BANNER CORP
For the period ended Sep 30, 2026. Filed Nov 3, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 3, 2026
BANR$70.09-0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-04.
0000946673-26-000172
Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive OverviewComparison of Financial ConditionComparison of Results of OperationsAsset QualityLiquidity and Capital ResourcesCapital RequirementsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-03.
0000946673-26-000203
Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive OverviewComparison of Financial ConditionComparison of Results of OperationsAsset QualityLiquidity and Capital ResourcesCapital RequirementsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 117 previous paragraphs and 123 current paragraphs.
43 unchanged; 64 reworded; 16 added; 10 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
On September 1, 2026, Banner completed the acquisition of Pacific Financial, the holding company for Bank of the Pacific. At closing, Bank of the Pacific had 18 branch locations, including 15 in Washington and three in Oregon. Shareholders of Pacific Financial received 0.2633 shares of Banner common stock for each share of Pacific Financial common stock they owned, plus cash in lieu of any fractional shares, for total consideration paid of $186.8 million.
Current report
The Pacific Financial transaction was accounted for using the acquisition method of accounting. Accordingly, the assets (including identifiable intangible assets) and the liabilities of Pacific Financial were measured at their respective estimated fair values as of the merger date. The excess of the purchase price over the fair value of the net assets acquired was attributed to goodwill. The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date. The acquisition accounting is subject to adjustment within a measurement period of no longer than one year from the acquisition date. The acquisition brought $1.29 billion of assets, including $756.9 million of net loans receivable, and $1.14 billion of deposits to Banner.
Current report
•Revenue was $177.3 million for the third quarter of 2026, compared to $172.0 million in the preceding quarter.
Current report
•Net interest income was $161.9 million in the third quarter of 2026, compared to $153.7 million in the preceding quarter.
Current report
•Repurchased 200,000 shares of Banner common stock during the third quarter of 2026 at an average price of $71.03 per share.
Current report
Business Combinations and Goodwill. Business combinations are accounted for using the acquisition method, under which assets acquired and liabilities assumed are recorded at their estimated fair values as of the acquisition date. Goodwill represents the excess of the consideration transferred 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 evaluated for impairment at least annually, or more frequently if events or changes in circumstances indicate that it may be impaired. Various significant assumptions and judgments are used to determine the fair values of the assets acquired and liabilities assumed, particularly for acquired loans, where key assumptions include expected credit losses, prepayment speeds and discount rates, and for the core deposit intangible, where key assumptions include deposit attrition rates, the alternative cost of funds and discount rates. Because goodwill is the residual of these measurements, it depends directly on these estimates.
Current report
In connection with the Pacific Financial acquisition, the Company recorded a core deposit intangible of $28.6 million and goodwill of $61.2 million. These fair values are preliminary and may be adjusted for up to one year after the acquisition date as additional information about facts and circumstances that existed as of the acquisition date becomes available. The Company’s most recent annual goodwill impairment assessment, performed as of December 31, 2025, indicated no impairment. As of September 30, 2026, Management did not identify any events or circumstances indicating that it is more likely than not that the fair value of the Company’s reporting unit is below its carrying amount.
Current report
General: Total assets increased $1.73 billion to $18.08 billion at September 30, 2026, from $16.35 billion at December 31, 2025, primarily due to assets acquired from the Pacific Financial acquisition and organic loan growth. The Pacific Financial acquisition increased total assets by $1.29 billion on September 1, 2026.
Current report
Total non-interest expense increased in the quarter ended September 30, 2026, compared to the preceding quarter and increased for the nine months ended September 30, 2026, compared to the same period a year ago. The increase from the previous quarter reflected merger and acquisition-related expenses of $5.2 million, as well as one month of expenses from the Pacific Financial branch operations. The increase in non-interest expense for the nine months ended September 30, 2026, compared to the same period last year, primarily reflected merger and acquisition-related expenses recognized during the current period, as well as higher salary and employee benefits expense, information and computer data services expense, advertising and marketing expense, and payment and card processing expenses. These increases were partially offset by lower occupancy and equipment expense and higher capitalized loan origination costs.
Current report
Net Interest Income. Net interest income increased $8.2 million during the quarter ended September 30, 2026, compared to the preceding quarter, primarily due to higher interest income resulting from growth in average interest-earning assets, driven by the acquisition of Pacific Financial and organic loan growth, as well as an increase in the yield on interest-earning assets. These increases were partially offset by higher interest expense resulting from an increase in the average balance and cost of interest-bearing deposits.
Current report
Merger and acquisition-related expenses during the current quarter and the nine months ended September 30, 2026, related to the Pacific Financial acquisition, which was effective September 1, 2026. The merger and acquisition-related expenses consist primarily of legal fees, investment banker fees, contract termination costs, and employee-related severance and retention expenses.
Current report
Payment and card processing services increased for the nine months ended September 30, 2026, compared to the same period last year, primarily due to higher online banking costs.
Current report
Real estate operations expense increased for the quarter ended September 30, 2026, compared to the quarter ended June 30, 2026, and for the nine months ended September 30, 2026. The increase for both periods related to write-downs of foreclosed real estate.
Current report
Miscellaneous expense increased for the nine months ended September 30, 2026, compared to the same period last year, primarily due to an increase in loan production expenses.
Removed paragraphs (10)
Previous report
•Revenue was $172.0 million for the second quarter of 2026, compared to $169.3 million in the preceding quarter.
Previous report
•Net interest income was $153.7 million in the second quarter of 2026, compared to $150.2 million in the preceding quarter.
Previous report
•Mortgage banking operations revenue was $2.8 million for the second quarter of 2026, compared to $3.2 million in the preceding quarter.
Previous report
On April 30, 2026, Banner entered into a definitive merger agreement to acquire Pacific Financial Corporation (“Pacific Financial”), the holding company for Bank of the Pacific, in an all-stock transaction. Under the terms of the agreement, at the effective time of the merger, shareholders of Pacific Financial will receive 0.2633 shares of Banner common stock for each Pacific Financial common share they own. The transaction is expected to close in the third quarter of 2026 and is subject to closing conditions, including Pacific Financial shareholder and regulatory approvals. There can be no assurance that all closing conditions will be satisfied or that the transaction will be completed on the anticipated timetable, or at all.
Previous report
General: Total assets increased $239.1 million to $16.59 billion at June 30, 2026, from $16.35 billion at December 31, 2025, primarily due to growth in loans receivable, partially offset by a decrease in securities.
Previous report
Total non-interest expense increased in the quarter ended June 30, 2026, compared to the preceding quarter and increased during the six months ended June 30, 2026, compared to the same period a year ago. The increase from the previous quarter reflected an increase in salary and employee benefits, primarily reflecting increased loan commissions and normal salary and wage increases, an increase in information and computer data services, primarily due to increased computer software expenses, an increase in professional and legal expenses, primarily reflecting increased legal fees, and an increase in advertising and marketing expense, primarily reflecting the timing of direct mail marketing, printed media, and radio and television expenses. These increases were partially offset by higher capitalized loan origination costs associated with increased loan origination activity, primarily in the construction, land and land development, and one- to four-family residential loan categories. The increase in non-interest expense during the six months ended June 30, 2026, compared to the same period last year primarily reflects increases in salary and employee benefits and information and computer data services, partially offset by an increase in capitalized loan origination costs.
Previous report
Net Interest Income. Net interest income increased $3.6 million during the quarter ended June 30, 2026, compared to the preceding quarter, due to an increase in interest income, primarily attributable to one additional calendar day in the current quarter, net interest margin expansion and growth in average interest-earning assets, partially offset by higher interest expense associated with increased FHLB borrowings.
Previous report
Professional and legal expense increased for the quarter ended June 30, 2026, compared to the quarter ended March 31, 2026. The increase compared to the preceding quarter primarily reflected increased legal fees.
Reworded paragraphs (64)
Previous wording
Banner is a bank holding company incorporated in the State of Washington, which wholly owns its subsidiary bank, Banner Bank. The Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington, and as of June 30, 2026, it had 135 branch offices and 15 loan production offices located in Washington, Oregon, California, Idaho, Utah and Nevada. Banner is subject to regulation by the Federal Reserve. The Bank is subject to regulation by the Washington State Department of Financial Institutions – Division of Banks (the DFI) and the Federal Deposit Insurance Corporation (the FDIC). As of June 30, 2026, we had total consolidated assets of $16.59 billion, total loans of $11.99 billion, total deposits of $13.79 billion and total shareholders’ equity of $2.0 billion.
Current wording
Banner is a bank holding company incorporated in the State of Washington, which wholly owns its subsidiary bank, Banner Bank. The Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington, and as of September 30, 2026, it had 153 branch offices and 19 loan production offices located in Washington, Oregon, California, Idaho, Utah and Nevada. Banner is subject to regulation by the Federal Reserve. The Bank is subject to regulation by the Washington State Department of Financial Institutions – Division of Banks (the DFI) and the Federal Deposit Insurance Corporation (the FDIC). As of September 30, 2026, we had total consolidated assets of $18.08 billion, total loans of $13.00 billion, total deposits of $15.39 billion and total shareholders’ equity of $2.13 billion.
Previous wording
•Net interest margin, on a tax equivalent basis, was 4.13% for current quarter, compared to 4.11% in the preceding quarter.
Current wording
•Net interest margin, on a tax equivalent basis, was 4.14% for current quarter, compared to 4.13% in the preceding quarter.
Previous wording
•Return on average assets was 1.20%, compared to 1.37% in the preceding quarter.
Current wording
•Return on average assets was 1.11% for the current quarter, compared to 1.20% in the preceding quarter.
Previous wording
•Net loans receivable were $11.83 billion at June 30, 2026, compared to $11.55 billion at March 31, 2026.
Current wording
•Net loans receivable were $12.82 billion at September 30, 2026, compared to $11.83 billion at June 30, 2026.
Previous wording
•Total deposits were $13.79 billion at June 30, 2026, compared to $13.84 billion at March 31, 2026.
Current wording
•Total deposits were $15.39 billion at September 30, 2026, compared to $13.79 billion at June 30, 2026.
Previous wording
•Core deposits represented 89% of total deposits at June 30, 2026.
Current wording
•Core deposits represented 90% of total deposits at September 30, 2026.
Previous wording
•Non-performing assets were $60.5 million, or 0.36% of total assets, at June 30, 2026, compared to $51.7 million, or 0.32% of total assets at March 31, 2026.
Current wording
•Non-performing assets were $63.0 million, or 0.35% of total assets, at September 30, 2026, compared to $60.5 million, or 0.36% of total assets at June 30, 2026.
Previous wording
•The allowance for credit losses - loans was $161.8 million, or 1.35% of total loans receivable, as of June 30, 2026, compared to $160.4 million, or 1.37% of total loans receivable, at March 31, 2026.
Current wording
•The allowance for credit losses - loans was $171.6 million, or 1.32% of total loans receivable, as of September 30, 2026, compared to $161.8 million, or 1.35% of total loans receivable, at June 30, 2026.
Previous wording
•Common shareholders’ equity per share increased to $58.83 at June 30, 2026, compared to $58.06 at March 31, 2026.
Current wording
•Common shareholders’ equity per share decreased to $58.56 at September 30, 2026, compared to $58.83 at June 30, 2026.
Previous wording
•Tangible common shareholders’ equity per share* increased to $47.82 at June 30, 2026, compared to $47.00 at March 31, 2026.
Current wording
•Tangible common shareholders’ equity per share* decreased to $45.84 at September 30, 2026, compared to $47.82 at June 30, 2026.
Previous wording
Our critical accounting estimates are described in detail in the Critical Accounting Estimates section of our 2025 Form 10-K. The condensed consolidated financial statements are prepared in conformity with GAAP and follow general practices within the financial services industry in which the Company operates. This preparation requires Management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements. As this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes that the allowance for credit losses and fair value measurements require significant judgments and assumptions which are susceptible to significant changes based on the current environment. There have been no significant changes in our application of critical accounting estimates since December 31, 2025.
Current wording
Our critical accounting estimates are described in detail in the Critical Accounting Estimates section of our 2025 Form 10-K. The condensed consolidated financial statements are prepared in conformity with GAAP and follow general practices within the financial services industry in which the Company operates. This preparation requires Management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements. As this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes that the allowance for credit losses and fair value measurements, which were identified as critical accounting estimates in our 2025 Form 10-K, require significant judgments and assumptions which are susceptible to significant changes based on the current environment. In addition to the critical accounting estimates of the allowance for credit losses and fair value measurements at December 31, 2025, Management believes business combination accounting and goodwill is also a critical accounting estimate this quarter as we completed the Pacific Financial acquisition on September 1, 2026.
Previous wording
Loans and lending: Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a total loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan to deposit ratio at June 30, 2026 was 87%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of real estate and commercial loans. Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $272.7 million at June 30, 2026, compared to December 31, 2025. The increase primarily reflected growth in commercial business loans, commercial real estate loans, and consumer loans, partially offset by declines in construction, land and land development loans, agricultural business loans, and one- to four-family residential loans.
Current wording
Loans and lending: Loans are our most significant and generally highest yielding earning assets. We attempt to maintain a total loans to total deposits ratio at a level designed to enhance our revenues, while adhering to sound underwriting practices and appropriate diversification guidelines in order to maintain a moderate risk profile. Our loan to deposit ratio at September 30, 2026, was 85%. We offer a wide range of loan products to meet the demands of our clients. Our lending activities are primarily directed toward the origination of real estate and commercial loans. Total loans receivable (gross loans less deferred fees and discounts and excluding loans held for sale) increased $1.27 billion at September 30, 2026, compared to December 31, 2025. The increase in loans was primarily the result of loans acquired from the Pacific Financial acquisition, which increased total loans $765.5 million on September 1, 2026, and organic loan growth. Organic loan growth was primarily driven by increases in commercial business loans, commercial real estate loans, consumer loans, and commercial construction loans.
Previous wording
Commercial real estate loans totaled $4.14 billion, or 34% of our loan portfolio, and multifamily real estate loans totaled $855.9 million, or 7% of our loan portfolio, at June 30, 2026. Commercial real estate loans increased by $88.6 million during the first six months of 2026, primarily due to new production. Multifamily real estate loans increased by $5.1 million, primarily due transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by loan payoffs.
Current wording
Commercial real estate loans totaled $4.61 billion, or 35% of our loan portfolio, and multifamily real estate loans totaled $913.3 million, or 7% of our loan portfolio, at September 30, 2026. Commercial real estate loans increased by $554.6 million during the first nine months of 2026, primarily due to loans acquired from Pacific Financial and new loan production. Multifamily real estate loans increased by $62.5 million, primarily due to loans acquired from Pacific Financial and transfers to the permanent loan portfolio upon completion of the construction phase, partially offset by loan payoffs.
Previous wording
Our construction, land and land development loans totaled $1.69 billion, or 14% of our loan portfolio, at June 30, 2026, compared to $1.71 billion at December 31, 2025. Multifamily construction loans decreased $11.3 million, or 2%, to $503.1 million at June 30, 2026, compared to December 31, 2025. Multifamily construction represented 4% of our total loan portfolio at June 30, 2026. Multifamily construction loans were comprised primarily of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. Commercial construction loans increased $25.8 million, or 17%, to $181.8 million at June 30, 2026, compared to $156.0 million at December 31, 2025, primarily due to new production and advances, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase and loan payoffs. Land and land development loans decreased $55.5 million, or 13%, to $378.2 million at June 30, 2026, compared to December 31, 2025, primarily due to payoffs and paydowns, partially offset by new loan originations. Construction loans across our footprint were concentrated primarily in Washington, California and Oregon at June 30, 2026, with the majority of multifamily construction projects expected to convert to permanent loans within the next 12 to 24 months as construction phases are completed.
Current wording
Our construction, land and land development loans totaled $1.80 billion, or 14% of our loan portfolio, at September 30, 2026, compared to $1.71 billion at December 31, 2025. Multifamily construction represented 4% of our total loan portfolio at September 30, 2026. Multifamily construction loans were comprised primarily of affordable housing projects and, to a lesser extent, market rate multifamily projects across our footprint. Commercial construction loans increased $64.0 million, or 41%, to $220.0 million at September 30, 2026, compared to $156.0 million at December 31, 2025, primarily due to new production and advances, partially offset by transfers to the permanent loan portfolio upon completion of the construction phase and loan payoffs. Land and land development loans decreased $17.3 million, or 4%, to $416.4 million at September 30, 2026, compared to December 31, 2025, primarily due to payoffs and paydowns, partially offset by new loan originations. Construction loans across our footprint were concentrated primarily in Washington, California and Oregon at September 30, 2026, with the majority of multifamily construction projects expected to convert to permanent loans within the next 12 to 24 months as construction phases are completed.
Previous wording
Our commercial business lending is directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agribusiness borrowers operating in our primary market areas. Our commercial business loans were $2.58 billion at June 30, 2026 and $2.41 billion at December 31, 2025. Commercial business loans represented 22% of our loan portfolio at June 30, 2026. Our agricultural business loans were $337.5 million at June 30, 2026 and $353.2 million at December 31, 2025. Agricultural business loans represented 3% of our loan portfolio at June 30, 2026. Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $222.2 million, or 2% of our loan portfolio, at June 30, 2026, compared to $195.6 million, or 2% of our loan portfolio, at December 31, 2025.
Current wording
Our commercial business lending is directed toward meeting the credit and related deposit needs of various small- to medium-sized business and agribusiness borrowers operating in our primary market areas. Our commercial business loans were $2.73 billion at September 30, 2026, and $2.41 billion at December 31, 2025, an increase of $321.0 million. Commercial business loans represented 21% of our loan portfolio at September 30, 2026. Our agricultural business loans were $389.2 million at September 30, 2026, and $353.2 million at December 31, 2025. Agricultural business loans represented 3% of our loan portfolio at September 30, 2026. Our commercial business lending also includes participation in certain syndicated loans, including shared national credits, which totaled $223.4 million, or 2% of our loan portfolio, at September 30, 2026, compared to $195.6 million, or 2% of our loan portfolio, at December 31, 2025.
Previous wording
We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California, Idaho and Utah. Most of the one- to four-family residential loans we originate in normal market conditions are sold in secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking operations. At June 30, 2026, one- to four-family residential loans retained in our portfolio decreased $16.7 million, to $1.56 billion, compared to $1.57 billion at December 31, 2025. The decrease was primarily the result of one- to four-family residential loan payoffs exceeding new loan originations and one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction. One- to four-family residential loans represented 13% of our loan portfolio at June 30, 2026.
Current wording
We are active originators of one- to four-family residential loans in most communities where we have established offices in Washington, Oregon, California, Idaho and Utah. Most of the one- to four-family residential loans we originate in normal market conditions are sold in secondary markets with net gains on sales and loan servicing fees reflected in our revenues from mortgage banking operations. At September 30, 2026, one- to four-family residential loans retained in our portfolio increased $46.9 million, to $1.62 billion, compared to $1.57 billion at December 31, 2025. The increase was primarily the result of loans acquired from Pacific Financial, new loan originations, and one- to four-family construction loans converting to permanent one- to four-family residential loans upon completion of construction, partially offset by one- to four-family residential loan payoffs. One- to four-family residential loans represented 13% of our loan portfolio at September 30, 2026.
Previous wording
Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients. At June 30, 2026, consumer loans, including home equity revolving lines of credit, increased $58.5 million to $827.0 million, compared to $768.5 million at December 31, 2025. The increase was primarily due to growth in home equity revolving lines of credit.
Current wording
Our consumer loan activity is primarily directed at meeting demand from our existing deposit clients. At September 30, 2026, consumer loans, including home equity revolving lines of credit, increased $161.3 million to $929.8 million, compared to $768.5 million at December 31, 2025. The increase was primarily due loans acquired from Pacific Financial and growth in home equity revolving lines of credit.
Previous wording
Loans held for sale decreased to $27.2 million at June 30, 2026, compared to $42.9 million at December 31, 2025. The decrease was primarily the result of increased sales of one- to four- family residential mortgage loans held for sale, with loan sales outpacing originations during the period. Originations of loans held for sale increased to $198.4 million for the six months ended June 30, 2026, compared to $171.0 million for the same period last year. The volume of one- to four-family residential mortgage loans sold was $267.1 million during the six months ended June 30, 2026, compared to $212.7 million in the same period a year ago.
Current wording
Loans held for sale decreased to $32.7 million at September 30, 2026, compared to $42.9 million at December 31, 2025. The decrease was primarily the result of increased sales of one- to four- family residential mortgage loans held for sale, with loan sales outpacing originations during the period. Originations of loans held for sale increased to $285.8 million for the nine months ended September 30, 2026, compared to $265.0 million for the same period last year. The volume of one- to four-family residential mortgage loans sold was $370.4 million during the nine months ended September 30, 2026, compared to $349.6 million in the same period a year ago.
Previous wording
Investment Securities: Total securities were $2.95 billion at June 30, 2026, decreased from $2.98 billion at December 31, 2025. Available-for-sale securities were flat at $2.02 billion at June 30, 2026, compared to December 31, 2025, while held-to-maturity securities decreased $31.9 million to $929.3 million, compared to $961.2 million at December 31, 2025, reflecting maturities and paydowns during the period. Purchases during the six months ended June 30, 2026, consisted of agency commercial mortgage‑backed securities, corporate securities and collateralized loan obligations. The average effective duration of the Company’s securities portfolio was 6.1 years at June 30, 2026, compared to 6.6 years at December 31, 2025. The fair value of securities designated as available-for-sale decreased $3.7 million for the six months ended June 30, 2026. This decrease, net of $900,000 in associated tax benefit, was recorded in other comprehensive income and reflected the impact of changes in market interest rates during the six months ended June 30, 2026.
Current wording
Investment Securities: Total securities were $3.10 billion at September 30, 2026, an increase from $2.98 billion at December 31, 2025. Available-for-sale securities increased $168.0 million to $2.18 billion at September 30, 2026, compared to $2.02 billion at December 31, 2025. In connection with the Pacific Financial acquisition, the Company acquired $322.9 million of investment securities, which were sold throughout the month of September to reposition the acquired portfolio consistent with the Company’s investment strategy and interest rate risk, resulting in a $2.1 million loss on sale. The Company purchased $505.5 million of securities during the nine months ended September 30, 2026, consisting of agency residential mortgage-backed securities, agency commercial mortgage-backed securities, corporate securities and collateralized loan obligations. Held-to-maturity securities decreased $42.3 million to $918.9 million, compared to $961.2 million at December 31, 2025, reflecting maturities and paydowns during the period. The average effective duration of the Company’s securities portfolio was 6.0 years at September 30, 2026, compared to 6.6 years at December 31, 2025, primarily reflecting purchases of shorter-duration and floating-rate securities. Net unrealized losses on available-for-sale securities increased $102.1 million during the nine months ended September 30, 2026, reflecting higher market interest rates. The change, net of the associated $24.5 million tax benefit, was recorded in other comprehensive income.
Previous wording
Deposits: Deposits, client retail repurchase agreements and loan repayments are the major sources of our funds for lending and other investment purposes. We compete with other financial institutions and financial intermediaries in attracting deposits and we generally attract deposits within our primary market areas. Much of the focus of our branch strategy and marketing efforts over the last several years have been directed toward attracting additional deposit client relationships and balances. This effort has been particularly directed towards emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts.
Current wording
Deposits: Deposits, client retail repurchase agreements and loan repayments are the major sources of our funds for lending and other investment purposes. We compete with other financial institutions and financial intermediaries in attracting deposits and we generally attract deposits within our primary market areas. Much of the focus of our branch strategy and marketing efforts over the last several years has been directed toward attracting additional deposit client relationships and balances. This effort has been particularly directed towards emphasizing core deposit activity in non-interest-bearing and other transaction and savings accounts.
Previous wording
Total deposits increased $46.4 million at June 30, 2026, compared to December 31, 2025, with core deposits increasing $105.7 million, partially offset by certificates of deposit decreasing $59.3 million. The increase in core deposits primarily reflects increases in non-interest-bearing deposits and interest-bearing transaction and savings accounts. We had no brokered deposits at June 30, 2026, compared to $50.0 million at December 31, 2025. Core deposits represented 89% of total deposits at both June 30, 2026 and December 31, 2025. Competition for deposits in our market areas remains strong.
Current wording
Total deposits increased $1.65 billion at September 30, 2026, compared to December 31, 2025, with core deposits increasing $1.57 billion and certificates of deposit increasing $82.9 million. The increase in deposits was primarily the result of the Pacific Financial acquisition, which added total deposits of $1.14 billion on September 1, 2026, consisting of non-interest-bearing accounts of $410.3 million and interest-bearing transaction and savings accounts of $586.8 million. The increase in core deposits reflected the core deposit base acquired from Pacific Financial. The increase in interest-bearing transaction and savings accounts also reflected organic growth. Core deposits represented 90% and 89% of total deposits at September 30, 2026, and December 31, 2025, respectively. Competition for deposits in our market areas remains strong. The increase in interest-bearing certificates of deposits was due to the Pacific Financial acquisition. We had no brokered deposits at September 30, 2026, compared to $50.0 million at December 31, 2025.
Previous wording
Borrowings: We had $320.0 million FHLB advances at June 30, 2026, compared to $150.0 million at December 31, 2025, as FHLB advances were temporarily used to fund the second quarter loan growth. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, increased $6.8 million to $114.5 million at June 30, 2026, compared to $107.7 million at December 31, 2025. At June 30, 2026, the Company’s off-balance sheet liquidity included additional borrowing capacity of $3.45 billion at the FHLB, $1.64 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions. Junior subordinated debentures totaled $79.7 million at June 30, 2026, compared to $79.2 million at December 31, 2025.
Current wording
Borrowings: There were no FHLB advances at September 30, 2026, compared to $150.0 million at December 31, 2025. All outstanding advances were repaid during the third quarter as deposits continued to serve as the Company’s primary source of funds. Other borrowings, consisting of retail repurchase agreements primarily related to client cash management accounts, decreased $2.5 million to $105.2 million at September 30, 2026, compared to $107.7 million at December 31, 2025. At September 30, 2026, the Company’s off-balance sheet liquidity included additional borrowing capacity of $3.82 billion at the FHLB, $1.56 billion at the Federal Reserve, and $125.0 million in federal funds lines of credit with other financial institutions. Junior subordinated debentures totaled $87.1 million at September 30, 2026, compared to $79.2 million at December 31, 2025, which increased due to the two additional junior subordinated debentures assumed from Pacific Financial.
Previous wording
Shareholders’ Equity: Total shareholders’ equity increased $53.0 million to $2.00 billion, or 12.05% of total assets, at June 30, 2026, compared to $1.95 billion, or 11.90% of total assets, at December 31, 2025. The increase was primarily due to a $68.4 million increase in retained earnings resulting from $103.6 million in net income, partially offset by the accrual of $35.2 million in cash dividends and the repurchase of 250,000 shares of Banner common stock in the first quarter of 2026 at an average price of $64.56 per share. In addition, accumulated other comprehensive loss increased by $1.5 million, primarily due to an increase in unrealized losses on the available for sale securities portfolio.
Current wording
Shareholders’ Equity: Total shareholders’ equity increased $187.6 million to $2.13 billion, or 11.80% of total assets, at September 30, 2026, compared to $1.95 billion, or 11.90% of total assets, at December 31, 2025. The increase was primarily due to the stock compensation of $185.9 million in the Pacific Financial acquisition, a $98.2 million increase in retained earnings resulting from $151.3 million in net income, partially offset by the accrual of $53.1 million in cash dividends and the repurchase of 450,000 shares of Banner common stock during the nine months ended September 30, 2026, at an average price of $67.44 per share. In addition, accumulated other comprehensive loss increased by $71.2 million, primarily due to an increase in unrealized losses on the available for sale securities portfolio.
Previous wording
Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $53.5 million to $1.63 billion, or 10.02% of tangible assets, at June 30, 2026, compared to $1.57 billion, or 9.84% of tangible assets at December 31, 2025. A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above under the heading “Reconciliation of Non-GAAP Financial Measures.”
Current wording
Tangible common shareholders’ equity, which excludes goodwill and other intangible assets and is a non-GAAP financial measure, increased $99.0 million to $1.67 billion, or 9.48% of tangible assets, at September 30, 2026, compared to $1.57 billion, or 9.84% of tangible assets at December 31, 2025. A reconciliation of this non-GAAP financial measure to its comparable GAAP financial measure is presented above under the heading “Reconciliation of Non-GAAP Financial Measures.”
Previous wording
Comparison of Results of Operations for the Three Months Ended June 30, 2026 and March 31, 2026, and the Six Months Ended June 30, 2026 and 2025
Current wording
Comparison of Results of Operations for the Three Months Ended September 30, 2026, and June 30, 2026, and the Nine Months Ended September 30, 2026 and 2025
Previous wording
For the quarter ended June 30, 2026, net income was $48.9 million, or $1.43 per diluted share, compared to $54.7 million, or $1.60 per diluted share, for the preceding quarter. For the six months ended June 30, 2026, our net income was $103.6 million, or $3.03 per diluted share, compared to $90.6 million, or $2.61 per diluted share for the same period a year earlier. The decrease in net income compared to the preceding quarter was primarily due to an increase in the provision for credit losses and higher non-interest expense, partially offset by an increase in net interest income. The increase in net income for the six months ended June 30, 2026, compared to the same period a year ago was primarily due to higher net interest income and a lower provision for credit losses, partially offset by higher non-interest expense.
Current wording
For the quarter ended September 30, 2026, net income was $47.7 million, or $1.36 per diluted share, compared to $48.9 million, or $1.43 per diluted share, for the preceding quarter. For the nine months ended September 30, 2026, net income was $151.3 million, or $4.39 per diluted share, compared to $144.1 million, or $4.15 per diluted share for the same period a year earlier. The decrease in net income compared to the preceding quarter was primarily due to a decrease in non-interest income and an increase in non-interest expense, partially offset by higher net interest income and a lower provision for credit losses. The increase in net income for the nine months ended September 30, 2026, compared to the same period a year ago was primarily due to higher net interest income and a lower provision for credit losses, partially offset by lower non-interest income and higher non-interest expense.
Previous wording
Net interest income was $153.7 million in the second quarter of 2026, compared to $150.2 million in the preceding quarter, and $303.9 million for the six months ended June 30, 2026, compared to $285.5 million for the comparable period a year ago. The increase in net interest income compared to the prior quarter primarily reflected one additional calendar day in the current quarter, net interest margin expansion and growth in average interest-earning assets, partially offset by higher funding costs associated with increased FHLB borrowings. The increase in net interest income for the six months ended June 30, 2026, compared to the same period a year ago primarily reflected lower funding costs and an increase in the average balance of interest-earning assets.
Current wording
Net interest income was $161.9 million in the third quarter of 2026, compared to $153.7 million in the preceding quarter, and $465.8 million for the nine months ended September 30, 2026, compared to $435.5 million for the comparable period a year ago. The increase in net interest income compared to the prior quarter was primarily driven by an increase in average interest-earning assets resulting from the acquisition of Pacific Financial on September 1, 2026, and organic loan growth, as well as expansion in net interest margin reflecting higher yields on interest-earning assets. The increase in net interest income for the nine months ended September 30, 2026, compared to the same period a year ago primarily reflected an increase in the average balance of interest-earning assets and lower funding costs.
Previous wording
We recorded a $3.8 million provision for credit losses for the quarter ended June 30, 2026, compared to a $796,000 recapture of provision for credit losses in the preceding quarter. The provision for credit losses recorded in the second quarter of 2026 primarily reflected loan growth, partially offset by improvements in credit quality and changes in portfolio mix. We recorded a $3.0 million provision for credit losses for the six months ended June 30, 2026 and a $7.9 million provision for credit losses for the same period a year ago.
Current wording
We recorded a $2.8 million provision for credit losses for the quarter ended September 30, 2026, compared to a $3.8 million provision for credit losses in the preceding quarter. The provision for credit losses primarily reflected loan growth, partially offset by improvements in credit quality. We recorded a $5.8 million provision for credit losses for the nine months ended September 30, 2026, and a $10.6 million provision for credit losses for the same period a year ago.
Previous wording
Total non-interest income decreased in the quarter ended June 30, 2026, compared to the preceding quarter and increased during the six months ended June 30, 2026, compared to the same period a year ago. The decrease in non-interest income from the previous quarter was driven primarily by an unfavorable shift in fair value adjustments on financial instruments. In addition, net losses on the sale of securities were recognized in the preceding quarter. The increase in non-interest income during the six months ended June 30, 2026, compared to the same period last year, primarily reflected higher deposit fees and other service charges and favorable fair value adjustments on financial instruments carried at fair value, partially offset by a net loss recognized on the sale of securities during the current period.
Current wording
Total non-interest income decreased in the quarter ended September 30, 2026, compared to the preceding quarter and decreased for the nine months ended September 30, 2026, compared to the same period a year ago. The decrease in non-interest income from the previous quarter was driven primarily by a net loss on the sale of investment securities acquired from Pacific Financial and decreased miscellaneous income, partially offset by a favorable shift in fair value adjustments on financial instruments. The decrease in non-interest income for the nine months ended September 30, 2026, compared to the same period last year, primarily reflected a net loss on the sale of securities recognized during the current period, as well as decreases in miscellaneous income and mortgage banking income, partially offset by higher deposit fees and other service charges and favorable fair value adjustments on financial instruments carried at fair value.
Previous wording
Net interest margin on a tax equivalent basis was 4.13% for the second quarter of 2026, compared to 4.11% for the preceding quarter. The net interest margin for the current quarter benefited from loan growth, a slight increase in loan yields, and lower deposit costs, partially offset by the increased use of FHLB advances.
Current wording
Net interest margin on a tax equivalent basis was 4.14% for the third quarter of 2026, compared to 4.13% for the preceding quarter. The net interest margin for the current quarter benefited from a higher average yield on interest-earning assets, partially offset by higher funding costs.
Previous wording
Net interest income increased by $18.4 million, or 6% for the six months ended June 30, 2026, compared to the same period one year earlier. The increase was primarily the result of a $6.4 million increase in interest income, primarily reflecting an increase in the average balance of loans, as well as a $12.1 million decrease in interest expense reflecting an 18 basis-point reduction in the average cost of funding liabilities to 1.39% from 1.57%. The net interest margin on a tax equivalent basis increased to 4.12% for the six months ended June 30, 2026, compared to 3.92% for the same period in the prior year.
Current wording
Net interest income increased by $30.3 million, or 7%, for the nine months ended September 30, 2026, compared to the same period one year earlier. The increase was primarily due to a $15.1 million increase in interest income, primarily reflecting an increase in the average balance of loans, driven primarily by organic loan growth and, to a lesser extent, the acquisition of Pacific Financial, as well as a $15.2 million decrease in interest expense, reflecting a 17 basis-point reduction in the average cost of funding liabilities to 1.40% from 1.57%. The net interest margin on a tax equivalent basis increased to 4.13% for the nine months ended September 30, 2026, compared to 3.94% for the same period in the prior year.
Previous wording
Interest Income. Interest income for the quarter ended June 30, 2026 was $202.7 million, compared to $197.8 million for the preceding quarter. The increase for the current quarter, compared to the preceding quarter reflects growth in average loan balances and a slight increase in average loan yields.
Current wording
Interest Income. Interest income for the quarter ended September 30, 2026, was $214.6 million, compared to $202.7 million for the preceding quarter. The increase for the current quarter, compared to the preceding quarter reflected growth in average interest-earning assets as well as an increase in the yield on interest-earning assets.
Previous wording
The total average loan yield increased two basis points to 6.09% for the quarter ended June 30, 2026, from 6.07% in the preceding quarter. The increase in average loan balances for the current quarter, compared to the preceding quarter, primarily reflected growth in real estate secured loans and commercial and agricultural business loans.
Current wording
The total average loan yield increased three basis points to 6.12% for the quarter ended September 30, 2026, from 6.09% in the preceding quarter. The increase in average loan balances for the current quarter, compared to the preceding quarter, primarily reflected growth in real estate secured loans, primarily resulting from the acquisition of Pacific Financial and organic loan growth.
Previous wording
The total investment securities average balance decreased for the quarter ended June 30, 2026, compared to the preceding quarter, reflecting paydowns and maturities that were not fully replaced by new purchases during the period. The average yield on the combined portfolio increased to 3.03% for the quarter ended June 30, 2026, from 3.01% for the preceding quarter. Interest income on interest-bearing deposits with banks decreased for the current quarter, compared to the preceding quarter, reflecting decreases in both the average balance and yield of interest-bearing deposits. The average yield on interest-bearing deposits with banks decreased to 3.16%, compared to 3.34% in the prior quarter.
Current wording
The total investment securities average balance increased for the quarter ended September 30, 2026, compared to the preceding quarter, primarily reflecting new purchases during the period. The average yield on the combined portfolio increased to 3.10% for the quarter ended September 30, 2026, from 3.03% for the preceding quarter. Interest income on interest-bearing deposits with banks increased for the current quarter, compared to the preceding quarter, reflecting an increase in the yield earned on interest-bearing deposits, partially offset by a decrease in average balance of interest-bearing deposits. The average yield on interest-bearing deposits with banks increased to 3.67%, compared to 3.16% in the prior quarter.
Previous wording
Interest income for the six months ended June 30, 2026 was $400.5 million, compared to $394.1 million for the same period in the prior year, an increase of $6.4 million, primarily reflecting growth in average loan balances.
Current wording
Interest income for the nine months ended September 30, 2026, was $615.1 million, compared to $600.0 million for the same period in the prior year, an increase of $15.1 million, primarily reflecting growth in average loan balances.
Previous wording
Interest Expense. Interest expense increased for the quarter ended June 30, 2026, compared to the preceding quarter. Average funding liabilities increased by $122.0 million, primarily due to a $141.1 million increase in the average balance of FHLB advances, partially offset by a $23.6 million decrease in average deposit balances. The average cost of funding liabilities increased one basis point, to 1.39% for the quarter ended June 30, 2026. Interest expense for the six months ended June 30, 2026 was $96.6 million, compared to $108.6 million for the same period in the prior year. The decrease primarily resulted from an 18 basis-point decrease in the average cost of funds to 1.39% from 1.57%.
Current wording
Interest Expense. Interest expense increased for the quarter ended September 30, 2026, compared to the preceding quarter. Average funding liabilities increased by $545.4 million, primarily due to a $631.3 million increase in average deposit balances, partially offset by an $80.0 million decrease in the average balance of FHLB advances. The average cost of funding liabilities increased four basis points, to 1.43% for the quarter ended September 30, 2026 compared to the preceding quarter. Interest expense for the nine months ended September 30, 2026, was $149.3 million, compared to $164.5 million for the same period in the prior year. The decrease primarily resulted from a 17 basis-point decrease in the average cost of funds to 1.40% from 1.57%, partially offset by an increase in average funding liabilities.
Previous wording
Deposit interest expense for the quarter ended June 30, 2026 decreased slightly to $45.6 million, compared to $45.7 million for the preceding quarter. The average rate paid on total deposits, including non-interest-bearing deposits, was 1.33% for the quarter ended June 30, 2026, compared to 1.35% for the preceding quarter. The average rate paid on interest-bearing deposits decreased to 1.98% for the quarter ended June 30, 2026, compared to 1.99% in the preceding quarter. The decrease in the average rate paid on interest-bearing deposits, compared to the preceding quarter is attributable to lower rates paid on certificates of deposit and money market accounts. The decrease in the average rate paid on interest-bearing deposits compared to the preceding quarter was also impacted by shifts in the deposit mix, primarily reflecting continued migration from higher-rate certificates of deposit into lower-cost deposit accounts. Total average deposit balances, including non-interest-bearing deposits, decreased to $13.74 billion for the quarter ended June 30, 2026, compared to $13.76 billion for the preceding quarter.
Current wording
Deposit interest expense for the quarter ended September 30, 2026, increased to $50.0 million, compared to $45.6 million for the preceding quarter. The increase in deposit interest expense compared to the preceding quarter was primarily due to higher average balances of interest-bearing deposits, including deposits assumed in the Pacific Financial acquisition, and higher average rates paid across all interest-bearing deposit categories. The average rate paid on total deposits, including non-interest-bearing deposits, was 1.38% for the quarter ended September 30, 2026, compared to 1.33% for the preceding quarter. The average rate paid on interest-bearing deposits increased to 2.04% for the quarter ended September 30, 2026, compared to 1.98% in the preceding quarter. Total average deposit balances, including non-interest-bearing deposits, increased to $14.37 billion for the quarter ended September 30, 2026, compared to $13.74 billion in the preceding quarter.
Previous wording
Deposit interest expense for the six months ended June 30, 2026 decreased $6.8 million to $91.2 million, compared to $98.1 million for the same period in the prior year. Average deposit balances increased to $13.75 billion for the six months ended June 30, 2026, from $13.43 billion for the same period a year earlier, while the average rate paid on deposits decreased to 1.34% for the six months ended June 30, 2026 from 1.47% for the same period in the prior year. The average cost of interest-bearing deposits decreased by 22 basis points to 1.99% for the six months ended June 30, 2026, compared to 2.21% in the same period a year earlier. The decrease in the average cost of interest-bearing deposits primarily reflected lower rates paid across all categories of interest-bearing deposits, as well as a reduction in the total average balance of higher- rate certificates of deposit.
Current wording
Deposit interest expense for the nine months ended September 30, 2026, decreased $9.1 million to $141.3 million, compared to $150.3 million for the same period in the prior year, as the impact of lower rates paid on interest-bearing deposits more than offset higher average interest-bearing deposit balances. Average deposit balances increased to $13.96 billion for the nine months ended September 30, 2026, from $13.55 billion for the same period a year earlier, while the average rate paid on deposits decreased to 1.35% from 1.48%. The average cost of interest-bearing deposits decreased 22 basis points to 2.01% for the nine months ended September 30, 2026, compared to 2.23% in the same period a year earlier. The decrease in the average cost of interest-bearing deposits primarily reflected lower rates paid across all categories of interest-bearing deposits, reflecting lower market rates paid on deposits.
Previous wording
Interest expense on total borrowings for the quarter ended June 30, 2026 increased to $3.4 million from $2.0 million for the preceding quarter, due to an increase in the average balance on total borrowings, primarily reflecting a $141.1 million increase in the average balance of FHLB advances. Average total borrowings were $350.5 million for the quarter ended June 30, 2026, compared to $204.8 million for the preceding quarter. The average rate paid on total borrowings for the quarter ended June 30, 2026, decreased to 3.88%, from 3.90% for the preceding quarter.
Current wording
Interest expense on total borrowings for the quarter ended September 30, 2026, decreased to $2.7 million from $3.4 million for the preceding quarter, due to a decrease in the average balance of total borrowings, primarily reflecting an $80.0 million decrease in the average balance of FHLB advances. Average total borrowings were $264.7 million for the quarter ended September 30, 2026, compared to $350.5 million for the preceding quarter. The average rate paid on total borrowings for the quarter ended September 30, 2026, increased to 3.99%, from 3.88% for the preceding quarter.
Previous wording
Interest expense on total borrowings for the six months ended June 30, 2026 decreased to $5.4 million from $10.6 million for the same period a year earlier due to a decrease in both the average balance of and rate paid on total borrowings, reflecting the pay-off of Banner’s subordinated debt in June 2025. Average total borrowings were $278.1 million for the six months ended June 30, 2026, compared to $484.3 million for the same period a year earlier. The decrease was primarily due to a $111.6 million decrease in the average balance of FHLB advances and an $80.1 million decrease in the average balance of Junior subordinated debentures and subordinated notes, due to the pay-off of higher-rate subordinated debt during 2025. The average rate paid on total borrowings for the six months ended June 30, 2026 decreased to 3.89% from 4.41% for the same period a year earlier.
Current wording
Interest expense on total borrowings for the nine months ended September 30, 2026, decreased to $8.0 million from $14.2 million for the same period a year earlier, primarily due to decreases in both the average balance of and rate paid on total borrowings. Average total borrowings were $273.6 million for the nine months ended September 30, 2026, compared to $436.4 million for the same period a year earlier. The decrease in average total borrowings was primarily due to a $97.0 million decrease in the average balance of FHLB advances and a $52.3 million decrease in the average balance of junior subordinated debentures and subordinated notes, due to the pay-off of higher-rate subordinated debt during 2025. The average rate paid on total borrowings for the nine months ended September 30, 2026, decreased to 3.92% from 4.35% for the same period a year earlier.
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