Q3 2023 Horizon Bancorp Inc Earnings Call
Operator: Welcome to Coruscall, please hold, an operator will be with you shortly Welcome to Coruscall, Coruscall, what conference would you like?
Chorus call. Please hold and operator will be with you shortly.
[music].
Welcome to chorus call, please hold and operator will be with <unk>.
Chorus call what conference would you like.
Operator: Yes, ma'am, hi, I'm your Philly Horizon Bancorp, earnings call. I can go ahead and join you in at this time for a horizon. One moment. Thank you. Sure thing. Our contained in the presentation. The company assumes no obligation to update any forward-looking statements made during the call. For anyone who does not already have a copy of the press release, and supplemental presentation issued by Horizon yesterday, they can access at the company's website horizonbank.com.
And I can go ahead and join you and at this time for horizon.
Matt.
Sure thing.
Contained in the presentation.
The company assumes no obligation to update any forward looking statements made during the call.
For anyone who does not already have a copy of the press release and supplemental presentation issued by horizon yesterday.
SaaS at the Companys website Horizon Bank Dot com.
Thomas Prame: Representing Horizon today are the Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, the Executive Vice President and Chief Financial Officer, Mark Secor, and Chief Executive Officer and President, Thomas Prame. At this time, I would like to turn the call over to Mr. Thomas Prame. Please go ahead. Good morning, and thank you for participating. We're pleased to share our third-core results that were highlighted by strong-long growth led by our commercial banking team, resilient and stable core-to-posit portfolio, and an increase in our non-interest income performance.
Representing horizon today, our executive Vice Pres, Vice President and Chief commercial banking Officer Lynn Carver.
Executive Vice President and Chief Financial Officer, Morris Mark C cohort.
And Chief Executive Officer, and President Thomas frame.
At this time I would like to turn the call over to Mister Thomas brain.
Please go ahead.
Good morning, and thank you for participating we're pleased to share our third quarter results that were highlighted by strong loan growth led by our commercial banking team resilient and stable core deposit portfolio and an increase in our noninterest income performance not unlike the first half of 2023 the team continues to.
Thomas Prame: Not unlike the first half of 2023, the team continues to manage expenses very well, and you'll see in our presentation, our credit quality performance remains a positive foundation for the franchise. Within our comments today, we'll update you on our fourth quarter and full-year outlook as we continue to strategically manage our balance sheet, portfolios and pricing and expand revenue sources, conservatively manage risk, and maintain ample capital and liquidity that we believe will position us well as we move into 2024.
We managed expenses very well and you'll see in our presentation. Our credit quality performance remains a positive foundation for the franchise.
Well that our comments today, we will update you on our fourth quarter and full year outlook as we continue to strategically manage our balance sheet portfolio and pricing and expand revenue sources considerably manage risk and maintain ample capital and liquidity that we believe will position us well as we move into 2024.
Lynn Kerber: To offer more detail under our third quarter results, let me introduce Lynn Kerber, our Executive Vice President and Chief Commercial Banking Officer, to provide insight into our lending and credit performance. Lynn? Thank you, Thomas. Beginning on slide six, we show that commercial loans increased $83 million for the quarter, or 13.1% on an annualized basis. Net fundings were $96.8 million for the third quarter, versus $128 million for the second quarter. Our average commercial loan yield was 5.80% for the portfolio and 7.5% for new production.
I will offer more detail end of our third quarter results, Let me introduce Lynn Kerber, our executive Vice President and Chief commercial banking officer to provide insight into our lending and credit performance Lynn.
Thank you Thomas.
Beginning on slide six we show that commercial loans increased to $83 million for the quarter or 13, 1% on an annualized basis net fundings were $96 8 million for the third quarter versus $128 million for the second quarter.
Our average commercial loan yield was 5.0 per cent for the portfolio and seven 5% for new production.
Lynn Kerber: New loan originations continue to be very diverse across our markets and industries. In the third quarter, one-third of our originations were commercial and industrial, which is a continuation of some expansion in this category. The overall commercial pipeline increased from 118 million at June 30th to 145 million as of September 30th. Activity continues to be well diversified by industry and geography with 51% in Michigan and 49% in Indiana. Commercial credit quality remains strong with low-pass dues of 8 basis points for quarter-end, non-performing commercial loans decreased 16% in the quarter, and year-to-date net charge-offs were 1 basis point at an annualized basis.
New loan originations continue to be very diverse across our markets and industries in the third quarter. One third of our originations were commercial and industrial which is a continuation of some expansion in this category.
The overall commercial pipeline increased from $118 million at June 30th two $145 million.
September 30th actor.
Activity continues to be well diversified by industry, and geography, with 51% in Michigan and 49% in Indiana.
Commercial credit quality remains strong with low past dues of eight basis points for quarter end nonperforming.
Nonperforming commercial loans decreased 16% in the quarter and year to date net charge offs were one basis point.
White spaces.
Lynn Kerber: Turning to slide 8, you will see that consumer direct-to-lone balances increased $64 million during the quarter, which consisted primarily of increases in home equity loans. This increase was partially offset by intentional runoff and indirect auto loans. This change in next is consistent with our strategic plan of redeploying capital to higher yielding product sites. The average consumer direct yield was 8.05% for the portfolio and 8.96% for new production. The average yield for consumer indirect was 3.25% for the portfolio and 9.51% for new production.
Turning to slide eight you'll see that consumer direct loan balances increased $64 million during the quarter, which consisted primarily of increases in home equity loans. This increase was partially offset by intentional run off in the indirect auto loans. This change in mix is consistent with our strategic.
Plan of redeploying capital to higher yielding product types.
The average consumer direct yield was 8.05% for the portfolio and $8 96 per cent for new production.
The average yield for consumer interactive was 3.25% for the portfolio and $9 five 1% for new production.
Lynn Kerber: Consumer pass dues increased in the third quarter for both consumer direct and consumer indirect, reflective of the broader economic conditions. However, consumer non-performing loans remained stable. Year-to-date net charge-offs for consumer direct are a net recovery of 1 basis point and consumer indirect charge-offs were 31 basis points.
Consumer past dues increased in the third quarter for both consumer direct and consumer indirect reflective of the broader economic conditions.
Ever consumer nonperforming loans remained stable.
Year to date net charge offs for consumer direct or a net recovery of one basis point and consumer indirect charge offs were 31 basis points.
Lynn Kerber: Slide 9 highlights our mortgage loan performance for the quarter. Our portfolio was stable and consistent with our expectations for 2023, aligning with our industry trends. Thus far for 2023, 67% of our year-to-date production is saleable. The average mortgage loan yield was 4.23% for the portfolio and 7.63% for new production. With zero charge-offs to the quarter, this portfolio continues to reflect high-quality borrowers with significant payment capacity and equity in their homes. Our asset quality metrics continued to be strong as outlined on slide 10. Net charge-offs for the third quarter were 722,000 representing two basis points of average loans, non-performing loans improved to 0.45%. Pass dues continued to be low at 30 basis points of total loans for the quarter.
Slide nine highlights our mortgage loan performance for the quarter, our portfolio was stable and consistent with our expectations for 2023, aligning with our industry trends.
Thus far for 2023, 67% of our year to date production is saleable.
The average mortgage loan yield was 423% for the portfolio and 7.63% for new production.
Zero charge offs for the quarter. This portfolio continues to reflect high quality borrowers with significant payment capacity and equity in their homes.
Our asset quality metrics continue to be strong as outlined on slide 10.
Net charge offs for the third quarter were 722000, representing two basis points of average loans.
Nonperforming loans improved to <unk>.
Four 5%.
Past dues continued to be low at 30 basis points of total loans for the quarter.
Lynn Kerber: Finally, our allowance for credit losses was maintained at 49.9 million representing 1.14% of total gross loans, which we believe is appropriate given the low level of pass dues and non-performing and charge-offs and current economic forecasts. Credit quality across all of our lending classes is performing well and reflects our history of consistent and well-balanced approach to lending.
Finally, our allowance for credit losses was maintained at $49 9 million, representing 1.14% of total gross loans, which we believe is appropriate given the low level of past dues and nonperforming and charge offs and current economic forecasts credit quality across.
All of our lending classes is performing well and reflects our history of consistent and well balanced approach to lending.
Thomas Prame: Now I'd like to turn things back to Thomas, who will provide an overview of our deposit portfolio and trends. Thank you, Lynn, and appreciate the insight in the detail. Transition to our deposit base, which is going to start on slide number 12. As noted, Horizon has a season and very granular portfolio with an average client tenure of about 10 years. A majority of these balances continue to be held in our transactional relationship accounts that no one trusts to Horizon will.
Now I'd like to turn things back to Thomas.
Who will provide an overview of our deposit portfolio and trends.
Thank you Lynn and I appreciate the insight and the detail.
Transitioning to our deposit base, which is going to start on slide number 12.
Raj has a seasoned and very granular portfolio with an average client tenure about 10 years. A majority of these balances continued to be held in our transactional relationship accounts, but no one trust horizon.
Thomas Prame: Additionally, in Q3, the portfolio displayed less than 20% of balances being uninsured. As I stated in my opening remarks, we're very pleased with our third quarter deposit performance, maintaining Horizon's core funding stability and limiting additional funding needs from broker and or wholesale balances. On slide 13, provides detail on the resiliency of the portfolio, and the team continues to be very upbeat about its strength. Our core consumer and commercial relationships were stable with minimum changes in total balances.
Additionally, in Q3s, the portfolio displayed less than 20% of balances being uninsured.
I stated in my opening remarks, we're very pleased with our third quarter deposit performance, maintaining horizons core funding stability and limiting additional funding needs from brokered and wholesale balances on.
On slide 13 provides detail on the resiliency of the portfolio and the team continues to be very upbeat about our strength our.
Our core consumer and commercial relationships were stable with minimal changes in total balances the combined portfolio balances changed approximately six 4% for the quarter.
Thomas Prame: The combined portfolio balances changed approximately 0.64% for the quarter. Public funds balances were also stable and experienced some heightened pricing pressures for excess liquid funds as quarter. However, the portfolio continues to maintain a significantly lower cost of funding when compared to alternative wholesale options. The quarter closed with broker treaties and other fixed rate borrowings flat with ample borrowing capacity available if needed. As we saw in Q2, cash flows from our operations and securities portfolio provided a positive fed fund sold position of 72 million at the end of Q3.
Public funds balances were also stable and experienced some heightened pricing pressures for excess liquid funds. This quarter. However, the portfolio continues to maintain a significantly lower cost of funding when compared to alternative wholesale options.
The quarter closed with brokered Cds and other fixed rate borrowings flat with ample borrowing capacity available if needed.
You saw in Q2 cash flows from our operations in Securities portfolio provided a positive fed fund sold position of $72 million at the end of Q3.
Thomas Prame: This excess liquidity will continue to provide options in the fourth quarter for higher yielding asset growth or flexibility and deposit pricing. As mentioned previously, the deposit portfolio continues to deliver strong results in terms of stability, resiliency and flexibility in our funding.
This excess liquidity will continue to provide options in the fourth quarter for higher yielding asset growth or flexibility in deposit pricing.
As mentioned previously the deposit portfolio continues to deliver strong results in terms of stability resiliency and flexibility in their funding.
Mark Secor: Let me hand the presentation over to our executive vice president and chief financial officer, Mark C.Core, who will walk for our current highlights and our income statement and key financial metrics for Q3 Mark. Thank you, Thomas. Our third quarter results were positive on many fronts. As lens stated, we had quality long growth from the commercial team, improved non interest income and continued a disciplined operating model in respect to expenses and credit.
Let me hand, the presentation over to our executive Vice President and Chief Financial Officer, Mark <unk>, who will walk through our current highlights in our income statement and key financial metrics for Q3 Mark.
Thank you Thomas.
Our third quarter results were positive on many fronts.
As Lynn stated, we had quality loan growth from the commercial team.
Proved noninterest income and continued a disciplined operating model with respect to expenses and credit.
Mark Secor: And our approach to new loan production spreads and strong long growth shifted lower yielding assets into higher yielding loans. In Q3, we experienced elevated deposit pressure on commercial and public liquid funds, putting pressure on the net interest margins and net interest income in the near term. However, we will continue to actively manage pricing and our balance sheet to begin improving the net interest margin over the longer term. Starting with slide 14, non interest income improvement over the link quarter with led by increases in gain on sale of mortgages and other income from sale of assets, while most other line items remain consistent.
And our approach to new loan production spreads and strong loan growth shifted lower yielding assets into higher yielding loans.
In Q3, we experienced elevated deposit pressure on commercial and public liquid funds.
Putting pressure on the net interest margin and net interest income in the near term.
However, we will continue to actively manage pricing and our balance sheet to begin improving the net interest margin over the longer term.
Starting with slide 14.
Noninterest income improvement over the linked quarter was led by increases in gain on sale of mortgages and other income from sale of assets, while most other line items remain consistent.
Mark Secor: The company is continuing to diversify core fee income categories that align with our relationship banking model. Going forward, we also expect our investments in treasury management and private wealth capabilities to contribute additional fee income to horizons revenue mix.
The company is continuing to diversified core fee income categories.
Along with our relationship banking model.
Going forward, we also expect our investments in Treasury management, and private wealth capabilities to contribute additional fee income to horizon's revenue mix.
Slide 15, our efforts to manage our operating expenses continues to be a strength for horizon.
Mark Secor: Slide 15. Our efforts to manage our operating expenses continue to be a strength for horizon. Non-interest expenses were 1.81 percent of average assets for the quarter compared to 1.86 percent last quarter. Our longstanding commitment to being agile in this part of our business model and consistently reviewing opportunities to reduce expenses and streamline processes continue to be a priority and you can expect it to remain our focus throughout 2023. Non-interest expenses improved modestly even with an elevated FDIC insurance expense that was offset by lower quarter-over-quarter expenses in several other categories.
Noninterest expenses were 1.81% of average assets for the quarter compared to 1.86% last quarter.
Our long standing commitment to being agile in this part of our business model and consistently reviewing opportunities to reduce expenses and streamline processes continue to be a priority and you can expect it to remain our focus throughout 2023.
Noninterest expenses improved modestly even with an elevated FDIC insurance expense that was offset by lower quarter over quarter expenses in several other categories.
Mark Secor: Sowering benefits in the third quarter were slightly lower based on stable headcount and modest reductions in commissions and other variable compensation. Our loan and deposit pricing management maintains a strong spread of displayed on slide 16. While it narrowed in the quarter, we believe a 414 basis point spread in horizon's loan and deposit pricing remains healthy compared to faveler compared to recent median and has the ability to improve over time. The results highlight our discipline loan pricing for new loan production and a greater focus on originating higher yielding loan products.
Salary and benefits in the third quarter were slightly lower based on stable head count and modest reductions in commissions and other variable compensation.
Our loan and deposit pricing management maintains a strong spread.
On slide 16.
While it narrowed in the quarter, we believe a 414 basis point spread and horizon's loan and deposit pricing remains healthy compares favorably to peers. This recent median.
And has the ability to improve over time.
The results highlight our disciplined loan pricing for new loan production and a greater focus on originating higher yielding loan products we.
Mark Secor: We will continue to focus on loan spread management product shift into higher yielding loan products and cash flow reinvestment at higher rates. Of course these results also reflect our efforts to retain quality, durable and market relationships in a highly competitive market for deposits.
We will continue to focus on the loan spread management product shift into higher yielding loan products and cash flow reinvestment in at higher rates.
Of course. These results also reflect our efforts to retain quality durable end market relationships and a highly competitive market for deposits.
Yeah.
Mark Secor: Moving to the investment portfolio on slide 17, it totaled 2.8 billion at the end of the quarter down 26 million from June 30th. The portfolio had a book yield of 2.21 percent and an effective duration of 6.7 years at the quarter end.
Moving to the investment portfolio on slide 17.
Total of $2 8 billion at the end of the quarter down $26 million from June 30th.
The portfolio had a book yield of 2.21% and an effective duration of six seven years at quarter end.
Mark Secor: As longer-term investments were originally identified as health and maturity, the duration of that portfolio is 2.2 years longer than the available for sale portfolio. Expected cash flows from investments are estimated to be 25 million per the remainder of 2023 and a total of 120 million over the next 12 months.
As longer term investments were originally identified as held to maturity the duration of that portfolio is 2.2 years longer than the available for sale portfolio.
Expected cash flows from investments are estimated to be $25 million for the remainder of 2023 and a total of $120 million over the next 12 months.
Mark Secor: But we continue to actively review strategic options for this portfolio.
But we continue to actively review strategic options for this portfolio.
Mark Secor: Slide 18, horizon continues to maintain solid regulatory capital ratios well above the required requirements to be considered well capitalized.
Slide 18 horizon continues to maintain solid regulatory capital ratios well above the required.
To be considered well capitalized and we believe we have sufficient capital to be open to options to improve our earnings outlook in the foreseeable future.
Mark Secor: Can we believe we have sufficient capital to be open to options to improve our earnings outlook in the foreseeable future? We anticipate that growth in capital will outpace the growth in total assets during the next 12 months, providing additional strength. As shown on slide 19, we continue to maintain a strong cash position at the holding company with adequate cash to cover eight quarters of fixed costs, including shareholder dividend. The cash position helps provide additional stability in uncertain times and as mentioned previously, keep the door open for strategies to improve our Horizon's current focus for the use of capital is organic earnings growth as current opportunities and marketing conditions make M&I M&A less likely.
We anticipate that growth in capital will outpace the growth in total assets. During the next 12 months, providing additional strength.
Yeah.
As shown on slide 19, we continue to maintain a strong cash position at the holding company with adequate cash to cover eight quarters of fixed costs, including shareholder dividend.
The cash position helps provide additional stability in uncertain times and as mentioned previously keeps the door open for strategies to improve our earnings.
Horizon's current focus for the use of capital is organic earnings growth as current opportunities and market conditions make M&A M&A less likely however, we remain open and receptive to discussions for profitable new revenue opportunities both in acquisition and lift outs.
Mark Secor: However, we remain open and receptive to discussions for profitable new revenue opportunities, both in acquisition and liftouts. We expect to continue our targeted dividend payout ratio of 30 to 40 percent, continuing our 30 year plus year of uninterrupted quarterly cash dividends based on our current stock price our dividend provides a higher yield relative to the sector.
We expect to continue our targeted dividend payout ratio of 30% to 40% continuing our 30 year plus year of uninterrupted quarterly cash dividends.
Based on our current stock price our dividend provides a higher yield relative to the sector.
Mark Secor: Looking ahead on slide 20, we provide you with an update on our current expectations for the fourth quarter in full year 2023. Our loan growth continues to be solid in both commercial and consumer sectors which should be valuable contributed to core earnings and subsequent quarters. For the fourth quarter in full year 2023, we expect 45 percent and 6 to 7 percent total loan growth respectively. Our net interest margin and net interest income trends should continue to benefit from our balance sheet and pricing management and we expect a net interest margin of 2.33 percent to 2.38 percent for the fourth quarter and 2.5 percent to 2.55 percent for the whole year.
Looking ahead on slide 20, we provide you with an update on our current expectations for the fourth quarter and full year 2023.
Our loan growth continues to be solid in both commercial and consumer sectors.
It should be valuable contributors to core earnings in subsequent quarters.
For the fourth quarter and full year 2023, we expect 4% to 5% and 6% to 7% total loan growth respectively.
Our net interest margin and net interest income trends should continue to benefit from our balance sheet and pricing management and.
We expect our net interest margin of 2.33% to 2.38% for the fourth quarter and two 5% to 2.55% for the whole year.
Mark Secor: We expect net interest income of 40 to 42 million for the fourth quarter and 174 to 176 million for all of 23. We anticipate the net interest margin to reach its floor in early 2024, assuming the Fed funds target reaches its terminal rate in the fourth quarter of 2023. Net interest income should continue near current levels with the anticipation of consistency income from our investments in Treasury management and wealth and a seasonal softening in Q4 of mortgage lending.
We expect net interest income of 40% to $42 million for the fourth quarter and 174 to 176 million for all of 'twenty three.
We anticipate the net interest margin to reach its floor and early 'twenty 'twenty four assuming the fed funds target reaches its terminal rate in the fourth quarter of 2023.
Noninterest income should continue near current levels with the anticipation of consistency income from our investments in Treasury management and wealth and a seasonal softening in Q4 of mortgage lending the expected range of $10 million to $11 million in noninterest income in the fourth quarter and a total of 43 to 40.
Mark Secor: The expected range of 10 to 11 million in net interest income in the fourth quarter and a total of 43 to 44 million in 2023. Net interest expenses continue to be proactively managed across the organization specifically in segments of our business impacted by writing rates such as mortgage and consumer lending. We also intend to invest in revenue generating talent in our Treasury management and commercial lending teams to contribute to top line in 2024.
<unk> 4 million in 2023.
Noninterest expenses continued to be proactively manage it across the organization specifically in segments of our business impacted by rising rates, such as mortgage and consumer lending.
We also intend to invest in revenue generating talent and our Treasury management and commercial lending teams to contribute to top line in 2024.
Mark Secor: As a result, we expect net interest expenses to range from about 35 to 36 million in the fourth quarter. This will result in 142 to 143 million of non-interest expense for the year. We also expect these expenses to range below 1.85 percent of average assets for the fourth quarter and the full year.
As a result, we expect noninterest expenses to range from about 35 to 36 million in the fourth quarter.
This would result in a $142 million to $143 million of noninterest expense for the year.
We also expect these expenses to remain below 1.85% of average assets for the fourth quarter and the full year.
Mark Secor: Our operating metrics, ROAA and ROAE, are expected to be slightly lower in the next quarter. We anticipate ROAA to range from 75 and 80 basis points for the fourth quarter and between 85 and 90 basis points for the year. We expect ROAE to range from 8.5 to 9 percent for the fourth quarter and between 9.5 percent and 10 percent for the full year 2023. Finally, for the TCE ratio on December 31st, we are expecting 6.6 to 6.8%.
Our operating metrics ROA and ROE a E are expected to be slightly lower in the next quarter.
We anticipate ROE age range from 75, and 80 basis points for the fourth quarter and between 85 and 90 basis points for the year.
We expect ROA E to range from eight 5% to 9% for the fourth quarter and between nine 5% and 10% for the full year 2023.
Finally for the TCE ratio on December 31st we're expecting six six to six 8%.
Thomas Prame: Now I would turn it back over to Thomas for some final comments. Thank you, Mark.
Now ill turn it back over to Thomas for some final comments.
Thank you Mark so why invest in horizon.
Thomas Prame: So why invest in Horizon? You know, our investment thesis is simple. We're located in attractive Midwest growth markets. These markets have desirable economic environments, significant infrastructure investment, and flourishing legal systems for business and communities. Horizon continues to execute well in its strategy of shipping growth to higher yielding efforts while maintaining its conservative credit risk profile. Horizon's demonstrated a track record of consistent underwriting and active portfolio management to ensure the success of our clients and our shareholders.
<unk> thesis is simple.
Okay at an attractive Midwest growth markets. These markets have desirable economic environments significant infrastructure investment and flourishing ecosystems for business and communities.
<unk> continues to execute well on our strategy of shifting growth to higher yielding assets, while maintaining a conservative credit risk profile.
<unk> demonstrated a track record of consistent underwriting and active portfolio management to ensure the success of our clients and our shareholders.
Thomas Prame: The franchise has a stable and loyal deposit base with significant access liquidity of 2.8 billion, providing flexibility and nibbleness to our funding strategies. And our discipline operating culture consistently achieves a low annual ratio of operating expense to average assets, which we expect to be less than 1.85% for 2023. This is coupled with our analyzed net charge-offs of only two basis points and historically low non-performing loans. We are very compelling value stock, support of our commitment to our dividend for the 5.9 times PE ratio and a 6% dividend yield. Horizon has a track record of 30 plus years of uninterrupted, quarterly cash dividends to our shareholders.
The franchise has a stable and loyal deposit base with significant excess liquidity of $2 8 billion, providing flexibility and nimbleness to our funding strategy.
And our disciplined operating culture consistently achieves a low annual ratio of operating expense to average assets, which we expect to be less than 1.85% for 2023. This.
This was coupled with our annualized net charge offs of only two basis points and historically low nonperforming loans.
We are very compelling value stock support of our commitment to our dividend with a five nine times p/e ratio and a 6% dividend yield horizon has a track record of 30 plus years of uninterrupted quarterly cash dividends to our shareholders.
Thomas Prame: We thank you in advance for a joint-air presentation this morning.
We thank you in advance for joining our presentation. This morning. This concludes our prepared remarks, so now I'll ask the operator, please open up the line for questions.
Operator: This concludes our prepared remarks, so now I'll ask the operator, please open up the line for questions. And we will now begin the question and answer session to ask a question you may press star the one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
And we will now begin the question and answer session to ask a question you May press Star one.
One on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Terry McAvoy: And our first question comes from Terry McAvoy from Stevens.
And our first question.
It comes from.
Mcevoy from Stephens Terry Please go ahead.
Terry McAvoy: Terry, please go ahead. Hi, thanks. Good morning, everyone.
Hi, Thanks, Good morning, everyone, maybe Mark I'll start with a question for you. Thanks for your thoughts on the fourth quarter net interest margin any thoughts on assuming the forward curve is correct, where you would expect the margin or when you would expect the margin or possibly net interest income to bottom in the future.
Mark Secor: Maybe Mark, start with a question for you. Thanks for your thoughts on the fourth quarter net interest margin. Any thoughts on assuming the forward curve is correct where you would expect the margin or when you'd expect the margin or possibly net interest income to bottom in the future? Yeah, good morning, Terry. We think it's close. We said we think in the first quarter based on what the current expectations are on rates that it will try by our modeling, we're seeing that.
Yeah, Good morning, Terry.
We think as close as he said we think in the first quarter based on what the current expectations are in rates that it will trough by our modeling we're seeing that and then start to tick up as we get into the second half of next year.
Mark Secor: And then start to pick up as we get into the second half of next year, barring any major rate change. If we start to see the rates coming down in the second half of 24, we'll see more benefit. What we saw coming out of this quarter were the last two months that the margin stabilized. So we have a pretty good idea of what we're coming into going into the fourth quarter.
Barring.
Any major rate change if we start to see the.
The rates coming down in the second half of 'twenty four we will see more benefit what we saw coming out of this quarter. What are the last two months that the margin stabilized. So we have a pretty good idea of of what we're coming into going into the fourth quarter.
Yes.
Great and then I'm just listening to your comments about investing in Treasury management and open to hiring commercial teams any initial thoughts on how you manage expense growth in 2024.
Terry McAvoy: Great.
Good morning, Terry Lynn cover.
Lynn Kerber: And then just listen to your comments about investing in Treasury management and open to hiring commercial teams. Any initial thoughts on how you manage expense growth in 2024?
Thanks for the question Yeah.
Lynn Kerber: Good morning, Terry, it's Lynn Kerber. Thanks for the question. Yeah, we are looking at adding some additional staffing in our Treasury department. Fathers some additional expenses related with that staffing. The goal is to diversify our corporate deposit-based better and a virtue of a lower cost of funding in that contribution that would help offset that staffing increase. On the commercial side, there's going to be some team members that will be adding some assets that would assist in paying for their salary. And I think it'd be a fairly short payback on that.
Yeah, we are looking at adding.
Some additional staffing in our treasury.
Departments.
There's some additional expenses related to that staffing and the goal is to diversify our corporate deposit base better.
And by virtue of a lower cost of funding and that contribution that would help offset that staffing.
Kris.
On the commercial side, there's going to be.
Team members that it'll be adding some assets that would assistant paying for your salary and I think.
A fairly short payback on that.
Great. Thanks for taking my questions I appreciate it.
Terry McAvoy: Great. Thanks for taking my questions. Appreciate it. Thanks, Terry.
Thanks Terry.
Okay.
Nathan Race: And our next question comes from Nathan Race, from Piper Sandler. Nathan, please go ahead. Great. Good morning, everyone. Thank you for taking the questions. Good morning.
And our next question comes from Nathan race from Piper Sandler.
Please go ahead.
Great. Good morning, everyone. Thanks for taking the questions.
Good morning.
Thomas Prame: Just some kind of thinking about getting to the margin guidance of 250 to 255 for the full year. Here is kind of what that constant plays in terms of the size of the earning asset base. Here's the fourth quarter. Are you guys seeing an opportunity to space a mere deposit? Pipeline to wind out some wholesale funding to maybe bring down the earning asset base? Or I guess I'm just trying to think about how to get to that 10 to 255 expectations is given the lower margin expectations for 4Q. Sure, thanks. Thank you, Mrs. Thomas. Appreciate the question.
Just kind of thinking about getting to the margin.
Margin guidance of $2 50 to 255 for the full year I'm curious kind of what that contemplates in terms of the size of the earning asset base.
Fourth quarter, you guys see an opportunity just based on your deposits.
Pipeline to wind down some wholesale funding to maybe bring down the earning asset base or I guess I'm just trying to think about how to get to the 255 expectations just given the lower margin expectations for <unk>.
Sure. Thanks, Nathan This is Tom I appreciate the question.
Mark Secor: When we look at our asset size going in the fourth quarter, we're going to imagine it'll be relatively consistent as we left the third quarter. We did have the access cash position that we'll use to pay down any type of a call higher cost borrowing. When you look at our structured borrowing, it's actually a relatively lower cost compared to overnight borrowing. So we would say our borrowing position will be relatively consistent going in the fourth quarter.
No. We look when we look at our asset size coming in the fourth quarter, we're going to imagine it'll be relatively consistent as we left the third quarter. We did have the excess cash position that we'll use to pay.
Mark Secor: Access funds would be used to pay down any type of higher priced borrowings, which would be most likely on the public fund side that we saw some elevation in the third quarter, relatively consistent balance going through the fourth quarter.
Pay down any type of I'll call higher cost borrowing when you look at our structured borrowers borrowing it's actually at a relatively lower cost compared to overnight borrowings. So we would say our borrowings.
Our borrowing position will be relatively consistent going into the fourth quarter excess funds will be used to pay down any type of our higher priced borrowings, which would be most likely on the public fund side that we saw some elevation in the third quarter relatively consistent balance sheet going third and fourth quarter.
Sure.
Mark Secor: Yeah, and make that four year, if you recall, it's not not adjusted. It's not adjusted, so it includes the swap gain that we received in the third quarter. Joshua, understood.
Yeah, It would make that full year, if you recall it isn't that's not adjusted unadjusted. So it includes the swap.
Again that we received in the third quarter.
Gotcha understood.
Lynn Kerber: And then just kind of thinking about the trajectory of boon yields going forward in a higher prolonger rate environment, any color and just kind of a new rate on production was in the third quarter and just how you're thinking about kind of the trajectory of boon yields over the next few quarters assuming the Fed pauses and just kind of the tailwinds that you guys have with some blows reprising going forward. Hi, this is Lynn Kerber.
And then just kind of thinking about the trajectory of loan yields going forward and are higher for longer rate environment.
Any color on just kind of what the new rate on production was in the third quarter and just how you're kind of thinking about kind of the trajectory of loan yields over the next few quarters, assuming the fed pauses.
And.
Just kind of a tailwind that you guys have with some of those re pricing going forward.
Oh, Hi, this is Lynn kerber are relative to the commercial portfolio.
Lynn Kerber: Relative to the commercial portfolio, we're really basing our new originations on corrupt, and so that's been generally very much in sync. You know, over the last year as the rate increases have occurred, you know, generally there's a few-week lag as our pipeline catches up to the new rate depending on the rate structure in terms of the funding. But overall, our margin over cost of funds for commercial has been pre-stable. And so if rates start to stabilize, I don't see that really having a lot of variation. Yeah, but it sounds like when the kind of new production on a weight average basis is just coming on nicely above the portfolio yield.
And we're really basing our new originations on uncapped.
Cost of funds and so that's been generally very much in sync you know over the last year as the rate increases have occurred generally theres a few week lag as our pipeline catches up to the new rate.
Depending on the rate structure in terms of that.
But overall our margin over cost of funds for commercial it's been pretty stable and so if rates start to stabilize I don't I don't see that really having a lot of variation.
Got it but it sounds like when a new production on a weighted average basis is still coming on nicely above the portfolio yield coming out of the third quarter, yes. It is.
Lynn Kerber: Can I have the third quarter? Yes, it is. Okay, great.
Okay great.
Lynn Kerber: And then just lastly, sorry. I can add, we in the presentation, Nate, we have the average production to last quarter for commercial was seven and a half. Consumer was just under nine percent and mortgage was six, seven point six.
Then just lastly, sorry.
Nathan Race: Okay, great. Thank you for that.
I think that we are in the presentation. We have the average production for the last quarter for commercial was seven and a half consumer was just under 9% and mortgage was a.
7.6.
Okay, great. Thank you for that and then just lastly, any thoughts on the.
Nathan Race: And then just lastly, any thoughts on a kind of shared purchase activities in the fourth quarter in early next year, just given where the stock is trading today? You know, we have, we have an ability and we have a, I think 1.8 million shares in a plan that we could re-purchase. But in our, we've done quite a bit of evaluation of what piece of capital and with the current cost of funds to give up cost of that cash to buy it, it doesn't appear stock repurchase right now is the best use, although it's always on the table and we're constantly looking at it.
Kind of.
Share repurchase activities in the fourth quarter and early next year, just given where the stock is trading today.
We haven't we have the ability and we have a minute.
I think one 8 million shares and a plan that we could repurchase.
But in our we've done quite a bit of evaluation of what use some capital and with the current cost of funds to.
They give up cost of that cash to buy it it doesn't appear stock repurchase right now is the best use although that's always on the table and we're constantly looking at it.
Operator: Okay, great. I'll step back. I appreciate the color. Thank you. Thanks for the questions. And let me just remind you, if you would like to enter the question to just press star one.
Okay, Great I'll step out.
I appreciate the color. Thank you.
For the questions.
Okay.
And let me just remind you if you would like to enter the question queue Just press star one.
Damon Del Monte: Our next question comes from Damon Del Monte from KBW.
Our next question comes from Damon Delmonte from K B W. Damon. Please go ahead.
Damon Del Monte: Damon, please go ahead. Morning Damon. Hey, good morning everyone. Hope everybody's doing well today and thanks for taking my questions.
Good morning Damon.
Hey, good morning, everyone hope everybody's doing well today and thank for taking my questions.
Damon Del Monte: I just want to start off on credit, you know, obviously very strong credit trends continue with you guys, but just wondering, you know, are there any areas of your portfolio where you're maybe seeing some early signs of stress? And maybe something tied to a particular industry or geography?
I just wanted to start off on credit you know, obviously very strong credit trends continue with you guys. But just wondering you know are there any areas of your portfolio, where you're maybe seeing some early signs of stress.
And maybe something tied to a particular.
Industry or geography.
Lynn Kerber: Good morning Damon and Salin. Thank you for the question. As you see in our deck, we had a slight increase in past views and although it's still at only 30 basis points, which is the traditionally low past due percentage. Most of that was in our consumer portfolio and as we reviewed those numbers are primarily automobile. And while the percent increase, you know, if you look at our overall portfolio mix, we have been having reduction in our indirect loan portfolio. And so while a percent has increased, the dollar amount hasn't increased substantially there. Relative to charge us that did increase this quarter, and that was predominantly indirect auto. We've got it. Okay.
Good morning, Damon insulin Oh, thank you.
And as you see in our deck and we had a slight increase in past dues and.
Although it's still at only 30 basis points, which is a traditionally low.
Past due percentage most of that was in our consumer portfolio and as we reviewed those numbers are primarily automobile.
And while the percent increase.
If you look at our overall portfolio mix, we have been having a reduction in our indirect loan portfolio and solid up one 1% has increased the dollar amount hasn't increased substantially there.
Relative to charge offs that did increase this quarter and that was predominantly indirect auto.
Got it okay.
Damon Del Monte: Just real quick follow up on that. I know we've seen a lot on the industry around Indirect Auto and Consumer Chargers. The disaster is you review our results.
Real quick follow up on that I know, we've seen a lot of the industry around indirect auto and consumer charge offs and SaaS as you review our results. Please take a peek at page eight I think we will see that even though Lynn said that we'll see a little bit.
Mark Secor: Please take a peek at page eight. I think we'll see that even though a Lynn said that we'll see a little bit increase in our consumer charge aus simply because where the economy is, our consumer portfolio is a high quality borrowers and so we're expecting that our trends on consumer charge aus even though the industry may go in a different direction or are going to outperform there. Got it. Okay. And then with respect to, I guess a broader view on credit and you look at where the reserve is, that's been steadily marching down since it obviously peaked during the COVID time like most others.
Increase in our consumer charge offs simply because of where the economy is our consumer portfolio.
High quality borrowers and so we're expecting that our trends on consumer charge offs, even though the industry may go in a different direction or they're going to outperform there.
Yeah.
Got it Okay, and then with respect to you know.
Just a broader view on credit and you look at like where the reserve is now that's been steadily marching down since it.
Peaked during the Covid time like most others, where do you feel is a comfortable level to settle at.
Mark Secor: Where do you feel is a comfortable level to settle at? It's bound to 1.14% as of this quarter. So how do we think about settling rate for the reserve and then kind of using the provision line to keep that there? Yeah.
One to $1 one 4% as of this quarter. So you know how do we think about settling rate for the.
The reserve and then kind of using the provision line to keep that there.
Mark Secor: Thank you again. As we've shared at previous calls, you know, during the pandemic, we had allocated quite a bit for certain sectors related to the COVID pandemic and those portfolios predominantly hotels and retail, those performed extremely well in fact really stellar. And so we had been releasing those reserves steadily over the last year. So what I think you'll see is that our reserve is returning to more core analysis based on historic loss rate and the economic forecast.
Yeah. Thank you again, you know as we've shared in previous calls during the pandemic.
We had allocated quite a bit.
For certain sectors are related to the Covid pandemic.
And are those portfolios predominantly of hotels.
And retail.
Those performed extremely well.
Some really stellar.
And so we had been releasing reserves.
Over the last year or.
So what I think you'll see is that our reserve is returning to more core.
Analysis based on our historic loss rates and the economic forecast and so I think as we move forward, it's gonna be predominantly a function of that economic forecast.
Mark Secor: And so I think as we move forward, it's going to be predominantly a function of that economic forecast. Our credit quality metrics all remain very low as you can see. And if you look back over our history over the last business cycle, we performed generally about 75% of our peer group losses. Yeah, and this is Mark. You know, you have to let the model drive the results. And there is management, you know, judgment in there.
Our credit quality metrics all remain very low as you can see and if you look back over our history over the last business cycle.
We performed generally about 75% of our peer group our losses.
Yeah. This is Marc.
You have to let the model drive the results and there is management you know.
<unk> in there but.
Mark Secor: But as you see, the portfolio is like indirect, which historically has our highest top is it is shrinking. We're putting on assets and categories in mortgage commercial that have much lower historical losses. So that also is contributing to this. Yeah, that okay.
You see the portfolios like indirect which historically has our highest torque off as it is shrinking we're putting on assets and categories men mortgage commercial that have much lower historical losses. So that also is is.
Contributing to this.
Got it okay.
Mark Secor: Mark, be able to kind of like ballpark a rough estimate for provision and going forward. I mean, is it fair to look at the first three quarters of the year and kind of take that average and think that's doable here in the fourth quarter? Or do you think maybe just giving changing in broader macro trends, we need to have a little bit higher provision?
Mark are you able to kind of like ballpark, a a a rough.
A rough.
Estimate for provision going forward I mean is it fair to look at the first three quarters of the year and kind of take that average and think that's doable here in the fourth quarter or do you think.
Maybe just given changing and broader macro trends, we need to have a little bit higher provision.
Mark Secor: You know, you know, Lincoln added this. But I think if you look at what we might be seeing in the last several quarters for charge ops that we need to, you know, replace those. I think that's probably a good guidance to what we're looking at.
You know you know Lincoln.
Mark Secor: Thank you. Okay, great.
Do this but I think our I think if you look at what we might be seen in the last several quarters for charge offs that we need to replace those.
I think that's probably as they are is a good guidance on what we're looking at.
Okay great.
Mark Secor: And then just last advice from these one more. What's a good effective tax rate we should be using? I guess for the fourth quarter, and then it's the look to 2024. Yeah, thanks for the question. You know, the effective tax rate continues to go down as earnings pre-tax earnings have come down from the last year. So it's hard to just say peg a number, but I think where we are right now is pretty good going forward at around that 8%.
And then just lastly, if I sneak one more in what's a good effective tax rate, we should be using.
Mark Secor: And what's driving that is we continue to invest in lower tax credits and they're having, and we have obviously other tax free income from unions and such. But the solar credits are what's contributing a lot. And those were continuing to invest in those have a 20 year carry forward. So we want to continue to invest in those and use that to help keep the marginal rate down. So I think where we are right now is good guidance. Got it.
I guess for the fourth quarter and then as we look to 2024.
Yeah. Thanks for the question.
The effective tax rate continues to go down as the earnings.
Pre tax earnings have come down from the last from.
Last year.
So it's hard to just say purger peg a number but I think where we are right now is pretty good going forward it around that 8%.
On what's driving that is we continue to invest in solar tax credits and Theyre, having and we have obviously other tax free.
Pre income from Muni and such.
So the solar credits or what's what's contributing a lot.
And those will continue to invest in those that have a 20 year carryforward.
So we want to continue to invest in those.
And use that to help people.
The marginal rate down so I think where we are right now is good guidance.
Got it okay. That's all I had thanks, a lot for the color everyone. Appreciate it.
Damon Del Monte: Okay, that's all that I had. Thanks a lot for the color. Everyone appreciate it. Thank you.
Thank you.
[noise].
David Long: And our next question comes from David Long from Raymond James. David, please go ahead. Morning, David. Good morning. Thanks for taking my question. Just a couple of things here. The first one on 517 and you discussed this in the formal comments. But the 25 million of scheduled securities cash flows this fourth quarter and then 120 million next year. Are there any pre-payment assumptions built into that or those simply just those that are contractually maturing?
And our next question comes from David Long from Raymond James.
Please go ahead.
Morning, David.
Good morning, Thanks for taking my question just a couple of things here. The first one on slide 17, and you discussed this in the ER and the formal comments, but the $25 million of scheduled securities cash flows. This fourth quarter and then a 120 million next year are there any prepayment assumptions built into that.
Are those simply just those that are contractually maturing.
David Long: It's contractually maturing and run off. Payment got it got it. So so if there are pre payments, those numbers could be a little bit higher. They could and we see that once in a while. We'll see a bond get get recall. Yeah, sure. Okay, great. Thank you.
It's contractually maturing and runoff.
Got it got it so so far our prepayments those numbers could be a little bit higher they could and we see that once in a while we'll see some a blanket.
Oh yeah.
Sure sure Okay, great. Thank you and then second question as it relates to non interest bearing deposits.
Thomas Prame: And then second question. Is it related to non interest bearing deposits? The contraction there seems to stabilize a little bit for you guys. Where do you think that plays out over the next few quarters? Do you see more mixed shifting still? And do you have like a percentage in mind that you think not interest bearing will get to X percent of total deposits? How are you thinking about that level here in near to intermediate term?
The contraction there seems to have stabilized a little bit for you guys, where do you think that plays out over the next few quarters do you see more mix shifting still and do you have like a percentage in mind that you think noninterest bearing will get to X percent of total deposits. How are you thinking about that level here in the near to intermediate term.
Thomas Prame: Thank you for the question. Usually in the what we see in the fourth quarters, we do take in some tax money from our public funds group that we'll cause. Perhaps the average is the relatively stable is not slightly up there. And then in the consumer spending happens in the fourth quarter, the first quarter historically for our business model and our clients usually is an outflow deposits. As people think their tax payments, given an outdoor company.
Thank you for the question.
And they will be seen in the fourth quarter as we do take in some tax money from our public funds group.
What caused from perhaps your average to see relatively stable if not slightly up there.
And then in the consumer spending happens in the fourth quarter to first quarter historically for our prior business model and our clients usually is an outflow of deposits as people think their tax payments a dividend out there of companies. So I would say, we'd see a slight decline, but nothing that nothing of major concern probably just the seasonality that you saw from the first quarter of last year.
Thomas Prame: So I would say we see a slight decline, but nothing that nothing of major concern. Probably just the seasonality that you saw from the first quarter last year. Got it. Thank you, Thomas. Appreciate it. Thanks, guys.
Got it. Thank you Thomas I appreciate it thanks guys.
Thanks, Kevin.
Okay.
Brian Martin: And we have a question now from Brian Martin from Janie, Janie Montgomery. Brian, please go ahead. Hey, good morning, everyone. Just wondering if you can talk a little bit about where you talk about being a little bit more targeted on what you're thinking on moon growth and just kind of getting better yield. Just kind of where you're focused today on, you know, it sounds like maybe indirect, could still have some continued to run off, but maybe just point us a little bit there and just kind of the yield pick up you're expecting on that, you know, with the liquidity levels you guys have.
And we have a question now from Brian Martin from Jamie Jamie Montgomery, Brian. Please go ahead.
Hey, good morning, everyone.
So just wondering if you can talk a little bit about where the you talked about being a little bit more targeted on what are your thinking on loan growth and just kind of getting better yield just kind of where you're focused at today on you know it sounds like maybe indirect costs still have some continued to run off but maybe just probably just a little bit of there and just kind of a yield pick up you're expecting on that you know with the liquidity levels you guys have.
Yes.
Brian Martin: Thanks for the question. I'll start and I'll pass over to Linda to talk specifically about commercial and say from a macro level on the balance sheet our growth will still primarily be in the commercial and Lincoln talked about the segments there. We're seeing a natural run off this quarter of indirect which is reflective of our pricing. I would anticipate on a go for the decline in that portfolio be relatively near for the next several quarters.
Thanks for the question I'll start and I'll pass over to Linda talk specifically about commercial let's say from a macro level in the balance sheet, our growth will primarily be in the commercial and Lynn can talk about the segments there.
We're seeing a natural runoff this quarter of indirect which is reflective of our pricing I would anticipate on a go forward.
The decline in that portfolio will be relatively mirrored for the next several quarters, our consumer portfolio outside of that through the branches has been stable.
Brian Martin: Our consumer portfolio outside of that through the branches has been stable slight uptick and then mortgage has been, you know, that one there has been a slight up and that's really because our prepayments are slowing down on that. The originations are relatively consistent with about as we talked about for about 25% of the originations going on the balance sheet, but we're seeing slowdowns and payments there which is giving us a modestly up and I'll pass it over to Linda to talk about the commercial growth in the various segments.
Uptick and then mortgage has been a you know that one there has been a slight up and that's really because our prepayments are slowing down on that the originations are relatively consistent with the balance as we talked about before about 25% of the originations on the balance sheet, but we're seeing slowdowns in payments, there, which is given that the stock.
I would say modestly up and I'll pass it over to Linda talked about the commercial growth in the various segments.
Brian Martin: Thanks, Thomas. I'm directing a page six of our slide deck. We've got a portfolio composition for the commercial portfolio. This has been very consistent. You'll see that are not on your occupied is 48% CNI's 25% and our on our occupied is 23%. This has been very consistent over the last several years and when you break down our quarterly pipeline and new original new originations, it virtually mirrors this mix. As I made in my commented in my comments earlier, we have been seeing some increase in CNI this quarter.
Thanks Thomas.
I direct you to page six of our slide deck, we've got in our portfolio composition for the commercial portfolio.
This has been very consistent and you'll see that our non owner occupied is 48% C&I is 25% and our owner occupied is a 23%.
This has been very consistent over the last several years and when you break down our quarterly pipeline and new arrange new originations at virtually mirrors. This next.
As I made in my car.
Commented in my comments earlier, we haven't been seeing some increase in C&I this quarter it was 33%.
Brian Martin: It was 33% versus our portfolio composition of 25%. And this is a continuation of a trend that we've been seeing over the last year as we seek to diversify into that sector a little bit more and that will be a continued trend as we go into next year by expanding some efforts into CNI. Okay, and in the yield, in the yield, you pick up your getting on that liquidity then with this type of low growth.
Versus our portfolio composition of 25% and and this is a continuation of a trend that we've been seeing over the last year as well.
We seek to diversify into that sector, a little bit more and that will be a continued trend as we go into next year.
Banding some efforts into C&I.
Okay, and then in the yields and as they ill pick up you're getting on that liquidity then.
Type of loan growth.
Brian Martin: The average yield that mark, I guess we've talked about it with the number one, is that kind of what we should expect on as far as the pickup goes? Our pricing and the pickup yourself in the deck should be consistent as we go in the fourth quarter.
Average yield that Mark I think as we've talked about it what the number was it that kind of what we should expect on a as far as the pick up goes.
Our pricing and the pickup of yourself and the DUC should be consistent as we go into fourth quarter.
Thomas Prame: Okay, all right, and Thomas, I don't know if you can give any update on just I think you get to talk last quarter about potentially looking at a restructuring the bond book, just kind of where you're at there, what kind of you guys are still looking at that?
Okay, Alright, and then Thomas I don't know if you can give any update on just I think you guys talked last quarter about potentially looking at AR.
Restructuring the bond book just kind of.
Where you're out there what you know what kind of you guys are still looking at that.
Thomas Prame: Thank you for the question. I think as Mark alluded, we're always looking for the best use of capital, where we can put that, whether that's share by back, security, distancing, or leveraging the balance sheet. Right now, we're still evaluating that for us, it's really our view where the fourth curve is going to be. As we saw, what happened with the curve here, this quarter, expectations where the terminal rate changed and what next year will look like.
Thank you for the question I think as Mark alluded you know, we're always looking for the best use of capital, where we can put that whether that's share buybacks security repositioning or leveraging the balance sheet.
Right now, we're still evaluating that for us, it's really our view of where the forward curve is going to be.
As we saw what happened with the curve here this quarter the expectations were at the terminal rate change than what next year will look like so that we get some more stability in view of what the 2024. It looks like we'll probably sit down with our board and our leadership team around the capital deployment. There understanding there of course, we still have margin pressures here, but we're still.
Thomas Prame: So if we get some more stability in view of what 2024 will look like, we'll probably sit down with our board and our leadership team around the capital deployment there, understanding and of course, we still have margin pressures here, but we're still very optimistic about the strength or deposit portfolio. And as Mark talked about earlier, we believe that our margin is probably at the bottom of the trust now as we move into 2024.
Very optimistic about the strength of our deposit portfolio and as Mark talked about earlier I believe that our our margins probably at the bottom of the trough out as we move into 2024.
Brian Martin: Perfect, that's helpful.
Perfect. That's helpful and just maybe one last one for Mark just on the margin Mark do you have a spot margin for the month of September and then it sounds like it was it was bottoming.
Mark Secor: Maybe one last one from Mark, just on the margin mark. Do you have a spot margin for the month of September? I know it sounds like it was it was bottoming. Yeah, on adjusted, we were at 239. Okay, perfect.
Yeah, unadjusted or we were at.
$2 39.
Okay perfect. That's all I had guys. Thank you for taking the questions right.
Brian Martin: That's all I had guys. Thank you for taking the questions. All right, thank you. Thank you, Brian.
Operator: And this concludes our question and answer session.
Alright. Thank you. Thank you Brian.
Yeah.
And this concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thomas Prame: I would like to turn the conference back over to management for any closing remarks. Thank you, Marleys, and appreciate your help today. I also want to thank everyone for participating in our earnings call today. We believe our in-market revenue opportunities, the valuable deposit franchise, credit culture, expense management discipline, have positioned Horizon well for the final months of 2024. We appreciate your interest in investment or Horizon. We look forward to speaking to you next quarterly call that will happen in January.
Yeah.
Thank you Myra lease and appreciate your help today I also want to thank everyone for participating in our earnings call. Today, We believe our end market revenue opportunities the valuable deposit franchise credit culture expense management discipline.
<unk> horizon well for the final months of 2024, we appreciate your interest and investment Horizon, and we look forward to speaking to you in next quarterly call that will happen in January in the meantime, don't hesitate to reach out with any questions and have a.
Operator: In the meantime, don't hesitate to reach out many questions and have a wonderful holiday season. Thank you.
A wonderful holiday season. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a good day.
Yeah.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Good day.