Banner Corporation (BANR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. Positive elements include an increase in net interest margin and a stable return on equity. However, deposit decreases and competitive pressures on loan growth balance this out. The Q&A reveals uncertainties, such as potential NIM compression due to rate cuts and unclear management responses on share buybacks and M&A. The market cap suggests a moderate reaction, but without strong catalysts or guidance changes, the stock is likely to remain stable, resulting in a neutral sentiment.
Key Financial Performance
Net profit available to common shareholders (Q4 2025) $51.2 million or $1.49 per diluted share, compared to $1.54 per share in Q3 2025 and $1.34 per share in Q4 2024. The year-over-year increase is attributed to improved operating performance.
Net income available to common shareholders (Full Year 2025) $195.4 million or $5.64 per diluted share, compared to $168.9 million or $4.88 per share in 2024. The increase is due to an 8.5% rise in net interest income driven by higher net interest margin and growth in earning assets.
Core earnings (Full Year 2025) $255 million, compared to $223.2 million in 2024. The increase reflects improved operating performance.
Core revenue (Q4 2025) $170 million, compared to $169 million in Q3 2025 and $160 million in Q4 2024. The year-over-year increase is attributed to strong core operations.
Core revenue (Full Year 2025) $661 million, compared to $615 million in 2024, an 8% increase due to strong core operations.
Loan originations (Q4 2025) Up 9% compared to Q3 2025 and 8% compared to Q4 2024. Growth was offset by higher-than-expected affordable housing tax credit paydowns and lower C&I line utilization.
Portfolio loan balances (Year-over-Year) Increased 3.2%, with investor CRE up 5% and owner-occupied CRE up 11%. Growth was diversified and granular.
Delinquent loans (Q4 2025) 0.54% of total loans, up from 0.49% in Q4 2024. The increase is primarily due to a spike in the one- to four-family portfolio.
Net provision for credit losses (Q4 2025) $2.4 million, including $1.5 million for loan losses and $945,000 for unfunded loan commitments.
Allowance for credit losses (Q4 2025) $160.3 million, providing 1.37% coverage of total loans, consistent with prior quarters.
Net interest margin (Q4 2025) 4.03%, up from 3.98% in Q3 2025. The increase is due to higher average earning assets and reduced funding costs.
Return on tangible common equity (Q4 2025) 13.11%, with a full-year return of 13.16% for 2025.
Deposits (Q4 2025) Decreased by $273 million due to seasonal activity and deployment of excess liquidity by larger clients.
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Operating Highlights
Net Profit: Banner Corporation reported a net profit available to common shareholders of $51.2 million or $1.49 per diluted share for Q4 2025, compared to $1.54 per share in Q3 2025 and $1.34 per share in Q4 2024. For the full year 2025, net income was $195.4 million or $5.64 per diluted share, up from $168.9 million or $4.88 per share in 2024.
Core Revenue: Core revenue for Q4 2025 was $170 million, compared to $169 million in Q3 2025 and $160 million in Q4 2024. Full-year 2025 core revenue was $661 million, an 8% increase from $615 million in 2024.
Loan Portfolio: Loan originations increased by 9% compared to Q3 2025 and 8% compared to Q4 2024. However, overall loan growth was negligible due to higher-than-expected paydowns and reduced line utilization. Year-over-year, portfolio loan balances increased by 3.2%.
Credit Quality: Delinquent loans increased to 0.54% of total loans in Q4 2025, up from 0.49% in Q4 2024. Adversely classified loans rose by $19 million, representing 1.65% of total loans. Nonperforming assets were $51.3 million, or 0.31% of total assets.
Net Interest Margin: Net interest margin increased to 4.03% in Q4 2025 from 3.98% in Q3 2025. Average earning assets grew by $60 million during the quarter.
Super Community Bank Strategy: Banner continues to execute its strategy focused on growing client relationships, maintaining core funding, and promoting client loyalty through responsive service. This strategy has contributed to strong core deposits (89% of total deposits) and a return on average assets of 1.24% for Q4 2025.
Recognition and Awards: Banner was named one of America's 100 Best Banks and one of the best banks in the world by Forbes. Newsweek recognized Banner as one of the most trustworthy companies in America and the world, and J.D. Power named it the best bank in the Northwest for retail client satisfaction.
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Risk or Challenges
Loan Growth: Negligible loan growth during the quarter due to higher-than-expected affordable housing tax credit paydowns, CRE and shared national credit payoffs, and significantly lower C&I line utilization.
Loan Portfolio: Decline in multifamily portfolio due to stabilized properties moving to the secondary market. Decline in C&I portfolio driven by reduced line utilization, exiting of classified relationships, and refinancing of shared national credits.
Delinquent Loans: Delinquent loans increased to 0.54% of total loans, up 15 basis points from the linked quarter.
Adversely Classified Loans: Adversely classified loans increased by $19 million in the quarter, now representing 1.65% of total loans.
Noninterest Income: Decrease of $5.5 million from the prior quarter due to a $1.4 million loss on asset disposal and a $2 million fair value decrease on financial instruments.
Noninterest Expense: Increase of $2.1 million from the prior quarter due to higher medical claims, software expenses, and legal expenses.
Deposits: Deposits decreased by $273 million during the quarter due to seasonal activity and deployment of excess liquidity by larger deposit clients.
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Guidance & Outlook
Loan Growth: Loan growth was limited during the quarter due to increased payoffs and reduced line utilization. However, the company is well-positioned to support existing clients and add new clients in the future.
Net Interest Margin: The tax equivalent net interest margin increased to 4.03% for the current quarter, up from 3.98% in the prior quarter. This was driven by a 5 basis point increase in net interest margin and higher average earning assets.
Capital and Liquidity: The tangible common equity ratio increased from 9.5% to 9.84%, reflecting robust capital and strong liquidity positions. The company repurchased approximately 250,000 shares during the quarter and declared a quarterly dividend of $0.50 per share.
Core Deposits: Core deposits represent 89% of total deposits, providing a stable funding base for future operations.
Credit Quality: The company maintains a moderate risk profile with stable and strong credit metrics, a solid reserve for loan losses, and robust capital levels, positioning it well to manage through the current economic cycle and market uncertainty.
Loan Portfolio Diversification: The commercial real estate portfolio showed solid year-over-year growth, with investor CRE increasing 5% and owner-occupied CRE increasing 11%. The construction portfolio remains well-balanced at 15% of total loans, with growth in commercial construction and one- to four-family construction.
Earnings Per Share: For the full year 2025, earnings per share increased to $5.64, up from $4.88 in 2024, driven by an 8.5% increase in net interest income and growth in earning assets.
Strategic Positioning: The company continues to execute its super community bank strategy, focusing on growing new client relationships, maintaining core funding, and promoting client loyalty through responsive service.
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Shareholder Return Plan
Core Dividend: Banner Corporation announced a core dividend of $0.50 per common share, reflecting strong regulatory capital ratios and a 14% increase in tangible common equity per share compared to the same period last year.
Share Repurchase: Banner Corporation repurchased approximately 250,000 shares during the quarter, reflecting robust capital and strong liquidity positions.
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Key Q&A
Q:What is the outlook for loan growth in 2026?
A:Jill Rice expects commercial real estate payoffs to continue being a headwind in 2026. However, if the economy holds up, the loan book is projected to grow in the mid-single digits over the year.
Q:How is the competitive landscape affecting loan originations?
A:Jill Rice mentioned that the competitive environment remains strong, with some banks offering terms that Banner is unwilling to match. However, she believes Banner competes well in terms of product offerings and pricing.
Q:What are the expectations for net interest margin (NIM) in 2026?
A:Robert Butterfield stated that NIM will largely depend on Federal Reserve actions. If there are no rate cuts, NIM could expand slightly due to adjustable rate loans repricing. However, multiple rate cuts could lead to NIM compression. Moody's forecast suggests three rate cuts in 2026, which could result in a flat or slightly declining NIM in the first half of the year, with potential expansion in the fourth quarter.
Q:What was the spot deposit cost and average margin for December?
A:The spot deposit cost for December was 1.39%, and the average margin was approximately 4.03%.
Q:What is the outlook for expenses in 2026?
A:Robert Butterfield expects normal inflationary increases of around 3% in total expenses for 2026 compared to 2025. He noted some transitory expenses in the fourth quarter of 2025, including higher IT and medical expenses, as well as legal costs.
Q:What drove the increase in Special Mention and substandard loans?
A:Jill Rice explained that the increase in Special Mention loans was primarily due to downgrades of alcoholic beverage enterprises with declining cash flows. The largest Special Mention relationship is approximately $25 million. Substandard loans increased modestly by $19 million, with the largest relationship at $19 million. There is no specific industry or segment causing concern.
Q:What is the company's approach to capital and share buybacks?
A:Robert Butterfield stated that the company has repurchased around 250,000 shares over the last two quarters and has 1.2 million shares available under the current authorization. The company will monitor market conditions and stock price to decide on further buybacks. Mark Grescovich added that the company remains open to M&A opportunities.
Q:What is the outlook for deposit growth in 2026?
A:Robert Butterfield attributed deposit growth to the addition of new clients, particularly small businesses, and the efforts of new bankers. He expects similar core deposit growth in 2026.
Q:What are the expectations for deposit betas in 2026?
A:Robert Butterfield mentioned that the deposit beta has been modeled at 28% through the cycle. He expects it to trend down over time, depending on Federal Reserve activity.
Q:What is the expected tax rate for 2026?
A:Robert Butterfield expects the tax rate to be around 19%, consistent with the first nine months of 2025.
Q:What were the nonrecurring items in other fees during the fourth quarter of 2025?
A:Robert Butterfield noted a $1.4 million loss on asset disposals, including building-related costs and a $1 million write-off of software-related assets. These are not expected to recur.
Q:What is the impact of commercial real estate payoffs on loan growth?
A:Jill Rice acknowledged that commercial real estate payoffs have been a headwind and are expected to continue impacting loan growth in 2026. However, she remains optimistic about mid-single-digit growth due to strong production and new relationship managers.
Q:What are the key drivers behind year-on-year deposit growth?
A:Robert Butterfield attributed deposit growth to the addition of new clients, particularly small businesses, and the efforts of new bankers. Small businesses are deposit-rich, often having larger deposits than loans.
Q:What is the outlook for margin in the first quarter of 2026?
A:Robert Butterfield does not expect significant margin headwinds in the first quarter. He noted that the benefit from adjustable rate loans repricing is diminishing, but funding costs are expected to remain stable.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the specific appetite for increasing share buybacks, stating that it would depend on market conditions and stock price. Additionally, the response to M&A opportunities was vague, emphasizing ongoing conversations without concrete details or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America World
Banking division
CEO Grescovich
CI line
CI reduction
CRE credit
CRE owner
CRE product
Chief Credit
Community Banking
Construction lending
Core pretax
Credit Officer
Deposits activity
Executive VP
Fed fund
credit payoff
decline
disposal asset
family portfolio
fund rate
home
housing tax
instrument value
land
line credit
loan basis
loan origination
loss disposal
margin asset
market uncertainty
point loan
reduction Fed
return equity
share decrease
software
source strength
spite
tax credit
BANR Transcript
Banner Corporation (BANR) Q4 2025 Earnings Call Transcript
Unknown1-22
The earnings call presents a mixed outlook. Positive elements include an increase in net interest margin and a stable return on equity. However, deposit decreases and competitive pressures on loan growth balance this out. The Q&A reveals uncertainties, such as potential NIM compression due to rate cuts and unclear management responses on share buybacks and M&A. The market cap suggests a moderate reaction, but without strong catalysts or guidance changes, the stock is likely to remain stable, resulting in a neutral sentiment.
Banner Corporation (BANR) Q3 2025 Earnings Call Transcript
Unknown10-16
The earnings call presents mixed signals. Strong loan growth and improved credit metrics are positive, but economic uncertainties and unclear management responses on key metrics like margins and M&A plans create caution. The Q&A reveals stable deposit growth and strategic investments, but also highlights potential margin compression with rate cuts. The market cap suggests moderate volatility, leading to a neutral sentiment prediction.
Banner Corporation (BANR) Q2 2025 Earnings Call Transcript
Unknown7-17
The earnings call presents a mixed picture: strong loan growth and stable credit metrics are positive, but there are concerns about increased expenses and uncertainties in deposit growth. Management's optimistic guidance and strategic focus on organic growth are tempered by unclear responses on funding gaps and reliance on seasonal trends. The market cap suggests moderate sensitivity to these factors, leading to a neutral outlook for the stock price over the next two weeks.
Banner Corporation (NASDAQ:BANR) Q1 2025 Earnings Call Transcript
Unknown4-18
The earnings call revealed a mix of positive and negative factors. Financial performance showed growth in revenue, net income, and loan portfolio, but concerns about trade tariffs, economic conditions, and regulatory risks were raised. The share repurchase program is a positive signal, yet management's unclear responses on tariffs and margin expansion add uncertainty. Given the market cap, these mixed signals suggest a neutral stock price movement in the short term.
BANR Report
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