Q1 2020 Earnings Call
Good day, everyone and welcome to the North East Bank fiscal year, 2021st quarter earnings results Conference call.
This call is being recorded.
With us today from the Bank is Rick Wayne, President and Chief Executive Officer Officer, and J.P. Lapointe, Chief Financial Officer.
Earlier, this morning, and Investor presentation with uploaded to the banks web site, which we will reference in this morning's call.
The presentation can be accessed at the Investor Relations section of North East Bank Dot com.
Under events and presentations you will find a helpful to download this investor presentation and follow along during the call also this call will be available for rebroadcast on the web site for future use.
The question answer session for this call will be conducted electronically following the presentation.
Please note that this presentation contains forward looking statements about north East Bank forward looking statements are based upon the current expectations of North East banks management and are subject to risks and uncertainties actual results may differ materially from those discussed in the forward looking statements North East Bank.
Not undertake any obligation to update any forward looking statements.
This time I would like to turn the call over to Rick Wayne. Please go ahead Sir.
Good morning, and thank you all for joining us today.
I'm Rick Wayne.
Keep executive officer of Northeast Bank and with me on the call as Jay people, a point or Chief Financial Officer.
Before turning the call over to JP for a more detailed analysis.
I would like to discuss highlights for the quarter ended September 32019, which is the first quarter over fiscal year.
For our first quarter of fiscal year 2020, after the close of the market yesterday.
We announced a quarterly net income of $4.8 million or <unk>.
52 cents per diluted common share.
A return of equity of 12.2 person.
A return on average assets of 1.7%.
And the net interest margin of 5.7 person.
Additionally, as announced last week.
Bank adopted a share repurchase program to purchase up to 900000 shares of our common stock representing approximately 10% over outstanding common stock.
The repurchase program has the potential to enhance shareholder value, while returning capital to our shareholders and gives us the opportunity to repurchase our stock at a price.
To the extent, we feel it is undervalued.
The repurchase program does not obligate the bank the purchase any particular number of shares.
Turning to slide three.
During the first quarter bank wide, we generated $79.5 million of loans, including 69.2 million in or L.A.S.G.
<unk> 40.6 million were originated.
28.6 million were purchased.
Offsetting the origination and purchase activity was an unusually high number of payoffs and paydowns in the L.A. is cheap portfolios, which totaled approximately $100 million for the quarter.
The weighted average yield of the L.A.S.G. loans originated in the first quarter was 7.5% of September Thirtyth.
All of which were variable tied to prime with a weighted average floor of 7.5% as of September thirtyth.
The total return on purchased loans for the quarter.
Was 9.7%.
Which included 2 million of transactional income.
And as previously mentioned the net interest margin for the quarter was 5.7%.
Moving onto slide four.
Up to 69.2 million invested by L.A.S.G. for the quarter.
28.6 million were purchased loans.
In 40.6 million were originated loans.
Purchase loans for the quarter.
Have unpaid principal balances of $30.3 million, representing a purchase price of 94.4%.
Since 2010.
Yes, she has invested in aggregate of $2 billion, consisting of approximately $900 million of purchase loans and 1.1 billion of originated loans.
During the past quarter, we reviewed loans with $389 million of unpaid principal balances.
And bid on loans with a 117 million of unpaid principal balances.
As indicated we purchase loans with a U.P.B. of 30.3 million at 94.4%.
The $28.6 million invested consisted of 24 loans acquired and seven transactions.
Moving onto slide five.
Have you ended the quarter the discount on purchase loans was 33.8 million.
As compared to 33.9 million as of June Thirtyth.
The decrease is primarily due to accelerated.
Accretion from purchase loan payoffs of 21.4 million in the quarter, which generated 2 million of transactional income.
Oh, partially offset by the quarters purchases with the related $1.7 million discount.
Approximately 88% of the $33.8 million discount.
As expected to be realized over the remaining life of the purchase loans through accretion.
The non accretable portion of the discount represents cash flows contractual cash flows.
That an or estimation may not be collectible.
Turning to slide six we provide detail on returns of the L.A. as chief portfolio.
For the quarter the purchase portfolio generated a total return of 9.7%.
Including transactional income of $2 million.
As we've discussed in the past transactional income on the purchase loan portfolio as well as the amount of loans purchased may not be consistent from quarter to quarter.
The L.A.S.C. originated portfolio generated a strong return.
7.6% in the quarter.
Turning to slide seven.
We provide statistics on the LSG loan portfolio.
As of September Thirtyth of significance.
As noted in the chart in the top right. The purchase loan portfolio has a net investment basis of 91%.
Which is consistent with the linked quarter.
On an invested basis the average loan size for purchase loans was 418000.
And the average loan size for the originated loans was 2 million.
81% of LSG loans had an investment size of less than $6 million.
The loan portfolio has a diverse collateral type.
Primarily focused on multifamily retail industrial hospitality office and mixed use.
By geography, the largest concentrations are in New York in California.
23, and 22% of the portfolio respectfully.
Our collateral is geographically diverse with collateral and 41 states.
Before turning it over to J.P. I'd like to discuss our SP a business.
Over the past year, it has become increasingly difficult.
For us to book loans in the hotel vertical.
With originations that have declined from.
19 million in Q1.
To 7.7 million in Q4 fiscal 19 and zero in the quarter that just ended.
Well, we have seen many loan opportunities in the hotel vertical it has become increasingly more challenging for us to book loans that meet our credit appetite.
And we don't see this changing anytime in the near future.
Well, we will certainly continue to originate SB loans, where they meet our credit and other criteria.
We will now do so as part of our Las Gi.
And not through a separate SBH division.
As part of this Fred Schwartz, who headed up RSV, a SP a hotel hotel vertical left the bank at the end of September .
And now I'd like to turn it over to JP, who will discuss in more detail our financial results after which we will be happy to answer your questions JP.
Thanks, Rick and good morning, everyone.
Picking up on slide eight to provide more information on our financial results.
As announced in our earnings release, there was made public after the close of business yesterday.
Net income for the quarter was $4.8 million were 52 cents per diluted common share.
Diluted net operating earnings per common share were down seven cents from the quarter ended June Thirtyth 2019 professional referred to as the linked quarter and up three cents from the quarter ended September Thirtyth, 2018, which I show referred to as the comparable prior year quarter.
The decrease seven cents per diluted common share from linked quarter was due to decreased loan interest income, which amounted to $19.7 million in the current quarter.
Compared to $21.4 million in the linked quarter as a result of less transactional interest income compared to linked quarter, which decreased by $1.6 million.
Additionally, interest income another short term investments in dividends decreased by $389000 compared to the linked quarter.
These decreases in interest income were partially offset by lower interest expense.
Totaling $4.8 million in the current quarter compared to $5.3 million in the linked quarter as a result of lower funding costs from the decrease in deposits and the redemption of trust preferred securities as a result of the corporate reorganization completed in the linked quarter.
Provision for loan losses amounted to a credit of $136000 in the current quarter.
Compared to a provision of $262000 in the linked quarter due to changes in the composition of loan portfolio due to higher pay offs during the current quarter.
Fee income decreased $116000 compared to the linked quarter due to the right up from servicing assets from the payoff of SPD loans in the current quarter.
Additionally, bank owned life insurance income increased $131000.
As a result of death benefit gain related to a former employees.
Operating expenses, which exclude reorganization expenses incurred in the linked quarter.
Amounted to $10.4 million during the current quarter.
Compared to $10.2 million in the linked quarter.
Primarily due to an increase in loan acquisition in collection expense.
From increased expenses incurred loan workouts in the early SG portfolios.
Which can vary due to the timing of recruitment of these expenses, which positively impacted the linked quarter.
Offset by a decrease in FDIC insurance premiums due to a small business assessment credit received in the current quarter.
Excluding the reorganization expenses in the linked quarter and related tax effects. The effective tax rate for the current quarter was 28.7% compared to 32.5% in the linked quarter.
The increase from the comparable prior year quarter of three cents in earnings per diluted common share was due to an increase in loan interest income of $2.2 million.
Due to an increase in transactional income along with higher average balances in the last few portfolios in higher rates earned.
This increase was partially offset by a decrease in interest income on short term investments.
$540000 from the comparable prior year quarter.
Due to lower cash balances held an increase in deposit funding costs of $634000 due to higher rates offered.
The decrease in noninterest income due to $589000 of lower gains from the sale of SPD loans.
And an increase in noninterest expense of $999000, primarily due to increased salary and employee benefit costs incurred.
Turning to slide died.
Over the past year, we've seen that loan portfolio growth of $46.8 million or 5%.
The majority of growth over the last 12 months comes from our legacy portfolio with $370.2 million purchases and originations.
Well bank wide loan production has been strong over the trailing 12 months.
Increases have been significantly offset by Paydowns and amortization in the purchase and originated portfolios, which amounted to $326.6 million over the trailing 12 months.
These results are further detailed on slide 10.
Which shows the composition of loan portfolio over the most recent five quarters.
The net loan growth over this time is primarily driven by the strength of the LSG portfolio.
I had net loan growth of $80 million.
Or 11% since September Thirtyth 2018.
In the current quarter Eleonore originated $40.6 million of loans.
The purchase loans will be recorded investment amounting to $28.6 million.
82% of the Eleonore originated loans, having interest rate floor.
Which was a weighted average floor of 7.23% as of September Thirtyth 2019.
Additionally, a percent of the total Elliot she originated loan portfolio is fixed at a weighted average rate of 7.9%.
Turning to funding on slide 11.
Our deposits have decreased by $108 million or 11% over the trailing over the trailing 12 month period.
In connection with the corporate reorganization that was completed during the linked quarter.
We increased our loan to core deposit ratio.
From 100% to 125%.
Which allowed us to reduce our excess deposits along with a reduced the for funding due to higher loan pay offs than expected during the current quarter.
Over the past year time deposits have grown well money market accounts have decrease.
Our non maturity accounts, which include money market savings and demand deposit products as a percent of total deposits has decreased from 57%.
As of September Thirtyth, 2018, but remains high at 48% as of September Thirtyth 2019.
Compared to the linked quarter, we experienced $509000 of interest expense savings.
$340000 of which was associated with interest bearing deposits.
However, the weighted average rates of deposits remain constant from the linked quarter.
We have $113 million of time deposits maturing between October and January at the current weighted average rate of 2.81%, which we expect to reprice at much lower rates.
Operating results are further details on slide 12.
Which shows trends in total revenue and operating non interest expense, which excludes a corporate reorganization expenses incurred in the linked quarter.
Compared to the linked quarter total revenue has decreased by $1.5 million due to the decrease in net interest income primarily caused by lower transactional income.
Additionally, operating non interest expense increased by $184000 from the linked quarter.
Primarily due to increased loan acquisition and collection expense.
Total revenue has helped us achieve an annualized return on average equity of 12.2%.
Return on average assets of 1.7% and an efficiency ratio of 61.2% in the current quarter.
Compared to the comparable prior year quarter.
Total revenue has increased by $1 million, while non interest expense also increased by $1 million.
The increase in revenue is primarily due to an increase in base net interest income due to higher average balances and rates earned in the LSG portfolios.
Along with an increase in transactional interest income.
Partially offset by a $378000 decrease in noninterest income.
Due to lower gains on sale of SPD loans.
The increase in noninterest expense compared to the comparable prior year quarter.
It's primarily due to an 870000 dollar increase in salary and employee benefits due to increased stock based compensation employee salaries and incentive compensation.
Slide 13 shows trends in the key components of our income.
Compared to the linked quarter base net interest income increased $52000 due to lower average deposit balances along with lower interest expense of subordinated debt.
Due to the redemption of trust preferred securities during the linked quarter.
Base interest income decreased $457000.
Primarily due to the decrease in the average balance of short term investments from the linked quarter.
Transactional interest income from the purchase loan portfolio.
Decreased by $1.6 million compared to the linked quarter.
The purchase on portfolio had a total return of 9.7% in the current quarter compared to 12.3% in the linked quarter.
Interest expense also decreased by $509000 from the linked quarter.
The increase in net interest income from the comparable prior year quarter is largely attributable to an increase in based net interest income of $885000.
Due to higher average balances in the last few portfolio.
And higher rates earned on the loans in the portfolio.
Along with an increase of $493000 and transactional interest income from the purchase portfolio.
The 9.7% return on the purchase portfolio in the current quarter.
It's up from 9.5% in the comparable prior year quarter.
Due to higher transactional interest income.
Along with an increase in regularly scheduled interest and accretion due to higher average balances in the purchase on portfolio compared to the comparable prior year quarter.
Noninterest income increased by $25000 over the linked quarter, well noninterest income decreased $378000 from the comparable prior year quarter, primarily due to a $599000 decrease in the gain on sale of SPD loans due to lower volume sold in the current quarter.
Partially offset by a 182000 dollar increase than other noninterest income.
Mostly related to life insurance death benefit gain recognized during the current quarter.
Slide 14 provides additional information on trends in yields average balances and our net interest margin, which was 5.72% in the current quarter.
As compared to 5.95% in the linked quarter and 4.93% in the comparable prior year quarter.
As previously discussed the net interest margin, which decreased from the linked quarter is largely driven by a decrease in net interest income from lower transactional interest income from the purchase all portfolio.
The average balance of loans for the current quarter was $951 million.
As compared to $961 million in the linked quarter and $894 million in the comparable prior year quarter.
Primarily due to net growth in the last few portfolio.
Originated purchase portfolios from the comparable prior year quarter, net paydowns and payoffs in the portfolios from the linked quarter.
Slide 15 provides a snapshot of our asset quality metrics.
Compared to the linked quarter.
Nonperforming loans to total loans has remained consistent at 1.51%.
And nonperforming assets total assets has decreased to 1.43% from 1.4 or 5%.
The decrease in nonperforming loans is primarily due to one loan the paid off during the quarter.
The top right hand corner classified commercial loans were $11.1 million as of September Thirtyth 2019 decreased from $11.6 million in the linked quarter.
As noted in the chart on the bottom right hand corner of the slide.
Annualized net charge offs to average loan balances have remained at very low levels over the past several years and were seven basis points in the current quarter, a slight increase over the three previous fiscal years.
Our allowance coverage appears appropriate to address the risk inherent in our loan portfolio with consistent adjusted allowance coverage at a slight decrease in the coverage ratio, which is primarily due to the change in the composition of the loan portfolio in management's analysis of qualitative loss factors inherent in the portfolio.
That concludes our prepared remarks at this time, we would like to open up the call to Q1 day.
Hey, Joe I'd like to ask a question. Please do so by pressing the star Keith by the digit one on your Touchtone telephone if you're using a speaker phone to ask a question. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal us and we'll take as many questions as time permits.
Once again, please press star one on your touched on telephone to ask a question.
And our first question comes from Alex Twerdahl with Sandler O'neil. Please proceed with your question.
Hey, good morning, guys.
One ounce morning.
First off one who I spent a little bit more time talking about the paydowns that you saw on the LSG originated loans during the quarter, which were a little bit higher than they've been running over the last I guess really since you've been doing that business, maybe would that do you think tied to.
Decrease in interest rates or another event or or anything else that we should be aware.
Well in the.
Yes.
Some dollars in those loans that were paid down because of business was sold.
And in fact, those were they had been on the balance sheet quite a while at the analyst at a pretty low.
Rate, which we had booked early on when we needed to increase our originated loans to increase our purchased loans.
There may have been some of that you know with with lower rates I think it was more just lumpy in the quarter.
We don't really see.
Well the pay down staying at at that rate, even you don't want to put seems to be of continually lower rate environment.
So maybe some of it but I just think it was more coincidental than anything else.
Okay.
So kind of if you look at that business and kind of the pipeline going forward and sort of the origination volume that you capable of doing in any given quarter I know thats pretty lumpy too, but the expectation is for that portfolio to continue growing you don't anticipate.
These things are hard to project going forward, but but based on what you know right. Now you described that portfolio to start moving higher again in that into the final quarter. This year right.
Yes, the we.
On the originated side, we booked 40 million, which.
By most any other standard not as it applies to us because you know we tend to see a.
Put more loans on the books then.
Than other banks that was I don't know eight or.
9% I'm doing the math in my head of the original balance.
On originated loans.
In that but.
I I auto I won't read the whole forward looking statement that was read earlier, but I will point out. This is a forward looking statement.
And it could change, but we have fairly robust pipeline and.
Frankly, we thought we were going to close this quarter at 60 million and we just had some loans that didnt close if they close on.
September thirtyth, they're in and if they close on.
You know October 5th during the next quarter, we had some number of those that rolled into this quarter I would expect that.
We will continue to see.
Apollo significant bookings in our originated loan portfolio.
I would expect to see pay downs slow down.
I don't think we're going to see $400 million of Paydowns in early as chief portfolio. This year that would be surprising and we have as I said pretty robust.
Pipeline.
Okay.
I went over I just does maybe outside uses as an opportunity for I know you know this but for some of the other callers to underscore a few things J.P. mentioned we have.
On our or actually repeating but I want to under that I want to amplify on that.
In our.
Originated loan book, you, we have a weighted average floor of 723.
You know it appears that prime is going to go down again, which is probably for 75.
So we have baked into there.
Pretty good spreads, we we had to absorb a little bit of that because the floor was less than our rate before but.
Now, what we're going to see or.
Probably significantly less funding costs as all of the Cds JP mentioned fund and our loans, we have the floors baked into those.
And just to elaborate on that a little bit so based on those floors and based on the average rate.
Or at average yield on that portfolio right now it seems like maybe if we get a cut I guess this week theres, a little bit more pricing pressure on the downside at least from one market and then maybe in some sides. But then you also mentioned that some of these payoffs were both with lower rates and kind of it on the balance sheet for OCA for awhile. So so maybe that acts as a lot.
They have an offset to any pressure of another rate cut this week.
I'm not sure I've, followed all of that will you one more time.
I was just I was just getting to know if you look at the originated loans right. Now there are 755, and if you're saying the weighted average four is around 723, then that would suggest maybe a little bit price and a more pricing pressure in that portfolio should we get a cut this week, which I think is largely expected.
And then but I was just wondering if there would be any offset to that pressure on those portfolio on that portfolio on the other that portfolio.
Due to the fact that some of the loans that paid off where as you mentioned earlier lower rate loans.
Yeah, Alex I think part of that is.
We had the two rate cuts in those in the as.
Previous quarter.
So while we were at some 55 for the quarter. Some of those loans had adjusted at the ended the quarter. So I'm not sure. This rate cut if it if it happens from the fed tomorrow will have much more of an effect on our portfolio.
From where we kind of ended the quarter. Now. These are you are right that were at 750 and that we have a floor 723, we're going to take a headwind when the rate goes down but then at 723.
Within protected right, but my point was much does more by the September rate cut the will experience going forward in next quarter. So hopefully this next rate cut the may come this week shouldn't have any additional impact on us I think the big savings for us will be out you know we didn't see any repricing on our deposit we had as JP mentioned, we saved about $500000. It.
Interest expense on deposits, because our port our deposit.
Came down by about $75 million or so, but the but the rate on those didn't change. It was 2.0 to win the linked quarter and 2.0 to this quarter.
But and the the improvement will come when those hundred $20 million of Cds mature.
In roughly December .
Give or take a little bit better at 286 today, they would reprice at too and I suspect that theres another rate cut they will reprice said number less than two.
And that ought to be meaningful interest expense savings.
Yeah that was going to be my next question is beyond and then even beyond the Cds given that it's sort of the nature and the complexion of the ways you guys gather deposits should we expect some additional relief on things like money market accounts. It seemed like there are significantly higher than you might see money market account rate to other banks.
I would hope so it really depends on.
No what our competitors do and I would call. Those you know we have two groups, we have money market rates in Maine, and we have through our Ablebanking, we have national rates, but it wasn't that long ago that.
We had a money mark rate.
At 1.1.
That was the highest on we're bringing money like crazy. So hopefully those rates will come down they seem like they should come down and if they do we have great opportunity there as well.
Okay, and then that I'm sure you're right on the SB eight.
Business is that going to wind up now.
That you're going to any SB laws. The originate are going to windup staying on the balance sheet as part of the LSG unit or will you continue to sell a portion of though is depending on pricing.
You know.
Probably we would depending on pricing, we probably would sell when might that the point I was.
Really trying to make is previously you know we had.
Higher aspirations for that SB eight business, a while back when.
The market was different but we've been as you know I'm every quarter, our originations are going down and we probably have is around number, but we probably had about $600000 of cost in business development and marketing and travel and those things by having it you know what is it just kind of a separate division.
You know when with Fred who we like very much in our and our to Parcher was very amicable.
And understood by both of Us, but we're going to still do SB eight loans as we get referrals from.
You know compete groups currently known to the bank.
But.
We're going to just run out as part of our through our LSG. So it's going to save us some money on the cost side.
And.
The we previously did all of the underwriting for that Adabel SG anyway. So it's not no one's getting displaced in the bank there.
Going to just be continue to work in.
The L.A.S.G. activities and when we have SB eight loans.
Well, we'll book come through them, but I'm trying to make the point that I don't want to emphasize this over it.
Emphasize this part of our business, it's a relatively small part of our revenue and we think by.
Putting it now where it belongs based on the volume we're doing it will be Clare will save some some meaningful amount of on the expense side and clear too.
You know to you and tube investors as to how that fits into our entire business.
But on your question you know we could sell if we book them, we could sell them as that's not the change we're making its not kind of what lower live oak decided to.
Moved from a model of selling to putting them on their portfolio.
That wasn't really the impetus for the the structural change.
And you mentioned in your prepared remarks that really the reason the volumes are way down has to do the credit quality of what you're seeing out there.
However, I know that the pricing has changed materially as rates have gone higher I mean.
How do you have you seen any change in the pricing for these things to sell or has that product. I guess, you mentioned that you don't see much changing the way the underwriting out there but.
Nothing that would suggest that that market can come back based on on what the outlook for interest rates are correct are you, saying the pricing challenge divide into two pieces. When you say the pricing changes you are you referring to the premium on loans sold.
Great. Okay. So.
For us it wasn't we could live with lower rates and there we were reasonably happy with the premium for US. It was all about credit and we saw a lot to Fred's credit I want to make sure Thats clear on this call. We think the world of many did you showed us a lot of deals, but there is a spectrum of credit quality. You know you can range from.
You know in exterior corridor hotel, you know that needs a meaningful and what they call Pip property improvement.
You know in a tertiary market.
Sponsored by a borrower that owner that's worked hard and accumulated some money, but post closing doesn't have a lot of capital. If there is a problem.
So those are because it kind of deals that we saw a lot of in turn down you know you can obviously and the other end to the spectrum is as the credits get better.
No.
A lot lot of times, they're not appropriate SB loans, we were seeing a lot of deals that we set a book, we probably could have if we booked everything we saw no I don't know what we would have done we could have done $50 million of $60 million of of hotel loans.
And.
Now this is going be a.
Complementing the team not me, but we had the discipline may we had the discipline to say no to those because those are loans. We just felt were the credits were going to be a problem. We can feel great on day, one by booking those selling those having meaningful gains and growing our volume, but when they blow up its pretty unpleasant. So we just couldn't find deals that we were comfortable on.
Credit quality sites.
And that's really what happened.
For us it was like a makes a lot offense.
Question on the buyback 10% of shares outstanding seems like a pretty large number can you give us a little bit more color on.
I'm sort of the thought process around around that size of the buyback and if theres any expectations and you know what sort of price points, you might be interested in actually being in the market buying shares.
You know the you know for us in the and the and the but we wanted to have this as a tool.
In our in our business.
You know as you we've seen recently the market can be volatile, we're a small company thinly traded.
Our thought was if we woke up one day and somebody had to sell block and we saw our groups.
Excuse me.
Our stock trading at a very low price, we wanted to have the opportunity to move in and buy it as a as a good investment.
You know as I said in my comments.
The plan doesn't obligate us.
You know investors shouldn't assume that we necessarily will buy any stock, it's really a function of kind of.
A few things you know one is what is the stock price relative what we think it's worth.
I'm not just talking about written in relationship to tangible book, but in relationship to what we think the company's worth is one and two.
What are our opportunities.
To use that capital in our business, where we're looking at.
A lot of loans to buy in a pool this quarter.
Bid on over 100 million.
Frankly, we thought we were going to wind up with more than we wound up with so it's kind of looking at those two things do we need a winner opportunities in the business and what is the stock price.
This will not be a particularly.
Helpful answer in terms of providing guidance, but I wouldn't I don't know, whether we'll buy any shares it will buy a lot of shares it really depends on those factors, but whereas we talk to investors.
And we felt the same way they encourage us to put in place of buyback plan. So.
If it turns out that there was a.
Our stock went up at a price where it made sense for us to do that.
We would do that.
Understood I think Thats all my questions for now thanks for taking the time.
Thank you Alex.
Thank you and our next question comes from David Minkoff with DCM asset management. Please proceed with your question.
Good morning, Rick and the JP.
Congratulations on congratulations on another very decent quarter, you seem to make it look easy even though I'm sure it's not.
Actually my question was on the buyback and Alex probably preempted. The question I think you largely answered it but.
Multi pack, a little a little bit anyway.
It was a lot buyback, so that you announced and.
In the past, you've always announced your buybacks uncompleted that within the year, but each time you did it.
The buyback was announced at a time the stock was selling below book value. This is the first time, you announced a buyback let's see the books I think it was 17 17 in the late this quarter.
And even though you are cautioned us not to annualize quarters.
If it cuts or sense in the first quarter I'm going to go out on the limb and annualize that despite your lumpiness warnings and so all assume approximately $2 for the year. So that puts the book value up to 1917 lesser $19.
Now, it's the buyback at 22 and a half.
I was going to ask you a before basically answered it.
Whether what was different this time and I think you kind of said that it's fair as the failsafe showed the stock fault.
That's certainly understandable, but each time you did it in the past you did it at the end market price could you still justify buying the stock at the current price when you announced it not only being as failsafe for sure the full to 19 or 20 or whatever number you had in mind.
No I Wouldnt say, whatever what what price we would buy this stock I would I know you know this data, but I'll say it the remind and the other listeners that.
In the past buybacks, we bought 20% of the bank back at $10 right, obviously at $22 $10 look quite smart.
I think that kind of the guiding philosophy to this is.
If we wind up.
Accumulating more capital than we need for our business it would be appropriate.
You know to return that capital too.
Investors.
All right so I will.
Go back to.
The point that May when Alex asked the question you know the decision to the buyback stock.
Relates to both the price of the stock to what we consider the real value of the company, which is not necessarily it's not annual book and it's not necessarily was trading at.
Versus our opportunity to.
Use that capital so to make that more tangible.
God forbid our stock price went back to $10 and were trained we have a $17.
Tangible book value I suspect.
Most rational people would say that the by a lot of stock at $10 you would do that.
Our stock price now I would say please god went to $40.
Wont be thrilled with that.
You, probably know which would be more than 225% of tangible book of my head.
Most rational people once they don't buy back stock at that price.
If it turns out that we're kind of trading at them.
A more rational range relative to tangible book and we have an opportunity to grow our loan book the most profitable thing we can do.
Hi back the most profitable thing we can do is leverage our existing capital and put on loans that you know and earn up slightly less than 6% NIM on.
And so that what you know in it so thats a function of what opportunities do we see both in the purchase and the originated.
Our full I know, it's not as helpful and answer is saying at this price we would do that acts and at that price, we would do why but it's really a dynamic and we have to take consider all of the things that are going on.
Right understood well understood across the other way and I've mentioned this a few times. So the other way to return funds to shareholders would be to increase the dividend a lot less expensive than buying back stock.
Well there are two ways to look out if you could say it might be more expense or might not be.
I think you're earning in the two dollar share range for you for year paying only a penny a share probably leaves plenty of room for an increase should you choose to do it you haven't chose chosen to do it in the past I'm. Just wondering why you refer to keep the dividend. So low I think if you look at your peers Camden other banks in Maine.
The dividend yield maybe 1% Cooper said, even up to three in some cases and yours is a basically just out there.
At a fraction of a 1%.
Just wondering why that is when might you take a harder look this time, but perhaps raising the dividend I think you'll get some mileage and your stock. If you did it. So I'm just wondering why you don't do it and how you're thinking about it I would say what.
Distinguishes us from other banks is our ability notwithstanding this quarter where our.
Average loan book went down, but if you take a look at last year, we grew our.
Let's see portfolio by 20%.
And you know will the kind of yields we get as opposed to the growth in.
There are other banks are able to achieve and their loan book.
I do agree with your your underlying principle, which is if we don't have a use for our capital in our bank.
It would be appropriate to think about returning it but it's not as if we have we're sitting here and we have $900 million at home capacity, we have maybe 300 350.
I looked at last quarter.
$130 million purchase opportunities one of the things.
This is my view anyway, while not really my view on.
I'm repeating what one of our very smart direct just tell me about capital, which as you know the lease expensive capital that will ever get as the capital. We have now and so we don't want to really be in a position, where we distribute the capital and then needed.
By loans and to originate loans and need to go in the marketplace and raise it.
That tends to be pretty expensive idle just mean in that.
Well earned fees that Sandler would get.
Let's say that benefit.
And your colleagues, but just in terms of you know when you add to the market.
Very often you don't get.
The the price that you're trading at before you go out to the market No. I think is this something game, but we're going to we obviously the port thinks about it a lot. We think talk about capital planning management does as well.
I think we you and I and others, we could identify all the issues, we may dumped a different conclusions as we see the.
The facts on the ground.
But we're paying attention to it.
Okay, except that very good keep up the good work.
David delightful talking to you. Thank you.
You're welcome.
Thank you and as a reminder, ladies and gentlemen, that's star one to ask a question.
I'll now turn the call over to Rick Wayne for any closing remarks.
Thank you very much.
For those of you on the call and for those of you that.
Well listen.
Later on line on our website want to thank you for your support or.
The time you spend.
Thinking about in reviewing the activities of our of our company.
And I want to on so little bit early but we won't talk before them with all of you and your family's LTM happy Thanksgiving.
And look forward to talking to you again in January .
And we wish you happy new year, but Thats way out there I'll do it when I talk next thank you very much.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.