BANR - Earnings call transcript Q3 2017

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Operator

Good morning and welcome to the Banner Corporation’s Third Quarter 2017 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to President and CEO, Mr. Mark Grescovich. ahead. go Please

Mark Grescovich

and to Andrea, earnings everyone. would I for Thank you good to like welcome Corporation. XXXX the also Banner you, morning, third call quarter

forward-looking Rick on As Marshall, joining Financial the Harbor and Corporation. Financial Officer Safe Peter the Lloyd the Officer Barton, Corporation; Chief our Albert, the Secretary please our call Baker, is of our Chief me read would Albert today Conner, customary, of of Officer; Credit Bank; our is statement? you Chief Banner

Albert Marshall

Certainly. Good morning.

discusses presentation for include performance for other forecast Our and economic objectives, of outlook forward-looking services, statements. Banner’s or outlook goals today business management’s measures, other conditions. and and Those future or descriptions or financial will operations, statements products statements about include of general plans, Banner’s

make actual in number materially the risk to may earnings press subject Information XXXX. period also the actual a yesterday June the statements These and was released quarter other for a from differ discussion. that discussed recently We statements uncertainties, ended from factors and to the question-and-answer results forward-looking cause on and forward-looking management’s XX, following today. Form are those differ available release XX-Q are of that risks could filed results may

you. Forward-looking Thank assumes are as no statements are concerning of Banner expectations. effective they made, obligations information and only the date its to update

Mark Grescovich

Al. you, Thank

$X.XX share million, in or XXXX. diluted for per a of Banner net the XXXX. XX, common common profit to shareholders quarter per a profit of share reported and $X.XX quarter of As second net of $XX.X third Corporation for to ended compared XXXX announced, the available share the per This September quarter $X.XX to shareholders

gains the the financial $XX.X and earnings sale were XXXX. at flat Excluding acquisition XXXX, quarter on of changes for and essentially compared third third and impact million the the $XX.X instruments, in in fair quarter value to merger losses of of securities million of expenses,

in banking mortgage deliver the Due quarter the fee previous to was in in to the decline strategies on company, and priorities growth sustainable the experienced third throughout quarter, executing hard compared revenue profitability our are deposits successfully and growth we the strong. income we employees While the in quarter core to our of Banner. and work to loans

and core we on which great had scale impact the of has opportunity are continue integration and performance Our a operating for revenue dramatic success core the proven acquisitions, recent to and of the our providing from acquisition the producing company reflect reach are benefiting client strong revenue are growth. strategies, our successful which a of

quarter third that our Our XXXX building shareholder value. performance effective clearly strategic continue we demonstrates is plan and

of growing bank year deposits augmenting organic while our growing service September and is growth mix, core of X% revenue. quarter position point, XXXX. of bearing super Third and opportunistic X.XX% acquisitions. of this quarter $XXX.X above for in strategy. net X% funding generation Non-interest asset this that core deposit continued our the X% larger XXXX. of million, X% client – increased XXXX. our performance good remained promoting on relationships, to strong resulted To our assets and the new also the ago, that client and and responsive a core relationships. model, community through by quarter representing client again, core That improved with fee increased compared our Overall, Once one to XX, on new average a execution deposits our advocacy third to adding reflects return revenue was quarter earning from loyalty We margin deposits compared interest third an from benefited XXXX increase

of Peter XX.XX%, our moments, Baker share. will these product the with solid the detail. and strong XX, equity In a December XXXX. few per dividend issued performance, Reflective since is net organic Lloyd we categories growth more ratio XX% a Conner core $X.XX coupled in Our client our of quarter performance discuss in tangible in now of common operating

on margin, profitability strategies profile. and our grow our focused to of metrics our effectively we deliver While this risk have our again, sustainable interest a on the relationships, net improved protect client been prudently we quality And capital, reflect maintaining Banner. credit risk have moderate profile executing also invest quarter,

the portfolio, non-performing totaled migration the our as seven expected, acquired our ratio years, As of the addition the the discounted quarter our the during portfolio for At invest assets and the to Rick the success recorded profile. losses of a third and we In discuss Officer Credit of X.XX% and charge-offs, loan risk our loans In provision the context and amount Chief $X metrics a out total preceding of X.XX%. we lease Barton, throughout a allowance moderate modest and loan loans of company some end in quarter, of losses net credit moment, franchise. quarter. well a due new credit maintaining the total as and continue million our was for around loan to provide the loans to loan at of will

and have all company into Banner’s and We credit banking sales talented added our personnel further commercial retail and our we invested and developing proven have integrating in to culture. bankers

risk company made continuing the have positioning in investments to growth IT continued significant our for and infrastructure, and are and management We make also scale.

increased client J.D. one Associates our in value I’ve noted as core the year-over-year deposit have fee strong core Bank bank growth Northwest expenses, in marketplace recognition loan satisfaction. have investments received Further, before, and strong we revenue number income. portfolio our progress customer as resulted these While for have and acquisition, growth, rank Banner our operating the of Power in they and proposition

out second Banner Bank Best the consecutive district for America. year, The Regional acquisitions risk this focus strategic Bank for the $XX.XX Also, XX, the to and plan Bank Administration and years, Lender won of two and Forbes of Banner our Business Bankrate.com America. profile the third quarters and improving consecutive versus profitability, persistent now Regional Small in ranked of increased The we year, this and our Banks the execution named year the XXX in have organic named of resulted the of has Banner XX augmented value $XX.XX share of book The share per September Seattle Year Spokane award. tangible for our named XXXX consecutive Community with Best in Lender Banner successful XX XXXX. in growth on Year at Banner Bank per

strategic sell closed reflected and our discuss call in Coast. now our our West loan trends the turn be portfolio. investments recently been to Finally, made Rick? we and on our sale like has to the quarter as will fourth performance. successfully I’d focus to the Rick economic Barton announced, future and a Utah in branches in financial decision over seven to That

Richard Barton

the Thank Banner XXXX. you, Mark. Stability as quarter quality credit continued during third general at of a theme for

be portfolios metrics continues to demonstrated our profile will recapped. risk by briefly that Our now be moderate credit

continuing loans, is mark compared equates was was linked-quarter level quarter. for Before during This Siuslaw totals provision which reflected in one- September in successes activity in doing XX, growth underlying around in against so, XX, The have assets of profile. markets. Delinquent The September decreased down totals annual these in compares were non-performing quarter, under remaining we a just the and charge-offs again the X.XX% XXXX. metrics by points and XX, increased compared The at There when and common assets. September loans to marketing of protection loss both $XXX increase I to when performing and lease this would metrics AmericanWest as assets the are no are September points. growth over assets quarter a versus an from $X X.XX% net net against and to to increased Non-performing This modest acquired of strong. rules. Lloyd the of third After linked-quarter X.XX% good were press non-performing rate were over $X in in by X.XX% total million. the and the a just estate, the risk and million points XX quarter’s X acquired our the recurring, quarter be $XX net just slightly This to for quarter. million for be basis include the by not debt summary, to during increases bankers non-performing charge-off asset acquired last allowance low linked-quarter. million theme And remains the compared charge-off release, seasoning discussed, Gross assets since last XX was his just turn company’s With quarter. losses however, loans year the construction, million this consumer from for losses. Banks, basis reflects year total be their of XXXX. our for ratio XX% $X.X growth assets portfolios commercial additional rate the and which X.XX% million the total noted an considered further comments. and classified last I loan Gross which growth annualizes remaining the $X.X non-performing $XXX of million, million loan to quarter basis Not loan This million our are for basis that $X.X of purchase company’s loans four-family loss reportable a was approximately the again X.XX% in from the provision metric presentations as commercial X.XX% were mid-XXXX. the X.XX% loans. Troubled loans were we last and Loan recoveries Banner’s repeat our in provides net recorded and the at X% and If quarter-over-quarter the want in In quarter rate. loan charge-offs XX portfolio the real to total comparing completed of points After indicate versus that basis business, non-performing cannot lease in The XX XXXX to loan recorded accounting $XX.X has that, potential $XXX,XXX moderate points. loan declined of company’s were level rate to stability XX, loans growth adversely during now credit restructured comment to quarter accounting X%, made to Quarter-over-quarter a will totals, position growth. pipelines several hovered historically third XXXX. ago. loans economic quarter’s allowance origination and terms loan X.XX% still to company restructures to under stage our for the favorable levels. ago. marked under the to credit loans,

Lloyd Baker

morning, and Rick, you, everyone. good Thank

general effective few remarks Chief Mark with provide me, to regulatory is year-to-date growth costs a trends Corporation’s AmericanWest initiatives, billion Peter and approach benefits result generally Financial third revenue asset noted, us results. on the as Peter as of a XXXX meaningfully Bank operating Bank, As here will result from into of as has a insight as increased results total Banner of quarter and for execution including And today. detailed threshold. consistent subsequent continue of quarter well the Conner, our Officer significant more reflect Banner and third the of our breach to $XX acquisition a as result after strategic

and supported and in increased performance – acquisition significant quarter, continued client of and deposit scale by asset a growth driven positive income additional strong interest which continued financial the the company, fee loan reflecting again, generation, quality. the and operating net Our solid environment, was

the However, we mortgage third strong market provide ago. part preceding banking accounting which decrease levels Peter pricing a compared operational and as changes, in will in reflects more banking and revenues, experience particularly revenues a quarter to decline has the the mortgage in dynamics. quarter noted, part, on year in in and in detail Mark did

is multifamily the revenues, one core franchise. of were XXXX the banking revenues of it of solid. and and period weakness nine-month were for year note same community production the quarter our current year-to-date revenue to third business unit, sales quarter continues the from origination super mortgage Banner increased Further, the nine and X% sales the reflect both to the our loan for that However, XXXX their generation to volumes in despite the for compared to the good operations important quarter – bank four-family value origination for increasing This solid and model compared X% execution increased total remained to months successful and core earlier. a pipelines

While we in that presented the appreciating as well as current of financial at win carry material on not core certain results the performance, acquisition-related the each for for impactful the effects of and year’s valuation of sale Banner’s last on adjustments particularly securities. important gains fair operating expenses requires clear instruments and value losses the – and understanding fully a of periods merger quarter,

share net the a net on an securities million, the share. for sale which similarly that effect of Banner for – – for XXXX. small $XX.X taxes nine valuation with quarter. the related related immediately were value nearly the $X.XX value $X.X per XXXX, instruments expenses included diluted on offsetting in earnings. insignificant $X.XX For amount fair gains diluted income charges By adjustments diluted $X.XX net diluted of impact of reduced reduced reduced securities of third on contrast, the per had just reported This million in gains adjustments, securities, share acquisition-related negative the by for third net and per which the earnings $XXX,XXX quarter and transactions share of earnings by by had quarter charges or months net financial XXXX, together $XXX,XXX of tax quarter which preceding first and margin effects Fair along per $X.XX together of of

nine million, fair while importantly, value ago, for charges were acquisition-related the months More year securities expenses of larger, a gains much $XXX,XXX. were $XX.X net first

that tax net of for diluted per reduced period. of $X.XX by together, effects earnings All which share

Excluding value earning $X.XX the in gains, core million, operations per or from share $XX.X $X.XX the or to preceding adjustments current $XX.X diluted and immediately acquisition-related expenses, compared securities million, for per quarter, were fair share share the current diluted $X.XX benefited ago. a tax tax annual third returns. from our in adjustments related million or million, quarter quarter year $X.X the $XX.X and state in net diluted Earnings filing to of and quarter per our federal the

X% $X.XX share or $X.XX $XX.X XXXX. diluted For of increased the our diluted to first XXXX, or nine per from million, operations months per million, compared to earnings share, core in $XX.X

principally reduction the the of in year. of core shares increase earnings average as in as of repurchases, well executed result operations, a a the a result second-half total outstanding As from in as stock last

year earnings year-to-date same core from to by operations XXXX other included the earnings in reconciliation and core operations to per Again, non-GAAP release, quarter, of financial increased this which the you earlier. share information a review. XX% period from Our compared I have press a we a nine-month encourage

greater noted, totaling was the third X% quarter I million, million As $XXX.X million Banner’s margin. losses income reflecting and of ago, increasing strong and Similarly, interest net earlier. asset before provision to year the stronger year balances a income for $XXX compared a earning our third the for a net nine interest actually again net interest increased first for $XX.X loan than period cresting months XXXX quarter was X% same

to contractual reported in discount margin XXXX, our that quarter, decreased above loan our for XX, interest preceding largely acquired year well decreased ended as to strong quarter net result accretion, a While compared X.XX% margin X.X% levels. and remained ago September of the

preceding the quarter third quarter our accounting, the in year compared impact X.XX%, X.XX% contractual quarter X.XX% of net and ago. acquisition for a the margin was Excluding the to third interest in

compared the loan rates, our XXXX, third September and months million $XX.X generally the line ago. steady interest And deposit quarter, net were million and in in XX, X.XX% X% was interest our Deposit quarter, our $XX.X while to quarter the earlier. from and year yields preceding X.XX%, unchanged. to quarter service to XXXX first a in with net at XXXX. accretion, a fees charges market Again, expanded months the X.XX% interest interest increased third the nine period margin compared margin for nine-month expectations in discount this benefited the compared margin ended million net $XX.X increased to loan same reported X.XX% nine pricing to year-to-date the the for excluding For year seasonal compared acquired contractual remained and of

in quarter were preceding in the non-interest to X% third million expenses increase nine XXXX, related result the quarter, Total deposit period of growth a $XX.X modest first increased direct and months XXXX. accounts a the million in of to core same year and fees quarter and For million a charges service of $XX.X earlier, transaction in activity. $XX.X the compared compared deposit third the

excluding year’s $XX continue necessary the as operating compliance costs However, in and acquisition-related expenses, expanded in incur more scale support expenses with the increased increased last to asset invest we billion the company associated total of crossing regulatory core to significantly, and infrastructure threshold. the

Despite remarks. compared Finally, our I payment believe our special XXXX. another period. dedicated regular many the concludes this of dividend it’s to December per earlier and our quarterly prepared year-to-date, the In worth XX, that declared noting reflects strong associates. nine-month skilled tangible dividends to This per capital XX, September during quarter, solid had $X share summary, and at [ph] year hard book XXXX, share per my value remain that increased at of continuing $XX.XX $X.XXXX performance the Banner good share work $XX.XX of and the

but would as I As forward – color quarter. always, the your it to first, will add more look on some Peter questions,

Peter Conner

additional I and provide financial Lloyd, commentary the on good third results. you, morning, everyone. some Thank will quarter

related Net in due offset outstandings, yields. in by and Lloyd net from prior average decline decrease an our interest $X.XX decreased loan in a fees. recoveries due $XX.X prior we AmericanWest. was generally result to flat with B&O Mark quarter $X.XX tax $X.XX $X.XX share per other. to we billion. following $X.XX Non-interest GAAP the in third primarily as starting sales billion to deposits expense quarter, categories the expense mortgage to $XXX including as As portfolio, loan assets of reported earnings expense of a Non-interest quarter quarter recognized increased announced modest items. Lending write-downs in other at noted, share release, from in quarter. interest-bearing tax the for to The second in at principally are $X.X the due refunds acquired the The changes income current increase declines $X.XX, and loan one-time to income multifamily per on gains on investment due tax grew Income million OREO quarter-end. assets increased the in a and remained income each declined and

yields decline prepayment the income X.XX% contractual the declined basis put in previous quarter, quarter, the loan compared accounted grew outstandings. decline The the reflecting with However, yield, well and the loan nearly million, prior the Accretion basis penalty quarter-end, due from of growth brokerage basis increased $XXX were $XXX Time loan loan portfolio. in Total deposits to of a acquisition. quarter, in Core million across basis previous run-off average as and basis seasonal time of in investment current XX the CD loans category. offset maturity points X the of the in XX the the CDs million, by yields excluding the of points this growth to accretion prior acquired interest in modestly quarter. year, on compared points to elevated accretion cost declined non-accrual in quarter. income prior with to from yield continued quarter. deposits to the in XX points. reversals prior current quarter, $XXX for quarter, over third on levels a growth Loan quarter, every the interest portfolio the coupled in XXX,XXX partially million distributed on due was to modestly a or increased flat points compared X% normal Net quarter. discount robust the $XX the $XXX third Total declined XX client of retail up balance million average combination for loans by loans deposits to prior lower

previous loan X.XX%. and and The amortization The in accounting, delinquent points. in basis quarters, XX accounted interest to the basis for net X Excluding by compared third excluding quarter. accounting points premium points contractual actually XX points effects X prepayments margin, including to interest margin decreased time quarter. the basis quarter, in contractual both accretion yield increased the effects purchase both of the in deposit basis declined third of write-offs purchase the The basis of margin net interest of the XX impact the points loan

from by decline to on and and margin reduction point unhedged losses million primarily quarter. had secondary and value. hedging the hedge program carried gains Excluding in in a in third mirroring market in product of the origination gains gain security of the XX of the loan between on second due on income, by prepayments in the originated the $X.X interest Core lower realizable hedging from accelerating of the and fair on for multifamily initiation quarter and prior not initiation sold impact the sales sold originated, quarters, contractual the the in gain to non-interest and in sale loans loan program due the $X.X declined quarter. excess the the write-offs excluding decline loans after multifamily costs. value funding second hedge in for of from sales. points. Gain on spread effect established a the mortgage sale X in of the instruments but million in market sale prior amount and The XX third net first in loans. Currently, this basis quarter, basis expected funds costs in on securities originated combination XX% and hedging income decline of the in and adjustments income quarter declined multifamily the cash sold, the second values the quarter second both market were The on Compounded at quarter second fair quarter, the of the ranges to adding declined and debt of recognition fair was change a on quarter loan the loans a in multifamily value deducting

second loans, compared secondary quarter, market due sold to production which lower in of carry an spreads lower loan in on premiums. quarter sales increased While the fee by percentage CRE part, to qualified residential mortgage XXX,XXX increase declined income in to quarter, the and market third originated in due the current the

sales recognized in the core flat increased current gains categories, to the XXX,XXX the quarter total third a benefit gains credit expenses decline the Real State to result and a The second to due to by in in as quarter. quarter. estate more to amount – expense a declined quarter debt remarks. due XXX,XXX of on second due due normal related in to B&O previous expenses and previous recorded occupancy due were the increased prepared OREO Finally, increased net operating amount including in to expense, the the multi-year XXX,XXX normal modestly quarter. Non-interest personnel more non-recurring quarter. product. taxes a quarter concludes generally operations a a a second income – expenses of third-party municipal a in tax This my from expense refund as

Mark Grescovich

you, And our concludes open Andrea, Lloyd, Peter remarks. call your and That prepared we now welcome Rick. and for questions. comments. we’ll the Thank

Operator

We session. will ahead. of Rulis [Operator the D.A. begin first Please question-and-answer now Instructions] Davidson. question from Our go Jeff comes

Jeff Rulis

morning. Good Thanks.

Mark Grescovich

Jeff. Good morning,

Jeff Rulis

influx on nice Mark it’s – bearing deposits. of a for non-interest question a the Maybe

having bit in and some I on little future could think, or that touched on the the you on on But expand deposit some non-interest you’re bearing there. success sort on competition context seasonality thoughts a side maybe maybe front? in of just you

Mark Grescovich

very We’ve This pricing it a Mark. comment I’ll to Jeff. strategy our discipline. of and briefly strategy successful client and over acquisition attrition. reducing of good very I’ll is Peter comment had a client Thanks, Yes. to turn on

again, our had strong given which We’ve able that about the us year-over-year, been annualized, grow that growth inflection a fact we in for number has client by major client been nice net a X.X% last actually So a our conversion year. that base. very you’re seeing to

I grow continue to and the to been conversions So is amounts what deposits. we the and testament we’ve to a have staff fact acquiring exercise product the that client our sales base two to able think in

In front, the terms over turn it deposit of Peter. I’ll to pricing discipline on

Peter Conner

This Jeff. morning, is Good Yes. Peter.

in markets, out we across composition calls, we slightly to markets of the and monitor competition each all XX% of But our our XX% price our in typically all said those they we’ve As different regional across previous had competition. products. of a of

However, really pricing in that we specials deposit do is regional what to is What credit markets Banks unions Money our the our one-off majority other do the from drive and forward see going a going share. certain own typically Center banks.

that beta increases. had far several a over last we’ve very benign the deposit So

deposits a And non-interest so, fact to interest-bearing market bearing to we the again, be net component our some going forward, the banks terms alluded again that overall real really do have of our in the benefits us of respect our what large the as going here in deposit large mix very key Mark to driver deposits in for base. with But is in core create beta their

Jeff Rulis

Great, thanks. just cost Peter, DFAST maybe, ramp the the the And a of on on kind follow-up expense side preparation.

you’ve go XXXX, the there I up year, or of I first-half million think, about by total. you through where mentioned, we what we, leaving $X you the way second-half for on the incurred the Could to some what’s the towards million and you in in QX, of think to kind sit all was another million us $X.X update the expect year-end? be for where give $X in estimated of of to

Peter Conner

around and expect we in I’ll forward what Yes, of terms aggregate expense. some color additional add going sure,

we’ve We’ve XX%, So still run expense DFAST that’s third XX% recognized rate the approximately recognized through the our through third quarter, of the $X above run of that $X rate annualized million. quarter. million

and consistent down XXXX, into engagements XXXX, And forward going some typically of working complete now. our risk seasonality year-end. on we management-related infrastructure. looking principally, in management quarters will pattern that component But the of stay saw invest second begin then $X we infrastructure-related we going for to outside we delivery underway ready to in in with get will because professional our into as to an relatively largely what the have a be so we going have the into services several first we’ll are quarter, the ramping the they third forward Infrastructure begin annualized are projects and being said, expenses that audit bit to get to professional basis DFAST expense, build-out on lumpy, as a go That risk platform. fourth of million quarter So XXXX. left permanent the

Jeff Rulis

fringes Okay, Utah on and impact one, last great. expenses maybe we’re income, if of fee of one sequentially? and at does just the that, And that, all fee sale how piece if the expenses branch the income

Peter Conner

net a and the Utah it tax, basis between year announced and in associated to after and as million after was overall million divestiture. ratio. the million generating think a the net deposits is lost Utah we release, we $XXX expenses, it dilutive press was about $X million to in company’s $X So revenues with income in efficiency The easiest in on way $XXX loans saw

In terms approximately that year the revenue and million a think $X revenue of the divestiture. elements can you a $X expense contribution expense, year contribution and of about from and of million of

So again, million guidance. is $X million to $X the

Now the continue near-term across efficiently to overheads that, deploy impact the scale obviously grow. go we’re as the that, some more continue to will drag rest we that’s to we of away that franchise the as able as of existing

Jeff Rulis

Great. Thanks for the color.

Mark Grescovich

Thank you, Jeff.

Operator

comes Our Please question next ahead. Jaffray. of from Matthew go Clark Piper

Matthew Clark

Hi, good Morning.

Mark Grescovich

Matthew. morning, Good

Matthew Clark

the would gotten rate in new hike we loan on in had yield me, was what you were I have prepays or actually, a and hand rate the the actually that the up think, and reversals. of get lot yields? X that new up to trying interest you excuse I more quarter? I what talk yields a little to guess, mentioned basis thought a or the can Peter, excluding June better Just production down, adjusted money lift loan the was a what you and points, around fact contractual noise

Peter Conner

Yes.

this is Peter. yes, So,

yields loan we the So third in quarter the – was excluding so accretion XXX. contractual

reversals we the due second quarter. as and some discussed, a interest bit to prepayments we noise so And of had large fairly some in

lot of additional expect a another improvements contractual we loan outside of Going don’t whole Fed yield hike. forward,

more over it’s loan going high by right But earlier, that tightening large going contractual in level mix the influenced by be and a Fed. we XXX the XXX to fourth of loan reversals closer level wouldn’t that are guide normalized any now quarter about effect forward, the But yields to on increase basis. the another pending to into level, XXXs, meaningful the around our change the talked the our Going portfolio. interest I of

Matthew Clark

sense the hike? is that that here core steady the remain a your XXX December So without from margin fairly

Peter Conner

I that’s fair. think Yes,

Mark Grescovich

because me Jeff core question just the we’ve little why deposit out Matthew, the base franchise That’s the franchise value this very really it’s front. of I Mark, and regarding and invested our add much to organization. is deposits deposit similar recognize growing a so wonder, let is color, our our of Rulis’s

a earnings a non-interest having in bearing is mix, we maintaining to So us really core deposits deposit close added concentration XX%, of XX% XX% to power. the that total important where

Matthew Clark

multifamily, a how But margin net just run that’s which normalized think might or sale what expected. on for of be clarity much I is of think sale family. single of little basis a family and previously going for rate from hedging point lower that gain lot about Obviously, Yes, gain with okay. XX But production seasonality to a kind should arena, the to, multifamily you normalized how And some here? we around then business? in than single there’s I we But XX on on resi talked think a what? forward more

Peter Conner

Yes, this is Mathew, Peter.

XX unit that So is basis XX on and million currently that costs, the some – program. to loan quarter The million XX a the fees broker XX are basis deferred $XX and the generating net-net production origination to a cost after hedging to points and they sales. in go currently – $XX with realizing business

of in forward on for what well, on product loans that and there the originating secondary Part the the compression those as fees six on so of rate that So gain you there rate expectation part is in can in going that we’ve in two sale the that fact on well gain to in months. the on parts spreads normalized in last obviously it as terms that terms of side business. compression due of run the market the some on the competition lower sale do so in of kind in the sales gain is more that is was as generates marketplace to somewhat compression the seen math

Matthew Clark

assume I family multifamily; And single top of you to is on that? there speaking just are

Peter Conner

increased affected. sell loans on It is CRA there to on sale was is proportion the production due sold into of residential actually that third we levels on we reasons and do gain we the levels loans market. but various business, of and portfolio in We Yes, slightly the a quarter were had loans mortgage compression don’t the qualified did that higher we the fact – of sale and that this that higher then mortgage gain production some sold that sell, for originated of the sold, limit for generated secondary the CRA into the on secondary quarter the portion loans market.

the of majority the gains we had of on the that this effect so saw some on compressing And sales mortgage quarter.

Matthew Clark

to ratio at just know are expense then opportunities to consider the you X.XX could efficiency there from to of outlook, revenue any outside the that initiatives size the ratio, X.XX improvement asset and but running XX%, base expect of to Okay operating are revenue? you mean kind partly or come growth, I on expense right you over I expense

Peter Conner

think to taking we considering Matt, is like what I are actions. we

of consolidated we that sale of as Utah announced XX seen obviously the AmericanWest and You’ve part also were branches.

we We by so ways look the existing reduce consolidation and across to to at expense the also some branches consolidate continue of overhead. have footprint branches,

going the focused franchise. generation and primarily opposed to on forward going initiatives be back pairing to So revenue the are as

ratio investments help some back the the and Now is there technology that will scalability. additional in office at get us provide same could time efficiency the some we

Matthew Clark

a lot. thanks Okay,

Peter Conner

you. Thank

Operator

Worthington Our next ahead. question Raymond of comes James. Please Don go from

Don Worthington

everyone. Good morning

of provide? like can can couple looking anything there kind color and Just one in was was on credit, at small it the a you that that or any uptick whether credits provide, NPAs of they that

Richard Barton

very Barton. factor a there of at, in any was other this terms Rick of a granular is number latter industry It’s geography so commonality Don you no scenario or increase. credits, spread the it might was look was that through

Don Worthington

about in gross what related were the then quarter? and Okay charge-offs the What to? those

Peter Conner

credit was the by an increase and company. agricultural the by combination that management really market forces driven of Well, suffered a bad from

Don Worthington

it was credit so one largely there. Okay,

Okay, you. thank

Operator

go question of next O’Brien ahead. O’Neill. comes from Sandler Please Our Tim

Tim O’Brien

can be, somewhat net will be the the to and for ballpark benefit a You the of the with than the sale part what it premium, less or to of full give amount branch, guys us you other deposit premium the on is costs of Utah some alluded fees business? will that associated it going the be

Peter Conner

this X.X% anticipating to quarter. downs franchise, gets on premium fourth deposit sold, however Peter. on an $XX with of sale goodwill on core We Tim, million tangible write gain and that and booked receive sure be the pre-tax is on that $XX we in the some total pre-tax in between Yes, so are reduced basis deposit associated million deposit by a net

Tim O’Brien

the resolve a total one more – you guys these you for a around and can you have then great of cost bit that, have you expect execute info for share accruals little on qualified and that to Okay thanks, that initiatives budgeted cost efficiency the do back time getting year about initiatives next of year? kind that lumpy a from you

Peter Conner

optimal goals. to Tim evaluating of it’s generate process appropriate areas branches process we in and in footprint an so our our an have locations ongoing strategic continue ongoing our that’s market those reviewing of Yes, branch and for our performance, growth to ability for

so into we management have branch just that aggregate to some will risk we carry optimize build the offsetting ramp network, our factors, the expense, while infrastructure carry XXXX. In of on have of terms out some we continue

any of XXXX, in wouldn’t into effects in end reductions curve XXXX guide so built I but as land the the fourth gone of the material So, XXXX Utah. again I going see of much as quarter, efficiency growth an expense obviously operating S that we we’ll infrastructure, through said more in towards outside to we’ve expense we’ve as earlier, risk measured in out phase

Tim O’Brien

And through, and in relative through regard in your came business Is tight vacancies and we regard by affected to feeling cost where out you in the labor just pack then to we as Northwest you know into it staff it? and are XXXX, feeling looking or to well, filling at are California Bank. you XXXX with the you also with guys a perhaps pressure comp while are came vacancies, market salary on –

Mark Grescovich

Well, I Mark. Tim this think,

talent safe think is across a assume I difficult it’s the industry acquisition footprints that in banking to proposition. the

really been We a attracting organization and retaining quality building that attract have our staff. successful retain talent to very your performance We’ve and in at organization. propositions been driving at are really to value here. in We’ve the colleagues successful have very out

on and compensation through So, I we’ve to the and business the think front, model set them. bank and our super that product while proposition for successful provide good retaining value along they there help revenue generators clients our with capacity community attracting size along pressure really been with the at and is is

out. done of also looked we increase levels precipitously they value expect very that not an to when staff the a job support provide and infrastructure, proposition where at today. – at I the On the have and we’ve excellent we staff would them are building would staff our from good

scale continue I think we into the to have organization. to grow the

Tim O’Brien

my questions thanks right, All answering for guys.

Mark Grescovich

Tim. Thanks

Operator

go last Instructions] from Please Jackie comes Our [Operator Bohlen question of KBW. ahead.

Jackie Bohlen

loan opportunities a deposit net Mark, that got relationships, you’ve an is that generation, it’s that of from you loan client the spoken or deposits at when coming, about and over missed had as of growth these depositor? you some as generation the there much between growth purely customers the between meaning had, they how overlay bringing are

Mark Grescovich

Jackie see or household really products touting approaching we there for question relationship, as our new that Business has a wholesome taking five in truly wholesome proposition a services what really is organization clients into generation and obviously five a Administration Small you in it’s for we the and are thank see the Also – gotten you what small so that relationship. Excellent and would characterize business deposits. that, can our with awards we’ve services, us comes by that value our is root on

not loans. So business necessarily it’s the front, small the in

that small have loans, have it. sized may basis with equal but You come deposit you

our wholesome they relationships are organization. So truly they enter into as

on we’re other piece, a about I our The the mortgage XX% say front, ratio would cross-sell is running mortgage business. with

products services. of company, and are wholesome about mortgages that that into them the XX% come additional new So have relationships

Jackie Bohlen

you. helpful. very Thank That’s

Mark Grescovich

welcome You’re

Operator

question Stafford ahead. comes of Tyler go next Our from Please Inc. Stephens

Tyler Stafford

expense if and Thanks. hopped the and now being haven’t offset morning, right very already. got? M&A, on of in I Hey, to about about so feelings just But talked M&A participate able apologize you you I be or – your as discussion guys. late, I scale some I’d thoughts just curious miss around this you’ve Banner good

Mark Grescovich

Tyler, this Mark. Thanks, is Yes.

We’ve have in additional very that We And approach I no have as for in been we’ve crossing the the of folks disciplined to past provided an what what think infrastructure in billion certain in is is on our M&A. to cost We be need guidance in place the front. the we want we’ve past in outlined do terms impact from we our $XX and what scalable. roadmap organization. the M&A

in organic advantage our what opportunities those. growth don’t the should But the think, of on focused footprint I additional And we any take on we’re have still will be I is there guidance. now. Coast, certainly West

Tyler Stafford

Thanks, that’s Mark. fine. No,

Mark Grescovich

you. Thank

Operator

follow-up question Please we Piper ahead. a of from Matthew Jaffray. Clark have go And

Matthew Clark

M&A my that was Yes, question.

same is to why it might wanted Is we what get it just be get guys a just trying just can’t the better – just maybe of for sense haven’t slowed, as activity well? has make price or Just announcement. it work, on that on to a going seen an or is better you sense

Mark Grescovich

don’t additional I Yes, Matthew, Like this guidance. said, is Mark. I any have

and to then deposit to next become nice filter [ph] the brilliant a strategic have the make it’s going have very franchise to with issue. first economics sure, Our is us a strong it’s and for position

we as So we to recall that, just to four amounts we forward, digested have sure what want proceed acquisitions. that make

fit for So strategic the best we make want that forward do to organization. sure going the whatever we is

Matthew Clark

Understood. Thanks.

Mark Grescovich

back Thank session. closing Grescovich I over to to question-and-answer Mr. you. our any This remarks. conference turn for the Mark like would concludes

Mark Grescovich

Thank you, Andrea.

all deploying and our solid to We call a Banner the thank third we day. market prudently on quarter. improving making my on your bank operating performance Thank maintaining and interest by colleagues to performance, we executing value quarter for Thank it driving in are pleased today. our you for progress super next model to are very risk and strengthening joining Have I to are build like with look would everyone. moderate growing As capital. core our solid strategic excess plan as disciplined that XXXX profile you deposit company. our talking see our substantial who stated, performance, and franchise, a by good sustainable I our forward community share, for our shareholder evidence you,

Operator

attending you Thank concluded. now has for conference today’s The presentation.

You may now disconnect your lines.

Banner (BANR) 26 Oct 172017 Q3 Earnings call transcript