Q4 2022 FIRST BANK (Hamilton) Earnings Call
Okay.
Thank you for joining I forgot to welcome you to the first bank My name is pretty cool fourth quarter 'twenty 'twenty Kay.
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A brief question and answer session will follow the formal presentation.
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Now, let me turn the call over to Patrick Ryan President and CEO Pat.
Patrick you may begin.
Okay.
Thank you and good morning, everybody and welcome to our fourth quarter earnings Conference call I'm joined today by Andrew Hibshman, Our Chief Financial Officer, and Peter Cahill, Our Chief lending officer before we begin Andrew can you. Please read the safe Harbor statement.
The following discussion may contain forward looking statements concerning the financial condition results of operations and business of first bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore, you should not place undue reliance on any forward looking statements we make.
May not update any forward looking statements, we make today for future events or developments information about risks and uncertainties are described under item one a risk factors in our annual report on Form 10-K for the year ended December 31st 2021 filed with the FDIC that back to you.
Yeah.
Thank you Andrew I'll start with some high level comments on the quarter and the year I'll turn it over to Andrew to get a little more detail behind the numbers and then he'll turn it to Peter to give a little more background on the lending side I'd say overall I think it was a decent finish to a very very good year. Unfortunately in.
Q4, the NIM expansion that we achieved in Q3 was a row names and we ended up back at margin levels more in line with where we saw savings in the second quarter, but despite the margin erosion. We do have overall profitability levels that remain very strong and we achieved tangible book value.
For share growth of 46 cents, which was meaningful book value growth during the quarter, our asset quality remains very good we saw net recoveries during the period and our level of nonperforming loans remained very very low a return on average assets was down a little bit from the third quarter, but remained very healthy.
1.35%, we continue to bring in high quality, new bankers several new deposit generators were also brought in on the sales side during the year and we're excited about the prospects for those teams as we move forward and we think we'll see continuing apple with operating leverage opportunities as we continue to scale.
Our operations and also look to integrate the Malvern merger later in the year I'd like to highlight the strong performance metrics by while they were down from Q3, I think they still show very very good performance, especially relative to peers a return on tangible common equity was.
13.5%, our efficiency ratio was below 50% for an eighth straight quarter, our pre provision net revenue return on assets was 195% just a little bit below 2%. Our net interest margin has been over three 5% for the past eight quarters, our nonperforming assets to assets.
Remained very low at 23 basis points and overall, our allowance coverage of our nonperforming loans by over four times on the lending side, we saw a 74 million in loan growth during the quarter with over 70% of that new production coming from C&I, we had very strong asset quality with low delay.
Let's see we're building out our capabilities in small business and asset based lending to continue to move our ratios a little higher on the C&I side further diversifying down a little bit from the Investor Real estate category and we've seen gradual evolution of the organization as we've continued to layer in attractive.
C&I lending niches.
Really building the franchise out from a traditional real estate focused community bank into more of a middle market commercial bank.
On the deposit side, we obviously had some challenges overall deposit growth was strong, but we did see a significant increase in our cost of deposits. Some of that was related to the the way the timing of events played out during the quarter as I mentioned, we had significant C&I lending opportunities, we actually had a reduction in <unk>.
Payoffs and Paydowns that we normally see on the commercial real estate side, those two things together and put a little pressure on funding, which caused us to have to increase the rates on our money market and the good news is we were able to bring in over $100 million in deposits and deposit growth during the quarter, but we also.
So a lot of excess noninterest bearing balances move out of the noninterest bearing accounts into interest bearing accounts here at the bank, which gave us the liquidity we need it but obviously it had an impact on our cost of funds and on the margin.
We were expecting some movement out of an IV, although it did happen a little bit quicker than we expected. We think some of that again was a timing issue related to the need to bump up our money market rate in order to make sure. We have the dollars needed to fund the good C&I loan opportunities, but all in all we've made a lot of good moves to make sure that.
We can continue to drive core deposit growth, we did actually see an increase when you look at just new noninterest bearing accounts opened during the quarter, we actually brought in more and new money in new accounts than we saw money, leaving in closed accounts. So again it was a lot of money moving out of.
Of noninterest bearing into interest bearing would impact the margin, but in terms of retaining customer relationships. Our team did an excellent job. So in summary, despite some headwinds emerging in Q4, we had a very good and profitable year in 2022, we realized top quartile performance across key metrics like return on assets.
Return on tangible common equity pre provision net revenue and tangible book value per share growth in fact, our tangible book value per share grew 10% during the year. Despite a lot of challenges on the interest rate side, and we achieved good high quality loan growth and an improved asset quality profile. Furthermore.
We have reason for optimism as we work our way into 2023, we've been able to attract several key bankers that will help us drive core deposit growth moving forward. We've got some nice new C&I lending niches, which will help drive both portfolio diversification and an improvement in our overall commercial deposit balances.
Which will put less reliance on higher cost sources of funds were doing a nice job enhancing our digital banking capabilities to make sure that we remain competitive in that space and we're continuing to see fallout and opportunities from M&A within the New Jersey banking market that we think will create.
Great opportunities for both customer acquisition and banker acquisition as we move into 2023, and finally, the exciting opportunity with the Malvern acquisition too.
Integrate that really drive some size and scale and improve profitability within our Ta franchise and also drive overall improved scale benefits across the entire franchise. So certainly challenges as we look out to 2023, but also reasons for optimism as we look to continue to build and grow shareholder value here at first.
So at this time I will turn it over to Andrew to dive into the numbers Andrew.
Thanks, Matt.
For the three months ended December 31, 2022, we earned $9 1 million and net income or <unk> 46 cents per diluted share, which translates to a $1 35 return on average assets or $1 40, excluding tax affected merger related expenses. The primary factors contributing to the quarterly results were a historically strong but slightly declining net.
Interest margin strong credit quality metrics and effective management of noninterest expenses net income declined $1 $1 million from the linked third quarter, but was up $1 3 million compared to the fourth quarter of 2021 strong commercial loan growth continued in the quarter loans were up approximately $75 million, excluding a small decline in P. P. P alone.
Compared to an increase in non PPP loans of $36 million in Q3 $84 million in Q2 and $65 million in the first quarter of 2022.
Total deposits were up $104 million during the fourth quarter of 2022, that's interest bearing deposits up $184 million and noninterest bearing deposits down approximately $80 million. We continue to maintain key relationships. However, they have become more rate sensitive resulting in movement of funds. We did a detailed analysis of the decline in noninterest bearing.
Bearing balances during the fourth quarter, a very small percentage of the decline related to accounts that were closed and left the bank.
But during the fourth quarter, we did experience several large relationships that maintain significant noninterest bearing deposits moved into interest bearing interest.
Interest bearing products and we saw some normal end of year fluctuations.
Growth in interest bearing deposit balances was due to new money CD and money market promos. We initially initiated during the quarter coupled with the movement of funds I just discussed.
Due to the shift in the deposit mix, the repricing of certain existing customer balances and the new money promos during the fourth quarter. Our total cost of deposits increased 71 basis points compared to the linked prior quarter.
Due to this increase in the deposit costs offset somewhat by the increase in the average rate on loans, our tax equivalent net interest margin decreased to $3 69, 3.69% for the quarter ended Q4, 2022 compared to $3, 97% in the previous quarter.
Decline in the margin in the fourth quarter. It was exacerbated by low P. P. P fee income and prepayment penalty income during the fourth quarter of 2022, excluding PPP fee income and prepayment penalty income.
And would have been approximately $3 six 7% in Q4 versus $3 eight 9% in the third quarter of 2022.
Our asset liability management approach continues to be conservative, but we have taken steps in the fourth quarter or two and plan to continue to shift our balance sheet to a more liability sensitive GAAP position and the current rate environment. We expect continued pressure on the margin in the short term, but we believe the quarterly decline will not be as severe as the decline was in the fourth quarter of <unk>.
'twenty two.
<unk> levels increased slightly during the fourth quarter due to our deposit gathering initiatives. We also we were also able to slightly reduce borrowings and broker deposit balances during the fourth quarter as.
As we have mentioned on previous calls our strong organic loan growth has lowered our liquidity levels, but it's also contributed to our investment portfolio being relatively small when compared to peers the size and low risk nature of our investment portfolio has limited our unrealized losses compared to some of our peers. During the first three quarters of 2022 unrealized losses increase.
But unrealized losses actually declined slightly during the fourth quarter due to our strong net income we were able to increase our tangible book value per share by 46 cents during the current quarter.
Based on net recoveries during the quarter and a strong asset quality profile, we maintained our allowance for loan losses as a percentage of loans to 1.09% at December 31, 2022 compared to the same percentage at the end of September . This was supported by only a very slight increase in nonperforming loans compared to the end of the third quarter.
We are also currently finalizing our seasonal calculation and expect our allowance as a percentage of loans to increase by approximately 5% to 10% upon adoption during the first quarter of 2023.
In the fourth quarter of 2023 total noninterest income increased to $1 4 million from 934000 in the third quarter of 2022, the increase from the third quarter of 2022 was primarily due to an increase in loan fees, which was principally related to a miscellaneous onetime loan fees.
Our SBA loan activity and pipelines continue to be strong. However, sale activity has been slower than expected primarily due to the rising interest rate environment, which has reduced the premiums earned on sales and in most cases, we are attaining the loans on our balance sheet loan swap activity was also continues to be slow.
While noninterest income levels may continue to fluctuate we do not expect a significant increase in noninterest income over the next several quarters.
Annualized Q4, 2022 noninterest expenses were 1.84% of average assets or $1 78 per cent exclusives and excluding merger related expenses compared to a peer average of 2.11% and total noninterest expenses were $12 5 million in the fourth quarter of 2022 up 702.
8000, or six 2% compared to the third quarter of 2022. The increase was primarily due to merger related expenses associated with the merger agreement will be finalized in December and higher salaries and employee benefits excluding merger related expenses noninterest expenses increased only 2.4 per cent compared to the linked third quarter.
With a difficult interest rate environment, we continue to be laser focused on expense control, but we do anticipate our quarterly expenses will continue to increase slightly from the core Q4, 2022 levels as we continue to add the staff and inflationary pressure continues to affect other expense items.
While we believe the current interest rate environment will continue to put pressure on our margin. We are still generating historically high levels of net interest income and operating efficiency results. We believe we can continue to generate core loan and deposit growth and combined with very strong credit quality metrics and effective management of noninterest expenses, we are well positioned to continue.
Our strong core profitability trends into in 2023.
This time I'll turn it over to Peter Cahill, our Chief lending officer for his remarks Peter.
Thank you Andrew.
I'll try to provide some additional information not already covered by pad where Andrew.
From a lending perspective, 2022 is pretty clean from the standpoint of noise.
Noise in the numbers my comments will focus only on organic results.
P. P loans as Andrew mentioned, though are about done with slightly over $3 million or so remaining and they're paying as agreed.
Regarding the fourth quarter I think the results were excellent.
Approximately 29% of our growth for the year took place in Q4, just slightly behind Q2, our largest quarter, but up nicely from the third quarter, which was the slowest.
Total loan growth for the year again absent P. P. P was around $260 million. This exceeded our total loan growth goal.
200 million by 30% and overall kept us in double digit loan growth for the year.
Loan generation continues to be good in all areas of the bank one thing of interest as the new loans closed and funded during the fourth quarter declined from an average of $126 million in the first three quarters of the year to $83 million.
In Q4.
There were a number of factors at play here.
First we were well ahead of plan throughout the year, which meant we could be a bit more selective.
Also through the first six months loan growth was weighted towards Investor real estate loans. So again, we were selective about what we pursued in the second half of the year and into the fourth.
Quarter.
Then with the impact of the economy or interest rates, helping cool loan growth on the investor real estate side, but we experienced a reduction in loan pay offs, but I think both Pat and Andrew mentioned during the fourth quarter.
All of this resulted in good growth in the C&I side of the portfolio for the quarter, which brings in as you know more floating rate.
Loans as well as relationship deposits.
Payoffs in the fourth quarter totaled only $14 million.
Care to a $177 million or a quarterly average of $59 million per quarter. During the first three quarters of the year.
The total.
Total for the year C&I and to a much lesser extent consumer made up 47% of all new loans closed and funded and Investor Real estate made up the difference the positive news we saw moving into the fourth quarter was it the percentage of new loans coming from C&I rose, 70% of total loans closed and funded.
Looking at the reason for loan payoffs in Q4, 62% of payoffs were due to the underlying asset being sold in <unk>.
25% of total payoffs were refinanced by another bank.
The entire year, the kind of quote unquote refinanced out number was higher at around 38%.
At this point I'll talk a little bit about our loan pipeline, which continues to look good.
The numbers, we discuss here are based upon probable funding, which means you project first your usage and.
Multiply that by a probability factor based upon where we are in the approval process that means for example alone. That's already approved will have a much higher probability of closing the one that just went into underwriting.
At December 31, our loan pipeline stood at $233 million down slightly from 240 at the end of Q3.
Total number of individual loans in the pipeline rose However from 211 at the end of Q3, the 222 year end.
The average pipeline figure for the 12 months. This past year was $244 million. So December .
At December we were around four 5% off the average for the year.
Factors that impact the month. The numbers include the number and size of loans that have already closed and funded and therefore get moved off the pipeline. For example, we closed and funded $45 million in loans in December this is above the average.
The average months and those deals came off the pipeline at 12 31.
Overall I'm satisfied with what we're seeing on the pipeline things seem to have slowed a bit but we're still seeing a lot of activity.
Based upon the economic uncertainty that we see and face every day, we're taking a cautious approach to underwriting new business.
Investor real estate and construction lending as well as with any new perspective, a customer coming into the bank.
As loans move through the pipeline and eventually you hit our projected loan funding report, which we've talked about here before this report looks at 60 days and projects funding funding then prepayments were Andrew's team and finance.
Our review of the loan plenty report over the next 60 days just continued good activity right in line with previous quarters.
Regarding asset quality is not much more to say beyond that.
Andrew's comments.
What's in the earnings release things from my perspective to continue to look very good credit metrics are solid loan delinquencies, which were at record lows at the end of Q3, one even lower at the end of December .
That's my recap of the fourth quarter of 2022.
Planning on continued growth and meeting our goals and objectives going into 2020 free from the lending side you have a number of priorities some of which were previously announced but what's really haven't had a chance to positively impact performance yet.
Obviously number one on our list is the pending merger with Malvern, that's the top priority.
Discuss that on a previous call.
We have a new regional office in opening up in Westchester, Pennsylvania, right before the end of the first quarter here.
Right now, we're running that market out of a very small space on the third floor of a building downtown.
In a few weeks, we're going to have a full service bank branch in Westchester, which will provide room to grow is supposed to be a better retail locations, you know drive up et cetera.
Similarly in Northern New Jersey, we've located the new Northern regional office in Essex County.
We are tentatively scheduled to have our relationship management team in the new states by the end of the quarter with retail space to follow in Q2.
Late last year, we announced our equity fund banking initiative lending to private equity funds in our market.
Team is doing well and has a strong pipeline.
Patent Andrew mentioned SBA lending.
I'm satisfied with the results the team had in 2022, despite the impact on sales of the guaranteed portion of a seven.
Seven eight loans, we expect even better performance this year in SBA and we're looking to add the staff. There if we can find the right people.
I'm also happy to report that we recently hired a seasoned banker to build out and develop an asset base lending team that.
That made reference to that in his comments.
This person has many years of experience in asset based lending.
Our market and will add to our product set we expect that seem to be up and running or by early second quarter.
So we're excited about all these projects each in its own way will.
Enable us to continue to grow successfully in 2023 and in the years to come.
Uh huh.
That concludes my report for lending I'll turn things back over to Pat for some final comments.
Thank you Peter and thank you Andrew at this point I'd like to open it up for the Q&A.
Session for the call.
Yeah.
Thank you.
If you would like to ask a question. Please press Star then one on your kind of funky.
The first question we have on the phone line comes from.
David Fischer.
Okay great.
David.
Yeah. Thank you Hey, Pat good morning.
Yeah.
Good morning, Dave.
Okay.
I think you noted.
You exited the year a little bit.
Flushed with cash was there.
And obviously you noted the.
Decline in DDA balances.
Was there any like motor come up aggressiveness, maybe pre fund.
Some of the loan growth in 2023 and tried to get ahead of the market.
Further rate increases and just be a little bit more aggressive.
Positioning yourself.
From a liquidity perspective.
2023.
Yeah listen I think there's always a variety of reasons why certain actions are taken I mean, the practical reality is yet you put up you put a product out there or you tweak a rate and you don't know exactly the.
The extent of the activity it will generate and I think as we were taking a look at our product design and setting our rates and.
And we thought there might be an opportunity if we were going to err on the side of.
You know one or the other we wanted to maybe bring in a few more dollars than not enough dollars and.
Yeah. That's that's ultimately how it played out I think.
We've put out rates set at the time or or decent rates I think they subsequently been surpassed by competitors based on subsequent a fad.
Fed moves, but it did give us an opportunity to you know.
Retain business that was you know getting a getting competitively.
Comparatively courted if you will and then also bringing some additional dollars in and listen to your point well, we love trying to have the highest margin possible you don't want to play games on the liquidity front, you've got to make sure you're dealing from a position of strength on the liquidity side. So yeah that obviously played a role.
And I'm just curious.
Pat or Andy when you.
Look at the overall cost of deposits maybe.
But I don't know if there's a way to quantify where you see maybe that trending to over the next couple of quarters.
What youre seeing in terms of average loan yields on new production.
Yeah I mean.
Yeah. Great question, obviously, we have visibility into rates that are currently being offered and what's that generating in terms of new business.
The piece, that's a little harder to forecast is money that's been sitting on the sidelines folks that maybe you don't need it and their operating account that are you know when yields were while they didn't want to bother, making the move over now those folks are looking to put some of that money to work either with us at a higher rate or are in the market and I think we saw.
A fair amount of that happened in Q4 are our hope is a lot of that money.
The money that was looking to move made the move and that what we'll see going forward will be.
Significant reductions in that shift out of niv into interest bearing and at least so far in <unk>.
January the noninterest bearing balances are holding up so little.
A little hard to say with with a lot of certainty, but we think.
Every bank will reach a point, where depending on their liquidity position they may need to make a move and when they make that move out on the rate side at all.
Cause a short term job, but then.
Things will normalize and I think we believe.
Based on the efforts, we're making on the core deposit generation side of that you know that Joel.
That just came for us in Q4, and that's not to say deposit costs will continue to move higher but we're we're optimistic they'll move higher at a much slower pace.
Got it and then just one final question for me I'll hop back into the queue.
Outlook for loan growth just curious I mean, your double digit this year it sounds like a decent pipeline do you think.
There's enough demand in.
Bank of credits out there to support that or it comes in a little bit from the low double digit range.
Yeah sure David I think given some of our new initiatives and given what we're seeing in terms of significant slowdowns in terms of prepayments and payoffs.
I think getting our plus or minus 200 million.
Loan growth goal will be will be manageable.
Will it be done with that new business right, maybe not as much churn as in prior years and certainly we expect that it'll be done in a lot more with C&I and floating rate commercial deals and a little less on the commercial real estate side, but I just think because we will see fewer payoffs and pay downs.
Teething in net growth all of you know in that 200 million range I suspect will be doable yeah.
Great. Thanks, Pat.
Thank you Dave.
Thank you.
Next question comes from the line of Glenn you're never P.
D. A davidson. Please go ahead when you're ready.
Hey, good morning.
Could you give a little bit more color on kind of.
The NIM trajectory and then I know you have you have there.
Deal closing two and.
Just kind of you had a little bit less pressure this coming quarter, what's kind of thought process after that.
Yeah, Great question I'd love to have better visibility than we do obviously, there's a lot of.
Moving pieces right now and.
It's a little tough to predict I think we expect there'll probably be some continued pressure on the margin we're sort of targeting a margin over the next couple of quarters is somewhere in the 350 to 360 range, we're going to.
Work like Hell to try to get it up closer to the higher end of that range, but you.
You know that's sort of the best I can predict at this point and then when you look out to the back half of the year largely because of the.
Idiosyncrasies of merger accounting.
Almost certainly see a sizable margin pickup on the backend because of how you take the upfront marks and you accreted back into income.
If you have any thing you wanted to add there but I.
I hope based on some preliminary numbers, you're showing the margin going up quite a bit on the back half, but more a function of the merger accounting than anything else.
Yeah, that's right I mean, obviously a lot will depend on the shape of the yield curve and what happens it seems like the fed is going to move a little bit more gradually here over the next couple of meetings and we'll see what happens there, but yeah, it's going to get it's going to get a little complicated later in the year with all the purchase accounting, but we'll make sure to do a good job.
Rob of disclosing the impact of the different purchase accounting things that are flowing through the margin. So you'll see that but I think pat's got kind of guidance on the margin coming down slightly again in early in the year and then hopefully.
We get a little bit of a better yield curve over the back half of the year and hopefully we can kind of maintain that kind of core margin and then with the Malvern integration, you'll see some some significant fluctuations because of those interest rate marks that are get accreted back into interest income.
That's that's really helpful.
As you kind of talked a little bit about deposit costs.
And in the Big picture are you targeting a certain beta.
For the year and anything that can kind of help with seeing where theyre going to go or is it just such a moving target at the current moment.
Okay.
Oh, yes.
Yeah.
I mean, we obviously have deposit betas don't seem too.
Budgets in our forecasts.
I'd say they were.
They were coming in a lot lower than expected as we move through the year and then I think they've jumped up.
A little bit higher than was anticipated towards the back end of the year. So I think the short answer is yeah. We're looking at those data, but there a bit of a moving target right. Now we're trying to look at the margin overall and what we can do to keep it at that and I think if we can keep it in that $3 50 to $3 60 range, that's a very healthy level and that's it.
Level of which I think we can generate really strong returns on assets and equity.
We obviously have other levers to pull up the deposit costs move a little higher than we anticipate we're going to have to get a little leaner on the operating side, but you know theres always opportunities. There if you look hard enough. So.
It just becomes a function of.
Tony you can maintain those deposit costs, while maintaining our liquidity and if you're going to end up pushing them, a little higher than you'd like them you got to.
Find other ways to make sure you can keep your profitability at a sustainable level.
That's helpful and I I think I might've missed this in the expense discussion but is there.
Kind of a a core run rate expectations for 2023.
Well I think Andrew broke out what you know what we estimate and it's kind of a core for Q4 was and then okay indicated that would be there'd be a what we think would be modest increases from that core level. So I don't know Andrew if there's details you didn't know.
Already provided there, but I saw you gave some good guidance in terms of what kind of a core expense base look like and you know in the fourth quarter of things always move around a little bit as a true up of accruals and other things but.
There certainly is continued.
Pressure on the expense side I think the good news there is those pressures are subsiding and.
We're hopeful that what what used to be a sort of a 2% to 5% expense growth, where all that kind of jumped more to eight to 10 will come back into that plus or minus 5% range. So.
Yeah, I think that's right Pat I mean, we have Peter mentioned, some we have the new Westchester location, but that's really just a movement of a location. So expenses aren't going up significantly there do you have the new Fairfield location, which will add to our occupancy expense.
But we don't have any other.
Significant initiatives that are going to drive our expenses significantly early in 2023, but then obviously we have the Malvern deal Which'll.
Drive up expenses, when we close that deal in the middle of the year.
Thank you for that I'll hop back into the queue.
Thank you.
Okay.
Thank you ask another question. Please press star followed by one on your telephone keypad.
We now have the next question from Christian Buss happening that's H H.
Your line is now open.
Good morning, gentlemen, how are you could you talk a little bit about.
The merger with Malvern and.
When you close up any are there any of their branches and.
And could you talk about the revenue enhancements, possibly thank you.
Sure sure. Thanks Ross.
Yeah, I mean listen we're obviously looking closely at opportunities.
Think there.
Are some things that they had under way that.
We're.
Going to work with them to continue to finish up on there are some branches that are near some of our locations. You know there's a branch in Florida that is in.
Market, we havent been in that will obviously take a look at to see how that's performing but.
There's nothing that we've announced to date, but we're certainly going to take a good hard look at that and you know the other.
The thing is there is some some spots that we had our eye on from a strategic growth perspective, and some of these new locations will allow us to hold off on some expenditures that were that we had planned in those markets. So I think the branch profile something we always look at we are always looking at our own branch profiles.
Quite honestly, if theres opportunities there as well there is some back office space that.
We may not need theres. Some some owned buildings that have some open space that there could be opportunities for sales or for lease up. So I do think there's opportunities on the expense side and then you know we did a deep dive into sort of the SG&A side of things and we uncovered a number of line items.
That.
Just quite honestly, where we're a lot higher than we would've expected for a bank that size and in a lot higher than what we think will need on a on a pro forma basis going forward. So we feel pretty good about our ability to hit R&R.
Guidance, we provided in terms of the overall cost savings and then you know as you as you talked about revenue enhancement certainly they have some things that we don't currently offer on the wealth management and insurance side I think it's important to point out we didn't build in any revenue enhancements into our pro forma earnings model, but certainly we'll take a hard look at what's what.
Happening there in terms of those ancillary products and services and what can be done either from a growth or a cross sell perspective, and I also think theres just going to be opportunities as a as a larger bank.
You know to be.
Basically make sure we're getting we're getting more looks at more deals, which allow us to be a little more selective a little more discipline allow us to get get our get our rate uncertain deals that maybe.
Before you had to feel like you had to be a little more competitive to win the business and so you know that's an area of quite honestly than we've seen in our prior deals that we never model in but just by virtue of having a little bit of extra pricing discipline. We found we've been able doing prove the.
The loan yield for the combined franchise pretty nicely so.
Hmm, Okay and go going back going back to.
Your expense growth could you could you just touched upon I got on a little late what kind of net expense growth you expect.
Over and above the 22 base.
Noninterest expense.
Yeah, Andrew do you want to you want to take that I know you gave a.
The range on a percentage basis above the cores or maybe you can just spell that out here.
Yeah, I think we talked about the six.
5% to 8% is kind of a reasonable number and now you've got a.
Doctor and we're gonna have a bunch of merger related type expenses over the next couple of quarters until we get this thing closed, but I think our core.
We expect to be in and around that range.
Because we are seeing some pressure, but we don't have any.
Major cost initiatives here outside of the Malvern acquisition.
Yeah.
Okay.
Okay, and just one final if I just thought about this question as well less less thought would you consider buying back some shares if your if your stock continues to stay at this.
Seems to be in a truly low inexpensive level.
Yeah. So the short answer is you know absent any constraints, we'd love to be buyers of our stock at these levels now.
There are challenges when you announced the merger and what that means for your attendee five plans and exactly when you're allowed to be in the market and how much you can buy when you are in the market. So we're not.
It's free to do perhaps as much as we would want on the buyback front right now just given the rules there, but yeah objectively.
Or said differently on a personal level I'd be really looking at the opportunities as we get out of blackout here because.
Yeah listen we're growing book value were in a good money I'm really excited about the opportunities ahead of us I'm not pretending that there aren't challenges as well, but you.
You know I think our the way we've shown we can we can try.
Core earnings and book value growth.
I think its attractive at these levels.
When does the blackout and if I may ask but that's my final question. Thanks, a lot guys.
Yeah, that's something where we're working on and discussing with council Theres, a few different rules and obviously.
Blackouts tie into.
Not just what's already been.
Disclose but I fear in possession of material nonpublic information that can create new blackout periods and.
You know what what you're allowed to do once the merger has been announced before it has regulatory shareholder approval. Those rules are a little different and then you may have one set of approvals and not the other and what does that mean in terms of your ability to get in and out of the market. So it's something we will be monitoring closely with council, but theres no theres no simple answer there.
Sure.
Yeah. Thank you very much the best of luck alright.
Alright.
Sorry, Yeah, I'd just add to that yeah. It's very nuanced. The rules are very nuanced once you announce an acquisition. So even if you get out of blackout, you're very limited in how much you can do so it's gonna be difficult for us to get any more.
Meaning full shares, but we're going to take a look at this because if we have any opportunity to get share. So that's not mentioned I think we'd be very interested in buying shares back at this price.
Thank you very much the best of luck guys I appreciate the help.
Alright, Thank you Ross.
Thank you.
Philip I wanted to ask any further questions.
Okay.
I can confirm we've had no further questions registered so I'd like to hand, it back to Patrick for any closing remarks.
Okay. Thank you very much appreciate everybody, who took the time to dial it unless it and appreciate the great questions and we'll.
Well look forward to bring everybody a fresh update as we get through the first quarter and announce our earnings are.
And about 90 days. So thank you everybody and have a great day.
Thank you for joining.
That does conclude today's call. Please have a lovely day you may now disconnect your lines.
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