Banner(US:BANR)2023-07-20 19:16Financial Data and Key Metrics Changes - Banner Corporation reported a net profit available to common shareholders of $39.6 million or $1.15 per diluted share for Q2 2023, down from $1.39 per share in Q2 2022 and $1.61 per share in Q1 2023, primarily impacted by the provision for credit losses and increased funding costs [6][24] - Core earnings for Q2 2023 were $63.4 million, up from $57.8 million in Q2 2022, reflecting a strong core deposit base and effective expense control [7] - Revenue from core operations increased 7% to $158.6 million compared to $148.3 million in Q2 2022 [7] Business Line Data and Key Metrics Changes - Total loans increased by $324 million during the quarter, with significant growth in 1-to-4 family real estate loans, commercial business loans, and commercial real estate loans [24] - The loan portfolio showed an increase of 11% year-over-year, with core deposits representing 90% of total deposits [8] - The consumer mortgage portfolio grew by 7% in the quarter, continuing the trend of retaining completed all-in-one custom construction loans on the balance sheet [20] Market Data and Key Metrics Changes - Delinquent loans as of June 30 were 0.28% of total loans, down from 0.37% as of March 31, and compared to 0.19% as of June 30, 2022 [12] - Adversely classified loans represented 1.38% of total loans, down from 1.46% in the previous quarter [12] - Agricultural loan balances increased by 14% compared to the linked quarter, reflecting higher operating line usage [20] Company Strategy and Development Direction - The company continues to execute its super community bank strategy, focusing on growing client relationships and maintaining a strong core funding position [8] - Banner Corporation is capitalizing on market disruptions to enhance client acquisition and expand its workforce, particularly in small business banking [58] - The company aims to maintain a moderate risk profile while navigating economic uncertainties [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather economic challenges, citing strong credit metrics and a solid reserve for loan losses [21] - The economic environment remains uncertain, with expectations of muted loan growth due to increased rates and overall economic pessimism [41] - Management noted that the company is well-positioned to navigate potential recession impacts, leveraging its strong capital ratios and client relationships [21] Other Important Information - Banner Corporation was recognized as one of America's 100 Best Banks and received accolades for its trustworthiness and financial performance [10] - The company continues to invest in technology to streamline deposit opening and loan origination processes, enhancing the digital client experience [31] Q&A Session Summary Question: Update on deposit costs and betas - Management indicated that deposit betas are modeled similarly to the last rate cycle, with expectations that they may creep beyond 25% [34][36] Question: Loan growth and demand outlook - Management acknowledged a slowdown in pipeline refilling, with expectations of low-single-digit growth going forward due to economic conditions [41] Question: Market opportunities and competition - Management noted that competition is primarily from community banks and credit unions, with a focus on small business banking as a growth area [52] Question: Credit quality monitoring - Management is closely monitoring debt service coverage ratios and overall credit quality, particularly in the commercial real estate sector [75][79] Question: Future of non-interest expenses - Management expects non-interest expenses to remain similar to the first two quarters of the year, around mid-90 million [74] Question: Buyback appetite - Management is contemplating a buyback for the second half of the year, pending new authorization [70]