Skip to content
    BANR
    Earnings call· Jun 2026(Q2 FY26)

    BANNER CORP BANR

    Jul 23, 2026 Source

    Executive summary

    Banner Corporation Q2 FY26 — Solid Operating Performance Driven by Loan Growth and NIM Expansion

    Banner Corporation delivered a solid Q2 FY26, marked by strong loan growth across multiple product lines and an increase in core earnings. The company maintained a robust balance sheet and capital position, supporting a moderate risk profile. Management continues to focus on organic growth and operational efficiency, while also progressing with the Bank of the Pacific acquisition to enhance its core deposit base.

    Highlights

    5

    • Net profit available to common shareholders was $48.9 million or $1.43 per diluted share.

    • Core earnings increased to $64.4 million, up from $62.5 million year-over-year.

    • Revenue from core operations increased nearly 6% to $172 million.

    • Loan outstandings grew by $287 million or nearly 10% on an annualized basis.

    • Tangible common equity per share increased by 11% from the prior year.

    Concerns

    3

    • Nonperforming assets increased by $8.9 million due to a single condo construction project moving to nonaccrual.

    • Total noninterest income decreased $939,000 from the prior quarter.

    • Total noninterest expense increased $5.4 million from the prior quarter, partly due to delayed Q1 expenses and a $924,000 write-off of an old loan origination system.

    Guidance & targets

    4
    CategoryTargetConfidence
    Loan growth rate
    mid-single-digit growth rate
    high materiality
    Medium
    Net interest margin (NIM) increase
    1 to 2 basis points of increase quarter-over-quarter
    high materiality
    Medium
    Deposit costs
    remain relatively flat
    medium materiality
    Medium
    Net interest margin (NIM) expansion
    couple of basis points of margin expansion
    high materiality
    Medium

    Operational metrics

    25
    Diluted EPS
    $1.43$1.60 prior quarter
    Q2 FY26

    net profit available to common shareholders

    Core pretax pre-provision income
    $64.4 millionincreased $1.9 million or 3% YoY
    Q2 FY26

    excluding gains and losses on the sale of securities, changes in fair value of financial instruments, merger and acquisition-related expenses and building and lease exit costs

    Revenue from core operations
    $172 millionincreased nearly 6% YoY from $163 million
    Q2 FY26
    Return on average assets
    1.20%
    Q2 FY26
    Core deposits as % of total deposits
    89%same as previous quarter
    Q2 FY26
    Tangible common equity per share growth
    11%YoY
    Q2 FY26
    Adversely classified assets as % of total loans
    1.82%decreased 19 bps QoQ
    Q2 FY26

    down $16.5 million QoQ

    REO balances
    $5.7 milliondeclined by $500,000 QoQ
    Q2 FY26
    Provision for unfunded loan commitments
    $2.2 million
    Q2 FY26

    part of net provision for credit losses

    Loan losses
    $577,000
    Q2 FY26

    offset in part by recoveries totaling $476,000

    Loan originations growth
    45%QoQ
    Q2 FY26
    Loan outstandings growth
    $287 millionnearly 10% annualized
    Q2 FY26

    despite continued commercial real estate and C&I loan payoffs

    Loan-to-deposit ratio
    87%
    Q2 FY26

    provides strong liquidity and funding flexibility

    Tangible common equity to asset ratio
    10.02%
    Q2 FY26
    Total shareholders' equity
    $2 billionincreased $33 million QoQ
    Q2 FY26
    Average rate on new loan production
    6.53%compared to 6.69% prior quarter
    Q2 FY26
    Non-interest bearing deposits as % of total deposits
    33%same as previous quarter
    Q2 FY26
    Valuation of financial instruments
    $1.7 millionincrease
    Q1 FY26

    prior quarter had this increase, contributing to QoQ decrease in noninterest income

    Software expense
    $1.8 millionhigher QoQ
    Q2 FY26

    related to write-off of previous commercial loan origination system

    Marketing expense
    $1.3 millionhigher QoQ
    Q2 FY26

    due to timing of advertising campaigns, effectively two quarters' worth in Q2

    Salary expense
    $800,000higher QoQ
    Q2 FY26

    due to normal annual salary increases completed at end of Q1

    Legal expenses
    $764,000higher QoQ
    Q2 FY26

    due to various legal matters

    M&A expense
    $238,000
    Q2 FY26

    related to the Bank of the Pacific acquisition

    Residential construction loans as % of total loan portfolio
    5%
    Q2 FY26
    Overall construction portfolio as % of total loans
    14%
    Q2 FY26

    reflecting measured approach to managing construction-related exposure

    Industry KPIs

    10
    MetricValueDetails
    Loans—
    Deposits—
    Rotce ROE12.27%%
    Capital returns$0.52per common share
    Allowance reserves1.35%%
    Net interest income—
    Net interest margin4.13%%
    Net charge offs npls0.51%%
    Total operating expenses—
    Provision for credit losses$3.8 millionUSD

    Deals & partnerships

    1
    Bank of the PacificCombination to add strong core deposits and expand market presence.

    Management expects the integration to go smoothly and on schedule. The transaction would not preclude Banner from doing something else.

    Risks & headwinds

    4
    Economic uncertaintyOngoing

    Unquantified, but described as ongoing headwinds.

    Mitigation: Super community bank delivery model, disciplined credit culture, strong balance sheet, robust capital levels, and solid allowance for credit losses.

    Loan payoffsQ2 FY26, slowing but not done

    materially tempered loan growth

    Mitigation: Strong pipelines and new originations are offsetting the impact.

    Elevated interest rate environmentQ2 FY26

    increased modestly this quarter

    Mitigation: Completed and unsold inventory levels remain within historical norms and are considered manageable. Closely monitoring sales velocity, particularly in higher-end products.

    Consumer credit strainOngoing

    Nonperforming assets increased by $8.9 million due to a single condo construction project moving to nonaccrual.

    Mitigation: The majority of nonperforming loans are 1-4 family or other consumer-related credits with protracted resolution timelines; the condo project is expected to have a medium-term resolution.

    What to watch in Q3 FY26

    5

    Loan growth rate

    Q3 FY26 / Full Year FY26
    Currentnearly 10% on an annualized basis
    Targetmid-single-digit growth rate

    Why it matters

    Loan growth is a primary driver of NII and overall bank profitability. Achieving the full-year target will indicate continued strong demand and effective origination.

    third quarter will probably come down a little bit in originations and loan growth, yet we still expect to end the year -- the full year at that mid-single-digit growth rate.

    Q&A highlights

    5

    What was the weighted average rate on new loans, and what is the outlook for loan yields and deposit costs, especially with the CD book repricing and potential Fed action?

    The average yield on new loan production was 6.53%. Loan yield increases are slowing, with 1-2 bps expected for the rest of the year. Deposit costs were flat at 133 bps and are expected to remain flat as the CD book is mostly repriced, though CD specials are increasing in the market.

    “So the average yield on loan production for the quarter was 6.53%.”

    asked by Matthew Clark · answered by Robert Butterfield

    1 min read5 chapters

    Detailed Narrative

    01

    Credit Quality Trends

    Delinquent loans declined 5 basis points to 0.51% of total loans, and adversely classified assets decreased by $16.5 million, representing 1.82% of total loans. However, nonperforming assets increased by $8.9 million due to a single condo construction project moving to nonaccrual. The loan loss reserve remains strong at 1.35% of total loans, providing robust coverage.

    02

    Loan Origination and Growth Drivers

    Loan originations increased 45% quarter-over-quarter, with commercial originations up 85%, construction up 73%, and consumer up 55%. Loan outstandings grew by $287 million, or nearly 10% annualized, driven by C&I, consumer, and owner-occupied real estate. This growth was broad-based across the West Coast, reflecting new client acquisition and expanded existing relationships, despite continued loan payoffs.

    03

    Deposit Dynamics and Funding

    Total deposits decreased $51 million due to normal seasonal activities, primarily tax payments. Core deposits, representing 89% of total deposits, decreased $59 million. FHLB advances increased $319 million to temporarily fund loan growth and seasonal outflows, but are expected to decrease in Q3 with anticipated deposit growth.

    04

    Operational Efficiency and Technology Investment

    The company invested in a new commercial loan origination system, leading to a $924,000 nonrecurring write-off of the previous system. This investment aims to automate manual back-office processes, streamline operations by consolidating multiple systems, and improve the speed of loan processing, contributing to increased originations.

    05

    Strategic Outlook and M&A

    Management continues to pursue an organic growth model, leveraging strong capital levels and core earnings. The pending Bank of the Pacific acquisition, expected to close in Q3 FY26, is on track and will add a strong core deposit base. This transaction will not preclude Banner from pursuing further opportunistic nonorganic growth, especially given the scarcity of opportunities on the West Coast.

    AI-generated summary of the company’s earnings call. Not investment advice.