BANR - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Banner Corporation's 4Q 2020 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 Mark Grescovich, President and Chief Executive Officer of Banner Corporation. Please go ahead.

Mark Grescovich

good and Sarah, you, morning, everyone. Thank also quarter and would like for to fourth the to you full-year Corporation. welcome Banner I XXXX call earnings

is Rich, Financial statement? customary, Conner, Rich Chief Safe Arnold, is joining Harbor of on please and call As Investor read Head Relations. forward-looking me Credit Officer; our you Jill Officer; today Chief our Rice, would our the Peter our

Rich Arnold

Mark. Good Sure, morning.

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

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

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

Mark Grescovich

on Thank I to you. continue battle you, and hope communities interesting are items cover with Rich. and the as XXXX and four and we we all will the effects was challenging you its families year, our certainly economy. an primary virus well and Today, your COVID

XXXX. our clients, shareholders; on and communities second, to to the extremely do our lived and comments Company communities the for current performance for team, performance; values, and the level Company XXX right including accommodations detail change the that provide provide of thing are of the Peter will and X,XXX on provide has these all our our times. quarter Banner are Rice clients our take our as difficult to colleagues, and our and stakeholders summed by the third, begin our full-year assist our hard our our that clients; operating on during of am all Banner portfolio right core want I we loan I for will shareholders Banner's a years. our to pleased working do. stakeholders, that provide a critically communities, is I our finally, actions we entire thanking the will status exactly is our high continues I'm doing full-year our to through - what and and continue continue we events. consistent Jill commentary my source to made assist in have reliable Conner report up commerce our First, cycles you clients, thing important and to more support It economic colleagues quarter core values. team capital proud our Banner that and to all our of very living of to

turn overview of me our let Now an performance. to

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

our of banking full-year moderate with virus strategy liquidity XXXX, will sale excluding value and on impact an The credit full year interest mortgage very for core and XXXX, power This $XXX.X of changes on And the net compared X%. to pre-tax maintain instruments, December illustrating increase the pre-provision on $XXX.X securities Corporation estimated impacted a shortly. losses for Directing earnings. coupled XXXX. measure gains XXXX, believe in rates, the of items attention million XXst, low inflow impact and available of strong full COVID of based reported $XXX.X were was to the allowance to profile, billed earnings risk economy, of for million detail million merger I helpful common financial is for in performance income of losses the Banner the an of of $XXX.X and by acquisition more the earnings expenses, year year shareholders Banner. full compared fair ended full-year the your the the to discuss For these COVID the million, revenue. of to for Peter expenses,

deposits. To adding new solid from generation continued million, quarter in stock. of year. X.XX% XXXX increased funding promoting operations of and return deposits again, increased quarter share to tangible XXXX. year good full-year X% the with organic dividend ratio, we the for our client a advocacy that a assets strong for $XXX issued benefited on average and even compared December mix, per pandemic, point, we the execution and represent of client banking is XXXX. equity responsive strong and strategy asset performance, authorized Reflective common through our core of bank mortgage super in million deposits repurchase Overall, approximately growing our with coupled the XXXX performance common our We $X.XX a our loyalty margin, core full strong a relationships revenue net-interest compared also the growing total this full service on revenue. of of this our relationships, larger of Once of of Our position fee continued $XXX.X community reflects to from that our for X% and Further, by the challenges XX% our XX% the the client core resulted core this and XXst, earning model. new to year in core to

our remainder remotely and accessible for others meetings functioning, limited have has ensuring working been branches, duties. available the ATMs by in working in-person performing nearly remain mobilized and we and operations XX% appointment While our workforce operational our our drive-throughs, with effectively

have or in support for for waived regional for our provided sickness. needs exposure employees Protection SBA deemed $X.X paid X,XXX We interest XXXX, provided X,XXX our Payroll deferred billion provide we several to payments and $X.X and we Funds support time-off in clients provided local to important special and Significant nonprofits created also clients for available our totaling financial assistance commitment loans, footprint. made we or million in essential $X.XX totaling and To are contributions has additional programs worksite basic an on billion. minority-owned Also, Banner programs. providing businesses have support emergency made footprint. for

discuss portfolio and the turn the over Banner's loan comments credit on Jill Jill? to trends Let in to call now her me quality.

Jill Rice

with landscape. by and previously-granted we that that X.XX% metrics as us Mark, remained loans, to Banner's the totaled not total in quarter to other for you, XXXX. served continue fiscal X.XX% REO morning. point relief yet have Thank a metrics the and prior programs fourth decrease consistent moderate-risk good in our I quarter this That well XXXX. navigate and each adversely totaling continue standards part the our payment nonperforming theme, economic our during of and/or indicated Banner's of X year-end previous did capture last million cycle. the of Pre-pandemic assets, economic credit that said, be to represents the and assets place the and stable. as call credit to and delinquent metric movement in have of assets basis of total the X.XX% in were continue compared begin $XX.X to asset the Non-performing Nonperforming credit we credit Today, of I quarter. portion latter pleased of changing our $XXX,XXX. And credit underwriting quarter-over-quarter. when of assets three loans we compared this various am stating comprised positive by will classified quarters, supported noting are will profile report half that metrics stimulus of that loans

the the As classified December to down X.XX% the the full the the represent in partial risk as of X.XX% adversely loans result the in our Nearly resulting prior XX% of as collection from of XXst, X% of decrease pay-offs. of of in is upgrade. and of strong XXst, change, was approximately result XX%, and result or rating December Less of change than quarter the total loans is of charge-offs of majority compared XXXX. activity full X.XX% classified quarter loans, the

of As from up December XXst, million totaled as our $XXX XXXX. X.XX% XXst, of reserve as of loans, of reported December of ACL and or X.XX% from total loans September XXth total X.XX%

fourth offset recoveries by coverage during represents totaled released to September of credit paycheck protection $XX.X loans in of ending as down of losses ACL current a of held Excluding quarter total XXth $X.X quarter provides comparison and our reserve nonperforming million a of significant and ending both as loans. from and our million. $X.X million reserves quarter million XXX% were of a of We the quarter $XX.X XXth. for losses recorded sale, provision our in and loans of $XXX,XXX the June the X.XX% for the robust Loan loans the

in that portfolio overall tied of more excess that had in fully pay-off modest and direct the loss rate quarter is the protection the balances nonperforming Excluding X paycheck reserve was full guaranteed the loans, release loans the XXst. the occurred basis aggregating loan our reserves to relief. function December full in the a fourth specifically impairment decline The of of ending year points for

As XXXX of downgrading we we impacted have the captured noted the in as were that in downturn. were in most majority reserve our was calls, credits economic prior proactive early build those by

our and the have being the the large of well stimulus indicators part development additional supporting as We in be of the and distribution virus, the pace economy. of function rate loan future of that would by communicated of that the driven vaccine, growth, reserving are a rollout economic the as

agricultural is the market that small CRE down and decline prevailed note and think two, balance estate a their also of taken which recoveries XXXX. year-over-year, significant out down as XXXX, the point is year-over-year, of with and multi-family part a tied of respectively of to well to environment $X sources and The environment I Reviewing to reasons; the maximizing on strong that of current portfolio team strong portfolio, loan X.X% maintaining compared recovery and they recoveries quarter collection for a quarter-over-quarter is our to circle when by loans, to to year-over-year. offset quarter I commercial permanent interest to utilization of access process. the note of million resolution PPP the down nearly call XX% to charge-offs a two out properties the include partial throughout compared important decline in and at the XXXX. portfolios, function the volume events as purchase XX% liquidity emphasize this as portfolio, that investor full second to CRE focused credit X.X% bank's well led construction loans sizable on through I residential real excluding X% is of and reflection amount one, other X.X%, year-end quarter in this isolated continued growth These within extremely when are fourth residential collected that recovery it's manage cash. the were our up rate reported in back also the declines year-over-year. this credit. within Nearly the was we the refinance multi-family XX% a low line size they as the a from loan economic the refinancings and borrowers X.X% as skilled XX%

to light totaling remaining been businesses, decline. million have commercial the identified balance full as under ground. at-risk $XX.X loans as level XX% have loans payment of to hospitality split $XX PPP $X.X We loans $X.X under and of widespread virus we deferrals and almost affected of stated repayment. late clients a trade the totaling specific, portfolio. are request performance, COVID-XX will under by in in operating limited their This of collateral relief. any loans. and on We XX% within current portfolio food with review $X.X occurring classified committed the provided the to the the long-term I million of and coverage restaurant primary sound that previously. with support These not again The be always real is commercial the vaccine expect the throughout operating services million totaling providing in what that return payment safe of the industries, three regarding have maintaining billion industries. X.XX% operating only, And Active are continued moderate-risk guarantees to do stabilizes, impact proactive a portfolio, to payment found two deal of to borrowers commercial and they continue we manner increments. very loans providing June the are been million assets. of loans Banner approach growth $X.X principal form regular providing seven loan credits of to $X.X balance as clients Also a million loans Specific normalized loans our rental loans the guarantors. in of to relief and operating burn we will in their to $XX.X of liquidity the Shifting assisting leasing loans focus interest rates, has source well the adversely currently our relief have in portfolio loans loans downgrading $XX.X loan total and payment balance of rates in within containment. of which We reviewing not note state recreation Banner's leisure current and industry, function loans, XXXX to economy almost XXth. Throughout to borrower down that forbearance, tertiary and retail pandemic, the in five our alignment XX economic million deferrals have XX-day seven entirely deferrals, in totaling or are under as totaling a been deferrals and million XX% round and our comprised have updates trend view personal to has that with have from the with as and distribution in current include profile, each in are deferral anticipate the continued are the until relief. net a operating we commercial interest million totaling limited spread remained our cash the overtones focus portfolio, additional second by million mortgage impact do a are the estate of number support. of of of high has our In we note, of I $XX.X reiterate and relief the are under

the practices pandemic. located of I our of the by classified healthcare Outside that onset to loans the adversely continue is of XX% XX% we restaurant well remarks the not prepared loans of in portfolio, ongoing segments, within and within X% located modified identifying at-risk asset retail of the have within at-risk or assets the classified those since pre-pandemic, portfolio, services line are were X% food Currently, adversely close located leisure reiterating all concentration are the serve recreation underwriting adversely are X% Our within classified no my are hospitality portfolio us industry, trade reviews industries. of business and the loans. classified. adversely portfolio, Banner's that which there services within adversely is classified and class the of will the are

maintained We we history reviews, our culture continue risk on credit of portfolio long and a a quarterly robust moderate focused profile. have

We strong excess a of balance capital reserve credit regulatory a robust losses have requirements. levels in well for sheet, and

that any over I microphone Peter? to quality further With We next quarters. the his be comments. to few positioned continued deterioration for Peter in for credit well the hand

Peter Conner

and Jill, you, Thank good everybody. morning,

decline related compared The was share previously or our and fourth lower for As a $X.XX provision changes to the in prior as per in decreased Loan increase the by in quarter, offset value fair Core primarily $XX.X an increased a income in at to expense increase a $X.X income the of expense, non-interest in release, prior branch exit $XX.X in reported per instruments in as million mortgage gains and million increase result expenses million and of $X.XX revenue. non-interest in or costs financial decline litigation-related due legal to quarter. diluted of result $X.XX part discussed of securities credit-loss consolidations, million diluted the as a earnings in an revenue carried and million share $X.X $XX excluding marketing from a in higher Core on and net and classified expense costs. increases recapture a per outstandings. expense. provision value held for as expense we a reduction result advertising announced provision and driven portfolio earnings losses modest loss decline investment fair in in direct-mail loan loans to decreased of share quarter, due

Turning along sheet. for forgiveness. the loan $XXX quarter-end wave result loans of held portfolio, PPP prior by as in driven balance decreased decline the paydowns SBA the the investment the of to the million of portfolio, from loan a Total with initial loan

Excluding and Held to to one-to-four due primarily PPP loan due commercial in held loans mortgage, and loans million loans lower production by loans, levels. $XX sale portfolios. increase portfolio the $XXX utilization multifamily for normal to million prepayments an declined in sale investor in the business commercial increased more for estate a real line pre-pandemic

remain Core client consumers fiscal of last board over even the have reflecting program. deposit deposits end balances prior to at loan loans, of increase Excluding flat the year, pandemic $XXX to systemic grown of payments deposit result million over deposits increase X.X% low client Time lower borrower by held borrowings XX% our were - from stimulus the an a SBA due in PPP balance rate deposit loans driven prior the core increased million. for utilization prior end continued induced overall Ending faster build from and the environment SBA liquidity, year, liquidity. prepayment proceeds line quarter-end, in by across and $XXX speeds increase the unprecedented liquidity. as declined investments FHLB PPP an an and quarter to and

margin income the in an forgiveness, X and an by as income increase interest to offset the in point recoveries. increased resulted from growth by the increased third X.X% Compared due PPP basis portfolio yields interest earning a quarter, in basis average quarter, Turning the statement. net in workout-related X points Net continued $XXX,XXX interest loan core CRE driven prior to for yields of the quarter. in million loan deposits $XXX prepayments fourth growth the a combination loan loan assets in decline or to by

from declined coupon average the Excluding loan of acquired accretion, prepayments, interest points and impact recoveries prior loan basis X quarter. the the

the lower points net as deposit overnight the to basis quarter basis interest quarter, remained basis rates. invested of points prior to funds interest-bearing total headwinds the to and from decline overnight deposit liquidity and was invested deposit increase has continue on While at declined at increase basis excess points rates driven adjustable costs costs by yield Security modest loan as XX loan affect portfolios, the the fourth total repricing quarter. basis. the an basis two declined deposits yield XX% retail due a basis lower term-loan demand declined in on to of points of of deposit coupled to lower securities. slowed declines decline rates. in to of to core in at ratio margin they due to bearing balances. downward long-term points declined XX in liquidity non-interest on quarters, deposits from fixed-rate core significantly reprice The pace accounts. The to rates, fourth X.XX% cost ongoing result of Total lower equivalent increases the an points in as funds The CDs in XX deposits cost at elevated XX in prepayments excess X tax with same a The mortgage-backed due X deposit and yields prior

portfolio. the and of offsetting to next Looking repricing PPP loan generation we of prepayment anticipate and forward the quarters, loan by forgiveness deposit new the margin impact effects be production, PPP of the other loan the loan against activity to impacted and few dilutive securities related ongoing

from level. have the and quantity our due of modestly expense quarter. carried volume third continued in quarter. $X.X quarter, above upcoming Miscellaneous and seasonal and Total payroll decreased write-downs The preparations in as sales increased decrease COVID-XX and quarter, in margin in the production, increased sale fourth $X.X of million. the decreased branches balances. the Merger capitalized for Given expense the charitable income plastics the to commitments banking well Islanders The million million. non-interest due Advertising XX% to to line family Total lower by costs million unfunded the $X.X prior to on the annual to reflecting fair the Non-interest advertising the origination securities XX% to to in any loan by excluding costs fourth total costs due reduction $XXX,XXX below million merger with merger, for from the up costs, and contribution overall elements $XXX,XXX increased and new income loan sales higher from and experience accrual on in the claims securities a for ability production. an pending the for utilization an going expense sale primarily multifamily decreased increased parts, income, excluding prior mail, Within changes losses moving a due for quarter percentage swap and card benefits first due of spreads. offset $X.X into unfunded loan prior item, from these due $XXX,XXX by Bank held Provision in value, timing quarter expense. $XXX,XXX from increased first one-to-four were Professional decreased gain to the a commitment income fees, number $XXX,XXX, in during partially or as drive both the refinance expense. prior SBA million consulting in asset sale this declined $X.X million prior at marketing decrease Deposit and on fees adjustment mortgage an infrastructure into the loan-related increased due decreased volumes, declined and $XXX,XXX quarter, The of gain modestly litigation costs increased quarter. fee credit sales of $XXX,XXX and quarter. costs pushed and as accrual loan increase pending loan corresponding closed increases services non-interest seasonal from related taxes. line by expense expenses lower medical non-interest enhancements. direct operating pandemic-specific associated and legal $XXX,XXX $X.X due increased for Salary with on increased decline to to while core following declined of to quarter, expenses increases $X.X quarter.

noted XX As the in XX, including the to quarter. the for represents reduction on with merger branch in of total in closing six the earnings XX% consolidated branches for Collectively, the release, quarter. we of Bank locations the company additional Bank with consolidated had locations an third quarter, bringing fourth in a this proceeding number track second Preparations at smoothly, end Banner Islanders the quarter. this the are of a the

they and quarter, that implemented last branch support the the delivery benefit flight consolidations, rate will channels are across in referenced are prospectively to core during the ongoing course the expense addition as of year. As efficiency in initiatives, run the

million As concludes Mark? these initiatives, prepared taking anticipate the in my second the restructuring and first another $X in we million we quarter. This implement costs another efficiency remarks. $X.X in quarter

Mark Grescovich

questions. and and the prepared Jill will concludes And comments. open call you, That remarks. Peter, Thank Sarah, your your welcome for we our now

Operator

Instructions] Rulis [Operator first ahead. Please Jeff from with question go D.A. Davidson. Our comes

Jeff Rulis

you you're quarter, get go-forward know again, to in look somewhat you a if of costs? kind be fourth costs given speak can Peter, just to what core growth we restructuring you and again on expense I kind some XXXX, or guess a commentary, ex rate if the gauge you if costs a could what those of those work the time, remove like on - doing exclude - restructuring expense, in one but the follow guess I up basis number just had I restructuring don't to if expense on legal in-house trying of the any the we the to think levels your

Peter Conner

that the implemented the branch with of combined the indicated prospectively initiatives as number We we Yes, initiatives. administration decline consolidations go are course call, the channels in with efficiency as a and during go of through be so Jeff. year. and this XXXX, will support the we some core that across restructuring - being our other effects delivery continued last year, There be expenses those will of costs in

So point be and anticipate when be landing XXXX. as there to our we landing spending get we will core were to we in lumpiness run will what percentage below rate that low-single-digit in of that the we a get expenses bit point, range

through year. quarter that's improvement so And the as perspective all It that achieved. of not expense There's will be we will a be expectation. single will go the

So you'll see fourth generally to soft by the landing we get quarter. that to number the time

Jeff Rulis

you quarter? you maybe just help fourth Peter, could core if were the expenses what would in me, claim

Peter Conner

the core and take to Yes, it's but not provision of litigation exclude expense, restructuring costs, we move would so we the the accrual expense that tends part those and the for out. unfunded around, commitment

quarter theory XXXX, so incur increases of call might had in normal as and that rate. in charitable in would We piece than some, advertising what reinvestment it, also for in marketing adjust will contributions, I contributions efforts some period-to-period seasonal along with contributions, some we more fourth normally some higher run well were that our a the

of And as those of are I going effects so that about items you top would core and the the XXXX. on laid efficiency rate into adjusting our then perspective consider think improvements expense the run

Jeff Rulis

of out, of It impacts year on Maybe sort demand guess, on making the to for until Okay. at approach I the appetite helpful? really on year the to and any the in second just anybody, outlook book would is growth economy side. half a pandemic kind in-house of sounds well, just wash the of growth and you pointed switching where as looking on growth there Mark taking not out be the any, commentary conservative like and recovery. of somewhat XXXX you've or gears loans sit versus where

Mark Grescovich

Jeff... Yes,

Jill Rice

Yes, Jill. Go Jeff. is, This ahead, Mark.

Mark Grescovich

after Go No, ahead. you, Jill. ahead. Go

Jill Rice

markets Okay. - XXXX. half I right loans now still businesses normalized to in and in the actually come their closed back growth say, yes, year rates grow, overall. virus the the the will then economy XXXX to the pipelines but that when are Clients flat be factor terms we be really Jeff, - our in are targeting delayed, to that. a to in like of you books I coming going that, we was we every the the shutdown, just forgiveness, second growth desire growth of the money gyms, with basically think through things and are had loan just mean, restaurants, the spend think starting in will off PPP we

Jeff Rulis

just to that. clarify Okay. Jill,

portfolio are expected Your of those - know commentary the don't Is expected that on of inclusive but a on well, out PPP. includes X PPP, forgiveness round X flattish comments flattish round correct? I commentary

Jill Rice

would Yes, the be that goal.

Jeff Rulis

some modest in next to of back half offset the year growth it. Suggesting

Jill Rice

Right.

Mark Grescovich

Yes, This thing add the not only I'd other just loans. And is, the it's PPP Mark. is Jeff.

We the are strong. continues seeing that mortgage business be to

see in even You headlines the today. that can

we're book. to to family some So, continue going one-to-four out refinance of our see

Operator

next with go Raymond comes question Our from David Feaster James. ahead. Please

David Feaster

a may seeing on originations - then just like if of kind you across there of Is and you where to especially accelerate. growth give there? you're seeing for some see strength, I wanted and just of, it's seeing follow-up maybe great - are start color the be positive kind land-side. footprint? And Jeff's looks could line market, us to, what questioning, construction to you're opportunities any in your It just

Jill Rice

is This morning, David. Good Jill.

turning it's footprint, is as the construction across quickly. - business strong So, our and residential

So to the and affordable is seeing - are selling not our and footprint balance that building, our a - really we're and the that CRA economy affordable now multi-family, across multifamily loans, the in are The within line. well. And product as appetite housing well as right strong market they goes before want remains that's the market holding are back as the investment for loans. see recover the waiting reinvestment. clients the commercial they start where What is we same homes

clients be open deploy their capital are waiting reinvest. really for business. to We for ready It's those and to

David Feaster

where geographic Okay. like perspective, And then you from are just a opportunities? seeing

Jill Rice

They're California, particular Washington. I the loans up - them across the a on answer basis, it's of business. loans this line them booking businesses on guess I just in footprint, and we how It's loans are based growing footprint in booking that. hit seeing reserve We're the the industry are seeing in and would across I of or that I-X right. really. down mean, strength we we're

David Feaster

helpful. That's Okay.

Mark Grescovich

Yes, David. is Mark. This

to just that. Let me on add

be - itself, going They're is financing clarity of need are clients little They're utilize credit, demand. it's is going the bit and right. is some to our manifest It the meet rebound, to to how going economy you once to right. inventory their first thing Here's on receivables. going to start lines there to build additional do to see a of

utilization a line of the going become they capital more will is lead of out then investment. So this, to

their the their As including opportunity that businesses occurs, there to is will have a some institutions, of some business they review for. with number there institutions, footprint who they then that of our take the out use upset of been in and and large financing

So we're good economy as to really proposition. portion our the good have a rebounds for value expecting opportunity

David Feaster

expectations asset and your how going about light for asset and could and - and liquidity C&I you're helpful. sensitivity Just in forward? Okay. might just maybe your opportunity talk And changed from of about you the That's then, how drawdowns have the today, lines the sensitivity on just here of asset benefits the the of extremely thinking for impact managing sensitivity curve, steepening floors? curious just just

Peter Conner

Peter. is address can This David. Yes, I that. Yes.

than taken liquidity invested we of as And more relatively asset we sensitive approach the we've year. modestly earlier become were discussed, this excess this enjoyed, short. all we've keeping deposit we've of So

at which overnight sitting investments, rates the rising So today up, quickly a conservative and dilutive have the in benefit of duration yields as the of large margin the effect on move in portion a in the think of the curve. it longer opportunity that low current having is liquidity investments. been And laddering excess long cost it. waiting intentionally in we end very worth especially have yield We've albeit of is

putting than originated, half money floors portfolio our has have floating as ago. strong and we are portfolio of and on year. a our more talked, our of third the end so, process floors rate kept that and of About we money is loan this of months the had then has are floating floating. a loans a rate in sensitive throughout were about asset the that at today our six And yields loan the as program we've year And we've

go to begins we'll a we floor in little short-end on on if the improve, of funding much that got the priced general. then will are catch improvement savings, deposits rates up non-interest three-to-five will we higher money does bearing a we percentage but And up as down loan rates slowly yields so, low-cost and on long on side, bit end, you DDA, point loans be year enjoy of go that, immediate the market reprice in it the And road, as of - and go then see before the market up the the curve more higher rates, some see loans on that we've than know, up as or which top a have road. more longer-term

do rising our positioned So margin. some that interest sheet of rates we're the we and at well-positioned we've think for balance intentionally current expense even to net

David Feaster

then Okay. last one just That's And helpful. for me.

has on I mortgage in a backdrop. income revenue any challenging what been been lifeboat has the Just line? a obviously fee thoughts otherwise mean

Just performing obviously, still guess, mortgage is pretty well. I

process Just business going just of at other we think that you on mortgage line earlier in any about fees expanding the the waived you waived are interested some pandemic? which where do How of to? maybe are And are you in there reinstating those forward? in

Peter Conner

mortgage, I'll We - speak mortgage. to

not production mortgage pipeline second seasonality was you in remain Our And mix, quarter of the fourth is our not quarters, traditionally demand. it's robust if and us, our quarter resilient. and the is even one given had still down refinance. at But continues of going mortgage look mortgage. weather-related the and remain for our first for business purchase strongest likely quarter - to a the into We production reduction quarter into half the

refinancing is while our - not we're the demand. So entirety of an it's element, important mortgage not

mortgage until quarter the as remain into it coming will demand and coming this levels refinance quarter, perform the there's back more to strong good normal will think the away. second we before signs well business continue So begins to ebb

line we've have have fees. that the items, through those waivers released. us. on affected We working other waivers the lot On been did A of deposit been some

that XXXX. improve going price and positively We rate into are run in the affect deposit adjustments will place putting some fee

the see that up, go recently, in as drive swap and that we've there benefits as seen along the with going will some more and clients up. we'll that rates additional to we're SBA growth perception along and recently are are lock-in program seeing some so then demand the sale, strength And looking on is gain up. account And generating more

to the expect year. strong of for rest fee swap we So income be this

slows the think we lines, the those perform as are perhaps well of half will continue treasury into second core as go So management kind even XXXX. business mortgage of down in we including to XXXX

Operator

ahead. with next comes Liesch go Sandler. from Our Piper Andrew question Please

Andrew Liesch

quarter. like just you've seen what so as and the looks accelerated, It for far of that It you loans on Can far comment round decline in them in the the pace demand good you January seeing next on funding? what forgiven are hi. PPP nice looks in - - so of some some - were forgiven like had were PPP as you fourth here they

Peter Conner

a forgiveness requests as see forgiveness Yes, process steady loan I PPP and we going had amount the through. QX we're is We've in today being split we seeing perhaps and of and the and what processed when so, strong higher to and QX we can - the all of Andrew. first original of of of anticipated of even speak infrastructure terms that, team, a see probably a a go it we we'll even more last quarter. the steady of got than program, in and pace say pace loan and in quarter. through second forgiveness forgiveness QX I between an would

the QX. new existing but and those had on And ramping until income of but good would we've - up new is QX and earnings on receptivity year. forgiveness the probably continuing expect for in that very our characterize we applying PPP the this benefit round half So program, clients I the don't to on nicely, loans, then with being of forgiveness program the loans even second higher in

say the it a would to round. first less likely be will right of that of the volume than of round less now. X. percentage It's the is to second that the or little be originated loans PPP right round in early amount what we originated We we in gauge XX% of XX% now, But

Andrew Liesch

off thought the part a and round last loans maybe bit might that So fee it of second less of stronger sounds the like quarter, fund have PPP little - then a in little second first the get than year trailing in could bit the we recognition forgiven? but the quarter, until then

Peter Conner

the crystal we it's - that that's you've Yes. the this timing. That's hard I think a like best fair. on point. at have here probably, it's estimate to And ball But articulated, have

Andrew Liesch

it. Got

This on staying the on goes So liquidity, late that this utilization beneficial year. you're that'd - the certainly funds what be they away the but the negative that rate to be then those improves margin, liquidity if get outlook maybe, seems wildcard. side, in to think with elevated remains activity to seeing

Just around please. comments any that,

Peter Conner

that come that - loans anticipate the the Banner of we of into new about round account. turn Yes, PPP with through XX% deposits those checking into loans

And pace related economy. that that offsetting back the excess the deployed some see the will new build to liquidity deposit more of then, of effects round. we'll getting the - So the into PPP be

or outflow of guidance if as function We the economic consumer and again, investment a of we can't any yet, they would the XXXX, to of economic excess really expect begin we a so hold deposits. off up it's - pace far we of it's timing our and and So now, seen resumption the going reopening - haven't but business a excess that that's we manifest to liquidity of the forecast but - are it right pace course spending you the don't it. have - on during specific give deposit so of flowing drive

Operator

Please from comes go KBW. ahead. Jackie next with Bohlen Our question

Jackie Bohlen

PPP are regarding, there I essentially with with when it at I going loans wanted understand balances the back inflows to - looking just those, $X circle staying comment roughly and coming that those billion and on today some in there. and is to be with flat

do were the those returned the line maybe latter in X% include that a at year-on-year? year, looking some mentioned also until know it half roughly a just down the has that utilization? to So of normalized for not expectations your those level I rebound you growth with expectations

Jill Rice

first is will as we'll the This their down thing even draw Jackie. earlier, expenditures, resources. utilizing further line suggested return the would see be end of equipment come capital well. things But I that normal that. in then utilization the as lines to be to return rebounds to It their morning, Yes, economy invest will Jill. towards expect Mark businesses we Good think, and XXXX in as and more to and like more

Jackie Bohlen

Okay.

some from rate kind So pushes at to XXXX within year-end sum than PPP and portfolio loan a of the to basis program. pulls you'd XXXX, outflows, at lower year-end the see point-to-point inflows I guess up a the just original

prospects increase You a in then line new you And utilization economy some that as non-customers have recovers. also, an normalization had some that of fair have from you could that the the general and on become Is growth summation? customers. mentioned

Jill Rice

and the small balanced that, of loans consumer small secured are refinances balance to lot be in we're paydown home would equity the The recognizing continue thing underwritten. are the the to the would Sure. they Jackie, as estate real estate well over add by those when especially via often residential having only into real flow I that continued that and loans,

market. So you'll some off continue see roll mortgage refinance market, to with of that strong the

Operator

Our Instructions] ahead. [Operator question Janney. go Tim Coffey with Please comes next from

Tim Coffey

for I a the - Jill, a quality. on get some of credit if have you we can question

do loans of trouble to them some hospitality and your some these retail kind of So early, cure continue how identified gyms be themselves? You've of spots. they

do cure themselves? loans So - what's how these

Jill Rice

I Am Good unmuted? morning, Tim.

in hospitality occupancy will an tell seeing down were on XX% from I portfolio we what the September. in about that you of average November, XX% is rate So

they're deteriorated, shut down. all they've not So but

port The in loans the so the them I of well. some carry you average well. significant And adversely but million, of - size often as is loan so, are carry larger them in portfolio, working XX% indicated was the overall - $X.X support terms, the hospitality XX% that have classified they comments, can and my guarantor loans as the no in as of are it portfolio,

debt are debt X.X - operations back had cash normal value of expect while before to them have We normal a timeframe So to able classified, XX% pre-pandemic adversely to get and they flow. north times coverage. - underwriting loan from service to operations. an to be times the their we year to were service two-to-three have don't X They

cure how They that's they run So, themselves. lower. can

Our rates strong and risk. at there operate underwriting going lets these their debt. We service lower them say, is in still

Tim Coffey

Sure.

mean didn't there. cut to Sorry, you off I

the So that a improving it economy like back - sounds in half you saw runway which you're an saying to year? have could loans be of these this

Jill Rice

Well, guarantor core tail rural see to before we'll at and strong will have back base, business-centric. downtown they're they its that. of terms were to to level that that have see with Those portfolio able more of And coupled - support any that we because normal the be of in hit are but what of saying they occupancy carries. are they hotels to will is lot don't hotels don't improvement operation, have a operating longer what business-centric I'm service a

Tim Coffey

round That's PPP? Thank Peter, to first much the in is recognize from very how Okay. terms left fees helpful. of of you.

Peter Conner

entirety the that it worth characterize $XX million, was it, Yes, I exact the is fees around $XX but range - million probably $XX this get $XX something and on the or we at number, that's back Tim. of of there the to point. - I'll portfolio exact you, low about that for don't amortized I'd million $XX is million to is you in million - $XX have But prepaid million number but amount in originally been

Tim Coffey

follow-up it of it the in all that Would the discussion half given of a just earlier. in the year margin first bit half would - the of then, to be kind softer think a this to relative accurate margin be on second be And kind your Okay. could inputs?

Peter Conner

Yes.

some influence some the saw move will pace are the the right quarter. of likely as to sheet, got overnight in to there or ongoing one-to-four then especially to invested forgiveness we we a see an lot the on from loan just margin the that mentioned the accretive and are but The QX headwinds going short the have it the deposit of could will we far on lot the half, and less be mentioned, be investments. portfolio margin of the the to is repricing what than that portfolio, just, balance As other. the are loans I I be for a to of since to the margin is continues parts things in upside now. the would from margin well a that lesser that the the The beginning. the effect excess upside prepayments, moving items positive of effect at first investment a CRE mortgage pace PPP And portfolio. that on positive existing I'd accelerates There off begin forgiveness extent term call in the that other fourth held that three And the of effect

right actually with the down So I move think XX/XX, going based to we're it or up margin - quarter. I'd to any now, on in the call MX as is first move whether

now. be equal quarter there it go going think or think much equal somewhat I right there fourth of direction. higher I the odds chance an being that could I to either is is think lower it's than different. it So But don't

Tim Coffey

on then we or heard but buyback when yet that things Mark, you allocation, going finally of something could wait haven't just really improving. you you if half dividend, recognize Okay. for, dividend the the to have that's kind of And are the on regular wait and likely in wondering special capital year see second and say, I'm Board I the place, a anything to

Mark Grescovich

agnostic said We've of done excess capital. repurchases as think special past, we're I Well, in we've and dividends. done we use we've the share on have before, of the acquisitions, kind done

So why best authorization. repurchase excess the is with reinstituted that's stable, we whatever the being capital core really opportunity deploy to dividend the any looking share at we're and

So it's economically past, look look more they've pretty accretive we're likely, to and in going how repurchases we've the share forward. at been done going the if you at that's it

Operator

over closing no for [Operator concludes further to our like session. Showing turn to would Mark remarks. any Grescovich question-and-answer the conference Instructions] questions. back This I

Mark Grescovich

Sarah. you, Thank

of virus. continue future. We this battle Have we the great for to effects today. the everyone, right as to the of call you stay our reporting team a in please and and proud forward very are safe. we to stated, COVID do our thing, as I've Banner day, results your look Thank we the in interest you again As Banner joining

Operator

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

You may now disconnect.

Banner (BANR) 22 Jan 212020 Q4 Earnings call transcript