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Banner(BANR) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $55.6 million or $1.61 per diluted share for Q1 2023, compared to $1.27 per share for Q1 2022 and $1.58 per share for Q4 2022 [10] - Core earnings for Q1 2023 were $75.9 million, up from $49.7 million in Q1 2022, reflecting a 24% increase in revenue from core operations to $170.4 million [11] - Return on average assets was 1.44% for Q1 2023, indicating strong core performance [12] Business Line Data and Key Metrics Changes - Loan growth increased by 11% year-over-year, with core deposits representing 93% of total deposits [12] - Delinquent loans as of March 31st were 0.37% of total loans, up from 0.21% a year ago, while adversely classified loans were 1.46% [15] - The multifamily portfolio grew 16% year-over-year, with 50% of it being affordable housing [22] Market Data and Key Metrics Changes - Total loans increased by $6 million from the prior quarter, with a notable growth in 1-4 family real estate loans [27] - Core deposits decreased by $692 million from the prior quarter, primarily due to outflows of rate-sensitive balances [28] - Agricultural loans were down 8% from the linked quarter but up 11% year-over-year [25] Company Strategy and Development Direction - The company continues to implement its "Banner Forward" initiatives aimed at maintaining a moderate risk profile and supporting stakeholders [9] - The strategic focus remains on growing new client relationships and maintaining core funding positions [12] - The company aims to navigate economic cycles with a strong capital position and robust reserve methodology [48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about new client acquisition despite economic pessimism and increasing rates [44] - The current economic environment is expected to have a longer tail, presenting opportunities for growth [48] - Management noted that the bank has not seen material impacts from recent bank failures, maintaining client confidence [40] Other Important Information - Banner was recognized as one of America's 100 Best Banks and received an outstanding CRA rating [13] - The company published its inaugural environmental, social, and governance highlights report, reflecting its commitment to community support [12] Q&A Session Summary Question: Deposit flows and impacts from bank failures - Management noted that deposit declines in Q1 were less than in Q4, primarily driven by non-operating balances moving to higher-yielding investments [39][40] Question: Loan growth and risk-adjusted returns - Management indicated that loan growth expectations have moderated but remain optimistic about new client acquisition [44] Question: Deposit costs and betas - The deposit beta for interest-bearing deposits is expected to be similar to the last rate cycle, around 25% [51] Question: Loan to deposit ratio comfort level - Management indicated a comfort level in the mid-80% range for the loan to deposit ratio, depending on market conditions [69] Question: Changes in customer behavior post-bank failures - Management reported no major shifts in customer behavior but noted increased inquiries from potential new clients [72]