BANNER CORPBANR
BANNER CORP Fair Value Disclosure
The following table presents estimated fair values of the Company’s financial instruments as of December 31, 2025 and 2024, whether or not recognized or recorded in the Consolidated Statements of Financial Condition (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
| Level | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | 422,640 | $ | 422,640 | $ | 501,858 | $ | 501,858 | ||||||||||||||||||||
| Securities—available-for-sale | 2 | 1,985,990 | 1,985,990 | 2,078,826 | 2,078,826 | ||||||||||||||||||||||||
| Securities—available-for-sale | 3 | 30,271 | 30,271 | 25,685 | 25,685 | ||||||||||||||||||||||||
| Securities—held-to-maturity | 2 | 955,459 | 808,965 | 995,237 | 819,230 | ||||||||||||||||||||||||
| Securities—held-to-maturity | 3 | 5,737 | 5,703 | 6,327 | 6,298 | ||||||||||||||||||||||||
| Loans held for sale | 2 | 42,902 | 43,062 | 32,021 | 32,215 | ||||||||||||||||||||||||
| Loans receivable, net | 3 | 11,561,411 | 11,497,137 | 11,199,135 | 10,894,024 | ||||||||||||||||||||||||
| Equity securities | 1 | 406 | 406 | 481 | 481 | ||||||||||||||||||||||||
| FHLB stock | 3 | 16,476 | 16,476 | 22,451 | 22,451 | ||||||||||||||||||||||||
| Bank-owned life insurance | 1 | 319,347 | 319,347 | 312,549 | 312,549 | ||||||||||||||||||||||||
| Mortgage servicing rights | 3 | 11,498 | 34,862 | 12,618 | 37,926 | ||||||||||||||||||||||||
| SBA servicing rights | 3 | 1,104 | 1,104 | 869 | 869 | ||||||||||||||||||||||||
| Investments in limited partnerships | 3 | 15,566 | 15,566 | 13,955 | 13,955 | ||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Interest rate swaps | 2 | 9,978 | 9,978 | 14,507 | 14,507 | ||||||||||||||||||||||||
| Interest rate lock and forward sales commitments | 2,3 | 333 | 333 | 331 | 331 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Demand, interest checking and money market accounts | 2 | 8,486,920 | 8,486,920 | 8,536,303 | 8,536,303 | ||||||||||||||||||||||||
| Regular savings | 2 | 3,723,922 | 3,723,922 | 3,478,423 | 3,478,423 | ||||||||||||||||||||||||
| Certificates of deposit | 2 | 1,532,304 | 1,527,803 | 1,499,672 | 1,492,829 | ||||||||||||||||||||||||
| FHLB advances | 2 | 150,000 | 150,000 | 290,000 | 290,000 | ||||||||||||||||||||||||
| Other borrowings | 2 | 107,715 | 107,715 | 125,257 | 125,257 | ||||||||||||||||||||||||
| Subordinated notes, net | 2 | — | — | 80,278 | 78,832 | ||||||||||||||||||||||||
| Junior subordinated debentures | 3 | 79,151 | 79,151 | 67,477 | 67,477 | ||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Interest rate swaps | 2 | 19,207 | 19,207 | 30,184 | 30,184 | ||||||||||||||||||||||||
| Interest rate lock and forward sales commitments | 2,3 | 151 | 151 | 2 | 2 | ||||||||||||||||||||||||
| Risk participation agreement | 2 | 5 | 5 | 6 | 6 | ||||||||||||||||||||||||
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 value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. 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 value amounts. In addition, reasonable comparability between financial institutions may not be likely 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.
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 December 31, 2025 and 2024 (in thousands):
| 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 | ||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Securities—available-for-sale | |||||||||||||||||||||||
| U.S. Government and agency obligations | $ | — | $ | 7,933 | $ | — | $ | 7,933 | |||||||||||||||
| Municipal bonds | — | 123,982 | — | 123,982 | |||||||||||||||||||
| Corporate bonds | — | 99,305 | 25,685 | 124,990 | |||||||||||||||||||
| Mortgage-backed or related securities | — | 1,676,848 | — | 1,676,848 | |||||||||||||||||||
| Asset-backed securities | — | 170,758 | — | 170,758 | |||||||||||||||||||
| — | 2,078,826 | 25,685 | 2,104,511 | ||||||||||||||||||||
Loans held for sale(1) | — | 26,185 | — | 26,185 | |||||||||||||||||||
| Equity securities | 481 | — | — | 481 | |||||||||||||||||||
| SBA servicing rights | — | — | 869 | 869 | |||||||||||||||||||
| Investment in limited partnerships | — | — | 13,955 | 13,955 | |||||||||||||||||||
| Derivatives | |||||||||||||||||||||||
| Interest rate swaps | — | 14,507 | — | 14,507 | |||||||||||||||||||
| Interest rate lock and forward sales commitments | — | 221 | 110 | 331 | |||||||||||||||||||
| $ | 481 | $ | 2,119,739 | $ | 40,619 | $ | 2,160,839 | ||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Junior subordinated debentures | $ | — | $ | — | $ | 67,477 | $ | 67,477 | |||||||||||||||
| Derivatives | |||||||||||||||||||||||
| Interest rate swaps | — | 30,184 | — | 30,184 | |||||||||||||||||||
| Interest rate lock and forward sales commitments | — | — | 2 | 2 | |||||||||||||||||||
| Risk participation agreement | — | 6 | — | 6 | |||||||||||||||||||
| $ | — | $ | 30,190 | $ | 67,479 | $ | 97,669 | ||||||||||||||||
(1) The unpaid principal balance of one- to four family residential loans held for sale carried at fair value on a recurring basis was $33.6 million and $25.7 million at December 31, 2025 and 2024, 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 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 using 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 our 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 rate. The credit risk–adjusted spread reflects the nonperformance risk of the liability. The Company utilizes 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.
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 December 31, 2025 and 2024. The factors used in these estimates are subject to change after the measurement date; therefore, current fair value estimates may differ significantly from the amounts presented herein.
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3):
The following table provides a description of the valuation technique, unobservable inputs and quantitative and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and non-recurring basis at December 31, 2025 and 2024:
| Weighted Average Rate or Range | ||||||||||||||||||||||||||
| December 31 | ||||||||||||||||||||||||||
| Financial Instruments | Valuation Technique | Unobservable Inputs | 2025 | 2024 | ||||||||||||||||||||||
| Corporate bonds (TPS) | Discounted cash flows | Discount rate | 6.91 | % | 9.57 | % | ||||||||||||||||||||
| Junior subordinated debentures | Discounted cash flows | Discount rate | 6.91 | % | 9.57 | % | ||||||||||||||||||||
| Loans individually evaluated | Collateral valuations | Discount to appraised value | 0.00% to 8.75% | 0.00% to 75% | ||||||||||||||||||||||
| Interest rate lock commitments | Pricing model | Pull-through rate | 88.86 | % | 92.34 | % | ||||||||||||||||||||
| SBA servicing rights | Discounted cash flows | Constant prepayment rate | 18.14 | % | 18.85 | % | ||||||||||||||||||||
TPS: 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 and terms and conditions and issuers with similar credit risk profiles and with similar expected probability of default. Management attributes the change in fair value of these instruments, compared to their par value, primarily to perceived 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 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 perceived 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 utilized to measure the Company’s junior subordinated debentures at fair value as of December 31, 2025, or the passage of time, will result in negative fair value adjustments. At December 31, 2025, the discount rate utilized was based on a credit spread of basis points and three month SOFR of 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, where a decrease in CPR would result in a positive fair value adjustment.
The following table provides a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the years ended December 31, 2025 and 2024 (in thousands):
| 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 | |||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | 25,304 | $ | 66,413 | $ | 251 | $ | 13,475 | $ | 740 | |||||||||||||||||||
| Net change recognized in earnings | 115 | — | (143) | (1,013) | 129 | ||||||||||||||||||||||||
| Net change recognized in AOCI | 266 | 1,064 | — | — | — | ||||||||||||||||||||||||
| Purchases, issuances and settlements | — | — | — | 1,493 | — | ||||||||||||||||||||||||
| Balance, December 31, 2024 | 25,685 | 67,477 | 108 | 13,955 | 869 | ||||||||||||||||||||||||
| Net change recognized in earnings | 320 | — | 157 | (1,309) | 235 | ||||||||||||||||||||||||
| Net change recognized in AOCI | 4,266 | 11,674 | — | — | — | ||||||||||||||||||||||||
| Purchases, issuances and settlements | — | — | — | 1,899 | — | ||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | 30,271 | $ | 79,151 | $ | 265 | $ | 14,545 | $ | 1,104 | |||||||||||||||||||
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. The change in fair value of the TPS is recorded in other comprehensive income. The change in fair value of the investment in limited partnerships and the SBA servicing asset are recorded as a component of non-interest income. The change in fair value of the interest rate lock and forward sales commitments are included in mortgage banking operations in non-interest income.
Items Measured at Fair Value on a Non-recurring Basis
The following tables present financial assets and liabilities measured at fair value on a non-recurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Loans individually evaluated | $ | — | $ | — | $ | 5,607 | $ | 5,607 | |||||||||||||||
| REO | — | — | 5,578 | 5,578 | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Loans individually evaluated | $ | — | $ | — | $ | 6,590 | $ | 6,590 | |||||||||||||||
| REO | — | — | 2,367 | 2,367 | |||||||||||||||||||
The following table presents the gains and losses resulting from non-recurring fair value adjustments for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Loans individually evaluated | $ | (978) | $ | (1,483) | $ | (933) | |||||||||||
Loans held for sale (1) | — | — | 2,538 | ||||||||||||||
| Total loss from non-recurring measurements | $ | (978) | $ | (1,483) | $ | 1,605 | |||||||||||
(1) Gains and losses related to loans held for sale were due to the multifamily real estate loans held for sale until the loans were transferred to loans held in portfolio in the fourth quarter of 2023.
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 or when the Bank determines that foreclosure is probable, the expected credit loss is measured based on the 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 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 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 fair value of the collateral, less costs to sell (if applicable) and the amortized cost basis of the loan. If the 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 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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.