changes in instrument specific credit risk of the liability, and the change in fair value of TPS securities are recorded in other comprehensive income. Changes in the estimated fair value of investments in limited partnerships and the SBA servicing asset are recorded as a component of non-interest income. Changes in the estimated fair value of interest rate lock and forward sales commitments are included in mortgage banking operations in non-interest income.
40
Table of Contents
Items Measured at Fair Value on a Non-recurring Basis:
The following tables present financial assets and liabilities for which fair value is measured on a non-recurring basis and the level within the fair value hierarchy of the related fair value measurements for those assets as of June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
Level 1 Level 2 Level 3 Total
Loans individually evaluated $ — $ — $ 4,727 $ 4,727
Real estate owned (REO) — — 5,720 5,720
December 31, 2025
Level 1 Level 2 Level 3 Total
Loans individually evaluated $ — $ — $ 5,607 $ 5,607
REO — — 5,578 5,578
Loans individually evaluated: Expected credit losses for loans evaluated individually are measured based on the present value of expected future cash flows discounted at the loan’s original effective interest rate. When the Bank determines that foreclosure is probable, the expected credit loss is measured based on the estimated fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. As a practical expedient, the Bank measures the expected credit loss for a loan using the estimated fair value of the collateral, if repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the Bank’s assessment as of the reporting date. In both cases, if the estimated fair value of the collateral is less than the amortized cost basis of the loan, the Bank will recognize an allowance as the difference between the estimated fair value of the collateral, less costs to sell (if applicable) and the amortized cost basis of the loan. If the estimated fair value of the collateral exceeds the amortized cost basis of the loan, any expected recovery added to the amortized cost basis will be limited to the amount previously charged-off. Subsequent changes in the expected credit losses for loans evaluated individually are included within the provision for credit losses in the same manner in which the expected credit loss initially was recognized or as a reduction in the provision that would otherwise be reported.
REO: The Company records REO (acquired through a lending relationship) at estimated fair value on a non-recurring basis. Fair value adjustments on REO are based on updated real estate appraisals which are based on current market conditions. All REO properties are recorded at the lower of the estimated fair value of the real estate, less expected selling costs, or the carrying amount of the defaulted loans. From time to time, non-recurring fair value adjustments to REO are recorded to reflect partial write-downs based on an observable market price or current appraised value of property. Banner considers any valuation inputs related to REO to be Level 3 inputs. The individual carrying values of these assets are reviewed for impairment at least annually and any additional impairment charges are expensed.
Note 8: INCOME TAXES, DEFERRED TAXES, AND TAX CREDIT INVESTMENTS
As of June 30, 2026, the Company had a net deferred tax asset of $125.3 million, compared to $127.6 million at December 31, 2025. In addition, the Company has estimated $2.0 million of unrecognized tax benefits related to uncertain tax positions.
The Company recorded income tax expense of $24.1 million and $21.2 million for the six months ended June 30, 2026 and 2025, respectively, representing an effective tax rate of 18.9% for both periods. The effective tax rates differed from the statutory rate principally due to the effects of tax-exempt income, certain tax credits, and tax benefits related to restricted stock vesting.
Tax credit investments: The Company invests in low income housing tax credit funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of these tax credit investments over the life of the investment using a proportional amortization method and this tax credit investment amortization expense is a component of the provision for income taxes. The current balance of these tax credit investments is included in other assets, while the unfunded commitments are included in accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.
The following table presents the balances of the Company’s tax credit investments and related unfunded commitments at June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026 December 31, 2025
Tax Credit Investments:
Total commitments $ 201,816 $ 215,688
Unfunded commitments 96,719 118,471
41
Table of Contents
The following table presents other information related to the Company’s tax credit investments for the three and six months ended June 30, 2026 and 2025 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Tax credits and other tax benefits recognized $ 5,574 $ 4,331 $ 11,148 $ 8,662
Tax credit amortization expense included in provision for income taxes 4,086 3,510 8,172 7,020
Note 9: CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING FOR EARNINGS PER SHARE (EPS)
The following table reconciles basic to diluted weighted average shares outstanding used to calculate earnings per share data for the three and six months ended June 30, 2026 and 2025 (in thousands, except shares and per share data):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net income $ 48,886 $ 45,496 $ 103,602 $ 90,631
Basic weighted average shares outstanding 34,012,611 34,627,433 34,025,849 34,568,948
Dilutive effect of unvested restricted stock 116,562 111,515 171,247 192,096
Diluted weighted average shares outstanding 34,129,173 34,738,948 34,197,096 34,761,044
Earnings per common share
Basic $ 1.44 $ 1.31 $ 3.04 $ 2.62
Diluted $ 1.43 $ 1.31 $ 3.03 $ 2.61
Anti-dilutive restricted stock excluded from the diluted weighted average shares outstanding calculation — 20,428 — —
Note 10: STOCK-BASED COMPENSATION PLANS
The Company operates the 2014 Omnibus Incentive Plan (the 2014 Plan), the 2018 Omnibus Incentive Plan (the 2018 Plan) and the 2023 Omnibus Incentive Plan (the 2023 Plan), all of which were approved by its shareholders. The purpose of these plans is to promote the success and enhance the value of the Company by providing a means for attracting and retaining highly skilled employees, officers and directors of the Company and linking their personal interests with those of the Company’s shareholders. Under these plans, the Company currently has outstanding awards of restricted stock shares and restricted stock units.
The Company reserved 900,000 shares of its common stock for issuance under the 2014 Plan in connection with the settlement of awards. As of June 30, 2026, 580,576 restricted stock units have been granted under the 2014 Plan of which 44,084 were unvested. No further awards will be granted under the 2014 Plan.
The Company reserved 900,000 shares of common stock for issuance under the 2018 Plan in connection with the settlement of awards. As of June 30, 2026, 892,720 restricted stock units have been granted under the 2018 Plan of which 121,239 were unvested.
The Company reserved 625,000 shares of common stock for issuance under the 2023 Plan in connection with the settlement of awards. As of June 30, 2026, 13,743 restricted stock shares and 317,948 restricted stock units have been granted under the 2023 Plan of which 6,023 shares and 266,305 units were unvested, respectively.
The expense associated with all restricted stock grants (including restricted stock awards and restricted stock units) was $3.0 million and $5.7 million for the three and six months ended June 30, 2026, and $2.7 million and $4.9 million for the three and six months ended June 30, 2025, respectively. Unrecognized compensation expense for these awards as of June 30, 2026, was $20.3 million and is expected to be recognized over a weighted average period of 13 months.
Note 11: COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk - The Company has financial instruments with off-balance-sheet risk generated in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit, commitments related to standby letters of credit, commitments to originate loans, commitments to sell loans, and commitments to buy or sell securities. These instruments involve, to varying degrees, elements of credit and interest rate risk similar to the risk involved in on-balance sheet items.
Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument from commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. We apply the same credit policies to these commitments and conditional obligations as we do to our on-balance sheet financial instruments.
42
Table of Contents
Outstanding commitments consisted of the following at the dates indicated (in thousands):
Contract or Notional Amount
June 30, 2026 December 31, 2025
Commitments to extend credit $ 4,241,995 $ 3,978,474
Standby letters of credit and financial guarantees 29,028 26,406
Risk participation agreements 40,098 41,191
Commitments to originate loans held for sale 46,140 39,895
Commitments to sell loans secured by one- to four-family residential properties 29,495 43,264
Commitments to sell securities related to mortgage banking activities 34,500 27,250
In addition to the commitments disclosed in the table above, the Company is also committed to funding the unfunded portion of its tax credit investments, as well as the remaining unfunded portion of its investments in limited partnerships. As of June 30, 2026 and December 31, 2025, the remaining outstanding commitments related to the unfunded tax credit investments and limited partnership investments were as follows (in thousands):
Unfunded commitment balance for: June 30, 2026 December 31, 2025
Tax credit investments $ 96,719 $ 118,471
Limited partnerships investments $ 10,648 $ 11,398
Commitments to extend credit are agreements to lend to a client, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of the commitments may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. Each client’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on Management’s credit evaluation of the client. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income producing commercial properties. The Company’s allowance for credit losses - unfunded loan commitments at June 30, 2026 and December 31, 2025 was $15.1 million and $15.0 million, respectively.
Standby letters of credit are conditional commitments issued to guarantee a client’s performance or payment to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. Under a risk participation agreement, the Bank guarantees the financial performance of a borrower on the participated portion of an interest rate swap on a loan.
Interest rates on one- to four-family residential loan applications are typically rate locked (committed) to clients during the application stage for periods ranging from 30 to 60 days, the most typical period being 45 days. Traditionally, these loan applications with rate lock commitments have the pricing for the sale of these loans locked with various qualified investors under a best-efforts delivery program at or near the time the interest rate is locked with the client. The Bank then attempts to deliver these loans before their rate locks expire. This arrangement generally requires delivery of the loans prior to the expiration of the rate lock. Delays in funding the loans may require a lock extension. The cost of a lock extension is sometimes covered by the client and other times by the Bank. These lock extension costs have not had a material impact to the Company’s operations. For mandatory delivery commitments the Company enters into forward commitments at specific prices and settlement dates to deliver either: (1) residential mortgage loans for purchase by secondary market investors (i.e., Freddie Mac or Fannie Mae), or (2) mortgage-backed securities to broker/dealers. The purpose of these forward commitments is to offset the movement in interest rates between the execution of its residential mortgage rate lock commitments with borrowers and the sale of those loans to the secondary market investor. There were no counterparty default losses on forward contracts during the three and six months ended June 30, 2026 or June 30, 2025. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Company limits its exposure to market risk by monitoring differences between commitments to clients and forward contracts with market investors and securities broker/dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the transaction is completed by either paying or receiving a fee to or from the investor or broker/dealer equal to the increase or decrease in the market value of the forward contract. Changes in the value of rate lock commitments are recorded as assets and liabilities.
In the normal course of business, the Company and/or its subsidiaries have various legal proceedings and other contingent matters outstanding. These proceedings and the associated legal claims are often contested and the outcome of individual matters is not always predictable. These claims and counterclaims typically arise during the course of collection efforts on problem loans or with respect to action to enforce liens on properties in which the Bank holds a security interest, but also include other claims arising in the ordinary course of business, including employment-related matters. Based upon the information known to Management, there were no legal proceedings, pending or threatened, that Management believes would reasonably be expected to have a material adverse effect on the results of operations or consolidated financial position at June 30, 2026.
In connection with certain asset sales, the Bank typically makes representations and warranties about the underlying assets conforming to specified guidelines. If the underlying assets do not conform to the specifications, the Bank may have an obligation to repurchase the assets or indemnify the purchaser against any loss. The Bank believes that the potential for material loss under these arrangements is remote. Accordingly, the fair value of such obligations is not material.
43
Table of Contents
Note 12: DERIVATIVES AND HEDGING
The Company is party to various derivative instruments that are used for asset and liability management and client financing needs. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require no net investment and allow for the net settlement of positions. The notional amount serves as the basis for the payment provision of the contract and takes the form of units, such as shares or dollars. The underlying variable represents a specified interest rate, index, or other component. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the market value of the derivative contract.
The Company’s predominant derivative and hedging activities involve interest rate swaps related to certain term loans and forward sales contracts associated with mortgage banking activities. Generally, these instruments help the Company manage exposure to market risk and meet client financing needs. Market risk represents the possibility that economic value or net interest income will be adversely affected by fluctuations in external factors such as market-driven interest rates and prices or other economic factors.
As of June 30, 2026 and December 31, 2025, the notional values or contractual amounts and fair values of the Company’s derivatives were as follows (in thousands):
Asset Derivatives Liability Derivatives
June 30, 2026 December 31, 2025 June 30, 2026 December 31, 2025
Notional/ Contract Amount Fair Value Notional/ Contract Amount Fair Value Notional/ Contract Amount Fair Value Notional/ Contract Amount Fair Value
Interest rate swaps $ 419,165 $ 18,996 $ 409,748 $ 19,185 $ 419,165 $ 19,007 $ 409,748 $ 19,207
Master netting agreements (10,465) (9,207) — —
Net interest rate swaps 8,531 9,978 19,007 19,207
Risk participation agreements 467 — 583 — 39,632 2 40,607 5
Mortgage loan commitments 46,140 301 39,895 333 — — — —
Forward sales contracts 11,011 — 28,405 — 42,963 180 33,793 151
Total $ 476,783 $ 8,832 $ 478,631 $ 10,311 $ 501,760 $ 19,189 $ 484,148 $ 19,363
The Company’s asset derivatives are included in other assets, while the liability derivatives are included in accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.
Interest Rate Swaps: The Bank offers an interest rate swap program for commercial loan clients under which a client with a variable-rate loan enters into an interest rate swap to receive a variable-rate payment in exchange for paying a fixed-rate payment. To offset its risk exposure, the Bank enters into an offsetting interest rate swap with a dealer counterparty for the same notional amount and term, under which the dealer counterparty receives a fixed-rate payment in exchange for a variable-rate payment. These swaps do not qualify as designated hedges; therefore, each swap is accounted for as a freestanding derivative.
Risk Participation Agreements: In conjunction with the purchase or sale of participating interests in loans, the Company also participates in related swaps through risk participation agreements. The existing credit derivatives resulting from these participations are not designated as hedges as they are not used to manage interest rate risk in the Company’s assets or liabilities and are not speculative.
Mortgage Loan Commitments: The Company sells originated one- to four-family residential loans into the secondary mortgage loan markets. During the period of loan origination and prior to the sale of the loans in the secondary market, the Company has exposure to movements in interest rates associated with written interest rate lock commitments with potential borrowers to originate one- to four-family residential loans that are intended to be sold and for closed one- to four-family residential loans held for sale for which fair value accounting has been elected, that are awaiting sale and delivery into the secondary market. The Company economically hedges the risk of changing interest rates associated with these one- to four-family residential loan commitments by entering into forward sales contracts to sell these loans or mortgage-backed securities to broker/dealers at specific prices and dates.
Gains (losses) recognized in income within mortgage banking operations on non-designated hedging instruments for the three and six months ended June 30, 2026 and 2025, were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Mortgage loan commitments $ 356 $ 324 $ 66 $ 605
Forward sales contracts (401) (352) 167 (809)
$ (45) $ (28) $ 233 $ (204)
44
Table of Contents
The Company is exposed to credit-related losses in the event of nonperformance by the counterparty to these agreements. Credit risk of the financial contract is controlled through the credit approval, limits, and monitoring procedures and Management does not expect the counterparties to fail their obligations.
In connection with the interest rate swaps between the Bank and the dealer counterparties, the agreements contain a provision where if the Bank fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Bank would be required to settle its obligations. Similarly, the Bank could be required to settle its obligations under certain of its agreements if specific regulatory events occur, such as a publicly issued prompt corrective action directive, cease and desist order, or a capital maintenance agreement that required the Bank to maintain a specific capital level. If the Bank had breached any of these provisions at June 30, 2026 or December 31, 2025, it could have been required to settle its obligations under the agreements at the termination value. As of June 30, 2026 and December 31, 2025, the Company had no obligations to dealer counterparties related to these agreements. The Company generally posts collateral against derivative liabilities in the form of cash, government agency-issued bonds, mortgage-backed securities, or commercial mortgage-backed securities. Collateral posted against derivative liabilities was $20.1 million and $17.4 million as of June 30, 2026 and December 31, 2025, respectively. The collateral posted included restricted cash of $19.1 million and $16.4 million as of June 30, 2026 and December 31, 2025, respectively.
Derivative assets and liabilities are recorded at fair value on the balance sheet. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis and to offset net derivative positions with related collateral where applicable. In addition, some interest rate swap derivatives between the Company and the dealer counterparties are cleared through central clearing houses. These clearing houses characterize the variation margin payments as settlements of the derivative’s market exposure and not as collateral. The variation margin is treated as an adjustment to our cash collateral, as well as a corresponding adjustment to our derivative asset or liability. The variation margin adjustment was a positive adjustment of $10.5 million and $9.2 million as of June 30, 2026 and December 31, 2025, respectively.
45
Table of Contents
The following tables present additional information related to the Company’s derivative contracts, by type of financial instrument, as of June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
Gross Amounts of Financial Instruments Not Offset in the Consolidated Statement of Financial Condition
Gross Amounts Recognized Amounts offset in the Statement of Financial Condition Net Amounts in the Statement of Financial Condition Netting Adjustment Per Applicable Master Netting Agreements Fair Value of Financial Collateral in the Statement of Financial Condition Net Amount
Derivative assets
Interest rate swaps $ 18,996 $ (10,465) $ 8,531 $ — $ — $ 8,531
$ 18,996 $ (10,465) $ 8,531 $ — $ — $ 8,531
Derivative liabilities
Interest rate swaps $ 19,007 $ — $ 19,007 $ — $ (18,470) $ 537
$ 19,007 $ — $ 19,007 $ — $ (18,470) $ 537
December 31, 2025
Gross Amounts of Financial Instruments Not Offset in the Consolidated Statement of Financial Condition
Gross Amounts Recognized Amounts offset in the Statement of Financial Condition Net Amounts in the Statement of Financial Condition Netting Adjustment Per Applicable Master Netting Agreements Fair Value of Financial Collateral in the Statement of Financial Condition Net Amount
Derivative assets
Interest rate swaps $ 19,185 $ (9,207) $ 9,978 $ — $ — $ 9,978
$ 19,185 $ (9,207) $ 9,978 $ — $ — $ 9,978
Derivative liabilities
Interest rate swaps $ 19,207 $ — $ 19,207 $ — $ (15,767) $ 3,440
$ 19,207 $ — $ 19,207 $ — $ (15,767) $ 3,440
46
Table of Contents
Note 13: SEGMENT DISCLOSURES
The Company is managed by legal entity, rather than by lines of business, and its activities are considered a single operating segment for financial reporting purposes. The Bank is engaged in the single line of business of community banking, which involves gathering deposits and originating loans in its primary market areas. The Bank manages its operations, allocates resources, and monitors and reports its financials as a single operating segment.
Banner’s Chief Executive Officer is considered the Chief Operating Decision Maker (CODM). The CODM assesses performance based on net income that is reported on our Consolidated Statements of Operations. The measure of segment assets is reported on our Consolidated Statement of Financial Condition as total assets. The CODM uses consolidated net income as the primary measure to evaluate resource allocations. The CODM is regularly provided with our consolidated financial statements, specifically the statement of operations and the statement of cash flows, as well as expense and budget data.
47
Table of Contents