The Bank enters into financial instruments with off-balance sheet credit risk in the normal course of business to meet the financing needs of its customers. These instruments primarily consist of commitments to extend credit and standby letters of credit. Such instruments involve credit and interest-rate risk similar to those associated with the Bank's on-balance sheet lending activities. The contractual or notional amounts of these instruments represent the maximum potential exposure to credit loss in each category.

The Bank's exposure to credit loss in the event of non-performance by the counterparty for commitments to extend credit, standby letters of credit, and other financial guarantees is limited to the contractual notional amount of these instruments. The Bank uses the same credit approval, risk management, and monitoring policies for these off-balance sheet instruments as it does for on-balance sheet financial instruments.

Standby letters of credit and written financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including international trade finance, commercial paper, bond financing, and similar transactions. The credit risk associated with issuing letters of credit is substantially similar to the credit risk associated with extending loan facilities to customers. The Bank may require collateral to support these commitments when deemed appropriate, which can include cash, marketable securities, or real estate. There were no financial guarantees in connection with standby letters of credit that the Bank was required to perform on during the three months ended March 31, 2026 and 2025. As of March 31, 2026, approximately $415 million of standby letters of credit were scheduled to expire within one year, with an additional $14 million expiring thereafter.

Residential mortgage loans sold into the secondary market are generally sold with limited recourse to the Company. Under these arrangements, the Company may be obligated to repurchase the loan or otherwise reimburse the investor for losses incurred if a loan experiences an early payment default, fails to meet applicable underwriting or investor guidelines, or is determined to include borrower misrepresentations made prior to closing.

Legal Proceedings and Regulatory Matters—The Company is subject to litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations, and other actions brought or considered by governmental and self-regulatory agencies. The Company is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial or uncertain amounts.

In September 2023, 34 related real estate investment entities (the "iCap Entities") that maintained their primary deposit accounts with the Bank filed jointly-administered Chapter 11 bankruptcies in the United States Bankruptcy Court for the Eastern District of Washington. In pleadings filed in the Bankruptcy Court for the Eastern District of Washington on behalf of investors who claimed losses of approximately $290 million, the Bank was identified as a party against which claims may be brought in connection with the iCap Entities' alleged operation of a Ponzi scheme prior to the bankruptcy proceedings described above. On September 26, 2025, the co-trustees of the iCap Trust, a liquidating trust created by the Second Modified Second Amended Joint Chapter 11 Plan of Liquidation of the iCap Entities, filed suit in the United States District Court for the Western District of Washington alleging aiding and abetting claims against the Bank associated with the provision of banking services to the bankrupt iCap Entities. The suit was filed on behalf of 488 investors with claims totaling approximately $90 million. Remaining investors may pursue their claims separately. The Bank intends to vigorously defend against any and all claims.

As previously disclosed, in 2023 the Bank was informed by one of its technology service providers (the "Vendor") that a widely reported security incident involving MOVEit, a file sharing software used globally by government agencies, enterprise corporations, and financial institutions, resulted in the unauthorized acquisition by a third party of the names and social security numbers or tax identification numbers of certain of the Bank's consumer and small business customers (the "Vendor Incident"). On behalf of the Bank, the Vendor notified affected customers (approximately 429,000), and the Bank and Vendor notified applicable federal and state regulators regarding the Vendor Incident. Subsequently, the Bank was named in a number of putative class action lawsuits related to the Vendor Incident. The lawsuits collectively allege claims for negligence, negligence per se, breach of contract, breach of implied contract, breach of third-party beneficiary contract, breach of fiduciary duty, invasion of privacy, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of certain state statutes. Given the large number of federal cases throughout the United States (including those involving the Bank), on October 4, 2023 the United States Judicial Panel on Multidistrict Litigation initiated a multidistrict litigation ("MDL") to consolidate such cases – In Re: MOVEit Customer Data Security Breach Litigation, MDL No. 3083 – in the United States District Court for the District of Massachusetts (MDL No. 1:23-md-03083-ADB-PGL). The Bank has engaged defense counsel and intends to vigorously defend against these lawsuits and any similar or related lawsuits or claims. The Bank has notified relevant insurance carriers and business counterparties and continues to reserve all of its relevant rights to indemnity, defense, contribution, and other relief in connection with these matters.

At least quarterly, liabilities and contingencies are assessed in connection with all outstanding or new legal matters, utilizing the most recent information available. If it is determined that a loss from a matter is probable and that the amount of the loss can be reasonably estimated, an accrual for the loss is established. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments in the specific legal matter. It is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Actual losses may be in excess of any established accrual or the range of reasonably possible loss. Management's estimate will change from time to time. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established.

The resolution and the outcome of legal claims are unpredictable, exacerbated by factors including the following: damages sought are unsubstantiated or indeterminate; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; discovery or motion practice is not complete; the proceeding is not yet in its final stages; the matters present legal uncertainties; there are significant facts in dispute; there are a large number of parties, including multiple defendants; or there is a wide range of potential results. Any estimate or determination relating to the future resolution of legal and regulatory matters is uncertain and involves significant judgment. The Company is usually unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely or probable, or to estimate the amount or range of a probable or reasonably likely loss until relatively late in the process.

Although there can be no assurance as to the ultimate outcome of a specific legal matter, the Company believes it has meritorious defenses to the claims asserted against us in our currently outstanding legal matters, and the Company intends to continue to vigorously defend ourselves. The Company will consider settlement of legal matters when, in management's judgment, it is in the best interests of the Company and its shareholders.

Based on information currently available, advice of counsel, available insurance coverage, and established reserves, the Company believes that the eventual outcome of the actions against us will not have a material adverse effect on the Company's consolidated financial statements. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to the Company's results of operations for any particular reporting period.

Concentrations of Credit Risk—The Bank extends real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers primarily located in Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah, and Washington. Based on management's judgment, a concentration of credit risks exists in real estate-related loans, which represented approximately 75% and 76% of the Bank's loan and lease portfolio as of March 31, 2026 and December 31, 2025, respectively. CRE concentrations are actively managed to promote geographic and business diversification, primarily within the Bank's footprint. The multifamily portfolio, including construction loans, represented approximately 24% of the total loan portfolio as of both March 31, 2026 and December 31, 2025. The office portfolio represented approximately 7% and 8% of the total loan portfolio as of March 31, 2026 and December 31, 2025, respectively. Although management believes such concentrations do not expose the Bank to risks beyond normal collectability, a substantial decline in the economy in general, material increases in interest rates, changes in tax policies, tightening of credit or refinancing markets, or declines in real estate values within the Bank's primary market areas, could have an adverse impact on the repayment of these loans. Primary sources of repayment for a majority of these loans include personal and business cash flows, proceeds from the sale of real property, and proceeds from refinancing.

The Bank also recognizes the credit risks inherent with transactions involving other depository institutions. To mitigate these risks, the Bank has established standards for the selection of correspondent banks and internal limits on exposure to any single correspondent. In addition, the Bank maintains an investment policy that sets forth limitations that apply to all investments with respect to credit rating and concentrations with an issuer.