Q1 2024 Financial Performance Overview This section provides a comprehensive review of the company's financial results for the first quarter of 2024, covering key performance indicators, income statement, balance sheet, and credit quality Key Financial Highlights Banner Corporation reported first-quarter 2024 net income of $37.6 million, or $1.09 per diluted share, a decrease from prior periods due to net interest margin compression, while maintaining strong credit quality and a solid core deposit base Q1 2024 Key Financial Results | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income | $37.6 million | $42.6 million | $55.6 million | | Diluted EPS | $1.09 | $1.24 | $1.61 | | Net Interest Income | $133.0 million | $138.4 million | $153.3 million | | Revenue | $144.6 million | $152.5 million | $162.6 million | | Net Interest Margin (tax equiv.) | 3.74% | 3.83% | 4.30% | - The Board of Directors declared a regular quarterly cash dividend of $0.48 per share, payable on May 10, 2024, to shareholders of record on April 30, 20241 - At March 31, 2024, the company had $15.52 billion in assets, $10.72 billion in net loans, and $13.16 billion in deposits1 - Core deposits represented 89% of total deposits at quarter-end, highlighting a strong deposit base12 Income Statement Analysis The income statement reflects pressure on profitability, with net interest income declining to $133.0 million and the net interest margin compressing to 3.74% due to higher funding costs outpacing the increase in asset yields Net Interest Income and Margin Net interest income was $133.0 million, down from $138.4 million in Q4 2023, with the net interest margin compressing by 9 basis points sequentially to 3.74% due to higher funding costs partially offset by increased asset yields Yield and Cost Analysis (Q1 2024 vs Q4 2023) | Metric | Q1 2024 | Q4 2023 | Change (bps) | | :--- | :--- | :--- | :--- | | Net Interest Margin (tax equiv.) | 3.74% | 3.83% | -9 bps | | Avg. Yield on Earning Assets | 5.16% | 5.06% | +10 bps | | Total Cost of Funding Liabilities | 1.53% | 1.31% | +22 bps | Provision for Credit Losses A provision for credit losses of $520,000 was recorded in Q1 2024, a significant decrease from the $2.5 million provision in Q4 2023, primarily driven by loan growth partially offset by a reduction in unfunded loan commitments - The provision for credit losses was $520,000 in Q1 2024, compared to a $2.5 million provision in Q4 2023 and a $524,000 recapture in Q1 20234 Non-Interest Income Total non-interest income was $11.6 million, a decrease from $14.1 million in the prior quarter but an increase from $9.3 million in the prior-year quarter, mainly due to lower mortgage banking revenue sequentially and a smaller net loss on securities sales year-over-year - Mortgage banking operations revenue decreased to $2.3 million from $5.4 million in the preceding quarter, primarily due to a $3.5 million positive adjustment in Q4 2023 from transferring multifamily loans5 Non-Interest Expense Non-interest expense rose slightly to $97.6 million from $96.6 million in Q4 2023, driven by higher salary and employee benefits, resulting in an increased efficiency ratio of 67.55% - The increase in non-interest expense was mainly due to higher salary and employee benefits, partially offset by decreases in professional/legal and advertising/marketing expenses5 Balance Sheet Analysis Total assets remained stable at $15.52 billion, reflecting continued loan growth, particularly in residential and construction loans, funded by a slight increase in total deposits, while maintaining strong liquidity and capital levels Assets, Loans, and Securities Total assets decreased slightly to $15.52 billion, while total loans receivable grew by 0.5% quarter-over-quarter to $10.87 billion, driven by increases in residential and construction loans, with the securities portfolio decreasing to $3.32 billion Loan Portfolio Changes (Q1 2024 vs Q4 2023) | Loan Category | Q1 2024 Balance | QoQ Change | | :--- | :--- | :--- | | Total Loans Receivable | $10.87 billion | +0.5% | | One- to four-family residential | $1.57 billion | +3% | | Construction, land and land development | $1.57 billion | +2% | | Agricultural business | $318.0 million | -4% | Deposits and Liquidity Total deposits increased to $13.16 billion, with core deposits representing 89% of the total, and the company maintained a strong liquidity position with $5.05 billion in available borrowing capacity - Total deposits increased 1% QoQ to $13.16 billion; Certificates of deposit increased 56% YoY to $1.49 billion as clients sought higher yields8 - Estimated uninsured deposits were approximately 31% of total deposits, or 28% excluding collateralized public and affiliate deposits28 - Available borrowing capacity increased to $5.05 billion from $4.65 billion at the end of the prior quarter28 Shareholders' Equity and Capital Ratios Total common shareholders' equity increased to $1.66 billion, or 10.73% of total assets, driven by net income partially offset by dividends, with all regulatory capital ratios remaining well above 'well-capitalized' requirements Key Equity and Capital Ratios | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Common shareholders' equity per share | $48.39 | $48.12 | | Tangible common equity per share* | $37.40 | $37.09 | | Common equity Tier 1 capital ratio | 12.06% | N/A | | Tier 1 leverage capital ratio | 10.71% | 10.56% | | Total capital to risk-weighted assets | 14.70% | N/A | Credit Quality Credit quality remained strong and stable in the first quarter, with the allowance for credit losses at 1.39% of total loans, providing 513% coverage of non-performing loans, and experiencing net loan recoveries Credit Quality Metrics | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Allowance for Credit Losses / Total Loans | 1.39% | 1.38% | 1.39% | | Non-performing Assets / Total Assets | 0.19% | 0.19% | 0.17% | | Net (Recoveries) Charge-offs | ($73,000) | $1.1 million | $782,000 | - Substandard loans decreased to $116.1 million at March 31, 2024, from $125.4 million at December 31, 2023, and $148.0 million a year ago, primarily due to paydowns and risk rating upgrades10 Detailed Financial Tables This section presents comprehensive financial tables, including income statements, balance sheets, loan portfolio details, and capital ratios, providing granular data for the reported periods Results of Operations (Income Statement) This table provides a detailed breakdown of the company's income and expenses for the first quarter of 2024, with comparisons to the preceding and prior-year quarters Condensed Income Statement (in thousands) | Description | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $132,959 | $138,409 | $153,312 | | Provision for Credit Losses | $520 | $2,522 | ($524) | | Total Non-interest Income | $11,591 | $14,052 | $9,277 | | Total Non-interest Expense | $97,641 | $96,621 | $94,621 | | Net Income | $37,559 | $42,624 | $55,555 | Financial Condition (Balance Sheet) This table presents the company's consolidated balance sheet, detailing assets, liabilities, and shareholders' equity as of March 31, 2024, with comparisons to previous period ends Condensed Balance Sheet (in thousands) | Description | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $15,518,279 | $15,670,391 | $15,533,603 | | Net Loans Receivable | $10,717,956 | $10,660,812 | $10,019,227 | | Total Deposits | $13,158,771 | $13,029,497 | $13,154,202 | | Total Liabilities | $13,853,771 | $14,017,700 | $14,001,908 | | Total Shareholders' Equity | $1,664,508 | $1,652,691 | $1,531,695 | Loan Portfolio Details These tables provide a detailed breakdown of the loan portfolio by type, geographic location, and originations for the quarter Total Loans by Type (in thousands) | Loan Type | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Commercial real estate (CRE) | $3,609,303 | $3,635,741 | | Multifamily real estate | $809,101 | $811,232 | | Construction, land and land development | $1,571,519 | $1,537,075 | | Commercial business | $2,290,783 | $2,277,888 | | One- to four-family residential | $1,566,834 | $1,518,046 | | Total Loans Receivable | $10,869,096 | $10,810,455 | - Total loan originations (excluding loans held for sale) were $777.9 million in Q1 2024, up from $741.5 million in Q4 2023, driven primarily by increased construction and land originations19 Allowance for Credit Losses This section details the changes in the Allowance for Credit Losses (ACL) for both loans and unfunded commitments, including provisions, charge-offs, and recoveries Change in Allowance for Credit Losses – Loans (in thousands) | Description | Q1 2024 | | :--- | :--- | | Beginning Balance | $149,643 | | Provision for credit losses | $1,424 | | Net Recoveries | $73 | | Ending Balance | $151,140 | - The allowance for credit losses on unfunded loan commitments decreased to $13.6 million from $14.5 million at the end of the prior quarter, following an $887,000 recapture of provision21 Non-Performing Assets and Credit Risk These tables provide a breakdown of non-performing assets (NPAs) and classify the loan portfolio by internal credit risk ratings Non-Performing Assets (in thousands) | Category | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total non-performing loans | $29,489 | $29,602 | | REO and other repossessed assets | $448 | $526 | | Total non-performing assets | $29,937 | $30,128 | - Substandard loans, a key credit risk indicator, decreased to $116.1 million from $125.4 million in the prior quarter22 Deposit Details This section provides a detailed breakdown of deposit composition by account type and geographic concentration Deposit Composition (in thousands) | Deposit Type | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Non-interest-bearing | $4,699,553 | $4,792,369 | | Total core deposits | $11,672,891 | $11,552,030 | | Interest-bearing certificates | $1,485,880 | $1,477,467 | | Total deposits | $13,158,771 | $13,029,497 | - Geographically, Washington holds the largest share of deposits at 55.2%, followed by Oregon (22.1%) and California (17.6%)25 Regulatory Capital Ratios This table shows the estimated regulatory capital ratios for both Banner Corporation (consolidated) and Banner Bank, demonstrating that both entities exceed the minimum requirements to be categorized as 'Well Capitalized' Estimated Regulatory Capital Ratios (Consolidated) - March 31, 2024 | Ratio | Actual | 'Well Capitalized' Minimum | | :--- | :--- | :--- | | Common equity tier 1 capital | 12.06% | n/a | | Tier 1 capital | 12.72% | 6.00% | | Total capital | 14.70% | 10.00% | | Tier 1 leverage | 10.71% | n/a | Net Interest Spread Analysis This table provides a detailed analysis of average balances, interest income/expense, and yields/costs for all interest-earning assets and interest-bearing liabilities, leading to the calculation of the net interest margin Net Interest Margin Analysis (Tax Equivalent) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Avg. Yield on Interest-Earning Assets | 5.16% | 5.06% | 4.68% | | Avg. Cost of Total Funding Liabilities | 1.53% | 1.31% | 0.40% | | Net Interest Rate Spread | 3.63% | 3.75% | 4.28% | | Net Interest Margin | 3.74% | 3.83% | 4.30% | Non-GAAP Financial Measures This section provides reconciliations for non-GAAP measures used in the report, such as adjusted revenue, adjusted earnings, tangible common equity, and the adjusted efficiency ratio, to their nearest GAAP equivalents Reconciliation of Adjusted Revenue and Earnings This table reconciles GAAP net income and revenue to adjusted (non-GAAP) figures by excluding the net loss on the sale of securities and changes in the valuation of financial instruments Adjusted Earnings Reconciliation (in thousands) | Description | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net income (GAAP) | $37,559 | $42,624 | $55,555 | | Exclude: Net loss on sale of securities | $4,903 | $4,806 | $7,252 | | Exclude: Net change in valuation of financial instruments | $992 | ($139) | $552 | | Total adjusted earnings (non-GAAP) | $42,039 | $46,170 | $61,595 | Reconciliation of Adjusted Efficiency Ratio This table calculates the adjusted efficiency ratio by removing certain non-core expenses from non-interest expense and non-core income items from total revenue Adjusted Efficiency Ratio | Ratio | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Efficiency ratio (GAAP) | 67.55% | 63.37% | 58.20% | | Adjusted efficiency ratio (non-GAAP) | 63.70% | 60.04% | 54.23% | Reconciliation of Tangible Common Equity This table reconciles GAAP shareholders' equity and total assets to tangible common shareholders' equity and tangible assets by excluding goodwill and other intangible assets Tangible Common Equity to Tangible Assets | Ratio | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Common shareholders' equity to total assets (GAAP) | 10.73% | 10.55% | 9.86% | | Tangible common equity to tangible assets (non-GAAP) | 8.50% | 8.33% | 7.59% | Other Information This section includes important disclosures such as forward-looking statements and other relevant information for investors Forward-Looking Statements This section contains standard cautionary language regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ materially from those projected - Key risk factors cited include changes in the interest rate environment, inflation, potential economic recession, credit risks of lending, competitive pressures, and regulatory changes12
Banner(BANR) - 2024 Q1 - Quarterly Results