Banner Q4 Earnings Call Highlights

22 Jan 2026, 17:08 by Kim Johansen · The Markets Daily

Banner (NASDAQ:BANR) detailed fourth-quarter and full-year 2025 results on its earnings call, highlighting higher year-over-year profitability, steady core revenue, and continued emphasis on a moderate risk profile. Management also discussed loan growth dynamics that were tempered by payoffs and lower line utilization, credit trends, net interest margin sensitivity to potential Federal Reserve actions, and capital deployment through dividends and share repurchases.

Quarterly and full-year results

President and CEO Mark Greschovich said Banner reported net profit available to common shareholders of $51.2 million, or $1.49 per diluted share, for the quarter ended Dec. 31, 2025. That compared with $1.54 per share in the third quarter of 2025 and $1.34 per share in the fourth quarter of 2024.

For the full year, Banner posted net income available to common shareholders of $195.4 million, or $5.64 per diluted share, compared with $168.9 million, or $4.88 per share, for 2024.

Greschovich pointed to core earnings power using a pre-tax, pre-provision measure that excludes certain items (including gains and losses on the sale of securities, fair value changes on financial instruments, and building and lease exit costs). On that basis, he said core earnings were $255 million in 2025 versus $223.2 million in 2024. Banner’s fourth-quarter revenue from core operations was $170 million, compared to $169 million in the prior quarter and $160 million in the year-ago period. Full-year 2025 core revenue was $661 million, up from $615 million in 2024, an increase of 8%.

Loan growth held back by paydowns and line utilization

Chief Credit Officer Jill Rice said loan originations were solid, rising 9% from the linked quarter and 8% year over year, but overall loan growth in the quarter was negligible. She attributed the offset to “higher-than-expected affordable housing tax credit paydowns,” a small number of commercial real estate (CRE) and shared national credit payoffs, and a decline in C&I line utilization, down 3% in the quarter and 4% year over year. Total portfolio loan balances increased 3.2% year over year.

Within commercial real estate, Rice said investor CRE increased 5% year over year and owner-occupied CRE increased 11%. She described growth as diversified by product and geography and “granular in nature,” noting small business teams provided nearly 40% of owner-occupied originations by dollar.

Rice also discussed construction lending as a long-standing strength for Banner, with construction portfolios “well-balanced” at 15% of total loans. She said quarter-over-quarter increases in commercial construction, one-to-four family construction, and land/land development reflected funding of previously approved projects, while multifamily construction declined primarily due to the affordable housing tax credit paydowns.

In C&I, Rice said the decline was driven largely by reduced line utilization, exits of several classified relationships, refinancing of shared national credits off-balance sheet, and payoffs of relationships Banner did not retain because of underwriting terms offered by competitors. She said that was partially offset by small business growth, up 8% year over year.

Looking ahead, Rice told analysts that CRE payoffs are likely to remain a headwind in 2026, but pipelines are “building” and new bankers hired in the last two years are showing positive impact. Assuming the economy holds up, she said Banner expects to grow its loan book in the mid-single digits over 2026.

Credit quality metrics and reserve levels

Rice said overall credit metrics “remain strong,” though delinquencies increased modestly due primarily to a spike in the one-to-four family portfolio. Delinquent loans ended the quarter at 0.54% of total loans, up 15 basis points from the linked quarter, compared with 0.49% a year earlier.

Adversely classified loans increased by $19 million and represented 1.65% of total loans. Non-performing assets totaled $51.3 million, representing 0.31% of total assets.

The net provision for credit losses was $2.4 million, including $1.5 million for loan losses and $945,000 tied to unfunded commitments. Loan losses were $1.2 million, partially offset by recoveries of $310,000. Rice said net charge-offs for the year were six basis points of average total loans. The allowance for credit losses ended at $160.3 million, or 1.37% of total loans, consistent with prior quarters.

In response to a question about criticized loan categories, Rice said special mention increases were driven largely by downgrades of a couple of alcohol beverage-related enterprises due to declining cash flows, including one relationship of roughly $25 million. For substandard loans, she characterized downgrades as idiosyncratic and said the largest substandard relationship had about $19 million outstanding, with the average substandard loan “well under $1 million.”

Margin, expenses, capital actions, and outlook items

Chief Financial Officer Rob Butterfield said the quarter’s earnings per share decline from the prior quarter primarily reflected a decrease in valuation of financial instruments carried at fair value, a loss on disposal of assets related to software no longer used, and higher medical and IT expenses, partly offset by higher net interest income. For the full year, he attributed the EPS increase mainly to an 8.5% increase in net interest income from higher net interest margin and growth in earning assets.

Butterfield said net interest income rose $2.5 million from the prior quarter, driven by a five-basis-point increase in net interest margin and a $60 million increase in average earning assets. The tax-equivalent net interest margin was 4.03% versus 3.98% in the prior quarter. He said earning asset yields declined four basis points, including a seven-basis-point drop in loan yields as floating-rate loans repriced down following a 75 basis point reduction in the fed funds rate. The average rate on new loan production was 6.88% versus 7.35% in the prior quarter. Funding costs declined 10 basis points, as deposit costs fell 7 basis points and average borrowings decreased.

Butterfield also addressed margin sensitivity, saying the outlook depends largely on Fed actions. He outlined scenarios where no cuts could allow some expansion, one cut could produce a flatter result as deposit repricing offsets impacts, and multiple cuts could create compression given Banner’s floating-rate exposure. He noted Moody’s interest rate forecast (as of January) contemplated three cuts in the first half of the year (March, June, and July), though he also referenced market expectations that could differ.

On deposits, Butterfield said deposits fell $273 million during the quarter, largely due to seasonal activity including agricultural clients using deposits to pay down lines of credit and larger deposit clients deploying excess liquidity. Core deposits remained 89% of total deposits, and non-interest-bearing deposits were 33% of total deposits. The loan-to-deposit ratio ended at 86%. In Q&A, Butterfield said the spot deposit cost for December averaged 1.39% and December margin was approximately 4.03%, in line with the quarter.

Expenses rose from the prior quarter, with Butterfield citing higher medical claims, software expense, and legal expense, as well as lower capitalized loan origination costs. He said IT expenses increased as a new loan and deposit origination system was fully rolled out early in the fourth quarter. For 2026 expense expectations, he suggested using full-year 2025 expenses as a baseline with “normal inflationary” growth of roughly 3%.

On capital, Butterfield said Banner repurchased approximately 250,000 shares during the quarter and declared a quarterly dividend of $0.50 per share. He said tangible common equity ratio rose from 9.5% to 9.84%. In Q&A, he said about 1.2 million shares remained available under the repurchase authorization and that the bank would monitor market conditions and stock price in deciding whether to continue buybacks. Greschovich added that Banner’s approach to M&A had not changed and that the company continued to hold conversations with potential partners, emphasizing that timing is uncertain.

Butterfield also said the company expects a normalized tax rate of about 19% in 2026, following a fourth-quarter true-up. He noted the quarter included a $1.4 million loss on disposal of assets, including a $1 million write-off of software assets no longer in use, which he characterized as non-recurring.

About Banner (NASDAQ:BANR)

Banner Corporation, through its principal subsidiary Banner Bank, operates as a regional commercial bank headquartered in Walla Walla, Washington. Founded in 2000 as a bank holding company, Banner traces its origins to community banking roots in Eastern Washington dating back to the late 19th century. Over the past two decades, the company has grown through both organic expansion and strategic acquisitions, establishing a strong presence throughout the Pacific Northwest.