Q3 2024 Banner Corp Earnings Call
Speaker Change: Good morning, all good afternoon, all welcome to the banner corporation third quarter 2024 conference school and webcast.
Adam: My name is Adam, and I'll be a representative today.
Adam: If you'd like to ask a question during the Q&A portion of today's cool, you may do so requesting staff followed by one on your telephone keypad. Oh, and now hand the floor to Mark Grescovich to begin some work, please go ahead to when you're ready.
Mark Grescovich: Thank you Adam and good morning everyone. I would also like to welcome you to the third quarter 2024 earnings call for banner corporation.
Mark Grescovich: Joining me on the call today is Rob Butterfield, Banner Corporations Chief Financial Officer.
Mark Grescovich: our Chief Credit Officer and Rich Arnold, our Head of Investor Relations.
Mark Grescovich: would you please read our forward-looking safe harbor statement.
Mark Grescovich: Jr.
Speaker Change: Good morning. Our presentation today discusses panoramic physics outlook and will include forward-looking statements.
Speaker Change: So statements include descriptions of management's plans, objectives or goals for future operations, products or services. Forecasts up financial or other performance measures and statements about Banner's general outlook for economic and other conditions.
Speaker Change: We also may make other form of looking statements in the question and answer period following management's discussion.
Speaker Change: The support of looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today.
Speaker Change: Information on the risk factors that could cause actual results to differ or available from the earnings press release.
Speaker Change: Thank you, Rich. As it's customary, today we will cover four primary items with you.
Speaker Change: First, I will provide you high-level comments on Baner's 3rd quarter 2020-4 performance.
Speaker Change: Second, the action's banner continues to take to support all of our stakeholders, including our banner team, our clients, our communities, and our shareholders.
Speaker Change: will provide comments on the status of our loan portfolio.
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.
Speaker Change: Before I get started, I want to again thank all of my 2000 colleagues in our company who are working extremely hard to assist our clients and communities.
Speaker Change: Paners lived our core values, summed up as doing the right thing for the past 134 years.
Speaker Change: Our overarching goal continues to be to do the right thing for our clients, our communities, our colleagues, our company, and our shareholders. Interprovide a consistent and reliable source of commerce and capital through all economic cycles and change events.
Speaker Change: I'm pleased to report again to you that is exactly what we continue to do.
Speaker Change: I'm very proud of the entire banner team that are living our core values.
Speaker Change: Now, let me turn to an overview of our performance.
Speaker Change: As announced, Banner Corporation reported a net profit available to common shareholders.
Speaker Change: A $45.2 million or $1.30 per diluted chair for the quarter ended September 30, 2024.
Speaker Change: This compares to a net profit to common shareholders of $1.15 per share for the second quarter of 2024.
Speaker Change: Our strategy to maintain a moderate risk profile and the investments we have made and continue to make to improve our operating performance, have positioned the company well to whether recent market headwinds and we saw that in this quarter results.
Speaker Change: Robbled Discuss these items in more detail with his remarks.
Speaker Change: To illustrate the core earnings power of banner, I would direct your attention to pre-tax pre-provision earnings, excluding gains and losses on the sale of securities, and changes in fair value of financial instruments.
Speaker Change: Our third quarter, 2024, core earnings were $57 million, compared to $52 million for the prior quarter.
Speaker Change: The interest third quarter 2020 for revenue from core operations was approximately $154 million and increase of $3 million compared to the second quarter of 2024.
Speaker Change: We continue to have a strong core deposit base that is proven to be resilient and loyal to banter in the wake of a highly competitive environment.
Speaker Change: and a very good net interest margin.
Speaker Change: Overall, this resulted in a return on average assets of 1.13% for the third quarter of 2024.
Speaker Change: Although we are in a very difficult operating environment for commercial banks, our core performance reflects continued execution on our super community bank strategy.
Speaker Change: That is growing new client relationships, maintaining our core funding position, promoting client loyalty and advocacy through our responsive service model and demonstrating our safety and soundness through all economic cycles and change events.
Speaker Change: To that point, our core deposits represent 89% of total deposits.
Speaker Change: Further, we continue our organic generation of new relationships and our loans increase 6% over the same period last year.
Speaker Change: reflective of the solid performance.
Speaker Change: Coupled with our strong regulatory capital ratios. In the fact that we increased our tangible common equity per share by 24% from the same period last year. We announced a core dividend of 48 cents per pound and share.
Speaker Change: Earlier this year, we released our environmental, social and governance report, which reflects the continued maturation of our approach to ESG.
Speaker Change: Banner has always been committed to doing the right thing in support of our clients, the many communities that we're serve in our colleagues.
Speaker Change: The accomplishments highlighted in this report are meant to reflect the deep connection we have with all of our stakeholders and our commitment to creating positive change in the communities we serve.
Speaker Change: Finally, I am pleased to say that we continue to receive Marketplace Recognition and Validation of our business model and our value proposition.
Speaker Change: Banner was again named one of America's 100 best banks and one of the best banks in the world by force.
Speaker Change: Newsweek named Banner one of the best most trustworthy companies in America and the world again this year, and just recently named Banner one of the best regional banks in the country. [inaudible]
Speaker Change: S&P Global Market Intelligence, Raint Banner's Financial Performance, among the top 50 public banks with more than $10 billion in assets.
Speaker Change: and the Digital Banking Provider Q2 Holdings Awarded Danner, their Bank of the Year for Excellence.
Speaker Change: Additionally, the Crowl Bond rating agency affirmed all of Banner's investment grade debt and deposit ratings.
Speaker Change: and as we've noted previously, Vanert Bank received an outstanding CRA rating in our most recent CRA examination.
Speaker Change: Let me now turn the call over to Jill to discuss the trends in our portfolio and her comments on Banners Credit Quality.
Jill: Thank you, Mark
Jill: Thank you Mark and good morning everyone
Jill: Our overall credit metrics remain strong in spite of the slight deterioration reported. Delinkland loans end of the quarter at 0.40% up from 0.29% as of the linked quarter and from 0.27% as of September 30th, 2023.
Jill: Adversed the classified loans increased by 28 million in the quarter, driven in large part by three isolated relationships, and now represent 1.33% of total loans, up 24 basis points when compared to June 30th.
Jill: Non-performing assets increased 12 million in the quarter represent 0.28% of total assets and consists of 43 million in non-performing loans and 2.2 million in REO.
Jill: The net provision for credit losses for the quarter was $1.7 million, and includes a $2 million provision for law losses and a $262,000 release related to unsundid loan commitments.
Jill: The provision this quarter was primarily driven by an increase in the reserve for individually evaluated collateral dependent on.
Jill: Low masses in the quarter were a modest 964,000 and were partially offset by recoveries totaling 734,000.
Jill: After the provision, the reserve for credit loss is loaned total 154.6 million and provides 1.38% coverage of the portfolio and 359% coverage of our non-performing loans.
Jill: By way of comparison, the reserve for long losses provided 1.37% coverage of the loan portfolio as of the length quarter and 1.38% coverage as of September 2023.
Jill: Long Girls was muted this quarter and was further impacted by the decision to move 48 million from our wonderful family portfolio to help for sales.
Jill: In total portfolio long balances increased a modest 81 million or 1% from the linked quarter with your over year growth of 6%.
Jill: Given the limited loan growth, my comments will be brief. The large increase in the multi-family real estate portfolio reflects movement from construction to permanent as several projects transitioned into their mini-pronged status.
Jill: The growth in investor CRA with a combination of new originations as well as a shift from construction into the permanent portfolio and we again reported solid growth in owner occupied real estate this quarter up 4% and 9% year over year with the growth spread across footprint.
Jill: Residential Construction Exposure remains a moderate at 5% of the portfolio and reflects a slight shift in mix with approximately 70% for sale housing and 30% one-to-four family custom construction residential mortgage loans. Similar to previous quarters, when we include multi-family, commercial construction and land, the total construction exposure is 14%.
Jill: Given the market dynamics that continue to be driven by limited resale inventories, the absorption of the speculative housing starts across our markets remains timely with builders continuing to slowly rebuild inventory levels.
Jill: Conversely, given the higher interest rate environment, our custom construction origination tests load over the past few quarters.
Speaker Change: The decline reflected in CNI is driven by reduced line utilization, down 1% quarter over quarter. This was, however, largely offset by additional growth in the small business portfolio.
Speaker Change: And as expected, agricultural balances increased again this quarter due to line utilization of 4% compared to last quarter.
Speaker Change: As I stated earlier, our overall credit metrics remain strong, while increasing the level of adverse-aclast-bright assets remains modest as a percentage of total loans with no concentration in any specific industry or market.
Speaker Change: The office and multi-family segments of the commercial real estate book continue to perform well and repricing risk continues to be manageable. The spike in agricultural non-accrual loans is a northern California Trenat relationship, and we believe that we are adequately reserved for any potential loss exposure.
Speaker Change: As I stated last quarter, our credit underwriting criteria has not changed materially over the course of the last decade.
Speaker Change: The vast majority of our loan book has solid sponsorship, personal guarantees, and properly margined collateral support. Our reserve for loan losses remained strong, and we continue to have a robust capital base which further solidifies our balance sheet. We remain well positioned for the future.
Speaker Change: with that I will hand a call over to Rob for his comment.
Speaker Change: ro
Rob Butterfield: We report $1.31 per diluted chair for the second quarter, compared to $1.15 per diluted chair for the prior quarter.
Rob Butterfield: The 15 cent increase in earnings per share was primarily due to an increase in net interest income and lower expenses compared to the prior quarter.
Rob Butterfield: So our loans increased 146 million during the quarter with portfolio loans increase in 81 million and help for sell loans increasing 65 million. The increase in help for sell loans was primarily due to transferring 48 million of loans from help for investment to help for sell.
Rob Butterfield: The loan to deposit ratio into the quarter at 83%.
Rob Butterfield: Total securities increased 31 million primarily due to the fair value increases as a result of interest rate decreases during the quarter, partially offset by normal portfolio cash flows.
Rob Butterfield: The positive increase by 459 million during the quarter due to quarter the positive increase in 462 million.
Rob Butterfield: which included an increase of 150 million in non-interpreting deposits. The increase in court deposits was partially offset by time deposit, decreasing 3 million. Due to broker deposits, decreasing 55 million, partially offset by retail time deposits, increasing 52 million. Court deposits into the quarter 89% of total deposits.
Rob Butterfield: Total borrowing decreased 89 million during the quarter, as the growth in court deposits was used to fund loan growth and reduce FHLB advances.
Rob Butterfield: The Annars liquidity and capital profile continued remains strong with a robust core funding base, a low reliance on wholesale borrowings and significant off balance sheet borrowing capacity.
Rob Butterfield: In addition, all of our capital ratios are in excess of regulatory, well-capitalized levels.
Rob Butterfield: Net interest income increased 3.1 million from the prior quarter, primarily due to average earning assets, increasing $142 million, and tax equivalent net interest margin, increasing two basis points to 3.72%.
Rob Butterfield: Compared to the prior quarter, average loan balance is increased to an earned $17 million. This increase was partially offset by total average interest-faring cash and investment balance as decreasing $75 million. The yield on earning assets increased a base of points driven by loan yields increasing and equal amount.
Rob Butterfield: The increase in loan yields was the result of adjustable rate loan free pricing higher, as well as new production continue to come on at interest rates above the overall portfolio yield.
Rob Butterfield: The average rate on new loan production for the quarter was 8.23% compared to 8.47% in the prior quarter.
Rob Butterfield: Tolacostafunds increase 7 basis points to 173 basis points due to an increase in the cost of deposits, partially offset by lower borrowing balances.
Rob Butterfield: Total cost of deposits increased to 11 basis points to 161 basis points, primarily doing too much of the growth in quarter-pods that's during the quarter-cure, occurring in higher cost in the product, deposit products.
Rob Butterfield: The cost of deposits for the month of September were 162 baseless points, non-interest bearing deposits ended at 35 percent of total deposits, identical to the prior quarter.
Rob Butterfield: The 50th basis point reduction fed funds in the middle of September had limited impact on our net interest margin in the current quarter.
Rob Butterfield: The 28% of our loan portfolio that are variable rate loans will reprise down in equal amount within 30 days of the rate reduction. We expect deposit cost reductions to lag the portfolio repricing, resulting in some moderate compression and net interest margin in the fourth quarter.
Rob Butterfield: Golden non-interest income increased 864,000 from the prior quarter, primarily due to the prior quarter, including 8562,000 loss on a bond called early.
Rob Butterfield: The current quarter also benefited from having lower fair value right down on fair value instruments carried at fair value.
Rob Butterfield: Solon, non-interested expense, decrease 1.8 million from the prior quarter, the decreased reflected lower benefit expense due to a payroll tax refund of 800,000, and self-insured medical expense, decreasing by 1 million. The current quarter also had lower payment and card processing service expense and lower REO expense.
Rob Butterfield: The decreases were partially offset by a higher legal expense as the prior quarter of the venture fitted from an 874,000 reversal of expense related to finalizing two legal matters.
Rob Butterfield: Capital and liquidity positions continue to position as well to execute on our super community bank business model. This concludes my prepared comments. Now I'll turn it back over to Mark.
Mark Grescovich: for your detailed comments. That concludes our prepared remarks and Adam, we will now open the call in welcome questions.
Speaker Change: That's a reminder, if you would like to ask the question on today's cool, please press star, followed by one on your telephone keypad now. From the parent to ask a question, please ensure you are unreaded locally.
Speaker Change: and our first question comes from Andrew Toreau from Stevens and we please go ahead, you will open.
Speaker Change: and Paul Smith.
Speaker Change: Hey, good morning.
Paul Smith: Morning Andrew.
Andrew Toreau: Hey, if I could just start on the on the expense side, so we saw it kind of two million drop in compensation this quarter, I think it was called out medical premiums.
Andrew Toreau: Compensation, just with that drop this quarter lower than you might have expected, should the run rate normalize higher from here, could you help us better understand the fluctuation and comp, expand and then go to the overall expense outlook into the 4Q.
Andrew Toreau: Thank you.
Speaker Change: Yes, thanks Andrews Robb.
Speaker Change: So yeah, I mean, I don't think it's unusual for expenses to kind of bounce around a couple of million dollars quarter to quarter. Clearly this quarter we benefited from a couple items that were not expected. So the run rate was a bit lower this quarter. I would expect that to normalize certainly the payroll tax refund that we received. I mean, that's not an ongoing item. We could see the trend of self-insured medical expense carry over into Q4, but you know, eventually it's going to normalize back to normal expected levels there, so I don't think that's a long-term item.
Speaker Change: So I'm expecting that, you know, we'll see some normalization as we move forward in our expenses.
Speaker Change: Okay, and then if I just look back at kind of the past few years, you've generally been growing overall operating expenses and call it the low single digit range.
Speaker Change: I guess, you know, we've seen inflation come down quite a bit. Is it fair to think that, you know, absin, any kind of M&A, you could continue that kind of low single digits type of expense growth into 2025?
Speaker Change: Yeah, in general, the way I would think about it is that we would expect normal inflationary increases, whatever inflation is for a particular period. If you think about compensation expenses, two-thirds of our expenses, so there's going to be obviously some increases in that.
Speaker Change: Okay.
Speaker Change: and then moving over to the margin.
Speaker Change: Just quickly, can you talk about where we're spot deposit costs, either interstaring or total at the end of the period and then just more broadly kind of what your approach is to repricing deposits lower for the 50 basis pointing cuts we've already seen as well as kind of expected future cuts.
Speaker Change: in the next episode of The Bigger League.
Speaker Change: Sir, just first on the cost of deposit, first September, it was 162 basis points, so one basis point higher than the quarter number.
Speaker Change: if we think about how we approached kind of the reduction in deposit of cost related to the reduction in Fed funds.
Speaker Change: in the middle of September . We did make some reductions subsequent to that rate reduction. If you look at our advertised CD specials, those went down by 25 basis points initially. We also did some repricing of our exception price deposits and then also the tiers in our high yield savings account. I would say overall probably the reductions that we did in those was similar to what we did on the CD book.
Speaker Change: Okay, great. I appreciate the color. I'll back in the queue. Thank you.
Speaker Change: Thank you, Andrew
Speaker Change: The next question comes from Jeff Rillas from DA Davidson. Jeff, your line is open, please go ahead.
Jeff Rillas: Good morning. Robert, maybe just to follow on on the margin. So, you've got your comments about expectations in the fourth quarter and it sounds like a kind of a wait and see a little bit on the competition. You know, a little bit further out into 25 and where the balance sheets position, I think it mentioned 28% alone is variable. If we do see further cuts, um...
Speaker Change: Could you either specific to margin or pick picture, and how you think the balance of margin how that reacts in it's 25.
Speaker Change: Yeah, sure, so I would point to the ramp down scenarios that we provided in the investor presentation.
Speaker Change: We use moves for the interest rate forecast and their forecast right now seems to be kind of a graduate decline in the Fed funds rate. And if that's the scenario that comes to play, if you look at our, you know, down 100 basis point ramps scenario, it suggests that we're slightly acid sensitive where we would see a negative 1% reduction in our mid interest income over the next 12 months.
Speaker Change: of course, that assumes a flat balance sheet which isn't a reality situation and then also what that's assuming is that it has to depots the beta on the downside 28%.
Speaker Change: The deposit beta that we've experienced on the upside is 45%. So I think we have a chance to outperform that. But I think we want to see kind of what deposit deposit for behavior is. That's where it starts to climb, what competitor behavior is to get a better read on that.
Speaker Change: Thanks Rob, Jill, just hopping over to credit.
Speaker Change: that the $12 million increase in non-acruals, I think, I mentioned that Northern California Ag Credit could you just outline the additions this quarter, something it was isolated into?
Speaker Change: a few credits.
Speaker Change: Got it. Okay. And it's not to get the ag credit. Is that sort of commodity price even? It's been it.
Speaker Change: Challenge industry. Is this more operator or more climate sort of...
Speaker Change: and the pressures on the industry, or is it the operator issues.
Speaker Change: This one I would suggest is a mix of both of those issues, this is a large, ag processing operation, Walmouth and almonds, and yeah, it involves not just the commodities pricing.
Speaker Change: Okay, thank you. And then lastly,
Speaker Change: Yeah, I guess a few more questions from Mark, any thoughts on the credit unions in the Northwest in terms of...
Speaker Change: M&A Activity. You've been pretty aggressive, but I guess I'm just interested in your thoughts of how that impacts expectations as you have conversations or little to no impact is that I'd bounce it off here to see if you have any thoughts on that activity.
Speaker Change: Well, probably, Jeff, thank you for the question. Probably nothing I want published as it relates to the credit unions and how there's an unfair, you know, advantage in terms of their business models. But what I would suggest to you is that as you might anticipate.
Speaker Change: Specifically in the West Coast, there are a limited number of buyers that
Speaker Change: that can afford to absorb some of these banks, banner fortunately as one of those. So what you can suspect is that...
Speaker Change: If some of these institutions that the credit unions are purchasing are in the market to be acquired, I think the buyers, not just Panner but the other buyers in our market have looked at them as well.
Speaker Change: So, I'm not here to criticize their business decisions, however, they do want and unfair advantage in terms of pricing. And to the extent that, you know, some of these institutions want to take cash.
Speaker Change: you know that creates a whole different dynamic as well so I think it's fair to say that you know the buyers in the West Coast have looked at the institutions that the credit unions are purchasing.
Speaker Change: Thanks Mark
Speaker Change: Thank you.
Speaker Change: The next question comes from David Feester from Raymond James David your line as I can please go ahead
David Feester: Hey, good morning everybody!
David Feester: I wanted to touch on the deposit landscape. You guys have done a great job growing cord deposits broadly, especially good to see the increase in IB. I'm just curious, how do you think about your ability to continue to drive cord deposits? Where are you having success there? And would you kind of expect cord deposit growth to continue outpacing loan growth and maybe be able to reduce borrowings and broker deposits? Is it continuing to do that?
David Feester: David, it's what I've been looking for, Mark, if you all have any additional comments, but
David Feester: Maybe on the last point first, I don't think long-term we would expect that deposit growth would outpace long growth, we would expect that long growth would probably outpace deposit growth.
David Feester: but long-term we have to grow our core deposit if we're going to grow our long-book.
David Feester: I think we saw some seasonality in Q3. We talked about that before we went into Q3 that we expected it to be a good quarter. Historically, Q3s are best quarter for us.
David Feester: Better than historical is the way I described the third quarter. I think where what we saw is we saw some carry over from the second quarter. Normally we see some build in the pod that's as we move through the second quarter into June especially and we really didn't see that in the second quarter. So I think there was some carry over from the second quarter just normal build back after the payment of taxes and stuff like that. [inaudible]
David Feester: Beyond that, you know, we also had some success as quarter and kind of bringing some quarter positive back to the bank, some quarter positive said head left to.
David Feester: some brokerage accounts, that type of stuff and so we had some success in bringing some of those core deposits back to the organization. I think long term, if you think about it, you know, really where the core deposit growth comes from is really the small business area as a percentage of the loan balances that's been very good for us historically. We have a focus really on small business lending and as part of that small business lending the deposits come with it and typically are pretty rich from a loan to the deposit ratio standpoint.
Speaker Change: I don't know, Mark Grescovich is going to add anything there.
Mark Grescovich: I think you covered well.
Speaker Change: Okay, that's great. And then maybe, you know, touching on the other side, touching on loan growth, we've kind of talked about that low to mid single digit pace. I'm curious, how do you think about loan growth as we look forward? How's the man trending? What do you expect to be key drivers of growth? And then, you know, just given kind of where the five year is in potential for are you start, are you starting and where CRE pricing is? Are you, are you seeing any, you know, early payoffs or re-fi activity with the CRE book? Which could, you know, maybe way on, on growth? Yeah, that's great.
Speaker Change: Yes, thanks, David. Starting with that last part of your question, we really haven't started to see any of that accelerated CRE payoffs yet. And I guess the way I would address that is that as they come to looking to refinance, we should be looking to see if we want to hold that as well, as well, if we can do it at a market rate. The commercial pipelines have continued to rebuild throughout the year. They're being bolstered by the success of our newer relationship managers. So I feel good about that. We're still projecting that low to mid-single digit for 2024. And I think that I would, if I was looking further out into 2025.
Speaker Change: Probably mid-Single Digit is where we would anticipate borrowing a massive real estate refining it.
David Feester: Okay, okay, that's helpful. And then just going back to the margin, I don't want to beat a dead horse here, but just kind of thinking, how do you think about the trajectory? I mean, because you did talk about the lag impact on the repricing side, I mean, you know, assuming the forward curve kind of comes to fruition. I'm just kind of curious, how do you think about the timing of a potential trough in 2025 or, you know, because there's other, there's like you said, the, the, you know, the rate assumptions assume a static balance sheet, there's a lot of other moving parts into that, obviously. I'm just kind of curious how you think about the margin trajectory as we look forward.
Speaker Change: Yeah, the way I think about it David is, you know, I mean, I talked about some of the scenarios we have out there as far as the ramp scenarios and stuff and so I'm certainly point back to those as well but
Speaker Change: If I just think about it from a big picture standpoint, we did see an increase in net interest margin during the current quarter, which was before the Fed started the cut.
Speaker Change: So, you know, during the up-cycle I guess, or the long higher for longer cycle, we kind of trough there.
Speaker Change: and I think what's going to happen there just overall that is as long as the Fed takes kind of a balanced approach to things where...
Speaker Change: You know, it's a more balanced approach, 25 basis points a quarter or something like that. I think we can overcome that and we certainly could see margin flat to up in that scenario if the feds more aggressive and takes 50 basis points or higher quarter we could see some.
Speaker Change: initial decline there, moderate compression as the lag in the deposit cost funding there. But longer term, I think really what we want to get back to, and I think the whole industry wants to get back to as a normal shape yield curve. And so if I think out longer, I think that's where we can really start to really expand margin again, once we get back to that normal shape yield curve.
Speaker Change: has there been any change in your appetite for us, your degree of positioning or anything to help, you know, maybe accelerate some of that margin, just given, you know, the decline in rates and.
Speaker Change: Maybe the maps are a little bit less.
Speaker Change: You know, painful
Speaker Change: Yeah, sure. So, you know, we've kind of had that barometer out there where we were willing to make a security.
Speaker Change: Reposition, if we are going to have an earnback with him that three year period of time.
Speaker Change: Currently there's probably limited opportunities for us to stay within that three-year urn back, so we would have to expand that urn back in order to do that. Certainly as the rate and environment continues to change, we continue to evaluate whether that makes sense or not. I can't say that we have anything planned at this point in time, but we're also remaining flexible there and continue to do evaluations. So I can't say it never will happen or it won't happen, but we don't have anything currently planned.
Speaker Change: All right, great, thanks everybody.
David Feester: Thank you David.
Speaker Change: The next question comes from Andrew Lynch, from Piper Sandler. Andrew, your line is open. Please go ahead.
Andrew Lynch: Thanks. Good morning, everyone. No, just one question for me here on the M&A environment. Mark, you got much better currency over the last few months. I guess how is the, how is the chatter in your markets? I guess going up and down the west coast, because you can acquire a lot of different regions. Are you getting inbound interest? Are you reaching out how the, how, how is the, the M&H chatter? What's the, the M&H chatter been? The M&H chatter.
Speaker Change: Great, thank you Andrew for the question.
Speaker Change: You know, look, our philosophy has never changed.
Speaker Change: So you're probably tired of hearing my-
Mark Grescovich: at the same story, which is, you know, we recognize there are some partners on the west coast that would be a great fit for our organization, then we continue to have dialogue with, with all of those parties. I think we have a great reputation. We have a very strong integration team, and so those, the conversations of when the timing's right, dip the timing's right, that, that continues. But again, we are very focused on our organic business growth strategy and to the extent there's something opportunistic that presents itself.
Mark Grescovich: We will, the good news is we're in a position to take advantage of that.
Speaker Change: Got it. From the size perspective, is there a certain size range that you're targeting that you would like to do or something to bigger than small?
Speaker Change: No, I don't think so, you know, I think.
Speaker Change: Certainly, on the smaller end, something less than a billion dollars doesn't make a lot of sense with the current regulatory environment. Right? Well, you don't want to do is find yourself in a position where just because an opportunity presents itself that the regulators lock you out for a period of time. So I think all parties, not just me, but all of my colleagues are being very thoughtful. And what the approach is going to be to M&A. [inaudible]
Speaker Change: but I would roll out, you know.
Speaker Change: and any size, you know.
Speaker Change: You know, variable that it doesn't make a lot of sense. We've done small deals as small as $350 or $400 million in asset size.
Speaker Change: Right, right. All right. I'll maybe request some sort of an answer. Thanks so much. I'll step back.
Speaker Change: Thank you, Andrew
Speaker Change: As a reminder, that's staff followed by one under telephone keypad to ask a question today.
Speaker Change: and the next question comes from Kelly Mojo from KBW Kelly your line is open please go ahead.
Kelly Mojo: I guess circling back to the funding side, you had incredible deposits of growth and I think to release called out some seasonality. It's been a couple years where normal seasonal trends have gotten buried in some of the overall deposits.
Speaker Change: Travis here or something?
Kelly Mojo: just hoping to get a better color and a better...
Kelly Mojo: percent of how we should be.
Kelly Mojo: Thinking about the season.
Kelly Mojo: Now that liquidity is the more normalized normal levels, if that's something you see.
Kelly Mojo: We're turning.
Kelly Mojo: Moore, prominently on a golf hard business.
Rob Butterfield: Yeah, Kelly, it's Rob. So yeah, I would say, you know, I mean, this year overall, I think we have seen more of a return to normal seasonality.
Rob Butterfield: You know, Q1 we saw the quarter-pause and increase because of tax refunds starting to come in, Q2 we saw.
Rob Butterfield: that Alphalo deposits related to tax payments and, you know, some seasonality there and an ag clients using.
Rob Butterfield: They're deposits to fund their operations on the initial site of before they started to draw down their lines. Q3 here was very strong for us obviously and even much stronger than we would normally see from the seasonality standpoint.
Rob Butterfield: And so it really does feel like we're returning to kind of those normal seasonal flows, plus or minus what we would expect.
Rob Butterfield: Of course, as we look forward, if you think about Q4, Q4's more of a flat quarter for us.
Rob Butterfield: You know we could certainly see her aggliance that had...
Rob Butterfield: Cash coming from crops that went into their deposit balances. Initially, we could see them start to pay down some of their lines in the fourth quarter. That's typical. And then also what we could see too is there are property tax payments and in many of the states that we operate in that occur in in October . So there's some seasonal output for that. So, but overall, I mean, I think we I think it feels like we have returned to somewhat normal seasonality absent. You know, there's always there's always kind of it'll just in crowded or one off events that are out there that that caused a lot of some balances to move that wasn't expected, but it feels like it seasonality at this point.
Speaker Change: Got it. Thanks for that. That was a tough full rob. Maybe you asked one for me. Most of my questions have been answered at this point.
Speaker Change: You have, I think, about 100 million.
Speaker Change: and of some dad's dad's huge.
Speaker Change: for the removal in a couple of quarters, potentially just wondering, and to look at your cap full pack, I know we already discussed M&A, but cap full more broadly how you're potentially looking at.
Speaker Change: You know, with that beyond the table, and you'll have to bet the buyback offer is the issue.
Speaker Change: and your fault for on that.
Speaker Change: Sure, so if we think about the sub-death specifically, I mean, obviously we're evaluating that right now to determine if we want to call and replace that sub-debt or because of our capital position right now, which is very strong, whether we just want to call that sub-debt and pull it back.
Speaker Change: You know it's going to move to a variable rate which is less advantageous to us you know effectively July 1st of 2025 and at that point we start to lose some of the capital treatment and then also the rate goes up as well. So at this point for that I think we're just continuing to monitor what the sub-depth market looks like and whether it makes sense to replace that or to call it at that point in time. If we just think about our overall capital stack rate right now the core dividend of course is our priority continues to be at a very reasonable payout level there which is key to have a long-term continued core dividend there. We do have the share repurchase authorization.
Speaker Change: and that are board-putting to place back in late July last this year and so we're continuing to evaluate whether at some point in time it makes sense to restart those shared purchases. You know, beyond that I think there's, you know, we have done special divins in the past. I would say those are our vehicle that we've used less, but we have done those in the past. So that's kind of how we're thinking about capa right now.
Speaker Change: Awesome, thanks for the questions, I'll step back.
Speaker Change: Thank you Kelly.
Speaker Change: The next question comes from Tim Coffee, a journey. Tim, your line is open, please go ahead.
Tim Coffee: Thank you. Thanks for asking me that question here. Thanks for talking about us going to be a loan growth from the angle of loan originations. Clearly, you know, your organizations were up a hundred million year over year and rates are coming down. If it's your sense that there is pent-up demand for credit from your customer base.
Tim Coffee: Yeah, thanks Tim. The way I would answer that is yes, there is demand and I think that as we get past the election and get some, you know...
Tim Coffee: Understanding of what the economy may be is going to look like under whatever the administration is. I think we'll start to see some of that break loose.
Tim Coffee: Certainly there was waiting for race and that playing in as well, but I do believe there is demand.
Speaker Change: Okay, all right, great. Thanks. And then my second question was on the new chief banking officer role, kind of a two-part question. First, kind of, let's insight into the strategy to refilling that position, and to just putting that seat in Sacramento, reflect greater emphasis on the original and moving California.
Speaker Change: Yeah, thanks Tim for the question. Look, I think Banner has been...
Speaker Change: Very focused over many years on making sure that succession planning is a significant part of our operation.
Speaker Change: and as you know, in the commercial banking space.
Speaker Change: Succession is a very big deal.
Speaker Change: and Finding Talent, Recruiting Talent and Having Great Leadership.
Speaker Change: So we were very, very fortunate to have the opportunity for Mark to join our organization. He's got depth as a CEO. He has depth in the California and West Coast market, in commercial banking and retail banking. So anytime you have an opportunity to add talent to the organization, I think it's a great scenario for the company.
Speaker Change: At the same time, I think it's really important to say that we have focused and you've heard us talk about improving operating efficiency.
Speaker Change: So we've isolated the chief operating officer Jim Costa with with the operations and how we can improve efficiency from an operation standpoint Cindy Grousel from a strategy standpoint and integration if we were to do some combinations or acquisitions.
Speaker Change: She has 45 years of experience with this organization and great background and integration. And now the opportunity to add all the revenue lines under a cheap banking officer really streams line the stream lines the operations going forward. So I think it's a very focused approach on behalf of the company.
Speaker Change: Okay, and then I'm putting the seat, having that seat in Sacramento, because I don't apply, they're going to put this on the original and looms in California.
Speaker Change: I think California is a fantastic market opportunity for us.
Speaker Change: So I would just leave it at that.
Speaker Change: Alright, thank you. There's my questions.
Speaker Change: We have no further questions, so I'll hand the call back to Mark for some concluding remarks.
Mark Grescovich: Thank you all for your questions and certainly for your participation today in our third quarter earnings call. As I've stated, we're very proud of the banner team and our results for the quarter, you know, given the current operating environment, it's been challenging, but it's nice to see that we're making great progress and it's been evidenced by our performance this quarter.
Mark Grescovich: Thank you for your interest in our company and joining the call. We look forward to reporting our results to you again in the future. Thank you everyone and have a wonderful day.
Speaker Change: This concludes today's cool. Thank you very much for your attendance. You may now disconnect your lines.
Speaker Change: Music