GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

6 Months Ended

Jun. 30, 2025

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

Goodwill and Other Intangible Assets: At June 30, 2025, intangible assets are comprised of goodwill and core deposit intangibles (CDI) acquired in business combinations. 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 at least annually for impairment. The Company has identified one reporting unit for the purpose of evaluating goodwill for impairment. The Company completed an assessment of qualitative factors as of December 31, 2024 and concluded that no further analysis was required as it was more likely than not that the fair value of the reporting unit exceeded the carrying value.

CDI represents the value of transaction-related deposits and the value of the client relationships associated with the deposits. The Company amortizes CDI assets over their estimated useful lives and reviews them at least annually for events or circumstances that could impair their value.

The following table summarizes the changes in the Company’s goodwill and other intangibles for the year ended December 31, 2024 and the six months ended June 30, 2025 (in thousands):


	Goodwill		CDI		Total
Balance, December 31, 2023	$	373,121	$	5,684	$	378,805

Amortization	—		(2,626)		(2,626)


Balance, December 31, 2024	373,121		3,058		376,179

Amortization	—		(911)		(911)


Balance, June 30, 2025	$	373,121	$	2,147	$	375,268

The following table presents the estimated amortization expense with respect to CDI as of June 30, 2025, for the periods indicated (in thousands):


	Estimated Amortization
Remainder of 2025	$	656
2026	904
2027	426
2028	126
2029	35

	$	2,147

Mortgage Servicing Rights: Mortgage and Small Business Administration (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. Mortgage servicing rights are subsequently evaluated for impairment based upon the fair value of the rights compared to the amortized cost (remaining unamortized initial fair value). If the fair value is less than the amortized cost, a valuation allowance is created through an impairment charge to servicing fee income. However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value. The unpaid principal balance of loans for which mortgage and SBA servicing rights have been recognized totaled $2.80 billion and $2.84 billion at June 30, 2025 and December 31, 2024, respectively. Custodial accounts maintained in connection with this servicing totaled $17.8 million and $12.2 million at June 30, 2025 and December 31, 2024, respectively.

An analysis of the mortgage and SBA servicing rights for the three and six months ended June 30, 2025 and 2024 is presented below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Balance, beginning of the period	$	13,421	$	14,293	$	13,487	$	14,649
Additions—amounts capitalized	627		478		1,243		784
Additions—through purchase	—		74		2		109
Amortization (1)	(867)		(797)		(1,636)		(1,603)
Fair value adjustments (2)	84		(38)		169		71

Balance, end of the period	$	13,265	$	14,010	$	13,265	$	14,010

(1) Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income within mortgage banking operations and any unamortized balance is fully amortized if the loan repays in full.

(2) Fair value adjustments relate to SBA servicing rights. These adjustments are estimated based on an independent dealer analysis by discounting estimated net future cash flows from servicing SBA loans.

BANNER CORP 10-Q