BANNER CORP Q3 FY2024 earnings call

Mark Grescovich thanked colleagues and provided an overview of performance. Rob Butterfield discussed net interest income increase, loan and deposit changes. Jill Rice commented on loan portfolio, credit metrics, and loan growth. Banner has a strong core deposit base, moderate credit metrics, and continues to execute on its super community bank strategy including growing new client relationships, maintaining core funding, and demonstrating safety and soundness.

Banner Corporation reported a net profit available to common shareholders of $45.2 million or $1.30 per diluted share for the quarter ended September 30, 2024. Third quarter 2024 core earnings were $57 million compared to $52 million for the prior quarter. Revenue from core operations was approximately $154 million, an increase of $3 million compared to the second quarter of 2024. Core deposits represent 89% of total deposits. Loans increased 6% over the same period last year. Return on average assets was 1.13% for the third quarter of 2024.

Expect some moderate compression in net interest margin in the fourth quarter. Based on Moody's interest rate forecast, in a down 100 basis point ramp scenario, net interest income could see a negative 1% reduction over 12 months assuming a flat balance sheet. Also evaluating security repositioning but no current plans.

Adversely classified loans increased, with a large ag relationship in Northern California being a driver. Credit risk related to agricultural industry mix of operator and climate pressures. Also, potential impact of competitor behavior on deposit costs and margin.

Q: Andrew Turrell asked about expense side, comp expense fluctuation and expense outlook.

A: Rob said expenses can bounce quarter-to-quarter, expecting normalization with normal inflationary pressures and strategic investments.

Q: Jeff Rulis asked about margin and balance sheet position with variable rate loans.

A: Rob discussed ramp down scenarios and deposit beta.

Q: Jeff Rulis asked about credit non-accruals.

A: Jill said primary driver was a large ag relationship, with others in consumer and small business.

Q: David Feaster asked about deposit landscape and loan growth.

A: Rob talked about core deposit growth from small business lending and loan growth trends.

Q: Andrew Liesch asked about M&A chatter.

A: Mark said continuing dialogue on potential M&A with focus on organic growth.

Q: Kelly Motta asked about funding seasonality and capital.

A: Rob said returning to normal seasonality and evaluating sub-debt and share repurchases.

Q: Timothy Coffey asked about loan growth demand and new CBO role.

A: Jill said pent-up demand and Mark mentioned California as a market opportunity.