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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES
The following table presents the components of the provision for income taxes included in the Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 (in thousands):
 Years Ended December 31
 202420232022
Current
Federal$22,648 $28,805 $26,653 
State7,843 6,296 5,882 
Total Current30,491 35,101 32,535 
Deferred
Federal10,567 7,698 11,595 
State(471)664 1,267 
Total Deferred10,096 8,362 12,862 
Provision for income taxes$40,587 $43,463 $45,397 

The following table presents the reconciliation of the provision for income taxes based on the federal statutory rate to the actual effective rate by amount and percent for the year ended December 31, 2024 (amounts in thousands):
 Year Ended December 31
 2024
AmountPercent
Federal income tax statutory rate$43,992 21.0 %
State income taxes, net of federal tax offset (1)
6,174 3.0 
State audits and amended returns4 — 
Tax credits(9,597)(4.6)
Low income housing tax credit partnerships, net of amortization6,791 3.2 
Nontaxable and nondeductible items:
Tax-exempt interest(6,914)(3.3)
Investment in life insurance(1,930)(0.9)
Other2,067 1.0 
Provision for income taxes and effective income tax rate$40,587 19.4 %

(1) State taxes in California and Oregon made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents the reconciliation of the federal statutory rate to the actual effective rate by percent for the years ended December 31, 2023 and 2022:
 Years Ended December 31
 20232022
PercentPercent
Federal income tax statutory rate21.0 %21.0 %
State Income taxes, net of federal tax offset2.6 2.3 
State audits and amended returns— (0.1)
Tax credits(2.7)(1.9)
Low income housing partnerships, net of amortization2.0 1.4 
Nontaxable and nondeductible items:
Tax-exempt interest(3.6)(3.6)
Investment in life insurance(0.9)(0.7)
Other0.7 0.5 
Provision for income taxes and effective income tax rate19.1 %18.9 %

The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2024 (in thousands):
 Income Taxes Paid
US federal$20,000 
US state and local
California2,705 
Oregon 1,215 
Idaho220 
Utah39 
Montana15 
Total$24,194 
The following table reflects the effect of temporary differences that gave rise to the components of the net deferred tax asset as of December 31, 2024 and 2023 (in thousands):
 December 31
 20242023
Deferred tax assets:  
Loan loss and REO$41,045 $39,495 
Deferred compensation22,983 21,470 
Net operating loss carryforward10,482 12,967 
Federal and state tax credits758 758 
State net operating losses3,757 3,978 
Loan discount379 625 
Lease liability10,416 11,547 
Unrealized loss on securities—available-for-sale, net87,709 91,455 
Other1,191 4,222 
Total deferred tax assets178,720 186,517 
Deferred tax liabilities:  
Depreciation(3,783)(5,428)
Deferred loan fees, servicing rights and loan origination costs(12,575)(13,008)
Intangibles(2,922)(3,313)
Right of use asset(9,583)(10,378)
Financial instruments accounted for under fair value accounting(815)(841)
Total deferred tax liabilities(29,678)(32,968)
Deferred income tax asset149,042 153,549 
Valuation allowance(184)(184)
Deferred tax asset, net$148,858 $153,365 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recognized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment.

At December 31, 2024, the Company had federal net operating loss carryforwards of approximately $49.9 million. The Company also has $53.0 million of state net operating loss carryforwards, against which the Company has established a $184,000 valuation reserve. The federal and state net operating losses will expire, if unused, by the end of 2034.  The Company has federal general business credit carryforwards at December 31, 2024 of $219,000, which will expire, if unused, by the end of 2031. The Company also has federal alternative minimum tax credit carryforwards of $538,000, which are available to reduce future federal regular income taxes, if any, over an indefinite period. At December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $61.7 million and $56.8 million, respectively, and federal general business credits carryforwards of $219,000 and federal alternative minimum tax credit carryforwards of approximately $538,000.

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. Section 382 limits the ability of a corporate taxpayer to use net operating loss carryforwards, general business credits, and recognized built-in-losses, on an annual basis, incurred prior to the change in control against income earned after the change in control. As a result of the Section 382 limitations, the Company is limited to utilizing $21.5 million on an annual basis (after the application of the Section 382 limitations carried over from Starbuck Bancshares, Inc.) of federal net operating loss carryforwards, general business credits, and recognized built-in losses. The applicable state Section 382 limitations range from $575,000 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.

As a consequence of Banner’s capital raise in June 2010, the Company experienced a change in control within the meaning of Section 382 of the Code. As a result of the Section 382 limitations, the Company is limited to utilizing $6.9 million of net operating loss carryforwards which existed prior to the acquisition of Starbuck Bancshares, Inc., on an annual basis. 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 of December 31, 2024, the Company had utilized all federal net operating losses and credits limited due to the June 2010 change in control. Certain state net operating losses subject to the change of control limitations are still outstanding.
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 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. Based on its analysis, the Company believes it is more likely than not that the Section 382 limitations will not impact its ability to utilize all of the related available net operating loss carryforwards and general business credits.

Retained earnings at December 31, 2024 and 2023 included approximately $5.4 million in tax basis bad debt reserves for which no income tax liability has been recorded.  In the future, if this tax bad debt reserve is used for purposes other than to absorb bad debts or the Company no longer qualifies as a bank or is completely liquidated, the Company will incur a federal tax liability at the then-prevailing corporate tax rate, estimated as $1.1 million at December 31, 2024.

A reconciliation of the beginning and ending amount of total unrecognized state tax benefits for the years ended December 31, 2024 and 2023, is as follows (in thousands):
 Years Ended December 31
 20242023
Balance, beginning of year$2,000 $1,600 
Changes related to prior year tax positions— 149 
Changes related to current year tax positions— 251 
Balance, end of year$2,000 $2,000 

None of the unrecognized tax benefits, if recognized, would materially affect the effective tax rate. The Company does not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease in the next twelve months. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense. The amount of interest and penalties accrued for the years ended December 31, 2024, 2023 and 2022 is immaterial. The Company files consolidated income tax returns in Oregon, California, Utah, Montana and Idaho and for federal purposes. The Company is no longer subject to tax examination for tax years before 2021.

Tax credit investments: The Company invests in low income housing tax credit funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method and this tax credit investment amortization expense is a component of the provision for income taxes. The current balance of these tax credit investments is included in other assets, while the unfunded commitments are included in accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.

The following table presents the balances of the Company’s tax credit investments and related unfunded commitments at December 31, 2024 and 2023 (in thousands):
December 31, 2024December 31, 2023
Tax Credit Investments:
Total commitments$153,618 $103,453 
Unfunded commitments94,416 62,594 

The following table presents other information related to the Company’s tax credit investments for the years ended December 31, 2024, 2023 and 2022 (in thousands):
For the years ended December 31,
202420232022
Tax credits and other tax benefits recognized$12,072 $8,018 $5,621 
Tax credit amortization expense included in provision for income taxes9,334 6,449 4,638