Q3 2023 National Bank Holdings Corp Earnings Call
Ladies and gentlemen, you're currently on hold for today's National Bank Holdings Corporation 2023 third quarter earnings call. We are awaiting additional participants and plan to be underway. Shortly we thank you for your patience and please continue to stay on the line.
[music].
[noise] [noise] please standby.
Good morning, everyone and welcome to the National Bank Holdings Corporation 2023 third quarter earnings call. My name is Mark Jerry and I'll be your conference operator for today at this time all participants are in a listen only mode. We will conduct a question and answer session. Following the prepared remarks as a reminder, this conference is being recorded for replay per.
Specifically I would like to remind you that this conference call will contain forward looking statements, including but not limited to two statements regarding the company's strategy loans deposits capital net interest income noninterest income margins allowance.
And non interest expense.
Results could differ materially from those discussed today. These forward looking statements are subject to risks uncertainties and other factors, which are disclosed in more detail in the company's most recent filings with the U S Securities and Exchange Commission. These.
These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes no obligation to update or revise these statements.
In addition, the call today will reference certain non-GAAP measures, which National Bank Holdings Corporation believes provides useful information for investors reconciliations of these non-GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of Www Dot National Bank Holdings Dot Com. It is now my pleasure to turn the call.
All over and introduce National Bank Holdings Corporation's Chairman, President and CEO, Mr. Tim Laney. Please go ahead, sir thanks.
Thanks, Marguerite good morning, and thank you for joining us as we discuss National Bank Holdings third quarter 2023 financial results.
And by oldest Burkins, our chief financial Officer.
We delivered a 10, 8% increase in earnings for the quarter with year over year pre provision revenues growing 54.6%, while doubling net income during the same period, we continued to build capital ending the quarter with a CET one ratio.
<unk> of 11, six 1% and delivering a healthy $18, 38% return on tangible common equity.
I'll add that we continue to be pleased with our asset quality with just one basis point, but charge offs for the quarter.
Further we expect to reduce non accruals during the fourth quarter, having already experienced a nice reduction during the first three weeks of the fourth quarter and on that note I'll turn the call over to all this alright, well. Thank you Tim and good morning. Thank you for joining our earnings call this quarter.
For the third quarter 2023, we delivered another quarter of strong financial performance with earnings of $36 $1 million or 94 cents per diluted share.
Overall this resulted in a return on average tangible assets of 1.58% and a return on tangible common equity of $18, 38%.
On a linked quarter basis, we grew our pre provision net revenue by $4 million.
And on a year to date basis adjusting for the acquisition expenses incurred in the prior year.
Our pre provision net revenue increased by $51 2 million or 55%.
Driven by organic balance sheet growth, well executed acquisitions and as always a strong discipline on expenses.
We will continue to be pleased with our loan growth. Our teams have generated new loan originations during the third quarter were $324 1 million.
Abated average yield of eight 6%.
And on a year to date basis, we have funded $1 $1 billion in your loss.
Our total loan balance growth to four 8% annualized.
Total loan fundings first time for the fourth quarter and combined with the remaining loan pipeline for the fourth quarter, we expect to achieve our full year loan growth guidance.
Our core deposit balances grew $28 million on a spot basis, and $116 million or five 8% annualized on average balance basis.
Deposit pricing has continued to reflect the higher rates paid by the banking industry.
Our cycle to date total deposit beta remains quite low at 28%.
The third quarter's total deposit cost was 164% and we do expect that to continue to drift higher.
Fully taxable equivalent net interest income for the quarter came in at <unk>.
$89 $89 4 million.
Slight decrease through the second quarter, and an $18 $9 million increase over the last year's third quarter.
The resulting net interest margin for the quarter was 392% and we project NIM to be in the range of three eight to $3, 85% for the fourth quarter of 2023.
In terms of asset quality, our loan portfolio continued continues to perform nicely with only one basis point annualized.
Net charge offs in the quarter.
This quarter's provision expense was primarily driven by new loan growth.
The portfolio transfer main bell behaved and.
They're all basis.
Well behaved on overall basis, and consequently, our allowance to total loan loss coverage remained at two 5% during the quarter.
Both NPA and NPL ratios improved over the prior quarter as did our classified loan ratio.
Total noninterest income for the third quarter was strong at $19 4 million, an increase of $5 5 million on a linked quarter basis.
Core banking fees showed strong performance, resulting in $12, 9% annualized growth in bankcard and service charges combined.
Other banking income benefited from a one $1 million gain on sale of mortgage servicing rights this quarter and solid performance from our diversified fee generation businesses, such as trust and wealth management SBA loan sale gains and camber.
Looking ahead for the fourth quarter of 2023, B project non interest income to be around $16 million or linked quarter decrease mostly driven by the seasonal slowdown in mortgage related income.
Noninterest expense for the third quarter totaled $60 6 million, a decrease of zero point $4 million from the prior quarter.
Expenses continued to be well controlled and we continue to find efficiencies that allow us to fund our investment to you and other technologies.
The third quarters, <unk> expenses were approximately $2 million and we expect them to grow to close to $3 million in the fourth.
The fourth quarter's total noninterest expenses are projected to be in the range of 60% to $62 million.
Which will bring the full year 2000, 22023 expenses to be below the low end up our guidance.
Finally, we continue to build capital with TCE ratio, increasing to eight 5% and tier one leverage ratio increasing to nine 5% to 6%.
Tangible book value per share grew nine 2% annualized to $21 43.
More than offsetting the dividends paid in any increases in Aoc high loss due to higher long term interest rates.
With that I will turn it back to you. Thank you all as well we believe we're set up for a solid finish to the year our pipeline of new business has been building as we approach year end and as previously covered asset quality trends are positive and we continue to deliver an attractive return while building capital so on that.
Let's go ahead and open up the lines for questions.
Thank you and ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad, if youre using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment and again that is star one and while we build that <unk>. We will take our first question from Jeff <unk> from D. A Davidson. Please go ahead.
Thanks, Good morning.
Good morning, Jeff.
Hi, good morning wanted to Jackie.
<unk>.
The timing of it.
<unk> advanced sort of reduction.
<unk>.
Largely.
Over the kind of gradual over the pace of the quarter.
It was.
The bigger pop at the end of the quarter, but we.
We kind of continue.
Given the average balances grew so much relative to spot.
We were able to pay down chunk of it throughout the quarter.
Okay.
Strategy Wise I.
I guess pending deposit success.
Expectation would be to further reduce that.
How do you feel on liquidity.
Well in terms of liquidity, we feel very well.
With the addition of camber as a source of off balance sheet liquidity Federal home loan bank.
Undrawn lines that we do have the on balance sheet unfunded sorry.
Encumbered investment portfolio that cash that we hold we have various sources that'd be stress test through liquidity and we feel good in terms of how this hlv balances will evolve here throughout the end of the year.
It will largely be driven by the remaining loan growth and deposit.
Growth and it is noteworthy Jeff.
On a related note that we operate with zero brokered deposits. So.
And back.
That's historically been the case and certainly the <unk>.
Case through the cycle.
Okay.
All of this I missed it.
The full year guide on loan growth.
Matt.
Yes, the full year guidance has been met.
<unk>.
Single digits mid to high.
And we are as I mentioned, four 8% year to date.
But fourth quarter is looking quite strong with a couple loans pushing here in the fourth and we certainly look to be about five.
Got it.
And did you have a September <unk>.
<unk> margin average as it compares to the $3 92 for the whole quarter.
Yes September margin was.
172, Im sorry, Im sorry, 172, that's our cost of deposits September.
September margin was $3 90.
Okay 90, okay.
Got it.
Jumping to credit.
And it sounds like.
<unk> got some nice.
Reductions coming in in the fourth quarter.
You can.
Imagine as this some progress on some of the non accruals that were brought forward in the second quarter.
That's exactly right that's exactly right.
And any.
It's either that or you're just at this point.
Expecting some wins that we'll leave it at that.
Operator: Ladies and gentlemen, you're currently on hold for today's National Bank Holdings Corporation, 2023, 3rd quarter earnings call. We are awaiting additional participants and plan to be underway shortly. We thank you for your patience and please continue to stay on the line. Please stand by.
Yes, I would say, it's probably given where we're at into the fourth quarter probably.
First we wait report on that on the next earnings call, but we feel good about frankly, all of our credit quality trends and make no mistake. We believe as we look ahead to 'twenty for that.
Yeah.
We're going to benefit from having very little exposure in areas like office and.
Retail.
Again in both of those cases exposure is less than 2% of the total loan book reach.
Yeah.
I noticed.
There was a sequential a pretty meaningful drop in accruing modified loans and a court kind of down $13 million was it was there a payoff in that bucket.
There was.
Okay.
Alright, I'll step back thank you.
Alright, Thank you Jeff.
Thank you we'll next go to Kelly Motta with K B W.
Hi, good morning, Thanks, so much for the question.
Good morning Kelly.
It looks like there was some.
Very nice growth on owner occupied CRE.
Just wondering kind of the opportunities you're seeing.
What's going on in your markets. If there is any.
Tim Leney: Good morning everyone and welcome to the National Bank Holdings Corporation, 2023, 3rd quarter earnings call.
If it's broad based across kind of like all of the markets you're in or if you're seeing any sort of trend.
Marjorie: My name is Marjorie and I'll be your conference operator for today. At this time, all participants are in a listen only mode. We will conduct a question and answer session following the prepared remarks. As a reminder, this conference is being recorded for replay purposes. I would like to remind you that this conference call will contain forward-looking statements including but not limited to statements regarding the company's strategy, loans, deposits, capital, net interest income, non-interest income, margins, allowance, tax and non-interest expense.
Well.
Kelly Pratt.
Practical matter, we strive to bank.
The full relationship the full banking relationship with our business clients and often times that certainly doesn't involve financing the facilities that they operate in the beauty of that is.
Marjorie: Actual results could differ materially from those discussed today. These forward-looking statements are subject to risks, uncertainties and other factors which are disclosed in more detail in the company's most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes no obligation to update or revise these statements. In addition, the call today will reference certain non-GAAP measures which National Bank Holdings Corporation believes provides useful information for investors.
Unlike traditional commercial real estate, where youre not picking up the depository business. Our approach is to burn all of the deposit toward business that goes with that business and have keen insight into the global cash flow and the ability of that business to serve a solid debt including.
Including any facilities that.
Marjorie: Reconciliation of these non-GAAP financial measures to the GAAP measures are provided the news release posted on the Investor Relations section of www.nationalbankholdings.com.
Okay.
That's helpful and switching to the deposit side.
It looks like there was some.
Outflow of noninterest bearing just.
Wondering if you expect to see some continued migration out of that line.
Tim Leney: It is now my pleasure to turn the call over and introduce National Bank Holdings Corporations Chairman, President and CEO Mr. Tim Leney. Please go ahead sir. Thanks, Marjorie. Good morning and thank you for joining us as we discuss National Bank Holdings 3rd quarter 2023 financial results.
Borrowers do something with their liquidity to pay down lines, just the operating cost as well as <unk>.
Migration to higher cost funding source.
I guess, how it went.
Do you see that.
Line item.
And any sort of guidance in terms of.
Tim Leney: I'm joined by all of us, Berkins, our Chief Financial Officer. We delivered a 10.8% increase in earnings for the quarter with year-over-year pre-prevision revenues growing 54.6% while doubling net income during the same period. We continue to build capital ending the quarter with a CET-1 ratio of 11.61% and delivering a healthy 18.38% return on tangible common equity. I'll add that we continue to be pleased with our asset quality with just one basis point of charge loss for the quarter. Further, we expect to reduce non-acrolls during the fourth quarter, having already experienced a nice reduction during the first three weeks of the fourth quarter.
That should be as a percentage of total deposits.
Ooh.
We really have seen.
A reduction in that glide ratio down and I think for a little more color.
Interestingly enough <unk> seen the most pressure coming out of our consumer book of business and back to the discussion point earlier with.
The success, we are having growing commercial relationships thats the opportunity to begin to grow through that decline on the consumer side with noninterest bearing deposits that come out of core operating relationships. So we don't at this point expect any.
Major changes in that.
And.
Aldis Birkans: And on that note, I'll turn the call over to Aldis. All right. Well, thank you, Tim. Good morning.
And that particular part of the business.
Got it.
Aldis Birkans: Thank you for joining our earnings call this quarter. For the third quarter, 2023, we delivered another quarter of strong financial performance with earnings of $36.1 million, on 94 cents per diluted share. Overall, this resulted in hit return on average tangible assets of 1.58 percent and that return on tangible common equity of 18.38 percent. On the link quarter basis, we grew our pre-privission net revenue by $4 million. And on a year-to-date basis, adjusting for acquisition expenses incurred in the prior year, our pre-privission net revenue increased by $51.2 million for 55 percent.
Maybe a last question for me I was hoping I didn't I didn't hear any anything on capital in the prepared remarks, just wondering.
Levels look pretty healthy here, just wondering if you could walk through again.
What are your capital priorities are any interested a buyback and I know you were very active in M&A.
So last year, but wondering.
If there is any.
Pace of conversation.
Yes.
Yes, great Great question. Thanks for asking number one we operate with an authorization to engage in buybacks and we certainly have a targeted price at which we would engage.
Aldis Birkans: Driven by organic balance, growth, well-executed acquisitions, and as always, strong discipline on expenses. We continue to be pleased with the long growth how teams have generated. New loan originations during the third quarter worth $324.1 million at evaded out of yield of 8.6 percent. And on a year-to-date basis, we have funded $1.1 billion in new loans, bringing our total loan balance growth to 4.8 percent rate annualized. Several loan funding is pushed in for the fourth quarter and combined with the remaining long pipeline for the fourth quarter, we expect to achieve our full-year long growth guidance.
On the M&A front.
We've committed to stand down really when I say committed.
We made the decision ourselves to stand down this year ensure we had complete integration of the last acquisitions to rebuild capital when to put ourselves in a position.
To be opportunistic in 'twenty, four and Thats unfolding nicely that would be our expectation is to.
Reengage and again.
Perhaps even on a more opportunistic basis.
Got it that's super helpful. I really appreciate all the color Tim I'll step back.
Aldis Birkans: Our quarter-posit balances grew $28 million on a spot basis and $116 million or 5.8 percent annualized on average-balanced basis. Deposit pricing has continued to reflect the higher rates paid by the banking industry. Yet our cycle-to-date total deposit data remains quite low at 28 percent. The third quarter's total deposit cost was 1.64 percent, and we do expect that to continue to drift higher. A fully taxable equivalent net interest income for the quarter came in at $89.4 million, a slight decrease to the second quarter, and an 18.9 million dollar increase over the last year's third quarter.
Thank you Kelly.
Thank you and next we'll go to Andrew <unk> from Stephens. Please go ahead.
Hey, good morning, Tim Good morning, Aldo.
Good morning, good morning.
Hey, I had a few questions maybe on the margin.
One it sounds like loan growth or at least originations kind of shaping up to be pretty solid in the fourth quarter.
Can you disclose what the with the new.
<unk> for originations right now I think it was kind of high 8% range last quarter.
Last quarter was $8 six I'll say the last month.
So September month was eight 9% for example, so.
Aldis Birkans: The resulting net interest margin for the quarter was 3.92 percent, and we project NEM to be in the range of 3.8 to 3.85 percent for the fourth quarter of 2023. In terms of ethicality, our loan portfolio continues to perform nicely with only one basis point annualized net charge also in the quarter. This quarter's provision expense was primarily driven by new long growth. The portfolio trends remain well-behaved, and on overall basis, well-behaved on overall basis.
And that includes advances on existing lines, which typically are some lower levels. So new fixed rate bonds got funded actually at 9%.
Okay.
Got it I appreciate it.
And then on the.
Time deposit portfolio, it's really impressive that the cost was $2 48. This quarter just relative to the market that feels pretty low just wanted to get a sense of where you're pricing new new CD that today and how that compares to the market.
Yes.
Aldis Birkans: And consequently, our allowance the total loan loss coverage remained at 1.25 percent during the quarter. Both NPA and NPL ratios improved over the prior quarter, as did our class five loan ratio. Total non-interesting income for the third quarter was strong $19.4 million, an increase of $5.5 million on the link quarter basis. The core banking fees showed strong performance resulting in 12.9% annualized growth in bank art and service charges combined. Other banking income benefited from a $1.1 million gain on sale of mortgage servicing rights to the and sell performance from hard-diversified fee generation businesses such as trust and wealth management as being a long sale gains and camper.
There is a mixed bag there.
Finally, certain time deposits, they're just rollover and have been for years and frankly decades.
Debt.
Rates that are much more.
Pages, where you paid for a new client to come in so debated average rate on new time deposits has been around three 5% to three eight type of percent.
But I will say also I will say that.
Unlike.
Maybe the bad drafted broker deposits had gotten in.
A while back.
We've always had time deposit being a focus in making sure that it.
We get duration on those deposits so.
Aldis Birkans: Looking ahead for the fourth quarter of 2023, we project non-interesting income to be around $16 million, a link quarter decrease, mostly driven by the seasonal slowdown in mortgage-related income. Non-interesting expense for the third quarter totaled $60.6 million, a decrease of $0.4 million from the prior quarter. Expenses continue to be well controlled and we continue to find efficiencies that allow us to fund our investment into you and other technologies. The third quarters to you expenses were approximately $2 million and we expect them to grow to close to $3 million in the fourth.
There is.
Long tail in terms of a pricing that is certainly helping here as well and historically and currently time deposits have not been.
Meaningful part of our marketing campaign, and I wouldn't expect to begin.
Doing so in 'twenty four so.
Obviously, it's an important part of the balance sheet, but it's not an area that.
We heavily rely upon.
Yeah understood. Okay, and then just maybe netting together on the margin.
Aldis Birkans: The fourth quarter's total non-interesting expenses are projected to be in the range of $60 to $62 million, which will bring the full year 2023 expenses to be below the low end of our guides. Finally, we continue to build our capital with TCE ratio increasing to 8.5% and tier 1 leverage ratio increasing to 9.56%. Our tangible book value per share grew 9.2% annualized to $21.43. More than a setting dividends paid in any increases in AOC I lost due to higher long-term interest rates.
It sounds like I mean, the month of September not far off the quarterly average the guidance for the fourth quarter is pretty close relative to where you came in at in late September.
And it feels like with new originations coming on to that kind of clip and maybe some lingering deposit pressure does it feel like you can you can kind of hold that margin in this.
38385 type type band moving forward or is it more of a kind of wait and see.
Well, let's say outside of that for fourth quarter, we feel pretty good about that guidance and that certainly is showing a slowdown.
Tim Leney: I will turn it back to you. Thank you, Aldous. Well, we believe we're set up for a solid finish through the year. Our pipeline of new business has been building as we approach year in and has previously covered asset quality trends are positive and we continue to deliver an attractive return while building capital.
In terms of pace of decreases from 30 something basis points to 15 last quarter.
Quarter before 15 last quarter, and certainly implying here slowed down again.
Wherever you're going to be in 2024, we'll wait to provide that guidance until our January call.
Operator: So on that note, let's go ahead and open up the lines for questions. Thank you, and ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypads. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, that is star one.
Yeah understood. Okay, and then last one obviously you have the.
On the MSR sale. This quarter do you have what the pricing was on that sale and then do you do you anticipate any more MSR sales moving forward.
Starting with the latter one nothing in near term. We certainly this is our second one in last three years and what we do is it's really it's not necessarily.
Jeff Rouleth: And while we build that queue, we'll take our first question from Jeff Rouleth from DA David's fan. Please go ahead. Thanks. Good morning. Good morning, Joe. Good morning.
The gain we managed risk operational risk purposes, we do the sell downs.
Jeff Rouleth: One of the timing of HOP advance reductions was that largely over the kind of gradual over the pace of the quarter. It was with a bigger pop at the end of the quarter, but we kind of continued to be given the average balances. Good to sell much relative to spot. We were able to pay down chunk of it throughout the quarter.
And since we are not building rebuilding that asset as fast given the mortgage business right now I don't foresee.
Another sale in near term here.
In terms of pricing.
Something that we haven't disclosed and I can sell it at all.
That would be sold down approximately half of our asset in half of our portfolio that would be we're servicing here Mitch just now.
Aldis Birkans: Okay. And strategy wise, I guess pending deposit success, the expectation would be to further reduce that. How do you feel on liquidity? Well, in terms of liquidity, we feel very well made with the addition of camber as a source of off-balance liquidity, federal home loan bank on drawn lines that we do have the on-balance sheet on fund, sorry, unentombered investment portfolio that cash to behold, we have various sources that we stress test through liquidity and we feel good.
Another component here is going to provide us opportunities to think smartly, how those resources that were supporting that portfolio will be allocated on a go forward basis.
Yes understood Okay.
Thank you for taking the questions I appreciate it.
Thank you.
Thank you we will next go to Andrew Liesch with Piper Sandler. Please go ahead.
Hey, good morning, guys.
Thanks for taking my questions I think you've covered.
Nearly everything on expenses you mentioned the two unify.
Much stepping up to $3 million. This quarter is $3 is a good run rate I guess, how should we be looking at those.
Aldis Birkans: In terms of how FHLB balances will evolve here throughout the end of the year, you know, it will largely be driven by the out of many long growth and to deposit growth. And it is no worthy Jeff on a related note that we operate with zero broker deposits. So, in fact, that's historically been the case and certainly the case through the cycle.
Costs going into next year.
Okay, well I'll pour full year I'll provide guidance in terms of.
But what 2020 affordable look like in January I'll say that $3 million as today's run rate and Thats, where we were in September that's where it will be in October in terms of quarterly run rate. So I'll just leave it at that.
Jeff Rouleth: And Aldis, I missed the full-year guide on long growth. Yeah, the full-year guidance has been met a single digit's met to high and we are, as I mentioned, 4.8% here today, but the fourth quarter is looking quite strong with a couple loans pushing here in the fourth and we certainly look to be about five. And did you have a September, the intergest margin average? Is it compared to the 392 for the whole quarter?
Got it.
<unk>.
I guess Glenn.
As far as to unify concerned I mean, when do you think we could start to see some revenue from that business falls to the bottom line.
Yes.
We we believe we're going to be positioned to take to unify on the road and begin to demonstrate some of the friends and family work that we're doing we'll be doing with it in the second half of 'twenty four I wouldnt expect meaningful revenue to be coming in in 'twenty four.
It's really more of a 'twenty five focus and beyond.
Jeff Rouleth: Yeah, the September margin was 172, I'm sorry, 172, that's our cost of deposits. September margin was 390. 390, okay. Got it, you know, just jumping a credit for a minute, you know, sounds like, Kim, you've got some some nice reductions coming in the fourth quarter. I can imagine is this some progress on some of the notacles that were brought forward in the second quarter? That's exactly right. In any kind of size of that or you just at this point, expecting some wins and we'll leave it at that.
Got it.
Thank you you've covered everything else Scott.
On my list here. Thanks, so much I'll step back. Thanks, Yeah. Thank you very much thanks Andrew.
Yeah.
Thank you and I am showing we have no further questions. At this time, so I will now turn the call back to Mr. Laney for any closing remarks.
Thank you again and I would just thank everyone for joining us today and feel free to follow up if you have other questions have a good day.
Okay.
And this concludes today's conference call, if you'd like to listen to the telephone replay of this call. It will be available in approximately 24 hours and the link will be on the company's website on the Investor Relations page. Thank you very much and have a great day you may now disconnect.
Jeff Rouleth: Yeah, I would say it's probably given where we're at into the fourth quarter, probably best we wait, report on that on the next earnings call, but we feel good about frankly all of our credit quality trends and, you know, make no mistake, we believe as we look ahead to 24 that we're going to benefit from having very little exposure in areas like office and retail. Again, you know, in both of those cases, exposure is less than 2% of the total envelope for each. Yeah, I noticed that there was a sequential, pretty meaningful drop in accruing modified loans in the quarter. I kind of down 13 million, was there a payoff in that bucket? There was. Okay. All right.
Okay.
Okay.
[music].
Okay.
[music].
Operator: I will step back. Thank you.
Operator: All right. Thank you.
Kelly Motta: And we'll next go to Kelly Motor with KBW. Thank you. Hi, good morning. Thanks so much for the question. Good morning, Kelly.
Tim Leney: It looks like there was some very nice growth on owner-occupied CRE, just wondering kind of the opportunities you're seeing, what's going on in your market, if there's any, you know, if it's broad-based across kind of like all the markets you're in, or if you're seeing any sort of trends. Well, Kelly, as a practical matter, we strive to bank the full relationship, the full banking relationship of our business clients, and oftentimes that certainly does involve financing the facilities that they operate in.
Tim Leney: The beauty of that is, you know, unlike traditional commercial rules, they were you're not picking up the depository business, our approaches to earn all of the depository business that goes with that business, and have a keen insight into the global cash flow and the ability of that business to service all debt, including any facilities debt.
Kelly Motta: Okay, that's helpful, and switching to that deposit side looks like there was some outflow of non-interest bearing, just, you know, wondering if you expect to see some continued migration out of that line as borrowers use some of their liquidity that's paid out lines, just operating costs as well as, you know, migration to higher cost funding sources. I guess how, when do you see that line item, not a thing out, and any sort of guidance in terms of where that should be as a percentage of total profits?
Kelly Motta: We really have seen a reduction in that blood ratio down, and I think for a little more color, you know, where we've interestingly enough seen the most pressure coming out of our consumer book of business, and back to the discussion point earlier, with the success we're having growing commercial relationships, that's the opportunity to begin to grow through that decline on the consumer side with non-interest bearing deposits that come out of core operating relationships. So, we don't at this point expect any major changes in that particular part of the business. Got it.
Tim Leney: Maybe a last question for me, I was hoping I didn't hear anything on capital in the prepared remarks, just wondering, you know, levels look pretty healthy here, just wondering if you could walk through, again, what your capital priorities are, any interested to buy back, and I know you were very active in M&A last year, but wondering, if there's any pace of conversation, pages in the pace of the business. Yeah. Foundation. Yeah, great, great question.
Tim Leney: Thanks for asking. Number one, we operate with an authorization to engage in buybacks, and we certainly have a targeted price at which we would engage. On the M&A front, we've committed to stand down. Really, when I say committed, we made the decision ourselves to stand down this year, ensure we had complete integration of the last acquisitions to rebuild capital and to put ourselves in a position to be opportunistic in 24, and that's unfolding nicely. That would be our expectation is to re-engage and again, perhaps even on a more opportunistic basis.
Kelly Motta: That's super helpful, I really appreciate all the color, Tim, I'll step back. All right, thank you, Kelly.
Andrew Terrell: Thank you, and next we'll go to Andrew Terrell from Stevens, please go ahead. Hey, good morning, Tim, morning, Aldis. Good morning.
Andrew Terrell: Hey, I had a few questions, maybe on the margin. One, it sounds like loan growth or at least originations, kind of shaping up to be pretty solid in the fourth quarter. Can you disclose what the new yield is for originations right now? I think it was kind of high 8% range last quarter. Last quarter was 8.6. I'll say the last month, September month was 8.9% for example, and that includes advances on existing lines, which typically are at some lower levels, so new fixed rate loans got funded actually at 9%, plus percent. Okay, got it, I appreciate it.
Andrew Terrell: And then on the time deposit portfolio, it's really impressive. I mean, the cost was 248, this quarter just relative to the market that feels pretty low. Just wanted to get a sense of where you're rising new CDs at today and how they can bear some of the market. Yeah, you know, there's a, it makes back there is certainly a certain time deposits that just roll over and have been for years and frankly decades, that are rates that are much more advantageous for you paid for a new client to come in.
Andrew Terrell: So the vated average rate on new time deposits has been around 3.5 to 3.8 to 100%. But I'll say also, I will say that are, you know, unlike maybe the bad rap that broker deposits had gotten a while back, you know, we've always had time deposits being a focus and making sure that we get duration on those deposits. So there is a, you know, long tail in terms of a price thing that is certainly helping here as well.
Andrew Terrell: And historically and currently time deposits have not been a meaningful part of our marketing campaign. And I wouldn't expect to begin doing so in 24. So, you know, obviously it's an important part of the balance sheet, but it's not an area that we heavily rely upon.
Andrew Terrell: Yeah, understood. Okay. And then just maybe netting together on the margin, it sounds like I mean the month of September not far off the quarterly average, the guidance for the fourth quarter is pretty close relative to where you came in at in late September. And it feels like with new originations coming on in that kind of clip and maybe some lingering deposit pressure, does it feel like you can you can kind of hold that margin in this in this 38385 type ban moving forward or is it more of kind of wait and see?
Andrew Terrell: Well, I'll say that for fourth quarter, we feel pretty good about that guidance. And it certainly is showing a slowdown, right? In terms of pace of decreases from 30 something in basis points to 15 last in the quarter before 15 last quarter and certainly implying here slowdown again. And you know, where are we going to be in 2024?
Andrew Terrell: We'll wait to provide the guidance until our January call. Yeah, understood. Okay.
Andrew Terrell: And then last one, Aldis, do you have the MSR sale this quarter? Do you have the pricing was on that sale?
Aldis Birkans: And then do you anticipate any more MSR sales moving forward? Starting with the latter one, nothing in near term. We certainly we this is our second one in last three years. And what we do is it's really not necessarily for the gain, we manage risk, operational risk purposes, we do the sell downs.
Aldis Birkans: And since we are not building rebuilding that asset as fast given the mortgage business right now, I don't foresee another sale in near term here. In terms of pricing, it's something that we haven't disclosed and I can say that I will say that we sold down approximately half of our asset and half of our portfolio that we were servicing here. Which, you know, just another component here has been to provide this opportunity to think of smartly held out three sources that were supporting that portfolio will be allocated and go forward basis. Yeah, understood.
Andrew Terrell: Okay. Thank you for taking the questions. I appreciate it. Hey, thank you. Thank you.
Andrew Lysch: And we'll next go to Andrew Lysch with Piper Sandler. Please go ahead. Hey, good morning, guys. Thanks for the question. I think you've covered nearly everything. On expenses, you mentioned the two unify costs, much stepping up to three million this quarter is three million to good run rate. I guess how should we look at that as those costs going into in the next year? Again, well, I'll for full year, I'll provide guidance in terms of what 20, 24 will look like in January.
Andrew Lysch: I'll say that three million is today, so run rate. And that's where we were in September. That's where it will be in October in terms of quarterly run rate. So, I'll just leave it at that. Got it.
Andrew Lysch: I guess then as far as to unify concern, I mean, when do you think we could start to see some revenue from that business falls to the bottom line? We believe we're going to be positioned to take to unify on the road and begin to demonstrate some of the friends and family work that we're doing we'll be doing with it in the second half of 24. I wouldn't expect meaningful revenue to be coming in in 24. It's really more of a 25 focus and beyond. Thank you. Yeah, you've covered everything else that I have on my list here. Thanks much.
Andrew Lysch: I'll start back. Thank you. Thank you very much. Thanks, Andrew.
Tim Leney: Thank you and I am showing we have no further questions at this time so I'll now turn the call back to Mr. Laney for any closing remarks. Thank you again and I would just thank everyone for joining us today and feel free to follow up if you have other questions. Have a good day.
Operator: And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available in approximately 24 hours and the link will be on the company's website on the investor relations page. Thank you very much and have a great day.
Operator: You may now disconnect.