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.

        On January 26, 2006, Banner Corporation issued its earnings release for the quarter ended December 31, 2005. A copy of the earnings release is attached hereto as Exhibit 99.1, which is incorporated herein by reference.

            (c)        Exhibits

             99.1     Press Release of Banner Corporation dated January 26, 2006.

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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.

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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

Walla Walla, WA - January 26, 2006 - Banner Corporation (Nasdaq: BANR), the parent company of Banner Bank, today reported fourth quarter earnings from recurring operations (see footnote below), exclusive of the balance-sheet restructuring transactions announced and completed in the fourth quarter of 2005, were $5.6 million, or $0.47 per diluted share. In the fourth quarter of 2004, earnings were $5.3 million, or $0.45 per diluted share. For the full year ended December 31, 2005, earnings from recurring operations, exclusive of the restructuring charges, were $21.0 million, or $1.76 per diluted share, compared to earnings of $19.3 million, or $1.65 per diluted share for the prior year.

Late in the fourth quarter of 2005, Banner completed a balance-sheet restructuring designed to pay down high interest rate FHLB borrowings and reduce the size of the investment portfolio. To effect the restructuring, Banner sold $207 million of securities at a $7.3 million loss before tax and used a portion of the proceeds of the sale to prepay $142 million of high-cost, fixed-term Federal Home Loan Bank (FHLB) borrowings, incurring pre-tax prepayment penalties of $6.1 million. The remainder of the proceeds were applied to repay other relatively high-cost short-term borrowings from the FHLB. The total cost of the transactions was $13.4 million, with a tax benefit of $4.8 million, resulting in an after tax cost of $8.6 million or $0.72 per diluted share, which was slightly more favorable than the previously announced estimated cost of $8.9 million, or $0.74 per diluted share.

Including the effects of the restructuring charges, Banner reported a loss of $2.9 million, or $0.25 per diluted share, for the fourth quarter of 2005 and earnings of $12.4 million, or $1.04 per diluted share, for the year ended December 31, 2005.

"For the past several years, we have focused on expanding our franchise in key market areas in order to build a resilient retail deposit base and decrease our reliance on high-cost borrowed funds," said D. Michael Jones, President and CEO. "In 2005, we opened eleven new branch offices, including new branch offices in Burlington, Washington, Beaverton, Oregon and Twin Falls, Idaho in the fourth quarter. This franchise expansion has significantly contributed to our success in attracting new deposits, which increased by almost $400 million in the last twelve months. In addition, we improved asset quality while strengthening our earnings from core business areas. These improvements have allowed us to place less emphasis on the use of wholesale assets and liabilities and the restructuring transactions eliminate positions that have been a significant drag on earnings in recent periods. In addition to lowering our cost of funds, we anticipate future benefits will include an expanded net interest margin, an improved interest rate risk position, stronger performance metrics, increased profitability, and enhanced shareholder value. Although the restructuring transactions were not completed until mid December, we were encouraged by the margin expansion that did occur in the quarter just ended."

2005 Highlights (compared to 2004)

• Completed balance-sheet restructuring transactions in the fourth quarter of 2005.
• Net interest margin improved 8 basis points to 3.79% for the year, and improved 16 basis points to 3.93% for the fourth quarter of 2005, compared to 3.77% for the third quarter of 2005.
• Net interest income before provision for loan losses grew 13% to $108.8 million.
• Non-performing assets declined by 37% for the year (and 21% since September 30, 2005).
• Loans increased 17% to $2.41 billion.
• Non-interest bearing deposits increased 40% and total deposits increased 21% to $2.32 billion.

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BANR-Fourth Quarter Results
January 26, 2006
Page 2

Income Statement Review

For the fourth quarter of 2005, net interest income before the provision for loan losses increased 15% to $28.8 million, compared to $25.1 million in the same quarter a year ago. Excluding the net loss on the sale of securities relating to the balance-sheet restructuring, revenues (net interest income before the provision for loan losses plus other operating income) were $33.0 million in the fourth quarter, a 12% improvement over revenues of $29.4 million in the fourth quarter of 2004.

Excluding the net loss on the sale of securities relating to the balance-sheet restructuring, total other operating income for the fourth quarter was unchanged at $4.3 million compared to the same quarter last year. Income from deposit fees and other service charges increased 21% to $2.5 million in the fourth quarter, reflecting the strong growth in customer relationships and deposit balances. However, income from mortgage banking operations declined by 34% from the third quarter of 2005 and 23% from the fourth quarter of 2004, reflecting the seasonality of the business and the effect of rising interest rates and a moderating housing market.

For the year ended December 31, 2005, net interest income before the provision for loan losses increased 13% to $108.8 million, compared to $96.3 million a year ago. Excluding the net loss on the sale of securities, revenues were $126.6 million for the year, compared to $113.3 million a year ago, and total other operating income was $17.9 million in 2005, compared to $17.0 million in 2004.

Excluding the FHLB prepayment penalties relating to the balance-sheet restructuring, other operating expenses increased to $23.8 million in the fourth quarter of 2005, compared to $23.6 million in the third quarter of 2005 and $20.4 million in the fourth quarter of 2004. For the year 2005, other operating expenses were $91.5 million exclusive of the FHLB prepayment penalties, compared to $79.7 million in the prior year. The ratio of other operating expense (expense ratio) to average assets was 3.05% for the fourth quarter of 2005 exclusive of the FHLB prepayment penalties, compared to 2.98% for the third quarter of 2005 and 2.85% for the fourth quarter a year ago. Again, excluding the FHLB prepayment penalties, the ratio of other operating expense to average assets was 3.00% for the year ended December 31, 2005, compared to 2.90% for the year ended December 31, 2004.

"In 2005 we opened eleven new branches in Oregon, Idaho and Washington. We also relocated three branches in Washington and made significant progress on the construction of three other southwestern Idaho branch offices, which we expect to open in 2006. All of this growth is expensive and we will continue to see higher operating expenses as a result of our expansion, but we believe 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. As a result of the sale of securities in the fourth quarter, combined with Banner's enhanced deposit gathering ability, the Company has reduced its dependence on borrowings from the FHLB by 55% to $265 million at December 31, 2005, from $584 million just a year earlier.

Banner's net interest margin was 3.93% for the fourth quarter of 2005, a 16 basis point improvement from 3.77% in the quarter ended September 30, 2005, and a 21 basis point improvement from 3.72% for the fourth quarter of 2004. For the full year, the net interest margin was 3.79%, an eight basis point improvement from 3.71% in 2004. "We enjoyed an expansion of our net interest margin in part as a result of the restructuring transactions even though the benefit did not occur until late in the fourth quarter. The margin was also positively affected by the strong loan and deposit growth we experienced throughout the year. We expect our net interest margin to continue to expand as a result of the restructuring and as we continue to improve the liability side of our balance sheet," said Jones. Funding costs were up 13 basis points compared to the previous quarter and up 66 basis points from the fourth quarter a year earlier. However, asset yields were also higher, increasing by 28 and 87 basis points, respectively, compared to the quarters ended September 30, 2005 and December 31, 2004.

In contrast with last year, in 2005 Banner Bank did not record any dividend income on its investment in stock of the FHLB. For the quarter and year ended December 31, 2004, Banner Bank recorded $175,000 and $1.2 million, respectively, of dividend income on its FHLB stock, which contributed three and four basis points to the margin calculations for the respective periods.

Total deposits increased 21%, to $2.32 billion at December 31, 2005, compared to $1.93 billion at December 31, 2004. Non-interest bearing deposits increased 40% at December 31, 2005 compared to a year earlier. "Deposit growth over the past year has been very strong, growing nearly $400 million for the year," said Jones. Non-interest bearing deposits and transaction accounts continued to grow, with transaction and savings accounts increasing 25% during the twelve months ending December 31, 2005, while certificates of deposit increased 14%.

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BANR-Fourth Quarter Results
January 26, 2006
Page 3

Assets were $3.04 billion at December 31, 2005, a 5% increase from $2.90 billion a year earlier. Net loans increased 17%, to $2.41 billion at December 31, 2005, from $2.06 billion at December 31, 2004. "The loan portfolio has grown significantly over the past year and our credit quality indicators have also improved," said Jones. "Our loan business is strong and the financial health of our borrowing customers appears to be good, which makes us optimistic about future performance."

Book value per share was $18.81 at December 31, 2005, an improvement from $18.74 a year earlier, and tangible book value per share was $15.73 at December 31, 2005, compared to $15.58 a year ago.

Non-performing assets decreased 37% to $11.0 million, or 0.36% of total assets, at December 31, 2005, compared to $17.4 million, or 0.60% of total assets, a year ago, reflecting significant progress in reducing credit risk. Non-performing assets decreased 21% compared to the previous quarter. "Our credit quality has continued to improve dramatically, resulting in a lower loss provision in the fourth quarter," said Jones. The provision for loan losses for the fourth quarter was $1.1 million, compared to $1.3 million in the fourth quarter of 2004. Net loan charge-offs in the fourth quarter of 2005 were $763,000, or 0.03% of average loans outstanding, compared to $1.1 million, or 0.05% of average loans outstanding in the fourth quarter of 2004. At December 31, 2005, the allowance for loan losses totaled $30.9 million, representing 1.27% of total loans outstanding.

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BANR-Fourth Quarter Results
January 26, 2006
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BANR-Fourth Quarter Results
January 26, 2006
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