BANR
#You bet.
Have a great day.
Sure.
<UNK>, this is <UNK>.
Good morning.
The registration of the shares probably contributed $300,000 to $400,000 to the expense line, and principally that related to sales that occurred by some of those shareholders.
So it is interesting to note that a number of those restricted shares have changed hands over the ---+ principally since April 1 when it became 144 eligible and since we recorded the S-3 at that point in time, registering those shares as well.
So there were some delayed cost associated with that, and you know, there were other things.
The seasonal aspect we do get into year-end Sarbanes-Oxley testing, year-end audit expenses, some of those things.
So professional fees tend to be a little lumpy, but I would caution here that as we've noted, we're going to incur additional fees going forward as a result of the $10 billion particularly preparing for it to become a DFAS compliant bank as well as some additional compensation expense related to that.
Having noted all of that, the efficiency ratio, particularly the adjusted efficiency ratio or the ratio of expenses to average assets both continue to show improving trends, which is what we've indicated all along is that we will grow into this expense base over the next number of quarters.
So, again, I think that's the trend.
<UNK> asked the question about budget.
I think the thing you can anticipate with Banner is that there's a lot of stuff that is just exactly on trend, and the plan is unchanged, which is to continue to grow the <UNK> and grow into that expense base and grow revenue at a faster pace.
Well, it's both.
We've indicated it is underway, but we've also made it very clear that there are ---+ there's going to be expense growth associated with that specific issue of becoming a $10 billion bank and our expectations there have not changed for some period of time.
We have started.
I think the important point there is that there is much effort underway at the <UNK> today to prepare and ensure that we will be able to comply with all of those regulatory requirements.
Now, let's put that back in perspective that we've laid out before.
We'll stay under $10 billion through the end of this year, likely cross it sometime next year, which means that the Durbin Amendment will become effective for us in the second half of 2018.
There's a revenue impact of that that we have previously estimated to be about $11 million annual revenue, so that's $5 million to $6 million in the second half of 2018.
And our first DFASed required submission will likely be in 2019, but we're moving forward with building out the skillset and the capacity to be DFAS compliant by the end of next year.
<UNK>, this is <UNK>.
Just in reference to the questions to expenses that you and <UNK> both had, the <UNK> remains extremely focused on generating positive operating leverage.
So, there's two sides to that equation.
Obviously, we have to do ---+ we have to continue to grow revenue and what you've seen over the last couple of quarters is that we have had positive operating leverage and we anticipate that going forward.
So ---+ this is <UNK> again, <UNK>.
As I noted that buyback, we triggered that.
We've had that authorization for a while.
We triggered it with a 10(b)(5) filing in the third week of September as part of our deleveraging strategy.
We announced a plan to repurchase about 1.3 million shares there, and we're probably at least halfway through that plan to date.
What may surprise some people just a little bit is that the effect on average shares outstanding in the quarter was fairly modest for the third quarter.
Should be significantly more impact on the fourth quarter this year.
Sure.
The ---+ it's fairly straightforward.
The movement in LIBOR, which trended up by about 20 basis points to 25 basis points as I recall, during the quarter had a direct impact on that mark to market.
So, as you've noted before, without any change in rates or spreads, we would anticipate about $300,000 to $350,000 a quarter of mark on the trust preferreds ---+ net mark on the trust preferred securities, just because of the passage of time, and that's the principal thing that is going through that fair value account.
The movement in LIBOR accounts for most of the difference this quarter.
Yes.
Thanks, Tim, and Good morning.
I don't have anything particular different to add than I have in the previous quarters.
I think there are certainly conversations that are occurring about the difficult operating environment that a lot of institutions are faced with with low interest rates and now with concentration limits becoming an issue in some institutions with commercial real estate, so it's becoming a challenging environment for a number of banks to continue to operate at a high performing level.
So the conversations continue, but I don't have anything further to add than what I have in the previous quarters.
I think all of our markets as we've alluded to in many of our investor presentations are very, very attractive markets.
We are certainly seeing California be, as you already know, the sixth highest rated economy in the world.
It's ---+ all of our markets are doing extremely well, and we need additional density, so we're looking to build out in every one of those markets.
I'm not going to go to Nevada though.
We're not there yet.
Does that help, Tim.
Sure, Tim.
This is <UNK>.
Obviously, there's always been seasonality in the mortgage market, but I think if you look at our balance [sheet] you're going to see that we still have a very strong position in loans held for sale.
Interest rates continue to be, mortgage rates in particular, continue to be very attractive and make housing affordable.
As I noted, there's still refinance activity going on, but 65% of what we did was purchase activity, which is indicative of what <UNK> and <UNK> have both said about the strength of markets that we operate in.
So I'm optimistic around mortgage as far into the future as I can see, which obviously things can change, but the next few quarters look pretty good again.
There will be a natural seasonal slowdown.
Most likely you'll see that in the first quarter would be my expectation.
First of all, I ---+ that is kind of the range that we've said that the core operation can operate at and continue to have positive operating leverage, so thank you for reaffirming that range, and on an adjusted basis, we're at 64%.
We are not ---+ we set our business plans based on a status quo business climate, so we're not reliant on rising rates.
If we continue to take market share like we have and leverage the acquisition of American West, we will continue to drive down that efficiency ratio as we've done in the last couple of quarters.
Thank you, Kate, and thank you, everyone, for your questions, as well.
As I stated, we're pleased with our solid third quarter 2016 performance, and we see it as evidence that we're making substantial and sustainable progress on our disciplined strategic plan to build shareholder value by executing on our super community bank model by growing market share, strengthening our deposit franchise, improving our core operating performance, maintaining a moderate risk profile, and prudently deploying excess capital.
I'd like to thank all of my colleagues who are driving the solid performance for our <UNK>.
Thank you for your interest in Banner and for joining the call today, and we look forward to reporting our results to you again next quarter.
Have a great day, everyone.
