Q4 2022 BankFinancial Corp Earnings Call
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Good day, and thank you for standing by and welcome to the Bank Financial Corporation.
Q4 and it.
2022 year end earnings conference call.
At this time all participants in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advisory your hand is right to withdraw your question. Please press star one again please.
Today's conference call is being recorded I would like to turn the call over now to Mr. CEO . Please go ahead.
Good morning, and welcome to the Bank financial fourth quarter, 'twenty, two Investor Conference call.
Sorry for the delay.
At this time, we would like to have our forward looking statement read.
The remarks made at this conference May include forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1934, we intend all forward looking statements to be covered by the safe Harbor provisions contained in the private Securities Litigation Reform Act of 1995 and are including this statement for purposes of invoking These safe Harbor provisions.
Forward looking statements include involve significant risks and uncertainties and are based on assumptions that may or may not occur.
They are often identifiable by the use of words believe expect intend anticipate estimate.
Project plan or similar expressions, our ability to predict results.
Or the actual effect of our plans and strategies is inherently uncertain and actual results may differ from those predicted but further details on the risks and uncertainties that could impact our financial condition and results of operation. Please consult the forward looking statements declarations and risk factors. We have included in our reports to the SEC. These risks.
[noise] uncertainties should be considered in evaluating forward looking statements. We do not undertake any obligation to update any forward looking statement in the future and our now I'll turn the call over to chairman and CEO . Mr. F. Morgan Gasior. Thank you our earnings release was completed last week Friday.
The 10-K will be filed on schedule.
And we are now ready for questions.
Thank you if you would like to ask a question. Please.
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Oh.
Hey, good morning.
There's been lots of Davidson.
Hey, So I guess my first works is about our loan growth for next year, you had a really strong end of the end of the year multifamily was a quite strong equipment finance kind of as expected what are your kind of expectations for next year, you've talked about 10%.
Last quarter.
Any any extra color there would be great.
Oh well thank you for the question.
You hit a good fourth quarter, even though the fundings were delayed kind of in the last part of the quarter as the gap between the year end numbers in the average outstanding for the fourth quarter, but we had a good growth we had a good growth for the entire year year over year. So we're pleased with that.
As far as 2003 is concerned.
We're operating in somewhat of an unusual environment and an inverted yield curve.
Federal Reserve policy, obviously is going to dictate a lot and we've noticed that the middle part of the curve. The three to five year part of the curve has actually been dropping for the last several weeks.
Which makes the planning or even a little more interesting.
Generally speaking.
For 2003, our focus is going to be between 5% to 10% loan growth.
Yeah, we'd like to see the higher end of the range at the 10% level.
But the strength of that will come again, primarily through equipment finance.
And then C&I and our commercial finance areas. That's the those are the areas that we're going to spend the most time and focus on.
And given relative returns from from various asset classes.
The equipment finance side.
Commercial finance side makes the most sense. So most of the marketing attention expansion attached that won't begin.
Finance side and the commercial finance side.
So with multifamily and commercial real estate were $5 million to $10 million growth.
Equipment finance was somewhere between $30 million to $50 million for the year.
And then C&I was $30 on the low side to $75 million on the high side that gets you a range of up to 10%.
The end of the year in terms of commercial finance the strongest part of the portfolio.
B the health care portfolio, we got a very good pipeline of new opportunities going into 'twenty, three some of which have already started on.
And we saw greater utilization.
In the health care portfolio, particularly in fourth quarter, continuing on now and into the first quarter and that has.
Two dimensions, so our customers are using their excess liquidity. So youre seeing the commercial demand deposits decline, which is something that we thought would happen a year ago, when it started and its continuing but.
But that also means that their line utilization will improve.
So thats, where we see the bulk of the growth in C&I and based on what we have right now.
But we also see opportunities in commercial finance government finance.
Or financing even in the Chicago community Finance area.
That will make up the bulk but health care will probably be about half of the growth from what we see right now the other categories will be the other half based on their own individual category opportunities.
Okay.
That kind of half the growth for the year or half for commercial finance just clarifying.
Maybe that question again please.
Is that half of the growth for the year in health care is that half the growth in commercial finance loan pay off the <unk>.
Both in commercial finance.
So roughly about 30 to 35 million to $40 million in $30 million to $40 million would be health care and the rest of it would be in the other commercial finance categories.
So about 4% of the total.
As health care half of it within commercial finance.
Okay got it and your.
The thought process on multifamily or CRE being less of a focus just kind of rate driven or are you already seeing slower demand. There you did have a great ended the quarter.
Okay.
Yes.
All of things one is we're pricing it we're reallocating cash flows.
So right now from a profitability perspective, and an asset liability perspective.
Continuing to maintain a bit shorter duration.
It also picking up some improvement in yield.
It seems important to continue the improvement of profitability.
So we're really looking at doing is allocating cash flows for the year.
And again, the equipment finance side and the commercial finance side gives us the most flexibility from an asset liability perspective.
For example in 'twenty three.
We will have over $600 million in assets repricing.
The bulk of the.
The greater portion of it in the second half.
So we're really doing is reallocating assets.
Cash flows.
For example.
The multifamily portfolio is expected to have significantly reduced prepayment rates.
In part because of market conditions and in part because of where rates are right. Now so we'll see less cash flow coming off that portfolio to reinvest.
Equipment finance will probably have close to $200 million coming off of the portfolio.
We expect we'll be able to reinvest that back into equipment finance.
Take some of the excess cash flow as we might have from securities or multifamily put it into our equipment finance and then in commercial finance as we mentioned last quarter.
We'll have about $60 million coming off of the securities portfolio This year and.
At an average of 266% our goal is to put that into commercial finance at an average of about 966%.
So pretty strong contribution to growth there and that's why it's our priority.
Okay.
With that kind of repricing and.
Improved asset yields.
Performance what are your kind of thoughts on the NIM going forward at the same time, you're having a little bit of increase in deposit costs.
But just kind of what are your thoughts on the NIM outlook.
Well, we would expect net interest margin to stay relatively stable in the first half.
One our caution all of these observations with the uncertainties of deposit repricing.
So far.
We're able to maintain a good funding base with the pricing we have so far.
But would you have to watch what market reactions are.
As more customers seek higher yields will also see communications from the federal reserve on their expectations for rates during the year and that does have that does drive some of our deposit customer perceptions on what they should be seeking for rates. So a big wildcard. This year is going to be deposit interest expense. So in the first half.
We expect net interest margin stayed relatively stable in the second half when we have more cash flows repricing, we have an opportunity to expand the net interest margin.
Especially as we get better deployment in higher yields and equipment financing, especially in commercial finance.
The securities Repriced in the second half of the year. If we time the deployment of those cash flows into commercial finance at that time, then you see a strong opportunity for net interest margin expansion in the second half.
I appreciate that.
Switching over to expenses.
It did a little better this quarter.
Then I would have thought and then you had you had the branch savings plan for for I believe next year.
What kind of a good expense run rate in 2023.
We're comfortable with the expense if you look at where we're at now.
We'd say expenses generally will run between just under $40 million say $39 five to just over.
So framed right around $40 million.
To the extent, we see savings from the from the branch operations.
We want to plow that back into marketing.
Especially for the commercial finance and some commercial deposit.
Assets and liabilities.
The branches are now closed.
The two branches that issue.
We had a new payer contract.
One of the branches it fell through just a couple of weeks ago. There is still some interest in it. So we have reopened up the process and we are actually starting to negotiate an acquisition of the second branch the larger facility.
And we're told that that buyer has a 90 to 120 day process that they're working through so it is conceivable that we could have both buildings.
Sold and closed by the end of second quarter.
The estimated cost saves from both those branches are roughly $800000. So we would see an improvement in expenses.
About 400000 for the second half.
We do think theres going to be some disposition costs on that based on where the contracts settle in I don't think it will be material to the financial statements, but it could cost us a couple of cents a share or whatever period. We record. This most likely here in the first quarter since that's when we've.
Closed facilities.
So we could see a little bit of impact on first quarter.
And then once the facilities are actually sold and closed as the bulk of the benefit after after that.
One of the facilities for example has an annual tax bill of approaching $300000.
So the sooner it's gone better we are.
But that's the key to achieving the cost saves as the disposition of the facilities.
Is.
That increased marketing spend.
Kind of dependent on where the economy is.
Is that an area where it could shift.
The second half of the area is a little bit weaker like how.
How are you thinking about the back half of the year and possible places you can shift.
<unk> changes.
Well I would say that the.
The commercial finance side.
It's something that we need to allocate marketing expenses too.
And that needs to be a relatively consistent process.
So I would say once we commit to a plan and that.
We're going to see it through.
How effective the marketing yes.
The product the product.
Abilities with Gavin commercial finance and government finance.
<unk> been unless our finance.
Our very strong within the market in some ways unique.
Unique.
So we need to make sure the word gets out and so that is a fundamental level of expense that we're not likely to change very much on the deposit side.
To your point.
If we are well funded for our objectives and especially.
Our commercial marketing deposit marketing as effective.
Those two things one it.
Might bring down the overall marginal cost of funds a bit.
And two.
We can.
Meter the expenditures a little bit based on how the marketing has affected so right now.
I would say the marketing is is a fluid number we know we're going to spend more on it.
But it's hard to predict it and so we measure the effectiveness of what we're going to try to do and some of what we're going to try to do is relatively new to us.
Focusing our commercial deposit marketing.
Has been something Thats done within the loan the credit areas now we're going to make that a central focus within the organization branch level Treasury services.
Are both going to contribute to those business plans and see if we can improve our total percentage of commercial to total deposits as best we can so it's hard to predict those numbers.
But once we get into it we'll have a better sense of what works and doesn't work.
Got it got it.
Alright, I guess my last question before I step back into the queue is just that.
Updated thoughts on your buyback.
I know that you're a little bit concerned about the tax. This year you did get some shares bought here in the fourth quarter.
Just kind of thoughts on that going forward.
We put the board approved an increase to the share repurchase plan last week.
And I would say that given that the lower level of volume we've seen in the fourth quarter, we were able to do some volume, but I would say that it will probably slow down a little bit.
I would probably use 50000, a quarter as a baseline it could be higher.
I doubt it would be much lower.
And so at that point, you would end up the year roughly around $12 million and 500000 shares plus or minus.
So I would use a little bit lower baseline than we have historically, hopefully we trade up a little bit of share price and its a little bit less accretive but.
But still I think 50000, a quarter is a good baseline if it's better than it's better, but I think thats a reasonable place to start.
A minimum estimate.
Thank you I'll hop back into the queue.
Thank you one moment, while we prepare for the next question.
If you would like to ask a question. Please press star one on your telephone.
Okay.
Next question is coming from Brian Martin of Janney. Your line is open. Please go ahead.
Hey, good morning, guys.
Good morning.
Hey, Morgan can you, maybe just talk a little bit about or.
I guess the thought on that.
How you fund the loan growth. This year, just kind of the size of the balance sheet I know that the cash balance is obviously down pretty substantially but you also talked about.
$600 million it sounds like it's repricing over the next 12 months I just kind of an in connection with maybe if you look at the 10% loan growth Youre talking about $120 million at the higher end. So just kind of just trying to understand how youre thinking about funding it and just the balance sheet along with some of the deposit contraction you saw this.
<unk> south.
Yes.
I think the simplest thing is if you look at it will take $60 million out of the securities portfolio to fund new loan growth and.
And we will need 60 million of new funding.
Plus or minus and the new funding.
Probably in the shorter run would be done through retail Cds and money markets, but especially retail Cds.
The customers that we're working with seem to want to go in that direction right now.
And there seems to be working for us.
And then as the year goes on.
As I said earlier, we're going to try and focus some attention on commercial deposit marketing, whether its new commercial deposit DDA is from new customers.
<unk> <unk>.
And.
Then some commercial Cds, we don't have that much of it.
But commercial would be the next component. So let's assume for example that we're able to take that $60 million of new funding requirement.
Do have in commercial and half in retail that would be a good result for us because it will come in at a lower cost of funds than the retail side.
And it would also mean, we are growing our our core banking franchise in our core commercial finance or core commercial deposit franchise in a meaningful way.
Gotcha, Okay, and as far as the contraction a little bit contraction in deposits and just kind of how you see that playing out with kind of managing the loan to deposit ratio what what do you see do you see more contraction potentially on the given where rates are and some of the deposit mix or is that do you feel like its stabilizing here.
Well of course, that's the big question.
I would expect to see some more.
The contraction.
Just based on the fact that the economy is.
<unk> has seen some inflationary components that have drained liquidity, especially on the retail side.
And you see customers looking for higher yields we've been able to play pretty good defense.
But if there is not 100% retention there. So we do expect to see some some further declines the commercial deposits.
As I said earlier customers are going to use their liquidity.
Before they start borrowing against their wives.
Obviously, there are certain minimum liquidity requirements they have to maintain.
But again.
There are choices simple if they have cash available they're going to use it first and then they'll draw next.
Is that cash diminishes just through operating expenses.
Youll see greater impact on line utilization, but first the cash is going to run off.
It's also the case in 'twenty two we have one large depositor that did a capital markets transaction at the end of 'twenty one.
Dropped $25 billion of DDA on us and consumed about 20 of it during the course of the year that we do not expect to repeat so I would say a slowdown in commercial deposits is more likely given that large depositor.
Delta but.
But still the retail side I would say some some runoff is still possible.
Especially since we will see just a little bit greater inflation.
Coming through the economy real estate taxes that our customers have to pay.
The timing of that is different than it used to be here in the Chicago market.
So we're we're bracing for a little bit of additional run off during the course of 'twenty three.
And that's why we're planning ahead with some replacement in retail Cds, and we're going to try to focus as much as we can on commercial deposit growth.
Builders are stable.
ROIC franchise there.
Gotcha. That's helpful. So maybe not net net not much change in net net to that loan to deposit ratio I think it's around 90% today are in that in that area.
Higher yes, I think thats about right.
And if we feel that we need to bring that ratio down a little bit then we obviously have the cash flows to do that.
But I think if we can maintain it in that 90 to 92 range.
The mix that we want on both the loan side of the deposit side. It speaks to a stable environment for the first half of the year in an expanding environment in the second half of the year.
Gotcha and just you said earlier, maybe just your comments about the bulk of the growth sounds like it's both kind of equipment finance and <unk>.
Commercial finance.
The yield youre seeing in those buckets today.
Can you just remind us I think you said that was not Oklahoma is overnight and have made it as a commercial but on the equipment finance side, just kind of what you expect to be just trying to understand that pick up youre thinking about getting here.
Well again.
It gets a little variable and somewhat volatile.
But right off the bat in equipment finance. If you. If you think about a moderate duration of around three to five years say four years at an average.
Then the swap rates there can go anywhere between three three and a half.
Sure.
So say 375 is a reasonable number.
Then we're looking at around $2 50 to 300, depending on the asset class.
Whether it's corporate other middle market or small ticket.
So high sixes.
Seem reasonable there.
Six is kind of a floor for us right now given where we think funding costs could go and profitability targets, but the swap rate plus.
$2 50 is a reasonable proxy it might go a little higher depending on the mix.
But we're trying not to lock ourselves into relatively low yielding assets at this moment.
Given the uncertainty.
Where things might go.
Okay, and then on the on the commercial finance side I think the variable.
Here Youre looking at anywhere between prime plus a half by the low side.
It gets you.
If theres a modest bump here in the fed funds rate and the prime rate here in the first quarter. That's eight in the quarter on the low side and then you can see prime plus two on the high side.
So it began weighted average that depending on the mix in the portfolio you can get yourself in the mid nines, which is kind of where we're trying to target it.
Gotcha Okay.
Okay, and then just on the.
I guess just jumping you said the pipelines today in general are I guess it sounds like.
You kind of outlined where you're targeting your growth, but just the pipelines in general support.
The outlook.
And you're kind of talking about here.
Seems fair, yes, I think explains the pipelines in health care are the strongest.
There is quite a bit of activity out there now plus we have the opportunity for greater line utilization right. So let's assume we're trying to grow that portfolio by $40 million.
$20 million of it is quite foreseeable based on greater wide utilization.
But we think we probably will do better than that with growth in commitments.
The next area to focus on is commercial finance and government finance those pipelines are relatively thin right now thats, where the marketing is got to come from.
Lessor finance, there's some opportunities there that once the hardest to predict growth because it tends to get hip line utilization during the quarter, but period end.
They usually discount the transactions from the lines that you don't see much.
Quarter over quarter growth in their portfolio.
In community finance of <unk>.
<unk> finance side, we've got some new product development. That's just rolling out right now that's intended for our small business customers, who are also seeing some liquidity consumption. They will probably need some credit support during the course of the year no more PPP Nomura RTC Nomura <unk>.
So we will see some modest growth there, but healthcare we feel the strongest about.
The others are really going to be a function of marketing and growth. So that's why we've kind of underway with those until we can prove up the efficacy of the marketing.
Gotcha, Okay, and just maybe one on the payments and payoffs this quarter I guess, I guess, you've kind of talked about maybe the payoffs coming down a bit or at least a one one area. There was one you mentioned, but.
Just in general can we expect here I guess are you expecting the payoffs in 'twenty three that would be a bit lower than what they were in 'twenty, two or just trying to gauge kind of trend and the trend. The last few quarters, it's been definitely lower.
So just trying to understand if thats kind of a trend do you expect to continue on it sounds like it is.
Well certainly in the real estate portfolio.
Expect lower Prepays.
Compared to two.
'twenty two.
And that's in two dimensions one.
The rate environment right now doesn't really.
Lend itself to significant amount of of refinances from our portfolio.
Two.
The multifamily markets in a bit of transition with higher debt service requirements on new purchases, maybe somewhat higher cap rates may be somewhat lower NOI.
Seeing real estate taxes.
In almost all markets take a bite out of NOI as compared to the last couple of years, So those building valuations and relative Trey.
Trading trading values might might alter a bit during 'twenty three.
So I would say the fourth quarter payoff rates were probably a reasonable proxy for what's going to happen.
23, absent a material change in the rate environment.
We do see some purchase opportunities in the market.
Some of them driven by 10 31 exchanges.
So thats a good credit environment for us.
Some people are just taking profits and deferring the taxes.
Getting themselves into the best assets they can.
So that will drive some prepayment activity, but we would expect real estate prepayments to be considerably more muted than they were in 'twenty two and its also the case that we don't.
Customers that paid off portfolios for example in third quarter, the one customer that sold their entire portfolio and paid us off completely and several other lenders.
There is not those concentrations in the portfolio at this time, where we'd see a massive paydown like there. So one fewer concentrations into slower market activity equals lower prepayment rates of 23.
Equipment finance is relatively stable.
Principally.
Amortization, but from time to time, we do see some early terminations.
In our case, that's probably favorable it gives us more cash to redeploy at a higher yield in almost all cases in that in that environment.
In the commercial finance isn't so much a question of prepayments as it is because of volatility in line usage.
It's not unusual for us to see a draw of $5 seven to $8 million to $10 million in a week at a paydown. Two weeks later of the same amount or a little more.
So for that matter, it's line utilization week by week month by month.
Hard to predict in the extreme.
With greater commitments out there and overall lower liquidity among those borrowers we still expect to see somewhat higher utilization.
Okay.
Utilization back to Kevin normal level or is it still well below where it was running kind of pre pandemic.
Yes.
Not quite where it was before it's probably retraced about 50%.
And so that's why we think there is some runway ahead of us in a more normalized liquidity environment.
Also.
Even though in the healthcare space.
Many of our customers are enjoying somewhat higher reimbursement rates at.
At the state level.
Their expenses are going up too.
Especially in states that have organized labor as part of their workforce.
So the margins will remain relatively stable, but in an intra period basis. Their expenses are going up which means theyre draws are going up.
And we will then therefore see somewhat higher utilization on those credits almost no matter what if it retraced, that's where we're saying if it retraced all the way back to set with shall we say that 2019 level, we would pick up at least another $40 million of utilization right now, we're expecting 20 and our official business plan.
Okay that color is helpful and maybe just last one or two for me Morgan.
The margin I think we talked about.
In the past the margin maybe peaking in the upper 3% 370 380 type of level if any.
The thing changed in your outlook there I know, maybe it's a back half event just trying to understand when the margin peaks and if there's any real difference in your outlook on that level today versus a quarter ago.
No I actually think that as I said earlier, we have an opportunity to expand the margin.
In the second half of the year it will depend on the mix and it will particularly depend on us being successful in commercial finance growth.
But if we are successful I wouldnt necessarily call a peak to net interest margin.
Obviously to be part of that as deposit interest expense.
Things remained relatively stable.
We're able to maintain the funding base at the levels. We're talking about then again I see some opportunity for margin expansion.
If we're able to bring in commercial deposits and reduce the overall marginal cost of funds. There is yet another opportunity to expand margin. So.
I would say that.
The higher end of the range for the year with BMO Upper threes.
It seems a reasonable place for us to be but if we are successful in what we're trying to do in the second half on the commercial finance side of the commercial deposit side.
That isn't necessarily the peak.
But again, we have to see what happens with the core funding costs. During the first half of the year, what the Feds communications are as far as rates are concerned.
If all of a sudden there is a pivot in the <unk>.
Latter part of the year that it might take some pressure off of funding cost, but at the same time, we will be able to maintain or even expand margins because we're going to be repositioned and cash flows.
Gotcha, Okay, and then last two Marvin just for assisting with the growth you're outlining or at least kind of anticipating by bucket can.
Can you just talk about that reserve that reserve level, and just how you're thinking about it in the context of T cell and then.
Just I know you've talked in the past about kind of the levels of profitability are targeting just thinking about I think paas, it's kind of in the low thirty's or mid thirties, and kind of a 1% ROA.
The reserve with regard to Tc saw and the profitability outlook would be great. Thank you.
Okay, well first then reserves CFO was upon us.
In the final stages of model analysis, and validation, but we do expect that consistent with the impact of C. So the overall reserve ratio is going to go up.
And obviously as we put in somewhat higher risk credits in the commercial finance area middle market equipment Finance small ticket equipped finance those are higher reserve ratio credits. So we would expect there to be some additional growth in reserves, both because of the day one impact of seasonal.
And as we pivot the portfolio further to equipment and commercial finance Youll see some higher provisioning.
Probably better able to give you more specifics on our next call.
But just right off the bat the middle market small ticket portfolios will have a reserve ratio of greater than 1% of the commercial finance portfolios will have a reserve ratio reserve ratio greater than 1%. So on a weighted average basis.
Both of those credits are going to require higher reserves and therefore bring up the average reserve ratio.
Profitability, given our the timing of cash flows this year we.
We expect.
Mid to high <unk> for the first half, but we do see ourselves.
Hopefully being able to push into the low to mid <unk> in the second half.
The bank at that point would do somewhere between 95 basis points.
90 to 95 on the low end and $105 10.
Even pushing $1 15, right at the end of the year on the high end, so again right within that 1% range, which is what we've been trying to achieve it looks like we're getting pretty close the key is to just keep it stable in the first half and then work to expand that in the second half.
Perfect. Thank you for taking all the questions I appreciate it.
Very good thank you.
Thank you.
You have a question. Please press star one wanting a telephone.
One moment.
Okay.
Next question comes from Henri why was that.
Your line is open. Please go ahead.
Good morning, Mark.
Good quarter, there Alex just wondering.
Since our debt rent coverage ratio has improved drastically since earnings have gone up would you consider an increase in its evidence or a special dividend. It will really help us all timers. Thank you.
Well, let me say that both as a significant shareholder and as an old timer.
I generally personally.
But right now when you look at our comparative dividend yields.
They're very competitive in the market.
And we also want to see what happens with interest rates overall, if theyre actually going to be coming down during the course of the year the dividend yield looks even better.
So I would rule nothing out right now.
The company is well capitalized at both.
At the bank level and at the holding company level and to your point. We appreciate the recognition of the better dividend coverage.
So I would expect at least for the first quarter or two.
We get a handle on federal reserve policy.
And we make sure that we're able to put a floor under net interest margin.
And earnings the dividend policy will remain about the same.
But I would also say that we're going to take another look at that in April and another look at that in July it would roll nothing out right now.
Dividends have been a key component of shareholder return. These last several years. It is an important component of it and if that is a path to better total shareholder return I would not necessarily rule anything out right now.
Thank you Mark and that was helpful. Just one more quick comments.
I guess one of your competitors matrix.
<unk>.
The Chicago area neighborhood, but do you have a comment on <unk>.
Field in the Chicago area.
Thank you.
That would be a great conversation to have over a longer period of time.
But.
To address our particular plans I would say this.
First right now.
Executing our business plan on it on a organic basis has proven to have good results.
As you look at the improvements in originations, even starting in 2021 continuing onto 2022.
We have an opportunity to further improve.
Results here in 'twenty, three and towards that we want to stay as focused as we can having.
Having said that.
Growth can be a good thing.
If it contributes.
Funding base, that's helpful to us if it contributes higher operating leverage.
And if it improves the capital base to the point, where we may meet the Russell 2000 threshold for inclusion later this year.
So I would not really want to comment on the broader aspects of Chicago people have their own perspectives, but I do think that we may see an opportunity to do something later in the year. If it would help us, but it's certainly not our focus it would almost be something that somebody offered us and we thought it made sense not something that we're going to go out and seek out to do.
It does appear that.
The the market will respect higher earnings and more stable earnings.
We think that the pivot to more commercial base.
Helps earnings strength and therefore, the multiple on earnings going forward. So again, that's our focus.
Thank you Marvin and keep up the good earning.
Earnings growth rate perspective, thank you.
Thank you.
Thank you.
Your question please.
Please press star one.
There are no more questions in the queue I would like to turn the call back over to management for closing remarks.
Thank you well we appreciate all the very good questions that continued interest.
We look forward to 2023 building on the 22 results.
We will do our very best to improve or stabilize or improve our results for shareholders.
As Roy the rest of the winter if you can and we will talk to you in the spring.
This concludes today's conference call. Thank you all for joining and enjoy the rest of your day.
Okay.
Okay.
Okay.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
[music].
The conference will begin shortly to raise and lower Johan during Q&A.