Q3 2022 FIRST BANK (Hamilton) Earnings Call
Okay.
Hello, and welcome to the first Bank earnings Conference call third quarter 2022.
My name is Harry and I'll be coordinating your call today.
If you'd like to ask a question during the presentation reduce the professional staff by one when youre trying to think about it.
It's 100 over to Patrick <unk>, President and CEO to begin Patrick. Please go ahead.
Thank you Harry.
Like to welcome everyone today to first bank's third quarter 2022 earnings call I'm joined by Andrew Andrew Hibshman, Our CFO and Peter Cahill, our Chief lending officer before we begin however, Andrew will read the safe Harbor statement.
Following discussion may contain forward looking statements concerning the financial condition results of operations and business of first bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore, you should not place undue reliance on any forward looking statements we make.
We may not update any forward looking statements, we make today for future events or developments information about risks and uncertainties are described under item one a risk factors in our annual report on Form 10-K for the year ended December 31, 2021 filed with the FDIC.
Back to you.
Thank you Andrew I'll make a few high level comments and then we'll turn it back to Andrew and Peter for a little more detail overall I'd say it was another quarter of really strong profitability. We saw net interest margin expand by another 21 basis points during the quarter and we also enjoyed continue.
Tangible book value per share growth of 35 cents, which is a nice accomplishment given the interest rate environment and the impact that that's having on the available for sale securities portfolio. So nice to see the tangible book value growth. We did also see a significant reduction in our nonperforming loan portfolio.
We're very pleased about our return on assets of 1.57 during the quarter, which is close to an all time high and we continue to bring in high quality new bankers as a result of some of the M&A activity in our markets and we believe the merger fallout will continue to drive customer and banker.
Vision as we move forward.
Couple of key highlights on the performance side, our return on tangible common equity was north of 15% during the quarter and our efficiency ratio was below 50% for the seventh straight quarter. Our pre provision net revenue return on assets was over 2% at 2.12, and our net interest margin has been over three 5% for the patch.
Seven quarters importantly, our nonperforming assets to total assets declined to just 21 basis points on the lending side, we had $185 million and year to date net loan growth and that's exclusive of P. P. P, which is about a 12% annualized growth rate are we continue to see.
Wrong asset quality metrics. In addition to the decline in our non performers. We also saw very low delinquency numbers during the quarter. Our SBA group remains very active we're currently holding off on loan sales in this interest rate environment, given the reduction in spreads in the high yields that those loans are earning.
US and on the lending side, but we also saw some nice activity from our new private equity fund banking team that we brought in and we think we'll continue to see nice activity from that group as we move forward on the deposit side, we're up 75 million year to date, but the market for deposit generation is clearly getting tougher we think.
We'll see an acceleration of deposit costs, but that's certainly to be expected given how fast rates have moved up so far this year.
In summary, our strong profit trends continue in quarter, three and we're well positioned to finish the full year with great results, we see real good strengthen our lending area and we're well positioned to take advantage of the opportunities that present themselves and even to be selective in this environment and we're also refocusing our organization after a.
In a period of excess liquidity.
Team in all areas is getting refocused on the deposit side, and we're making strong strides there to continue to drive deposit growth growing forward.
We think there are a diversity of commercial banking opportunities as we move forward, we talked about SBA and fun banking, where we already have a presence and are also on the higher side within the middle market area and we're also looking at new opportunities that may present themselves in niche opportunities within commercial whether that.
The things like asset based lending or small business lending, which we think will drive further diversification and profit enhancement within our portfolio and then we continue to look for opportunities outside of the traditional space, whether that'd be fintech or government banking or other areas, where we continue to drive core deposit growth. So a lot of it.
Citing things going on right now and at this point I'd love to turn it over to Andrew for a little more detail on the financial results.
Thanks, Pat for.
For the three months ended September 32022, we earned $10 2 million and net income or <unk> 52 cents per diluted share, which translates to a 1.57% return on average assets.
Primary factors as Pat mentioned contributing to another strong income quarter included an improving net interest margin strong credit quality metrics and effective management of noninterest expenses net income increased one $4 million from the linked second quarter and was up $1 2 million compared to Q3 2021 commercial loan growth continued in the quarter.
<unk>, excluding PPP loan forgiveness total loans, where our net loans were up $36 5 million compared to an increase in non PPP loans of $84 million in Q2, and $65 3 million in Q1 of 2022 during the third quarter of 2020 to $6 $2 million in PPP loans were forgiven, leaving.
$3 $9 million in PPP loans outstanding as of September 30th during Q3 2022, we earned 200000 in PPP fees compared to 493000 in Q2, 2022 and 768000 in the third quarter of 2021 as of September 30th 2022, we have 136.
And deferred PPP loan fees remaining.
Total deposits were up $25 million during the third quarter of 'twenty to 'twenty, two but non interest bearing deposits were down $16 4 million. The small decline in noninterest bearing deposits was expected as the current higher interest rate environment is putting pressure on all banks deposit pricing and mix due to our disciplined deposit pricing are.
Total cost of deposits increased only 27 basis points in Q3 of 2022 compared to the linked prior quarter. Despite the 300 basis point increase in the federal funds rate since March of this year.
Primarily due to an increase in rates on our variable rate loans, coupled with our disciplined deposit pricing our tax equivalent net interest margin increased to 397% for the quarter ended Q3 2022 compared to $3 76 in the previous quarter, excluding PPP fee income our margin would've been approximately <unk> <unk>.
393% in the current quarter versus 368% in the linked second quarter, our margin benefited from the rising rate environment as our variable rate loans and investments repriced immediately while our deposit portfolio is repriced more slowly.
Our asset liability management approach continues to be conservative with the goal over the next few quarters to get to a balanced or potentially slightly liability sensitive got position. Currently we continue to be well positioned for the rising rate environment with a slightly asset sensitive balance sheet. However, deposit pricing pressures have increased as the fed continue.
To raise rates, we anticipate that we can maintain our margin at the third quarter level when the federal funds rate plateaus, we will inevitably see pressure on the margin, but any declines will be off our currently historically high levels.
Liquidity levels increased slightly during the quarter. Our continued loan growth has put pressure on our excess liquidity possession position, but we have ramped up our core deposit gathering efforts. We also increased our use of broker deposits and <unk> advances during the third quarter of 2022, as we mentioned in our last call, we had reduced our broker deposits and <unk>.
Balances by a combined $57 million over the period from July of 2021 through the end of June of this year. So we had additional capacity to use these ancillary ancillary sources as loan growth opportunities continue to present themselves.
Our strong organic loan growth has also contributed to our investment portfolio being relatively small when compared to peers. We have also been focused on credit and interest rate management in our investment decisions.
In short duration of our investment portfolio has limited our unrealized losses, but these unrealized losses are impacting our stated equity capital somewhat we also had some additional buyback activity in Q3 2022, although slightly less than the prior quarter as we repurchased 59885 shares at an average.
Price of $30 97, or a total of 833000 during the quarter. These purchases also reduced our capital levels, but only marginally impacted our tangible book value per share because the shares were bought at only a slight premium to our tangible book value per share of <unk> 13 for $13 43 as of September 30.
2022 in spite of these factors, we were able to increase our tangible book value per share by 35 during the current quarter because of our strong net income.
Based on another quarter of modest charge offs and strong asset quality profile, we reduced our allowance for loan losses as a percentage of loans to 1.09% at September 32022, excluding the impact of PPP loans from 113% at June 32022. This reduction was primarily supported by nonperforming loans declining.
By 57% when comparing the balance at September 30th to the June 30th balance and our nonperforming loans are now only 23 basis points of total loans and.
In the third quarter of 2020 through 22 total noninterest income decreased to 944000 from $1 5 million in Q2 2022. The decrease from the second quarter was primarily due to lower loan sale income and lower loan fees, our SBA loan activity and pipelines are strong however, sale activity has been slower.
Expected, primarily due to the rising rate environment, which has reduced the premiums earned on sales and in most cases, we are retaining the loans on our balance sheet loan fees are low primarily due to no loan swap activity during the third quarter of 2022, while noninterest levels may continue to fluctuate we do not expect a significant increase in noninterest income at least over.
The next several quarters.
Annualized Q3, 2022, noninterest expenses were $1 eight 1% of average asset average assets compared to a peer average of 2.0% to 4% and total noninterest expenses were $11 7 million in the third quarter of 2022 up 328000, or two 9% compared to the linked second.
Quarter, the increase was primarily due to higher salaries and employee benefits combined with some smaller increases in various other expense categories.
You need to be laser focused on expense control, but we anticipate our quarterly expenses will continue to increase slightly from Q3 2022 levels. As we continued to add staff and inflationary pressure continues to affect numerous other expense items.
With continued loan and deposit growth a historically strong margin, which has benefited from the rising rate environment strong credit quality metrics and effective management of noninterest expense, we are well positioned to continue our strong and improving core profitability trends during the remainder of 2022 into 2023 at this time I will turn it over to Peter Cahill.
Our chief lending officer for his remarks Peter.
Okay.
Thanks, Andrew.
As it usually does the earnings release summarizes pretty well the results for the lending area.
Andrew at this point have highlighted a lot of the numbers in their remarks.
My comments are always focused.
On a non PPP related results.
Andrew pointed out PPP loans are about done now declining to under $4 million during the quarter.
The third quarter represented a period of good growth for the bank.
As Andrew mentioned after growing $65 million in Q1, we followed that up with the loan growth of $84 million in Q2, and we talked about another 36 million.
Growth this quarter.
Our six month total organic growth at this point it is $185 million and that puts us in good position to meet or exceed our loan growth goal for the year of 200 million, which represents right around 10% organic loan growth.
Our loan generation continued to be very good in all areas, we closed and funded new loans totaling $101 million in the quarter that experienced payoffs of $63 million.
Both the New Jersey region in the Pennsylvania region are doing well as is our specialized lending group specialized lending compas is a large investor real estate borrowers SBA lending and consumer lending.
Last quarter I believe I mentioned that the Investor real estate team had led the way that quarter.
Approximately 60% of our newly funded loans this quarter, our New Jersey region, our largest in terms of relationship managers closed and funded the most new business at around 43% of the total with the Pennsylvania region right behind them at 42%.
This fluctuation between lending areas as normal and as I've mentioned before all of our producing well and have good pipelines.
But as I stated previously in this rising rate environment outside of variable rate loans for fixed rate loans, we typically permit to spreads over a base rate usually.
Five or seven year treasury rate and fixed interest rates on loans.
Only two to three days prior to closing.
I think we've remained disciplined here.
You mentioned loan yields in the portfolio for the quarter.
Early in the lending area, we get a report monthly of what the weighted average loan yield was.
Our new loans close that month.
As I mentioned last quarter that as you might expect those rates continue to decline.
I referenced in average loan rate weighted average loan rate at the end of last quarter of $4 six 2% for example.
Now our average yield for September was $6 three 7%.
Looking at loan pay offs $63 million in Q3. This represented our largest quarter for the payer for payoffs this year.
Just above the amount we experienced in the second quarter.
We track the regions alone gets paid off and on a year to date basis, the underlying asset being sold usually real estate was the biggest reason.
For for a loan payoff at 49% of total payoffs.
I'm also happy to report that the $5 million.
A piece of the total payoffs included alone our workout area, we were taken out by an investor in that and that probably.
Jack.
Yes.
Also when you look at the loan composition tables in the earnings release notes that normal term loan amortization and line of credit activity. In addition to new loans that paid all paid off loans activity all contribute to movement in the numbers in those tables.
This point I'll talk a little bit about our loan pipeline.
<unk> to look good as we've discussed before our pipeline numbers are based upon.
Well, we call it probable funding, which means we project anticipated first year usage and multiply that by a probability factor based upon where in the approval process.
Loan request is.
That means for example that alone is already approved will have a higher probability of closing then we'll one that just went into say the underwriting process.
Oh.
At September 30th our loan pipeline stood at $240 million up from $226 million at the end of Q2.
The average at month end for the nine months. This year was $249 million. So at September we were around 3% off the average so far for the year.
Factors that impact the monthly numbers include the number and size of loans that we recently closed and funded and therefore moved off the pipeline changes in probability factors as loans move through the process of negotiation underwriting documentation et cetera can also impact those numbers.
One positive we continue to experience with the loan pipelines investor real estate loans in the pipeline have been maintained at less than 50% of the total.
We said that 50% target some time ago to not let this type of loan grow unabated.
In June we actually get Investor real estate loans in the pipeline under the target.
Overall, I'd say that based upon the economic uncertainty we face.
Taking a more cautious approach to underwriting new business, especially in investor real estate and construction lending obviously.
We continue to sensitize projected results and we take a firm line on speculative projects or just the.
Not as easy to do anymore.
As long as move through the pipeline and eventually hit our projected loan funding report this.
Well it looks out 60 days projects funding and payoffs were interest team in finance.
To get on the list of projected fundings alone must be approved and moving towards closing.
That list our projected loan fundings net of payoffs continues to look continue to look strong.
We are.
It's really putting us in a good position to meet or exceed our goals for the year.
Towards that end Pat had mentioned our equity fund banking initiative, we have a couple of other new projects. We're working on as well. The first is a new regional office in Westchester, Pennsylvania, right now, we're running that market out of a very small space on the third floor of a building in downtown in Westchester we are in the process of.
Moving to what was taken full service.
Branch in Westchester that will provide room to grow as well as be a better retail location with a drive up etcetera.
Similarly in Northern New Jersey, we're working on a new northern regional office, we've outgrown the space, we have up there and we're targeting locations for a new office as well as retail space. We're.
We're excited about these projects will provide the needed space to continue to grow as well as give us additional visibility in those markets.
Lastly regarding asset quality, there's not much to say beyond Andrew's comments on what's in the release.
My perspective continue to look very good credit metrics are solid and as a percentage of total loans delinquencies were at record lows at the end of Q3 lower than they were in either Q1 or Q2.
That's my report for lending for the third quarter I will turn it back over now to Pat for some final comments.
Yeah.
Great. Thank you Peter well at this point I would like to turn it back to the moderator to open things up for the Q&A portion of the call.
Great. Thank you and as a reminder, if you would like to ask a question. Please tell stocking up by one on your telephone keypad now.
And our first question of todays from the line of Nick <unk> of Piper Sandler.
We opened now if you would like to proceed with your question.
Good morning, everyone. How are you.
Good morning, Nick how are you.
Thank you.
So I wanted to start with look with loan growth.
Historically, you've pretty consistently posted high single digit low double digit organic loan growth and you are certainly on track for that again this year.
May be too early at this point, but given the remarks, calling for an acceleration of deposit costs. How are you thinking about the pace of loan growth going forward.
Yeah. Good question, Nick I mean, our ability to generate good opportunities and to have a full and healthy pipeline is has been pretty consistent so.
Not seeing a real slowdown in demand yet I think.
Depending on how high rates move you might start to see a little bit of a slowdown from a market perspective, but I also expect are going to start to see a pickup in opportunities based on some of the recent M&A activity, obviously investors banks being acquired is it is a big big deal.
In our markets and I think there'll be some opportunities emerging from that.
On the way.
Mergers tend to create displacement I think the Provident Lakeland.
Merger will create further opportunities so even if the market slows a little bit in general in terms of demand I think from a market share perspective, we're going to have lots of opportunities. So then you get to the at the other side of the equation and I think the heart of your question, which is.
How you're going to find those opportunities and obviously our strong desire is to fund it with core deposit growth and to the extent that we can hit our goals on that side I think we will continue to produce net organic loan growth in line with what we've done in years past. It is possible if for some reason the ability to generate cash.
Core deposits slows a little bit we may have to be a little bit more selective on the lending side in the short run, but I don't anticipate that to be the case, Nick I think we've got a lot of exciting initiatives underway on the deposit side and I think we'll be able to continue to grow at a moderate but healthy levels consistent with what we've done.
In the past, but are 100% right. If for some reason the core deposit growth becomes more challenging may end up slowing the loan growth a bit but I don't think it would be.
Large a large decline from historical levels.
That's very helpful. I just wanted to follow up on the loan sale commentary just given the shift in the SBA environment. Its not surprising there's more of a willingness to portfolio these assets rather than sell into the secondary market should we expect any loan sales in the near term.
Well I'd never say never right, but I think in general our mindset right now for the new SBA production is to hold it.
You know at some point the cost benefit on holding on to the guaranteed piece may change in which case, we may look to explore selling off those guaranteed.
<unk> down the road so I don't look at it Nick is hey, if we book it now and we don't sell it that just means we're going to hold it forever I think the sale of the guaranteed piece is something we can look at at any point in time, depending on the rate environment and in the meantime, we can enjoy the healthy yields that those loans are provide.
So yes.
Yes, I think maybe it creates a bit of a pipeline or a backlog of future sales, but when exactly those might come to fruition I think it's a little hard to predict at this point.
Yes, It makes sense and then lastly, you've been opportunistic with stock repurchases in the past and I saw the regulatory approval for the new authorization can you share some color on how youre thinking about the repurchase and capital return more broadly.
Yeah, I mean listen I think our capital levels are strong and so.
We want to be thoughtful about how best and most effectively to return capital to shareholders.
We like being in a strong capital position, especially with some of the economic uncertainty out there and.
Certainly M&A could be a potential use of capital depending on what comes to fruition and those areas although hard.
Hard to predict M&A, certainly, but the calculus for us when we're trading at levels at or slightly above book value. The stock buyback feels like the more efficient way to return capital and if we get to a point, where we're trading at significant premiums to book value. Then you know I think we'll take a look.
At the dividend to see if that.
That would be a better mechanism, but we're looking at all the angles.
Thank you for taking my questions I appreciate the color.
Yeah, great. Thank you Nick.
Thank you and our next question is from the line of David Bishop.
David Your line is now open. Please proceed.
Yes. Thank you good morning, gentlemen.
Okay.
Quick question for you in terms of the.
The refocus on the deposit funding side of the house or are you all changing or <unk>.
Revamping instead of plants to sort of.
And sent bankers.
The focus on that side of the equation more in terms of as you head into 2023.
Yeah, I mean, the short answer Dave is not really because we have a lot of incentives in place I think when we say refocus its really more about.
You know are returned to a return to normal where you got a.
To get in the trenches and and then cover the dollars, whereas we were temporarily in an environment, where with excess liquidity, maybe just didn't need to fight as hard to get to get the dollars and so I don't think theres a need to really revamped things, it's more a function of.
Making sure folks have that deposit mindset back at the top of their priority list, where it may have dropped the second or third just given the liquidity environment.
Got it and then in terms of the.
The fund banking group.
Mostly up a loan growth play or.
We will also be some component of our deposit generation in that too.
Yeah, I'm, sorry, Dave I lost you at the beginning there can you repeat the first part of that question.
Yes.
Private funds banking group.
You all noted in the comments.
Yeah, So I mean, I think thats.
<unk> it.
I think of it as sort of the natural evolution for our organization as we grow from a traditional small community bank into more of a you know called lower mineral middle market commercial bank and that's not to say, we're abandoning the traditional community bank.
This lines because we've been very successful there and we want to continue to.
Grow and build in those areas, but I think as we've grown as an organization we've been able to attract different types of talent as our lending limit someone's higher we've been able to look at different types of deals and so that's private equity fund banking unit really it's kind of a natural evolution of an organization that can can now look at different types of deals.
So I see the primary benefits is twofold, a little bit more diversification into C&I away from Investor Real estate, but also a lot of these opportunities come with some significant deposit balances as well, which I think is is another positive two to building out the group and.
I think it's an area where quite honestly, we have got a great opportunity because you know relationship banking as we define it I think sells well with with.
With the private equity folks and their portfolio companies and now we've got an opportunity to get in front of them and tell our story and at least so far Dave it's been well received so.
Is there a.
Target.
You have in mind in terms of how big this could become over the near to intermediate term.
Yeah, I mean listen I think anytime we're we're you know.
Launching a new venture or or entering a new niche our our philosophy is to walk before we run so far.
For for that group within.
Our 12 month period, if they could do call. It 20 to 40 million I think that would be a really good start over time, maybe it can become 5% 10% of the total portfolio, but you know I do.
Don't see it becoming the primary Oh.
Source of growth in the company so.
Got it and then maybe a housekeeping question I saw it looks like if I'm reading the release loan fees turned negative there.
The thing driving that was there any sort of like accounting do you want to drive that to the negative level.
Yeah, I can take that and that one over to Andrew Yeah go ahead.
Yeah, it's the way that certain SBA.
Servicing assets are recorded in if SBA, we had a few large SBA loans pay off early and those servicing assets kind of get written off net against income normally we have enough kind of loan fee income to offset some of those there was netting but this quarter, we were kind of slow from a loan.
Loan fee amount, that's also where our swap fee income goes through that line item and we hadn't we didn't have any this quarter. So it was really just an accounting thing and it related to SBA servicing assets.
Any guidance or we should think about that in the fourth quarter of 2023.
Yes, I think it'll get back to positive, but it's going to be fairly fairly low again. The primary driver of those some of those larger loan fee quarters was when we were doing a decent amount of loan swap activity. So it will be back to positive numbers, but it'll be it loan fees shouldnt be a significant piece.
Of the puzzle going forward at least in the short term.
Got it thanks for taking my questions.
Yeah.
Thank you Dave.
Thank you before we take our next question as a reminder, you still saw Philip I Wonder if you'd like to ask a question.
And we'll take our next question from manual analysis da Davidson.
Your line is now open.
Hey, good morning, guys.
Hey, good morning, everyone.
With your NIM.
Patients have kind of a state.
Stable with with Fed fund increases what what kind of or are you assuming on the deposit data front.
Has that shifted at all.
Yeah.
Yeah, I think on the deposit beta side, where we're seeing it move closer to the levels, we had in our models.
And we're starting to see a bit of an inflection point during the quarter where.
Deposit costs were moving up a little bit faster than.
The loan asset yields of course that could change again, if and when the fed moves in November and December but.
You know.
I think Andrew on the beta side, you know, we're probably right now at a level of mix.
Listen with what's in our models, but maybe you can provide a little more detail there.
Yeah, we typically model.
And each product, we model a little bit differently, but betas around <unk>.
<unk>, 50% I think we're getting closer to that number but obviously we were way below that early I definitely think that we're gonna see betas that are lower than what we've seen in some previous rate cycles because of all the liquidity that was in the market, but yeah. We're definitely betas are getting kind of closer to kind of that normal expectation I think it's.
While we talked about I think in a previous call that this is fairly regular right. The first couple moves the betas are very low and then the betas do start to move significantly. So we're definitely going to see I think betas closer to that number I just threw out there but we.
Wait wait and see what's going to happen here, but we are we are seeing some additional pressure on the on the betas on the deposit side now.
So that's kind of like your conservative modeling on the interest bearing.
Deposit beta or is that the total cost.
Yeah, that'd be it on the interest bearing side.
Okay. That's helpful.
On the new PE fund team is that all from one organization and is that.
Is that capital fund lines or is that like a capital call lines or is that working.
I'm working with PE sponsors.
Yeah. So it's a it's a couple of guys that we hired.
They came from different banking organizations, but they had worked together in that in previous lives and to be clear. These are folks that we hired that can do traditional C&I as well as the fund banking deals so it wasn't a.
It's a call it a partially dedicated group if that makes sense, but yes.
As far as products I'll forget capital call lines, its banking services for our portfolio companies.
The traditional <unk>.
<unk> suite of services that private equity sponsors or their portfolio of companies are looking for.
Okay, that's helpful and it's ABL.
New new personnel, helping with that line or is that is that also similar where you have yeah, that's exactly right.
Yeah. That's an example of an area, where if we found the right person or the right team I think it's a logical strategic fit but at this point, it's still in the exploratory phase, but yeah it wouldn't be.
We'd roll out without bringing in the requisite expertise either.
Through banker acquisition or or or company acquisition, but it's an example of areas where I think as we continue to build and grow as more of that.
Middle market commercial bank that could be an area, where if we find the right group that could be another little niche bolt on opportunity.
I appreciate that color.
I have another question on the buyback just circling back to that.
If you saw growth slow for whatever reason it just maybe the economy.
Heating demand.
Rates being higher what would the buyback potentially be.
An area, where you could deploy more as like an offset to lower growth or is it really just depending on pricing of shares.
Well again I think if we were in a lower growth environment, and we got to a point where excess capital was well beyond what was necessary then I think the buyback or the dividend would be vehicles, we kick used for deployment and how we how we think.
About which to use I think is to some degree driven by you know when the stock is trading at lower levels. The buyback feels like the the easy best solution when the stock trades higher at some point you start to think about the dividend in addition to or instead of the buyback.
Okay perfect.
Thoughtful I appreciate that and I guess my last question is there's some of your expense commentary include.
The investments in like your two new offices and some of the new personnel is that all in.
Yeah.
Yeah. So obviously when we're looking out at the expense horizon, we're factoring in those potential future investments I would say when you look at the Westchester.
You know opportunity for us it's it's a relocation into what we think is a better more full service location, but the net expense of the office is fairly comparable to the place. We're in so theres not a huge incremental cost. We just think an improvement in the location and quality there and then on the <unk>.
North Jersey side.
The new office there if it comes to fruition I would be a net incremental expense, but the place where we have some people located currently that would move over.
That could be an opportunity for a sublease or a sale lease back. So again, there might be some incremental additional expense, but we have you know.
Some ways to offset as well.
Okay I appreciate that thank you. Thank.
Thanks for the time today.
Yeah sure. Thank you.
Thank you and we have no further questions registered today, so I'd like to hand back to Pat Ryan for any closing remarks.
Great. Thanks, so much well I just wanted to thank everybody for taking some time to listening to the call today. We appreciate.
Your interest in first bank and we'll look forward to reconnecting with folks after the yearend results come out. Thank you everyone.
Thank you to everyone who has joined US today. This concludes the call and you may now disconnect your lines.
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