Banner Corporation (NASDAQ:BANR) Q1 2018 Earnings Conference Call - Final Transcript

Apr 24, 2018 • 11:00 am ET

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Banner Corporation (NASDAQ:BANR) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Executive
Peter Conner

earning asset mix will be higher in the second quarter than it was in the first quarter relative to loan outstanding. So we'll have some headwinds on the total earning asset yield in the second quarter. And then that coupled with increasing funding costs, which will be some likely modest increase to our deposit costs as we go into the second quarter, but also influenced by the amount of wholesale funding that we'll use to fund the earning assets, which are going up at so much faster rates given the wholesale market. And the second quarter will create some pressure on our margin relative to the first quarter.

Analyst
Jacquelynne Bohlen

Do you expect a big increase in wholesale -- I guess, do you expect much of an increase in wholesale funding in the second quarter?

Executive
Peter Conner

Well, it's not so much the increase from where we ended March. But you can think of where we ended. We rely on the FHLB, which tends to correlate highly with short-term LIBOR rates in terms of our wholesale borrowing costs. But the bigger driver of our funding cost increase will be the fact that we typically have a slow -- a bit of a slowdown in deposit growth in the second quarter were tax payments. So more of our funding mix will be made up of wholesale borrowings in the second quarter than it was in the first quarter. So the mix of funding will have some pressure on simply due to the fact that more of the funding will come from wholesale sources in the second quarter than it did in the first.

Analyst
Jacquelynne Bohlen

Okay. That's very helpful. And then just one last one and I'll step back. In terms of deposit costs, given the very limited movement that we saw in the first quarter and then the comments about pressure going forward. Are you seeing an increase in volume of calls coming in after the March increase, or are there any changes that you're making as a result of that?

Executive
Peter Conner

We have a calibrated approach to evaluating our deposit pricing across all of the regional markets we're in. And we are seeing the beginnings of some pressure on the higher tier money market balances, savings balances and some of the CD tenures channels. And we've made some calibrated adjustments in those products. Some of those, you saw the effect in Q1. You'll see some of the effect of what the changes we made in the first quarter continued to carry into the second quarter in the form of additional increases. We continue to see a fair amount of requests for exception pricing. And those also bubbled through as some increases the overall deposit costs, although, so far they're fairly modest.

Analyst
Jacquelynne Bohlen

Okay. Great, thanks for all the color here. And Lloyd congratulations on your retirement.

Executive
Lloyd Baker

Thank you Jackie.

Executive
Mark J. Grescovich

Thank you, Jackie.

Operator
Operator

The next question comes from Jeff Rulis with D.A. Davidson.

Analyst
Jeffrey Rulis

Thanks good morning guys.

Executive
Mark J. Grescovich

Good morning Jeff.

Analyst
Jeffrey Rulis

Comment on the deposit success that you had