Q3 2022 Peoples Bancorp Inc Earnings Call
Good morning, and welcome to the Peoples Bancorp, Inc. 's Conference call. My name is Matt and I will be your conference facilitator today's call will cover a discussion of results of operations for the quarterly and nine month periods ended September 30th 2022.
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After the Speakers' remarks, there will be a question and answer period.
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Please be advised that the commentary in this call will contain projections and other forward looking statements regarding peoples' future financial performance or future events.
These statements are based on management's current expectations.
Once in this call, which are not historical fact are forward looking statements and involve a number of risks and uncertainties detailed in the Peoples' Securities and Exchange Commission filings.
Management believes that forward looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of peoples business and operations. However, it is possible actual results may differ materially from these forward looking statements peoples disclaims any responsibility to update these forward looking statements. After this call.
Sept as may be required by applicable legal requirements.
Peoples' third quarter 2022 earnings release was issued this morning and is available at peoples Bancorp Dot com under Investor Relations.
A reconciliation of the non generally accepted accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release.
This call will include about 20 to 25 minutes of prepared commentary followed by a question and answer period, which I will facilitate.
An archived webcast of this call will be available on peoples Bancorp Dot com in the Investor Relations section for one year.
Participants in today's call will be Chuck seller, Askey, President and Chief Executive Officer, and Katie Bailey, Chief Financial Officer, and Treasurer, and each will be available for questions. Following opening statements. Mr. Seller Askey you may begin your conference.
Thank you Matt Good morning, and we appreciate you joining our call today.
Earlier this morning, we announced the merger with limestone Bancorp, Inc.
Stone has $1 5 billion in assets and operate 20 branches in 14 counties in Kentucky.
We anticipate closing the merger during the second quarter of 2023.
We're excited about this partnership and our expansion into strategically important markets and low in Kentucky.
Stone's management team led by John Taylor has a very similar culture and credit discipline as us.
We believe this merger will benefit all shareholders employees and clients of both institutions.
I will go into more details on the merger later on the call.
To highlight our results issued this morning.
In the third quarter, we reported an increase in our net income which totaled $26 million, while our diluted earnings per share were <unk> 92 status as we anticipated our reported earnings improved for the third quarter.
Notably our efficiency ratio improved to 57, 2% compared to 58, 8% for the linked quarter.
We generated positive operating leverage meaning revenues grew faster than expenses compared to the linked quarter.
On the average stockholders' equity grew 31 basis points to 12 nine 2%.
Return on average assets increased five basis points to 1.45% compared to the linked quarter.
We had our highest ever quarterly pre tax pre provision net revenue as a percent of average asset.
Which stood at 196%.
Our net interest income was up 9% over the linked quarter to $67 1 million with net interest margin at what 0.17%.
We continue to control our deposit cost, which was 16 basis points and only up two basis points compared to the linked quarter.
Fee based income also grew and was up 4% over the linked quarter.
This was our highest quarterly revenue ever reported.
We also had improvement in all credit quality compared to the linked quarter end with reduction in both criticized and classified loans.
Our allowance for credit losses grew by 1% compared to the linked quarter end.
For the third quarter, we recorded a provision for credit losses of $1 8 million, which reduced diluted EPS by five cents for the quarter.
Year to date, we have recorded a release of provision totaling $5 8 million, which is added 16 cents to diluted EPS.
Most of the increase in our allowance for credit losses compared to the linked quarter was driven by deterioration in macroeconomic forecast, which were partially offset by improvements in reserves for into Italy analyzed alone.
Our allowance for credit losses comprised 1.15% of total loans at quarter end.
<unk> to 1.14% at June 32022, and 1.43% at year end.
Moving on to our loan portfolio, excluding P. P. P loans, our loan balances increased by over $35 million or 4% annualized compared to the linked quarter end.
Leading the growth this quarter was a consumer indirect loans, which were up $29 million or 21% annualized all commercial and industrial loan balances increased by $19 million, which is net of an $11 million decline in P. P. P balances due to forgive me, if we see though in the quarter.
Our remaining balances the P. P. P loans stood at $4 million at the end of September . So these loans should have little impact going forward.
Premium finance loans were up $15 million, while all construction loans grew 13 million.
At the same time, our commercial real estate portfolio declined over $36 million and partially offset our other loan growth for the quarter.
Had strong production levels for new loan originations as we had anticipated.
We continue to focus on strong credit quality and some of the reductions in our loan portfolio reflect our efforts remain to maintain high credit standards.
From a credit quality perspective, we have improved metrics compared to the linked quarter end.
The biggest improvement was reduction of both our criticized and classified loans compared to linked at linked quarter end.
Our criticized loans declined nearly 17 million or 9% compared to linked quarter end.
This was driven by $18 million in pay downs, and 7 million in upgrades, which would net of $10 million in downgrades.
Half of which was due to commercial and industrial relationships at the same time, our classified loans decreased $21 million or 18% and was mostly due to the upgrade of a 12 million dollar hospitality relationship from substandard to special mention and the pay off of three large commercial relationship.
That were acquired.
Compared to September 30th 'twenty, 'twenty, one our criticized and classified loans were down $70 million or 30% and $48 million or 33% respectively.
Our nonperforming loans also declined compared to the linked quarter and due to reductions in our non accrual loans of nearly $2 million, which were partially offset by increases in loans 90, plus days past due and accruing.
A portion of our loan portfolio considered current stood at 98, 9%.
Which was an improvement from 98, 8% for the linked quarter and end year end, our quarterly annualized net charge off rate was 15 basis points for the third quarter.
First nine months of 2022.
Compared to the linked quarter prior year quarter, and first nine months of 2021 our net charge off rates are relatively consistent.
For the past six years, our quarterly net charge off rate has averaged 12 basis points.
We're confident in our credit quality for future periods, but we're keeping a close eye on the impact of high interest rate and economic conditions, we remain disciplined from a credit perspective, and will not compromise credit standards for loan growth.
Now I'll turn the call over to Katy for additional details about our financial performance.
Thank you Jack for the third quarter, our net interest income grew 9% compared to the linked quarter and our net interest margin expanded to 417% up 33 basis points from the linked quarter.
Our loan yields continued to be positively impacted by the higher interest rate environment and were up 33 basis points from the linked quarter at.
At the same time, our investment yields grew by 17 basis points.
Our funding costs rose two basis points compared to the linked quarter and we continued to control our deposit costs, which were relatively flat while also responding to competition for deposit balances.
Accretion income net of amortization expense from acquisitions declined to $2 $8 million compared to $3 $9 million for the linked quarter, adding.
Adding 16 basis points, and 25 basis points, respectively to net interest margin.
E. P. P. M com has a nominal in recent period and only added one basis point to net interest margin for the quarter.
Compared to the prior year quarter net interest income grew 57% and net interest margin expanded 67 basis points.
The improvement continued to be driven by our acquisitions core growth and increases in market interest rates.
Loan yields expanded by 71 basis points, and we controlled our deposit costs, which were down five basis points.
Our increased borrowing costs were due to the acquired vantage borrowings coupled with the recent rise in market interest rates.
Our net interest income and margin grew 55% and 40 basis points respectively.
First nine months of 'twenty, 'twenty, two compared to 'twenty to 'twenty one.
The majority of the increase was driven by the premier and vantage mergers coupled with higher market interest rates during 2022.
Our reported efficiency ratio improved to 57, 2% for the third quarter compared to 58, 8% for the linked quarter and 94, 7% for the prior year quarter.
On a year to date basis, our efficiency ratio improved to 67% from 78, 4% in 2020 one.
When adjusted for Noncore expenses, our efficiency ratio was 56.6% a sizable improvement over 58% for the linked quarter and 63, 9% for the prior year quarter.
Year to date, the adjusted efficiency ratio improved to 59, 6% compared to 64, 3% for 2020 one.
We are very pleased with how quickly we've been able to lower our efficiency ratio, which has been a main focus for us this year.
Compared to the linked quarter, our fee based income grew 4%.
Other noninterest income grew at $1.2 million, which was due to the additional fee based income from the leasing businesses.
Deposit account service charges were up mostly because of customer activity.
At the same time, our trust and investment.
Electronic banking and bank owned life insurance income declined.
The decrease in our trust and investment income was primarily due to lower market values I've trusted investment asset managed which we're not able to be offset by the new accounts we have added.
Our lower bank owned life insurance income was driven by a one time death benefit we recognized during the linked quarter about half of which was offset by the additional policies, we purchased last quarter.
Compared to the prior year quarter, our fee based income was up 21%.
Other noninterest income contributed.
Tribute that a large portion of the growth and was that because of the fee based income from leasing that instead.
Deposit account service charges also experienced a significant increase and were up 50%, while electronic banking income increased 22%.
Both of these items grew as a result of the acquired Premier accounts, coupled with increased customer activity in recent period.
Other growth in fee based income was but then insurance bank on life insurance and swap fee income.
As we noted last quarter, we purchased an additional 30 million in bank on life insurance during the linked quarter, which contributed to the increase.
Through the first nine months of 2022 fee based income was up 19% compared to the prior year.
Other noninterest income grew $2 $5 million, which was primarily due to fee based income from the leasing businesses deposit account service charges were up 64% followed by electronic banking income and served as the main contributors for the growth.
We had increases in all other categories with the exception of mortgage banking income, which was directly related to the higher interest rate environment. During 2022 compared to 2020, one driving down demand from customers.
Moving on to our total noninterest expense, we had a 5% increase compared to the linked quarter.
Professional fees marketing expenses and data processing and software expense experienced the largest increases.
Our professional fees grew as we had have engaged third parties to help create efficiencies and implement new software in an effort to support enhanced processes of our operational teams.
We also recorded $339000 of acquisition related expenses during the quarter.
Our S T I C insurance premiums declined coupled with lower electronic banking expense and amortization of other intangible assets.
Compared to the prior year quarter, our total noninterest expense declined 10%.
The decrease was largely due to the acquisition related expenses associated with Premier, which totaled $16 $2 million for the third quarter up 2021.
We had increases in nearly all categories of expense, excluding acquisition related expenses, which reflected our recent growth through acquisition.
Our professional fees declined $3.6 million compared to the third quarter of 2021, which had been driven by acquisition related expenses last year.
For the first nine months of 2022 total noninterest expense grew 13% compared to 2021.
This increase was mainly due to the growth in our size and footprint over the last year driven by acquisitions.
From a balance sheet perspective, we were able to deploy a large portion of our cash and shrink our investment portfolio in total balance sheet compared to the linked quarter end.
We utilized the proceeds to fund our loan growth, while also paying down a portion of our short term borrowings.
Our deposits declined 1% compared to the linked quarter end.
More than half of the reduction was in retail Cds with decreases in both money market and noninterest bearing deposits being partially offset by higher interest bearing checking and governmental deposit account.
And looking forward to year end I would note that we typically experience some seasonal declines in our governmental deposit balances during the fourth quarter of each year.
From a capital perspective, our regulatory capital ratios continued to improve compared to the linked quarter end.
At September 30th 2020 to our common equity tier one capital ratio was 11, 8% our total risk based capital ratio was 13% and our tier one leverage ratio was eight 6%.
Our tangible equity to tangible asset ratio declined slightly to six 5% from 6.6% at the linked quarter end.
During 2022 improvements in loss ratio from higher earnings have been more than offset by increased unrealized losses on our available for sale investment portfolio, which stems from the higher market interest rate environment.
Well, we are monitoring this decline and continually considering our investment options. We do not expect this to be a permanent impact on our ratio.
Our unrealized losses on the available for sale investment portfolio grew $42 million.
Holding and a reduction to our stockholders equity during the third quarter of 2022.
Compared to year end this decline was 123 million.
Our tangible book value if you exclude the accumulated other comprehensive losses grew at an 11% annualized rate compared to the linked quarter end.
I will now turn the call back to Chuck for additional comments.
Thank you Katie limestone merger will move us into key markets within Kentucky, Louisville is the ninth largest manufacturing city in the United States and the limestone footprint covers some other high profile, Kentucky markets, including Lexington, Frankford and Owensboro.
Emergent will put our organization of six in terms of Kentucky deposit market share among community banks, the culture and credit profile of limestone is very similar to ours, which makes us even more attractive they have top notch talent with a knowledgeable management team that has a great mix of Big Bank and community Bank experience.
We think the partnership and the integration between our associates and the limestone associates will be seamless.
Our diversified products and service suite, including a higher lending capacity will benefit the limestone clients.
Moshe will also give our current clients more locations to more easily service their needs.
We look forward to partnering with the limestone associates to deliver high quality customer service, while also providing a topnotch workplace.
Steel is estimated to be valued at $210 million.
This consideration is 100% stock with a 0.9 fixed exchange ratio as far as assumptions, we anticipate realizing 30% cost savings associated with this transaction.
75% will be realized in 2023, and 100% realized in 2024.
Based on our pro forma we expect these savings to drive continued improvement in our efficiency ratio we.
We have completed a lot of work as far as projected fair values and on the loans and deposit portfolios. Our pro forma is included in the Investor deck. We published this morning, all inclusive of marks on the loans investments and borrowing portfolios, which also illustrate the core deposit intangible which is up heavily.
At three 6% due to the current rate environment. We have also sensitize. These marks to account for various scenarios.
A portion of the expected EPS accretion run rates, we have projected due to the weight loss, but the benefits of the weight marks are generally free of execution risk.
Currently we expect the transaction to have a tangible book value earn back of two eight years and will be accretive to our 23 and 24 earnings by <unk> 16 cents and 37 cents respectively.
Excluding accumulated other comprehensive income core deposit antigen intangible and the assuming no rate marks on the acquired assets. The tangible book value earn back period would be zero and would be immediately accretive we believe that combined with return on average assets. The 'twenty 'twenty four will be around.
Around one 5%, while our return on average tangible equity will be approximately 22%.
We also anticipate that our regular regulatory capital ratios will decline at the close of the merger.
Based on pro forma results, but believe this will build back quickly with improved earnings and efficiency.
Excluding accumulated other comprehensive income and weight marks our common equity tier one capital ratio is projected to decline to 11, 2%, while our tier one capital ratio would be at 11, 7%.
Limestone merger transaction is subject to the satisfaction of customary closing conditions, including regulatory and shareholder approvals moving.
Moving back to our performance, we are working to close out the year in a position of strength.
We are focused on integrating our recent acquisitions and growing our business, while becoming more efficient both in terms of income and expense and operational processes, we're making meaningful investments in our infrastructure in an effort to benefit our clients and employees.
We have added high level talent to our organization that he had to prepare for a bright future.
This includes a wide range of associates from experienced emotional and industrial bankers and Washington D. C area, two accounting professionals within our finance group.
We increased our earnings for the quarter to 92 cents per diluted share, which exceeded the consensus estimate of 85 cents for the quarter.
Increased earnings were not driven by releases of provisional credit losses.
You our expectations for the fourth quarter and full year 2022 excluding one time items.
We expect loan growth for the full year to be between 4% to 6% excluding PPP loans.
We have seen relatively low credit cost, we believe that these will grow in future quarters to our historic levels for the third quarter. Our net charge off rate was 15 basis points and we anticipate that our quarterly net charge off rate, including the leases will be between 20 to 30 basis points as a percent of balances.
For the fourth quarter of 2022.
We think there is still some opportunity for net interest margin expansion in the fourth quarter, but this would be at a slower pace than our third quarter growth.
We expect between 51 and 53 million for a total quarterly noninterest expenses for the fourth quarter.
This is a slight increase as we accelerated the merit increases for a portion of our employee base from January one 2023 to October 2022 in light of the inflationary pressures and we are still on track to have an efficiency ratio of between 60% excuse me our efficiency ratio.
A below 60% for full year 'twenty two.
As we close out the year and start looking ahead to 'twenty three we have some guidance to provide which excludes the impact of large stone.
We believe net interest margin for 'twenty 'twenty, three will be between 4.4% and four 6%, which assumes relatively flat rates for 2023 as compared to year end 2022.
We anticipate loan growth of between five and 7%.
We expect our fee based income will be 5% to 7% higher in 2022.
We're projecting quarterly noninterest expenses between 56 and $58 million.
This projection includes our annual expenses that we normally see during the first quarter of each year.
Higher stock compensation expense employer contributions to health savings accounts and higher base salaries and related payroll due to merit increases.
We expect our efficiency ratio to be between 58 and 59% for the full year.
We believe we will see an increase of about five basis points to net charge offs during 2023.
<unk> to 2022 given the above we are very optimistic about 'twenty 'twenty three and believe that we will exceed all current analyst estimates.
These estimates currently range from $3.18.
$3.60 and averaged $3 and 42 sets.
Again, we are very comfortable we will beat the highest of these estimates and we will do so excluding the benefits of limestone.
We are pleased with our results for the third quarter and the investments we have made in our business at the same time, considering the recent changes in interest rate environment, we are keeping a close eye on credit quality.
This concludes our commentary and we will open the call for questions. Once again. This is Chuck seller of skiing and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer, I will now turn the call back into the hands of alcohol facilitator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question will come from Brendan Nosal with Piper Piper Sandler. Please go ahead.
Hey, good morning, Jack and Katie how are you guys.
How are you doing.
Well, thanks, maybe to start off could you offer us a little bit of background on how the line still limestone deal came about and thoughts on why now is the right time, just given how the market's preceding bank deals today, just due to the heavy out of your remarks.
Yeah. So we've been talking to limestone for many years, we have been very interested in joining.
Getting more in central.
Kentucky, Louisville, Lexington, Frankford, etc.
Obviously as time has gone by.
Several of the targets have disappeared.
So there's a scarcity value I think from the limestone perspective.
<unk> had conversations with dividends.
Different institutions and thought we were the right partner for the long term for which we're very very grateful.
As far as timing you know their.
To me, it's a very very good deal a very strategically important deal and.
Right now you know we were the obvious the buyer for them. You know there are other banks that have been acquiring banks in the area that are tied up right now and waiting. This may not have been there. So you know we saw the scarcity value I think we paid a respectable price is going to earn back is reasonable.
And we are tremendously excited about the future you know we have a lot of capabilities and.
Investments insurance leasing.
Indirect larger lending limits, we're just going to bring a lot to the market to their customers. They have a great team of people, they're a great mix of community bankers and we use the term big Bang for refugees, but they have a lot of people with a lot of large institution a capability and we just think that's tremendous ups.
Syed.
Alright.
That's helpful color.
And maybe moving on can.
Can you just walk us through a lot of the work that limestone had has done in recent years to rectify the credit issues. They experience kind of during and in the aftermath of the the last downturn and then your overall comfort with their their book and credit quality today.
Well first of all I think limestone has done an extraordinary job all of the folks who have been working on it you know we're not associated with the issues that they had.
There was a very talented very skilled capability are the quality of their credit portfolios very much mimics the quality the quality of our credit portfolios. So we have no concern about their their credit I think that as indicated in the credit Mark on the deal.
Alright fantastic thanks for taking the questions.
Thank you Brendan.
Our next question will come from Tim Switzer with K B W. Please go ahead.
Hey, there thanks for taking my question.
Good morning, good morning.
Good morning, I guess my first question is if you could just give us a little bit of background on the 30% cost savings, where do you expect a lot of that to be coming from and on the systems conversion when that will occur and if they have the same system as you guys as well.
They do not have the same system. We're on F. I S. There on Jack Henry We expect this system conversion to happen.
First weekend in August .
We expect the deal to close in the second quarter the.
The savings will come.
Kind of a combination of systems and and labor.
Okay.
Okay, Great and then any revenue synergies that you guys are maybe hoping to achieve I know you talked about possible cross selling and then.
Higher Linda an ability there could you talk about that and the opportunities you see.
Well first off none of the revenue synergies are and anything that we modeled you know we think that will have a similar experience to what we're having in the Premier citizen acquisition that we did last year, where we're having hundreds of thousands of dollars of fee income from trust and investments.
We are doing a lot more indirect lending in that market place than we were doing a pre previously are beginning to even enter these introduced some leasing opportunities.
Yeah. So yeah, we've got a really robust retirement plan offerings. So there's just a tremendous upside.
And.
The lending capacity.
But you know that we bring will be helpful. But I think that it'll be more just bread and butter.
All 510 15 million dollar plus customers, but yeah, we can obviously do much more than that if we need to.
Okay, Great and then the last question I had was really helpful, giving us arrange for the NIM in 'twenty two 'twenty three but could you talk a little bit about the I guess the path of getting there.
You know what do we would you expect you know some NIM expansion more at the front end of say the end of this year and next year and then good deposit repricing catch up when we see maybe NIM compression at the end of next year I just want to know how you're thinking about that yeah.
Yeah sure I'll take that as one of them. So I think you're right I think we do expect some more.
Samsung in margin in the fourth quarter I think we were expecting some rate increases next week and into December .
And then there's a couple of factors that play so the rate increases I think we do expect some deposit cost increases, but then if you recall, we have a mix shift on our balance sheet going on so early this year, we put some fund some cash and to work in the investment portfolio, but they're not so within our lending portfolio.
We have the leases that are decently higher yielding than our core banking lending platforms provide and so there's some stronger growth in those portfolios than what we would experience at the for the core bank and so that mix shift is providing some expansion in that that margin number as well.
I got you so growth in the leasing portfolio it might be able to offset some of the deposit repricing once the or.
A lot of the other asset yield there I've already repriced correct and I would just add to that that the value of our franchise is really the quality of the deposit.
Book relatively very low low beta I think you've seen some of that already.
But I think you'll see more of that as the rates keep going up.
Yeah, and I think you guys talked about a 25% deposit beta last quarter is that still a good number for you guys. That's what we use in our model that I would say, it's not what we have been experiencing in 'twenty two and that.
We used that.
That is the upper range and some projections, we did them, but I I think that's a little higher than what we definitely higher than what we've seen and what we expect to see at least in the next few quarters.
Got it understood. Thank you for taking all my questions.
Thank you.
Our next question will come from David Long with Raymond James. Please go ahead.
Yeah.
Good morning, Katie good morning, Chuck.
I wanted to follow up on the deposit discussion here, maybe just quickly you know you talked about the asset mix changing do you see the deposit mix changing over the course of the next few quarters.
Excluding the acquisition.
Well I don't think we expect no major shifts I think you'll see them in the fourth quarter as we noted.
A seasonal low point for our governmental deposits. So they kind of peaked in the March time frame in the September time frame and she probably as you've seen in our numbers, we've had decent run off of our retail C. DS so excluding those two kind of the seasonality.
Governmental deposits and then the run off on the Cds I don't think we expect much mix shift within the deposit portfolio from that.
And I would add you know 47% of the deposits or DDA noninterest.
Noninterest bearing and interest bearing that's a pretty high percentage. So I think you're going to see a more stable deposit base.
Base than normal.
Got it do you think that 47% sticks or can you see that do you see that coming down over the next several quarters.
I mean, when I think of the six.
Got it okay cool thanks for the color and then I wanted to switch over to the acquisition and really just just big picture with that transaction can.
Can you maybe talk about what you see in the Kentucky landscape from a competitive perspective, and how that compares to your current footprint.
Well first of all I think.
Ohio, West, Virginia, and Kentucky are right now are experiencing incredible capital investment you know there are multiple multibillion dollar investments going on in each state and that is much more than what you've seen over the last 30 years.
So I think that both seeing a.
Renaissance driven by Onshoring are from a manufacturing standpoint, and you see the big National headlines you know, whether it's Intel whether it's sports commitments of Kentucky on their battery plant, but there are so many more things.
Going on so we like we like the Kentucky marketplace, and we're very very optimistic that there's going to be a positive upturn in both Kentucky, West, Virginia, and Ohio over the next few years.
Got it thanks for the color Chuck Thanks again.
Thanks, David Thank you.
Our next question will come from manual ne boss with D. A Davidson. Please go ahead.
Yeah.
Hi, Good morning, this is actually Cameron sugary and on behalf of Manwell My boss How're you both doing this morning.
Sorry.
Well thank you.
So sticking with a recent acquisition do you guys plan on seeing any more in the upcoming future or what or what are your opportunities post this transaction in regards to M&A.
You know I think that we will take some time to digest. This we also are getting closer to $10 billion and we have no urgency to go over $10 billion.
So you know this is certainly going to keep associated for 'twenty.
'twenty 'twenty three and.
Look forward to the benefits of growing.
Yeah.
Thank you.
And then just one follow up question regarding this specific acquisition do.
Do you expect to see any customer attrition or do you have that worked in anywhere.
You know you always see customer attrition in every deal that you'd do saying that you're going to retain 100% of all customers is.
A bit of a pipe dream, but we don't we don't see any reasons, whether there'd be any significant customer attrition.
Thank you both.
Thank you.
Again, if you have a question. Please press Star then one our next question will come from Terry Mcevoy with Stephens. Please go ahead.
Hi, Thanks, Good morning, Ralph Good morning, good morning.
Maybe just start with.
Some of the lending.
In the in the third quarter, maybe talk about what was behind the growth in C&I and Kate I think you mentioned maybe some.
Plan kind of slowing in certain areas just to manage credit risk and the one area that was down was was leasing. So I didn't know if you were kind of pointing at that portfolio or something else and if not I'm. It sounds like your outlook for growth in the leasing portfolio is pretty optimistic based on some earlier comments.
Yeah. So I'll start on that first off we are optimistic on leasing and have had good growth in leasing and continue.
Our expectation is that the leasing businesses will grow in the neighborhood of 20%.
Next next next year, Yeah, we did have good C&I growth and Oh, you know.
No I would just say, it's all kind of I'm going slower business over you know over time. We also had really good indirect are you know.
Growth.
And consumers continue to stay in looks strong.
And we didn't.
Tober looks.
It looks positive on the indirect front our pipelines are very robust you know our loan growth this year if.
If we had not selected some of if we had if we had not made some changes to existing credits for overall portfolio improvement, we would've had very robust low loan growth.
It is yeah, we're going to be in that 4% to 6% for the year. We think we're going to do a little better next year.
And you know this portfolio that we're acquiring is significantly better than the portfolio, we picked up with premier and the Premier acquisition.
So we are we are optimistic.
Just a follow up to $4 40 to $4 60 margin for next year, what are your thoughts on accretion income within that outlook.
Yeah, I think it stays in the range of what we saw for the third quarter. So I think last quarter I guided him 15 to 20 basis points in the quarter I think it'll stay in that range. It might dip down you know 13 14 basis points, but I think around the 15 basis point impact on a quarterly basis.
And maybe one more could you talk about the I think he referred to them as it like enhanced efficiencies of your operational teams are when you were citing the increase in professional fees, maybe what parts of the company or are you looking at and and and how should we think about the potential positive kind of benefits from what you're evaluating internally.
Yeah, I think it's a couple of fold. It's in again, the operational areas of credit and finance and just looking and in true operations, both loans and deposits looking for automation and technology to support their growth.
Not ease.
<unk>.
Growth is not as incremental to head counts, we're not as dependent on head count going forward as we grow.
Great. Thank you both I appreciate it thank you.
At this time there are no further questions. Sir do you have any closing remarks, yeah I'd like to thank everybody for joining us I'd like to just reiterate that we feel extremely comfortable that we're going to be the highest level of analyst estimates out there and we.
I'll do that without without the help of limestone. So if anybody needs help with the modeling I encourage them to give kt or I, a call and love to I'd Love to help you see what we see again. Thank you for joining US. Please remember that our earnings release and a webcast of this call will be.
Cause that peoples Bancorp dot com under the Investor Relations section.
If you for your time and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.