BANNER CORP

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial Statements contained in Item IV of this Form 10-K.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial Statements contained in this Form 10-K.

Previous wording

Banner’s successful execution of its super community bank model and strategic initiatives has delivered solid core operating results and profitability over the last several years. The Company’s longer term strategic initiatives continue to focus on originating high-quality assets and client acquisition, which we believe will continue to generate strong revenue while maintaining the Company’s moderate risk profile. We strive to uphold our core values, which are to do the right thing for our clients, communities, colleagues, company and shareholders; and to provide consistent and reliable strength through all economic cycles and change events.

Current wording

Banner’s successful execution of its super community bank model and strategic initiatives has delivered solid core operating results and profitability over the last several years. The Company’s longer term strategic initiatives continue to focus on originating high-quality assets and client acquisition, which we believe will continue to generate strong revenue while maintaining the Company’s moderate risk profile.

Previous wording

•Net interest margin, on a tax equivalent basis, was 3.75% compared to 4.01% in the prior year.

Current wording

•Net interest margin, on a tax equivalent basis, was 3.96% compared to 3.75% in the prior year.

Previous wording

•Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $614.8 million or the year ended December 31, 2024, compared to $643.9 million for the prior year.

Current wording

•Adjusted revenue* (the total of net interest income and total non-interest income adjusted for the net gain or loss on the sale of securities, the net change in valuation of financial instruments, and gains or losses incurred on building and lease exits) was $661.5 million for the year ended December 31, 2025, compared to $614.8 million for the prior year.

Previous wording

•Mortgage banking revenue was $12.2 million for the year ended December 31, 2024, compared to $11.8 million in the prior year.

Current wording

•Mortgage banking revenue was $13.2 million for the year ended December 31, 2025, compared to $12.2 million in the prior year.

Previous wording

•Income from deposit fees and other service charges was $43.4 million for the year ended December 31, 2024, compared to $41.6 million for the prior year.

Current wording

•Income from deposit fees and other service charges was $43.2 million for the year ended December 31, 2025, compared to $43.4 million for the prior year.

Previous wording

•Return on average assets was 1.07% for year ended December 31, 2024, compared to 1.18% for the prior year.

Current wording

•Return on average assets was 1.21% for year ended December 31, 2025, compared to 1.07% for the prior year.

Previous wording

•Net loans receivable increased 5% to $11.20 billion at December 31, 2024, compared to $10.66 billion a year ago.

Current wording

•Net loans receivable increased 3% to $11.56 billion at December 31, 2025, compared to $11.20 billion a year ago.

Previous wording

•Non-performing assets were $39.6 million, or 0.24% of total assets, at December 31, 2024, compared to $30.1 million, or 0.19% of total assets, a year ago.

Current wording

•Non-performing assets were $51.2 million, or 0.31% of total assets, at December 31, 2025, compared to $39.6 million, or 0.24% of total assets, a year ago.

Previous wording

•The allowance for credit losses - loans was $155.5 million, or 1.37% of total loans receivable, at December 31, 2024, compared to $149.6 million, or 1.38% of total loans receivable a year ago.

Current wording

•The allowance for credit losses - loans was $160.3 million, or 1.37% of total loans receivable, at December 31, 2025, compared to $155.5 million, or 1.37% of total loans receivable a year ago.

Previous wording

•Cash dividends paid to shareholders were $1.92 per share, consistent with the prior year.

Current wording

•Cash dividends paid to shareholders were $1.94 per share, up from $1.92 per share paid in the prior year.

Previous wording

•Common shareholders’ equity per share increased to $51.49 at December 31, 2024, compared to $48.12 a year ago.

Current wording

•Common shareholders’ equity per share increased to $57.08 at December 31, 2025, compared to $51.49 a year ago.

Previous wording

•Tangible common shareholders’ equity per share* decreased 1% to $40.57 at December 31, 2024, compared to $37.09 a year ago.

Current wording

•Tangible common shareholders’ equity per share* increased 14% to $46.09 at December 31, 2025, compared to $40.57 a year ago.

Previous wording

(7)Net interest income as a percent of average interest-earning assets on a tax equivalent basis.

Current wording

(8)Net interest income as a percent of average interest-earning assets on a tax equivalent basis.

Previous wording

(8)Non-interest expenses divided by the total of net interest income and non-interest income.

Current wording

(9)Non-interest expenses divided by the total of net interest income and non-interest income.

Previous wording

(9)Non-performing loans consist of nonaccrual and 90 days past due loans still accruing interest.

Current wording

(10)Non-performing loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Non-performing assets consist of non-performing loans and REO.

Previous wording

(10)Represents a non-GAAP financial measure. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure, see, “Non-GAAP Financial Measures” below.

Current wording

(11)Represents a non-GAAP financial measure. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure, see, “Non-GAAP Financial Measures” below.

Previous wording

Management has presented non-GAAP financial measures in this discussion and analysis because it believes that they provide useful and comparative information to assess trends in our core operations and to facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, we have also presented comparable earnings information using GAAP financial measures. For a reconciliation of these non-GAAP financial measures, see the tables below. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.

Current wording

Management has presented non-GAAP financial measures in this discussion and analysis because it believes that they provide useful information to assess trends in our core operations and to facilitate the comparison of our performance with our peers. However, these non-GAAP financial measures are supplemental to, and not a substitute for, any analysis based on GAAP. The most directly comparable GAAP financial measures are presented with equal or greater prominence. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, see the tables below. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.

Previous wording

Adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio are non-GAAP financial measures. To calculate the adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio, we make adjustments to our GAAP revenues and expenses as reported on our Consolidated Statements of Operations. Management believes that these non-GAAP financial measures provide information to investors that is useful in evaluating the operating performance and trends of financial services companies, including the Company. The following tables set forth reconciliations of these non-GAAP financial measures (dollars in thousands, except share and per share data):

Current wording

Adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio are non-GAAP financial measures. To calculate adjusted revenue, diluted adjusted earnings per share and adjusted efficiency ratio, we make adjustments to our GAAP revenues and expenses as reported on our Consolidated Statements of Operations. Management believes that these non-GAAP financial measures provide information to investors that is useful in evaluating the operating performance and trends of financial services companies, including the Company, by excluding certain items that Management considers not reflective of core operating performance. The following tables set forth reconciliations of these non-GAAP financial measures (dollars in thousands, except share and per share data):

Previous wording

The ratio of tangible common shareholders’ equity to tangible assets is a non-GAAP financial measure. We calculate tangible common equity by excluding goodwill and other intangible assets from shareholders’ equity. We calculate tangible assets by excluding the balance of goodwill and other intangible assets from total assets. We believe this is consistent with the treatment by our bank regulatory agencies, which exclude goodwill and other intangible assets from the calculation of risk-based capital ratios. The following table sets forth the reconciliation of tangible equity and tangible assets (dollars in thousands, except share and per share data).

Current wording

The ratio of tangible common shareholders’ equity to tangible assets is a non-GAAP financial measure. We calculate tangible common equity by excluding goodwill and other intangible assets from shareholders’ equity. We calculate tangible assets by excluding the balance of goodwill and other intangible assets from total assets. Bank regulatory capital measures also exclude goodwill and certain intangible assets; however, tangible common equity and tangible assets as presented here are non-GAAP financial measures and should not be considered substitutes for regulatory capital ratios. The following table sets forth the reconciliation of tangible equity and tangible assets (dollars in thousands, except share and per share data).

Previous wording

Allowance for Credit Losses: The allowance for credit losses reflects Management’s evaluation of our loans and their estimated loss potential, as well as the risk inherent in various components of the portfolio. Significant judgment and assumptions are applied in estimating the allowance for credit losses. These judgments, assumptions and estimates are susceptible to significant changes based on the current environment. Among the material estimates required to establish the allowance for credit losses are a reasonable and supportable forecast; a reasonable and supportable forecast period and the reversion period; value of collateral; strength of guarantors; the amount and timing of future cash flows for loans individually evaluated; and determination of the qualitative loss factors.

Current wording

Allowance for Credit Losses: The allowance for credit losses reflects Management’s evaluation of our loans and unfunded loan commitments along with their estimated loss potential, as well as the risk inherent in various components of the portfolio. Significant judgments and assumptions are applied in estimating the allowance for credit losses. These judgments, assumptions and estimates are susceptible to significant changes based on the current environment. Among the material estimates required to establish the allowance for credit losses are a reasonable and supportable forecast; a reasonable and supportable forecast period and the reversion period; value of collateral; strength of guarantors; the amount and timing of future cash flows for loans individually evaluated; and determination of the qualitative loss factors.

Previous wording

Management considers various economic scenarios and forecasts to arrive at the estimate that most reflects Management’s expectations of future conditions. As of December 31, 2024, Management used a baseline forecast to estimate the allowance for credit losses. The selection of a more optimistic or pessimistic economic forecast would result in a lower or higher allowance for credit losses. While there are multiple economic forecast scenarios available, the use of a protracted slump economic forecast would have increased the allowance for credit losses - loans by approximately 11% as of December 31, 2024, where the use of a stronger near-term growth economic forecast would have resulted in a negligible decrease in the allowance for credit losses - loans as of December 31, 2024.

Current wording

Management considers various economic scenarios and forecasts to arrive at the estimate that most reflects Management’s expectations of future conditions. As of December 31, 2025, Management used a baseline forecast to estimate the allowance for credit losses. The selection of a more optimistic or pessimistic economic forecast would result in a lower or higher allowance for credit losses. While there are multiple economic forecast scenarios available, the use of a protracted slump economic forecast would have increased the allowance for credit losses - loans by approximately 10% as of December 31, 2025, where the use of a stronger near-term growth economic forecast would have resulted in a negligible decrease in the allowance for credit losses - loans as of December 31, 2025.

Previous wording

Management uses a scale to assign qualitative and environmental (QE) factor adjustments based on the level of estimated impact which requires a significant amount of judgment. Some QE factors impact all loan segments equally while others may impact some loan segments more or less than others. If Management’s judgment was different for a QE factor that impacts all loan segments equally, a five basis-point change in this QE factor would increase or decrease the allowance for credit losses by 3.7% as of December 31, 2024.

Current wording

Management uses a scale to assign qualitative and environmental (QE) factor adjustments based on the level of estimated impact which requires a significant amount of judgment. Some QE factors impact all loan segments equally while others may impact some loan segments more or less than others. If Management’s judgment was different for a QE factor that impacts all loan segments equally, a five basis-point change in this QE factor would increase or decrease the allowance for credit losses by approximately 4% as of December 31, 2025.

Previous wording

Fair Value Accounting and Measurement: We use fair value measurements to record certain financial assets and liabilities at their estimated fair value. A hierarchical disclosure framework associated with the level of pricing observability is utilized in measuring financial instruments at fair value. The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of pricing observability. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have little or no pricing observability and a higher degree of judgment utilized in measuring fair value. Determining the fair value of financial instruments with unobservable inputs requires a significant amount of judgment. This includes the discount rate used to fair value our trust preferred securities and junior subordinated debentures. A 25 basis-point increase or decrease in the discount rate used to calculate the fair value of our trust preferred securities would result in a $514,000 decrease or increase in the reported fair value as of December 31, 2024, with an offsetting adjustment to our accumulated other comprehensive income. A 25 basis-point increase or decrease in the discount rate used to calculate the fair value of our junior subordinated debentures would result in a $1.3 million decrease or increase in the reported fair value as of December 31, 2024, with an offsetting adjustment to our accumulated other comprehensive income.

Current wording

Fair Value Accounting and Measurement: We use fair value measurements to record certain financial assets and liabilities at their estimated fair value. A hierarchical disclosure framework associated with the level of pricing observability is utilized in measuring financial instruments at fair value. The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of pricing observability. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have little or no pricing observability and a higher degree of judgment utilized in measuring fair value. Determining the fair value of financial instruments with unobservable inputs requires a significant amount of judgment. This includes the discount rate used to fair value our trust preferred securities and junior subordinated debentures. A 25 basis-point increase or decrease in the discount rate used to calculate the fair value of our trust preferred securities would result in a $628,000 decrease or increase in the reported fair value as of December 31, 2025, with an offsetting adjustment to our accumulated other comprehensive income. A 25 basis-point increase or decrease in the discount rate used to calculate the fair value of our junior subordinated debentures would result in a $1.6 million decrease or increase in the reported fair value as of December 31, 2025, with an offsetting adjustment to our accumulated other comprehensive income.

Previous wording

General. Total assets increased to $16.20 billion at December 31, 2024, compared to $15.67 billion at December 31, 2023. The increase in assets was primarily due to loan growth and an increase in interest-bearing deposits, partially offset by the decrease in the securities portfolio in 2024.

Current wording

General. Total assets increased to $16.35 billion at December 31, 2025, compared to $16.20 billion at December 31, 2024, primarily due to loan growth, partially offset by decreases in cash and securities.

Previous wording

Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $544.2 million, or 5%, to $11.35 billion at December 31, 2024, from $10.81 billion at December 31, 2023. The increase in total loans receivable primarily reflects growth in multifamily real estate, commercial business, commercial real estate and one- to four-family residential loan balances.

Current wording

Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $367.0 million, or 3%, to $11.72 billion at December 31, 2025, from $11.35 billion at December 31, 2024. The increase in total loans receivable primarily reflects growth in commercial real estate, construction, land and land development, and consumer loan balances.

Previous wording

The aggregate of securities and interest-bearing deposits decreased $73.1 million, or 2%, to $3.40 billion at December 31, 2024, compared to $3.48 billion a year earlier, primarily due to a decrease in securities, partially offset by an increase in interest-bearing deposits. Securities decreased to $3.11 billion at December 31, 2024, from $3.43 billion at December 31, 2023, primarily due to normal security portfolio cash flows. Fair value adjustments for securities designated as available-for-sale reflected a decrease of $5.0 million for the year ended December 31, 2024, which was included net of the associated tax benefit as a component of other comprehensive income. The average effective duration of our securities portfolio was approximately 6.6 years at December 31, 2024, compared to 6.5 years at December 31, 2023.

Current wording

The aggregate of securities and interest-bearing cash deposits decreased $187.2 million, or 5%, to $3.22 billion at December 31, 2025, compared to $3.40 billion a year earlier, primarily due to decreases in available-for-sale securities. Securities decreased to $2.98 billion at December 31, 2025, from $3.11 billion at December 31, 2024, due to normal security portfolio cash flows. Fair value adjustments for securities designated as available-for-sale reflected an increase of $99.3 million for the year ended December 31, 2025, which was included, net of the associated tax expense, as a component of other comprehensive income. The average effective duration of our securities portfolio was approximately 6.2 years at December 31, 2025, compared to 6.6 years at December 31, 2024.

Previous wording

Deposits increased $484.9 million, or 4%, to $13.51 billion at December 31, 2024, from $13.03 billion at December 31, 2023, with core deposits increasing $462.7 million and certificates of deposit increasing $22.2 million. The increase in core deposits reflects increases in interest-bearing transaction and savings accounts. Core deposits were 89% of total deposits at both December 31, 2024 and 2023. Non-interest-bearing deposits decreased by $200.8 million, or 4%, to $4.59 billion from $4.79 billion at December 31, 2023, while interest-bearing transaction and savings accounts increased by $663.5 million, or 10%, to $7.42 billion at December 31, 2024, from $6.76 billion at December 31, 2023. Certificates of deposit increased $22.2 million, or 2%, to $1.50 billion at December 31, 2024, from $1.48 billion at December 31, 2023, primarily due to clients moving funds from core deposit accounts to higher yielding certificates of deposit, partially offset by a $57.7 million decrease in brokered deposits. We had $50.3 million of brokered deposits at December 31, 2024, compared to $108.1 million at December 31, 2023.

Current wording

Deposits increased $228.7 million, or 2%, to $13.74 billion at December 31, 2025, from $13.51 billion at December 31, 2024, with core deposits (which consist of non-interest-bearing checking accounts and interest-bearing transaction and savings accounts) increasing $196.1 million and certificates of deposit increasing $32.6 million. The increase in core deposits reflects increases in interest-bearing transaction and savings accounts, partially offset by a decrease in non-interest bearing deposits. Core deposits were 89% of total deposits at both December 31, 2025 and 2024. Non-interest-bearing deposits decreased by $101.7 million, or 2%, to $4.49 billion from $4.59 billion at December 31, 2024, while interest-bearing transaction and savings accounts increased by $297.8 million, or 4%, to $7.72 billion at December 31, 2025, from $7.42 billion at December 31, 2024. Certificates of deposit increased $32.6 million, or 2%, to $1.53 billion at December 31, 2025, from $1.50 billion at December 31, 2024, primarily due to clients moving funds to higher yielding certificates of deposit. Brokered deposits totaled $50.0 million at December 31, 2025, compared to $50.3 million at December 31, 2024.

Previous wording

We had $290.0 million and $323.0 million of FHLB advances at December 31, 2024 and 2023, respectively. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $57.6 million to $125.3 million at December 31, 2024, compared to $182.9 million at December 31, 2023. Junior subordinated debentures totaled $67.5 million at December 31, 2024, compared to $66.4 million at December 31, 2023. Subordinated notes, net of issuance costs, were $80.3 million at December 31, 2024, compared to $92.9 million at December 31, 2023. The decrease was due to the Bank’s purchase of $13.0 million of Banner’s outstanding subordinated debt during 2024.

Current wording

We had $150.0 million and $290.0 million of FHLB advances at December 31, 2025 and 2024, respectively. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $17.5 million to $107.7 million at December 31, 2025, compared to $125.3 million at December 31, 2024. Junior subordinated debentures increased to $79.2 million at December 31, 2025, compared to $67.5 million at December 31, 2024, primarily as a result of fair value adjustments. The outstanding balance of the Company’s subordinated notes was fully repaid during the second quarter of 2025. Subordinated notes, net of issuance costs, totaled $80.3 million at December 31, 2024.

Previous wording

Total shareholders’ equity increased $121.6 million, to $1.77 billion at December 31, 2024, compared to $1.65 billion at December 31, 2023. The increase in shareholders’ equity primarily reflects $168.9 million of net income and an $11.9 million increase in AOCI. This increase was partially offset by $67.0 million of cash dividends paid or accrued to common shareholders. There were no shares of common stock repurchased during the year ended December 31, 2024. Common shareholder’s equity to total assets was 10.95% and 10.55% at December 31, 2024 and 2023, respectively. Tangible common shareholders’ equity (a non-GAAP financial measure), which excludes goodwill and other intangible assets was $1.40 billion, or 8.84% of tangible assets at December 31, 2024, compared to $1.27 billion, or 8.33% at December 31, 2023. The increase in tangible common shareholders’ equity as a percentage of tangible assets was primarily due to the previously mentioned increase in AOCI and an increase in retained earnings. The Company’s book value per share was $51.49 at December 31, 2024, compared to $48.12 per share a year ago, and its tangible book value per share (a non-GAAP financial measure) was $40.57 at December 31, 2024, compared to $37.09 per share a year ago. See, “Executive Overview - Non-GAAP Financial Measures” above for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

Total shareholders’ equity increased $172.0 million, to $1.95 billion at December 31, 2025, compared to $1.77 billion at December 31, 2024. The increase in shareholders’ equity primarily reflects $195.4 million of net income and a $69.3 million increase in AOCI, related primarily to unrealized gains on available-for-sale securities. This increase was partially offset by $67.7 million of cash dividends paid or accrued to common shareholders. In addition, there were 499,975 shares of common stock repurchased during the year ended December 31, 2025, at an average price of $63.14 per share. Common shareholder’s equity to total assets was 11.90% and 10.95% at December 31, 2025 and 2024, respectively. Tangible common shareholders’ equity (a non-GAAP financial measure), which excludes goodwill and other intangible assets was $1.57 billion, or 9.84% of tangible assets at December 31, 2025, compared to $1.40 billion, or 8.84% at December 31, 2024. The increase in tangible common shareholders’ equity as a percentage of tangible assets was primarily due to the previously mentioned increase in AOCI and an increase in retained earnings. The Company’s book value per share was $57.08 at December 31, 2025, compared to $51.49 per share a year ago, and its tangible book value per share (a non-GAAP financial measure) was $46.09 at December 31, 2025, compared to $40.57 per share a year ago. See, “Executive Overview - Non-GAAP Financial Measures” above for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

Investments. At December 31, 2024, our securities portfolio totaled $3.11 billion, consisting principally of mortgage-backed and mortgage-related securities. Our investment levels may be increased or decreased depending upon Management’s projections as to the demand for funds to be used in our loan origination, deposit and other activities, and upon yields available on investment alternatives. During the year ended December 31, 2024, our aggregate investment in securities decreased $326.8 million, primarily due to normal security portfolio cash flows and the sale of securities. Mortgage-backed securities decreased $219.4 million and U.S. Government and agency obligations decreased $26.3 million, while municipal bonds decreased $6.8 million, corporate debt obligations decreased $23.1 million and asset-backed securities decreased $50.1 million.

Current wording

Investments. At December 31, 2025, our securities portfolio totaled $2.98 billion, consisting principally of mortgage-backed and mortgage-related securities. Our investment levels may be increased or decreased depending upon Management’s projections as to the demand for funds to be used in our loan origination, deposit and other activities, and upon yields available on investment alternatives. During the year ended December 31, 2025, our aggregate investment in securities decreased $128.6 million, primarily due to normal security portfolio cash flows. Mortgage-backed securities decreased $113.1 million and U.S. Government and agency obligations decreased $1.8 million, while municipal bonds increased $11.7 million, corporate debt obligations decreased $7.5 million and asset-backed securities decreased $18.2 million.

Previous wording

U.S. Government and Agency Obligations: Our portfolio of U.S. Government and agency obligations had a carrying value of $8.2 million (with an amortized cost of $8.8 million) at December 31, 2024, a weighted average contractual maturity of 13 years and a weighted average coupon rate of 4.11%. Many of the U.S. Government and agency obligations we own include call features which allow the issuing agency the right to call the securities at various dates prior to the final maturity.

Current wording

U.S. Government and Agency Obligations: Our portfolio of U.S. Government and agency obligations had a carrying value of $6.4 million (with an amortized cost of $6.7 million) at December 31, 2025, a weighted average contractual maturity of 13.7 years and a weighted average coupon rate of 3.83%. Many of these U.S. Government and agency obligations include call features which allow the issuing agency to call the securities at various dates prior to the final maturity.

Previous wording

Mortgage-Backed Obligations: At December 31, 2024, our mortgage-backed and mortgage-related securities had a carrying value of $2.24 billion ($2.56 billion at amortized cost, with a net unrealized loss adjustment of $319.0 million). The weighted average coupon rate of these securities was 2.60% and the weighted average contractual maturity was 26 years, although we receive principal payments on these securities each month resulting in a much shorter expected average life. As of December 31, 2024, 97% of the mortgage-backed and mortgage-related securities pay interest at a fixed rate.

Current wording

Mortgage-Backed Obligations: At December 31, 2025, our mortgage-backed and mortgage-related securities had a carrying value of $2.12 billion ($2.36 billion at amortized cost, with a net unrealized loss adjustment of $230.9 million). The weighted average coupon rate of these securities was 2.60% and the weighted average contractual maturity was approximately 27 years, although we receive principal payments on these securities each month resulting in a much shorter expected average life. As of December 31, 2025, 97% of the mortgage-backed and mortgage-related securities pay interest at a fixed rate.

Previous wording

Municipal Bonds: The carrying value of our tax-exempt bonds at December 31, 2024 was $493.5 million ($512.3 million at amortized cost), comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and, to a lesser extent, revenue bonds (i.e., backed by revenues from the specific project being financed) issued by cities and counties and various housing authorities, and hospital, school, water and sanitation districts. We also had taxable bonds in our municipal bond portfolio, which at December 31, 2024 had a carrying value of $68.5 million ($79.9 million at amortized cost). Many of our qualifying municipal bonds are not rated by a nationally recognized credit rating agency due to the smaller size of the total issuance and a portion of these bonds have been acquired through direct private placement by the issuers. We have not experienced any defaults or payment deferrals on our current portfolio of municipal bonds. Our combined municipal bond portfolio is geographically diverse, with the majority within the states of Washington, Oregon, Texas and California. At December 31, 2024, our municipal bond portfolio, including taxable and tax-exempt, had a weighted average maturity of approximately 22 years and a weighted average coupon rate of 3.13%.

Current wording

Municipal Bonds: The carrying value of our tax-exempt bonds at December 31, 2025, was $506.2 million ($522.9 million at amortized cost), comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and, to a lesser extent, revenue bonds (i.e., backed by revenues from the specific project being financed) issued by cities and counties and various housing authorities, and hospital, school, water and sanitation districts. We also had taxable bonds in our municipal bond portfolio, which at December 31, 2025, had a carrying value of $67.7 million ($77.1 million at amortized cost). Many of our qualifying municipal bonds are not rated by a nationally recognized credit rating agency due to the smaller size of the total issuance and a portion of these bonds have been acquired through direct private placement by the issuers. We have not experienced any defaults or payment deferrals on our current portfolio of municipal bonds. Our combined municipal bond portfolio is geographically diverse, with the majority within the states of Washington, Oregon, Texas and California. At December 31, 2025, our municipal bond portfolio, including taxable and tax-exempt, had a weighted average maturity of approximately 22 years and a weighted average coupon rate of 3.15%.

Previous wording

Corporate Bonds: Our corporate bond portfolio had a carrying value of $127.5 million ($134.0 million at amortized cost) at December 31, 2024. At December 31, 2024, the portfolio had a weighted average maturity of 11.0 years and a weighted average coupon rate of 4.82%.

Current wording

Corporate Bonds: Our corporate bond portfolio had a carrying value of $120.2 million ($118.5 million at amortized cost) at December 31, 2025. At December 31, 2025, the portfolio had a weighted average maturity of 13 years and a weighted average coupon rate of 5.14%.

Previous wording

Asset-Backed Securities: At December 31, 2024, our asset-backed securities portfolio had a carrying value of $170.8 million (with an amortized cost of $170.6 million), and was comprised of collateralized loan obligations. The weighted average coupon rate of these securities was 6.51% and the weighted average contractual maturity was 14 years. At December 31, 2024, 100% of these securities had adjustable interest rates tied to three-month SOFR.

Current wording

Asset-Backed Securities: At December 31, 2025, our asset-backed securities portfolio had a carrying value of $152.5 million (with an amortized cost of $152.4 million), and was comprised of collateralized loan obligations. The weighted average coupon rate of these securities was 5.81% and the weighted average contractual maturity was 16 years. At December 31, 2025, 100% of these securities had adjustable interest rates tied to three-month SOFR.

Previous wording

The following tables set forth certain information regarding carrying values and percentage of total carrying values of our portfolio of securities—trading and securities—available-for-sale, both carried at estimated fair market value, and securities—held-to-maturity, carried at amortized cost, net of the allowance for credit losses - securities, as of December 31, 2024, 2023 and 2022 (dollars in thousands):

Current wording

The following table sets forth certain information regarding carrying values and percentage of total carrying values of our portfolio of available-for-sale securities, carried at estimated fair market value, and held-to-maturity securities, carried at amortized cost, net of the allowance for credit losses - securities, as of December 31, 2025, 2024 and 2023 (dollars in thousands):

Previous wording

Loans and Lending. Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a portfolio of loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan-to-deposit ratio at December 31, 2024, was 84%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of commercial real estate and business loans. While we originate a variety of loans, our ability to originate each type of loan depends upon the relative client demand and competition in each market we serve. We continue to implement strategies designed to capture more market share and achieve increases in targeted loans. New loan originations and portfolio balances will continue to be significantly affected by economic activity and changes in interest rates.

Current wording

Loans and Lending. Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a portfolio of loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan-to-deposit ratio at December 31, 2025, was 86%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of commercial real estate and business loans. While we originate a variety of loans, our ability to originate each type of loan depends upon the relative client demand and competition in each market we serve. We continue to implement strategies designed to capture more market share and achieve increases in targeted loans. New loan originations and portfolio balances will continue to be significantly affected by economic activity and changes in interest rates.

Previous wording

One- to Four-Family Residential Lending: At December 31, 2024, $1.59 billion, or 14% of our loan portfolio, consisted of permanent loans on one- to four-family residences. We are active originators of one- to four-family residential loans in the communities we serve. Our balance of loans for one- to four-family residences increased by $73.2 million in 2024, compared to the prior year. The increase in one- to four-family residential loans during 2024 was primarily the result of a higher percentage of one- to four-family construction loans converting to one- to four-family residential loans and a larger percentage of new production being held in portfolio.

Current wording

One- to Four-Family Residential Lending: At December 31, 2025, $1.57 billion, or 13% of our loan portfolio, consisted of permanent loans on one- to four-family residences. We are active originators of one- to four-family residential loans in the communities we serve. The balance of loans for one- to four-family residences decreased by $18.1 million in 2025, compared to the prior year. This decrease reflects that payoffs of existing permanent loans exceeded the combination of new originations and conversions of one- to four-family construction loans to permanent loans.

Previous wording

Construction, Land and Land Development Lending: Our construction loan originations have been relatively strong in recent years as builders have expanded production and experienced strong home sales in many markets where we operate. At December 31, 2024, construction, land and land development loans totaled $1.52 billion, or 14% of total loans. The largest shifts in this portfolio occurred in commercial construction and land and land development loans. Commercial construction loans decreased $47.6 million, or 28%, to $122.4 million at December 31, 2024, primarily due to the conversion of commercial construction loans to the commercial real estate portfolio upon the completion of the construction phase, partially offset by new loan production. Commercial construction loans represented approximately 1% of our total loan portfolio at December 31, 2024, comprised primarily of retail property construction projects. Land and land development loans increased $33.0 million, or 10%, to$369.7 million at December 31, 2024. Land and land development loans represented approximately 3% of our total loan portfolio at December 31, 2024 and was comprised of residential properties for personal use and development. Multifamily construction loans increased $9.7 million, or 2%, to $513.7 million at December 31, 2024. Multifamily construction loans represented approximately 5% of our total loan portfolio at December 31, 2024 and was comprised of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. One- to four-family construction loans decreased $12.2 million, or 2%, to $514.2 million at December 31, 2024. One- to four-family construction loans represented approximately 5% of our total loan portfolio at December 31, 2024, and included speculative construction loans, as well as “all-in-one” construction loans made to owner occupants that convert to permanent loans upon completion of the homes that, depending on market conditions, may be subsequently sold into the secondary market.

Current wording

Construction, Land and Land Development Lending: Our construction loan originations have been relatively strong in recent years, as builders have expanded production and experienced strong home sales in many markets where we operate. At December 31, 2025, construction, land and land development loans totaled $1.71 billion, or 15% of total loans. The largest shifts in this portfolio occurred in one- to four-family construction, land and land development loans. One- to four-family construction loans increased $93.2 million, or 18%, to $607.4 million at December 31, 2025, primarily due to new loan production and advances exceeding payoffs and the conversion of one- to four-family construction loans to permanent one- to four-family residential loans upon completion of construction. One- to four-family construction loans represented approximately 5% of our total loan portfolio at December 31, 2025, and included speculative construction loans, as well as “all-in-one” construction loans made to owner occupants that convert to permanent loans upon completion of the homes that, depending on market conditions, may be subsequently sold into the secondary market. Commercial construction loans increased $33.7 million, or 28%, to $156.0 million at December 31, 2025, primarily due to new loan production and advances exceeding the conversion of commercial construction loans to the commercial real estate portfolio upon the completion of the construction phase. Commercial construction loans represented approximately 1% of our total loan portfolio at December 31, 2025, comprised primarily of retail and industrial property construction projects. Land and land development loans increased $64.0 million, or 17%, to$433.7 million at December 31, 2025. Land and land development loans represented approximately 4% of our total loan portfolio at December 31, 2025, and were comprised of residential properties for personal use and development. Multifamily construction loans represented approximately 5% of our total loan portfolio at December 31, 2025, and were comprised of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint.