Q3 2020 Equity Bancshares Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2020 equity Bancshares Inc. earnings Conference call. At this time all participant lines are in a listen only mode. After.
The speakers presentation, there will be a question and answer session.
Good question during the session you will need to press Star then one on your telephone. Please be advised that todays conference is being recorded if you acquire any further assistance. Please press Star then zero I would now like to have the converts over to your host Christian happened to please go ahead.
Good morning, and thank you for joining equity Bankshares conference call, which will include a discussion and presentation of our third quarter 2020 years.
Presentation slides to accompany our call are available by a PDF or download at Investor day equity make dot com I couldn't the presentation tab. You may also could be about dialing in for todays call posted an investor not equity bank dot com to view the webcast player.
During this call on our webcast player. Please note that slides will not automatically advanced please.
Please reference slide one including important information regarding forward looking statements from time to time, we may make forward looking statements within today's call and actual results may vary following the presentation. We will not allow time for questions and further discussion. Thank you all for joining us with that I'd like to turn it over to Brian Elliott.
Thank you Chris.
Good morning, Thank you for joining our call and your interest in equity Bancshares join.
Joining me, it's Eric Newell our.
Yes so.
Great cost over our Chief operating officer.
And our President Greg Anderson.
Despite the disruption and uncertainty.
Oh in 19, I'm excited with the equity base team has been able to achieve.
Our company has accomplished many of our 2020 objectives well deal.
Well dealing with.
The disruption of the weird operating world, we currently face.
We continue to protect and support our team members on the.
On the front lines as they serve our customers and their communities.
Okay.
I can't remember a time.
Our capital has been better position.
Take advantage of opportunities that might come our way.
Well poised for organic growth.
And we'll keep looking for opportunistic banks that need merger partners.
We intend to response, we continue our share repurchase program.
We remain focused on key strategic initiatives that we must accomplish to become high performing bank.
I believe it is beneficial to have the goodwill impairment, we discussed in our earnings release.
Our rearview mirror.
It is a non economic issue for our stakeholders and improve.
Operating ratios with no impact to our continued growth in tangible book value per share.
Eric will detail, our balance sheet and goodwill adjustment more in a moment.
In our third quarter, we finished raising offensive capital totaling $75 million.
Which will allow us to take advantage of opportunities I previously mentioned.
We successfully completed our joint regulatory exam with the federal reserve.
In the state of Kansas in the third quarter.
Our tangible book value has grown 40% since the end of 2019 or $2.97 per share.
We completed our 2019 stock repurchase program.
In September we.
Purchasing 383000 shares.
All of which were accretive to tangible book value.
And earnings.
In addition, the board approved a second repurchase program totaling $16 million to start in the fourth quarter of 2020.
Subject to customary regulatory review.
At the start you've been doing.
Our equity teams took a trusted adviser approach with our customers to preserve.
To preserve cash.
We did it's very early in the process.
It did result in 26% of our loans being on deferral at.
At June Thirtyth.
But it helped her customers set aside much needed cash reserves for the current period.
But also.
Ramping period of this pandemic.
As a 90 day deferrals expired in the third quarter, we remain focused to ensure our customers had what they needed to operate.
And when looking at the deferral.
We ensure that those that needed an additional deferral, we're still showing the impact from the pandemic.
On September 15th we reported our progress with only 11% of our loans still on deferral at that date.
As expected at the end of the third quarter.
At approximately 1%.
Carloads still remaining in on deferrals.
Through this period, our customers cash position has increased and in some cases the amount of cash on hand is the highest they have ever experienced.
By taking the approach we did early in the process. We have your customers are now positioned to be able to survive.
It possibly ride in the recovery from this pandemic.
Over the last several months, Greg Anderson and I visited our regions regularly.
I met with local customers.
I'm excited to see our customers adapting to that change environment and.
And how many are operating at levels superior to the start of the COVID-19 disruption.
I am pleased the equity team continues to be steadfast partners to our customers and communities.
I think our bankers for their commitment and approach to helping our local communities.
As a community bank.
We do what it takes to help each community succeed.
Eric.
Why don't you take us through the details of the quarter.
Thank you Brad and good morning.
During the quarter, we identified a non cash goodwill impairment totaling a 104.8 million, which resulted in a GAAP loss of $6 in the planning for the quarter ending September thirtyth.
Driving this impairment is the drop in the bank stocks overall, including the company's common stock price, resulting in a lower fair value of our capital versus book value prior to the impairment.
Reduction in market multiples of peers use in our valuation analysis.
Our cash flow forecast in light of uncertainty related to that pandemic.
They are higher discount rates given the environment.
The impairment does not affect cash balances liquidity tangible book value or regulatory capital ratios.
As some of the goodwill was created from taxable events. The effect on capital totaled 99.5 million with 5.3 million of deferred tax assets being created due to timing differences in expense recognition for book and tax purposes.
Let me Peel back the GAAP number to assist in understanding core operating performance.
Without the goodwill impairment pre tax earnings would have been 11.4 million using a pro forma tax rate of 22.5% the resulting pro forma net income would have been 9.1 million or 60 cents per diluted share. This income.
This includes the effect of TPP loans on our balance sheet during.
During the quarter, we recognized 1.3 million of SBK fees related to the PPP loans compared to 1.03 million in the second quarter.
Both of these numbers are net of costs associated with originating PPP loans.
As a reminder, we will recognize our total net 11 million of fees associated with a PPP program for which we have already recorded 2.3 million, leaving 8.7 million left to recognize.
At September Thirtyth, we had submitted approximately 26% of our PTP dollars for forgiveness for for forgiveness and have started to see the Sta forgiving loan balances we.
We believe that anything that had been submitted by the end of the quarter will be recognized in the fourth quarter. This year and the remainder will be recognized in 2021.
Ppt loans totaled.
376 million at September Thirtyth, and the average balance in the quarter totaled 375 million.
Interest earned from the PPP loan portfolio was 960000 during the quarter.
Pre tax pre provision revenue in the quarter ending September thirtyth totaled a pro forma 12.6 million when excluding the impairment.
This compares to the second quarter pretax pre provision revenue of 14.7 million, which included a nonrecurring benefit of 932000 deferring of expenses associated with a PPP loan origination.
The trend in the third quarter run rate a pretax pre provision is primarily due to the timing of Fas 91 salary deferral in the second quarter is not expected in future quarters.
Our net interest margin held up well given the headwinds weve enhanced our margin disclosure in our press release tables by adding granularity to the table and alone section.
NIM declined two basis points linked quarter, showing stability and total earning assets and cost of interest bearing liabilities.
We're particularly happy about the progress made in our interest bearing deposits with a cost declining 13 basis points linked quarter.
Late in the third quarter, we paid off a relatively higher cost.
HIV borrowing there had a notional value of $250 million.
We expect to see some modest improvement in the cost of FHLB advances in the fourth quarter offset by a modest increase in cost of other borrowings as we only have two months of the 75 million subordinated debt in the third quarter.
As Greg and I mentioned in the second quarter earnings call the expectation for future declines in interest bearing deposits will largely be driven by continued repricing those CD portfolio.
The average life of that portfolio is about 14 months and we're nine months into the repricing. So we expect to see another quarter of benefit before we level out.
On the interest earning assets, we have taken a measured approach to new origination yields generally originating loans with a four handle versus a three handle.
This has allowed us to maintain relative stability in the yield earned on our loans declining six basis points linked quarter.
The total total securities portfolio is expected to continue to decline in yield and over time as we see loan demand will remix the composition of our earning assets into loans if we.
If we exclude TPP loans from a NIM analysis for the quarter ending September thirtyth.
Hold on C. and I.
Total loans and total earning assets would be.
Would be 5.16%.
5.1% and 4.19% respectively.
This compares to 5.23 per se five.
5.07%.
4.24%, respectively for the quarter ending June Thirtyth.
Excluding TPP loans again pro forma NIM for the quarters ending September Thirtyth in June Thirtyth would be 3.59% and 3.65% respectively.
You will note that our provision for loan loss was 815000 materially lower than what we reported in the first half of 2020.
As a reminder, we continue to be under the incurred loss methodology for the allowance for loan losses, and we use qualitative factors in the first half of 2020 to 22.4 million to the allowance for loan losses.
Qualitative factors included the rise in unemployment and the incidence of deferred loans.
While these factors have both eases the uncertainty remains.
Yes, and circumstances have not materially changed which drove the minimal provision in the quarter if.
If circumstances remain unchanged, we do not believe a material provision under the incurred loss method will result in the fourth quarter.
Timber Thirtyth, we had $5.7 million of credit marks on acquired loans when included in a triple the pro forma coverage ratio rises to 1.69% when excluding the ending balance of TPP loans from the denominator.
Under the carriers that were required to adopt Cecil at December 31, 2020, and are ready to do so well.
When adopting Cecil the effect of the adoption will run through capital and not current period earnings.
We're expecting that at December 31, after adopting Cecil our Hcl coverage of non TPV loans is expected to be north of 2% positioning us well for 2021.
Greg.
Thanks, Eric I want to Echo Brad's comments about working with our customers through this period of uncertainty. We took early steps to work with our customers to preserve cash which resulted in a higher level of deferred loans at June Thirtyth, then perhaps you saw it in many of our peers. However, as these 90 day deferrals came up for review during.
In the summer Greg Malan myself took a close look at those customers that may have needed an additional deferral to ensure it was not due to inherent weakness in the credit and then it was specific to implications from COVID-19.
Of the total deferred loans at June Thirtyth, we did provide a second deferral on commercial loans totaling $158 million.
That deferral was typically not for another 90 days, though as a real.
As a result, we now report a small level of deferrals at the end of the quarter about 1% there will be one off concerns that name show up in our nonperformers in future periods, but for the most part I share and the optimism Brad indicated our customers have responded to the changing environment by adjusting their business plans and approaches.
And in some cases, our customers are operating at the highest level of performance and profit they have experienced.
While we are pleased with the success of transitioning the majority of our customers out of deferral programs. During the quarter. There is continued uncertainty in the operating environment and I would like to spend a little time on two specific portfolios hotel and aviation.
Our hotel portfolios continue to comprise approximately 10% of the overall portfolio as discussed on slide 25. Our book is comprised of experienced hoteliers with a proven capacity to weather changing economic cycles, and the proactively manage their businesses discrete costs and conserve cash.
Positioning themselves to continue to perform in an uncertain environment as of today in our hotel portfolio. We have seen one loan which was purchased in a merger at less than $4 million transition to nonperforming assets management will continue to work closely with these borrowers to position their business.
It is and the bank for continued success.
Manufacturing directly tied to aerospace comprised approximately 2% of the overall portfolio at September Thirtyth, the relationships consistent proven operators would diversify capacity to serve various components of the airline manufacturing industry.
The management teams at each of the underlying businesses have proactively manage their operations to best position themselves for continued performance. However, as the airline industry remains in flux due to the impact of the pandemic risk remains management will continue to closely monitor this portfolio and proactively work with our board.
Growers to ensure the best result for both the businesses and the bank.
Well, we show a minor uptick in total nonperforming assets from $55.8 million to $59.4 million. He can be attributed to one shared national credit.
This credit totaled $6.2 million and is currently been contracted to sell and should settle in the next few weeks with a slight loss, but already reserved for in the third quarter.
Excluding this relationship total nonperforming assets were $53.3 million at quarter end and trending positively as compared to June thirtyth.
Other real estate owned is down linked quarter as we continue to responsibly sell assets when excluding our close branches that were added to Oreo in the third quarter.
You're possibly will be other issues in credit that arise as various borrowers. They are different COVID-19 related issues. However, we believe our resources are adequate and our teams are focused as we move forward. The management team will continue to closely monitor performance within our portfolio and proactively work through issues.
As they arise the credit and special assets teams led by Greg Mail, our seasoned and prepared to continue to support the bank and our customers Brad.
One of our strategic goals has been to grow the quality of our deposit base by having industry, leading technology for our customers.
In 2019, we Oklahoma added a new online and mobile banking platform.
We knew this would elevate our customers experience.
And the upgrade group critical for our company in 2020.
We've seen engagement with our mobile and online channels continue to grow throughout the year.
Usage grew during our branch light period in the second quarter.
And enrollments payments and log ins have continued to grow throughout the third quarter.
I frequently get asked by investors about branch utilization and hear from my peers. They are now closing branches for cost efficiencies.
We did close three branches permanently in May of this year from previously evaluating the efficiencies of our branch network.
We will perform a continual review of our branches to understand performance and profitability.
I have always done this.
We will see we have seen our branch utilization hold steady in arc.
In our community markets.
This is reassuring and critical to our strategic goal of defending and growing the quality of our deposits.
A key to our multi channel.
Customer experience.
We do not anticipate that there will be a meaningful change in our branch strategy in the markets we serve.
I am also delighted.
At the progress we've made in 2020 with consumer DTA deposits.
Which are not affected by PPP funds.
At the end of the third quarter.
We opened a net 3400, new consumer DTA count year to date.
Compared to a net 1200 through the same period in 2019.
The average consumer DTA balance increased by 20% in two.
2025.
From 2018.
Expanding on Brads theme service charges and fees improved to 1.7 million from 1.4 million in the linked period entirely from a higher level of overdraft fees.
And Ssds have continued to normalize from earlier periods totaling 1.1 million in the third quarter.
From 107000 in the second quarter also.
Also noteworthy is the increase in debit card income linked quarter, we experienced an increase in 12%.
Transaction count in the third quarter from the second quarter corresponding to a 13% increase in debit card income we experienced in the third quarter.
Another strategic goal, we continue to work on is improving the mix of revenue.
By increasing fee income to total revenue.
We can we continue to emphasize areas of opportunity such as trust and wealth management led by Galen Mcgregor, England mailing and Treasury income from our commercial clients.
We've made progress in our trust and wealth management area as we have doubled asset under management since 2019.
The pipeline of new clients is encouraging and I expect the contribution to fee income from a unit to become more meaningful.
As we grow you have them in future periods.
I would ask our president Greg.
Our president Greg Anderson to discuss our pipeline Greg.
Thanks, Brad I want to update you on loan growth and pipelines, while we experienced a decline in loan balances in the third quarter.
Approximately 80 million, we have seen our pipelines build throughout the summer more so in August and September.
We are hopeful that pull through improves and translates into loan growth in the fourth quarter and early 2021.
In the third quarter, we originated 154 million of new loans with a weighted yield of 4.44% compared to non PPP loan originated 92 million in the second quarter with a yield of 4.47%.
We are and approve main street lender the federal reserve of Boston and have closed several loans and we have been active in looking at new deals.
We had the opportunity of looking at 90 borrowers over the last several months.
Today, we have internally approved approximately 300 million and are working with the perspective borrowers and the federal reserve.
As a reminder, 95% any main street lending originations are sold to the federal reserve these laws.
These loans also bring substantial treasury fee income and large noninterest bearing deposits Brad.
Thanks, Craig.
Before we open it up for questions.
I want to once again commend our equity bank teams.
In our markets for their focus on our customers.
Greg Anderson has done a great job, leading our commercial banking.
And sales teams Greg.
Greg Mail has led our credit administration team with a focus on our high asset quality and.
And process improvements, Brad Daniel has helped us maintain competitive products.
And be a key choice for deposit customers throughout our regions.
Julie humor, and Jeremy Allen have continued to lead the charge for improvements.
Through our processes and technology implementation.
And most of all our bankers from tellers to personal bankers to treasury interest have been bodies. The entrepreneurial spirit, that's been key for our company's growth.
With that.
I'd be happy to open it up to take questions now.
Thank you.
Ladies and gentlemen, as a reminder to ask the question you would need to press Star then one on your telephone.
So it's all your question first the pound key again, so I want to ask a question. Please stand by while we compile the culinary roster.
Yes.
Okay.
Yes.
Next question comes from the line of Jeff Foolish.
Your line is open please with D.A. Davidson.
Hi, Thank you can you hear me.
We can good morning, Jeff Okay, all right good morning.
Yes, just the credit question or two.
Eric I think you outlined just want.
Did it kind of.
That figure out north of 2%.
Hcl.
Would that imply it a day one adjustment of in the $20 million range.
That's probably a little north of what we're thinking although got it.
All of that would flow through capital but.
You are pretty close there's two parts to that Jeff Baird both the.
Mark loans will flow back in and.
The other part of that so.
Lets say you get to the point I want to just give they want a judgment.
Fair enough okay.
And just.
Greg I think you outlined the.
The expectation on the Snic credit that was added.
Yes, as we go into 21 or the next couple of quarters, what's expected to be heavier last year for the industry.
Any of those chunkier credits that reside in nonaccrual expect didn't become current or pay off.
I'll give it to hold up a little higher balance than than peers.
Well its interesting question Jeff burst.
At 930, I think that we're.
We're pleasantly surprised that the credit quality has held up.
In the industry the way it has certainly for US we aren't seeing huge negative trends right now the.
Particular.
Nick that you're talking about really was not cobot related they had some litigation concerns and we didn't want to take the risk of.
Sitting on that so we chose to get rid of it and it will come off that's already been.
Negotiated for sale will come off here in the next week or so we don't see any of our other chunky or credits that.
That are causing us immediate concern today.
Obviously, we're watching several the industries like we mentioned in in lodging and some in aviation very closely but.
I got to tell you that we've been working with our borrowers they've had access to capital and some have gone out and procure that capital, which makes us feel really good and speaks positively of they in their organizations.
And so some of the.
Some of the credits and assets are not performing.
Nationwide to wave all of us bankers want them to but as we've mentioned on past calls Brad and the credit team.
Several years ago anybody that wasn't a strong credit we tried to get out of the bank.
And.
We tried to get out of the bank and.
And in earlier quarters, and we were successful with that which left us with strong borrowers.
I don't know that we'll see a heavy migration one way or the other.
In fourth quarter from the classifications that we have today and I don't I can't predict obviously whats going to happen in Q1, and Q2, right now things are pretty pretty level and pretty consistent.
Okay. It doesn't sound like imminent fall off from.
While you're seeking resolution.
Call. It 55 billion dollar base, if you knock out the Snic credit.
This sounds like you are comfortable with no concerns with that balance and and.
Fair enough okay.
Jumping to that margin.
Eric you outlined some puts and takes it.
The borrowings spoke on the FHLB and kind of the sub debt but.
Balanced that with your Securities Comex.
On the core margin, what's the expectation there.
As a manager and I guess I couch that X P. P P impact, but just that the core level. Thanks.
Yeah, Jeff looking at.
Our expectation for the next quarter, we're thinking when you exclude the effect of GPP from income as was the average balance.
We're thinking we're probably going to see another compression.
Of probably six to eight basis points.
You know some of that is due to the increase or the effect of the.
Having the sub debt and on a full quarter the full 75 million for the full three months that.
That will have an effect of increasing our total interest bearing liabilities will still still see.
Benefit from the time deposits coming down a little bit.
Bye.
The cost of that that's something that's going to offset the benefits were seeing and the time deposits and FHLB.
And then in terms of on the earning asset side.
Yeah again non PTT.
We're seeing.
Similar.
Decline in earning asset yields like we saw sands TPP this quarter.
That's great color for the fourth quarter. So I guess, if we roll into 21 sounds as if the sub debt impact.
Sort of normalize is that it's.
Sort of more about settling sort of outlook on the margin.
Great and a lot of.
The puts and takes that to still occur, but the margin in 21.
The thought there is that that normalized to sum.
Yes, you know big picture again, excluding the effects of TPP Coes will we'll be dealing with some noise in the fourth quarter as well as in.
The first couple of quarters in 2021 as those loans get forgiven.
Celleration, a feasible will cause our GAAP NIM.
Well, it's a little wonky, but excluding the effect of that I think Jeff you're right.
We're going to see some stability and our cost of interest bearing liabilities, if we compare.
We continue to see an improvement.
And the.
Composition of non interest bearing deposits that will be helpful and earning asset side.
You know, we're hopeful that as we see loan growth will be able to mix, our earning asset.
Mix into or increase our mix of loans of our total earning assets and weve.
And we've been pretty selective today on originating loans out of yield that are pretty close to where the.
Portfolio yield is.
We might see that might happen.
You know.
I see that you give a little but I think we're pretty hopeful that we can continue to find our yield on on the loan side and you know.
Expectation would be on the investment securities. We just have not been seeing attractive yields. There. So you are you seeing that portfolio decline and I think you'll continue to see that decline, but we're hopeful that by moving into the loans will be able to offset the adverse or unfavorable impact of that.
Great. Thanks for walking through that that's it that's it for me. Thank you.
Hey, Jeff. So so one thing I want to circle back on Craig and Greg Mayo and Greg are working hard on move in nonperforming assets that we actually have.
Several that could move out in the fourth quarter, but we sure can't commit to that because there's.
Theres a lot can happen between now and then so there's a lot there's a lot of moving parts in there.
That they're working really hard on making some things happen but.
As you know with those they twist and turn.
Thanks, Brett.
Yes.
Thank you.
Our next question comes from a lot of Michael Perito with KBW. Your line is open.
Okay.
Hey, good morning, guys.
Good morning, Michael.
A couple of questions from me one.
You know transitioning off the margin conversation, we just had I mean, obviously you guys have some levers, but there are some cost pressure as well maybe Brad as you think about kind of the cost structure of the franchise. Today you commented on branches in your prepared remarks, but just it would seem like there needs to be some pretty strong cost discipline to protect profitability here with.
Margins still kind of being a bit of a challenge can you expand maybe on what you guys are thinking there today, it's not franchisor or what levers or thoughts you have around trying to protect or limited expense growth moving forward.
Yes, I mean, we got to stay vigilant on it my.
Michael and the other is the you know there's two prongs of that is the other is we're working really hard on increasing non interest income.
To continue to focus on our expense ratio so.
But yeah weve been laser focused on expense control salary control.
Number of Fts, So we're continuing to look at that.
From every department that we that we have.
And any specific thoughts on kind of the near term expense run rate here I mean, I was that you had a little bit of the trop last quarter, which I think is poor accounting related but do you are you hopeful to try to hold and 26 million dollar run rate that you had in the first and third quarter on a core basis.
Yes, I actually think that we're probably going to see a little benefit in the fourth quarter.
I wouldn't go back to the second quarter and as a run rate though.
Because there were some things happening in that quarter, where it was a benefit to us.
I would look towards the first quarter, maybe even a little bit better than that.
But I wouldn't expect that we would.
Have a.
A run rate like the third quarter on a sans that goodwill impairment.
Okay, and then Brad more on the fee side. I mean, you guys were kind of in that six and a half million dollar range for the last three quarters 20 nights here. So all of the drop off in the first half year, which I think you know I imagine was at least partly environmental but you know nice pickup in the third quarter any expanded thoughts on the outlook, there and what maybe the one or two areas.
Growth you think are our most critical to try and sheets of expansion there that's sustainable.
Yes, our retail deposit fees are coming back.
Yeah, there's really dropped off but we.
What we see those increasing month over month.
And so I think those are coming back.
Our wealth management team's doing a great job.
Never fast enough for the people who are running the department, but from an expectation standpoint, I think they've done a great job and developing relationships and bringing assets under management.
So they continue to do that that will continue to increase fee income we also rolled out costs.
Corporate credit cards.
And so we're just getting those implemented in lots of customers hands, we had.
We had been referring to those too.
One of our competitors honestly U.S. bank and so we are now pulling those back in so is that fee income continues to increase which will be.
Which will be incremental month over month, I think we'll see nice fee income growth from that as well. So we've got some good initiatives that we started the year with we've been able to implement on those.
And and then and then the interchange income continues to grow as well as people continue to use cards more than they use cash. So we see what can see continued growth in that area as well I missed anything here.
No.
Good great. Thanks, and just one last one I'll step back just.
In addition.
Additional expectations you can give us as we try to think about kind of the liquidity liquidity position of the bank and the size of the investment portfolio over the next several quarters here I mean, it would you know from an industry perspective, we're hearing that lots of commercial retail customers are heavier in cash and that's I just had a positive impact deposit balances, but I've also heard from other banks this quarter.
There's not a lot of spending appetite yet it's for some of these customers. Just curious if you could maybe give us a quick liquidity comment and any thoughts about how the size of the investment portfolio my trend near term here.
Yes in terms of liquidity I think you're seeing that our on balance sheet liquidity is probably stronger now.
Long time, given the fact that we've we've seen some nice.
Nice deposit growth and particularly in the consumer side you know.
You know at Fred's comments indicated weve seen some about 20% growth year over year on the consumer DJ side, we've been opening more accounts there.
So we're happy about that in terms of the investment portfolio you are you're right in terms of the redeployment of.
Cash flow.
To the portfolio hasn't been attractive and yields.
That portfolio is a source of liquidity it does provide us some.
Pledging.
Capabilities for some of our public deposit so.
There is a level, where we would not want that to fall below.
Well, we're well ahead of that at this point. So we're hopeful that as cash comes back to us.
You know were able to redeploy on one side of the balance sheet.
Great helpful guys. Thanks for taking my questions.
Thank you.
As a reminder, ladies and gentlemen that star one to ask the question.
Our next question comes from a lot of Terry Mcevoy with Stephens. Your line is open.
Good morning, everyone.
Good morning.
Maybe a question for you Brad I'm, just curious are there any caught restrictions or limitations just from the goodwill impact and write down and the related EPS loss, you don't pay a dividend, but in the past you've been buying back stock and clearly M&A. It's been an important in key part of your growth story.
Yes, we don't foresee any impact from that we earn back into that retained earnings within four quarters.
And we just don't see any real impact coming from that from.
From our being able to execute on our strategy.
As we said in our prepared comments the board approved.
Re implement the buyback program.
We will soon.
Assuming customary approval from the regulators will be able to continue to do that we have plenty of liquidity at the holding company to do that.
And so you know I think we're in a really good position to be able to take advantage of opportunities.
Terry and you know.
You know so we continue to look at opportunities.
And so I think we've got.
I think we're in a really great position actually still is good today about the company's that felt in the last couple of years.
You know as we had some growing pains the last couple of years.
We've got all that stuff behind us our team has worked incredibly hard from our accounting team to our risk management team Tina calls and a great job.
Hired a new internal auditors that's done a great job and so we've got all of our process is working really well.
And so I think we're going to you know I think we're better positioned today than we were two years ago in our capital position is stronger than its been in a long time, so I feel really bullish honestly Terry about being able to go execute on all the different organic and M&A strategies that we have.
That's great to hear and then just for my follow up Greg I think you mentioned more one off concerns as it relates to just and Peter or maybe specifically charge offs what.
What segment of the portfolio stands out is that the two that you.
Kind of talked about in the prepared remarks, and I noticed this quarter, you didnt disclosed retail and I think it was restaurants as well maybe some updated comments on those kind of 100 plus million dollar portfolios.
Yes, retail restaurant and we didn't put in the deck. This time cary because by and large there they are doing well and you clearly you're up to speed on the dynamics of what cobot has done too.
Dining and all that stuff most of our restaurants is in is in.
Is in fast food and take out and with really really strong companies and so it's doing fine we highlighted aviation and because we expect that that's on People's mind, we don't.
We don't have a large portfolio there and what we have is really.
Well.
Position going into this lots of capital fantastic operators one.
Of our largest credits just had a very large equity infusion into their company recognizing that they're going to continue to make parts for the major aircraft manufacturers and so we feel very good about that we've been working closely with them and the hotel portfolio is holding up really well Terry we've got great Bob.
Growers and we've got great product and we do have one as I mentioned hotel that we acquired in a merger and that.
Has moved to non accrual we have not recognized a loss on that because the assets in pretty good shape and that just didn't impacted by cash flow and frankly, it wasn't well run going into co that we did not originate that loan.
We are working closely with our borrowers and on on a weekly basis, making sure that we understand that portfolio and some product and the more budget roadside products doing very well as fewer people flying more drive but.
But the product that we have that is.
That is more urban and east coast West coast to those borrowers and sponsors and as we've said before.
The best around and so myself and others are working closely with them I don't have any in those portfolios and I look at and say man, that's going to be a problem.
As we sit here today.
And we do have a couple of other.
Credits that we're also paying attention to that are outside of those industries, but so far the two.
Between adjusting the operations and the guarantor sponsor support.
They are holding up quite well.
That's good to hear thanks, guys.
Within Johnson aerospace.
Credit that we were most worried about aerospace.
Right got it Terry.
Thank you.
Our next question comes from a lot of Angeles with Piper Sandler Your line is open.
Morning, guys.
Just a couple of follow up questions Doug previous remarks.
The buyback just curious.
Timing on when that could be approved by the regulators and your appetite to use it.
And how quickly you want to go through it.
Yeah, we we would anticipate that happened in the fourth quarter.
And be able to be used in the fourth quarter.
Okay got you and then.
You referenced capital being strong as it's been in some time.
I think on both to come back next PBT, but.
And that acquisition standpoint, I mean, obviously the stock is that the greater valuation right now are the greatest currency to do deals whether there.
Is there any chatter examples.
Rental transaction in the market.
Yes.
Yeah, there is chatter Andrew and so there are conversations going on you know.
The driver on most of these has been age bone.
Age of ownership or age of management.
And those things haven't changed and so as.
You know some things have to happen.
You will see those things happen so.
They need a merger partner and so.
We'll I think we'll be in a good position to be able to help them with those opportunities.
Okay, Great and covered all my other questions I'll step back thank you.
Thank you.
Ladies and gentlemen, I'm showing no further questions. Thank you put your wanting the equity Bancshares' third quarter conference call have a great day.
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