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): October 27, 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 October 27, 2005, Banner Corporation issued its earnings release for the quarter ended September 30, 2005. 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 October 27, 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: October 27, 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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                                                                                 Contact: D. Michael Jones,
                                                                                               PRESIDENT AND CEO 
                                                                                               LLOYD W. BAKER, CFO
                                                                                              (509)527-3636
 

News Release

BANNER CORPORATION'S THIRD QUARTER PROFITS INCREASE 10%
TO $5.7 MILLION, AS BOTH LOANS AND DEPOSITS INCREASE 19%

Walla Walla, WA - October 27, 2005 - Banner Corporation (Nasdaq: BANR), the parent company of Banner Bank, today reported improved third quarter profits as a result of continued loan and deposit growth. Net income increased 10% to $5.7 million, or $0.47 per diluted share, in the third quarter ended September 30, 2005, compared to $5.2 million, or $0.44 per diluted share, in the third quarter a year ago. For the first nine months of 2005, Banner's net income increased 9% to $15.4 million, compared to $14.1 million in the first nine months of 2004.

"The investments we are making in our branch network, marketing programs and lending teams are combining to produce solid results, as demonstrated by our third quarter profits," said D. Michael Jones, President and Chief Executive Officer. "Our efforts have paid off as we have increased both loans and deposits 19% over the past twelve months. Transaction and savings accounts comprise the bulk of this new deposit growth over the past year as balances for these types of accounts have increased 33%. Much of this deposit growth can be attributed to our successful franchise expansion, which we are continuing. In the third quarter we opened offices in Vancouver and Walla Walla, Washington and Boise, Idaho, and this month we opened an office in Beaverton, Oregon. Before year-end, we expect to be operating our new branch in Burlington, Washington and to have construction substantially complete for new offices in Pasco, Washington and Twin Falls, Idaho."

In the third quarter ended September 30, 2005, Banner issued $25 million of trust preferred securities to help fund its expanding operations. "Trust preferred securities are an excellent source of capital to support our continued growth," said Jones. "The proceeds from this offering provide additional flexibility with regard to the capital structure of both the Bank and the Company. We currently have over $40 million of unencumbered cash at the holding company level that could be used to fund the Bank's capital needs, acquisitions, stock repurchases or the prepayment of more costly trust preferred securities issued in prior years."

Third Quarter 2005 Highlights (Compared to Third Quarter 2004)

• Assets grew 13% to $3.19 billion.
• Loans increased 19% to $2.33 billion.
• Non-interest bearing deposits increased 40% and total deposits increased 19% to $2.28 billion.
• Non-performing assets declined by 41% (and 19% since June 30, 2005).
• Revenues advanced 11% to $33.1 million.
• Net income increased 10% to $5.7 million.
• Net interest income before provision for loan losses grew 12% to $28.1 million.

Income Statement Review

For the third quarter, net interest income before the provision for loan losses increased 12% to $28.1 million, compared to $25.1 million in the same quarter a year ago. Revenues (net interest income before the provision for loan losses plus other operating income) grew 11% to $33.1 million in the third quarter, from $29.9 million last year. Total other operating income for the third quarter increased 5% to $5.0 million, compared to $4.8 million for the same quarter last year. Income from deposit fees and other service charges increased 19% to $2.6 million in the third quarter, compared to $2.1 million for the same period in 2004. Income from mortgage banking operations increased 21% to $1.7 million in the third quarter, compared to $1.4 million in the third quarter a year ago.

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BANR-Third Quarter Results
October 27, 2005
Page 2

For the nine-month period ended September 30, 2005, net interest income before the provision for loan losses increased 12% to $80.0 million, compared to $71.2 million in the same period a year ago. Revenues increased 12% to $93.6 million in the first nine months of 2005, compared to $83.9 million in the nine-month period a year ago. Total other operating income increased 7% to $13.6 million in the first nine months of 2005, compared to $12.7 million in the first nine months of 2004.

Primarily as a result of Banner's branch expansion program over the past twelve months, other operating expenses increased to $23.6 million in the third quarter, compared to $20.9 million in the third quarter last year. For the first nine months of 2005, other operating expenses were $67.7 million, an increase from $59.3 million in the first nine months of 2004. The ratio of other operating expense (expense ratio) to average assets was 2.98% for the third quarter, compared to 3.02% for the second quarter of 2005 and 2.98% for the third quarter a year ago.

"So far during 2005 we have opened new branches in Beaverton, Oregon, Boise, Idaho and Vancouver, Kent, Everett, Edmonds, Lynnwood, Mercer Island and East Wenatchee, Washington. In addition, we have relocated branches in Lynden, Spokane and Walla Walla, Washington. We also saw significant progress on the construction of our four other southwestern Idaho branch offices, which we expect to open within the next six to twelve months. Operating expenses will continue to be higher as a result of our expansion, but over time these new branches should help improve our profitability by providing low cost deposits and proportionately reducing our borrowings from the Federal Home Loan Bank," said Jones. In part reflecting its enhanced deposit gathering ability, Banner has reduced its dependence on borrowings from the Federal Home Loan Bank of Seattle ("FHLB") 17% to $485 million at September 30, 2005 from $584 million just nine months earlier.

Banner's net interest margin was 3.77% for the third quarter of 2005, an improvement from 3.75% in the previous quarter. The net interest margin was 3.79% for the third quarter of 2004. For the first nine months of the year, the net interest margin was 3.75%, a four basis point improvement from 3.71% for the same period last year. "We experienced a modest expansion in our net interest margin from the previous quarter as a result of the shift in our loan and deposit mix and increasing asset yields, despite higher funding costs as a result of increasing short-term interest rates," said Jones. Funding costs were up 17 basis points compared to the previous quarter and up 63 basis points from the same quarter a year earlier. However, asset yields were also higher, increasing by 19 and 61 basis points, respectively, compared to the quarters ended June 30, 2005 and September 30, 2004. "As we have noted before, our exposure to interest rate risk remains very manag eable; however, we do expect modest expansion of our margin over future periods as a result of our improving funding mix," said Jones.

In contrast with last year, for the first nine months of 2005 Banner Bank did not record any dividend income on its investment in stock of the FHLB. For the quarter and the nine months ended September 30, 2004, Banner Bank recorded $311,326 and $1,004,834, respectively, of dividend income on its FHLB stock, which contributed five basis points to the margin calculations for both of those periods.

Balance Sheet Review

Total deposits grew 19%, to $2.28 billion at September 30, 2005, compared to $1.91 billion at September 30, 2004. Non-interest bearing deposits increased 40% at September 30, 2005 compared to a year ago, and increased 7% compared to June 30, 2005. "Deposit growth over the past year has been very strong with non-interest bearing deposits and transaction accounts leading the way," said Jones. Transaction and savings accounts grew 33% during the twelve months ending September 30, 2005, while certificates of deposit increased 8%.

Assets reached $3.19 billion at September 30, 2005, a 13% increase from $2.83 billion a year earlier. Net loans increased 19%, to $2.33 billion at September 30, 2005, from $1.95 billion a year ago. "Although slowing from the record pace of the two previous quarters, the major components of the loan portfolio showed significant growth in the last year," said Jones. "Compared to a year ago, we increased commercial and multifamily real estate loans 7%, construction and land loans 47% and commercial and agricultural business loans 13%. In addition, over the same period our credit quality indicators have improved dramatically."

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BANR-Third Quarter Results
October 27, 2005
Page 3

Book value per share was $19.01 at September 30, 2005, an improvement from $18.77 a year earlier. Tangible book value per share was $15.89 at September 30, 2005, compared to $15.53 a year earlier. Return on average assets was 0.72% for the third quarter of 2005 compared to 0.74% in the third quarter of 2004. Return on average equity was 10.03% in the third quarter of 2005 compared to 9.84% during the same period in 2004.

Credit Quality

Non-performing assets decreased 41% to $13.9 million, or 0.44% of total assets, at September 30, 2005, compared to $23.7 million, or 0.84% of total assets, a year ago, reflecting significant progress in reducing the Company's credit risk. Non-performing assets decreased 19% compared to the previous quarter. At June 30, 2005, Banner's non-performing assets totaled $17.3 million or 0.55% of total assets. The provision for loan losses for the third quarter was $1.3 million, compared to $1.4 million in the same quarter of 2004 and $1.3 million for the quarter ended June 30, 2005. Net loan charge-offs in the third quarter of 2005 were $527,000, or 0.02% of average loans outstanding. "Recent trends in credit quality have been very encouraging and have allowed us to maintain the current level of loan loss provisioning despite significant growth in outstanding balances," said Jones. At September 30, 2005, the allowance for loan losses totaled $30.6 million, represe nting 1.29% of total loans outstanding.

Conference Call

The Company will host a conference call today, Thursday, October 27, 2005, at 8:00 a.m. PDT, to discuss third quarter results. The conference call can be accessed live by telephone at 303-262-2139. 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 11032893# until Thursday, November 3, 2005 or via the Internet at www.fulldisclosure.com.

About the Company

Banner Corporation is the parent company of Banner Bank, a commercial bank that operates a total of 53 branch offices and 14 loan offices in 24 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.

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 affecting operations, pricing, products and services and Banner's ability to successfully resolve 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-Third Quarter Results
October 27, 2005
Page 4

RESULTS OF OPERATIONS				Quarters Ended						Nine Months Ended
( In thousands except share and per share data )				Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Sep 30, 2005		Sep 30, 2004
INTEREST INCOME:
	Loans receivable		$	43,646	$	39,842	$	33,051	$	119,625	$	92,368
	Mortgage-backed securities			3,330		3,586		4,155		10,589		13,076
	Securities and cash equivalents			2,990		2,943		3,194		8,782		9,415
				49,966		46,371		40,400		138,996		114,859
INTEREST EXPENSE:
	Deposits			14,086		12,146		9,074		36,646		25,342
	Federal Home Loan Bank advances			5,920		5,927		5,058		17,464		15,145
	Other borrowings			472		392		257		1,196		717
	Junior subordinated debentures			1,405		1,193		911		3,665		2,446
				21,883		19,658		15,300		58,971		43,650
	Net interest income before provision for loan losses			28,083		26,713		25,100		80,025		71,209
PROVISION FOR LOAN LOSSES				1,300		1,300		1,444		3,803		4,344
	Net interest income			26,783		25,413		23,656		76,222		66,865
OTHER OPERATING INCOME:
	Deposit fees and other service charges			2,555		2,401		2,148		6,960		6,048
	Mortgage banking operations			1,672		1,645		1,383		4,548		4,087
	Loan servicing fees			466		232		711		1,137		1,324
	Gain on sale of securities			- -		8		67		8		140
	Miscellaneous			288		339		441		950		1,092
	Total other operating income			4,981		4,625		4,750		13,603		12,691
OTHER OPERATING EXPENSE:
	Salary and employee benefits			15,758		15,263		13,719		44,814		38,846
	Less capitalized loan origination costs			(2,677)		(2,753)		(1,806)		(7,471)		(5,184)
	Occupancy and equipment			3,550		3,394		2,791		10,171		7,923
	Information / computer data services			1,258		1,193		1,107		3,568		3,149
	Professional services			760		818		746		2,379		2,451
	Marketing and advertising			1,801		1,512		1,108		4,664		3,557
	Miscellaneous			3,111		3,373		3,257		9,539		8,544
	Total other operating expense			23,561		22,800		20,922		67,664		59,286
	Income before provision for income taxes			8,203		7,238		7,484		22,161		20,270
PROVISION FOR INCOME TAXES				2,537		2,222		2,322		6,772		6,197
NET INCOME			$	5,666	$	5,016	$	5,162	$	15,389	$	14,073
Earnings per share
		Basic	$	0.49	$	0.43	$	0.46	$	1.33	$	1.27
		Diluted	$	0.47	$	0.42	$	0.44	$	1.29	$	1.20
Cumulative dividends declared per common share			$	0.17	$	0.17	$	0.16	$	0.51	$	0.48
Weighted average shares outstanding
		Basic		11,593,365		11,531,987		11,168,735		11,532,244		11,120,318
		Diluted		11,951,058		11,895,158		11,736,415		11,922,456		11,702,890
Shares repurchased during the period				6,047		67,522		104		81,597		19,786

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BANR-Third Quarter Results
October 27, 2005
Page 5

FINANCIAL CONDITION
( In thousands except share and per share data )			Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Dec 31, 2004
ASSETS
Cash and due from banks		$	117,669	$	82,266	$	65,800	$	51,767
Securities available for sale			483,395		526,629		583,196		547,835
Securities held to maturity			51,784		50,801		49,554		49,914
Federal Home Loan Bank stock			35,844		35,844		35,698		35,698
Loans receivable:
	Held for sale		3,462		5,837		8,303		2,145
	Held for portfolio		2,361,549		2,308,808		1,976,100		2,090,703
	Allowance for loan losses		(30,561)		(29,788)		(29,407)		(29,610)
			2,334,450		2,284,857		1,954,996		2,063,238
Accrued interest receivable			15,371		17,015		14,930		15,097
Real estate owned held for sale, net			1,437		1,290		2,923		1,485
Property and equipment, net			47,252		45,091		35,351		39,315
Goodwill and other intangibles, net			36,303		36,325		36,405		36,369
Deferred income tax asset, net			8,853		6,612		5,266		5,888
Bank-owned life insurance			36,545		36,154		34,957		35,371
Other assets			17,144		16,986		11,086		15,090
		$	3,186,047	$	3,139,870	$	2,830,162	$	2,897,067
LIABILITIES
Deposits:
	Non-interest-bearing	$	322,043	$	302,266	$	229,624	$	234,761
	Interest-bearing transaction and savings accounts		811,748		729,983		624,461		635,972
	Interest-bearing certificates		1,141,455		1,142,666		1,057,087		1,055,176
			2,275,246		2,174,915		1,911,172		1,925,909
Advances from Federal Home Loan Bank			484,858		566,458		530,958		583,558
Other borrowings			69,577		65,905		79,080		68,116
Junior subordinated debentures			97,942		72,168		72,168		72,168
Accrued expenses and other liabilities			30,609		27,511		21,288		25,027
Deferred compensation			6,329		6,010		4,931		5,208
Income taxes payable			300		6,185		50		1,861
			2,964,861		2,919,152		2,619,647		2,681,847
STOCKHOLDERS' EQUITY
Common stock			128,516		128,210		125,672		127,460
Retained earnings			101,817		98,124		88,796		92,327
Accumulated other comprehensive income ( loss )			(5,529)		(1,952)		183		(888)
Unearned shares of common stock issued to Employee Stock
	Ownership Plan ( ESOP ) trust: at cost		(3,096)		(3,096)		(3,628)		(3,096)
Net carrying value of stock related deferred compensation plans			(522)		(568)		(508)		(583)
			221,186		220,718		210,515		215,220
		$	3,186,047	$	3,139,870	$	2,830,162	$	2,897,067
Shares Issued:
Shares outstanding at end of period			12,007,725		11,991,074		11,652,816		11,856,889
	Less unearned ESOP shares at end of period		374,595		374,595		438,985		374,595
Shares outstanding at end of period excluding unearned ESOP shares			11,633,130		11,616,479		11,213,831		11,482,294
Book value per share (1)		$	19.01	$	19.00	$	18.77	$	18.74
Tangible book value per share (1)		$	15.89	$	15.87	$	15.53	$	15.58
Consolidated Tier 1 leverage capital ratio			8.55%		8.55%		8.85%		8.93%
(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-Third Quarter Results
October 27, 2005
Page 6

ADDITIONAL FINANCIAL INFORMATION
( Dollars in thousands )
LOANS ( including loans held for sale ):			Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Dec 31, 2004
Commercial real estate		$	562,612	$	562,240	$	531,714	$	547,574
Multifamily real estate			118,756		119,668		104,713		107,745
Construction and land			663,943		631,557		451,393		506,137
Commercial business			430,374		436,428		364,235		395,249
Agricultural business including secured by farmland			157,955		149,651		156,110		148,343
One- to- four-family real estate			341,183		327,249		298,759		307,986
Consumer			90,188		87,852		77,479		79,814
	Total loans outstanding	$	2,365,011	$	2,314,645	$	1,984,403	$	2,092,848
NON-PERFORMING ASSETS:			Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Dec 31, 2004
Loans on non-accrual status		$	12,205	$	15,859	$	20,091	$	15,416
Loans more than 90 days delinquent, still on accrual			116		110		579		472
Total non-performing loans			12,321		15,969		20,670		15,888
Real estate owned ( REO ) / Repossessed assets			1,622		1,290		3,051		1,559
	Total non-performing assets	$	13,943	$	17,259	$	23,721	$	17,447
Total non-performing assets / Total assets			0.44%		0.55%		0.84%		0.60%
			Quarters Ended						Nine Months Ended
CHANGE IN THE			Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Sep 30, 2005		Sep 30, 2004
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period		$	29,788	$	29,736	$	28,037	$	29,610	$	26,060
Provision			1,300		1,300		1,444		3,803		4,344
Recoveries of loans previously charged off			465		219		975		1,057		1,411
Loans charged-off			(992)		(1,467)		(1,049)		(3,909)		(2,408)
	Net ( charge-offs ) recoveries		(527)		(1,248)		(74)		(2,852)		(997)
Balance, end of period		$	30,561	$	29,788	$	29,407	$	30,561	$	29,407
Net charge-offs / Average loans outstanding			0.02%		0.06%		0.00%		0.13%		0.05%
Allowance for loan losses / Total loans outstanding			1.29%		1.29%		1.48%		1.29%		1.48%

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BANR-Third Quarter Results
October 27, 2005
Page 7

ADDITIONAL FINANCIAL INFORMATION
( Dollars in thousands )
( Rates / Ratios Annualized )
			Quarters Ended						Nine Months Ended
OPERATING PERFORMANCE:			Sep 30, 2005		Jun 30, 2005		Sep 30, 2004		Sep 30, 2005		Sep 30, 2004
Average loans		$	2,342,995	$	2,224,089	$	1,952,163	$	2,231,768	$	1,854,229
Average securities and deposits			610,881		630,141		683,520		624,732		706,990
Average non-interest-earning assets			186,650		175,705		155,668		177,391		156,169
	Total average assets	$	3,140,526	$	3,029,935	$	2,791,351	$	3,033,891	$	2,717,388
Average deposits		$	2,182,452	$	2,069,062	$	1,858,240	$	2,071,499	$	1,768,856
Average borrowings			699,664		708,660		700,034		709,217		719,220
Average non-interest-earning liabilities			34,218		32,409		24,321		31,948		21,429
	Total average liabilities		2,916,334		2,810,131		2,582,595		2,812,664		2,509,505
Total average stockholders' equity			224,192		219,804		208,756		221,227		207,883
	Total average liabilities and equity	$	3,140,526	$	3,029,935	$	2,791,351	$	3,033,891	$	2,717,388
Interest rate yield on loans			7.39%		7.19%		6.74%		7.17%		6.65%
Interest rate yield on securities and deposits			4.10%		4.16%		4.28%		4.15%		4.25%
	Interest rate yield on interest-earning assets		6.71%		6.52%		6.10%		6.51%		5.99%
Interest rate expense on deposits			2.56%		2.35%		1.94%		2.37%		1.91%
Interest rate expense on borrowings			4.42%		4.25%		3.54%		4.21%		3.40%
	Interest rate expense on interest-bearing liabilities		3.01%		2.84%		2.38%		2.84%		2.34%
Interest rate spread			3.70%		3.68%		3.72%		3.67%		3.65%
Net interest margin			3.77%		3.75%		3.79%		3.75%		3.71%
Other operating income / Average assets			0.63%		0.61%		0.68%		0.60%		0.62%
Other operating expense / Average assets			2.98%		3.02%		2.98%		2.98%		2.91%
Efficiency ratio ( other operating expense / revenue )			71.26%		72.76%		70.09%		72.27%		70.66%
Return on average assets			0.72%		0.66%		0.74%		0.68%		0.69%
Return on average equity			10.03%		9.15%		9.84%		9.30%		9.04%
Average equity / Average assets			7.14%		7.25%		7.48%		7.29%		7.65%

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