SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 26, 2005
Banner Corporation
(Exact name of registrant as specified in its charter)
Washington	0-26584	91-1691604
State or other jurisdiction	Commission	(I.R.S. Employer
of incorporation	File Number	Identification No.)
10 S. First Avenue, Walla Walla, Washington		99362
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number (including area code) (509) 527-3636
Not Applicable
(Former name or former address, if changed since last report)

        Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

[  ]      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
          CFR 240.14d-2(b))

[  ]      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
           CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition

        On January 26, 2005, Banner Corporation issued its earnings release for the quarter ended December 31, 2004. A copy of the earnings release is attached hereto as Exhibit 99.1, which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

        (c)        Exhibits

        99.1     Press Release of Banner Corporation dated January 26, 2005.

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SIGNATURES
        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	BANNER CORPORATION
Date: January 26, 2005	By: /s/ D. Michael Jones
	D. Michael Jones
	President and Chief Executive Officer

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Exhibit 99.1

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The Cereghino Group
CORPORATE INVESTOR RELATIONS
5333 - 15^th AVE So., Suite 1500
SEATTLE, WA 98108
206.762.0993
www.stockvalues.com Contact: D. Michael Jones,
              President and CEO
              Lloyd W. Baker, CFO
              (509) 527-3636
News Release

BANNER CORPORATION'S NET INCOME INCREASES 20% FOR FOURTH QUARTER AND YEAR;
NET INTEREST INCOME CLIMBS 24% AS LOANS INCREASE 21% FOR THE YEAR

Walla Walla, WA - January 26, 2005 - Banner Corporation (Nasdaq: BANR), the parent company of Banner Bank, today reported that continued growth in loans and net interest income contributed to a 20% increase in profits for the fourth quarter and full year ended December 31, 2004, compared to the quarter and year ended December 31, 2003. For all of 2004, net income increased 20% to $19.3 million, or $1.65 per diluted share, compared to $16.1 million, or $1.44 per diluted share, a year ago. For the fourth quarter of 2004, net income increased to $5.3 million, or $0.45 per diluted share, compared to $4.4 million, or $0.39 per diluted share, for the fourth quarter of 2003.

"Our primary goals for 2004 were to improve our performance results and credit quality while being aggressive in growing our franchise," said D. Michael Jones, President and Chief Executive Officer. "To those ends, we have produced increased earnings quarter over quarter and significantly decreased our non-performing assets to more acceptable levels. With respect to franchise growth, earlier this year we opened new offices in Hillsboro, Oregon, Walla Walla, Washington, and Boise and Twin Falls, Idaho. During the fourth quarter we began the process of opening branches in Kent, Edmonds and Everett, Washington. We expect them to be fully operational in the first quarter. In the next 30 days, we expect to open branches in Lynnwood and Mercer Island, Washington, and relocate our Lynden, Washington branch. During the first quarter of 2005, we will also relocate our Spokane Valley branch. In addition, we have broken ground on a Vancouver, Washington branch and are working on plans for three new branches in Southern Idaho."

Fourth Quarter 2004 Highlights (Compared to Fourth Quarter 2003)

·
·
·
·
·
·
· Net income increased 20% to $5.3 million.
Non-performing assets to total assets declined by 50%.
Assets increased 10% to $2.90 billion.
Loans increased 21% to $2.06 billion.
Deposits grew 15% to $1.93 billion.
Net interest income, after the provision for loan loss, increased 19% to $23.8 million.
Revenues increased 16% to $29.4 million.

Income Statement Review

Net interest margin increased 18 basis points to 3.71% for the year ended December 31, 2004, compared to 3.53% for the prior year. In the fourth quarter of 2004, the net interest margin was 3.72%, compared to 3.57% in the fourth quarter a year ago. "We have seen steady improvements in our net interest margin on a year over year basis as strong loan growth and increasing asset yields more than offset recent pressures on funding costs," said Jones. "Although net interest margin for the fourth quarter improved 15 basis points from the fourth quarter last year, it was lower than third quarter net interest margin primarily due to the collection of more than $600,000 of delinquent interest on non-accrual loans that occurred in the third quarter." Banner's third quarter net interest margin was 3.79%. Funding costs were up ten basis points compared to the previous quarter and up four basis points from the fourth quarter a year earlier. By contrast, asset yields were higher by two and 17 basis points, respectively, compared to the quarters ended September 30, 2004 and December 31, 2003.

Revenues (net interest income before the provision for loan losses plus other operating income) for 2004 increased 13% to $113.3 million, compared to $100.2 million for 2003. For the fourth quarter, revenues increased 16% to $29.4 million, compared to $25.3 million for the same quarter of 2003.

For the year, net interest income before the provision for loan losses increased 20% to $96.3 million, compared to $80.6 million in 2003. For the fourth quarter, net interest income before the provision for loan losses increased 17% to $25.1 million, compared to $21.5 million in the same quarter a year ago, reflecting asset growth and improved credit quality. Banner's net interest income, after the provision for loan losses, increased 24% and 19% for the year and the fourth quarter 2004 compared to the respective periods a year ago.

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 2

Total other operating income for the fourth quarter increased 11% to $4.3 million, compared to $3.8 million for the same quarter last year. For all of 2004, other operating income was $17.0 million compared to $19.6 million in fiscal 2003. Income from deposit fees and other service charges increased to $2.1 million in the fourth quarter and $8.1 million for the year, compared to $1.8 million and $7.2 million for the respective periods in 2003. For all of 2004, income from mortgage banking operations, including loan servicing fees, decreased to $7.3 million compared to $10.5 million in 2003, as generally higher interest rates had an adverse effect on loan origination and refinancing activity. However, mortgage banking operations and loan servicing fees increased 17% to $1.9 million in the fourth quarter compared to $1.6 million for the fourth quarter a year ago.

Reflecting the increased size of the Bank and its new offices, other operating expense was $20.4 million for the quarter ended December 31, 2004, compared to $17.7 million for the fourth quarter a year ago and $20.9 million for the third quarter of 2004. For the full year, other operating expense totaled $79.7 million, compared to $69.9 million in 2003. The ratio of other operating expense (expense ratio) to average assets was 2.85% for the fourth quarter, compared to 2.98% for the third quarter of 2004 and 2.75% for the fourth quarter of 2003. For the year, the expense ratio was 2.90%, compared to 2.86% for 2003.

"In 2004, we focused on building our franchise by adding seven branches, three lending centers and one operations center and advancing plans for further expansion in 2005. Hiring personnel to staff this expansion and increased occupancy costs have contributed to a higher level of non-interest expenses," said Jones. "One of the primary purposes of the rapid branch expansion is to proportionally reduce our reliance on borrowed funds and large certificates of deposit by emphasizing core deposit growth and thereby reducing the relative level of our cost of funds. This expansion will temporarily impact our short-term profitability but if successful will improve our net interest margin, a needed action to improve our performance metrics."

Balance Sheet Review

Net loans increased 21%, to $2.06 billion at December 31, 2004, from $1.70 billion a year ago. "Our lending personnel have generated steady growth in commercial and multifamily real estate loans, construction and land loans, and commercial and agricultural business loans, which now account for 81% of the loan portfolio," said Jones. "We are pleased with the growth in balances and the new loan relationships that have been added in 2004."

Assets reached a record $2.90 billion, a 10% increase from $2.64 billion a year earlier. "Banner Bank's deposit growth has also been solid this year, in part reflecting some of our new locations, but also resulting from continued success at many of our existing branches," added Jones. Deposits grew 15%, to $1.93 billion, compared to $1.67 billion at December 31, 2003. Core deposits grew 26% in 2004, while certificates of deposit increased only 8% as the Bank continues to change its funding mix. Book value per share increased to $18.74 at December 31, 2004, from $18.37 a year earlier. Tangible book value per share increased to $15.58 at year-end, compared to $15.06 a year earlier.

Credit Quality

"Our key credit quality ratios have improved significantly as a result of a 50% reduction in non-performing assets to total assets during 2004," said Jones. "Net charge-offs to average loans outstanding, at 11 basis points for 2004, also shows dramatic improvement from 47 basis points a year ago." Non-performing assets were $17.4 million, or 0.60% of total assets, at December 31, 2004, a 45% improvement from $31.6 million, or 1.20% of total assets, a year ago. The loan loss provision for the fourth quarter of 2004 was $1.3 million, compared to $1.4 million in the like quarter of 2003. At December 31, 2004, the allowance for loan losses totaled $29.6 million, representing 1.41% of total loans outstanding.

Conference Call

The Company will host a conference call today, Wednesday, January 26, 2005, at 8:00 a.m. PST, to discuss fourth quarter and year-end results. The conference call can be accessed live by telephone at 303-262-2211. To listen to the call online, go to the Company's website at www.bannerbank.com or to www.fulldisclosure.com. Institutional investors may access the call via the subscriber-only site, www.streetevents.com. An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11020058# until Wednesday, February 2, 2005 or via the Internet at www.fulldisclosure.com.

About the Company

Banner Corporation is the parent company of Banner Bank, a commercial bank, which operates a total of 49 branch offices and 12 loan offices in 23 counties in Washington, Oregon and Idaho. Banner Bank serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 3

Statements concerning future performance, developments or events, expectations for earnings, growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements, which are subject to a number of risks and uncertainties that are beyond Banner's control and might cause actual results to differ materially from the expectations and stated objectives. Factors which could cause actual results to differ materially include, but are not limited to, regional and general economic conditions, management's ability to generate continued improvement in asset quality and profitability, changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, competition, loan delinquency rates, the successful operation of the newly-opened branches and loan offices, changes in accounting principles, practices, policies or guidelines, changes in legislation or regulation, other economic, competitive, governmental, regulatory and technological factors af fecting operations, pricing, products and services and Banner's ability to successfully resolve the outstanding credit issues and/or recover check kiting losses. Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Banner undertakes no responsibility to update or revise any forward-looking statements.

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 4

RESULTS OF OPERATIONS				Quarters Ended						12 Months Ended
( In thousands except share and per share data )				Dec 31, 2004		Sep 30, 2004		Dec 31, 2003		Dec 31, 2004		Dec 31, 2003
INTEREST INCOME:
	Loans receivable		$	34,624	$	33,051	$	28,711	$	126,992	$	116,211
	Mortgage-backed securities			3,806		4,155		3,857		16,882		12,319
	Securities and cash equivalents			2,941		3,194		3,221		12,356		11,911
				41,371		40,400		35,789		156,230		140,441
INTEREST EXPENSE:
	Deposits			9,725		9,074		8,373		35,067		34,984
	Federal Home Loan Bank advances			5,191		5,058		5,056		20,336		21,842
	Junior subordinated debentures			1,015		911		674		3,461		2,233
	Other borrowings			334		257		226		1,051		789
				16,265		15,300		14,329		59,915		59,848
	Net interest income before provision for loan losses			25,106		25,100		21,460		96,315		80,593
PROVISION FOR LOAN LOSSES				1,300		1,444		1,400		5,644		7,300
	Net interest income			23,806		23,656		20,060		90,671		73,293
OTHER OPERATING INCOME:
	Deposit fees and other service charges			2,084		2,148		1,832		8,132		7,224
	Mortgage banking operations			1,435		1,383		1,217		5,522		9,447
	Loan servicing fees			417		711		368		1,741		1,056
	Gain on sale of securities			1		67		45		141		63
	Miscellaneous			340		441		379		1,432		1,791
	Total other operating income			4,277		4,750		3,841		16,968		19,581
OTHER OPERATING EXPENSE:
	Salary and employee benefits			13,485		13,719		11,737		52,331		47,032
	Less capitalized loan origination costs			(1,824)		(1,806)		(1,618)		(7,008)		(7,196)
	Occupancy and equipment			3,177		2,791		2,407		11,100		9,575
	Information / computer data services			1,063		1,107		896		4,212		3,532
	Professional services			807		746		784		3,258		2,684
	Advertising			1,348		1,108		788		4,905		3,373
	Miscellaneous			2,372		3,257		2,682		10,916		10,876
	Total other operating expense			20,428		20,922		17,676		79,714		69,876
	Income before provision for income taxes			7,655		7,484		6,225		27,925		22,998
PROVISION FOR INCOME TAXES				2,388		2,322		1,821		8,585		6,891
NET INCOME			$	5,267	$	5,162	$	4,404	$	19,340	$	16,107
Earnings per share
		Basic	$	0.47	$	0.46	$	0.40	$	1.74	$	1.49
		Diluted	$	0.45	$	0.44	$	0.39	$	1.65	$	1.44
Cumulative dividends declared per common share			$	0.17	$	0.16	$	0.15	$	0.61	$	0.61
Weighted average shares outstanding
		Basic		11,207,582		11,168,735		10,885,611		11,142,254		10,830,365
		Diluted		11,828,644		11,736,415		11,423,742		11,734,507		11,216,784
Shares repurchased during the period				114,477		104		14,931		134,263		23,657

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 5

FINANCIAL CONDITION
( In thousands except share and per share data )			Dec 31, 2004		Sep 30, 2004		Dec 31, 2003
ASSETS
Cash and due from banks		$	51,767	$	65,800	$	77,298
Securities available for sale			547,835		583,196		674,942
Securities held to maturity			49,914		49,554		27,232
Federal Home Loan Bank stock			35,698		35,698		34,693
Loans receivable:
	Held for sale		2,145		8,303		15,912
	Held for portfolio		2,090,703		1,976,100		1,711,013
	Allowance for loan losses		(29,610)		(29,407)		(26,060)
			2,063,238		1,954,996		1,700,865
Accrued interest receivable			15,097		14,930		13,410
Real estate owned held for sale, net			1,485		2,923		2,967
Property and equipment, net			39,315		35,351		22,818
Goodwill and other intangibles, net			36,369		36,405		36,513
Deferred income tax asset, net			5,888		5,266		1,941
Bank-owned life insurance			35,371		34,957		33,669
Other assets			15,090		11,086		8,965
		$	2,897,067	$	2,830,162	$	2,635,313
LIABILITIES
Deposits:
	Non-interest-bearing	$	234,761	$	229,624	$	205,656
	Interest-bearing		1,691,148		1,681,548		1,465,284
			1,925,909		1,911,172		1,670,940
Borrowings:
	Advances from Federal Home Loan Bank		583,558		530,958		612,552
	Junior subordinated debentures		72,168		72,168		56,703
	Other borrowings		68,116		79,080		69,444
			723,842		682,206		738,699
Accrued expenses and other liabilities			25,027		21,288		18,444
Deferred compensation			5,208		4,931		4,252
Income taxes payable			1,861		50		178
			2,681,847		2,619,647		2,432,513
STOCKHOLDERS' EQUITY
Common stock			127,460		125,672		123,375
Retained earnings			92,327		88,796		80,286
Accumulated other comprehensive income (loss)			(888)		183		3,191
Unearned shares of common stock issued to Employee Stock
	Ownership Plan ( ESOP ) trust: at cost		(3,096)		(3,628)		(3,589)
Net carrying value of stock related deferred compensation plans			(583)		(508)		(463)
			215,220		210,515		202,800
		$	2,897,067	$	2,830,162	$	2,635,313
Shares Issued:
Shares outstanding at end of period			11,856,889		11,652,816		11,473,331
	Less unearned ESOP shares at end of period		374,595		438,985		434,299
Shares outstanding at end of period excluding unearned ESOP shares			11,482,294		11,213,831		11,039,032
Book value per share (1)		$	18.74	$	18.77	$	18.37
Tangible book value per share (1)		$	15.58	$	15.53	$	15.06
Consolidated Tier 1 leverage capital ratio			8.93%		8.85%		8.73%
(1)	- Calculation is based on number of shares outstanding at the end of the period rather than weighted average shares      outstanding and excludes unallocated shares in the employee stock ownership plan ( ESOP ).

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 6

ADDITIONAL FINANCIAL INFORMATION
( Dollars in thousands )
LOANS ( including loans held for sale ):			Dec 31, 2004		Sep 30, 2004		Dec 31, 2003
Commercial real estate		$	547,574	$	531,714	$	455,964
Multifamily real estate			107,745		104,713		89,072
Construction and land			506,137		451,393		398,954
Commercial business			395,281		364,235		321,671
Agricultural business including secured by farmland			148,343		156,110		118,903
One- to four-family real estate			307,986		298,759		275,197
Consumer			79,782		77,479		67,164
	Total loans outstanding	$	2,092,848	$	1,984,403	$	1,726,925
NON-PERFORMING ASSETS:			Dec 31, 2004		Sep 30, 2004		Dec 31, 2003
Loans on non-accrual status		$	15,416	$	20,091	$	28,010
Loans more than 90 days delinquent, still on accrual			472		579		421
Total non-performing loans			15,888		20,670		28,431
Real estate owned ( REO ) / Repossessed assets			1,559		3,051		3,132
	Total non-performing assets	$	17,447	$	23,721	$	31,563
Total non-performing assets / Total assets			0.60%		0.84%		1.20%

			Quarters Ended						12 Months Ended
CHANGE IN THE ALLOWANCE FOR LOAN LOSSES:			Dec 31, 2004		Sep 30, 2004		Dec 31, 2003		Dec 31, 2004		Dec 31, 2003
Balance, beginning of period		$	29,407	$	28,037	$	26,161	$	26,060	$	26,539
Provision			1,300		1,444		1,400		5,644		7,300
Recoveries of loans previously charged off			176		975		155		1,587		1,075
Loans charged-off			(1,273)		(1,049)		(1,656)		(3,681)		(8,854)
	Net ( charge-offs ) recoveries		(1,097)		(74)		(1,501)		(2,094)		(7,779)
Balance, end of period		$	29,610	$	29,407	$	26,060	$	29,610	$	26,060
Net charge-offs / Average loans outstanding			0.05%		0.00%		0.09%		0.11%		0.47%
Allowance for loan losses / Total loans outstanding			1.41%		1.48%		1.51%		1.41%		1.51%

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BANR  -  Fourth Quarter Results
January 26, 2005
Page 7

ADDITIONAL FINANCIAL INFORMATION ( Dollars in thousands ) ( Rates / Ratios Annualized )
			Quarters Ended						12 Months Ended
OPERATING PERFORMANCE:			Dec 31, 2004		Sep 30, 2004		Dec 31, 2003		Dec 31, 2004		Dec 31, 2003
Average loans		$	2,031,006	$	1,952,163	$	1,701,335	$	1,898,664	$	1,654,344
Average securities and deposits			656,762		683,520		685,836		694,365		625,804
Average non-interest-earning assets			166,997		155,668		167,042		158,891		163,481
	Total average assets	$	2,854,765	$	2,791,351	$	2,554,213	$	2,751,920	$	2,443,629
Average deposits		$	1,928,851	$	1,858,240	$	1,678,097	$	1,809,072	$	1,619,297
Average borrowings			684,303		700,034		654,057		710,443		609,356
Average non-interest-earning liabilities			26,458		24,321		22,407		22,695		18,735
	Total average liabilities		2,639,612		2,582,595		2,354,561		2,542,210		2,247,388
Total average stockholders' equity			215,153		208,756		199,652		209,710		196,241
	Total average liabilities and equity	$	2,854,765	$	2,791,351	$	2,554,213	$	2,751,920	$	2,443,629
Interest rate yield on loans			6.78%		6.74%		6.70%		6.69%		7.02%
Interest rate yield on securities and deposits			4.09%		4.28%		4.09%		4.21%		3.87%
	Interest rate yield on interest-earning assets		6.12%		6.10%		5.95%		6.03%		6.16%
Interest rate expense on deposits			2.01%		1.94%		1.98%		1.94%		2.16%
Interest rate expense on borrowings			3.80%		3.54%		3.61%		3.50%		4.08%
	Interest rate expense on interest-bearing liabilities		2.48%		2.38%		2.44%		2.38%		2.69%
Interest rate spread			3.64%		3.72%		3.51%		3.65%		3.47%
Net interest margin			3.72%		3.79%		3.57%		3.71%		3.53%
Other operating income / Average assets			0.60%		0.68%		0.60%		0.62%		0.80%
Other operating expense / Average assets			2.85%		2.98%		2.75%		2.90%		2.86%
Efficiency ratio ( other operating expense / revenue )			69.52%		70.09%		69.86%		70.37%		69.75%
Return on average assets			0.73%		0.74%		0.68%		0.70%		0.66%
Return on average equity			9.74%		9.84%		8.75%		9.22%		8.21%
Average equity / Average assets			7.54%		7.48%		7.82%		7.62%		8.03%

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Transmitted on Business Wire on Wednesday, January 26, 2005, at 5:00 a.m. PST.