Q3 2022 Byline Bancorp Inc Earnings Call
Good morning, and welcome to the Byline Bancorp third quarter 2022 earnings call. My name is Amber and I will be your conference operator today all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question simply press star followed by one.
On your telephone if he would like to withdraw your question. Please press star and two if you were listening via speaker phone. Please lift your handset prior to asking your question.
If you require operator assistance. Please press Star then zero. Please note the conference call is being recorded at this time I would like to introduce Brooks Reni head of Investor Relations for Byline Bancorp to begin the conference call.
Thank you Amber and good morning, everyone and thank you for joining us today for the byline Bancorp third quarter 2022 earnings call.
In accordance with the regulatory regulation FD. This call is being recorded and is available via webcast on our Investor Relations website, along with our earnings release and the corresponding presentation slides.
Management would like to remind everyone that certain statements made on today's call involve projections or other forward looking statements regarding future events or the future financial performance of the company.
We caution that such statements are subject to certain risks uncertainties and other factors that could cause actual results to differ materially from those discussed.
The company's risk factors are disclosed and discussed in our SEC filings.
In addition, certain slides contain and we may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.
Reconciliation for these numbers can be found within the appendix of the earnings release for.
For additional information about risks and uncertainties. Please see the forward looking statements and non-GAAP financial measures disclosures in the earnings release.
I would now like to turn the conference call over to Alberto <unk> President of <unk> Bancorp.
Thanks, Brooks and good morning to everyone on the call. Joining me. This morning are chairman and CEO , Roberto <unk>, our CFO and Treasurer, Tom Bell and our Chief Credit Officer, Mark <unk> before we get going here I would like to welcome Tom to his first earnings call as CFO of Byline welcome Tom.
Starting with financial highlights on slide three of the deck as you've seen by now we delivered another strong quarter highlighted by higher earnings strong loan growth positive operating leverage solid profitability and stable asset quality for the quarter. We generated net income of $22 7 million or <unk> 61 per diluted share which.
Compared favorably to the 54, we earned last quarter. These results continued to show the strength of our diversified model commercial focus and the hard work of our employees. Our return metrics continue to be solid across the board with pretax pre provision income of $34 7 million up eight 9% quarter over quarter and.
Pre tax preparation, an ROA of 193% again up nine basis points from last quarter.
Turn on assets came in at a solid 126%, while Aro TCE was 15, 4%.
Total revenue came in at $81 million up 7% quarter over quarter. The combination of continued growth in our commercial loan book, coupled with higher rates boosted net interest income by 12% and our margin increased by 28 basis points to four points Europe , 5%, we continue to remain well positioned to benefit from additional.
Rate increases noninterest income was $12 million, which was down $2 million from last quarter. The decline was driven by lower gain on sale income stemming from lower volume of loans sold for the quarter expenses were up by $2 4 million, primarily due to higher incentive compensation accruals and lower deferred loan origination.
Costs, notwithstanding expenses were well managed as we achieve positive operating leverage for the quarter and our efficiency ratio remained essentially flat at 55% moving onto the balance sheet. The third quarter saw growth in both loans and deposits loans increased by $107 million or 8% annualized and stood at.
$5 3 billion as of quarter end. This was the sixth consecutive quarter of solid growth and consistent with our guidance last quarter net of loan sales, we originated $303 million in loans coming primarily from our C&I and leasing businesses pay off activity increased this quarter as expected in line utilization.
<unk> remained relatively stable at 55, 8% our government guaranteed lending business had strong production with $151 million in closed loans up 21% from the prior quarter, we remain a market leader in this business on the government's fiscal year ends on September 30th where the fifth large.
Just seven lender in the U S moving on to the liability side total deposits stood at $5 6 billion as of quarter end up about 17%.
On a linked quarter basis.
With the growth coming primarily from money market and other interest bearing accounts. The mix remained solid despite the higher absolute level of rates with DDA, representing 38% of total deposits.
<unk> costs increased 27 basis points to 43 basis points this quarter and were in line with expectations deposit betas continued to track with our previous guidance of 40% for the cycle for interest bearing accounts and we are currently operating below that level, we added some additional.
Final detail on deposit betas for your benefit on page six of the deck Tom will cover this shortly but we expect that continued target rate increases by the fed will obviously impact loan and deposit rates at this point in the cycle given our asset sensitive position, we expect loan yields will continue to exceed that.
Change in deposit costs asset quality remained stable with NPA as a number forming loans basically flat to last quarter and charge offs coming in at 15 basis points, which was nine basis points lower than the previous quarter.
Our reserves increased consistent with growth in the portfolio and uncertainty in the outlook, while our portfolio metrics remained stable. We are cognizant of the impact that a recession, coupled with rapid increases in borrowing costs can have on our portfolio to that end, we are proactively conducting targeted reviews of different ports.
Folio segments closely monitoring past dues and communicating with customers to get a street level perspective on current performance and the outlook going forward to date, we have not found much in terms of weakness, but we will continue to remain vigilant given the uncertainty in the environment.
Moving onto capital capital levels remain strong with a CET one ratio of 10, 3% total capital ratio of 13% and TCE inclusive of OCI of 8.25% as of quarter end, which is consistent with our targeted TCE range of 8% to 9% this past quarter.
We returned capital to shareholders with the repurchase of approximately 174000 shares of our common stock along with our quarterly dividend of <unk> per share. We remain focused on executing our strategy invest in the business and continue to look for opportunities to grow the franchise, while delivering value to shareholders with that.
I'd like to turn over the call to Tom who will provide you with more details on our results.
Thank you Alberto and good morning, everyone I.
I will start with some additional information on our loan and lease portfolio on slide four.
Total loans and leases were $5 3 billion at September 30, an increase from the end of the prior quarter.
Of note our year to date originations surpassed $1 billion.
Payoffs were elevated in the third quarter as we expected and came in at $216 million compared to $128 million in the second quarter.
Furthermore, our outlook for the full year, our loan and lease growth guidance is unchanged.
For the fourth quarter, we believe loan and lease growth will be in the mid single digits.
Turning to slide five.
We look at our government guaranteed lending business at September 30th Jan balance sheet, SBA, 7% exposure was $482 million up $3 million from the prior quarter with $107 million in guaranteed by the SBA.
The USDA on balance sheet exposure was $61 million down $3 million from the end of the prior quarter.
Of which $22 million as guarantee.
We continue to see stable credit trends in this portfolio as a result, our allowance as a percentage of our guaranteed loan balances remains at six 6%.
Turning to slide six.
Total deposits increased by $224 million or 17% annualized from the end of the prior quarter we.
We saw growth in our money market and interest bearing checking accounts.
We remain disciplined on deposit pricing with our total cost of deposits coming in at 43 basis points for the third quarter.
We gave guidance last quarter that we anticipated interest bearing deposit betas of approximately 40% over the full cycle.
Only we are operating below that level.
Our deposit composition and ability to generate core deposits continues to be a strength of our franchise.
Turning to slide seven.
Our net interest income increased to a quarterly record $69 million, an increase of 12% from the prior quarter.
This was primarily due to higher interest rates.
Loan and lease growth, which more than offset the impact of higher interest expense on deposits and borrowings.
Net interest income on a year over year basis increased 15% driven by a combination of net interest margin expansion and strong organic loan growth.
On a GAAP basis, our net interest margin was four 4% up 28 basis points from the prior quarter.
Accretion income on acquired loans contributed 90 basis points to the NIM up one basis point from last quarter.
Earning yield assets increased a healthy 63 basis points, driven by an increase of 76 basis points and our loan yield to five 5% or 4%.
The NIM performed as we expected in Q3 as the margin expansion was primarily driven by higher rates and a well managed cost of funds.
Our margin remains in the top quartile for banks our size.
Looking forward as a result of the rising rate environment, our asset sensitive profile and organic growth. We believe the net interest margin will continue to expand in the fourth quarter.
Furthermore, our net interest income guidance is unchanged, which to reiterate for every 25 basis point increase in rate would result in approximately $4 million to $5 million of additional net interest income on an annualized basis.
Turning to noninterest income on slide eight.
Non interest income decreased from the prior quarter, primarily driven by lower net gain on sale due to lower volumes of wall sale and lower average premium.
We sold $75 $4 million of government guaranteed loans in the third quarter compared to $118 million during the second quarter.
The net average premium was approximately nine 1% for Q3.
Lower than the second quarter as expected.
We saw an increase in originated SBA loans that were not fully funded as a result, they were not available for sale.
We anticipate that equals the available for sale in the future and during this holding period, we will benefit from the additional net interest income.
With all that said our pipeline and fully funded government guaranteed loans is forecasted to be consistent with Q3 results.
We believe the net premiums next quarter will stabilize, albeit at a lower level when compared to Q3.
Yes.
Turning to non interest expense trends on slide nine.
Our non interest expense was $46 $2 million in the third quarter, an increase of 5% from the prior quarter.
The increase was primarily attributable to two factors first we saw an increase of $1 $9 million in salary and employee benefits, mainly due to higher incentive accruals and compensation paid.
The decrease in deferred costs related to lower production, along with the increasing of our minimum wage to $18 an hour.
And second we saw an increase of other non interest expense.
Due to increased marketing costs, and higher FDIC insurance and stuff.
We are focused on expense management and continue to look for opportunities to gain efficiencies to offset expense pressures as a result of inflation.
Going forward, we believe our quarterly non interest expense run rate will trend between 49% and $51 million.
Turning to slide 10.
Asset quality continues to remain stable, reflecting our diverse portfolio in a disciplined credit culture.
Our nonperforming assets to total assets stood at 54 basis points.
<unk> from the prior quarter net charge offs were $2 million in the third quarter and total delinquencies were $5 6 million on September 30th a $10 million or 65% decline linked quarter.
<unk> lower commercial loan delinquencies.
Our third quarter allowance increased to $64 7 million.
From $62 4 million at the end of June and represents a 123 basis points of total loans.
Reserve Bill was primarily due to conventional loan and lease growth higher uncertainty in the environment and specific reserves on impaired loans.
As a reminder, we are still accounting for our reserves under the incurred loss model and we will be adopting seasonal on December 31 2022.
Turning to slide 11, we display our strong capital and liquidity position.
We have $2 billion of available on balance sheet liquidity.
Through the first nine months of the year, we returned approximately 42% of our earnings to stockholders through the common stock dividend and our share repurchase program.
We believe our capital levels and robust liquidity positions us well for a solid foundation to take advantage of both organic and strategic opportunities.
With that Alberto back to you.
Thank you, Tom and moving on to Slide 12, so going forward. Our strategy remains consistent we want to continue to grow our business, while maintaining credit and pricing discipline.
Given the level of uncertainty in the environment, we want to pay particular attention to credit and capital in order to continue to invest in the business and take advantage of opportunities that arise both on the talent front and with respect to M&A.
Closing, we were pleased with our performance for the quarter and our position in the market our pipelines remain healthy and we are in a strong position as we look to the end of the year as always I want to thank our employees for their hard work in the third quarter and for all they do to deliver for customers our communities and shareholders.
With that Amber, let's open the call up for questions.
Of course, thank you.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question Thats Star one.
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I'll pause here briefly ask questions are registered.
Our first question comes from.
Terry Mcevoy with Stephens Terry Your line is now open.
Thanks, Good morning, everyone.
Good morning, Terry Good morning, Terry.
Tom can you maybe just talk about the fourth quarter expense outlook, you reported $46 million last quarter and I think you said 49 to 51, what's kind of driving that growth how much of it is maybe in a seasonal issue and then I guess as you think about 2023, how much more.
Opportunities do you have on the branch in kind of real estate side to control inflation and then you know I know investing in digital capabilities and automation right here on slide 12 remains a priority as well.
Yeah. Thanks Terry.
Our guidance on expenses.
Are driven by higher costs related to compensation and then we have as I mentioned in my comments.
Regulatory FDIC assessments or higher going forward, so obviously a larger bank.
Is causing some additional expense there.
But other things related to that or incentive compensation.
As it relates to branch optimization savings I think we're towards the end of that I mean, we will continue to look at that and we are prudent in managing that but as you know we've come a long way there.
And we'll continue to look for opportunities, but the pace will definitely be much slower.
Yes Terry.
Just to add to what Tom said, so for the quarter some of that and you saw a little bit this quarter in the sense that we had to boost accruals for incentive compensation were clearly expecting to have to do some of that here in the fourth quarter, we instituted an increase in our minimum wage so now our minimum wages.
$18 that went into effect in the latter part of the third quarter. So we'll see the effect of that in the fourth quarter.
Obviously, we're operating in.
We had higher inflationary environment. So we just want to be cautious as we give guidance out.
And we're also continue to grow so we're investing in that so I think from a guidance perspective, I think is pretty fair as we look out that I think we need to be consistent with that view incorporating these.
Factors and taking them into account to give guidance at this point of kind of a 49% to 51 range.
One thing I would say with respect to the first quarter is.
And I think we kind of highlight this every year. The first quarter is usually high because you have all of the.
Traditional kind of tax component of payroll that.
Essentially subside over the latter part of the year. So that's going to happen again, so we just want to be.
Make sure that we gave you guidance that's consistent throughout view into 2023 at this point.
So that portfolio as these loans roll into a higher rate. Thank you sure Mark do you want to take that one.
The SBA book.
It was pretty stable.
See it from our statistics there.
And the portfolio management is very kind of a thorough and consistent.
I expect that to be moving obviously, maybe in a different direction as these rates kick in but so far the borrowers but customers are hanging in there on the real estate front.
Our commercial real estate books in really good shape.
From a credit perspective very few issues.
Don't have a lot of exposure in some of.
The areas of real estate, you might be concerned with like office or hotel or even retail.
So again, it's a it's an area we're focused on.
Target those areas in our portfolio reviews.
As part of our normal situation here in the fourth quarter, but so far everything is holding together very nicely and our outlook is positive.
Sorry, if I could add just one comment there and it's more from a from an origination standpoint, one area were you.
You mentioned real estate Mark covered the existing portfolio, but one area, where we are seeing.
Thank you saw a little bit this past quarter. When you look at just the originations.
I think the Fad is having the effect that intended in terms of slowing down, particularly the rate sensitive sectors and I think real estate is one of those particularly as it pertains to new projects you know the market is going through an adjustment.
And I think in terms of you know.
Probably originations in that part of the book you know we're definitely seeing.
A slowdown there because people are just simply having a harder time with rates what cap rates, you know, perhaps moving higher with.
S higher expectations as far as the equity component moving higher people are having a hard time.
Penciling in transact new transactions.
Great. Thanks, again, and hope everybody has a nice weekend.
Great. Thanks, Derrick Thanks, Sir.
Our next question comes from the line of Nathan race with Piper Sandler Nathan Your line is now open.
Good morning, everyone.
Good morning, Nick Good morning, Nate.
Just thinking about kind of the deposit growth outlook going forward. Obviously, it was nice to see some core deposits come back on balance sheet as discussed last quarter. How are you guys kind of thinking about the runway for deposit growth going forward.
Is it can be a function of just a lot of the hires that you guys have made over the last several years, just pulling market share versus maybe you guys needing to be somewhat price leaders from a deposit pricing perspective to drive the core deposit growth commensurate with loans to kind of keep that loan deposit ratio at a comfortable range going forward.
Yes, Nate so a couple.
Complex question, there that you threw out.
Let's just unpack it and just kind of go one by one so when it comes to kind of the traditional commercial banking business. It's full relationships. So to answer to your question is yes, we want to continue to see our bankers focus on that and bringing relationships that maybe they've had in the paas.
Continuing to prospect.
Four.
Additional opportunities to grow both loans and deposits. So the short answer on that one is yes.
To your second question about having to become kind of a price leaders I don't necessarily think that we will be the absolute price leader in the space.
That being said and I think you guys have seen this this quarter is.
A lot of the institutions that had seemed to have a lot of flexibility last quarter, having loan to deposit ratios in excess liquidity.
Liquidity has been drained from the system. So I think youre seeing broadly speaking loan to deposit ratio has moved higher.
And as far as the competitive environment here, we definitely noticed an uptick institutions that were not necessarily very active prior quarter now are very active this quarter. So you know.
That's just part of part and parcel with where we are in the environment.
To a degree that.
And this goes to our comments on the on the prepared remarks.
To the degree that the fed continues to increase rates I think you can expect both loans and deposit rates to increase accordingly, given our position we feel pretty good about our ability to continue to see margin expansion at this point, given where we are in the cycle.
So hopefully that.
That gives you some color into our thinking here.
Yeah very helpful and maybe just within the context in terms of thinking about the margin going forward in the fourth quarter early next year, if we strip out the accretion and the PPP fees.
From the last couple of quarters.
It looks like the margin was up about 30 basis points versus the second quarter. It sounds like that piece of it is going to slow just given the deposit pricing pressures that exist.
Particularly in Chicago and industry wide, so maybe Tom any thoughts just in terms of kind of the pace of future margin expansion and <unk> went into the first half of next year as well assuming the fed remains on its current path with no fed funds, you know approaching 475 or so.
Yes Nate.
It really depends on what the fed does here in the market is expecting 75 here in the next this next month and then obviously, we'll have to see what happens with December but I think if you if you have.
125 basis point increase given our the composition of the assets and liabilities, we would expect margin expansion to continue.
I'd also remind you again that the SBA loans are on a lag. So we will get the benefit of that in the next quarter for anything that happens in Q3 and anything that happened in.
I'm, sorry anything that happened in Q3 as effective in Q4, and then <unk>.
Same thing goes for Q1 of next year.
So that that will definitely happen and then it just comes down to balance sheet growth.
We continue to operate in the mid <unk>.
Single digits, then we won't have as much funding pressure to go out and raise deposits and I think as Alberto touched on competition is moving up but it's not it's nowhere near where it was before in the last cycle.
Okay, great and if I could just add.
I think yes.
Yes go ahead.
What's going to add something to what Tom said because it's.
When rate increase when the fed moves rates matters. So obviously as you if you were.
Potentially getting a rate increase here in November and potentially another one in December so kind of factor that in as Youre thinking about.
The margin expanding we do think that we're positioned.
Position for that here in the fourth quarter and as Tom said.
Because of the lag what the SBA book, you know, you'll see that catch up further in the first quarter of next year. So we think we're pretty well positioned here to see to see the margin expand over the next couple of quarters.
Okay, great very helpful.
Just one last one just thinking about kind of the SBA.
Gain on sale framework between over.
And selling product into the secondary market it looked like your you.
You guys. Your commitments were up nicely versus second quarter, yet you have opted to sell less loans into the secondary market is that just a function of premiums being below palatable levels.
They then as long as premiums remain near these levels is that kind of the.
Methodology, our approach going forward as it relates to how you guys want to.
Manage that product growth going forward.
Good question and so a couple a couple of things there I think theres a theres a couple of things at play so youre spot on with the first one you know as you know for us the buy versus the hold versus sell decision.
You know is is economics.
So economics did play.
Our role and whether or not.
We decided to sell more or less this past quarter. So that that certainly was a factor.
Another factor was the fact that this.
This is the nice thing of our franchise we had.
Have flexibility you know we want to see.
The gain on sale component of our revenues come down overtime. Some of that is going to come from growth in other revenue sources be it fees or be at higher net interest income obviously, we saw some of that this quarter. So.
Think of it as we had.
Fair amount of flexibility to really make.
Purely economic decisions on buy versus hold our solid versus hold and the last thing.
Is.
You know the rate increases do play a role here in the pricing of loans.
In the short run because of the lag. So we wanted to make sure that when we're executing we're looking to sell loans, we can get absolutely the best execution possible.
Put differently, we don't want to sell loans that just because.
We wanted to sell them this month as opposed to arbitrarily in two months or so or three months, we could get better execution, because the rates would reflect the repricing on those loans. So all of that and then the last thing I would say, we do a fair amount of loans, where the loans are not 100.
3rd% fully fund that these are you know.
Construction loans in some cases construction loans with equipment.
I think this past quarter, we saw some of the effects of <unk>.
Just what youre seeing in in.
Our conventional book, which is projects in some cases are taking longer deliveries of equipment are taking longer. So the nice thing is the fact that the loan did not fully funds simply means that we're basically earning to carry on on the portfolio. So all in all I think Nate that's problem.
Our best.
Our best take on that going forward.
Understood Okay.
Okay very helpful and if I could just sneak one last one within the context on SBA and just going back to Terry's last question.
In the event that you guys continue to maybe.
Portfolio more SBA production versus sell in the secondary market are you guys, maybe tightening your underwriting boxes on the SBA front these days or any.
Any notable adjustments expected along those lines.
I think we're being cautious about certain industries again that you would you expect.
Those that are going to be more sensitive to what's going on with the current environment.
Environment in the country.
The economic forces that are at work here. So we're being more cautious I would say, but again, we're being consistent to the underwriting practices. We've had in place for some time at the same time.
Okay, Great I appreciate all the color.
Tom and Mark.
Thanks again, thanks, Nate Thank you Nate.
Our next question comes from the line of.
David long with Raymond James David Your line is now open.
Good morning, everyone.
Good morning, Dave take a closer look at the investment securities portfolio yield was up a few basis points quarter to quarter.
What are your expectations with the securities portfolio yield and what is the current portfolio.
Duration and then finally, how much is cash flowing out of that each each month or quarter.
Yes, hi.
David It's time the duration is five six years.
And currently we've been letting all the cash flows run down to the.
Bottom line to support loan growth.
And the estimated cash flows are roughly.
In that 20% to $25 million a month range.
Got it thank you and then.
Just as a follow up just thinking about the loan growth and your appetite for lending.
<unk> growth is not keeping up does that does that change your appetite to.
To land or change, how your pricing and even loans. Thank you.
Pricing and so I think they credit and pricing discipline in this environment is paramount.
Given the given the broad outlook that we have.
That being said, we're still continuing to see really good opportunities in our pipelines are healthy.
You know I think in the past several quarters, we've had a run and I think I know this is your first call formally covering us but for all the other analysts on the call. It's we finally kind of got the growth rate down in the loan portfolio to that mid single digit number that.
We've been providing guidance and I still think that's a good number.
I think it's probably you know in the kind of the mid.
Single digit range and that range as opposed to the upper end of mid to high.
Our balanced approach, meaning you know are our philosophy is we want to fund the loan portfolio with deposits and having multiple strategies in multiple.
Ways in which we can continue to you know.
Sustain.
Solid growth in core deposits as part of part of our strategy and part of what we do to continue to grow the bank. Accordingly. So at this point, we're pretty comfortable where we are I mean, obviously you saw the loan to deposit ratio took a downtick this quarter.
From the previous quarter, we want to kind of continue to see that but we also know that you know.
It's.
It's not perfect right. Some if we can.
Could timed the inflows and the outflows perfectly we would we would have little to do in terms of managing the book and managing the company, but philosophically, we want to we want to kind of target that kind of 90% range from a loan to deposit standpoint on a long term basis.
So hopefully that gives you some color and answers the question.
Definitely no I do appreciate your book Albert joined time post thanks, Thanks for the color.
You bet.
Thank you as a reminder, if you would like to submit for a question Thats Star one on your telephone keypad.
Yeah.
Our next question comes from Brian Martin with Janney. Your line is now open.
Good morning.
Good morning, Brian .
Hey, just wanted to circle back one one follow up on the margin that was asked earlier, just Tom as far as our Alberta.
As far as if we do appreciate the color on the next couple of quarters, but I guess if we.
Let me look beyond and get the rate increases that are expected out there today and the fed does pause for a bit.
How do you expect the margin to behave when that pause occurs I guess as it should.
The margin.
Compress a bit then is that deposit betas continue to catch up and gets here.
40% level is that how to think about the world today.
I think that's a fair view.
Brian I think it's obviously going to be fed dependent we'll see if the fed stops here in December and.
Puts.
Pauses and makes them assessment before deciding what to do next.
Or if they continue to raise into the fourth.
First quarter of next year, so obviously fed dependent but at some point what youre describing is probably the right way to think about it at some point the margin will peak.
For us probably and again fat dependent so it's.
We don't want to but probably in the second quarter.
Probably we'll where we will see that and then.
Dan I think what you mentioned is probably <unk>.
Pharma fact bell flags.
With deposit costs that happened.
And then we'll see kind of where we are from a from our outlook on rates at that point in kind of the fat is going to be on hold or or given where the economy is.
The outlook changes, but I think what you are saying is a fair way to think about it.
Gotcha, Okay no that's helpful.
Maybe just one or two others just on the deposit side I mean, obviously, a very very strong quarter and like I say in the core franchises is very strong but.
How much if you kind of talk about that goal of the 90% level in the growth Youre expecting how much migration do you expect in the portfolio on the deposit side I mean, you saw a little bit of a dropdown in the noninterest bearing this quarter I guess, just kind of what's kind of a normalized level as we look out over the next couple of quarters, given what's happened with rates and then the.
The growth Youre expecting is there more migration to come there I think is beginning to stabilize do you think it kind of is 38% level on the DDA side or.
It's Brian .
We are patient you know with that we realize that.
You know, we realize that look if to my comment earlier, if we could match everything perfectly we can match loan demand with deposit growth perfectly. Then then we'd always be trying to optimize but we realize that.
We don't necessarily control that we want to do it in a measured way.
In which we're ensuring that we're doing very we're doing it prudently.
So the nice thing is we have ample liquidity our capital levels are very very strong.
So this is.
This is going to be a measured approach as opposed to having to necessarily Gee, we want to get there next quarter. So we need to to really drive rates really really high I mean, we're not going to do that so we will.
Target that you know that we will reach but it's not a target that we necessarily want to achieve.
Next month or or by the end of the quarter.
Got you no I wasn't expecting that I got to say and so okay and.
And maybe just a last one for me was just on the loan outlook and just the payoffs of Paas were up a little bit as you guys had talked about.
I mean with rates, where they are I guess is your sense that the payoffs may slow a little bit or just be at a lower level than they were this quarter or is this pretty indicative more normal today I know they had been very low the previous quarters.
But just given the rate environment and then just on the other side of it. The origination side was was strong this quarter and just beyond this quarter, you're beginning to see any cautiousness on your borrowers as you look at the visibility of that origination pipeline beyond fourth quarter.
You know that pipelines remain pretty healthy, Brian I think with respect to the pay offs.
We were expecting that I think in prior quarters as you well know.
Payoff activity was.
It was much lower than than we expected some of it was timing.
<unk> transactions that were half were to happen on a particular date got pushed over into the following quarter et cetera, and I think we saw some of that here in the third quarter.
I think we have a pretty good view in terms of kind of where we're payoff activity is going to be obviously, it's a it's a holiday season.
Coming up you know, so things do slow down a bit but.
Our sense is you know probably in the you know and.
We don't give guidance, but you know you are asking for some color probably in the kind of a low $200 million range is kind of what we're expecting as far as payoffs are concern and that should still.
Translate into into kind of that mid single digit kind of range for for loan growth at this point.
<unk> is our best take on edits as things stand today.
Yeah, No I appreciate the color, Alberta tough questions.
Thank you guys for taking the questions I appreciate it.
Anytime.
Thank you all for your questions today, I will now turn the call back over to Mr. Alberto <unk> for any closing remarks.
Great. Thank you Amber.
So that concludes our call. This morning on behalf of all of US here. Thank you for your time today and your interest in byline. We also want to wish you a happy and safe holiday season, and look forward to speaking to you again in the new year. Thank you.
Okay.
This concludes the <unk> Corp, third quarter 2022 earnings Conference call. Thank you for your participation you may now disconnect your line.