Q3 2022 ConnectOne Bancorp Inc Earnings Call
Factors as key market Differentiators the culture, we built the team we have and now the bankers were actively seeking us out for <unk>.
Joining a known client centric culture and organization and those have resulted in consistent market share gains and our traditional operating area.
And on top of that over the past year, we've expanded into new geographic areas, including the robust southeast, Florida in Eastern long Island markets.
Also creating opportunities across new verticals, we recently brought on a healthcare team enhance our SBA lending capabilities and continue to build our franchise referral and lending platform in conjunction with both light.
Our next step count has grown in excess of 75 people over the last year now taking us over 500 employees as we continue to capitalize on M&A dislocation in our market.
Several highly seasoned and talented bankers joined the team unsolicited in many cases, they were attracted to connect one culture and reputation.
Finally, we are executing on a number of innovation initiatives in order to enhance the client experience, while digitizing workflows and expanding opportunities to generate deposits as a result, a significant majority of this quarter's loan originations also have a base deposit relationship.
With that backdrop, we're extremely pleased with <unk> third quarter performance, yet again, delivering high quality earnings and strong performance metrics <unk> increased by almost four 5% for the quarter and 12% from a year ago and was in excess of 2% once again.
Tangible book value per share increased for the 10th consecutive quarter and is up 30% over that period and our efficiency ratio improved to 38, 4%, even as we significantly invest in both technology and people.
Notwithstanding this quarter's results.
We are experiencing increased competition for deposits, but our client focused model has proven adept at generating core deposits at a commensurate pace with loan growth.
Our companywide deposit focus along with the investments, we're making in our people and technology gives us confidence in our ability to continue that match space regarding loans growth for the third quarter was higher than anticipated, but we expect growth rates to level off for the fourth quarter and heading into 2023 is tempered growth outlook reflects.
Higher rates the impact of the fed tightening and normalization in our pipeline in this environment growth guidance is really challenging, but our best estimate right now is low double digit on an annualized basis.
From a business perspective, we have long standing relationships with highly experienced operators simultaneously as a result of our expansion, we're seeing a healthy diversification in the profile of our originations, including geography segments and business lines.
<unk> origination metrics remained strong, reflecting our conservative underwriting standards and for the third quarter weighted average yields were near five 5% and as of today yields are already well over 6%.
We're clearly benefiting from our recent investments in our business and growth focused initiatives, we've shared over the last few quarters or years.
Ultimately our success comes down to our <unk>.
<unk> in our people and the Digitization of our tech focused infrastructure, both of which in our view enhances <unk> competitive advantage and provides a superior client experience.
As I mentioned earlier, we're extending our New York and long Island presence with a business development office in East Hampton that office, which just opened this month builds on our existing presence on long island, allowing us to support existing clients while building on opportunities in a new market.
He spent a long island has a robust small business market that values. The relationship focused banking that connect one provides and is yet another opportunity we're excited about.
Let's turn to credit once again, the company's credit metrics remain sound. Our NPA has continued to trend lower delinquencies remain near zero and we're prudently maintaining reserved levels, which are commensurate with our organic growth and the changing macroeconomic forecast bill will provide further color around our seasonal based provisioning.
Okay.
As we look ahead, a number of recent strategic tech investments are moving through the implementation earlier. This year, we announced the partnership with Nimbus to build a new business vertical on a lean and nimble cloud based tool. We have now branded goods vertical venture on and it will provide the spoke banking services to deposit rich tech focused businesses.
You'll hear more details regarding venture on later this year as we expect in early 2023 rollout.
We're also well underway with the implementation of mantle a tool to enhance our deposit origination infrastructure. We expect the first phase of the initiatives to be rolled out by year end.
And then of course at both life, we continue to enhance our platform and the user experience, while increasing the number of net franchise dealers and franchisees. This is the foundation that contributes to loan opportunities in both the SBA and now non SBA lending verticals.
<unk> entered 2022 with a strong and resilient balance sheet, and we're committed to preserving that position going forward.
These capital base and strong earnings that can support growth initiatives dividends and share repurchases on.
On a macro basis, there are certainly headwinds facing our industry, but our third quarter and year to date results fully support our belief that connect one is operating from a position of strength at.
At connect one we've always set ourselves apart by making it easier for our clients to do business with us while empowering them with the latest technology to meet their evolving needs.
By our operating leverage connect one remains one of the most efficient banks in the industry leveraging both our technological advantages and our culture to drive our results.
As we look ahead in terms of size, it's likely we'll be crossing the $10 billion threshold in 2023, and we're both ready and prepared and with that I'll turn it over to bill.
Yes.
Alright, Thank you Frank good morning, everyone.
As Frank mentioned, we have a long track record of organic growth, while delivering leading performance metrics.
When we built here is a highly valuable franchise, one that I believe is a compelling investment opportunity, especially at these market levels. We're currently trading less of one two times tangible book and we believe and we estimate that is 20% behind what the metrics tell us and want to start there and add some more detailed before covering the rest of the quarter.
Overall on operating earnings P. PNR easily reached a new record, reflecting that strong organic growth and a continued stable and strong net interest margin. This quarter again, we were right at about $3 70.
Have to tell you, although not completely unexpected I was quite pleased with how the results turned out for the quarter in particular that large amount of growth combined with a stable margin.
Spreads on new loan originations have tightened my initial outlook was the more we grew the balance sheet. The more compression we would have but it turns out we had close to no compression on a core basis.
I know all of you out there live and die by five basis points, but there is easily plus or minus five basis points of natural volatility in nims for all banks and keep in mind, our margin never compressed over the past few years, we have maintained margins at a very profitable level for an extended period of time.
Our attribute our NIM performance and stability to pricing discipline to stability and pricing discipline from our lending team combined with relationship banking in other words, the building of the deposits along with the loan growth.
The metric I'm watching is our efficiency ratio, we have reported and we've guided our expense growth has been accelerating especially as we add significantly to staff reward our people with incentive compensation and continue to make technology investments, but even with that double digit growth in opex. Our efficiency ratio has remained very low decreasing it.
Again, this quarter to $38 four.
Let me turn to some details on the quarter and I'll conclude with some comments on our outlook and give you guys. Some guidance. So once again, a truly remarkable quarter highlighting the strength of the organic origination franchise, we've built here over the past decade.
Deposits led the way this quarter growing by a record 700 million or more than 10% sequentially. We were very effective at repricing deposits in terms of both magnitude and timing.
That served to not only retain deposits, but also attract new clients and we expect that a large majority of those new deposits will benefit us going forward.
We believe most will stick and some will evolve into larger relationships and in any case, the deposit growth and a good portion of it was Cds and a fixed duration of our liabilities, helping to protect the margin over the next year.
Loans.
They grew by eight 5% sequentially the growth reflects not only strong market conditions for bank lending in general, but also our culture, our new hires and our geographic expansion.
As you know rates have risen dramatically, but duration matched spreads have been tight by historical standards, probably do more than anything else to the weight of the speed of rate increases essentially the beta on loans.
We have had success, probably a little better than most on driving origination rates higher there is still room to go even though as Frank mentioned, our rates are already cross well above 6% in the fourth quarter. So we do expect continued upper moving on loan pricing and wider spreads as we finish out the year and head into 2023, we all know the set of set to continue.
Year to raise short rates, but hopefully will longer and will be less volatile. We of course will continue to monitor that.
With that in mind, we will continue to grow as we always have that is with a focus on relationship banking, which includes deposits virtually all loans originated this quarter had at least some deposit relationship.
The overall segment composition of loan growth was consistent for Kinect one although construction remained about flat and thats typical construction when rates are rising.
And just give you a little more color, 75% of the loan growth was from our traditional markets and existing clients, while about 25% of it.
It came from new hires new markets, such as Florida, and new verticals, such as franchise, our healthcare lending.
For the quarter about two thirds of the growth was CRA, while one third was commercial including owner occupied we've maintained strict underwriting standards with regard to ltvs cap rates and stress debt service coverage ratios.
Okay.
Now turning to the margin and net interest income and there is always moving parts here. So let me just reset the landscape a little bit as a reminder, the second quarter included $3 5 million of favorable nonrecurring items in our NIM. So our core margin declined by just a few basis points, but more importantly reported.
Net interest income increased by three 5% sequentially.
And if you adjust out those special items on a core basis that incur.
<unk> increased by eight 5% sequentially or.
Our net interest margin remains very strong relative to both the industry and to our own historical standards and is driving solid performance metrics, including <unk> return on equity and assets and the efficiency ratio.
Our static core balance sheet has been and is well immunized in other words, we've been successfully aimed for interest rate risk neutrality, our business development team combined with our Treasury team has done a great job maintaining a strong net interest margin throughout the full cycle of the pandemic.
And our view of the beta on our core deposits has remained quite low below 20% per our calculations any beta above that typically comes from new growth, which we monitor religiously and had been effective in minimizing.
Lower beta performance and many other banks also reflects deposit run off at those banks. So the comparison to us is a little bit apples to oranges.
Turning to noninterest income at about three 5 million for the quarter. It was lower than typical both lie is contributing about 400000 per quarter now of fee income that continues to grow gains on sale of loans decline as this quarter was only represented only by SBA, where there were no residential and CRE sales this quarter.
As I mentioned before we sell CRA strictly on an opportunistic basis and we've had we have some in the pipeline today, so you'll see some gains in quarter four.
Okay.
In terms of expenses as I've mentioned before we continue to hire talented staff and that along with wage inflation has caused a sequential increase at about 5% per quarter I expect that to moderate a bit in quarter four.
And for those that are out there I know as well our best in class efficiency is based on a branch light model technology and revenue growth.
And in terms of credit quality and seasonal provisioning.
All signs remain positive charge offs with next to nothing same is true for delinquencies, we have less than $1 million in 30, plus day delinquency at quarter end, that's point <unk>, 1% of loans.
Non performance continued to decline in taxi medallion reserves are trending towards the recovery there were virtually no additional reserves for any specific credits.
Provisioning was elevated in the quarter, increasing our reserves by about $10 million gives.
Given the growth in that basically maintain our reserve for loan percentage of 116 actually it was a couple of basis points.
$6 million of the $10 million of the reserve supported growth in the portfolio. The other 4 million came from macroeconomic factors, namely a reduction in the forecasted GDP growth and the biggest impact for US there was in the C&I segment.
In any case, we think it makes sense to be building reserves at this time, notwithstanding the strong credit metrics with connect one and for the industry in general.
And finally, I do want to mention our tangible book value creation creation, which is up 30% over the last 10 quarters and that reflects both our strong earnings and management of the Securities book.
Our securities available for sale, which is the way it should be the portfolio as a source of liquidity, we refrain from purchasing securities in the Pan during the pandemic when rates were low.
And we only we started purchases recently at today's much higher treasury levels.
We also have in place hedges protecting about half the portfolio and with that we offset about $50 million and pretax securities devaluation. All in all the securities devaluation represents less than 4% and tangible capital.
Our tangible book value per share is now up 10 consecutive quarters to about $21 per share.
Looking forward loan growth is expected to slow to an approximately 10% annualized rate in the fourth quarter. That's based on our actual pipeline could fluctuate by the level of prepayments.
We are attributing the decline in growth to a slowdown in demand, resulting from higher rates loan growth in 2023 will naturally depends on economic conditions.
On the net interest margin side, they're off course, pluses or minuses loan yields continued to increase both in absolute terms in spread terms.
Don't forget 20% of our portfolio pure variable, 40% of it is adjustable and our average rate on originations in the fourth quarter. So far is approximately six and a quarter.
The difficult part of the equation is the cost of funding with continued quantitative tightening and the recent data suggests that the fed is working to actually reduce the money supply there'll be even more competition for deposits. So all in all we could see some moderate compression I think that's true for connect one is also true for the entire industry.
But we still expect increased net interest income in quarter four.
In terms of noninterest income.
Three as I mentioned before represented a low point for US expect continued increases from both ly as well as CRE gains on sale from time to time and SBA income is building and will likely contribute more in the future.
On Opex I did mentioned earlier that we see the expense growth moderating a bit.
We're looking at slower expense growth in quarter, four but that could pick up in quarter. One is company wide compensation increases go into effect.
In terms of provisioning for loan losses, it's a little early to project, but with slower growth I would expect reserve increases to slow down with the caveat that economic forecast can always take a turn for the worse and with that I'm going to turn it back over to Frank.
Thanks Bill.
As you know our team joined the connect one de Novo just over 15 years ago and today now stand at the precipice of $10 billion of assets driven primarily through organic means something we are very proud of you.
Moving ahead, our foundation is stronger than ever and we are prepared and geared to continue to gain market share even with a number of uncertainties hanging over the industry.
We have a dynamic team when that's uniquely accustomed to high growth on both sides of the balance sheet, we have a <unk>.
Scalable operating model that continuously evolves by leveraging technology and we.
New 2023 of the year that will be ripe with opportunities for continued execution of our prudent growth model, particularly given the M&A disruption and our proven success at capitalizing in these moments. We're very excited for the future ahead, our view connect one continues to generate meaningful shareholder value and <unk>.
<unk> is a very compelling investment opportunity.
Thanks, again and at this time, we're happy to take your questions operator.
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One moment, please pull for questions.
Our first question comes from Michael Perito with <unk>. Please.
Proceed with your question.
Okay.
Hey, guys. Good morning, Thanks for taking my question.
Good morning, Mike Rmi.
I wanted to start on the margin I appreciate the color I guess, just kind of conceptually, though and.
Realizing this is kind of a challenging question, but if we just kind of look at the consensus rate forecast that's out there right now and if we look back to kind of a last time rates are rising and where the NIM kind of trough out I guess any thoughts around where.
NIM could normalize assuming that that consensus forecast has some spec credibility here what can I realize there is a big assumption, but just trying to get a better grasp of kind of structurally where you guys think that NIM trend over a multi quarter period.
Maggie Archer by Mike I mean, good question, there's a lot of uncertainty out there we've done a great job of maintaining our margins. If you take a look historically has done a great job of maintaining our margins we focus on immunizing the portfolio and we're very focused on spreads on loans.
And so yes, it could see some margin compression I think I've mentioned before I didn't see maybe maybe we could get as low as $3 50.
But to me that's going to drive superior continued superior performance.
So I just.
You have to remember our margin never compressed.
And so when other banks are taking their excess cash and putting it into new secured new securities and loans at higher rates.
Probably at rates lower than we are originating new assets today.
I'm confident we're on the right track and we're going to continue to drive performance in terms of return on equity return on assets efficiency ratio.
Great. Thank you helpful color and then on the.
On the on the growth side I was wondering if you guys could give a little bit more detail I appreciate the comment in the release about how.
New commercial customers or bringing in deposits with them I mean, any more context, you could provide in terms of like what types of deposits how much.
Any thoughts around that would be helpful. So we try to get an idea of the magnitude because I imagine you guys expect that to continue moving forward is as loans grow.
Well as.
As we mentioned before just about every loan that we brought in had a depositary relationships as you would expect.
One third of the of the pipeline that we brought onboard this quarter that was C&I that meant all of their deposits noninterest bearing interest bearing time deposits the whole nine yards.
In the CRE buckets, it's a little bit harder to bring on those noninterest bearing deposits. We had some success there a little bit easier to bring on some of the interest bearing deposit. So it's really a mix across the board and as you also know typically the deposit growth.
From new clients lags, the closing of a loan, especially in the CRE world buses to.
Close the loan Don and then everybody lags on the deposit side, so theres still a lot of work to be done.
With that large volume of increase in loan origination but.
I think the most important point that we tried to make here is that these are all relationship based businesses, we weren't out buying loans werent out doing things that.
Just to put numbers up on the board we were in fact originating high quality relationships that will bring in deposits, it's never a perfect match.
But in this case, we were pretty happy with the overall moves.
<unk> both in the deposit growth.
The loan growth.
Now let me just add.
The value deposits come from those relationships as Frank said, a mix of noninterest bearing and interest bearing.
Rates that are there.
That add to earnings and add to the spreads we've been proactive on the other side in terms of you saw our CD balances go up.
We always we try to be we're both reactive and proactive we went out and raise Cds under 3%.
We think thats good we lock those rates in right today, I think we're issuing Cds at three in a quarter.
When you mix that whole thing together it leads to a very and combined with the loan origination rates. We're now well over 6% of loans are coming out at 493 and were putting back on at 625. When you put all those things together the margin is fairly stable.
Got it thanks for that and then just just lastly.
Frank I appreciate that the loan growth outlook beyond the next few months here is challenging but just the low double digit number you referenced.
Wondering if you got like what are some of the levers within that that could maybe push that higher or lower I mean are you guys factoring in kind of.
Contribution right from some newer markets and lending offices or or just curious if you could take that a layer deeper for us that'd be great.
Look I think when you look at the third quarter. It really represents sort of everything colliding at one time, we have made so many different initiatives or participated in so many different things over the last let's call. It 12 months.
Both enhanced markets we're in today.
Take advantage of all the M&A disruption that's going on in the marketplace and bring on new talent again, either to bolster existing markets or.
To take advantage of operating in new markets I think when you add the products.
People.
The services and just the way to connect one of those business. It just all added up to a really spectacular quarter now we've made a lot of hires I think we.
We said that.
We had 75 higher than last year.
Over the last 12 months.
<unk>.
Those folks are going to.
They brought a lot of business early on I think those things are going to moderate over time.
We will get back to a more normalized growth rate, but even a normalized growth rate at 10% or so for us for connect one means we're going to be growing over $1 billion in it.
12 month period.
A lot of loan growth.
So that's net by the way so I think everything conspired in this quarter to come together.
All of the different initiatives.
Look I hope we have another I would hope we have more quarters like that but I'm not so sure that's realistic.
No it makes sense and I appreciate you guys taking my questions.
Yes.
Thank you Michael.
Our next question comes from Frank Schiraldi with Piper Sandler. Please proceed with your question.
Good morning.
Good morning, Brian Hi, Frank.
Just on the <unk>.
Mentioned Bill I think you mentioned that 25% of the growth in the quarter was a new markets or new verticals.
Can you just remind us or let us know how much of that was Florida, specifically and just remind us what total balances are.
Around down there in terms of the loan and deposit side.
Good morning.
Florida market has about $180 million approaching $200 million in FERC today.
Okay.
That's been pretty good in those areas.
Okay.
And then.
You mentioned going through the $10 billion threshold probably in 2023.
No I think it's less impactful for you guys and some others in terms of going through that in terms of associated expense, but obviously, one popular way too.
Handle that.
To do it through acquisition.
I'm just wondering if thats less likely just given this environment or just your general thoughts on M&A.
Look we've always been opportunistic when it comes to M&A.
It's something that.
If something presents itself.
Makes good financial sense for us to do we'll do it but I will tell you sitting here today and thinking about how we're going to cross $10 billion market really almost no consequence to us.
We intent when not when we we will just charge ahead and whenever we crossover we crossover.
We are well prepared as you can well imagine.
All the.
What's considered to be additional costs that are baked in relative to regulatory compliance and other systems management are already baked in you don't get rates at this point without having.
In depth thought process around it so those things are already here.
We are.
Mostly a commercial bank and so there is virtually no durbin charge, it's very small.
There are some other small costs FDIC insurance, whatever but overall, we do not expect it to be anything other than a small wrinkle as we move forward through that now if we.
Ahead of M&A transaction at some point in 2023 would that make it a little bit easier, maybe but it's marginal so either way expect us to crossover unless something really dramatic happens.
Right. Okay, and then just lastly wondering if you could just talk about.
Any more color on some of that you talked about the initiatives coming down the pike.
Any more color on that front.
And I know you guys have how the efficiency ratio below 40%, even with the investment.
Just curious if maybe that could pick up.
And the as.
As we look out and think about 2023 pick up.
As you maybe accelerate some of that investment ahead of potential revenues.
Well look.
I think it's been very clear that we intend to keep growing and taking advantage of market opportunities as they present themselves now.
It's not.
Generally not a straight line and sometimes more opportunities present themselves. Then you feel like you're prepared for or there could be somewhat of a drag at any point in time. So it could be lumpy. So we have condition to everyone understand that we might cross back over 40% efficiency ratio. If we if there are really great opera.
<unk> for us in the marketplace I'm very proud of the fact that thus far we've been able to take advantage of all the opportunities that we thought made sense for us to do and at the same time continue growing our revenues in such a way that our efficiency ratio has remained below 40%.
That's the ideal place, where we want to be I think you could do the math pretty easily and see that if we stopped investing in the future we could get our efficiency ratio is significantly lower.
But that's not part of our model, we need to prepare the company for the future.
Making both technology and.
People focused acquisitions over time.
So yes, it's possible that the efficiency ratio could bounce around a little bit.
But overall the trend is down as add ons is lower the balance sheet gets bigger in the revenue opportunities get higher in the more we're putting focus you mentioned.
On noninterest income.
Type projects those things keep picking a theme I think both why as we sit here today is probably close to double where we started with it.
Three years ago, the SBA Division started zero and it is now a fairly decent contributor to noninterest income and that continues to grow.
And there are a lot of other.
Smaller opportunities that we're seeing at this time and investing in that may be not contributing necessarily to the bottom line, but will over time. So we're pretty confident that as time goes on that diversification of that income stream.
And the growth of revenue will keep that efficiency ratio below that 40% range.
Yes.
Okay, great. Thanks for all the color.
Thanks Frank.
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Our next question comes from Matthew Breese with Stephens, Inc. Please proceed with your comps.
Question.
Good morning, everybody.
More on that.
I had a bunch of questions. So if I go on too long just please let me know.
When you said NIM.
And you said that it may get as low as $3 50, I just wanted to make sure I understood.
You are right. There were you referring to perhaps like a full cycle trough NIM or a worst case scenario or is that indicative of what we should expect in the fourth quarter.
Oh, no not the fourth quarter I still see a stable margin, maybe compressing a little bit, but I'm, just thinking about the whole market out there and that.
Money supply is getting tighter and tighter and everyone's going to be affected by it.
And so I think youre going to see a trend of lower margins at some point.
I'm just trying to give you guys an idea of how low I think it could go and Thats based on the spreads on our new business and the ability to bring in deposits and so it can't get it can't get below that because that's our way of doing business. That's how we price our business going forward, but.
Next quarter now that.
That's more out of few quarters okay.
And then in terms of deposit funding.
Can you maybe just give us some idea of the near term sources and whats. The CD effort. We saw this quarter more of a in your mind kind of a onetime effort get ahead of price increases.
Yes, right. We wanted to get ahead of price price increases and we think thats going to work out really well for us as I said those deposits are they have a duration of about one five years. So we actually locked in some cheaper funding.
As the fed raises there'll be there may be more opportunities to do that.
So that's part of the strategy, but the most important thing is bringing.
Bringing in relationship deposits, because thats, where the real.
The funding spread.
Spread boost comes from.
Talk about spreads on loans.
You know we've talked about this before.
We're very disciplined in looking at what the marginal cost of match duration funded.
Cost sock.
Anything that we get in terms of deposits of those relationships adds to the spreads.
Understood and maybe along those lines you talked about new loan yields coming in and that kind of over six 5% range.
Not that long ago rates were kind of three 4% in your market.
As you refi old customers from those low rates into something higher 6% yields would have you, particularly in commercial real estate and multifamily how our debt service coverage ratio is reacting.
Up to the higher rates and then when you do stress the new paper.
What are you stressing for in terms of cap rates or.
Yeah.
Rates on top of the 6% and how are customers reacting to that.
No.
Matt cap rates as you would well expect are up fairly significantly from a year ago.
The our stress models are probably about the same meaning we have the same level of.
Basis points up when we put them in the stress model what.
I don't think enough people are giving credit for is that most multifamily.
<unk> that we finance have seen rent increases of over 25%.
So.
While that operator, when they re finance that project, let's say this year or next year, we may not be able to pull out a lot of cash debt service coverage ratio is going to be.
Well in line with with where we started let's say three years ago or so so we've seen a good rollover.
<unk> track record for the projects that we have keep in mind.
A fair amount of the projects that we financed either were construction projects that we started.
So we're at a lower LTV or they were purchased money in which case again, the LTV was probably low.
The most of the.
The biggest portion of our multifamily portfolio comes from purchase money mortgages.
And so we've been in a good place with strong <unk>.
Capital Cushions are equity cushions in those in those properties.
And with.
Again with a rapid rise in rents over the last I don't know 12 18 months.
The numbers are still looking pretty good now again theyre not looking as great as they were a year ago, where people were able to.
Get lower rates and take out additional cash.
Yes.
There's a lot of pressure there in that part of the marketplace, which is why I think.
Entire multifamily market has slowed down dramatically.
Understood Okay.
And then two other items.
Thank you had mentioned NIM is and that could get up and running early 'twenty three.
Could you just I don't know.
It provides an update on where that partnership is heading I think the way you last described it was it was a new core being brought on for specific purpose to standup, a particular vertical but I don't really I don't really have the details as to what the vertical is what the purposes.
So as I mentioned, a little earlier this morning, we.
Branded that vertical that's going to be called venture on and it will be focused on tech.
Tech type companies.
Generally that are venture backed that typically carry large deposit balances and so we'll be going after that segment.
Or that industry.
And.
We are building together in partnership with Nimbus, a very bespoke deposit gathering model that takes into account what those businesses need in order to flourish in order for them to do their business and not have to worry too much about their banking needs.
Could you better describe the.
Types of deposits, whether they will be.
Noninterest bearing or interest bearing and then generally when you provide.
Deposit services for the venture industry Theres lending along with it will you be providing that.
So again it'll be a full banking relationship that we're envisioning and that would include all the various types of deposits and if there are lending needs of course that would be.
We would consider but we believe that this vertical the way in which we're attacking it is going to be.
Much more deposit rich and less reliant on lending most of the things we do here connect one lead with our lending. This is really one of the first places where specifically designing products to lead with the deposit gathering capabilities.
Okay.
Okay and then the last one Frank you'd also mentioned a couple of hires in the healthcare segment.
I haven't heard you talk about the segment in a little while maybe provide some updates types of loans geography size of that portfolio.
Yes.
Yes, I mean, we've been in the health care space for quite a while that includes all the various.
Whether it's senior living assisted living skilled nursing.
Right down to doctors nurses dentist you name it.
But we've always had.
In the area here that works.
Not always but certainly over the last number of years, we've had a number of folks here that work in that space.
We had the opportunity because one of the mergers in our market to lift out of the entire team that specialize their hat.
Fairly decent size book of business.
And they are coming on board or have come onboard and are helping us to build out that entire space from pretty much it.
So we're pretty excited about that it is.
As you know a lot of these operators we focus on operators that are located within our geography, but generally those operators will have assets outside the market and we're okay with that.
So we will see assets that are outside our primary market area, but generally for operators that backlog within our market area.
And Matt if you wanted to know right now we have about $200 million in Outstandings in that healthcare group and 30% to 40% of it is deposits associated with it.
Great. Okay, I've taken up enough of your time I appreciate it. Thank you.
Alright, Thanks, Matt Thank you.
Okay.
Yes.
Okay.
Yes.
I was going to say thank you.
I really appreciate everyone's time today, and we certainly look forward to speaking with you again at our year end conference call, which will be held in early 2023.
So thank you.
Yes.
This concludes today's conference you may disconnect your lines at this time, thank you for your call.
Anticipation.
Okay.
Okay.
Yes.
[music].