Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, everyone, and welcome to today's conference, Banner Corporation Fourth Quarter 2022 Conference Call and Webcast. My name is Bruno, and I will be coordinating your call today. [Operator Instructions]

I will now hand over to your host, Mark Grescovich, President and CEO of Banner Corporation. Mark, please go ahead.

Mark Grescovich

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

Peter on our Rice, Credit Relations. Officer; our call me Officer; Arnold, Chief joining Rich of customary, Chief Financial is today As is Head Conner, and our Jill the Investor

statement? would please you read Rich, our forward-looking safe harbor

Rich Arnold

Sure, morning. Good Mark.

Banner's statements. today discusses business presentation will forward-looking outlook Our include and

or for goals statements forecasts include statements management's of or future performance of services, So, other products other plans, objectives financial for about operations, or Banner's economic descriptions measures conditions. and general and outlook

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

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

Mark Grescovich

Rich. Thank you,

with you. Today, we cover four primary will items

including initiative Forward. update well third, Jill First, current on an provide our more Banner and Banner performance detail quarter, and for provide performance; on operating portfolio; our stakeholders, Banner Rice Banner's second, all team, of will as will Conner provide comments continues support communities Peter and provide on the high-level the our as our finally, shareholders; loan to fourth status called our strategic our I our will full comments our on of actions you clients, quarter year XXXX take to the

back commercial As deepen our with a strategies relationships clients, banking, in to Banner growth and the advance streamline is office. technology reminder, retail Forward accelerate of focus

and our continue our colleagues started, all Before Banner to who are of thank communities. X,XXX clients that I I get and company my Forward working hard implementing want in initiatives our extremely again to assist

our Banner the core for doing has summed years. XXX the values, as up thing, lived right past

continues economic cycles on shareholders, and to right thing report proud entire am communities, our continue capital to exactly provide do goal that I'm we for a and and our overarching events. our source our that to our our through are colleagues, change and values. living very I to of pleased core again commerce company to what consistent Our you clients, Banner reliable of do. is the team all and the be,

of turn Now, an overview let me performance. our to

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

For full year ended million net Banner income year to Corporation full $XXX shareholders XXXX. reported the common $XXX.X for to XXXX, of available million compared the December XX, a

liquidity, excess by: rapid comparison to Paycheck or rates; strategy with coupled recapture change detail shortly. and on forgiveness more fee in Peter income loan associated branches; items loan Protection acceleration these the sale deferred of discuss SBA the of four will of with gain loans. risk a our moderate losses; earnings a of is impacted interest provision credit in profile; The the a maintain

to year Banner $XXX.X $XXX.X of in losses To sale of securities, full Forward on of earnings XXXX. of million instruments pre-provision the sale financial value on for full were to direct impact your illustrate Banner, the the expenses, XXXX and COVID compared expenses, expenses, and million pre-tax I fair gains attention year core would changes and of earnings gain and the the excluding acquisition earnings of the merger branches, power

increased ago. operations $XXX.X core a from for year revenue compared XXXX in quarter XXXX, the million of $XXX.X X% and fourth $XXX.X quarter million third the to fourth million quarter to Banner's

revenue For year XXXX, core increased the million when full to XXXX. compared year operations $XXX.X from X% the full to

to net core control. XXXX. improving interest of deposit benefit good fourth and in quarter core for return-on-average expense strong and from continue margin resulted a X.XX% the base Overall, We assets of this

through Once deposits to again, core bank deposits growing performance To on core represent service and that client is, execution strategy; our deposits. point, our of our promoting by relationships, growing client reflects our that model. and core position core continued loyalty super community new funding advocacy XX% total our responsive adding

our outside organic of XX% relationships, increased generation over loans PPP period Further, new the same year. loans we strong of our and continued last

solid the a our per with from common strong $X.XX share, core performance, dividend ratios, of last regulatory announced X% of our dividend. capital coupled up Reflective we

As in colleagues. our published clients, and ways the communities noted Report our inaugural support our Social thing Highlights striving Governance report we in our Environmental, which addresses release, and Banner This right December. to do in the to many of the are

much footprint, in equity level as of of including items has institution many further in have Banner covers investment to providing communities in mentioned businesses in Black-lead $X.X million financial City $X many it for in the clients, serve. $X.X while SBA States. more before, First the as we approximately our commitment the million totaling largest United a It minority-owned funds, commitment outlining which well the support protection XX,XXX Bank, payroll depository And billion I the than goes the to

review you yet, few moments it. take you If encourage I a to haven't to

the bank receive ranked to of pleased Number to that and marketplace proposition. validation the and continue XXX the I'm business recognition rating Finally, our and Banks model examination. we in Banner received an America's has Associates client been value Bank of Power One Banner our say sixth for Banner in outstanding for by time. Best recent one most CRA and CRA Forbes, named satisfaction J.D. our Northwest

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

Jill Rice

morning, Thank everyone. you, Mark, and good

X.XX% loans low total quarter linked X.XX% of and XX X.XX% prior the XX, XXXX. X.XX% loans, XX, XX to press of quarter compared fourth Delinquent our total within as quarter Banner's as December loans down strong. as remain release, classified December up to the of represent when loans, detailed of Adversely compared credit from compared and basis at of to remained X.XX% metrics was December as of points XXXX. As

assets $XX and modest primarily assets remained loans $X.X comprised at million. X.XX% Nonperforming increased Nonperforming press of but total assets, in total the quarter noted $XX.X nonperforming are in of totaling million. release, the as million now

for reported a losses reserve growth quarter loan year, to $X.X the the Banner $XXX,XXX additional recovery negative Given strong million losses our and of work another modest, of posted to and provision loan for the Net the collection full sentiment, for Special an we be coupled continued continued and million department. economic a provided strong $X with loan commitments. Assets within net unfunded due to

of of After of the or point December currently of increase XXX% XX, loans a XXXX. The quarter the provides X.XX% December provision, nonperforming linked from as XX, our as coverage $XXX.X totals an X and our X.XX% total million reserve of reserve ACL reserve basis loans. to compares of

basis. the the of be quarter loan XX% portfolio the robust in million loan fourth $XXX portfolio. with an Looking quarter, or Origination in annualized continue on growth volumes to at

Excluding at remained the annualized growth in strong to X%. portfolio, rate growth four-family the the one-

quarter. remained activity the fourth in strong C&I

industry equates in be of XX modest loans, over an the and $XXX to when new additional in is loan size, originations geographic million much and growth which continue small utilization past the arena. compared course For both commercial loan to X% C&I million $XXX however, combined lending scored The the basis, it increased to by is payoffs clients a last of reported existing million diversified quarter, in year, location. in growth business months. in on of to commercial full This has we of spite it of plus the growth XX% the $XXX year-over-year. flat is nearly

a or function past balances experienced declined CRE the real of payoffs million year. Commercial this $XXX significant estate year-over-year, X%

the commercial adversely rate classified property exits. four real Over estate term due refinances, sales and totaled relationship $XXX payoffs and nearly to past million quarters,

portfolio prior of construction completed XX% in loans the the in up multifamily the as quarters, projects, as conversion reported both new As growth well term multifamily represents year-over-year.

is as remains market transfer and of the the portfolio multifamily held-for-sale before, multifamily and housing to granular approximately in diversified. exposure and affordable XX% this portfolio now the geographically With rate, noted quarter, loans XX%

due loan by development in grew and commercial X% balances on draws and quarter to the Construction projects. construction multifamily

four-family projects slowed As construction in of has balances to one- outstanding residential which is reflected anticipated, the quarter-over-quarter. the volume significantly, reduction in

construction and land construction driven loans In XX% total, an primarily of the increase by year-over-year, portfolio. development multifamily reflect

residential of geography. is across starts I product pleased that the volume construction am both While well and continues to to our mix and perform in slowed, portfolio has diversified the report

strongest our land our is standards remained and to underwriting Additionally, our exposure have sponsors. consistent limited

through remain move capitalized begin We carry product keep expect clients we concessions their and builder this year seeing to anticipated activity. will well longer prepared we more anticipate the to as Still, moving. homes next completed our slower absorb builders sales to work as finished and that

Our portfolio. nearly total remains products. include of construction total the loan total is quarter. our land, that four-family consistent X% remains of with residential periods, loans, one- reporting When at XX% construction custom exposure prior And multifamily mortgage the of exposure consistent XX% acceptable at and last residential you commercial with to construction

HELOC reported construction balances, noted solid sheet. in Again, And loans of equity prior a moving in to recorded of portfolio. home reported campaign consumer again quarters. XX% earnings the function a up X%, as increase balance custom with quarter-over-quarter growth release, successful year-over-year all-in-one modest very the a mortgage We due in we growth completed in solid on

in located of that in footprint was portfolio growth other pleasure was the the within small consumer result the year-over-year quarter. consumer third Lastly, boat loans a completed

that environment comments culture wrap Banner's few will are facing. it designed last continued to noting for is through the have success all overhang relates I the as my credit of the Still, business economic I pessimism cycles. as up we quarters

remains of Our brings. next metrics losses does base. our moderate the of solid remains to profile capital strong source this credit cycle well us for economic our reserve strength, remain robust navigate and risk as intact, Banner's and positioning phase whatever consistent underwriting a loan

over Peter Peter? turn With microphone that, I'll the his comments. to for

Peter Conner

Thank you, Jill.

noninterest in third noninterest and previously for for was we million larger and release, earnings increase share of $X.XX to quarter earnings higher per the expense, or our loan And to as income, compared by million fourth diluted $X.XX a quarter. interest provision diluted reported income per offset partially net quarter. discussed lower $XX losses per income, for net increase share The in or in $X.XX as share due the $XX announced this an

and of an and carried increase noninterest gains due the of in the income. from excluding and sale value losses quarter securities, to sold prior million revenue, fair value gains changes $XX.X income at Core interest branches increased fair on in on net financial instruments

occupancy expense Banner accrual $X.X lower origination for Noninterest expenses, specific to matter, capitalized increased in loan excluding and an Forward, due primarily increases a litigation costs. million,

Turning in $XX a held-for-portfolio loans. to million balance from the by sheet. loans quarter-end million Total prior loans, increased held-for-sale increases partially decline in $XXX the of a as result offset

loans Excluding production and $XXX construction quarter in PPP potential in the or a as held-for-sale basis. an the portfolio slower mortgage real $XXX anticipate the loans of four-family loans annualized quarters. increased portfolio. pace grew XX.X% estate result current loans loans, to of a on on-balance One- million mortgage million custom coming We on directing sheet

coming CDs. deposit $X Ending-core quarter-end balances, existing the albeit anticipated the the The slowdown a transferred a time experienced and accounts declines balances. hikes. deposit in the funds we deposits fund rate slower balances core quarter, deposits the quarter-end than as with anticipate of in this in loan-to-deposit higher-yielding Fed prior fourth decreased in rate-sensitive ratio from their outflows first million XX.X%. decline the for end growth quarters, core remained the $XXX due in million long-term to at clients offset time commensurate in time increased The at pace further the of at partially prior deposit moderate to of cycle, We from at with quarter pace pivoted from in

the quarter outstandings growth prior income of Net quarter, loan points, and recoveries loan basis lower-yielding impact million the the $XX.X loan balances forgiveness, net Compared and interest cash. in XX yields with from interest overnight interest excluding increased lower coupled interest-bearing to an the prior due increased to prepayment acquired loan of penalties, PPP average margin, expansion of accretion.

interest and from basis on prior driven overnight market the average balances million cash on quarter, higher basis rate new yields points cash loans. quarter investment XX to rates. yield and loan both increases $XXX to securities average combined the fixed balances yields the while interest-bearing higher portfolio points floating increased coupon declined and adjustable-rate and prior XX due in increased the term The on and by the loans due higher funds, from average The

Total and borrowing funds core of XX in deposits to points reflecting steady The increased total to to basis quarter. XX%, basis and deposits increased rates basis market ratio XX basis points, The increases the cost deposit costs. CDs. of last points X X cost remained due in increases total points same to money deposits modest at of as rates

margin overnight interest lower The XX larger a of loans cash, on tax increased overnight a net and basis to of mix The yield mix points and driven by increase equivalent earning the within X.XX% securities was loans, base. with a on higher coupled cash asset basis.

deposit margin overnight a cash In loan increase yield sheet, off coming expansion increase. anticipate slowdown of the and as rate-sensitive move quarters, of the rates the deposits decline we balance slows, the in pace levels pace interest-bearing

security with we sales secondarily forward, will and borrowings. growth funded and with primarily outflows anticipate Going loan deposit be

the impacted from $X.X sale the a income, $X.X The in carried of prior loss and $X.X on million. of Core at current sales Total branches by of the noninterest million noninterest gain gains securities. excluding million fair increased the quarter securities, changes the was value, income quarter. on on declined sale investments

million residential for sale, income. increase Total while in value decreased income deposit offset on fees by in held to of due mortgage loans sale fair partially the multifamily a an increased banking $X.X $XXX,XXX mortgage gain decline

both Total prior sale, held those higher investment held headwinds a slowdown declined production, the for XX% including home the loans in from residential continued and rates quarter, mortgage sales. and of reflecting for

to prior XX% quarter loans and function of total the to originated nonperforming function improved rising on the prior refinance production, mortgage from income in continued decline the fair taken as loans decline of portfolio on Miscellaneous a residential of of value to rates. of production down production, prior the held-for-sale decreased fee Within loan with Multifamily and the in in even a quarter. dropping recently the a remained rates, XX% as percentage market gains higher yields quarter. volume due

from an costs an disclosed and origination $X noninterest previously million Forward-related the increase prior of to anticipated Total quarter, for deduction due exit a lower loan matter, increased expense settlement accrual an occupancy for litigation Banner in costs. capitalized

decreased to to settlement noninterest was production origination to prior Excluding accrual expense the quarter. mortgage Forward, Banner and and costs due Capitalized prior HELOC loan one- lower litigation compared quarter. the the loan four-residential to flat construction

due settlement expense. Forward-related and increased costs mortgage expense Compensation loan due expense -- commission to weather-related building declined by expense. and to declines to an the and legal Banner $X.X litigation outstanding facility costs Professional medical maintenance claims occupancy million, matter. in due equipment Occupancy aforementioned expense exit $X.X of million anticipated million and increased $X.X

continued performance Banner Majority to course and deposit the rate quarter. additional the along service of the Banner anticipate and charges We Forward-related administrative space acquisition were with Forward building place market remaining anticipated current as small consolidated run XXXX of in middle program business improvements over of in selected relationships. the in is as occur increases initiatives of product

leverage significant rates, along in from benefit to continues improvement efficiency Banner by the with company ROA ratio. put company's evidenced rising Forward the place and core as the by closing, in In the improved operating

prepared Mark? concludes remarks. This my

Mark Grescovich

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

Operator

you, Mark. please Our go [Operator from question from ahead. Thank first Jeff Perfect. D.A. Jeff, Davidson. is Instructions] Rulis

open. Your now line is

Jeff Rulis

Thanks. Good morning.

Mark Grescovich

Good morning, Jeff.

Jeff Rulis

those added overall, general kind a there? but credits and sense then just and X to type any it that increases and seeing is the you're non-accruals, anything the of of question of And on other, a or I looks the to appreciate X -- commentary. on family, thoughts Jill, the were C&I in as color statistics delinquency offer you the specifically that it just like Just could timing

Jill Rice

Jeff. morning, good Yes,

So the to specific change as you in one categories, any non-performing, to there family. hit driver on isn't the the X the X

non-accrual, Some Jeff? other resolution nothing that credit various where of work point their issue tending SBA tend had is to process business that, things at we any one on it industry people put while small small beyond month is or to this timing. one mortgage their like put times. we any or loan December into point, the modest and a But through at to that is things guaranteed than then loans, cash

Jeff Rulis

the I maybe, the, expenses, on call And Peter, guess, it, Okay. the mid-XXs. in expenses core

that You more Forward a But probably mentioned be exit for Banner on be kind of on costs if of just there can your some would sense of expectation base Banner expenses, potentially Forward there's you some And kind rate helpful. off XX-ish getting consolidation. that growth touch for 'XX. maybe can additional if

Peter Conner

of we terms Yes, Jeff. -- the mid-XXs guidance expense. in Sure, low to 'XX, the guide terms our in core in so of for to continue

have 'XX. item continue or might of And to for some there, some occupancy a than the anticipate we 'XX. expense where some lower 'XX. quarter into nothing over do in some tax albeit in are There we because going have bonus, modest even restructuring exit the accruals then line to and in payroll consolidated of few For first QX. or any as fourth that running are costs. had at ins we amounts XXXX, quarter have perhaps We we compensation run material elevated a increases the anticipate what don't be little reductions bit those run, incentive material outs facilities We'll we course but for to

mid-XXs guidance the see my don't overall, run going basically course we'll throughout the XXXX base is compensation the in something So, of 'XX. expense first quarter rate similar somewhat large into we see But with costs. that a to of to low increase higher

Jeff Rulis

Okay, I you. will step back. Thank

Mark Grescovich

Thanks, Jeff.

Operator

Jeff. you, Thank Perfect.

your Feaster from from James. David, line Raymond is Please open. next go ahead. now Our is question David

David Feaster

everybody. Hey, morning, good

Mark Grescovich

Good morning, David.

David Feaster

rate on tend good have material stress coverage flows your insights. thoughts these have points and costs collateral portfolio Have whatever, the as ratios? basis your seen you that in you And or just how seen Do on at values the And floating borrowers for of as very any come curious about conservative credit in think hikes as some more for increased think impacts touch the curious it. over see credit And -- we Or the changes you just wanted as just prospects look But a of you regard, cash and another I XX loans debt maybe past XX-months. up restructurings? to I do service how do to it? you you of their materially wanted and approach how borrowing base kind you look of you about how ultimately, change? at quality? on are renewal, some thinking about some

Jill Rice

you, was That go origination question to we I thinking into first each environment need for a Thank changes wide-ranging as credit. there stress loans, collateral rising at for of David. as But a you these in to value. and remind about we them rate that

up, start event collateral we prepared collateral So going and coverages to the changes that Debt the cover the variable certainly might for in of are secondary us anything behind coverage being impacted has not with service strong portfolio it is -- loans supplant have rate to in that business. our sources is as impact rates guarantors strong the with we generally but in do that a value. go

last lasted will can stress it going environment watching change that, for we're several recognizing rising rate rate in, though very environment at We that if years. as we collateral forever, we're looking again, if the enter values as it. interest even couldn't low it and So But a portfolio.

David Feaster

Okay.

market a realistic? about think side, slowing you kind backdrop. you that, that growth on demand just Okay. curious weaker growth in what's dynamics appetite exclusive and single-digit the even for I credit converting about the originations was of touched given in And perm forward? decelerating. of of slowing the touching growth of I'm I is guess, some maybe ballpark. going and Or If just loan the kind mid maybe with potentially or then unique of and loan your market growth side. construction just on some mean X% mortgage look here, talked pace the we the how other You that on

Jill Rice

the with of second first. start I'll So question half that

cycles. to want for fact through to appetite answer open that we with the thinks for the be credit, business Our all that credit

to want so loans the We want to make loans, good certainly. doing we So we anticipate make cycle. through and

volumes it's As and the expectations, year-end, economic a the at growth the to pessimism, loan conditions. overall pace. to rate and they're overall they've and increasing continued rebuilding, increased more Pipeline market general of were down as certainly, measured uncertainty environment as moderated but given

that, line model, And bank the I increases of in XXXX. the will our anticipate So for continued utilization, with community growth. slowed, low loan super single-digit refinance which headwinds terms the in in activity growth range help loan I anticipate have of with

David Feaster

Okay.

we're either maybe the you're of but some of pursue competitive And of you how talk accelerate? on balance and And could seeing. deposit touch your -- like if dynamics to about and helpful. That's think just on trends to versus could competitive the projects sounds the dynamics Okay. than pay on curious some to debt is then on rates? It price-sensitive Or continued seeing? it defend the some higher front expecting outflows, the about migrating to you -- maybe How versus utilizing more outflows just sheet drivers clients about outflowing clients take those Just the more higher not the letting that could some you of flows try talk much it down surge and or get dynamics of keep more willingness cost rather some deposits you're -- you and debt? of seeing? cash is either or of you're some deposits seasonal

Peter Conner

the deposit composition. outflow Peter. Yes, address Yes, kind of so David, to it's

also of clients surgery But existing their balance of business high the the of cash cash of some paying accounts online when the first. move rate-sensitive into in kind excess rate-sensitive excess we came offerings. from the some components deposit the And the a -- rate two-thirds And to most we think dive of moving that clients more our were early excess of were client operating this looked those fourth saw an at decline quarter. then initial So consumer outflow, we lot was down loans that accounts. composition of quarter, in fourth to we and/or with if reducing the decline

some we will we the the further of base get into pace have and as of the As to bedrock that already we 'XX, moved. of buoyances deposit core think get decline surge outflow our

we our but base diversified very it's metro deposit a from in also market perspective, said, rural granular. both As both geographic very markets, is

a our compared We low balance, peers. to average with have a lot relatively of deposit accounts

think And cycle. that integrity to our so this is going we stickiness base create and to deposit rate through core

In terms rate-sensitive we and selected of we tactics around And right our to bank CD we bank specials pricing, market-by-market, some the our price couple median Banner. to more peer competition community then with tend and of in retain continue balances to do that. with that

pricing pace of some we couple CD next ample over same in we 'XX. single-digit worked actually of of And period have low core Nothing certain in that continued entire the through modest back we We for that last think get deposit was low tools do as liquidity effectively on cycle, network outflow slowdown exception anticipate a further as then cycle. cycle. said, finally, for those the the to pace the have to the and rate the our pricing quarters. higher balances we branch of in support that being selected we exception but to the 'XX cycle a going of to That or rate we'll into and having retention without balance be the they rate rate-sensitive portfolio. down purposes some of clients were again allow we in reprice get outflow effective delegated a basis, model see our time, goes go of this but unanticipated, up outflow here anticipate

David Feaster

Okay. That's Thanks, helpful. everybody.

Mark Grescovich

David. you, Thank

Operator

Perfect. Thank you, David.

Our Andrew, is next Sandler. from please question ahead. from Andrew go Liesch Piper

open. now is line Your

Andrew Liesch

Thanks. Hi, good everyone. morning,

that some the think margin now where sheet do trends just now you noting, these sits and has peaked? liquidity So of given balance you're

Peter Conner

Fed securities Andrew, more it have pace, move some pace the terms and of of increases Peter. funds. loan up all the of we can aggregate and loan here to upside. confidence be to on based with there to floating Fed overall adjustable that at run slower you our and continue see some the higher in pace the the fixed just There's a Hi, lag form of side, and rate book, the funds will yield in yields hikes terms effect -- coming in book lesser rate repricing active. it's a prior extent, the of portfolio loan reflects the on repricing in in in mix And but also It's of

We not the but investor this at loan about you if the quarter that in quarter, new deck on chart originations the the average production, yield put was chart that X.X%. a illustrates average in And look new the yield just on production. fourth

yield, to in for So average will accretive on coming a next our effect effect a there's are lag loans portfolio several have loan quarter-to-quarter quarters. existing and positive to carrier the that continue yields

XX down. time, We're It's we of couple last in of see quarters, the same to going continue do the slow at the the yield. continue 'XX. Fed earning asset assuming just we will likely -- had room would And going to sometime anticipate big than basis but half hikes short-term the run in peak costs it funding before likely the some peaks of not second that of half pace to another points will pace to be second 'XX, does of out, less peak it's in to the it but the here out increase towards the in

Andrew Liesch

result would borrowing additional might then then would sales side. you funding the securities Because of would lot security in be really the imagine balance the or result just do would borrowings. helpful. how on longer bit guess, sales That's funding I some And growth that? a but losses, with the -- you higher outflows rate or have little also deposit Okay. loan mentioned I thought. than A of I

that balance do decision? how you So

Peter Conner

the we Yes. CMO sell we've and in We've a nature deposit as adequate in some got any we're at growth both realized securities outflows portfolio losses fund have without planning barbell and that past available component security MBS -- inordinate is There's a liquidity in to modest securities. characterized it. with loan of an use our long-duration of fair it value short-duration traditional losses amount we -- more securities the to book along with as

of So, be securities the liquidity. primary source will

secondary Secondarily, both but be any the very we to lot very a support losses that to security FHLB expect need and borrowings we'll FHLB, leverage will look deposit much modest that. that to don't expect of We support we a or additional of to on loan sales or generate fundings here, need. outflows

Andrew Liesch

the then quarterly Got the are? off you. remind monthly can you book just us securities flows what And cash or

Peter Conner

Yes.

about I run securities past the (ph) the that the we've on amortization think $XX [went] in book said million rate month. a

a to and activity million maybe So, and prepayment securities $XX natural $XX I book. on think just amortization quarter million about the

Andrew Liesch

Got Thank taking questions. it. Got you All back. for it. the step I'll right.

Mark Grescovich

you, Andrew. Thank

Operator

Perfect. Andrew. Thank you,

Our is from Andrew, Terrell is your from go now Please line open. next question ahead. Stephens. Andrew

Andrew Terrell

morning. Hey, good

Mark Grescovich

Good Andrew. morning,

Andrew Terrell

I to wanted adjustable and the discussion just on like of go loans. the fixed some to back

think roughly are hoping, tailwinds either I and . just mature? of in total I do year, you XX% term reprice breakout and loans or margin some I per was there dynamics guess, and the maybe repricing both much rate adjustable of longer have a there. fixed how

Peter Conner

a for duration have book exact any don't months number you, on XX loan XX our Andrew. between average basis. somewhere is weighted The I rate on Yes, fixed and

that think those of frequency. kind So you loans can repricing level about around of

as hit We've of on as taking we're overall rate been the and obviously, to beginning that cycle. more since rate duration duration -- have book of more our that. a top we get the cycle do encouraging bankers We to loan the doing the bit the

typically in The reprice the effect the FHLB in into design. by addressable that loan we five loans extended that are duration and book get or treasury index of further three some seeing we're cycle between rate the so, as And years. months loans

off we a repricing still yet to baseline as increase of the process. a that -- higher there have they there's indices carry bit through of run an have to price So that's

we loans remind And all adjusted XX% a of loan loans reasonable that's that's mandate floors, to actual to price strike floors have those or of a higher and on a are book, a the rate overnight within price subsection that yield. loans, on of LIBOR them, closer SOFR that floating we characterize floor of floating the have loans, rate we would have you, have so percentage on I we rate on floor and weight floating

in a it embedded loan it without go our we've So having in to as about we big good got naturally book pretty out loan embedded portfolio feel put got and book. optionality we've is. in the our portfolio the floors

some in floors we've up. we'll the symmetry the the been come on in future, given down putting way when So have that nicer rates

Andrew Terrell

Okay, one for I it. And portfolio. construction appreciate on the Jill maybe

then I think credit any underwrite on you of in a lot you're within of you right of of, financing the permanent about, focused business? And seeing trends kind within time hoping investors maybe spend I now. could little kind to bit was a book specific metrics construction just maybe dynamics this market? talking that of books

Jill Rice

Andrew. Yes,

construction the equity we too portfolio, on cash don't on our as I So in underwriting those credit require do want projects. metrics, but get specific to to

have about, be we've book We product. market, The a still seeing as undersupplied talked they pretty good strong terms there. homes, builders continue so that in in of available to of movement in and we're

Andrew? part As to your the underwriting, of that part -- first second permanent the question, the was loans, mortgage

Andrew Terrell

right. that's Yes,

go loans construction those as to the perm Just market.

Jill Rice

Yes.

continues we're theoretically, The to custom all rate loan in generally or fact low that will and still market. construction upon from on that at in the down 'XX that the underwriting loans it because late early secondary completion. rate So loans, 'XX, sheet into able environment we is we as originated because to and the keep the But market we be balance determining we time, market that balance that sheet time. not growth. set the to little it those secondary the of generally rate that on for so price The underwriting so one, in the to into standard that whether sell float then of you will it want market would come and a permanent at than secondary expect sell higher the would the the

Andrew Terrell

taking Okay. I the questions. appreciate you

Mark Grescovich

you. Thank

Operator

Thank you, from Motta line Our is KBW. now question is Please your Andrew. next open. from ahead. Kelly [Operator Instructions] Kelly, go

Kelly Motta

asked more at and more morning. -- you questions. position a some that Most just in the But liquidity answered this point. of lot Thanks have in, the Hi, other good great may issues. you're are my having have that for been than so be quarter. on given banks wondering, Congrats questions a

the in or any Just picked the discussions up consistency all changes at of or has M&A of pace wondering there months? couple last if

Mark Grescovich

thought with things, be you and accounting quarter stagnant for it's M&A M&A very not bank you with fairly good just thank was rules credit muted morning, uncertainty thank as with or interest and so now is transaction, associated pretty also rate sensitivity just We various a environment I environment well. buying, be to the you what Kelly, going and along a is buy, strong Mark, this the it your potentially of Well, lot compliment. think an the question, Look, institutions, may here. but for the right because of

our But changed. our policies philosophy changed, haven't hasn't

Banner, We have this as combinations. exist as admire think we of And that the that great have where than continue to partners a now dialogue. we we ever. and more more it's to that get we would companies to opportunities and to have that continue might for with be through select important cycle dialogue group

has think you If it transactions over management combination team. opportunistic. nurtured about And team has strategy, understanding been our it several our and and of management company our been our and always been that their years company strategy -- have and their acquisition

see I So process now. right continuing that

Kelly Motta

is we're Thanks for Mark all My the it. taking next appreciate for look. one deeper just a color, Jill,

nature service that have your Can or for portfolio attention. as continued LTVs well that I get us think of sort office on as of book? is that a getting can a And us refresh of there? with any to you debt ratios share kind coverage of -- you lot exposures

Jill Rice

the core -- well. our don't Like X% we Kelly. the closely, business very to of limited portfolio Limited everyone, in think is performing anything we have book important watch or total, exposure have in remember, and that really market office Sure, exposure it's we to to loan the and continue districts.

Our -- is of XX% book, is office that the X% it portfolio or as already loan owner-occupied. small relatively said but of at I

in portion in last, XXX limiting $X going The portfolio loan maintained When you million. that of of is would had I underwriting. coverage the and course a a roughly exposure that. portfolio average significantly add has say drops post individual pretty that over the going north in. pandemic, office of service debt loan-to-value granularity consistent roughly size the investor to say of from XX% adds the our owner-occupied We've it the portfolio,

Kelly Motta

last helpful. around -- you provide for any or the really today color I but for just is there apologize Appreciate outlook fees Jill. if you XXXX? question My That's all I it, did guidance missed

Peter Conner

income, Or non-interest Kelly?

Kelly Motta

Yes. Correct.

Peter Conner

Yes, environment. the reflects drop guidance, quarter we deposit muted seeing Forward. green mortgage, but baseline. two some the we'll the in 'XX It's we seen representative. we good or is It going mortgage quarter Banner in the the see is the mortgage our XXXX. the didn't we've expectation levels provide for shoots half We're the while XX-year, we're run a in think fourth in fee second coming some changes at product any given to of selected deposit And last lower of bulk fees, residential part some in as of have but the

compensating we're hold We're bit credit analysis deposits, going of those on the rate in analysis rates. seeing more a our with we giving ECR up ECR the little as fees offset

trend deposit quarter. are fees what neutral our of generally seen we've So, in to the last to going kind

than we multifamily, we in a we'll 'XX. did have year better said, being that in think all So,

on core see took So, be 'XX of in the terms income upside think we some 'XX. similar we the 'XX. very overall, trend we given will it in fee it multifamily in in marks that to But should aggregate

Kelly Motta

color. Thank I'll Peter. you, step the appreciate I back.

Mark Grescovich

Thank you, Kelly.

Operator

Thank you, Kelly.

Coffey & open. is is ahead. question Tim Please Our your Janney Scott. next Tim, Montgomery go from line from

Tim Coffey

like Thanks, saw here. or it quarter? would morning, have next the question you opportunity potentially, what be you the cost as you look to and appreciate everybody sell Peter, ballparked in you do of fourth to would that year, the Great. -- securities have any ask good this could be be anything

Peter Conner

Yes.

a that we QSIPs mark single-digit more and there's with securities have But is growth sale to fund portfolio liquidating need no -- that on I kind loss have those based on or we outflows. the deposit a of to secures think that them loss sell on duration. low the stratified significant loan

repos quarter that overnight for now, of on going to remind the you, in there's here have right and And dilution in risk decision. of that million and remaining first no them we've portfolio come and so, the to have portfolio we're that we're securities then balance, to sale return there's up it. second terms low based going triage relatively But got on $XXX just marks maturity on -- mark yield the

don't to go So fund loss we 'XX, ample as we liquidity to there number. think material will we the a sale inordinate have company without be it on of advantage through so take

Tim Coffey

footprint across best got markets Okay, best probably And as certain bank. are of the Great. you've That's seeing your others? of better Coast color. look than then, you geography, the wondering, Mark, great West one I'm performing any you -- And

Mark Grescovich

Yes.

And think It's some think I out part, all political these the economic we And think going very to look, in of cycle, drivers go still But the -- a would occurring, headwinds as the issues most benefit community geographies California, I very for rebound. economic see characterize. I Northern an Pacific you -- thanks, the to Tim, some with where business well and very, stable the start question. we market, is some Northwest. very of Southern associated migration the long-term I in to strong for through see California tax issues. are from

capita with some markets the layoffs of Even news. the population of the of are associated in expect going generally of are in layoffs headline They're and headline impacted press migration. as not we're technology be markets the still time. greatly aerospace, as as experiencing or the to Most the some trend Northwest over still to we growth, income with per in that experiencing continue

the optimistic favorably long-term So we're very and trends about very the -- markets, optimistic for trends us. very about we're continuing the

Tim Coffey

to -- Okay. people marketplace? And see just the Or back in comment there seeing starting maybe in your what general you're a then out from Are irrational actors you a still pulling bit? of there competition. are from little

Mark Grescovich

what behavior they're act doing rationale the up it you've of understand Yes, talk Tim, that they're simply about way we term to believe set well. team's look irrational don't just irrationally, at to other institutions. tend me perspective. like coming I'd from I doing. why We management this from don't our other People competitors

So were aggressive we would in there previously. folks than more certain I much be behavior would are characterize that their then

given some I the some think that of our of constraints now competitors. of has normalized liquidity

the of amount rationalizing the think that's there. because out I And marketplace of is uncertainty

more that a that's against -- deposit financial to or the -- institutions being loan-to-deposit the in simply marketplace campaigns stabilized are the significantly and to flip such above XXX% are we're in on ours. going have and chase when are That ratios remember, credit unions things underwriting base front, think pricing as that. need some deposit -- our running compete when you that to pricing loan fundamental behavior I have we you more are and folks that So And credit CD flip marketplace. said, that than that not certain side, that

need So as again, what Hopefully, don't do models. a their to own I they know business that's that see for they but helpful. it's rational, that's fit

Jill, I know if to further. add you want don't anything

Jill Rice

No, I think you covered that one.

Tim Coffey

was Great. questions. All all I my right, Thank you. that's it. appreciate

Mark Grescovich

Thanks, Tim.

Operator

for back comments. hand We have go speaker further will no currently questions. Tim. Mark, All right. our please you, now Thank I final to ahead.

Mark Grescovich

you, Bruno. Thank

interest performance. Banner proud and XXXX As our our I you stated, quarter for to full-year we forward us joining everyone. the the on Have today. We of in results the look to and wonderful again very and you reporting Banner your in call a Thank fourth team future. are day,

Operator

today's Thank call. concludes gentlemen, Ladies this for you and joining.

disconnect now Thank lines. may your you. You

Banner (BANR) 20 Jan 232022 Q4 Earnings call transcript