Q3 2023 Banner Corp Earnings Call

[music].

Yeah.

Speaker 1: Hello and welcome to the Banner Corporation's third quarter 2023 conference call and webcast. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn the conference call over to our host Mark Gresser Smith, President and CEO of Banner Corporation.

Hello, and welcome to the banner Corporation spot quote taught to fall from 23 conference call and webcast. All lines have been placed on mute during the presentation portion of the coach with an opportunity for question and answer.

If you'd like to ask a question. Please press star followed by one on your telephone keypad now.

Like to turn the conference call I bought twice Mark question.

President and CEO to spawn a corporation. Please go ahead.

Speaker 2: Thank you, Banerik. And good morning, everyone. I would also like to welcome you to the third quarter 2023 earnings call for Banerik Corporation.

Thank you Panna.

And good morning, everyone. I would also like to welcome you to the third quarter 2023 earnings call for Banner Corporation.

Speaker 2: Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer, Joe Rice, our Chief Credit Officer, and Rich Arnold, our Head of Investor Relations.

Joining me on the call today is Rob Butterfield Banner Corporation's Chief Financial Officer.

Joe Rice, our Chief Credit Officer, and Rich Arnold our head of Investor Relations.

Speaker 2: Rich, would you please read our forward-looking safe harbor statement?

Rich would you please read our forward looking safe Harbor statement.

Speaker 2: Sure, Mark. Good morning. Our presentation today discusses Banner's business outlook and will include forward looking statements.

Sure Mark Good morning, our presentation today discusses banner's business outlook and will include forward looking statements.

Speaker 3: Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about banners, general outlook for economic and other conditions.

Statements include descriptions of management's plans objectives or goals for future operations products or services forecast of financial or other performance measures and statements about banner's general outlook for economic and other conditions. We also may make other forward looking statements in the question and answer period. Following management's discussion. These forward looking statements are.

Speaker 3: We also may make other forward-looking statements in the question and answer period following management discussion

Speaker 3: These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday, and the most recently filed Form 10Q for the quarter ended June 30th, 2023.

<unk> to a number of risks and uncertainties and <unk> actual results may differ materially from those discussed today information on the risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the most recently filed Form 10-Q for the quarter ended June 30th two.

2023 forward looking statements are effective only as of the date. They are made and banner assumes no obligation to update information concerning its expectations.

Speaker 3: forward-looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expected date.

Speaker 2: Thank you, Rich. As is customary, today we will cover four primary items with...

Thank you rich as is customary today, we will cover four primary items with you.

Speaker 2: First, I will provide you high level comments on Banner's third quarter 2023 performance.

First I will provide you a high level comments on banner's third quarter 2023 performance.

Speaker 2: Second, the actions Banner continues to take to support all of our stakeholders, including our Banner team, our clients, our communities, and our shareholders.

The actions banner continued to take to support all of our stakeholders, including our banner team our clients our communities and our shareholders.

Speaker 2: Third, Joe Rice will provide comments on the current status of our loan portfolio. And finally, Rob Butterfield will provide more detail on our operating performance for the quarter, as well as comments on our balance sheet.

Third Joe Wright, who will provide comments on the current status of our loan portfolio and finally, Rob Butterfield will provide more detail on our operating performance for the quarter as well as comments on our balance sheet.

Speaker 2: Before I get started, I want to again thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and communities.

Before I get started I want to again, thank all of my 2000 colleagues in our company, who are working extremely hard to assist our clients and communities.

Speaker 2: Banner has lived our core values, summed up as doing the right thing for the past 133 years.

Banner has lived our core values summed up is doing the right thing for the past 133 years.

Speaker 2: Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company, and our shareholders, and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events.

Our overarching goal continues to be to do the right thing for our clients our communities our colleagues our company and our shareholders.

And to provide a consistent and reliable source of commerce in capital through all economic cycles and change events.

Speaker 2: I am pleased to report again to you that is exactly what we continue to do.

I am pleased to report again to you that is exactly what we continue to do.

Speaker 2: I'm very proud of the entire banner team that are living our core values. Now let me turn to an overview. I'm very proud of the entire banner team that are living our core values.

I'm very proud of the entire banner team that are living our core values.

Now, let me turn to an overview of our performance.

Speaker 2: As announced, Banner Corporation reported a net profit available to common shareholders of $45.9 million or $1.33 per diluted share for the quarter ended September 30, 2023.

As announced banner Corporation reported a net profit available to common shareholders of $45 $9 million or $1 33 per diluted share for the quarter ended September 30th 2023.

Speaker 2: This compares to a net profit to common shareholders of $1.15 per share for the second quarter of 2023, and $1.43 per share for the third quarter of 2022.

This compares to a net profit to common shareholders of $1 15 per share for the second quarter of 2023, and $1 43 per share for the third quarter of 2022.

The earnings comparison is primarily impacted by the provision for credit losses and.

Speaker 2: The earnings comparison is primarily impacted by the provision for credit losses, and the increase in the...

And the increase in funding cost.

Speaker 2: Our strategy to maintain a moderate risk profile and the investments we made during our banner forward program to improve operating performance have positioned the company well to weather recent market head.

Our strategy to maintain a moderate risk profile and the investments we made during our banner forward program to improve operating performance have positioned the company well to whether recent market headwinds.

Speaker 2: Robble Discussies, items and more detail shortly.

Rob will discuss these items in more detail shortly.

Speaker 2: to illustrate the core earnings power banner. I would direct your attention to pre-tax, pre-provision earnings, excluding gains and losses on the sale of security.

To illustrate the core earnings power of banner I would direct your attention to pretax pre provision earnings excluding gains and losses on the sale of securities.

Speaker 2: be in our forward expenses and changes in fair value of financial

Banner forward expenses and changes in fair value of financial instruments, our third quarter core earnings were $62 $8 million compared to $63 $4 million for the second quarter of 2023.

Speaker 2: Our third quarter core earnings were $62.8 million compared to $63.4 million for the second quarter of 2023.

Operator: Hello, and welcome to the Banner Corporation's third quarter, 2023 conference call and webcast. All lines have been placed on mute during a presentation portion of the call, with an opportunity for question and answer at the end. If you would like to ask a question, please press star, followed by one on your telephone keypad.

Speaker 2: Banner 3rd quarter, 2023, revenue from core operation.

<unk> third quarter 2023 revenue from core operations was $157 $7 million compared to $158 $6 million for the second quarter of 2023.

Speaker 2: was $157.7 million compared to $158.6 million for the second quarter of 2023.

Mark Grescovich: I would now like to turn the conference call over to our host, Mark Grescovich. President and CEO of Banner Corporation, please go ahead. Thank you, Banner, and good morning, everyone. I would also like to welcome you to the third quarter, 2023 earnings call for Banner Corporation. Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer, Joe Rice, our Chief Credit Officer, and Rich Arnold, our head of investor relations.

Speaker 2: We continue to benefit from a strong core bit deposit base that is proved to be resilient and loyal to banner in the wake of a highly competitive environment.

We continue to benefit from a strong strong core deposit base that has proved to be resilient and loyal to banner in the wake of a highly competitive environment.

Speaker 2: very good net interest margin and core expense control.

A very good net interest margin.

Core expense control.

Speaker 2: Overall, this resulted in a return on average assets of 1.17% for the third quarter of 2023.

Overall this resulted in a return on average assets of 1.17% for the third quarter of 2023.

Rich Arnold: Rich, would you please read our forward-looking, safe harbor statement? Sure, Mark.

Speaker 2: Once again, our core performance reflects continued execution on our Super Community Bank strategy.

Once again, our core performance reflects continued execution on our Super community Bank strategy.

Rich Arnold: Good morning. Our presentation today discusses Banner's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question and answer period following management's discussion. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today.

Rich Arnold: Information on the risk factor sector causes actual results to differ are available from the earnings press release that was released yesterday, and the most recently filed form 10-2 for the quarter ended June 30, 2023. Forward-looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expectations.

Speaker 2: That is, growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and demonstrating our safety and soundness through all economic cycles and changes.

That is growing new client relationships, maintaining our core funding position promoting client loyalty and advocacy through our responsive service model and demonstrating our safety and soundness through all economic cycles and change events.

Speaker 2: To that point, our core deposits represent 89% of total deposits.

To that point, our core deposits represent 89% of total deposits.

Speaker 2: Further, we continued our strong organic generation of new relationships and our loans increased 8% over the same period last.

Further we continued our strong organic generation of new relationships and our loans increased 8% over the same period last year.

Speaker 2: Reflective of this valid performance, coupled with our strong regulatory capital ratios, and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced the core dividend of 48 cents per common share.

Reflective of this solid performance, coupled with our strong regulatory capital ratios and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced a core dividend of 48 per common share.

Speaker 2: As I mentioned on previous calls, banner published our environmental, social, and governance highlights report last December . And published our inaugural 2022 ESG report earlier this summer.

As I have mentioned on previous calls banner published our environmental social and governance highlights report last December and published our inaugural 2022 ESG report earlier this summer.

Mark Grescovich: Thank you, Rich. As is customary, today we will cover four primary items with you. First, I will provide you high-level comments on Banner's third quarter 2023 performance. Second, the actions Banner continues to take to support all of our stakeholders, including our Banner team, our clients, our communities and our shareholders. Third, Joe Rice will provide comments on the current status of our Lumpur Folio, and finally, Rob Butterfield will provide more detail on our operating performance for the quarter, as well as comments on our balance sheet.

Speaker 2: Both of these documents reflect the ways in which we continually strive to do the right thing in support of our clients, our communities, and our colleagues, and provides an outline of the level of commitment Banner has to the many communities we serve.

Both of these documents reflect the ways in which we continually strive to do the right thing in support of our clients our communities and our colleagues and provides an outline of the level of commitment banner has to the many communities we serve.

Speaker 2: Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value prop.

Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition.

Speaker 2: Banner was again named one of America's 100 Best Companies and Banks and one of the best banks in the world by four.

Banner was again named one of America's 100, best companies and banks and one of the best banks in the world by Forbes.

Mark Grescovich: Before I get started, I want to again thank all of my 2,000 colleagues in our company who are working extremely hard to assist our clients and communities. Banner has lived our core values, summed up as doing the right thing for the past 133 years. Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company and our shareholders, and to provide a consistent and reliable source of commerce and capital through all economic cycles and change events. I am pleased to report again to you that is exactly what we continue to do. I'm very proud of the entire Banner team that are living our core values.

Speaker 2: Newsweek named Banner one of the most trustworthy companies in America.

Newsweek named banner, one of the most trustworthy companies in America.

Speaker 2: S&P Global Market Intelligence ranked banners financial performance among the top 50 public banks with more than $10 billion in assets.

S&P global market intelligence ranked banners financial performance among the top 50 public banks with more than $10 billion in assets and.

Speaker 2: and the digital banking provider, Q2 Holdings, awarded banner their Bank of the Year for X.

And the digital banking provider Q2 holdings awarded banner bank of the year for excellence.

Speaker 2: Additionally, we have noted previously Banner Bank received an outstanding CRA rating in our most recent CRA examination.

Additionally, we have noted previously banner bank received an outstanding CRA rating and our most recent CRA examination.

Speaker 2: Let me now turn the call over to Jill to discuss trends in our loan portfolio and her comments on Banner's credit quality. Jill? Thank you, Mark, and good...

Let me now turn the call over to Jill to discuss trends in our loan portfolio in her comments on banner's credit quality Joe.

Thank you Mark and good morning, everyone.

Speaker 4: Banner's Credit Metrics continue to be strong and our Super Community Bank Model continues to serve our clients well.

Banner's credit metrics continue to be strong and our Super community Bank model continues to serve our clients well.

Mark Grescovich: Now let me turn to an overview of our performance. As announced, Banner Corporation reported a net profit available to common shareholders of $45.9 million or $1.33 per deluded share for the quarter-ended September 30, 2023. This compares to a net profit to common shareholders of $1.15 per share for the second quarter of 2023, and $1.43 per share for the third quarter of 2022. The earnings comparison is primarily impacted by the provision for credit losses and the increase in funding costs. Our strategy to maintain a moderate risk profile and the investments we made during our Banner Forward program to improve operating performance have positioned the company well to weather recent market headwinds.

Speaker 4: The Lincolnt Lones of September 30th were 0.27% of total loans compared to 0.28% of total loans reported as of June 30th and 0.22% of total loans as of September 30th, 2022.

As of September 30th, whereas they're all point to 7% of total loans compared to 0.28% of total loans reported as of June 30th and 0.22% of total loans as of September 30th 2022.

Speaker 4: Adversity classified loans represent 1.17% of total loans down from 1.38% as of the linked quarter and compared to 1.39% as of September 30th 2022.

Adversely classified loans represent 1.17% of total loans down from 138% as of the linked quarter and compared to 139% as of September 32022, net loan losses continue to be moderate at 663000 for the quarter and $1 8 million year to date and banners nonperforming.

Speaker 4: Net loan losses continue to be moderate at 663,000 for the quarter and 1.8 million year to date. And banners non-performing assets remain low at 0.17% of total assets.

Assets remain low at 0.17% of total assets.

Speaker 4: Our reserve for low-mosses continues to be a source of strength. We posted a provision for low-mosses of 2.9 million this quarter, covering the moderate level of net charge off taken in the quarter, as well as providing for low-end growth. In addition, we provided 346,000 to the reserve for unfunded loan commitments for a total provision for low-mosses of 3.3 million.

Our reserve for loan losses continues to be a source of strength, we posted a provision for loan losses of $2 9 million in this quarter covering the moderate level of net charge offs taken in the quarter as well as providing for loan growth. In addition, we provided 346000 to the reserve for unfunded loan commitments for total provision for loan losses of $3 3 million.

Mark Grescovich: Robble discusses items in more detail shortly. To illustrate the core earnings power of Banner, I would direct your attention to pre-tax pre-provision earnings, excluding gains and losses on the sale of securities. Banner Forward expenses and changes in fair value of financial instruments. Our third quarter core earnings were $62.8 million compared to $63.4 million for the second quarter of 2023. Banner's third quarter, 2023 revenue from core operations was $157.7 million compared to $158.6 million for the second quarter of 2023.

Yeah.

Speaker 4: Due to an improvement in market valuation, we released 1.3 million of the provision recorded last quarter that was related to financial institutions, subordinated debt, held within the investment portfolio. In total, the net provision for credit losses for the quarter was 2 million.

Due to an improvement in market valuation, we released $1 3 million of the provision recorded last quarter that was related to financial institutions subordinated debt held within the investment portfolio.

In total then that provision for credit losses for the quarter was 2 million.

Speaker 4: After the provision for credit losses, our ACL reserve total is 147 million, or 1.38% of total loans as of September 30th. This coverage level is identical to that reported in the linked quarter, as well as that reported as of September 30th, 2022, and currently provides 560% coverage of our non-imperforming loans.

After the provision for credit losses.

Our ACL reserve totaled $147 million or 138% of total loans as of September 30th. This coverage level is identical to that reported in the linked quarter as well as that reported as of September 30th 2022, and currently provides 560% coverage of our nonperforming loans.

Speaker 4: As reflected in the release, loan originations declined modestly quarter over quarter. Still, loan outstanding grew by 139 million or 5.3% on an annualized basis and are up 8% year over year.

Mark Grescovich: We continued to benefit from a strong core bit deposit base that has proved to be resilient and loyal to Banner in the wake of a highly competitive environment, a very good net interest margin, and core expense control. Overall, this resulted in a return on average assets of 1.17% for the third quarter of 2023. Once again, our core performance reflects continued execution on our super-community bank strategy. That is, growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model, and demonstrating our safety and soundness through all economic cycles and change events. To that point, our core deposits represent 89% of total deposits. Further, we continued our strong organic generation of new relationships, and our loans increased 8% over the same period last year.

As reflected in our release loan originations declined modestly quarter over quarter still loan Outstandings grew by 139 million or five 3% on an annualized basis and are up 8% year over year.

Speaker 4: The CNI line utilization decreased 1% in the quarter, and balances were down 49 million in the quarter, due to a combination of loan payoffs and decreased line utilization. This was partially offset by a 2% increase in small business score loans.

C&I line utilization decreased 1% in the quarter and balances were down $49 million in the quarter due to a combination of loan payoffs and decreased line utilization. This was partially offset by a 2% increase in small business card loans.

Mark Grescovich: Reflective of this solid performance, coupled with our strong regulatory capital ratios, and the fact that we increased our tangible common equity per share by 11% from the same period last year, we announced the core dividend of 48 cents per common share.

Speaker 4: Compared to September 30th, 2022, commercial and small business score loans are at 5.4%. We also saw an increase of 17 million in owner-occupied CRE, or 7.4% on an annualized base.

Compared to September 30 of 2022, commercial and small business card loans are up five 4%. We also saw an increase of $17 million in owner occupied CRE or seven 4% on an annualized basis.

Speaker 4: Excluding multi-family, our commercial real estate balances decreased 1% in the quarter, driven primarily by the payoff of a substandard assisted living facility as well as an underperforming self-storage property, and are down 3% when compared to September 30th, 2022.

Excluding multifamily or commercial real estate balances decreased 1% in the quarter driven primarily by the payoff of a substandard assisted living facility as well as an underperforming self storage property and are down 3% when compared to September 30th 2022.

Speaker 4: Given the expectation of a sustained interest rate increased rate environment and the impact of overall market dynamics, we continue to anticipate muted commercial real estate loan growth in the near term. That said, it is important to note that the portfolio continues to perform well and similar to last quarter, less than 1.5 percent of the total CR-reportfolio is adversely classified at this time.

Given the expectation of a sustained interest rate and increased rate environment and the impact of overall market dynamics, we continue to anticipate muted commercial real estate loan growth in the near term.

That said it is important to note that the portfolio continues to perform well and similar to last quarter less than one 5% of the total CRE portfolio is adversely classified at this time.

Speaker 4: There has been negligible change in our office portfolio performance. It continues to be granular and size, diversified in geographic location, and overall credit performance has been solid. In line with prior disclosures and as reflected in the investor presentation, the office portfolio currently represents 6.3% of total loans and has split roughly 50-50 between investor CRE and owner occupied and adversely classified loans in this asset class are limited to 1.2 million.

There has been negligible change in our office portfolio performance. It continues to be granular in size diversified and geographic location and overall credit performance has been solid.

Mark Grescovich: As I mentioned on previous calls, Banner published our environmental, social, and governance highlights report last December, and published our inaugural 2022 ESG report earlier this summer. Both of these documents reflect the ways in which we continually strive to do the right thing in support of our clients, our communities and our colleagues, and provides an outline of the level of commitment Banner has to the many communities we serve. Finally, I'm pleased to say that we continue to receive marketplace recognition and validation of our business model and our value proposition.

In line with prior disclosures and as reflected in the Investor presentation. The office portfolio. Currently represents six 3% of total loans and is split roughly 50 50 between investor CRE and owner occupied and adversely classified loans in this asset class are limited to $1 2 million.

Speaker 4: It is worth noting that there has been no meaningful change in the portfolio of loans secured by office properties within the major metropolitan areas across our geographic footprint.

It is worth noting that there has been no meaningful change in the portfolio of loans secured by office properties within the major metropolitan areas across our geographic footprint.

Speaker 4: Multi-family real estate loans were up 9.5% in the quarter as multiple affordable housing projects completed construction and were moved into the permanent bucket.

Multifamily real estate loans were up nine 5% in the quarter as multiple affordable housing projects completed construction and were moved into the permanent bypass.

Mark Grescovich: Banner was again named one of America's 100 best companies and banks and one of the best banks in the world by Forbes. Newsweek named Banner one of the most trustworthy companies in America, S&P Global Market Intelligence ranked Banner's financial performance among the top 50 public banks with more than $10 billion in assets, and the digital banking provider Q2 Holdings awarded Banner their Bank of the Year for excellence. Additionally, we have noted previously, Banner Bank received an outstanding CRA rating in our most recent CRA examination.

Speaker 4: In total, the multi-family portfolio is split approximately 55% affordable housing and 45% market rate. And as I have commented before, the average loan size is less than 1 million with balances spread across our footprint.

In total the multifamily portfolio is split approximately 55% in affordable housing and 45% market rate and as I have commented before the average loan size is less than 1 million with balance is spread across our footprint.

Speaker 4: Construction and development loan balances declined by $6 million in the quarter or 40 basis points. The decline and residential construction outstanding continued in the quarter as sales of completed residential starts continue to outpace new takedown, down 2% in the quarter and down nearly 20% when compared to September 2022.

Construction and development loan balances declined by $6 million in the quarter or 40 basis points. The decline in residential construction Outstandings continued in the quarter as sales of completed residential starts continue to outpace new takedown down 2% in the quarter and down nearly 20% when compared to September 2022.

Speaker 4: The commercial construction loans were also down in the quarter, primarily due to the expected refinancing of various projects upon completion.

Commercial construction loans were also down in the quarter, primarily due to the expected refinancing of various projects upon completion.

Jill Rice: Let me now turn the call over to Jill to discuss trends in our loan portfolio and her comments on Banner's credit quality. Jill. Thank you Mark and good morning everyone. Banner's credit metrics continue to be strong and our super community bank model continues to serve our clients well. The linked loans of September 30th were 0.27% of total loans compared to 0.28% of total loans reported as of June 30th and 0.22% of total loans as of September 30th 2022.

Speaker 4: These declines were partially offset by increased outstanding on the multi-family construction projects underway. Multifamily construction outstanding are up 64% year over year. A reflection of the strong origination of affordable housing projects as well as modest, a modest level of origination of market rate middle income projects for strong spawns.

These declines were partially offset by increased outstandings on the multifamily construction projects underway multi.

Multifamily construction outstandings are up 64% year over year, a reflection of the strong origination of affordable housing projects as well as modest a modest level of origination of market rate middle income projects for strong sponsors.

Speaker 4: When compared to September of 2022, in total, construction and land development will reflect an increase of 4 percent, driven primarily by the growth in the multi-family construction portfolio, and to a much lesser extent to growth in the land development book.

When compared to September of 2022, and total construction and land development loans reflect an increase of 4% driven primarily by the growth in the multifamily construction portfolio and to a much lesser extent to growth in the land development book.

Jill Rice: Adversely classified loans represent 1.17% of total loans down from 1.38% as of the linked quarter and compared to 1.39% as of September 30th 2022. Net loan losses continue to be moderate at 663,000 for the quarter and 1.8 million year to date, and Banner's non-performing assets remain low at 0.17% of total assets. Our reserve for loan losses continues to be a source of strength. We posted a provision for loan losses of 2.9 million this quarter covering the moderate level of net charge off taken in the quarter as well as providing for loan growth.

Speaker 4: As discussed last quarter, the pace of residential construction starts continues to be slower than historical norms. Builders remain proactive in moving completed products, and while they continue to benefit from the general lack of resale housing in the inventory on the market, they remain cautious with the level of inventory under construction.

As discussed last quarter the pace of residential construction starts continues to be slower than historical norms builders remain proactive in moving completed product and while they continue to benefit from the general lack of resale housing inventory on the market they remain cautious with the level of inventory under construction.

Speaker 4: In total, residential construction exposure remains acceptable at 5% of the portfolio, flat with last quarter, and of that, 45% is comprised of our custom 1-4 family residential mortgage loan product.

In total residential construction exposure remains acceptable at 5% of the portfolio flat with last quarter and of that 45% is comprised of our cost on one to four family residential mortgage loan product. When you include multifamily commercial construction and land. The total construction exposure remains at 14% of total loans.

Jill Rice: In addition, we provided 346,000 to the reserve for unfunded loan commitments for a total provision for loan losses of 3.3 million. Due to an improvement in market valuation, we released 1.3 million of the provision recorded last quarter that was related to financial institutions, subordinated debt, housed within the investment portfolio. In total, the net provision for credit losses for the quarter was 2 million. After the provision for credit losses, our ACL reserve total is 147 million or 1.38% of total loans as of September 30th.

Speaker 4: When you include multi-family, commercial construction and land, the total construction exposure remains at 14% of total loans.

Speaker 4: and as is customary the portfolio continues to be diversified both in product mix and price point with start spread across our geography. In short, the portfolio continues to perform well.

And as is customary the portfolio continues to be diversified both in product mix and price point will start to spread across our geography and short the portfolio continues to perform well.

Speaker 4: As expected, agricultural loan balances increased again this quarter due to operating line usage up 8% when compared to the length quarter. Balances are up 12% year over year. And lastly, as noted in the earnings release, we again reported growth in the consumer mortgage portfolio up to 10% in the quarter, continuing the trend of retained completed

As expected agricultural loan balances increased again this quarter due to operating line usage up 8% when compared to the linked quarter balances are up 12% year over year and lastly, as noted in the earnings release, we again reported growth in the consumer mortgage portfolio.

Jill Rice: This coverage level is identical to that reported in the linked quarter as well as that reported as of September 30th 2022 and currently provides 560% coverage of our non-performing loans. As reflected in the release, loan originations declined modestly quarter over quarter. Still, loan outstanding grew by 139 million or 5.3% on an annualized basis and are up 8% year over year. CNI line utilization decreased 1% in the quarter and balances were down 49 million in the quarter due to a combination of loan pay-offs and decreased line utilization.

Sent in the quarter continuing the trend every chain completed.

Speaker 4: trend of retaining completed all-in-one custom construction logs on balance.

Trend of retaining completed all in one custom construction loans on balance sheet.

Speaker 4: I will close them the same way I started, noting that banners credit metrics continue to be strong and our super community bank model continues to serve our clients well. And I will reiterate a theme that has been consistent of late, which is that our credit quality metrics should not be expected to get better than they currently are. We will not be immune to credit deterioration that emerges as we move through the cycle.

I will close on the same way I started noting that banner's credit metrics continued to be strong and our Super community Bank model continues to serve our clients well and I will reiterate a theme that has been consistent of late which is that our credit quality metrics should not be expected to get better than they currently are we will not be immune to credit deterioration that emerges as we move through.

The cycle still the credit culture that runs throughout banner as a source of strength. So too are the solid reserves for loan losses, and capital base, all of which position us well for the future with that I'll turn the microphone over to Rob for his comments Rob great. Thank you Jill So today, we reported $1 33 per diluted share for the.

Speaker 2: Still, the credit culture that runs throughout banner is a source of strength. So two are the solid reserves for loan losses and capital base, all of which position as well for the future. With that, I'll turn the microphone over to Rob for his comments. Rob? Great, thank you, Jiddles. So today we reported $1.33 per Jiddler to chair for the second quarter.

Jill Rice: . We also saw an increase of 17 million in owner-occupied CRE or 7.4% on an annualized basis. Excluding multi-family, our commercial real estate balances decreased 1% in the quarter, driven primarily by the payoff of a substandard assisted living facility as well as an underperforming self-storage property, and are down 3% when compared to September 30th, 2022.

The second quarter.

Speaker 3: compared to $1.15 per diluted share for the prior quarter.

Compared to $1 15 per diluted share for the prior quarter.

Speaker 3: The 18 cent increase in earnings per share was primarily due to lower provision for credit losses, lower losses on the sale of securities, and lower negative fair value adjustments on financial instruments, period up fair value.

The 18% increase in earnings per share was primarily due to lower provision for credit losses lower losses on the sale of securities and lower negative fair value adjustments on financial instruments carried at fair value.

Speaker 3: Core Revenue, excluding the lost Sunfell securities, and changes of investments carried out fair value, decreased 883,000 from the prior core.

Core revenue, excluding the loss on sale of Securities and changes in investments carried at fair value decreased 883000 from the prior quarter.

Jill Rice: Given the expectation of a sustained interest rate environment and the impact of overall market dynamics, we continue to anticipate muted commercial real estate loan growth in the near term. That said, it is important to note that the portfolio continues to perform well and similar to last quarter less than 1.5% of the total CRE portfolio is adversely classified at this time. There has been negligible change in our office portfolio performance. It continues to be granular in size, diversified in geographic location, and overall credit performance has been solid.

Speaker 3: primarily due to higher deposit cost leading to a decline in net interest income.

Primarily due to higher deposit cost leading to a decline in net interest income.

Total loans increased $133 million during the quarter.

Speaker 3: with an increase of 139 million for portfolio loans partially offset by a decrease of six million and held for sale loans. The increase was primarily due to one to four family real estate loans increasing 99 million and multi-family loans increasing 67 million partially offset by $49 million to climb in this.

With an increase of $139 million for portfolio loans, partially offset by a decrease of $6 million in held for sale loans. The increase was primarily due to one to four family real estate loans, increasing $99 million and multifamily loans, increasing $67 million, partially offset by 49 million.

Jill Rice: In line with prior disclosures, and as reflected in the investor presentation, the office portfolio currently represents 6.3% of total loans and is split roughly 50-50 between investor CRE and owner-occupied, and adversely classified loans in this asset class are limited to 1.2 million. It is worth noting that there has been no meaningful change in the portfolio of loans secured by office properties within the major metropolitan areas across our geographic footprint. Multi-family real estate loans were up 9.5% in the quarter as multiple affordable housing projects completed construction and were moved into the permanent bucket.

Million dollar decline in business loans.

Speaker 3: Total securities declined $195 million. The client was due to the sale of 57 million of VELF for sale securities and normal portfolio cash flows. And also a decrease in the fair value of a VELF sell securities due to an increased interest rate.

Total securities declined 195 million the decline was due to the sale of $57 million of built for sale securities and normal portfolio cash flows and also a decrease in the fair value of the Vale sell securities due to an increase in interest rates.

Speaker 3: Any additional security sales during the fourth quarter will be dependent upon market condition.

Any additional security sales during the fourth quarter will be dependent upon market conditions.

Speaker 3: and deposits increase 75 million during the quarter, due to a $143 million increase in retail time deposits, partially offset by a $41 million decline in brokerage CDs and a $26 million decrease in core deposits.

Deposits increased $75 million during the quarter due to a $143 million increase in retail time deposits, partially offset by a $41 million decline in brokerage Cds and a $26 million decrease in core deposits.

Jill Rice: In total, the multi-family portfolio is split approximately 55% affordable housing and 45% market rate, and as I have commented before, the average loan size is less than 1 million with balances spread across our footprint. Construction and development loan balances declined by $6 million in the quarter or 40 basis points. The decline in residential construction outstanding continued in the quarter as sales of completed residential starts continued to outpace new takedown, down 2% in the quarter, and down nearly 20% when compared to September 2022.

Speaker 3: We have not increased rates on our deposit rate special since then to make.

We have not increased the rates on our deposit rates specials Simpson domain.

Speaker 3: Banner's liquidity and capital profile continue to remain strong with all capital ratios in excess of regulatory well-capitalized levels. And we continue to maintain significant off-balance borrowing capacity. Advances from the Federal Home Lumbank decreased 130 million during the quarter, ending the quarter at 140.

<unk> liquidity and capital profile continue to remain strong with all capital ratios in excess of regulatory well capitalized levels and we continue to maintain significant off balance sheet borrowing capacity advances from the federal home loan bank decreased to $130 million during the quarter ending the quarter at $140 million.

Jill Rice: Commercial construction loans were also down in the quarter, primarily due to the expected refinancing of various projects upon completion. These declines were partially offset by increased outstanding on the multi-family construction projects underway. Multi-family construction outstanding are up 64% year over year, a reflection of the strong origination of affordable housing projects as well as modest, a modest level of origination of market rate middle income projects for strong sponsors. When compared to September of 2022 in total, construction and land development loans reflected increase of 4% driven primarily by the growth in the multi-family construction portfolio and to a much lesser extent to growth in the land development book.

Speaker 3: Net interest income was essentially flat with a decrease of $752,000 from the prior quarter, due to an increase in funding cost offsetting the increase in earning asset balances and yield.

Net interest income was essentially flat with a decrease of 752000 from the prior quarter due to an increase in funding cost offsetting the increase in earning asset balances and yields.

Speaker 3: Compared to the prior quarter, average loan balances increase 242 million, while loan yields increase 14 basis points due to floating and adjustable rate loan repricing, as well as new production coming on at a higher interest rate.

Compared to the prior quarter average loan balances increased $242 million, while loan yields increased 14 basis points due to floating and adjustable rate loans re pricing as well as new production coming on at higher interest rates.

Speaker 3: Total average interest bearing cash and investment balances declined by 219 million from the prior quarter. While the average yield on the combined cash and investment balances increased to base.

Total average interest bearing cash and investment balances declined by $219 million from the prior quarter, while the average yield on the combined cash and investment balances increased two basis points.

Speaker 3: Total cost of funds increase 22 basis points to 108 basis points due to increases and rates paid on deposit to borrow.

Total cost of funds increased 22 basis points to 108 basis points due to increases in rates paid on deposits and borrowings.

Jill Rice: As discussed last quarter, the pace of residential construction starts continues to be slower than historical norms. Builders remain proactive in moving completed product and while they continue to benefit from the general lack of resale housing inventory on the market, they remain cautious with the level of inventory under construction. In total, residential construction exposure remains acceptable at 5% of the portfolio, flat with last quarter, and of that 45% is comprised of our custom one-to-four-family residential mortgage loan product.

Speaker 3: The 22 basis point increase in funding cost was lower than the 46 basis points increase in funding cost we experienced in the second quarter.

22 basis point increase in funding cost was lower than the 46 basis points increase in funding costs, we experienced in the second quarter. The total cost of deposits increased 30 basis points to 94 basis points, reflecting both increases in the rates paid on interest bearing deposits as well as a shift in the mix of deposits with a portion of non.

Speaker 3: The total cost of deposits increase 30 basis points to 94 basis points, reflecting both increases in the rates paid on interest bearing deposits, as well as a shift in the mix of deposits, with a portion of non-interest bearing deposits moving into CDs and other interest bearing deposits.

Interest bearing deposits moving into Cds and other interest bearing deposits I will note the pace of movement out of noninterest bearing slowed compared to the prior quarter with noninterest bearing deposits remain robust at 39% of total deposits.

Speaker 3: I will note the pace of movement out of non-interest bearing slowed compared to the prior quarter, with non-interest bearing deposits remaining robust at 39% of total deposits.

Jill Rice: When you include multi-family commercial construction and land, the total construction exposure remains at 14% of total loan. And as is customary, the portfolio continues to be diversified both in product mix and price point with start spread across our geography. In short, the portfolio continues to perform well. As expected, agricultural loan balances increased again this quarter due to operating line usage up 8% when compared to the length quarter. Balances are up 12% year over year.

Speaker 3: The average cost for broker tedious is 5.29%. These added seven basis points to the cost of deposits for the quarter.

The average cost for brokered Cds this quarter. It was 529% these added seven basis points to the cost of deposits for the quarter.

Speaker 3: NEDETRUS MARGEN DECREES 7 BASES POINTS 2 3.93% ON ATTACKS QUALTBLE ON BASES

Net interest margin decreased seven basis points to 393% on a tax equivalent basis.

Speaker 3: The decrease was driven by increases in funding cost on interest bearing liabilities, outpacing the increase in yield on Erin S.

The decrease was driven by increases in funding cost on interest bearing liabilities outpacing the increase in yield on earning assets. We expect the net interest margin will see some additional moderate compression during the fourth quarter contingent on market conditions.

Jill Rice: And lastly, as noted in the earnings release, we again reported growth in the Consumer Mortgage Portfolio up to 10% in the quarter, continuing the trend of retained, completed. Trends of retaining completed all-in-one custom construction loans on balance sheet.

Speaker 3: We expect that NHS Margin will see some additional moderate compression during the fourth quarter, contingent on market conditions.

Yeah.

Speaker 3: So total non-interest income increase 4.2 million from the prior quarter due to lower losses on the sale of securities and lower negative fair value adjust.

Total noninterest income increased $4 2 million from the prior quarter due to lower losses on the sale of securities and lower negative fair value adjustments.

Jill Rice: I will close in the same way I started, noting that Banner's credit metrics continue to be strong and our Super Community Bank model continues to serve our clients well. And I will reiterate a theme that has been consistent of late, which is that our credit quality metrics should not be expected to get better than they currently are. We will not be immune to credit deterioration that emerges as we move through the cycle. Still, the credit culture that runs throughout Banner is a source of strength. So two are the solid reserves for loan losses and capital-based, all of which position as well for the future.

Speaker 3: The current quarter included a $2.7 million loss on the sale of securities, the payback on these trades averaged two and a third years. In addition, we recorded a 700,000 negative fair value adjustment on investments held for trading as market rates.

Current quarter included a $2 $7 million loss on the sale of securities. The payback on these trades averaged two in the third years. In addition, we recorded a 700000 negative fair value adjustment on investments held for trading as market rates increased.

Speaker 3: Core non-interest income, excluding the loss on sale of securities, and changes in investment carried at fair value decreased 131,000, due to declines in bank-owned life insurance and miscellaneous income. Offsetting increases in deposit fees and mortgage banking income.

Core noninterest income excluding the loss on sale of securities and changes in investments carried at fair value decreased 131000 due to declines in bank on life insurance and miscellaneous income.

Robert Butterfield: With that, I'll turn the microphone over to Rob for his comments. Rob? Great, thank you, Jiddles.

Offsetting increases in deposit fees and mortgage banking income.

Robert Butterfield: So today, we reported $1.33 per due due to share for the second quarter, compared to $1.15 per due due to share for the prior quarter. The 18-cent increase in earnings per share was primarily due to lower provision for credit losses, lower losses on the sale of securities, and lower negative fair value adjustments on financial instruments carried out fair value. Core revenue, excluding the loss on-fell securities, and changes in investments carried out fair value, decreased 883,000 from the prior quarter.

Speaker 3: The deposit fees and other service charges increase 316,000 as lower expenses on debit card transactions offset the reduction in NSF fees due to the discontinuation of charging return to item fees implemented in June .

Deposit fees and other service charges increased 316000 as lower expenses on debit card transactions offset the reduction in NSF fees due to the discontinuation of charging returned item fees implemented in June <unk>.

Speaker 3: Income for mortgage banking operations increased 363,000 due to a lower negative fair value adjustment on multi-family loans held for fill.

Income from mortgage banking operations increased 363000, due to a lower negative fair value adjustment on multifamily loans held for sale year.

Speaker 3: Here today we have recorded 831,000 in losses on the multifamily loans held for sale.

Year to date, we have recorded an 831000 in losses on the multifamily loans held for sale.

Robert Butterfield: Primarily due to higher deposit cost leading to a decline in net interest income. Total loans increased $133 million during the quarter. With an increase of $139 million for portfolio loans, partially offset by a decrease of $6 million in health for sale loans. The increase was primarily due to one to four family real estate loans increasing $99 million. And multi-family loans increasing $67 million, partially offset by $49 million dollar decline in business loans.

Speaker 3: This business line has been effectively shut down for all of 2023 due to the lack of an active secondary market. With your-to-date originations for this group being less than 1 million.

This business line has been effectively shut down for all of 2023 due to the lack of an active secondary market with year to date originations for this group being less than $1 million as such during the quarter. We made the decision to formally discontinue the multifamily origination for sale business line income from residential mortgage operations.

Speaker 3: As such, during the quarter we made the decision to formally discontinue the multifamily origination for sale business line.

Speaker 3: income from residential mortgage operations was slapped for the quarter. Miscellaneous income decreased $400,000,000, primarily due to a loss of $276,000 on the disposition of assets related to branch consolidation.

It was flat for the quarter miscellaneous income decreased 486000, primarily due to a loss of 276000 on the disposition of assets related to branch consolidations.

Speaker 3: Total non-interest expense increased 486,000 from the prior quarter. The expense for the quarter includes 623,000 of expenses associated with the discontinuation of the multifamily origination for failed business line. Compensation expense decreased by 881,000 as declines in salaries and payroll taxes, 301

Robert Butterfield: Total securities declined $195 million. The decline was due to the sale of $57 million of vell for sale securities and normal portfolio cash flows, and also a decrease in the fair value of a vell for sale securities due to an increase in interest rates. Any additional security sales during the fourth quarter will be dependent upon market conditions. Deposites increased $75 million during the quarter due to a $143 million increase in retail time deposits, partially offset by a $41 million dollar decline in brokerage CDs and a $26 million decrease in core deposits.

Total noninterest expense increased 486000 from the prior quarter.

<unk> for the quarter includes 623000 of expenses associated with the discontinuation of the multifamily origination for sale business line.

<unk> expense decreased by 881000 as declines in salaries and payroll taxes offset an increase in <unk> related expenses.

Speaker 3: Advertising and marketing expenses increased due to summer marketing campaigns. Professional and consulting expenses increased due to normal timing of annual audit expense.

Advertising and marketing expenses increased due to summer marketing campaigns professional and consulting expenses increased due to normal timing of annual audit expenses.

Speaker 3: RIO expenses declined due to the gain on the sale of an RIO proper.

Oreo expenses declined due to the gain on the sale of an Oreo property.

Robert Butterfield: We have not increased rates on our deposit rate specials since end of May. Banner's liquidity and capital profile continue to remain strong with all capital ratios in excess of regulatory well capitalized levels. And we continue to maintain significant off-balance borrowing capacity. Advances from the Federal Home Lumbank decreased $130 million during the quarter, ending the quarter at $140 million. Net interest income was essentially flat with a decrease of $752,000 from the prior quarter due to an increase in funding cost offsetting the increase in earning asset balances and yields.

Speaker 3: Despite the competitive deposit rate environment, retail deposit balances increased in the quarter, as our teams remain focused on delivering on our value proposition of being connected, knowledgeable, and responsive. The strength of the company's balance sheet positions as well for being able to take advantage of the ongoing market disruptions.

Despite the competitive deposit rate environment retail deposit balances increased during the quarter as our teams remained focused on delivering on our value proposition of being connected knowledgeable unresponsive.

The strength of the Companys balance sheet positions us well for being able to take advantage of the ongoing market disruption.

Speaker 3: This concludes my prepared comments and now we will turn it back to Mark.

This concludes my prepared comments and now I will turn it back to Marc Marc.

Speaker 2: Thank you Rob and Jill for your comment on the quarter. That concludes our prepared remarks and we will now open the call to ask your question.

Thank you, Rob and Joe for your comments on the quarter that concludes our prepared remarks, and we will now open the call to your questions.

Speaker 1: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If there are any reason you'd like to restore your question, it's a star followed by two. Please remember if you're using a speaker phone to pick up your handsets before asking your question.

Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad, if by any reason you'd like to withdraw your question I'll, let mikey.

Robert Butterfield: Compared to the prior quarter, average loan balances increase $242 million, while loan yields increase 14 basis points due to floating and adjustable rate loan repricing, as well as new production coming on that higher interest rates. Total average interest bearing cash and investment balances declined by $219 million from the prior quarter, while the average yield on the combined cash and investment balances increase two basis points. Total cost of funds increased 22 basis points to 108 basis points due to increases in rates paid on deposit and borrowings.

Please remind folks who are using a speakerphone. Please pick up your handset before.

Yep.

Speaker 1: So our first question comes from the line of David Feastar of Raymond James. Your line is now open. Please go ahead.

So off the last question comes from the line of David.

Of Raymond James Your line is now open. Please go ahead.

Buddy.

Good morning, David.

Speaker 5: Maybe, how would you just hope that we could dig into a bit some of the trends that you're seeing on the core funding side? You know, it looks...

Maybe I was just hoping we could dig into a bit.

Some of the trends that youre seeing on the core funding side.

Robert Butterfield: The 22 basis point increase in funding cost was lower than the 46 basis points increase in funding costs we experienced in the second quarter. The total cost of deposits increased 30 basis points to 94 basis points, reflecting both increases in the rates paid on interest bearing deposits, as well as a shift in the mix of deposits with a portion of non-interest bearing deposits moving in to CDs and other interest bearing deposits.

Speaker 5: A lot of the growth that we're seeing, we've seen the migration slow, which is great. A lot of the growth that we're seeing in the interest bearing checking, high yield savings. I'm just curious some of the underlying trends that you're seeing, where are you seeing the most opportunity to drive cool to positive growth? And now, just how new cool to positive pricing is kind of trending for those products.

It looks.

A lot of the growth that we're seeing we've seen the migration slow which is great a lot of the growth that we're seeing.

The interest bearing checking high yield savings I'm, just curious some of the underlying trends that youre seeing where are you seeing the most opportunity to drive core deposit growth and now and just how new core deposit pricing is kind of trending for those products.

Robert Butterfield: I will note the pace of movement out of non-interest bearing slowed compared to the prior quarter, with non-interest bearing deposits remaining robust at 39% of total deposits. The average cost for brokerage CDs is quarter was 5.29%, these added seven basis points to the cost of deposits for the quarter. Net interest margin decreased seven basis points to 3.93% on a tax equivalent basis. The decrease was driven by increases in funding cost on interest bearing liabilities, outpacing to the increase in yield on earning assets. We expect that net interest margin will see some additional moderate compression during the fourth quarter, contingent on market conditions.

Speaker 3: yeah david it's it's robbed so uh... i think you hit on some of their i mean we saw the stabilization overall court deposits for the court

Yes, David it's Rob so.

I think you hit on some of it there I mean, we saw the stabilization in overall core deposits for the quarter.

Speaker 3: We did see the mix continuing to move out of some of the non-interest bearing and lower yielding products into the higher yield savings account that we're offering.

We did see the mix continuing to move out of some of the noninterest bearing and lower <unk>.

Yielding products into the.

The higher yield savings account that we're offering.

Speaker 3: But the pace did continue to slow throughout the quarter.

But the pace did continue to slow throughout the quarter.

Speaker 3: And what we're thinking now is that, you know, we expect that pace to even slow further into the fourth quarter. And then we, as we go into 2024, we would expect that we would see the point, you know, in the first part of the year, we would see stabilization there.

And what we're what we're thinking now is that we expect that pace to even slow further into the fourth quarter and then as we go into 2024, we would expect that we would see the point on the first part of the year, we see stabilization there.

Speaker 3: As far as the growth that we're seeing is mainly in that high yield savings account and the rates on that range from 2% to 4% depending on the peer, the average cost in that account right now is around 350.

Robert Butterfield: Total non-interest income increased 4.2 million from the prior quarter due to lower losses on the sale of securities and lower negative fair value adjustments. The current quarter included a $2.7 million loss on the sale of securities, the payback on these trades averaged two and a third years. In addition, we recorded a 700,000 negative fair value adjustment on investments held for trading as market rates increased. Core non-interest income, excluding the loss on sale of securities and changes in investment carried at fair value decreased 131,000 due to declines in bank-owned life insurance and miscellaneous income, offsetting increases in deposit fees and mortgage banking income.

As far as the.

The growth that we're seeing is mainly in our high yield savings account and the rates on that range from 2% to 4% dependent on the tier the average cost in that account right now is around $3 50.

Speaker 3: But if you're looking at time deposits, time deposits on average are probably coming in, that 425 to 450 range for a new re-kill time deposits.

But if youre looking at time deposits time deposits on average are probably coming in that.

That 425 to $4 50 range for new retail time deposits.

Speaker 5: Maybe just putting that together with kind of where new waltz wheels are. You know, just maybe seven back two just.

Maybe just putting that together with kind of where new loan yields are.

Just maybe stepping back to just I'm curious how you think about some of the implications of a higher for longer rate environment, maybe just on the margin and NII trajectory.

Speaker 5: I'm curious how you think about some of the implications of a higher for longer rate in life.

Speaker 5: Maybe just on the margin in an NIH trajectory, as we look forward, I mean, just kind of given what you're talking about, and where new loans are, the repricing of the earning asset base, it seems like margin might be closer to a trough here, or at least nearing it. I'm just curious.

Robert Butterfield: Deposit fees and other service charges increased 316,000 as lower expenses on debit card transactions offset reduction in NFS fees due to the discontinuation of charging return to item fees implemented in June. Income for mortgage banking operations increased 363,000 due to a lower negative fair value adjustment on multifamily loans held for sale. Year to date, we have recorded 831,000 losses on the multifamily loans held for sale. This business line has been effectively shut down for all of 2023 due to the lack of an active secondary market with year-to-date originations for this group being less than 1 million.

As you look forward I mean, just kind of given what you're talking about and where new loan yields are.

Shifting to the earning asset base it seems like margin might be closer to a trough year or at least nearing it I'm just curious kind of how you think about the margin trajectory in it.

Speaker 5: kind of how you think about the margin trajectory and and you know any other impact on the business if we if we do stay in a higher square per longer or environmental...

Any other impacts on the business if we if we do stay in the higher for longer environment.

Speaker 3: Yeah, so David, on the margin expectations there, I mean, we are expecting to see some additional moderate compression.

Yes, so David on the on the margin expectations. There I mean, we are expecting to see some additional moderate compression.

Speaker 3: probably for the fourth quarter of this year, because we think the funding cost is gonna, well, the pace of increase is gonna slow there. We do think that it's gonna still outpace the increase in the yield on earning assets for the fourth quarter, but I would say it's, I would consider a moderate, call it, you know.

Probably for the fourth quarter of this year.

Robert Butterfield: As such, during the quarter, we made the decision to formally discontinue the multifamily origination per sale business line. Income from residential mortgage operations was slapped for the quarter. Miscellaneous income decreased 486,000, primarily due to a loss of 276,000 on the disposition of assets related to branch consolidation, and David Feaster. Total non-interest expense increased 486,000 from the prior quarter. The expense for the quarter includes 623,000 of expenses associated with the discontinuation of the multi-family origination for failed business line.

Because we think the funding cost is going to while the pace of increase is going to slow there. We do think that it's going to still outpace the increase in the yield on earning assets for the fourth quarter, but I would say, it's I would consider a moderate call it.

Speaker 3: mid-single digits something something in that range maybe but then as we go into 2024 I mean if you know assuming those trends continue where we continue to see the slowdown in the funding cost and and the yield on earning assets you know coming on at higher yields we would expect in the first part of 2024 that we would start to see stabilization in the net interest margin you know as we go through the quarter we'll have a better visibility on our expectations for 2024

Mid single digits, something something in that range maybe.

But then as we go into 2024.

Those trends continue where we continued to see a slowdown.

And the funding cost.

And the yield on earning assets coming on at higher yields we would expect in the first part of 2024 that we would start to see stabilization in the net interest margin as.

Robert Butterfield: Compensation, expense decreased by 881,000, as declines and salaries and payroll taxes, off-set and increase in seven related expenses. Increasing expenses increased due to normal timing of annual audit expenses. REO expenses declined due to the gain on the sale of an REO property. Despite the competitive deposit rate environment, retail deposit balances increased in the quarter as our teams remain focused on delivering on our value proposition of being connected, knowledgeable and responsive. The strength of the company's balance sheet positions as well for being able to take advantage of the ongoing market disruption.

As we go through the quarter, we'll have a better visibility on our expectations for 2024.

Speaker 5: Maybe just touching on the long growth side. You know, it's again great to see the increase in origination yield.

Maybe just touching on the loan growth side again, great to see the increase in origination yields.

Speaker 5: I'm just curious, where are you still seeing an opportunity to bring good risk adjusted returns with rates kind of in that low to mid-8%, range? How's the pipeline and then?

I'm, just curious where are you still see an opportunity to bring good risk adjusted returns with rates kind of in that low to mid 8%.

Range, you know hows the pipeline and then obviously construction and land has been.

Speaker 5: Obviously construction and land has been a big driver of origination that's still a big proportion of it. I'm just curious what you're seeing in that segment and how underwriting these chains at all and where you're still seeing projects pencil there.

A big driver in origination, but still a big proportion of it I'm just curious what youre seeing in that segment and in how underwriting change.

Mark Grescovich: This concludes my prepared comments and now we will turn it back to Mark. Thank you Rob and Jill for your comments on the quarter.

Changed if at all and.

Where are you still seeing projects pencil there.

Operator: That concludes our prepared remarks and we will now open the call to asking your questions. Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If there are any reason you'd like to withdraw your question to star followed by two, please remember if you're using a speaker phone to pick up your handsets before asking your question.

Speaker 4: So David, this is Jill. There was a lot in that question, so hopefully I'll hit it all. Pipelines are currently about 20% lower than they were at this time last year, but we continue to see good opportunities across the footprint, and it really is important at this time because of the increased...

So David this is Jill.

There was a lot in that question. So hopefully I'll I'll hit at all pipelines are currently about 20% lower than they were at this time last year, but we continue to see good opportunities across the footprint and it really is.

Important at this time because of the increased opportunities due to liquidity issues at other institutions that we just maintain our moderate risk profile. Our underwriting has not changed over the course of this cycle or really any in the past we have been pretty stable in our method of underwriting.

David Feaster: So our first question comes from the line of David Feaster of Raymond James. Your line is now open. Please go ahead. Good morning, David. Maybe I was just hoping that we could dig into a bit some of the trends that you're seeing on the core funding side. You know, it looks a lot of the growth that we're seeing. We've seen the migration slow, which is great. A lot of the growth that we're seeing in the interest bearing checking high yield savings.

Speaker 4: opportunities due to liquidity issues at other institutions that we just maintain our moderate risk profile. Our underwriting has not changed over the course of this cycle or really any in the past. We have been pretty stable in our method of underwriting.

Speaker 4: The construction book, as I indicated, performs really well. We are seeing some land development rebuilding in, you know, with our stronger developers, because they need that, you know, finish lot inventory when we come out of this, say, in the end of 2025 and end of 2026. They're just trying to make sure that, you know, they have that to go forward. So we will see some of that. I feel like I'm missing one. You all

The construction book as I indicated performs really well and we are seeing some land development rebuilding and you know with our stronger developers because they need that lot finished lot inventory when we come out of this say and the end of 2025 and into 2020 States, they're just trying to make sure that they have.

David Feaster: I'm just curious some of the underlying trends that you're seeing. Where are you seeing the most opportunity to drive core to positive growth. And now just how new core deposits pricing is kind of trending for those products. Yeah, David, it's Rob. So I think you hit on some of it there. I mean, we saw the stabilization overall core deposits for the quarter. We did see the mix continuing to move out of some of the non-interest bearing and lower yielding products into the higher yield savings account that we're offering.

Have that to go forward. So so we will see some of that.

Like I'm missing one piece of your question David.

Yes.

Yeah.

Speaker 2: David, this is our government's best. Yeah, let me go on this, Dad. I think you were getting at the question, the implication of hire for longer, what's that gonna do to potential loan growth? And clearly, if you're hire for longer, you're gonna have muted economic act too.

Well David This is Scott Yeah. Let me go is dead I think you're I think you were getting at the question the implication of higher for longer what's that going to do to.

Potential loan growth and clearly if you're higher for longer.

Gonna have muted economic activity I mean businesses have done a very good job of managing their balance sheets.

Speaker 2: businesses have done a very good job of managing their balance sheets. They've utilized excess cash to help reduce their borrowings. Some of the capital investment areas that businesses were contemplating maybe put on hold, not terminated but put on hold. So higher for longer we'll definitely have an impact of muted loan growth from an economic standpoint.

David Feaster: But the pace did continue to slow throughout the quarter. And what we're thinking now is that, you know, we expect that pace to even slow further into the fourth quarter. And then we, as we go into 2024, we would expect that we would see the point, you know, in the first part of the year, we see stabilization there. As far as, you know, the growth that we're seeing is mainly in that high yield savings account.

They've utilized excess cash.

To help reduce their borrowings.

Some of the capital investment.

Or is that the businesses, we're contemplating maybe put on hold not terminated but put on hold so higher for longer we will definitely have an impact of muted loan growth from an economic standpoint.

Speaker 2: even in the high growth regions that we have on the West Coast.

David Feaster: And the rates on that range from 2% to 4% dependent on the peer, the average cost in that account right now is around 350. You know, but if you're looking at time deposits, time deposits on average are probably coming in, you know, that 425 to 450 range for a new retail time deposits, and maybe just putting that together with kind of where new loan yields are, you know, just maybe stepping back too.

Even in the high growth regions that we have on the West coast.

That being said.

Speaker 2: There's a lot of market disruption out there that provides us great opportunity to take market share. And Banner's balance sheet and our liquidity position are put us in a great position to take advantage of that market disruption.

There's a lot of market disruption out there that provides us great opportunity to take market share.

And banners balance sheet and our liquidity position.

Put us in a great position to take advantage of that market disruption.

Okay.

Okay.

David Feaster: I'm curious how you think about some of the implications of a higher-for-wonger rate in March. Maybe just on the margin in NII trajectory, as we look forward, I mean, just kind of given what you're talking about and where new loan yields are, the repricing of the earning asset based. It seems like margin might be closer to a trough here, or at least nearing it. I'm just curious kind of how you think about the margin trajectory and, you know, any other impact on the business if we do stay in a higher-for-wonger environment.

Thank you.

Speaker 1: Our next question comes from the line of Andrew Lee of Piper Sandler. Your line is open. Please go ahead.

Our next question comes from the line of Andrew Liesch Piper Sandler. Your line is open. Please go ahead.

Speaker 6: Good morning. Um, morning shift on the back back of the margin here.

Good morning.

Sure.

If you go back to the margin here.

Speaker 6: If the Fed hikes one more time, I guess how would you expect the margin to react to that? And then if we get a series of cuts later next year and then the 25, how do you expect the margin to react to that dynamic?

If the fed hikes, one more time I guess, how would you expect the margin to.

<unk> react to that and then if we get a series of cuts later next year and then the 25, how do you think the.

How would you expect the margin to react to that dynamic.

David Feaster: Yeah, so David, on the margin expectations there, I mean, we are expecting to see some additional moderate compression probably for the fourth quarter of this year, because we think the funding cost is going to, you know, the pace of increase is going to slow there. We do think that it's going to still outpace the increase in the yield on earning assets for the fourth quarter. But I would consider a moderate, you know, mid-single digits, something in that range maybe.

Speaker 3: Yeah, Andrew, it's Rob. So I guess first on the rate hike, in general, we have about 30% of our loans that are variable. And so I would expect those to reprice, you know, essentially instantaneously with the rate hike there.

Yes, Andrew its Rob So I guess first on the on the rate hike.

In general we have about 30% of our loans that are variable and so I would expect those to reprice essentially instantaneously with with the rate hike there and then.

Speaker 3: and then the other piece of it is that I don't think, you know, from what we're seeing right now, peer banks, competitors are not reacting to one additional 25 basis point increase and fit funds as far as reacting.

The other piece of it is that.

I don't think.

From what we're seeing right now.

Banks competitors are not reacting to one additional 25 basis point increase in fed funds.

As far as reacting incur.

David Feaster: But then as we go into 2024, I mean, you know, assuming those trends continue, where we continue to see the slowdown in the funding cost and the yield on earning assets, you know, coming on at higher yields, we would expect in the first part of 2024 that we would start to see stabilization in the net interest margin. You know, as we go through the quarter, we'll have a better visibility on our expectations for 2024.

Speaker 3: increasing rate specials. Throughout the corridor I'd say the rate specials that we're seeing out there are from what I call peer bank.

Increasing rates specials.

Throughout the quarter I would say the rate specials that we're seeing out there from from what I'd call peer banks have been pretty steady and there hasn't been a lot of increases in rate specials out there.

Speaker 3: have been pretty steady and there haven't been a lot of increases in rate specials out there. You know, there are a few outliers all, always out there, you know, credit union something like that, but not a true competitors for us necessarily. So I think that the ad ventation, it's probably for another 25 basis point increase for us in our margin.

There are a few outliers all I'll always out there you know a credit union or something like that but but not not a true competitors for us necessarily.

So so I think that's advantageous gauges, probably for another 25 basis point increase for us.

David Feaster: Maybe just touching on the long growth side, you know, again, great to see the increase in origination yields. I'm just curious, where do you still see an opportunity to bring good risk of just returns with rate kind of in that low to mid-8% range? You know, how's the pipeline? And then, obviously, construction and land has been, you know, a big driver origination that's still a big proportion of it. I'm just curious what you're seeing in that segment and how underwriting these chains at all and where you're still seeing projects pencil there.

In our margin.

Speaker 3: On the other side of it, as rates go down, so we have a number of the adjustable rate loans, both of the loans that reprise over, they don't reprise instantaneously, they reprise anywhere from 30 days up to five years.

On the other side of it as rates go down. So we have we have a number of the adjustable rate loans also the loans that reprice over they don't reprice instantaneously. They reprice anywhere from 30 days up to up to five years.

Speaker 3: And there's a number of those loans that I haven't repriced through this cycle yet.

And Theres a number of those loans that havent repriced through this cycle yet.

Speaker 3: And so under a kind of a flat rate, flat balance sheet cycle, we would expect that our loan yields would increase about eight basis points per quarter.

And so under a kind of a flat rate flat balance sheet cycle.

We would expect that our loan yields would increase about eight basis points per quarter.

Speaker 3: And I think the initials, any initial decline in our, you know, the Fed funds.

And I think the initial any initial decline in in in our.

David Feaster: So David, this is Jill. There was a lot in that question, so hopefully I'll hit it all. Pipelines are currently about 20% lower than they were at this time last year. But we continue to see good opportunities across the footprint, and it really is important at this time because of the increased opportunities due to liquidity issues and other institutions that we just maintain our moderate risk profile. Our underwriting has not changed over the course of this cycle or really in the past.

The fed funds I think what will initially happen as those variable rate loans that 30% bucket will will reprice down, but I think youre going to see some continued repricing of those adjustable rate loans and then I think youre also going to see fixed.

Speaker 3: I think what will initially happen is those variable rates loans that 30% bucket will reprise down. But I think you're going to see some continued repricing of those adjustable rate loans. And then I think you're also going to see fixed rate loans that are at a much lower yield as they mature and refinance. I think you're going to see those come at a higher yields too. So I think initially there's going to be a little bit of protection on the downside from a low yield standpoint.

Fixed rate loans that are at a much lower yield as they mature and refinance I think youre going to see those come at a higher yields too. So I think initially theres going be a little bit of protection on the downside from a loan yield standpoint.

Speaker 6: Got it. That was kind of leading him in the next question. Do you have the percentage of loan that have yet to benefit and reprise higher from the late from the Fed rate hikes of the last year plus?

That was kind of leading to my next question do you have the percentage of loans that have yet to benefit and reprice higher from the from the fed rate hikes over the last year plus.

David Feaster: We have been pretty stable in our method of underwriting. The construction book, as I indicated, performs really well. We are seeing some land development rebuilding with our stronger developers because they need that finish lot inventory when we come out of this say in the end of 2025 and end of 2026. They're just trying to make sure that they have that to go forward. So we will see some of that. I feel like I'm missing one piece of your question, David.

Speaker 3: So just on the adjustable rate loans, I don't know the complete makeup of the fixed rate loans, but I would say about $2 billion of adjustable rate loans. Haven't reprice since the beginning of 2020.

So just on the adjustable rate loans I don't know the complete makeup of the fixed rate loans, but I would say about $2 billion of adjustable rate loans Havent repriced since the beginning of 2022.

Speaker 6: Got it. Great. That's what we helpful basically in the question of the back here.

Got it.

Great. That's really helpful. Thanks for taking the questions I'll step back here.

Thank you Andrew.

Speaker 1: Thank you. Our next question comes from the line of Kelly Mota of KBW. Your line is now open. Please go ahead.

Thank you. Our next question comes from the line of Kelly K.

Mark Grescovich: Well, David, this is Mark Grescovich. I think you were getting at the question, the implication of hire for longer, what's that going to do to potential loan growth. And clearly, if you're hired for longer, you're going to have muted economic activity. Businesses have done a very good job of managing their balance sheets. They've utilized excess cash to help reduce their borrowings. Some of the capital investment areas that businesses work contemplating may be put on hold, not terminated, but put on hold.

<unk>. Your line is now open. Please go ahead.

Mark Grescovich: So, hire for longer will definitely have an impact of muted loan growth from an economic standpoint, even in the high growth regions that we have on the West Coast. That being said, there's a lot of market disruption out there that provides us great opportunity to take market share. And Banner's balance sheet and our liquidity position are put us in a great position to take advantage of that market disruption.

Speaker 7: Hi, good morning. Thanks for the question. Good morning, Zoe.

Hi, good morning, thanks for the corner handling them.

Speaker 7: Maybe keeping along the lines of margin and what happens.

E Mail.

Maybe keeping on along the lines of margin.

Operator: Thank you.

Margin didn't wait what happens.

Speaker 7: rate cuts. Just thinking about the other side of the balance sheet with the positive, there's a lot of things out there that still need a lot more liquidity than you do at this point.

Rate card just thinking about the other side of the balance sheet with deposit.

There's a lot of banks out there that still.

Or does that need a lot more liquidity than you do at this point so when we do get these rate cuts.

Jack.

Deposit pricing.

To react.

Would you expect I'm thinking.

And kind of a slower beta on the way down given kind of how other maker position.

Speaker 3: Yeah, Kelly, it's Rob again. And yeah, I think that's accurate. I think over the cycle, I think we're going to see whatever deposit made we see on the upside here. We think we'll see that deposit beta on the downside as well over the long term.

Yeah, Kelly, it's Rob again, I think I think thats accurate I think over the cycle I think we're gonna see whatever deposit beta we see on the on the upside here. We think we will see that deposit beta on the on the downside as well over the long term, but but initially I think there could be a little bit of a lag there I don't think similar.

Speaker 3: But initially I think there could be a little bit of a lag there. I don't think, you know, similar to what we're seeing on a rising rate of 25 basis points or something like that. We're not seeing much reaction from deposit pricing. And I think it'll be similar on the down. So the initial rate cuts will say 25 basis points. And as they start, I think there's going to be a lag there and you're not going to see a reaction just because of, you know, other banks are more challenged from liquidity.

What we're seeing on a rising rate of 25 basis points or something like that we're not seeing much reaction from deposit pricing and I think it will be similar on the down so the initial rate cuts, let's say 25 basis points.

Andrew Lee: Our next question comes from the line of Andrew Lee of Piper Sandler. Your line here, if the Fed hikes one more time, I guess, how would you expect the margin to react to that? And then if we get a series of cuts later next year and then the 25, how do you think how do you expect the margin to react to that dynamic?

As they start I think theres going to be a lag there and youre not going to see a reaction just because the.

Other banks are more challenged from liquidity out there right now.

Speaker 3: out there right now. I mean, eventually once you get to, let's say 100 basis points of combined decrease, I think you'll start to see the positive come down, but there's probably gonna be some lag there, right?

Eventually once you get to let's say 100 basis points of combined decrease I think youll start to see deposits come down, but theres, probably going be some lag there I agree.

Speaker 8: got it and can you remind us how how much of cash was our front off the security book in the next quarter or two.

Got it and can you remind us how much of it.

Caseloads are thrown off the securities book in the next quarter or two.

Yes, it's running at about $65 million a quarter right now.

Speaker 7: Great. And then turning to expenses, I think, on the last call, you expected the second half.

Okay great.

Robert Butterfield: Yeah, Andrew, it's Rob. So I guess first on the rate hike, in general, we have about 30% of our loans that are variable and so I would expect those to reprise, you know, essentially instantaneously with the rate hike there. And then the other piece of it is that I don't think, you know, from what we're seeing right now, peer banks, competitors are not reacting to one additional 25 basis point increase in Fed funds, as far as reacting, increasing rate specials.

Great and then turning to expenses I think.

On the last call you expected the second half of the year to be similar to the first half just wondering if that expectation still holds and I know you mentioned you decided to discontinue your multifamily sales operations wondering if theres any.

Speaker 8: just wondering if that expectation still holds that I know you.

Speaker 8: you're here, free-hand. Make a Safe Salmed

Cost saves associated with that decision.

Speaker 3: Yeah, I think for the fourth quarter, for the fourth quarter, I think the fourth quarter will look on a quarter basis. I think we'll look similar to the third quarter.

Yeah, I think for the for the fourth quarter for the fourth quarter I think the fourth quarter will look.

On a core basis I think it will look similar to the third quarter.

Speaker 3: And the multifamily origination for sale business line just to give you a perspective. The annual expenses running from that division were about two and a half million a year. So I think we could see some benefit of that in 2024. I wouldn't expect necessarily see the benefits of that.

Robert Butterfield: Throughout the quarter, I'd say, the rate specials that we're seeing out there are from what I call peer banks have been pretty steady and there haven't been a lot of increases in rate specials out there. You know, there are a few outliers always out there, you know, credit unions, something like that, but not a true competitors for us necessarily. So I think that the advantage is probably for another 25 basis point increase for us in our margin.

And.

The multifamily origination for sale business line, just to give you a little perspective.

Annual expenses running from that division.

We're about $2 5 million a year. So I think we could see some benefit of that in 2024, I wouldn't expect necessarily see the benefits of that.

Speaker 3: in the fourth quarter there could be some additional cost associated with ex-analyse and other things in the fourth quarter potentially as non-core items. But I guess the way I look at that expense save in 2024, I look at it as something that could offset the normal inflationary increases that you would see in expense.

In the fourth quarter, there could be some additional costs associated with exiting leases and other things in the fourth quarter potentially.

As noncore items.

Robert Butterfield: On the other side of it, as rates go down, so we have a number of the adjustable rate loans, most of the loans that reprise over, you know, they don't reprise instantaneously, they reprise, you know, anywhere from 30 days up to five years. And there's a number of those loans that I haven't repriced through this cycle yet. And so under kind of a flat rate, flat balance sheet cycle, we would expect that our loan yields would increase about eight basis points per quarter.

But but so I guess the way I look at that expense save in 2024, I look at it as something that could offset the normal inflationary increases that you would see in expenses and so if I think about 2024.

Speaker 7: And so if I think about 20, 24, we're still going through our strategic planning process. So we're not finalized on anything, but in general, I think we're going to, our expenses for 24 will likely be flat to maybe up in the low single digits since what I'm thinking right now. Great, thank you. Maybe it'll last questions for me.

We're still going through our strategic planning process. So we're not finalized on anything but in general I think we're going to our expenses for 24 will likely be flat to maybe up in the low single digits is what I'm thinking right now.

Great. Thank you maybe it maybe last question for me maybe for Mark.

Robert Butterfield: And I think the initials, any initial decline in our, you know, the Fed funds, I think what will initially happen is those variable rates loans that 30 percent bucket will reprise down. But I think you're going to see some continued repricing of those adjustable rate loans. And then I think you're also going to see fixed rate loans that are at a much lower yield as they mature and refinance. I think you're going to see those come at higher yields too. So I think initially there's going to be a little bit of protection on the downside from a loan yield standpoint.

Are you potentially give us an update on just.

The piece of it.

M&A conversations.

Any any change in that regard.

Speaker 2: yeah thanks for the question kelly uh... like i think right now there's there's enough uncertainty out there whether it's the regulatory environment whether it's the credit marks for the interest rate marks the accounting marks associated with the combination

Yeah. Thanks, Thanks for the question Kelly.

Look I think right now there's there's enough uncertainty out there whether it's the regulatory environment.

Whether it's the credit marks for the interest rate marks the accounting marks associated with a combination that.

Speaker 2: I think everybody's just a bit cautious on trying to proceed with any meaningful combination.

I think everybody's just a bit cautious on trying to proceed with any meaningful combinations, but what I will say, though is as you might suspect.

Andrew Lee: David. That was kind of leading him in my next question. Do you have the percentage of loans that have yet to benefit and reprise higher from the Fed rate hikes for the last year plus? So just on the adjustable rate loans, I don't know the complete makeup of the fixed rate loans, but I would say about $2 billion of adjustable rate loans. I haven't reprised since the beginning of 2022. Got it. Great. That's what we helpful, basically, in the questions off the back here.

Operator: Thank you, Andrew.

Speaker 2: But what I will say, though, is as you might suspect, a company with a strong balance sheet as banner is with great core earnings power and a history of being a good partner. You would expect that banner would be a natural for any types of combinations that come down the road. As soon as the market gets a little bit more clarity.

A company with a strong balance sheet is banner is with great core earnings power.

And in our history of being a good partner.

You you would expect that banner would be a natural for any types of combinations that come down the road as soon as the market gets a little bit more clarity.

I appreciate the color thanks, a lot.

I'll step back.

Kelly Motta: Thank you. Our next question comes from the line of Kelly Motta of KBW. Your line is now open. Please go ahead. Hi, good morning. Thanks for the question. Maybe keeping along the lines of margin in what happens with rate hikes. Just thinking about the other side of the balance sheet with deposits. There's a lot of banks out there that still need a lot more liquidity than you do at this point. So when we do get these rates, how do you expect deposit pricing to react?

Thanks Kelly.

Speaker 1: Thank you. Our next question comes from the line of Andrew Terrell or Stephen's, your line is so open, please go ahead.

Thank you next.

Next question comes from the line of Andrew <unk> of Stephens. Your line is now open. Please go ahead.

Hey, good morning.

Good morning, Andrew.

Speaker 3: If I could start Rob, I think last quarter we discussed this, but you mentioned potential for a buyback in the second half of the year. I know obviously there's a lot of moving pieces with the macro, but you guys have a really strong capital position and a really strong allowance as well. Would love to hear just how you're thinking about the buyback or incremental capital return as we close the year and we move into 24.

If I can start.

Rob I think last quarter, we discussed this but you mentioned potential for a buyback in the second half of the year I know, obviously theres a lot of moving pieces with the.

The macro but you guys have a really strong capital position and a really strong allowance as well we'd love to hear just how you're thinking about the buyback or incremental capital return as we close the year and we move into 'twenty four.

Kelly Motta: Would you expect some thickness and kind of a slower beta on the way down given how other banks are positioned? Yeah, Kelly. It's Rob again. I think that's accurate. I think over the cycle, I think we're going to see whatever deposit beta we see on the upside here. We think we'll see that deposit beta on the downside as well over the long term. But initially, I think there could be a little bit of a lag there.

Speaker 3: Yeah, yeah, sure, Andrew. So yeah, as you know, I mean, we view Sherry purchases as one of our four options for capital deployment. Most important is obviously the core dividend.

Yeah, Yeah sure Andrew So so yeah as you know I mean, we view share repurchases as one of our four options for capital deployment.

Most important is obviously the core dividend that we have.

Speaker 3: Beyond that, we would consider sharing purchases. M&A is optimistic, so if that would come up and we have done a special dividend in the past occasionally.

Beyond that we would consider share repurchases M&A.

<unk>, so if that would come up and we have done a special dividend in the past occasionally.

Speaker 3: The way we're thinking specifically about share repurchases is that I would think that we would not be contemplating starting share repurchases until 2024 at this point. We just want to see the macroeconomic environment.

Kelly Motta: I don't think similar to what we're seeing on a rising rate of 25 basis points or something like that. We're not seeing much reaction from deposit pricing. I think it'll be similar on the down. So the initial rate cuts will say 25 basis points. As they start, I think there's going to be a lag there and you're not going to see a reaction just because of other banks from more challenge from liquidity out there right now.

The way we are thinking specifically about share repurchases is that.

I would think that we would not be contemplating starting share repurchases until 2024 at this point, we just wanted to see the macroeconomic environment play out a little bit here before we make any decisions around capital deployment beyond our core dividend right now.

Speaker 3: play out a little bit here before we make any decisions around capital deployment beyond our court of indrider.

Speaker 9: Yep, nice sense. I appreciate it. And then Jill, if I could ask, on the office loan portfolio, I appreciate that it's roughly minimal and I think about about 6% of total loans. Do you have the reserve against the office portfolio? Either...

Yeah makes sense I appreciate it and then Jill if I could ask.

Kelly Motta: I mean, eventually, once you get to, let's say, 100 basis points of combined decrease, I think you'll start to see deposits come down. But there's probably going to be some lag there. I agree. Got it. And can you remind us how much of cash flows are thrown off the securities books in the next quarter or two? Yeah, it's running about 65 million a quarter right now. Okay, great. And then turning to expenses, I think on the last call, you expected the second half of the year to be similar to the first half.

On the office loan portfolio I appreciate that it's relatively minimal at I think around about 6% of total loans do you have the the reserve against the office portfolio.

Either dollars or a person.

Speaker 4: Yeah, we don't break it out that way in the Cecil analysis, so I don't. I could probably figure it out for you, but I don't have a number right now.

Yeah, we don't break it out that way in the T cell analysis, So I don't I could probably figure it out for you but.

I don't have a number right now.

Speaker 9: Okay. And then do you have the total dollar amount or percentage of the loan portfolio that's syndicated or snick?

Okay, and then do you have the total dollar amount or percentage of the loan portfolio, that's syndicated or snakes.

Kelly Motta: Just wondering if that expectation still holds. And I know you mentioned you decided to just continue your multi-family sales operations. Wondering if there's any cost statements associated with that decision. Yeah, I think for the fourth quarter, I think the fourth quarter will look on a quarter basis. I think we'll look similar to the third quarter. And the multi-family origination for sale business line just to give you a perspective. The annual expenses running from that division were about two and a half million a year.

Speaker 4: Yeah, I do. We have limited exposure to shared national credit. Less than two and a half percent of the loan book, our average loan balance is less than 10 million. And of that shared national credit portfolio, less than 30 percent of it would be considered leverage lending. It's performing well and we have one adverse the classified snake at this time.

The idea that they are we have limited exposure to shared national credits less than two 5% of the loan book, our average loan balance is less than $10 million and of that shared national credit portfolio less than 30% of it would be considered leveraged lending, it's performing well and we have one adverse day class.

Suffice snick at this time.

Yeah.

Speaker 3: Okay, got it. I appreciate it. And then if I could ask one more on the 785 million of loan originations this quarter, do you have what the weighted average yield was on the on the originations? So 827. 827 got it.

Okay got it I appreciate it and then if I could ask one more on the $785 million of loan originations. This quarter do you have what the weighted average yield was on the on the originations.

Kelly Motta: So I think we could see some benefit of that. In 2024, I wouldn't expect necessarily see the benefits of that. In the fourth quarter, there could be some additional cost associated with exiting leases and other things in the fourth quarter potentially as non-core items. But so I guess the way I look at that expense saving 2024, I look at it as something that could offset the normal inflationary increases that you would see in expenses.

So 827.

Hey, 27 got it.

Okay. Thank you for taking the questions.

Thank you Andrew.

Thank you.

Speaker 1: Next question comes from the line of Tim Coffee of Janney. Your line is so open. Please go ahead

Our next question comes from the line of Tim Coffey of Janney. Your line is now open. Please go ahead.

Great. Thank you good morning, Mark.

Speaker 5: Morning, Tim. Hey, so for Mark, for you and Joe, on the multi-family for sale business, can you kind of provide color on what's happening in the secondary market? Is it as simple as just the yield being offered on the loans for sale?

Good morning, Tim.

Alright.

Kelly Motta: And so if I think about 2024, we're still going through our strategic planning process. So we're not finalized on anything. But in general, I think we're going to, our expenses for 24 will likely be flat to maybe up in the low single digits since what I'm thinking right now. Great, thank you.

So for market for you and Joe on the multifamily for sale business can you kind of.

Great color on what's happening in the secondary market.

Is it as simple as just the yields being offer the loans for sale.

Speaker 2: Yeah, Tim, thanks for the question. I think what is appropriate is to remind everybody on the call what our multi-family for origination unit actually was. So we had an operation that with several seasoned bankers who had been doing this for many, many years.

Yeah, Tim Thanks for the question I think what is appropriate is to remind everybody on the call what our multifamily for origination unit actually was so we had an operation.

Mark Grescovich: Maybe last questions for me, maybe for Mark, if you potentially give us an update on just the pace of, you know, M&A conversations, if there's any change in that regard. Yeah, thanks for the question, Kelly. I look, I think right now there's enough uncertainty out there whether it's the regulatory environment, whether it's the credit marks or the interest rate marks, the accounting marks associated with the combination, that I think everybody's just a bit cautious on trying to proceed with any meaningful combinations, but what I will say though is as you might suspect, a company with this strong balance sheet as Banner is with great core earnings power and a history of being a good partner, you would expect that Banner would be a natural for any types of combinations that come down the road as soon as the market gets a little bit more clarity.

That with a bunch of it with several seasoned bankers who had been doing this for many many years.

Speaker 2: in the multi-family sector where they would do refinances and then remodeling and that type of finance.

In the in the multifamily sector, where would they would do refinances, and then remodeling and that type of financing.

Speaker 2: which we wanted to originate and then sell. And we would sell that to community banks.

Which we wanted to originate and sell and we would sell that to community banks and that business model. As you know became stressed last year with the rapid rise in interest rates to making transactions pencil out.

Speaker 2: And that business model, as you know, became stressed last year with the rapid rise in interest rates to making transactions pencil out.

Speaker 2: number one and then number two, the lack of liquidity in the system because we were primarily selling to community-based banks and once they start stop purchasing obviously that entire business unit came under some stress and really wasn't driving the financial results that we were looking

Number one and then number two the lack of liquidity in the system.

Because we are we were primarily selling to community based banks and once they start stop purchasing obviously that that entire business unit.

Came under <unk>.

Some stress and really wasn't driving the financial results that we were looking for.

Speaker 2: And we don't see that condition changing in the immediate term. So just like we do in any business, prudent business decision, we evaluate all of our products and our lines of business in terms of their return and profitability. And we came to the conclusion that since that business model is probably going to be under stress for a while, that we would look to transition that business model out. so over time, you might immediately notice that the company at the Met åt, yo, you d

And we don't see that condition changing in the immediate term. So just like we do in every any business prudent business decision, we evaluate all of our products and our lines of business in terms of their return and profitability and we came to the conclusion that since our business model is probably going to be.

Kelly Motta: Appreciate the color, thanks, I'll step back. Thanks Kelly.

Operator: Thank you.

Andrew Terrell: Our next question comes from the line of Andrew Terrell or Steven, your line is so open, please go ahead. Hey, good morning. Good morning Andrew.

Under stress for a while.

That we would look to.

Transition that business model out but.

Robert Butterfield: If I could start Rob, I think last quarter we discussed this, but you mentioned potential for a buyback in the second half of the year. I know obviously there's a lot of moving pieces with the macro, but you guys have a really strong capital position and a really strong allowance as well. Would love to hear to tell you about the buyback or incremental capital return as we close the year, are we moving to 24?

Speaker 2: keep in mind though that we still have an origination business in a affordable housing unit that we do for on balance sheet lending. So to your point, it's a combination of things. It's a combination of the rate environment as well as the lack of liquidity in the secondary market for where we sold multiple.

Keep in mind, though that we still have an origination business animal and affordable housing units that we do for on balance sheet lending. So to your point, it's a combination of things. It's a combination of the rate environment as well as the lack of liquidity in the secondary market for where are we.

We sold multifamily loans.

Robert Butterfield: Yeah, sure Andrew, so yeah, as you know, I mean we view share repurchases as one of our four options for capital deployment. Most important is obviously the core dividend that we have. Beyond that, we would consider share repurchases emanate as opportunistic, so if that would come up, and we have done a special dividend in the past occasionally.

Speaker 5: Okay, great. Great topic. Thank you. And Jill, as you're doing a praisell, the receiving of praisell on your commercial real estate portfolio, are you seeing any meaningful change in cap rates across the product?

Okay, great great color. Thank you.

And Jill as you're doing appraisals are receiving appraisals on your commercial real estate portfolio are you seeing any meaningful change in cap rates across the products.

Speaker 4: They're ticking up Tim, but I would not say meaningfully yet. We expect them to continue to migrate up, but it's not having a huge impact at this.

They're ticking up Tim, but I would not say meaningfully yet we expect them to continue to migrate up but.

Robert Butterfield: The way we're thinking specifically about share repurchases is that I would think that we would not be contemplating starting share repurchases until 2024 at this point. We just want to see the macroeconomic environment play out a little bit here before we make any decisions around capital deployment beyond our core dividend right now. Yep, thanks, I appreciate it.

It's it's not having a huge impact at this point.

Speaker 3: Okay, and then the outlook for the construction book. Is it reasonable to expect that multifamily is going to leave the growth in that book? I heard she said about the well-heeled developers trying to clear out the loss, but I just want to get some clarification on that.

Right, Okay, and then the outlook for the construction book is it reasonable to expect that multifamily is going to lead the growth in that book I I hope she says about the well he'll developers trying to clear up a lot, but I just want to get some clarification on that.

Jill Rice: And then Jill, if I could ask, on the office loan portfolio, I appreciate that it's relatively minimal and I think about six percent of total loans. Do you have the reserve against the office portfolio? Either dollars or a percent? Yeah, we don't break it out that way in the fiscal analysis, so I don't. I could probably figure it out for you, but I don't have a number right now.

Speaker 9: Could you say that again about the multi-family? I missed that. Oh, yeah, sorry. If I look at the construction book, we've seen most of the strengths come out of the multi-family construction. Do you expect that trend to continue?

Could you say that again about the multifamily I missed that Oh, yes, sorry, if I look at the construction book, we've seen most of the strength come out come out of the multifamily construction do you expect that trend to continue.

Speaker 4: Yeah, for the short term, I mean, that's what we're going to see those dollars continue to fund up and our builders are being conservative in their takedown. So I would continue to see that outstrip in the immediate term in the affordable housing construction bucket primarily.

Yeah for the short term I mean, that's what we're going to see those dollars continue to fund up and our builders are being conservative in their takedown. So I would continue to see that outstrip it.

In the immediate term in in the affordable housing construction market primarily.

Jill Rice: Okay, and then do you have the total dollar amount or percentage of the loan portfolio that's syndicated or snick? Deidoo. We have limited exposure to shared national credits. Less than two and a half percent of the loan book, our average loan balance is less than 10 million. And of that shared national credit portfolio, less than 30 percent of it would be considered leverage lending.

Speaker 4: You know, we have, we do do limited middle income market rate multifamily, but the real growth there is in the affordable housing. And we have lots of construction in that to fund up. Okay.

We do do limited middle income market rate multifamily, but the real growth. There is in the affordable housing and we have lots of construction in that to find out.

Okay, Great. Those are my questions. Thank you for your time.

Thanks, Kevin.

Speaker 1: Thank you. Our final question comes from the line of Jeff Ruliff, DA Davidson. Your line is open. Please go ahead.

Thank you.

Our final question comes from the line yet realistic D. A Davidson. Your line is now I've been please go ahead.

Speaker 6: Thanks, good morning. Morning, Jeff. Just a question. Maybe for Rob.

Thanks, Good morning.

Just a question.

Andrew Terrell: The 785 million of loan originations this quarter, do you have what the weighted average yield was on the on the originations? 827. Okay, thank you for taking the questions. Thank you, Andrew.

Maybe for Rob.

Speaker 10: I appreciate the exploitation for March and and despite, you know, maybe some compression, I guess we're getting closer to an II bottom and I guess

I appreciate that the expectation for margin.

Despite maybe some compression I guess.

We're getting closer to our NII bought them and I guess.

Operator: Thank you.

Speaker 10: If you want to frame up your expectations for the possibility of NII growth, even if margin pulls in a bit here.

If you want to frame up your expectations for the.

The possibility of NII growth, even if margin pulls in a bit here.

Tim Coffey: Our next question comes from the line of Tim Coffey of Janney. Your line is so open. Please go ahead. Thank you. Morning, Mark. Morning, Tim.

Okay.

Speaker 3: Yeah, so yeah, I think if we're thinking about margin growth, I think we're probably thinking about you know second half of 2024.

Yeah. So so yes, I think if we're thinking about margin growth I think we're probably thinking about second half of 2024.

Mark Grescovich: Hey, so for Mark, for you and Jill, on the multi-family for sale business, can you kind of provide a color on what's happening in the secondary market? Is it as simple as just the yield being offered on the loans for sale? Yeah, Tim. Thanks for the question. I think what is appropriate is to remind everybody on the call what our multi-family for origination unit actually was. So we had an operation that with a bunch of with several season bankers who had been doing this for many, many years in the multi-family sector where they would do refinances and then remodeling and that type of financing, which we wanted to originate and then sell and we would sell that to community banks.

Speaker 3: And of course, it's going to be influenced by what the Fed does and their timing on when they might start to decrease rates there. But even under a flat rate cycle, you know, higher for longer, I would expect that we're going to get to this point probably in the second half of 2024 where low yields are increasing faster than the cost of funding.

And of course, it's going to be influenced by what the fed does and their timing on when they might start to.

Decrease rates, there, but even under a flat rate cycles, Neil higher for longer.

Would expect that we're going to get to this point probably in the second half of 2024, where loan yields are increasing faster than the than the cost of funding.

Speaker 5: Okay, so if I, that's on the, the margin side, but is it, you know, given the balance sheet, could you, could you scratch out NII growth from here? I guess, you know, link quarter that's diminishing that decline and just wanted to see if that turn and then I, yeah, yeah, yeah, yeah. Yeah, so, so on that, on that piece of it, yeah, so.

Okay. So if I that's on the margin side is it given.

The balance sheet, you could you could you scratch out NII grew.

Growth from Americas <unk>.

Quarter, Thats diminishing that that decline and just wanted to see if that turn in NII.

Yep Yep Yep God, yes.

Yes, so so on that on that piece of it Jeff So.

Mark Grescovich: And that business model, as you know, became stressed last year with the rapid rise in interest rates to making transactions, pencil out. Number one, and then number two, the lack of liquidity in the system because we were primarily selling to community-based banks. And once they start stop purchasing, obviously, that entire business unit came under some stress and really wasn't driving the financial results that we were looking for. And we don't see that condition changing in the immediate term.

Speaker 3: I mean, that business, so I would say our normal, let's call it our normal community banking fee and come side a bit.

I mean that business, so I would say our normal let's call. It a normal community banking fee income side of it.

Speaker 3: you know that that will remain steady from from what you saw this quarter the other piece of this course is the one to four family business which is heavily influenced by the market rate environment and you know where's 10 years at for to see meaningful growth in that we're gonna have to see some pullback in in the 10 year on that

You know that that will remain steady from from what you saw this quarter.

The other piece of it is of course is the one to four family.

Business, which is heavily influenced by the market rate environment and you know we're at 10 years out for to see meaningful growth in that we're gonna have to see some pullback in the tenure on that but beyond that we are looking at some strategic initiatives to enhance that.

Speaker 3: But beyond that, we are looking at some strategic initiatives to enhance that. One of them is regarding SBA lending. We're looking at enhancing our Regenation capability in that business.

Mark Grescovich: So just like we do in any business, prudent business decision, we evaluate all of our products and our lines of business in terms of their return and profitability. And we came to the conclusion that since that business model is probably going to be under stress for a while, that we would look to transition that business model out. But keep in mind, though, that we still have an origination business in a affordable housing unit that we do for on-balance sheet lending. So to your point, it's a combination of things.

One of them is regarding SBA lending, we're looking at enhancing our origination capability in that business and then we're also the <unk>.

Speaker 3: And then we're also the FX for an exchange and come that we have is more of a...

FX foreign exchange income that we have is more of a.

Speaker 3: convenience for some customers and not something we've gone after in the past or looking at that. And then a longer term play is looking at some wealth management in hand-painted or capability as well.

Our convenience for for some customers and not something we've gone after in the past. So we're looking at that and then a longer term play is looking at some wealth management enhancing our capabilities there as well.

Speaker 10: Thanks, and maybe one other one. Kind of cute part, if you will.

Okay. Thanks.

And maybe one other one.

Two part if you will.

Looking at the.

Speaker 10: And maybe from Mark, just your perception of competition, both loan and deposit pricing, you find that better or worse in the Northwest versus your Southern footprint. And the second piece of that is.

Jill Rice: It's a combination of the rate environment as well as the lack of liquidity in the secondary market for where we sold multiple, and Jill, as you're doing a praisles or receiving a praisles on your commercial real estate portfolio, are you seeing any meaningful change in cap rates across the products? They're ticking up Tim, but I would not say meaningfully yet. We expect them to continue to migrate up, but it's not having a huge impact at this point. Right, okay.

Maybe for Mark just your perception of <unk>.

Competition, both loan and deposit pricing, you find that better or worse in the northwest versus your southern footprint and the second piece of that is.

Speaker 10: And I know where do you see more opportunity for talent, deflication, and or nay in the Northwest versus the Southern areas? So that's two parties competition. Second part is opportunity. Thanks.

And where do you see more opportunity for talent dislocation.

In the northwest versus the southern areas. So thats two part is competition second part is opportunity.

Speaker 2: yeah thanks for the question Jeff i think from from a competitive standpoint luck there's uh...

Yeah. Thanks, Thanks for the question, Jeff I think for the from a competitive standpoint look there's.

Speaker 2: There's clearly some financial institutions that are under a bit of stress in terms of what they can do with their balance sheet as it relates to growth. So while there's still competitive forces out there in terms of pricing, we're finding some great opportunities and are able to compete effectively.

There's clearly some financial institutions that are under a bit of stress.

In terms of what they can do with their balance sheet.

Right.

Jill Rice: And then the outlook for the construction book, is it reasonable to expect that multi-family is going to leave the growth in that book? I heard she said about the well-heeled developers trying to clear out the loss, but I just want to get some clarification on that. Could you say that again about the multi-family? I miss that. Oh, yeah. Sorry, so look at the construction book. We've seen most of the strength come out of the multi-family construction.

As it relates to growth.

While theres still competitive forces out there in terms of pricing, we're finding some great opportunities.

We're able to compete effectively.

Speaker 2: So we're seeing a stabilization in terms of pricing as it relates to, specifically in the Pacific Northwest. And you will see that continue and migrate down into California with some of the regional banks that we compete against. So we're seeing some good opportunities and we think that they're, you know,

So we're seeing a stabilization in terms of pricing as it relates specifically in the Pacific Northwest.

And you will see that continue and migrate down into California with some of the regional banks that we compete against so we're seeing some good opportunities and we think that there you know.

Jill Rice: Do you expect that trend to continue? Yeah, for the short term, I mean, that's where we're going to see those dollars continue to fund up, and our builders are being conservative in their takedown. So I would continue to see that outstrip in the immediate term in the affordable housing construction bucket primarily. We do do limited middle income market rate multi-family, but the real growth there is in the affordable housing, and we have lots of construction in that to fund up.

Speaker 2: I don't view this as being a major price competitive market into the course of the next 24 months. I think Banner is going to have a real advantage from that standpoint to take March.

I don't I don't view this as being.

A major price competitive market.

Into the course of the next 24 months I think banner it can have a real advantage.

From that standpoint to take market share.

Speaker 2: So that's, I think from a competitive standpoint, I think we're, we've stood pretty well. And a lot of it has to do with just general market conditions, but more importantly, the source of capital that some of the regional banks are going to be able to deploy. That's going to benefit.

So that's I think from a competitive standpoint, I think we did pretty well and a lot of it has to do with just general market conditions, but more importantly, the sourcing.

Capital that some of the regional banks are going to be able to deploy that.

Tim Coffey: Okay, great. Those are my questions. Thank you for your time. Thanks. Thank you.

Benefit us.

Speaker 2: In terms of talent, we've taken the same approach that we have in the past, which is we're much more of a rifle shot approach rather than hiring teams of bankers. And we have been extremely successful at hiring some very good talent in all of our markets, from some of the regional and larger institutions.

In terms of talent, we've taken the same approach that we have in the past, which is we're much more of a rifle shot approach rather than hiring teams of bankers and we have been extremely successful at hiring some very good talent in all of our markets.

Jeff Rulis: I'll find a question coming from the line of Jeff Ruilis, DA Davidson. Your line is open. Please go ahead. Thanks. Good morning. Just a question. Maybe for Rob. I appreciate the expectation for margin. And despite, you know, maybe some compression, I guess we're getting closer to an eye bottom. And I guess if you want to frame up your expectations for the possibility of an eye growth, even if margin pulls in a bit here.

From some of the regional and larger institutions and we're going to continue to do so we see some great opportunity with some of the market disruption that is adding some real talent to the organization. So thank you for the question.

Speaker 2: And we're going to continue to do so. We see some great opportunity with some of the market disruption that is adding some real talent to the organization. So thank you for the question.

Thanks Mark.

Thank Keith.

Speaker 1: As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Mark breast bitch for closing remarks.

Oh, sorry with no additional questions at this time I'd like to turn the conference call.

Jeff Rulis: Yeah, so, so yeah, I think if we're thinking about margin growth, I think we're probably thinking about, you know, second half of 2024. And of course, it's going to be influenced by what the Fed does. And they're timing on when they might start to decrease rates there. But even under a flat rate cycles, you know, higher for longer, I would expect that we're going to get to this point probably in the second half of 2024.

Buckeye Petsmart question Mitch for closing remarks.

Speaker 2: Thank you everyone. Thank you for your questions and your interest. As I stated, we are very proud of the banner team. Inner third quarter performance, very solid third quarter performance. Again, thank you for your interest in joining us on the call today. We look forward to reporting results to you in the future. Have a great day.

Thank you everyone. Thank you for your questions and your interest as I stated we are very proud of the banner team in our third quarter performance, a very solid third quarter performance again. Thank you for your interest in joining us on the call today.

We look forward to reporting results to you.

In the future have a great day, everyone. Thanks again.

Jeff Rulis: Where loan yields are increasing faster than the cost of funding. Okay, so if I, that's on the, the margin side, like, you know, given the balance sheet, could you, could you scratch out an eye growth from here? I guess, you know, link quarter, that's diminishing that decline and just wanted to see if that turn in an eye. Yep, yep, yep. Yeah, so, so on that, on that piece of it, yeah, so.

Yeah.

Speaker 1: Ladies and gentlemen, thank you for joining the day's course. Have a great day ahead. You may now disconnect your line.

Ladies and gentlemen, thank you for joining today's call.

Have a great day Heck you may now disconnect your line.

Yeah.

[music].

Jeff Rulis: I mean, that business, so I would say our normal, let's call it our normal community banking fee income side of it, you know, that will remain steady from what you saw in this quarter. The other piece of this course is the one to four family business which is heavily influenced by the market rate environment and, you know, we're 10 years at, to see meaningful growth from that, we're going to have to see some pull back in the 10 year on that.

Jeff Rulis: But beyond that, we are looking at some strategic initiatives to enhance that. One of them is regarding SBA lending, we're looking at enhancing our regeneration capability in that business, and then we're also, the FX for an exchange income that we have is more of a convenience for some customers and not something we've gone after in the past or looking at that. And then a longer term play is looking at some wealth management and hand thinner capabilities there as well.

Jeff Rulis: Okay, thanks, and maybe one, one other one, kind of two part, if you will. Looking at the, maybe from Mark, just your perception of competition, both loan and deposit pricing, you find that better or worse in the Northwest versus your Southern footprint and the second piece of that is, I know, where do you see more opportunity for talent, defocation, and or NA in the Northwest versus the Southern areas? So that's two part is competition, second part is opportunity.

Jeff Rulis: Thanks. Yeah, thanks for the questions, Jeff. I think from a competitive standpoint, look, there's clearly some financial institutions that are under a bit of stress in terms of what they can do with their balance sheet as it relates to growth. So while there's still competitive forces out there in terms of pricing, we're finding some great opportunities and are able to compete effectively. So we're seeing a stabilization in terms of pricing as it relates specifically in the Pacific Northwest and you will see that continue and migrate down into California with some of the regional banks that we compete against.

Jeff Rulis: So we're seeing some good opportunities and we think that there, you know, I don't view this as being a major price competitive market into the course of the next 24 months. I think Banner can have a real advantage from that standpoint to take market share. So that's, I think, from a competitive standpoint, I think we're, we've said pretty well. And a lot of it has to do with just general market conditions, but more importantly, you know, the source of capital that some of the regional banks are going to be able to deploy.

Jeff Rulis: That's going to benefit us. In terms of talent, we've taken the same approach that we have in the past, which is we're much more of a rifle shot approach rather than hiring teams of bankers. And we have been extremely successful at hiring some very good talent in all of our markets from some of the regional and larger institutions, and we're going to continue to do so. We see some great opportunity with some of the market disruption that is adding some real talent to the organization. So thank you for the question. Thanks Mark.

Mark Grescovich: Thank you everyone. Thank you for your questions and your interest. As I stated, we are very proud of the Banner team in our third quarter performance, a very solid third quarter performance. Again, thank you for your interest in joining us on the call today. We look forward to reporting results to you in the future. Have a great day everyone. Thanks again.

Operator: Ladies and gentlemen, thank you for joining today's call. Have a great day here. You may now disconnect your line.