Banner Corp (NASDAQ:BANR) Q4 2019 Earnings Conference Call - Final Transcript
Jan 24, 2020 • 11:00 am ET
Peter J. Conner
The composition of non-interest bearing deposits to total deposits held steady at 40% of total deposits and the ratio of core deposits to total deposits increased to 89% in the fourth quarter, in part due to the acquisition of AltaPacific. The net interest margin declined 5 basis points to 4.20% as a result of lower market rates, principally due to the decline of Fed funds and LIBOR rates coupled with the lag in deposit repricing. Partially offsetting margin compression in the fourth quarter was a higher impact of acquired loan accretion as a result of the AltaPacific acquisition.
Loan accretion contributed 8 basis points to the margin in the fourth quarter, up 2 basis points from the 6 basis points of loan accretion contributed to the margin in the third quarter. The Bank continued to adjust deposit rates down during the quarter and into January, and we anticipate seeing a continued decline in average deposit cost carry through into the first quarter. It's also worth noting that during the fourth quarter, the Bank prepaid a portion of its higher cost FHLB longer term borrowings and replaced them with lower cost and shorter duration FHLB borrowings to reduce the company's asset sensitivity.
Total non-interest income declined modestly by $584,000 from the prior quarter. Adjusted non-interest income, excluding losses on the sales of and changes in securities carried a fair value declined by $684,000. Deposit fees declined $694,000 due to lower interchange fees. Total mortgage banking income declined modestly by $366,000 as a robust refinance volume that continued into the fourth quarter was offset by a decline in average gain on sale premiums. Miscellaneous fee income increased $288,000 due to increased swap and SBA fee income.
Adjusted non-interest expense increased by $2.6 million from the prior quarter excluding acquisition costs. A significant portion of the increase was a result of higher operating costs associated with AltaPacific. $700,000 of the increase was due to FHLB prepayment fees on term advances and the remainder was due to normal seasonal increases in charitable contributions and employee conference expense. By way of comparison, during the third quarter, the small bank FDIC insurance fund expense rebate largely offset the SERP expense true-up associated with the reduction in the discount rate applied to the bank's SERP liability.
Finally, with the closing of AltaPacific on November 1, we look forward to a smooth conversion and branch consolidation in the first quarter and recognizing the remaining expense synergies in the second quarter. This concludes my prepared remarks. Mark?
Mark J. Grescovich
Thank you, Peter and Rick for your comments. That concludes our prepared remarks. And Jamie, we will now open the call and welcome questions.