Q4 2022 Horizon Bancorp Inc Earnings Call
Good morning, everyone and welcome to the Horizon Bancorp conference call to discuss.
Actual results for the fourth quarter and full year of 2022.
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Before turning the call over to the management. Please remember that today's call may contain statements that are forward looking in nature.
These statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from those discussed including those factors noted in the slide presentation.
Additional information about factors that could cause actual results to differ materially.
And then the horizon current 10-K and later violence.
In addition management may refer to certain non-GAAP financial measures that are intended to help investors understand horizon's business.
Reconciliations for these measures are contained in the presentation.
The company assumes no obligation to update any forward looking statements made during the call.
If anyone does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, you can access it at the company's website at Www Dot Horizon Bank Dot com.
Representing horizon today, our chairman and Chief Executive Officer, Craig Dwight.
President Thomas frame EV.
B P and Chief Financial Officer, Mark C Corp.
V P of Chief commercial banking officer, Lynn Carver, and EVP, and CFO of retail and mortgage lending officers, though in a horror.
At this time I would like to turn the call over to Mr. Craig Dwight Chairman and Chief Executive Officer, Thank you and over to you Sir.
Thank you Rocco and good morning.
Thank you for participating in Horizon Bancorp fourth quarter earnings conference call. Our comments today will follow the Investor presentation and press release that we published yesterday January 25th.
Horizon is pleased to report record earnings for 2022 in fourth quarter that continues our momentum into 2023 with strong commercial and consumer loan growth efficiencies gained from closing seven offices.
And effective expense control the challenges during the quarter, where the magnitude and velocity with the short term interest rate increases by the federal Reserve's open market Committee and the corresponding increase competition for deposits, which drove our cost of deposits up at a faster rate in the fourth quarter.
The outlook for 2023 calls for the Federal Reserve Bank has slowed the pace and magnitude of raising the beds targeted interest rate with an expectation that our deposit betas will also moderate during the year.
In addition, we see 2023 is a transition year as we continue to focus on reinvesting cash flows and maturing loans into higher yielding assets.
I'm starting on our presentation slide deck number for horizon met or exceeded most of our 2022 goals as announced in fourth quarter 2021, and revised upward in the second quarter of 2022 total loans, excluding P. P P and sold commercial loan participations.
<unk> 14, 6% for the year led by consumer and commercial loan growth of 36% and 11, 4% respectively.
Thomas Kramer President will provide more detail on horizon's loan growth in a few minutes.
Other notable horizon financial metrics for the year include return on average assets of one point to 4% and return on average equity of 13.66% given.
Given the size of our balance sheet efficient operation talented work force and solid additions to our team.
It is well positioned to capitalize on significant organic loan growth as we focus on shifting our balance sheet to higher yielding assets and continue our disciplined approach to expense control.
So why invest in horizon Horizon continues to report solid returns with a low credit risk profile due to our diversified balance sheet excellent liquidity and low cost core deposits.
Horizon historical credit metrics, even during the great recession have outperformed the U S commercial banks as a result of consistent underwriting and active portfolio management.
Horizon's deposit mix has improved compared to our pre pandemic deposit mix as a result of the stabilizing of prior year's 14 branch acquisition and good organic growth.
We are located in attractive Midwest growth markets, where real estate values are not as volatile as in other areas of the country and where our manufacturing outlook calls for continued expansion.
[laughter] regional infrastructure improvements are attracting record inflows of private investment to Indiana, and Michigan and include the commuter rail expansion in North West, Indiana, knowing that a double track in waste West Lake County extensions, which is forecasted to have multi million dollar billion dollar a positive economic impact.
Northwest, Indiana.
The investment in quantum of communication lines between Chicago Lafayette in South Bend, Indiana.
Indiana 6 billion dollar state surplus with plans to increase infrastructure spending.
Outbound migration by Illinois businesses and residents as they move into our attractive markets due to our quality of life affordability and lower taxes.
Horizon has a proven history of organic growth supplemented by strategic strategic acquisitions as evidenced by our compounded annual growth rate.
Four.
2000, 2000, 2002 to 2022 for average assets at 12, 7% and net income at 15, 2%. In addition, horizon has historically outpaced the change in G. D P, which clearly demonstrates our ability to add market share and attract talent and grow organically.
This is further supported and reviewing Horizon's top 10 deposit markets fiber entered into via acquisitions and five represent our legacy or de Novo markets, India acquired markets, we increased market share over time, which results of hiring and retaining local talent and our disciplined approach to market development.
Since 2010, our legacy in de Novo markets have also demonstrated our ability to increase market share.
A key long term focus for horizon as digital transformation horizons advantages in technology over other community banks include our in house, cerium and core platforms, resulting in a lower cost per transaction than our peers and the ability to expedite the onboarding of new Fintech partners and flex.
Built in data management by not relying on a core service provider.
<unk> is able to select technology partners based on best in class and who can deliver strategic products and services at the best price with the optimum flexibility.
Our in House core strategy has also proven very effective for integrating acquisitions, including our most recent 14 branch deal.
As a result of our investments in technology, our digital transactions increased from 44% in 2018% to 70% of total transactions in 2022.
We increased online consumer deposit account openings to 19% in 2022, and 84% of our online chats are answered by our program box.
[noise] horizon managers, and deploys capital efficient efficiently as evidenced by our most recent completed integration of 14 acquired branches and continuing focus on organic growth in 2022.
Through the fourth quarter in Horizon Bank continues to report strong regulatory capital ratios with succeed the regulatory definition for well capitalized banks.
In addition, horizon is a consistent dividend policy as we fully expect to continue our 30 year plus of uninterrupted quarterly cash dividends, we last increased our dividend in the second quarter of 2022 reporting a six 3% an increase from 15 to 16 cents per common share, which represents our 10th dividend increase in the.
Past 11 years.
Horizon's historical dividend increases are aligned with earnings growth sound capital management and as of December 31, 2022, our dividend yield was attractive at four 2%.
Now I would like to congratulate Thomas frame on his recent appointment to Chief Executive Officer of Horizon, Bancor, Inc, and Horizon Bank effective June one 2023, we're delighted with his addition to the team with Big Bank experience and passion for strategic planning technology and focus to move the company forward.
Just frame in our senior leadership team has what it takes to continue the bank success. It's now my pleasure to introduce Thomas Crane Thomas.
Thank you Craig and I appreciate the comments.
As mentioned previously it was another solid quarter in total loan growth of $145 million or just over 12 point, 12% annualized that's excluding or P. P. P installed loan participations, highlighting the quarter was our commercial balances increasing $63 million or just over 10% annualized.
Net commercial loan fundings of $98 million was well balanced across our commercial asset classes and our markets. The.
The commercial loan pipelines position at $134 million and continues to provide confidence in our ability to generate mid to high single digit growth in 2023 with yields continuing to increase as new production replaces our paydowns and payoffs.
As we transition to slide 16, consumer loan balances increased $49 million or 21% annualized as we discussed in Q3, the short term nature of the consumer portfolio creates opportunities to ship loan growth to higher yielding assets.
Q4, we enhance the pricing structure of our indirect lending increasing production yields and slowing the historical portfolio growth. This strategy was coupled with an acquisition of high quality variable rate home equity loans that provided over 300 basis points and improve yield when compared to the indirect portfolio. These.
These loans are also well positioned with higher floors to protect against potential down rate environments, we anticipate having similar opportunities throughout 2023, as we leverage the diversity of our loan.
That form and manage new origination yields.
Looking at slide 17, with mortgage our Q4 production and fee income results aligned with industry trends and the team also completed proactive steps to further reduce staffing levels and overall costs relative to volumes.
Mortgage warehouse balances also reflected current industry trends at 69 million down slightly <unk> 4 million from Q3.
In concert with the consumer portfolio, we continue to be smart in our balance sheet deployment with mortgage balances growing about $18 million in Q4 with higher new production yields compared to payoffs and Paydowns looking.
Looking at Slide 18, our credit metrics remained strong as evidenced by our 0.0% to 1% charge offs and loan nonperforming loans in the quarter and also the last several quarters. Additionally, our allowance for credit losses is well positioned at one point to 1% of total loans.
This is down from one point to two 7% in the third quarter. This is primarily due to low historical charge off levels and improvement in specific segments adjustments such as hotels that was offset by increased allocation for consumer loans and indirect auto.
As we look at slide 19, Horizon's historical credit metrics display our ability to outperform the market during the previous economic cycle.
We attribute this to our consistent and conservative underwriting practices as Craig mentioned earlier, the strength of the markets, we serve and the talent within our local bankers and credit teams as.
As this graph shows the performance of our credit metrics lessens the impact from credit cycles, and we exit the cycle at a faster pace.
We moved into a fluid economic environment, we feel confident our current credit profile, where produce very similar results at this time I'll transition to mark for highlights into our financial highlights.
Thank you Thomas.
Verizon reported a solid quarter for net income and loan growth as interest rates continue to increase in the competitive landscape for funding and pricing intensified.
Starting with slide 21.
Fourth quarter net income results were primarily impacted by lower net interest income offset partially by improvement in noninterest income and expenses compared to the third quarter.
Annualized total loan growth of 13% excluding P. P P loans and sold commercial participations with a strong contributor to the quarter.
Slide 22, the company's diversified business model has provided leading returns over various periods.
Over the last 10 years Horizon has produced a return on average tangible common equity greater than peers, 71% of the time and was 35% less volatile.
This was through economic cycles, including the recovery from the great recession, the pandemic shutdown and reopening.
In addition, during the last three years through September 30, 22 peer data horizon B K Rx index core return on tangible average tangible common equity and return on average assets of 92% and 85% of the time respectively.
Slide 23.
As deposit betas increase during the quarter deposit balances remain flat.
However, we are experiencing movement from lower cost deposit products to higher yielding money market and C. DS.
<unk> and the balance sheet continuing to be liability sensitive.
As a result at an up 100 basis point parallel shock as of December 31st we model a decrease in net interest income of approximately $5 1 million or 2.48% over the next 12 months.
During the quarter core net interest income declined approximately $900000, excluding the change in loan fees purchase accounting and dealer reserve amortization, which was in line with the modeling at the end of the third quarter.
Contributing to these results or the expected deposit betas used for rising rates, which currently range from $6 five per cent for consumer deposits to 60% on public funds with an average beta for non maturity interest bearing deposits approximately 31%.
The actual data for the fourth quarter was 24% for non maturity interest bearing deposits compared to 23% in the third quarter.
<unk> C d's the beta for this interest rate cycle has been 24% with a projection of interest rates, peaking in the first quarter of 2023. The estimated full interest rate cycle beta is estimated to be 28%.
We have approximately $2.2 million of assets, representing 30% of earning assets, which are expected to reprice within the next 12 months.
Included in this estimate are adjustable rate loans, representing approximately 90 million that adjust immediately.
900 million at adjust immediately with short term rate moves and additional 400 million that adjust within 90 days and 60 million that will adjust throughout the year.
Estimated remaining $840 million in assets that will reprice.
Represent investment cash flows principal loan payments and prepayments and loan maturities.
Liquidity is forecasted to fund the growth in our higher yielding originations and increase overall portfolio yields.
Slide 24 during the fourth quarter, we determined that a revision for the treatment of the indirect dealer reserve asset and the related amortization expense should be made to prior periods.
This revision has no impact to net income or total assets.
He was determined to be immaterial.
As a result of this revision decrease other assets for the dealer reserve asset on the balance sheet and increases total loans.
On the income statement the amortization expense of the dealer reserve asset currently expense noninterest expense and loan expense is now recognized as a reduction to loan interest income that reduces the net net it reduces net interest income.
As a result of this revision reduces the net interest margin and reduces noninterest expenses.
All prior periods have been revised for this revision.
The details are included in the press release and the presentation for the change to the balance sheet income statement and ratios.
Slide 25 in the fourth quarter. The adjusted net interest margin decreased 16 basis points and adjusted net interest income decreased by $2 6 million, primarily due to $1 2 million in lower loan fee income and $490000 higher amortization of the dealer reserve asset compared to the third quarter.
As I previously mentioned the remaining 900000 was due to the increase in funding costs.
There is volatility in the recognition of purchase accounting loan fees in the amount of dealer reserve amortization that will affect net interest income and the margin.
With the pace of rate increases anticipated this slow and potentially stabilizing and decreasing towards the end of 'twenty. Three we believe that horizon is nearing the low end of its margin and is expected to begin to stabilize over the next two quarters. This will be the result of assets continuing to reprice, replacing the asset cash flows into higher yielding.
Assets.
To grow interest, earning assets and the stabilization of short term borrowing costs.
Slide 26, our stable deposit base continues to provide core funding as rates hasn't have rapidly increased the increasing betas and some deposit flow from lower cost to higher cost products has increased funding costs, but they still do.
Excuse me they still provide a strong spread.
She was the earning asset yield.
3.88% for the quarter with a total cost of deposits of 71 basis points.
By maintaining a disciplined approach with deposit pricing. The total cost of deposits increased 43 basis points during the quarter compared to the average fed fund rate increase of 147 basis points, while deposit account retention remains strong.
Slide 27, the COO.
Core funding mix, which is non interest and interest bearing deposits has remained stable and is slightly improved compared to the pre pandemic funding at the end of 2019 core funding was 65% of total funding at the end of 2022.
We're funding was 68% of club total funding at the end of that at the end of 'twenty three a 3% increase.
Stimulus money the branch acquisition in 2021, and the long term customer base have all contributed to providing consistent core funding.
Slide 28.
Lower unrealized loss on available for sale securities in the fourth quarter helped to increase tangible common equity from 6.25% at September 30th% to 6.56%.
December 31st.
This is a result of the inversion in the yield curve, reducing the unrealized losses on the longer duration F Fs investments.
Because we have the ability and the intent to hold all investments to maturity. These unrealized losses are expected to decline over time as investment pay down and mature.
The bank's regulatory capital is strong and exceeded the regulatory definition for well capitalized and well continue to fund our growth without restricting our ability to utilize our capital to fund organic growth in the future.
Slide 29, noninterest expenses were 1.84% of average assets for the quarter compared to 1.91% last quarter.
This was partially attributed to the reduction of direct expenses from the changes in business cycle, including mortgage and indirect lending.
These expense percentages reflect the revision for the dealer reserve expense.
Expense management will continue to be a focus in 2023 to help offset lower revenues.
Slide 30 as competition for funding has quickly increased in the latter part of 2022 and expect it to continue into 2020 three there's an increased focus on balance sheet liquidity due to the structure of our balance sheet, which includes the majority of our investment portfolio Unpledged, we have approximately $2 $7 billion of available liquidity from borrowings.
Brokered Cds and Unpledged investment.
And this time of uncertainty safe and sound liquidity provided additional strength to our balance sheet.
Now Craig will provide some final thoughts.
Thank you Mark to summarize horizon Bancorp's key franchise highlights horizon as a growth company as evidenced by our 20 years of compounded annual growth rates for net income and total assets of 15.2% and 12, 7% respectively.
Our balance sheet has a diversified loan portfolio with the product mix in geography, with ample liquidity and cash flows to fund future growth into higher yielding assets.
<unk> asset quality has historically outperformed the industry in varying economic cycles.
The combination of Horizon's historical solid returns on average assets and average equity our ability to increase market share in our top 10 markets and weather varying economic cycles, our diversified balance sheet and current high dividend yield I'll provide support that we have an attractive long term investment.
This concludes our prepared remarks today and now I'll ask the operator to please open it up for questions. Thank you.
Thank you we will now begin the question and answer session.
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Today's first question comes from Terry Mcevoy with Stephens. Please go ahead.
Hi, good morning, everyone.
Morning, Jerry Good morning, Hi, Craig.
Craig just maybe a question for you in your prepared remarks, you talked about 2023 being a transition year and.
Were you just specifically talking about the margin outlook and the interest rate sensitivity or should we read into that more than more than just a the margin.
No. It was focused in the margin sensitivity as well as the transition to a new CEO . So a boat.
Okay. Thank you.
And then maybe you talked about mark that the margin kind of bottoming out I was wondering if you could maybe frame some expectations about the first quarter based on the interest rate environment, and the forward curve and and maybe specifically.
Specifically net interest income when do you think that that is positioned to bottom based on kind of the loan growth in the outlook you just ran through.
[noise] Yeah, Terry Thanks for the question I think as we're going into the first quarter, we will see additional pressure with the conditional hopefully smaller rate increases.
We are because we have the borrowing side. The short term we impact that most of that impact hit US you know with all the rate increase through the fourth quarter and our spend rate sensitive deposits are also a move.
Well move during the quarter.
So we would anticipate you know less although it when you're getting to the end of the cycle the betas on the on.
On the rate increases are higher which is why we see that the the cycle beta right now is about 24% and we see it increasing to about 28% for the full cycle I'm, assuming that rates will will flatten out or the rate increases will flatten out in the first quarter. So I think the first quarter as it is the challenge and then as our assay.
To reprice going into the rest of the year, we would anticipate to see the stabilization and improvement.
Improvement could be as assets reprice.
And then maybe just one last quick one.
The CET one is really strong at 13.6 and nice to see some recovery in the in the TCE ratio.
When the stock at one three of of book you know it is a buyback being discussed at all.
Yeah, I think as we and Craig Thomas you can comment too I think as we see stabilization in the economic factors I think that is a discussion to have and Ah, but we wanted to see if we wanted to make sure that we have a good outlook for <unk>.
For credit and economic issues.
Right and I should have said welcome to the call Thomas and thanks for taking my questions.
Thank you thank you Terry.
And our next question today comes from David Long of Raymond James. Please go ahead.
Good morning, everyone.
And let me say congratulations Craig as well on the on the planned retirement and Thomas to adding the CEO role. So congratulations to both of you.
My question is looking at the deposit base here and you're at 22% and noninterest bearing.
Or where do you see this going over the course of the next couple of quarters. When you. When you think about a couple of more rate hikes baked in.
Thanks for the question. David This is Thomas we anticipate that our noninterest bearing portfolio directly will be relatively flat quarter over quarter. That's a very granular portfolio on the consumer side, specifically as we brought in some of the new assets are the new teams from Tcf. It does have a.
A little bit of volatility with some seasonality around the public funds, but I'd say on an average average quarter basis, it should be relatively consistent.
Yeah.
Great. Thanks, Thomas and then.
Thinking about the borrowings obviously up up year over year loan growth it sounds like or loan demand still seems like it's prevalent if you. If you do have a flat environment well how are you going to fund that Willie you well your use of F. H L B increase and where do you see overall the borrowings as a percentage.
Ah as you move through the year this year.
Yeah.
It's two fold.
Cash flows from the investment portfolio flowing into higher yielding assets into the loan portfolio will be one funding source to help keep the keep.
Keep borrowings.
Steady through.
Through loan volume growth.
The other is we are trying we have been successful and continue to look at retail C. D opportunities to be able to use the C. DS to fund the growth and to help maintain the the borrowing our goal would be to try to keep the borrowings fairly stable if we can.
They're getting those deposit our deposit flows.
Okay.
Got it thanks, Mark and then just as a follow up when you talk about the cash flows do you have a contractual number that of cash flows that you're that you're expected for expected to see in 2023.
From the investment portfolio, we are right now it looks like it's about $130 million to $150 million in that range. It has slowed and due to our prepayment speeds.
And then what we originally had were seen last year last year into the first part of this year.
So so that would be the cash flows. Additionally, as discussed we've got 840 million of loans that will reprice payments. So forth that includes the investment portfolio that can reprice into higher yielding assets.
Yeah.
Got it thank you very much appreciate it.
Yeah.
And our next question today comes from Nathan race with Piper Sandler. Please go ahead.
Yeah.
Hi, everyone. Good morning, and appreciate taking the questions I just wanted to Echo David's comments and congratulating Craig on your upcoming retirement and Thomas as well on the.
Promotion to CEO .
I guess first question just as we kind of zoom out on the margin outlook, perhaps into the back half of this year, just given our liability sensitive nature of the balance sheet. If we were to get one or two fed rate cuts do you think that would drive some margin expansion under that scenario. How do you guys kind of thinking about the margin trajectory.
Perhaps more.
Okay.
Yeah.
Yeah no. Thanks for the question, Yes, I think the nature of the balance sheet and what we're modeling them with a lag of a repricing on the on the asset side, especially the loan portfolio that.
And that would continue to improve.
And then on the immediate repricing them short term borrowings.
And we would look to be.
As aggressive.
Bringing rates down as we get to the market would allow us. They you know as we have seen an increased here on the deposit side, especially the.
More rate sensitive deposit.
So yes.
Sure.
Okay great.
You have to kind of loan growth environment or the.
Loan growth environment were to soften to some degree.
What potential maybe unwind some of the higher cost borrowings that you guys have brought on balance sheet.
Just to maybe kind of a kind of reduce your overall you know liability sensitive nature of the balance sheet again, assuming kind of overall.
Our loan growth slowed to some degree in 'twenty two 'twenty three.
Yeah, I think we were gonna see you know the loan growth projections and will probably require some funding and like I said I think we would like to see that funding come from a retail side C. DS, but if we had opportunities we would definitely be replacing those short term.
Short term liabilities, our short term borrowings.
Okay great.
But just one last one.
One last one for me just on the kind of reserve outlook from here you know obviously, our credit metrics continue to improve generally in the quarter.
How do you guys kind of thinking about where you.
You can expect a reserve settle out maybe as a percentage of loans or on an absolute dollar basis.
As you.
Oh 2023, progressive been kind of absent any.
Meaningful seasonal adjustments relative to the Q factors.
Good morning, Nathan This is lynn carbon or how are you.
Hi, Linda.
Right so as far as the allowance go you know we continue to work within our model and as you know there's different components to that and drivers.
We are seeing some change in mix as far as you know the outlook for possible recession, so you've seen some.
The increase related to some of the econometrics and as Thomas mentioned earlier.
The overall consumer area and watchful and that.
Meanwhile, we've seen some reduction in some of the commercial sectors that we had heavier allocations on because they've been performing really well and so personally I think the outlook is pretty stable.
But some of that's going to depend on economic conditions of course.
Hum.
And is that stable outlook then you.
You know the economic conditions on a absolute dollar.
Basically on the reserve or whereas the percentage of loans.
I would say percentage of loans.
Okay great.
No.
Thanks again.
And our next question today comes from Damon Delmonte with <unk>. Please go ahead.
Hello, everybody. This is Matt ranked filling in for Damon Delmonte Ah Congrats to Greg and Tom most of my questions have been asked and answered, but I'm just as a follow up to nathan's questions on credit could you provide a little color on your office segment and what types of exposures you have there.
Yes. Thank you we have let me just turn to that page.
We have both medical and general office exposure just for some context, though I know that there's been a lot of focus on office exposure and a lot of the metropolitan areas.
And horizon as you know our primary markets.
Are considered mid size cities, so Grand Rapids, dry eye Indianapolis and those have all been performing very well for us and so I would say overall, there's really been no deterioration.
Haitian and credit metrics and lease rates have been maintained.
And we traditionally have done business with very strong sponsors and I have.
Some conservative loan to values in that space, So it's been performing pretty well for us.
If you turn to page 35, and we've got our office.
Metrics there as of 12, 31, 20 to 164 million and it was 6.6% of our commercial portfolio three 9% of the total bank portfolio.
So not a significant exposure.
Great. Thank you very much I'll step back.
And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.
Next question comes from Brian Martin with Janney Montgomery. Please go ahead.
Hey, good morning, guys.
I'm, Brian good morning.
Hey, just a.
One touch on the expense side of things, maybe if I if I missed it just kind of your thoughts about how to think about expense. I know you guys have talked about your goal on the expense to assets just thinking about that as you go into 'twenty three.
A new target on that that's kind of how you're still thinking about things or any outlook. You can provide on just kind of the expense guide.
Yeah, Brian we still expect it to be I'm under the 2% and and also maybe in the range of.
185095.
The we commented we kept expenses are lower this quarter, some due to the business cycle reduction.
In our in the staff.
In the Montney in those business cycles that are slowed we are that it's going to flow into the first quarter.
A lot of the reduction was done right at the end of the year. So that's going to give some kind of help to expense control and then just an overall just in this environment.
They are a hard look at controllable expenses in.
And wanting to be as cautious as we can and where we're spending so we anticipate that our expenses should should be in that range coming into 'twenty three.
Gotcha, Okay. Thanks, Mark and then just the loan pipeline unless I missed it just kind of your I guess can you just give a little color on just kind of the the.
The different buckets, the consumer the commercial and the residential just kind of how you're thinking about growth.
Growth for 'twenty, three and just kind of the pipelines where they are today.
Okay.
Thanks for the question. This is Thomas and I'll pass it over to knowing to lend to give some color on the on the individual lines of business overall as we exited the fourth quarter, our pipelines, where we're strong.
I was a little bit stronger in the commercial side. The consumer side has seen the cyclical portion of the of the fourth quarter and also they are probably I think in the adjustments that have only seen across the marketplace in mortgage but our pipelines overall look like there and well positioned and continue the mid to upper single digit loan growth throughout 'twenty, three but I'll I'll pass over to Noah to give some additional color.
Yeah. Good morning, everyone. This is nowhere near.
Yes, our consumer pipeline has remained consistent we are.
Our our cyclical as well indirect we expect to remain flat for the most part we are going to see some single digit growth and a direct consumer primarily in the HELOC a portion of our portfolio. Our mortgage we will again remain in the low to single digit growth.
Are expected in the first quarter as well and we will mimic really the industry standards that are being published in the.
The forecast as well.
Yeah.
Yeah. This is Lynne again concerning commercial as we indicated in a day and we are positioned with a pipeline of $134 million as we go into Q1 2023.
This is on following on for the Q4 quarter, which was 126 million gross.
Pipeline, so pretty consistent.
I'm a little bit.
Better actually than what we had maybe anticipated for first quarter with all of the interest rate increases.
Overall demand has been pretty good.
I will say that with the rate increases you know as far as new projects are those are getting a little tighter for some of the developers and so but at this point the metrics are working and we're seeing some continued demand there.
So 10 point, a little over 10% annualized growth in the fourth quarter and for 2023, we're looking at a high single or mid single digits.
So we're looking at that perhaps moderating a bit with the rate environment and the economy, but overall, it's been good growth and good demand and we're continuing to entertain new packages.
Yeah.
Perfect. Thank you for the added color and maybe just the last one or two for me just on the mortgage side.
No he or who but just kind of a dollar amount that we saw and on the gain on sale. This quarter I know the expectations relative to the peers.
Peers.
Hey to outperform but just kind of an in dollars, how we should be thinking about the mortgage operation. This year I mean, it is kind of a base to build off of in in fourth quarter. I think it was just over a little over $1 million.
Or just any any thoughts on your outlook on mortgage.
Yeah. Thank you for the question did the first quarter outlook will be very similar to what we saw in the fourth quarter.
As far as the pipeline, we obviously saw a decrease in our it late in the year with a rising rate environment.
As the the forecast for the for the pricing has stabilized somewhat we still expect a few rate hikes, but so.
So we expect that it will perform very similar to the fourth quarter as far as dollar wise.
Okay, perfect and last one was just maybe for Mark on the on the margin I think he said a little bit lower second quarter and I guess is the yeah. I guess is that the inflection point Mark is the is the third quarter are kind of in your mind today, how we ship it assets begin to reprice are trending higher.
Is that what I'm hearing or maybe I missed what you said there.
No I think that's the trend as it is we have a lagging the asset repricing and we.
We see with the anticipation that the rate increases will stop here and the first our first quarter and let the assets start to to catch up that that that would that would be the trajectory Bryan yes.
Yeah, Okay perfect. Thanks for taking the questions and congratulations to up to Craig and Tom. Thanks.
Thank you Brian .
And ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Dwight for any closing remarks.
Thank you Rocco and closing we'd like to invite you to join US for our 2023 virtual Investor Analyst Day on Tuesday February 21st starting at noon Eastern time, [laughter] registration information will be sent out next week and we will post on the Investor Relations section of our website.
Thank you for participating todays earnings call and we look forward to speaking to you again at our Investor Day Conference now I'll turn the call back over to Rocco to close off the Congress. Thank you.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Okay.
Okay.