USCB Financial Holdings Inc. Q1 2023 Earnings Call
Good morning, and welcome to the U S C. B financial Holdings Conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an.
Kennedy to ask question.
Ask a question in my Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please note that this event is being recorded I would like now to turn the conference over to Mr. Luisa Lau due later president and CEO of the company. Please go ahead.
Good morning, and thank you for joining us today for U S. C. B financial Holdings 2023 first quarter earnings call with me today, reviewing our Q1 highlights as CFO , Rob Anderson, and Chief Credit Officer, Ben parcel, who will provide an overview of the bank's performance. The highlights of what you can see on <unk>.
Three.
Well, what a difference a quarter makes who would have imagined that just six weeks. After our last earnings call. Three banks would have suddenly failed heightening client concerns about the safety and soundness of the banking industry and intensifying discussions on inflation liquidity uninsured deposit ratios any potential recession.
Banking is based on confidence in clients look for guidance and support during stressful economic times.
It is critical to maintain our clients' trust and we see the moment as an opportunity to further interact with them to strengthen and grow their relationships more on that shortly.
These challenges we are pleased to announce that the U S. P. B team delivered strong performance in the first quarter of 2023, reflecting our ability to navigate a challenging operating environment with prudent consistency.
Our financial results demonstrate robust earnings driven by solid loan production disciplined credit underwriting and risk management practices over the past six years, we have focused on diversifying our loan portfolio by developing multiple non CRE business lines, which are delivering in a meaningful way.
64% of the bank's Q1 product loan production was non CRE and we expect that trend to continue.
Our deposits are derived primarily from local businesses. There are owners in the communities we serve.
We do not have any exposure to either crypto currencies or investments or to crypto related businesses. We are a commercial bank and our strength and stability is reinforced by growing core customer relationships, enabling us to build the granular deposit base and diversified loan portfolio and one of the fastest growing mark.
It's in Florida in the United States as we review our Q1 2023 highlights lets start by comparing our results to those posted in the first quarter of 2022.
Average deposits increased by 194 million or 11, 8% compared to the first quarter of last year.
Average loans, excluding PPP loans increased $137 million or 31, 4% compared to the first quarter of 2022.
Tangible book value per share was $9.37, including an after tax unrealized security loss impact of $2.14.
Net income was $5 8 million or 29 cents per diluted share an increase of $1 million for 19, 7% compared to the first quarter of 2022.
Annualized return on average assets for the quarter ended March 31, 2023 was 1.11% compared to 1.03 for the first quarter of 2022.
Annualized return on average stockholders equity for the quarter ended March 31, 2023 was $12 eight 5% compared to $9, 75% for the first quarter of the previous year.
The efficiency ratio for the quarter ended March 31, 2023 was $56 three 2% compared to 58.88% for the first quarter of last year.
Credit metrics remained strong nonperforming loans to total loans was point <unk>, 3% at March 31, 2023 compared to zero at March 31 of last year with a single loan for 486000 classified as nonperforming.
The allowance for credit losses represented a one point to 1% of total loans. Both at the March 31, 2023, and March 31st of last year effectively as of March.
As of January one of this year the company adopted the seesaw methodology for estimating credit losses, which resulted in an increase to the allowance for credit losses for loans of $1 1 million and an increase to the reserve for unfunded commitments of 259000. This one time cumulative adjustment result.
And an after tax decrease of $1 million in retained earnings.
During the quarter the company repurchased 500000 shares of U S. TB Financial Holdings, Inc. At a weighted average price per share of $11 74.
The aggregate purchase price for these transactions was approximately $5 9 million, including transaction costs.
These open market repurchases were made pursuant to the company's publicly announced repurchase program as of March 31, 23, 250000 shares remaining to be repurchased under the program.
The following page is self explanatory directionally, showing nine select historical financial trends since our recapitalization.
Profitable performance based on sound and Conservative risk management is what our team is focused on consistently delivering so now let's turn our attention to our specific financial results and key performance indicators, which will be reviewed by our CFO Rob Anderson.
Thank you Lou and good morning, everyone and looking at our financial statements and by many measures U S century Bank had another great quarter, Let me highlight a few items on the next couple of pages before getting into specific details.
<unk> total assets were $2 2 billion for the quarter loan balances were $1 6 billion, which is up $73 million from the prior quarter and deposits are at $1 8 billion at quarter end, we had $416 million in securities like most banks in the industry. Today. These securities were put on the books during the pandemic period.
At a very low interest rates as interest rates have taken a fast and sharp rise. These securities now have a negative mark due to the mark to Mark accounting treatment total equity is now $184 million up slightly from $182 million in Q4, and although footnoted on the slide the $184 million in equity includes.
$42 1 million and unrealized losses on the securities portfolio running through a OCI moves.
Moving onto the P&L net interest income decreased from the prior quarter due to higher deposit costs and our non interest income of $2 1 million reflects the execution of SBA loan sales the bank implemented diesel in the quarter and booked 201000 in provision expense with loan growth. Additionally, our.
Day, one seasonal implementation resulted in a $1 1 million increase to our loan loss reserve, which we ran through retained earnings on a GAAP basis net income was $5 8 million or 29 cents a share and with that let's take a quick look at our performance indicators on the next page in terms of soundness, our credit metrics.
<unk> remained strong our loan loss reserve coverage ratio increase with the adoption of stiefel at 120 per cent and Ben will discuss our credit book in more detail in a bit in terms of profitability. Our return on average assets was one point 11 for the quarter and return on average equity was $12 eight 5%.
Our NIM was down 23 basis points from the quarter to 3.22% driven by a higher cost of funding efficiency.
Ratio was $56 three 2% and our tangible book value per share moved up slightly to $9 37 per share, which is reflective of the negative mark of $2.14 per share on our securities portfolio and E. O S. T I that I referenced earlier and the stock repurchases in the quarter absent.
The OCI Mark our tangible book value per share would have been $11.51.
Let's hit on liquidity on the next page.
During the month of March our industry saw three notable banks fail and liquidity became a headline issue across the industry.
The Federal reserve created a new liquidity program to make additional funding available to depository institutions. We have enrolled in the bank term funding program or B T. F P. But have not accessed the program and do not intend to access the program anytime soon.
Our on balance sheet liquidity is in excess of $413 million and our off balance sheet sources, excluding brokered Cds as in the excess of $228 million, we continue to beef up our pledging of both loans and securities and our liquidity sources have expanded post quarter end. Additionally.
U S century bank has access to the brokerage CD market and listing Cds, which we have self imposed policy limits on these products and are not listed on the chart. If we include all sources of wholesale funding our self imposed the liquidity limits are in excess of 500 million of funding, which we believe is.
<unk> to weather the current environment, so with that let's take a look at our deposit book on the next page average.
Deposits increased 44 million or nine 1% annualized compared to the prior quarter and $194 million or 11, 8% compared to the first quarter of 2022 <unk>.
Average DDA deposits increased $10 5 million or six 5% annualized compared to the prior quarter and increased 38 million or six 1% compared to the first quarter of 2022.
Average DDA balances comprised 36% of total deposits during the quarter and is consistent with the prior quarter. You may note that U S. D. B did not experience the mixed shift that seems prevalent with other institutions. Today. We believe this speaks to the strength of our deposit base.
Also you will notice that quarter end spot balance of 1.831 billion is below our quarterly average of 1.844 billion. We had numerous conversations with clients in the last two weeks of March they were concerned about the events happening within the industry Wow few clients decided to minimize their balances.
With Uscb I'm happy to report that we did not lose any clients due to these events and we had a few clients place their deposits into the intra Fi Ics and SEDAR as product, which provides the deposit door with insurance on every dollar of their deposit today.
That point, we had $35 7 million in Ics theaters at quarter end and some clients have continued to put more in the Ics product post quarter end.
As it relates to the cost of our deposit book, we continue to see increases relative to the fed funds rate increases, but remained with a 24% deposit beta through the current rate cycle. So let's take a closer look at the deposit book on the next slide.
Our deposit book reflects our business model, a diversified commercial bank, 54% of our deposits are commercial or business accounts, 35% personal or retail accounts and a 11% public fund accounts, which are partially collateralized the.
The bank has 19.2 thousand deposit accounts with the majority in personal accounts 12.4 thousand or 64, 4% of the total as you can see by the chart on the lower left the average balance in our business comp is 145000, 52000, and a personal account and seven point.
$1 million in a public fund accounts.
The total amount of uninsured deposits adjusted by the collateralized portion of public bonds is 56% per quarter and a decrease of 3% compared to the fourth quarter of 2022 and below the 2022 average so far.
We anticipate this number to come down or more significantly next quarter as we continue to place clients in the Ics product post quarter and with that let me turn it back to live.
Thank you Rob as seen on the graph on slide 10 average loans for Q1, 2023, excluding PPP loans increased $90 6 million or $25 to annualized compared to the prior quarter and $370 million or 31, 4% compared to the first quarter of 2022.
As a competitive relationship driven bank, we price based on risks and relationship to this point, we know that loan coupons increased 32 basis points compared to the prior quarter and 107 basis points compared to the first quarter of 2022.
Notwithstanding our loan growth or yields our focus is on quality and ongoing risk assessment and management, our chief credit officer will be reviewing our portfolio mix detailing our CRE concentrations by loan type weighted average loan to value and debt service coverage as well as average loan size here you will note that.
Low leverage strong repayment and diversified nature of this portfolio.
Furthermore, we will take a look a close look at the bank's CRE office portfolio. Following the Covid pandemic. There has been a significant course correction in the office sector as the industry evaluates how office buildings will be used repriced valued and transacted again conservative underwriting and risk management guide or Choi.
A selection and all our CRE asset classes.
As seen on the graph on page 11, the strong loan production posted throughout 2022 slowed over the past four quarters as the fed increase rates 425 basis points from March to March over this time higher borrowing costs have impacted loan demand, specifically CRE loan demand and refinancing.
The bank delivered or exceeded budget over the past five quarters, and we forecast were forecasted to do so throughout 2023, excluding PPP loans, our point to point loan growth for 2022 ran at 31, 4%.
As an effect of the Fed's monetary policy, which has led to higher rates and decreased loan demand, we expect high single digit to low double digit growth.
In 2023 still the average coupon for new loans increased to 666% for Q1, 2023 152 basis points above the portfolio average.
Obviously noted 64% of the first quarter's loan production totaling $94 million was well diversified and non CRE. This shift was due toward development and diversification of new product lines, namely HOA, SBA and correspondent bank lending as well as equipment and yacht financing all of which.
Strong demand in South, Florida with that said, let me turn things over to Beth.
Thank you Lisa and good morning to all.
Our loan portfolio mix.
On slide 12, and not change appreciably from the numbers you have seen before.
I don't want to book over 1.5, 80 billion CRE loans amount to 988 medium and this includes owner occupied.
Our biggest concentration is in the retail segment with $298 million.
I'm happy to report that as of the end of quarter, one and even up to today.
Asset quality is excellent.
The CRE book has conservative metrics across all segments.
Weighted average loan to values, ranging from 54% to 62% debt service coverage ranging from 140 times.
Who 262 times and average loan size is concerned with really low ranging from 1 million to four 6 million.
Moving to slide 13, we have information on our CRE office segment.
The numbers you see in this slide confirmed that CRE office is not among our largest CRE segments non owner occupied office loans or just 13% on the theory of the CRE loans and 8% of all of them we.
We do have 80% of our work Golar owns in the owner occupied bucket that are office related.
Key metrics for office loans in both the non owner occupied bucket on the owner who by bucket in our hung around 20 notes totaling $173 million.
And they.
They are.
Or they have a weighted average loan balance of $1 4 million weighted average loan to values for 57%.
And an average debt service coverage of two one times.
In addition to what we said before for a rebound loans asset quality is very good and most importantly.
Majorities within a year or 4% on the office.
Moving to slide 14 asset quality continues to be very good, reflecting conservative underwriting and prudent risk management.
We're a triple a coverage of SaaS at one <unk>.
20% the bank implemented this seesaw methodology, starting January 1st of these year implementation of seasonal led to an initial increase of one $1 million in acre foil and the subsequent increase is a result of that loan.
After several quarters, where we see where our non accrual loans, we placed 486.
Power's alone in this category in quarter, one we do continue where no Oreo and non D. C band It a go.
Forward.
Our classified asset book is negligible and that results in a ratio of classified loans to total loans of just order of 1%.
Going to slide 15, Rob will talk about our team.
Okay. Thank you Ben net interest income decreased by 869000 compared to prior quarter predominantly due to an increase in deposit costs. Our net interest margin compressed 23 basis points to three 2%.
Our earning asset mix continues to improve towards higher earning assets, even though we held higher levels of cash and increased our F. H L. B advances at quarter end, given the heightened attention on liquidity.
With approximately $50 million of cash flows rolling off our securities portfolio. This year, we will have the opportunity to reinvest those funds into higher yielding assets and we fully expect our team to grow our deposit book, despite a challenging environment.
Let's take a look at our interest rate sensitivity.
Coding to our asset liability model, our balance sheet is liability sensitive for year, one and asset sensitive for year. Two this is a direct result of higher money market and savings account balances and having a higher portfolio are variable rate loan portfolio repricing in year two.
Furthermore, the yield curve shape has also had an impact on the magnitude of the repricing under an inverted yield curve, our liabilities particular money market accounts in short term borrowings are repricing faster and higher than our assets, which increases our liability sensitivity in the short term.
While our through the cycle deposit beta remains near our stated range of 25% to 35% going forward and give an expectation on the yield curve current and future shape and our current balance sheet composition. We expect further NIM compression going forward, so with that let's move on to the next page.
We had a very solid quarter of noninterest income service fees were steady and we are excited about some new initiatives to move this number up in the coming quarters SBA fees were consistent from prior quarters, and we saw very little movement in our Securities book This quarter.
With be straightforward, let's take a look at our expenses.
Our total expense base was $10 2 million and slightly up from the prior quarter salaries and benefits were up with a few new hires and seasonal increases in payroll taxes. The remaining line items were in line with prior quarter. So not much to highlight here. So let's take a look at capital <unk>.
Capital levels remain above well capitalized levels, but came down a bit as the company repurchased 500000 shares at an average weighted price of $11 74.
I would also mention that these purchases happen prior to the banking events, which further depressed bank stocks at quarter end.
The company has 250000 shares remaining under the current authorization and you'll notice a OCI improved by $2 7 million in the quarter.
With capital straightforward I will turn it back to Louis for some closing comments.
Thank you Rob you of century Bank closed the first quarter of 2023, Directionally as forecasted responding with consistency to both the expected challenges of rising interest rates and the unexpected liquidity pressures caused by a crisis of confidence and a perceived a flight to safety that is impacted most banks.
Team Uscb took the situation and created an opportunity.
Immediate action by reaching out to our clients to proactively explain the situation here their concerns and provide solutions.
Every relationship manager contacted their top depository clients in the first week. Many hundreds of contacts were made.
This effort was very much in line with the new business mining project launch in the fourth quarter of 2022. The project is led by teams of lenders and business development officers for an effect contacting and further developing the deposit and business potential of existing customers. This high touch business mining initiative was designed to expand our share.
Or a wallet with non lending transaction banking products to deepen relationships and our efforts are delivering consistent results.
Even in challenging times you with century is advantageously located in one of the most attractive banking markets in Florida and the U S.
Our state is the third largest in population and the fourth largest economy of the country.
With 900 net new residents, arriving in Florida every day and at an estimated population of two of 26 million by 2023, Florida is primed for continuous growth I.
I mentioned earlier, how 64% of our first quarter loan production was non CRE related.
Pivoting in this manner was not done by chance. It has taken time talent and planning to develop new non CRE lending verticals in a state where businesses are largely real estate denominated higher interest rates lead to higher borrowing costs slowing CRE demand and the number of quality financing opportunities over the last five.
Five years, we have developed strong competencies and association lending SBA lending and most recently yacht lending all of which are in strong demand in Florida EBIT in the current interest rate environment. Collectively these three business lines have generated over $280 million and diversified non CRE loans and we expect this trend to continue.
To underscore this point I point to the following data, Florida has the second highest number of HOS nationwide and the highest concentration of <unk> accounting for 67% of all homeowners Association banking activities have grown its deposit book to $125 million and generated $54 million in new.
<unk> and over the past year with regards to SBA lending. There are currently $2 8 million small businesses of Florida that represent over 90% of all business in the state with a five 5% corporate tax rate in Florida has become one of the best States in the nation for small business startups recognizing this off.
<unk>, we're in the process of developing a new initiatives to further serve our owner operated businesses with small ticket SBA financing, we plan to analysis shortly and.
In January 2022, we launched our newest lending vertical yacht financing focused on high net worth individuals and a state that has the highest number of registered recreational boating vessels in the country with more than 1 billion in total again since the launching of this business in January 2022, we have generated $97 million.
And low leverage short duration quality loans.
Ongoing development of new client centric products and business lines as part of our DNA, we recognized product profitable business opportunities and we develop them and technology plays a big role in these plans at U S century Bank, we believe that tech modernization is a forever process.
Working in lockstep with production too.
To consistently improve our performance on May 1st this coming Monday, we will be going live with a brio our choice for new for a new loan operating system that will dynamically coordinate the entire loan process from application to underwriting to closing in booking our new Ela west will make us more responsive to our clients by digitally.
Coordinating the loan approval process experienced across the board. The next several quarters, we will see the delivery of multiple tech products, including zelle for small business pigeon real time payment solution and robotics process automation with more in the works by proactively responding to our clients' needs for digital business solutions.
We expanded share of wallet with non lending transaction banking products and deepen relationships to improve our service model.
Now I would like to open the floor for Q&A.
Okay.
Thank you.
We'll now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time well pause.
Momentarily to assemble our roster.
Yeah.
Yeah.
Our first question comes with Michael Rose with Raymond James Please.
Go ahead.
Hey, good morning, everyone I hope you're well.
Michael.
Yes, maybe just wanted to start on loan growth I appreciate the slide as always on loan production.
Obviously slowing I think for you and everybody else how much of that is do you guys intentionally pulling back versus any sort of slowdown in the mark obviously understand that Florida is a much stronger place you throw out some statistics Louise that I think are really really important here just trying to get a sense because it is obviously, implying a pretty decent acceleration from.
From this quarter's growth and I assume that some of the growth was.
Versus prior commitments funding up but would just love some some greater color. Thanks.
Well, yes, Mike like like I said.
The slower loan demand has slowed a specifically on the CRE.
Sector, clearly with the prime at 8% Theres a lot of elite refinancing has pretty much gone away and there's just a lot of projects that don't work at that level and investors are kind of sitting on the sideline.
Notwithstanding.
Our pipeline going into the second quarter.
<unk> is very strong and we're very bullish on it.
<unk>.
About 65% of that pipeline is non CRE and we're very pleased it's in all areas that I mentioned on the SBA side on the HOA side on the yacht financing equipment financing. So I think our people have done a really good job of diversifying things and again this is something that didn't.
Happened last quarter, we've been added for the last seven years. So I think that the efforts that we've put into it are going to.
We're going to provide good results.
But theres no question that the that.
The CRE market has slowed.
Slow down.
That's helpful. Thank you and then maybe for you Rob I appreciate the color that.
<unk> will be down.
One hand growth continues.
I think you said that you expected.
<unk> balances deposit balances.
From here.
But you have the full quarter impact would be kind of the excess liquidity that's been put on you and everybody else.
Can you give us a sense of magnitude for what we can kind of expect for <unk>.
Margin compression in the second quarter understanding that we will probably see some stabilization in the in the back half of the year. Thanks.
Yeah, It's a good question.
A very tough operating environment I'm sure you've heard from for many of your banks that they are experiencing margin compression I would say.
If we don't get.
More fed rate increases.
I think two scheduled in this upcoming quarter May and June .
We'd be down 10 to 15 basis points on the margin most likely closer to the 15, but if we get increases.
Increases in May and in June are one or two of them. Then we're certainly going to be passed that and could be 15% to 20 basis points down.
That's helpful and then maybe just.
Finally for me the expenses were.
Touch higher than what I was kind of looking for just as you guys are balancing cost containment efforts with ongoing investments in the franchise and heard you mentioned the SBA rollout.
Here in the short term how should we think about the cadence of expense growth from here just just balancing the puts and takes.
Yeah. So I think our expense base is going to be fairly steady from our base today. If you looked at slide 18.
We're about $10 1 million in the third quarter of last year $10 million in the fourth quarter were just 10 point to this quarter. We had built some open slots with some new hires but you have the bike type hitting in Q1, but I think we're going to try to hold that number at the current level certainly expense control.
We will be very critical as we move through 'twenty, three and probably in the 24. So I would say that 10.2 is a good modeling for on a quarterly basis near term.
Alright, thanks for taking my questions.
Thank you.
The next question comes with.
Graham <expletive> with Piper Sandler Sandler.
Please you May proceed.
Hey, good morning, guys.
Good morning, good morning Graham.
So I appreciate all the color you guys gave on the deposit front just kind of wanted to talk about funding in general.
It looks like the end of period number was about $15 million lower than the average so I assume there there must've, probably with some movement there in the month of March around the banking crisis, which is unexpected and is understandable given the unprecedented.
Thank you Jean but I wanted to know kind of where those <unk>.
Deposit balances have trended since the end of the quarter.
And then also how that relates to your guys.
Strategy around borrowings.
And if you think that deposit growth will be good enough in the coming quarter to pay down some of those borrowings you guys added in <unk>.
Yes. It is a great question and certainly with the unprecedented events that happened from March 10th forward, We did see some volatility and I would just say overall, yes.
Some clients getting a little nervous so there was a lot of education from our sales team about the Ics product, we did move some clients into the Ics Some clients, who had I would say the larger deposit balances decided to take a little bit of those deposits.
And move that around and spread that to other institutions.
We didn't lose clients, but I would say there were some clients that minimize their deposits not significantly I mentioned the spot balances versus the average it has leveled off in the.
Time since quarter end, we are seeing more people move to Ics. So I think youll see the Ics number grow and then our uninsured deposits drop because we will have in the Ics product, but overall in terms of how we think about funding the balance sheet I think.
Loan growth is slowing we are still trying to control our deposit costs. So we're very careful on who we're giving preferential rates too.
They typically have to be core relationships. We do have people shopping there are deposits, mainly their money market and Cds. So the incremental cost of the dollars coming in are pretty pricey and if the fed raises rates again, theyre going to get more pricey and that's going to lead to margin compression we have no brokered.
Cds, but we would entertain a little bit of that and I think we have some opportunities either with hedging opportunities or with brokered Cds to lower the cost of funds, but our preference is to bank, our relationships and our clients and to win them over from our competitors and I think we can do that but I think the net.
A couple of quarters are going to be challenging from a funding standpoint, because all banks are having the same issues and they are all fighting for clients and some they're doing it with rates.
Okay. That's helpful and yet everyone seeing crazy amount of funding pressure right. Now so would you would it be safe to assume I guess borrowings.
Just.
I'll at least level.
From here through the next couple of quarters.
Yes, I would say, we're going to have a heightened attention on liquidity, we might keep a little bit more on cash and if that means having.
Some some borrowings on the books, who will I don't think the borrowings will go up substantially from here, but I think current levels will probably carry of the quarter.
Okay.
Got it and then I guess just one last question.
The $486000 non accrual I know, it's tiny but you guys have had among.
Amazing credit for the last.
Over a year.
Just interested to hear what the loan wise or any details around that you could share.
It's just it's just outside the norm for you guys I would say, even though it's still only three basis points of loans.
Yes.
<unk>.
As you know, we do a fair amount of SBA seven loans.
This is the 25.
Person on guaranteed portion that alone we sold the remaining 75% and naturally.
We are at the.
That file.
Enhancing in perfect condition.
This is a client that was.
Trying to get rid of some debt that <unk> acquired.
In the process of growing the company.
We remain.
As friendly as we can be a he has another.
A loan that is a firewall for financing the building where he operates now and one is completely recurring no issues.
And as I said.
It has to go through the court.
The process in order to go back to normal.
At this point, we don't anticipate a charge off there.
Okay, that's great color thanks, guys.
Thank you. Thank you Graham Q.
The next question comes with Brady Gailey with K B W.
Please go ahead.
Hey, Thank you good morning.
Good morning Bernie.
So it was good to see us century active on the buyback in the quarter.
Yeah, if you look at where you repurchased those dockets, it's cheaper today than it was then.
I know you have some authorization left but not not a ton.
Just thoughts on how aggressive you could get on the buyback going forward.
Yes, so on the buyback I mean, we bought at 11 74 of 500000 shares. We got 250000 shares remaining we did make those purchases prior to the.
March 10th kind of you know.
Chaos that happened in the industry and certainly that has had an impact on the share price. We just think it's a great value.
Banks across the industry or our are down significantly I mean, we're we're way down I mean.
Pick a name your most popular and well run banks, they're all down and there is not a lack of buyers right now so putting capital to work sometimes your stock is the best use of it.
We prefer to make make loans and use the capital too.
Make loan balances, but right now the price is very attractive we have a board meeting Monday that topic will come up but yes. The 250000 shares remaining at this price I think we could be buyers.
<unk>.
It's a little turbulent time, so there's a school of thought that you might want to preserve some capital, but certainly it is very attractive at this price right now.
Alright.
And then I wanted to ask about anticipated deposit growth.
As I look at a lot of deposit ratio, it's been ticking up.
The last year or so I mean, it's still relatively low at 86% but.
Your loan growth guide as you said is high single digit low double digit do you think that deposits can grow at that same pace.
Or will we could or will we continue to see the loan to deposit ratio tick up here.
Yes, I think youre going to continue to see it to tick up a little bit I mean prior to March 10th I would I would have said that we're making really good progress on funding our assets with core deposits that has changed a little bit in the market. We are seeing a lot of competition.
On the money market and CD side and.
It's being rate driven so I think that we will have.
Some borrowings and advances maybe some brokerage Cds down down the road, but certainly I think youre going to see the loan to deposit move up a little bit you know Ive always said like I'd prefer operating between 90 and 95% for kind of a really strong profitability profile. So if we're at about 86.
Percent loan to deposit ratio could it be closer to 90% next quarter.
I think so.
Alright.
And then the size of the <unk>.
Deferred tax asset I think it was.
<unk>.
About a little over $42 million.
Where does that balance finished at the end of March.
Yeah, and I'll, certainly give you a kind of there's lots of different pieces in there Brady the big piece that is.
It is kind of the abnormal for a bank is the net operating loss piece for us that has trended down over time.
At $19 9 million at the end of it ended the quarter and you have other timing differences between book and tax and we can send over to you that quarterly number but the NOL portion was $19 nine I think at the end of the fourth quarter that NOL portion was 21.
Seven if I recall I can confirm that number but certainly as we continue to.
Provide earnings that number is going to come down.
And I know this is not a near term.
Probably but if you guys did eventually decide to sell this company has.
Having a DTA that is the size that it currently is like is that a limiting factor like with what the buyer not be able to realize that full DTA upon the sale of the company.
The DTA is is pretty tricky.
Tax.
Depending upon ownership type changes.
If you just took.
Roughly $20 million of $20 million and just under 20 million shares it's like a dollar a share right now the impact on our fully.
If you had to lose every bit of it.
That doesn't always happen in an ownership changes so it's very situational Brady.
I'll speak for the management team, we've always said, we're shareholder focused but right now we prefer to run the company and provide the best returns we can for our shareholders.
Yep.
That makes sense alright, thanks for the color.
Thank you Barry Thank you.
The next question comes with Ross Haberman with R. L. H investment. Please go ahead.
Good morning, gentlemen, thanks for taking the call I have a quick question about the uninsured deposits you said I guess some of them are migrating.
SEDAR.
What would you are you actively trying to get that number to a lower level.
And.
And what's your thought about.
Moving that down significantly over the next couple of quarters. Thank you.
That's a good question Ross again as we have.
Reiterated throughout the presentation, we are a commercial bank and a lot of our.
Our deposits are larger on the HOA side on the municipal side and even on the commercial we have a lot of.
Clients that have been with us for many years it maintain very large balances thats just the nature of the of the bank. We are we contacted our top.
Depository clients like I said, we spent a good week and a half talking to every single one of them and.
Okay.
They weren't they were concerned about the industry, but not concerned about the bank, let's put it that way a lot of them asked for information on Ics.
And we gave it to them a lot of them.
Looked like they were going to do something and ultimately when we contacted them and said no. We're fine. So it's difficult to see to say is that going to move.
Things down we did model it that we moved the top 25.
Deposit relationships by size, we dropped this number down into the low forties very very quickly. It's just that they haven't been interested in doing it so will they do it.
It could happen.
But.
We've done everything that we can to to let them know that the product is available and it's going to really going to be up to them, but our our business model is not a retail model, it's a commercial bank.
We also in our <unk>.
We've got about $180 million and.
And our correspondent banking.
Those those banks.
It is what it is that nobody is going to move deposits there.
And can I just ask one other question could you.
Scott the amount of participations you have in.
In dollars and sorry, one thing about the <unk>, which you mentioned what was the dollar amount of the.
Guaranteed portion which are on your books.
Yes.
The dollar amount was about a 1.8 million the earnings.
They participated the amount that we sold in there mark.
As I said.
We recently ordered with the servicer.
Portion and they are finally seeing in good standing.
We don't do a lot of part D C patients.
This is not a bank.
We may have.
We do have a few participations with a strong local banks.
Out of.
Out of.
They need to and minimize risk and a few ASC durations, we've been asked by my bankers and banks that we've known for a while too.
Our D C based.
For the same reasons.
As I said this is a.
A bank where loan growth is not based on part D C patients.
We are not unnecessarily.
Geared to do that we will.
We don't feel is.
It's something that we should do.
Okay. Thank you for your help I greatly appreciate it.
Certainly thank you Ross.
Thank you. This concludes our Q&A session I'd like to turn the conference back over to Mr. <unk> for any closing remarks.
Thank you Caroline.
<unk>.
We're focused on.
Delivering quarter over quarter as we've had since not only since the IPO, which is a new management team has gotten here.
So with that said, we will get back to work and see an export.
Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect have a good day.
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