Banner Corporation

Banner reported net profit available to common shareholders of $48.9 million, or $1.43 per diluted share, for the quarter ended 06/30/2026, versus $1.31 per diluted share in the second quarter of 2025. Core revenue from operations was $172 million, compared with $163 million a year ago, and core earnings were $64.4 million versus $62.5 million in the prior-year quarter. Net interest margin was 4.13%, up from 4.11% in the prior quarter, and return on average assets was 1.20%. Loan balances increased $287 million during the quarter, or nearly 10% annualized; nonperforming assets were $8.9 million higher due to one condo construction project moving to nonaccrual, while delinquent loans declined to 0.51% of total loans. For the next quarter, management expects loan growth to moderate somewhat but still finish the year at a mid-single-digit rate, with third-quarter margin expansion of a couple of basis points helped by lower wholesale funding and about 1 to 2 basis points of additional loan yield improvement through year-end. Deposit costs are expected to remain relatively flat, and full-year loan growth is expected to be mid-single digits.

Mark Grescovich framed the quarter as evidence that Banner’s moderate-risk model and operating investments are working, pointing to strong core earnings power, a resilient core deposit base, and continued recognition for the franchise. He emphasized Banner’s long-standing “do the right thing” culture, safety and soundness, and ability to manage through uncertainty while growing relationships across its footprint. He also said the Bank of the Pacific deal should be a good fit and that Banner will remain opportunistic on future M&A given strong capital and core earnings.

Robert Butterfield highlighted that EPS fell sequentially to $1.43 from $1.60 mainly because of a higher provision for credit losses, lower noninterest income, and higher noninterest expense, partly offset by stronger net interest income. He said NII rose $3.6 million as average earning assets increased $129 million and margin improved to 4.13%, while deposit costs were down 2 basis points due to CD repricing; he expects deposit costs to stay roughly flat because the CD book has largely fully repriced. He also noted total borrowings rose $319 million as FHLB advances temporarily funded loan growth and seasonal deposit outflows, tangible common equity to assets improved to 10.02%, and capital return actions beyond the dividend are paused until the Bank of the Pacific deal closes.

Analysts focused on whether loan yields and deposit costs can keep improving, how sustainable the expense run rate is, and how the balance sheet will be funded as loan growth continues. Management said new loan production averaged 6.53%, loan-yield gains are slowing to about 1 to 2 basis points per quarter, deposit costs should stay flat absent Fed moves, and third-quarter margin could expand by a couple of basis points as FHLB balances come down with normal seasonal deposit inflows. On expenses, Robert said Q2 was elevated by timing, the old loan origination system write-off, and M&A costs, and that the new system is already improving efficiency and loan throughput. Questions also covered credit and M&A; Jill said the one condo project moving to nonaccrual should resolve in the medium term, while Mark said the Bank of the Pacific acquisition remains on track and does not rule out further opportunistic deals.