Q3 2020 Spirit of Texas Bancshares Inc Earnings Call
[music].
Greetings and welcome to the Spirit of Texas, Bancshares third quarter earnings Conference call.
At this time all participants are in a listen only mode a brief.
A brief question and answer session will follow the formal presentation if any.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Jerry Goldman Chief Operating officer. Thank you Mr. Goldman you may begin.
Thank you operator, and good morning, everyone. We appreciate you.
We appreciate you joining us for the spirit of Texas Bankshares Conference call and webcast to review 2023rd quarter results.
With me today is Mr., Dean bass, Chairman and Chief Executive Officer, Mr., David Mcguire, President and Chief lending Officer, and Ms., Allison Johnston interim Chief Financial Officer.
Following my opening remarks, we will provide a high level review and commentary on the financial details of the third quarter before opening the call for Q and a.
I'd now like to cover a few housekeeping items, there will be a replay of today's call and it will be available by webcast on our website at www Dot Esso TB Dot com.
There will also be a telephonic replay available until October 28, 2020 and.
And more information on how to access. These replay features was included in yesterday's release.
Please note that the information reported on this call speaks only as of today October 21, 2020 and they are.
And therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.
In addition, the comments made by management during the conference call may contain certain forward forward looking statements within the meaning of the United States Federal Securities laws.
These forward looking statements reflect the current views of management, however, various risks uncertainties and contingencies could cause actual results performance or achievements to differ materially from those expressed in the statements made by management.
The list or reader is encouraged to read the company's annual report form 10-K filed with the FCC for the year ended December 31 2019.
I understand certain of those risks uncertainties and contingencies the car.
The comments today will also include certain non-GAAP financial measures Aedis.
Additional details and reconciliations to the most directly comparable GAAP financial measures are included in yesterday's earnings release, which can be found on the spirit, Texas Web site.
Now I'd like to turn the call over to our chairman and CEO Mr. being best theme.
Thank you Gerry and good morning, everyone.
I'm happy to report another strong quarterly performance.
This quarter reflected improved earnings a successful merger conversion branch optimization, improving COVID-19 response results and strong asset quality metrics.
During the quarter, we have reached another important milestone in the history of our bank.
We have thoroughly reviewed our capital needs and plans for future growth and determined that the time was right to authorize a quarterly cash dividend for our company.
The dividend declared of seven cents per common share is a solid starting point this year, both our stable current earnings and future growth prospects we have.
We have carefully chosen a dividend payout ratio that will reward our current investors for their continued support while enticing new investors.
With an attractive dividend yield.
We will also preserve a strong position and retained earnings to continue on the path of strong organic growth.
And revitalize our successful M&A program that has brought us to this milestone.
We are pleased to announce net income of $7.1 million for the.
For the third quarter and dilutive earnings per share.
41 cents.
Accretion of origination fee.
Fees on PDP loans net of deferred costs continue to assist our financial performance and.
And replace the reduction of interest income from the.
From the deep rate cuts experienced in the first quarter.
As these loans are forgiven in the fourth quarter of 2020.
And into the first and second quarters of 2021, we are actively finding new revenue sources and growth opportunities to further enhance profitability.
Noninterest income for the third quarter, excluding gain on sale of securities increased 48% over the second quarter.
And we will continue to find growth opportunities and noninterest income given that we will likely be in a low interest rate environment for the immediate future.
At the same time, we have been successfully optimizing our branch network.
By improving the bank's efficiencies by reducing non interest expense.
We have begun to see more clearly the impact of the COVID-19 pandemic.
And I've made this strategic moves necessary to emerge stronger than ever regard.
Regardless of the shape of the recovery.
We have a clear vision of the future of this great Bank and welcome.
And we'll continue to focus on serving the needs of our communities generating stable core earnings for our investors and maintaining a strong capital position to serve as a bedrock for future growth now.
Now I'd like to turn the call over to Mr., David Maguire, our president and Chief lending officer to discuss the loan portfolio and asset quality David.
Thank you again.
The third quarter was a pivotal time for both the lending and credit administration staff in our fight to mitigate the impact of the global pandemic.
Most of the borrowers were able to resume business operations, although at limited capacity and were able to gain a much clearer picture of the impact that the global pandemic will have going forward.
Our lenders were provided a better sense of the borrower's ability to repay as is the majority of the loans exited the deferment period during the quarter. Additionally, our credit administration staff received more accurate information regarding borrower financial position and ability to service debt going forward.
During the quarter 90 day deferment periods have expired on approximately 81.5% of the 520 million in loans request in deferment and 81% have resumed a regularly scheduled payments.
Over the coming months, we expect the remaining 18.5% of loans exiting turning is a deferment will have similar results for us.
For loans, not able to resume regularly scheduled payments and four loans associated with businesses that have permanently close.
Permanently closed our credit team is working diligently to mitigate losses wherever possible.
We initially focused our attention on a group of industry is expected to be unfavorably impacted by the COVID-19 pandemic.
However over the past quarter, we have a much clearer picture of which borrowers had been impacted the most and which borrowers will experience a longer impact and possibly need additional assistance.
Specifically currency.
Current stability in oil prices and the ability of restaurants to open dining rooms has significantly assisted borrowers in those segments.
Additionally, housing demand and retail spending remains strong with no significant signs of future deterioration.
With respect to commercial real estate capitalization rates are stable that we do expect compression in the coming quarters, which we will keep a close island.
Travel and leisure appear to be the most negatively impacted segments as business and leisure travel have slowed tremendously and hotel occupancy rates are below levels necessary to service the underlying debt at September Thirtyth 2020, our total exposure in the hospitality segment consisted of 97.6 million.
Or 4% of our loan portfolio.
Bose loan growth during the third quarter showed significant signs of improvement however loan payoffs specifically on large relationships offset the majority of the growth in net growth for the quarter was approximately 4% annualize the Len.
The lending pipeline remains robust and we continue to see that many potential borrowers have delayed as opposed to cancel future plans.
During the fourth quarter uncertain surrounding the election, the severity of the latest wave of COVID-19 cases, and the development of the best seen should decline and enable us to return to a more normalized level of loan demand.
The yield on loans in the third quarter of 2020 was 4.87%, which decreased 27 basis points from Q2 2020.
The reduction in yield was expected as the remaining population of our variable rate loans reprice in higher yielding loans paid off during the quarter.
As of September Thirtyth 2020, the majority of our variable rate loans remain at their floors, and we expect loan yields to stabilize.
Asset quality remained strong and stable as we now have a much clearer picture of exposure in troubled segments and have taken steps to mitigate losses in these areas.
Nonperforming loans to outstanding loans increased to 36 basis points at the end of Q3 2020 compared to 31 basis points at the end of Q2 2020.
The provision for losses for the third quarter was $2.8 million, which increased the allowance to $12.2 million.
Or 50 basis points of our loans outstanding.
At quarter end the coverage ratio on the organic portfolio was 94 basis points, excluding PPP loans and.
Annualized net charge offs were of eight basis points for the third quarter of 2020.
Throughout the coming quarter end and into next year, our focus will be on assisting the relatively small population of borrowers still needing assistance quickly working through problem credits and rent turning to more normal levels of loan growth.
With that I will turn the call back over to Gerry Goldman to provide a review of the funding side of the company.
Sorry.
Thank you David.
Total deposits at the end of Q3 for $2.3 billion, a decrease of $127 million or 5.2% from Q2 2020.
And an increase of $702 million or 44.3% over Q3 2019.
Of the $127 million sequential decrease from Q2 2020, approximately $63 million was the anticipated runoff of PPP related deposits addition.
Additionally, public fund deposits due to their cyclical nature were down $31 million.
Noninterest bearing deposits decreased $78.4 million or 10.5% from Q2 again with PPP deposits accounting for $63 million of the degree of the decrease.
Exclusive of PPP related deposits noninterest bearing deposits now make up 27.4% of total deposits up from 23.1% at the end of Q3 2019. This is.
This improved shift in deposit mix, along with aggressive repricing of deposits resulted in 8.57%.
Cost of deposits.
A decrease of 10 basis points from Q2 2020.
The bank has no brokered deposits.
The reported loan to deposit ratio at the end of Q3 is 107.2%.
Excluding PPP activities the loan to deposit ratio drops to 88.8% up slightly from 86.6% at the end of Q2.
Borrowings increased by $84.7 million during the third quarter to $277.7 million due.
Due to our $37 million sub debt issuance and $79 million in additional draws from the BBB Yep.
Offset FHLB pay downs.
Borrowings totaled 9.5% of assets at the end of Q3.
The company has significant sources available liquidity, including $50 million in the holding company line of credit.
Fed funds lines totaling $108 million and federal home loan bank availability of $522 million.
I would now like to turn the call over to our interim Chief Financial Officer, Allison Johnston provide a financial overview of the third quarter.
Awesome.
Thanks, Gary and good morning, everyone.
We provided detailed financial tables in yesterday's earnings release.
On a consolidated basis net income for the three months ended September Thirtyth 2020, with $7.1 million with fully diluted EPS of 41 cents compared to earnings of $5.3 million and fully diluted EPS of 34 cents in the third quarter of 2019.
Our financial results continue to benefit from the second quarter success with the payroll protection program via net accretion of loan origination fee as we.
As we look to the next few quarters and we prepare for the remaining 7.8 million of net origination fees. The amortizing the income as London forgiven. It is imperative that we diligently look for new sources of non interest income, while continuing to reduce noninterest expense.
Our tax equivalent margin in the third quarter of 2020 with 3.97% compared to second quarter 20 point tax equivalent margin at 4%, representing a three basis point decrease.
Excluding the impact of TPP, while our tax equivalent net interest margin was 4.28% for the quarter.
Compression within the net interest margin has abated as the impact of rate cuts by the federal open market studies have been fully realized within the portfolio and the majority of our loans are at their respective floors.
As of September Thirtyth 2020, our loan yield declined 27 basis points to 4.87% from Q2 2020, well we.
Well, we do expect to remain in a low interest rate environment for at least the next few quarters, we do not expect further compression within interest earning assets.
The net interest margin will continue to improve on the interest bearing liability side is higher rate Cds continue to roll off.
Additionally, during the quarter, we issued 37 million of subordinated debt at an interest rate of 6%.
We have neutralized this earnings drag accurate reinvestment and other banks debt issuances.
We also implemented a balance sheet strategy to monetize efficient gains in the investment portfolio to offset the loss on high cost FHLB borrowing we.
We took a 1 million dollar gain on the sale of $36.1 million of investment securities with the duration of less than one year to unwind $10 million of FHLB borrowings with a duration of 2.3 years and reinvested the proceeds.
This strategy will be immediately accretive to net interest margin.
The provision for loan losses for the second quarter was 2.8 million, which increased the allowance to $12.2 million or 50 basis points of our loans outstanding or 60 basis points, excluding the 100% government guaranteed ERP alone.
The majority of the provision expense for the quarter related to increase in qualitative reserves as a result of our annual allowance model update and in response to the current economic environment.
Typically we reconfigured qualitative weightings to wait external factors more heavily than internal factor.
This change resulted in an additional provision of approximately $1 million.
The coverage ratio on the organic portfolio was 94 basis points on the $1.3 billion in organic loans outstanding excluding PBP loans at quarter end. Additionally, we have $5.8 million in unamortized discount on the acquired loan portfolio at September Thirtyth clients wanting.
As David mentioned, we are currently closely monitoring specific portfolios segment and expect the coverage ratio to continue to increase in the next two quarters as we gain more clarity on borrowers within the segment.
Additionally, we would expect another quarter or two of elevated provision as loans are downgraded and we obtain updated collateral valuations on newly impaired loans.
Noninterest income totaled 4.8 million for the third quarter of 2020 compared to 2.6 million for the second quarter of 2020, excluding the 1 million dollar gain on the sale of Securities noninterest income rose, 48% to $3.8 million.
During the quarter, we have seen increased demand for interest rate swap and have seen an increase in FDIC lending activity.
We expect these trends to continue and slightly improved over the next few quarters as we emerge from recession.
We have also experienced higher mortgage sales volume given the overall health of the housing market driven by low interest rates.
We will focus heavily on expanding noninterest income wherever possible in the coming quarters to build a solid foundation to replace interest income losses as the rate cuts and origination fees on PPP learn.
Noninterest expense totaled $19.3 million in the third quarter of 2020, an increase of 19.8 from $16.1 million in the second quarter 2020.
When excluding the deferral salaries related to PPP loan origination during the second quarter of $4.9 million noninterest expense declined $1.7 million from the second quarter of 2020.
This reduction is the result of cost saving initiatives implemented early in the third quarter, which include targeted force reductions in key areas with weaker declining demand.
We will continue to look for productivity efficiency and reduce redundancies from recent acquisitions in the coming quarters to further reduce noninterest expense.
As noted in Yesterdays press release on October 16th we closed the previously announced sale of our clear Lake branch, which resulted in the sale of deposits as approximately 24.2 million.
Final settlement on the sale will occur during the fourth quarter of 2020 and is expected to result in a gain on sale of approximately 700000 and a reduction in rental and personnel expenses of 350000.
Additionally, yesterday the bank entered into a branch purchase and assumption agreement for the sale of our tax for a location, which is expected to close in the fourth quarter of 2020.
As of September Thirtyth 2020, we continue to enjoy strong capital ratios with the tier one leverage ratio at the bank of 9.91% and 9.62% at the company on a consolidated basis.
Maintaining a strong capital position is the current priority. So that we can capitalize on any growth opportunities that arise in coming quarters.
We also continue to focus on initiatives designed to return shareholder value.
We continue to repurchase undervalued shares of our stock under the current stock repurchase plan and we'll continue to do so in the coming quarters and for as long as the stock remains undervalued level.
I'd now like to turn the call back over to Mr. bass for closing remarks theme.
Thank you Allison as.
As we prepare to close out 2020, we must reflect on the past nine months to understand fully the challenges we face and the accomplishments we have achieved.
The first quarter ended with nationwide hearing concern are.
Our primary focus was on protecting our investment our great employees and customers, while working diligently to understand the government programs designed to assist them.
We experienced a call to serve and support our communities during the second quarter and the magnitude of which we may never see again.
And one that made us all extremely proud to be community bankers and an essential part of the fight against.
Against the virus.
During the third quarter, we took a hard look at our current financial and operational position and began making strategic plans for a bigger and better future at the same time continuing to focus on asset quality improving earnings and branch optimization.
We will close out 2020 excited about the year to come.
And the ability to share our future successes with our bankers support staff and investors.
We have been battle tested this year.
And can now proceed with absolute confidence that our overall strategy of growing by partnering with other extraordinary bankers, while focusing on our security.
Stability and strength.
Is a winning formula for success.
This concludes our prepared remarks I'd like to ask the operator to open up the line for any questions operator.
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Our first question comes from the line of Brad Milsaps with Piper Sandler. Please proceed with your question.
Hey, good morning, guys.
Good morning, good morning, Brad.
Dave maybe I wanted to start with deferrals, if my math right you're down to I don't know, maybe a 100 million or so deferral.
Deferral, then it sounds like you have some confidence around those going.
Going off deferral, but would you kind of say that that was kind of in the group you're watching the closest.
Kind of ultimately where do you think that that number's fault that number falls too.
You kind of close out that program.
Yeah, you're correct. It is approximately 100 million listened live in some form of deferral of some are still in their first round of deferrals on their second round.
And very little is going into the third round. So right now we expect that to that number will decline significantly throughout the Ah.
The rest of the fourth quarter as schedule into the beginning of the first quarter of 2021.
Okay, and just wanted to maybe get some more color on your comments around loan growth returning can you maybe.
Give us a little more color there maybe in percentage wise on kind of what you're thinking.
And in terms of growth you might be anticipating or.
How much bigger is your pipeline relative to where it was maybe at the lows in June or something just any additional color there would be great.
Sure.
Currently our pipeline has almost returned to pre coded levels back in.
March it was approaching $1 billion or today slightly below that are all are saying, a mom and pop stuff, we like to do.
Across the whole game and if you look at our.
Granularity of our portfolio that's remaining we're seeing a lot.
Larger deals smaller deals and in between deals. So what we're seeing also is that our customers to start a head it taken their fingers off the pause button and are now actively planning for their projects or expansions going into 2021. So we expected that pipeline that we have accumulated today.
We'll start producing that this quarter, we ended 2021.
Overall, we're very happy with the organic organic growth we've seen in the third quarter, we expect will be more in the fourth.
And going into what we believe will be a good year for 2021 right now.
Okay, Great and then just final question for me I know.
You guys have been hard at work on that with some branch sales and getting cost savings out from from some of those deals from last year Allison just curious if.
You think this represents a pretty good expense run rate kind of less what you talk about with the two pending branch closures or sale. This use me or do you think there are more cost savings to come sort of off of this run rate that we saw in the third quarter.
I think going into Q4, you should expect to see a roughly a 3% decline in noninterest expense. We made significant strides between Q3 and Q2, we had an 11% decline if you add back in the 4.9 of salary deferrals that we took in Q2 of 2020 so.
We see we saw quite a bit of progress from Q2 to Q3, and then we'll continue to see that going into Q4.
Okay, great. Thank you.
Thanks.
Our next question comes from the line of Matt Olney with Stephens. Please proceed with your question.
Hey, great. Good morning, everybody a one dollar one thank you one follow up on the more.
The margin it sounds like you expect some nice improvements here.
If we remove the impact of PPP, which can obviously be volatile I think the margin was around for 28 EPS.
T third quarter I want to make sure you also expect improvements from from those levels as well. Thanks.
Yeah. Good question, Matt Yeah, we definitely felt an improvement of seven basis points to Fortunately, excluding PBP, but as reported you saw was it 397, and we like to maintain that margin north of 4%. So David's team has been doing a good job of drawing a line in the sand as far as rates. It what we're putting on new loans that.
As we mentioned on the call. We've got we've got our higher cost Cds Rolling off in the next we've got 20% of those actually rolling off in the next quarter and then 75% of vessel will reprice in the next 12 months. So we expect to see some pickup there in the net interest margin and we're just committed going forward to maintaining that minister.
Net interest margin at 4% or better.
Okay, and then the core loan yields in the third quarter, if I'm doing my math right. If I take out the PPP impact I think around 540 does that sound about right and David any color on where are the new and renewed loan yields are coming on more recently.
I'll take the first part of that so yeah. Excluding TPP 540 is about right new loans Youre getting David you want to take that.
As I said earlier, we have drawn a line in the sand and really targeting a yields above 5% where possible a competition is out there of course, but we'll compete on rate. If we if we if it's a good enough deal for us and we are not going to compete on a credit terms at all.
And so far we're able to get what we that's driven for with our with our customer and maintaining yields above 5% and but up into the mid fives is a target for us and with our current cost of funds at a yield is an area that we want to see.
New stuff coming on today is is no different than it was 90 days ago as far as pricing for us.
Okay got it and.
And then on the P.P. Pcs.
I think originally you said around $15 million, just remind us how far weve how much we've recognized so far and how you expect to recognize that from from here. Thanks.
Yeah. So gross 15 million in fees, we've recognized roughly 3 million of those none of those deferred cost that we deferred in Q2, we've got about 7.8 million remaining on P.B. FISA in PPP beef.
And from here out how do you see that flowing in from from Fourq you went into one Q.
Yeah, right now Matt we're in the process of finishing up a all the loans above a $150000 for forgiveness. We made very good progress on that we should be finished by the end of this month and that represents approximately $300 million and ones that we'll have applied for.
Yes.
And with the expectation that some of them will start paying off Weve already we've had a total of three pay off and ER, we expect and we submitted a well over 300. So we expect most of that will come into the fourth quarter.
Or overrun into the first floor and then the next by mid November we're starting on the loans below $50000, because theyre much simpler process and faster than the ones that are 50000, and we think that that well will be ER that crosses that's 1800.
<unk> loans.
And we will be finished with that project by the end of the year and then that will leave us with approximately 900 loans or they don't get taken care of in late fourth quarter early first quarter. So we're hoping to have all forgiveness taken here into the first quarter 2021, and then whenever the SP a taser Seth.
We will recognize the fee.
Okay.
Okay, Great and then just lastly from me on the credit front. It looks like nonaccrual loans were relatively flat linked quarter and it's great to see what about special mention loans substandard loans I think those amounts were around $16 million and $32 million last quarter.
Any updates on those two lines.
Coming out of our watch list committee meeting or about six or eight weeks ago. We did we had more upgrades and downgrades, but the expectation is is that in it and it hasn't materialized yet is that of the $100 million and deferrals that are still remain out there a certain percentage of them will.
Be downgraded at some point further down into a special mention or into a down further into substandard, particularly if they ask for a a third deferral, which we're being very stingy on that but yeah. The reality of it is there's going to be some that do that right now that number is.
It's about $6 million in third deferral.
And that's below expectations by about 40% and so and then also we have a you know approximately 70 odd million dollars initiate laws that are coming off of their SP. A seamless name is this not a they were over.
For 561 loans, the Sta loans that this is or less than that.
Our first payment is due in during October.
We were projecting at 20% a request for.
A a deferral that that he hit in the first place because yesterday it was paying on their behalf.
It's coming in at about 60% of that number. So we're very happy with that result, so you know the SP a portfolio that certainly has our attention, but it's a the results. So far it looks like that it's going to come in or below water alone. So I guess it was going to come out which is a very very positive for us.
Okay, Great. That's all for me thanks, guys.
Yeah. Thanks, Matt.
Our next question comes from the line of well Jones with KBW. Please proceed with your question.
Hey, Thanks, good morning, guys.
<unk>.
Hey, Al is now a time or two you alluded to maybe enhancing some of your revenue streams on the fee income side are you seeing up a non interest income just curious if you guys have thought about you know.
M&A to expand fee income or a possible initiatives to just expand your current business lines there.
[noise] Oh, let mr. rafting first stab at that question [laughter] <unk> M&A is in our DNA will is as you know over the over the 10 years in 11, new we've been together in this investment group we've had.
And about that many.
If the average is probably for a year, but.
But whether it's a branch or full bank.
Yes, yes to that question you know we have we continue to be very active and Oh yeah.
And.
In a in the areas that are in market. We look very closely and we are on the edges as well and there are certain regions in Texas that were not in yet. So those that we think can be marketed successfully but at the same time, if we think we have locations.
That they're not performing up to standards. We are we will not be quick to move in that direction, but we'll we'll move in that direction a appropriately we have we did.
We did announce the closing of.
Three of our locations two of which we sold to two other banks and third we rolled up into one of ours, but at the same time in the in the next quarter. We have this quarter will will also open up or L.P.O. into a full bank in corpus and also Adam.
Other location in Austin, a market that we like very much and we continue to focus on the San Antonio market as well. So so yes to that question.
Very very interested in that Allison anything yet and well as far as your question regarding our existing lines of business. You know what do you see the new Austin, San Antonio that we brought on at Lowe's, Our corporate banking group you know their bars are looking for interest rate swap opportunities that we hope to get into that market, a little bit more and be able to offer.
That said some of our as well as you know, we see nice fee income and mortgage referral fees, obviously given to the health of the housing market currently and it's nice to see a F.D.A. I'm gain on sale of loans come back a little bit this quarter. So we hope to see that trend into the remainder of the year also.
Right no that's great color. Thank you guys that Hmm and maybe maybe just last one for me I'll discuss a lot of 'em question, thus far but [noise] elsner, you referenced just not a quarter to me.
Can be expected an elevated provisioning.
Over the past two or three quarters, new guidance, averaging that should remain range does that number still feel bright moving into Fourq. You are you guys starting to get comfortable with a reserve levels and maybe just some thoughts around the provision.
So we've got a number of factors that could impact the provision for Q4 and Q1 of next year as David mentioned earlier, the majority of our loans will be coming out of their deferment period as well as the SP a portfolio, that's coming out of a period, where the Sps and paying or node.
We also have a those are Comanche and beville acquired loan portfolios, which had a weighted average life of 40 month Uh huh.
<unk> is approaching the back half of that 40 miles. So our analysis will probably yield a small provision on non acquired portfolio in Q4, so with that being said I would expect a provision expense of four to 5 million and $4 million to $5 million range in Q4.
Okay Awesome, Great and then maybe I guess just last one from me you guys still remain active on the repurchasing stock you.
You know your stock trades at I'm trying to tangible book value, which is not as steep as Dan but are still.
<unk> you know tractor levels I'm, just wanted to get your thoughts on maybe future repurchase activity. You know how you guys are thinking about the buyback.
It's a bargain, but I'll, let Alan [laughter] Ilim is like snow, we aggressively in the first half of the year, we aggressively repurchase shares you know, particularly when we were trading around $910 a share and we have eased up on that this quarter I think we bought back roughly 750000 and stop as we see in our stock price getting closer to that 10.
Well book level I, we're going to continue to repurchase our shares as long as we maintain below that tangible book level that we'll reassess that when our stock price breaks that threshold.
[noise] [noise], okay, great well, that's all from you guys congrats on the quarter.
Thank you we'll take you appreciate it.
We have a follow up question from the line of Matt Olney Stephens. Please proceed with your question.
Yeah, guys just to follow up the the press release mentioned that the $436000 prepay penalty.
Allison was that in the interest expenses or the non interest expense I couldn't I couldn't find it.
[noise] that ran through noninterest expenses were that prepayment penalty that okay.
Okay. So.
I guess just trying to understand the you mentioned the expectations for operating expenses in the fourth quarter. I think you said would be about 3% lower <unk> versus <unk> versus the third quarter you just reported.
Does that does that include the reported number you guys gave us at 19.3 or does that consider there.
Prepayment penalty and those conversion costs.
All right that's the reported 19.3 number.
Okay, so 3% lower than that never got that right.
And then on the other side the.
The fees.
Well were strong across the board maybe mentioned in his remarks, the I missed it just any any commentary on fees as far as anything and.
Unusual this quarter, we can fix you consider for our forecasting or should we consider just assume additional additional build from here with the with the growth that you guys have invested over the last few quarters.
I think I think really the fee income was driven by people starting to see some green shoots and actually putting that taking their finger off the pause button. So going forward I would expect it to continue to increase from here on out I don't know if David you want to add anything to that yeah, we're seeing a real good opportunities to.
Institute fees with our customers are and you know as mentioned earlier the swap fee income as a is oh.
Good expectation for this quarter and into 2021 as people try to lock.
Lock in lower rates on a long term basis of which we benefit from foreign nice fees.
And then we're starting to see a return to the SP a premiums.
Volume there is a is steady and so that had some impact worse in the third quarter.
And then just our normal you know origination fees, we what we've always been able to get origination fees on most of the loans that we originate.
Originate.
Got it.
Okay guys. Thanks for all your help.
Sure. Thank you Matt I appreciate it.
There are no further questions I'd like to end the call back to management for closing remarks.
[noise], we'd just like to thank everyone for their continued support.
An interest in us and Uh huh.
We welcome any questions and calls after this meeting so thank you very much for being a part of his today.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.