Q3 2020 County Bancorp Inc Earnings Call
Good day and welcome to the casualty Bancorp Inc. earnings call Q3, 2020 conference call.
Participants will be in a listen only mode should you need assistance. Please secondly conference specialist by pressing Star then zero. After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to.
To withdraw your question. Please press Star then two please note. This event is being recorded I would like now to turn the conference over to Tim Schneider. Please go ahead.
Thank you and good morning, everyone.
Welcome everyone to our earnings call for the third quarter of 2020.
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Looking statements as a reminder, we ever disclaimer on the use of forward looking statements on slide two of our presentation.
Moving to slide three there were several positive trends to our financials this quarter, which resulted in net income of 3.4 million or 52 cents per diluted share.
These included a decrease in loan loss provision to <unk> point, Onemillion with overall credit quality holding up well in.
An increase in noninterest income to 3.4 million related to loan sales and servicing.
And third point loans on payment deferral being cut in half to 100.4 million or 9.34% of our loans.
And now I'd like to turn it over to Matt Lemke Senior Vice President of banking services for an update on our funding transformation Matt.
Thanks, Tim.
Moving to slide four I'm going to highlight a few key points as it relates to our funding transformation since.
Since late 2018, we have purposely stuff out to change the competition right side of our balance sheet. The goal has been to reduce our reliance on wholesale funding in high rate Cds and instead focus on generating client deposits decreased our cost of funds and enhance long term franchise value.
We have decreased wholesale funding by approximately 113 million since the end of 2019, while at the same time, increasing client deposits by approximately 93 million.
The spike in client deposits in the second quarter of 2020 was partially related to the influx of P. P. P funds, which accounts for approximately 58 million or 93 million to deposit growth year to date.
Those funds have remained on the balance sheet and we have seen balances continue to grow in.
In terms of the structure of our client deposits. We have spent time focusing on generating transaction accounts as opposed to Cds.
The client deposit graph on this slide depicts that trajectory in dollars and end of last year and if you back out a few more quarters you see the same upward progression.
In terms of the number of accounts since the end of 2019, we have increased transaction accounts by 9.6% commercial.
Commercial transaction accounts have increased by 10.5%.
Tumor transaction accounts have grown by 9.2%.
And egg transaction accounts have grown by 9%.
To further unwind or higher cost to funding we are executing on several tactics.
Well, we have chosen to focus on three main areas people infrastructure and services.
In March of 2020, we returned to the mortgage origination business.
In doing so we decided to take a more forward looking approach to mortgage origination using this business line as a tool to generate client deposits and grow relationships as opposed to using it at the pure source of revenue we are.
We are selling these loans servicing released and are using current retail staff as mortgage originators to maximize the efficiency of adding this business line.
We understand the value client deposits bring to our franchise and therefore had been redesigning and rethinking how we manage that.
We are adjusting how we manage our treasury function to improve accountability and streamline our performance and we have a plan and a path forward ensuring the infrastructure. We are building for the long term payoff.
Our frontline personnel have been focused on deepening client relationships relationships, which will help to de leverage our overall risk profile longer term, providing us a greater base on which to land.
We have spent time hiring treasury experts and are working to align our business model to take advantage of shifts within our industry.
We have begun putting together mechanisms to measure client deposit growth along with Incenting folks are the sorts of activities and behaviors that help us to achieve sustainable outcomes.
Everything we have done to shift our funding source has been deliberate by strategically adding product services and digital tools. We are working to eliminate barriers for our teams to be able to cultivate lasting relationships.
As we continue to focus on people infrastructure and service since we expect to see a decrease in our cost of funds a more permanent stable funding base and an increase in more profitable relationships.
And now I'd like to turn it over to John Phil and Jim Chief Credit Officer for an update on credit John.
Thank you, Matt and good morning, everyone.
Moving to slide five I'd like to provide an update to our cobot payment relief metrics on the.
On the AG side 86 customers remained on payment relief as of September Thirtyth 2020.
Our AG portfolio benefit for benefited from a significant amount of government assistant which helped to rebuild many of our customers balance sheet from a working capital and liquidity standpoint.
Additionally, these customers have seen their businesses from a from the initial impact of the pandemic.
Overall, we are encouraged by our AG portfolio and we're proud of the work our bankers have done to service our customers do a challenging macroeconomic environment.
80% of the AG notes currently on interest only are scheduled to return to normal payment terms in the fourth quarter of 2014.
On the commercial side. We initially provided 90 days of payment relief to customers, who requested that and were negatively affected by October 19.
At September Thirtyth, we had 16 commercial customers that remained on some form of payment relief.
Oh, those only sub and have requested an additional 90 days a payment really.
We are pleased by the relatively small number of commercial customers still receiving payment relief and our commercial bankers have done an outstanding job of staying close to their customers to anticipate any additional needs.
Given that the long term impact an outlook of code, but 19 is uncertain. We will continue to monitor both our commercial and I books very closely for signs of any deterioration.
Turning to slide six Oh.
I want to highlight some of our key credit metrics.
Adversely classified ratio increased slightly to 42 point, 64% quarter over quarter.
While we saw a shift.
From substandard performing to substandard impaired for one AG relationship we had an overall decrease in our Washington Special mentioned buckets.
Oreo saw a slight increase due to what our customer totaling 768000, but.
But this property is set for auction in the fourth quarter of 20 Twond.
We continue to have our bankers report on their high concern watch and substandard credits on a quarterly basis to ensure proper monitoring and follow up on these accounts.
We've also completed 96% of the annual reviews of our watch in worse rated I dreaded by dollar amount and we have begun the process of our dairy stress test for the 2019 operating year.
Given the improved milk price environment and the substantial amount of government assistance. That's been provided to our AG producers. We are encouraged by the outlook for our dairy portfolio.
Turn to slide seven.
As of September Thirtyth, we had total commercial real estate exposure of $281 million.
Of that total 96 million or 34% is owner occupied and 184 million or 66% is non owner occupied.
Our non owner occupied exposure is 88% of our tier one capital plus a triple though which is significantly below the regulatory guidance of 300%.
We have recently updated our CRB industry concentration limits to ensure that we maintain comfortable limits to our overall commercial real estate.
Moving to slide eight.
You will see that the majority of our AG exposure is to the dairy industry.
I'd also like to highlight the 69% of our dairy relationships and 63% of our total AG relationships are supported by FSC guarantees.
Yes, I'd say guarantees have been a key contributor to our low AG losses since the bank's inception.
At this time I'd like to turn it over to Dave Coggins, Our Chief banking officer to give an update on the overall AG environment.
Dave.
Thanks, John moving to slide nine.
The volatility in class three milk prices that we experienced in quarter to settle down a bit in quarter three and.
In June the settled price increased to 24 54, <unk> four class three what the average projected price for 2020 expected to be over $18.
Most of our dairy producers have breakeven prices well under $18 per class three milk. Please keep in mind that class three prices are the base price each month, plus farmers typically receive a premium over the base price that runs about 10% of the base dependent on quality and process are paid premiums. The two amounts combined make up the mail.
Box price, which is the total price received at the farm gate.
Unlike 2019 cropping conditions for this growing season have been very good in most areas of the state of Wisconsin.
In addition government supported the dairy industry. This year has been very strong. This is come through for programs. The PPP long time.
Farmers were eligible for SB eight P. P P.
Yes. The P. P. P program and most were able to take advantage of it and we we gave about processed about 29 million.
Yes be a PPP loans for our AG customers. The Corona virus food assistance programs. Another program that was run by the U.S.D.A. and it was particularly helpful to the dairy industry designed to help offset the impact of Coleman.
This program provided two separate rounds of funding with receipts perform averaging well over 100000 per round or the SEC.
The second round of funding is in the process of being and talk to our farm customers right now.
The third program has been the U.S.D.A. farm to families food box program and it was designed to purchase various fund products and distribute them to food pantries and various nonprofit organization another program that Oh.
Authorized for U.S.D.A. 4 billion was authorized in well over 3 billion has been used so far it doesn't help provide a strong level support for class three milk prices.
Yes, the U.S.D.A. cares Act.
Our business and industry loan program as a fourth program that was made available to farm customers.
It was granted a special $900 million round of funding for which production agriculture was determined to be the eligible for half of it or 450 million. This program has provided some permanent working capital for certain dairy operations, what the government guaranteed providing some risk mitigation and that's a 90% government guaranteed.
We've also seen dairy exports exceeding imports and the cumulative value of U.S. dairy exports. So far in 2020 exceed imports by 1.98 billion.
Most since 2014 and the third largest positive balance on record.
This improvement has been supported largely by a recent surge in interest from China.
And by politics and demand for dairy powders China.
China is imported 34000 metric tons of dairy products from the U.S. in August triple the level year over year.
In addition, global Cheddar prices are continuing to rise.
Some other factors affecting the industry and our direct customers include.
Producers utilizing risk management tools to protect their margin.
Forged quality, which is an important part of the dairy cows died is very good in quantities are plentiful.
The negative restaurant demand that we all saw.
We're concerned about early in the years been offset by an increase in in home usage.
Expectations are for China to continue to be a more active buyer.
In energy prices drive a lot of costs and expenses portion of the farm income statement.
Continued modest energy prices are having a positive impact on input costs.
Something called a negative producer price differential was a temporary problem that you might have heard about from class threed prices reached high level.
Yes is proving to be a short lived phenomenon as prices moderate.
And now I would like to turn it over to Glenn slightly for further discussion about our financial performance Glenn.
Thanks, Dave.
Turning to slide 10, we continue to see strong growth in loans sold and service and continued improvement in our overall wholesale funding levels.
Additionally, we continue invest excess cash in the securities portfolio.
Turning to slide 11.
Loan yields are being offset by deposit rate cuts. We begin we've begun to invest our excess cash in the third quarter to offset the impact of deposit rate cuts and inspect the positive impact of net interest margin going forward.
We have started to see some loan forgiveness in the P.P.P. side, but the remaining loan forgiveness is unknown as far as timing and impacts the margin.
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Turning to slide 12.
You will see the breakout of how our allowance.
Is made up as of 934.
2020.
Continuing with our COVID-19, qualitative factor, which total 1.9 million this quarter. We also added.
$4 million in specific reserves, which were offset by improvements in our total dollars of substandard performing loans, which resulted in lower <unk> lower loan loss provisions. Thank you.
In Q3 versus Q2.
[laughter] [noise] Curtis.
Turning to slide 13 loans sold and service increased 35.8 million during the quarter offset by a three basis point.
Decline in loan servicing spread.
Loan servicing rights origination income increased due to the originations this quarter as the overall value of those rights as a percentage of loan service remains stable.
[noise] [noise] turning to slide 14, if you back out the noise from Q4 19 in Q1 2020, weve been able to hold the line on expenses.
As you know, we only have four branches of limited retail staff, which this historically laws to be very efficient.
We are in the middle of budget season, right now, we're looking at each and every opportunity to hold or decrease our overall level of Uh huh.
Moving to slide 15 based on our current capital levels and credit quality metrics, we plan a contending with our common stock repurchase plan that we announced in January this year.
So we'll be well, but we'll continue to be prudent in balancing our risk profile against our desire to be opportunistic with this program.
We purchased.
81425 shares at a weighted average price of 19.89 in the quarter.
Our board water ticket, then review our dividend policy and capital plan next four as it does every year.
As always made or the board will adjust our capital plans as we know more about the credit impacts of COVID-19.
To conclude we continue to be extremely proud of this organization our people in the role we play in supporting our local customers and communities. Our team continues to rise as a channel to navigate a true in the world.
And I'd like to open it up to questions.
[noise] [noise], we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press star.
And two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Brendan No. So from Piper Sandler. Please go ahead.
Good morning, everybody.
Morning Brennan.
Just want to start off a kind of the dairy environment here yeah. Thank you very much for the overview.
Credibly help help frame it for for us.
I mean, it sounds like the current state of the industry and the outlook is probably the best it's been in a few years.
I guess the question that a with the dairy have you completed the outlook. Good what is it that actually causing dairy nonperforming loans and classified loans to start declining.
Yeah. This is Tim I guess, you know, we're continuing to work on exit strategies for some of our nonperforming operators and then some of the the operations that.
Havent been viable throughout this cycle.
You know as John alluded to we've seen some or are you sales that have been effective I think we've got a few more that should be occurring this quarter.
You know we do also see some continued credit quality improvement and we feel as we move through the 2021.
Reduce cycle in early 2021 of the 2020 numbers.
We're going to see some improvements and we may see some of those those.
Those are nonperforming.
Operations move the other direction.
As long as the future's outlook for milk prices hold I know John or Dave you have any other thoughts I I would all this is John Phil and Jim I would only add that we've had a couple of instances even in the last several months.
More some of the producers, who maybe didn't get as efficient as some of the others from a cost standpoint I've seen this as an opportunity to act said and we've had a couple of voluntary you know collaborative type exits that have helped drive down some of those so some of those non performers and I'm. So I'm you know we've been encouraged by that and we continue to work.
With folks that are you, there or watch or or a sub standard you know, where we don't see an out.
You know for them to continue to operate but no work collaboratively collaboratively with them to be able to try to.
Develop a an exit strategy that's good for them and good for the bank. So we've got a.
We've got a couple of those still in the works right now.
And then David I would just.
Yeah, I would just add that in past.
Era.
Auction and price were the two big factors that made a difference in how that farm performed.
Probably more important than those two today is what I'd call business side Q and these are big businesses that take a lot of management and the viability depends heavily on that business I Q and unfortunately, not everybody can get their break.
Can get their breakeven to a range that the industry average.
Has right now and there are some casualties, but fortunately.
We're trying to work with those that seem to be heading in that direction proactively so that they have a decent and viable exit strategy.
Got it Thats helpful color. Thanks, one more from me and then I'll step back I think you guys hear about it at about a third of your buyback authorization.
Remaining in your <unk> this quarter with capital levels still as strong as they are I am not well contained.
Right now I'm.
Would you consider instituting another program once you complete this one.
Well and you want to speak to that.
Yes, Brendan you know one of them. We're in the process of doing our annual review capital planning for 2021 and you know.
I think we have every intention, especially at these trading levels of reinstituting, a new program. So.
Perfect. Thanks for taking my questions.
Our next question comes from Jeff Rulis from D.A. Davidson. Please go ahead.
My apologies. Our next question comes from Evan Lyle from Janney Montgomery Scott. Please go ahead.
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Hi, guys. This is Evan on for Brian Martin just a few quick questions from me good morning, Good morning.
Morning.
Yeah. So firstly just some color on your loan growth moving forward. Just can you just some color on the pipelines and where you're optimistic optimistic.
Yeah, and I'd, just make a general comment that Weve had meetings with both our AG and our commercial team within the last week and we have a.
A pipeline that we keep a live in published on a regular basis and it. It appears weve got some some fairly robust pipelines on both sides of the house and maybe I'll, let Dave speak to a little more color on that.
[noise], Doug as as we as we found ourselves in a position of having more than adequate liquidity and certainly strong capital some of our prior restrictions on growth that we had artificially put in place said have been removed and our commercial team has got as Tim.
Mentioned, a nice solid.
Solid and robust pipeline our AG team continues to.
Take advantage of some of the opportunities that come about by adding three comer.
KMR AG bankers from a competing AG bank, that's well known and they've been able to take advantage.
Take advantage of that they have not they did not have non competes so they've been able to bring over a number of their prior clients.
Pretty aggressively and the good news is there is a number of those clients that are not Gary. So it helps some of our concentration to add some non dairy.
Relationships to the books.
One other item.
Go ahead, Dave sorry.
Type line on that side, it is solid and robust as well.
The one other point I'd make is that next week, we'll be announcing the hiring of a senior commercial banker up in the Green Bay market that is joining us from another financial institution and he's lived in that market for about 25 years.
He does have a one year noncompete non solicitation that'll holding back from bringing some of its existing customers over but.
With all the relationships and contacts he hasn't that market, we think that will help us build on.
To build on our commercial.
Pipeline in that market for sure moving forward as well.
And I would add Tim one of the things that that we constantly.
Juggle is how much of the growth that we have opportunities on do we keep on balance sheet, how much do we sell off to take advantage of some of the long term fixed rates that we have access to so it's it's a constant juggling act in that regard, but but the pipeline is robust.
Awesome Yeah. Thanks for the color that's a that's helpful.
I think trying to stick on loans are just looking at a PPP and forgiveness I know in the slides you said it are you starting to see some forgiveness, but the timing of that down.
Just any additional thoughts on how you guys are thinking about this I expect end markets. This quarter or is it really a next year like one Q2, Q that just any color on that would be helpful.
Dave I think you're again close is that has been working with some of the upset staff on the forgiveness side. So I'll, let you respond.
Got it it's been a little.
I would say, it's frustrating with the.
The <unk>.
BA started allowing applications to roll in back on August 12, we got our first TPP forgiveness.
Yes around the first about tolbert and.
And people.
People that have their application submitted goals our stock.
Those are starting to get approved with there's no rhyme or reason to how fast we get them approved but we have a pretty solid number in for approval.
But there's no way, there's no incentive with a 1% loan that they have quite a bit.
Quite a bit of time to get there forgiveness in and then there's some tax considerations that are being juggled.
Juggle.
Talk to their accountants, depending on whether they want that forgiveness. This year or next year. There is some difference for some operations. So we're trying to give them all the tools to get the application in and help encourage them to to apply now to get it taken care of and move on.
But there is not any.
Strong incentive to make it happen before year end. So we're we're continuing to monitor and hope that it can be.
Within the next three three months, but Theres no way to know how how much each month and that's been hard to predict.
Dave what's the number of applicants, we have or or PD lones again as a percentage that are under the 50000 that'll be eligible for the expedited approval process do you recall.
It's about half.
Number so that.
So that could help us as well my point in bringing that up with that one page of.
Self certification by the borrowers so we're trying to encourage that and promoting that as well.
Yes, we have a pretty.
Pretty well built.
Portal that we can that applicants can apply through and so the process is about as.
User friendly as you can make it but it still takes time and not everybody is as tech savvy and as they.
Might need to be so so we ours arts and staff and spend some time working with them to bring that through the process.
But it has been a great opportunity for us to connect with some new borrowers new customers and show them that where Pos.
Possible bank for the future on their entire business. So that's been that's been helpful as well.
All right Awesome, Yeah, no. That's helpful. Thanks for the color appreciate it maybe lastly from me you know aren't they should see you mentioned a technology a expenses came in lower than expected and I know one on slide four you mentioned, some new investments and that technology or just any color on how you are seeing expenses you know.
On the run rate what are your what you're seeing there would be helpful.
Glenn you want to touch on that.
Yeah, you know where as I mentioned, we're in the middle of budget season saw its it's it's a little tough to tell exactly where we're going to flush out at but.
Our goal is to try to you know we are making some additional investments in technology, but we've kind of cute talked about we've got to figure out a way to pay for that.
Some of that's going to come from growth, but part of it's going to be just about disciplined expense management. So.
For now I would just look at our current run way in you know use that as the baseline I guess.
Like I said, our goal is to try our best to maintain where it's at right now.
All right. Thank you that's it for me Thanks for taking my question guys.
Seven.
Our next question comes from Jeff Rulis from D.A. Davidson. Please go ahead.
Hi, Good morning could you hear me.
Yes, we can hear you now Jeff Okay. Appreciate it thank you.
I wanted to follow up on the margin.
Glenn you mentioned, you've got some some funding maturities.
Coming in and putting some cash to work into securities.
Kind of alluded to.
Got it like a more positive or more.
Margin outlook to getting a sense for.
Getting a sense for the decline that you've seen and I guess, we'll talk.
I guess I'm asking more about the core margin any thoughts on on the outlook there.
Yeah, that's it if you're excluding the PPP, which I think you are you know we've got cost the repricing in both sides of the balance sheet on because of the short loan portfolio. We've got quite a few AG loans at a repricing constantly but as you can.
But as you can tell we've got also got quite a bit of Cds and in wholesale funding that's maturing maturing in re pricing as well it seems like it's so far it's been we've been able to match. It. So you know I'm, hoping that that combined the investments is going to stabilize the margin.
It's just tough for me to make any big predictions about are about our margin overall, but.
I'm, hoping we can see the whole kind of where it's at.
Okay and just.
I forget about the accounting on that but and the amount of forgiveness. This quarter was pretty small relative to the the remaining amount, but does that not help the the yield there I mean, it looks like the coupon still at 1%, but do you not get a.
A perk and as we get a pickup in forgiveness.
Now that if we include PVD and the margin calculation.
We should see a pick up correct.
Correct. So the you know we got the 3.3 million the net deferred fees that will be recognized into interest income as loans are forgiven, it's just that the timing a loan forgiveness.
We thought that we'd have quite a bit of this doesnt forgiven by the end of the year, but as Dave noted, it's just really tough to tell how fast this is going to move now so.
So it's really tough to predict the margin from that perspective.
Right. So the small amount, but you did receive didn't didn't really do much today.
It was still not head yes.
Yes, probably it was a couple of them I think it was a couple of <unk> you know it was probably a couple of million if anything of forgiveness on cars. So.
Got it.
And then I had just the outlook on the loan servicing line, it's been pretty.
Pretty strong and good growth there any thoughts on that outlook is as you become.
I guess a continued focus obviously some some of that.
His rate dependent but.
How do you see that line item.
On board.
Dave you want to touch on that topic.
Davies solar.
All right I guess I'll try to adjusted you know as as Dave alluded to we've had done three additional AG bankers that we've added and.
You know, although they brought up a fair amount of new business. Here recently, we have been pushing that off balance sheet. Some of its driven by the long term interest rates. So we can obtain with our participants help benefit our customers I think.
I think as all of you are aware I mean, our servicing spread on those participations have been you know one of the 70 to 80.
70 to 80 basis point average spread historically, so it's been a good piece of business for us and and as well helps our customers with some interest rate mitigation. So we anticipate that remaining fairly strong here into the fourth quarter as.
As a as we alluded to earlier our pipeline on that side of the house for sure on the AG side as this has been very strong.
Okay, maybe one last one if I could just on the capital side Tim.
B.
You alluded to the buyback in any interest there but.
The discussion on the dividend payout is that.
Is that fairly real I mean could are they exclusive one another or could you could you do both just trying to get.
Thoughts on the dividend income.
Increase potentially.
Glenn you want to speak to that.
Yes, Jeff I don't I don't consider a mutually exclusive so you know.
We've got plenty of cash and plenty capital.
We raised the sub debt.
In the summer when we've kept all that money at the holding company. So we we have some flexibility in my mind from a capital allocation perspective. So it's definitely something you know we have strategic planning capital planning coming up here with the board and stuff on the topic of conversation so, but just again just to reiterate it they're not mutually exclusive.
Got it thank you.
As a reminder, if you have a question. Please press star then one to be joined into the queue. Our next question comes from Terry Mcevoy from Stephens. Please go ahead.
Happy Friday, guys hope you're well.
Hey, good morning, Terry.
I have a question page page five on the deferral that.
The the 9.34% as of the end of September is is is high relative to what others have ever been reporting and I'm just wondering as a fair amount of those kind of rule hopefully roll off in October.
What did you have any updated data data points, either today or where generally speaking any thoughts on where that ratio will be towards the at the end of the fourth quarter.
I'm in I'm going to let John speak to this yes. Good morning. This John filling Jim So the vast majority of watch left are on the AG side and as I mentioned you know there's like 81 of those notes that are currently on deferral will come off by the end of the year. The reasoning there is that we did an additional spot.
We did original six months interest only on the AG side, where we took a 90 day approach on the commercial side, where we felt there was more we needed more time to kind of see what happened during that first 90 days. So with the majority of those notes rolling off by the end of the year some folks didn't.
Some folks didn't take advantage of any payment deferral on the AG side until beginning in July so the six months. Therefore won't you know won't roll off until we get into the first quarter. So by the end of the year, you're going to see a significant decrease in the number of loans that are all still own payment deferral. You had if you recall milk prices kind of hit a low back in it.
Berlin May add it wasn't the right away when cobot hits. So there was a little bit of a delay in the payment deferrals for the AG group and.
As things have played out the balance of the year milk prices and with all the other government stimulus that the dairy producers have received you know me.
Maybe it wasn't even necessary at all but.
We're trying to be proactive with our dairy producers as well and as we've said earlier at the end of this year looks strong from a pricing standpoint and into next year look see look solid as well. So we really anticipate the majority of those AG producers have fallen off by the end of the year and I think I may have missed I misspoke I said 80.
It was that Theres, 80% of the notes that our own AG that will becoming often.
That number I've got to sit on my desk I don't have it in front of me, but there's there's a couple of hundred left nodes on the AG side total nodes, but 80% of those are going to be coming off. So it's it is a significant number that will be rolling off by the end of the year.
Thank you and then.
A follow up for Glenn just to maybe help I know, we talked about the margin, but just maybe new loan yields what you're seeing in and I know you know there was some security purchases what opportunities do you see to invest in securities and what are those rates.
Yeah, So we loaded up quite a bit in the third quarter, Terry we probably need about well, yes, starting in July and we.
We had about $80 million of investments and.
Taxable needs for roughly kind of 190% to 2%.
Oh, sorry.
Starting to invest a little bit in some bank sub debt that will be about 40 million.
Those yields are coming in at.
For 75 to 550.
I'll do I'll defer to Tim or David if they want to comment on the on the loan pricing that there that they're seeing.
Dave I'll, let you take that one of your back on.
Yes.
Sorry about that the the AG side, yes.
Very competitive.
There's a lot of.
The competition is.
Constantly.
Working hard to try to either keep the customers that they have with some with rate or attract new ones with rate, we try to be disciplined in that regard and so on.
But it is challenging to get margin on on the commercial side the AG side.
Well to do a little bit better and.
Sure.
Where we have.
Variable rates, we're putting floors, then we're doing some things with hedging.
So I would say that we work hard to try to keep the margin.
Where it where it needs to be and not just chase deals over rate because the people that will only come for rate they tend to lead for rate. So.
I think we're.
We're crossing our fingers on that that we can continue to maintain and as we dropped our funding costs, we can hopefully hold our yields.
Thanks, everyone have a good weekend.
Thank you Gerry.
This concludes our question and answer session I would like to turn the conference back over to Timm Schneider for any closing remarks.
Yes, I'm very pleased with our success in our continued funding transformation has matched shared in the beginning part of the presentation.
Credit quality has seen improvement as well and we're pleased to Sarah CR borrowers performing in this current environment.
We're beginning to see our pipeline growing on both sides of the house as we alluded to which should assist in utilizing some of our excess liquidity currently impacting our net interest margin. Overall overall, we are very satisfied with our third quarter performance Im pleased to share. These numbers with you. Thank you again all for joining us.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Oh.
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