Q3 2022 CrossFirst Bankshares Inc Earnings Call
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Good morning, and welcome to <unk> third quarter 2022 earnings Conference call.
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Good morning, and welcome to the Cross first Bancshares third quarter 2022 earnings Conference call.
Heather Worley director of Investor Relations before we begin please be aware. This call will include forward looking statements, including statements about our business plans the acquisition of central and our future financial performance. These comments are based on our current expectations and assumptions and are subject to risks and uncertainties that could.
Cause actual results to differ materially from these statements are forward looking statements are as of the date of this call. We do not assume any obligation to update or revise them, except as required by law statements made on this call should be considered together with the risk factors identified in today's earnings.
The release and our other filings with the FCC, we may refer to adjusted or non-GAAP financial measures. A reconciliation of non-GAAP financial measures to GAAP financial measures can be found in our earnings release. These non-GAAP financial measures.
Are not meant to substitute for or superior to financial measures prepared in accordance with GAAP.
This presentation. This presentation will include remarks regarding the third quarter financial results from Mike Maddox, President and CEO of Cross first Bancshares, Randy Rapp President of Cross first Bank and then Klaus CFO of Cross Forest Bankshares.
The conclusion of our prepared remarks, our operator, Nick will facilitate a Q&A session. At this time I would like to turn the call over to Mike who will begin on slide four of the presentation Mike.
Thank you Heather and good morning, everyone.
Thank you for joining us as we discuss cross first third quarter operating results.
Before we dive into the details from the third quarter.
I'd like to share a historical milestone with all of you.
On October one we celebrated our 15th anniversary as a company the.
The growth of our organization in the past 15 years is nothing short of remarkable.
What started as a de Novo bank in 2007 with $15 million in assets has grown to over $5 8 billion in assets with nine full service locations.
Cross, Kansas, Missouri.
Oklahoma, Texas, Arizona.
And we are looking forward to adding Colorado, new Mexico to our footprint.
As I reflect on the first 15 years I see a dynamic group of talented individuals coming together every day to deliver extraordinary service and make a difference in the lives of our clients.
One another and then the communities, where we live and work.
Simply put this is and will be the legacy of our organization.
I want to thank and congratulate our founding shareholders and board members, who had the courage to invest in a startup bank 15 years ago. We work hard every day to make you proud and continue our legacy of entrepreneurship and extraordinary service.
People, our most important asset and while competition for talent continues to remain a top challenge for all businesses, we must stay keenly focused on culture strengths engagement and performance to recruit and retain the best talent in our industry.
From new training and professional development opportunities expanded awards and recognition programs and a clear line of sight regarding career advancement.
We reward people for doing the right things for our team our clients and our shareholders.
As we announced last quarter, we promoted Randy Rapp as president of the bank in July .
He has been instrumental in enhancing our leadership team and positioning our company for future growth.
He will speak shortly about some of the changes during his comments.
Turning to our financial performance, we reported $17 3 million in net income and our team produced 149 million of net loan growth during the quarter, which is an annualized rate of over 13%.
While a level of uncertainty remains in the economy. We are optimistic that we will see continued loan growth through the remainder of 'twenty to 'twenty two.
Although the growth could slow from the pace that we have seen so far this year.
We are highly focused on credit quality, which is key to sustainable results and earnings we will not compromise quality for growth.
We've made improvement in our credit quality with our nonperforming assets down to 31 basis points.
The team is closely monitoring the impacts of rising rates and a changing economy.
Our goal is to take a balanced approach as we monitor risk and build long term value for our shareholders.
With another quarter of solid earnings we.
We maintained our strong capital position, while investing for our future.
We have added to our stock buyback initiatives and invested in technology and talent.
We are optimistic that central bank will become a part of cross first bank with a transaction close in the fourth quarter.
We are excited about what this merger will bring to serve the business and professional banking needs of their clients.
And the expanded mortgage and SBA capabilities that will be scaled across all of our markets.
We will work to become extraordinary together.
After closing it will be business as usual for their clients, while we worked to integrate systems.
This combination will advance our market expansion, bringing experienced leaders to our team accelerate our growth strategy and enhance and add shareholder value.
It will be immediately accretive and puts a portion of our excess capital to work.
As we focus on long term sustainable growth I am proud to highlight our second annual cross first impact report.
And our second annual report, which covers calendar year 2021 we share an update on the progress we are making across numerous benchmarks through the ESG lens diversity inclusion employee satisfaction and philanthropic support.
Last year the U S. G oversight responsibility of our board of directors.
We established a management level ESG committee to develop implement and oversee the foundation of our sustainability and ESG program.
In a rapidly changing and complex world, we are committed to making a positive impact.
2022 it's been a year of acceleration for cross first we were again recognized by the Kansas City business Journal as the best place to work.
This type of independent acknowledgment is based on employee surveys and confirms what those of us across first already knew.
Our culture in the company, we are building this truly special and unique.
As we look to 'twenty twenty-three, our focus will shift to optimizing the investments we have made in 'twenty 'twenty. Two this will range from leveraging our new digital banking platform to serve our personal and business clients.
To expand the reach of our newly formed specialized industry groups to scale. The investments we have made in Arizona, Texas, New Mexico and Colorado.
I will do all I can to make sure our team has the right tools and the right resources in place to succeed.
And with that I'd like to turn the call over to our President of Cross first Bank Randy Rapp.
Thanks, Mike and good morning, everyone as Mike mentioned in September we announced the promotion of several current leaders who are taking on expanded roles and responsibilities within our company.
To lead our community banking model, Steve Foreskin has been promoted to regional President and will oversee our Oklahoma City, Tulsa Wichita markets Steve.
Steve joined Cross first bank in 2015, as the Oklahoma City market, President and has recruited an exceptional team of bankers.
Steve will coordinate strategy within the markets and assist with talent recruitment and business development.
With the expansion of Steves responsibilities, Amy Bally has been promoted to Oklahoma City market President.
Amy has been an integral part of our Oklahoma City team since 2015, most recently overseeing the commercial and real estate teams, serving as managing director of commercial banking.
Amy brings extensive banking and market knowledge to her new role.
To enhance another key part of our business. We are dedicating specific expertise to serve as a resource for our consumer and small business deposit and lending areas, which we referred to as relationship banking.
Tiffany Hatcher, who joined our company in 2017 and currently serves as our Tulsa market President is taking on a new role as executive director relationship banking.
This new role reflects our commitment and strategic focus on relationship banking and we will have a strong focus on deposit generation.
In addition to relationship banking, we're also dedicating expertise to serve as a resource for our commercial real estate teams.
Can't Howard is taking on a new role as executive director real estate banking to oversee the bank's commercial real estate portfolio.
Kent joined Cross first bank in 2017, as managing director Dallas Real estate and has built a commercial real estate portfolio of over $800 million in it.
His new role Kent will coordinate concentration management deal selection structure pricing and underwriting guidelines. We were excited to recognize these team members who were taking on expanded roles within our company as we continue to grow and evolve.
Turning to Q3 highlights we reported loan growth of 3.3% or 149 million.
Loans have increased 11% or $445 million over the past four quarters.
Loan growth in Q3 was balanced between C&I and commercial real estate and also geographically diversified over the majority of our markets.
Total loans increased despite a $53 million decrease in the energy portfolio, which ended the quarter at 173 million.
During the quarter average C&I line utilization was 45% consistent with the prior quarter and portfolio churn decreased slightly but remains above the historical average level.
Our loan portfolio remains diversified with a 43% concentration in commercial real estate and 44% concentration in C&I and owner occupied real estate.
There's also good diversity within each of those portfolios with the highest CRE property type accounting for 15% of total CRE exposure and the largest industry segment in C&I being manufacturing at 11%.
Weird are adhering strictly to our underwriting standards to reflect the higher level of economic and interest rate uncertainty that exists in the markets today.
For the quarter average deposits increased 8% to $4 9 billion up $372 million from the previous quarter.
Over the past four quarters average deposits have increased 11%.
Average non interest bearing deposits decreased 1% during the quarter to $1 1 billion and represent 22% of total deposits in Q4 of this year. We are moving forward with an upgrade to our digital banking platform that we believe will enhance our deposit growth strategy.
Moving to credit highlights for Q3, we reported a drop in nonperforming assets of $12 6 million to $18 2 million, resulting in a nonperforming asset to total asset ratio of 0.31%.
The decrease was primarily due to upgrades or refinances within the portfolio and the charged down referenced below.
This ratio is down from <unk> five 4% in Q2 and 92% in Q3 of 2021.
Classified assets to capital plus combined reserves was 11, 2% down from 12% in Q2 and 17, 3% in Q3 of 2021.
For the quarter, we reported net charge offs of 1.9 million, resulting in an annualized charge off rate of 16 basis points and a trailing 12 month charge off rate of 11 basis points.
Did you keep the charge offs in Q3 were primarily related to the charge down of a previously identified substandard C&I transaction.
At September 30th we reported an allowance for credit loss to total loan ratio of 1.19% and combined allowance for credit loss and reserves for unfunded commitments of 1.34%.
We are focused on strong portfolio monitoring and maintaining good credit metrics moving forward.
We continued to closely monitor the local U S and global economies changes in interest rates and inflation rates and the potential impact those factors could have on our loan portfolio.
We were fortunate to operate in many markets and states continuing to show positive job creation continued low unemployment rates positive population migration and increasing gross domestic product.
We are directing our bankers to actively engage with our clients and prospects to better understand the effects. These macro level issues are having on their individual businesses and financial performance.
I will now turn the call over to Ben to cover financial results in more detail yeah.
Thanks, Randy and good morning, everyone.
As Mike indicated net income expanded this quarter to $17 3 million.
<unk> 35 per share and we maintained solid loan and deposit growth.
Quarterly return on average assets was 1.19% and return on average equity was 11.18%.
These ratios were the result of strong performance driven by balance sheet growth.
An expanding margin and continued future investments.
We are executing our strategy to grow loans deposits are away and Roe.
And are striving to gain scale as we approach 6 billion in assets.
Our interest income in the third quarter increased 24% from the prior quarter to $65 6 million.
This was driven by rate increases loan growth and accrual improvements.
Interest income also included an additional day in the quarter, which added <unk> 6 million.
NIM for Q2, and Q3 included accrual improvements a point $7 million and 1 million, respectively, which we do not expect to be in the run rate going forward.
These accrual improvements impacted margin by five and seven basis points in Q2 and Q3, respectively.
Our average loan balances were up 4% quarter over quarter and average yield was up 80 basis points.
Interest expense was up $9 7 million for the quarter as we increased deposit rates to fund loan growth.
Our percentage of demand deposits was 22%, reflecting the competitive rate environment and some deployment of liquidity.
Average deposits increased 8% for the quarter driven by money market and time deposits, primarily our total cost of deposits was one 2% for the quarter, our first meaningful increase since rates declined in early 2020.
F H L. B borrowings were down $91 million from second quarter, and brokered funding declined by $89 million from second quarter.
Our total deposits beta against the rate increases this year.
It was about 50 through the end of the third quarter in line with our target.
We continue to target a beta of around 50 for the rest of the year.
We are assuming rates will end the year.
In a range of $4 50 to 475, although if that moves up or down 25 basis points. It would not necessarily change our beta target.
Net interest margin was up to 3.56% on a fully tax equivalent basis.
We expect margin to be in a range of $3 45 to $3 55 for fourth quarter.
With expansion of our loan yields offset partially by potential deposit migration away from DDA and higher rates needed to fund growth.
Our balance sheet has moderate sensitivity was 69% of our earning assets repricing or maturing over the next 12 months with much of that being in the first 90 days.
Noninterest income for the quarter was $3 8 million and declined due to lower credit card transaction volume and lower letter of credit fees.
We are focused on increasing credit card volume and driving diversification in our client base and we were able to offset part of the concentration decline with growth in new credit card clients during this quarter.
Noninterest expenses for the quarter were $28 5 million down point 8 million from the second quarter and within our expected range.
During the quarter, we added nine new producers in a very competitive environment.
We anticipate noninterest expense to be in a range of 28 to 29 million for the fourth quarter outside of additional merger costs.
We plan to manage our cost base tightly given the current environment and will strike a balance between growing earnings and investing for the future.
Our efficiency ratio improved from the second quarter, and we are focused on driving it into the low fifty's.
Our tax rate was 23% for the quarter down slightly from last quarter and in the range. We expect for the rest of the year.
Our capital ratios remained strong as we generated significant earnings and continued to grow.
We experienced some additional unrealized losses to the securities portfolio as longer term rates moved up again, but we believe this will resolve in the longer term.
As the interest rate environment moves through the cycle.
We have elected the option to exclude the unrealized loss from regulatory capital R. F. S. Securities provides significant liquidity as they can serve as collateral for borrowing if needed.
Even with unrealized losses, our tangible common equity ratio was 10% at quarter end well above the median of our peers.
And total and our total capital to risk weighted assets ratio that we used for regulatory purposes remains above 12%.
We repurchased 794000 shares in the third quarter for $10 8 million and we intend to continue our buyback under the existing $30 million Board authorization.
With deposit growth in excess of loan growth this quarter, our loan to deposit ratio decreased slightly to 94%.
We are focused on driving deposit growth to fund loans and.
And we have significant capacity for borrowing or wholesale funding if needed.
We had another great quarter and are well positioned going into the end of the year.
Operator, we are now ready to begin the question and answer portion of the call.
I do yeah I'll begin the question and answer is often ask a question you May Press Star then one on your thoughts going forward.
The bigger problem. Please pickup your handset before pressing the game.
What's wrong with your question.
Glad Star then.
This time, we'll pause momentarily to assemble the wrong.
First question comes from radio Daily Cape VW. Please go ahead.
Hey, Thanks, good morning, guys.
Good morning, Brian Good morning.
I wanted to start with kind of the growth outlook for next year, you guys or a high growth company, but you know growing at a high pace on the funding side as you know it can be kind of painful nowadays. So I was just wondering how you think about unit growth next year and you know.
Do you see that growth start to slow a little bit.
Yeah I mean, it's that's the question, we're all asking trying to figure out you know, what's going to happen with the economy and rising rates and and what opportunities are going to be provided us.
We are yeah. We believe we will continue to grow but I don't know that it will be at the pace that we've grown this year, obviously funding is becoming more challenging and expensive so that will be a driving factor for us and obviously credit quality and and what happens in the economy.
Something we're looking at closely you know having said that we're still pretty excited about the markets. We're in a Dallas Phoenix Denver are still pretty dynamic growing markets and in and we think with some of the investments we've made in 2022 and some of those new markets there's still a.
The bill amount of room for us to continue to provide some some quality growth.
Brady This is Randy the other thing I would add to what Mike said is one of the things we're watching as churn within the portfolio. We we have booked quite a bit of real estate commitments. This year that our unfunded. So we're sitting with a decent unfunded that will will fund up next year of the churn rate in the CRE book has been at an elevated level if that.
Were to slow that will definitely impact the growth rate as well so.
So we're watching that but as Mike also said we've made some investments in some new markets Frisco Fort worth although we expect to hit some stride next year and in addition to our other good markets.
Alright, that's helpful.
And then my second question is just on the central acquisition any any updates there I know rates have kind of moved around from today are relative to announcement day. So any updates on how you're thinking about EPS accretion or tangible tangible book value per share dilution and can you just remind us where you are on the regulatory.
We.
Ruble process do you have all of those are I think I heard you guys say, you're still planning to close the deal at some point before year end.
I'll, let Ben address some of the financial metrics, but from a regulatory standpoint, we believe we're in the ninth inning of that process.
It's it's gone smoothly we've provided the FDIC was all the requested information that they've asked for and we're hopeful.
That we may hear something in the near future. So we're we're we're hopeful that we can continue to move the process forward at a at a reasonable pace and we don't we don't foresee any big roadblocks, but Dan you want to talk about but yeah sure. Good morning, Brady are in regard to the financial aspects we.
We're still on track for the amount of accretion that we allow outlined which was between 11 and 12% for 2020 three no change there no change in our tangible book value dilution assumptions definitely our pro forma capital ratios have.
Moved a little bit because our capital ratios have moved but central.
<unk> to perform in line with with our projections through through the third quarter.
Alright, and then last question for me.
You guys have been pretty active on the buyback for the last couple of years, I mean year to date, you've repurchased over 4% of the company.
You know as we potentially head into a recession does that does that change your stance on the buyback.
Well, we will be conservative as it relates to our capital positions.
But you know we can continue to drive pretty strong earnings and and as long as our stock continues to trade at a level. We think is very undervalued.
We're going to do everything that is prudent to continue to to buy it buy it back at a we think a low price so.
What we're keeping an eye on capital levels, and a well, we'll always be conservative as it relates to capital we've been that way from the very beginning.
We're at where we are a faster growing company and and we understand that it's important for us to keep keep keep good capital levels.
And I would add one thing to that Brady, which is just a reminder, that the we have complete flexibility with the buyback. So as Mike said, we will obviously monitor that ongoing in and adjust it accordingly, if if that feels prudent.
Okay, great. Thanks, guys.
Thanks, Brian .
Thank you. Our next question from Michael Rose Raymond James. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions and Mike wanted to circle back Hey, Good morning, I'm, just wondering to circle back.
Some of the deposit.
No comments.
You know it sounds like broker came down but maybe you did some some.
Some specials out in the market I think I saw that in some of the posted rates.
You just kind of talk about the interplay between kind of loan growth and the ability to fund an increasingly higher.
Deposit rates and how we should think about the name I think there were seven basis points.
Interest accrual recoveries this quarter, they said will kind of come out so.
So it seems to me that we're probably at or near a peak for the margin as begins about fourth quarter or is that kind of the way to think about it and then how should we think about the deposit funding strategy going forward. Thanks.
I think that's the right way to think about it Michael Youre correct seven basis points of.
Of accrual gain this quarter in the range I gave 345 to $3 55 to two reinforce would suggest we see opportunity for some some expansion in NIM, but I don't think a great deal.
I I think your assumption is accurate, we are probably near nearing or or near the top of that we would see our number one goal of course is to fund our loan growth with relationship deposits and we will continue to make relationship decisions, which we do every.
Day, that's the that's the way we operate and we will we will fund our growth with what with the the best mix that we can are our number one goal of course being core deposits, but we have a huge amount of flexibility in wholesale or brokered or borrowing should we.
To go there, but we think think about that as a as a safety valve we had great growth in deposits. This this quarter as you heard us say and so we hope to continue that momentum.
No Michael I also think that that we're going to see more opportunity on the loan side for pricing.
It we are seeing better opportunities that are there more favorably priced than we have in the last couple of years and so.
Where we're taking the approach of maybe being a little more selective and on the credit side and and and I think the lenders are starting to get a little pricing power.
Final thing I would add Mike Oh, sorry, Michael I was just going to add on on deposit strategy looking forward.
There's no one big thing I think it's just a bunch of smaller things put together, but you know part of it is just focus and making sure that our bankers are are laser focused on deposit growth in DDA expansion. There too is as I put in my comments, you know, putting Tiffany had Turner, who her new role one of the things you will do is is help guide you know our go to market.
Deposit strategy three is just to make sure everybody's aligned building that into our bankers' incentive model to make sure that they're focused on that and then for we do think our digital banking platform conversion will will help enhance the strategy. So I think all those things combined is really what we were thinking about is our deposit strategy looking into.
Four into 'twenty three.
Very helpful. Maybe just switching gears on a separate topic you know credit books.
Right I think when you guys I P. Owed so there was definitely some concern that I heard voice just around you know some of the verticals that you were and whether it would be kind of energy or enterprise value lending, obviously everything looks great here and you right size some of those portfolios, but can you just give us an update on kind of like the snick portfolio of enterprise value.
Tribal lending.
Energy lending kind of et cetera, and then how are you.
A little bit more cautious there as we get into maybe a choppy waters here. Thanks.
Okay.
Well, yeah, I'll start and I'll, let Randy fill in.
We are very proud of our credit quality I think it's improved dramatically.
And we we've worked very hard at that and we're pleased with with the movement downward in classified assets and nonperforming.
You know we like every bank.
Diving deep into our portfolio and making sure we're trying to stay on top of any arising issues and.
So far you know, we're just not saying.
A lot of problems, yet and as far as it relates to some of our verticals.
<unk> archrival lending business is as good as it's a small part of our portfolio today.
As you know energy I think is down under 5% of our portfolio and performing very well today with commodity prices where they're at.
And we think that's probably an opportunity to maybe see some growth.
Our our franchise lending.
Portfolio is performing well.
I'm trying to think about in other words you talked about.
Add to that that you would ask specifically about the snick portfolio and when that's not ever been a really big number for us that's about $120 million and it's been you know pretty consistently at that lower level, you talked about the some of the credit issues around the IPO and we feel it really feel like those where we're a couple of one off transactions and that's what we have communicated.
And we feel like those are behind us and so I look at the portfolio today.
You know as we look into next year I mean, there is uncertainty in the economy, but I think you know we don't have a big consumer portfolio and some of the noise. You're hearing early on is on the on the banks with the larger consumer portfolios are energy has reduced down to Mike said, you know is in the 3% to 4% range quite.
We think there's some opportunity to grow that portfolio next year, but feel very good about the quality of about that.
That portfolio.
He is a big portion of what we do there's a vertical and theyre in homebuilding you know theres been a lot of publicity about homebuilding lately, but what we're seeing in our portfolio is where we're in good markets activity has slowed but it's back to probably a 2018 type level. The builders are still profitable they have very healthy balance.
Seats and have very low spec inventory.
And are sitting on very alone a lot a very low lot inventories, which are some of the things that created issues in the great recession. So we feel good about the health of the builder portfolio C&I as a diversified portfolio that you would hit on a couple you know travel as Mike said is small our leveraged lending portfolio is about 210 million and that's a number we.
We keep an eye on them and so you know obviously, we're spending a lot of time visiting with our borrowers are monitoring the portfolio looking at great accuracy. We just had another very successful third party loan review that did not change any land loan grades. So we feel good about our internal monitoring and grading accuracy.
And again, just the overall diversity of the portfolio as we head into next year.
Thanks, guys I appreciate all the color.
Yeah.
Thank you. Our next question will be from John Remember. Please go ahead.
Thanks, so much for taking my question.
Just curious.
You'd mentioned, you think that's going to be a bit slower over the near term.
Let's do you think loan growth will moderate as you get more selected.
Well, Jennifer I'm, not I'm, not really prepared to give guidance on what that exact number is going to be but.
But you know it we're just going to cap to keep an eye on it there's just a lot of uncertainty out there and and today. Our pipeline remains remained strong and pretty consistent with what we've seen over the last couple of quarters, but.
As we look into 2023 I, just I can't give you enough visibility right now on on where things are going we're in the middle of our strategic planning process and and you.
You know, we'll be talking a lot about that but yeah. We still believe we're in good markets and in and fairly strong economies in those markets. So you know we're hopeful that we'll continue to see solid growth.
Jennifer we do a bottom up budgeting process and so we as Mike said, we're in the middle of that process. We are market leaders in vertical leaders to come up with what they think that that looks like for next year. So really in the process of assembling that and can give better guidance on that in future calls.
And you mentioned you hired nine producer in the third quarter, but I believe you said you were going to optimize your investment.
Next year, so I'm, assuming that means fewer.
New hires in 'twenty three versus 22.
I think that's a fair assumption Jennifer you know we've made some investments in Fort worth in Frisco in Phoenix, and we'll be bringing on Denver, and Colorado Springs in New Mexico. So really we want to let those investments scale are we want to continue to be entrepreneur neuro at all as it relates to.
Really talented bankers, but.
But we we've done a lot of hiring this year that we hope to to scale in 'twenty three.
Thank you so much.
Thanks.
Thank you next question will be from Amber Lee could papers Lambert <unk> go ahead.
Hey, everyone. Thanks for taking the questions. This morning, Andrew right. So just a question going back to credit quality here you referenced in the presentation part of the provision was more qualitative factor does that.
Your own management thoughts on a potential recession in the next year or has there been any change in anything in the people model.
Andrew This is Randy there weren't a lot of.
Substantial Q factor adjustments this quarter, one of the drivers and and you know Andrew we were we were learning to live with Cecil is many of the other banks are and seeing you know the drivers there one of the drivers for US was an increase in unfunded commitments this quarter as it relates to our real estate portfolio that was a driver of part of the reserve and then just.
Overall, you know trying to be a bit more conservative looking into the future heading into some economic uncertainty and there were a few adjustments there, but one of the larger drivers as I said was the increase in unfunded commitments.
Got it alright, that's that's really helpful.
And then just going back to some of the margin outlook here I'm wondering if you have the spot rate.
Cost of funds at September 30th or if you. If you don't like what the new with the current rate on new money market account, either one of those times.
Andrew It's been you know our spot rate at the end of the quarter on the overall mix was about $1 65.
Okay, I'd call that our jump off for the quarter.
That's helpful. There and then.
New loan it sounds like there wasn't.
Been out of opportunity that you have some pricing pressure there I guess, where are new loans coming on and I.
I guess, what what activity did you see during the quarter as far as the trending up in the pace of improvement in loan yield.
Yeah, and this is Randy again.
We did see a widening margins in it it actually moved fairly quickly.
Especially as it relates to the CRE book, where we might have been looking at a.
250 margin previously we're seeing now a three handle on on that margin with a little more fee potential and so you know Ben referenced that in his comments some of what's funding now was booked during the more competitive periods I think youre seeing across the industry a little more pricing.
Power within the within the banking and so are the things where are the opportunities. We're seeing today. The things. We're booking today are at are definitely at wider margins and higher fees than we've seen over the last 18 months.
Andrew I would just add to that maybe to put a little color on that as you heard us say our.
Our loan yield for the quarter was five O eight but the weighted average for new loans added in the quarter was $5 42, and I agree with Randy we are we will see that expand.
Now that pricing has has started to move a little bit.
Got it all right that's really helpful. There.
And then just on the expense run rate going forward.
It looks like there was maybe some severance costs.
Salaries and benefits line I'm, just curious from the call it 24 million, whereas the good run rate not including central of course, but jumping off into the fourth quarter.
Yeah, I would say between 28 and 29 million Andrew is our expected Q4 rate.
Right.
That's all the questions. Thanks, so much for taking them. Thanks.
Thanks, Andrew.
Thank you and again, if you'd like to ask a question. Please press Star then one.
Next question will be from Oh My God.
Please go ahead.
Hey, Thanks, Good morning, I wanted to go back to the discussion around Central Bancorp.
Pretty strong growth from the bank in the second quarter and I Didnt appreciate maybe the momentum the bank had on the growth front.
I'm curious any more color you can add to their growth.
Or any early expectations for them.
Half of the year as far as there.
Thanks.
And.
Maybe I'll start I'll, let Mike or Randy add, but I think I said earlier.
There their trajectory through the last two quarters is right in line with with what we modeled and they continue to have a good growth both loans and deposits.
In regard to opportunity I would just remind you and I'll, let Mike or Randy add you know they are relatively new in Denver. For example, so there's huge opportunity there and we would expect outsized growth.
In that market I don't know if you guys want to add supplement that I think that's right. I mean, there's still you know only maybe 100 $150 million of assets in Denver and.
We really see that as a great opportunity to expand any of the other thing about this acquisition is we're very excited about the SBA and mortgage operations, which.
We believe we will be able to scale across our franchise and our we think theres a lot of opportunity to generate fee income and growth in those platforms as well obviously the mortgage business today is a bit slower with where the economy is but the nice thing is they've scaled their expenses to adjust for.
For that and we really don't have to add very much incremental volume to the platform to make it profitable so.
We think those two things are also big drivers.
Okay. That's helpful. Mike and then I guess on that note thinking about the impact of central.
Mortgage and the SBA front, well that'd be very.
<unk> initially or just more of a more of a longer term initiative.
Company.
Hello.
Mortgage Matt that's definitely a longer term initiative and we in our projections on our modeling we didn't assume any significant lift from mortgage we all know that the environment. There Hum currently due to due to rates and the housing situation and they have.
I've already rightsize their mortgage organization based on the lower volumes that we're seeing right now in regard to SBA similar although I think there's more opportunity near term there as we deploy their process and their team across our existing markets I think there's more near term.
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Okay. That's helpful. Thank you guys very much well thanks, Matt.
And you can go on for.
A question and answer session I'd like to turn the conference back over to Mr. Mike Madden for closing remarks.
Well I just want to thank everybody for joining us today are I want to thank our team. They they really worked hard this quarter and done a great job and we're really pleased with our improvement in our credit quality and our continued improvement in margin and are very excited about the opportunity to bring our team members in Colorado.
In new Mexico, and and bring them in as a part of the cross first team. So thank you all for joining us and look forward to talking to you I guess it'll be in January so take care.
Thank you. This concludes the conference you may now disconnect.
Okay.
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