Banner Corporation Reports $47.7 Million in Third-Quarter 2026 Net Income Following Pacific Financial Acquisition
Banner Corporation (NASDAQ: BANR), the parent company of Banner Bank, has reported net income of $47.7 million, or $1.36 per diluted share, for the third quarter of 2026. The results reflect continued loan growth, improved net interest income, and the September completion of its acquisition of Pacific Financial Corporation, the parent company of Bank of the Pacific.
The company’s third-quarter performance compared with net income of $48.9 million, or $1.43 per diluted share, in the second quarter of 2026 and $53.5 million, or $1.54 per diluted share, in the third quarter of 2025. Although quarterly net income declined year over year, Banner benefited from a larger interest-earning asset base, organic lending activity, and an expansion in net interest margin.
Net interest income reached $161.9 million in the third quarter, up from $153.7 million in the preceding quarter and $150 million in the year-ago period. The increases were primarily attributable to the Pacific Financial acquisition, which closed on September 1, 2026, as well as organic loan growth and higher yields on interest-earning assets.
However, higher funding costs compared with the previous quarter partially offset the improvement in interest income. The company also recorded $5.2 million in merger and acquisition-related expenses during the quarter, compared with $238,000 in the second quarter and no such expenses in the third quarter of 2025. Provision for credit losses totaled $2.8 million, down from $3.8 million in the preceding quarter and slightly above the $2.7 million reported a year earlier.
For the nine months ended September 30, 2026, Banner reported net income of $151.3 million, or $4.39 per diluted share, compared with $144.1 million, or $4.15 per diluted share, for the corresponding period in 2025. The year-to-date improvement reflects the company’s overall earnings performance despite additional acquisition expenses and changes in securities-related results.
Banner Declares Quarterly Cash Dividend
Banner Corporation’s Board of Directors declared a regular quarterly cash dividend of $0.52 per share. The dividend is payable on November 13, 2026, to common shareholders of record as of November 5, 2026.
The dividend announcement follows another quarter of lending growth and the expansion of Banner’s banking operations through the Pacific Financial transaction. The company also repurchased 200,000 shares of its common stock during the third quarter at an average price of $71.03 per share.
Shareholder distributions remain an important component of Banner’s capital allocation strategy, alongside investments in banking operations, customer relationships, technology, and long-term business expansion. The declared dividend is consistent with the quarterly payment reported for the period ended September 30, 2026.
Pacific Financial Acquisition Expands Western Banking Presence
Banner completed its acquisition of Pacific Financial Corporation on September 1, 2026, in an all-stock transaction. Pacific Financial was the holding company for Bank of the Pacific, a community banking institution with established operations in Washington and Oregon.
Under the transaction terms, Pacific Financial shareholders received 0.2633 shares of Banner common stock for each share of Pacific Financial common stock they owned. Cash was paid in lieu of fractional shares, bringing the total consideration to $186.8 million.
At the time of closing, Bank of the Pacific operated 18 branches, including 15 in Washington and three in Oregon. The acquisition added approximately $1.29 billion in assets to Banner’s balance sheet, including $756.9 million in net loans receivable and $1.14 billion in deposits.
The transaction strengthens Banner’s presence in attractive Western Washington and Western Oregon markets, increasing the density of its branch network and expanding its customer relationships. It also provides acquired customers with access to a broader range of banking products, enhanced technology tools, higher commercial lending limits, and a larger branch delivery system.
Mark Grescovich, president and chief executive officer of Banner Corporation, said the company completed the merger during the third quarter and described Bank of the Pacific as a respected and financially strong community bank with exceptional core deposits.
Grescovich also highlighted the continued strength of Banner’s community banking model, which emphasizes deeper customer relationships, a stable funding base, strong service, and a moderate risk profile. He noted that loan growth and the acquisition contributed to third-quarter earnings, while higher non-interest expenses, particularly merger-related costs, partially offset those benefits.
The acquisition was accounted for using the acquisition method of accounting. Under this approach, Pacific Financial’s acquired assets, identifiable intangible assets, and liabilities were measured at their estimated fair values as of the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired was attributed to goodwill. These estimates may be adjusted during the one-year measurement period following the acquisition.
Net Interest Income and Margin Continue to Improve
Banner’s net interest income increased to $161.9 million in the third quarter of 2026 from $153.7 million in the second quarter and $150 million in the third quarter of 2025. Net interest margin, calculated on a tax-equivalent basis, reached 4.14%, compared with 4.13% in the preceding quarter and 3.98% a year earlier.
The quarter-over-quarter margin improvement primarily reflected higher average yields on interest-earning assets, partially offset by increased funding costs. On a year-over-year basis, the improvement reflected lower funding costs and higher average yields on interest-earning assets.
Interest income totaled $214.6 million for the third quarter, compared with $202.7 million in the preceding quarter and $205.8 million in the same period last year. The average yield on interest-earning assets increased to 5.46%, up from 5.41% in the second quarter and 5.43% in the third quarter of 2025.
The increase in average asset yields compared with the preceding quarter reflected a higher proportion of loans within the company’s interest-earning asset mix and improved loan yields. Average loan yields reached 6.12%, compared with 6.09% in the second quarter, although the figure remained below the 6.17% recorded a year earlier.
Interest expense was $52.7 million in the third quarter, up from $48.9 million in the preceding quarter but down from $55.9 million in the third quarter of 2025. Total deposit costs increased to 1.38% from 1.33% in the preceding quarter, primarily because of higher average rates paid across deposit categories and a shift toward interest-bearing deposits. Growth in non-interest-bearing deposits partially offset these increases.
Compared with the year-ago quarter, deposit costs declined from 1.50%, reflecting lower average rates paid across deposit categories. The average rate paid on borrowings increased to 3.99% from 3.88% in the second quarter but declined from 4.18% a year earlier.
Overall, the total cost of funding liabilities was 1.43% in the third quarter, compared with 1.39% in the preceding quarter and 1.57% in the third quarter of 2025. These trends demonstrate the continuing importance of deposit mix, funding costs, and asset yields to Banner’s earnings performance.
Revenue Growth and Operating Expenses
Banner reported third-quarter revenue of $177.3 million, compared with $172 million in the preceding quarter and $170.7 million in the third quarter of 2025. The year-over-year increase was approximately 4%, supported primarily by higher net interest income.
Non-interest income totaled $15.4 million in the third quarter, down from $18.2 million in the second quarter and $20.7 million a year earlier.
The sequential decline was primarily attributable to a $2.1 million net loss on securities sales following the sale of the investment portfolio acquired from Pacific Financial. Miscellaneous income also decreased by $630,000, reflecting lower gains on Small Business Administration loan sales and changes in other income items. A favorable $470,000 change in fair value adjustments on financial instruments partially offset these declines.
Compared with the third quarter of 2025, lower miscellaneous income and mortgage banking revenue contributed to the decrease in non-interest income. Higher deposit fees and other service charges provided a partial offset. For the first nine months of 2026, non-interest income totaled $52.8 million, compared with $57.6 million in the corresponding period of 2025.
Non-interest expenses rose to $115.7 million in the third quarter from $108 million in the preceding quarter and $102 million a year earlier. Merger-related expenses accounted for $5.2 million of the current-quarter total.
Excluding merger-related expenses, the increase from the preceding quarter reflected additional costs associated with the acquired Pacific Financial operations, including salaries and employee benefits. Real estate operations expenses also increased by $1.1 million, reflecting write-downs of foreclosed real estate.
Year over year, higher personnel expenses, information and computer data services costs, professional and legal expenses, and real estate operations expenses contributed to the increase. Lower occupancy and equipment expenses partially offset these increases.
Total non-interest expenses for the nine months ended September 30, 2026, were $326.3 million, compared with $304.6 million for the same period in 2025.
Banner’s reported efficiency ratio was 65.25% in the third quarter, compared with 62.80% in the preceding quarter and 59.76% a year earlier. The adjusted efficiency ratio, a non-GAAP measure, was 59.53%, compared with 61.30% in the second quarter and 58.54% in the third quarter of 2025. These measures provide additional context for evaluating the company’s operating costs relative to revenue.
Credit Quality and Loan Loss Provisions
Banner recorded a $2.8 million provision for credit losses in the third quarter of 2026. This consisted of a $1.8 million provision for loan losses and a $1 million provision for unfunded loan commitments.
The provision compared with $3.8 million in the second quarter, consisting of $1.6 million for loans and $2.2 million for unfunded commitments. In the third quarter of 2025, the company recorded a $2.7 million provision, including $1.4 million for loans and $1.3 million for unfunded commitments.
The current-quarter provision primarily reflected loan growth, partially offset by improvements in credit quality. For the first nine months of 2026, the provision for credit losses totaled $5.8 million, compared with $10.6 million in the corresponding period of 2025.
Non-performing assets stood at $63 million, or 0.35% of total assets, at September 30, 2026. This compared with $60.5 million, or 0.36% of total assets, at June 30, 2026, and $45.3 million, or 0.27% of total assets, a year earlier.
The allowance for credit losses on loans was $171.6 million, equal to 1.32% of total loans receivable, at the end of the third quarter. The allowance compared with $161.8 million, or 1.35% of loans, at June 30, 2026, and $159.7 million, or 1.36% of loans, at September 30, 2025.
The larger allowance balance reflects, in part, the expansion of the loan portfolio. Its proportion relative to total loans declined as the portfolio grew, underscoring the importance of monitoring credit quality as Banner integrates acquired lending operations and continues originating new loans.
Balance Sheet Expands With Loan and Deposit Growth
Banner Corporation reported total assets of $18.08 billion at September 30, 2026, representing a 9% increase from $16.59 billion at June 30, 2026, and a 9% increase from $16.56 billion a year earlier. The growth primarily reflected the Pacific Financial acquisition and continued organic loan growth.
Net loans receivable reached $12.82 billion at the end of the third quarter, up 8% from $11.83 billion at the end of the second quarter and 11% from $11.54 billion at September 30, 2025. Total loans receivable, including loans held for sale, increased to $13 billion, compared with $11.99 billion in the preceding quarter and $11.70 billion a year earlier.
Loan originations reached $1.28 billion in the third quarter, compared with $1.26 billion in the preceding quarter and $794.5 million in the third quarter of 2025. The year-over-year increase of approximately 61% highlights the expansion of Banner’s lending activity, supported by acquired portfolios and new loan production.
Commercial real estate loans totaled $4.61 billion at September 30, 2026, increasing 11% from $4.14 billion at June 30, 2026, and 15% from $4 billion a year earlier. Commercial business loans reached $2.73 billion, up 6% quarter over quarter and 12% year over year.
Multifamily real estate loans totaled $913.3 million, compared with $855.9 million in the preceding quarter and $860.7 million a year earlier. Construction, land, and land development loans reached $1.80 billion, up from $1.69 billion at June 30, 2026, and $1.74 billion at September 30, 2025.
Agricultural business loans increased to $389.2 million, compared with $337.5 million in the preceding quarter and $354.9 million a year earlier. Consumer loans reached $929.8 million, up from $827 million at June 30, 2026, and $740.3 million in the year-ago period.
Growth across these lending categories reflected the Pacific Financial acquisition, new loan production, and additional advances, partially offset by loan payoffs and paydowns. In construction lending, some balances also moved into permanent loan portfolios as projects completed their construction phases.
Loans held for sale totaled $32.7 million at September 30, 2026, compared with $27.2 million at June 30, 2026, and $20.3 million a year earlier. Banner sold $103.3 million in one- to four-family residential mortgage loans held for sale during the third quarter, compared with $134.6 million in the preceding quarter and $136.9 million in the third quarter of 2025. The higher ending balance reflected mortgage originations exceeding loan sales during the current quarter.
Core Deposits Support Funding Stability
Total deposits increased to $15.39 billion at September 30, 2026, compared with $13.79 billion at June 30, 2026, and $14.02 billion at September 30, 2025. The Pacific Financial acquisition contributed approximately $1.14 billion in deposits during the third quarter.
Core deposits reached $13.78 billion, up from $12.32 billion in the preceding quarter and $12.48 billion a year earlier. Core deposits represented 90% of total deposits at the end of the third quarter, compared with 89% at both June 30, 2026, and September 30, 2025.
Excluding the acquired balances, deposit growth reflected increases in non-interest-bearing accounts and interest-bearing transaction and savings accounts. The high proportion of core deposits provides Banner with an established funding base as it integrates acquired operations and supports additional lending.
Certificates of deposit totaled $1.62 billion at September 30, 2026, compared with $1.47 billion at June 30, 2026, and $1.54 billion a year earlier. The increase primarily reflected the Pacific Financial acquisition.
Banner also reported changes in its borrowing position during the quarter. The company had no outstanding Federal Home Loan Bank advances at September 30, 2026, compared with $320 million at June 30, 2026, and $100 million at September 30, 2025. The company repaid its outstanding FHLB advances during the quarter, with deposits serving as its primary source of funding.
Additional off-balance-sheet liquidity included $3.82 billion in available FHLB borrowing capacity, $1.56 billion in borrowing capacity at the Federal Reserve, and $125 million in federal funds credit lines with other financial institutions. These resources provide additional funding flexibility if needed.
Capital Position and Shareholders’ Equity
Banner reported total common shareholders’ equity of $2.13 billion at September 30, 2026, equal to 11.80% of total assets. This compared with $2 billion, or 12.05% of total assets, at June 30, 2026, and $1.91 billion, or 11.55%, at September 30, 2025.
The quarterly increase in common shareholders’ equity primarily reflected a $174.6 million increase in common stock associated largely with the Pacific Financial acquisition. Retained earnings increased by $29.8 million, reflecting third-quarter net income of $47.7 million, partially offset by $17.9 million in accrued cash dividends. These increases were partly offset by a $69.7 million increase in accumulated other comprehensive loss.
Common shareholders’ equity per share was $58.56 at September 30, 2026, compared with $58.83 at June 30, 2026, and $55.71 a year earlier.
Tangible common shareholders’ equity, a non-GAAP financial measure, totaled $1.67 billion, representing 9.48% of tangible assets. This compared with $1.63 billion, or 10.02% of tangible assets, at June 30, 2026, and $1.54 billion, or 9.50%, at September 30, 2025. Tangible common shareholders’ equity per share was $45.84, down from $47.82 in the preceding quarter but up from $44.79 a year earlier.
Banner and Banner Bank continued to maintain capital levels above the regulatory thresholds required to be categorized as well-capitalized. At September 30, 2026, Banner’s estimated common equity Tier 1 capital ratio was 12.57%, its estimated Tier 1 leverage capital-to-average-assets ratio was 11.59%, and its estimated total capital-to-risk-weighted-assets ratio was 14.42%. These figures remain estimates pending the completion and filing of regulatory reports.
The company’s capital position supports its ability to manage credit risks, maintain shareholder distributions, and pursue opportunities for growth while integrating the acquired business.
Long-Term Strategy and Community Banking Focus
Banner’s third-quarter results highlight the impact of combining organic lending activity with strategic expansion. The Pacific Financial acquisition added assets, deposits, customers, and branch locations while increasing Banner’s presence in Western Washington and Western Oregon.
The company continues to emphasize relationship-based community banking, supported by a substantial core deposit base, a diversified lending portfolio, and investment in technology and customer service. Its expanded network also provides opportunities to offer additional financial products and services to acquired customers.
At September 30, 2026, Banner operated 153 full-service branches and reported $18.08 billion in consolidated assets, $12.82 billion in net loans receivable, and $15.39 billion in deposits. The company’s branches include locations in eight of the 20 largest metropolitan statistical areas in the western United States by population.
Management has emphasized the importance of maintaining credit discipline, strengthening customer relationships, and managing expenses as the company integrates Pacific Financial. Although merger-related costs and certain operating expenses weighed on quarterly earnings, higher net interest income and loan growth provided support.
Banner’s results for the first nine months of 2026 showed an improvement in net income compared with the same period last year. However, the company continues to face the need to manage funding costs, operating expenses, asset quality, and the integration of acquired operations.
Looking ahead, the company’s financial performance will depend on its ability to maintain a healthy net interest margin, grow its loan portfolio responsibly, preserve deposit stability, and realize operational benefits from the acquisition. Its capital position and available liquidity provide additional flexibility as it continues to develop its regional banking franchise.
With the Pacific Financial acquisition completed and its core deposit base remaining strong, Banner enters the next quarter with an expanded market presence and a larger balance sheet. Its continued focus on prudent risk management, customer service, and long-term financial performance will remain central to its strategy.
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