Q3 2023 Financial Institutions Inc Earnings Call

Yeah.

Hello, and welcome to todays financial institutions, Inc. Announces third quarter 2023 results.

Speaker 1: Hello and welcome to today's Financial Institutions, Inc. announces third quarter 2023 results. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad.

My name is and I'll be coordinating your cold stacked.

If you'd like to register their question Joanne States Vince. Please press star followed by one on your telephone keypad.

Speaker 1: I'd now like to hand over to Kate Croft, Director of Investor Relations. The floor is yours. Please go.

I'd like to hand over to Ken Krause director of Investor Relations. The floor is yours. Please go ahead.

Speaker 2: Thank you for joining us for today's call. Providing prepared comments will be present in CEO Marty Birmingham and CSO Jack Lance. They will be joined by additional members of the company signing some leadership teams during the question and answer session.

Thank you for joining us for today's call, providing prepared comments will be president and CEO, Marty Birmingham and CFO. Jack later, it will be joined by additional members of the company's finance leadership team. During the question and answer session. Today's prepared comments and Q&A will include forward looking statements actual results may differ materially from forward.

Speaker 2: Today's prepared comments and Q&A will include board looking statements. Actual results may differ materially from board looking statements due to a variety of risks, uncertainties, and other factors. We refer you to yesterday's earnings release and investor presentations, as well as the struggle FEC filing, which are available on our investor relations website for a safe parboard description and a detailed discussion of the risk factors relating to poor looking statements.

Looking statements due to a variety of risks uncertainties and other factors. We refer you to yesterday's earnings release, and Investor presentation, as well as historical SEC filings, which are available on our Investor Relations website for a safe Harbor description as detailed discussions of the risk factors relating to forward looking statements well also discuss certain non-GAAP financial measures.

Speaker 2: We'll also discuss certain on-guess financial measures in time to disupplement and not substitute for comparable GAAP measures . Reconciliation of these measures to GAAP financial measures were provided in the earnings relief filed as an exhibit to form a K. Please note this call includes information that may only be accurate as of today's date October 27, 2023. I'll now turn the call over to President and CEO Mardi Burbingan.

To supplement and not substitute for comparable GAAP measures reconciliation of these measures to GAAP financial measures were provided in the earnings release filed as an exhibit to form 8-K. Please note. This call includes information that may only be accurate as of today's date October 27, 2023, I'll now turn the call over to President and CEO Marty Birmingham.

Speaker 3: Thank you, Kate. And good morning, everyone. Thank you for joining us today.

Yes.

Thank you Jay.

Good morning, everyone and thank you for joining us today.

Speaker 3: Third quarter results were highlighted by healthy deposit growth and a continuation of stable credit quality metrics.

Third quarter results were highlighted by healthy deposit growth and a continuation of stable credit quality metrics, both of which position us well for the remainder of 2023 and give us confidence in our ability to effectively navigate the operating environment in 2024, including capitalizing on opportunities.

Speaker 3: both of which position us well for the remainder of 2023 and give us confidence in our ability to effectively navigate the operating environment in 2024, including capitalizing on opportunities.

Speaker 3: Third-quarter net income available to comment shareholders was 13.7 million or 8.8 cents per deluded share, down to 14 million or 91 cents per share in the second quarter of 2023, and in line with the prior results of 13.5 million or 8.8 cents per share.

Third quarter net income available to common shareholders was $13 7 million.

Or 88 cents per diluted share down from 14 million or <unk> 91 per share in the second quarter of 2023 and in line with the prior year results of $13 5 million or <unk> <unk> per share.

Speaker 3: Like much of the country, competition for deposits remains fierce in our markets. And I'm incredibly proud of our team's ability to drive 6% deposit growth during the quarter.

Like much of the country competition for deposits remains fierce in our markets and I am incredibly proud of our team's ability to drive 6% deposit growth during the quarter.

Speaker 3: The fact that this growth was led by core non-public deposits is all the more noble.

The fact that this growth was led by core nonpublic deposits is all the more noteworthy with retail banking as a service or bass and commercial all contributing.

Speaker 3: Retail, banking as a service or a bath and commercial all contribute.

Speaker 3: The significant driver of non-public deposit growth was the 5% money market account campaign that you'll be calling launched in late July .

A significant driver of nonpublic deposit growth was 5% money market account campaign.

Youll recall, we launched in late July.

Speaker 3: In addition to helping us deepen relationships with existing customers,

In addition to helping us deepen relationships with existing customers. We have introduced more than 800, new retail customers to five star Bank and our relationship based approach to community banking through this campaign.

Speaker 3: We have introduced more than 800 new retail customers to five star bank in our relationship-based approach to community banking through this campus.

Speaker 3: These new customers brought in approximately 72 million balances through October 14. In addition to balance the deposit by...

These new customers brought in approximately 72 million balances through October 14th.

Addition to balance was deposited by our long standing customer base.

Speaker 3: We plan to continue the campaigns through Mid-O-Vabber, providing a strong start to the fourth quarter.

We plan to continue the campaign through mid November provided a strong start to the fourth quarter.

Speaker 3: That's also a game momentum during the third quarter, with approximately 77 million related deposits of quarter-end.

That's also gained momentum during the third quarter was approximately $77 million of related deposits at quarter end.

We consider these to be an attractive alternative to higher cost wholesale funding.

Speaker 3: While these deposits have come on slower than we originally anticipated.

While these deposits have come out slower than we originally anticipated.

Speaker 3: Our approach to onboarding new partners includes a thoughtful governance process before transitioning them on to our best plan.

Our approach to Onboarding, New partners includes a thoughtful governance process before transitioning them onto our <unk> platform.

Speaker 3: We look forward to continued growth in 2024 and beyond as we build out our pipeline of Fintech and non-banked parts.

We look forward to continued growth in 2024 and beyond as we build out our pipeline of Fintech and non bank partners.

Speaker 3: Our commercial banking franchise also supported deposit growth in the quarter. As we implemented changes earlier in the year to incentivize our commercial liners to focus on deposit gathering initiative.

Our commercial banking franchise also supported deposit growth in the quarter as we implemented changes earlier in the year to incentivize our commercial lenders to focus on deposit gathering initiatives.

Speaker 3: Public deposit balances at September 30, 2023 were up compared to the end of the second quarter, largely reflecting seasonal inflows that we typically experienced late in the third quarter.

Public deposit balances at September 32023 were up compared to we ended the second quarter, largely reflecting seasonal inflows that we typically experienced late in the third quarter.

Speaker 3: Reciprocal deposits also grew during the quarter. As this continues to be an attractive option of boarding our larger customers, the benefit of FVIT insurance unaccounts greater than 250,000.

Cyclical deposits also grew during the quarter as this continues to be an attractive option affording our larger customers the benefit of FDIC insurance on accounts greater than 250000.

Speaker 3: Setting aside our third quarter deposit code, delay this data from the FDIC summary of deposits underscores the strength of our position in our market.

Setting aside our third quarter deposit growth the latest data from the FDIC summary of deposits underscores the strength of our position in our markets.

Speaker 3: Based on June 30, 2023 deposit balances, our company ranked top three in 10 of the 14 upstate New York counties where we reported deposits. In addition, we are among the top 10 financial institutions serving Iri and Monroe counties, home to Buffalo and Rochester. Respect.

Based on June 32023 deposit balances our company ranked top three in 10 of the 14 Upstate New York Counties, where we reported deposits. In addition, we are among the top 10 financial institutions, serving area and Monroe counties home to Buffalo and Rochester, respectively.

Unknown Executive: Hello and welcome to today's Financial Institutions Inc. Announces 3rd Quarter 2023 Results. My name is Elliot and I'll be coordinating your course today. If you would like to register a question in June State's event, please press star full of by one on your telephone keypad.

Kate Croft: When I'd like to hand over to Kate Croft, Director of Investor Relations, the floor is yours, please go ahead. Thank you for joining us for today's call. Providing prepared comments will be present in the EO, Marty Birmingham, and CSO, Jess Lance. They will be joined by additional members of the company signing some leadership teams during the question and answer session. Today's prepared comments and Q&A will include board looking statements. Actual results may differ materially from board looking statements due to a variety of risks, uncertainties, and other factors.

Speaker 3: Growth in these cities is an important element of our community bank franchise growth strategy, and accordingly, our recent money market campaign was heavily focused on these markets.

Growth in these cities is an important element of our community bank franchise growth strategy and accordingly, our recent money market campaign was heavily focused on these markets.

Speaker 3: Total loans were relatively stable on a link-cordinate basis at 4.4 billion. As modest growth in residential and commercial lending was partially offset by decline in our indirect portfolio.

Total loans were relatively stable on a linked quarter basis at $4 4 billion as modest growth in residential and commercial lending was partially offset by decline in our indirect portfolio.

Speaker 3: Other consumer loans were also off slightly, reflecting a relatively small amount of solar panel financing related to a fast climate focused on climate-positive banking. With respect to commercial-

Other consumer loans were also up slightly reflecting a relatively small amount of solar panel financing related to our bass player focused on climate positive banking.

Kate Croft: We refer you to yesterday's earnings release and investor presentations, as well as historical FEC filings, which are available on our investor relations website for a state harbor description and a detailed discussion of the risk factors relating to board looking statements. We'll also discuss certain non-gap financial measures intended to supplement and not substitute for comparable gap measures. Reconciliation of these measures to gap financial measures were provided in the earnings release filed as an exhibit to form a K.

With respect to commercial lending as anticipated.

Speaker 3: CREATRO slopes significantly in the third quarter due to a combination of software command, a mid-challenging economic environment, higher price convertals, and our effort to moderate.

CRE growth slowed significantly in the third quarter due to a combination of softer demand.

Challenging economic environment higher pricing hurdles and our effort to moderate production <unk>.

Speaker 3: competition remains strong for seeing eye loans in our markets, but we are seeing opportunities from prospects looking for a true local community.

Competition remains strong for C&I loans in our markets, but we are seeing opportunities from prospects looking for a true local community bank.

Unknown Executive: Please note, this call includes information that may only be accurate as of today's date October 27, 2023.

Speaker 3: Our residential loan portfolio grew during both the three and 12 months ended September 30, 2023, despite the high-interest rate environment and tight housing inventory that has impacted home sales in our markets.

Our residential loan portfolio grew during both the three and 12 months ended September 32023, despite the higher interest rate environment and tight housing inventory that has impacted home sales in our market.

Martin Birmingham: I'll now turn the call over to President and CEO, Marty Birmingham. Thank you, Kate, and good morning, everyone, and thank you for joining us today. Third-quarter results were highlighted by healthy deposit growth and a continuation of stable credit quality metrics, both of which positioned us well for the remainder of 2023 and give us confidence in our ability to effectively navigate the operating environment in 2024, including capitalizing on opportunities. Third-quarter net income available to common shareholders was 13.7 million or 88 cents per deluded share, down to 14 million or 91 cents per share in the second quarter of 2023, and in line with the priority results of 13.5 million or 88 cents per share.

Speaker 3: We continue to see success through our partnerships with select new home builders in the Western New York region.

We continue to see success through our partnerships with select new homebuilders in the Western New York region.

Speaker 3: Consumer indirect loan balance has declined again in the third quarter, as expected, primarily as a result of our internal efforts to moderate production.

Consumer indirect loan balances declined again in the third quarter as expected primarily as a result of our internal efforts to moderate production.

Speaker 3: Why don't we just see an uptake in charge of associated with this portfolio in the third quarter? I would remind you that our second quarter indirect charge of house works sexually low as a result of strength in recovery.

While we did see an uptick in charge offs associated with this portfolio in the third quarter I would remind you that our second quarter indirect charge offs were exceptionally low as a result of strength in recoveries.

Speaker 3: We remain comfortable with this asset class and the quality of our portfolio given the deep experience of our management team and long track record of this line of business.

We remain comfortable with this asset class in the quality of our portfolio given the deep experience of our management team and long track record of this line of business.

Martin Birmingham: Like much of the country, competition for deposits remained scarce in our markets, and I'm incredibly proud of our team's ability to drive 6% deposit growth during the quarter. The fact that this growth was led by core non-public deposits is all the more no-worthy. With retail, banking as the servers were vast, and commercial, all contributing. A significant driver of non-public deposit growth was the 5% money market account campaign that you'll be calling launched in late July.

Speaker 3: Third quarter consumer indirect charge offs were partially offset by a commercial recovery as outlined in our earnings press release, resulting in annualized NCOs to average loans of 14 base.

Third quarter consumer direct charge offs were partially offset by a commercial recovery as outlined in our earnings press release, resulting in annualized Ncos to average loans of 14 basis points.

Speaker 3: Our commercial portfolio asset quality remains sound, and we are confident in the strength of the underlying credit.

Our commercial portfolio asset quality remains sound and we are confident in the strength of the underlying credits.

Speaker 3: Our relationship managers have been and continue to be in close contact with their customers amid what has been a volatile operating environment.

Our relationship managers have been and continue to be in close contact with their customers and then what has been a volatile operating environment.

Speaker 3: And we recently completed additional internal stress testing on loans larger than $1 million within our multifamily and office portfolios, set to mature in the next 24 months.

And we recently completed additional internal stress testing on loans larger than $1 million within our multifamily and office portfolios set to mature in the next 24 months.

Martin Birmingham: In addition to helping us deepen relationships with existing customers, we have introduced more than 800 new retail customers to five-star bank in our relationship-based approach to community banking through this campaign. These new customers brought in approximately 72 million balances through October 14th. In addition to balances deposit by our long-standing customer base, we plan to continue the campaigns through mid November, providing a strong start to the fourth quarter. That's also gained momentum during the third quarter, with approximately 77 million of related deposits at quarter end.

Speaker 3: Part of this analysis, we ran a variety of scenarios, stressing loans larger than 1 million in these seconds, with NOI downside and higher injuries.

As part of this analysis, we ran a variety of scenarios stressing loans larger than $1 million in these segments with NOI downside and higher interest rates.

Speaker 3: even above where current rates have transitioned in the last 12 to 18 months.

Even above where current rates of transition in the last 12 to 18 months.

Speaker 3: Under these scenarios, the large majority continue to have debt service coverage ratios at or greater than one-to-one coverage.

Under these scenarios. The large majority continue to have debt service coverage ratios at or greater than one to one coverage.

Speaker 3: After individually analyzing any that would fall below that threshold, we found that guarantor strength, access to capital, project progress or completion, and the overall strong quality of sponsors all reinforce our concept.

After individually analyzing Andy that would fall below that threshold, we found the guarantor strength access to capital project progress for completion and the overall strong quality of sponsors all reinforce our confidence we anticipate incorporating this focused exercise into our management routines for the <unk>.

Martin Birmingham: We consider these to be an attractive alternative to higher-cost wholesale fund- While these deposits have come on slower than we originally anticipated, our approach to onboarding new partners includes a thoughtful governance process before transitioning them on to our vast platform. We look forward to continued growth in 2024 and beyond as we build out our pipeline of Fintech and non-bank partners. Our commercial banking franchise also supported deposit growth in the quarter as we implemented changes earlier in the year to incentivize our commercial blenders to focus on deposit gathering initiatives.

Speaker 3: We anticipate incorporating this focused exercise into our management routines for the foreseeable future.

Seeable future.

Speaker 3: We remain comfortable with our allowance coverage ratio with an allowance for credit losses, the total loans of one hundred and twelve base.

We remain comfortable with our allowance coverage ratio with an allowance for credit losses to total loans of 112 basis points and 521% of non performing loans as of September 30.

Speaker 3: and 521% of non-performing loans as of September .

Speaker 3: This concludes my introductory comments and it's now my pleasure to turn the call over Jack for additional details on results and updates on our guidance for 2023. Thank.

This concludes my introductory comments that it's now my pleasure to turn the call over to Jack for additional details on our results and update on our guidance for 2023.

Martin Birmingham: Public deposit balances at September 30, 2023, were up compared to the end of the second quarter, largely reflecting seasonal inflows that we typically experienced late in the third quarter. Reciprocal deposits also grew during the quarter, as this continues to be an attractive option affording our larger customers, the benefit of FVIC insurance on accounts greater than 250,000. Setting aside our third quarter deposit growth, the latest data from the FVIC summary of deposits underscores the strength of our position in our markets.

Thank you Marty good morning, everyone.

Speaker 4: As Marty noted, net income was down modestly from the linked quarter. Do in part to higher funding costs as we work to successfully defend and grow our deposit base in the current interest rate environment.

As Marty noted net income was down modestly from the linked quarter due in part to higher funding costs as we work to successfully defend and grow our deposit base in the current interest rate environment.

Results were also impacted by lower noninterest income and a modest increase in noninterest expenses that were partially offset by a lower level of provision in the most recent quarter.

Speaker 4: Net interest income of $41.6 million was down $660,000 from the second quarter of 2023 as our overall cost of funds increased 27 basis points during the quarter to 230 basis.

Net interest income of $41 6 million was down 660000 from the second quarter of 2023.

Martin Birmingham: Based on June 30, 2023 deposit balances, our company ranked top 3 in 10 of the 14 upstate New York counties where we reported deposits. In addition, we are among the top 10 financial institutions serving Iri and Monroe counties home to Buffalo and Rochester respectively. Growth in these cities is an important element of our community bank franchise growth strategy, and accordingly our recent money market campaign was heavily focused on these markets. Total loans were relatively stable on a link quarter basis at 4.4 billion, as modest growth in residential and commercial lending was partially offset by decline in our indirect portfolio.

As our overall cost of funds increased 27 basis points during the quarter to 230 basis points.

We continued to experience margin compression in the third quarter.

Speaker 4: We continue to experience margin compression in the third quarter, though at a more moderate pace.

More moderate pace.

Speaker 4: That interest margin on a fully taxable equivalent basis was 291 basis points for the quarter compared to 299 basis points in the linked quarter.

Net interest margin on a fully taxable equivalent basis was 291 basis points for the quarter.

Compared to 299 basis points in the linked quarter.

Speaker 4: Relative to the magnitude of FOMC rate increases that occurred in 2022 and so far in 2023, our total deposit portfolio has experienced a cycle-to-date beta of 38%, including the cost of time deposit.

Relative to the magnitude of epilepsy rate increases that occurred in 2022, and so far in 2023.

Our total deposit portfolio has experienced a cycle to date beta of 38%.

Including the cost of time deposits.

Speaker 4: excluding the cost of time deposits, the non-maturity deposit portfolio had a beta of 18%.

Excluding the cost of time deposits.

Martin Birmingham: Other consumer loans were also off slightly, reflecting a relatively small amount of solar panel financing related to a batch client focused on climate-positive banking. With respect to commercial lending as anticipated, CRE growth slowed significantly in the third quarter due to a combination of softer demand, a mid-challenging economic environment, higher pricing hurdles, and our effort to moderate production. Competition remains strong for seeing our loans in our markets, but we are seeing opportunities from prospects looking for a true local community bank.

Non maturity deposit portfolio had a beta of 18%.

Speaker 4: Non-interest income totaled $10.5 million in the third quarter, down $980,000 on a linked quarter basis.

Noninterest income totaled $10 5 million in the third quarter down 980000 on.

On a linked quarter basis.

Speaker 4: While our earnings release provides additional detail on our diverse fee-based revenue sources, I would like to touch on a few key areas this morning.

While our earnings release provides additional detail on our diverse fee based revenue sources I would like to touch on a few key areas. This morning.

Our investment advisory and insurance businesses are the largest contributors of noninterest income.

Speaker 4: Our investment advisory and insurance businesses are the largest contributors of non interest income, making up about 40%.

Making up about 40% in the third quarter.

Speaker 4: Insurance income increase as a result of the timing of commercial renewals as well as business development.

Insurance income increased as a result of the timing of commercial renewals as well as business development.

Martin Birmingham: Our residential loan portfolio grew during both the 3 and 12 months ended September 30, 2023, despite the higher interest rate environment and tight housing inventory that has impacted home sales in our market. We continue to see success through our partnerships with select new home builders in the Western New York region. Consumer indirect loan balances decline began in the third quarter as expected, primarily as a result of our internal efforts to moderate production.

Speaker 4: Declines in our investment advisory income were attributable to the third quarter market downturn and the impact on AUM.

Declines in our investment advisory income were attributable to the third quarter market downturn and the impact on AUM.

Speaker 4: coupled with our strategic decision to focus on wealth management services for high net worth individuals, as opposed to our retail branch network.

Coupled with our strategic decision to focus on wealth management services for high net worth individuals as opposed to our retail branch network.

While this has negatively impacted transaction related fees in the near term we.

Speaker 4: while this has negatively impacted transaction related fees in the near term.

Speaker 4: We believe this move will support enhanced profitability in this line of business moving forward.

We believe this move will support enhanced profitability in this line of business moving forward.

Martin Birmingham: While we did see an uptake in charge of associated with this portfolio in the third quarter, I would remind you that our second quarter indirect charge house works sexually low as a result of strength and recoveries. We remain comfortable with this asset class and the quality of our portfolio given the deep experience of our management team and long track record of this line of business. Third quarter consumer indirect charge house were partially offset by a commercially company and not lying in our earnings press release, resulting in annualized NCOs to average loans of 14 banks, points.

Swap income was down as expected given our lower level of commercial loan activity during the quarter.

Speaker 4: swap income was down as expected, given our lower level of commercial loan activity during the quarter.

Noninterest expenses were up less than 3% on a linked quarter basis.

Speaker 4: Non-intercept expenses were up less than 3% on a linked quarter basis, higher salaries and benefits, occupancy and equipment, computer and data processing, and FDIC insurance expenses were partially offset by lower professional services.

With higher salaries and benefits occupancy and equipment computer and data processing and FDIC insurance expenses were partially offset by lower professional services expense.

Speaker 4: Income tax expense was 2.4Million in the quarter. Representing an effective tax rate of 14.8%. Relatively consistent.

Income tax expense was $2 4 million in the quarter, representing an effective tax rate of 14, 8%.

Martin Birmingham: Our commercial portfolio asset quality remains sound and we are confident in the strength of the underlying credits. Our relationship managers have been and continue to be in close contact with their customers, then what has been a volatile operating environment. And we recently completed additional internal stress testing on loans larger than one million within our multi-family and office portfolios, set to mature in the next 24 months. As part of this analysis, we ran a variety of scenarios, stressing loans larger than one million in these segments with NOI downside and higher interest rates, even above where current rates have transitioned in the last 12 to 18 months.

Relatively consistent with the linked quarter.

Our accumulated other comprehensive loss stood at $161 4 million at September 32023.

Speaker 4: are accumulated other top-reheance of loss, so that 161.4 million, it's September 30th, 2023.

Speaker 4: We reported a TCE ratio at September 30th of 5.25% and tangible common book value per share of $20.69.

We reported a TCE ratio at September 30 of $5, two 5% and tangible common book value per share of $20 69.

Excluding the OCI impact since December 31, 2021, the TCE ratio and tangible common book value per share would have been $7 six 9%.

Speaker 4: Excluding the AOCI impact since December 31st, 2021, the TCE ratio and tangible common book value per share would have been 7.69% and $30.31.

$30 31, respectively.

Speaker 4: We continue to expect these metrics to return to more normalized levels over time.

We continue to expect these metrics to return to more normalized levels over time.

Martin Birmingham: Under these scenarios, the large majority continue to have debt service coverage ratios at or greater than one-to-one coverage. After individually analyzing, any that was fought below that threshold, we found that guarantor strength, access to capital, project progress, or completion, and the overall strong quality of sponsors already enforce our confidence. We anticipate incorporating this focused exercise into our manager routines for the foreseeable future. We remain comfortable with our allowance coverage ratio, with an allowance for credit losses to total loans of 112 basis points and 521% of non-forming loans as of September 30th.

Speaker 4: given the high credit quality and cashflow nature of our investment portfolio.

Given the high credit quality and cash flow nature of our investment portfolio.

Earlier this month, we sold approximately $54 million of agency mortgage backed securities at an after tax loss of $2 8 million.

Speaker 4: Earlier this month, we sold approximately 54 million of agency mortgage-backed securities at an after-tax loss of $2.8 million.

Speaker 4: reinvesting the proceeds into higher yielding Ginnie Mae and Freddie Mac bonds.

Reinvesting the proceeds into higher yielding Ginnie Mae and Freddie Mac bonds.

The after tax income benefit of $1 4 million annually translates to an earn back of two years.

Speaker 4: The after-tax income benefit of $1.4 million annually translates to an earnback of two years.

Speaker 4: I would now like to provide an update on our outlook for 2023 in key areas.

I would now like to provide an update on our outlook for 2023 in key areas.

Speaker 4: We now expect full year NIM of 295 to 300 bases.

We now expect full year NIM of 295 to 300 basis points.

Speaker 4: five basis points lower than previous guidance given the impact of higher interest rates on our funding base.

Martin Birmingham: This concludes my introductory comments, and it's not my pleasure to turn the call over to Jack for additional details on results and updates on our guidance for 2023.

Five basis points lower than previous guidance, given the impact of higher interest rates on our funding base.

Our forecast assumes spud activity remains muted for the remainder of the year.

Speaker 4: Our forecast assumes that activity or meaning muted for the remainder of the year.

Unknown Executive: Thank you, Marty.

Jack: Good morning, everyone. As Marty noted, net income was down modestly from the linked quarter, due in part to higher funding costs, as we worked to successfully defend and grow our deposit base in the current interest rate environment. Results were also impacted by lower non-interest income and a modest increase in non-interest expenses that were partially offset by a lower level of provision in the most recent quarter. Net interest income of 41.6 million was down 660,000 from the second quarter of 2023, as our overall cost of funds increased 27 basis points during the quarter to 230 basis points.

Given the continued strength of our credit quality metrics, we expect full year net charge offs between 15 and 20 basis points.

Speaker 4: Given the continued strength of our credit quality metrics, we expect full year net charge offs between 15 and 20 basis points. 10 basis points.

10 basis points lower than previous guidance.

We now expect the 2023 effective tax rate to fall within a range of 15% to 16%.

Speaker 4: We now expect the 2023 effective tax rate to fall within a range of 15 to 16% down 200 basis points.

Down 200 basis points from previous guidance.

Speaker 4: reflecting the impact of the amortization of tax credit investments placed in service in the current quarter and recent years.

Reflecting the impact of the amortization of tax credit investments placed in service in the current quarter in recent years couple.

Speaker 4: coupled with the impact of revised margin guidance on pre-tax income for the remainder of 2023.

Coupled with the impact of revised margin guidance on pre tax income for the remainder of 2023.

We are lowering our guidance for flat noninterest income to a single digit decrease given the pressures we have seen an investment advisory fees and slower onboarding bass initiatives than anticipated.

Speaker 4: We are lowering our guidance for flat non-interest income to a single-digit decrease, given the pressures we have seen on investment advisory fees and slower onboarding of BAS initiatives than anticipated.

Jack: We continued to experience margin compression in the third quarter, though in a more moderate pace. The interest margin on a fully taxable equivalent basis was 291 basis points for the quarter, compared to 299 basis points in the linked quarter. Relative to the magnitude of FOMC rate increases that occurred in 2022, and so far in 2023, are total deposit portfolio has experienced a cycle to date beta of 38%, including the cost of time deposits.

Speaker 4: This guidance excludes the impact of security gains or losses.

This guidance excludes the impact of securities gains or losses.

Speaker 4: limited partnership income, non-recurring items such as enhancement on company-owned life insurance and gains on the sale of indirect loans.

Limited partnership income.

Non recurring items, such as enhancement on company owned life insurance and gains on the sale of indirect loans.

Speaker 4: Our expectations for mid single digit, full year expense growth. Mid single digit growth and non public deposits. Low double.

Our expectations for mid single digit full year expense growth.

Mid single digit growth in nonpublic deposits.

Low double digit growth in loans.

Speaker 4: And then ROA between 85 and 95 basis points remain unchanged.

Jack: Excluding the cost of time deposits, the non maturity deposit portfolio had a beta of 18%. Non-interest income totaled 10.5 million in the third quarter, down 980,000 on a linked quarter basis. While our earnings release provides additional detail on our diverse fee-based revenue sources, I would like to touch on a few key areas this morning. Our investment advisory and insurance businesses are the largest contributors of non-interest income, making up about 40% in the third quarter.

And then ROA between 85 to 95 basis points remain unchanged.

Speaker 4: That concludes my prepared remarks and updated guidance. I'll now turn the call back to Marty.

That concludes my prepared remarks, and updated guidance I will now turn the call back to Marty.

Thank you Jack.

Speaker 3: We were off to a solid star in the fourth quarter and remained focused on Valjee management, as well as opportunities to enhance margin and manage not interest expense.

We're off to a solid start in the fourth quarter and remained focused on balance sheet management as well as opportunities to enhance margin and manage noninterest expenses.

We have an incredibly strong team in place in several promotions and appointments, we announced recently underscore that.

Speaker 3: We have an incredibly strong team in place and several promotions and appointments we announced recently underscore that.

Speaker 3: Within key internal functions, like information security and accounting, we have identified experience and well-prepared internal candidates ready to step into leadership roles.

Within key internal functions like information security and accounting, we have identified experienced and well prepare internal candidates ready to step into leadership roles.

Jack: Insurance income increased as a result of the timing of commercial renewals as well as business development. The clients in our investment advisory income were attributable to the third quarter market downturn and the impact on AUMs. Coupled with our strategic decision to focus on wealth management services for high net worth individuals as opposed to our retail branch network. While this is negatively impacted transaction-related fees in the near term, we believe this move will support enhanced profitability in this line of business moving forward.

Speaker 3: In addition, just this week, we announced a leadership succession at our wealth management subsidiary, Courier Capital.

In addition, just this week, we announced the leadership succession, and our wealth management subsidiary Courier capital.

Speaker 3: Jim Iglouski, who joined our firm in mid-2022 after more than two decades in private banking with several large U.S. banks.

Jim <unk>, who joined our firm in mid 2022 after more than two decades, and private banking with several large U S. Banks has been promoted to president <unk>.

Speaker 3: He succeeds long time later Tom Hanlon, who transitions to the role of executive vice president of wealth management and co-cheap investment.

He succeeds longtime leader, Tom Hamlin, who transitioned to the role of executive Vice President of wealth management and co Chief investment Officer.

Speaker 3: We believe that this new leadership structure allows current capital to continue serving its wealth management retirement plan in institutional services clients at the highest level while positioning odds for continued growth moving forward. Following the merger of our two RIA chip series earlier this year.

We believe that this new leadership structure allows curve capital to continue serving as wealth management retirement plan and institutional services clients at the highest level, while positioning us for continued growth moving forward following the merger of our two.

Jack: Swap income was down as expected given our lower level of commercial loan activity during the quarter. Non-interest expenses were up less than 3% on a link quarter basis, with higher salaries and benefits, occupancy and equipment, computer and data processing, and FDIC insurance expenses were partially offset by lower professional services expense. Income tax expense was 2.4 million in the quarter, representing an effective tax rate of 14.8%, relatively consistent with the linked quarter.

Subsidiaries earlier this year.

Speaker 3: And finally, in addition to these internal appointments, we recently hired Blake Jones as chief marketing officer.

And finally in addition to these internal appointments, we've recently hired Blake Jones as Chief Marketing Officer. She brings more than 20 years of branding and communications experience and will lead both marketing and analytics.

Speaker 3: She brings more than 20 years of branding and communications experience and will lead both marketing and analytics.

On an enterprise wide basis, focusing on strategy brand and performance marketing along with customer and prospect insights.

Speaker 3: focusing on strategy, brand and performance marketing, along with customer and prospect insight.

Speaker 3: with diversified and complimentary lines of business, including consumer and commercial banking, wealth management, insurance and bass. Our company has excellent opportunity to deepen relationships with existing clients and attract new customers across our footprint and beyond.

With diversified and complementary lines of business, including consumer and commercial banking wealth management insurance and bass, our company as an excellent opportunity to deepen relationships with existing clients and attract new customers across our footprint and beyond.

Jack: Our accumulated other comprehensive loss, so that 161.4 million, it's September 30 of 2023. We reported a TCE ratio at September 30 of 5.25%, intangible common book value per share of $20.69. Excluding the AOCI impact since December 31, 2021, the TCE ratio, intangible common book value per share, would have been 7.69%, and $30.31 respectively. We continue to expect these metrics to return to more normalized levels over time, given the high credit quality and cash flowing nature of our investment portfolio.

Operator that concludes our prepared remarks, please open the call for questions.

Speaker 3: Operating that concludes our prepared remarks. Please open the call for questions.

Speaker 1: Thank you. If you would like to ask a question, please press the file file by one on your telephone keyboard. If you would like to withdraw your question, please press the file file by two. When preparing to ask your question, please ensure your device is unmuted locally.

Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad. If you would like to withdraw your question. Please press star followed by.

When preparing to ask a question. Please ensure your device is on mute.

Our first question comes from Nick <unk> with Hovde Group. Your line is open.

Speaker 1: Our first question comes from Nick Cusherell with Hoved Group. Your line is open.

Good morning, everyone. How are you.

Good morning, Nick.

Jack: Earlier this month, we sold approximately 54 million of agency mortgage-backed securities at an after-tax loss of 2.8 million, reinvesting the proceeds in the higher yielding Ginny May and Freddie Mac bonds. The after-tax income benefit of 1.4 million annually translates to an urnback of two years.

Speaker 5: Just a question on the banking as a service strategy, just referencing slide five, there was a large step up in total clients from June to September . Do you anticipate a period where you slow new client relationships and focus more on monitoring and cultivating the existing relationships? Or do you have capacity to continue adding partnerships at a strong pace?

Just a question on the banking as a service strategy just referencing slide five there was a large step up in total clients from June to September do you anticipate a period, where you slow new client relationships and focus more on monitoring and cultivating the existing relationships or do you have capacity to continue adding partnerships at a strong pace.

So thanks for pointing that out because.

Speaker 3: So thanks for pointing that out because, you know, we've got some assumptions built into our balance sheet and related deposits.

Jack: I would now like to provide an update on our outlet for 2023 in key areas. We now expect a full year name of 295 to 300 basis points, 5 basis points lower than previous guidance, given the impact of higher interest rates on our funding base. Our forecast assumes that activity or meaning muted for the remainder of the year. Given the continued strength of our credit quality metrics, we expect full year net charge offs of between 15 and 20 basis points, 10 basis points lower than previous guidance.

We've got some assumptions built into our balance sheet and related deposits.

Speaker 3: for the year and that's being impacted by the timing of onboarding clients.

For the year and Thats being impacted by the timing of on boarding clients and we have spent a lot of time upfront ensuring that our management and our governance routines as well as our controls are right for this line of business as new activity. So.

Speaker 3: And, you know, we have spent a lot of time up front ensuring that our management and our governance routines as well as our controls are right for this line of business as it's new activity. So that has impacted our timing overall upon boarding clients to our platform. We're very comfortable with the clients that we've added to this point, but Sean Willett is here, who needs that line of business for us and has asked us to get the time.

That has impacted our timing overall of onboarding, our clients to our platform.

We're very comfortable with the clients that we've added it to this point, but Sean will it is here who leads that line of business for us.

Jack: We now expect the 2023 effective tax rate to follow the range of 15 to 16%, down 200 basis points from previous guidance. Reflecting the impact of the amortization of tax credit investments placed in service in the current quarter in recent years. Coupled with the impact of revised margin guidance on pre-tax income for the remainder of 2023. We are lowering our guidance for flat non-interest income to a single-digit decrease, given the pressures we have seen on investment advisory fees and slower onboarding a fast initiative than anticipated.

It does contemplate yes.

Speaker 6: Yeah. Good morning and thank you for the question. I would just say that we have capacity to continue to bring on clients, but that being said, as Marty has indicated, we will continue to be hyper selective and ensure that those opportunities fit with our risk appetite and the thesis driven approach that we've taken to client select.

Good morning, and thank you for the question I would just say that we have capacity to continue to bring on clients, but that being said as Marty indicated we will continue to be hyper selective and ensure that those opportunities fit with our risk appetite.

The thesis driven approach that we've taken to.

<unk> collection.

And just a follow up there when do you anticipate a material impact on the noninterest income side from these partnerships or is that already occurring.

Speaker 5: And just to follow up there, when do you anticipate a material impact on the non-interest income side from these partnerships, or is that already occurring?

Jack: This guidance excludes the impact of security of gains or losses, limited partnership income, and non-recurring items such as enhancement on company-owned life insurance, and gains on the sale of indirect loads. Our expectations for mid-single-digit, full-year expense growth, mid-single-digit growth and non-public deposits, low-double-digit growth and loans, and an ROA between E-5 and 95 basis points to remain unchanged.

Yeah, Nick this is al.

Take that one.

Speaker 4: So this is Jack, I can cover that first shot. Your, our first strategy was to have an impact on the balance sheet out of standards, which we've seen through deposits, which were off about $78 million in the quarter in the slient business.

So this is Jack I can cover that first Sean.

Our first strategy was to have an impact on the balance sheet, outstandings, which we've seen through deposits.

Which were up about $78 million in the quarter in this line of business.

Speaker 4: That is something that I think is critical to franchise success, particularly in this environment, given that they have a.

That is something that I think is critical to franchise success, particularly in this environment given that they have.

Speaker 4: lower cost relative to funding that we're raising in our current.

Martin Birmingham: That concludes my preferred remarks and updated guidance, I'll now turn the call back to Marty. Thank you, Jack. We are off to a solid start in the fourth quarter and remain focused on valedictive management as well as opportunities to enhance margin and manage non-interest expenses. We have an incredibly strong team in place and several promotions and appointments we announced recently underscored that. Within key internal functions, like information security and accounting, we have identified experienced and well-prepared internal candidates ready to step into leadership roles.

Lower.

<unk> costs relative to plan.

One thing that we're raising in our current market footprint.

Speaker 4: Now, the non-interesting comes side. That's been slower to translate, as the fee sharing is coming in a little bit later than the deposits. I would expect to see some marginal contribution in the fourth quarter and beyond, but I'll ask Sean to discuss the partnerships that were onboarding and how they can contribute in future periods.

The noninterest income side.

That's been slower to translate as the fee sharing is.

Coming in a little bit later than the deposits I would expect to see some marginal contribution in the fourth quarter and beyond.

But I'll ask Sean to discuss the partnerships that we're onboarding and how they can contribute in future periods.

Yes, so I think.

Speaker 6: Yeah, so I think it's spot your spot on Jack in terms of the opportunities that we're going after are the positive, our focus is to positive acquisition. And then with that, as we start to see activity from those partners, then we start to see contribution not only on the platform side, but also on energy.

Youre spot on Jack in terms of the opportunities.

Martin Birmingham: In addition, just this week, we announced a leadership succession at our wealth management subsidiary, Courier Capital. Jim Gluski, who joined our firm in mid-2022, after more than two decades in private banking with several large US banks, has been promoted to president. He succeeds longtime leader Tom Hanlon, who transitions to the role of executive vice president of wealth management and co-chief investment officer. We believe that this new leadership structure allows Courier Capital to continue serving its wealth management, retirement plan, and institutional services clients at the highest level, while positioning us for continued growth moving forward, following the merger of our two RIA chip series earlier this year.

That we're going after are the consequence of our focus is deposit acquisition.

And then with that as we start to see activity from those partners. Then we start to see contribution not only on the platform side, but also on interchange income.

Yes.

That's very helpful. Maybe just a follow up on the NIM. After the revised guidance I understand it's too early for 2024 commentary, but can you help us think about the direction of the margin as we turn the page on a new year.

Speaker 5: It's very helpful. Maybe just a follow up on the name after the revised guidance. I understand it's too early for 2024 commentary, but can you help us think about the direction of the margin as we turn the page on a new year?

Yes, Nick this is Jack again so.

Speaker 4: We've had some success with repositioning the liability side of the balance sheet during the quarter. We were successful with the retail money market campaign coming on board, success in the vast deposits, growth in commercial deposits, which allowed us to pay off with a little over $300 million in higher cost wholesale borrowing.

We've had some success with repositioning the liability side of the balance sheet. During the quarter. We were successful with retail money market campaign coming onboard success in the bass deposits growth in commercial deposits, which allowed us to pay off.

Martin Birmingham: And finally, in addition to these internal appointments, we recently hired Blake Jones as chief marketing officer. She brings more than 20 years of branding and communications experience and will lead both marketing and analytics on an enterprise wide basis, focusing on strategy, brand and performance marketing, along with customer and prospect insights. With diversified and complimentary lines of business, including consumer and commercial banking, wealth management, insurance, and bass, our company has excellent opportunity to deepen relationships with existing clients and attract new customers across our footprint and beyond.

Little over $300 million of higher cost wholesale borrowings.

Speaker 4: We'll see the full quarter benefit of that in the fourth quarter, as well as the benefit of the security three positioning, which should help to limit the margin compression that we've observed throughout this year in quarter to date. Now it appears to be slowing and it certainly feels like we're approaching a bottom. Our guide is that we provided for a full year, which was revised to 295.

We will see the full quarter benefit of that.

In the fourth quarter as well as the benefit of the securities repositioning, which should help to limit the margin compression that we've observed.

Throughout this year and quarter to date.

It appears to be slowing and it certainly feels like we're approaching a bottom our guidance that we provided for full year, which was revised to $2 95.

Speaker 4: to 300 basis points would assume that if we reach a low point of 280 basis points in the fourth quarter, that would put us at that low round of our full year guidance at 295 basis points. So it certainly feels like we're approaching the bottom.

The 300 basis points would assume that if we.

Reached a low point of 280 basis points in the fourth quarter that would put us at the lower end of our full year guidance of 295 basis points. So.

Unknown Executive: Operator, that concludes our prepared remarks.

Unknown Executive: Please open the call for questions. Thank you. If you would like to ask a question, please press staff all above one on your telephone key path. If you would like to withdraw your question, please press staff all above two. When propane to ask your question, please ensure your device is unmuted and locally.

It certainly feels like we're approaching the bottom there.

Speaker 5: A tellful and then lastly do you have the AUM for career at September 30th? I'm just trying to gauge the impact of the weaker equity markets in the quarter. Yes, it was 2.7.

That's helpful. And then lastly, do you have the AUM for carrier at September 30th I'm, just trying to gauge the impact of the weaker equity markets in the quarter.

Nicholas Cucharale: The first question comes from Nick Kusherail with Hope Group. Your line is open. Good morning, everyone. How are you? Good morning, Nick. Just a question on the banking as a service strategy. Just referencing slide five. There was a large step up in total clients from June to September. Do you anticipate a period where you slow new client relationships and focus more on monitoring and cultivating the existing relationships? Or do you have capacity to continue adding partnerships at a strong pace?

Yes, it was $2 7 billion.

Thank you for taking my questions.

Speaker 1: Our next question comes from Damon Dalmond with KBW. Your line is up.

Our next question comes from Damon Delmonte with <unk> your.

Your line is open.

Hey, good morning, everyone I hope everybody is doing well today.

Speaker 5: Hey, good morning, everyone. Hope everybody's doing well today. I just wanted to ask a couple of questions here. Starting off with Patrick Jack on the security portfolio, we thought a pretty decent decline this quarter. You know, these in the past, you've given projected cash flow expectations. Could you just remind us of what your quarterly cash flows are and kind of your thoughts on where the, you know, security settle in at the percentage of average during asset?

Just wanted to ask a couple of questions here starting off with.

Piper Jack on the Securities portfolio, we saw a pretty decent decline this quarter.

Nicholas Cucharale: So, thanks for pointing that out because, you know, we've got some assumptions built into our balance sheet and related deposits for the year and that's being impacted by the timing of onboarding clients. And, you know, we have spent a lot of time up front ensuring that our management and our governance routines as well as our controls are right for this line of business as it's new activity. So, that has impacted our timing overall of onboarding clients to our platform. We're very comfortable with the clients that we've added to this point.

I think in the past you've given projected cash flow expectations can you just remind us of which a quarterly cash flows are and kind of your thoughts on where the.

Securities settle in as a percentage of average earning assets.

Speaker 4: Yeah, the the cash flow that we're projecting is a hundred and forty million dollars annually on the security portfolio.

Yes.

The cash flow that we're projecting is $140 million annually on the securities portfolio.

Speaker 4: and relative to the percentage of assets, I look at the security portfolio as a collateral source for our public deposit base.

And relative to the <unk>.

Percentage of assets I look at the securities portfolio as a collateral source for our public deposit base.

Speaker 4: But we also have alternative sources available through federal home loan bank, municipal lines of credit, which we've been able to bolster our position there through additional collateral was been posted. So I think that we can drift a little bit lower on the securities portfolio outstanding as we take cash flow off and let it reinvest into loan out standings. And then we'll use alternative sources to support our public deposit base.

But we also have alternative sources available through federal home loan bank.

Municipal water lines of credit, which we've been able to bolster our position there through additional collateral that's been posted so I think that we can drift a little bit lower on the securities portfolio outstanding as we take cash flow often want to reinvest into loan Outstandings and then we'll use alternative sources to support our public deposit.

Sean Willett: But, Sean Willett is here, who needs that line of business for us and I'd ask you to comment please. Good morning and thank you for the question. I would just say that we have capacity to continue to bring on clients, but that being said, as Marty has indicated, we will continue to be hyper selective and ensure that those opportunities fit without risk appetite and the these are driven approach that we've taken to client selection.

This.

Okay.

Speaker 6: Got it. Thank you. That's helpful. And then I guess, you know, Marty, can just give a little bit more perspective on your outlook for long growth here, kind of going into the fourth quarter. Do you think things kind of say moderate through your end and kind of given the forward look on pipelines? Do you think things kind of pick up as you move into, move in and through 2024?

Got it. Thank you that's helpful.

Then I guess Marty can you just give a little bit more perspective on your outlook for loan growth are kind of going into the fourth quarter do you think.

Sean Willett: And just to follow up there, when do you anticipate a material impact on the non-interesting come side from these partnerships or is that already occurring? Yeah, no, this is AAC, I have to take that one. So, this is Jack, I can cover that first Sean. Our first strategy was to have an impact on the balance sheet out of standards, which we've seen through deposits, which were up about $78 million in the corner in this line of business.

Things kind of stay moderate through year end and kind of given the forward look on pipelines do you think things kind of pick up as we move into and through 2024.

Speaker 3: So, you know, definitely as we're continuing our conversation this morning, Damon, you know, we've seen low growth moderate in the second half of the year. That will continue through the fourth quarter. And, you know, we are in our midst of our planning season for 2024. And we're looking at a lot of different scenarios. As, you know, we've had a hard fought years in industry this year. We want to make sure as we drive low growth that we're driving acceptable spreads.

So definitely as we're continuing our conversation this morning, David we've seen loan growth moderate in the second half of the year that will continue through the fourth quarter and we are.

Sean Willett: And that is something that I think is critical to franchise success, particularly in this environment, given that they have a lower cost relative to funding that we're raising in our current market footprint. Now, the non-interesting comes side. That's been slower to translate as the fee sharing is coming in a little bit later than the deposits. I would expect to see some marginal contribution in the fourth quarter and beyond, but I'll ask Sean to discuss the partnerships that we're onboarding and how they can contribute future periods.

Sure.

In our midst of our planning season for 2024, and we're looking at a lot of different.

Scenarios.

<unk>.

I had a hard fought years in industry. This year, we wanted to make sure as we drive loan growth that we are driving acceptable spreads risk adjusted returns.

Speaker 3: risk of just returns, saving space on our balance sheet for those where we've got the deepest relationship. So...

Savings space on our balance sheet for those where we've got the deepest relationships. So.

Up.

Speaker 3: You know, Mike, I'm in the at this point would be that long growth will be moderate in 2024 moderating.

My comment at this point would be that loan growth will be moderate.

In 2020 for moderate.

Sean Willett: Yeah, so, I think it's spot on Jack in terms of the opportunities that we're going after, our focus is deposit acquisition. And then with that, as we start to see activity from those partners, then we start to see contribution not only on the platform side, but also on interchanged income. That's very helpful.

Got it Okay, and then just lastly kind of broadly on credit is there any any concerns throughout the portfolio.

Speaker 7: Okay, and then just lastly, kind of broadly on credit, are there any any concerns throughout the portfolio? You know, I know there's a little bit of uptick and indirect auto, that's not a real meaningful concern at this point, but just kind of like your commercial real estate portfolio, any areas there like office where you might be seeing a, you know, a little bit of degradation there.

I know theres, a little bit of uptick in indirect auto.

Real meaningful concern at this point, but just kind of like your commercial real estate portfolio any areas. There like office, where you might be seeing a little bit of degradation there.

Speaker 3: We've not seen any degradation to this point. In my prepared comments, I did talk about a routine that we're gonna continue to build on, which is taking a deep dive, deeper dives, into our commercial state portfolio and across those loan categories.

We've not seen any degradation to this point.

Jack: Maybe just a follow-up on the name after the revised guidance I understand it's too early for 2024 commentary. But can you help us think about the direction of the margin as we turn the page into new year? Yeah, Nick, this is Jack again. So, we've had some success with repositioning the liability side of the balance sheet during the quarter. We're successful with the retail money market campaign coming on board, success in the vast deposits, growth in commercial deposits, which allowed us to pay off a little over $300 million higher cost wholesale borrowings.

In my prepared comments I did talk about.

A routine that we're going to continue to build on which is.

Taking a deep dive deeper dives into our commercial real estate.

Portfolio and across those loan categories. So we've done some pretty strong sensitivity relative to.

Speaker 3: So, you know, we've done some pretty strong sensitivity relative to, you know, those loans that we have underwritten the lower interest rate environment and, you know, sensitizing them to the current rate environment plus more interest rate, less net operating income and looking at those outcomes. So, we feel very good relative to a severe stress.

Those loans that we have underwritten the lower interest rate environment.

<unk>.

Sensitizing them to the current rate environment, plus more interest rate less net operating income.

Jack: We'll see the full quarter benefit of that in the fourth quarter, as well as the benefit of the security three positioning, which should help to limit the margin compression that we've observed throughout this year in quarter to date. Now, it appears to be slowing and it certainly feels like we're approaching a bottom. Our guidance that we provided for a full year, which was revised to 295 to 300 basis points, would assume that if we reach a low point of 280 basis points in the fourth quarter, that would put us at that low round of our full year guidance at 295 basis points. So, it certainly feels like we're approaching Director. That's helpful.

Looking at those those outcomes. So we feel very good relative to a severe stress.

Speaker 3: downsized scenario where we end up with most of that analysis showed that we are at around that service coverage or above and we'll monitor it. And as we think about those with tighter debt service going forward and the maturity is in the next 24 months.

Downsize scenario, where we end up with most of that analysis showed that we are.

At or around one <unk>.

Debt service coverage or above and we'll monitor it.

As we think about those with tighter debt service going forward in maturities in the next 24 months were supported by our fundamental underwriting approach, which includes personal recourse.

Speaker 3: We're supported by our fundamental underwriting approach, which includes personal recourse and dealing with sponsors with long track records and access to their own capital and alternative forms of capital.

Dealing with sponsors with long track records and access to alternative their own capital and alternative forms of capital we have seen.

Speaker 3: We have seen our CRE portfolio continue to cycle off, some of our construction loans, you know, cycling through to the agency funding. So, you know, so far so good, but we are going to continue to monitor with discipline and consistency.

Unknown Executive: And then lastly, do you have the AUM for career? It's September 30th. I'm just trying to gauge the impact of the weaker equity markets in the quarter. Yes, it was 2.7 billion.

Our CRE portfolio continue to cycle off some of our construction loans.

Unknown Executive: Thank you for taking my questions.

Cycling through to the agency funding so so far so good but we are going to continue to monitor.

With discipline and consistency.

Damon Delmonte: Oh, next question comes from Damon DelMonte with KPW. Your line is up. Hey, good morning, everyone. Hope everybody's doing well today. Just wanted to ask a couple of questions here, starting off with Patrick Jack on the security's portfolio. We saw pretty decent decline this quarter. You know, I think in the past, you've given projected cash flow expectations. Could you just remind us of what your quarterly cash flows are and kind of your thoughts on where the security settle in at the percentage of average during assets.

Great. Okay. I appreciate all that color. Thank you very much.

Speaker 7: Great. Okay. I appreciate all that color. Thank you very much.

Speaker 1: Our next question comes from Alex Toradol with Quaker Sandler. Your line is open.

Our next question comes from Alex <unk> with Piper Sandler Your line is open.

Hey, good morning.

Good morning, Alex.

Speaker 8: Hey, a couple of questions. First, Marty, I think in your prepared remarks, you said something along the lines of being ready to capitalize on opportunities. I was just curious, is that just a blanket statement or are there some specific opportunities that you're alluding to?

Couple of questions first Marty I think in your prepared remarks, you said something along the lines of being ready to capitalize on opportunities. I was just curious is that just a blanket statement or are there. Some specific opportunities that you are alluding to.

Damon Delmonte: Yeah, the cash flow that we're projecting is $140 million annually on the security portfolio. And relative to the percentage of assets, I look at the security portfolio as a collateral source for our public deposit base. But we also have alternative sources available through federal home loan bank. Municipal lines of credit, which we've been able to bolster our position there through additional collateral was been posted. So I think that we can drift a little bit lower on the security portfolio outstanding as we take cash flow off and let it reinvest into loan outstanding. And then we'll use alternative sources to support our public deposit base. Yeah, thank you. That's helpful.

So it's the fundamentals of.

Speaker 3: So it's the fundamentals of operating our...

Operating our full service community Bank.

Speaker 3: full service community bank, you know, in terms of consumers who are open to switching and making a change. And we've had good success with our money market offering and, you know, bringing in average balances of close to 100,000.

In terms of consumers, who are open to switching and making a change we've had good success with our money market offering.

Bringing in average balances of close to 100000 with those that have chosen to take advantage of our offer and that provides real nice upside to driving relationship and showing them, how we do business versus where they've come from and then as well I think on the commercial industrial there is significant opportunity for us relative.

Speaker 3: with those that have chosen to take advantage of our offer and that provides real nights upside to Driving relationship and showing them how we do business versus where they come from and then as well I think on the commercial industrial there is significant opportunity for us relative to

I've two.

Long standing solid companies has been operating in our footprint that has experienced.

Speaker 3: you know, longstanding solid companies are then operating in our footprint that have experienced unsatisfactory interactions with their existing bank.

Martin Birmingham: And then I guess, you know, Marty, you can just give a little bit more perspective on your outlook for for loan growth here, kind of going into the fourth quarter. Do you think things kind of stay moderate through your end and kind of given the forward book on pipelines. You think things kind of pick up as you move into move in and through 2024. So, you know, definitely as we're continuing our conversation this morning, Damon, you know, we've seen a low growth moderate in the second half of the year that will continue through the fourth quarter.

Unsatisfactory interactions with their existing banks.

Speaker 3: And it seems to me, as I think about it, we're building some momentum there, which is consistent with where, I think the industry is certainly where we're trying to emphasize our commercial activity, given the more higher probabilities that have...

It seems to me as I think about it that we are building some momentum there, which is consistent with where I think the industry is certainly where we're trying to <unk>.

<unk>, our commercial activity given the.

More higher probability to have full relationships.

Okay.

Got it.

Speaker 8: Got it. And then, you know, the securities transaction that you alluded to, Jack, seems like a good start. I'm just curious, is that sort of the full capacity of what you're willing to take on right now? Or are you sort of in the midst of a more deep dive onto the securities portfolio and, you know, looking for more opportunities that could potentially help to really stabilize the NIM heading into 2024?

And then the securities transaction that you alluded to Jack <unk>.

Yes.

Martin Birmingham: And, you know, we are in our midst of our planning season for 2024 and we're looking at a lot of different scenarios. As you know, we've had a hard fought years in industry this year, we want to make sure as we drive long growth that we're driving acceptable spreads, risk adjusted returns, you know, saving space on our balance sheet for those where we've got the deepest relationship. Yeah, so, you know, my time at this point would be that long growth will be moderate in 2024 moderated. Okay.

Like a good start I'm. Just curious is that is that sort of the full capacity. What are you willing to take on right now or are you sort of in the midst of a more deep dive onto the securities portfolio.

And.

Looking at some more opportunities that could potentially help to really stabilize the NIM heading into 2024.

Speaker 4: Yeah, big Alex, we continue to look at more opportunities there. I think this is the start of the first week.

Yes, Thanks, Alex we continue to look at more opportunities. There I think this is the start of.

The first repositioning that we could see.

Okay.

Speaker 8: And then can you just remind us, you know, sort of, I know you've done a bunch on the wealth business, you know, merge the truck, the, the businesses together and you can make some changes to leadership sort of where are we in. In that sort of restructuring process, and, you know, in terms of the revenues, it seems like we, I think they sort of said, we're sort of backing up to get a running start, you know, sort of rejiggering the model there sort of what the outlook might be. And then also, you know, there's some expense considerations that we should be thinking about as well.

And then can you just remind us sort of I know you've done a bunch of the wealth business emerged.

Martin Birmingham: And then just lastly kind of broadly on credit, are there any any concerns throughout the portfolio. You know, I know there's a little bit of up sick and indirect auto. That's not a real meaningful concern at this point, but just kind of like your commercial real estate portfolio, any areas there like office where you might be seeing a, you know, a little bit of degradation there. We've not seen any degradation to this point in my prepared comments.

The businesses together and you made some changes to leadership sort of where are we in.

And that sort of restructuring process and.

In terms of the revenue it seems like I think.

Sort of said, we sort of back enough to get a running start sort of rejiggering the model there.

Sort of what the outlook might be and then also there's some expense considerations that we should be thinking about as well.

Jack go ahead.

Martin Birmingham: I did talk about a routine that we're going to continue to build on, which is taking a deep dive deeper dives into our commercial real estate portfolio and across those long categories. So, you know, we've done some pretty strong sensitivity relative to, you know, those loans that we have underwritten the lower interest rate environment and, you know, sensitizing them to the current rate environment, plus more interest rate, less net operating income and looking at those outcomes.

Yes, so the new leadership team New leadership change there with Jimmy Glu ski was meant to.

Speaker 4: Yeah, so the new leadership team, the new leadership change there with Jimmie Gluski was meant to provide more of a strategic focus on building out the sales culture at the institution to cultivate more clients through new wealth managers and more of an aggressive approach to the client base. Typically, our...

Provide more of a strategic focus on building out the sales culture at the institution to cultivate more clients through.

New wealth managers and more of an aggressive approach to the client base typically are.

Speaker 4: business was achieved through referrals from existing clients. So I would expect to see some growth there across the institutional base and more of the high net worth individuals.

New business was achieved through.

The loss from existing clients, so I would expect to see some.

Growth there across the institutional base and more of the high net worth individuals.

Martin Birmingham: So, we feel very good relative to a severe stress downside scenario where we end up with most of that analysis showed that we are at around one that service coverage or above. And we'll monitor it. And, you know, as we think about those with tighter debt service going forward and maturities in the next 24 months, we're supported by our fundamental underwriting approach, which includes personal recourse and in dealing with sponsors with long track records and access to alternative their own capital and alternative forms of capital.

Speaker 4: over the coming time frame. Those institutional clients do take time to come on board through an RFP process, but we do have expertise in that front. And on the expense side, we've operated that business on a pretty lean infrastructure historically. So I would expect that we're just going to continue to drive revenue there rather than cut expenses and wealth management.

Over the coming time frame.

Institutional clients do take time to come onboard through an RFP process that we do have expertise in that front and on the expense side, we have operated that business on a pretty lean infrastructure historically so.

I would expect that we're just going to continue to drive revenue there rather than cut expenses in wealth management.

Speaker 8: Okay. And then you know, you've talked a bunch about this, the 5% money market campaign, does that? And it is a point where that 5% clicks down to a different rate or, you know, how should we be thinking about that kind of money from a modeling standpoint in terms of how it could impact the deposit data.

Okay and then.

You've talked a bunch about this the 5% money market campaign does that.

I mean is there a point where that 5% gets down to a different rate or.

Martin Birmingham: We have seen our CRE portfolio continue to cycle off some of our construction loans, you know, cycling through to the agency funding. So, you know, so far so good, but we are going to continue to monitor it with discipline and consistency. Great.

How should we be thinking about that kind of money from a modeling standpoint in terms of how it could impact deposit betas.

Speaker 4: Alex, that 5% rate was guaranteed for a 12-month timeframe, which we thought was reasonable given the Fed's outlook on where they expect to maintain rates over the next year. And afterwards, we have the ability to adjust that to market levels.

Alex that that 5% rate was guaranteed for a 12 month time frame, which we thought was reasonable given the fed's outlook on where they are where they expect to maintain rates over the next year and afterwards, we have the ability to adjust that to market levels.

Damon Delmonte: Okay. I appreciate all that color. Thank you very much.

Alexander Twerdahl: Oh, next question comes from Alex Twerdahl, raise a quick assignment. You'll line this up.

Great. Thanks, so much for taking my questions.

Thanks, Alex.

Speaker 1: As a reminder, if you'd like to ask any further questions, please press star one on your telephone, keep it now.

Martin Birmingham: Hey, good morning. Where else? Hey, a couple of questions. First, Marty, I think in your prepared remarks, he said something along the lines of being ready to capitalize on opportunities. I was just curious. Is that just a blanket statement or are there some specific opportunities that you're alluding to? So it's the fundamentals of operating our full service community bank in terms of consumers who are open to switching and making a change.

As a reminder, if you'd like to ask any further questions. Please press star one on your telephone keypad now.

Speaker 1: We now turn to Matthew Breeze with Stevens. Your line is open.

You May now since you Matthew Breese with Stephens. Your line is open.

Hey, good morning, everybody.

Hi, Matt Good morning, I was hoping along with your NIM comments.

Speaker 9: I'm mad. Yeah, I was hoping along with your name comments, if you could provide the monthly name throughout the quarter, specifically the September name, and you'd made a comment that, you know, if it's...

You could provide the monthly NIM throughout the quarter, specifically the September NIM and and you had made a comment that.

Martin Birmingham: We've had good success with our money market offering and bringing in average balances of close to 100,000 with those that have chosen to take advantage of our offer and that provides real nights upside to driving relationship and showing them how we do business versus where they come from. And then as well, I think on the commercial industrial, there is significant opportunity for us relative to long-standing solid companies that are operating in our footprint that have experienced unsatisfactory interactions with their existing banks.

If.

Okay.

Speaker 9: We come in at 280 for the fourth quarter, then we'd be at the low end of the full year range. I just wanted to get a sense for whether or not you thought that was realistic.

We come in at $2 80 for the fourth quarter, then we'd be at the low end of the full year range I just wanted to get a sense for whether or not you thought that was a realistic outcome.

Speaker 4: Yeah, I do think that 280 is on the downside or realistic outcome. That was what guided to our 295.

Yes.

I do think that $2 80 is on the downside a realistic outcome.

So that was what guided to our 295.

Range September came in at $2 88.

Speaker 4: range. September came in at 288, so

So.

Speaker 4: I think that's a good proxy for I'll look for the remainder of the quarter.

I think thats, a good proxy for outlook for the remainder of the quarter.

And as you look out into 2024.

Speaker 9: I guess where do you see the point at which deposit costs stabilized and where do you see a point at which the nim begins to stabilize?

I guess, where do you see the point at which deposit costs stabilize and where do you see a point at which the NIM begins to stabilize.

Martin Birmingham: And it seems to me, as I think about it, we're building some momentum there, which is consistent with where I think the industry and certainly where we're trying to emphasize our commercial activity, given the more higher probabilities that have full relationships.

Speaker 4: So we haven't completed the 2024 budget yet, but anecdotically, I feel like we're approaching the bottom from a margin perspective. There continues to be pressure in our deposit space for commercial accounts.

So we haven't completed the 2020 for budget, yet but anecdotally.

Feel like we're approaching the bottom.

From a margin perspective, there continues to be pressure.

Pressure in our deposit space for commercial accounts.

Jack: Got it. And then the security transaction, the led to Jack seems like a good start. I'm just curious, is that sort of the full capacity of what we're willing to take on right now, or are you sort of in the midst of a more deep dive onto the securities portfolio and looking at some more opportunities that could potentially help to really stabilize the name heading to 2024? Yeah, I think, Alex, we continue to look at more opportunities there.

Speaker 4: and public deposits through what's offered by NIClast and local government investment pools. But when we think about our balance sheet positioning overall, we have a billion dollars of cash flow that comes off the portfolio and is reprising a current market rates. And given that outlook that we maintain this current level, to me, that feels like we have stability in our margin over the next 12 months.

And public deposits through what's offered by NIE class with local local government investment pools, but when we think about our balance sheet positioning overall, we have $1 billion of cash flow that comes off the portfolio.

As repricing at current market rates and given fed outlook that we maintain the current level to me that feels like we have stability in our margin over the next 12 months.

Speaker 9: Great, okay. Maybe moving on to the indirect idle book.

Jack: I think this is the start of the first reposition that we could see. Okay. And then can you just remind us, I know you've done a bunch in the wealth business, you know, merged the businesses together, made some changes to leadership. So where are we in in that sort of restructuring process? And in terms of the revenue, things like I think they sort of said we're sort of back enough to get a running start, you know, sort of rejagering the model there, sort of what the outlook might be, and then also, you know, there's some expense considerations that we should be thinking about as well.

Great Okay.

Maybe moving on to the indirect auto book.

Speaker 9: Could you just remind us of the underlying FICO scores within that book and maybe what the lower kind of quartile FICO scores are?

Could you just remind us of the underlying FICO scores within that book and maybe what the.

The lower kind of core tile FICO scores are.

Speaker 9: And then what caused the pickup in Torojov's 92 Biffs is higher than historical averages.

And then what caused the tick up in charge offs 92 bps is higher than historical averages.

Speaker 9: I also wanted to get a sense for what kind of early stage and link the keys for this book look like today versus prior quarters.

I also wanted to get a sense for what kind of early stage delinquencies for this book look like today versus prior quarters.

Well, Matt you've watched our company for.

Speaker 4: So Matt, you've watched our company for a while and seen several cycles. So I'm underwriting...

While <unk> seen several cycles so.

Jack: Jack, go ahead. Yes, so the new leadership team, the new leadership change there with Jimmy Gluski was meant to provide more of a strategic focus on building out the sales culture at the institution to cultivate more clients through new wealth managers and more of an aggressive approach to the client base. Typically our new business was achieved through referrals from existing clients. So I would expect to see some growth there across the institutional base and more of the high network individuals over the coming time frame.

Our underwriting.

<unk>.

Speaker 3: remains consistent. You know, 65 or so percent, 60 to 65 percent is what we call tier 1, 700 above cycle score. 680 in above gets us to 92 percent of our originations. We're not as far prime lender. I'll have to ask for some assistance on the lower core tile, but it's not really material. We've been focused on credit fundamentally. And we really do have our technical model, our industrial model. What are we going to do? Here? We've certainly also made using the

Remains consistent.

65, or so percent $60 to 65% is what we call tier one 700 above FICO score.

680, and above gets us to 92% of our originations, we're not a subprime lender.

I'll have to ask for some assistance on the lower quartile, but it's not really material we've been focused on credit fundamentally.

Speaker 4: You know, we, in terms of the delinquency and the uptick, some of that deals with the pressure consumers are feeling, some of it deals with timing of liquidation of collateral and underlying clueless values in terms of our charge offs. But...

We in terms of the delinquency in the uptick.

Some of that deals with.

Jack: Those institutional clients do take time to come on board through an RFP process that we do have expertise in that front. And on the expense side, we've operated that business on a pretty lean infrastructure historically. So I would expect that we're just going to continue to drive revenue there rather than cut expenses and wealth management.

The pressure consumers are feeling some of it deals with timing of liquidation of collateral.

Underlying collateral values in terms of our charge offs, but Jack.

Speaker 3: Jack, you have anything further that you could add to the response.

Jack do you have anything further.

Could add to the response.

Speaker 4: Yeah, we look at the credit metrics of the portfolio as far as FICO's concerned. About 86% of our portfolios, 670 and above, and 65% of our portfolios, over 700.

Yes, when we look at the <unk>.

Credit metrics of the portfolio as far as FICO is concerned.

Martin Birmingham: Okay. And then, you know, you've talked a bunch about this the 5% money market campaign. Does that? I mean, is there a point where that 5% clicks down to a different rate or, you know, how should we be thinking about that kind of money from a modeling standpoint in terms of how it could impact deposit data? Alex, that 5% rate was guaranteed for a 12 month timeframe, which we thought was reasonable given the Fed's outlook on where they're where they expect to maintain rates over the next year. And afterwards, we have the ability to adjust that to market levels.

About 86% of our portfolio of $6 70, and above 65% of our portfolio is over 700.

Unknown Executive: Great.

That answers your question, though.

Speaker 9: Yeah, that's great color. Do you have the early stage in the quantities that 30 to 89 days pass due for auto? And I want to get a sense for whether or not, you know, given the persistence of some of the challenges you cited Marty, if we should expect as level of charge up to continue from time to end.

Yes, that's great color.

Do you have the early stage delinquencies to 30 to 89 days past due for auto and I wanted to get a sense for whether or not.

Given the persistence of some of the challenges you cited Marty if we should expect this level of charge offs to continue some timing.

Speaker 4: That this is Jack, I'll take that one. So I would expect that our third quarter charged off experience to be representative of expectations for the next couple of quarters. The second quarter experience was exceptional because we had a significant amount of recoveries. But the third quarter looks like what I would expect to see come through in the, at least for the fourth and first quarters.

Yeah, Matt This is Jack I'll take that one so I would expect that our.

Unknown Executive: Thanks so much for taking my questions. Thanks, Alex.

Third quarter charge off experience.

Unknown Executive: As a reminder, if you'd like to ask any further questions, please press star one on your telephone, keep up now.

To be representative of expectations for the next couple of quarters.

Matthew Breese: We now turn to Matthew Breese with Stevens. Your line is open. Hey, good morning, everybody.

The second quarter experience was exceptional because we had a significant amount of recoveries, but the third quarter it looks like.

Jack: I was hoping along with your name comments, if you could provide the monthly name throughout the quarter, specifically the September name. And you'd made a comment that, you know, if we come in at 280 for the fourth quarter, then we'd be at the low end of the full year range. I just wanted to get a sense for whether I thought that was realistic outcome. Yeah, I do think that 280 is on the downside or realistic outcome. So that was what guided to our 295 range September came in at 288. So I think that's a good proxy for I'll look for the remainder of the quarter.

What I would expect to see come through in the at least for the fourth and first quarters.

Speaker 10: And do you have the early stage link with you? 30 to 89 days passed, too. Well,

And do you have the early stage delinquencies in the 30 to 89 days past due.

Well that let us get back to you on that.

Okay.

Last question for me.

I don't know if you have any but I was just curious what the overall exposure to syndicated loans or.

Speaker 11: I don't know if you have any, but I was just curious what the overall exposure to syndicated bones are, what the performance of that book looks like, and how much of it is out of market?

What the performance of that book looks like and how much of it.

Is that a market.

Speaker 3: That's not something we pursue in terms of shared national credits that we...

That's not something we pursued in terms of.

Shared national credits that we have.

Speaker 3: We've done several club deals that we've initiated, relative to, you know, so far, I'm going commercial exposure CRE and CNI, but in terms of large syndicated credits, it's been, it's very limited. I would say it's not material for our commercial book business, and it would relate to companies that are headquartered in and around our franchise where that we know, you know, have professional relationships with the management.

We've done several club deals that we've initiated relative to some of our ongoing commercial exposure CRE and C&I, but in terms of large syndicated credits. It's been it's very limited I would say, it's not material for our commercial book of business.

Jack: And as you look out into 2024, I guess, where do you see the point at which deposit costs stabilized and where do you see a point at which the new begins to stabilize? So we haven't completed the 2024 budget yet, but anecdotically, I feel like we're approaching the bottom from a margin perspective. There continues to be pressure in our deposit space for commercial accounts and public deposits through what's offered by Ny class and local local government investment pools.

It would relate to companies that are headquartered.

In and around our franchise or that we know.

Professional relationships with the management team.

Speaker 9: Okay, that's one for me. Just the overall tangible comment equity, tangible acid ratio, shots around capital adequacy, and if this type of environment persists.

Got it Okay last one for me.

Just the overall tangible common equity to tangible asset ratio.

Thoughts around capital adequacy, and if this type of environment persists.

Speaker 11: You know, what kind of position does this level of capital leaving in the 24 clear to cease an upkick in love?

Jack: But when we think about our balance sheet positioning overall, we have a billion dollars of cash flow that comes off the portfolio and is repricing at current market rates. And given that outlook that we maintain this current level to me, that feels like we have stability in our margin over the next 12 months.

What kind of position does this level of capital, leaving in a 24, if we were to see an uptick.

In logo.

So thats.

Unknown Executive: Great. Okay.

Speaker 3: relative to our 2024 planning, that's where my earlier comment met. We're looking at several scenarios. And ultimately our goal is to continue to drive and to create capital through the performance and how we manage the balance sheet. And so...

Relative to our 2020 for planning, that's where my earlier comment that we're looking at.

Several scenarios.

And.

Ultimately our goal is to continue to drive and to create capital.

Jack: Maybe moving on to the indirect auto book. Could you just remind us of the underlying FICO scores within that book and maybe what the what the lower kind of quartile FICO scores are? And then what caused the pickup in charge of 92 bits is higher than historical averages. I also wanted to get a sense for what kind of early-stage linkages for this book look like today versus prior quarters. Oh, Matt, you've watched our company for a while and seen several cycles.

Through the performance and how we manage the balance sheet and so.

Generally I think thematic Lee that equates to an translates to.

Speaker 3: Generally, I think thematically that equates to, and translates to slower growth, moderating growth. And I think that's one way we're thinking about. We're well aware of where our TCE ratio stands today. We know from feedback and conversations like this, that it's

Slower growth moderating growth.

And I think that's.

That's one way, we're thinking about we're well aware of where our TCE ratio stands today.

We know from feedback in conversations like this that.

It's.

Speaker 3: It's low and that's something that's on the top of our management teams. Mine right now.

It's slow and.

That's something that's on the top of our management teams.

Buying right now.

Speaker 9: We've seen a couple of your larger peers go ahead and sell insurance companies rather you know, why is it being come businesses that to help on the on the Traff AOC eye and overall capital front. Is that something you're considering?

We've seen a couple of your larger peers go ahead and sell insurance companies or other.

Jack: So, our underwriting of the remains consistent, you know, 65 or so percent, 60 to 65 percent is what we call tier 1, 700 above cycle score. 6, 18 above gets us to 92 percent of our originations. We're not as far prime lender. I'll have to ask for some assistance on the lower core tile, but it's not really material. We've been focused on credit fundamentally. You know, we in terms of the consumers are feeling some of it deals with timing of liquidation of collateral and underlying collateral values in terms of our charge offs.

Why is the fee income businesses that to help on.

On the on the trap OCI and overall capital front is that something you are considering.

So we've we're aware of that.

Speaker 3: So we're aware of that strategically.

<unk> strategically.

Speaker 4: It's been a good move for us relative to the diversification of revenues and the increase that it represents in terms of non-interstravatives in terms of what we've done with our wealth and our insurance business, but you know, we're open to any possibility from a capital, you know, efficient use of capital and allocation perspective for that line of business or any other line of business we have in terms of what you just said unlocking.

It's been a good move for us relative to the diversification of revenues and the increase that it represents in terms of noninterest revenues in terms of what we've done with our wealth and insurance business, but.

We're open to.

Any possibility from a capital.

Efficient use of capital and allocation perspective.

For that line of business or any other line of business. We have in terms of what you just said unlocking.

Value.

Speaker 11: Got it. Okay. I know I went over where I said I would sell my last question. So I apologize and thank you for taking me a couple of extras. Appreciate it.

Got it Okay, I know whenever where I said I would tell my last question. So I apologize and thank you for taking yet the couple of <unk> I appreciate it.

Jack: But Jack, do you have anything further that you could add to the response? Yeah, we look at the credit metrics of the portfolio as far as cycles concerned, about 86 percent of our portfolios, 6, 70 above and 65 percent of our portfolios, over 700. That answers your question, though. Yeah, that's great color. Do you have the early stage inequalities, the 30 to 89 days past due for auto? And I want to get a sense for whether or not, you know, given the persistence of some of the challenges you cited, Marty, if we should expect this level of charge up to continue from time being.

Thanks, Matt Thank you Matt.

Speaker 1: This concludes our Q&A. I'll not hand back to Marty Birmingham. President and CEO for closing remarks.

This concludes our Q&A I'll now hand back to Marty Birmingham President.

President and CEO for closing remarks.

Speaker 3: I want to thank everybody thanks to our analysts and those that are participating on the call this morning. We look forward to talking with you again in January .

Well, thank everybody thanks to our analysts and those that are participating on the call. This morning, we look forward to talking with you again in January.

Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.

Speaker 1: Ladies and gentlemen, today's call is now concluded. We'd like to thank for your participation. You may now disconnect your line.

[music].

Jack: Yeah, that this is Jack. I'll take that one. So I would expect that our third quarter charge off experience to be representative of expectations for the next couple of quarters. The second quarter experience was exceptional because we had a significant amount of recoveries, but the third quarter looks like what I would expect to see come through in the, at least for the fourth and first quarters. And do you have the early stage delinquencies, the 30 to 89 days past due?

Unknown Executive: Well, let us get back to you on that.

Unknown Executive: Okay, last question for me.

Okay.

[music].

Unknown Executive: I don't know if you have any, but I was just curious what the overall exposure to syndicated loans are, what the performance of that book looks like and how much of it is out of market.

Martin Birmingham: That's not something we pursued in terms of shared national credits, that, you know, we've done several club deals that we've initiated relative to, you know, so far, I'm going commercial exposure CRE and CNI, but in terms of large syndicated credits, it's been, it's very limited. I would say it's not material for our commercial book business. And it would relate to companies that are headquartered in and around our franchise, or that we know, you know, have professional relationships with the management. Got it. Okay, that's one for me.

Martin Birmingham: Just the overall tangible comment equity, tangible acid ratio, shots around capital adequacy and, you know, if this type of environment persists, you know, what kind of position does this level of capital leave you in the 24 clear to see, you know, pick in local. So that's, you know, relative to our 2024 planning, that's where my earlier comment, Matt, we're looking at several scenarios and, you know, ultimately our goal is to continue to drive and to create capital through the performance and how we manage the balance sheet.

Martin Birmingham: And so, generally, I think thematically, that equates to and translates to slower growth, moderating growth. And I think, you know, that, that's one way we're thinking about, we're well aware of where our TCE ratio stands today. And, you know, we know from feedback and conversations like this, that it's, it's low. And that's something that's on the top of our management teams mind right now.

Martin Birmingham: We've seen a couple of your larger peers go ahead and sell insurance companies or other, you know, why is a fee income businesses to help on the on the Trappe OCI and overall capital front? Is that something you're considering? So, we've we're aware of that, you know, strategically. It's been a good move for us relative to the diversification of revenues and the increase that it represents in terms of not interest revenues, in terms of what we've done with our wealth and our insurance business.

Martin Birmingham: But, you know, we're open to any possibility from a capital, you know, efficient use of capital and allocation perspective. For that line of business or any other line of business, we have in terms of what you just said, unlocking value. Got it. Okay.

Matthew Breese: I know it went over where I said I was done my last question. So, I apologize and thank you for taking the couple of extras. Appreciate it. Thanks, madam. Thank you.

Unknown Executive: This concludes our Q&A.

Martin Birmingham: I'll not hand back to Marty Birmingham. President and CEO for closing remarks. Well, thank everybody. Thanks to our analysts and those that are participating on the call this morning. We look forward to talking with you again in January.

Unknown Executive: Ladies and gentlemen, today's call is now concluded. We'd like to thank for your participation. You may now disconnect your lines.