Banner NASDAQ: BANR reported first quarter 2026 net profit available to common shareholders of $54.7 million, or $1.60 per diluted share, as management highlighted growth in core earnings and continued balance-sheet strength amid an uncertain economic backdrop.
President and CEO Mark Grescovich said results reflected the company’s “moderate risk profile” and ongoing investments to improve operating performance. Banner’s return on average assets was 1.37% for the quarter, and core deposits remained 89% of total deposits, which Grescovich described as a resilient funding base.
Quarterly performance and “core” results
Grescovich noted that first quarter 2026 earnings compared with $1.30 per diluted share in the first quarter of 2025 and $1.49 per diluted share in the fourth quarter of 2025. To emphasize underlying performance, he pointed to pre-tax, pre-provision earnings excluding certain items, saying first quarter 2026 core earnings were $66.3 million versus $58.6 million a year earlier.
Banner’s revenue from core operations totaled $169 million, up from $160 million in the year-ago quarter, which Grescovich said represented an increase of nearly 6%. He attributed performance to a “very good net interest margin,” core expense control, and the company’s deposit base.
Reflecting capital levels and an 11% increase in tangible common equity per share from the prior year period, Grescovich said the company increased its quarterly dividend 4% to $0.52 per common share.
Loan growth, payoffs, and portfolio mix
Chief Credit Officer Jill Rice said Banner posted “a strong quarter of loan originations” that was in line with the fourth quarter and 61% higher than the first quarter of 2025. However, significant commercial real estate (CRE) payoffs and expected agricultural paydowns offset production, resulting in a $14 million decline in portfolio loans from Dec. 31, 2025. Year-over-year loan growth was 2.4%.
Rice detailed diverging trends across CRE categories. Owner-occupied CRE increased 3% in the quarter and 15% year-over-year, while investor real estate rose 1% in the quarter and nearly 8% year-over-year. Those gains were “almost entirely offset” by multifamily paydowns, with multifamily balances down 6% in the quarter and 9% year-over-year as stabilized properties moved to the secondary market.
In construction, Rice said commercial construction balances increased 12% quarter-over-quarter due to continued funding of previously approved projects, while land development balances fell 7.5% after two large projects paid off. She also said Banner is seeing longer days on market in its for-sale one-to-four family construction portfolio given elevated rates and economic uncertainty, though completed-and-unsold inventory remains within historical norms. One-to-four family construction represented 5% of the loan portfolio, and total construction (including land and land development) represented 14% of total loans.
Rice said C&I line utilization increased 2% in the quarter after declining 3% in the prior quarter, with total commercial loans up about 1% both quarter-over-quarter and year-over-year. Agricultural balances fell 6% in the quarter due to seasonal paydowns from crop proceeds, and the year-over-year decline reflected “the collection and payoff of multiple classified ag balances.”
During the Q&A, Rice said management expects CRE payoff headwinds to slow, though she was “not prepared” to say they are finished. She added that the company’s construction funding backlog and pipelines remain meaningful, and Banner is “still sticking with the mid-single-digit growth rate for 2026.”
Credit quality and reserves
Rice said credit metrics remained strong. Delinquent loans increased two basis points to 0.56% of total loans, compared with 0.63% at March 31, 2025. Adversely classified loans increased $42 million in the quarter to 2% of total loans, while non-performing assets totaled $51.7 million, or 0.32% of total assets. Rice said the increase in adversely classified assets was centered in three relationships in manufacturing, residential construction, and wholesale agricultural supplies.
As of March 31, the allowance for credit losses totaled $160.4 million, equal to 1.37% of total loans and consistent with prior quarters. Loan losses were $1.5 million in the quarter, partially offset by recoveries of $253,000. Rice said the company recorded a $1.3 million provision for credit losses on loans, offset by a $2.1 million release from the reserve for unfunded commitments, resulting in a net provision recapture of $796,000.
In response to an analyst question, Rice characterized non-performing loans as relatively flat and “centered in consumer and small business and the ag-related businesses,” adding that the average non-accrual loan size was less than $250,000, with the largest loan approximately $3 million. She said changes in criticized assets were idiosyncratic rather than tied to a single industry, though the bank is “beginning to see the impact of the higher interest rates and wage inflation and other economic factors strain certain business operations.”
Net interest margin outlook, funding, and capital actions
Chief Financial Officer Rob Butterfield said earnings per share increased from the prior quarter primarily due to lower expenses and the provision recapture, and he noted that the prior quarter included a fair value decrease on certain financial instruments and a loss on asset disposals. He said core pre-tax, pre-provision income increased 13% year-over-year, and Banner posted a 14% return on tangible common equity.
Butterfield said deposits increased $97 million during the quarter, driven by a $165 million increase in core deposits (5.5% annualized), partially offset by a $67 million decline in time deposits. He said $50 million of brokered CDs matured during the quarter, leaving Banner with no brokered deposits at quarter-end. Total borrowings decreased to $142 million, and Banner ended the quarter with no outstanding FHLB advances. The tangible common equity ratio increased to 9.97% from 9.84%.
On net interest margin, Butterfield said tax-equivalent net interest margin was 4.11% in the first quarter, up from 4.03% in the fourth quarter. Net interest income declined $2.3 million from the prior quarter due to lower earning assets and two fewer interest-earning days, partially offset by an eight basis-point increase in margin. Butterfield said funding costs decreased nine basis points, helped by deposit pricing reductions implemented in the fourth quarter of 2025.
Looking ahead, Butterfield said Banner typically sees higher funding costs in the second quarter due to tax-related deposit outflows and the use of FHLB advances, which he expects to be “mostly offset” by higher loan yields as adjustable-rate loans reprice and new loan production comes on at higher yields than the portfolio average. He said that suggests net interest margin will be “relatively flat” in the second quarter, with potential expansion in the third quarter and “some net interest margin expansion in the second half of the year.”
Butterfield also addressed capital deployment, noting Banner repurchased 250,000 shares during the quarter and that the bank has repurchased shares for three consecutive quarters. He reiterated that management’s dividend goal is to pay out 35% to 40% of earnings as a core dividend, and said additional buybacks could be considered depending on market conditions and valuation. He also said the tangible common equity ratio is “above where we’d like it to be,” adding that “ideally” management would like the ratio to be about 100 basis points lower over time.
On M&A, Grescovich said Banner remains “very selective” and opportunistic, looking for partners that fit culturally, add market density, and bring strong core deposit franchises. He said management feels good about Banner’s organic growth opportunities, while remaining open to attractive opportunities.
Technology investments and market recognition
In the Q&A, management also discussed technology and AI. Butterfield said Banner has an internal fintech council to evaluate new technologies and has begun adopting AI primarily by enabling AI capabilities within existing software platforms. He cited the company’s loan and deposit origination system that went fully live last year, and said the bank is also staying current on developments in tokenized deposits and stablecoin, including bringing in outside experts during its strategic planning process.
Grescovich added that regional banks need to be cautious with AI to protect client data integrity, and he pointed to potential applications such as BSA/AML and call center responsiveness.
Grescovich also highlighted third-party recognition Banner received, including being named one of America’s 100 best banks and one of the best banks in the world by Forbes, as well as recognition from Newsweek, J.D. Power, Great Place to Work, and S&P Global Market Intelligence.
About Banner NASDAQ: BANR
Banner Corporation, through its principal subsidiary Banner Bank, operates as a regional commercial bank headquartered in Walla Walla, Washington. Founded in 2000 as a bank holding company, Banner traces its origins to community banking roots in Eastern Washington dating back to the late 19th century. Over the past two decades, the company has grown through both organic expansion and strategic acquisitions, establishing a strong presence throughout the Pacific Northwest.
The company offers a comprehensive suite of financial products and services for individual and business clients.
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