Q4 2023 Banner Corp Earnings Call

January 19, 2024

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Thank you.

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Good morning, everyone and welcome to the Banner Corporation fourth quarter 2020 for a conference call a web call all lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer.

Good morning everyone and welcome to the Banner Corporation Off Quarter 2023 conference call and webcast. All lines have been placed on the

Good morning everyone and welcome to the Banner Corporation Off Quarter 2023 conference call and webcast. All lines have been placed on the and a portion of the call with an opportunity for question and answer at 1:30 p.m. Eastern Time. If you would like to ask a question, please press start followed by 1 on your telephone keypad. I would now like to turn this conference call over to our host, Mark Grescovich, President and CEO of Banner Corporation. Please go ahead.

and a portion of the call with an opportunity for question and answer at

If you'd like to ask a question. Please press star followed by one on your telephone keypad I would now like to turn this conference call live up to our highest Mark Russ Kovich President and C.

If you would like to ask a question, please press start followed by 1 on your telephone keypad. I would now like to turn this conference call over to our host, Mark Grescovich, President and CEO of Banner Corporation. Please go ahead.

Corporation. Please go ahead.

Thank you Candice.

Mark J. Grescovich: Thank you, Candace.

Mark J. Grescovich: Happy New Year, everyone.

Mark J. Grescovich: Happy New Year, everyone. I would also like to welcome you to the fourth quarter and full year 2023 earnings call for Banner Corporation. Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer; and Joe Rice, our chief credit officer.

Happy new year everyone.

Mark J. Grescovich: I would also like to welcome you to the fourth quarter and full year 2023 earnings call for Banner Corporation.

Speaker Change: I would also like to welcome you to the fourth quarter and full year 2023 earnings call for Banner Corporation.

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

Mark J. Grescovich: Joining me on the call today is Rob Butterfield, Banner Corporation's Chief Financial Officer.

Mark J. Grescovich: Joe Rice, our chief credit officer.

Speaker Change: Joe Rice, our Chief Credit Officer.

Speaker Change: and Rich Arnold, our head of investor relations.

Speaker Change: and Rich Arnold, our head of investor relations. Rich, would you please read our forward-looking safe harbor statement?

Speaker Change: And rich Arnold our head of Investor Relations.

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

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

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

Rich: Sure Mark Good morning 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 forecast of financial or other performance measures and statements about banner's general outlook for economic.

Operator: Thank you for watching! Thank you. Good morning everyone and welcome to the Banner Corporation fourth quarter 2023 conference call and webcast. A portion of the call with an opportunity for question and answer will be held at, If you would like to ask a question, please press start followed by 1 on your telephone keypad. I would now like to turn this conference call over to our host, Mark Grescovich, President and CEO of Banner Corporation. Please go ahead.

Speaker Change: 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.

Speaker Change: 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. Information on the risk factors that could cause actual results to differ is available in the Earnings Press release that was released yesterday and a recently filed Form 10-Q for the quarter ended September 30th, 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.

Another conditions. We also may make other forward looking statements in the question and answer period following management's discussion.

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

Speaker Change: 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 in the Earnings Press release that was released yesterday and a recently filed Form 10-Q for the quarter ended September 30th, 2023.

Rich: 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 in the earnings press release that was released yesterday and a recently filed Form 10-Q for the quarter.

Rich: <unk> ended September 30 of 2023.

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

Rich: Forward looking statements are effective only as.

Rich: As of the date they are made and banner assumes no obligation to update information concerning its expectations Mark.

Speaker Change: Mark?

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

Mark J. Grescovich: Thank you, Rich. As is customary, today we will cover four primary items

Mark J. Grescovich: First, I will provide you high-level comments on Banner's fourth quarter and full-year 2023 performance.

Speaker Change: First I will provide you high level comments on banner's fourth quarter and full year 2023 performance.

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

Speaker Change: Second the actions banner continues to take to support all of our stakeholders.

Speaker Change: Including our banner team our clients our communities and our shareholders.

Mark J. Grescovich: Thank you, Candace. Happy New Year, everyone. I would also like to welcome you to the fourth quarter and full year 2023 earnings call for Banner Corporation. Joining me on the call today is Rob Butterfield, Banner's Chief Financial Officer; Joe Rice, our chief credit officer; and Rich Arnold, our head of investor relations. Rich, would you please read our forward-looking safe harbor statement? Sure, Mark. Good morning.

Mark J. Grescovich: Third, Gil Rice will provide comments on the current status of our loan portfolio.

Speaker Change: Third Bill Rice will provide comments on the current status of our loan portfolio.

Gil Rice: and finally Rob Butterfield will provide more detail on our operating performance for the quarter as well as comments on our balance

Gil Rice: and finally, Rob Butterfield will provide more detail on our operating performance for the quarter as well as comments on our balance.

Speaker Change: And finally, Rob Butterfield will provide more detail on our operating performance for the quarter as well as comments on our balance sheet.

Rob Butterfield: Before I get started I want to again, thank all of my 2000 colleagues in our company.

Rob Butterfield: Before I get started,

Rob Butterfield: Before I get started, I'd like to again thank all of my 2,000 colleagues who are working extremely hard to assist our clients and communities. Banner has lived by our core values, which can all be 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 changes. I am pleased to report again to you that this is exactly what we continue to do. I'm very proud of the entire Banner team and our core values.

Rob Butterfield: I'd like to again thank all of my 2,000 colleagues

Rob Butterfield: who are working extremely hard to assist our clients and communities.

Rob Butterfield: Who are working extremely hard to assist our clients and communities.

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

Rob Butterfield: Banner has lived our core values.

Rich Arnold: 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.

Rob Butterfield: are all being summed up as doing the right thing for the past 133 years.

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

Our overarching goal continues to be 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.

Rob Butterfield: and to provide a consistent and reliable source of commerce and capital.

Rob Butterfield: All economic cycles and changes.

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

Rob Butterfield: I'm very proud of the entire Banner team.

Rob Butterfield: I am very proud of the entire banner team better living our core values.

Rob Butterfield: and our core values.

Rich Arnold: Information on the risk factors that could cause actual results to differ is available in the Earnings Press release that was released yesterday and a recently filed Form 10-Q for the quarter ended September 30th, 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. Mark

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

Rob Butterfield: Now, let me turn to an overview of our performance. As announced, Banner Corporation reported a net profit available to common shareholders of $42.6 million, or $1.24 per diluted share, for the quarter ended December 31st, 2023. This compares to a net profit to common shareholders of $1.58 per share for the fourth quarter of 2022 and one dollar and 33 cents per share for the third quarter of 2023. For the full year ended December 31st, 2023, Banner reported net income to common shareholders of $183.6 million compared to $195.4 million for the full year of 2022. The earnings comparison is primarily impacted by the provision for credit losses and the increase in funding.

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

Rob Butterfield: As announced, Banner Corporation reported a net profit available to common shareholders Banner Corporation reported a net profit available to common shareholders

Rob Butterfield: As announced banner Corporation reported a net profit available to common shareholders of $42 $6 million or $1 24 per diluted share for the quarter ended December 31 2023.

Rob Butterfield: $42.6 million or $1.24 per diluted share for the quarter ended December 31st, 2023.

Rob Butterfield: This compares to a net profit to common shareholders of $1.58 per share for the fourth quarter of 2022.

This compares to a net profit to common shareholders of $1 58 per share for the fourth quarter of 2022.

Mark J. Grescovich: Thank you, Rich. As is customary, today we will cover four primary items. First, I will provide you with high-level comments on Banner's fourth quarter and full-year 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, Gil 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. Before I get started, I'd like again to thank all of my 2,000 colleagues who are working extremely hard to assist our clients and Banner has lived by our core values, which are all summed up as doing the right thing for the past 133 years.

Rob Butterfield: and one dollar and 33 cents per share for the third quarter of 2023.

Rob Butterfield: And $1 33 per share for the third quarter of 2023.

Rob Butterfield: For the full year ended December 31, 2023 banner reported net income to common shareholders of $183 6 million compared to $195 $4 million for the full year 2022.

Rob Butterfield: For the full year ended December 31st, 2023, Banner reported net income to common shareholders of $183.6 million compared to $195.4 million for the full year 2022.

Rob Butterfield: 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. Rob will discuss these items in more detail shortly to illustrate our core earnings power.

Rob Butterfield: The earnings comparison is primarily impacted by the provision for credit losses any increase in funding costs.

Rob Butterfield: The earnings comparison is primarily impacted by the provision for credit loss

Rob Butterfield: and the increase in funding.

Rob Butterfield: Our strategy to maintain a moderate risk profile and the investments we made during our banner forward program to improve operating performance.

Rob Butterfield: <unk> the company well to whether recent market headwinds.

Rob Butterfield: Rob will discuss these items in more detail shortly.

Rob Butterfield: to illustrate the core earnings power

Rob Butterfield: 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 banner forward expenses.

Rob Butterfield: I would direct your attention to pretext.

Rob Butterfield: I would direct your attention to the pretext and Earnings, excluding gains and losses on the sale of securities.

Mark J. Grescovich: 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 changes. I am pleased to report again to you that this is exactly what we continue to do. I'm very proud of the entire Banner team and our core values.

Rob Butterfield: and Earnings, excluding gains and losses on the sale of securities.

Rob Butterfield: Banner Forward Expense

Rob Butterfield: Gaines on the sale of branch

Rob Butterfield: Gains on the sale of branches lost on the extinguishment of debt, and changes in fair value of financial

Rob Butterfield: Gains on the sale of branches.

Rob Butterfield: lost on the extinguishment of debt, and changes in fair value of financial

Rob Butterfield: On the extinguishment of debt and changes in fair value of financial instruments.

Rob Butterfield: Our full year 2023 core earnings were $262 7 million compared to $251 9 million for the full year 2022.

Rob Butterfield: Our full year 2023 core earnings were $262.7 million compared to $251.9 million for the full year 2022.

Rob Butterfield: Our full year 2023 core earnings were $262.7 million compared to $251.9 million for the full year 2022. Banner's fourth quarter 2023 revenue from core operations was $157.1 million compared to $157.7 million for the third quarter of 2023. For the full year 2023, revenue from core operations increased 3% to $643.9 million when compared to the full year of 2020. We continue to benefit from a strong core deposit base that has proved to be resilient and loyal to Banner in the wake of a highly competitive environment.

Rob Butterfield: Banner's fourth quarter 2023 revenue from core operations.

Mark J. Grescovich: Now, let me turn to an overview of our performance. As announced, Banner Corporation reported a net profit available to common shareholders of $42.6 million or $1.24 per diluted share for the quarter ended December 31st, 2023. This compares to a net profit to common shareholders of $1.58 per share for the fourth quarter of 2022 and one dollar and 33 cents per share for the third quarter of 2023. For the full year ended December 31st, 2023, Banner reported net income to common shareholders of $183.6 million compared to $195.4 million for the full year of 2022.

<unk> fourth quarter 2023 revenue from core operations was $157 1 million.

Rob Butterfield: was $157.1 million compared to $157.7 million for the third quarter of 2023.

Rob Butterfield: Compared to a $157 7 million for the third quarter of 2023.

Rob Butterfield: For the full year 2023 revenue from core operations increased 3% to $643 $9 million when compared to the full year of 2022.

Rob Butterfield: For the full year 2023,

Rob Butterfield: The revenue from core operations increased 3% to $643.9 million when compared to the full year of 2020.

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

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

Rob Butterfield: A very good net interest margin.

Rob Butterfield: A very good net interest margin and CORE Expense. Overall, this resulted in a return on average assets of 1.09% for the fourth 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 changes. To that point, our core deposits represent 89 percent of total. Additionally, we continued our strong organic generation of new relationships, and our loans increased 7% over the same period last year.

Rob Butterfield: Very good net interest margin and core expense control.

Rob Butterfield: and CORE Expense.

Rob Butterfield: Overall, this resulted in a return on average assets of 1.09% for the fourth quarter of 2023.

Rob Butterfield: Overall this resulted in a return on average assets of 1.09% for the fourth quarter of 2023.

Rob Butterfield: Once again, our core performance reflects continued execution on our Super community Bank strategy that is growing new client relationships.

Rob Butterfield: Once again, our core performance reflects continued execution on our super community bank strategy, that is, growing new client relationships.

Mark J. Grescovich: The earnings comparison is primarily impacted by the provision for credit losses and the increase in funding. 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. Rob will discuss these items in more detail shortly, but to illustrate the core earnings power, I would direct your attention to pretext and Earnings, excluding gains and losses on the sale of securities, Banner Forward Expense, Gains on the sale of branches lost on the extinguishment of debt, and changes in fair value of financial instruments. Our full year 2023 core earnings were $262.7 million compared to $251.9 million for the full year 2022. Banner's fourth quarter 2023 revenue from core operations was $157.1 million compared to $157.7 million for the third quarter of 2023.

Rob Butterfield: 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.

Rob Butterfield: Changing our core funding position.

Rob Butterfield: Promoting client loyalty and advocacy through our responsive service model and demonstrating our safety and soundness through all economic cycles and change events.

Rob Butterfield: to that point our core deposits represent 89 percent of total

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

Rob Butterfield: Reflective of the Salad Performance coupled with our strong regulatory capital ratio and the fact that we increased our tangible common equity per share by 18% from the same period last year, we announced a core dividend of 48 cents per common share.

Rob Butterfield: Further we continued our strong organic generation of new relationships and our loans increased 7% over the same period last year.

Rob Butterfield: Further, we continued our strong organic generation of new relationships.

Rob Butterfield: and our loans increased 7% over the same period last year.

Rob Butterfield: 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 18% from the same period last year, we announced a core dividend of <unk> 48 per common share.

Rob Butterfield: Reflective of the Salad Performance

Rob Butterfield: coupled with our strong regulatory capital ratio.

Rob Butterfield: and the fact that we increased our tangible common equity per share by 18% from the same period last year, we announced a core dividend of 48 cents per common share.

Rob Butterfield: As I mentioned on previous calls, we entered published our environmental social and governance highlights report last December.

Rob Butterfield: As I mentioned on previous calls,

Rob Butterfield: As I mentioned on previous calls, Banner published our Environmental, Social, and Governance Highlights Report last December and published our inaugural ESG report earlier this summer. Both of these documents reflect the many ways in which we continually strive to do the right thing in support of our clients, our communities, and our colleagues, and provide an outline of the level of commitment Banner has to the many communities it serves.

Rob Butterfield: Banner published our Environmental, Social, and Governance Highlights Report last December.

Rob Butterfield: and published our inaugural ESG report earlier this summer.

Rob Butterfield: Published our inaugural ESG report earlier this summer.

Rob Butterfield: Both of these documents reflect the many ways in which we continually strive to do the right thing in support of our clients

Rob Butterfield: Both of these documents reflect the many ways in which we continually strive to do the right thing in support of our clients.

Rob Butterfield: our communities and our colleagues.

Mark J. Grescovich: For the full year 2023, revenue from core operations increased 3% to $643.9 million when compared to the full year of 2020. We continue to benefit from a strong core 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. Overall, this resulted in a return on average assets of 1.09% for the fourth quarter of 2023.

Rob Butterfield: Our communities and our colleagues and provides an outline of the level of commitment banner has to the many communities. It serves.

Rob Butterfield: and provides an outline of the level of commitment Banner has to the many communities it serves.

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

Rob Butterfield: Finally.

Rob Butterfield: Finally,

Rob Butterfield: We need to say that we continue to receive marketplace recognition and validation of our business model and our value.

Rob Butterfield: We need to say that we continue to receive marketplace recognition and validation of our business model and our value. Banner was again named one of America's 100 best banks and one of the best banks in the world by four. Newsweek named Banner one of the most trustworthy companies in America and just recently named it one of the best regional banks in the country. 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 of Excellence. Additionally, as we have noted previously, Banner Bank received an outstanding CRA rating in our most recent CRA examination.

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

Rob Butterfield: Banner was again named one of America's 100 best banks and one of the best banks in the world by four.

Rob Butterfield: Newsweek named Banner one of the most trustworthy companies in America and just recently named Banner one of the best regional banks in the country.

Rob Butterfield: Newsweek named banner one of the most trustworthy companies in America, and just recently named banner one of the best regional banks in the country.

Rob Butterfield: S&P Global Market Intelligence ranked Banner's financial performance among the top 50 public banks with more than $10 billion in assets.

Rob Butterfield: S&P Global market Intelligence ranked banner financial performance among the top 50 public banks with more than one or $10 billion in assets.

Mark J. Grescovich: 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 changes. To that point, our core deposits represent 89 percent of total. Furthermore, we continued our strong organic generation of new relationships, and our loans increased 7% over the same period last year. Reflective of the Salad Performance, coupled with our strong regulatory capital ratio and the fact that we increased our tangible common equity per share by 18% from the same period last year, we announced a core dividend of 48 cents per common share. As I mentioned on previous calls, Banner published our Environmental, Social, and Governance Highlights Report last December and published our inaugural ESG report earlier this summer. Both of these documents reflect the many ways in which we continually strive to do the right thing in support of our clients, our communities, and our colleagues, and provide an outline of the level of commitment Banner has to the many communities it serves. Finally,

Rob Butterfield: The digital banking provider Q2 holdings awarded banner their bank of the year of excellence.

Rob Butterfield: and the digital banking provider Q2 Holdings awarded Banner their Bank of the Year of Excellence.

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

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

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

Rob Butterfield: Let me now turn the call over to Jill.

Rob Butterfield: Let me now turn the call over to Jill. We're going to discuss the trends in our loan portfolio and her comments on Banner's credit quality. Jill?

Rob Butterfield: We're going to discuss the trends in our loan portfolio and her comments on Banner's credit quality. Jill?

Jill: Thank you Mark and good morning, everyone as reflected in our release Banner's credit metrics continued to remain solid delinquent loans ended the quarter at zero point, <unk> zero percent and compared to 0.27% as of the linked quarter and 0.32% as of year end 2022.

Jill: Thank you Mark and good morning everyone. As reflected in our release, Banner's credit metrics continue to remain solid. Delinquent loans ended the quarter at 0.40% and compared to 0.27% as of the linked quarter and 0.32% as of year-end 2022.

Jill: Thank you Mark, and good morning everyone. As reflected in our release, Banner's credit metrics continue to remain solid. Delinquent loans ended the quarter at 0.40%, compared to 0.27% as of the linked quarter and 0.32% as of year-end 2022. Adversely classified loans remain relatively flat at 1.16% of total loans and are down from 1.35% as of December 31, 2022. Banner's non-performing assets increased $3 million in the quarter, continue to be centered on non-performing loans, and now total $30 million, representing a modest 0.19% of total assets. The net provision for credit losses for the quarter was $2.5 million, which included a $3.8 million provision for loan losses, offset in part by a release of $526,000 in the reserve for unfunded loan commitments, as well as a release of $750,000 of the provision recorded in the second quarter related to financial institution subordinated debt held within the investment portfolio.

Jill: Adversely classified loans remain relatively flat at 1.16% of total loans and are down from 1.35% as of December 31, 2022.

Jill: Adversely classified loans remained relatively flat at one 6% of total loans and are down from 135% as of December 31 2022.

<unk> nonperforming assets increased $3 million in the quarter continue to be centered in nonperforming loans and now totaled $30 million, representing a modest 0.19% of total assets.

Jill: Banner's non-performing assets increased $3 million in the quarter, continue to be centered in non-performing loans, and now total $30 million, representing a modest 0.19% of total assets.

Jill: The net provision for credit losses for the quarter was $2.5 million, which included a $3.8 million provision for loan losses, offset in part by a release of $526,000 in the reserve for unfunded loan commitments, as well as a release of $750,000 of the provision recorded in the second quarter related to financial institution subordinated debt held within the investment portfolio.

Jill: The net provision for credit losses for the quarter was $2 5 million, which included a $3 8 million provision for loan losses offset in part by a release of 526000 in the reserve for unfunded loan commitments as well as the release of 750000 provision recorded in the second quarter related to financial institutions.

Mark J. Grescovich: We need to say that we continue to receive marketplace recognition and validation of our business model and our value. Banner was again named one of America's 100 best banks and one of the best banks in the world by four. Newsweek named Banner one of the most trustworthy companies in America and just recently named it one of the best regional banks in the country.

Jill: Loan losses in the quarter totaled $1.7 million and were offset in part by recoveries of $531,000, with net losses for the year totaling a nominal three basis points of average total loans. The provision for loan losses this quarter provided for continued loan growth, after which our ACL reserve totaled $149.6 million or 1.38% of total loans as of December 31st.

Subordinated debt held within the investment portfolio.

Jill: Loan losses in the quarter totaled $1.7 million and were offset in part by recoveries of $531,000, with net losses for the year totaling a nominal three basis points of average total loan.

Losses in the quarter totaled $1 7 million and were offset in part by recoveries of 531000.

Jill: With net losses for the year totaling a nominal three basis points of average total loans.

Mark J. Grescovich: 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 of Excellence. Additionally, as we have noted previously, Banner Bank received an outstanding CRA rating in our most recent CRA examination. Let me now turn the call over to Jill. We're going to discuss the trends in our loan portfolio and her comments on Banner's credit quality. Jill?

Jill: The provision for loan losses this quarter provided for continued loan growth, after which our ACL reserve totals $149.6 million or 1.38% of total loans as of December 31st.

Jill: The provision for loan losses. This quarter provided for continued loan growth after which our ACL reserve totaled $149 6 million or $1, 38% of total loans as of December 31st.

Jill: This coverage level is identical to that reported in the linked quarter, compares to 1.39% coverage as of December 31, 2022, and currently provides 506% coverage of our non-performing loans. As anticipated, loan originations declined modestly again this quarter. Still, loan outstandings grew by $199 million, or 2% for the quarter, and grew by 7% year over year. While C&I line utilization was up 1% in the quarter, balances were down modestly and were down 2.2% year over year. Small business originations offset these paydowns such that, year over year, on a combined basis, commercial and small business loans are up 2.1%. Owner-occupied commercial real estate production was also positive, up 8.3% year-over-year, all of which reflects the success of our super community relationship banking business model.

Jill: This coverage level is identical to that reported in the linked quarter compares to 139% coverage as of December 31, 2022, and currently provides 506% coverage of our nonperforming loans.

Jill: As anticipated, loan originations declined modestly again this quarter. Still, loan outstandings grew by $199 million or 2% for the quarter and grew by 7% year over year. While C&I line utilization was up 1% in the quarter, balances were down modestly and were down 2.2% year over year.

Jill: As anticipated loan originations declined modestly again this quarter still loan outstandings grew by $199 million or 2% for the quarter and grew by 7% year over year.

Jill: Thank you, Mark, and good morning everyone. As reflected in our release, Banner's credit metrics continue to remain solid. Delinquent loans ended the quarter at 0.40% and compared to 0.27% as of the linked quarter and 0.32% as of year-end 2022. Adversely classified loans remain relatively flat at 1.16% of total loans and are down from 1.35% as of December 31, 2022. Banner's non-performing assets increased $3 million in the quarter, continue to be centered on non-performing loans, and now total $30 million, representing a modest 0.19% of total assets. The net provision for credit losses for the quarter was $2.5 million, which included a $3.8 million provision for loan losses, offset in part by a release of $526,000 in the reserve for unfunded loan commitments, as well as a release of $750,000 of the Loan losses in the quarter totaled $1.7 million and were offset in part by recoveries of $531,000, with net losses for the year totaling a nominal three basis points of average total loans.

Jill: C&I line utilization was up 1% in the quarter balances were down modestly and were down two 2% year over year.

Jill: Small business originations offset these paydowns such that year over year on a combined basis commercial and small business card loans are up two 1%.

Jill: Small business originations offset these paydowns such that year over year on a combined basis, commercial and small business scored loans are up 2.1%.

Jill: Owner-occupied commercial real estate production was also positive, up 8.3% year-over-year, all of which reflects the success of our super community relationship banking business model.

Jill: Owner occupied commercial real estate production was also positive up eight 3% year over year, all of which reflects the success of our Super community relationship banking business model.

Jill: As we anticipated, growth in the investor CRE portfolio, excluding multifamily, was muted in the quarter and reflected a modest decline in balances year over year. Given the expectation of the increased rate environment holding in the near term, we continue to anticipate muted commercial real estate loan growth over the next few quarters. Repeating what I have said before, our office portfolio remains well diversified both in size and in geographic location, and overall credit performance has been solid to date. It remains balanced between investor CRE and owner-occupied, represents 6% of our loan book, and there has been no meaningful change in the portfolio of loans secured by our office properties within the major metropolitan areas across our geographic footprint.

Jill: As we anticipated, growth in the investor CRE portfolio, excluding multifamily, was muted in the quarter and reflects a modest decline in balances year over year.

Jill: As we anticipated growth in the Investor CRE portfolio, excluding multifamily was muted in the quarter and reflects a modest decline in balances year over year.

Jill: Given the expectation of the increased rate environment holding in the near term, we continue to anticipate muted commercial real estate loan growth over the next few quarters.

Jill: Even the expectation of the increased rate environment holding in the near term we continue to anticipate muted commercial real estate loan growth over the next few quarters.

Jill: Repeating what I have said before, our office portfolio remains well diversified both in size and in geographic location, and overall credit performance has been solid to date. It remains balanced between investor CRE and owner occupied, represents 6% of our loan book, and there has been no meaningful change in the portfolio of loans secured by our office properties within the major metropolitan areas across our geographic footprint.

Jill: Repeating what Ive said before our office portfolio remains well diversified both in size and geographic location and overall credit performance has been solid today. It remains balanced between investor CRE and owner occupied represents 6% of our loan book and there has been no meaningful change in the portfolio of loans secured by our offer.

Properties within the major metropolitan areas across our geographic footprint.

Jill: We downgraded two small office secured loans this quarter, adversely classified loans secured by office properties are currently limited to four loans totaling $7.2 million with only two loans totaling approximately $500,000 currently past due.

Jill: We downgraded two small office secured loans this quarter; adversely classified loans secured by office properties are currently limited to four loans totaling $7.2 million, with only two loans totaling approximately $500,000 currently past due.

Jill: The provision for loan losses this quarter provided for continued loan growth, after which our ACL reserve totaled $149.6 million or 1.38% of total loans as of December 31st. This coverage level is identical to that reported in the linked quarter, compares to 1.39% coverage as of December 31, 2022, and currently provides 506% coverage of our non-performing loans. As anticipated, loan originations declined modestly again this quarter. However, still, loan outstandings grew by $199 million, or 2% for the quarter, and grew by 7% year over year.

Jill: We downgraded to small office secured loans this quarter adversely classified loans secured by office properties are currently limited to four loans totaling $7 2 million with only two loans totaling approximately 500000 currently past due.

Jill: Multifamily real estate loans were up $45 million or 6% in the quarter, almost exclusively related to converting the balance of multifamily loans that were originated for sale into the portfolio after eliminating that business line in Q3.

Jill: Multifamily real estate loans were up $45 million or 6% in the quarter almost exclusively related to converting the the balance of multifamily loans that were originated for sale into the portfolio after eliminating that business line in Q3.

Jill: This portfolio has grown 26% year over year and remains split approximately 55% affordable housing and 45% middle income market rate housing and remains granular in size with balances spread across our footprint.

Jill: This portfolio has grown 26% year over year and remains split approximately 55% of affordable housing and 45% middle income market rate housing and remains granular in size with balances spread across our footprint.

Jill: While C&I line utilization was up 1% in the quarter, balances were down modestly and were down 2.2% year over year. However, small business originations offset these paydowns such that, year over year, on a combined basis, commercial and small business loans are up 2.1%. Owner-occupied commercial real estate production was also positive, up 8.3% year-over-year, all of which reflects the success of our super community relationship banking business model. However, as we anticipated, growth in the investor CRE portfolio, excluding multifamily, was muted in the quarter and reflected a modest decline in balances year over year.

Jill: Growth in the construction and development loan balances during the quarter was found almost entirely in the multifamily construction portfolio, up 51 million, or 11% in the quarter. This portfolio grew by 55% year-over-year, primarily due to our continued emphasis on financing affordable housing projects throughout our footprint.

Jill: Growth in the construction and development loan balances during the quarter was found almost entirely in the multifamily construction portfolio.

Jill: Growth in the construction and development loan balances during the quarter was found almost entirely in the multifamily construction portfolio, up 51 million, or 11% in the quarter.

Jill: <unk> 1 million or 11% in the quarter.

Jill: This portfolio grew by 55% year-over-year, primarily due to our continued emphasis on financing affordable housing projects throughout our footprint.

Jill: This portfolio grew by 55% year over year, primarily due to our continued emphasis on financing affordable housing projects throughout our footprint.

Jill: Commercial construction Outstandings increased a modest 1% in the quarter and ended the year, 8% lower than that recorded as of December 31, 2022, as there has been less demand for new projects in this higher rate environment.

Jill: Commercial construction outstandings increased a modest 1% in the quarter and ended the year 8% lower than that reported as of December 31, 2022, as there has been less demand for new projects in this higher rate environment. Residential construction exposure remains acceptable at 5% of the portfolio, flat with last quarter, and is now split approximately 60% for sale housing and 40% are custom 1-4 family residential mortgage loan products. Outstanding balances continued their declining trend again this quarter, down 2%, and are down 19% year over year. As I have discussed throughout the year, sales of completed starts continued to outpace new takedowns, with builders remaining cautious in relation to their unsold inventory. Additionally, production of new custom construction 1-4 family mortgage originations declined, with commitments down 33% year-over-year. In total, construction and land development loan balances increased 3% year-over-year, driven primarily by the growth in the multifamily construction portfolio.

Jill: Given the expectation of the increased rate environment holding in the near term, we continue to anticipate muted commercial real estate loan growth over the next few quarters. Repeating what I have said before, our office portfolio remains well diversified both in size and in geographic location, and overall credit performance has been solid to date. It remains balanced between investor CRE and owner occupied, represents 6% of our loan book, and there has been no meaningful change in the portfolio of loans secured by our office properties within the major metropolitan areas across our geographic footprint. We downgraded two small office secured loans this quarter. Adversely classified loans secured by office properties are currently limited to four loans totaling $7.2 million with only two loans totaling approximately $500,000 currently past due.

Jill: Residential construction exposure remains acceptable at 5% of the portfolio, flat with last quarter, and is now split approximately 60% for sale housing and 40% are custom 1-4 family residential mortgage loan products.

Jill: Residential construction exposure remains acceptable at 5% of the portfolio flat with last quarter and is now split approximately 60% for sale housing and 40% are kept them one to four family residential mortgage loan product.

Jill: Outstanding balances continued their declining trend again this quarter, down 2%, and are down 19% year over year. As I have discussed throughout the year, sales of completed starts continued to outpace new takedowns, with builders remaining cautious in relation to their unsold inventory.

Jill: Outstanding balances continued their declining trend again, this quarter down 2% and are down 19% year over year as I have discussed throughout the year sales have completed starts continued to outpace new takedowns with builders remaining cautious in relation to their unsold inventory.

Jill: Additionally, production of new custom construction 1-4 family mortgage originations has declined, with commitments down 33% year-over-year.

Jill: Additionally, production of new custom construction in one to four family mortgage originations has declined with commitments down 33% year over year.

Jill: In total, construction and land development loan balances increased 3% year-over-year, driven primarily by the growth in the multifamily construction portfolio. When you include multifamily, commercial construction, and land, the total construction exposure remains at an acceptable 14% of total loan.

Jill: In total construction and land development loan balances increased 3% year over year, driven primarily by the growth in the multifamily construction portfolio.

Jill: When you include multifamily, commercial construction, and land, the total construction exposure remains at an acceptable 14% of total loan.

Jill: Multifamily real estate loans were up $45 million, or 6%, in the quarter, almost exclusively related to converting the balance of multifamily loans that were originated for sale into the portfolio after eliminating that business line in Q3. This portfolio has grown 26% year over year and remains split approximately 55% affordable housing and 45% middle income market rate housing and remains granular in size with balances spread across our footprint. Growth in the construction and development loan balances during the quarter was found almost entirely in the multifamily construction portfolio, up 51 million, or 11% in the quarter. This portfolio grew by 55% year over year, primarily due to our continued emphasis on financing affordable housing projects throughout our footprint. Commercial construction outstandings increased a modest 1% in the quarter and ended the year 8% lower than that reported as of December 31, 2022, as there has been less demand for new projects in this higher rate environment.

Jill: When you include multifamily commercial construction and land at the total construction exposure remains at an acceptable 14% of total loans.

Jill: As expected, agricultural loan balances began their seasonal decline with balances down 1% from the linked quarter. When compared to December 2022, balances increased 12% as we both expanded existing and added new relationships during the last growing season.

Jill: As expected, agricultural loan balances began their seasonal decline with balances down 1% from the linked quarter. However, when compared to December 2022, balances increased 12% as we both expanded existing and added new relationships during the last growing season. And lastly, we again reported growth in the consumer mortgage portfolio, up 6% in the quarter and 29% year-over-year, continuing the trend of retaining completed all-in-one custom construction loans on the balance sheet. I will close in the same way I started, noting that Banner's credit metrics continue to be strong and are reflective of a credit culture that is designed for success throughout business life. Our consistent underwriting remains a source of strength, as does our solid reserve for loan losses and robust capital base.

As expected agricultural loan balances began their seasonal decline with balance is down 1% from the linked quarter when compared to December 2022 balances increased 12% as we both expanded existing and added new relationships during the last growing season.

Jill: And lastly, we again reported growth in the consumer mortgage portfolio, up 6% in the quarter and 29% year-over-year, continuing the trend of retaining completed all-in-one custom construction loans on balance sheet.

Jill: And lastly, we again reported growth in the consumer mortgage portfolio up 6% in the quarter and 29% year over year, continuing the trend of retaining completed all in one custom construction loans on balance sheet.

Jill: I will close in the same way I started noting the banner's credit metrics continue to be strong and are reflective of our credit culture that is designed for success throughout business cycles, our consistent underwriting remains a source of strength as does our solid reserve for loan losses and robust capital base.

Jill: I will close in the same way I started, noting that Banner's credit metrics continue to be strong and are reflective of a credit culture that is designed for success throughout business life.

Jill: Our consistent underwriting remains a source of strength, as does our solid reserve for loan losses and robust capital base.

Speaker Change: Given the continued economic uncertainty, I will again note that our credit quality metrics should not be expected to improve. Still, we remain well positioned to navigate the balance of this economic cycle. With that, I'll turn the microphone over to Rob for his comments.

Speaker Change: Given the continued economic uncertainty, I will again note that our credit quality metrics should not be expected to improve. However, we remain well positioned to navigate the balance of this economic cycle. With that, I'll turn the microphone over to Rob for his comments.

Jill: Given the continued economic uncertainty I will again note that our credit quality metrics should not be expected to improve.

Jill: We remain well positioned to navigate the balance of this economic cycle with that I'll turn the microphone over to Rob for his comments Rob.

Jill: Residential construction exposure remains acceptable at 5% of the portfolio, flat with last quarter, and is now split approximately 60% for sale housing, and 40% are custom 1-4 family residential mortgage loan products. Outstanding balances continued their declining trend again this quarter, down 2%, and are down 19% year over year. As I have discussed throughout the year, sales of completed starts continued to outpace new takedowns, with builders remaining cautious in relation to their unsold inventory. Additionally, production of new custom construction 1-4 family mortgage originations declined, with commitments down 33% year-over-year.

Speaker Change: Rob

Rob Butterfield: Great. Thank you Jill weave.

Rob Butterfield: Great. Thank you, Jill.

Rob Butterfield: We've reported $1.24 per diluted share for the fourth quarter compared to $1.33 per diluted share for the prior quarter.

Rob Butterfield: We reported $1.24 per diluted share for the fourth quarter compared to $1.33 per diluted share for the prior quarter. The $0.09 decrease in earnings per share was primarily due to lower net interest income and higher losses on the sale of securities, partially offset by a gain recorded on multifamily loans moved from held for sale to held for investment. Core revenue, excluding losses on the sale of securities and changes in investments carried at fair value, decreased $607,000 from the prior quarter, primarily due to higher funding costs leading to a decline in net interest income.

Rob Butterfield: We reported $1.24 per diluted share for the fourth quarter compared to $1 33 per diluted share for the prior quarter.

Rob Butterfield: The $0.09 decrease in earnings per share was primarily due to lower net interest income and higher losses on the sale of securities, partially offset by a gain recorded on multifamily loans moved from held for sale to held for investment.

Rob Butterfield: The <unk> decrease in earnings per share was primarily due to lower net interest income and higher losses on the sale of securities partially offset by a gain recorded on multifamily loans.

Moved from held for sale to held for investment.

Rob Butterfield: Core revenue, excluding losses on the sale of securities and changes in investments carried at fair value, decreased $607,000 from the prior quarter.

Rob Butterfield: Core revenue excluding losses on sales securities and changes in investments carried at fair value decreased 607000 from the prior quarter.

Jill: In total, construction and land development loan balances increased 3% year over year, driven primarily by the growth in the multifamily construction portfolio. When you include multifamily, commercial construction, and land, the total construction exposure remains at an acceptable 14% of total loans. As expected, agricultural loan balances began their seasonal decline with balances down 1% from the linked quarter.

Rob Butterfield: primarily due to higher funding costs leading to a decline in net interest income.

Rob Butterfield: Total loans increased $156 million during the quarter, with an increase of $199 million in health for investment loans, partially offset by a decrease of $43 million in health for sale loans, as 43 million of multifamily loans previously held for sale were transferred to Help for Investment. The increase in total loans was primarily due to one to four family real estate loans increasing $79 million, and multifamily construction loans increasing $51 million due to advances on affordable housing projects. Total securities increased $37 million. The recent decline in interest rates led to an increase in the fair value of a bill for self-security, which was partially offset by the sale of $34 million of bill for sale securities and normal portfolio cash.

Primarily due to higher funding costs.

Rob Butterfield: Going to a decline in net interest income.

Rob Butterfield: Total loans increased 156 million during the quarter.

Rob Butterfield: Total loans increased $156 million during the quarter.

Rob Butterfield: with an increase of $199 million in health for investment loans, partially offset by a decrease of $43 million in health for sale loans.

With an increase of $199 million in held for investment loans.

Rob Butterfield: Partially offset by a decrease of $43 million in held for sale loans at $43 million of multifamily loans previously held for sale were transferred to held for investment.

Rob Butterfield: as 43 million of multifamily loans previously held for sale were transferred to Help for Investment.

Jill: When compared to December 2022, balances increased 12% as we both expanded existing and added new relationships during the last growing season. And lastly, we again reported growth in the consumer mortgage portfolio, up 6% in the quarter and 29% year-over-year, continuing the trend of retaining completed all-in-one custom construction loans on the balance sheet. I will close in the same way I started, noting that Banner's credit metrics continue to be strong and are reflective of a credit culture that is designed for success throughout business life.

Yes.

Rob Butterfield: The increase in total loans was primarily due to one to four family real estate loans increasing $79 million.

Rob Butterfield: The increase in total loans was primarily due to one four family real estate loans, increasing $79 million.

Rob Butterfield: and multifamily construction loans increasing $51 million due to advances on affordable housing projects.

Rob Butterfield: Multifamily construction loans, increasing $51 million due to advances on affordable housing projects.

Rob Butterfield: Total securities increased $37 million. The recent decline in interest rates led to an increase in the fair value of a bill for self-security.

Rob Butterfield: Total securities increased $37 million. The recent decline in interest rates led to an increase in the fair value of available for sale Securities.

Rob Butterfield: Which was partially offset by the sale of $34 million of Vale for sales securities and normal portfolio cash flows.

Rob Butterfield: which was partially offset by the sale of $34 million of bill for sale securities and normal portfolio cash

Jill: Our consistent underwriting remains a source of strength, as does our solid reserve for loan losses and robust capital base. Given the continued economic uncertainty, I will again note that our credit quality metrics should not be expected to improve. Still, we remain well positioned to navigate the balance of this economic cycle. With that, I'll turn the microphone over to Rob for his comments. Rob, great. Thank you, Jill.

Rob Butterfield: Any additional security sales during the first quarter will be dependent upon market conditions.

Rob Butterfield: Any additional security sales during the first quarter will be dependent upon market conditions. Deposits decreased by $145 million during the quarter due to a $90 million decrease in retail deposits and a $55 million decline in brokered CDs.

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

Rob Butterfield: Deposits decreased by $145 million during the quarter due to a $90 million decrease in retail deposits and a $55 million decline in brokered CDs.

Rob Butterfield: <unk> decreased by $145 million during the quarter due to a $90 million decrease in retail deposits and a $55 million decline in brokerage Cds.

Rob Butterfield: Four deposits into the quarter at 89% of total deposits.

Rob Butterfield: Four deposits into the quarter at 89% of total deposits. Banner's liquidity and capital profile continue to remain strong, with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowings, with all capital ratios being in excess of well-capitalized levels. Net interest income decreased $3.4 million from the prior quarter due to an increase in funding costs, offsetting the increase in earning asset balances and yields. Compared to the prior quarter, average loan balances increased 142 million, and loan yields increased 12 basis points due to adjustable rate loans repricing, as well as new production coming on at higher interest rates.

Deposits ended the quarter at 89% of total deposits.

Rob Butterfield: Banner's liquidity and capital profile continue to remain strong, with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowings, with all capital ratios being in excess of well-capitalized levels.

Rob Butterfield: Banner's liquidity and capital profile continued to remain strong with a robust core funding base, a low reliance on wholesale borrowings and significant off balance sheet borrowings with all capital ratios being in excess of well capitalized levels.

Rob: We reported $1.24 per diluted share for the fourth quarter compared to $1.33 per diluted share for the prior quarter. The $0.09 decrease in earnings per share was primarily due to lower net interest income and higher losses on the sale of securities, partially offset by a gain recorded on multifamily loans moved from held for sale to held for investment. Core revenue, excluding losses on the sale of securities and changes in investments carried at fair value, decreased $607,000 from the prior quarter, primarily due to higher funding costs leading to a decline in net interest income.

Rob Butterfield: Net interest income decreased $3.4 million from the prior quarter.

Rob Butterfield: Net interest income decreased $3 4 million from the prior quarter.

Rob Butterfield: to the increase in funding costs, offsetting the increase in earning asset balances and yields. Compared to the prior quarter, average loan balances increased 142 million, and loan yields increased 12 basis points due to adjustable rate loans repricing, as well as new production coming on at higher interest rates.

Rob Butterfield: Due to the increase in funding cost offsetting the increase in earning asset balances and yields compared to the prior quarter average loan balances increased $150 million to $142 million and loan yields increased 12 basis points due to adjustable rate loans repricing as well as new production coming on at higher interest rates.

Rob Butterfield: The average rate paid on new production for the quarter was 8.59%. Total interest-bearing cash and investment balances declined $100 million from the prior quarter, while the average yield on the combined cash and investment balances increased one basis. The total cost of funds increased 23 basis points to 131 basis points due to increases in the rates paid on deposits and borrowings. The total cost of deposits increased 24 basis points to 118 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 interest-bearing deposits.

Rob Butterfield: The average rate paid on new production for the quarter was 8.59%.

Rob Butterfield: The average rate paid on new production for the quarter was eight 5% 9%.

Rob: Total loans increased $156 million during the quarter, with an increase of $199 million in health for investment loans, partially offset by a decrease of $43 million in health for sale loans, as 43 million multifamily loans previously held for sale were transferred to Help for Investment. The increase in total loans was primarily due to one to four family real estate loans increasing $79 million, and multifamily construction loans increasing $51 million due to advances on affordable housing projects. Total securities increased by $37 million. The recent decline in interest rates led to an increase in the fair value of a bill for self-security, which was partially offset by the sale of $34 million of bills for sale securities and normal portfolio cash. Any additional security sales during the first quarter will be dependent upon market conditions. Deposits decreased by $145 million during the quarter due to a $90 million decrease in retail deposits and a $55 million decline in brokered CDs.

Rob Butterfield: Total interest-bearing cash and investment balances declined $100 million from the prior quarter, while the average yield on the combined cash and investment balances increased one basis.

Rob Butterfield: Total interest bearing cash and investment balances declined $100 million from the prior quarter, while the average yield on the combined cash and investment balances increased one basis point.

Rob Butterfield: The total cost of funds increased 23 basis points to 131 basis points due to increases in the rates paid on deposits and borrowings.

Rob Butterfield: Total cost of deposits increased 24 basis points to 118 basis points, reflecting both increases in the rates paid on interest-bearing deposits as well as the shift in the mix of deposits.

The total cost of deposits increased 24 basis points to 118 basis points, reflecting both increases in the rates paid on interest bearing deposits as well as the shift in the mix of deposits.

Rob Butterfield: with a portion of non-interest bearing deposits moving into interest bearing deposits.

With a portion of noninterest bearing deposits moving into interest bearing deposits the decline in non interest bearing deposits. During the quarter was largely concentrated in the month of November where we saw some client event driven activity.

Rob Butterfield: The decline in non-interest-bearing deposits during the quarter was largely concentrated in the month of November, where we saw some client event-driven activity.

Rob Butterfield: The decline in non-interest-bearing deposits during the quarter was largely concentrated in the month of November, where we saw some client event-driven activity. Non-interest-bearing deposits into the quarter at 37% of total deposits. On a tax-equivalent basis, the net interest margin decreased 10 basis points to 3.83%. The decrease was driven by increases in funding costs on interest-bearing liabilities, outpacing the increase in yields on earning assets. We expect the net interest margin will experience some additional moderate compression during the first quarter, depending on Fed actions and market conditions.

Rob Butterfield: Non-interest bearing deposits into the quarter at 37% of total deposits.

Rob Butterfield: On interest bearing deposits ended the quarter at 37% of total deposits.

Rob Butterfield: On a tax equivalent basis net interest margin decreased 10 basis points to 383%.

Rob Butterfield: On a tax equivalent basis, net interest margin decreased 10 basis points to 3.83%.

Rob Butterfield: The decrease was driven by increases in funding costs on interest bearing liabilities, outpacing the increase in yields on earning assets.

Rob Butterfield: The decrease was driven by increases in funding cost on interest bearing liabilities outpacing the increase in yields on earning assets.

Rob Butterfield: We expect net interest margin will experience some additional moderate compression during the first quarter, depending on Fed actions and market conditions.

Rob Butterfield: We expect net interest margin, we will experience some additional moderate compression during the first quarter, depending on fed actions and market conditions.

Rob Butterfield: Total non-interest income increased $1.4 million from the prior quarter, primarily due to higher mortgage banking income partially offset by higher losses on the sale of securities. The current quarter included a $4.8 million loss on the sale of securities. The average payback on these trades was under three years. Core non-interest income excluding the loss on the sale of securities and then changes in investments carried at fair value increased $2.8 million due to a $3.5 million gain recorded on the multifamily loans moved from help for sale to help for investment, as well as increased income from bank-owned life insurance, partially offset by lower deposits, deposit fees, and other service charges decreased $1.4 million due to higher costs on debit card Income from residential mortgage operations declined by $568,000 due to seasonality.

Rob Butterfield: Total noninterest income increased $1 4 million from the prior quarter, primarily due to higher mortgage banking income, partially offset by higher losses on the sale of securities.

Rob Butterfield: The current quarter included a $4.8 million loss on the sale of securities. The average payback on these trades was under three years.

Rob Butterfield: The quarter included a $4 $8 million loss on the sale of Securities average payback on these trades was under three years.

Rob Butterfield: Core noninterest income excluding the loss on the sale of securities and changes in investments carried at fair value increased $2 8 million due to a $3 $5 million gain recorded on the multifamily loans moved.

Rob Butterfield: Core non-interest income excluding the loss on the sale of securities and then changes in investments carried at fair value increased $2.8 million due to a $3.5 million gain recorded on the multifamily loans moved

Rob: Four deposits into the quarter at 89% of total deposits. Banner's liquidity and capital profile continue to remain strong, with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowings, with all capital ratios being in excess of well-capitalized levels. Net interest income decreased $3.4 million from the prior quarter due to an increase in funding costs, offsetting the increase in earning asset balances and yields.

Rob Butterfield: From help for sale to help for investment, as well as increased income from bank-owned life insurance, partially offset by lower deposits.

Rob Butterfield: From held for sale to held for investment as well as increased income from bank owned life insurance, partially offset by lower deposit fees.

Rob Butterfield: deposit fees and other service charges decreased $1.4 million.

Rob Butterfield: Deposit fees and other service charges decreased $1 4 million.

Rob Butterfield: Due to higher cost on debit card transactions and card replacement related expenses income from residential mortgage operations declined 568000 due to normal seasonality.

Rob Butterfield: due to higher costs on debit card transactions and card replacement related expenses.

Rob Butterfield: Income from residential mortgage operations declined $568,000 due to seasonalities.

Rob Butterfield: Total non-interest expense increased to $730,000 from the prior quarter. The increase reflected higher payment and card processing expenses due to higher fraud losses. Higher occupancy and equipment expense due to seasonal building maintenance and lower capitalized loan costs. However, these increases were partially offset by lower compensation expense due to lower severance costs and lower legal expense. Despite the continued economic uncertainty, we remain focused on the long term. In 2024, Banner will be making strategic investments to expand its loan production capacity by adding talented relationship managers in key markets and investing initiatives to grow its non-interest income.

Rob Butterfield: Total non-interest expense increased to $730,000 from the prior quarter. The increase reflected higher payment and card processing expense due to higher fraud losses.

Rob Butterfield: Total noninterest expense increased 730000 from the prior quarter, the increase reflected higher payment and card processing expense due to higher fraud losses.

Rob: Compared to the prior quarter, average loan balances increased by 142 million, and loan yields increased 12 basis points due to adjustable rate loans repricing, as well as new production coming on at higher interest rates. The average rate paid on new production for the quarter was 8.59%. Total interest-bearing cash and investment balances declined $100 million from the prior quarter, while the average yield on the combined cash and investment balances increased one basis. The total cost of funds increased 23 basis points to 131 basis points due to increases in the rates paid on deposits and borrowings. Total cost of deposits increased 24 basis points to 118 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 interest-bearing deposits. The decline in non-interest-bearing deposits during the quarter was largely concentrated in the month of November, where we saw some client event-driven activity. Non-interest bearing deposits into the quarter at 37% of total deposits. On a tax equivalent basis, the net interest margin decreased 10 basis points to 3.83%.

Rob Butterfield: Higher occupancy and equipment expense due to seasonal building maintenance and lower capitalized loan costs. These increases were partially offset by lower compensation expense due to lower severance costs and lower legal expense.

Higher occupancy and equipment expense due to seasonal building maintenance and lower capitalized loan costs. These increases were.

Partially offset by lower compensation expense due to lower severance cost and lower legal expense.

Rob Butterfield: Despite the continued economic uncertainty, we remain focused on the long term. In 2024, Banner will be making strategic investments to expand its loan production capacity by adding talented relationship managers in key markets and investing initiatives to grow its non-interest income.

Rob Butterfield: Despite the continued economic uncertainty we remain focused on the long term and 2020 for banner will be making strategic investments to expand as loan production capacity by adding talented relationship managers in key markets and invest in initiatives to grow its noninterest income. This concludes my prepared comments now I will turn it back over to Mark Mark.

Rob Butterfield: This concludes my prepared comments. Now I'll turn it back over to Mark.

Mark J. Grescovich: Thank you.

Mark J. Grescovich: Thank you, Jill and Rob, for your comments.

Mark J. Grescovich: Thank you, Jill and Rob, for your comments. That concludes our prepared remarks.

Mark: Thank you Jill and Rob for your comments that concludes our prepared remarks and Kansas.

Mark J. Grescovich: That concludes our prepared remarks.

Speaker Change: and Candace, we'll now open the call and welcome questions.

Speaker Change: and Candace, we'll now open the call and welcome questions. If you would like to ask a question, please press star followed by 1 on your telephone keypad. For any reason, if your question has been answered and you'd like to withdraw it, please press start followed by stop. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.

Speaker Change: I'll open the call and welcome questions.

Thank you Mark.

Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad.

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

Speaker Change: For any reason your question has been answered and you'd like to withdraw it please press start followed by stop.

Speaker Change: For any reason your question's been answered then you'd like to withdraw it. Please press star followed by <unk>.

Speaker Change: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.

Speaker Change: As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

Speaker Change: So our first question comes from the line of Jeff Rulis of DA Davidson. Your line is now open, please go ahead.

Speaker Change: So last last question comes from the line of Jeff release of D. A Davidson. Your line is now open. Please go ahead.

Jeffrey Allen Rulis: Thanks. Good morning.

Jeffrey Allen Rulis: Thanks. Good morning, I'd like to follow on to kind of Rob's commentary on the non-interest bearing balances and then in the release, I think Mark you've got comments about, you know, still you know.

Thanks, Good morning.

Jeff: Just to.

Jeff: I guess a follow on to Rob's commentary on the noninterest bearing balances and then in the release I think Mark you've got comments about.

Jeffrey Allen Rulis: follow on to kind of Rob's commentary on the non-interest bearing balances and then in the release I think Mark you've got comments about you know still you know

Jeff: Phil.

Jeff: Customers' requests for higher rates.

Mark J. Grescovich: customers' requests for higher rates.

Rob: The decrease was driven by increases in funding costs on interest-bearing liabilities, outpacing the increase in yields on earning assets. We expect net interest margin to experience some additional moderate compression during the first quarter, depending on Fed actions and market conditions. Total non-interest income increased $1.4 million from the prior quarter, primarily due to higher mortgage banking income partially offset by higher losses on the sale of securities. The current quarter included a $4.8 million loss on the sale of securities. The average payback on these trades was under three years. Core non-interest income excluding the loss on the sale of securities and then changes in investments carried at fair value increased $2.8 million due to a $3.5 million gain recorded on the multifamily loans moved from help for sale to help for investment, as well as increased income from bank-owned life insurance, partially offset by lower deposits, deposit fees, and other service charges decreased $1.4 million due to higher costs on debit card Income from residential mortgage operations declined by $568,000 due to seasonality.

That noninterest bearing balance as a percent of deposits down to 37% do you get a sense and maybe Rob you said it was November heavy.

Mark J. Grescovich: That non-interest bearing balance is a percent of deposits down to 37%. Do you get a sense, and maybe Rob, you said it was November heavy, but I guess what are you talking internally about where you think that troughs at or stabilizes?

Mark J. Grescovich: That non-interest-bearing balance is a percent of deposits down to 37%. Do you get a sense, and maybe Rob, you said it was November heavy, but I guess what are you talking internally about where you think that troughs at or stabilizes?

Jeff: But.

Speaker Change: I guess, what are you talking internally about where you think that.

That trough sadder stabilizes.

Speaker Change: Any read on that?

Speaker Change: Any read on that.

Speaker Change: Good morning, Jeff. Thanks for the question. I'll turn it over to Rob.

Speaker Change: Good morning, Jeff. Thanks for the question I'll turn it over to Rob.

Rob Butterfield: Okay Alright.

Rob Butterfield: Okay. Hey, Jeff. Yeah, I mean, as you point out, I mean, our non-interest-bearing deposits are...

Rob Butterfield: Okay. Hey Jeff. Yeah, I mean, as you point out, our non-interest-bearing deposits are...

Rob Butterfield: Hey, Jeff Yeah, I mean, as you point out I mean, our noninterest bearing deposits are.

Which.

Jeffrey Allen Rulis: is, in a little perspective, 39% was pre-COVID, but the interest rate environment was completely different back then. But the 37% continues to hold up very well compared to purebanks at this point. You know, it's hard to say where that trough is at. You know, I mean, I think the crystal ball is a little cloudy there. You know, at this point, I guess what we're, we still expect that we're going to hold up better than most in this category. But calling the actual trough is a little difficult. We certainly expect that we'll see some additional rotation out during the first quarter. And at this point, I would say we're taking it quarter by quarter. We want to see that point where we're seeing that continuing trend down in the amount that's rotating out each quarter. And then once we can see that trend kind of holding, then I think we'll have better visibility. You know, there certainly could be some help in the second half of the year when, you know, when and if the Fed starts to bring down rates. That could take some pressure off.

Jeffrey Allen Rulis: In little perspective, 39% was pre-COVID, but the interest rate environment was completely different back then. But the 37% continues to hold up very well compared to purebanks at this point. You know, it's hard to say where that trough is. You know, I mean, I think the crystal ball is a little cloudy there. You know, at this point, I guess what we still expect that we're going to hold up better than most in this category. But calling the actual trough is a little difficult. We certainly expect that we'll see some additional rotation during the first quarter.

Rob Butterfield: Hello perspective, 39% was pre COVID-19, but the interest rate environment was completely different.

Rob Butterfield: Back then.

Rob Butterfield: But the 37% continues to hold up very well compared to peer banks at this point.

Rob Butterfield: It's hard to say where that trough is that.

Rob Butterfield: The Crystal ball is a little cloudy there.

Rob Butterfield: Yes.

Rob Butterfield: At this point I guess, what we still expect that we're going to hold up better than most in this category.

But calling the actual trough is a little difficult. We certainly expect that we'll see some additional rotation out during the first quarter and at this point I would say, we're taking it quarter by quarter. We wanted to see that point, where we're seeing that continuing to trend down in the amount that rotate in and out each quarter and then once we can see that Trey.

Jeffrey Allen Rulis: And at this point, I would say we're taking it quarter by quarter. We want to reach the point where we're seeing that continuing trend down in the amount that's rotating out each quarter. And then once we can see that trend kind of holding, then I think we'll have better visibility. You know, there certainly could be some help in the second half of the year when, you know, when and if the Fed starts to bring down rates. That could take some pressure off. But at this point, we're just taking it a quarter at a time.

Speaker Change: And kind of holding that I think we will have better visibility there certainly could be some help in the second half of the year when.

Speaker Change: When and if the fed starts to bring down rates that could take some pressure off.

Jeffrey Allen Rulis: But at this point, we're just taking it a quarter at a time.

Speaker Change: At this point, we're just taking it a quarter at a time.

Rob: Total non-interest expense increased to $730,000 from the prior quarter. The increase reflected higher payment and card processing expenses due to higher fraud losses. Higher occupancy and equipment expense due to seasonal building maintenance and lower capitalized loan costs. However, these increases were partially offset by lower compensation expense due to lower severance costs and lower legal expense. Despite the continued economic uncertainty, we remain focused on the long term. In 2024, Banner will be making strategic investments to expand its loan production capacity by adding talented relationship managers in key markets and investing initiatives to grow its non-interest income. This concludes my prepared comments. Now I'll turn it back over to Mark.

Speaker Change: Okay, yeah, I should have alluded to the fact that, you know, in the mid-30s, that's a pretty high number versus peers. I guess if we transition to the margin...

Speaker Change: Okay sure.

Speaker Change: Alluded to the fact that.

Mid <unk>.

A pretty high number versus peers.

Speaker Change: I guess, if we transition to the <unk>.

Speaker Change: Margin.

Speaker Change: Rob, you mentioned additional compression.

Rob you mentioned additional compression.

Speaker Change: The decline linked quarter in the fourth quarter is actually larger than the prior quarter trying to get a sense for the magnitude.

Rob Butterfield: Klein link quarter and the fourth quarter is actually larger than the prior quarter trying to get a sense for magnitude.

Rob Butterfield: Klein link quarter, and the fourth quarter is actually larger than the prior quarter, trying to get a sense for magnitude.

Rob Butterfield: So one margin in the first quarter do we see.

Rob Butterfield: So one margin in the first quarter do we see, moderating compression, kind of discussion, and then the second part of the margin question would be

Speaker Change: So one.

Speaker Change: Margin in the first quarter do we.

Rob Butterfield: moderating compression kind of discussion and then the second part of the margin question would be

Speaker Change: It was moderating compression kind of discussion and then the second part of the margin question would be.

Rob Butterfield: I think you still screen pretty asset sensitive. What would be the outcome if it were, say, three cuts this year versus maybe six? Any kind of read on where you think margin goes from there?

Rob Butterfield: I think you still screen pretty asset sensitively. What would the outcome be if it were, say, three cuts this year versus maybe six? Any kind of read on where you think margin goes from there?

Speaker Change: I think you're still screen pretty asset sensitive.

Speaker Change: What would be the outcome. If it were say three cuts this year versus may be six.

Speaker Change: On a read on where you think margin.

Speaker Change: Goes from there.

Speaker Change: Sure sure Jeff. So first if we if we think look at the loan side. So I would say the asset size a little more predictable than this in this equation right now so if we look at the loan side.

Speaker Change: Sure, sure, Jeff. So, I mean, first, if we if we think look at the loan side, so the I would say the asset side is a little more predictable in this in this equation right now. So if we look at the loan side.

Speaker Change: Sure, sure, Jeff. So, I mean, first, if we think about the loan side, so I would say the asset side is a little more predictable in this equation right now. So on the loan side, if the Fed is on pause, we would expect loan yields to continue to increase similar to what we saw this quarter, kind of in that 10 basis point range, because we still have a large block of adjustable-rate loans that have not repriced through this cycle at this point. And also, as fixed-rate loans are maturing, they're coming on at a much higher interest rate. So absent anything else throughout the year, each quarter, we would expect kind of that, you know, 10 basis points of yield pickup quarter over quarter.

Mark J. Grescovich: Thank you. Thank you, Jill and Rob, for your comments. That concludes our prepared remarks, and Candace, we'll now open the call and welcome questions. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If, for any reason, your question has been answered and you'd like to withdraw it, please press start followed by stop.

Speaker Change: If the Fed is on pause, we would expect loan yields to continue to increase similar to what we saw this quarter, kind of in that 10 basis point range.

Speaker Change: The fed is on pause, we would expect loan yields to continue to increase similar to what we saw this quarter kind of in that in that 10 basis point range, because we still have.

Speaker Change: because we still have a large block of adjustable rate loans that have not repriced through this cycle at this point. And then also as fixed rate loans are maturing, they're coming on a much higher interest rate.

Speaker Change: A large block of adjustable rate loans that have not reprice through this cycle at this point and then also as fixed rate loans are maturing theyre coming at a much higher interest rates.

Operator: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. So our first question comes from the line of Jeff Rulis of DA Davidson. Your line is now open, please go ahead.

Speaker Change: So absent anything else throughout the year, each quarter we would expect kind of that, you know, 10 basis points of yield pickup quarter over quarter.

Speaker Change: So absent anything else throughout the year each quarter, we would expect kind of that 10 basis points of yield pickup.

Speaker Change: Quarter over quarter.

Speaker Change: Once the Fed starts to decrease, so the floating rate loans, which are about 26% of our book, those would reprice down instantaneously with the decline in Fed funds.

Jeffrey Allen Rulis: Good morning, I'd like to follow on from kind of Rob's commentary on the non-interest bearing balances and then in the release, I think Mark you've got comments about, you know, still customers' requests for higher rates. That non-interest-bearing balance is a percent of deposits down to 37%. Do you get a sense, and maybe Rob, you said it was November heavy, but I guess what are you talking internally about where you think that troughs at or stabilizes? Any read on that? Good morning, Jeff.

Speaker Change: Once the fed starts to decrease.

Speaker Change: The floating rate loans, which are about 26% of our book.

Speaker Change: Once the Fed starts to decrease, so the floating rate loans, which are about 26% of our book, those would reprice down instantaneously with the decline in Fed funds. If that comes at a gradual pace, if there are two cuts this year, if there's one cut in a quarter, we think that the adjustable rate loans repricing will offset any impact of the decline related to the floating rate loans coming down.

Speaker Change: Would reprice down.

Speaker Change: Instantaneously with with the decline in fed funds and so.

Speaker Change: If that comes at a gradual pace.

Speaker Change: If that comes at a gradual pace, if there's two cuts this year, if there's one cut in a quarter, we think that the adjustable rate loans repricing will offset any impact of the decline related to the floating rate loans coming down.

Speaker Change: If there is a couple of like two cuts this year.

Speaker Change: One cut in the quarter, we think that the adjustable rate loans repricing will will offset any impact.

Mark J. Grescovich: Thanks for the question. I'll turn it over to Rob. Okay. Hey, Jeff.

Speaker Change: Of the decline related to the floating rate loans coming down.

Rob: Yeah, I mean, as you point out, our non-interest-bearing deposits are... put that in perspective, 39% was pre-COVID, but the interest rate environment was completely different back then. But the 37% continues to hold up very well compared to purebanks at this point. You know, it's hard to say where that trough is. You know, I mean, I think the crystal ball is a little cloudy there. You know, at this point, I guess what we still expect that we're going to hold up better than most in this category. But calling the actual trough is a little difficult.

Speaker Change: Where it becomes more challenging is if the Fed becomes more aggressive. If the Fed becomes more aggressive, then we don't think those adjustable rates, you know, that 10 basis points a quarter, we don't think that's going to be able to offset, you know, a larger cut of 75 basis points in a particular quarter, on the other side of the equation, you know, the deposits, it's a little more cloudy, obviously, on that, on what that looks like going forward. But we do think that we're going to continue to see deposit and funding cost increases probably through the first half of the year once the feds, Action on that, will be a little bit, even some flattening in the funding deposit cost and then as we at some point we'll actually once they start cutting we'll be able to see some relief in deposit cost coming down but I think there's going to be some lag there just because of the overall market liquidity right now.

Speaker Change: It becomes more challenging as if the fed becomes more aggressive.

Speaker Change: It becomes more aggressive than we don't think those adjustable rate that 10 basis points a quarter. We don't think that's going to be able to offset.

A larger cut of 75 basis points in a particular quarter.

Speaker Change: on the other side of the equation, you know, the deposits, it's a little more cloudy, obviously, on that, on what that looks like going forward. But we do think that we're going to continue to see deposit and funding cost increases probably through the first half of the year once the feds,

On the other side of the equation.

Speaker Change: That's a little more cloudy, obviously on that and what that looks like.

Speaker Change: Going forward, but we do think that we're going to continue to see deposit and funding cost increases probably through the first half of the year.

Speaker Change: Once the fed.

Action.

Speaker Change: Action on that.

Sure.

Speaker Change: On that.

Speaker Change: will be a little bit.

Rob: We certainly expect that we'll see some additional rotation out during the first quarter. And at this point, I would say we're taking it quarter by quarter. We want to see that point where we're seeing that continuing trend down in the amount that's rotating out each quarter. And then once we can see that trend kind of holding, then I think we'll have better visibility. You know, there certainly could be some help in the second half of the year when, you know, when and if the Fed starts to bring down rates. That could take some pressure off.

There'll be a little bit.

Speaker Change: even some flattening in the funding deposit cost and then as we at some point we'll actually once they start cutting we'll be able to see some relief in deposit cost coming down but I think there's going to be some lag there just because of the overall market liquidity right now.

Speaker Change: Even some flattening in the funding deposit cost and then.

Speaker Change: As we.

Speaker Change: At some point, we will actually once they start cutting we will be able to see some relief in deposit cost coming down, but I think theres going be some lag there just because of the overall market liquidity right now.

Speaker Change: Okay.

Speaker Change: Okay, so Rob, any moves you're making to kind of make it the bank more rate neutral or, you know, I don't know about hedges. I guess you kind of have a natural revenue hedge with the mortgage unit. I would guess we get progressive cuts that kick in. But any management of the balance sheet? I mean, are you trying to get a little more neutral or at this point?

Speaker Change: Okay, so Rob, any moves you're making to kind of make the bank more rate neutral or, you know, I don't know about hedges. I guess you kind of have a natural revenue hedge with the mortgage unit. I would guess we get progressive cuts that kick in. But any management of the balance sheet? I mean, are you trying to get a little more neutral at this point?

Speaker Change: Robert any moves you're making to kind of make it.

The bank more rate neutral or I don't know about hedges I guess, you kind of have a natural revenue hedged with the mortgage unit.

Speaker Change: Yes, we get.

Speaker Change: It cuts that.

Speaker Change: Kick in but.

Rob: But at this point, we're just taking it a quarter at a time. Okay, yeah, I should have alluded to the fact that, you know, in the mid-30s, that's a pretty high number versus peers. I guess if we transition to the margin... Rob, you mentioned additional compression.

Any management of the balance sheet IBD trying to get a little more neutral or at this point.

Speaker Change: Any kind of adjustments.

Rob Butterfield: Any kind of adjustments?

Rob Butterfield: Any kind of adjustments? Sure. I mean, as you said, the residential mortgage business is a natural hedge against that. So, and, you know, I mean, that operation is still up and operating. And if the rate environment changes, we'll see some, you know, very quickly be able to take advantage of that in that unit. And, you know, we have put, we do have floors on our loans. A large percentage of our loans do have floors on them, so that will help in that environment. But, you know, as far as being able to artificially hedge the portfolio, that's not really an option because we do have those floors in place, and hedges don't play well with floors on the loans.

Speaker Change: Okay.

Rob Butterfield: Sure. I mean, as you said, I mean, the residential mortgage business is a natural hedge against that. So, and, you know, I mean, that operation is still up and operating. And if the rate environment changes, we'll see some, you know, very quickly be able to take advantage of that in that unit. And, you know, we have put, we do have floors on our loans. A large percentage of our loans do have floors on them. So, that will help in that environment. But, you know, as far as being able to artificially hedge the portfolio, that's not really an option because we do have those floors in place and hedges don't play well with floors on the loans.

Sure.

Speaker Change: You said I mean, the residential mortgage business as a natural hedge against that so.

Speaker Change: And I mean that operation is still up and operating and if the rate environment changes, we will see some very quickly be able to take take advantage of that in that in that unit.

Jeffrey Allen Rulis: Klein Link quarter and the fourth quarter is actually larger than the prior quarter trying to get a sense for magnitude. So one margin in the first quarter do we see, moderating compression kind of discussion, and then the second part of the margin question would be, I think you still screen pretty asset sensitive. What would the outcome be if it were, say, three cuts this year versus maybe six? Any kind of read on where you think margin goes from there? Sure, sure, Jeff.

Speaker Change: And we have put head we do have floors on our loans.

Speaker Change: And each of our loans do have floors on them, so that will help in that environment.

Speaker Change: But as far as being able to artificially hedged the portfolio, that's not really an option because we do have those floors in place and hedges don't play well with with floors on our loans.

Speaker Change: Thank you. I'll step back.

Speaker Change: Okay. Thank you I'll step back.

Speaker Change: Thanks, Jeff. Thanks.

Rob: So, I mean, first, if we think about the loan side, so I would say the asset side is a little more predictable in this equation right now. So if we look at the loan side. If the Fed is on pause, we would expect loan yields to continue to increase similar to what we saw this quarter, kind of in that 10 basis point range, because we still have a large block of adjustable rate loans that have not repriced through this cycle at this point.

Speaker Change: Thanks sure. Thank you.

Speaker Change: Our next question comes from the line of Eric Spector of Raymond James. Your line is now open. Please go ahead.

Speaker Change: Our next question comes from the line of Eric Specter of Raymond James Your line is now open. Please go ahead.

Eric Specter: Hey, good morning, everybody. This is Eric on the line for David Feaster, Thanks for taking the questions.

Eric Spector: Hey, good morning, everybody. This is Eric on the line for today's Easter. Thanks for taking the questions.

Eric Spector: Hey, good morning, everybody. This is Eric on the line for today's Easter. Thanks for taking the questions. Starting on the credit front, just given the uncertain backdrop, I know you're very conservative on the credit front, but just curious how maybe you're stressing the book and how you're approaching upcoming maturities and the process for modifications now that TDR rules have changed.

Eric Specter: Starting on the credit front, just given the uncertain backdrop I know you are very conservative on the credit front, but just curious how maybe stressing the book and how youre approaching upcoming maturities and the process for modifications now that TDI rules are changed.

Eric Spector: Starting on the credit front, just given the uncertain backdrop, I know you're very conservative on the credit front, but just curious how maybe you're stressing the book and how you're approaching upcoming maturities and the process for modifications now that TDR rules have changed.

Rob: And also, as fixed-rate loans are maturing, they're coming on at a much higher interest rate. So absent anything else throughout the year, each quarter, we would expect kind of that, you know, 10 basis points of yield pickup quarter over quarter. Once the Fed starts to decrease, so the floating rate loans, which are about 26% of our book, those would reprice down instantaneously with the decline in Fed funds. If that comes at a gradual pace, if there are two cuts this year, if there's one cut in a quarter, we think that the adjustable rate loans repricing will offset any impact of the decline related to the floating rate loans coming down. Where it becomes more challenging is if the Fed becomes more aggressive.

Speaker Change: Yes, Eric Thanks for the question.

Speaker Change: Yeah, Eric, thanks for the question. We are regularly stress testing our portfolio, so we take a look at it reviewing income and debt service coverage. We stress vacancy levels as to the real estate loans and their impact to the net operating income, debt serviceability, look at changes in cap rates based on the interest rate, you know, and what that does to the collateral coverages. When you think about our commercial real estate portfolio, that has about 15% of that will have a rate reset over the next 24 months. And our most recent review reflects no significant concerns with regards to the repayment ability based on the current yield curve and their current most recent operating statements. Additionally, because the portfolio is so lowly leveraged on an average basis, we're, you know, the properties are generally well positioned to sustain those changes. And asset values, so we have not seen to date any issues with people who need to refinance, whether it's off balance sheet or in our portfolio.

Speaker Change: Yeah, Eric, thanks for the question. We are regularly stress testing our portfolio, so we take a look at it, reviewing income and debt service coverage. We stress vacancy levels as to the real estate loans and their impact on net operating income, debt serviceability, and look at changes in cap rates based on the interest rate, you know, and what that does to the collateral coverages. When you think about our commercial real estate portfolio, about 15% of that will have a rate reset over the next 24 months. And our most recent review reflects no significant concerns with regard to repayment ability based on the current yield curve and their current most recent operating statements.

Speaker Change: Our regularly stress testing our portfolio. So we take a look at reviewing income and debt service coverage, we stressed vacancy levels as to the real estate loans and their impact to the net operating income debt serviceability look at changes in cap rates based on the interest rate and what that does to the collateral coverages.

Speaker Change: When you think about our commercial real estate portfolio that has about 15% of that will have a rate reset over the next 24 months.

Speaker Change: And our most recent review reflects no significant concerns with regards to the repayment ability based on the.

Speaker Change: The current yield curve and their current most recent operating statements. Additionally, because the portfolio is still lowly leveraged on an average basis, where the properties are generally well positioned to sustain those changes in asset values. So we have not seen to date any issues with people who need to refinance.

Speaker Change: Additionally, because the portfolio is so lowly leveraged on an average basis, we're, you know, the properties are generally well positioned to sustain those changes and asset values, so we have not seen to date any issues with people who need to refinance, whether it's off balance sheet or in our portfolio.

Rob: If the Fed becomes more aggressive, then we don't think those adjustable rates, you know, that 10 basis points a quarter, we don't think that's going to be able to offset, you know, a larger cut of 75 basis points in a particular quarter, on the other side of the equation, you know, the deposits, it's a little more cloudy, obviously, on that, on what that looks like going forward. But we do think that we're going to continue to see deposit and funding cost increases probably through the first half of the year once the feds, Action on that, will be a little bit, even some flattening in the funding deposit cost and then as we at some point we'll actually once they start cutting we'll be able to see some relief in deposit cost coming down but I think there's going to be some lag there just because of the overall market liquidity right now.

It's off balance sheet or in our portfolio.

Speaker Change: Okay. That's helpful.

Speaker Change: That's helpful.

Speaker Change: And then maybe just outside of the margin, I'm just curious how you think about the impacts of declining rates on the balance sheet and income statement. Would you expect to see additional loan growth potentially from that? And at what level would you expect to see and what segments would you think you'd see at first? And I'm just curious how you think about your ability to reprice deposits and drive additional core deposit flows if rates begin coming down.

Speaker Change: And then maybe just outside of the margin, I'm just curious how you think about the impacts of declining rates on the balance sheet and income statement. Would you expect to see additional loan growth potentially from that? And at what level would you expect to see them, and what segments would you think you'd see at first? And I'm just curious how you think about your ability to reprice deposits and drive additional core deposit flows if rates begin coming down.

And then maybe just outside of the margin I'm. Just curious how you think about the impacts of declining rates on our balance sheet and income statement do you expect to see additional loan growth potentially from that and at what level would you expect to see and what segments would you think you'd see it first.

I'm just curious how you think about your ability to reprice deposits and drive additional core deposit flows if rates begin coming down.

Speaker Change: So I'll take a stab at our loan growth and then let Rob talk about the deposit side of the equation, but going into 2024, we are expecting a low to mid single digit growth rate.

Speaker Change: So I'll take a stab at our loan growth and then let Rob talk about the deposit side of the equation. But going into 2024, we are expecting a low to mid-single digit growth rate. As the rates come down, we would expect activity to pick up both in commercial real estate and I would say construction as well. We'll just get more activity that has been on pause. Some of that will be offset by what I would anticipate to be a higher refinance on the residential mortgage book as they refinance down. So those combined together even in a shifting rate environment is what leads me to say low to mid-single digit growth rate.

Speaker Change: So I'll take a stab at our loan growth and then let Rob talk about the deposit side of the equation. But going into 2024, we are expecting a low to mid-single digit growth rate. As rates come down, we would expect activity to pick up both in commercial real estate and, I would say, construction as well. We'll just get more activity that has been on pause. Some of that will be offset by what I would anticipate to be a higher refinance rate on the residential mortgage book as they refinance down. So those combined together, even in a shifting rate environment, is what leads me to say a low to mid-single digit growth rate.

Speaker Change: As the as the rates come down we would expect activity to pick up both in commercial real estate.

Speaker Change: And I would say construction as well, we'll get we'll just get more activity that has been on pause some of that will be offset by what I would anticipate to be a higher refinance on the residential mortgage book as they refinance down so those combined together even in shifting rate environment.

Rob: Okay, so Rob, any moves you're making to kind of make the bank more rate neutral or, you know, I don't know about hedges. I guess you kind of have a natural revenue hedge with the mortgage unit. I would guess we get progressive cuts that kick in. But any management of the balance sheet? I mean, are you trying to get a little more neutral at this point? Any kind of adjustments?

Speaker Change: Ironman.

Speaker Change: That leads me to say low to mid single digit growth rate.

Jeffrey Allen Rulis: Sure. I mean, as you said, the residential mortgage business is a natural hedge against that. So, and, you know, I mean, that operation is still up and operating. And if the rate environment changes, we'll see some, you know, very quickly be able to take advantage of that in that unit. And, you know, we have put floors on our loans. A large percentage of our loans do have floors on them. So, that will help in that environment. But, you know, as far as being able to artificially hedge the portfolio, that's not really an option because we do have those floors in place, and hedges don't play well with floors on the loans. Thank you. I'll step back. Thanks, Jeff. Thanks. Our next question comes from the line of Eric Spector of Raymond James. Your line is now open. Please go ahead. Hey, good morning, everybody. This is Eric on the line for today's Easter.

Speaker Change: Yes on the deposit side I guess, what I'd say there is that clearly in the current environment with the rate environment right now it doesn't doesn't really pay too to try to go after deposits right now other than through full relationship. So I think as part of that loan growth, but the <unk>.

Rob Butterfield: Yeah, and on the deposit side, I guess what I'd say there is that clearly in the current environment with the rate environment right now, it doesn't really pay to try to go after deposits right now other than through full relationship. So I think as part of that loan growth that Jill's talking about there, as rates start to come down, we're focusing that loan growth either on existing clients or clients that are bringing a full relationship with them, meaning that they're bringing their primary deposit accounts with them as well. So there certainly could be some opportunities there as rates start to come down.

Rob Butterfield: Yeah, and on the deposit side, I guess what I'd say there is that clearly, in the current environment with the rate environment right now, it doesn't really pay to try to go after deposits right now other than through a full relationship. So I think as part of that loan growth that Jill's talking about there, as rates start to come down, we're focusing that loan growth either on existing clients or clients that are bringing a full relationship with them, meaning that they're bringing their primary deposit accounts with them as well.

Speaker Change: Thinking about there is as rates start to come down.

Speaker Change: We're focusing that loan growth either on existing clients or clients that are bringing a full relationship with them, meaning that they are bringing their primary deposit accounts with them as well. So there certainly could be some opportunities there as rates start to come down.

Rob Butterfield: So there certainly could be some opportunities there as rates start to come down.

Speaker Change: Okay. That's helpful and then.

Speaker Change: Okay, that's helpful. And then just maybe just touching on capital. It was great to see their release on TCE given lower rates. Just curious your thoughts on capital just more broadly and what capital priorities are at this point whether capital returns in the cards at all

Speaker Change: Okay, that's helpful. And then maybe just touch on capital. It was great to see their release on TCE given lower rates. Just curious your thoughts on capital just more broadly and what your capital priorities are at this point, whether capital returns are in the cards at all.

Just maybe just touching on capital it was great to see their.

Speaker Change: TCE given lower rates just curious your thoughts on capital just more broadly what capital priorities are at this point, let the capital returned in the cards at all just.

Eric Spector: Thanks for taking the questions. Starting on the credit front, just given the uncertain backdrop, I know you're very conservative on the credit front, but just curious how maybe you're stressing the book and how you're approaching upcoming maturities and the process for modifications now that TDR rules have changed. Yeah, Eric, thanks for the question. We are regularly stress testing our portfolio, so we take a look at it, reviewing income and debt service coverage. We stress vacancy levels as to the real estate loans and their impact on net operating income, debt serviceability, and look at changes in cap rates based on the interest rate, you know, and what that does to the collateral coverages. When you think about our commercial real estate portfolio, about 15% of that will have a rate reset over the next 24 months. And our most recent review reflects no significant concerns with regard to repayment ability based on the current yield curve and their current most recent operating statements.

Speaker Change: I'm just curious about your ideal methods for capital performance today.

Speaker Change: Scarce your ideal methods of capital deployment today.

Speaker Change: Sure sure. So I mean, just to reminder, kind of our capital priorities.

Speaker Change: Sure. So, I mean, just a reminder of kind of our capital priorities. First and foremost is the core dividend, which we kept at 48 cents for the quarter as we have been paying. And then beyond that, you know, historically we have done share repurchases and occasionally some type of special dividend. And beyond that, I mean, of course, we're always interested in M&A activity if it's the right opportunity, you know, at the right price. And the capital has continued to build. So, we haven't repurchased shares for, you know, all of last year at this point. So, capital levels continue to build. And we think in this current environment with a bit of economic uncertainty, it makes sense to be building that capital currently. And so, I wouldn't... I wouldn't expect in the near term that we would change any of our priorities or change the capital actions that you've seen really over the last year. Once we get into maybe the second half of the year, maybe there's better, you know, economic certainty out there. And then we can look at, you know,

Speaker Change: Sure. So, I mean, just a reminder of our capital priorities. First and foremost is the core dividend, which we kept at 48 cents for the quarter, as we have been paying. And then, beyond that, you know, historically, we have done share repurchases and occasionally some type of special dividend. And beyond that, I mean, of course, we're always interested in M&A activity if it's the right opportunity, you know, at the right price. And capital has continued to build. So, we haven't repurchased shares for, you know, all of last year at this point. So, capital levels continue to build.

Speaker Change: First and foremost is the core dividend, which we kept at 48.

Speaker Change: For the quarter as we have been pain and then beyond that.

Speaker Change: Nor can we have done share repurchases and occasionally.

Speaker Change: Some type of special dividend and beyond that I mean of course, we're always.

Interested in M&A activity, if it's the right opportunity.

Speaker Change: At the right price.

Speaker Change: And the capital has continued to build so we havent repurchased shares for.

Speaker Change: All of last year at this point, so capital levels continue to build and we think in this current environment with a bit of economic uncertainty. It makes sense to be building that capital currently and so I wouldn't expect in the near term that we would change any of our priorities or change the capital actions that you've seen.

Speaker Change: And we think in this current environment with a bit of economic uncertainty, it makes sense to be building that capital now. And so I wouldn't... I wouldn't expect in the near term that we would change any of our priorities or change the capital actions that you've seen really over the last year.

Speaker Change: Once we get into maybe the second half of the year, maybe there's better, you know, economic certainty out there. And then we can look at, you know, changes in our capital actions at that point in time.

Speaker Change: Really over the last year.

Speaker Change: Once we get into maybe the second half of the year and maybe there is better.

Speaker Change: Economic certainty out there and then we can look at.

Changes in our capital actions at that point in time.

Speaker Change: changes in our capital actions at that point in time.

Jill: Additionally, because the portfolio is so lowly leveraged on an average basis, we're, you know, the properties are generally well positioned to sustain those changes and asset values, so we have not seen to date any issues with people who need to refinance, whether it's off balance sheet or in our portfolio. That's helpful.

Speaker Change: Thanks for taking my questions and I'll step back.

Speaker Change: Thanks for taking my questions, and I'll step back.

Speaker Change: Yes, thanks for taking my questions and I'll step back.

Speaker Change: Thanks, Eric.

Speaker Change: Thank you next.

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

Andrew Brian Liesch: Thanks. Hi, good morning, everyone. Just a question on some of the last prepared comments mentioned expanding loan production capacity by adding new bankers and investing in initiatives to grow fee income. Any more details you can provide on that? What sort of hiring plans you may have, what locations, and what some of these initiatives may be? Sure, Andrew. This is Jill. I'll take that one. As we have discussed throughout the year, we have been adding new bankers, and it has included not just commercial and commercial real estate lenders, but we've added business bankers, treasury management officers, and other back office personnel as well. It's been across the footprint, really, and as to relationship managers, more up and down the West Coast I-5 corridor, but not limited to that. And we expect to see that continue into 2024. We're still having good conversations. You know, we kind of hit a...

Andrew Brian Liesch: Thanks, Hi, good morning, everyone.

Andrew Brian Liesch: Just a question on <unk>.

The last prepared comments.

Eric Spector: And then maybe just outside of the margin, I'm just curious how you think about the impacts of declining rates on the balance sheet and income statement. Would you expect to see additional loan growth potentially from that? And at what level would you expect to see it, and what segments would you think you'd see at first?

Andrew Brian Liesch: You mentioned expanding loan production capacity by adding.

Andrew Brian Liesch: New bankers investing in initiatives to grow fee income and any more details you can provide on that.

Andrew Brian Liesch: What sort of like hiring plans you may have what locations and what some of these initiatives maybe.

Sure Andrew This is Jim I'll take that one.

Andrew Brian Liesch: Sure, Andrew. This is Jill. I'll take that one. As we have discussed throughout the year, we have been adding new bankers, and it has included not just commercial and commercial real estate lenders, but we've added business bankers, treasury management officers, and other back office personnel as well. It's been across the footprint, really, and as to relationship managers, more up and down the West Coast I-5 corridor, but not limited to that. And we expect to see that continue into 2024. We're still having good conversations. You know, we kind of hit a...

Jim: As we have discussed throughout the year, we have been adding new bankers and it hasn't included not just commercial and commercial real estate lenders, but we've added business bankers Treasury management officers and other back office personnel as well it's been across the footprint really end.

Jill: And I'm just curious how you think about your ability to reprice deposits and drive additional core deposit flows if rates begin coming down. So I'll take a stab at our loan growth and then let Rob talk about the deposit side of the equation. But going into 2024, we are expecting a low to mid-single digit growth rate. As rates come down, we would expect activity to pick up both in commercial real estate and, I would say, construction as well. We'll just get more activity that has been on pause.

Jim: As to relationship managers more up and down.

Jim: First coast Ive quarter, but not limited to that.

Jim: And we expect to see that continue into 2024, we're still having good conversations.

Jim: We kind of hit it.

Jim: Slight pause I would say right here in the first quarter until people get their annual or quarterly bonuses, but the conversations are still going on we would expect to continue to add.

Jill: Slight pause I would say right here in the first quarter until people get their annual or quarterly bonuses, but the conversations are still going on. We would expect to continue to add and I would throw in that these new team members are not just bringing new client relationships, but they bring a level of enthusiasm about what Banner is able to serve that kind of lifts the whole boat. So we anticipate more client disruption and more new bankers.

Jill: Slight pause, I would say right here in the first quarter until people get their annual or quarterly bonuses, but the conversations are still going on. We would expect to continue to add, and I would throw in that these new team members are not just bringing new client relationships, but they bring a level of enthusiasm about what Banner is able to serve that kind of lifts the whole boat. So we anticipate more client disruption and more new bankers.

Rob: Some of that will be offset by what I would anticipate to be a higher refinance rate on the residential mortgage book as they refinance down. So those combined together, even in a shifting rate environment, is what leads me to say a low to mid-single digit growth rate. Yeah, and on the deposit side, I guess what I'd say there is that clearly, in the current environment with the rate environment right now, it doesn't really pay to try to go after deposits right now other than through a full relationship. So I think as part of that loan growth that Jill's talking about there, as rates start to come down, we're focusing that loan growth either on existing clients or clients that are bringing a full relationship So there certainly could be some opportunities there as rates start to come down. Okay, that's helpful. And then maybe just touching on capital. It was great to see their release on TCE given lower rates.

Jim: I would throw in that these new team members and not just bringing new client relationships that they bring a level of enthusiasm about what banner is able to serve that kind of lifts the whole boat.

Jim: So we anticipate more client disruption and more new bankers.

Speaker Change: Got it. And I think in the past you've mentioned these are coming from larger banks. Is that still the case?

Speaker Change: Got it. And I think in the past you've mentioned these are coming from larger banks. Is that still the case? It is, and then just

Speaker Change: Got it and I think in the past you've mentioned these are coming from larger bank because that's still the case.

Speaker Change: It is.

Speaker Change: and then just

Speaker Change: By end market and then just.

Speaker Change: Got it. Just to clean up questions on the fee income side. So it sounds like maybe the deposit fees and other service charge line, is that going to snap back to the prior run rate? And then on bank-owned life insurance, is this the new run rate to be looking at going forward?

Speaker Change: Got it. Just to clean up questions on the fee income side. So it sounds like maybe the deposit fees and other service charge lines are going to snap back to the prior run rate? And then on bank-owned life insurance, is this the new run rate to be looking at going forward?

Speaker Change: Got it got it.

Speaker Change: The cleanup questions on the fee income side, so it sounds like maybe the deposit.

Speaker Change: Other service charge line is that going to kind of snap back to the prior run rate and then on bank owned life insurance is this the new run rate to be looking at going forward.

Yes, so so first on the deposit and fee side. So I would say the run rate's, probably somewhere in between Q4 and Q3 is what I would say that run rate.

Speaker Change: Yeah, so first on the deposit and fees side, so I would say the run rate's probably somewhere in between Q4 and Q3 is what I would say the run rate.

Speaker Change: Yeah, so first on the deposit and fees side, I would say the run rate's probably somewhere in between Q4 and Q3, which is what I would call the run rate, and then on the bank-owned life insurance, there was a death claim in that area, so the current quarter was a bit higher than the run rate.

Speaker Change: and then on

Speaker Change: And then on.

Speaker Change: On the bank-owned life insurance, there was a death claim in that area, so the current quarter was a bit higher than the run rate.

Speaker Change: On the bank loan life insurance, there was a death claim.

Speaker Change: In that area so.

Eric Spector: Just curious about your thoughts on capital just more broadly and what your capital priorities are at this point, whether capital returns are in the cards at all. I'm just curious about your ideal methods for capital performance today. So, I mean, just a reminder of our capital priorities. First and foremost is the core dividend, which we kept at 48 cents for the quarter, as we have been paying. And then beyond that, you know, historically, we have done share repurchases and occasionally some type of special dividend. And beyond that, I mean, of course, we're always interested in M&A activity if it's the right opportunity, you know, at the right price. And the capital has continued to grow.

Third quarter was a bit higher than the run rate.

Speaker Change: Gotcha. All right. That's helpful. Thanks for taking the questions. I'll step back.

Speaker Change: Gotcha.

Alright.

Speaker Change: Helpful. Thanks for taking my questions I'll step back.

Speaker Change: Thank you Andrew.

Speaker Change: Thank you, Andrew.

Speaker Change: Thanks Pete.

Speaker Change: Our next question comes from the line of Andrew Terry.

Speaker Change: Our next question comes from the line of Andrew Terry. Stephen, your line is now open. Please go ahead.

Our next question comes from the line of.

Speaker Change: Andrew.

Andrew Brian Liesch: Steven Your line is now open. Please go ahead.

Speaker Change: Stephen, your line is now open please go ahead.

Steven: Hey, good morning.

Andrew Brian Liesch: Hey, good morning.

Good morning, Andrew.

Stephen: Good morning, Andrew.

Stephen: Good morning, Andrew. Um, wanted to first kind of follow up on some of the commentary on hiring and, um, just maybe first acknowledging you guys have done a really good job in managing the expense space with some of the banner forward initiatives, but just as we look into 2024, it sounds like the pipeline for hiring still is solid today. Just want to maybe marry that with how you're thinking about just expense growth and the rate of expense growth in 2024. Andrew So yeah, we have been making those strategic investments. I mean, we want to keep our eye on the long term. And so, if there are opportunities to take advantage of the current market disruption by getting the right talent into the bank, we're willing to make those investments.

Stephen: um wanted to first kind of follow up on some of the the commentary on the the hiring and um just maybe first acknowledging you guys have done a really good job in in managing the expense space with some of the the banner forward initiatives but just as we look into 2024 it sounds like the the pipeline for for hiring still is is solid today just want to maybe marry that with how you're thinking about just expense growth and and the rate of expense growth in in 2024.

Steven: Wanted to first kind of follow up on some of the commentary around the hiring in.

Steven: Maybe first acknowledging you guys have done a really good job in managing the expense base with some of the banner foreign initiatives, but just as we look into 2024 it sounds like the pipeline for hiring still is solid today, just wanted maybe marry that with how youre thinking about expense growth and the rate of expense growth in 2024.

Rob: So, we haven't repurchased shares for, you know, all of last year at this point. So, capital levels continue to build. And we think in this current environment with a bit of economic uncertainty, it makes sense to be building that capital currently. And so, I wouldn't

Eric Spector: I wouldn't expect in the near term that we would change any of our priorities or change the capital actions that you've seen really over the last year. Once we get into maybe the second half of the year, maybe there's better, you know, economic certainty out there. And then we can look at, you know, changes in our capital actions at that point in time. Thanks for taking my questions, and I'll step back. Thanks, Eric. Our next question comes from the line of Andrew Liesch, from Piper Sandler. Your line is now open. Please go ahead. Thanks. Hi, good morning, everyone.

Stephen: Andrew, it's Rob. So yeah, we have been making those strategic investments. I mean, we want to keep our eye on the long term. And so if there's opportunities to take advantage of the current market disruption by getting the right talent into the bank, we're willing to make those investments.

Yes, Andrew it's Rob so so yes, we have been making those strategic investments I mean, we want to keep our eye on the long term and so if there are opportunities to take advantage of the current market disruption by by getting the right talent into the bank, we're willing to make those investments.

Rob Butterfield: You know, just thinking about expenses overall for 24, we're expecting kind of a normal inflationary increase. So if you think about all of 23, annual 23 compared to annual 24, something in that 3% range is probably what we're currently thinking at this point in time. Just from a quarterly look, I mean, first quarter is always a bit high because all the payroll taxes reset. So we expect that Q1 will probably be the highest of the year. So we would expect it to be a bit higher than the true run rate in the first quarter of the year.

Rob Butterfield: You know, just thinking about expenses overall for 24, we're expecting kind of a normal inflationary increase. So if you think about all of 23, annual 23 compared to annual 24, something in that 3% range is probably what we're currently thinking at this point in time. Just from a quarterly look, I mean, the first quarter is always a bit high because all the payroll taxes reset. So we expect that Q1 will probably be the highest of the year.

Just thinking about expenses overall for 'twenty four.

Steven: We're expecting kind of a normal inflationary increase so if you think about all of 'twenty three annual 23 compared to annual 24.

And that 3% range, probably what we are.

Steven: Currently thinking at this point in time.

Steven: Just from a quarterly look I mean first quarter is always a bit high because all the payroll taxes reset so.

Andrew Brian Liesch: Just a question on some of the last prepared comments mentioned expanding loan production capacity by adding new bankers and investing in initiatives to grow fee income. Any more details you can provide on that? What sort of hiring plans you may have, what locations, and what some of these initiatives may be? Sure, Andrew. This is Jill.

Steven: We expect that Q1 will probably be the highest.

Rob Butterfield: So we would expect it to be a bit higher than the true run rate in the first quarter of the year.

Steven: The highest of the year. So we would expect it to be a bit higher than than the true run rate in the first quarter of the year.

Speaker Change: Okay. That's helpful. I appreciate it.

Speaker Change: Okay, that's helpful. I appreciate it.

Speaker Change:

Speaker Change: If I could ask on the margin.

Speaker Change: If I could ask on the margin, Rob, do you have the spot cost of either interest bearing or total deposits?

Speaker Change: If I could ask on the margin, Rob, do you have the spot cost of either interest-bearing or total deposits?

Speaker Change: Rob do you have the spot cost of either interest bearing or total deposits.

Speaker Change:

Rob Butterfield: in a month of December.

Rob Butterfield: in the month of December. I don't have that in front of me here, but what I'd say, Andrew, is that the cost of deposits for Q4 was essentially in line with, probably just, November's cost of deposits. And so if you take the starting point and ending point and the trajectory, I would think that December, you know, you can probably kind of interpolate where December would have been. But November and the cost of deposits average for the quarter were about the same, and December is higher than that.

In the month of December.

I don't have that in front of me here, but what I, what I'd say Andrew as the.

Rob Butterfield: I don't have that in front of me here, but what I'd say, Andrew, is the

Rob Butterfield: the cost of deposits for Q4.

Speaker Change: The cost of deposits for for Q4.

Rob Butterfield: was essentially in line with probably just November cost of deposits. And so if you take the starting point and ending point and the trajectory, I would think that December, you know, you can probably kind of interpolate where December would have been at. But November and the cost of deposits average for the quarter were about the same, and December is higher than that.

Speaker Change: <unk> was essentially in line with probably just November cost of deposits.

Jill: I'll take that one. As we have discussed throughout the year, we have been adding new bankers, and they have included not just commercial and commercial real estate lenders, but we've added business bankers, treasury management officers, and other back office personnel as well. It's been across the footprint, really, and as to relationship managers, more up and down the West Coast I-5 corridor, but not limited to that. We're still having good conversations.

Speaker Change: And so if you take the starting point at any point in the trajectory I would think that December.

Speaker Change: You can probably kind of interpret late where December would have been out but November and the cost of deposits average for the quarter were about the same in December is higher than that.

Speaker Change: Got it. OK.

Speaker Change: Got it okay.

Speaker Change:

Speaker Change: That makes sense.

Speaker Change: That makes sense. And I guess just overall in the margin kind of going into the first quarter,

Speaker Change: That makes sense. And I guess just overall on the margin, kind of going into the first quarter. Given the non-interest bearing decline and maybe a higher starting point on the deposit cost side, is it fair to think that the margin could see more compression than the 10 basis points you saw in 4Q as we go into the first quarter?

Speaker Change: And I guess, just overall on the margin kind of going into the first quarter.

Speaker Change: Given the non-interest bearing decline and maybe a higher starting point on the deposit cost side, is it fair to think that the margin could see more compression than the 10 basis points you saw in 4Q as we go into the first quarter?

Speaker Change: Given the noninterest bearing decline and maybe a higher starting point on the on the deposit cost side. I mean is it fair to think that the margin could could see more compression in the 10 basis points you saw in <unk> as we go into the first quarter.

Andrew Brian Liesch: You know, we kind of hit a... slight pause, I would say right here in the first quarter until people get their annual or quarterly bonuses, but the conversations are still going on. We would expect to continue to add, and I would add that these new team members are not just bringing new client relationships, but they bring a level of enthusiasm about what Banner is able to serve that kind of lifts the whole boat. So we anticipate more client disruption and more new bankers. Got it. And I think in the past you've mentioned these are coming from larger banks. Is that still the case? It is, and then just, I got it.

Speaker Change: Yeah, I mean, I, you know, we're a bit hesitant to put a number on it just because of, you know, it's, there's a lot of cloudiness out there at this point in time. But, you know, I think we were looking at the trends. So, you know, Q3 was seven base points, Q4 is 10. You know, it certainly could be in that in that in that 10% or 10 basis points decline their compression in in the first quarter. But what I what I would say too, is that

Speaker Change: Yeah, I mean, I'm a bit hesitant to put a number on it just because, you know, there's a lot of cloudiness out there at this point in time. But, you know, I think we were looking at the trends. So, you know, Q3 was seven basis points, and Q4 is 10. It certainly could be in that 10% or 10 basis points decline in their compression in the first quarter. But what I would say, too, is that historically, Q1 has been a better deposit quarter for us compared to Q4 and then Q3 usually the two best deposit quarters for us are actually Q3 and Q1, and Q3 behaved a lot better than Q4, so I think you know while we could be a bit higher than 10 basis points, we certainly could be a bit lower than that as well. Okay.

Speaker Change: Yes.

Speaker Change: I'm a bit hesitant to put a number on it just because of.

Speaker Change: There's a lot of clouds out there at this point in time, but.

Speaker Change: I think we were looking at the trends. So Q3 was seven basis points Q4 is 10.

Speaker Change: It certainly could be in that in that in that 10%.

There are 10 basis points decline there.

Speaker Change: Oppression in the first quarter, but what I, what I would say too is that historically Q1 has been a better deposit quarter for us compared to Q4.

Speaker Change: Historically Q1 has been a better deposit quarter for us compared to Q4 and then Q3 usually the two best deposit quarters for us are actually Q3 and Q1 and Q3 behaved a lot better than Q4 so I think you know while we could be a bit higher than 10 basis points we certainly could be a bit lower than that as well.

Speaker Change: And then Q3, usually the two best deposit quarters for US are actually Q2, Q3, and Q1 and Q3 behaved a lot better than.

Jill: Just to clean up questions on the fee income side. So it sounds like maybe the deposit fees and other service charge lines are going to snap back to the prior run rate? And then on bank-owned life insurance, is this the new run rate to be looking at going forward? Yeah, so first on the deposit and fees side, I would say the run rate's probably somewhere in between Q4 and Q3, which is what I would call the run rate, and then on bank-owned life insurance, there was a death claim in that area, so the current quarter was a bit higher than the run rate. Gotcha. All right. That's helpful. Thanks for taking the questions. I'll step back.

Speaker Change: In Q4, so so I think while we could be a bit higher than 10 basis points, we certainly it could be a bit lower than that as well.

Speaker Change: Okay.

Speaker Change: And maybe last one for me, just on the savings deposits, they were up really nicely this quarter.

Speaker Change: And maybe last one for me, just on savings deposits. They were up really nicely this quarter.

Speaker Change: And maybe last one for me just on the savings deposits they were up really nicely this quarter.

Speaker Change: I just wanted to get a sense of, I think it was up $230 million or so quarter on quarter. For that deposit growth that you saw in the savings bucket specifically, do you have any idea what the incremental rate paid was for the new growth? And what I'm trying to get a sense of is just whether there's kind of money coming from like a new high yield savings offering, or just is it more kind of in line with the average deposit costs? Any color there would be helpful.

Speaker Change: Just wanted to get a sense of I think it was up $230 million or so a quarter on quarter.

Speaker Change: For that deposit growth that you saw in the savings bucket specifically.

Speaker Change: Do you have kind of what the incremental rate paid was for the for new growth and I'm trying to get a sense of is just whether there is kind of.

Speaker Change: Money coming on from like a new high yield savings offering or just is it more kind of in line with the average deposit costs? Any color there would be helpful.

Speaker Change: Money coming on from like a new high yield savings offering or just is it more kind of in line with what.

Speaker Change: The average deposit costs any color there would be helpful.

Rob: Thank you, Andrew. Our next question comes from the line of Andrew Terry. Stephen, your line is now open. Please go ahead. Hey, good morning. Good morning, Andrew. Um, wanted to first kind of follow up on some of the commentary on hiring and, um, just maybe first acknowledging you guys have done a really good job of managing the expense space with some of the banner forward initiatives, but just as we look into 2024, it sounds like the pipeline for hiring still is solid today. Just want to maybe marry that with how you're thinking about just expense growth and the rate of expense growth in 2024. Andrew, it's Rob.

Speaker Change: Yeah sure. So I mean, our stated deposit specials.

Speaker Change: Yeah, sure. So I mean, our stated deposit specials, we haven't changed those since May. Really, because of our strong liquidity position that we have and strong core funding base, we haven't had to chase the market completely all the way up. But the rate on our savings right now, the stated rate, it's tiered, but the top tier is 4% currently on that. But we are willing to make some exception pricing for our very best clients.

Speaker Change: Yeah, sure. So I mean, our stated deposit specials haven't changed those since May. Really, because of the strong liquidity position that we have and a strong core funding base, we haven't had to chase the market completely all the way up. But the rate on our savings right now, the stated rate, it's tiered, but the top tier is 4% currently on that. But we are willing to make some exception pricing for our very best clients in that particular product, and we probably have exception pricing up into that 5% range. But the average cost on that particular high yield savings account right now is running right around 361; that's where we're at on average on that account.

Speaker Change: We haven't changed though since since may.

Speaker Change: Really we because of our.

Speaker Change: Strong liquidity position that we have in and strong core funding base, we hadn't had to chase the market completely all the way up.

Speaker Change: But the rate on our savings right now at the stated rate, it's a tiered but the top tier is 4% currently on that.

Speaker Change: But we are willing to make some exception pricing for our very best clients.

Andrew Brian Liesch: So yeah, we have been making those strategic investments. I mean, we want to keep our eye on the long term. And so if there's opportunities to take advantage of the current market disruption by getting the right talent into the bank, we're willing to make those investments. You know, just thinking about expenses overall for 24, we're expecting kind of a normal inflationary increase. So if you think about all of 23, annual 23 compared to annual 24, something in that 3% range is probably what we're currently thinking at this point in time. Just from a quarterly look, I mean, the first quarter is always a bit high because all the payroll taxes reset.

Speaker Change: in that particular product. And we probably have exception priced up into that 5% range. But the average cost on that particular high yield savings account right now is running right around 361 is where we're at on average on that account.

Speaker Change: In that particular product.

Speaker Change: We probably are exception priced up into that 5% range, but the average cost on that particular high yield savings account right now is running right around $3 61.

Our add on average on that account.

Speaker Change: Got it okay.

Speaker Change: Got it. Okay. Those are all the questions I had. I appreciate you guys making time for me today.

Speaker Change: Those are all the questions I had I appreciate you guys, making time for me today.

Speaker Change: Thank you Andrew.

Speaker Change: Thank you, Andrew.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you'd like to ask a question, please press star followed by one on your telephone.

Speaker Change: I wonder if you'd like to ask a question. Please press star one on your telephone keypad.

Rob: So we expect that Q1 will probably be the highest of the year. So we would expect it to be a bit higher than the true run rate in the first quarter of the year. Okay, that's helpful.

Speaker Change: Our next question comes from the line of Kelly Mota of KBW. Your line is so open, please go ahead.

Speaker Change: Our next question comes from the line of Kelly Motta of <unk> your.

Kelly Motta: Your line is now open. Please go ahead.

Kelly Mota: Hi, good morning. Thanks for the question.

Kelly Mota: Hi, good morning. Thanks for the question. I wanted to follow up on the deposit side. I think, Rob, you made a comment in the Q&A that it doesn't necessarily make sense to change deposits here. Just wondering, I saw in 4Q with deposits down, you kind of backfilled funding with FHLB. Just how should we be thinking about the funding of growth and the use of wholesale funding as we look ahead with kind of that low to mid single-digit loan growth anticipated?

Kelly Motta: Hi, good morning, Thanks for the question.

Kelly Mota: I wanted to follow up on the deposit side. I think, Rob, you made a comment in the Q&A that it doesn't necessarily make sense to change deposits here. Just wondering, I saw in 4Q with deposits down, you kind of backfilled funding with FHLB. Just how we should be thinking about the funding of growth and the use of wholesale funding as we look ahead with kind of that low to mid single digit loan growth anticipated.

Andrew Brian Liesch: I appreciate it. If I could ask on the margin, Rob, do you have the spot cost of either interest-bearing or total deposits for the month of December?

Speaker Change: Good morning follow up on that.

Speaker Change: I wanted to follow up on the deposit side I think Rob you made a comment lethal Renee that it doesn't necessarily make sense to chase deposits here.

Rob: I don't have that in front of me here, but what I'd say, Andrew, is that the cost of deposits for Q4 was essentially in line with probably just November's cost of deposits. And so if you take the starting point and ending point and the trajectory, I would think that December, you know, you can probably kind of interpolate where December would have been. But November and the cost of deposits average for the quarter were about the same, and December is higher than that. Got it. OK. That makes sense. And I guess just overall on the margin, kind of going into the first quarter. Given the non-interest bearing decline and maybe a higher starting point on the deposit cost side, is it fair to think that the margin could see more compression than the 10 basis points you saw in 4Q as we go into the first quarter? Yeah, I mean, I'm, you know, we're a bit hesitant to put a number on it just because, you know, there's a lot of cloudiness out there at this point in time.

Speaker Change: Just wondering I saw in <unk> with the deposits down kind of backfill funding with H L. B.

Speaker Change: How we should be thinking about.

Speaker Change: Funding of growth.

Speaker Change: Our wholesale funding at <unk>.

Speaker Change: Go ahead with kind of that low to mid single digit loan growth anticipated.

Speaker Change: Yes, Kelly I mean.

Speaker Change: We did see an uptick in our <unk> advances.

Speaker Change: But I will point out our reliance on wholesale funding is very very small but.

Speaker Change: But we did see that uptick in <unk>.

Speaker Change: If you look at the activity, we saw that about $90 million decline in retail deposits.

Speaker Change: And some of that was event driven activity so not necessarily.

Speaker Change: Something we expect.

Speaker Change: <unk> there and then we also let $55 million of brokerage Cds run off as well and so I would look at part of the increase in <unk> advances as essentially covering the brokerage Cds that we let roll off there.

Andrew Brian Liesch: But, you know, I think we were looking at the trends. So, you know, Q3 was seven base points, and Q4 is 10. You know, it certainly could be in that 10% or 10 basis points decline in their compression in the first quarter. But what I would say, too, is that historically, Q1 has been a better deposit quarter for us compared to Q4 and then Q3 usually the two best deposit quarters for us are actually Q3 and Q1, and Q3 behaved a lot better than Q4, so I think you know, while we could be a bit higher than 10 basis Okay.

Speaker Change: In our brokerage Cds are also very small at this point at $108 million.

Speaker Change: But as we let those roll off.

Speaker Change: The deposit activity overall.

Speaker Change: Retail deposit activity doesn't cover it will have to cover those with FHA advances.

Rob Butterfield: The advantage of the FHLB advances is we're staying short on those, so it's essentially overnight. We're able to pay those down as deposit activity comes in, and then clearly if rates start to come down later in the year, then it will give us the opportunity to pay those down very quickly. But I think from a loan growth standpoint, we're looking at the roll-off of the securities, so we're getting about $60 million of cash flows off our security portfolio, so part of it will come from that. We could consider some additional security sales, similar to what we have been doing here, although given the current rate environment and everything that's going on, I mean, we continue to kind of evaluate all options there. But other than that, I think it would come kind of the last bucket that we'd use as infill as those FHLB advances.

Rob Butterfield: The advantage of the FHLB advances is that we're staying short on those, so it's essentially overnight. We're able to pay those down as deposit activity comes in, and then clearly, if rates start to come down later in the year, then it will give us the opportunity to pay those down very quickly. But I think from a loan growth standpoint, we're looking at the roll-off of the securities, so we're getting about $60 million of cash flows from our security portfolio, so part of it will come from that.

Speaker Change: But the advantage of <unk> advances were staying short on those so it's essentially overnight. So we're able to pay those down as deposit activity comes in and then clearly if rates start to come down later later in the year, then will give us the opportunity to pay those down very quickly but.

Speaker Change: I think from a loan growth standpoint, we're looking at.

Speaker Change: Roll off in the securities. So we're getting about $60 million of cash flows off our security portfolio. So part of it will come from that.

Andrew Brian Liesch: And maybe last one for me, just on savings deposits, they were up really nicely this quarter. I just wanted to get a sense of how much, I think it was up $230 million or so quarter on quarter. For that deposit growth that you saw in the savings bucket specifically, do you have kind of what the incremental rate paid was for the new growth? And what I'm trying to get a sense of is just whether there's kind of money coming on from like a new high-yield savings offering or just is it more kind of in line with the average deposit costs? Any color there would be helpful.

Rob Butterfield: We could consider some additional security sales, similar to what we have been doing here, although given the current rate environment and everything that's going on, I mean, we continue to kind of evaluate all options there. But other than that, I think it would come kind of as the last bucket that we'd use as infill as those FHLB advances.

We could consider some additional security sales similar to what we have been been doing here, although given the current rate environment and everything that's going on I mean, we continue to kind of evaluate all options there.

Speaker Change: But other than that I think I think it would come kind of the last bucket that we would use as infill as those <unk> advances.

Speaker Change: Got it.

Speaker Change: Got it. And I'd like you to circle back a bit to the margin going through what you mentioned about low yields and being able to offset pressure if there's maybe one or two cuts, but it would be more draconian or more punitive if we potentially follow the forward curve. Is that how to think about it with the margin that you might see some?

Speaker Change: Got it. And I'd like you to circle back a bit to the margin, going through what you mentioned about low yields and being able to offset pressure if there's maybe one or two cuts, but it would be more draconian or more punitive if we potentially followed the forward curve. Is that how you should think about it with the margin that you might see some?

Okay.

Yes.

Rob: Yeah, sure. So, I mean, our stated deposit specials haven't changed those since May. Really, because of the strong liquidity position that we have and a strong core funding base, we haven't had to chase the market completely all the way up. But the rate on our savings right now, the stated rate, it's tiered, but the top tier is 4% currently on that. But we are willing to make some special exception pricing for our very best clients on that particular product.

Speaker Change: Mark.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Be able to offset pressure, if theres, maybe water water cut but it would be more draconian or more punitive. If we follow the forward curve is that is that how to think about it with the margin that you might see some.

Speaker Change: Thank you so much for joining us today, and we'll see you next time.

Speaker Change: Thank you so much for joining us today, and we'll see you next time. We have expectations relative to what the market is pricing in versus what KBW, what we have internally, on our rate expectation side.

Speaker Change: A relief on the margin.

Speaker Change: Some modest rate cut but.

Speaker Change: There would still be greater downward pressure at least initially.

Speaker Change: <unk> follow the forward curve, just trying to get kind of.

Rob: And we probably have exceptions priced up into that 5% range. But the average cost on that particular high yield savings account right now is running right around 361 which is where we're at on average on that account. Got it. Okay. Those are all the questions I had. I appreciate you guys making time for me today.

Speaker Change: Yes.

Speaker Change: were expectations relative to what the market is pricing in versus what KBW, what we have internally.

Speaker Change: Where expectations relative to what the market is pricing in versus what kw, but when you have internally.

Speaker Change: Our rate expectation side.

Speaker Change: on our rate expectation side.

Speaker Change: Sure, sure. Yeah, no, no, I think that's accurate. I mean, I think we're well positioned for kind of a gradual decline in interest rates, because I think we're going to, you know, the adjustable rate loans that haven't repriced through the cycle, I think they're going to benefit us if you see 25 basis points at a time. You know, if you see two or three cuts in the second half of the year, I think the adjustable rates will cover that. But if the Fed got more aggressive than that, and then I think temporarily you'd see more impact on margin. But again, those adjustable rate loans, as time goes by, will continue to reprice up unless rates really come down, you know, more rapidly.

Speaker Change: Sure, sure. Yeah, no, no. I think that's accurate. I mean, I think we're well positioned for kind of a gradual decline in interest rates because I think we're going to, you know, the adjustable rate loans that haven't repriced through the cycle, I think they're going to benefit us if you see 25 basis points at a time. You know, if you see two or three cuts in the second half of the year, I think the adjustable rates will cover that. But if the Fed got more aggressive than that, then I think temporarily you'd see more impact on margin. But again, those adjustable rate loans, as time goes by, will continue to reprice up unless rates really come down, you know, more rapidly.

Speaker Change: Sure sure, Yes, no no I think thats accurate.

I think we're well positioned for kind of a gradual.

Andrew Brian Liesch: Thank you, Andrew. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone. Our next question comes from the line of Kelly Mota of KBW. Your line is so open, please go ahead. Hi, good morning.

Speaker Change: Decline in interest rates, because I think we're going to.

Speaker Change: The adjustable rate loans that havent re prices cycle, I think theyre going to benefit us if if you see 25 basis points at a time.

Kelly Mota: Thanks for the question. I wanted to follow up on the deposit side. I think, Rob, you made a comment in the Q&A that it doesn't necessarily make sense to change deposits here. Just wondering, I saw in 4Q that with deposits down, you kind of backfilled funding with FHLB. Just how we should be thinking about the funding of growth and the use of wholesale funding as we look ahead with kind of that low to mid single-digit loan growth anticipated. Yeah, Kelly.

Speaker Change: Two or three cuts in the second half of the year I think the adjustable rates will cover that.

Speaker Change: But if the fed got more aggressive than that and then I think temporarily you'd see more impact on margin, but again, it's those adjustable rate loans as time goes by.

Speaker Change: We will continue to reprice up unless rates really come down more rapidly.

Speaker Change: are helpful. Maybe last question for me, maybe for Jill. It looks like there was a, obviously a very small base, but a little bit of an uptick on early stage delinquencies. Just wondering if there's anything you're seeing there or if it's

Speaker Change: are helpful. Maybe the last question for me, maybe for Jill. It looks like there was a, obviously, a very small base, but a little bit of an uptick in early stage delinquencies. Just wondering if there's anything you're seeing there or if it's kind of later payments around the holiday season. Just wondering if you could provide any color on that.

Speaker Change: Alright helpful. Maybe last question for me.

Speaker Change: And then maybe for Jill.

Speaker Change: But it looks like there was a.

Speaker Change: Obviously, you had a very small base, but a little bit of an uptick on early stage delinquencies just wondering if theres anything youre seeing there is just normal I guess later payments around the holiday season.

Rob: I mean, we did see an uptick in our FHLB advances, but I will point out our reliance on wholesale funding is very, very small. But we did see that uptick. And, you know, I mean, if you look at the activity, we saw that about $90 million decline in retail deposits. And some of that was event-driven activity.

Speaker Change: and kind of later payments as around the holiday season. Just wondering if you could provide any color on that.

Speaker Change: Just wondering if you could provide any color on that.

Speaker Change: Yes, Kelly that's exactly what it is year end holidays.

Speaker Change: Yeah, Kelly, that's exactly what it is, is year-end holidays and just normal delinquencies. I think what I would emphasize is that when the credit metrics are as clean as they have been, any little change moves the dial, so 0.4% delinquency is still very strong.

Speaker Change: Yeah, Kelly, that's exactly what it is, year-end holidays and just normal delinquencies. I think what I would emphasize is that when the credit metrics are as clean as they have been, any little change moves the dial, so 0.4% delinquency is still very strong.

Speaker Change: And just normal delinquencies I think what I would emphasize is that when the kind of metrics are as clean as they have been any little change moves the dial so <unk>.

Rob: So not necessarily something we expect to continue there. And then we also let 55 million broken CDs run off as well. And so I would look at part of the increase in FHLB advances as essentially covering the brokered CDs that we let roll off there. And our brokered CDs, I mean, are also very small at this point, at 108 million. But as we let those roll off, if, you know, the deposit activity overall doesn't, you know, retail deposit activity doesn't cover it, we'll have to cover those with FHLB advances. The advantage of the FHLB advances is we're staying short on those, so it's essentially overnight.

Speaker Change: 4% delinquency is still very strong.

Kelly Mota: Absolutely. Thank you so much. I'll step back.

Speaker Change: Absolutely. Thank you so much I'll step back.

Speaker Change: Thank you, Kelly.

Speaker Change: Thank you Kelly.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Timothy Coffey of Jani. Your line is now over.

Speaker Change: Next question comes from the line of Timothy Coffey of Janney. Your line is now open. Please go ahead.

Timothy Coffey: Great, thank you, good morning everybody

Timothy Coffey: Great, thank you, good morning everybody.

Timothy Coffey: Great. Thank you and good morning, everybody.

Timothy Coffey: Yes.

Timothy Coffey: Question I guess for Mark and Rob. As you kind of look at the type of depositors that are still chasing rate, are you seeing a difference between your urban customers and your more rural depositors?

Timothy Coffey: Question I guess for Mark and Rob. As you kind of look at the type of depositors that are still chasing rates, are you seeing a difference between your urban customers and your more rural depositors? Jim, it's Rob. Thanks for the question. Yeah, I mean, I think we are seeing a little bit of different behavior there.

Timothy Coffey: Question, I guess for Mark and Rob.

Speaker Change: Just trying to look at.

Mark: The types of depositors that are still chasing rate.

Mark: Are you seeing a difference between your urban customers and your more rural depositors.

Kelly Mota: We're able to pay those down as deposit activity comes in, and then clearly, if rates start to come down later in the year, then it will give us the opportunity to pay those down very quickly. But I think from a loan growth standpoint, we're looking at the roll-off of the securities, so we're getting about $60 million of cash flows from our security portfolio, so part of it will come from that. We could consider some additional security sales, similar to what we have been doing here, although given the current rate environment and everything that's going on, I mean, we continue to kind of evaluate all options there. But other than that, I think it would come kind of as the last bucket that we'd use as infill as those FHLB advances. I got it.

Mark: Tim It's Rob Thanks for the question, Yes, I mean I think it is I think we are seeing a little bit of different behavior. There.

Timothy Coffey: Jim, it's Rob. Thanks for the question. Yeah, I mean, I think we are seeing a little bit of different behavior there.

Rob Butterfield: in general, I would say are

Rob Butterfield: in general, I would say rural clients probably have more consumer-type deposits, not that there's not a number of commercial clients there as well, but on average. And then the metro probably has a higher percentage of business. And so rather than rural versus urban, I would probably characterize it as consumer versus commercial. And, you know, I think we're seeing that consumers are probably even more rate sensitive than some of our commercial clients. And so we're probably seeing more movement there. I mean, clearly, commercial clients are managing their balance sheets at this point and moving stuff back and forth, but they also have to maintain a certain level in their non-interest-bearing checking accounts just for normal operations and stuff. So I think that activity probably happened a while ago, but we're continuing to see sensitivity on consumer claims.

Rob Butterfield: In General I would say are our ROE.

Rob Butterfield: Rural clients probably has more consumer-type deposits, not that there's not a number of commercial clients there as well, but on average. And then metro probably has a higher percentage of business. And so rather than rural versus urban, I would probably characterize consumer versus commercial. And, you know, I think we're seeing that consumers are probably

Tim: Clients on is probably.

Tim: More consumer.

Tim: Type deposits not that there's not a number of commercial clients there as well, but on average and then metro probably has a higher percentage of it.

Tim: Business and so.

Tim: So rather than.

Tim: Rural versus urban I would probably characterize.

Consumer versus commercial.

Tim: And then.

Tim: We're seeing that consumers are probably.

Rob: And I'd like you to circle back a bit to the margin, going through what you mentioned about low yields and being able to offset pressure if there's maybe one or two cuts, but it would be more draconian or more punitive if we potentially followed the forward curve. Is that how you think about it with the margin that you might see some? Thank you so much for joining us today, and we'll see you next time. We have expectations relative to what the market is pricing in versus what KBW, what we have internally, on our rate expectation side. Sure, sure.

Rob Butterfield: even more rate sensitive than some of our commercial clients. And so we're probably seeing more movement there. I mean, clearly commercial clients are managing their balance sheet at this point and moving stuff back and forth, but they also have to maintain a certain level in their non-interest bearing checking accounts just for normal operations and stuff.

Even more rate sensitive than some of our commercial clients and so we're probably seeing more more movement. There I mean, clearly commercial clients are managing their balance sheet at this point and then moving to step back and forth, but they also have to maintain a certain level in their noninterest bearing checking.

Tim: <unk> just for normal operations and stuff.

Rob Butterfield: So I think that activity probably happened a while ago, but we're continuing to see sensitivity on the consumer claims.

Tim: So I think that activity probably happened a while ago, but we're continuing to see sensitivity on the consumer clients.

Okay, Alright thats helpful. Thank you.

Speaker Change: Okay, that's helpful. Thank you. And then a question for Jill. You know, as kind of the credit metrics start to, you know, somewhat normalized towards pre-COVID levels, what is your outlook for the economy within Banner's footprint? Is it for a soft landing or something harder?

Speaker Change: Okay, that's helpful. Thank you. And then a question for Jill. As the credit metrics start to, you know, somewhat normalize towards pre-COVID levels, what is your outlook for the economy within Banner's footprint? Is it for a soft landing or something harder?

Speaker Change: And then a question for Jill.

Kind of.

Jill: The credit metrics start to somewhat normalize towards pre COVID-19 levels.

Kelly Mota: Yeah, no, no, I think that's accurate. I mean, I think we're well positioned for kind of a gradual decline in interest rates because I think we're going to, you know, the adjustable rate loans that haven't repriced through the cycle, I think they're going to benefit us if you see 25 basis points at a time. You know, if you see two or three cuts in the second half of the year, I think the adjustable rates will cover that. But if the Fed got more aggressive than that, then I think you'd see more impact on margin temporarily. But again, those adjustable rate loans, as time goes by, will continue to go up unless rates really come down, you know, more rapidly. Maybe the last question for me, maybe for Jill.

Speaker Change: Is your what is your outlook for the economy.

Within banner's footprint is it for a soft landing or something harder.

Jill: Well, Tim, I wish I had a crystal ball.

Jill: Well, Tim, I wish I had a crystal ball. I'm leaning toward a soft landing, and it's really because of the markets that we're serving. I feel really good about the West Coast and how strong it has held up. But at the end of the day, we're well positioned to deal with whatever is thrown our way, and we're just going to keep on doing what we do.

Speaker Change: Well, Tim I wish I had a crystal ball.

Speaker Change: I'm leaning to a soft landing and it's really because the markets that we're serving I feel really good about the west coast and how strong it has held up but at the end of the day, we are well positioned to deal with whatever is thrown our way and we are and we're just going to keep.

Jill: I'm leaning to a soft landing and it's really because of the markets that we're serving. I feel really good about the West Coast and how strong it has held up. But at the end of the day, we're well positioned to deal with whatever is thrown our way and we're just going to keep on doing what we do.

Speaker Change: On doing what we do.

Speaker Change: Okay Alright.

Speaker Change: All right. Thank you. Those are my questions.

Speaker Change: All right. Thank you. Those are my questions,

Alright. Thank you those are my questions.

Speaker Change: Thanks, Tim.

Speaker Change: Thank you.

Speaker Change: Our last question is a follow-up question from Jeff Rulis of DA Davidson. Your line is now open, please go ahead.

Speaker Change: Our last question is a follow up question from Jeffrey <unk> with D. A Davidson. Your line is now open. Please go ahead.

Jeffrey Allen Rulis: Thanks. Just another quick one on credit and kind of splitting hairs a little bit. But the C&I, the increase in C&I non-recruits link quarter, I mean, overall MPAs to assets under 20 basis points. A small number, but just trying to get any read on what that commercial non-accrual increase was, if that was at any, I don't know, granular or by segment that you saw.

Jeffrey: Thanks, just another quick one on credit and kind of splitting hairs, a little bit, but the C&I the increase in C&I non accruals linked quarter, I mean overall npa's to assets under 20 basis points.

Kelly Mota: It looks like there was, obviously, a very small base, but a little bit of an uptick in early stage delinquencies. Just wondering if there's anything you're seeing there or if it's kind of later payments around the holiday season. Just wondering if you could provide any color on that.

Jeffrey Allen Rulis: Small number, but just trying to get any read on what that commercial non-accrual increase was, if that was at any, I don't know, granular or by segment that you saw.

Jeffrey: Small number but.

Jeffrey: Just trying to get any read on what that commercial non accrual increase was if that was at any granular by segment that you saw.

Jill: Yeah, Kelly, that's exactly what it is, year-end holidays and just normal delinquencies. I think what I would emphasize is that when the credit metrics are as clean as they have been, any little change moves the dial, so 0.4% delinquency is still very strong. Absolutely. Thank you so much.

Speaker Change: It was granular, Jeff. I mean, actually we've had a little bit of movement out and movement in, but it's not industry specific or anything that points to a larger concern.

Speaker Change: It was granular, Jeff. I mean, actually, we've had a little bit of movement out and movement in, but it's not industry-specific or anything that points to a larger concern.

Speaker Change: It was granular Jeff I mean, actually we've had a little bit of movement out and movement, and but it's not industry specific or anything that points to a larger concern.

Kelly Mota: I'll step back. Thank you, Kelly. Our next question comes from the line of Timothy Coffey of Jani. Your line is now over.

Jeffrey Allen Rulis: Fair enough. That I check. Then just one of the last one is on the mortgage side.

Jeffrey Allen Rulis: Fair enough. That I will check. Then just one last one is on the mortgage side, trying to get a read on, you know, it looks like a benefit on the move within the multifamily investment. I mean, it's a little bump in the mortgage banking line. Where could you see that kind of growth in 24 relative to 23? Do you think it shapes up as a slightly better year from mortgage banking overall if we look at it year over year? Yeah, it's Rob. So, yeah, I think, you know, it's obviously heavily interest rate environment driven, right?

Speaker Change: Fair enough.

Speaker Change: I thought I'd check.

Speaker Change: Just wanted to the last one is on the mortgage side, just trying to get a read on.

Timothy Coffey: Great, thank you, good morning everybody. Question for Mark and Rob. As you kind of look at the type of depositors that are still chasing rates, are you seeing a difference between your urban customers and your more rural depositors? Jim, it's Rob.

Jeffrey Allen Rulis: trying to get a read on, you know, it looked like a benefit on the move within the multifamily investment. I mean, it's a little bump in the mortgage.

It looked like.

Speaker Change: Benefit on that.

Speaker Change: Move within the multifamily.

I mean, it's a little bump in the mortgage.

Jeffrey Allen Rulis: banking line. Where could you see that kind of in 24 relative to 23? Do you think it shapes up as a slightly better year from mortgage banking overall if we look at year over year?

Speaker Change: Banking line.

Speaker Change: Where could you see that kind of in 'twenty four relative to 'twenty three I think it shapes up as.

Rob: Thanks for the question. Yeah, I mean, I think we are seeing a little bit of different behavior there. In general, I would say rural clients probably have more consumer-type deposits, not that there's not a number of commercial clients there as well, but on average. And then metro probably has a higher percentage of business. And so rather than rural versus urban, I would probably characterize it as consumer versus commercial.

Speaker Change: Slightly better year for <unk>.

Speaker Change: Mortgage banking overall, if we look at year over year.

Jeffrey Allen Rulis: Yeah, it's Rob. So, yeah, I think, you know, it's obviously heavily interest rate environment driven, right?

Speaker Change: Yes.

Speaker Change: It's Rob so yeah, I think I think it's obviously heavy heavily interest rate environment driven.

Speaker Change:

Rob Butterfield: but we have seen a bit of a pullback in rates so that should should help the activity if we continue to see rates come down our expectations is that 24 would look better than 23 still could be a challenging year for the industry obviously but but we do think that we would see some pickup and in residential mortgage banking operations during 2024 compared to 23.

Rob Butterfield: but we have seen a bit of a pullback in rates, so that should help the activity. If we continue to see rates come down, our expectations are that 24 would look better than 23. It could still be a challenging year for the industry, obviously, but we do think that we would see some pickup in residential mortgage banking operations during 2024 compared to 23.

Speaker Change: But we have seen a bit of a pullback in rates.

Speaker Change: So that should should help the activity. If we continue to see rates come down our expectations is that 'twenty four would look better than 23.

Speaker Change: Still could be a challenging year for the industry, obviously, but we do think that we would see some pickup in residential mortgage banking operations during two.

Timothy Coffey: And, you know, I think we're seeing that consumers are probably even more rate sensitive than some of our commercial clients. And so we're probably seeing more movement there. I mean, clearly, commercial clients are managing their balance sheets at this point and moving stuff back and forth, but they also have to maintain a certain level in their non-interest-bearing checking accounts just for normal operations and stuff.

Speaker Change: <unk> 2024 compared to <unk> 23.

Speaker Change: Rob would you anticipate any more multifamily kind of moves that would bump.

Speaker Change: Rob, would you anticipate any more multifamily moves that would bump

Rob Butterfield: That would be a benefit to that line item or was that kind of a Q4 heavy item?

Rob Butterfield: That would be a benefit to that line item, or was that kind of a Q4 heavy item?

Rob Butterfield: That would be a benefit to that line item or is that kind of a Q4 heavy item.

Speaker Change: Yeah, it was a Q4 heavy item. I mean, we had been writing down as interest rates had been coming up, we had been writing down the multifamily loans, the fair value of those. And all that was running through mortgage banking operations. So even during the first nine months of the year, we had written $800,000. So part of that gain that we recorded in the fourth quarter was really a recapture of some loss that we had taken during the first nine months of the year. But then there was also some losses in prior years. The write-down set was recaptured. And so, but now we've moved all of the multifamily loans out of the held for sale. So we don't expect that to see that benefit anymore. But on the other side of it, we did talk about making some strategic investments into some different areas. And one of those is our SBA operations. And we've made, you know, we've hired a number of folks in the fourth quarter here as well as far as.

Speaker Change: Yeah, it was a Q4 heavy item. I mean, as interest rates were coming up, we had been writing down the multifamily loans, the fair value of those. And all that was running through mortgage banking operations. So even during the first nine months of the year, we had written $800,000. So part of that gain that we recorded in the fourth quarter was really a recapture of some losses that we had taken during the first nine months of the year. But then there were also some losses in prior years. The write-down set was recaptured.

Speaker Change: Yes that was a Q4 heavy item I mean, we have been writing down as interest rates have been coming up we had been writing down the multifamily loans the fair value of those.

Rob: So I think that activity probably happened a while ago, but we're continuing to see sensitivity on the consumer claims. Okay, that's helpful. Thank you. And then a question for Jill. As the credit metrics start to, you know, somewhat normalize towards pre-COVID levels, what is your outlook for the economy within Banner's footprint? Is it for a soft landing or something harder?

Speaker Change: And all of that was running through our mortgage banking operations. So even during the first nine months of the year, we had written down from $800000. So so part of that gain that we recorded in the fourth quarter was really a recapture of some loss we had taken during the first nine months of the year, but then there was also some losses in prior years. So write downs that was recapture.

Speaker Change: And so but now we've moved all of the multifamily loans out of held for sale. So we don't expect that to to see that benefit anymore.

Speaker Change: And so, but now we've moved all of the multifamily loans out of the held for sale, so we don't expect to see that benefit anymore. But on the other side of it, we did talk about making some strategic investments into some different areas, and one of those was our SBA operations.

Speaker Change: But on the other side of it and we did talked about making some strategic investments into some different areas and then one of those is our SBA operations.

And we've made we've hired a number of folks in the fourth quarter here as well as far as business, but officers. So so what we're looking at is kind of growing our SBA business.

Timothy Coffey: But at the end of the day, we're well positioned to deal with whatever is thrown our way, and we're just going to keep on doing what we do. All right. Thank you.

Speaker Change: And we've made, you know, we hired a number of folks in the fourth quarter here as well as far as. So what we're looking at is kind of growing our SBA business and growing our gain-on-sale related SBA loans to kind of offset that historical gain-on-sale that we would have seen from multifamily during kind of a normal environment. So, you know, I can't give any specifics on what our expectations are from that SBA business for 24, but we do expect that, you know, we'll see some build of gain-on-sale throughout the year in that particular unit.

Speaker Change: So what we're looking at is kind of growing our SBA business and growing our gain-on-sale related SBA loans to kind of offset that historical gain-on-sale that we would have saw from multifamily during kind of a normal environment. So, you know, can't give any specifics on what our expectations are from that SBA business for 24, but we do expect that, you know, we'll see some build of gain-on-sale throughout the year in that particular unit.

Jill: Thanks, Tim. Our last question is a follow-up question from Jeff Rulis of DA Davidson. Your line is now open, please go ahead.

Speaker Change: And growing our gain on sale related to SBA loans to kind of offset that historical gain on sale that we would have saw from multifamily during kind of a normal environment. So.

Speaker Change: Can't give any specifics on what our expectations are from the SBA business for 'twenty four but we do expect that we will see some buildup gain on loan sale throughout the year in that particular unit.

Speaker Change: Alright. Thank.

Speaker Change: Thank you for the color there. That's it for me. Thanks.

Speaker Change: Thank you for the color there that's it for me thanks.

Jill: I mean, actually, we've had a little bit of movement out and movement in, but it's not industry specific or anything that points to a larger concern. Fair enough. That I check.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you I've said no additional questions waiting at this time I would like to hand, the conference call back over to clinical questions, President and CEO, Mark <unk> for closing remarks.

Speaker Change: If there are no additional questions waiting at this time, I'd like...

Speaker Change: If there are no additional questions waiting at this time, I'd like to call back over to Banner Corporation's President and CEO Mark Grescovich for closing remarks.

Speaker Change: call back over to Banner Corporation's President and CEO Mark Grescovich for closing remarks.

Jeffrey Allen Rulis: Then just one last one is on the mortgage side, trying to get a read on, you know, it looks like a benefit on the move within the multifamily investment. I mean, it's a little bump in the mortgage banking line. Where could you see that kind of growth in 24 relative to 23? Do you think it shapes up as a slightly better year from mortgage banking overall if we look at it year over year? Yeah, it's Rob.

Mark: Thank you Candice and thank you all for your questions and your attention today.

Mark J. Grescovich: Thank you, Candace, and thank you all for your questions and your attention today.

Mark J. Grescovich: Thank you, Candace, and thank you all for your questions and your attention today. We're very proud of the Banner team and our 2023 performance. In the wake of what is a very challenging environment for our industry, we thank you again for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future.

Mark J. Grescovich: We're very proud of the Banner team and our 2023 performance.

Mark: As I've stated, we're very proud of the banner team and our 2023 performance.

Mark J. Grescovich: In the wake of what is a very challenging environment for our industry,

Mark: In the wake of what is a very challenging environment for our industry.

Mark J. Grescovich: So thank you again for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future.

Speaker Change: Thank you again for your interest in banner and for joining our call today, we look forward to reporting our results to you again in the future.

Rob: So, yeah, I think, you know, it's obviously heavily interest rate environment driven, right? but we have seen a bit of a pullback in rates, so that should help the activity. If we continue to see rates come down, our expectations are that 24 would look better than 23. It could still be a challenging year for the industry, obviously, but we do think that we would see some pickup in residential mortgage banking operations during 2024 compared to 23. Rob, would you anticipate any more multifamily moves that would bump, that would be a benefit to that line item, or was that kind of a Q4 heavy item? Yeah, it was a Q4 heavy item.

Speaker Change: Have a wonderful day, everyone, and again, Happy New Year and a kickoff to 2024.

Speaker Change: Have a wonderful day, everyone, and again, Happy New Year and the kickoff to 2024.

Speaker Change: Have a wonderful day, everyone and again happy new year, and a kick off to 2024.

Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect your lines.

Speaker Change: You may now disconnect your line.

Speaker Change: [music].

Speaker Change: transcript Emily Beynon

Speaker Change: Yes.

Speaker Change: [music].

Jeffrey Allen Rulis: I mean, as interest rates were coming up, we had been writing down the multifamily loans, the fair value of those, and all that was running through mortgage banking operations. So even during the first nine months of the year, we had written $800,000. So part of that gain that we recorded in the fourth quarter was really a recapture of some losses that we had taken during the first nine months of the year. But then there were also some losses in prior years, the write-downs that were recaptured. And so, but now we've moved all of the multifamily loans out of the health care system for sale. So we don't expect that to see that benefit anymore.

Speaker Change: Okay.

[music].

Speaker Change: Yes.

Rob: But on the other side of it, we did talk about making some strategic investments into some different areas, and one of those was our SBA operations. And we've made, you know, we've hired a number of folks in the fourth quarter here, as well, as far as, So what we're looking at is kind of growing our SBA business and growing our gain-on-sale related SBA loans to kind of offset that historical gain-on-sale that we would have seen from multifamily during kind of a normal environment. So, you know, can't give any specific Thank you for the color there. That's it for me.

Jeffrey Allen Rulis: Thanks. Thanks, Jeff. If there are no additional questions waiting at this time, I'd like to call back over to Banner Corporation's President and CEO Mark Grescovich for closing remarks. Thank you, Candace, and thank you all for your questions and your attention today. We're very proud of the Banner team and our 2023 performance. In the wake of what is a very challenging environment for our industry, So thank you again for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future. Have a wonderful day, everyone, and again, Happy New Year and a great kickoff to 2024. You may now disconnect your line. Transcript Emily Beynon

Q4 2023 Banner Corp Earnings Call

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