Banner Corporation Reports $48.9 Million in Second-Quarter 2026 Net Income as Loan Growth and Lower Funding Costs Support Results
Banner Corporation (NASDAQ: BANR), the parent company of Banner Bank, reported net income of $48.9 million, or $1.43 per diluted share, for the second quarter of 2026, reflecting continued growth in its lending business, improved funding costs and a solid core deposit base.
The company’s second-quarter earnings compared with net income of $54.7 million, or $1.60 per diluted share, in the preceding quarter and $45.5 million, or $1.31 per diluted share, in the second quarter of 2025.
Although quarterly earnings declined sequentially, Banner’s results remained stronger than the year-ago period. The company also reported continued growth in net interest income and revenue, while loan originations increased significantly from both the previous quarter and the same period a year earlier.
Net interest income reached $153.7 million in the second quarter of 2026, compared with $150.2 million in the first quarter and $144.4 million in the second quarter of 2025.
The increase from the previous quarter was primarily driven by one additional calendar day in the quarter, expansion in net interest margin and growth in average interest-earning assets. These benefits were partially offset by higher interest expense associated with increased Federal Home Loan Bank borrowings.
Compared with the second quarter of 2025, the increase in net interest income was primarily attributable to lower funding costs and higher average balances of interest-earning assets.
Banner recorded a $3.8 million provision for credit losses during the second quarter, compared with a $796,000 recapture of provision for credit losses in the first quarter and a $4.8 million provision in the second quarter of 2025.
Six-Month Earnings Increase
For the six months ended June 30, 2026, Banner Corporation reported net income of $103.6 million, or $3.03 per diluted share. This compared with net income of $90.6 million, or $2.61 per diluted share, during the first six months of 2025.
The six-month results included a $3.0 million provision for credit losses, a $1.2 million net loss on the sale of securities and a $1.5 million net increase in fair value adjustments on financial instruments carried at fair value.
During the same period in 2025, the company recorded a $7.9 million provision for credit losses, a $3,000 net loss on the sale of securities and a $403,000 net increase in fair value adjustments on financial instruments carried at fair value.
Banner’s Board of Directors also declared a regular quarterly cash dividend of $0.52 per share. The dividend is scheduled to be paid on August 14, 2026, to common shareholders of record as of August 4, 2026.
Management Highlights Community Banking Strategy
Mark Grescovich, President and Chief Executive Officer of Banner Corporation, said the second-quarter results reflected the continued strength of the company’s community banking model.
Management remains focused on deepening client relationships, maintaining a strong funding base and providing high-quality service while maintaining a moderate risk profile.
Grescovich said robust loan growth supported the quarter’s earnings performance. However, the benefit from loan growth was partially offset by increased noninterest expense, including investments in new software expected to improve efficiency and support long-term growth.
The company continues to emphasize the strength of its credit quality and credit loss reserve. Management also highlighted Banner’s strong capital position, which provides flexibility to pursue future growth opportunities while maintaining resilience across changing economic conditions.
Core deposits remained an important strength of the franchise, representing 89% of total deposits at the end of the quarter.
The company’s long operating history and focus on relationship banking remain central to its strategy. Banner has operated for more than 135 years and continues to emphasize trust, service and long-term relationships with clients, communities, employees and shareholders.
Proposed Pacific Financial Acquisition
Banner also recently announced an agreement to acquire Pacific Financial Corporation, the holding company for Bank of the Pacific, in an all-stock transaction.
Under the terms of the definitive merger agreement, Pacific Financial shareholders will receive 0.2633 shares of Banner common stock for each Pacific Financial common share they own.
The transaction is expected to close during the third quarter of 2026, subject to customary closing conditions, including approval from Pacific Financial shareholders and applicable regulatory authorities.
Management said Bank of the Pacific is a financially strong community bank with an attractive core deposit base and a strong reputation in its markets.
The transaction is expected to expand Banner’s presence and market density in Western Washington and Western Oregon.
The combination is also expected to provide Bank of the Pacific customers with access to broader product offerings, expanded technology tools, increased commercial lending limits and a larger branch delivery network.
For Banner, the transaction represents another opportunity to expand its community banking franchise in attractive Western markets while increasing scale and operating capabilities.
Banner Maintains Significant Western Footprint
As of June 30, 2026, Banner Corporation had total assets of $16.59 billion, net loans of $11.83 billion and deposits of $13.79 billion.
The company operates 135 full-service branches, including locations in eight of the 20 largest western U.S. metropolitan statistical areas by population.
The company’s geographic footprint provides exposure to a broad range of markets and customer segments across the Western United States.
Net Interest Margin Improves
Banner’s tax-equivalent net interest margin increased to 4.13% during the second quarter, compared with 4.11% in the preceding quarter and 3.92% in the second quarter of 2025.
The improvement was supported by higher average yields on interest-earning assets and lower borrowing costs.
Interest income totaled $202.7 million during the quarter, compared with $197.8 million in the first quarter and $200.3 million a year earlier.
The average yield on interest-earning assets increased to 5.41%, compared with 5.39% in the preceding quarter and 5.40% in the year-ago period.
Average loan yields increased to 6.09% from 6.07% in the first quarter, although they remained below the 6.12% recorded in the second quarter of 2025.
Interest expense totaled $48.9 million, compared with $47.6 million in the first quarter and $55.9 million in the year-ago quarter.
The total cost of deposits declined to 1.33% from 1.35% in the previous quarter and 1.47% a year earlier.
The decrease was primarily related to lower pricing on certificates of deposit and money market accounts, along with an increase in the average balance of noninterest-bearing deposits.
The average rate paid on borrowings declined to 3.88%, compared with 3.90% in the first quarter and 4.47% a year earlier.
The lower borrowing cost was primarily due to declines in both average interest rates and the average balance of higher-cost FHLB advances.
Revenue Reaches $172 Million
Total revenue was $172.0 million during the second quarter, compared with $169.3 million in the first quarter and $162.2 million a year earlier.
The increase from the year-ago period represented growth of approximately 6%.
Mortgage banking operations generated revenue of $2.8 million during the quarter, compared with $3.2 million in both the first quarter and second quarter of 2025.
Total noninterest income was $18.2 million, compared with $19.2 million in the previous quarter and $17.8 million a year earlier.
The sequential decline was primarily caused by an unfavorable $1.8 million change in fair value adjustments on financial instruments.
The current quarter also included a slight gain on the sale of securities, compared with net losses of $1.2 million in the prior quarter.
Compared with the second quarter of 2025, the increase in noninterest income was primarily driven by higher deposit fees and other service charges, partially offset by lower mortgage banking revenue.
Operating Expenses Increase
Total noninterest expense reached $108.0 million during the second quarter, compared with $102.6 million in the preceding quarter and $101.3 million in the second quarter of 2025.
The increase from the prior quarter reflected several factors.
Salary and employee benefit expenses increased $1.7 million, primarily due to higher loan commissions and normal salary and wage increases.
Information and computer data services increased $2.0 million, including $924,000 related to the write-off of the company’s previous commercial loan origination software.
Professional and legal expenses increased $1.1 million, largely due to higher legal fees.
Advertising and marketing expenses rose $1.3 million, reflecting the timing of direct mail, print media and radio and television marketing expenses.
The quarter also included $238,000 in merger-related expenses.
These increases were partially offset by a $1.4 million increase in capitalized loan origination costs, reflecting higher loan origination activity.
Banner’s efficiency ratio was 62.80% for the second quarter, compared with 60.60% in the first quarter and 62.50% in the year-ago period.
The company’s adjusted efficiency ratio, a non-GAAP measure, was 61.30%, compared with 59.45% in the preceding quarter and 60.28% in the year-ago quarter.
Loan Portfolio Expands
Total loans receivable increased 2% to $11.99 billion at June 30, 2026, compared with $11.71 billion at March 31, 2026, and increased 3% from $11.69 billion a year earlier.
Loan originations totaled $1.26 billion during the second quarter, up significantly from $863.2 million in the first quarter and $966.6 million in the second quarter of 2025.
Commercial real estate loans totaled $4.14 billion, up from $4.11 billion in the first quarter and $3.97 billion a year earlier.
Commercial business loans totaled $2.58 billion, increasing 6% from the prior quarter and 5% from the year-ago period.
Multifamily real estate loans increased 7% sequentially to $855.9 million, while consumer loans increased 7% to $827.0 million.
Consumer loans were also up 13% from the second quarter of 2025, reflecting new production and advances on home equity lines of credit.
Core Deposits Remain Strong
Total deposits were $13.79 billion at June 30, 2026, compared with $13.84 billion at March 31 and $13.53 billion a year earlier.
Core deposits totaled $12.32 billion and represented 89% of total deposits.
The sequential decline was primarily due to seasonal client activity, including the use of deposit balances to pay taxes.
The company also reported an increase in noninterest-bearing deposits, which partially offset declines in interest-bearing transaction accounts, savings accounts and money market accounts.
Certificates of deposit totaled $1.47 billion, broadly stable compared with both the previous quarter and the year-ago period.
Banner temporarily increased its reliance on FHLB advances during the quarter to fund loan growth and seasonal deposit outflows.
FHLB advances totaled $320.0 million at June 30, compared with no outstanding advances at March 31 and $565.0 million a year earlier.
The company maintained significant additional liquidity capacity, including $3.45 billion of borrowing capacity at the FHLB and $1.64 billion at the Federal Reserve.
Capital Position Remains Strong
Total common shareholders’ equity increased to $2.00 billion, or 12.05% of total assets.
Tangible common shareholders’ equity totaled $1.63 billion, or 10.02% of tangible assets.
Common shareholders’ equity per share increased to $58.83, while tangible common shareholders’ equity per share rose to $47.82.
Banner’s estimated common equity Tier 1 capital ratio was 12.82%, its estimated Tier 1 leverage capital-to-average-assets ratio was 11.79% and its estimated total capital-to-risk-weighted-assets ratio was 14.67%.
Both Banner and Banner Bank maintained capital levels above the requirements for classification as well capitalized.
Credit Quality Remains Manageable
The allowance for credit losses on loans totaled $161.8 million, or 1.35% of total loans receivable.
The allowance represented 295% of nonperforming loans.
Net loan charge-offs remained minimal at $101,000 during the second quarter, compared with $1.2 million in the first quarter and $1.0 million in the second quarter of 2025.
Nonperforming loans increased to $54.8 million from $45.4 million in the previous quarter and $43.0 million a year earlier.
Total nonperforming assets were $60.5 million, or 0.36% of total assets.
Although nonperforming assets increased from the prior quarter, the company maintained a substantial allowance for credit losses and continued to report limited net charge-offs.
Banner Corporation enters the second half of 2026 with a strong financial foundation and several important strategic opportunities.
The company continues to benefit from loan growth, lower funding costs and a stable core deposit base. Its capital position remains robust, while its credit loss reserve provides significant protection against potential deterioration in credit quality.
The planned acquisition of Pacific Financial Corporation is expected to further expand Banner’s presence in Western Washington and Western Oregon and strengthen the company’s community banking franchise.
The transaction also provides an opportunity to broaden product offerings, increase commercial lending capabilities and improve technology resources for Bank of the Pacific customers.
With a large Western branch network, strong core deposits and a history of more than 135 years, Banner continues to position itself as a relationship-focused financial institution with the scale to support long-term growth.
The second-quarter results demonstrate the company’s ability to grow its loan portfolio and maintain strong funding metrics while investing in technology and future operating capabilities.
As Banner moves forward with its strategic initiatives, management remains focused on delivering high-quality service, maintaining disciplined risk management and creating long-term value for clients, communities, employees and shareholders.
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