Q3 2021 S&T Bancorp Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the <unk> Bancorp.
Third quarter earnings conference call at this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation. It.
It is now my pleasure to turn the floor over to your host Marc coach bar, Sir the floor is yours.
Thank you very much and good afternoon, everyone and thank you for participating.
Today's conference call.
Before beginning the presentation I want take time to refer you to our statement about forward looking statements and risk factors, which is on the screen in front of you.
<unk> provides cautionary language required by the Securities Exchange Commission for forward looking statements that may be included in this presentation.
A copy of the third quarter.
2021 earnings release can be obtained by clicking on the press release link on your screen or by visiting our Investor Relations website at Www Dot SP Bancorp Dot com.
We will be reviewing earnings supplement slide deck.
Part of the presentation you can take you can obtain a copy of the slides.
Clicking on the link on your screen or on our website under events and presentations third quarter 2021 earnings conference call click on the third quarter 2021 earnings ultimately.
With me today are Chris to comment <unk>, CEO, and David Antolik, S&P, President I would now like to turn the program over to Greg.
Thanks, Mark and good afternoon, everybody I'm very pleased to be with you. This afternoon and on behalf of Mark and Dave welcome to our call.
Firstly, a particularly pleased as I wrap up my first two months Needless to say, it's been a very busy.
Weeks as the new CEO at <unk> Bank.
Okay.
Another milestone and as you know when you're new you have a lot of firsts this quarterly earnings call.
The last of my significant first and we're now a 100% focused on moving forward.
To touch on a couple of things to two main things in my remarks, one where we.
And so their focus since I arrived and briefly touch on our.
Financial performance.
I don't want to steal <unk> Thunder, they will provide more detail and they along with our entire leadership team and that team and employee base deserve real credit versus solid results.
First on.
What I've been doing for us you'll see on the slide page three on the left hand side a few of.
These first days is that simply an integration into this company, becoming part of S&P S&P is learning about <unk> and we're moving forward together the German integration is something that we've used <unk>.
<unk> of the leadership team and an employee base in order to want to understand a lot about who we are how we differentiate ourselves how we're winning in the market and where the opportunities may be for growth and improved performance.
That will build to our future state and we'll have more details around that as.
Into 2022.
Within this activity and the integration it's been a very busy one.
We've had significant number of employee meetings, both one on one and group sessions.
And we told them that often I've had the opportunity over the past eight weeks to be in front of.
We have one third of our entire employee base.
We've also had significant senior leadership engagement, including a few day Offsite strategic planning session. At the end of September that did a lot to build that team as well as.
Organize our focus around how we move forward together.
Obviously significant engagement with our board shareholders and the Investor community to not only introduce myself discuss our future as well as most importantly significant customer engagement out in the marketplace.
By the end of the week I will have been in all of our markets.
Bob will then have come away from this time extremely extremely optimistic about our future. We have many strengths. Most importantly, we have a very talented employee base driving customer engagement and customer experience and that speaks a lot to the bottom left hand side of this page and there's really.
The three big areas of focus I think about this business and where our leadership team is focus is very much around doing everything we can.
To drive employee engagement first engaged excited employees that have the tools and the skills to perform and to deliver for customers.
Really it's going to lead to high levels of customer engagement as well as market. Following we have a great name and reputation in the marketplace.
Focusing in this way, it's only goodness going to enhance it that.
That work is very much underpinned by an everyday focus on not only safety.
Lasalle.
Delivering our results as we expect them, but operational excellence, whether were face to face with our customers with a digital interaction or in the back office from an operation standpoint. This focuses on operational excellence safety and soundness and delivering where those engaged.
Safety and customers in markets that we have the honor to serve our.
Our focus is on profitable growth and the consistency thereof. That's the output of the work that we're doing around these two are two big inputs around engagement.
As an operational excellence again more to come a lot more detail.
Gauged follow this is the perfect time of year for us to be planning for 2022 and beyond and we look forward to discussing those things with you in the future.
On the right hand side of the page a couple of highlights that I want you to hear it again.
Dave and Mark will go into more details first.
So the earnings of <unk> 70 cents a share we feel very good about those solid earnings primarily because of how they were driven and that was through.
So very strong loan growth of north of a $100 million linked.
Linked quarter loan growth was broad based both in our commercial C&I business as.
First we will add in.
Our consumer portfolios. The good news here is our pipelines remained strong and again, Dave will give you more details.
And during all of this change one of the things that we also wanted to do and it's a testament to this leadership team is we've also stay focused on expenses.
Efficiency of this company is part of what we are known more and in spite of change and transition to new leadership.
We kept our eye on that ball.
Last as we've talked about in the earnings release, we are seeing positive trends in our hotel portfolio. This is a topic that's been up discussion for the past.
Last few quarters in the past few months and things seem to be moving in the right direction certainly stabilizing.
With where they were and as it relates as it relates to confidence in our future I am very pleased to reemphasize. The decision that was made at our board meeting earlier this week and that was an increase.
Our dividend by a penny or three 6% to 29 a share.
I look forward to.
Your questions as we move forward in the call, but for now I'm going to turn it over to Dave and he can provide more details.
Thank you, Chris and good afternoon, everyone I'd refer you to slide.
<unk> four as Chris mentioned, we're pleased to report loan growth, excluding triple T $118 million during the quarter.
Represents a 7% annualized growth rate when compared to Q2 driver.
Drivers of growth include increased revolving line utilization in our C&I book from.
From 31 to 33.
3%, which translates into approximately $31 million of balanced growth we all.
Also experienced an increase in our total revolving commitments up $23 million during Q3 as new customer acquisition remains solid.
This commitment growth was in our asset based lending division, where we continue to carve.
Our niche are providing a unique banking solution for the lower middle market asset based lending we will continue to be a strategic focus for us moving forward.
For the quarter. We also experienced total consumer loan growth of $38 million, driven primarily by residential balance mortgage balance increases which are primarily.
Jeremy the result of a shift in customer activity away from recent financing to purchase where our balance sheet products are preferred.
Looking forward, our commercial loan pipelines improved quarter over quarter. This includes C&I commercial real estate and our business banking segment.
We also anticipate increased yields.
Utilization from the 33% that I mentioned earlier is our commercial borrowers seek additional working capital to support growth.
As a comparison pre pandemic utilization rates averaged approximately 42% getting back to pre pandemic levels would result in approximately $200 million.
Of additional loan growth.
Super pipeline also grew quarter over quarter and reflects the shifting customer activity that I mentioned earlier with demand for portfolio residential first mortgage and home equity loans both increasing.
Thank you for your continued support and interest in our company and I'll now.
<unk> the call over to Mark for his comments.
Thanks, David.
Net interest income improved by about 400000 compared to the second quarter.
This is due in part to an increase in P. P. P activity, which was $4 2 million compared to $4 1 million in the second quarter.
An extra day in the third quarter also helps that.
Sure come along with an increase in average loan balances, excluding PPP almost $100 million.
These improvements were offset by lower loan yields at the rates on new loans are tracking about 50 basis points willer in APAC.
The headline net interest margin rate decreased just two basis points as our loan yield decreased.
Interest in with higher average cash balances of $129 million were offset by relatively higher P. P revenue.
Although the dollar amount of <unk> revenue increased only slightly compared to the second quarter. The average balance of the P. P V loans declined by $193 million, resulting in an outside impact on the on.
On the NIM.
By remains about $181 million of Triple P loans on our balance sheet and approximately $5 7 million up related to needs to be recognized.
Looking ahead with loan growth, returning and Triple P coming to an end we should begin to deploy the higher cash levels on our balance sheet. This should help offset the loan yield pressure I mentioned earlier.
And stabilized net interest margin rate and importantly improved net interest income.
The influence of the choke piece should end after the first quarter of 2002 and forgive is expected to be essentially completed.
Noninterest income in the third quarter increased by about 400000 compared to the second quarter the largest decrease.
The rate was in mortgage banking, which improved by about 400000, primarily due to a higher mortgage servicing rights valuation.
Wealth management showed continued improvement through a combination of higher assets under management and increased customer activity.
We expect the run rate and that as it comes to be 15% to $16 million per quarter.
Noninterest expense increased by $1 4 million compared to the second quarter, but remained well controlled at $47 2 million in line with our expectation.
Higher salary and benefit of $7 million came mainly through incentives and higher base salaries related to some new hires.
Other expense categories were in line with the prior quarter.
We expect our expenses to be $48 million to $49 million in the fourth quarter as investments in our production capacity will continue and incentives will be higher related to the increased activity we've experienced.
Next our allowance for credit losses to loans decreased from 156% in the second quarter.
155% in the third quarter with the release of about $1 3 billion.
There were several moving parts in the reserve this quarter first specific reserves were higher than second quarter and all of it about half a million of $6 5 million as at the end of the second quarter, mostly relates to the hotels.
<unk> improved valuations, resulting in the elimination of those specific reserves.
Second we added a new $9 3 million specific reserve relates to C&I relationship.
This resulted in a net increase in specific reserves of about $3 4 million.
Third for the ACL total offsetting the net addition in specific.
Because there are some qualitative adjustments related to continued improvement in economic conditions and forecasts.
Unrelated to the to the allowance the impact in Mpls, we moved two relationships totaling $12 2 million to Oreo. So although npls decreased by $1 3 million with this move to Oreo MPA.
<unk> increased by $10 nine.
All capital ratios improved in the third quarter and are in excess of regulatory well capitalized levels.
And our capital position Cushing continues to expand.
While we have $37 $4 million remaining on our buyback authorization, we have no media plans for buyback and monitoring.
<unk> relations and are prepared to respond should conditions warrant our preference is to utilize our capital to support growth organically or through M&A.
Thank you very much at this time I'd like to turn the call back over to the operator to provide instructions for asking questions.
Ladies and gentlemen, the floor is now open for questions.
But do you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset listening on speaker phone to provide optimum sound quality.
Please hold while we poll for questions.
Yes.
Your first question for today is coming.
<unk> from Michael Perito with K B W. Michael Your line is live.
Yeah.
Thank you good afternoon, Chris good to speak with you Dave Mark at a.
Good to speak with you again.
Right.
A couple a couple of things I wanted to start on the wound growth. It was good to kind of see the reacceleration here in the quarter.
Dave based.
From that to me it sounds like the consumer and commercial pipelines are up quarter on quarter. So I mean, as we think about obviously, there's there's other items like paydowns and closings, they get pushed and things of that nature, but I mean is it.
Do you feel like.
With PPP balances largely gone I mean that we can kind of derive like five years to seven.
On your loan growth give or take near term here annualized I mean is that in the realm of what you guys are thinking based on the pipelines you see in it.
Anything above that likely comes from maybe a bigger pickup in line utilization yeah. They've your description is right on.
So with the existing pipeline of new business activity that we have we were.
Principle guiding towards that low single digit loan growth number through the balance of the year with the additional tailwind of increased utilization in both our revolving.
C&I book, the higher utilization that comes along with some of the ABL book and as construction projects continue to fund.
The balance of the year I think we would look at a higher number or guidance for overall loan growth and then in the consumer business as I mentioned the activity has moved more towards the purchase market, which is where our balance sheet played more of a role in terms of growth and assisting.
And through the customers.
Helpful.
And then.
Just a couple more on on the expense side.
Maybe Chris would love to hear kind of how you can kind of just got there, but any areas of investment or anything like that that are of particular interest or focus.
Because for you and as we look out to next year.
And I know you guys have probably just starting the budgeting season, but how do you guys kind of internally think of it.
Expense growth.
Potentially some revenue growth acceleration, obviously pushed to more digital.
Yeah, I'll start there and then I have a follow up.
Yes.
I'll put it in a couple of buckets mark touched on it a little bit we will continue to look for.
Talented teams of commercial middle market asset based.
Bankers that are in the marketplace and continue to look for expansion there.
That.
So it would require additional ftes in kind of the frontline commercial but I can say, we're also looking at what we would hope to find and what we've talked about is what are the operational excellence look like.
And there is opportunities within the organization to continue to.
A digitized process.
These and take paper out of what we're doing.
<unk>.
Anything from front end capabilities that they looked like CRM opportunities too.
As I said back office more call. It caused the loan the loan loan processing and origination function and the mortgage standpoint, but today we're.
We're in the assessment phase and thinking about where the needs are in the prioritization of those needs, but we do know that growth does require continued investment we do.
But again as I said earlier I'm very pleased with the discipline that's shown within the company around expense management.
Profit not a new thing to talk about with our organization, but we do also need to recognize the fact that in order to grow investments are required and will continue to develop those things up.
Helpful. And then just lastly on the.
On the capital side would love to hear you guys.
I kind of alluded to some things in the prepared remarks. It sounds like you know you had the dividend increase doesn't sound like buybacks are kind of top of the list here, but.
What would push you guys a little bit here I mean.
At least by my math, I mean, the tangible ratio probably gonna eclipsed 10% next year, even if you grow 567% on the loan side.
The economic environment doesn't seem to be getting worse, obviously, you have the $10 billion.
Actual to contend with here, but.
Would love some updated thoughts around capital and and how comfortable you are letting these ratios build I guess before we could start to see some more diversified deployment.
Yeah, I think it's something work.
We constantly look at I mean the.
The one thing with our balance sheet.
We are.
Have a heavier loan base and its commercial oriented.
As it requires more and.
More regulatory capital than than the average balance sheet I think of some of our some of our peers, so even though our.
Our tangible book.
Look high on a regulatory basis.
To be in line or actually a little bit below some of our peers. So we have to be cognizant not only of the tangible impact, but also the regulatory impact to make sure we maintain the correct and especially.
Cushion to weather any storm.
That limits that put some limits on how much we would be comfortable.
Buying back in the current environment.
That said our work as Chris mentioned, we are in that assessment phase and I know you're reluctant before we kind of flesh that out a little bit more to do anything that way.
Our options when it comes to our.
First and second priorities, which are organic and M&A.
That's helpful. I mean, just one quick clarification I mean so.
As we think about what you just laid out their marketing so.
Tier one leverage is like $9 seven year total risk based 14% I mean is it fair, though to take that.
Yep.
Closer nine maybe 13 13 and a half.
Would you guys consider these current levels still in excess I guess relative to how you think about the capital the balance sheet needs.
Yes, a little bit, but not overly so much that there would be room for a significant.
Buyback program that would really move the needle.
Thanks to be.
We will execute it.
It is.
Where our stocks trading and what the implied earn back of those buybacks are and even in that kind of low 30 range.
The earn back on that it gets to be a little bit a little bit longer.
You have to wonder if that's the right way.
To deploy the capital.
Yes.
Helpful. Thank you guys for the sites.
Sites and taking my questions I appreciate it. Thank you thanks, Mike.
Your next question is coming from Daniel Tamayo with Raymond James Daniel Your line is live.
Hi, everyone.
Just wanted to.
Maybe just touch first on the expenses.
No.
He went to something until there but.
I appreciate the guidance for the fourth quarter.
You know around that 48 $49 million level.
But kind of digging in.
And on your on your comments on continuing investments and higher incentives how should we think about it as we look into 2022.
Good base might be.
Or or normalized growth rate.
But in the past, we've always strive to hit that.
It's.
Pretty low single digit stood at 2% to 3% range I think with the reassessment that we're doing and the need to have a higher growth rate.
It could be higher in 'twenty two than in prior years as some of those investments.
<unk> and they may not come right away with revenue.
The following immediately.
One of the things, we're sitting here thinking about and planning processes potentially a little bit higher expense run rate.
In 'twenty two.
It will begin to normalize into the retina and it started to catch up and we could go back to a more normal increased number.
Part of the out years.
Got it thank you.
And then second just just a.
Modeling question.
You have the amount of what the MSR valuation adjustment wasn't a good quarter.
And the amount wasn't very much it's about 160000.
And that.
It's more of that change it was still negative.
Last quarter. So the Delta was about 400000, it was negative 200 per ton.
Followed by a positive 160, so overall overall.
Overall changes in lots of water.
Okay, Alright, that's helpful.
Thank you.
And then finally.
Just maybe to.
To touch a little bit on the on the C&I credit that was moved into nonperforming status in the quarter.
If theres anything else you could you could disclose there in terms of <unk>.
Industry or.
The.
Type of borrower.
I'm, assuming that that was a one off situation, but if there's anything else that you.
Discovered in the portfolio and finding that credit that'd be helpful. Thank you yeah.
Yeah sure Daniel so.
I'm not prepared to comment on the industry because it is an active workout, but the total.
It'll exposure in that relationship and it is a C&I relationship is $21 $7 million.
Continue to work with the customer and the customer has been cooperative in an effort to work to resolve the credit.
The loan was downgraded to substandard and moved to nonperforming during.
During Q3.
The customer was impacted to a certain expense extent by COVID-19, but there were some other operational issues that were.
Yeah were evident in our review of the credit.
Expect to formalize our workout strategy during Q4, which.
It's all in the charge off and we do however.
Expect it ultimately to resolve this credit sometime in 2022.
Okay.
Alright terrific. Thanks for taking all my questions I appreciate it.
Jacobina.
Your next question is coming from Russell Gunther with D. A Davidson Russell Your line is live.
Hey, good afternoon, guys, Hey, Brad.
I just want to start with the ABL portfolio and a reminder of what the size of the portfolio is today <unk>.
Some comments on what that.
Due to growth in the quarter and then how you ultimately would look to scale that going forward.
Yeah. So that's the commitment.
At the end of the quarter were around $165 million.
Utilization rates in that portfolio tends to run in the 60% range.
That.
Vertical is two years old the folks that we brought on board to lead that charge just celebrated their second anniversary.
We plan to accelerate our growth in that space, we do feel that from a risk perspective, we.
We have a very strong practice.
There's a very rigid monitoring in that space and our risk appetite in terms of size of credit.
Is unique in the market most of our competitors are going upstream.
There are kind of at the lower end of the middle market.
Market. So it's a it's a product that we can charge for it in terms of yield and in fees that surround it as we always demand it and get a full service relationship with these customers. So their treasury management private banking opportunities that evolve or revolve around these customers.
<unk>.
So a 30% kind of annualized growth rate in the commitment perhaps beyond that.
The folks that joined had non solicits with their previous employer that expired earlier and in the end of last year. So that's aided in some of the growth that we.
We saw this year, but as Chris mentioned earlier, we're looking to add resources human capital.
We've got a very robust technology platform that supports that effort and as scalable as well. So we see that becoming more of an integral part of our growth strategy is.
As we move through 2022 broke girls. This is Chris I'll just add that.
Part of my own assessment coming in here. One we are pleased with how the company built this business. One we we built an infrastructure from a technology standpoint that they've talked about that.
As you know.
The most current generation of the platform that's needed to service. These these sorts of credits we've got a.
Treasury management infrastructure that supports the business that puts us right out there with anybody from a competitive standpoint talking about any of our our banking competitors and then the third piece.
Pieces as we were not were not practicing then we'd do this week, we hired real seasoned professionals that know this space and are on top of that from a credit risk management and due diligence standpoint. So it's an area I've spent a fair amount of time with them over the past couple of weeks.
<unk> spent a whole morning with them last.
We're going through a detailed portfolio review and.
Give dave and Mark and the team a lot of credit for having the foresight in a couple of years ago to go this way and it's a good example of kind of organic growth that can be done with.
Relatively speaking few dollars.
And full of people really.
Last week people that know the business that they can move the needle for us.
Thanks, Dave and Chris I appreciate your thoughts there. It's really helpful. I guess just last one for me Chris would be as you look to leverage your background.
The legacy S&P business model are.
Are there any loan.
Smart products in niche verticals that you're not in.
B or a different approach to see income to trying to get that you know is a greater contribution of revenue two to peers and are those type of strategic.
Shifts if there are any something we might learn about in the first hundred days or.
Yeah, I think it'll be a little later than the first hundred days, if you think about depending on how we laugh here about the fighting isn't 100 business days are worthy of your calendar days and then it depends on which way it turns into my favorite roadway I go attack, but.
You know, we're thinking you know as we get to the latter half of Q.
But we haven't seen any recoveries tough time to be out there.
Talking just from where people have their attention. So we're working through the end of the year argued that aligns with our our budgeting process.
And I would I would define it as is more to come I again, there part of my own due diligence.
Just before I, even started was looking for.
Digitally at where the company has put his emphasis and you can look on the income statement. Some some good.
Double digit growth. So there is it's small.
<unk> digit growth across the board and important customer things like Treasury management.
Our fee income growth.
Wealth management fee income growth would be something as simple as a debit card.
Activity and growth that actually does require our employees and our company being actively engage with our customer base to utilize those cards and that does nothing but.
Connect those customers more closely to us so we're going to look at our online and digital offerings and see what we can do to upgrade and make them more user friendly we're not missing anything but I think there's enhancements that we can do to as much as anything drive that customer experience and customer.
We're engagement, that's where we're focused right now.
Great I appreciate it Chris. Thank you guys. That's it for me. Thanks, Thanks Ross.
Your next question is coming from Matthew Breese with Stephens.
Matthew Your line is live.
Hi, good afternoon.
Everybody.
Hey, Matt.
Hey, Chris maybe maybe away from potential new products and services.
Could you give us a sense for how you're measuring success at the bank. I mean are there metrics that you would kind of point us to that you're watching as well that you would say you know from point a to point B we were successful.
One of our new strategy.
I mean, we've talked a fair amount of.
Almost the simplest measure is looking at it.
Pre tax pre provision number relative to the size of our balance sheet and what could that be down the road knowing the infrastructure that we have in.
Existing budgets.
Just organic growth what could that look like that requires potentially some enhancements to the capabilities that we have as well as the <unk>.
<unk> of people I would say the other area that we've spent a lot of time internally talking about our credit metrics and back to the safety and soundness.
Oh wait.
<unk> way of running this business and.
We're working through that to ensure that.
The monitoring and staying on top of our credit book is in line with our expectations. So.
Those are a couple of areas that make a lot of sense, you've got a lot of moving parts right now.
Say well what is normal right with the PPP loans.
Coming off you've got it right environment is that the floor, that's going to be there for a long time, we've got liquidity on our balance sheet that we've never seen before so it's really hard to depend to a number thats reflective of what history looked like that those will be a couple of areas.
In the short term spending time on.
Got it and as you honed down that list the top three or four items that you do.
Need execution and focus in the most focus I'm curious where does M&A stand on that list and it's important just given the size of the balance sheet approximately $10 billion.
So.
Certainly mark.
There is a couple of times, we're not opposed to it and we would be interested.
And the right sort of opportunity, but as you know those things happen when they happen and I've told the team that my focus is solely on delivering what we can control and that's.
Mentioned in organic growth and then thinking about.
Part of what we did.
Describe dave's role and my role as CEO.
<unk> here you are driving performance for today and I am here thinking about building for tomorrow and that building for tomorrow is going to come in a couple of forms right organic growth is.
That should be the recipe and it's going to be the key ingredient to our ability to.
Have meaningful inorganic opportunities. So we've got to deliver performance like the team did this quarter continuing to do that that will help us with the currency that we need in order to potentially do things down the road, but certainly not.
Opposed to it.
Part of this business that I've been a part of for a long time.
Understood. Thank you last one for me in the last handful of quarters, we've seen the securities portfolio increase.
Increase anywhere from call it $20 million to $40 million could you consider the cash position of the bank is that something we should think about continuing.
It's going to be until until cash normalizes.
Yes, I think we think especially with a little bit better rate environment farther out the curve.
A little bit more value in that.
Securities purchases.
I would anticipate that we would continue to see some increase on a core basis for now.
Okay, Great. That's all I had thanks for taking my questions. Thank you. Thanks, Matt.
Your next question is coming from Daniel Cardenas with spending in scatter good Daniel Your line is live.
Good afternoon gentlemen.
Gentlemen.
And.
Just a quick question you may have mentioned it I might have missed it but.
Replacement yields on the loan portfolio, what do those look like now versus where the historical yields are.
And then.
On the funding side.
What kind of.
Or left to pull them in your cost of funds or or or.
What kind of levers are left to pull that can kind of help stabilize the margin.
At least in the next quarter or the next couple of quarters.
But on the on the loan side.
Lately the new rate is this overall weighted.
330.
And they paid right.
Full payoffs and amortization, they're rounded three so that's where that at this point.
It dropped.
Coming.
On the funding side there is not.
Found levers to pull but we're taking a hard look at what's left in the NDA.
The interest expense category and there are there are a few rocks that would cover when it comes to the exceptions and some of the some of the higher higher priced product that we have there's a very small amount of Cds that are drilling off there's a little bit of opportunity.
Nathan.
It's probably.
Yes.
You know less than a million a million and half dollars overall on an annualized basis.
Hello again.
Alright, great and then maybe on the lending side any comments you can provide a color you can provide an uncompetitive.
There are you starting to see.
Petitor show.
Signs of weakness on covenants and doing stuff, that's perhaps is a little crazy and any any part of your footprint.
And so there is some competitive pressure, particularly on rate.
I haven't seen.
Significant competition, where there is how it works based on our structure. That's one of the things we like about the ABL vertical our ability to grow there because it is a product offering.
You need.
To a bank of our size and is targeted at a section of the Mark.
Second is we believe underserved so it's not as competitive in terms of rate of returns and we can if we can.
Manage our credit risk maintain our credit risk profile and get a return.
You always have a little one off competitive.
Get their patients.
On a deal where a competitor wants to business and theyre going to do whatever they have to do to win or retain it but that's more business as usual than anything that's outstanding in this environment.
We're hearing from our customers the same thing that you're hearing elsewhere right. The desire for growth is.
Did you was there any hamstrung by.
Labor cost or labor shortages.
Issues relative to supply chain, those sorts of things but people.
People, what people want to move forward.
There's some external things that are ultimately slow.
Hello, Bill and Dan during the quarter.
We did see a modest decline in pay offs and a lot of effort related to some of the rate movement in the <unk>.
Permanent market that some of those.
Borrowers who are looking at the permanent market as a solution.
Either delay or decided to retain a bank relationship.
Quarter.
Okay excellent alright.
So that's my that's all I've got thanks, guys. Thank.
Thank you.
There are no more questions in queue.
All right well, we'll wrap it up.
And then my last first is over so listen thanks to all of you for your interest in our company and for the really good dialogue and questions that we've had this afternoon.
I'm proud of this team and what they've accomplished in Davis has led this group through a lot of the marks been.
Here, we've got a lot lot to be optimistic optimistic about as we move forward and we look forward to.
Further dialogue so thank you.
Okay.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day.
Thank you for your participation.
Yes.