Banner Corporation (BANR)
Q1 2010 Earnings Call Transcript
April 22, 2010 11:00 am ET
Mike Jones – CEO
Albert Marshall – Secretary
Lloyd Baker – EVP and CFO
Rick Barton – EVP and Chief Lending Officer
Mark Grescovich – President
Matthew Clark – KBW
Jeff Rulis – DA Davidson
Sara Hasan – McAdams Wright Ragen
Louis Feldman – Wells Capital Management
Brent Christ – Sirios Capital Management
Brian Freckmann – LS Capital
Kipling Peterson – Columbia Ventures Corporation
Previous Statements by BANR
» Banner Corporation Q4 2008 Earnings Call Transcript
» Banner Corporation Q3 2008 Earnings Call Transcript
» Banner Corporation Q2 2008 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by. Welcome to the Banner Corporation First Quarter 2010 Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions).
This conference is being recorded today, Thursday, April 22, 2010. I would now like to turn the conference over to Mike Jones. Please go ahead, sir.
Thank you very much. And let me add my welcome to all of you to the first quarter results conference call for Banner Corporation. With me today is Lloyd Baker, our Chief Financial officer; Rick Barton, our Chief Lending and Credit Officer; Albert Marshall, the Secretary of the Corporation. And I'm very pleased to indicate that we also have Mark Grescovich here with us. He is the new President of Banner Bank and Banner Corporation and he will have a few comments to say after we get through reporting on the first quarter results.
So, with that, Albert, would you please read the paragraph?
Sure. Thank you. Good morning, everyone. Our presentation today discusses Banner's business outlook and will include forward-looking statements. Both statements include descriptions of management's plans, objectives, or goals for future operations, products and services, forecast 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 are available from the earnings press release that was released yesterday and a recently filed Form 10-K for the year ended December 31, 2009. Forward-looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expectations. Thank you.
Thanks, Albert. Now, what I’d like to do is have Lloyd kind of go, Lloyd Baker, our Chief Financial Officer go through our results for the first quarter.
So with that, Lloyd, why don't you go ahead?
Okay. Great. Thanks and good morning, everyone. It's good to be with you again; it seems like we just did this not that long ago. For the past couple of days, I’ve been contemplating what I would say about the first quarter's operating results.
In that process, I kept coming to the same conclusion, which was to say, for Banner Corporation the first quarter was pretty unremarkable. There was nothing unanticipated; there was nothing requiring a complicated explanation. It was pretty much what we expected, although it may have been better than what some others expected and for the most part, things were generally improving. Actually, given the difficult economic environment that we’re still dealing with, that perhaps is remarkable.
For us and for most banks for that matter, the first quarter is always a challenge when comparing to the preceding quarter simply because it’s shorter, there are fewer business days. That means there are fewer days to earn interest, as well as to close loans and earn payment processing and other transaction fees.
Nonetheless, our total revenues for the first quarter at $45.2 million were nearly unchanged, compared to immediately preceding quarter and were slightly more than 5.5% stronger than the first quarter a year ago.
Of course, the most significant component of our revenue is net interest income. Net interest income was $38.2 million for the quarter. It was essentially unchanged again compared to the fourth quarter, despite the two fewer days and a meaningful decrease in earning assets.
But that net interest income was more than 9% greater than the $35 million amount in the first quarter of 2009, which was rewarding to see that kind of improvement. The improvement, compared to a year ago in net interest income reflects a 12 basis point improvement in our net interest margin during the most recent quarter, which represents a continuation of the margin expansion we've reported for the past three quarters now.
For the quarter, net interest margin was 3.61%, which was 35 basis points better than the 3.26% level that we recorded in the first quarter a year ago. This margin expansion has been very significant – has been driven, excuse me, by very significant improvement in our funding costs, which in turn has primarily been driven by continuing declines in cost of deposits.
Deposit costs declined by 15 basis points for the quarter and were 85 basis points lower than the same quarter a year earlier. By contrast, loan yields continue to be very stable, actually went up a couple of basis points during the quarter.
The trend towards lower deposit costs has been a very significant factor for us for a number of quarters and it had been, excuse me, has been significant for us for a number of quarters.
In deposit costs, importantly, deposit costs decreased every month during the quarter, another trend that has been in place allowing us the expectation of lower funding costs next quarter.