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BANNER CORP (BANR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered stable profitability: net income $45.5M and diluted EPS $1.31, essentially in line with consensus; adjusted EPS was $1.35, benefiting from higher asset yields and robust core deposits (89% of total) . Revenue of $162.2M grew 8% y/y; net interest margin (tax-equivalent) held at 3.92% q/q (+22 bps y/y) .
  • Mixed print vs Street: EPS matched S&P Global consensus (GAAP), while reported total revenue was below consensus; adjusted EPS modestly exceeded normalized expectations on non-GAAP basis (see Estimates Context) *.
  • Balance sheet actions and credit: FHLB advances increased to $565M to bridge loan growth; sub debt fully repaid; ACL coverage at 1.37% of loans; NPAs 0.30% of assets (up q/q, still low) .
  • Strategic catalysts: Board authorized repurchase of up to ~5% of shares (1,729,199) on July 24; dividend maintained at $0.48/share; KBRA affirmed stable investment-grade ratings—supportive for capital deployment and sentiment .
  • Near-term narrative: Margin supported by 4–5 bps/quarter loan yield tailwinds absent Fed cuts; management expects seasonal deposit inflows and some Q3 loan-growth moderation from Q2’s 9% annualized pace—stock likely reacts to buyback execution, NIM trajectory, and credit stability .

What Went Well and What Went Wrong

What Went Well

  • Core revenue and PPNR strength: Adjusted revenue up 8% y/y to $163.0M; adjusted pretax, pre-provision earnings rose to $62.47M (vs. $52.37M a year ago) .
  • Margin resilience: Tax-equivalent NIM held at 3.92% q/q (+22 bps y/y) despite higher FHLB usage; loan yields rose 5 bps q/q to 6.12% .
  • Relationship funding and capital: Core deposits at 89% of total; tangible book per share +13% y/y to $43.09; sub debt repaid; KBRA affirmed ratings (stable outlook) .
    • Quote: “Our core deposit base… has proved to be resilient and loyal to Banner” — CEO Mark Grescovich .

What Went Wrong

  • Top-line vs estimates and noninterest income mix: Reported revenue missed Street; total noninterest income fell q/q due to building/lease exit losses (~$0.9M) and lower miscellaneous income * .
  • Higher funding costs and borrowings: Total funding cost rose 5 bps q/q to 1.60% as FHLB advances temporarily financed loan growth; average borrowings increased .
  • Credit metrics drifted: NPAs rose to 0.30% of assets (from 0.26%); NPLs increased; provision for credit losses up to $4.8M (loan growth and risk-rating migration), though coverage remains solid .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenue (GAAP) ($USD Millions)$149.745 $160.191 $162.150
Adjusted Revenue ($USD Millions)$150.497 $159.876 $162.984
Net Interest Income ($USD Millions)$132.546 $141.083 $144.399
Diluted EPS (GAAP) ($)$1.15 $1.30 $1.31
Diluted Adjusted EPS (non-GAAP) ($)$1.17 $1.29 $1.35
NIM (tax-equivalent) (%)3.70% 3.92% 3.92%
Efficiency Ratio (GAAP) (%)65.53% 63.21% 62.50%
Adjusted Efficiency Ratio (%)63.60% 62.18% 60.28%
Provision for Credit Losses ($USD Millions)$2.369 $3.139 $4.795
ROA (%)1.02% 1.15% 1.13%

Segment/KPI detail:

  • Loan Originations (excluding HFS), $MM
CategoryQ2 2024Q1 2025Q2 2025
Commercial RE$102.3 $37.0 $216.2
Multifamily RE$2.8 $9.6 $13.1
Construction & Land$546.7 $287.6 $411.2
Commercial Business$167.2 $103.7 $203.7
Agricultural$22.3 $12.8 $14.4
1–4 Family Residential$34.5 $5.1 $5.5
Consumer$120.5 $80.0 $102.6
Total$996.1 $535.8 $966.6
  • Selected Balance/Rate KPIs
KPIQ2 2024Q1 2025Q2 2025
Loans ($B)$11.14 $11.44 $11.69
Deposits ($B)$13.08 $13.59 $13.53
Core Deposits (% of total)88% 89% 89%
Loan Yield (%)5.96% 6.07% 6.12%
Deposit Cost (%)1.50% 1.47% 1.47%
Funding Cost (%)1.66% 1.55% 1.60%
FHLB Advances ($MM)$398 $168 $565
  • Credit Metrics
KPIQ2 2024Q1 2025Q2 2025
NPAs ($MM)$33.3 $42.7 $49.8
NPAs / Total Assets (%)0.21% 0.26% 0.30%
NPLs ($MM)$30.7 $39.0 $43.0
ACL – Loans ($MM)$152.8 $157.3 $160.5
ACL / Loans (%)1.37% 1.38% 1.37%
Net Charge-offs ($MM)$0.245 $2.747 $1.023

Guidance Changes

MetricPeriodPrevious Guidance (Q4/Q1 calls)Current Guidance (Q2 call)Change
Loan yield trajectoryH2 2025 (Fed on pause)+5 bps/qtr while Fed paused +4–5 bps/qtr expected in Q3; trend moderates over time Maintained / refined
NIM outlook2025Up a few bps/qr when Fed on pause; flat-to-down after cuts Tailwinds from loan yields and seasonal deposits; reduced FHLB reliance could lower funding cost Maintained
Loan growthFY 2025Mid-single-digit growth target Still mid-single digit; Q3 pullback from Q2’s ~9% annualized pace Maintained with near-term moderation
Expenses2025 run-rate~$100M/qtr + normal inflation IT expenses to rise in H2 as new origination systems go live; some nonrecurring consolidation costs over next 3–4 quarters Raised near term
Capital actionsNear termConsider sub debt repayment; assess buybacks Sub debt repaid; buyback authorization up to ~5% of shares Executed actions

Earnings Call Themes & Trends

TopicQ4 2024 MentionsQ1 2025 MentionsQ2 2025 Current PeriodTrend
Tariffs/macroCaution on idiosyncratic credit; ag pressures noted Detailed tariff risk across West Coast; ag, retail, manufacturing exposure sizing; watch small business/consumer Tariff implementation paused; originations rebounded; still flagged as a risk if adopted Still a watchpoint; acute risk moderated
Funding/NIMNIM +10 bps in Q4; deposit costs reduced; hedge rolled off Model: NIM up when Fed paused; flat/down after rate cuts Loan yields +5 bps; funding cost +5 bps due to FHLB; seasonal deposit inflows expected Q3 Constructive near term
Loan growth5% y/y in 2024; pipelines healthy Q1 muted demand; pipelines rebuilding; mid-single-digit FY target Q2 strong originations; expect Q3 pullback; mid-single-digit FY maintained Positive momentum, normalizing
Technology initiativesNew loan/deposit origination system going live in Q2 2025 –IT costs rising H2; long-term efficiency/scalability benefits Investment phase
Capital/ratingsFortress balance sheet; consider sub debt/share actions Sub debt rate to float in July; considering repay/replace Sub debt repaid; KBRA affirmed ratings; buyback authorized Strength reaffirmed

Management Commentary

  • “Our earnings… benefited from solid year over year loan growth as well as higher yields on interest-earning assets… We also continue to benefit from a strong core deposit base, with core deposits representing 89% of total deposits” — Mark Grescovich, CEO .
  • “Loan originations increased 80%… CRE up 484%, C&I up 96%, construction +43%… pipelines continue to build” — Jill Rice, CCO .
  • “Funding costs increased five basis points… FHLB advances used to temporarily fund loan growth… expect deposit growth in the third quarter” — Rob Butterfield, CFO .
  • “We reported strong positive operating leverage… core PPNR increased 6.6% q/q and 19% y/y” — CFO .
  • “We view our stock to be a compelling investment opportunity… repurchasing shares supports long-term shareholder value” — CEO on buyback authorization .

Q&A Highlights

  • Deposits: Competition “not necessarily heating up”; relationship banking drives deposit-rich small business inflows; seasonal Q3 ag cash inflows expected to bolster deposits .
  • Margin outlook: Loan yields expected +4–5 bps/qtr with Fed on pause; funding costs could improve if FHLB reliance falls amid seasonal deposits; margin supported near term .
  • Expenses/IT: Second-half IT expenses to rise as origination systems go live; expect nonrecurring consolidation costs over next 3–4 quarters; attempt to offset longer-term with efficiency gains .
  • Loan growth cadence: Q3 slower than Q2’s 9% annualized pace; full-year mid-single-digit maintained .
  • Credit clarity: Increase in substandard ag credits due to commodity/input cost pressures; NPL uptick concentrated in 1–4 family consumer given resolution timelines .

Estimates Context

  • Q2 2025 EPS vs consensus: GAAP diluted EPS $1.31 vs S&P Global Primary EPS consensus $1.31 — in line; adjusted EPS $1.35 exceeded normalized EPS expectations on a non-GAAP basis *.
  • Q2 2025 Revenue vs consensus: Reported total revenue (GAAP) $162.2M vs S&P Global revenue consensus $166.9M — miss; Street likely adjusts for noninterest income volatility and funding mix *.
  • Q1 2025 and Q2 2024 context: EPS prints ahead/on par with consensus; revenues modestly below consensus as reported (see table).
MetricQ2 2024Q1 2025Q2 2025
EPS Consensus Mean ($)1.135*1.218*1.31*
EPS Actual (GAAP) ($)1.15 1.30 1.31
Revenue Consensus Mean ($)151.77M*159.67M*166.91M*
Revenue Actual (GAAP) ($)149.75M 160.19M 162.15M

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Banner’s margin story is intact: steady 3.92% NIM with visible loan-yield tailwinds and expected Q3 deposit inflows; watch funding cost normalization as FHLB reliance recedes .
  • Revenue miss vs consensus was largely a function of noninterest income noise (lease exit costs) and higher funding cost; core PPNR growth and adjusted efficiency ratio improvement to 60.28% are positives for operating leverage .
  • Credit remains manageable despite modest deterioration; ACL coverage unchanged at 1.37% of loans; NPAs low at 0.30% of assets—monitor ag/consumer buckets and NPL migration .
  • Capital deployment optionality has increased: sub debt paid off; buyback authorization up to ~5% of shares alongside dividend—potential EPS accretion and TBVPS support if executed .
  • Near-term trading lens: stock likely responds to confirmation of margin tailwinds (Q3 seasonal deposits), buyback activity, and stable credit; any tariff implementation headlines could pressure sentiment given West Coast exposure .
  • Medium-term thesis: super-community bank model in growth MSAs, relationship deposits, and disciplined risk profile underpin durable returns; IT investments should enhance scalability and efficiency over time .
  • Watch list: Q3 loan growth moderation from Q2 surge; progression of deposit costs; pace of share repurchases; ag/consumer credit trends; SBA gain-on-sale trajectory for fees .