Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banner Corp (BANR, Financial) reported a net profit of $45.2 million or $1.30 per diluted share for Q3 2024, up from $1.15 per share in the previous quarter.
- Core earnings increased to $57 million in Q3 2024 from $52 million in the prior quarter, demonstrating strong operational performance.
- The company maintained a strong core deposit base, with core deposits representing 89% of total deposits.
- Banner Corp (BANR) achieved a return on average assets of 1.13% for Q3 2024, indicating efficient asset utilization.
- The company announced a core dividend of 48 cents per common share, reflecting confidence in its financial stability and future prospects.
Negative Points
- Delinquent loans increased to 0.40% in Q3 2024, up from 0.29% in the previous quarter, indicating a slight deterioration in credit quality.
- Adversely classified loans rose by $28 million during the quarter, representing 1.33% of total loans.
- Nonperforming assets increased by $12 million, now representing 0.28% of total assets.
- Loan growth was muted, with total portfolio loan balances increasing by only 1% from the linked quarter.
- The company anticipates some moderate compression in net interest margin in Q4 2024 due to the lag in deposit cost reductions following the Fed's rate cuts.
Q & A Highlights
Q: Can you explain the fluctuation in compensation expenses this quarter and the overall expense outlook into Q4?
A: Rich Arnold, Investor Relations: The drop in compensation expenses this quarter was due to unexpected items like a payroll tax refund and lower self-insured medical expenses. These are not ongoing, so I expect expenses to normalize. Historically, we've grown operating expenses in the low single digits, and absent any M&A, we could continue that trend into 2025.
Q: What is your approach to repricing deposits following the recent 50 basis point rate cuts?
A: Robert G. Butterfield, CFO: The cost of deposits for September was 162 basis points. We made some reductions following the rate cut, including a 25 basis point reduction in advertised CD specials and adjustments in high-yield savings accounts. We are monitoring competitors and expect to take additional reductions in the coming months.
Q: How do you view the potential impact of further rate cuts on your net interest margin and balance sheet in 2025?
A: Robert G. Butterfield, CFO: We are slightly asset-sensitive, with a potential 1% reduction in net interest income over the next 12 months if rates decline gradually. We expect deposit cost reductions to lag loan repricing, leading to moderate margin compression initially. Long-term, a normal yield curve would help expand margins.
Q: Can you provide more details on the $12 million increase in non-accrual loans this quarter?
A: Jill Rice, Chief Credit Officer: The primary driver was a large agricultural relationship in Northern California, specifically in tree nuts. Other increases were in consumer loans and small business, with average loan sizes around $200,000.
Q: How do you view the M&A environment, particularly with credit unions' activity in the Northwest?
A: Mark Grescovich, CEO: Credit unions have an unfair advantage in pricing, but there are limited buyers on the West Coast who can absorb these banks, and Banner is one of them. We have looked at the institutions credit unions are purchasing, and we continue to focus on our organic growth strategy while being open to opportunistic acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
