Banner(US:BANR)2022-01-21 20:05Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $49.9 million or $1.44 per diluted share for Q4 2021, unchanged from Q3 2021, and an increase from $1.10 per share in Q4 2020 [10] - For the full year 2021, net income available to common shareholders reached a record $201 million, compared to $115.9 million in 2020 [10] - Pre-tax, pre-provision earnings for 2021 were $223.1 million, a 3.5% increase from $215.5 million in 2020 [11] - Return on average assets for 2021 was 1.24%, with a 5% increase in tangible common shareholder equity per share compared to Q4 2020 [12] Business Line Data and Key Metrics Changes - Core revenue from operations increased 2.3% to $593.3 million in 2021 compared to $579.9 million in 2020, driven by a larger earning asset mix and solid mortgage banking revenue [11] - Core deposits increased by 16% compared to December 31, 2020, representing 94% of total deposits [12] - Loan originations were strong across all business channels, up 28% year-over-year, excluding PPP loans [18] Market Data and Key Metrics Changes - The commercial and multifamily real estate portfolio increased by $250 million or 6.2% year-over-year, while C&I loans decreased by $94 million or 8% [20] - The agricultural loan portfolio declined by $16 million or 5% year-over-year, attributed to de-banking underperforming borrowers [21] - The overall adversely classified loans decreased by 53% since the pandemic-induced high reported in September 2020, primarily centered in the hospitality and recreation industries [22] Company Strategy and Development Direction - The company is focused on the "Banner Forward" initiative, which aims to accelerate growth in commercial banking, deepen retail client relationships, advance technology strategies, and streamline back-office operations [9] - The company is positioned to take advantage of market disruptions caused by mergers in the financial sector, aiming to grow its client base and market share [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth for 2022, anticipating upper single-digit growth rates as excess liquidity is absorbed and commercial utilization ramps back to normal [46] - The company remains committed to maintaining a moderate risk profile and has not changed its underwriting practices since the onset of the pandemic [23] - Management expects the pace of margin compression to slow and eventually expand as deposit liquidity is managed and market rates increase [28] Other Important Information - The company has made significant commitments to support minority-owned businesses and local communities, including a $1.5 million investment in Broadway Federal Bank [13] - The company authorized a 7% increase in its core dividend to $0.44 per share and plans to repurchase approximately 5% of its common stock [12] Q&A Session Summary Question: Impact of large mergers on customer base - Management noted that they have successfully grown their client base organically by over 120% in the past 12 years and are positioned to take advantage of market disruptions from ongoing mergers [39] Question: SBA valuation and branch location gains - The SBA asset accounting adjustment was $1.1 million, and branch sales generated an $800,000 gain, but these are not expected to recur [42] Question: Loan growth outlook - Management is optimistic about loan growth, expecting upper single-digit growth rates by the end of 2022 due to strong pipelines and improving utilization rates [46] Question: Asset sensitivity management - Management discussed the balance sheet's asset sensitivity, noting that two-thirds of the loan book consists of floating-rate loans, and they expect a lag in deposit rate increases compared to the Fed's actions [50] Question: Costs associated with Banner Forward - Management indicated that the costs associated with the Banner Forward initiative are focused on expense efficiency and revenue generation, with expectations for core expenses to run in the mid-to-high $80 million range [69]