BANNER CORP (BANR)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 EPS was $1.54 GAAP and $1.52 adjusted; EPS beat Wall Street consensus ($1.40), while revenue was slightly below consensus ($170.7M GAAP vs $171.5M) as the mix shift and asset sales drove adjusted revenue of $168.7M. EPS beat; revenue slight miss (values from S&P Global) *
• Net interest margin expanded 6 bps to 3.98% (tax-equivalent), net interest income rose 4% q/q to $150.0M, and the efficiency ratio improved to 59.76% from 62.50% .
• Deposits grew 4% q/q to $14.02B (core deposits 89%), enabling an 82% reduction in FHLB advances to $100M; management raised the quarterly dividend 4% to $0.50 and repurchased 250K shares at $63.11, signaling capital strength .
• Guidance commentary: with multiple Fed cuts in Q4, management expects “moderate” margin compression; deposit beta modeled at 28% and advertised CD rates cut 25 bps post-September cut (catalyst: capital return + NIM trajectory) .

What Went Well and What Went Wrong

What Went Well

• Net interest margin expanded to 3.98% and net interest income increased to $150.0M, supported by higher loan yields and lower funding costs .
• Efficiency improved: GAAP efficiency ratio fell to 59.76% (adjusted 58.54%), reflecting stronger NIM and controlled opex .
• Deposit momentum and liquidity: total deposits +4% q/q to $14.02B; FHLB advances down to $100M; CFO highlighted “ample capacity” and strong core funding base .
• Management tone: “continued strength of our super community bank strategy… strong core deposit base… strong credit quality” (CEO) .

What Went Wrong

• Non-interest expense ticked up to $102.0M and included $1.0M losses in building/lease exit costs; net charge-offs rose to $2.2M, with higher agricultural and commercial C/Os .
• While EPS beat, revenue was marginally below S&P Global consensus in Q3 (small miss vs GAAP revenue; adjusted revenue below consensus) (values from S&P Global)*.
• Forward NIM headwind: management expects “moderate” margin compression in quarters with multiple Fed cuts; deposit costs rose 3 bps q/q to 1.50% .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Banner’s third quarter performance reflects the continued strength of our super community bank strategy… strong credit quality… robust capital position… strong core deposit base, with core deposits representing 89% of total deposits at quarter-end” .
• CFO on NIM outlook: “In a quarter where there’s no Fed actions… margin would expand… If the Fed does one rate cut… relatively flat… multiple rate cuts in one quarter… we would expect some margin compression” .
• CFO on deposit actions: “Post-Fed rate cut, we reduced our advertised CD specials by 25 bps… reduced our high-yield savings tiers 5–20 bps… took some reduction on exception-priced clients as well” .
• CRO on loan growth: “Fourth quarter loan growth is typically strong… we still anticipate reporting a mid-single-digit growth rate for the full year” .
• CFO on capital: “Repurchased 250,000 shares… announced the increase in our core dividend by 4%… share repurchases on the table post-blackout, subject to market conditions” .

Q&A Highlights

• Margin trajectory under Fed cuts: Management expects “moderate” NIM compression with multiple cuts in one quarter; September margin was “really close” to the quarter average .
• Capital deployment: Buybacks viewed as attractive around Q3 levels; dividend raised; M&A optional with ample capital and strong earnings power .
• Deposits: Strong seasonal inflows (ag); no specials beyond standard efforts; broad pricing reductions post-cut; elevated average cash balances as “dry powder” for Q4 loan growth .
• Competitive dynamics: Pipelines rebuilding after strong Q2 pull-through; competition consistent; some pressure for longer interest-only structures; underwriting standards holding .
• Operating expense tailwinds: Back-office space consolidation will continue a “few more quarters” into mid-2026, implying occasional lease-termination costs .

Estimates Context

Results vs consensus in Q3: EPS beat (+$0.12) and revenue slight miss (-$3.47M). Where relevant, consider consensus updates given deposit repricing and NIM outlook. All values marked in this section are from S&P Global and may use S&P-defined “Primary EPS” and “Revenue” methodologies which can differ from GAAP totals shown in company materials.*

Key Takeaways for Investors

• EPS beat driven by NIM expansion and lower provisioning; expense discipline improving efficiency — supportive for near-term estimate revisions upward on EPS .
• Revenue line ran slightly below consensus; adjust revenue modeling for asset sales/fair-value items and seasoning in mortgage banking *.
• Deposit growth and core funding strength materially reduced wholesale funding reliance; expect lower funding costs to partially offset loan yield pressures in a falling-rate environment .
• Near-term NIM risk: multiple Fed cuts in Q4 point to “moderate” compression; deposit betas ~28% imply lagged relief; position around rate paths in modeling .
• Credit quality remains robust (NPA 0.27%, ACL/NPL 399%); watch agricultural and commercial charge-offs in the context of macro/commodity cycles .
• Capital return optionality is increasing (dividend up; buybacks active); mgmt remains selective on M&A; potential catalysts include continued repurchases post-blackout .
• Q4 loan growth historically strong; pipelines solid; monitor originations and any competitive shifts (interest-only asks) for spread/structure implications .

Footnote: *Values retrieved from S&P Global.