BANNER CORPBANR
BANNER CORP Income Taxes Disclosure
The following table presents the components of the provision for income taxes included in the Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| Years Ended December 31 | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 24,772 | $ | 22,648 | $ | 28,805 | |||||||||||
| State | 5,790 | 7,843 | 6,296 | ||||||||||||||
| Total Current | 30,562 | 30,491 | 35,101 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 13,323 | 10,567 | 7,698 | ||||||||||||||
| State | (353) | (471) | 664 | ||||||||||||||
| Total Deferred | 12,970 | 10,096 | 8,362 | ||||||||||||||
| Provision for income taxes | $ | 43,532 | $ | 40,587 | $ | 43,463 | |||||||||||
The following table presents the reconciliation of the provision for income taxes based on the federal statutory rate to the actual effective rate by amount and percent for the years ended December 31, 2025 and 2024 (amounts in thousands):
| Year Ended December 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||||||||||||
| Federal income tax statutory rate | $ | 50,172 | 21.0 | % | $ | 43,992 | 21.0 | % | |||||||||||||||
State income taxes, net of federal tax offset (1) | 3,628 | 1.5 | 6,174 | 3.0 | |||||||||||||||||||
| State audits and amended returns | — | — | 4 | — | |||||||||||||||||||
| Tax credits | (14,211) | (5.9) | (9,597) | (4.6) | |||||||||||||||||||
| Low income housing tax credit partnerships, net of amortization | 10,653 | 4.5 | 6,791 | 3.2 | |||||||||||||||||||
| Nontaxable and nondeductible items: | |||||||||||||||||||||||
| Tax-exempt interest | (7,395) | (3.1) | (6,914) | (3.3) | |||||||||||||||||||
| Investment in life insurance | (2,132) | (0.9) | (1,930) | (0.9) | |||||||||||||||||||
| Other | 2,817 | 1.1 | 2,067 | 1.0 | |||||||||||||||||||
| Provision for income taxes and effective income tax rate | $ | 43,532 | 18.2 | % | $ | 40,587 | 19.4 | % | |||||||||||||||
(1) State taxes in California and Oregon made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents the reconciliation of the federal statutory rate to the actual effective rate by percent for the year ended December 31, 2023:
| 2023 | |||||
| Percent | |||||
| Federal income tax statutory rate | 21.0 | % | |||
| State Income taxes, net of federal tax offset | 2.6 | ||||
| State audits and amended returns | — | ||||
| Tax credits | (2.7) | ||||
| Low income housing partnerships, net of amortization | 2.0 | ||||
| Nontaxable and nondeductible items: | |||||
| Tax-exempt interest | (3.6) | ||||
| Investment in life insurance | (0.9) | ||||
| Other | 0.7 | ||||
| Provision for income taxes and effective income tax rate | 19.1 | % | |||
The following table presents income taxes paid (net of refunds received) for the years ended December 31, 2025 and 2024 (in thousands):
| Years Ended December 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. federal | $ | 25,000 | $ | 20,000 | |||||||
| U.S. state and local: | |||||||||||
| California | 4,200 | 2,705 | |||||||||
| Oregon | 1,615 | 1,215 | |||||||||
| Idaho | 525 | 220 | |||||||||
| Utah | 44 | 39 | |||||||||
| Montana | 25 | 15 | |||||||||
| Total | $ | 31,409 | $ | 24,194 | |||||||
The following table reflects the effect of temporary differences that gave rise to the components of the net deferred tax asset as of December 31, 2025 and 2024 (in thousands):
| December 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Loan loss and REO | $ | 42,131 | $ | 41,045 | |||||||
| Deferred compensation | 23,336 | 22,983 | |||||||||
| Net operating loss carryforward | 8,082 | 10,482 | |||||||||
| Federal and state tax credits | 758 | 758 | |||||||||
| State net operating losses | 3,526 | 3,757 | |||||||||
| Loan discount | 628 | 379 | |||||||||
| Lease liability | 8,589 | 10,416 | |||||||||
| Unrealized loss on securities—available-for-sale, net | 65,837 | 87,709 | |||||||||
| Other | 1,528 | 1,191 | |||||||||
| Total deferred tax assets | 154,415 | 178,720 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | (3,101) | (3,783) | |||||||||
| Deferred loan fees, servicing rights and loan origination costs | (12,134) | (12,575) | |||||||||
| Intangibles | (2,720) | (2,922) | |||||||||
| Right of use asset | (7,864) | (9,583) | |||||||||
| Financial instruments accounted for under fair value accounting | (825) | (815) | |||||||||
| Total deferred tax liabilities | (26,644) | (29,678) | |||||||||
| Deferred income tax asset | 127,771 | 149,042 | |||||||||
| Valuation allowance | (184) | (184) | |||||||||
| Deferred tax asset, net | $ | 127,587 | $ | 148,858 | |||||||
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recognized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment.
At December 31, 2025, the Company had federal net operating loss (NOL) carryforwards of approximately $38.5 million and state NOL carryforwards of $49.3 million, against which the Company has established a $184,000 valuation reserve. The federal and state NOL carryforwards, if unused, will expire by the end of 2034. The Company also had federal general business credit carryforwards at December 31, 2025, of $219,000, which will expire, if unused, by the end of 2031, and federal alternative minimum tax (AMT) credit carryforwards of $538,000, which are available to reduce future federal regular income taxes over an indefinite period.
At December 31, 2024, the Company had federal and state NOL carryforwards of approximately $49.9 million and $53.0 million, respectively, federal general business credit carryforwards of $219,000, and AMT credit carryforwards of approximately $538,000.
As a result of the Company’s 2015 acquisition of Starbuck Bancshares, Inc., the Company experienced a change in control under Section 382 of the Internal Revenue Code. The Section 382 limitations that applied to Starbuck Bancshares, Inc. continue to apply to the Company. The Section 382 limits the ability of a corporate taxpayer to use net operating loss carryforwards, general business credits, and recognized built-in-losses, on an annual basis, incurred prior to the change in control against income earned after the change in control. As a result of the Section 382 limitations, the Company is limited to utilizing $21.5 million (after the application of the Section 382 limitations carried over from Starbuck Bancshares, Inc.) on an annual basis (after the application of the Section 382 limitations carried over from Starbuck Bancshares, Inc.) of federal NOL carryforwards, general business credits, and recognized built-in losses. The applicable state Section 382 limitations range from $575,000 to $21.5 million. The Company has recorded a $184,000 valuation reserve against the portion of state NOL carryforwards and tax credits it believes is more likely than not to be unrealizable due to the application of Section 382 limitations at the state level, which are based on future apportionment factors.
As a result of Banner’s capital raise in June 2010, the Company experienced a change in control within the meaning of Section 382 of the Internal Revenue Code. Under Section 382, the Company was limited to utilizing $6.9 million of pre-existing NOL carryforwards on an annual basis, which were generated prior to the acquisition of Starbuck Bancshares, Inc. Based on its analysis, the Company believes it is more likely than not that the June 2010 change in control will not impact its ability to utilize all of the related NOL carryforwards, general business credits, and recognized built-in losses. As of December 31, 2025, the Company had fully utilized all federal NOL carryforwards and credits subject to the June 2010 limitation. Certain state net operating losses subject to change-in-control limitations remain outstanding.
As a result of the Company’s 2019 acquisition of AltaPacific and AltaPacific Bank, the Company did not experience a change in control within the meaning of Section 382 of the Internal Revenue Code. However, the Section 382 limitations that applied to AltaPacific and AltaPacific Bank continue to apply to the Company. Under these limitations, the Company is limited to utilizing $110,000 of the federal NOL carryforwards and general business credits acquired from AltaPacific and AltaPacific Bank. Based on its analysis, the Company believes it is more likely than not that these limitations will not impact its ability to utilize the related NOL carryforwards and general business credits.
Retained earnings at December 31, 2025 and 2024 included approximately $5.4 million in tax basis bad debt reserves for which no income tax liability has been recorded. In the future, if this tax bad debt reserve is used for purposes other than to absorb bad debts or the Company no longer qualifies as a bank or is completely liquidated, the Company will incur a federal tax liability at the then-prevailing corporate tax rate, estimated as $1.1 million at December 31, 2025.
A reconciliation of the beginning and ending amount of total unrecognized state tax benefits for the years ended December 31, 2025 and 2024, is as follows (in thousands):
| Years Ended December 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance, beginning of year | $ | 2,000 | $ | 2,000 | |||||||
| Changes related to prior year tax positions | — | — | |||||||||
| Changes related to current year tax positions | — | — | |||||||||
| Balance, end of year | $ | 2,000 | $ | 2,000 | |||||||
None of the unrecognized tax benefits, if recognized, would materially affect the effective tax rate. The Company does not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense. The amount of interest and penalties accrued for the years ended December 31, 2025, 2024 and 2023 is immaterial. The Company files consolidated income tax returns in Oregon, California, Utah, Montana and Idaho and for federal purposes. The Company is no longer subject to tax examination for tax years before 2022.
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 tax credit investments over the life of the investment using a proportional amortization method as 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 December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Tax Credit Investments: | |||||||||||
| Total commitments | $ | 215,688 | $ | 153,618 | |||||||
| Unfunded commitments | 118,471 | 94,416 | |||||||||
The following table presents other information related to the Company’s tax credit investments for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Tax credits and other tax benefits recognized | $ | 17,062 | $ | 12,072 | $ | 8,018 | |||||||||||
| Tax credit amortization expense included in provision for income taxes | 13,572 | 9,334 | 6,449 | ||||||||||||||
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.