Banner(BANR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $51.2 million, or $1.49 per diluted share, for Q4 2025, compared to $1.54 per share in Q3 2025 and $1.34 per share in Q4 2024 [4] - For the full year 2025, net income available to common shareholders was $195.4 million, or $5.64 per diluted share, up from $168.9 million, or $4.88 per share in 2024 [5] - Core earnings for the full year 2025 were $255 million, compared to $223.2 million in 2024, reflecting an increase in core revenue to $661 million from $615 million, an 8% increase [6][5] - Return on average assets for Q4 2025 was 1.24% [6] Business Line Data and Key Metrics Changes - Loan originations increased by 9% compared to the linked quarter and 8% year-over-year, but overall loan growth was negligible due to higher-than-expected paydowns [9] - The commercial real estate portfolio showed solid growth year-over-year, with investor CRE increasing by 5% and owner-occupied CRE by 11% [9] - The small business segment grew by 8% year-over-year, contributing positively to overall loan production [11] Market Data and Key Metrics Changes - Core deposits represented 89% of total deposits, indicating a strong and loyal deposit base [7] - Total borrowings increased by $40 million during the quarter, reflecting low reliance on wholesale borrowings [18] Company Strategy and Development Direction - The company aims to maintain a moderate risk profile while investing to improve operating performance, positioning itself well for future challenges [5] - The strategy focuses on growing new client relationships, maintaining core funding, and promoting client loyalty through responsive service [7] Management's Comments on Operating Environment and Future Outlook - Management expects loan growth in the mid-single digits for 2026, contingent on economic stability [24] - The competitive landscape remains challenging, with some banks offering more aggressive terms, but the company believes it competes well in product offerings and pricing [26] - Management anticipates that net interest margin (NIM) will be influenced by Federal Reserve actions, with potential for margin expansion if no rate cuts occur [28] Other Important Information - The company was recognized as one of America's 100 best banks and received accolades for trustworthiness and client satisfaction [8] - The tangible common equity ratio increased from 9.5% to 9.84%, reflecting strong capital and liquidity positions [18] Q&A Session Summary Question: Outlook for loan growth in 2026 - Management expects mid-single digit loan growth in 2026, despite potential headwinds from commercial real estate payoffs [24] Question: Competitive landscape for loan originations - The competitive environment remains strong, with some banks offering aggressive terms, but the company believes it can compete effectively [26] Question: Expectations for net interest margin - Future NIM will largely depend on Federal Reserve actions, with potential for expansion if no rate cuts occur [28] Question: Capital position and buyback plans - The company has approximately 1.2 million shares available for repurchase and will monitor market conditions for potential buybacks [46] Question: Tax rate expectations for 2026 - The expected tax rate for 2026 is around 19%, consistent with prior periods [58] Question: Drivers of deposit growth - Year-on-year deposit growth is attributed to new client relationships and a focus on small business banking [68]