Banner (NASDAQ:BANR) Corporation recently reported a net profit available to common shareholders of $45.9 million or $1.33 per diluted share for Q3 2023, an increase from $1.15 per share in Q2 2023, but a slight decrease from $1.43 per share in Q3 2022. This fluctuation is primarily attributed to the provision for credit losses and an increase in funding costs. The company's core earnings for the third quarter stood at $62.8 million, with revenue from core operations reaching $157.7 million.
Key takeaways from the call:
- Banner's loan portfolio remains strong, with delinquent loans at 0.27% of total loans and net loan losses at $663,000 for the quarter. The reserve for loan losses totals $147 million or 1.38% of total loans.
- Construction and land development loans increased by 4% compared to September 2022, driven by growth in the multifamily construction portfolio.
- Agricultural loan balances increased by 8%, and the consumer mortgage portfolio grew by 7% compared to the previous quarter.
- Net interest income remained flat, while total loans increased by $133 million.
- Total securities declined by $195 million. Deposits increased by $75 million, with a significant increase in retail time deposits.
- The net interest margin decreased by 7 basis points to 3.93%. Total non-interest income increased, primarily due to lower losses on the sale of securities.
- The company expects some moderate compression in the net interest margin in the fourth quarter, but stabilization in the first part of 2024.
During the earnings call, executives discussed various topics, including funding costs, loan growth, net interest margin, and expenses. They anticipate a moderate increase in funding costs in the fourth quarter, with a slowdown expected in 2024. This slowdown is expected to stabilize the net interest margin.
Despite potential rate hikes leading to muted economic activity, Banner Bank sees opportunities to take market share amidst market disruption. The executives also discussed the potential impact of rate hikes and cuts on the margin, the percentage of loans that have yet to reprice higher, deposit pricing, and expenses.
The executives mentioned that the company is cautious about pursuing mergers and acquisitions due to uncertainty but is open to opportunities when there is more clarity. They also indicated that share repurchases are being considered for 2024, contingent upon the macroeconomic environment.
During the call, the CEO of Banner Corporation discussed potential future plans for the company. He mentioned that despite cautiousness regarding significant combinations, Banner's strong balance sheet and history as a good partner make it a natural candidate for future combinations once the market becomes clearer.
Strategic initiatives under consideration by Banner Corporation include enhancing its origination capability in SBA lending, expanding its foreign exchange income offerings, and enhancing its wealth management capabilities. They also see opportunities to compete effectively in the Pacific Northwest and California, expressing confidence in their ability to take market share and attract talent from regional and larger institutions.
Overall, the company reported a solid third-quarter performance, continuing to execute its super community bank strategy and receiving recognition for its business model and value proposition. The company's liquidity and capital profile remain strong, and all capital ratios exceed regulatory requirements. Despite potential challenges, the company is well-positioned to take advantage of market disruption and maintains a strong balance sheet and liquidity.
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