BANR - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to the Banner Corporation's First Quarter 2018 Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mark Grescovich, President and CEO. Please go ahead.

Mark Grescovich

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

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

Albert Marshall

Good Certainly. morning.

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

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

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

Mark Grescovich

Al. you, Thank

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

work quarter fair and million merger first of deliver losses profitability expenses, of the our of million successfully XXXX, value compared to and of our financial in to company, growth changes on the we are to revenue the impact X%. for in and earnings on employees an the instruments, executing sustainable sale of Due XXXX $XX.X $XX.X the and increase of priorities first throughout securities hard to Banner. quarter were the gains and Excluding acquisition strategies

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

to are quarter clearly first continues building Our and effective, our plan performance shareholder we XXXX value. strategic be demonstrates that

discuss advocacy resulted $XXX.X this million Peter improved performance First benefited to Overall, in quarter Lloyd through on and common a of quarter client and Baker the a growing assets of share ratio our core quarter coupled detail. funding execution the a X.XX%, XXXX net we of XX% deposits community organic deposits a To quarter continued new $X.XX ago, our nearly model. Reflective increased Once loyalty in with of operating deposit compared shares first super fee of new adding moments, stock. increased this our will larger earning core interest margin dividend core March X.XX% growing average promoting generation bank core that service reflects relationships. We quarter responsive mix, the our in and remained XXXX. total continued Conner of XX, client from revenue strong In million X% performance, above position was tangible on asset and XXX,XXX client from solid that for and of revenue. increased return XX% deposits. represent repurchased is, now XXXX. X% point, strategy and of our deposits equity good per and strong compared performance common this $XXX.X to our we XXXX. that by our again, more to our to year Noninterest-bearing first X few relationships, in X% Further, our

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

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

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

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

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

in Bank, the Spokane for call over The Bank the X Year The ranked to Bank Business out and the Community in of Regional Lender third Seattle Banner year I'll XXXX second we years. XXX Banner Banner loan year, consecutive to XX have the Money turn Best for America. Lender the America. trends won the this in And this Best portfolio. Banner Rick of named Magazine in Bank for Barton Small Regional our Year Banks And Administration the now of district named discuss the Rick? Also, consecutive Forbes Bankrate.com and award. year. named

Richard Barton

Thanks, will have profile company's stabled at the well-positioned moderate Mark. the My during risk first as the Maintenance credit remarks XXXX. metrics morning of continuing portfolio. of quarter loan Banner this continued brief highlight

loans of Not troubled $XX move in change metrics, points not of we from X to which modest restructures to the our ratio year rules. during level the nonperforming asset decreased these loans are from credit million. to were on banks, debt quarter, cycle. and and X.XX% and performance. nonperforming again between some are of quarter good the still activity total loans loans reflecting $X assets pattern not normal reportable million total assets ago. statement include economic of X.XX% million decreased assets of basis The REO X.XX% our adversely Banner's assets Performing were usual at This X.XX%. to totals, and continuing of Delinquent delinquent the we will year-ago their level. reflected other a under delinquencies level of when nonperforming loans commenting of basis total the next low current linked loans are linked in totals basis assets compares acquired metrics points $X to split likely Before points. of positive Siuslaw classified and that assets, during purchase acquired the XX modestly of credit to as Nonperforming the the and the total are nonperforming XX comparable my make would toward both decreased nonperforming from further quarter loans delinquent our $X.X company's improve If borrower of million accounting are X in is again, by quarter. X% in assets AmericanWest decreased to footprint Nonperforming be remaining I

losses. is company and million For recorded consider $XX.X allowance loans the X.XX% historical recoveries charge-offs for $X.X the the March of quarters ending $X.X is linked and quarter of We XX, XXX%. fourth million mark loan and net be to loan protection a million, very lease recent million level provision After $XXX,XXX. total norms. of losses for robust both compared when against quarter company abnormally XXXX. an loan charge-offs remaining and of totals The quarter loans loans recoveries provides low nonperforming loan to is X.XX% accounting first and loan the acquired million, to quarter $X $XX after additional for the net of compared of Coverage a against quarter, of net which the

nontraditional of to loan assets do in company's continue veteran Before discussion funding note are adversely of Their taking us prune advantage credit to to today portfolio. our this well a proper from metrics, work of will variety future. and leaving it's workout specialists serves sources the loan so classified Banner's that

During agriculture in land were $XX offset The first the estate was and commercial low of of realize commercial outstandings by loans, total other to our during million. advantage annualized quarter $XX $XX C&I decline The important at gains for by was loans, across residential construction footprint loans, refinance this receivables rate institutional real residential to increases million in XXXX, held seasonal. total loan rates. largely properties to fell decrease categories, $XX sold million. loans, It in million commercial properties This was loan such behind clients also million. note occurred loans quarter loan take growth construction as loan total decreases significant as X.X%. that multifamily loan driver either decline real the investment, million estate The an is or of $XX $X

loans construction days, Lease-up While last our activity loan these in levels. increasing all loans manner. has with sectors paying the on concentration at not Banner's XX off remained changed a multifamily portfolio acceptable timely construction within in

in loans However, either markets the we of inventory. we in or levels resulting observe residential growth manageable undersupplied and rents. multifamily are which make of in construction in moderation timely to absorption completed balance, remain continuing The

last my stable the is well Lloyd? portfolios no With the future. positions remarks, to with small which turn at credit sadness solidified our at comments. risk for Banner, for the that, remains us the his the of microphone further said of and moderate over of I I degree profile for time personal that loan and colleague As Lloyd friend, Baker, it my outset

Lloyd Baker

everyone. morning, good And Rick. you, Thank

that last that As before will the earnings the talk did of I in speaker which have Gary was when at then to sense do for me comments stared that Sirmon, Rick know be time first first that who, not in call. I the provide announcers of earnings Mark radio Banner noted, a was every I struck and I knowing was At I finish was, I participate deep as then I listening. call dumb. about. he Chairman, respect intended recall Gary Corporation I a if the not but And the CEO, was developed the is the and day. speakerphone our I had point recall table, time this middle hours who asked my single speaking, also anyone addressed to had for talk who

was now who surprises often provided joined Of say. X is these just and going The cause course, Grescovich. I for years X by CEO the And with Mark know years always good that of me followed what with is with news on well. I Jones, first to was as Mark cause the Gary that last with calls exactly Mike

and for the last I are the its continued success. I'm leave So general details company relate financial for is a and the instead this good. few state on believe very my because Peter of going call, quarter more prospects that to to observations Prospects the

would continued performance. overused quarters, of some in say generation consistent years, have revenue momentum we like and trends, number fact, describe Banner's a earnings words used For to solid and

CEOs of as acquisition company I line Banner mission capital first many a lead and evolved well a results And prudent of team focused results As Since and practices, been in type well. the should that margin all franchise release deposit comments, while in well-received high-quality community and quarters executive becoming that strong a under serve. to economies, our of strong fundamentals support Board produced fundamentals mentioned the base has of building for the Directors, the management a and presented core which management we risk Unlike XXXX interest include and that success revenue strong have similar call, talented increasing the that solid loan combined well-diversified to and efforts have clients hardworking noted and These local consistent opening of opportunities. has community participate reported employees company thoughtful to three we in going I in much definition towards the have and continuing underlying that delivered I in growth these first public net forward. exception the straight mentioned, now recurring and you progress of have not reflects many Mark's to quarter Banner reflect provide evidence description conversations. that many the the of suggest fundamentals that geography, portfolio, consistent no listen would dedicated sheet our a XXXX underlying the include goal. continuing generated and a the and and The and our positioned we years regularly to press and in of communities with know of revenues broader the by honestly management forward good a as I now new balance look recent -- of our and has franchise strengths leadership this banking of strong products And a always franchise. quarterly our on know calls. of other When continued I been ample I of investment you

many to So personally in interest for the those this continued thank your courtesies take and support years. and Banner me to I'd like to of over you've opportunity extended you for

and of many coworkers I but optimistic consistent. we its solid, I leave existence be Banner prepare have what built my company years have and cannot future. by As we -- of to what about back Corporation, and In public be over of our proud look summary, mean, those we, hundreds strong I help and

questions. I'll now I turn details always, you the to to call give So over your And quarter. forward the Peter as on to look

Peter Conner

working It's been honor you. you, with Thank Lloyd. an

at the in and As or share $X.XX noninterest net current per expense a in sale higher $X.XX deferred items, current following due due in Income gain assets taken current of million lower million the earnings as company's previously the Noninterest and higher a in and prior $X.XX expense, carried Core sales basis decreased for partially payroll fees of quarter. expense our the up from average increase quarter the effective the prior earning $XX.X services share to income, loss first from prior mortgage increase Noninterest the due securities fair to including offset modest net in and gain $X.XX $XX.X remained in per the gains employee the banking the income income quarter. as $X.XX despite stable. deposit share marketing decreased by current interest quarter due of quarter in was in quarter, and discussed REO announced the tax value net on of income decline in income or The release, to to in the quarter. quarter million offset tax operations the by the due decreased the benefits $X.XX in margin. the expense increased the declined interest of we $X.XX on the assets quarter. a professional rate per and XX prior taxes quarter, reported tax prior $XX partially write-down point a to result Utah in

On of prepayment and grew an to held-for-sale loans CRE threshold loans as quarter. quarter. year year-end. decline portfolio deposits, loans. compared reflecting investment in outstandings. $XX the after of Turning million result the activity of to basis billion the portfolio multifamily first the the under as the of deposit the balances million sheet. assets purchase fourth securities the increased prior the releveraging quarter X.X%. a new the offset billion partially the declines held-for-portfolio Total first portfolio, result $XX.X within million and at seasonal end year-end, $XXX the a or principally to loans, quarter including portfolio at growth in with the staying modestly, in of annual $XXX agricultural quarter $XXX loan balance $XX million Held-for-portfolio during the result ago, increased from of declined end a of Ending from as And growth increased interest-bearing from the a investment loans The

sale Excluding or million moved certain prior the to of of deleveraging. million portfolio off large the or upswing deposit basis, On the operations, $XXX normally across quarter grew deposits balances bank in few deposit commercial client balance the an $XXX sheet quarter due as throughout client as in loans increased result impact Utah the annual of the and of Core due X% compared an $XXX growth the generally X.X%. first payments. repatriation deposits grew X.X% quarter deposits part year-end from experiences of to the A a year modest sales core the end. or million prior then The quarter to business second tax robust a and decline deposits portfolio. inflows

in of Excluding from end. interest portfolio result well-performing total million X Time $XX the quarter quarter. from Net quarter of up $XXX the operations, of X.X% the net from in the loan to income Improvement the XX deposits were grew $X.X CDs. investment portfolio in purchasing core The points, prior interest due Utah deposits year-end selling year the securities by in quarter cost deposits brokerage to combined sale increases yields an million increased driven point in million with or increases was margin prior first the increased due first at increase security yields. the basis and in quarter. basis higher-yielding the prior securities

interest first increased yields yield, in benefited purchase through and the yields the curve. purchases the important loan X.XX% at improvement investment the to first floating higher deleveraging the increase Effects point excluding amortization, to similar interest interest X.XX%. quarter compared in and to basis net the result to X part contractual accretion accounted premium for yield basis loan in previous that accretion the points in basis loans. Accretion to points basis from temporarily in a rates loan higher quarter the earning The to company including the in in increased margin deposit first accounted XX both basis to accounting, basis securities The for on quarter loan XX of XX points ratio basis adjustable quarter the quarter. of due Loan As accretion, quarter. the of the due and in It's at that year-end, the increase due to points the positive of our impact activity points of quarter XX rate X points in of yield the the first of X.XX%. time increased quarter compared net margin this basis a points the to in releveraging first loans assets. net note was securities to previous interest X lower higher-yielding the relative make in margin up X

of charges due was banking bank and income. as result in the fair we quarter the will releveraging we and With generation and ratio good, with the to completion second the funding XXX,XXX well sales continued decreased on account the of some losses headwinds at property costs. quarter, in in a of instruments increases service portfolio from gains on noninterest as interchange security the and income. the continued value, quarter, higher net excluding investment modestly margin Deposit first mortgage interest loans of carried fee growth primarily experience securities income, on in the and quarter debt fair deposit as value lower at adjustments prior end exited securities to to the Core gains prior

basis under to impact noninterest reported and The comparing and merchant eliminating periods from to This basis, to gross restated to however, pass-through make net noninterest expense We quarter, had change, income revenue our of accounting expense the periods. processor. from we income prior apples. the basis third-party prior reporting prior we sent net net card apples to period no the in a a the revenue changed

income accounting the subordinated to statement balance to from junior debt This the referred sheet on the changes our also as of or changed sheet to the of they're quarter, OCI. fair balance we within debentures TRUP's value the

as increased as the fair to value par time result, on in reporting over In in tax quarter's and be they TRUP's increases to million a will Rather as discounted X-month first reduction TRUP's the the within debt the reduction comprehensive did debt recorded tightening a of occurred that a LIBOR than $XX.X on OCI. net of spreads equity by a loss value fair losses to life the passage quarter, change rates. it recognized previously, as due As marched we towards as equity the of their income. with this other income credit statement was remaining

noninterest held We in securities income. continue changes to report for trading value of in the

in the by million in to This expense decreased and gains spreads. This quarter, to in spend to modest Noninterest a lower tax to the campaigns, Personnel taken Noninterest direct $X.X remarks. REO Mark? the on million estate $X.X from due to securities quarter, quarter the mail fair expense. in and certain increased the marketing for increased increases on promotions a relative concludes gain sale fourth previous staff we the which on due quarter Advertising $XXX,XXX quarter. my growth of Real million the credit fourth reported expense in FTE, operations highest typically of higher quarter. payroll $X primarily is year. due turnover. merit value expenses reduction $X.X expense million to first due and slowdown expenses, due and a decreased prepared benefits

Mark Grescovich

for questions. prepared call Peter concludes Rachelle and Lloyd That open you, the your comments. Thank and will And Rick, your remarks. now our welcome

Operator

Instructions]. [Operator

The Bohlen first Jackie from with comes KBW. question

Jacquelynne Bohlen

was mix just given the I wanted off of to the that? loan yields into just in the start How had with, you dig strength that much quarter. factor in to

Peter Conner

Peter. Jackie, it's

impact mix. So modest some there was to

construction portfolio. average the yields an higher rest balances loans quarter in saw in we the construction the increase of in and loan So carry

much of in as and March. the as increase fed that, we to our December and had rates the due lesser extent are a of to of characterized although was price most of LIBOR, to move prime tied of some the effects soon loans those and benefit we XX% the both core end tightening, it at and rate So the contractual up.

Jacquelynne Bohlen

So to well? depending another up in assume is mix, -- construction then see the it another good side we'd XQ of that as fair course, on pump

Peter Conner

characterize this I'd it way. Well,

some said quarter. hike second see will that carry We the from will the benefit mid-March from into

continue create new pressure increase also headwinds the loans pricing we on see that with some rate of to However, loans. to otherwise floating CNO's

think the we I in stayed first a assuming would the second contractual in reasonable the increase the quarter quarter. same the saw mix be guide,

Jacquelynne Bohlen

where the new loan Okay. And portfolio? was pricing in the first versus quarter

Peter Conner

to that fed rates, It XX XX somewhat recall saw price where LIBOR X CRE loans. was we up only not curve of compared increase the in we term the and we point and XX in increases basis we part portfolio year the that average yield guide funds a to the but also

don't I higher characterize the So our new existing I'd on exact yields. But number are an portfolio coming have loan rates you. yields for at slightly than

Jacquelynne Bohlen

purchased were quarter? rate at? securities And the what What the in That's were that helpful. those about Okay.

Peter Conner

of the we're So taking about X.XX on on repurchase historical securities security rate. to continue in at so and rebuilding a coming and duration portfolio our contend we're to the portfolio. average, mix averages X] over similar to averaging We additional not manage those any X.XX But securities, our are X.XX. about that at

Jacquelynne Bohlen

is with go? done there releveraging, you are And or still pretty to Okay. the more much

Peter Conner

quarter. the We done. the at We end of throughout done will March. built we are note, were I however,

in than saw quarter. securities that the first we be remarks balance my second outstanding. average headwinds quarter and average the the our than will the it because create in earning asset the the quarter prepared higher into loan of in And balance as will the that And the going I second so relative higher quarter mix was composition in in of securities will some first margin to be noted

the And some will funding on the will use costs the earning are at which as pressure influenced that create quarter. faster deposit amount which increase up costs, wholesale the funding have in some that second first likely we'll also coupled wholesale assets, So increasing second fund be modest the we'll second asset with to then margin much our to go our headwinds yield going market. quarter. but some the the into quarter, of rates total by we earning quarter on relative given the so And to

Jacquelynne Bohlen

big guess, Do in you I do increase expect of a the -- quarter? wholesale wholesale funding you increase an expect in second in much

Peter Conner

Well, But you in ended growth rely wholesale which driver the it's tends bigger of the borrowing we increase increase rates highly short-term our where March. on the of from fact be payments. a ended. of can we to a cost -- in will where costs. We But slow the so not bit think much quarter tax terms a we typically the our funding that have FHLB, correlate with of slowdown deposit in LIBOR second were

was of quarter. first borrowings more made mix funding So in our be will up quarter than it of wholesale in the the second

that pressure on the in sources second in the of of it come have than simply mix due the funding fact wholesale some did more to will the funding So from the first. will quarter

Jacquelynne Bohlen

one and helpful. last one I'll very then That's And just Okay. back. step

the deposit you quarter comments after movement in result costs, Are the about the forward. increase, volume seeing that coming there going that of then given of In as very of terms we and first March increase saw you're that? a calls in making or pressure are in an any the limited changes

Peter Conner

balances CD regional of a on in the some are higher We of tier deposit the we're to market balances, approach the and And all those we've channels. some And savings pressure some the beginnings in. pricing calibrated tenures seeing calibrated of evaluating adjustments money made across markets our we have products.

Some of QX. those, saw in you effect the

form second changes made effect the what continued the of the some quarter to carry the into first we in additional see You'll of of increases. in quarter the

see through the of deposit amount to fair also And bubbled those exception as increases continue a for some pricing. requests costs. overall We

modest. fairly Although, so far they're

Operator

Jeff comes Rulis question Davidson. The next from D.A. with

Jeffrey Rulis

you success the had the growth side. in that on quarter the deposit on Comment

kind obviously, the of is side. to typical and or that's some mentioned, could more overly was seen You timing XQ? some It effective, and but seasonal you've a you in seemed something pronounced. or outflows deposit this it really little in point Anything on nature already in QX,

Peter Conner

Peter. Yes. Jeff, it's

that So they're somewhat the and first unusual elements deposit that of made two growth we quarter saw. amount the

that The about $XX repatriated deleveraging the million first off strategy our is moved we in deposits sheet quarter. had as fourth of we part balance of

on we balance So sheet. those back brought the

We client seen but elements amount our would first not growth portfolio, activity That and in inflows clients. of the growth a said, entire first the related of deposit increase of And did to what the generally that also large deleveraging a to good year, deposit sales large have in quarter. deposit to in an balance quarter. unusually characterize large being along very commercial few typically some commercial two with we we portion saw see I business end first inflows at related robust are we unusually across the -- the account

Jeffrey Rulis

number? growth just more I a the any that or That's then of year, on expenses. normalized. and payroll higher looked pretty so expenses don't time the if guess, of But, lower pretty solid from advertising had to Great. phase, there's helpful. And if you could core balance little comment this at rate guess, potential sort that's one a on clean. say, quarter the you on this if Really I anything know I of

Peter Conner

a reasons, one, is The we was it following lower a advertising first was typically quarter. expense the see a it for bit, and but than low had a first of in down low normally And quarter even bit base marketing. quarter we

back to marketing the pace to normal And second that'll as will and we advertising into that of go continue go quarters. a and third up so item line --

were year credits core prior had provider quarter. the line The we of first or miscellaneous expense other item, refunds recorded in from a our a line item, that from in particular, the service couple

a then expense quarter low a really So a then than lastly, And to that we was also -- positively so do expenses a and the amount pace loan affected also the miscellaneous company. -- lower which of tied the bit. some had loan our is was bit production and in a first that and services is line normal. the conferences we down we directly bit was quarter, expense we of lighter the due to of quarter by -- first also of to tied information that was And item rebates. line in expenses, our also fact production simply within we had couple were Employee travel seasonality down the

are second into couple into to our the end happen. the is, normal going quarter. One a quarter see employees promotional carry of full we at quarter, as the the first we're second so going things a to And given look quarter of to of increases, merit

to -- quarter. more of see So normal compensation items run pace those salaries, the along in going in the other impact some second specifically expense quarter, they're returning up rate second we'll and of with line

all means in in we'll the So recorded into first is, that see the expense quarter. from what we increase going our second quarter some overall

Jeffrey Rulis

one Okay. last And Mark. maybe one for

thoughts Just checking seeing on lately latest discussions in and your kind on what the you're of M&A front on M&A?

Mark Grescovich

Jeff. Thanks, where months M&A would conversations not the XX were Yes. I they to characterize ago. as dissimilar

for not us, is an negotiated Reform of positioned, have how are discussions Act, And as think overprice there be just still we've a M&A markets the to We're in their understand the take the we in before, of company Tax advantage of transactions. trying alluded to how have, strong we to for impact I franchise. position are which any type folks auctioned operate. that to to

occurring nothing that the So there really new M&A to is conversations are today.

Operator

with question next Stephens. comes The from Tyler Stafford

Tyler Stafford

both about deposit about about balance year. step deposit XXXX? expectations, growth as loan we but kind and back talked of think of know XQ growth, you do the growth for just how the Can you about think entirety you and sheet I the talk

Peter Conner

in Tyler, mid-single deposits core loan deposit both being outstandings. growth digits, annual and for mid- Peter. single in it's We're in around high the to both loans and guidance growth our Yes. digits consistent

trajectory. don't has changed. any And we And so anticipate meaningful that from change not that

Mark Grescovich

Tyler, this is Mark.

something the think the if of you think is strength I for were see loan only Utah, the economy, if We similar. the growth of add thing our over Peter's at of is, normalize inside I'd with year heard our is, comment, you loan to growth. you you some of this characterize just growth us X% would would sale what --

Tyler Stafford

some Okay. branches the hiring client dynamics saying just from you the given closing that the can and about And talk then acquisition whatnot? markets within competitors of secondly, you're the or opportunities

Mark Grescovich

Tyler. Mark, is This Right.

a I good think that's question.

retention to number either one here. And talent you components One, be top have well X a to acquisition markets. that continues we banks there's think is as from are priorities of alluded acquisition. to that talent as which I the is decided company, our benefiting exit the fact or of of contract

to -- low. been are in quite rate now talent of We turnover season. And through opportunity his retention comments, alluded rate on we're on what our or a also has characterize you client bit bonus Peter acquisition. would the acquisition very seeing as

in So organization. retaining job obviously, very our talent good a we've done of

a still tell. very market client some us early disruption to of it's tell. to for acquisition, customer terms opportunities little mean, -- going In is But that I we're early some prevent good optimistic present acquisition, still for market that, little our given And first X%, quarter, that would client disruption. an would grew by net under a little basis, we X%. accelerate In bit just on begin continuing growth. about to we annualized hope the households to the

Tyler Stafford

missed I Okay. the March? have increases the comp merit line on And what's that was much but then total? may How it, in

Peter Conner

all-in we'll the impact the second for see first so about on put X% the end didn't of carry very merit increase the will a the that March, much in So of We average we quarter. quarter an that at increase have around merit through company. into but really

Operator

Feldman The next with from comes question Capital Louis Management. Wells

Louis Feldman

what interest on this you terms a can little sell there of still color to Is and -- demand might on give a -- Rick, high? a cyclical more color the give in their is little be in CRE are you that? for loans can at more starting people or or CRE

Richard Barton

the let's that Well, activity Lou. first in address Sure, the occurred quarter.

to were in gains that very, mentioned your comments, the loans go in lock rates longer said term. the quarter. of for we're some second the seeing building towards Having comparable for rates marketplace. activity they some we able of to as into the I lower very in customers moving CRE sell gets As point that, significant institutional at properties were pipelines and to my And also,

are So in robust still lending I think that opportunities available that area. there

Louis Feldman

could touched really you on then Mark, there? us give you out And happens ever a Okay. that not update, XX-second a in haven't Islanders anything while,

Mark Grescovich

Lou. Thanks,

performed the to one San a doing in top of stable run it's as performing as X it's slightly to And continues a Bank it We're to the be very its currently well. continue good going would niche company. Islanders holding to quite of marketplace, has the performance bank. characterize on I Island, subsidiaries its is Islanders improving. it those in has Bank. well. branches very It affiliate And and Juan call, For our the and the it

Louis Feldman

Okay. strange Baker, FWWB? Mr. it's trip what a been long for

Lloyd Baker

Yes, and it has it will.

Louis Feldman

just Remembering in when you the XXXX days the that and myself. in with XXXX it back meeting Bradshaw and building, and was Gary back

Lloyd Baker

It's left awfully here. condition being Yes. good in

for conversations and time, Peter all going think. are quite with So you Mark I nice some have to

Operator

comes The O'Brien with O'Neill. Tim Sandler next from question

Timothy O'Brien

little think? heading or a First Is Where question, service $X.X is There bit last item think professional from last to quarter. going this million quarter, charges you $X.X it I of think, here talked you for about coming going that costs a here What guys was captured? million do nice that line versus run is or, fully at was quarter the decline that quarter. you down. forward

Peter Conner

company the it in Yes, to we're risk some management-related going as to forward the $X.X infrastructure first line of million projects is major Peter. continues is quarter, see focused we'll the begin spend what quarter, -- last recorded have in the some it's around X we years. so the is risk the going that second continue on decline for to within we to the albeit Tim, wrap up

platform, through line are branch we professional enhancements. on form there network, the some to run we banking, in digital our facilitate other invest all continue engage franchise of which outside the those to However, as focusing in overall -- services channels, of our our delivery help optimizing the delivery professional

as legal I the characterize have the own things and of and expense a rate and to some lumpy because like it includes for run albeit, reasonably tend March it's next which So flows. number quarter, ebbs their audit some good expense, seasonality

quarter anticipate the year-end. line in into work Going in we'd more of a principally to bit ramps increase that audit at fourth related item then a the and some modest the the of that up third quarter, decline

Timothy O'Brien

credits The prior follow-ups. do ballpark, couple the amount reclaimed a of you year have credit you those -- hit dollar then that total? And guys of in miscellaneous,

Peter Conner

Yes. between They aggregate. and $XXX,XXX -- and XXX in $X million were

Timothy O'Brien

and $X million. $XXX

Peter Conner

and $XXX $X million.

Timothy O'Brien

million. $X and $XXX

Peter Conner

don't have but... the I number exact

Timothy O'Brien

okay. That's

Lloyd Baker

$XXX million. and $X

Timothy O'Brien

in sales deposit clients, by you And do aggregate? was from what that proceeds happen then the business to know

Peter Conner

clients. I Tim. an don't exact several number was you, have for It several yes, --

first component a relatively present. although the was as, was put would minority I we quarter. the saw It's the percentage of it it in increase it Although, small of increase, overall

Timothy O'Brien

kind you or that benefit payroll of the any that or us, the by happen salary can that like seasonal where chance and quarter things costs is out comp. possible? And know -- to for like first you carve would there hit that workmens

Peter Conner

haven't XXX(k) from comp Tim, claims the the line in quarter seasonal expense, have as was a the which people majority of it actually high it increases, not yet. salary maxed payroll but just first the costs, first direct taxes came quarter, increase the out in medical principally, FICA in limits to related their

of the bit but benefit was and tax the was payroll payroll increase on tax. salary, an in increase that of It most a of of majority benefits form the So and impact related. was

Timothy O'Brien

will are that of it nature, those Like I won't -- -- accruals? sort come that's seasonal right? in onetime a mean, it's seasonal And recur,

Peter Conner

Yes. bit seasonality. some some some quarter. a the benefits, There's There's to the to the tax on albeit will seasonality into payroll that component of and continue second

onetime. not would the to I as characterize increase So want and you seasonal entire

So benefits the we growth tax the first into a quarter. and but portion in at of level will that payroll quarter, not the continue second saw

Timothy O'Brien

that bring of kind slower this a to mortgage that's and that forward look can a well, you unit nice give of revenue about that little as good as the for quarter, shorter switching line, Is quarter. is for gears, market? pretty going have? quarter -- And it color -- a a what it's pretty seasonally what's -- often far was you are that then And business seasonally optimistic banking you you

Peter Conner

Yes. is Tim, this Peter.

give you some to So just color.

pressure. very seen related. fairly remained purchase-related refi stable. the purchase -- was have with and the We've purchase purchase those of our a and of was XX% actually So robust and mix and first XX% in consistent refinance product mortgage production level residential And construction the levels quarter it, just what of to that's we markets that in we're we function originations then product, seasonally production in also has in nice of keeping have, We and geography, call popular us, that's diminished prem for third quarter clients construction a broad mortgage we tends very the fact custom first not the $XXX metro year. money quarter. our quarter purchase origination created our one that to quarter, the markets second quarters of supply to lowest valve mortgage the And given relief existing the as the the typically did in fraction been expect and about of mortgage increase some here, the million the highest in world. That's and up in for in first homes up a be volume weather

Timothy O'Brien

is And update the more you Or dividend can That's great room on you you repurchases? more TC, nice that additional capital us a for share it time, Is levels switching one gears you given repurchased What going little what's are an bit there, there share remaining and under where just quarterly of guys are program? -- then And that is? guys status there out? comfortable authorization the color. with forward? needs shares. repurchases paying Or give

Mark Grescovich

this Mark. Tim, is

the we had first As announce X% repurchased. in quarter. had we first to of in purchased indicated, quarter XXX,XXX authorization the that we also We the a reauthorization roughly previous we shares up under that did

proven or to we'd increased capital, done in the be quarter. M&A, that we dividend, use under evaluate use other reinvestment dividend first of the special which for will we've the of And We repurchase that whether stock -- first, establishment the franchise format of utilization forward capital before, continue capital going of which is the XX% look dividends. the core same

Timothy O'Brien

X% the -- so Mark, saying you're cashed? that hasn't new program been So

Mark Grescovich

The was XXX,XXX repurchased under old that the correct. authorization. That's was

Operator

comes question FIG Coffey Next Tim from with Partners.

Timothy Coffey

on any provide or California operation the how going? is can outlook you color if wondering was I Mark,

Mark Grescovich

as Well, we all view of our the markets. footprint robust being in

California. just as to traction. We're characterize what all be to strong. backlogs strong there. getting quite our operation would significant as not down of pleased California of we're accomplishing well to I as continues very be But The it's So date It's our and markets. acquisition continue client

community super in progress So forward we're our the we're California, making. that business resonating in is pleased model as very the with putting bank we're markets and a

Timothy Coffey

acquisition client business? is better market, that the it than in Is the overall worse or

Mark Grescovich

a at it has ways. two to base. Well, you It different look lower have

So a the lower having base, are higher. much percentages

dollars, growth characterize markets. in California percentage metro base. better other In is seeing absolute only would some the on that So because it lower I is we're our significantly a with it's of par

Timothy Coffey

then last Lloyd, for And Okay. you. question

final your is that conference call, where interest outlook margin Given this it's going? you net have changed on your on

Lloyd Baker

see will of going hard real we something margin think I has manage I that in that mean, the at Tim, strength something How's work margin. a see maintain. I I any been up that to right are look, it's rates market significantly as comments, you the the remain know that enjoyed well. me But core optimistic clearly deposit noninterest-bearing nice number for years and for It's cautiously the moment. don't And I growth to that? really I in the that strong No. on that a think, company and noted deposits my company. reasons has to It's now. supporting and of change is

franchise it's of very So much said, value. franchise terms a I that is self-sustaining in

Operator

next Instructions]. with question Piper from Jaffray. [Operator Clark The Matthew comes

Matthew Clark

to year, may range of you the on achieve end ratio, think, you think, longer-term efficiency that XX% by be fair? to high XX%. I the that's your Your I end that Do the of this kind outlook of goal sense is able

Peter Conner

Matthew, it's Yes. Yes. Peter.

of a the next higher the So investment to quarter, infrastructure. higher next natural We'll made portfolio balance several ratio efficiency to we levels We've coming our X management structural as the is efficiency the previously quarters. of the we investments few talked Those going And the grow improvement to going get outstandings, in some will quarters. be going loan interest the in into thus just income end. operating quarters. into leverage about reduction we next continue second and net the function going benefit an see ratio from to the some are to risk the in and benefit

of the growth normal of balance of areas be expense really we're as expense not production company see to the production those And 'XX to the the to out a company. in growth. So -- pace saw growth we and growth, sheet tied of more the build we'll pace back going we just

Matthew Clark

yield can you the they're headwinds of Okay. and least costs forward. muted bit -- change on seem Do like Great. the the the margin And on of funding outweigh still you short you assets, a they're little here actually the think reliance little deposit kind show talked going doesn't think in then headwinds, about in term. in forward enough it a but you and margin, earning more Do those mix going loan short to at expansion term? expansion wholesale

Peter Conner

anticipate mix I the compression of cost margin that shift quarter, Well, and modest in increases. some the funding because second

of As question, we pace and $XX we as normally it third core fourth is and stability some resumed We'll see normal in data. go a experience. this second the quarters our into deposit bit growth the balances that The after at year's in of pullback the margin. quarter deposit

the competitors of margin our to second our single year. the going and That the respond is component half costs. going biggest where of how has So market the deposit go number over to

the in second but reality if into is hold some characterize delighted QX. number I but have very quarter. going in could into we So to going representative going the of I'd first our our as it's quarter second strong, not quarter, rates be run it the structurally, compression that

Matthew Clark

increase just those for take here think margin loans selling and quarter in on at plan gain what second multifamily on the on? you the might do then Okay. down held balances of you Do in sale. And kind a

Peter Conner

Yes.

our bulk the And XXX to days. multifamily to quarter that they February and a origination-to-sales to As and XXX-day happened first of sale previously, seasoned basis. just origination one and not operation multifamily, we've in XX- of Most yet. in on production talked had our so the XX typical cycle is March, is point

balance But sales over creep the balance unusual about multifamily lumpy up seeing and do bring it that we but so just that second quarter way for business the in -- held-for-sale anticipate us. And did. the somewhat to nothing quarter that's there's down, typical

Matthew Clark

margin assumption terms in And gain.... reasonable of your X%

Peter Conner

I it's, multi X% -- assumption. characterize all yes, the a In of the fees be would net that would reasonable

Operator

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

Mark Grescovich

Rochelle. you, Thank

and solid see prudently our excess and we're quarter as the sustainable progress making and years. reporting Baker colleagues, company here for this capital. in driving We deploying performance over of here Have today. interest in and our like the especially forward look Thank to for all my a moderate again, to everyone. you solid results Mr. for joining we're thank you, the great Banner for your to risk our stated strengthening that XXXX substantial performance shareholder our would profile day, of market call pleased future. I executive it first executing community plan deposit team in on franchise, As with the by and share, our stated, value strategic I build super growing on our our disciplined, bank improving maintaining model evidence by operating core to our performance, a

Operator

The conference Thank attending is presentation. now concluded. you today's for

now may You disconnect.

Banner (BANR) 24 Apr 182018 Q1 Earnings call transcript