What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-23 · 556 added, 605 removed, 1922 unchanged (38% of the section changed)

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(b) Changes in Internal Controls Over Financial Reporting:

For the year ended December 31, 2020, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting other than the adoption of internal controls over financial reporting due to the implementation of FASB ASU 2016-13, Financial Instruments:

Credit Losses (ASC 326):

Measurement of Credit Losses on Financial Instruments, as amended and commonly referred to as CECL.

For the year ended December 31, 2021, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting:

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ITEM 9B – Other Information

ITEM 9C-Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable

ITEM 10 – Directors, Executive Officers and Corporate Governance

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The Code of Ethics and Business Conduct requires our officers, directors, and employees to maintain the highest standards of professional conduct.

A copy of the Code of Ethics and Business Conduct in substantially its current form was filed as an exhibit with Form 8-K on September 1, 2020 and is available without charge, upon request to Investor Relations, Banner Corporation, P.O.

A copy of the Code of Ethics and Business Conduct in substantially its current form was filed as an exhibit with Form 8-K on August 11, 2021 and is available without charge, upon request to Investor Relations, Banner Corporation, P.O.

Box 907, Walla Walla, WA 99362.

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Item 16 - Form 10-K Summary.

Electronic Signatures

Please note that electronic signatures are now allowed due to the November 2020 amendments to Rule 302(b) of Regulation S-T.

Rule 302(b) of Regulation S-T, as amended, permits a signatory to an electronic filing to electronically sign the document, provided that the signatory follows certain procedures and the electronic signature meets certain requirements specified in the EDGAR Filer Manual.

Pursuant to the amended EDGAR Filer Manual, the process by which a signatory sign an authentication document using an electronic signature must meet, at a minimum, the following:

• Require the signatory to present a physical, logical, or digital credential authenticating their individual identity;

• Reasonably provide a method for the non-repudiation of the signature;

• Require that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed;

• Provide a time stamp of the date and time of the signature to ensure it occurred before or at the time of the electronic filing.

The amendments also include a new Rule 302(b)(2) that requires a signatory—before using an electronic signature on an authentication document—to manually sign an attestation indicating his or her agreement that the use of an electronic signature on an authentication document is legally equal to a manual signature.

This manually signed attestation must be maintained by the filer for the period of time that the signatory uses an electronic signature to sign an authentication document and for seven years after the most recently dated electronically signed authentication document.

Regarding the initial electronic signature authentication document, we believe the following language is sufficient to satisfy the requirements of Rule 302(b), as amended:

The undersigned signatory attests and agrees that the use of an electronic signature in any authentication document that includes the undersigned signatory’s typed, conformed signature, and that is filed with or furnished to the Securities and Exchange Commission by or on behalf of the undersigned signatory, Banner Corporation or any of its affiliates, constitutes the legal equivalent of the undersigned signatory’s manual signature for purposes of authenticating the undersigned signatory’s signature to any filing or submission for which it is provided.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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/s/ Roberto R.

Herencia /s/ Ellen R.M.

Herencia Ellen R.M.

Director Director

February 24, 2022 Date:

February 24, 2022

/s/ John Pedersen

John Pedersen

February 24, 2022

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Management Report on Internal Control Over Financial Reporting 84

Report of Independent Registered Public Accounting Firm 91

Report of Independent Registered Public Accounting Firm ( Moss Adams LLP , Spokane, Washington , PCAOB ID:

Consolidated Statements of Financial Condition as of December 31, 2021 and 2020 89

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Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, on January 1, 2020 , the Company adopted ASU 2016 -13 “Financial Instruments - Credit Losses (Topic 326):

On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” applicable to financial assets measured at amortized cost including loan receivables and held to maturity debt securities.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

As described in Notes 1 and 4 to the consolidated financial statements, the balance of the Company’s consolidated allowance for credit losses – loans was $132.1 million at December 31, 2021.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of financial assets to present the net carrying value at the amount expected to be collected on such financial assets.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans held for investments to present the net carrying value at the amount expected to be collected on such financial assets.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

The allowance for credit losses – loans is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

These factors include, among others, changes in the size and composition of the loan portfolio, differences in underwriting standards, delinquency rates, actual loss experience and current economic conditions.

Management also considers qualitative, forecasted economic conditions and environmental factors for each loan category to adjust for differences between the historical periods used to calculate historical loss rates and expected conditions over the remaining lives of the loans in the portfolio.

Management also considers qualitative and environmental factors for each loan category to adjust for differences between the historical periods used to calculate historical loss rates and expected conditions over the remaining lives of the loans in the portfolio.

We identified the estimation and application of forecasted economic conditions used in the allowance for credit losses – loans as a critical audit matter.

The economic forecast component of the allowance for credit losses is used to compare the conditions that existed during the historical period to current conditions and future expectations, and to make adjustments to the historical data accordingly.

Auditing management’s judgments regarding the estimation of forecasted economic conditions and the method by which management applied these forecasts to the allowance for credit losses involved a high degree of subjectivity and complexity.

The economic forecast component of the allowance for credit losses - loans is used to compare the conditions that existed during the historical period to current conditions and future expectations, and to make adjustments to the historical data accordingly.

The primary procedures we performed to address this critical audit matter included:

• Testing the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for credit losses, including controls over the determination of the forecasted economic conditions used.

• Testing the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for credit losses, including controls over the selection and implementation of the forecasted economic conditions used.

• Obtaining management’s analysis and supporting documentation related to the forecasted economic conditions, and testing whether the forecasts used in the calculation of the allowance for credit losses are reasonable and supportable based on the analysis provided by management.

• Testing the appropriateness of the methodology and assumptions used in the calculation of the allowance for credit losses, and testing completeness and accuracy of the data used in the calculation, application of the forecasted economic conditions determined by management and used in the calculation, and recalculation of the allowance for credit losses balance.

We identified the estimation of qualitative and environmental factors used in the allowance for credit losses – loans as a critical audit matter.

The qualitative and environmental factors are used to estimate credit losses related to matters that are not captured in the historical loss rates, and are based on management’s evaluation of available internal and external data.

Auditing management’s judgments regarding the qualitative and environmental factors applied to the allowance for credit losses involved a high degree of subjectivity.

Auditing management’s judgments regarding the qualitative and environmental factors applied to the allowance for credit losses - loans involved a high degree of subjectivity.

The primary procedures we performed to address this critical audit matter included:

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• Testing the completeness and accuracy of the loan data used in the allowance for credit losses calculation, including application of the loan risk ratings determined by management and used in the calculation, and recalculation of the allowance for credit losses balance.

/s/ Moss Adams LLP

Spokane, Washington

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3,638,993 2,322,593

Securities—held-to-maturity, net of allowance for credit losses of $ 94 and none , respectively, fair value $ 448,681 and $ 237,805 , respectively

Securities—held-to-maturity, net of allowance for credit losses of $ 433 and $ 94 , respectively, fair value $ 541,853 and $ 448,681 , respectively

520,922 421,713

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Federal Home Loan Bank (FHLB) stock 12,000 16,358

Loans held for sale (includes $ 133.6 million and $ 199.4 million, at fair value, respectively)

Securities purchased under agreements to resell 300,000 —

Loans held for sale (includes $ 39,775 and $ 133,554 , at fair value, respectively)

96,487 243,795

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Deferred tax assets, net 71,138 65,742

Operating lease right-of-use assets 55,257 55,367

Other assets 171,471 144,823

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Junior subordinated debentures at fair value (issued in connection with Trust Preferred Securities) 119,815 116,974

Operating lease liabilities 59,756 59,343

Accrued expenses and other liabilities 148,303 143,300

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no shares issued and outstanding at December 31, 2021;

39,192 shares issued and outstanding at December 31, 2019

no shares issued and outstanding at December 31, 2020

Retained earnings 390,762 247,316

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23,609 37,845 56,768

Net interest income before provision for credit losses 481,301 468,919 430,988

PROVISION FOR CREDIT LOSSES 64,316 10,000 8,500

Net interest income 496,891 481,301 468,919

(RECAPTURE)/PROVISION FOR CREDIT LOSSES ( 33,388 ) 67,875 10,000

Net interest income after (recapture)/provision for credit losses 530,279 413,426 458,919

NON-INTEREST INCOME

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91,318 98,260 82,116

Net gain (loss) on sale of securities 1,012 33 ( 837 )

Net gain on sale of securities 482 1,012 33

Net change in valuation of financial instruments carried at fair value 4,616 ( 656 ) ( 208 )

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Amortization of core deposit intangibles 6,571 7,732 8,151

Provision for credit losses - unfunded loan commitments 3,559 — —

Loss on extinguishment of debt 2,284 — 735

Miscellaneous 24,236 22,712 27,387

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COVID-19 expenses 436 3,502 —

Merger and acquisition related costs 2,062 7,544 5,607

Merger and acquisition - related expenses 660 2,062 7,544

Total non-interest expense

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NET INCOME $ 201,048 $ 115,928 $ 146,278

OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAXES:

Unrealized holding gain (loss) on securities—available-for-sale arising during the period

45,247 33,843 ( 6,547 )

Income tax (expense) benefit related to securities—available-for-sale unrealized holding losses ( 10,860 ) ( 8,122 ) 1,538

Reclassification for net (gain) loss on securities—available-for-sale realized in earnings

( 454 ) ( 34 ) 839

Income tax expense (benefit) related to securities—available-for-sale realized (gains) losses 109 8 ( 201 )

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES:

Unrealized holding (loss) gain on securities—available-for-sale arising during the period ( 80,073 ) 45,247 33,843

Income tax benefit (expense) related to securities—available-for-sale unrealized holding losses 19,217 ( 10,860 ) ( 8,122 )

Reclassification for net gain on securities—available-for-sale realized in earnings ( 498 ) ( 454 ) ( 34 )

Income tax expense related to securities—available-for-sale realized gains 120 109 8

Net unrealized loss on interest rate swaps used in cash flow hedges ( 1,261 ) — —

Income tax benefit related interest rate swaps used in cash flow hedges 302 — —

Changes in fair value of junior subordinated debentures related to instrument specific credit risk

( 10,419 ) 2,330 601

Income tax (expense) benefit related to junior subordinated debentures ( 559 ) ( 144 ) 3,691

Other comprehensive income (loss) 35,813 26,152 ( 16,064 )

Income tax benefit (expense) related to junior subordinated debentures 2,501 ( 559 ) ( 144 )

Reclassification of fair value of junior subordinated debentures redeemed 1,613 — —

Income tax expense related to junior subordinated debentures redeemed ( 387 ) — —

Other comprehensive (loss) income ( 68,885 ) 35,813 26,152

COMPREHENSIVE INCOME $ 132,163 $ 151,741 $ 172,430

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Balance, January 1, 2019 35,182,772 $ 1,337,436 $ 134,055 $ 7,104 $ 1,478,595

Cumulative effect of reclassification of the instrument-specific credit risk portion of junior subordinated debentures fair value adjustments and reclassification of equity securities from available-for-sale ( 28,204 ) 28,204 —

Net income 146,278 146,278

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Balance, January 1, 2020 35,751,576 $ 1,373,940 $ 186,838 $ 33,256 $ 1,594,034

New credit standard (ASC 326) - impact in year of adoption, net of tax ( 11,215 ) ( 11,215 )

Net income 115,928 115,928

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32,404 7,714 7,714

Issuance of shares for acquisition

1,578,351 85,200 85,200

Balance, December 31, 2020 35,159,200 $ 1,349,879 $ 247,316 $ 69,069 $ 1,666,264

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Balance, January 1, 2021 35,159,200 $ 1,349,879 $ 247,316 $ 69,069 $ 1,666,264

New credit standard (ASC 326) - impact in year of adoption, net of tax ( 11,215 ) ( 11,215 )

Net income 201,048 201,048

Other comprehensive income

35,813 35,813

Other comprehensive loss ( 68,885 ) ( 68,885 )

Accrual of dividends on common stock ($ 1.64 /share-cumulative)

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Depreciation 17,345 18,130 17,282

Deferred income/expense and capitalized servicing rights, net of amortization ( 15,934 ) ( 881 ) ( 6,571 )

Deferred income/expense, net of amortization ( 38,786 ) ( 15,040 ) ( 1,543 )

Capitalized loan servicing rights, net of amortization ( 1,805 ) ( 894 ) 662

Amortization of core deposit intangibles 6,571 7,732 8,151

(Gain) loss on sale of securities, net ( 1,012 ) ( 33 ) 837

Gain on sale of securities, net ( 482 ) ( 1,012 ) ( 33 )

Net change in valuation of financial instruments carried at fair value ( 4,616 ) 656 208

Reinvested dividends – equity securities — ( 353 ) —

Principal repayments and maturities of securities—trading — — 100

(Increase) decrease in deferred taxes ( 2,654 ) 15,548 ( 3,498 )

Decrease (increase) in deferred taxes 16,357 ( 13,963 ) 7,290

(Decrease) increase in current taxes payable ( 3,643 ) ( 2,193 ) 607

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Gain on sale of loans, excluding capitalized servicing rights ( 26,140 ) ( 43,304 ) ( 15,993 )

Loss (gain) on disposal of real estate held for sale and property and equipment, net 859 1,075 ( 833 )

Provision for credit losses 64,316 10,000 8,500

Provision for credit losses - unfunded loan commitments 3,559 — —

(Gain) loss on disposal of real estate held for sale and property and equipment, net ( 2,305 ) 859 1,075

(Recapture) provision for credit losses ( 33,388 ) 67,875 10,000

Provision for losses on real estate held for sale — 45 —

Loss on extinguishment of debt 2,284 — 735

Origination of loans held for sale ( 1,102,663 ) ( 1,461,872 ) ( 1,094,237 )

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Proceeds from sales of equity securities 4,796 1,060,695 —

Loan originations, net of principal repayments ( 561,338 ) ( 304,191 ) ( 416,218 )

Loan repayments (originations), net 795,892 ( 561,338 ) ( 304,191 )

Purchases of loans and participating interest in loans ( 5,086 ) ( 2,510 ) ( 9,798 )

Proceeds from sales of other loans 46,028 19,469 27,560

Net cash received (paid) related to branch divestitures — 26,944 ( 1,574 )

Net cash received related to branch divestitures — — 26,944

Purchases of property and equipment ( 10,493 ) ( 12,803 ) ( 24,700 )

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Purchase of FHLB stock — ( 40,185 ) ( 170,380 )

Purchase of securities purchased under agreements to resell ( 300,000 ) — —

Investment in bank-owned life insurance ( 50,053 ) ( 83 ) ( 75 )

Other 2,355 5,197 1,511

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Repayment of long term FHLB borrowing ( 100,000 ) — ( 281,150 )

(Repayments) advances of overnight and short-term FHLB borrowings, net ( 300,000 ) ( 300,000 ) 540,000

Repayments of overnight and short-term FHLB borrowings, net — ( 300,000 ) ( 300,000 )

Increase (decrease) in other borrowings, net 79,704 66,311 ( 520 )

Net proceeds from issuance of subordinated notes — 98,027 —

Repayment of junior subordinated debentures ( 8,248 ) — —

Proceeds from redemption of trust securities related to junior subordinated debentures 248 — —

Cash dividends paid ( 57,621 ) ( 94,078 ) ( 56,074 )

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NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Loans, net of discounts, specific loss allowances and unearned income, transferred to real estate owned and other repossessed assets

1,602 303 1,645

Transfer of loans to real estate owned and other repossessed assets 512 1,602 303

Dividends accrued but not paid until after period end 1,338 1,357 51,199

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Banner Corporation (Banner or the Company) is a bank holding company incorporated in the State of Washington.

The Company is primarily engaged in the business of planning, directing and coordinating the business activities of two wholly-owned subsidiaries, Banner Bank and, at December 31, 2020, Islanders Bank.

Subsequent to December 31, 2020, Islanders Bank was merged into Banner Bank.

The Company is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly-owned subsidiary, Banner Bank.

Banner Bank is a Washington-chartered commercial bank that conducts business from its headquarters in Walla Walla, Washington and, as of December 31, 2021, its 150 branch offices located in Washington, Oregon, California and Idaho.

Banner Bank also has 18 loan production offices located in Washington, Oregon, California, Idaho and Utah.

Islanders Bank is also a Washington-chartered commercial bank that conducts business from three locations in San Juan County, Washington.

Banner Corporation is subject to regulation by the Board of Governors of the Federal Reserve System (Federal Reserve Board).

Banner Bank and Islanders Bank (the Banks) are subject to regulation by the Washington State Department of Financial Institutions, Division of Banks (DFI) and the Federal Deposit Insurance Corporation (the FDIC).

Banner Bank (the Bank) is subject to regulation by the Washington State Department of Financial Institutions, Division of Banks (DFI) and the Federal Deposit Insurance Corporation (the FDIC).

The Company’s operating results depend primarily on its net interest income, which is the difference between interest income on interest-earning assets, consisting of loans and investment securities, and interest expense on interest-bearing liabilities, composed primarily of client deposits, FHLB advances, other borrowings, subordinated notes and junior subordinated debentures.

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Basis of Presentation and Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

All material intercompany transactions, profits and balances have been eliminated.

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Securities and Exchange Commission (the SEC).

At December 31, 2020, the Company had ten wholly-owned subsidiary grantor trusts (the Trusts), each of which issued trust preferred securities (TPS) and common securities.

At December 31, 2021, the Company had nine wholly-owned subsidiary grantor trusts (the Trusts), each of which issued trust preferred securities (TPS) and common securities.

The Trusts are not included in the Company’s consolidated financial statements.

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The Company has evaluated events and transactions subsequent to December 31, 2021 for potential recognition or disclosure.

On February 18, 2022 , Banner Bank entered into a purchase and assumption agreement to sell four Banner Bank branches, subject to certain regulatory approvals and customary closing conditions.

The sale includes deposit accounts with an approximate balance of $ 212 million.

Banner Bank will receive a 5.0 % premium in relation to the core deposits.

The sale also includes all related branch premises and equipment.

Cash and Cash Equivalents:

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In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of Banner’s consolidated financial statements.

These policies relate to (i) the methodology for the recognition of interest income, (ii) determination of the provision and allowance for credit losses, (iii) the valuation of financial assets and liabilities measured at fair value, (iv) the valuation of intangible assets, such as goodwill, core deposit intangibles (CDI) and mortgage servicing rights, (v) the valuation of real estate held for sale, (vi) the valuation or recognition of deferred tax assets and liabilities and (vii) the valuation of assets and liabilities acquired in business combinations and subsequent recognition of related income and expense.

These policies relate to (i) the methodology for the recognition of interest income, (ii) determination of the provision and allowance for credit losses, (iii) the valuation of financial assets and liabilities recorded at fair value, (iv) the valuation of intangible assets, such as goodwill, core deposit intangibles (CDI) and loan servicing rights, (v) the valuation of real estate held for sale, (vi) the valuation or recognition of deferred tax assets and liabilities and (vii) the valuation of assets and liabilities acquired in business combinations and subsequent recognition of related income and expense.

These policies and judgments, estimates and assumptions are described in greater detail in subsequent Notes to the Consolidated Financial Statements.

Management believes that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate based on the factual circumstances at the time.

However, given the sensitivity of the consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the Company’s results of operations or financial condition.

Further, subsequent changes in

economic or market conditions could have a material impact on these estimates and the Company’s financial condition and operating results in future periods.

However, given the sensitivity of the consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and

assumptions could result in material differences in the Company’s results of operations or financial condition.

Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company’s financial condition and operating results in future periods.

Debt securities are classified as held-to-maturity when the Company has the ability and positive intent to hold them to maturity.

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The Company uses industry historical credit loss information adjusted for current conditions to establish the allowance for credit losses on the municipal bond portfolio.

Less than 2% of the Company’s held-to-maturity portfolio are community development bonds representing pools of one- to four-family loans.

The expected credit losses on these bonds is similar to Banner’s one- to four-family residential loan portfolio.

Therefore, the Company uses the one- to four-family residential loan portfolio loss rates to establish the allowance for credit losses on these bonds.

Less than 2% of the Company’s held-to-maturity portfolio are community development bonds;

approximately half represent pools of one- to four-family loans while the other half are not collateralized.

The expected credit losses on these bonds is similar to Banner’s commercial business loan portfolio.

Therefore, the Company uses the commercial business loan portfolio loss rates to establish the allowance for credit losses on the collateralized bonds and its own loss history to establish a loss rate on bonds that are not collateralized.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

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The remaining impairment related to all other factors, the difference between the present value of the cash flows expected to be collected and fair value, is recognized as a charge to AOCI.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

Changes in the allowance for credit losses are recorded as provision for (or recapture of) credit loss expense.

Losses are charged against the allowance when management believes the non-collectability of an available-for-sale or held-to-maturity security is confirmed or when either of the criteria regarding intent of requirement to sell is met.

Investment in FHLB Stock:

At December 31, 2020, the Banks had $ 16.4 million in FHLB of Des Moines stock (FHLB stock), compared to $ 28.3 million at December 31, 2019.

At December 31, 2021, the Bank had $ 12.0 million in FHLB of Des Moines stock (FHLB stock), compared to $ 16.4 million at December 31, 2020.

FHLB stock does not have a readily determinable fair value.

The Banks’ investments in FHLB stock is carried at cost or par value ($ 100 per share) and evaluated for impairment based on the Banks' expectations of the ultimate recoverability of the stock's par value.

The Bank’s investments in FHLB stock is carried at cost or par value ($ 100 per share) and evaluated for impairment based on the Bank’s expectations of the ultimate recoverability of the stock’s par value.

Ownership of FHLB stock is restricted to the FHLB and member institutions and can only be purchased and redeemed at par, therefore there has been no observable changes in market prices.

As members of the FHLB system, the Banks are required to maintain a minimum level of investment in FHLB stock based on specific percentages of their outstanding FHLB advances.

As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding FHLB advances.

Management periodically evaluates FHLB stock for impairment.

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Loans Receivable :

The Banks originate residential one- to four-family and multifamily mortgage loans for both portfolio investment and sale in the secondary market.

The Banks also originate construction and land development, commercial real estate, commercial business, agricultural and consumer loans for portfolio investment.

Loans receivable not designated as held for sale are recorded at amortized cost, net of the allowance for credit losses.

Amortized cost is the principal amount outstanding, net of deferred fees, discounts and

The Bank originates residential one- to four-family and multifamily mortgage loans for both portfolio investment and sale in the secondary market.

The Bank also originates construction and land development, commercial real estate, commercial business, agricultural and consumer loans for portfolio investment.

Loans receivable not designated as held for sale are recorded at amortized cost, net

of the allowance for credit losses.

Amortized cost is the principal amount outstanding, net of deferred fees, discounts and premiums.

Accrued interest on loans is reported in accrued interest receivable on the Consolidated Statements of Financial Condition.

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Loans acquired in business combinations are recorded at their fair value at the acquisition date.

Establishing the fair value of acquired loans involves a significant amount of judgment, including determining the credit discount based upon historical data adjusted for current economic conditions and other factors.

If any of these assumptions are inaccurate actual credit losses could vary significantly from the credit discount used to calculate the fair value of the acquired loans.

Acquired loans are evaluated upon acquisition and classified as either purchased credit-deteriorated or purchased non-credit-deteriorated.

Purchased credit-deteriorated (PCD) loans have experienced more than insignificant credit deterioration since origination.

For PCD loans, an allowance for credit losses is determined at the acquisition date using the same measurement methodology as other loans held for investment.

For PCD loans, an allowance for credit losses is determined at the acquisition date using the same methodology as other loans held for investment.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

The loan’s fair value is grossed up for the allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan or fully amortized into interest income when the loan is paid off.

The loan’s fair value is grossed up for the allowance for credit losses and becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.

Subsequent changes to the allowance for credit losses are recorded through a provision for credit losses.

For purchased non-credit-deteriorated loans, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loan or fully amortized into interest income when the loan is paid off.

While credit discounts are included in the determination of the fair value for non-credit-deteriorated loans, since these discounts are expected to be accreted over the life of the loans, they cannot be used to offset the allowance for credit losses that must be recorded at the acquisition date.

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Interest accruals on loans are generally discontinued when loans become 90 days past due for payment of interest or principal and the loans are then placed on nonaccrual status.

Loans are reported as past due when installment payments, interest payments, or maturity payments are past due based on contractual terms.

All previously accrued but uncollected interest is written off by reversing interest income upon transfer to nonaccrual status.

All previously accrued but uncollected interest is deducted from interest income upon transfer to nonaccrual status.

For any future payments collected, interest income is recognized only upon management’s assessment that there is a strong likelihood that the full amount of a loan will be repaid or recovered.

A loan may be put on nonaccrual status sooner than this policy would dictate if, in management’s judgment, the interest may be uncollectable.

Management’s assessment of the likelihood of full repayment involves judgment including determining the fair value of the underlying collateral which can be impacted by the economic environment.

A loan may be put on nonaccrual status sooner than this policy would dictate if, in management’s judgment, the amounts owed, principal or interest may be uncollectable.

While less common, similar interest reversal and nonaccrual treatment is applied to investment securities if their ultimate collectability becomes questionable.

Loans modified due to the COVID-19 pandemic are considered current if they are less than 30 days past due on the contractual payments at the time the loan modification was put in place and therefore continue to accrue interest unless the interest is being waived.

Loans modified due to the COVID-19 pandemic are considered current if they are less than 30 days past due on the contractual payments at the time the loan modification program was put in place and therefore continue to accrue interest unless the interest is being waived.

Provision and Allowance for Credit Losses - Loans :

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

The Banks have elected to exclude accrued interest receivable from the amortized cost basis in their estimate of the allowance for credit losses.

The methodology for determining the allowance for credit losses - loans is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for credit losses.

Among the material estimates required to establish the allowance for credit losses - loans 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.

All of these estimates are susceptible to significant change.

The allowance for credit losses - loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

The Bank has elected to exclude accrued interest receivable from the amortized cost basis in their estimate of the allowance for credit losses.

The provision for credit losses reflects the amount required to maintain the allowance for credit losses at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves.

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The Company increases its allowance for credit losses by charging provisions for credit losses on its Consolidated Statement of Operations.

Losses related to specific assets are applied as a reduction of the carrying value of the assets and charged against the allowance for credit loss reserve when management believes the non-collectability of a loan balance is confirmed.

Losses related to specific assets are applied as a reduction of the carrying value of the assets and charged against the

allowance for credit loss reserve when management believes the uncollectibility of a loan balance is confirmed.

Recoveries on previously charged off loans are credited to the allowance for credit losses.

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Management estimates the allowance for credit losses - loans using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.

The allowance for credit losses - loans is measured on a collective (pool) basis when similar risk characteristics exist.

In estimating the component of the allowance for credit losses for loans that share common risk characteristics, loans are pooled based on loan type and areas of risk concentration.

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For commercial real estate, multifamily real estate, construction and land, commercial business and agricultural loans with risk rating segmentation, historical credit loss assumptions are estimated using a model that categorizes loan pools based on loan type and risk rating.

For one- to four- family residential loans, historical credit loss assumptions are estimated using a model that categorizes loan pools based on loan type and delinquency status.

For one- to four- family residential loans, consumer loans, home equity lines of credit, small business loans, and small balance commercial real estate loans, historical credit loss assumptions are estimated using a model that categorizes loan pools based on loan type and delinquency status.

These models calculate an expected life-of-loan loss percentage for each loan category by calculating the probability of default, based on the migration of loans from performing to loss by risk rating or delinquency categories using historical life-of-loan analysis and the severity of loss, based on the aggregate net lifetime losses incurred for each loan pool.

For commercial real estate, commercial business, and consumer loans without risk rating segmentation, historical credit loss assumptions are estimated using a model that calculates an expected life-of-loan loss percentage for each loan category by considering the historical cumulative losses based on the aggregate net lifetime losses incurred for each loan pool.

The model captures historical loss data beginning with the first quarter of 2008.

For credit cards, historical credit loss assumptions are estimated using a model that calculates an expected life-of-loan loss percentage for each loan category by considering the historical cumulative losses based on the aggregate net lifetime losses incurred for each loan pool.

The model captures historical loss data commencing with the first quarter of 2008.

For loans evaluated collectively, management uses economic indicators to adjust the historical loss rates so that they better reflect management’s expectations of future conditions over the remaining lives of the loans in the portfolio based on reasonable and supportable forecasts.

These economic indicators are selected based on correlation to the Company’s historical credit loss experience and are evaluated for each loan category.

The economic indicators evaluated include unemployment, gross domestic product, real estate price indices and growth, yield curve spreads, treasury yields, the corporate yield, the market volatility index, the Dow Jones index, the consumer confidence index, and the prime rate.

The economic indicators evaluated include the unemployment rate, gross domestic product, real estate price indices and growth, industrial employment, corporate profits, the household consumer debt service ratio, the household mortgage debt service ratio, and single family median home price growth.

Management considers various economic scenarios and forecasts when evaluating the economic indicators and probability weights the various scenarios to arrive at the forecast that most reflects management’s expectations of future conditions.

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To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the adjustments discontinue to be applied so that the model reverts back to the historical loss rates using a straight line reversion method.

Management selected an initial reasonable and supportable forecast period of 12 months with a reversion period of 12 months.

Management selected a reasonable and supportable forecast period of 12 months with a reversion period of 12 months.

Both the reasonable and supportable forecast period and the reversion period are periodically reviewed by management.

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Management also considers the Company’s lending policies, the quality of the Company’s credit review system, the quality of the Company’s management and lending staff, and the regulatory and economic environments in the areas in which the Company’s lending activities are concentrated.

Loans that do not share risk characteristics with other loans in the portfolio that are individually evaluated for impairment are not included in the collective evaluation.

Loans that do not share risk characteristics with other loans in the portfolio are individually evaluated for impairment and are not included in the collective evaluation.

Factors involved in determining whether a loan should be individually evaluated include, but are not limited to, the financial condition of the borrower and the value of the underlying collateral.

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 Banks determine 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 Banks measure 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 Banks’ 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 Banks will recognize an allowance as the difference between the fair value of the collateral, less costs to sell (if applicable), at the reporting date and the amortized cost basis of the loan.

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) at the reporting date 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.

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Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications unless either management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Banks.

Some of the Banks’ loans are reported as troubled debt restructures (TDRs).

Loans are reported as TDRs when the Banks grant a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider.

The contractual term excludes expected extensions, renewals, and modifications unless either management has a reasonable expectation at the

reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Bank.

Some of the Bank’s loans are reported as troubled debt restructures (TDRs).

Loans are reported as TDRs when the Bank grants a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider.

Examples of such concessions include forgiveness of principal or accrued interest, extending the maturity date(s) or providing a lower interest rate than would be normally available for a transaction of similar risk.

The allowance for credit losses on a TDR is determined using the same method as all other loans held for investment, except when the value of the concession cannot be measured using a method other than the discounted cash flow method.

When the value of a concession is measured using the discounted cash flow method the allowance for credit losses is determined by discounting the expected future cash flows at the effective interest rate of the loan.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act) and the Consolidated Appropriations Act 2021 (the CAA) provided guidance around the modification of loans as a result of the COVID-19 pandemic, which provides, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA) provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

This includes short-term (e.g.

six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

To qualify as an eligible loan under the CARES Act, a loan modification must be (1) related to COVID-19;

(2) involve a loan that was not more than 30 days past due as of December 31, 2019;

and (3) occur between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the national emergency by the President or (b) December 31, 2020.

The CAA extended the relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022 or 60 days after the end of the end of the national emergency declared by the President, whichever is earlier.

Borrowers are considered current under the CARES Act and regulatory guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

The CAA extends relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022.

Loan Origination and Commitment Fees:

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Allowance for Credit Losses - unfunded loan commitments:

An allowance for credit losses - unfunded loan commitments is maintained at a level that, in the opinion of management, is adequate to absorb expected credit losses associated with the contractual life of the Banks’ commitments to lend funds under existing agreements such as letters or lines of credit.

The Banks use a methodology for determining the allowance for credit losses - unfunded loan commitments that applies the same segmentation and loss rate to each pool as the funded exposure adjusted for probability of funding.

An allowance for credit losses - unfunded loan commitments is maintained at a level that, in the opinion of management, is adequate to absorb expected credit losses associated with the contractual life of the Bank’s commitments to lend funds under existing agreements such as letters or lines of credit.

The Bank uses a methodology for determining the allowance for credit losses - unfunded loan commitments that applies the same segmentation and loss rate to each pool as the funded exposure adjusted for probability of funding.

Draws on unfunded loan commitments that are considered uncollectible at the time funds are advanced are charged to the allowance for credit losses on off-balance sheet exposures.

Provisions for credit losses - unfunded loan commitments are recognized in non-interest expense and added to the allowance for credit losses - unfunded loan commitments, which is included in other liabilities in the consolidated statements of financial condition.

Changes in the allowance for credit losses - unfunded loan commitments are recognized as provision for (or recapture of) credit loss expense and added to the allowance for credit losses - unfunded loan commitments, which is included in other liabilities in the Consolidated Statements of Financial Condition.

Real Estate Owned, Held for Sale:

Property acquired by foreclosure or deed in lieu of foreclosure is initially recorded at the estimated fair value of the property, less expected selling costs.

Development and improvement costs relating to the property are capitalized while direct holding costs are expensed.

Property acquired by foreclosure or deed in lieu of foreclosure is recorded at the estimated fair value of the property, less expected selling costs.

Development and improvement costs relating to the property may be capitalized, while other holding costs are expensed.

The carrying value of the property is periodically evaluated by management and, if necessary, allowances are established to reduce the carrying value to net realizable value.

Gains or losses at the time the property is sold are charged or credited to operations in the period in which they are realized.

The amounts the Banks will ultimately recover from real estate held for sale may differ substantially from the carrying value of the assets because of market factors beyond the Banks’ control or because of changes in the Banks’ strategies for recovering the investment.

The amounts the Bank will ultimately recover from real estate held for sale may differ substantially from the carrying value of the assets because of market factors beyond the Bank’s control or because of changes in the Bank’s strategies for recovering the investment.

Property is classified as held for sale when the Company commits to a plan to sell the property and is actively marketing the property for sale.

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We record an operating lease right of use (ROU) asset and an operating lease liability (lease liability) for operating leases with a lease term greater than 12 months.

The ROU asset and lease liability are recorded in other assets and other liabilities, respectively, in the consolidated statement of financial condition.

The ROU asset and lease liability are recorded in the Consolidated Statement of Financial Condition.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Goodwill represents the excess of the purchase consideration 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 annually, or more frequently as current circumstances and conditions warrant, for impairment.

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 annually, or more frequently as current circumstances and conditions warrant, for impairment.

The Company completes its annual review of goodwill as of December 31.

An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The qualitative assessment involves judgment by management on determining whether there have been any triggering events that have occurred which would indicate potential impairment.

If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed.

The quantitative goodwill impairment test is used to identify the existence of impairment and the amount of impairment loss and compares the reporting unit’s estimated fair value, including goodwill, to its carrying amount.

If the fair value exceeds the carrying amount then goodwill is not considered impaired.

If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to that reporting unit.

If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to the reporting unit.

The impairment loss would be recognized as a charge to earnings.

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Other intangible assets consist primarily of core deposit intangibles (CDI), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the client relationships associated with the deposits.

CDI is being amortized on an accelerated basis over a weighted average estimated useful life of three years to ten years .

CDI is being amortized on an accelerated basis over a weighted average estimated useful life of eight years to ten years .

These assets are reviewed at least annually for events or circumstances that could impact their recoverability.

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To the extent other identifiable intangible assets are deemed unrecoverable, impairment losses are recorded in other non-interest expense to reduce the carrying amount of the assets.

Mortgage Servicing Rights:

Mortgage and SBA Servicing Rights:

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of loans.

Generally, purchased servicing rights are capitalized at the cost to acquire the rights.

For sales of mortgage loans, the fair value of the servicing right is estimated and capitalized.

For sales of mortgage and SBA loans, the fair value of the servicing right is estimated and capitalized.

Fair values are estimated based on an independent dealer analysis of discounted cash flows.

Capitalized servicing rights are reported in other assets and are amortized into mortgage banking operations in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost.

Capitalized mortgage servicing rights are reported in other assets and are amortized into mortgage banking operations in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Capitalized SBA servicing rights are reported in other assets and are carried at fair value.

Changes in the fair value of SBA servicing rights are recognized into miscellaneous non-interest income.

Mortgage servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost.

Impairment is determined by stratifying rights into tranches based on predominant risk characteristics for the underlying loans, such as interest rate, balance outstanding, loan type, age and remaining term, and investor type.

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If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Servicing fee income is recorded for fees earned for servicing loans and is reflected in mortgage banking operations on the Consolidated Statements of Operations.

Servicing fee income is recorded for fees earned for servicing loans.

Servicing fee income is reflected in mortgage banking operations for mortgage servicing rights and in miscellaneous non-interest income for SBA servicing rights on the Consolidated Statements of Operations.

The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned.

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Bank-Owned Life Insurance (BOLI):

The Banks have purchased, or acquired through mergers, life insurance policies in connection with the implementation of certain executive supplemental income, salary continuation and deferred compensation retirement plans.

The Bank has purchased, or acquired through mergers, life insurance policies in connection with the implementation of certain executive supplemental income, salary continuation and deferred compensation retirement plans.

These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with the plans.

It is the Banks’ intent to hold these policies as a long-term investment;

It is the Bank’s intent to hold these policies as a long-term investment;

however, there may be an income tax impact if the Bank chooses to surrender certain policies.

Although the lives of individual current or former management-level employees are insured, the Banks are the respective owners and sole or partial beneficiaries.

Although the lives of individual current or former management-level employees are insured, the Bank is the respective owner and sole or partial beneficiaries.

BOLI is carried at the cash surrender value (CSV) of the underlying insurance contract.

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Derivatives include “off-balance-sheet” financial products, the value of which is dependent on the value of underlying financial assets, such as stock, bonds, foreign currency, or a reference rate or index.

Such derivatives include “forwards,” “futures,” “options” or “swaps.” Banner Bank is a party to $ 338,000 (all of which is designated in a hedge relationship) in notional amounts of interest rate swaps at December 31, 2020.

Some of these swaps serve as hedges to an equal amount of fixed rate loans which include market value prepayment penalties that mirror the provision of the specifically matched interest rate swaps.

Such derivatives include “forwards,” “futures,” “options” or “swaps.” Banner Bank uses an interest rate swap program which involves the receipt of fixed-rate amounts from a counterparty in exchange for variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

Such derivatives are used to hedge the variable cash flows associated with existing variable-rate assets.

These interest rate swaps qualify as cash flow hedging instruments so gains and losses are recorded in AOCI to the extent the hedge is effective.

Gains and losses on the interest

rate swaps are reclassified from AOCI to earnings in the period the hedged transaction affects earnings and are included in interest income.

Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received on the Company’s variable-rate assets.

Banner Bank is a party to $ 400.0 million in notional amounts of these types of interest rate swaps at December 31, 2021.

In addition, Banner Bank uses an interest rate swap program for commercial loan clients that provides the client with a variable rate loan and enters into an interest rate swap allowing them to effectively fix their loan interest rates.

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The commitments to originate mortgage loans held for sale and the related delivery contracts are considered derivatives.

The Company recognizes all derivatives as either assets or liabilities in the balance sheet and requires

measurement of those instruments at fair value through adjustments to current earnings.

The Company recognizes all derivatives as either assets or liabilities in the balance sheet and requires measurement of those instruments at fair value through adjustments to current earnings.

None of these residential mortgage loan related derivatives are designated as hedging instruments for accounting purposes.

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Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Banks, (2) the transferee has the right to pledge or exchange the transferred assets, and (3) the Banks do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee has the right to pledge or exchange the transferred assets beyond a trivial benefit, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Advertising Expenses:

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Income taxes are accounted for using the asset and liability method.

Under this method, a deferred tax asset or liability is determined based on the enacted tax rates which will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s income tax returns.

Under this method, a deferred tax asset or liability is determined based on the enacted tax rates which are expected to be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s income tax returns.

The effect on deferred taxes of a change in tax rates is recognized in income in the period of change.

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Basic earnings per common share is computed by dividing net earnings allocated to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities.

Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

Diluted earnings per common share

is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

Comprehensive Income:

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.

In addition, certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities and changes in fair value of junior subordinated debentures related to instrument specific credit risk, are reported as a separate component of the equity section of the Consolidated Statements of Financial Condition, and such items, along with net income, are components of comprehensive income which is reported in the Consolidated Statements of Comprehensive Income.

In addition, certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, unrealized gains and losses on interest rate swaps used in cash flow hedges and changes in fair value of junior subordinated debentures related to instrument specific credit risk, are reported as a separate component of the equity section of the Consolidated Statements of Financial Condition, and such items, along with net income, are components of comprehensive income which is reported in the Consolidated Statements of Comprehensive Income.

Business Segments:

The Company is managed by legal entity and not by lines of business.

Each of the Banks is a community oriented commercial bank chartered in the State of Washington.

The Banks’ primary business is that of a traditional banking institution, gathering deposits and originating loans for portfolio in its respective primary market areas.

The Banks offer a wide variety of deposit products to their consumer and commercial clients.

The Bank is a community oriented commercial bank chartered in the State of Washington.

The Bank’s primary business is that of a traditional banking institution, gathering deposits and originating loans for portfolio in its respective primary market areas.

The Bank offers a wide variety of deposit products to its consumer and commercial clients.

Lending activities include the origination of real estate, commercial/agriculture business and consumer loans.

Banner Bank is also an active participant in the secondary market, originating residential loans for sale on both a servicing released

and servicing retained basis.

In addition to interest income on loans and investment securities, the Banks receive other income from deposit service charges, loan servicing fees and from the sale of loans and investments.

The performance of the Banks is reviewed by the Company’s executive management and Board of Directors on a monthly basis.

The Bank is also an active participant in the secondary market, originating residential loans for sale on both a servicing released and servicing retained basis.

In addition to interest income on loans and investment securities, the Bank receives other income from deposit service charges, loan servicing fees and from the sale of loans and investments.

The performance of the Bank is reviewed by the Company’s executive management and Board of Directors on a monthly basis.

All of the executive officers of the Company are members of Banner Bank’s management team.

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ACCOUNTING STANDARDS RECENTLY ISSUED OR ADOPTED

Financial Instruments—Credit Losses (ASC 326)

On January 1, 2020, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, as amended, which replaced the incurred loss methodology that delays recognition until it is probable a loss has been incurred with an expected loss methodology that is referred to as CECL.

The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The ASU affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial asset not excluded from the scope that have the contractual right to receive cash.

The ASU replaced the incurred loss impairment methodology in previous GAAP with CECL, a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

This ASU broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually.

The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements.

The following table illustrates the pre-tax impact of the adoption of this ASU (in thousands):

January 1, 2020 As Reported Under ASC 326 January 1, 2020 Pre-ASC 326 Adoption Impact of ASC 326 Adoption

Held-to-maturity debt securities

Government and agency obligations $ — $ — $ —

Municipal bonds 28 — 28

Corporate bonds 35 — 35

Mortgage-backed or related securities — — —

Allowance for credit losses on held-to-maturity debt securities $ 63 $ — $ 63

Commercial real estate $ 27,727 $ 30,591 $ ( 2,864 )

Multifamily real estate 2,550 4,754 ( 2,204 )

Construction and land 25,509 22,994 2,515

Commercial business 26,380 23,370 3,010

Agricultural business 3,769 4,120 ( 351 )

One-to four-family residential 11,261 4,136 7,125

Consumer 11,175 8,202 2,973

Unallocated — 2,392 ( 2,392 )

Allowance for credit losses on loans $ 108,371 $ 100,559 $ 7,812

Allowance for credit losses on unfunded loan commitments $ 9,738 $ 2,716 $ 7,022

Total $ 14,897

The $ 14.9 million total increase was recorded net of tax as an $ 11.2 million reduction to shareholders’ equity as of the adoption date.

In addition to the increase in the allowance for credit losses upon adoption, the Company expects more variability in its quarterly provision for credit losses going forward due to the CECL model’s sensitivity to changes in the economic forecast and other factors.

The Company has updated its accounting policies based on the adoption of this ASU.

See Note 1 of the Notes to the Consolidated Financial Statements for additional information.

BUSINESS COMBINATIONS

Acquisition of AltaPacific Bancorp

On November 1, 2019 , the Company completed the acquisition of 100% of the outstanding common shares of AltaPacific Bancorp (AltaPacific), the holding company for AltaPacific Bank, a California state-chartered commercial bank.

AltaPacific was merged into Banner and AltaPacific Bank was merged into Banner Bank.

Pursuant to the previously announced terms of the acquisition, AltaPacific shareholders received 0.2712 shares of Banner common stock in exchange for each share of AltaPacific common stock, plus cash in lieu of any fractional shares and to buy out AltaPacific stock options.

The merged banks operate as Banner Bank.

The primary reason for the acquisition was to expand the Company’s presence in California by adding density within our existing geographic footprint.

The acquisition provided $ 425.7 million in assets, $ 313.4 million in deposits and $ 332.4 million in loans to Banner.

The application of the acquisition method of accounting resulted in recognition of a CDI asset of $ 4.6 million and goodwill of $ 34.0 million.

The acquired CDI has been determined to have a useful life of approximately ten years and will be amortized on an accelerated basis.

Goodwill is not amortized but will be evaluated for impairment on an annual basis or more often if circumstances dictate to determine if the carrying value remains appropriate.

Goodwill will not be deductible for income tax purposes as the acquisition is accounted for as a tax-free exchange for tax purposes.

The following table presents a summary of the consideration paid and the estimated fair values as of the acquisition date for each major class of assets acquired and liabilities assumed (in thousands):

November 1, 2019

Consideration to AltaPacific equity holders:

Cash paid $ 2,360

Fair value of common shares issued 85,200

Total consideration 87,560

Fair value of assets acquired:

Cash and cash equivalents 39,686

Securities 20,348

Federal Home Loan Bank stock 2,005

Loans receivable (contractual amount of $338.2 million) 332,355

Real estate owned held for sale 650

Property and equipment 3,809

Core deposit intangible 4,610

Bank-owned life insurance 11,890

Deferred tax asset 166

Other assets 10,150

Total assets acquired 425,669

Fair value of liabilities assumed:

Deposits 313,374

Advances from FHLB 40,226

Junior subordinated debentures 5,814

Deferred compensation 4,508

Other liabilities 8,154

Total liabilities assumed 372,076

Net assets acquired 53,593

Goodwill $ 33,967

Acquired goodwill represents the premium the Company paid over the fair value of the net tangible and intangible assets acquired.

The Company paid this premium for a number of reasons, including growing the Company’s client base, acquiring assembled work forces, and expanding its presence in existing markets.

See Note 16, Goodwill, Other Intangible Assets and Mortgage Servicing Rights for the accounting for goodwill and other intangible assets.

As of November 1, 2019, the unpaid principal balance on purchased non-credit-impaired loans was $ 333.5 million.

The fair value of the purchased non-credit-impaired loans was $ 328.2 million, resulting in a discount of $ 5.3 million recorded on these loans, which includes $ 5.8 million of a credit related discount.

This discount is being accreted into income over the life of the loans on an effective yield basis.

The following table presents the acquired AltaPacific purchased credit-impaired (PCI) loans as of the acquisition date (in thousands):

November 1, 2019

Acquired PCI loans:

Contractually required principal and interest payments $ 5,881

Nonaccretable difference ( 1,046 )

Cash flows expected to be collected 4,835

Accretable yield ( 683 )

Fair value of PCI loans $ 4,152

The financial results of the Company include the revenues and expenses produced by the acquired assets and assumed liabilities of AltaPacific since November 1, 2019.

Disclosure of the amount of AltaPacific’s revenue and net income (excluding integration costs) included in the Company’s Consolidated Statements of Operations is impracticable due to the integration of the operations and accounting for this acquisition.

The pro forma impact of the AltaPacific acquisition to the historical financial results was determined to not be significant.

Reference Rate Reform (Topic 848)

In March 2020, the Financial Accounting Standards Board (FASB) issued guidance within Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , in response to the scheduled discontinuation of LIBOR on December 31, 2021.

The amendments in this ASU provide optional guidance designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by reference rate reform.

Since the issuance of this guidance, the publication cessation of U.S.

dollar LIBOR has been extended to June 30, 2023.

The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

1) modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate;

2) modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under this Topic for modifications not accounted for as separate contracts;

3) modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging- Embedded Derivatives;

and 4) for other Topics or Industry Subtopics in the Codification, the amendments in this ASU also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

The amendments in these ASUs are effective upon the issuance date of March 12, 2020 and applies to contract modifications made and new hedging relationships entered into through December 31, 2022.

The Company has elected certain expedients related to individual hedge relationships.

The Company will be able to use other expedients in this guidance to manage through the transition away from LIBOR, specifically as they relate to loans, leases and hedging relationships.

The adoption of this accounting guidance did not have a material impact on the Company’s Consolidated Financial Statements.

The amortized cost, gross unrealized gains and losses and estimated fair value of securities at December 31, 2021 and December 31, 2020 are summarized as follows (in thousands):

22 unchanged sentences

December 31, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Amortized Cost Fair

Corporate bonds 27,203 $ 24,980

$ 27,203 $ 24,980

December 31, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair

Available-for-Sale:

5 unchanged sentences

$ 2,256,189 $ 68,543 $ ( 2,139 ) $ — $ 2,322,593

December 31, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair

Value Allowance for Credit Losses

Held-to-Maturity:

32 unchanged sentences

$ 189,078 $ ( 1,135 ) $ 58,616 $ ( 1,004 ) $ 247,694 $ ( 2,139 )

Held-to-Maturity:

Government and agency obligations $ — $ — $ — $ — $ — $ —

Municipal bonds 44,605 ( 1,889 ) 19,017 ( 324 ) 63,622 ( 2,213 )

Corporate bonds — — 489 ( 11 ) 489 ( 11 )

Mortgage-backed or related securities 11,117 ( 723 ) — — 11,117 ( 723 )

$ 55,722 $ ( 2,612 ) $ 19,506 $ ( 335 ) $ 75,228 $ ( 2,947 )

At December 31, 2021, there were 97 securities—available-for-sale with unrealized losses, compared to 54 at December 31, 2020.

At December 31, 2020, there were two securities—held-to-maturity with unrealized losses, compared to 17 at December 31, 2019.

Management does not believe that any individual unrealized loss as of December 31, 2020 resulted from credit loss or that any individual unrealized loss represented other-than-temporary impairment (OTTI) as of December 31, 2019.

Management does not believe that any individual unrealized loss as of December 31, 2021 or December 31, 2020 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.

1 unchanged sentence

There were no securities—trading in a nonaccrual status at December 31, 2021 or December 31, 2020.

Net unrealized holding losses of $ 656,000 and $ 208,000 were recognized in 2020 and 2019, respectively.

Sales of securities—available-for-sale totaled $ 150.4 million with a resulting net gain of $ 464,000 for the year ended December 31, 2020.

Sales of securities—available-for-sale totaled $ 66.3 million with a resulting net gain of $ 46,000 for the year ended December 31, 2019.

In addition, partial calls of securities resulted in net losses of $ 10,000 and $ 12,000 for the years ended December 31, 2020 and December 31, 2019, respectively.

Sales of securities—available-for-sale totaled $ 214.6 million with a resulting net loss of $ 839,000 for the year ended December 31, 2018.

Net unrealized holding gains of $ 2.0 million were recognized in 2021 and net unrealized holding losses of $ 656,000 were recognized 2020.

The following table presents gross gains and losses on sales and partial calls of securities available-for-sale (in thousands):

For the Year Ended December 31,

2021 2020 2019

Available-for-Sale:

Gross Gains $ 993 $ 899 $ 239

Gross Losses ( 495 ) ( 445 ) ( 205 )

Balance, end of the period $ 498 $ 454 $ 34

There were no securities—available-for-sale in a nonaccrual status at December 31, 2021 and 2020.

There were no sales of securities—held-to-maturity during the years ended December 31, 2020, 2019 or 2018 although there were partial calls of securities that resulted in a net gain of $ 216 ,000 for the year ended December 31, 2020, a net loss of $ 1 ,000 for the year ended December 31, 2019 and a net gain of $2,000 for the year ended December 31, 2018.

During the year ended December 31, 2021, the Company sold one held-to-maturity security with a resulting net gain of $ 3,000 and had partial calls of securities that resulted in a net loss of $ 65,000 .

There were no sales of securities—held-to-maturity during the years ended December 31, 2020 or 2019, although there were partial calls of securities that resulted in a net gain of $ 216,000 for the year ended December 31, 2020 and a net loss of $ 1,000 for the year ended December 31, 2019.

There were no securities—held-to-maturity in a nonaccrual status at December 31, 2021 and 2020.

There were two sales of equity securities totaling $1.06 billion for the year ended December 31, 2020 with a resulting net loss of $177,000 and no sales of equity securities for the years ended December 31, 2019 or 2018.

The Company also sold Visa Class B stock during the year ended December 31, 2020, with a net gain of $519,000.

During the year ended December 31, 2021, the Company sold a $ 4.8 million equity security with a resulting net gain of $ 46,000 .

There were two sales of equity securities totaling $ 1.06 billion for the year ended December 31, 2020 with a resulting net loss of $ 177,000 and no sales of equity securities during the year ended December 31, 2019.

During the year ended December 31, 2020, the Company also sold Visa Class B stock with a net gain of $ 519,000 .

The stock was previously carried at a zero-cost basis due to transfer restrictions and uncertainty of litigation.

4 unchanged sentences

Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value

Maturing in one year or less $ — $ — $ 135,129 $ 135,161 $ 4,644 $ 4,704

Maturing within one year $ — $ — $ 14,077 $ 14,174 $ 12,026 $ 12,087

Maturing after one year through five years — — 165,039 170,104 93,652 95,299

Maturing after five years through ten years — — 849,194 846,399 22,562 23,776

Maturing after ten years through twenty years 27,203 24,980 264,414 281,913 137,015 143,756

Maturing after twenty years — — 994,590 1,021,079 183,985 198,355

Maturing after ten years 27,203 26,981 2,624,850 2,608,316 393,115 410,691

$ 27,203 $ 26,981 $ 3,653,160 $ 3,638,993 $ 521,355 $ 541,853

9 unchanged sentences

Credit ratings are reviewed and updated quarterly.

The following table summarizes the amortized cost of held-to-maturity debt securities by credit rating at December 31, 2020 (in thousands):

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 remaining non-rated held-to-maturity debt securities balance is 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 December 31, 2021 and December 31, 2020 (in thousands):

December 31, 2021

3 unchanged sentences

$ 316 $ 420,555 $ 3,092 $ 97,392 $ 521,355

The following table presents the activity in the allowance for credit losses for held-to-maturity debt securities by major type for the year ended December 31, 2020 (in thousands):

December 31, 2020

Government and agency obligations Municipal bonds Corporate bonds Mortgage-backed or related securities Total

AAA/AA/A $ — $ 349,123 $ 500 $ — $ 349,623

Not Rated 340 21,875 2,722 47,247 72,184

$ 340 $ 370,998 $ 3,222 $ 47,247 $ 421,807

The following tables present the activity in the allowance for credit losses for held-to-maturity debt securities by major type for the year ended December 31, 2021 and December 31, 2020 (in thousands):

For the Year Ended December 31, 2021

2 unchanged sentences

Beginning Balance $ — $ 59 $ 35 $ — $ 94

Provision for credit losses — 144 445 — 589

Securities charged-off — — ( 250 ) — ( 250 )

Ending Balance $ — $ 203 $ 230 $ — $ 433

For the Year Ended December 31, 2020

Government and agency obligations Municipal bonds Corporate bonds Mortgage-backed or related securities Total

Allowance for credit losses – securities

Beginning Balance $ — $ — $ — $ — $ —

Impact of adopting ASC 326 — 28 35 — 63

2 unchanged sentences

LOANS RECEIVABLE AND THE ALLOWANCE FOR CREDIT LOSSES

As a result of the adoption of Financial Instruments - Credit Losses (Topic 326), effective January 1, 2020, the Company changed the segmentation of its loan portfolio based on the common risk characteristics used to measure the allowance for credit losses.

The following table presents the loans receivable at December 31, 2021 and 2020 by class (dollars in thousands).

The presentation of loans receivable at December 31, 2019 has been updated to conform to the loan portfolio segmentation that became effective on January 1, 2020.

December 31, 2021 December 31, 2020

23 unchanged sentences

Net loans $ 8,952,664 $ 9,703,703

(1) Includes $1.04 billion of PPP loans as of December 31, 2020 and none as of December 31, 2019.

The presentation of loans receivable at December 31, 2019 in the table below is based on loan segmentation as presented in the 2019 Form 10-K.

December 31, 2019

Amount Percent of Total

Commercial real estate:

Owner-occupied $ 1,580,650 17.0 %

Investment properties 2,309,221 24.8

Multifamily real estate 473,152 5.1

Commercial construction 210,668 2.3

Multifamily construction 233,610 2.5

One- to four-family construction 544,308 5.8

Land and land development:

Residential 154,688 1.7

Commercial 26,290 0.3

Commercial business 1,693,824 18.2

Agricultural business, including secured by farmland

One- to four-family residential 945,622 10.2

Consumer secured by one- to four-family

Consumer—other 211,815 2.3

Total loans 9,305,357 100.0 %

Less allowance for loan losses ( 100,559 )

Net loans $ 9,204,798

Loan amounts are net of unearned loan fees in excess of unamortized costs of $ 25.6 million as of December 31, 2020 and $ 438,000 as of December 31, 2019.

(1) Includes $ 132.6 million and $ 1.04 billion of SBA PPP loans as of December 31, 2021 and December 31, 2020, respectively.

(2) Includes $ 1.4 million of SBA PPP loans as of December 31, 2021 and none as of December 31, 2020.

Loan amounts are net of unearned loan fees in excess of unamortized costs of $ 8.6 million as of December 31, 2021 and $ 25.6 million as of December 31, 2020.

Net loans include net discounts on acquired loans of $ 9.7 million and $ 16.1 million as of December 31, 2021 and 2020, respectively.

2 unchanged sentences

The Company’s loans to directors, executive officers and related entities are on substantially the same terms and underwriting as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectability.

Such loans had balances of $ 1.5 million and $ 3.3 million at December 31, 2020 and 2019, respectively.

Such loans had balances of $ 700,000 and $ 1.5 million at December 31, 2021 and 2020, respectively.

Purchased credit-deteriorated and purchased non-credit-deteriorated loans.

1 unchanged sentence

Acquired loans are evaluated upon acquisition and classified as either purchased credit-deteriorated (PCD) or purchased non-credit-deteriorated.

There were no PCD loans acquired for the year ended December 31, 2020.

Purchased credit-impaired loans and purchased non-credit-impaired loans.

Prior to the implementation of Financial Instruments—Credit Losses (Topic 326) on January 1, 2020, acquired loans were evaluated upon acquisition and classified as either PCI or purchased non-credit-impaired.

PCI loans reflected credit deterioration since origination such that it was probable at acquisition that the Company would be unable to collect all contractually required payments.

The outstanding contractual unpaid principal balance of PCI loans, excluding acquisition accounting adjustments, was $ 23.5 million at December 31, 2019.

The carrying balance of PCI loans was $ 15.9 million at December 31, 2019.

These loans were converted to PCD loans on January 1, 2020.

The following table presents the changes in the accretable yield for PCI loans for the year ended December 31, 2019 (in thousands):

Year Ended December 31,

Balance, beginning of period $ 5,216

Additions 683

Accretion to interest income ( 1,891 )

Reclassifications from non-accretable difference 510

Balance, end of period $ 4,518

As of December 31, 2019, the non-accretable difference between the contractually required payments and cash flows expected to be collected was $ 7.4 million.

Impaired Loans and the Allowance for Loan Losses.

Prior to the implementation of Financial Instruments—Credit Losses (Topic 326) on January 1, 2020, a loan was considered impaired when, based on current information and circumstances, the Company determines it was probable that it would be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.

Factors involved in determining impairment included, but were not limited to, the financial condition of the borrower, the value of the underlying collateral and the status of the economy.

Impaired loans were comprised of loans on nonaccrual, TDRs that were performing under their restructured terms, and loans that were 90 days or more past due, but were still on accrual.

PCI loans were considered performing within the scope of the purchased credit-impaired accounting guidance and were not included in the impaired loan tables.

The following tables provide additional information on impaired loans, excluding PCI loans, with and without specific allowance reserves at December 31, 2019.

Recorded investment includes the unpaid principal balance or the carrying amount of loans less charge-offs and net deferred loan fees (in thousands):

December 31, 2019

Unpaid Principal Balance Recorded Investment Related Allowance

Without Allowance (1)

With Allowance (2)

Commercial real estate:

Owner-occupied $ 4,185 $ 3,816 $ 194 $ 18

Investment properties 3,536 1,883 690 40

Multifamily real estate 82 85 — —

Multifamily construction 573 98 — —

One- to four-family construction 1,799 1,799 — —

Land and land development:

Residential 676 340 — —

Commercial business 25,117 4,614 19,330 4,128

Agricultural business/farmland 3,044 661 2,243 141

One- to four-family residential 7,290 5,613 1,648 41

Consumer secured by one- to four-family 3,081 2,712 127 5

Consumer—other 222 159 52 1

$ 49,605 $ 21,780 $ 24,284 $ 4,374

(1) Includes loans without an allowance reserve that had been individually evaluated for impairment and that evaluation concluded that no reserve was needed, and $13.5 million of homogeneous and small balance loans, as of December 31, 2019, that were collectively evaluated for impairment for which a general reserve was established.

(2) Loans with a specific allowance reserve were individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell to establish realizable value.

The following table summarizes our average recorded investment and interest income recognized on impaired loans by loan class for the years ended December 31, 2019 and 2018 (in thousands):

Year Ended December 31, 2019 Year Ended December 31, 2018

Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

Commercial real estate:

Owner-occupied $ 3,366 $ 7 $ 3,806 $ 11

Investment properties 3,982 119 7,822 314

Multifamily real estate 36 — — —

Commercial construction 779 — 115 —

One- to four-family construction 1,319 18 778 6

Land and land development:

Residential 657 — 994 10

Commercial — — 4 —

Commercial business 5,510 26 3,443 21

Agricultural business/farmland 3,975 105 5,501 102

One- to four-family residential 6,589 249 7,845 302

Consumer secured by one- to four-family 2,694 22 1,583 17

Consumer—other 355 4 142 4

$ 29,262 $ 550 $ 32,033 $ 787

There were no PCD loans acquired during the years ended December 31, 2021 and 2020.

Troubled Debt Restructurings.

4 unchanged sentences

The Company had no commitments to advance additional funds related to TDRs as of both December 31, 2021 and 2020.

The following tables present new TDRs that occurred during the years ended December 31, 2020 and 2019.

No new TDRs occurred during the year ended December 31, 2018 (dollars in thousands):

There were no new TDRs that occurred during the year ended December 31, 2021.

The following tables present new TDRs that occurred during the years ended December 31, 2020 and 2019 (dollars in thousands):

Contracts Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment

53 unchanged sentences

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.

The following tables present the Company’s portfolio of risk-rated loans by grade as of December 31, 2020 (in thousands).

The following tables present the Company’s portfolio of risk-rated loans by class and by grade as of December 31, 2021 and December 31, 2020 (in thousands).

Revolving loans that are converted to term loans are treated as new originations in the table 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.

December 31, 2021

70 unchanged sentences

Total Agricultural business including secured by farmland $ 34,573 $ 25,812 $ 52,182 $ 27,894 $ 13,202 $ 32,680 $ 99,410 $ 285,753

The following table presents the Company’s portfolio of non-risk-rated loans by delinquency status as of December 31, 2020 (in thousands).

December 31, 2020

Term Loans by Year of Origination Revolving Loans Total Loans

2020 2019 2018 2017 2016 Prior

Commercial real estate - owner occupied

Pass $ 243,100 $ 156,838 $ 156,817 $ 122,484 $ 92,312 $ 212,792 $ 3,379 $ 987,722

Special Mention — 4,560 — 2,251 — 1,869 149 8,829

Substandard 7,923 26,914 3,040 2,516 11,731 27,792 — 79,916

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Commercial real estate - owner occupied $ 251,023 $ 188,312 $ 159,857 $ 127,251 $ 104,043 $ 242,453 $ 3,528 $ 1,076,467

Commercial real estate - investment properties

Pass $ 237,553 $ 262,543 $ 299,452 $ 218,018 $ 278,348 $ 502,914 $ 20,062 $ 1,818,890

Special Mention — 2,712 — — 2,730 1,856 — 7,298

Substandard 19,812 11,418 20,352 36,310 23,027 18,577 — 129,496

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Commercial real estate - investment properties $ 257,365 $ 276,673 $ 319,804 $ 254,328 $ 304,105 $ 523,347 $ 20,062 $ 1,955,684

Multifamily real estate

Pass $ 78,632 $ 69,825 $ 39,343 $ 93,442 $ 44,395 $ 96,863 $ 1,983 $ 424,483

Special Mention — — — — — — — —

Substandard 2,312 1,428 — — — — — 3,740

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Multifamily real estate $ 80,944 $ 71,253 $ 39,343 $ 93,442 $ 44,395 $ 96,863 $ 1,983 $ 428,223

December 31, 2020

Term Loans by Year of Origination Revolving Loans Total Loans

2020 2019 2018 2017 2016 Prior

Commercial construction

Pass $ 83,506 $ 67,152 $ 41,299 $ 6,038 $ 2,158 $ 1,129 $ — $ 201,282

Special Mention — 5,963 — — — — — 5,963

Substandard 12,913 3,808 4,873 — 98 — — 21,692

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Commercial construction $ 96,419 $ 76,923 $ 46,172 $ 6,038 $ 2,256 $ 1,129 $ — $ 228,937

Multifamily construction

Pass $ 79,710 $ 151,141 $ 59,744 $ 14,932 $ — $ — $ — $ 305,527

Special Mention — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Multifamily construction $ 79,710 $ 151,141 $ 59,744 $ 14,932 $ — $ — $ — $ 305,527

One- to four- family construction

Pass $ 461,294 $ 35,910 $ — $ — $ — $ — $ 7,581 $ 504,785

Special Mention 1,563 — — — — — 630 2,193

Substandard 501 331 — — — — — 832

Doubtful — — — — — — — —

Loss — — — — — — — —

Total One- to four- family construction $ 463,358 $ 36,241 $ — $ — $ — $ — $ 8,211 $ 507,810

December 31, 2020

Term Loans by Year of Origination Revolving Loans Total Loans

2020 2019 2018 2017 2016 Prior

Land and land development

Pass $ 156,450 $ 37,397 $ 16,560 $ 6,801 $ 6,264 $ 4,840 $ 17,020 $ 245,332

Special Mention — — — — — — — —

Substandard 14 30 3,047 190 — 302 — 3,583

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Land and land development $ 156,464 $ 37,427 $ 19,607 $ 6,991 $ 6,264 $ 5,142 $ 17,020 $ 248,915

Commercial business

Pass $ 1,243,276 $ 230,845 $ 203,051 $ 65,524 $ 38,757 $ 66,206 $ 264,741 $ 2,112,400

Special Mention 103 412 — 829 — 115 9,507 10,966

Substandard 6,624 14,413 18,569 5,224 1,320 453 8,492 55,095

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Commercial business $ 1,250,003 $ 245,670 $ 221,620 $ 71,577 $ 40,077 $ 66,774 $ 282,740 $ 2,178,461

Agricultural business including secured by farmland

Pass $ 32,032 $ 62,058 $ 31,381 $ 22,635 $ 22,394 $ 24,950 $ 91,660 $ 287,110

Special Mention — — — 810 — 537 — 1,347

Substandard 1,542 2,652 1,076 163 675 3,049 2,335 11,492

Doubtful — — — — — — — —

Loss — — — — — — — —

Total Agricultural business including secured by farmland $ 33,574 $ 64,710 $ 32,457 $ 23,608 $ 23,069 $ 28,536 $ 93,995 $ 299,949

The following tables present the Company’s portfolio of non-risk-rated loans by class and delinquency status as of December 31, 2021 and December 31, 2020 (in thousands).

Revolving loans that are converted to term loans are treated as new originations in the table 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.

December 31, 2021

39 unchanged sentences

Total Consumer-other $ 18,646 $ 12,917 $ 8,701 $ 8,398 $ 6,160 $ 17,092 $ 25,455 $ 97,369

The following table presents the Company’s portfolio of risk-rated loans and non-risk-rated loans by grade or other characteristics as of December 31, 2019 (in thousands) :

December 31, 2020

Pass (Risk Ratings 1-5) (1)

Special Mention Substandard Doubtful Loss Total Loans

Term Loans by Year of Origination Revolving Loans Total Loans

2020 2019 2018 2017 2016 Prior

Small balance CRE

Past Due Category

Current $ 56,544 $ 80,090 $ 84,749 $ 77,637 $ 68,791 $ 202,653 $ 2,550 $ 573,014

30-59 Days Past Due — — — — — — — —

60-89 Days Past Due — — — 45 — — — 45

90 Days + Past Due — — — 567 — 223 — 790

Total small balance CRE $ 56,544 $ 80,090 $ 84,749 $ 78,249 $ 68,791 $ 202,876 $ 2,550 $ 573,849

Small business scored

Past Due Category

Current $ 157,161 $ 145,037 $ 126,578 $ 89,734 $ 47,909 $ 63,347 $ 109,287 $ 739,053

30-59 Days Past Due 129 62 310 723 4 1 230 1,459

60-89 Days Past Due 98 147 3 140 — 352 151 891

90 Days + Past Due 73 228 800 484 169 248 46 2,048

Total small business scored $ 157,461 $ 145,474 $ 127,691 $ 91,081 $ 48,082 $ 63,948 $ 109,714 $ 743,451

One- to four- family residential

Past Due Category

Current $ 105,411 $ 90,425 $ 92,232 $ 101,491 $ 60,738 $ 254,850 $ 3,164 $ 708,311

30-59 Days Past Due 1,051 — 1,302 829 — 1,438 — 4,620

60-89 Days Past Due — — 19 — — 936 — 955

90 Days + Past Due — 114 1,185 456 169 2,129 — 4,053

Total One- to four- family residential $ 106,462 $ 90,539 $ 94,738 $ 102,776 $ 60,907 $ 259,353 $ 3,164 $ 717,939

December 31, 2020

Term Loans by Year of Origination Revolving Loans Total Loans

2020 2019 2018 2017 2016 Prior

Consumer—home equity revolving lines of credit

Past Due Category

Current $ 10,522 $ 2,617 $ 2,553 $ 3,359 $ 1,372 $ 2,154 $ 466,490 $ 489,067

30-59 Days Past Due — — — — — 50 409 459

60-89 Days Past Due — 202 — — — 237 — 439

90 Days + Past Due — 312 198 564 286 255 232 1,847

Total Consumer—home equity revolving lines of credit $ 10,522 $ 3,131 $ 2,751 $ 3,923 $ 1,658 $ 2,696 $ 467,131 $ 491,812

Consumer-other

Past Due Category

Current $ 21,811 $ 13,377 $ 13,936 $ 11,433 $ 8,575 $ 18,802 $ 25,460 $ 113,394

30-59 Days Past Due 48 35 15 22 46 26 44 236

60-89 Days Past Due 242 — — 33 21 14 18 328

90 Days + Past Due — — — — — — — —

Total Consumer-other $ 22,101 $ 13,412 $ 13,951 $ 11,488 $ 8,642 $ 18,842 $ 25,522 $ 113,958

The following tables provide the amortized cost basis of collateral-dependent loans as of December 31, 2021 and December 31, 2020 (in thousands).

Our collateral dependent loans presented in the tables below have no significant concentrations by property type or location.

December 31, 2021

Real Estate Accounts Receivable Equipment Total

Commercial real estate:

Owner-occupied $ 3,806 $ — $ — $ 3,806

$ 1,546,649 $ 4,198 $ 29,803 $ — $ — $ 1,580,650

Investment properties 7,322 — — 7,322

2,288,785 2,193 18,243 — — 2,309,221

Multifamily real estate 472,856 — 296 — — 473,152

Commercial construction 198,986 — 11,682 — — 210,668

Multifamily construction 233,610 — — — — 233,610

One- to four-family construction 530,307 12,534 1,467 — — 544,308

Land and land development:

154,348 — 340 — — 154,688

26,256 — 34 — — 26,290

Small balance CRE 1,831 — — 1,831

Commercial business 17 — 47 64

Agricultural business, including secured by farmland

One- to four-family residential 940,424 409 4,789 — — 945,622

Consumer secured by one- to four-family

427 — 594 1,021

Consumer—other

211,475 3 337 — — 211,815

Total $ 13,403 $ — $ 641 $ 14,044

(1) The Pass category includes some performing loans that are part of homogeneous pools which are not individually risk-rated.

This includes all consumer loans, all one- to four-family residential loans and, as of December 31, 2019, in the commercial business category, $ 764.6 million of credit-scored small business loans.

As loans in these homogeneous pools become non-accrual, they are individually risk-rated.

The following table provides the amortized cost basis of collateral-dependent loans as of December 31, 2020 (in thousands).

Our collateral dependent loans presented in the table below have no significant concentrations by property type or location.

December 31, 2020

Real Estate Accounts Receivable Equipment Inventory Total

Real Estate Accounts Receivable Equipment Total

Commercial real estate:

37 unchanged sentences

December 31, 2020

30–59 Days Past Due 60–89 Days Past Due 90 Days or More Past Due Total Past Due Purchased Credit-Impaired Current Total Loans Loans 90 Days or More Past Due and Accruing Non-accrual

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:

1 unchanged sentence

Investment properties — — 7,981 7,981 1,947,703 1,955,684 8,979 8,979 —

Small balance CRE — 45 790 835 573,014 573,849 567 791 —

Multifamily real estate — — — — 428,223 428,223 — — —

Construction, land and land development:

Commercial construction — — 98 98 228,839 228,937 — 98 —

2 unchanged sentences

Land and land development — — 317 317 248,598 248,915 302 507 —

Residential — — 340 340 — 154,348 154,688 — 340

Commercial — — — — — 26,290 26,290 — —

Commercial business

Agricultural business/farmland

Commercial business 3,247 31 2,088 5,366 2,173,095 2,178,461 555 1,988 889

Small business scored 1,459 891 2,048 4,398 739,053 743,451 91 3,419 136

Agricultural business, including secured by farmland

298 37 1,548 1,883 298,066 299,949 1,412 1,743 —

One-to four-family residential 4,620 955 4,053 9,628 708,311 717,939 171 3,556 1,899

Consumer secured by one- to four-family

1,174 327 1,846 3,347 110 547,503 550,960 398 2,314

Consumer—home equity revolving lines of credit 459 439 1,847 2,745 489,067 491,812 — 2,697 130

Consumer—other 236 328 — 564 113,394 113,958 — 22 —

1 unchanged sentence

(1) The Company did not recognize any interest income on non-accrual loans during both the years ended December 31, 2021 and 2020.

The following tables provide the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2020 (in thousands):

The following tables provide the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2021 and 2020 (in thousands):

For the Year Ended December 31, 2021

5 unchanged sentences

Beginning balance $ 57,791 $ 3,893 $ 41,295 $ 35,007 $ 4,914 $ 9,913 $ 14,466 $ — $ 167,279

Impact of Adopting ASC 326 ( 2,864 ) ( 2,204 ) 2,515 3,010 ( 351 ) 7,125 2,973 ( 2,392 ) 7,812

Provision/(recapture) for credit losses ( 2,758 ) 3,209 ( 14,101 ) ( 8,621 ) ( 1,573 ) ( 1,907 ) ( 7,361 ) — ( 33,112 )

2 unchanged sentences

Ending balance $ 52,995 $ 7,043 $ 27,294 $ 26,421 $ 3,190 $ 8,205 $ 6,951 $ — $ 132,099

The changes in the allowance for credit losses during the year ended December 31, 2020 was primarily the result of the $64.3 million provision recorded during the year ended December 31, 2020, mostly due to the deterioration in the economy during the year ended December 31, 2020 as a result of the COVID-19 pandemic, as well as forecasted additional economic deterioration based on the reasonable and supportable economic forecast as of December 31, 2020.

The provision for credit losses also reflects risk rating downgrades on loans that are considered at heightened risk due to the COVID-19 pandemic.

In addition, the change for the year ended December 31, 2020 included a $7.8 million increase related to the adoption of Financial Instruments - Credit Losses (ASC 326).

The following tables provide additional information on the allowance for loan losses and loan balances individually and collectively evaluated for impairment at or for the year ended December 31, 2019 (in thousands):

Net loan charge-offs as a percent of average outstanding loans during the period ( 0.02 ) % — % — % — % — % — % — % n/a ( 0.02 ) %

For the Year Ended December 31, 2020

Real Estate Multifamily

Real Estate Construction

and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Unallocated Total

Real Estate Construction and Land Commercial

Business Agricultural

Business One- to Four-Family Residential Consumer Unallocated Total

Allowance for loan losses:

Beginning balance $ 30,591 $ 4,754 $ 22,994 $ 23,370 $ 4,120 $ 4,136 $ 8,202 $ 2,392 $ 100,559

Provision/(recapture) for loan losses 4,121 936 ( 1,611 ) 7,478 1,206 ( 1,053 ) 1,722 ( 2,799 ) 10,000

Impact of Adopting ASC 326 ( 2,864 ) ( 2,204 ) 2,515 3,010 ( 351 ) 7,125 2,973 ( 2,392 ) 7,812

Provision/(recapture) for credit losses 31,643 1,409 15,781 12,615 ( 87 ) ( 1,679 ) 4,603 — 64,285

Recoveries 275 — 105 3,265 1,823 467 328 — 6,263

1 unchanged sentence

Ending balance $ 57,791 $ 3,893 $ 41,295 $ 35,007 $ 4,914 $ 9,913 $ 14,466 $ — $ 167,279

December 31, 2019

Real Estate Multifamily

Real Estate Construction

and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Unallocated Total

Allowance individually evaluated for impairment

$ 58 $ — $ — $ 4,128 $ 141 $ 41 $ 6 $ — $ 4,374

Allowance collectively evaluated for impairment

30,533 4,754 22,994 19,224 3,919 4,095 8,196 2,392 96,107

Allowance for purchased credit-impaired loans

— — — 18 60 — — — 78

Total allowance for loan losses

$ 30,591 $ 4,754 $ 22,994 $ 23,370 $ 4,120 $ 4,136 $ 8,202 $ 2,392 $ 100,559

December 31, 2019

Real Estate Multifamily

Real Estate Construction

and Land Commercial Business Agricultural Business One- to Four-Family Residential Consumer Unallocated Total

Loan balances:

Loans individually evaluated for impairment

$ 4,738 $ — $ 1,467 $ 19,331 $ 2,243 $ 4,390 $ 235 $ — $ 32,404

Loans collectively evaluated for impairment

3,870,210 473,145 1,168,097 1,674,125 367,913 941,158 762,367 — 9,257,015

Purchased credit-impaired loans

14,923 7 — 368 393 74 173 — 15,938

Total loans $ 3,889,871 $ 473,152 $ 1,169,564 $ 1,693,824 $ 370,549 $ 945,622 $ 762,775 $ — $ 9,305,357

Net loan (charge-offs) recoveries as a percent of average outstanding loans during the period ( 0.02 ) % — % — % ( 0.04 ) % 0.01 % — % ( 0.01 ) % n/a ( 0.05 ) %

The following table provides additional information on the allowance for loan losses for the year ended December 31, 2019 (in thousands):

9 unchanged sentences

Ending balance $ 30,591 $ 4,754 $ 22,994 $ 23,370 $ 4,120 $ 4,136 $ 8,202 $ 2,392 $ 100,559

Net loan (charge-offs) recoveries as a percent of average outstanding loans during the period ( 0.01 ) % — % — % ( 0.04 ) % ( 0.01 ) % 0.01 % ( 0.02 ) % n/a ( 0.07 ) %

REAL ESTATE OWNED, HELD FOR SALE, NET

9 unchanged sentences

Balance, end of period $ 852 $ 816 $ 814

The Company had no foreclosed residential real estate properties held as REO at December 31, 2020 and had $ 48,000 foreclosed residential real estate properties held as REO at December 31, 2019.

The recorded investment in one- to four-family residential loans in the process of foreclosure was $ 609,000 at December 31, 2020 and $ 1.5 million at December 31, 2019.

The Company had no foreclosed residential real estate properties held as REO at both December 31, 2021 and December 31, 2020.

The recorded investment in one- to four-family residential loans in the process of foreclosure was $ 609,000 at both December 31, 2021 and December 31, 2020.

PROPERTY AND EQUIPMENT, NET

27 unchanged sentences

Total public deposits $ 393,835 $ 362,002

Total brokered deposits $ — $ 202,884

(1 ) Certificates of deposit included $ 58,000 of acquisition discounts at December 31, 2020 and $ 269,000 of acquisition discounts at December 31, 2019.

(1 ) Certificates of deposit included no acquisition discounts at December 31, 2021 and $ 58,000 of acquisition discounts at December 31, 2020.

Deposits at December 31, 2021 and 2020 included deposits from the Company’s directors, executive officers and related entities totaling $ 13.1 million and $ 11.2 million, respectively.

24 unchanged sentences

As of December 31, 2021, Banner Bank has established a borrowing line with the FHLB to borrow up to 45 % of its total assets, contingent on having sufficient qualifying collateral and ownership of FHLB stock.

Islanders Bank similarly may borrow up to 45 % of its total assets, also contingent on collateral and FHLB stock.

At December 31, 2020, under these credit facilities based on pledged collateral, Banner Bank had $2.28 billion of available credit capacity and Islanders Bank had $32.5 million of available credit capacity.

At December 31, 2021, under these credit facilities based on pledged collateral, Banner Bank had $ 2.38 billion of available credit capacity.

OTHER BORROWINGS

9 unchanged sentences

At December 31, 2021, based upon available unencumbered collateral, Banner Bank was eligible to borrow $ 782.3 million from the Federal Reserve Bank, although, at that date, as well as at December 31, 2020, Banner Bank had no funds borrowed under this or other borrowing arrangements.

At December 31, 2020, Banner Bank had uncommitted federal funds lines of credit agreements with other financial institutions totaling $ 125.0 million, while Islanders Bank had an uncommitted federal funds line of credit agreement with another financial institution totaling $ 5.0 million.

At December 31, 2021, Banner Bank had uncommitted federal funds lines of credit agreements with other financial institutions totaling $ 125.0 million.

No balances were outstanding under these agreements as of December 31, 2021 and 2020.

13 unchanged sentences

SUBORDINATED DEBT AND MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

At December 31, 2020, the Company had ten wholly-owned subsidiary grantor trusts (the Trusts), which had issued $ 143.5 million of TPS to third parties, as well as $ 4.4 million of common capital securities, carried among other assets, which were issued to the Company.

At December 31, 2021, the Company had nine wholly-owned subsidiary grantor trusts (the Trusts), which had issued $ 135.5 million of TPS to third parties, as well as $ 4.2 million of common capital securities, carried among other assets, which were issued to the Company.

TPS and common capital securities accrue and pay distributions periodically at specified annual rates as provided in the indentures.

4 unchanged sentences

The Company has the right to redeem the Debentures in whole on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

For the year ended December 31, 2021, the Company redeemed $ 8.0 million in trust preferred securities and $ 248,000 in related common capital securities resulting in a loss of $ 2.3 million.

There were no redemptions for the year ended December 31, 2020.

Subsequent to December 31, 2021, the Company fully redeemed the debentures issued by four of the Trusts, totaling $50.5 million.

All of the TPS issued by the Trusts qualified as Tier 1 capital as of December 31, 2021.

3 unchanged sentences

Current Interest Rate Reset Period Interest Rate Spread

Banner Capital Trust II $ 15,000 $ 464 $ 15,464 2033 3.59 % Quarterly Three-month LIBOR + 3.35 %

Banner Capital Trust III 15,000 465 15,465 2033 3.14 Quarterly Three-month LIBOR + 2.90 %

Banner Capital Trust IV 15,000 465 15,465 2034 3.09 Quarterly Three-month LIBOR + 2.85 %

Banner Capital Trust II (3)

$ 15,000 $ 464 $ 15,464 2033 3.47 % Quarterly Three-month LIBOR + 3.35 %

Banner Capital Trust III (3)

15,000 465 15,465 2033 3.02 Quarterly Three-month LIBOR + 2.90 %

Banner Capital Trust IV (3)

15,000 465 15,465 2034 2.97 Quarterly Three-month LIBOR + 2.85 %

Banner Capital Trust V 25,000 774 25,774 2035 1.73 Quarterly Three-month LIBOR + 1.57 %

1 unchanged sentence

Banner Capital Trust VII 25,000 774 25,774 2037 1.51 Quarterly Three-month LIBOR + 1.38 %

Siuslaw Statutory Trust I 8,000 248 8,248 2034 2.93 Quarterly Three-month LIBOR + 2.70 %

Greater Sacramento Bancorp Statutory Trust I 4,000 124 4,124 2033 3.59 Quarterly Three-month LIBOR + 3.35 %

Greater Sacramento Bancorp Statutory Trust I (3)

4,000 124 4,124 2033 3.47 Quarterly Three-month LIBOR + 3.35 %

Greater Sacramento Bancorp Statutory Trust II 4,000 124 4,124 2035 1.88 Quarterly Three-month LIBOR + 1.68 %

5 unchanged sentences

(2) The Company has elected to use fair value accounting on its TPS.

(3) Fully redeemed subsequent to December 31, 2021.

On June 30, 2020, Banner issued and sold in an underwritten offering $ 100.0 million aggregate principal amount of 5.000 % Fixed-to-Floating Rate Subordinated Notes due 2030 (Notes) at a public offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately $98.1 million.

The interest rate on the Notes remains fixed equal to 5.000% for the first 5 years, after 5 years the interest rate changes to a floating interest rate tied to a benchmark rate, which

is expected to be Three-Month Term SOFR, plus a spread of 489 basis points.

The interest rate on the Notes remains fixed equal to 5.000% for the first 5 years, after 5 years the interest rate changes to a floating interest rate tied to a benchmark rate, which is expected to be Three-Month Term SOFR, plus a spread of 489 basis points.

The Notes will mature on June 30, 2030.

On or after June 30, 2025, the Company may redeem the Notes, in whole or in part.

The Notes are unsecured obligations and are subordinated in right of payment to all existing and future indebtedness, deposits and other liabilities of the Company's current and future subsidiaries, including the Banks’ deposits as well as the Company's subsidiaries' liabilities to general creditors and liabilities arising during the ordinary course of business.

The Notes are unsecured obligations and are subordinated in right of payment to all existing and future indebtedness, deposits and other liabilities of the Company’s current and future subsidiaries, including the Bank’s deposits as well as the Company’s subsidiaries’ liabilities to general creditors and liabilities arising during the ordinary course of business.

The Notes may be included in Tier 2 capital for the Company under current regulatory guidelines and interpretations.

19 unchanged sentences

Merger and acquisition costs — — 0.1

Valuation reserve release — — ( 2.5 )

State audits and amended returns — — ( 0.5 )

18 unchanged sentences

Right of use asset ( 13,071 ) ( 13,144 )

Unrealized gain on securities - available-for-sale ( 21,662 ) ( 10,353 )

Unrealized loss (gain) on securities - available-for-sale 91 ( 21,662 )

Financial instruments accounted for under fair value accounting ( 878 ) ( 947 )

5 unchanged sentences

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.

In December 2017, the federal government enacted the Tax Cuts and Jobs Act (2017 Tax Act).

Among other provisions, the 2017 Tax Act reduced the federal marginal corporate income tax rate from 35 % to 21 %.

As a result of the passage of the 2017 Tax Act, the Company recorded a $42.6 million charge for the revaluation of its net deferred tax asset to account for the future impact of the decrease in the corporate income tax rate and other provisions of the legislation.

The charge was recorded as an increase to tax expense and reduction of the net deferred tax asset for the year ended December 31, 2017.

The $42.6 million charge recorded by the Company included $4.2 million of provisional income tax expense related to AMT credits that are limited under Section 382 of the Code, which resulted in a reduction in the AMT deferred tax asset.

The adjustments to deferred tax assets and receivables related to the refundable nature of AMT credits were provisional amounts estimated based on information available as of December 31, 2017.

During 2018, the Company determined the Section 382 alternative minimum tax credits carried forward indefinitely and therefore released the provisional $4.2 million valuation reserve recorded in 2017 against the tax credits.

The release was recorded as a reduction to current tax expense and an increase to the net deferred tax assets.

At December 31, 2021, the Company has federal net operating loss carryforwards of approximately $ 96.0 million.

5 unchanged sentences

At that same date, the Company also had federal alternative minimum tax credit carryforwards of approximately $ 4.2 million.

As a consequence of our 2015 acquisition of Starbuck Bancshares, Inc., the Company experienced a change in control within the meaning of Section 382 of the Code.

As a consequence of the Company’s 2015 acquisition of Starbuck Bancshares, Inc., the Company experienced a change in control within the meaning of Section 382 of the Code.

In addition, the underlying Section 382 limitations at Starbuck Bancshares, Inc.’s level continue to apply to the Company.

2 unchanged sentences

The applicable state Section 382 limitations range from $ 525,000 to $ 21.5 million.

In 2017, the Company established a $ 184,000 valuation reserve against the portion of its various state net operating loss carryforwards and tax credits that it believed it is more likely than not that it would not realize the benefit because the application of the Section 382 limitations at the state level is based

on future apportionment rates.

In 2017, the Company established a valuation reserve against its federal Section 382 limited alternative minimum tax credit carryovers because of the uncertainty under the new tax law of the interplay of Section 382 and the revised carryover period.

The valuation reserve was released in 2018 as the Company determined the Section 382 limited alternative minimum tax credits are not subject to the revised carryover period and will continue to carryover indefinitely until they are utilized.

For non-Section 382 limited alternative minimum tax credits, the credits expired in 2019 due to the passage of the CARES Act in 2020.

2 unchanged sentences

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 available net operating loss carryforwards, general business credits, and recognized built-in-losses.

As a consequence of our 2019 acquisition of AltaPacific and AltaPacific Bank, the Company did not experience a change in control within the meaning of Section 382 of the Code.

However, the underlying Section 382 limitations at AltaPacific and AltaPacific Bank level continue to apply to the Company.

As a consequence 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 Code.

However, the underlying Section 382 limitations at AltaPacific and AltaPacific Bank’s continue to apply to the Company.

As a result of the Section 382 limitations, the Company is limited to utilizing $ 110,000 of the federal net operating loss carryovers and general business credits acquired from AltaPacific and AltaPacific Bank based on underlying limits carried over.

2 unchanged sentences

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, established as $ 1.1 million at December 31, 2021.

As of December 31, 2020 and December 31, 2019, the Company had $450,000 and $275,000, respectively, of unrecognized tax benefits for uncertain tax positions and an insignificant amount as of December 31, 2018, none of which if recognized would materially affect the effective tax rate.

A reconciliation of the beginning and ending amount of total unrecognized state tax benefits for the years ended December 31, 2021 and 2020 is as follows (in thousands):

Years Ended December 31

Balance, beginning of year $ 450 $ 275

Changes related to prior year tax positions 365 —

Changes related to current year tax positions 185 175

Balance, end of year $ 1,000 $ 450

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 in the next twelve months.

17 unchanged sentences

Employee Retirement Plans:

Substantially all of the Company’s and the Banks’ employees are eligible to participate in its 401(k)/Profit Sharing Plan, a defined contribution and profit sharing plan sponsored by the Company.

Substantially all of the Company’s and the Bank’s employees are eligible to participate in its 401(k)/Profit Sharing Plan, a defined contribution and profit sharing plan sponsored by the Company.

Employees may elect to have a portion of their salary contributed to the plan in conformity with Section 401(k) of the Internal Revenue Code.

1 unchanged sentence

For the years ended December 31, 2021, 2020 and 2019 , $ 6.5 million, $ 6.7 million and $ 6.2 million, respectively, was expensed for 401(k) contributions.

During 2020, the Board of Directors has elected to make a 4 % of eligible compensation matching contribution.

During 2021, the Board of Directors elected to make a 4 % of eligible compensation matching contribution.

Supplemental Retirement and Salary Continuation Plans:

Through the Banks, the Company is obligated under various non-qualified deferred compensation plans to help supplement the retirement income of certain executives, including certain retired executives, selected by resolution of the Banks’ Boards of Directors or in certain cases by the former directors of acquired banks.

Through the Bank, the Company is obligated under various non-qualified deferred compensation plans to help supplement the retirement income of certain executives, including certain retired executives, selected by resolution of the Bank’s Boards of Directors or in certain cases by the former directors of acquired banks.

These plans are unfunded, include both defined benefit and defined contribution plans, and provide for payments after the executive’s retirement.

3 unchanged sentences

Deferred Compensation Plans and Rabbi Trusts:

The Company and the Banks also offer non-qualified deferred compensation plans to members of their Boards of Directors and certain employees.

The Company and the Bank also offer non-qualified deferred compensation plans to members of their Boards of Directors and certain employees.

The plans permit each participant to defer a portion of director fees, non-qualified retirement contributions, salary or bonuses for future receipt.

4 unchanged sentences

At December 31, 2021 and 2020, liabilities recorded in connection with deferred compensation plan benefits totaled $ 15.0 million ($ 7.4 million in contra-equity) and $ 11.4 million ($ 7.6 million in contra-equity), respectively, and are recorded in deferred compensation or equity as appropriate.

The Banks have purchased, or acquired through mergers, life insurance policies in connection with the implementation of certain executive supplemental retirement, salary continuation and deferred compensation retirement plans, as well as additional policies not related to any specific plan.

The Bank has purchased, or acquired through mergers, life insurance policies in connection with the implementation of certain executive supplemental retirement, salary continuation and deferred compensation retirement plans, as well as additional policies not related to any specific plan.

These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with the plans.

It is the Banks’ intent to hold these policies as a long-term investment.

However, there will be an income tax impact if the Banks choose to surrender certain policies.

Although the lives of individual current or former management-level employees are insured, the Banks are the owners and sole or partial beneficiaries.

It is the Bank’s intent to hold these policies as a long-term investment.

However, there will be an income tax impact if the Bank chooses to surrender certain policies.

Although the lives of individual current or former management-level employees are insured, the Bank is the owner and sole or partial beneficiary.

At December 31, 2021 and 2020, the cash surrender value of these policies was $ 244.2 million and $ 191.8 million, respectively.

The Banks are exposed to credit risk to the extent an insurance company is unable to fulfill its financial obligations under a policy.

In order to mitigate this risk, the Banks use a variety of insurance companies and regularly monitor their financial condition.

The Bank is exposed to credit risk to the extent an insurance company is unable to fulfill its financial obligations under a policy.

In order to mitigate this risk, the Bank uses a variety of insurance companies and regularly monitor their financial condition.

STOCK-BASED COMPENSATION PLANS

35 unchanged sentences

Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended (BHCA), and the regulations of the Federal Reserve.

Banner Bank and Islanders Bank, as state-chartered federally insured commercial banks, are subject to the capital requirements established by the FDIC.

Banner Bank, as a state-chartered federally insured commercial bank, is subject to the capital requirements established by the FDIC.

The Federal Reserve requires Banner to maintain capital adequacy that generally parallels the FDIC requirements.

The following table shows the regulatory capital ratios of the Company and the Banks and the minimum regulatory requirements (dollars in thousands):

On February 5, 2021, Islanders Bank, a subsidiary of Banner Corporation and a Washington-chartered commercial bank, was merged into Banner Bank.

Banner Bank and Islanders Bank (the Banks), as a state-chartered federally insured commercial banks, were both subject to the capital requirements established by the FDIC at December 31, 2020.

The following table shows the regulatory capital ratios of the Company and the Bank and the minimum regulatory requirements (dollars in thousands):

Actual Minimum for Capital Adequacy Purposes Minimum to be Categorized as “Well-Capitalized” Under Prompt Corrective Action Provisions

10 unchanged sentences

Tier 1 common equity to risk-weighted assets 1,428,955 12.64 508,589 4.50 734,629 6.50

Islanders Bank:

Total capital to risk- weighted assets 29,333 15.65 14,997 8.00 18,747 10.00

Tier 1 capital to risk- weighted assets 26,983 14.39 11,248 6.00 14,997 8.00

Tier 1 capital to average leverage assets 26,983 7.87 13,720 4.00 17,150 5.00

Tier 1 common equity to risk-weighted assets 26,983 14.39 8,436 4.50 12,185 6.50

December 31, 2020:

13 unchanged sentences

Tier 1 common equity to risk-weighted assets 26,983 14.39 8,436 4.50 12,185 6.50

At December 31, 2020, Banner Corporation and the Banks each exceeded the requirements to be “well capitalized” and the fully phased-in capital conservation buffer requirement.

There have been no conditions or events since December 31, 2020 that have materially adversely changed the Tier 1 or Tier 2 capital of the Company or the Banks.

However, events beyond the control of the Banks, such as weak or depressed economic conditions in areas where the Banks have most of their loans, could adversely affect future earnings and, consequently, the ability of the Banks to meet their respective capital requirements.

At December 31, 2021, Banner Corporation and the Bank each exceeded the requirements to be “well capitalized” and the fully phased-in capital conservation buffer requirement.

There have been no conditions or events since December 31, 2021 that have materially adversely changed the Tier 1 or Tier 2 capital of the Company or the Bank.

However, events beyond the control of the Bank, such as weak or depressed economic conditions in areas where the Bank has most of its loans, could adversely affect future earnings and, consequently, the ability of the Bank to meet its respective capital requirements.

The Company may not declare or pay cash dividends on, or repurchase, any of its shares of common stock if the effect thereof would cause equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration and payment would otherwise violate regulatory requirements.

Banner Corporation and the Banks are subject to minimum required ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital, total capital and the leverage ratio and a required capital conservation buffer over the required capital ratios.

Banner Corporation and the Bank are subject to minimum required ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital, total capital and the leverage ratio and a required capital conservation buffer over the required capital ratios.

Under capital regulations, the minimum capital ratios are:

12 unchanged sentences

For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk-weighted from 0% to 1,250%, depending on the risk characteristics of the asset or item.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, Banner and each of the Banks must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, Banner and each of the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

3 unchanged sentences

Banner has identified one reporting unit for purposes of evaluating goodwill for impairment.

At December 31, 2020, the Company completed an assessment of qualitative factors and as a result of the economic impact of the COVID-19 pandemic concluded further analysis was required.

The Company completed a quantitative goodwill impairment test and concluded the fair value of the reporting unit exceeded the carrying value of the reporting unit including goodwill and therefore no impairment existed.

At December 31, 2021, the Company completed an assessment of qualitative factors and concluded that no further analysis was required as it is more likely than not that the fair value of Banner Bank, the reporting unit, exceeds the carrying value.

CDI represents the value of transaction-related deposits and the value of the client relationships associated with the deposits.

4 unchanged sentences

The CDI assets shown in the table below represent the value ascribed to the long-term deposit relationships acquired in various bank acquisitions.

These intangible assets are being amortized using an accelerated method over estimated useful lives of three years to ten years .

These intangible assets are being amortized using an accelerated method over estimated useful lives of eight years to ten years .

The CDI assets are not estimated to have a significant residual value.

5 unchanged sentences

Amortization — ( 8,151 ) — ( 8,151 )

Balance, December 31, 2018 339,154 32,699 225 372,078

Additions through acquisition (2)

33,967 4,610 — 38,577

Amortization — ( 8,151 ) — ( 8,151 )

Adjustments (2)

3 unchanged sentences

Balance, December 31, 2020 373,121 21,426 — 394,547

(1 ) The additions to Goodwill and CDI in 2018 relate to the acquisition of Skagit Bank.

Amortization — ( 6,571 ) — ( 6,571 )

Balance, December 31, 2021 $ 373,121 $ 14,855 $ — $ 387,976

(1) The additions to Goodwill and CDI in 2019 relate to the acquisition of AltaPacific.

4 unchanged sentences

Net carrying amount $ 14,855

Mortgage servicing rights are reported in other assets.

Mortgage and 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.

2 unchanged sentences

However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value.

In 2020 , 2019 and 2018, the Company did no t record any impairment charges or recoveries against mortgage servicing rights.

Unpaid principal balance of loans for which mortgage servicing rights have been recognized totaled $ 2.64 billion and $ 2.48 billion at December 31, 2020 and 2019, respectively.

In 2021 , 2020 and 2019, the Company did not record any impairment charges or recoveries against mortgage servicing rights.

Unpaid principal balance of loans for which mortgage and SBA servicing rights have been recognized totaled $ 2.77 billion and $ 2.64 billion at December 31, 2021 and 2020, respectively.

Custodial accounts maintained in connection with this servicing totaled $ 3.2 million and $ 3.8 million at December 31, 2021 and 2020, respectively.

An analysis of the mortgage servicing rights for the years ended December 31, 2020, 2019 and 2018 is presented below (in thousands):

An analysis of the mortgage and SBA servicing rights for the years ended December 31, 2021, 2020 and 2019 is presented below (in thousands):

Years Ended December 31

5 unchanged sentences

( 6,580 ) ( 7,672 ) ( 5,050 )

Fair Value adjustments 1,144 — —

Balance, end of the year (2)

$ 17,206 $ 15,223 $ 14,148

(1) Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income and any unamortized balance is fully written off if the loan repays in full.

(2) There was no valuation allowance as of December 31, 2020 and 2019.

(1) Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income.

Any unamortized balance is fully written off if the loan repays in full.

(2) There was no valuation allowance on mortgage servicing rights as of both December 31, 2021 and 2020.

The following table presents estimated fair values of the Company’s financial instruments as of December 31, 2021 and 2020, whether or not recognized or recorded in the Consolidated Statements of Financial Condition (in thousands):

9 unchanged sentences

Securities—held-to-maturity 3 57,347 57,370 11,769 11,799

Loans receivable held for sale 2 243,795 245,667 210,447 210,670

Securities purchased under agreements to resell 2 300,000 300,000 — —

Loans held for sale 2 96,487 96,914 243,795 245,667

Loans receivable 3 9,084,763 9,100,516 9,870,982 9,810,293

2 unchanged sentences

Mortgage servicing rights 3 16,045 24,393 15,223 18,084

SBA servicing rights 3 1,161 1,161 — —

Investments in limited partnerships 3 10,257 10,257 2,819 2,819

Interest rate swaps 2 20,826 20,826 39,066 39,066

2 39,066 39,066 15,202 15,202

Interest rate lock and forward sales commitments 2,3 1,555 1,555 5,641 5,641

2,3 5,641 5,641 1,108 1,108

Demand, interest-bearing checking and money market 2 9,253,494 9,253,494 6,994,197 6,994,197

Demand, interest checking and money market accounts 2 10,703,586 10,703,586 9,253,494 9,253,494

Regular savings 2 2,784,716 2,784,716 2,398,482 2,398,482

5 unchanged sentences

Interest rate swaps 2 11,336 11,336 22,336 22,336

2 22,336 22,336 10,966 10,966

Interest rate swaps used in cash flow hedges 2 279 279 — —

Interest rate lock and forward sales commitments 2 140 140 1,755 1,755

2 1,755 1,755 674 674

The Company measures and discloses certain assets and liabilities at fair value.

29 unchanged sentences

Corporate bonds — 117,347 — 117,347

Mortgage-backed securities — 1,646,152 — 1,646,152

Mortgage-backed or related securities — 2,805,268 — 2,805,268

Asset-backed securities — 206,434 — 206,434

1 unchanged sentence

Loans held for sale (1)

— 39,775 — 39,775

SBA servicing rights — — 1,161 1,161

Investment in limited partnerships — — 10,257 10,257

Interest rate swaps — 20,826 — 20,826

3 unchanged sentences

Interest rate swaps — 11,336 — 11,336

Interest rate swaps used in cash flow hedges — 279 — 279

Interest rate lock and forward sales commitments — 140 — 140

8 unchanged sentences

Corporate bonds — 221,769 — 221,769

Mortgage-backed securities — 1,342,311 — 1,342,311

Mortgage-backed or related securities — 1,646,152 — 1,646,152

Asset-backed securities — 9,419 — 9,419

1 unchanged sentence

Loans held for sale (1)

— 133,554 — 133,554

Investment in limited partnerships — — 2,819 2,819

Interest rate swaps — 39,066 — 39,066

1 unchanged sentence

$ — $ 2,495,633 $ 33,020 $ 2,528,653

Junior subordinated debentures at fair value

$ — $ — $ 119,304 $ 119,304

Junior subordinated debentures $ — $ — $ 116,974 $ 116,974

Interest rate swaps — 22,336 — 22,336

1 unchanged sentence

$ — $ 24,091 $ 116,974 $ 141,065

The following methods were used to estimate the fair value of each class of financial instruments:

(1) The unpaid principal balance of loans held for sale carried at fair value was $38.6 million and $128.1 million at December 31, 2021 and 2020.

The following methods were used to estimate the fair value of each class of financial instruments above:

The estimated fair values of investment securities and mortgaged-backed securities are priced using current active market quotes, if available, which are considered Level 1 measurements.

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The mortgage servicing portfolio is stratified by loan type and fair value estimates are adjusted up or down based on the serviced loan interest rates versus current rates on new loan originations since the most recent independent analysis.

SBA Servicing Rights:

Fair values are estimated based on an independent dealer analysis by discounting estimated net future cash flows from servicing.

The evaluation utilizes assumptions market participants would use in determining fair value including prepayment speeds, delinquency and foreclosure rates, the discount rate, servicing costs, and the timing of cash flows.

The SBA servicing portfolio is stratified by loan type and fair value estimates are adjusted up or down based on the serviced loan interest rates versus current rates on new loan 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 to which a proportionate share of net assets is attributed, for each limited partnership.

Junior Subordinated Debentures:

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Interest rate lock commitments Pricing model Pull-through rate 86.64 % 86.35 %

Investments in limited partnerships Net Asset Value Infrequent transactions n/a n/a

SBA servicing rights Discounted cash flows Constant prepayment rate 12 % n/a

TPS Securities :

Management believes that the credit risk-adjusted spread used to develop the discount rate utilized in the fair value measurement of TPS securities is indicative of the risk premium a willing market participant would require under current market conditions for instruments with similar contractual rates, terms and conditions and issuers with similar credit risk profiles and with similar expected probability of default.

Management believes that the credit risk-adjusted spread used to develop the discount rate utilized in the fair value measurement of TPS securities 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.

8 unchanged sentences

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, 2021 and 2020 (in thousands):

2 unchanged sentences

Junior Subordinated

Debentures Interest rate lock and forward sales commitments

Balance at January 1, 2019 $ 25,896 $ 114,091 $ 273

Debentures Interest Rate Lock and Forward sales Commitments Investments in Limited Partnerships SBA Servicing Asset

Balance, January 1, 2020 $ 25,636 $ 119,304 $ 791 $ 467 $ —

Total gains or losses recognized

Assets gains ( 260 ) — 518

Assets (losses) gains ( 656 ) — 4,430 — —

Liabilities losses — ( 2,330 ) — — —

Purchases, issuances and settlements, including acquisitions — 5,814

Balance at December 31, 2019 25,636 119,304 791

Purchases, issuances and settlements — — — 2,352 —

Balance, December 31, 2020 24,980 116,974 5,221 2,819 —

Total gains or losses recognized

Assets gains ( 656 ) — 4,430

Assets gains (losses) 2,001 — ( 3,754 ) 2,615 1,161

Liabilities losses — 11,089 — — —

Redemptions — ( 8,248 ) — — —

Purchases, issuances and settlements — — — 4,823 —

Balance at December 31, 2020 $ 24,980 $ 116,974 $ 5,221

Balance, December 31, 2021 $ 26,981 $ 119,815 $ 1,467 $ 10,257 $ 1,161

Interest income and dividends from the TPS securities are recorded as a component of interest income.

1 unchanged sentence

The change in fair value of the junior subordinated debentures, which represents changes in instrument specific credit risk, 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.

Items Measured at Fair Value on a Non-recurring Basis

The following table presents 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, 2020 and 2019 (in thousands):

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, 2021 and 2020 (in thousands):

December 31, 2021

4 unchanged sentences

Level 1 Level 2 Level 3 Total

Impaired loans $ — $ — $ 14,853 $ 14,853

Loans individually evaluated $ — $ — $ 3,482 $ 3,482

REO — — 816 816

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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.

In both cases, if the fair value of the collateral is less than the amortized cost basis of the loan, the

Banks will recognize an allowance as the difference between the fair value of the collateral, less costs to sell (if applicable), at the reporting date and the amortized cost basis of the loan.

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), at the reporting date 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 by the 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.

1 unchanged sentence

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 estimated fair value of the real estate, less expected selling costs.

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.

11 unchanged sentences

Miscellaneous liabilities $ 5,723 $ 2,170

Deferred tax liability 6,422 4,419

Deferred tax liability, net 3,737 6,422

Subordinated notes, net 98,564 98,201

22 unchanged sentences

Decrease in deferred taxes ( 571 ) 1,438 6,969

Net change in valuation of financial instruments carried at fair value 55 — —

Share-based compensation 9,258 9,168 7,142

Loss on extinguishment of debt 2,284 — —

Net change in other assets ( 2,970 ) 16,756 2,594

2 unchanged sentences

INVESTING ACTIVITIES:

Funds transferred to deferred compensation trust ( 38 ) ( 32 ) ( 27 )

Reduction in investment in subsidiaries — — 37,000

Other investing activities

( 228 ) ( 38 ) ( 32 )

Acquisitions — — 442

2 unchanged sentences

Net proceeds from issuance of subordinated notes — 98,027 —

Withholding taxes paid on share-based compensation ( 1,453 ) ( 1,915 ) ( 1,554 )

Repayment of junior subordinated debentures ( 8,248 ) — —

Proceeds from redemption of trust securities related to junior subordinated debentures 248 — —

Taxes paid related to net share settlement for equity awards ( 3,228 ) ( 1,453 ) ( 1,915 )

Repurchase of common stock ( 56,528 ) ( 31,775 ) ( 53,922 )

8 unchanged sentences

During the year ended December 31, 2019, the Company repurchased 1,000,000 common shares at an average price of $ 53.90 per share.

Of the total shares repurchased, 269,711 shares were repurchased prior to March 28, 2018 and were therefore accounted for under the 2017 authorization.

The remaining 325,000 shares were repurchased subsequent to March 28, 2018 and are accounted for under the 2018 authorization.

In addition to the shares repurchased under the authorization, there were 27,653 shares surrendered during 2018 by employees to satisfy tax withholding obligations upon vesting of restricted stock grants.

On March 27, 2019, the Company announced that its Board of Directors had authorized the repurchase up to 5% of the Company's common stock, or 1,757,637 of the Company's outstanding shares.

Under the authorization, shares may be repurchased by the Company in open market purchases.

During the year ended December 31, 2019, the Company repurchased 1,000,000 common shares at an average price of $ 53.90 per share.

All repurchases of shares in 2019 occurred subsequent to March 27, 2019 and are accounted for under the 2019 authorization leaving 757,637 shares available for future repurchase.

In addition to the shares repurchased under the 2019 authorization, there were 33,777 shares surrendered during 2019 by employees to satisfy tax withholding obligations upon vesting of restricted stock.

In addition to the shares repurchased under the authorization, there were 33,777 shares surrendered during 2019 by employees to satisfy tax withholding obligations upon vesting of restricted stock grants.

There were 624,780 shares repurchased in the first quarter of 2020 under the 2019 authorization at an average price of $ 50.84 per share.

This authorization expired in March 2020.

On December 21, 2020, the Company announced that its Board of Directors had authorized the repurchase up to 1,757,781 of the Company’s common stock (which was equivalent to 5 % of the Company’s common stock).

Under the authorization, shares may be repurchased by the Company in open market purchases.

The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

During the year ending December 31, 2020 no shares were repurchased under the 2020 authorization.

In addition to the shares repurchased under the 2019 authorization, there were 41,507 shares surrendered during 2020 by employees to satisfy tax withholding obligations upon vesting of restricted stock.

There were 1,050,000 shares repurchased during the year ending December 31, 2021 under the 2020 authorization at an average price of $ 53.84 per share.

This authorization expired in December 2021.

On December 22, 2021, the Company announced that its Board of Directors had authorized the repurchase of up to 1,712,510 of the Company’s common stock (which was equivalent to 5 % of the Company’s common stock).

15 unchanged sentences

At December 31, 2021, 2020 and 2019 there were 476,222 , 578,136 , and 367,230 , respectively, of issued but unvested restricted stock shares and units that were included in the computation of diluted earnings per share.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Results of operations on a quarterly basis for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in thousands except for per share data):

Year Ended December 31, 2020

Quarter Second

Quarter Third

Quarter Fourth

Interest income $ 131,665 $ 128,747 $ 129,581 $ 129,153

Interest expense 12,407 9,167 8,555 7,716

Net interest income before provision for loan losses 119,258 119,580 121,026 121,437

Provision (recapture) for credit losses 21,748 29,528 13,641 ( 601 )

Net interest income 97,510 90,052 107,385 122,038

Non-interest income 19,165 27,720 28,222 23,509

Non-interest expense 95,185 89,637 91,567 96,759

Income before provision for income taxes 21,490 28,135 44,040 48,788

Provision for income taxes 4,608 4,594 7,492 9,831

Net income $ 16,882 $ 23,541 $ 36,548 $ 38,957

Basic earnings per share $ 0.48 $ 0.67 $ 1.04 $ 1.11

Diluted earnings per share 0.47 0.67 1.03 1.10

Dividends declared 0.41 — 0.41 0.41

Year Ended December 31, 2019

Quarter Second

Quarter Third

Quarter Fourth

Interest income $ 130,000 $ 130,840 $ 131,438 $ 133,409

Interest expense 13,892 14,143 14,815 13,918

Net interest income before provision for loan losses 116,108 116,697 116,623 119,491

Provision for loan losses 2,000 2,000 2,000 4,000

Net interest income 114,108 114,697 114,623 115,491

Non-interest income 18,121 22,674 20,864 20,282

Non-interest expense 90,014 86,716 87,308 93,690

Income before provision for income taxes 42,215 50,655 48,179 42,083

Provision for income taxes 8,869 10,955 8,602 8,428

Net income $ 33,346 $ 39,700 $ 39,577 $ 33,655

Basic earnings per share $ 0.95 $ 1.14 $ 1.15 $ 0.96

Diluted earnings per share 0.95 1.14 1.15 0.95

Dividends declared 0.41 0.41 0.41 1.41

Year Ended December 31, 2018

Quarter Second

Quarter Third

Quarter Fourth

Interest income $ 104,820 $ 112,423 $ 117,660 $ 128,744

Interest expense 5,447 7,360 8,570 11,282

Net interest income before provision for loan losses 99,373 105,063 109,090 117,462

Provision for loan losses 2,000 2,000 2,000 2,500

Net interest income 97,373 103,063 107,090 114,962

Non-interest income 21,362 21,217 20,399 21,015

Non-interest expense 81,706 82,637 81,632 95,396

Income before provision for income taxes 37,029 41,643 45,857 40,581

Provision for income taxes 8,239 9,219 8,084 3,053

Net income $ 28,790 $ 32,424 $ 37,773 $ 37,528

Basic earnings per share $ 0.89 $ 1.01 $ 1.17 $ 1.10

Diluted earnings per share 0.89 1.00 1.17 1.09

Dividends declared 0.35 0.85 0.38 0.38

COMMITMENTS AND CONTINGENCIES

16 unchanged sentences

In addition to the commitments disclosed in the table above, the Company is committed to funding its unfunded tax credit investments (see Note 11, Income Taxes).

During 2019, the Company entered into an agreement to invest $ 10.0 million in a limited partnership.

At December 31, 2020, the Company had funded $ 2.8 million of the commitment, with $ 7.2 million of the commitment remaining to be funded, compared to $467,000 of the commitment funded, with $9.5 million to be funded at December 31, 2019.

The Company has also entered into agreements to invest in several limited partnerships.

As of December 31, 2021 and December 31, 2020, the funded balances and remaining outstanding commitments of these investments were as follows (in thousands):

December 31, 2021 December 31, 2020

Funded Balance Unfunded Balance Funded Balance Unfunded Balance

Limited partnerships investments $ 7,642 $ 9,858 $ 2,819 $ 7,181

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.

11 unchanged sentences

Traditionally, these loan applications with rate lock commitments had 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 Banner Bank then attempts to deliver these loans before their rate locks expired.

Banner Bank then attempts to deliver these loans before their rate locks expired.

This arrangement generally required delivery of the loans prior to the expiration of the rate lock.

13 unchanged sentences

These proceedings and the associated legal claims are often contested and the outcome of individual matters is not always predictable.

These claims and counter-claims typically arise during the course of collection efforts on problem loans or with respect to action to enforce liens on properties in which the Banks hold a security interest.

Based upon the information known to management at this time, the Company and the Banks are not a party to any legal proceedings that management believes would have a material adverse effect on the results of operations or consolidated financial position at December 31, 2020.

In connection with certain asset sales, the Banks typically make representations and warranties about the underlying assets conforming to specified guidelines.

If the underlying assets do not conform to the specifications, the Banks may have an obligation to repurchase the assets or indemnify the purchaser against any loss.

The Banks believe that the potential for material loss under these arrangements is remote.

Based upon the information known to management at this time, the Company and the Bank are not a party to any legal proceedings that management believes would have a material adverse effect on the results of operations or consolidated financial position at December 31, 2021.

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.

10 unchanged sentences

Derivatives Designated in Hedge Relationships

Interest Rate Swaps with Dealer Counterparties:

The Company’s fixed-rate loans result in exposure to losses in value or net interest income as interest rates change.

7 unchanged sentences

Banner Bank discontinued originating interest rate swaps under this program in 2008.

Interest Rate Swaps used in Cash Flow Hedges:

The Company’s floating rate loans result in exposure to losses in value or net interest income as interest rates change.

The risk management objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

During the fourth quarter of 2021, the Company entered into interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans.

These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation’s variable-rate assets.

During the next twelve months, the Corporation estimates that an additional $ 1.8 million will be reclassified as an increase to interest income.

As of December 31, 2021 and December 31, 2020, the notional values or contractual amounts and fair values of the Company’s derivatives designated in hedge relationships were as follows (in thousands):

5 unchanged sentences

Contract Amount Fair

Interest rate swaps $ 338 $ 9 $ 3,567 $ 220 $ 338 $ 9 $ 3,567 $ 220

Interest Rate Swaps with Dealer Counterparties $ — $ — $ 338 $ 9 $ — $ — $ 338 $ 9

Interest Rate Swaps used in Cash Flow Hedges

$ — $ — $ — $ — $ 400,000 $ 279 $ — $ —

Total $ — $ — $ 338 $ 9 $ 400,000 $ 279 $ 338 $ 9

(1) Included in Loans Receivable on the Consolidated Statements of Financial Condition.

(2) Included in Other Liabilities on the Consolidated Statements of Financial Condition.

The following table presents the effect of cash flow hedge accounting on AOCI for the year ended December 31, 2021 (in thousands):

For The Year Ended December 31, 2021

Amount of Gain or (Loss) Recognized in AOCI on Derivative Amount of Gain or (Loss) Recognized in AOCI Included Component Amount of Gain or (Loss) Recognized in AOCI Excluded Component Location of Gain or (Loss) Recognized from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income Included Component Amount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component

Interest rate swaps $ ( 920 ) $ ( 920 ) $ — Interest Income $ 340 $ 340 $ —

Derivatives Not Designated in Hedge Relationships

3 unchanged sentences

These swaps do not qualify as designated hedges;

therefore, each swap is accounted for as a free standing derivative.

therefore, each swap is accounted for as a freestanding derivative.

Mortgage Banking:

The Company sells originated one- to four-family and multifamily mortgage 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 loans that are intended to be sold and for closed one- to four-family and multifamily mortgage 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 mortgage loan commitments by entering into forward sales contracts to sell one- to four-family and multifamily mortgage loans or mortgage-backed securities to broker/dealers at specific prices and dates.

The Company sells originated one- to four-family 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 loans that are intended to be sold and for closed one- to four-family 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 mortgage loan commitments by entering into forward sales contracts to sell one- to four-family loans or mortgage-backed securities to broker/dealers at specific prices and dates.

As of December 31, 2021 and December 31, 2020, the notional values or contractual amounts and fair values of the Company’s derivatives not designated in hedge relationships were as follows (in thousands):

9 unchanged sentences

$ 695,678 $ 22,381 $ 671,564 $ 44,698 $ 676,435 $ 11,476 $ 728,271 $ 24,082

$ 671,564 $ 44,698 $ 493,607 $ 16,090 $ 728,271 $ 24,082 $ 677,132 $ 11,420

(1) Included in Other assets on the Consolidated Statements of Financial Condition, with the exception of certain interest swaps and mortgage loan commitments (with a fair value of $ 20,000 at December 31, 2021 and $ 231,000 at December 31, 2020), which are included in Loans Receivable.

72 unchanged sentences

Debit and credit card interchange income and expenses

Debit and credit card interchange income represent fees earned when a credit or debit card issued by the Banks is used to purchase goods or services at a merchant.

The merchant’s bank pays the Banks a default interchange rate set by MasterCard on a transaction by transaction basis.

The merchant acquiring bank can stop accepting the Banks’ cards at any time and the Banks can stop further use of cards issued by them at any time.

The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the Banks cardholders’ card.

Debit and credit card interchange income represent fees earned when a credit or debit card issued by the Bank is used to purchase goods or services at a merchant.

The merchant’s bank pays the Bank a default interchange rate set by MasterCard on a transaction by transaction basis.

The merchant acquiring bank can stop accepting the Bank’s cards at any time and the Bank can stop further use of cards issued by them at any time.

The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the Bank cardholders’ card.

Direct expenses associated with the credit and debit card are recorded as a net reduction against the interchange income.

Merchant services income

Merchant services income represents fees earned by the Banks for card payment services provided to its merchant clients.

The Banks have a contract with a third party to provide card payment services to the Banks’ merchants that contract for those services.

The third party provider has contracts with the Banks’ merchants to provide the card payment services.

The Banks do not have a direct contractual relationship with its merchants for these services.

The Banks set the rates for the services provided by the third party.

The third party provider passes the payments made by the Banks’ merchants through to the Banks.

The Banks, in turn, pay the third party provider for the services it provides to the Banks’ merchants.

Merchant services income represents fees earned by the Bank for card payment services provided to its merchant clients.

The Bank has a contract with a third party to provide card payment services to the Bank’s merchants that contract for those services.

The third party provider has contracts with the Bank’s merchants to provide the card payment services.

The Bank does not have a direct contractual relationship with its merchants for these services.

The Bank sets the rates for the services provided by the third party.

The third party provider passes the payments made by the Bank’s merchants through to the Bank.

The Bank, in turn, pays the third party provider for the services it provides to the Bank’s merchants.

These payments to the third party provider are recorded as expenses as a net reduction against fee income.

In addition, a portion of the payment received by the Banks represents interchange fees which are passed through to the card issuing bank.

In addition, a portion of the payment received by the Bank represents interchange fees which are passed through to the card issuing bank.

Income is primarily earned based on the dollar volume and number of transactions processed.

13 unchanged sentences

The table below presents certain information related to the lease costs for operating leases for the year ended December 31, 2021 and December 31, 2020 (in thousands):

2021 2020 2019

Operating lease cost (1)

2 unchanged sentences

Variable lease cost (1)

2,584 2,778 2,396

Less sublease income (1)

2 unchanged sentences

(1) Lease expenses and sublease income are classified within occupancy and equipment expense on the Consolidated Statements of Operations.

Rental expense was $ 17.2 million for the year ended December 31, 2018.

Supplemental Cash Flow Information

9 unchanged sentences

Lease obligations

As of December 31, 2020 and December 31, 2019, the Company had no undiscounted lease payments under an operating lease that had not yet commenced.

As of December 31, 2021, the Company had $ 353,000 undiscounted lease payments under an operating lease that had not yet commenced.

The Company had no undiscounted lease payments under an operating lease that had not yet commenced at December 31, 2020.

BANNER CORPORATION

Exhibit Index of Exhibits

2 {a} Agreement and Plan of Merger, dated as of July 25, 2018, by and between Banner Corporation and Skagit Bancorp, Inc.

(incorporated herein by reference to Exhibit 2.1 to the Registrant ’ s Current Report on Form 8-K filed with the SEC on July 27, 2018 (File No.

3{a} Amended and Restated Articles of Incorporation of Registrant [incorporated by reference to the Registrant ’ s Current Report on Form 8-K filed on April 29, 2010 (File No.

18 unchanged sentences

10{f} 2012 Restricted Stock and Incentive Bonus Plan [incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 19, 2013 (File No.

10{g} Form of Performance-Based Restricted Stock Award Agreement [incorporated by reference to Exhibit 10.1 included in the Registrant ’ s Current Report on Form 8-K filed on June 4, 2013 (File No.

10{h} Form of Time-Based Restricted Stock Award Agreement [incorporated by reference to Exhibit 10.1 included in the Registrant ’ s Current Report on Form 8-K filed on June 4, 2013 (File No.

10{i} 2014 Omnibus Incentive Plan [incorporated by reference as Appendix C to the Registrant ’ s Definitive Proxy Statement on Schedule 14A filed on March 24, 2014 (File No.

10{g} Amended and Restated Executive Severance and Change in Control Plan and Summary Plan Description (Amended and Restated effective as of October 1, 2021) [incorporated by reference to exhibit 10{j} included in the Form 10-Q dated September 30, 2021 (File No.

10{h} 2014 Omnibus Incentive Plan [incorporated by reference as Appendix C to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 24, 2014 (File No.

000-26584)] and amendments [incorporated by reference to the Form 8-K filed on March 25, 2015 (File No.

10{j} Forms of Equity-Based Award Agreements:

10{i} Forms of Equity-Based Award Agreements:

Incentive Stock Option Award Agreement, Non-Qualified Stock Option Award Agreement, Restricted Stock Award Agreement, Restricted Stock Unit Award Agreement, Stock Appreciation Right Award Agreement, and Performance Unit Award Agreement [incorporated by reference to Exhibits 10.2 - 10.7 included in the Registration Statement on Form S-8 dated May 9, 2014 (File No.

333-195835)].

10{k} 2018 Omnibus Incentive Plan [incorporated by reference as Appendix D to the Registrant ’ s Definitive Proxy Statement on Schedule 14A filed on March 23, 2018 (File No.

10{l} Forms of Equity-Based Award Agreements:

10{j} 2018 Omnibus Incentive Plan [incorporated by reference as Appendix D to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 23, 2018 (File No.

10{k} Forms of Equity-Based Award Agreements:

Incentive Stock Option Award Agreement, Non-Qualified Stock Option Award Agreement under the Banner Corporation 2018 Omnibus Incentive Plan;

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures