What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-27 · 255 added, 226 removed, 1709 unchanged (22% of the section changed)

41 unchanged sentences

The baseline loss rates are applied to each loan’s estimated cash flows over the life of the loan under the remaining life method to determine the baseline loss estimate for each loan.

The Company uses macroeconomic scenarios from an independent third party.

The Company uses macroeconomic scenarios from independent third parties.

These scenarios are based on past events, current conditions, the likelihood of future events occurring and include consideration of the forecasted direction of the economic and business environment and its likely impact on the estimated allowance as compared to the historical losses over the reasonable and supportable time frame.

15 unchanged sentences

We have served as the Company's auditor since 2012.

Denver, Colorado

Sacramento, California

February 27, 2026

60 unchanged sentences

Net interest income 224,405 209,364 225,155

Provision for (reversal of) credit losses 6,282 4,280 ( 1,426 )

Net interest income after provision for (reversal of) credit losses 203,082 220,875 220,811

Provision for credit losses 1,968 6,282 4,280

Net interest income after provision for credit losses 222,437 203,082 220,875

NONINTEREST INCOME:

40 unchanged sentences

8,376 17,709 9,547

Other comprehensive income (loss) 17,232 27,374 ( 109,246 )

Comprehensive income (loss) $ 60,490 $ 89,129 $ ( 27,371 )

Other comprehensive income 24,029 17,232 27,374

Comprehensive income $ 91,561 $ 60,490 $ 89,129

See accompanying Notes to Consolidated Financial Statements.

40 unchanged sentences

Net income 61,755 61,755

Other comprehensive loss, net of tax ( 109,246 ) ( 109,246 )

Other comprehensive income, net of tax 27,374 27,374

Cash dividends declared on common stock ($ 0.88 per share)

11 unchanged sentences

Depreciation, amortization and accretion 956 1,591 3,170

Provision for (reversal of) credit losses 6,282 4,280 ( 1,426 )

Provision for credit losses 1,968 6,282 4,280

Stock-based compensation expense 4,943 4,344 4,325

Amortization of intangible assets 1,174 1,640 2,434

Amortization of tax credit investments 24,656 19,853 16,456

Origination of mortgage loans held for sale — ( 1,318 ) ( 14,833 )

Proceeds from sale of mortgage loans held for sale — 1,344 15,176

Deferred income tax (benefit) expense ( 15,291 ) ( 13,204 ) 871

Deferred income tax benefit ( 17,939 ) ( 15,291 ) ( 13,204 )

Bank owned life insurance income ( 4,378 ) ( 2,967 ) ( 2,934 )

Valuation adjustment on interest rate swaps — — ( 66 )

Gain on sale of mortgage loans held for sale, net — ( 26 ) ( 343 )

Loss (gain) on sale of investment securities, net 22,742 12,231 256

Loss on sale of investment securities, net 10,741 22,742 12,231

Gain on sale of premises and equipment

8 unchanged sentences

Purchase of investment securities available for sale ( 88,169 ) ( 33,132 ) ( 178,396 )

Purchase of investment securities held to maturity — — ( 412,835 )

Proceeds from sales of investment securities available for sale 141,682 273,633 219,700

9 unchanged sentences

Net cash paid related to branch divestiture — — ( 13,826 )

Net cash used by investing activities

( 85,903 ) ( 93,446 ) ( 1,207,779 )

Net cash provided (used) by investing activities 186,750 ( 85,903 ) ( 93,446 )

Cash flows from financing activities:

6 unchanged sentences

Net cash (used) provided by financing activities ( 165,580 ) ( 86,453 ) 105,306

Net increase (decrease) in cash and cash equivalents 115,989 ( 107,873 ) 121,383

Year Ended December 31,

2025 2024 2023

Net (decrease) increase in cash and cash equivalents ( 107,873 ) 121,383 ( 1,619,702 )

Cash and cash equivalents at beginning of period 117,100 224,973 103,590

5 unchanged sentences

Investment in LIHTC partnerships and related funding commitment 326 100 37,007

Loans received from return of NMTC equity method investment — — 15,596

ROU assets obtained in exchange for new operating lease liabilities 3,937 3,504 6,880

2 unchanged sentences

Transfer of bank owned life insurance to prepaid expenses and other assets due to death benefit accrued, but not received

Transfer of deposits to deposits held for sale — — 17,420

See accompanying Notes to Consolidated Financial Statements.

5 unchanged sentences

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

The Bank is headquartered in Olympia, Washington and conducts business from its 50 branch offices located throughout Washington State, the greater Portland, Oregon area, Eugene, Oregon, and Boise, Idaho.

The Bank is headquartered in Olympia, Washington and conducts business from its 50 branch offices and one loan production office located throughout Washington State, the greater Portland, Oregon area, Eugene, Oregon, and Boise, Idaho as of December 31, 2025.

The Bank’s business consists primarily of commercial lending and deposit relationships with small and medium-sized businesses and their owners in its market areas and attracting deposits from the general public.

10 unchanged sentences

All significant intercompany balances and transactions among the Company and the Bank have been eliminated in consolidation.

Certain prior year amounts in the Consolidated Statements of Income have been reclassified to conform to the current year’s presentation.

Reclassifications had no effect on the prior year's net income or stockholders’ equity.

71 unchanged sentences

Loans are debited against the ACL on loans when management believes the uncollectibility of a loan balance is confirmed and subsequent recoveries, if any, are credited to the ACL on loans.

The Company records the changes in the ACL on loans through earnings as a "Provision for (reversal of) credit losses" in the Consolidated Statements of Income.

The Company records the changes in the ACL on loans through earnings as a "Provision for credit losses" in the Consolidated Statements of Income.

Management has adopted a historic loss, open pool CECL methodology to calculate the ACL on loans.

1 unchanged sentence

The allowance for individually evaluated loans is calculated using either the collateral value method, which considers the likely source of repayment as the value of the collateral less estimated costs to sell, or the net present value method, which considers the contractual principal and interest terms and estimated cash flows available from the borrower to satisfy the debt.

Nonaccrual modified loans are individually evaluated for credit loss except if the original interest rate is used to discount the expected cash flows, not the rate specified in the restructuring.

Nonaccrual modified loans are individually evaluated for credit loss except when the original interest rate is used to discount the expected cash flows, not the rate specified in the restructuring.

The allowance for collectively evaluated loans is comprised of the baseline loss allowance, the macroeconomic allowance and the qualitative allowance.

8 unchanged sentences

The macroeconomic allowance includes consideration of the forecasted direction of the economic and business environment and its likely impact on the estimated allowance as compared to the historical losses over the reasonable and supportable time frame.

The Company uses macroeconomic scenarios from an independent third party.

The Company uses macroeconomic scenarios from independent third parties.

4 unchanged sentences

A macroeconomic sensitive model is developed for each segment given the current and forecasted conditions and a macroeconomic multiplier is calculated for each forecast period considering the forecasted losses as compared to the long-term average actual losses of the dataset.

The impact of those macroeconomic factors on each segment, both positive or negative, using the reasonable and supportable period, are added to the calculated baseline loss allowance.

After the reasonable and supportable period, forecasted loss rates revert to historical baseline loss levels over the predetermined reversion period on a straight-lined basis.

At September 30, 2023, the Company upgraded its model used to calculate the ACL for collectively evaluated loans.

This upgraded version involved modifications to the macroeconomic variables for each loan segment.

Changes were based on regression testing, assessing the macroeconomic variable relationships to expected results and adjusting the lookback period from 1991 to 2000 for improved data relevance.

The most significant changes to macroeconomic variables were in the commercial and industrial and commercial real estate segments.

The commercial and industrial segment had previously used unemployment as a macroeconomic variable which was removed and replaced with a market index, rate index and real estate price index.

The commercial real estate segment had previously used gross domestic product as a macroeconomic variable which was removed and replaced with a housing price index.

Additionally, a new segment for home equity lines of credit was introduced in this version.

The overall impact on the ACL for collectively evaluated loans, before applying qualitative adjustments, was not considered to be material.

The impact of those macroeconomic factors on each segment, both positive and negative, using the reasonable and supportable period, are added to the calculated baseline loss allowance.

After the reasonable and supportable period, forecasted loss rates revert to historical baseline loss levels over the predetermined reversion period on a straight-line basis.

The Company’s ACL model also includes adjustments for qualitative factors, where appropriate.

Since historical information (such as historical net losses and economic cycles) may not always, by themselves, provide a sufficient basis for determining

future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL.

Since historical information (such as historical net losses and economic cycles) may not always, by themselves, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL.

Qualitative adjustments may be related to and include, but not be limited to, factors such as:

1 unchanged sentence

Qualitative adjustments primarily relate to certain segments of the loan portfolio deemed by management to be of a higher-risk profile where management believes the quantitative component of the Company’s ACL model may not have fully captured the associated impact to the ACL.

Qualitative adjustments also relate to heightened uncertainty as to future macroeconomic conditions and the related impact on the loan segments.

Qualitative adjustments also relate to heightened uncertainty as to future macroeconomic

conditions and the related impact on the loan segments.

Management reviews the need for an appropriate level of qualitative adjustments on a quarterly basis, and as such, the amount and allocation of qualitative adjustments may change in future periods.

8 unchanged sentences

The allowance methodology for unfunded commitments is similar to the ACL on loans, but additionally includes considerations of the current utilization of the commitment and an estimate of the future utilization as determined appropriate by historical commitment utilization and the Company's estimates of future utilization given current economic forecasts.

The ACL for unfunded commitments is recorded in "Accrued expenses and other liabilities" in the Consolidated Statements of Financial Condition and changes are recognized through earnings in the "Provision for (reversal of) credit losses" in the Consolidated Statements of Income.

The ACL for unfunded commitments is recorded in "Accrued expenses and other liabilities" in the Consolidated Statements of Financial Condition and changes are recognized through earnings in the "Provision for credit losses" in the Consolidated Statements of Income.

ACL on Accrued Interest Receivable

1 unchanged sentence

Additionally, no allowance has been established for accrued interest receivable on investment securities and loans receivable as interest accrued, but not received, is reversed timely in accordance with the policies stated above.

Provision for (reversal of) Credit Losses

Provision for Credit Losses

The provision for credit losses as presented in the Consolidated Statements of Income includes the provision for credit losses on loans, the provision for credit losses on unfunded commitments and the provision for credit losses on investment securities.

14 unchanged sentences

and for furniture, fixtures and equipment is three to seven years .

The Company reviews premises and equipment, including leasehold improvements, for impairment whenever events or changes in the

circumstances indicate that the undiscounted cash flows for the property are less than its carrying value.

The Company reviews premises and equipment, including leasehold improvements, for impairment whenever events or changes in the circumstances indicate that the undiscounted cash flows for the property are less than its carrying value.

If identified, an impairment loss is recognized through a charge to earnings based on the fair value of the property.

Federal Home Loan Bank Stock

The Bank is a member of the FHLB system.

Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts.

FHLB stock is carried at cost and is classified as a restricted security.

Bank Owned Life Insurance

12 unchanged sentences

If the implied fair value of goodwill is less than the recorded goodwill, an impairment charge would be recorded for the difference.

The Company and the Bank file a United States consolidated federal income tax return and an Oregon and Idaho State income tax return.

The Company and the Bank file a United States consolidated federal income tax return and Oregon and Idaho state income tax returns.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

24 unchanged sentences

The Company does not separate non-lease components from lease components and excludes operating leases with a term of twelve months or less from being capitalized as ROU assets and ROU liabilities.

The Company follows a policy to capitalize lease agreements with total contractual lease payments of $ 25,000 or more.

The Company follows a policy to capitalize

lease agreements with total contractual lease payments of $ 25,000 or more.

The Company does not account for any leases at a portfolio level.

33 unchanged sentences

Additionally, in conjunction with the Company's merger with Premier Commercial Bancorp in 2018, the Company assumed the Salary Continuation Plan.

The Salary Continuation Plan is an unfunded non-qualified deferred compensation plan for select former Premier Commercial executive officers, some of which are current Company officers.

The Salary Continuation Plan is an unfunded non-qualified deferred compensation plan for select former Premier Commercial executive officers.

Under the Salary Continuation Plan, the Company will pay each participant, or their beneficiary, specified amounts over specified periods beginning with the individual's termination of service due to retirement subject to early termination provisions.

4 unchanged sentences

Earnings per Share

The two-class method is used in the calculation of basic and diluted earnings per common share.

Basic earnings per common share is net income allocated to common shareholders divided by the weighted average number of common shares outstanding during the period.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.

All outstanding unvested share-based payment awards that contain rights to

nonforfeitable dividends are considered participating securities for this calculation.

Dividends and undistributed earnings allocated to participating securities are excluded from net income allocated to common shareholders and participating securities are excluded from weighted average common shares outstanding.

Diluted earnings per common share is calculated using the treasury stock method and includes the dilutive effect of additional potential common shares issuable under stock options.

Diluted earnings per common share is calculated using the treasury stock method and includes the dilutive effect of unvested restricted stock units.

Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.

Derivative Financial Instruments

The Company utilizes interest rate swap derivative contracts to facilitate the needs of its commercial customers whereby it enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution.

In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate.

At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount.

The transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate and the Company recognizes immediate income based upon the difference in the bid/ask spread of the underlying transactions with its customers and the third party.

The Company utilizes interest rate swap derivative contracts to facilitate the respective risk management strategies of its commercial customers whereby it enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution, such that the Company minimizes its net risk exposure.

Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

11 unchanged sentences

Operating Segments

While the Company’s chief operating decision maker ("CODM") monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis as operating results for all segments are similar.

While the Company’s CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis as operating results for all segments are similar.

Accordingly, all the financial service operations are considered by management to be aggregated in one reportable operating segment.

1 unchanged sentence

The Company's revenues are primarily composed of interest income on financial instruments, such as loans and investment securities.

The Company's revenue derived from contracts with customers are generally presented in "Service charges and other fees" and "Other income" in the Consolidated Statement of Income and includes the following:

The Company's revenue derived from contracts with customers are generally presented in "Service charges and other fees", "Card revenue" and "Other income" in the Consolidated Statement of Income and includes the following:

• Service Charges on Deposit Accounts:

7 unchanged sentences

• Merchant Processing Services and Debit and Credit Card Fees:

The Company earns fees from cardholder transactions conducted through third-party payment network providers which consist of (i) interchange fees earned from the payment network as a debit card issuer, (ii) referral fee income, and (iii) ongoing merchant fees earned for referring customers to the payment processing provider.

The Company earns fees from cardholder transactions conducted through third party payment network providers which consist of (i) interchange fees earned from the payment network as a debit and credit card issuer, (ii) referral fee income, and (iii) ongoing merchant fees earned for referring customers to the payment processing provider.

These fees are recognized when the transaction occurs, but may settle on a daily or monthly basis.

(d) Recently Issued or Adopted Accounting Pronouncements

FASB ASU 2020-04 , Reference Rate Reform (Topic 848) , as amended by ASU 2021-01, and ASU 2022-06 was issued in March 2020 and provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The amendments in this ASU are effective for all entities as of March 12, 2020.

In December 2022, FASB amended this ASU and deferred the sunset date of Topic 848 from December 31, 2022, to December 31, 2024.

The amendments are elective, apply to all entities, and provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

Effective January 25, 2021, the Company adhered to the Interbank Offered Rate Fallbacks Protocol as published by the International Swaps and Derivatives Association, Inc.

and recommended by the Alternative Reference Rates Committee.

The Company’s instruments indexed to the London Interbank Offering Rate ("LIBOR") have all been transferred to another index.

FASB ASU 2023-02 , Investments - Equity Method and Joint Ventures (Topic 323) :

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force), was issued in February 2023.

The amendments in this ASU permit companies to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, if certain conditions are met.

Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the statement of operations as a component of income tax expense (benefit).

The amendments also require that a reporting entity disclose certain information in annual and interim reporting periods that enable investors to understand the investments that generate income tax credits and other income tax benefits from a tax credit program.

The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted.

The amendments in the ASU can be applied either on a modified retrospective or a retrospective basis.

The Company had already applied proportional amortization to its LIHTC investments prior to January 1, 2024.

The amendments in this ASU allow the Company to expand the use of proportional amortization to other types of qualifying tax credit investments.

The Company has chosen not to expand the use of proportional amortization beyond its LIHTC investment portfolio.

Thus, at this time, this ASU only impacts disclosure requirements.

FASB ASU 2023-06 , Disclosure Improvements:

1 unchanged sentence

The amendments will be effective for the Company only if the SEC removes the related disclosure requirement from its existing regulations no later than June 30, 2027.

If the SEC timely removes such a related requirement from its existing regulations, the corresponding amendments within the ASU will become effective for the Company on the same date with early adoption permitted.

The Company does not expect the adoption of this ASU to have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2023-07 , Segment Reporting - Improvements to Reportable Segment Disclosures (Topic 280), was issued in November 2023.

This accounting standards update was issued to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The ASU applies to all public entities that are required to report segment information in accordance with ASC 280.

For public companies, amendments in this ASU was effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted.

This ASU only impacts the Company's disclosure requirements and the adoption of this ASU did not have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2023-09 , Income Taxes (Topic 740) :

Improvements to Income Tax Disclosures, was issued in December 2023.

The amendments in this ASU requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented.

The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of this ASU to have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2024-02 , Codification Improvements - Amendments to Remove References to the Concepts Statements, was issued in March 2024.

This update contains amendments in the Codification that remove references to various Concepts Statements.

In most cases, the references were extraneous and not required to understand or apply the guidance.

In other instances, the references were used in previous Statements to provide guidance in certain topical areas.

The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity may apply the amendments in this ASU prospectively to all new transactions recognized on or after the date that the entity first applies the amendments, or retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied.

If applied retrospectively, an entity shall adjust the opening period of retained earnings as of the beginning of the comparative period presented.

If the SEC timely removes such a related requirement from its existing regulations, the corresponding amendments within the ASU will become effective for the Company on the same date with early

adoption permitted.

The Company does not expect the adoption of this ASU to have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2024-03 , Disaggregation of Income Statement Expenses, was issued in November 2024.

This accounting standards update will require public companies to disclose, in the notes to financial statements, specified information about certain costs

and expenses at each interim and annual reporting period.

This ASU will require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, with early adoption permitted.

The Company does not expect the adoption of this ASU to have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2025-06 , Intangibles-Goodwill and Other-Internal-Use Software:

Targeted Improvements to the Accounting for Internal-Use Software , was issued in September 2025.

The amendment removed references to prescriptive and sequential software development stages throughout Subtopic 350-40 so that guidance is neutral to software development methods in determining when internal-use software is capitalizable.

The new standard is effective for annual periods beginning after December 15, 2027, with early adoption permitted.

The Company does not expect the adoption of this ASU to have a material impact on its business operations or Consolidated Statements of Financial Condition.

FASB ASU 2025-08 , Financial Instruments-Credit Losses:

Purchased Loans , was issued in November 2025.

The ASU makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model (CECL).

It does not change the existing models for originated assets, purchased credit deteriorated assets (PCD) or other acquired assets.

The ASU creates a new model for certain purchased loans expanding the gross-up approach to a newly created category “purchased seasoned loans” (PSL) which will decrease the accretion on acquired loans classified as PSL.

The new standard is effective for annual periods beginning after December 15, 2026 and interim reporting periods within those annual period.

Early adoption is permitted.

The company is currently evaluating the impact of this ASU on the Company's consolidated financial statements, including impact on the accounting related to the acquisition of Olympic Bancorp which closed on January 31, 2026.

(2) Investment Securities

61 unchanged sentences

Total investment securities due at a single maturity date 83,131 73,657 151,319 130,449

MBS and Other asset-backed securities (1)

564,374 533,865 522,788 494,838

Total investment securities $ 647,505 $ 607,522 $ 674,107 $ 625,287

(1) MBS, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their payment speed.

(1) MBS and Other asset-backed securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their payment speed.

There were no holdings of investment securities of any one issuer, other than the U.S.

10 unchanged sentences

Municipal securities (1)

1,241 — 45,785 ( 7,954 ) 47,026 ( 7,954 )

Residential CMO and MBS (2)

5 unchanged sentences

Total $ 11,849 $ ( 24 ) $ 383,751 $ ( 42,298 ) $ 395,600 $ ( 42,322 )

(1) The unrealized loss on municipal securities in a continuous unrealized loss position less than 12 months was less than one thousand dollars.

government agency and government-sponsored enterprise CMO and MBS.

12 unchanged sentences

Corporate obligations — — 3,890 ( 111 ) 3,890 ( 111 )

December 31, 2024

Less than 12 Months 12 Months or Longer Total

Value Unrealized

Other asset-backed securities 1,568 ( 1 ) — — 1,568 ( 1 )

31 unchanged sentences

Accrued interest receivable excluded from the amortized cost of investment securities available for sale totaled $ 2.2 million and $ 2.7 million at December 31, 2025 and December 31, 2024, respectively.

Accrued interest receivable excluded from the amortized cost on investment securities held to maturity totaled $ 2.2 million and $ 2.3 million at December 31, 2024 and December 31, 2023, respectively.

Accrued interest receivable excluded from the amortized cost on investment securities held to maturity totaled $ 2.2 million at December 31, 2025 and December 31, 2024.

No amounts of accrued interest receivable on investment securities available for sale or held to maturity were reversed against interest income on investment securities during the years ended December 31, 2025, 2024, and 2023.

3 unchanged sentences

These shares had a carrying value of zero and were restricted from resale to non-member banks of Visa U.S.A.

until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s Covered Litigation escrow account.

conversion into Class A (voting) shares upon the termination of Visa Inc.'s Covered Litigation escrow account.

During the year ended December 31, 2023, the Company sold all of its shares of Visa Inc.

1 unchanged sentence

(3) Loans Receivable

The Company originates loans in the ordinary course of business and has also acquired loans through mergers and acquisitions.

The Company originates loans in the ordinary course of business and has acquired loans through mergers and acquisitions.

In addition to originating loans, the Company may also purchase loans through pool purchases, participation purchases and syndicated loan purchases.

61 unchanged sentences

The Company also provides financing to builders for the construction of pre-sold residential homes and, in selected cases, to builders for the construction of speculative single-family residential property.

Construction loans are typically short-term in nature and

priced with variable rates of interest.

Construction loans are typically short-term in nature and priced with variable rates of interest.

Construction loans may also be originated as a construction-to-permanent financing loan whereby upon completion of the construction phase, the loan is automatically converted to a permanent term loan.

12 unchanged sentences

(b) Concentrations of Credit

Most of the Company’s lending activity occurs within its primary market areas which are concentrated along the I-5 corridor from Whatcom County, Washington to Lane County, Oregon, as well as Yakima County, Washington and Ada County, Idaho.

As of December 31, 2025, most of the Company’s lending activity occurred within its primary market areas which are concentrated along the I-5 corridor from Whatcom County, Washington to Lane County, Oregon, as well as Yakima County and Spokane County, Washington and Ada County, Idaho.

Additionally, the Company's loan portfolio is concentrated in commercial business loans, which include commercial and industrial, owner-occupied and nonowner-occupied CRE, and commercial and multifamily real estate construction and land development loans.

39 unchanged sentences

For Doubtful and Loss graded loans, the Company is almost certain of the losses and the outstanding principal balances are generally charged off to the realizable value.

There were no loans graded Doubtful or Loss as of December 31, 2024 and 2023.

The following tables present the amortized cost of loans receivable by risk grade and origination year, and the gross charge-offs by loan class and origination year, at the dates indicated.

December 31, 2024 Revolving Loans Revolving Loans Converted (1)

There were no loans graded Doubtful or Loss as of December 31, 2025 or 2024.

The following tables present the amortized cost of loans receivable by risk grade and origination year at the dates indicated.

December 31, 2025

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans Converted (1)

Loans Receivable

Amortized Cost Basis by Origination Year

2025 2024 2023 2022 2021 Prior

8 unchanged sentences

Pass 125,339 115,937 83,969 129,824 134,443 403,824 6,042 — 999,378

December 31, 2025

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans Converted (1)

Loans Receivable

2025 2024 2023 2022 2021 Prior Revolving Loans Revolving Loans Converted (1)

Loans Receivable

SM — — 3,785 — 4,694 6,539 — — 15,018

15 unchanged sentences

Total — 21,697 43,647 126,515 125,670 41,305 — — 358,834

December 31, 2024 Revolving Loans Revolving Loans Converted (1)

Loans Receivable

Amortized Cost Basis by Origination Year

2024 2023 2022 2021 2020 Prior

Real estate construction and land development:

21 unchanged sentences

(1) Represents the loans receivable balance at December 31, 2025 which was converted from a revolving loan to a non-revolving amortizing loan during the year ended December 31, 2025.

December 31, 2023 Revolving Loans Revolving Loans Converted (1)

December 31, 2024

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans Converted (1)

Loans Receivable

Amortized Cost Basis by Origination Year

2024 2023 2022 2021 2020 Prior

11 unchanged sentences

Total 116,031 96,286 137,711 152,843 82,669 417,169 534 — 1,003,243

December 31, 2023 Revolving Loans Revolving Loans Converted (1)

Loans Receivable

Amortized Cost Basis by Origination Year

2023 2022 2021 2020 2019 Prior

Non-owner-occupied CRE

14 unchanged sentences

Pass 34,078 34,436 6,415 — 1,000 955 256 — 77,140

SM — — 2,139 — — — — — 2,139

SS — 1,000 — 5,750 — — — — 6,750

3 unchanged sentences

SM — — 893 — 5,655 5,886 — — 12,434

SS — — — 15,625 — — — — 15,625

Total 37,022 169,816 148,682 25,490 5,655 8,888 — — 395,553

7 unchanged sentences

Total 1,882 1,513 1,502 339 3,311 21,127 133,415 1,615 164,704

December 31, 2024

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans Converted (1)

Loans Receivable

2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted (1)

Loans Receivable

Loans receivable

Pass 594,017 654,245 891,495 579,953 310,185 1,309,844 282,006 1,335 4,623,080

9 unchanged sentences

Commercial business $ — $ 77 $ 285 $ 429 $ — $ 645 $ — $ 1,436

Residential real estate — — — 27 — — — 27

Consumer — 10 20 12 — 117 326 485

14 unchanged sentences

Commercial and industrial $ 853 $ 2,086 $ 2,939

Owner-occupied CRE 2,250 — 2,250

Non-owner occupied CRE 3,947 — 3,947

Total commercial business 4,800 2,086 6,886

Residential real estate

1,196 — 1,196

Real estate construction and land development:

6,713 — 6,713

Commercial and multifamily

5,695 — 5,695

Total real estate construction and land development 12,408 — 12,408

Consumer 486 — 486

6 unchanged sentences

Owner-occupied CRE 2,250 — 2,250

Total commercial business 3,252 667 3,919

Consumer 160 — 160

Total $ 3,412 $ 667 $ 4,079

The following table presents the reversal of interest income on loans due to the write-off of accrued interest receivable upon the initial classification of loans as nonaccrual loans and the interest income recognized due to payment in full or sale of previously classified nonaccrual loans during the following periods:

Year Ended December 31, 2024 Year Ended December 31, 2023

Year Ended December 31,

Interest Income Reversed Interest Income Recognized Interest Income Reversed Interest Income Recognized

3 unchanged sentences

Owner-occupied CRE — 60 ( 28 ) 144

Non-owner occupied CRE ( 8 ) — — —

Total commercial business ( 77 ) 102 ( 55 ) 605

Residential real estate

Real estate construction and land development:

( 178 ) — — —

Commercial and multifamily

( 154 ) — — —

Total real estate construction and land development ( 332 ) — — —

Consumer ( 9 ) — ( 5 ) —

Total $ ( 451 ) $ 102 $ ( 60 ) $ 605

For the year ended December 31, 2024 and 2023, no interest income was recognized subsequent to a loan’s classification as nonaccrual, except as indicated in the tables above due to payment in full or sale.

For each of the years ended December 31, 2025 and 2024, no interest income was recognized subsequent to a loan’s classification as nonaccrual, except as indicated in the tables above due to payment in full or sale.

(e) Past due loans

15 unchanged sentences

— 6,714 6,714 88,636 95,350

December 31, 2025

30-89 Days 90 Days

or Greater Total Past

Due Current Loans Receivable

(Dollars in thousands)

Commercial and multifamily

15 unchanged sentences

832 — 832 402,122 402,954

December 31, 2023

30-89 Days 90 Days or

Greater Total Past

Due Current Loans Receivable

(Dollars in thousands)

Real estate construction and land development:

13 unchanged sentences

Total real estate construction and land development 194 —

Consumer — 87

Total $ 194 $ 1,195

6 unchanged sentences

Commercial and industrial $ — $ 482 $ — $ 61 $ 543

Owner-occupied CRE 2,250 — — — 2,250

Non-owner occupied CRE 3,947 — — — 3,947

Total commercial business 3,947 482 — 61 4,490

Residential real estate

— — 1,196 — 1,196

December 31, 2025

CRE Farmland Residential Real Estate Equipment Total

(Dollars in thousands)

Real estate construction and land development:

— — 6,713 — 6,713

Commercial and multifamily

5,695 — — — 5,695

Total real estate construction and land development 5,695 — 6,713 — 12,408

Consumer — — 486 — 486

7 unchanged sentences

Total commercial business 2,250 389 613 — 3,252

Consumer — — 160 — 160

Total $ 2,250 $ 389 $ 773 $ — $ 3,412

11 unchanged sentences

Commercial and industrial $ 13,180 $ 60 $ 13,240 1.62 %

Owner-occupied CRE 1,502 224 1,726 0.17

Non-owner occupied CRE — 219 219 0.01

Total commercial business 14,682 503 15,185 0.39

12 unchanged sentences

Commercial and industrial $ 20,962 $ 200 $ 21,162 2.51 %

Owner-occupied CRE 209 — 209 0.02

Non-owner occupied CRE 2,701 237 2,938 0.17

Total commercial business 20,962 200 21,162 0.56

11 unchanged sentences

Commercial and industrial ( 3.30 ) % 1.00

Owner-occupied CRE ( 1.80 ) 1.41

Non-owner occupied CRE ( 1.40 ) 2.17

Total commercial business ( 1.80 ) 1.07

8 unchanged sentences

Commercial and industrial 1.10 % 0.85

Owner-occupied CRE — 0.75

Non-owner occupied CRE 3.00 1.09

Total commercial business 1.10 0.85

4 unchanged sentences

Total 1.50 % 0.93

There were no modified loans included in the tables above that were past due or on nonaccrual as of December 31, 2024.

There were no loans to borrowers experiencing financial difficulty that had a payment default during the year ended December 31, 2024 that were modified in the twelve months prior to that default.

At December 31, 2025, there were $ 7.1 million in commitments to lend additional funds to borrowers experiencing financial difficulty whose terms had been modified during the year ended December 31, 2025.

At December 31, 2024, there were $ 4.3 million in commitments to lend additional funds to borrowers experiencing financial difficulty whose terms had been modified during the year ended December 31, 2024.

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to

understand the effectiveness of its modification efforts.

The Company considers a modified loan as a payment default if the borrower is 90 or more days past due.

At December 31, 2024, there were no loans 90 days past due or in default that have been modified in the past 12 months.

At December 31, 2025, there were three loans at a total of $ 6.8 million that were 90 days past due or in default that had been modified due to term extension in the past 12 months, of which $ 6.7 million was residential construction and $ 0.1 million was consumer.

There were no loans 90 days past due or in default that have been modified in the past 12 months at December 31, 2024.

The following tables present the performance of loans that have been modified within the previous twelve months:

December 31, 2025

Current 30-89 Days 90 Days or

Greater Nonaccrual

(Dollars in thousands)

Commercial business:

Commercial and industrial $ 4,278 $ — $ — $ 113 $ 4,391

Owner-occupied CRE 1,726 — — — 1,726

Non-owner occupied CRE 219 — — — 219

Total commercial business 6,223 — — 113 6,336

Real estate construction and land development:

— — — 6,713 6,713

Commercial and multifamily

886 — — — 886

Total real estate construction and land development 886 — — 6,713 7,599

Consumer 15 — — 106 121

Total $ 7,124 $ — $ — $ 6,932 $ 14,056

December 31, 2024

Current 30-89 Days 90 Days or

Greater Nonaccrual

(Dollars in thousands)

Commercial business:

Commercial and industrial $ 10,519 $ — $ — $ — $ 10,519

Total commercial business 10,519 — — — 10,519

Real estate construction and land development:

6,750 — — — 6,750

Total real estate construction and land development 6,750 — — — 6,750

Consumer 32 12 — — 44

Total $ 17,301 $ 12 $ — $ — $ 17,313

(h) Related Party Loans

8 unchanged sentences

Balance outstanding at the end of year $ 6,163 $ 6,460 $ 6,749

All related party loans were performing in accordance with the underlying loan agreements as of December 31, 2024 and December 31, 2023.

The Company had $ 143,000 and $ 113,000 of unfunded commitments to related parties as of December 31, 2024 and December 31, 2023.

All related party loans were performing in accordance with the underlying loan agreements as of both December 31, 2025 and December 31, 2024.

The Company had $ 175,000 and $ 143,000 of unfunded commitments to related parties as of December 31, 2025 and December 31, 2024, respectively.

(i) Commercial Loan Sales and Servicing

9 unchanged sentences

(k) Foreclosure proceedings in process

At December 31, 2025, there were two home equity loans valued at a total of $ 1.2 million, secured by residential real estate, for which formal foreclosure proceedings were in process.

At December 31, 2024, there was one home equity loan valued at $ 160,000 secured by residential real estate for which formal foreclosure proceedings were in process.

At December 31, 2023, there were no loans secured by residential real estate for which formal foreclosure proceedings were in process.

(4) Allowance for Credit Losses on Loans

54 unchanged sentences

Balance, beginning of period $ 587 $ 1,288 $ 1,744

Reversal of credit losses on unfunded commitments

( 701 ) ( 456 ) ( 863 )

Provision for (reversal of) credit losses on unfunded commitments 460 ( 701 ) ( 456 )

Balance, end of period $ 1,047 $ 587 $ 1,288

1 unchanged sentence

The following table presents a summary of premises and equipment at the dates indicated:

December 31, 2024 December 31, 2023

Year Ended December 31,

(Dollars in thousands)

15 unchanged sentences

There were no additions to goodwill during the years ended December 31, 2025, 2024, and 2023.

On January 31, 2026, the Company completed its acquisition of Olympic Bancorp, Inc., which resulted in an increase in the Company’s goodwill.

Refer to Footnote 22 Subsequent Merger Transactions for additional information related to the acquisition.

At December 31, 2025, the Company's analysis concluded the fair value of the reporting unit exceeded the carrying value so the Company's goodwill was not considered impaired.

5 unchanged sentences

The following table presents the changes in carrying value of other intangible assets at the dates indicated:

December 31, 2024 December 31, 2023

Year Ended December 31,

(Dollars in thousands)

19 unchanged sentences

276,349 ( 14,434 ) 299,236 ( 23,867 )

(1) The estimated fair value of derivatives with customers was $( 22.7 ) million and $( 22.5 ) million as of December 31, 2024 and December 31, 2023, respectively.

The estimated fair value of derivatives with third-parties was $ 22.7 million and $ 22.5 million as of December 31, 2024 and December 31, 2023, respectively.

(1) The estimated net fair value of derivatives with customers was $( 11.4 ) million and $( 22.7 ) million as of December 31, 2025 and December 31, 2024, respectively.

The estimated net fair value of derivatives with third parties was $ 11.4 million and $ 22.7 million as of December 31, 2025 and December 31, 2024, respectively.

Generally, the gains and losses of the interest rate derivatives offset each other due to the back-to-back nature of the contracts.

However, the settlement values of the Company's net derivative assets with customers had no change as of December 31, 2024 and December 31, 2023 and increased $ 66,000 as of December 31, 2022 due to the change in the credit valuation adjustment.

As such, the settlement values of the Company's net derivative assets with customers had no change as of December 31, 2025 and December 31, 2024 due to the change in the credit valuation adjustment.

The following table summarizes the Company's deposits at the dates indicated:

34 unchanged sentences

(Dollars in thousands)

Matures in 2025, fixed rate at rates from 4.51% to 5.16%, averaging 4.69 %

$ 348,000 $ —

Matures in 2025, floating rate at 4.62 %

Fixed rate $ 20,000 $ 348,000

Variable rate — 35,000

$ 20,000 $ 383,000

At December 31, 2025, the Company had a fixed rate advance of $ 20.0 million with a rate of 4.16 % which matures in 2026.

The FHLB functions as a member-owned cooperative providing credit for member financial institutions.

3 unchanged sentences

Limitations on the amount of advances are based on a percentage of the Bank's assets or on the FHLB’s assessment of the institution’s creditworthiness.

The advances are collateralized by $ 1,359 million and $ 1,418 million of loans under a blanket lien arrangement at December 31, 2024 and December 31, 2023 At December 31, 2024, the Bank maintained a credit facility with the FHLB with available borrowing capacity of $ 976.3 million.

The advances were collateralized by $ 1,306 million and $ 1,359 million of loans under a blanket lien arrangement at December 31, 2025 and December 31, 2024, respectively.

At December 31, 2025, the Bank maintained a credit facility with the FHLB with available borrowing capacity of $ 1,286 million.

Advances from the FHLB may be collateralized by FHLB stock owned by the Bank, deposits at the FHLB, certain commercial and residential real estate loans, investment securities or other assets.

1 unchanged sentence

The Bank maintains a credit facility with the FRB through the Discount Window with available borrowing capacity of $ 346.3 million as of December 31, 2025.

The Bank had no FRB borrowings outstanding at December 31, 2024.

The Bank had $ 500.0 million of FRB borrowings outstanding at December 31, 2023 through the BTFP, which is no longer available.

The Bank had no FRB borrowings outstanding at December 31, 2025 and December 31, 2024.

Any advances on the credit facility would be secured by either investment securities or certain types of the Bank's loans receivable.

7 unchanged sentences

The majority of the leases contain renewal options and provisions for increases in rental rates based on an agreed upon index or predetermined escalation schedule.

As of December 31, 2024 and December 31, 2023, the Company’s operating lease ROU asset was $ 22.4 million and $ 23.6 million, respectively, and is included in " Prepaid

expenses and other assets" in the Consolidated Statements of Financial Condition.

As of December 31, 2025 and December 31, 2024, the Company’s operating lease ROU asset was $ 19.8 million and $ 22.4 million, respectively, and is included in " Prepaid expenses and other assets " in the Consolidated Statements of Financial Condition.

The related operating lease ROU liability was $ 22.4 million and $ 24.9 million, respectively and is included in " Accrued expenses and other liabilities " in the Consolidated Statements of Financial Condition.

In addition, the Company has one operating sublease agreement in which the Company is the intermediate lessor.

The operating sublease is for five years with rental increases on a predetermined escalation schedule with a projected future cash flow of $ 1.3 million.

The Company does not have any leases designated as finance leases.

The operating sublease is for five years with rental increases on a predetermined escalation schedule with a projected future cash flow of $ 900,000 at December 31, 2025.

The Company did not have any leases designated as finance leases at December 31, 2025.

The table below summarizes the information about our leases during the periods or at period end presented:

29 unchanged sentences

The Company has entered into employment agreements with certain officers that provide severance benefits following a termination of the applicable officer by the Company without “cause” or a resignation by the applicable officer for “good reason.” If such termination or resignation occurs in connection with a change in control of the Company, the employment agreements provide for an enhanced severance benefit.

Additionally, the Company has entered into change in control agreements with certain officers that provide severance benefits following a termination of the applicable officer by the Company without “cause” or a resignation by the applicable for “good reason” in connection with a change in control of the Company.

Additionally, the Company has entered into change in control agreements with certain officers that provide severance benefits following a termination of the applicable officer by the Company without “cause” or a resignation by the applicable officer for “good reason” in connection with a change in control of the Company.

4 unchanged sentences

(d) Salary Continuation Plan

In conjunction with the Company's merger with Premier Commercial Bancorp in 2018, the Company assumed an unfunded salary continuation plan for select former Premier Commercial executive officers, some of which are current Company officers.

In conjunction with the Company's merger with Premier Commercial Bancorp in 2018, the Company assumed an unfunded salary continuation plan for select former Premier Commercial executive officers.

The following table presents a summary of the changes in the Salary Continuation Plan during the periods indicated:

45 unchanged sentences

The Company has implemented various stock repurchase programs since March 1999.

On April 24, 2024, the Board authorized the repurchase of up to 5% of the Company's outstanding common shares or 1,734,492 shares in total, under a new repurchase program, with 990,522 shares remaining available for repurchase under this new repurchase program at December 31, 2024.

On April 24, 2024, the Board authorized the repurchase of up to 5% of the Company's outstanding common shares or 1,734,492 shares in total, with 796,832 shares remaining available for repurchase at December 31, 2025.

The stock repurchase program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will make any further repurchases going forward.

2 unchanged sentences

The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the Program’s expiration, without any prior notice.

The new stock repurchase program superseded the Company's previous stock repurchase program authorized in March 2020 which authorized the repurchase of up to 5% of the Company's outstanding common shares, or 1,799,054 shares in total.

This stock repurchase program superseded the Company’s previous stock repurchase program authorized in March 2020 which authorized the repurchase of up to 5% of the Company’s common shares, or 1,799,054 shares in total.

(14) Fair Value Measurements

76 unchanged sentences

Collateral-dependent loans:

Commercial business:

Owner-occupied CRE $ 2,250 $ — $ — $ 2,250

Total commercial business 2,250 — — 2,250

Consumer 160 — — 160

Residential real estate

Total assets measured at fair value on a nonrecurring basis $ 806 $ — $ — $ 806

4 unchanged sentences

Owner-occupied CRE $ 2,250 $ — $ — $ 2,250

Total commercial business 2,250 — — 2,250

Consumer 160 — — 160

Total assets measured at fair value on a nonrecurring basis $ 2,410 $ — $ — $ 2,410

29 unchanged sentences

Loans receivable, net 4,730,682 4,740,417 — — 4,740,417

Accrued interest receivable 19,483 19,483 63 4,877 14,543

Derivative assets - interest rate swaps 14,434 14,434 — 14,434 —

5 unchanged sentences

Junior subordinated debentures 22,350 21,102 — — 21,102

Accrued interest payable 859 859 66 722 71

Derivative liabilities - interest rate swaps 14,434 14,434 — 14,434 —

6 unchanged sentences

Investment securities available for sale 764,394 764,394 — 764,394 —

December 31, 2024

Value Fair Value Fair Value Measurements Using:

Value Fair Value Level 1 Level 2 Level 3

(Dollars in thousands)

Investment securities held to maturity 703,285 623,452 — 623,452 —

Loans receivable, net 4,749,655 4,694,516 — — 4,694,516

Accrued interest receivable 19,518 19,518 96 6,127 13,295

Derivative assets - interest rate swaps 23,867 23,867 — 23,867 —

5 unchanged sentences

Junior subordinated debentures 22,058 20,357 — — 20,357

Accrued interest payable 13,026 13,026 63 12,880 83

Derivative liabilities - interest rate swaps 23,867 23,867 — 23,867 —

27 unchanged sentences

The risk-free interest rate was based on Treasury rates for a term commensurate with the expected life of the grant.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized compensation expense related to restricted stock unit awards of $ 4.3 million, $ 4.3 million, and $ 3.8 million respectively, and a related tax benefit of $ 961,000 , $ 949,000 , and $ 833,000 , respectively.

As of December 31, 2024, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $ 6.6 million and the related weighted-average period over which the compensation expense is expected to be recognized was approximately 2.0 years.

For the years ended December 31, 2025, 2024 and 2023, the Company recognized compensation expense related to restricted stock unit awards of $ 4.9 million, $ 4.3 million, and $ 4.3 million respectively, and a related tax benefit of $ 1.1 million, $ 961,000 , and $ 949,000 , respectively.

As of December 31, 2025, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $ 6.5 million and the related weighted-average period over which the compensation expense is

expected to be recognized was approximately 1.8 years.

The vesting date fair value of the restricted stock unit awards that vested during the years ended December 31, 2025, 2024 and 2023 was $ 4.9 million, $ 3.1 million and $ 3.5 million, respectively.

20 unchanged sentences

The Company's tax credit investments include LIHTC investments and a Solar Tax Credit investment.

LIHTC investments promote qualified affordable housing projects, some of which also support the Company’s regulatory compliance with the Community Reinvestment Act.

LIHTC investments promote qualified affordable housing projects, some of which also support the Company’s regulatory compliance with the CRA.

The Company’s investments in these entities generate a return primarily through the realization of federal income tax credits and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods.

These tax credits and deductions are recognized as a reduction to income tax expense.

The Company's accounting policies on tax credit investments are the same as those described in Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements.

LIHTC Investments

1 unchanged sentence

LIHTCs are accounted for using the proportional amortization method.

During the years ended December 31, 2024, 2023 and 2022 the Company recognized proportional amortization of $ 20.0 million, $ 16.5 million and $ 10.9 million, respectively as a component of income tax in the Consolidated Statements of Income.

During the years ended December 31, 2025, 2024 and 2023 the Company recognized proportional amortization of $ 24.8 million, $ 20.0 million and $ 16.5 million, respectively as a component of income tax in the Consolidated Statements of Income and as amortization of tax credit investments in the Consolidated Statements of Cash Flows.

Total unfunded contingent commitments related to the Company’s LIHTC investments totaled $ 18.1 million and $ 81.2 million at December 31, 2025 and 2024, respectively, as a component of accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.

The Company expects to fund LIHTC commitments totaling $ 7.2 million during the year ending December 31, 2026 and $ 1.9 million during the year ending December 31, 2027, with the remaining commitments of $ 9.1 million to be funded by December 31, 2041.

The Company recognized tax credits and other benefits from its LIHTC investments of $ 29.5 million, $ 24.0 million and $ 20.3 million during the years ended December 31, 2025, 2024 and 2023, respectively.

There were no significant modifications or events that resulted in a change in the nature or change in the underlying project for the Company's LIHTC investments at December 31, 2025, 2024 and 2023.

There were no impairment losses on the Company’s LIHTC investments during the years ended December 31, 2025, 2024 and 2023.

1 unchanged sentence

The Solar Tax Credit investment is accounted for using the equity method.

During the years ended December 31, 2024 and 2023, respectively, the Company recognized amortization expense of $ 101 and $ 21 , respectively, which was included within other expense in the Consolidated Statements of Income.

The Company recognized amortization expense of $ 101,000 for both of the years ended December 31, 2025 and 2024, respectively, and $ 21,000 for the year ended December 31, 2023 which was included within other expense in the Consolidated Statements of Income.

(17) Income Taxes

Income tax expense is substantially due to federal income taxes as the provision for the states of Oregon and Idaho income taxes are insignificant and the state of Washington does not charge an income tax in lieu of a business and occupation tax.

Income tax expense consisted of the following for the periods indicated:

Income before provision for income taxes consisted of the following:

Year Ended December 31,

1 unchanged sentence

(Dollars in thousands)

Current tax expense $ 24,292 $ 24,364 $ 16,690

Deferred tax expense (benefit) ( 15,291 ) ( 13,204 ) 871

Income tax expense $ 9,001 $ 11,160 $ 17,561

United States $ 78,603 $ 52,259 $ 72,915

Income tax expense (benefit) consisted of the following for the periods indicated:

Year Ended December 31,

2025 2024 2023

(Dollars in thousands)

Current Expense

$ 27,768 $ 23,314 $ 23,213

1,242 978 1,151

Total Current tax expense 29,010 24,292 24,364

Deferred Expense

( 17,675 ) ( 14,979 ) ( 13,099 )

( 264 ) ( 312 ) ( 105 )

Total Deferred tax expense (benefit) ( 17,939 ) ( 15,291 ) ( 13,204 )

Total Income tax expense $ 11,071 $ 9,001 $ 11,160

The effective tax rate was 14.1 % for the December 31, 2025 compared to an effective tax rate of 17.2 % and 15.3 % for the years ended December 31, 2024 and 2023, respectively.

The increase in the effective tax rate during the year ended December 31, 2024 was due primarily to tax expense related to the surrender of BOLI of $ 2.4 million.

The decrease in the effective tax rate during the year ended December 31, 2025 was due primarily to the additional tax expense related to the surrender of BOLI recognized in the prior year.

The following table presents the reconciliation of income taxes computed at the Federal statutory income tax rate of 21% to the actual effective rate for the periods indicated:

1 unchanged sentence

2025 2024 2023

Amount Percent Amount Percent Amount Percent

(Dollars in thousands)

Income tax expense at Federal statutory rate $ 10,975 $ 15,312 $ 20,882

Income tax expense at Federal statutory tax rate $ 16,507 21.0 % $ 10,975 21.0 % $ 15,312 21.0 %

State tax, net of Federal tax benefit (1)

773 1.0 526 1.0 827 1.1

Tax Credits (2)

LIHTCs and tax benefits ( 29,462 ) ( 37.5 ) ( 23,966 ) ( 46.2 ) ( 20,255 ) ( 27.7 )

Solar tax credit — — — — ( 4,466 ) ( 6.1 )

Amortization of LIHTCs 24,756 31.5 19,952 38.5 16,456 22.6

Amortization of solar tax credits — — — — 5,060 6.9

Tax-exempt instruments ( 1,075 ) ( 1.4 ) ( 850 ) ( 1.6 ) ( 1,311 ) ( 1.8 )

BOLI surrender 515 0.7 2,371 4.5 — —

Federal tax credits and other benefits (1)

( 4,014 ) ( 3,205 ) ( 1,979 )

Effects of BOLI ( 859 ) ( 1.1 ) ( 571 ) ( 1.1 ) ( 564 ) ( 0.8 )

1 unchanged sentence

Income tax expense $ 11,071 14.1 % $ 9,001 17.2 % $ 11,160 15.3 %

(1) State taxes in Oregon made up the majority (greater than 50 percent) of the tax effect in this category.

(2) Federal tax credits are provided for under the Solar Tax Credits and LIHTC programs as described in Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements.

Income taxes paid, net of refunds were as follows:

Year Ended December 31,

2025 2024 2023

(Dollars in thousands)

Federal $ 1,565 $ 1,330 $ 1,920

State and local:

Idaho 80 25 —

Oregon 812 385 930

All other states & local 235 30 348

Total income taxes paid, net of refunds $ 2,692 $ 1,770 $ 3,198

The following table presents major components of the deferred income tax asset (liability) resulting from differences between financial reporting and tax basis at the dates indicated:

19 unchanged sentences

Junior subordinated debentures ( 752 ) ( 813 )

December 31, 2024 December 31, 2023

(Dollars in thousands)

ROU lease asset ( 4,372 ) ( 4,938 )

6 unchanged sentences

As of December 31, 2025, based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management expects to realize the benefits of these deductible differences.

At December 31, 2024 and December 31, 2023, the Company had a net operating loss carryforward of $ 593,000 and $ 691,000 , respectively, that does not expire.

At December 31, 2025 and December 31, 2024, the Company had a federal net operating loss carryforward of $ 494,000 and $ 593,000 , respectively, that does not expire.

The Company is limited to the amount of the net operating loss carryforward that it can deduct each year under Section 382 of the Internal Revenue Code.

Due to sufficient earnings history and other positive evidence, management has no t recorded a valuation allowance on the net operating loss carryforward as of December 31, 2024 and December 31, 2023.

At December 31, 2024, the Company had a tax credit carryforward of $ 24.6 million that expires in 2044.

Due to sufficient earnings history and other positive evidence, management has no t recorded a valuation allowance on the federal net operating loss carryforward as of December 31, 2025 and December 31, 2024.

At December 31, 2025, the Company had a federal tax credit carryforward of $ 40.6 million that expires in 2044.

Due to sufficient earnings history and other positive evidence, management has not recorded a valuation allowance on the tax credit carryforward as of December 31, 2025.

As of December 31, 2024 and December 31, 2023, the Company had an insignificant amount of unrecognized tax benefits, none of which would materially affect its effective tax rate if recognized.

The Company does not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease in the 12 months following December 31, 2024.

The amount of interest and penalties accrued as of December 31, 2024 and December 31, 2023 were immaterial.

As of December 31, 2025 and December 31, 2024, the Company had no unrecognized tax benefits.

While the Company had no unrecognized tax benefits as of December 31, 2025 and 2024, in the event recording interest and penalties is necessary, they will be recorded as part of income tax expense.

The Company has qualified under provisions of the Internal Revenue Code to compute income taxes after deductions of additions to the bad debt reserves when it was registered as a Savings Bank.

19 unchanged sentences

Total commercial business 605,561 629,741

December 31, 2024 December 31, 2023

(Dollars in thousands)

Real estate construction and land development:

46 unchanged sentences

However, the Company manages its capital position as if the requirements apply to the consolidated Company and has presented the ratios as if they also applied on a consolidated basis.

As of December 31, 2024 and 2023, the capital measures reflected the revised CECL capital transition provisions adopted by the Federal Reserve and the FDIC that provided banking organizations that implemented CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

As of December 31, 2024, the capital measures reflected the revised CECL capital transition provisions adopted by the Federal Reserve and the FDIC that provided banking organizations that implemented CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

(20) Heritage Financial Corporation (Parent Company Only)

37 unchanged sentences

Net income $ 67,532 $ 43,258 $ 61,755

Comprehensive Income

$ 91,561 $ 60,490 $ 89,129

HERITAGE FINANCIAL CORPORATION

19 unchanged sentences

(21) Segment Information

The Company's reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker ("CODM"), based upon information provided about the Company's products and services offered, primarily

banking operations.

The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, such as branches, which are then aggregated if operating performance, products/services, and customers are similar.

The Company has one reportable operating segment, commercial banking.

The Company's reportable segment is determined by the President and Chief Executive Officer, who is the designated CODM.

While the CODM monitors information provided about the Company's various products and services offered, the Company's financial performance is evaluated on a company-wide basis.

The CODM will evaluate the financial performance of the Company's business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company's segment and in the determination of allocating resources.

1 unchanged sentence

The CODM uses consolidated net income to benchmark the Company against its competitors.

The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation.

The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment of performance and in establishing compensation.

Loans, investments, and deposits provide the revenues of the banking operation.

1 unchanged sentence

All operations are domestic.

Accounting policies for segments are the same as those described in Note 1.

Segment performance is evaluated using consolidated net income.

Information reported internally for performance assessment by the CODM follows, inclusive of reconciliations of significant segment totals to the financial statements:

Year Ended December 31,

2024 2023 2022

(Dollars in thousands)

Total interest income $ 309,712 $ 284,465 $ 227,457

Reconciliation of revenue

Other revenues 7,473 18,663 29,591

Total consolidated revenues 317,185 303,128 257,048

Total interest expense 100,348 59,310 8,072

Provision for (reversal of) credit losses 6,282 4,280 ( 1,426 )

Compensation and employee benefits 98,527 100,083 92,092

Other segment expenses (1)

59,769 66,540 58,874

Income tax expense 9,001 11,160 17,561

Segment net income/consolidated net income $ 43,258 $ 61,755 $ 81,875

Other segment disclosures

Total interest income 309,712 284,465 227,457

Total interest expense 100,348 59,310 8,072

Depreciation 6,567 6,255 5,421

Amortization of intangible assets 1,640 2,434 2,750

Other significant noncash items:

Provision for (reversal of) credit losses 6,282 4,280 ( 1,426 )

Segment assets $ 7,106,278 $ 7,174,957 $ 6,980,100

Expenses for segment assets 273,927 241,373 175,173

Reconciliation of assets:

Total assets for reportable segments 7,106,278 7,174,957 6,980,100

Other assets — — —

Total consolidated assets $ 7,106,278 $ 7,174,957 $ 6,980,100

(1) Other segment expenses include expenses for occupancy and equipment, data processing, marketing, professional services and other overhead costs.

Accounting policies for the Company's one reportable segment are the same as those described in Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements.

Segment performance is evaluated using consolidated net income which is also reported on the Consolidated Statements of Income as net income.

The measure of segment assets is reported on the Consolidated Statements of Financial Condition as total assets.

(22) Subsequent Merger Transaction

On January 31, 2026, the Company completed its acquisition of Olympic Bancorp, Inc., a bank holding company headquartered in Port Orchard, Washington, whereby Olympic merged with and into the Company, and subsequently Kitsap Bank, Olympic's wholly-owned banking subsidiary, merged with and into the Bank.

Pursuant to the terms of the merger agreement, Olympic shareholders received 45.0 shares of Heritage common stock for each share of Olympic common stock based on a fixed exchange ratio.

Olympic's principal activity was the ownership and operation of Kitsap Bank, a state-chartered banking institution that operated sixteen branches in Washington at the time of closing.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data