Q3 2023 Evans Bancorp Inc Earnings Call

[music].

Greetings and welcome to Evans Bancorp third quarter fiscal year 2023 financial results.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce you ever Pulaski Investor Relations for Evans Bancorp. Thank you you may begin.

Thank you Doug and good afternoon, everyone. We appreciate you taking the time today to join us as well as your interest in Evans Bancorp.

On the call I have with me, David Nasca, our president and CEO and John <unk>, Our Chief Financial Officer.

David and John are going to review the results of third quarter of 2023.

Provide an update on the company's strategic progress and outlook after that we will open the call for questions.

You should have a copy of the financial results.

So were released today after market close if not you can access them on our website at Www Dot Evans Bank dotcom.

As you are aware, we may make some forward looking statements during the formal discussion as well as during the Q&A. Please.

Future events and are subject to risks and uncertainties as well as other factors that could cause actual results to differ from what is.

Oh.

These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed by the company Securities and Exchange Commission.

You can find those documents on our website or at SEC Gov.

With that let me turn it over to David to begin David.

Hey.

Thank you Debbie.

Afternoon, everyone. We appreciate you joining us today.

I'll start with a review of the key themes that played out during the quarter and well then hand, it off to John to discuss our results in detail.

Third quarter results were mixed but positive overall from a growth and operating performance standpoint positioning the company solidly in a difficult business environment industry headwinds related to the cost of deposits drove further compression in that industry margin, which was anticipated.

Our margin was further impacted by the reversal of interest income and one large long time credit client that is experienced government reimbursement challenges.

Alright, this unique circumstance as we review and analyze credit, we see strength and resilience in our portfolio.

Trends remain favorable and actual charge offs continue to be low.

Absent the reversal of net income emerging was in line with projections.

We expect market conditions and pricing pressures generally persist, but are you seeing signs of moderation in deposit cost increases as we round out this year.

Don will provide more detail on our NIM expectations during his report.

Our deposit base and liquidity continued to be solid and stable backed by a diversified product portfolio. In addition, our associates have performed well in lending and business development, given today's market dynamics and are making inroads with new clients and cementing existing relationships as evidenced by our 8%.

<unk> loan growth in the quarter.

We are taking corrective measures to control costs and expenditures by focusing on operating efficiency and pride in providing exceptional experience to our valued clients overall, we continue to block and tackle and our core business as we grind out results within our risk and return parameters and an inhospitable banking environment.

With that I will turn it over to John to run through our results in greater detail and then we will be happy to take any questions.

Thank you David and good afternoon, everyone.

The quarter, we delivered earnings of $3 $6 million or 60 cents per diluted share, which was down from last year's third quarter largely due to reduced net interest income.

Helping offset this reduction was increased insurance service and fee revenue, while overall expenses decreased.

The reduction in earnings from the sequential second quarter also reflected a lower net interest income and an increase in provision for credit losses, partially offset by seasonally higher noninterest income.

Net interest income was impacted over both comparable periods.

Higher interest expense given intense competitive pressure on deposit pricing, which began to accelerate at the start of the year.

This more than offset increases in interest income driven by growth in our variable rate portfolios. Following the federal reserve's series of rate increases.

With increased interest expense from higher deposit costs, we saw a 31 basis point decrease in net interest margin in the quarter to $2 seven 9% as David indicated impacting net interest margin by eight basis points was the reversal of approximately $400000 of interest income primarily resulting from one large commercial loan that was put on non accrual.

Status during the quarter.

I will talk to our NIM expectations at the end of my remarks.

The increase of $506000 and provision for credit losses was predominantly due to loan portfolio growth.

Noninterest income was $5 6 million down approximately 4% over last year's second quarter and up 15% sequentially.

Insurance, which is the largest contributor within this category was up 3% year over year and 22% from the linked quarter.

The increase from the second quarter of 2023 reflects seasonally higher policy renewals for institutional clients, while the year over year increase was due to commissions from new commercial lines insurance sales and higher premiums.

Mentioned previously the competitive landscape in regulatory environment have brought to the forefront changes to overdraft fees in terms of how they are handled in the past.

What level, we did implement changes at the end of last year, which resulted in a reduction of fees within the deposit service charges line when compared with last year.

Other income decreased.

$3 million from last year's third quarter, primarily due to a point $2 million final payment received in connection with an historic credit investment during the third quarter of 2022.

Total noninterest expense increased 2% from our sequential second quarter and was down 10% from last year's second quarter.

But the driver of this change was largely within the salaries and employees benefits line, which is flat quarter over quarter and down 20% from the previous year when compared with last year's second quarter. The decrease was primarily due to lower incentive accruals of $1 3 million and reduced staff expenses.

Through consolidation of branches and back office operations.

Our expectation for full year expense run rate is a decrease of 3%.

Turning to the balance sheet and reviewing movements in the third quarter total loans were up approximately $34 million of that commercial loans increased 3% or $31 million.

Commercial originations were $62 million during the quarter compared with 54 million of net originations in the second quarter, we are being selective in our underwriting decisions, but are seeing opportunities in commercial real estate, including multifamily and warehousing warehousing facilities that are meeting our credit parameters.

C&I funding rates remained muted and continue to impact growth in that portfolio.

The current pipeline remains active and stands at 67 million at quarter end, we expect total commercial loan growth to be approximately 3% in 2023.

Credit metrics remain sound with a 2% decrease in nonperforming loans criticized loans increased slightly by $2 million from 74 million at June 30 was 76 billion as of the end of the third quarter.

This is an $11 million decrease from last year's third quarter from $89 million.

Total deposits of $1, eight 1 billion increased $18 million or 1% from the second quarter at September 30, the percent of <unk>.

Shirt and uncollateralized deposits were steady Eddie 18%.

Average total deposits decreased slightly to $1 $79 billion during the quarter when compared to 182 billion in the second quarter.

However.

As has occurred in previous cycles balances have and are expected to continue to migrate into different products. Specifically, we are seeing commercial clients migrate bonds from demand deposit accounts in the sweep accounts and we expect consumer clients to continue moving funds from savings accounts and Cds.

As mentioned earlier these trends and pricing pressures have been accelerated impacted our margin for the third quarter and are expected to impact the margin on a full year basis.

As with many banks, we will continue to fight for deposits by being proactive with pricing and maintaining competitive rates in our markets.

Deposit rates have continued to increase because of strong competition in the time deposits.

The marketplace and as I commented above have caused the continued shift of customer funds from noninterest bearing to interest bearing accounts.

Chances of a late 2023% decrease in fed funds rate had been replaced by expectations that interest rates will stay higher longer and this has affected customer and competitive behavior.

Currently we expect our NIM to experienced approximately between 15 and 20 basis points of compression in the fourth quarter of 2023.

Beyond the fourth quarter is difficult to forecast given external macro forces such as potential future fed rate moves and how competition may play out, but our current expectation is that NIM pressure could moderate.

Or at the beginning of next year.

With that operator, we would now like to open the line for questions.

Thank you.

Ladies and gentlemen at this time well be conducting a question and answer session.

If you'd like to ask a question you May press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Our first question comes from the line of Nick Couture Rally with Hovde Group. Please proceed with your questions.

Good afternoon, everyone how are you.

But Nick how are you Hello.

Good. Thanks, So just to clarify that the NIM guidance. John are you, suggesting 15 to 20 basis points of compression from the reported level of $2 79 or are the adjusted level of 287, which excludes the interest reversal.

287, adjusted Okay. Thank you.

No. Thank you and then a nice acceleration of loan growth relative to the prior quarter. You mentioned strong growth in commercial real estate are you seeing any sort of pull back from the competition just given the funding challenges in the industry.

We are we're seeing a bit of a pullback in certain quarters. Some people grew quickly and have stepped out others are taking their cree balances and selling them into the secondary market to get them out of their balance sheet. So we are seeing some pullback.

But we're also seeing projects small well a little bit as well.

We've been doing pretty well to capture our share but it's been.

The higher rates have.

Been a little bit frosty in terms of some of these projects are in terms of their piece.

That's very helpful. You've done a great job of controlling expenses. This year as we start thinking about 2024 are there any particular investments to be made that may cause an outsize impact next year.

No Nick we.

I think so.

Run rate that we have projected for next year.

It was low single digits.

Just more of the typical inflationary in.

The increases that we typically see in any particular year most of the.

Most of our <unk>.

Investments have been made previously and where we're not expecting any large changes to that.

Excellent and then maybe just one final one on the tax rate. It was just a little higher this quarter relative to prior periods any sense of where that shakes out going forward.

Yeah, 23% for the full year and that should be typical.

Thank you for taking my questions.

And Nick one thing I also wanted to say just because it's being recorded John when he was talking earlier, you talked about and it's in our press release, he talked about earnings of $3 6 million and he he stated that we had 60 cents per diluted share. It's actually 66 cents per diluted share. So I just wanted to get down on the recording but.

It is in our press release so.

Thank you.

Yep.

Our next question comes from the line of Alex <unk> with Piper Sandler.

Please proceed with your question.

Hey, good afternoon.

Good afternoon, Alex how are you.

Well, thanks I wanted to.

It's been a little bit of time chatting about the NIM here.

It looks like loan yields increased by about 10 basis points this quarter and last quarter.

As you kind of.

Look out and sort of maybe talk a little bit about new origination yields and sort of what kind of pricing you're getting in and you know, it's 10 basis points of higher per quarter kind.

Of what you were thinking John in your guidance for the NIM and your outlook for the NIM.

So.

Off the top of my head I haven't recalculated that if that's a quick calculation off of our reports that do include the adjustment for that 400000, Alex I would say, it's slightly higher than that.

And I know we've talked about this in the past.

We have we have around $300 million come back to us a year in principle and renewals securities pay down pay offs delight.

So that's kind of the repricing portfolio that comes back to us.

Driving our our expectation on the loan side, but I guess, the short answer would be.

Our expectation for this quarter's increase in yields would be a good expectation for the continued expectation for next year adjusted for that 400000.

Yeah. My calculation was adjusted for the 400000 on the nose.

So I guess you know I think you said some moderation potentially expected early in 2024.

I mean, when I guess, when and where do you think the NIM could wind up bottomed bottoming.

Well I mean, it's it's.

As I suggested in my comments.

Depend on competitive pressure.

Did see it kind of.

Competitive pressure moderate to some degree at the end of second quarter beginning of third quarter.

But based on the environment that we're in and the long end pulling up.

And the response that the competition did.

That was not expected so we had a little bit more compression not where you thought.

We expected 20 basis points, we came in around 23.

And.

At the beginning of fourth quarter here it.

It is again probably unexpected but.

But we would still stick with that moderation in the late second quarter first second quarter of next year.

Based on current run rates in the current environment that we're in.

Okay.

Have you guys been considering doing any.

Any restructuring in the securities portfolio or are adding on any swaps you've seen some of your competitors do that kind of stuff recently that's.

And it's been received well by the market I'm. Just curious if you have any appetite for for some products that could potentially.

Hope that NIM reverse sooner.

Yeah.

So we were always looking at our balance sheet and the asset liability management of that and we're open to continually looking at where we're also balancing any type of capital levels that we have in and putting those things altogether. So yes. The answer is yes, we're always looking at those things nothing planned immediately.

Got it and then can you just go through the credit metrics again, and you know it seems like you know you guys reverse in noninterest income or some interest income as a result of a credit deteriorating what that was didn't look like it hit the N. P. L number the charge off number so just help us figure out exactly what's going on underneath the.

Underneath the surface.

Sure so that talked about that last quarter, Alex that was one of our credits that had gone it was in nonperforming, but it was 90 days and still accruing.

It was.

David's comments suggested there are dependent on government reimbursement typically those can go along this is gone unexpectedly long, we still think that that credit is.

Is it secured well and it has it's going to come back around.

It's just there was too long from a time perspective, so we did put it into non accrual and we had to unwind that that accrued interest that was sitting in our receivable account, but it was already adjusted for in our nonperforming because it was 90 plus at the end of <unk>.

End of last quarter. So you wouldn't have seen any increases and it's well secured so we haven't really needed to reserve anymore, and we haven't charged anything off.

Okay.

If that makes sense to you.

Yeah.

That is helpful. I think that's all I have for right now thanks for taking my questions.

Alright, you're more than welcome.

Okay.

As a reminder, ladies and gentlemen, it is star one to ask a question.

Our next question comes from the line of Chris O'connell with K VW. Please proceed with your question.

Hey, good afternoon.

So just following up on the NIM commentary, you mentioned a little bit more pressure.

At the start of the fourth quarter did you guys have with the spot margin was.

Timber.

Okay.

I don't know that off the top of my head, Chris I apologize.

Okay.

And then.

Yeah.

In terms of the restructuring and <unk>.

That question regarding NIM improvement and things of that nature.

Do you see a few peer.

Insurance sale transactions in joint restructurings in the market for the past quarter or two is that something that you guys have considered at all.

Just any color around your thoughts there.

I think the answer that John was talking about about the asset liability, we're considering all options to create value for the shareholders. We're looking at all long term options strategically.

So that's sort of the answer we look at everything.

Got it.

Hey, James.

<unk> done.

If you guys have taken a look at that how you guys weigh the pros and cons.

I think the transaction.

Well any in any transaction that we look at we look at long term return to shareholders and.

What.

What happens to capital, where how we redeploy all of those things.

It is a full bid.

Business case for any opportunities, we look at but we look at everything.

Great.

And I apologize if I missed it earlier.

I know you guys gave the loan pipeline at $67 million.

And any thoughts on just overall net loan growth.

Going forward and beyond.

The oncoming yields are.

Well I think what we're looking at as we think.

The run rate that we talked about was sort of low single digits that 2% to 3% level.

Beyond coming.

So we're looking at is generally we're getting.

Our general yield spread is 250 over.

The comparable term.

We're getting a little more in some cases right now are we're able to get that.

Because it's a more challenging environment, we're making sure we're being paid for the risk.

You're seeing we're generally holding their spreads a little plus.

The yields are typically chris or somewhere seven five and above.

Great.

Okay.

Alright, that's all afternoon, thanks for taking my questions.

Thank you thanks, Chris.

There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.

Doug: Williams, and welcome to Evans Bancorp, Third Quarter, Fiscal Year, 2023 Financial Results. At this time, all participants are on the list and only mode. A question and answer session will follow the formal presentation.

Thank you.

Yes.

Real quickly I'd like to thank everybody for participating in our teleconference. Today. We certainly appreciate your continued interest and support please feel free to reach out to us at any time and we look forward to talking with all of you again, when we report our fourth quarter results for 2023, we hope you ever.

Operator: If anyone wants to require offer or assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Deborah Pawlowski: It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for Evans Bancorp. Thank you. You may begin. Thank you, Doug, and good afternoon, everyone. We appreciate you taking the time today to join us as well as your interest in Evans Bancorp.

Dave Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Deborah Pawlowski: On the call I have with me, Dave Nasca, our President's CEO, and John Connerton, our Chief Financial Officer. David and John are going to review the results of Third Quarter of 2023, and provide an update on the company's strategic progress and outlook. After that, we will open the call for questions. You should have a copy of the Financial Results that were released today after March its close. If not, you can access them on our website at www.eventsbanc.com.

Deborah Pawlowski: As you are aware, we may make some forward-looking statements during the formal discussions, as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from what is stated on today's call. These risks and uncertainties and other factors that provided in the earnings release, as well as with other doctors filed by the company with securities and exchange commissions. We find those documents on our website, or at sec.gov.

Deborah Pawlowski: So with that, let me turn it over to David to begin.

David Nasca: Dave? Thank you, Debbie.

David Nasca: Good afternoon, everyone. We appreciate you joining us today. I will start with a review of the key themes that played out during the quarter, and we'll then hand it off to John to discuss our results in detail. Third quarter results were mixed, but positives, overall from a growth and operating performance standpoint, positioning the company solidly in a difficult business environment. Industry headwinds related to the cost of deposits drove further compression in that interest margin, which was anticipated.

David Nasca: Our margin was further impacted by the reversal of interest income on one large long-time credit client that has experienced government reimbursement challenges. Despite this unique circumstance, as we review an analyzed credit, we see strength and resilience in our portfolio. Credit trends remain favorable, and actual charge-offs continue to be low. Absent the reversal of net income, our margin was in line with projections. We expect market conditions and pricing pressures to generally persist, but are seeing signs of moderation and deposit cost increases as we round out this year.

David Nasca: Donald provide more detail on our NIM expectations during his report. Our deposit base in liquidity continued to be solid and stable, backed by a diversified product portfolio. In addition, our associates have performed well in lending and business development, given today's market dynamics, and are making inroads with new clients and cementing existing relationships as evidenced by our 8% annualized loan growth in the quarter. We are taking corrective measures to control costs and expenditures by focusing on operating efficiency and providing exceptional experience to our valued clients. Overall we continue to block and tackle on our core business as we grind out results within our risk and return parameters in an inhospitable banking environment.

John Connerton: With that, I will turn it over to John to run through our results in greater detail and then we will be happy to take any questions. Thank you, David and good afternoon, everyone. For the quarter, we delivered earnings of $3.6 million or 60 cents per diluted share, which was down from last year's third quarter largely due to reduced net interest income. Helping offset this reduction was increased in terms of service and fee revenue, while overall expenses decreased.

John Connerton: The reduction in earnings from the sequential second quarter also reflected a lower net interest income, and an increase in provision for credit losses partially offset by seasonally higher non-interesting income. Net interest income was impacted over both comparable periods by higher interest expense, given intense competitive pressure on deposit pricing, which began to accelerate at the start of the year. This more than offset increases in interest income during the by growth of our variable rate portfolios, following the Federal Reserve Series of rate increases, with increased interest expense from higher deposit costs, we saw a 31 basis point decrease in net interest margin in the quarter to 2.79%.

John Connerton: And David indicated impacting net interest margin by eight basis points was the reversal of approximately $400,000 of interest income for a merely resulting from one large commercial loan that was put on a cruel status during quarter.

John Connerton: I will talk to our new expectations at the end of my remarks. The increase of $506,000 in provision for credit losses was predominantly due to loan portfolio growth. Non-interesting income was 5.6 million, down approximately 4% over last year's second quarter, and up 15% sequentially. Insurance, which was the largest contributor within this category, was up 3% year over year, and 22% from the link quarter. The increase from the second quarter of 2023 reflects seasonally higher policy renewals for institutional clients, while the year over year increase was due to commissions from new commercial lines insurance sales and higher premiums.

John Connerton: As mentioned previously, the competitive landscape and regulatory environment have brought to the forefront changes to overdraft fees in terms of how they are handled and the set and at what levels. We did implement changes at the end of last year, which resulted in a reduction in fees within the deposit service charge's line when compared with last year. Other income decreased $0.3 million from last year's third quarter, primarily due to a $0.2 million final payment receiving connection with an historic credit investment during the third quarter of 2022.

John Connerton: Total non-interests expense increased 2% from the second quarter, and was down 10% from last year's second quarter. The driver of this change was largely within the salaries and employees benefits line, which is flat quarter over quarter and down 20% from the previous year. When compared with last year's second quarter, the decrease was primarily due to lower incentive accruals of $1.3 million, and reduced staff expenses through consolidation of branches and back office operations.

John Connerton: Our expectation for full-year expense run rate is a decrease of 3%. Turning to the balance sheet and reviewing movements in the third quarter, total loans were up approximately $34 million. Of that commercial loans increased 3% or $31 million. The real estate, including multi-family and warehousing facilities that are meeting our credit parameters. The CNI funding rates remain muted and continue to impact growth in that portfolio. The current pipeline remains active and stands at $67 million at quarter end.

John Connerton: We expect total commercial loan growth to be approximately 3% in 2023. Credit metrics remain sound with a 2% decrease in non-performing loans. Critic loans increased slightly by $2 million from $74 million at June 30th to $76 million as of the end of the third quarter. This is an $11 million decrease from last year's third quarter from $89 million. Total deposit is a $1.81 billion increased $18 million at 1% from the second quarter.

John Connerton: At September 30th, the percent of uninsured and unkalatoized deposits was steady at a 18%. Average total deposit decreased slightly to $1.79 billion during the quarter when compared to $1.82 billion in the second quarter. However, as has occurred in previous cycles, balances have and are expected to continue to migrate into different products. Specifically, we are seeing commercial clients migrate funds from demand deposit accounts in the sweep accounts. We expect consumer clients to continue moving funds from savings accounts to CDs.

John Connerton: As mentioned earlier, these trends in pricing pressures have been accelerated impact in our margins for the third quarter and are expected to impact the margin on a full-year basis. As with many banks, we will continue to fight for deposits by being proactive with pricing and maintaining competitive rates in our markets. Deposit rates have continued to increase because of strong competition in the time deposit marketplace. And I, as I comment above, have caused the continued shift of customer funds from non-interest bearing to interest bearing accounts.

John Connerton: Chances of a late 2023 and decrease in Fed funds rate have been replaced by expectations that interest rates will stay higher longer and this has affected customer and competitive behavior. Currently, we expect our NIM to experience approximately between 15 and 20 basis points of compression in the fourth quarter of 2023.

John Connerton: Beyond the fourth quarter is difficult to forecast to make external macro forces such as potential future Fed rate moves and how competition may play out. But our current expectation is that NIM pressure could moderate towards the beginning of next year.

Operator: With that operator, we would now like to open the line for question. Thank you.

Operator: Ladies and gentlemen, at this time, we will begin documenting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation total indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants. Thank you for using speaker equipment. It may be necessary to pick up your handset before pressing the star key.

Nicholas Cucharale: Our first question comes from the line of Nick Cucharale with Hode Group. Please proceed with your question. Good afternoon everyone. How are you? Good. Thanks. So just to clarify that the Nim guidance, John, are you suggesting 15 to 20 basis points of compression from the reported level of 279 or the adjusted level of 279? 287, which excludes the interest reversal? The 287 adjusted. Thank you. No, thank you. And then a nice acceleration of long growth relative to the prior quarter.

Nicholas Cucharale: You mentioned strong growth and commercial real estate. Are you seeing any sort of pullback from the competition just given the funding challenges in the industry? We are seeing a bit of pullback in certain quarters. Some people grew quickly and have stepped out. Others are taking their free balances and selling them into the secondary market to get them off their balance sheet. So we are seeing some pullback. But we are also seeing projects small a little bit as well. We have been doing pretty well to capture our share but it has been a higher rate have been a little bit frosty in terms of some of these projects in terms of their pace.

Nicholas Cucharale: That is very helpful. You have done a great job of controlling expenses this year as we start thinking about 2024. Are there any particular investments to be made that may cause an outsize impact next year? No, Nick. We, you know, I think the run rate that we have projected for next year is low single digits that would just or the typical inflationary and increases that we typically see in any particular year.

Nicholas Cucharale: Most of our investments have been made previously and we are not expecting any large changes to that. Excellent. Then maybe just one final one on the tax rate. It was just a little higher this quarter of relative to prior periods. Any sense of where that shakes out going forward? Yeah, 23% for the full year and that should be typical. Thank you for taking my questions. Yeah. Nick, one thing I also wanted to say, I just because this being recorded.

Nicholas Cucharale: John, when he was talking earlier, he talked about and it's in our press release. He talked about earnings of 3.6 million. And he stated that we had 60 cents per deluded share. It's actually 66 cents per deluded share. So I just want to get that on recording, but it is in our press release. So thank you. Yep.

Alexander Twerdahl: Our next question comes in line of Alex toward all with Piper Sandler. Please proceed with your question. Hey, good afternoon. Good afternoon, Alex. How are you? Well, thanks. I wanted to, you know, spend a little bit of time chatting about the name here. It looks like loan yields increased by about 10 basis points this quarter and last quarter. As you kind of look out and sort of maybe talk a little bit about new origination yields and sort of what kind of pricing you're getting and, you know, is 10 basis points of higher per quarter.

Alexander Twerdahl: Kind of what you're thinking, John and your guidance for the name and your outlook for the name. So I off the top of my head I haven't recalculated that if that's a quick calculation off of our reports that it do include the adjustment for that 400,000 Alex, I would say it's slightly higher than that. And I know we've talked about this in the past, you know, we, we have, we have around 300 million dollars come back to us a year in principle and renewals, securities pay down, pay off.

Alexander Twerdahl: So that's kind of the repricing portfolio that comes back to us that is kind of driving our expectation on the loan side. But I guess the short answer would be, our expectation for this quarters increase in yields would be a good expectation for the continued expectation for next year adjusted for that 400,000. Yeah, my calculation was adjusted for the 400,000 on the nose. So I guess, you know, I think you said it's a moderation potentially expected early in 2024.

Alexander Twerdahl: I mean, when I guess when and where do you think the name could wind up bottom bottoming? Well, I mean, it's, you know, as I suggested in my comments, it's going to depend on competitive pressure. You know, we did see it kind of the competitive pressure moderates some degree at the end of second quarter, beginning at a third quarter. But based on the environment that we were in and the long end pulling up in the response that the competition did that was not expected.

Alexander Twerdahl: So we had a little bit more compression that we thought we expected 20 basis points. We came in around 23. And, you know, the beginning of fourth quarter here is again, probably unexpected. But but we would still stick with, you know, that moderation in the in the late second quarter, first second quarter of next year based on current run rates and the current environment that we're in. Okay. Have you guys been considering doing any, you know, any restructuring the securities portfolio or adding on any swaps you've seen some of your competitors do that kind of stuff recently that's been received well by the market.

Alexander Twerdahl: I'm just curious if you have any appetite for for, you know, some products that could potentially help that name reverse sooner. So we, you know, we're always looking at our balance sheet and are at the asset liability management of that and, you know, we're open to continually looking at it. We're also balancing, you know, any type of capital levels that we have and putting those things all together. So yes, the answer is yes, we're always looking at those things. Nothing plans immediately. Got it.

Alexander Twerdahl: And then can you just go through the credit metrics again. And you know, it seemed like, you know, you guys reverse some non interest income is some interest income as a result of a credit deteriorating what that was didn't look like it hit the NPL number, the charge off number. So just help us figure out exactly what's going on underneath the surface. Sure. So that talked about that last quarter, Alex, that was one of our credits that had gone.

Alexander Twerdahl: It was in nonperforming, but it was 90 days and still accruing. It was David comments suggested they're dependent on government rate reimbursement, typically those can go long. This has gone unexpectedly long. We still think that that credit is. It's cured well and it's going to come back around. It's just it was too long from a time perspective. So we did put it into a non accrual and we had to unwind that accrued interest that was sitting in our receivable account.

Alexander Twerdahl: But it was already adjusted for in our non performing because it was 90 plus at the end of the end of last quarter. So you wouldn't have seen any increases and it's well secured. So we haven't really needed to reserve anymore and we haven't charged anything off. Okay. If that exists, yeah. Yeah, that is helpful. I think that's all I have for right now. Thanks for taking my questions. You're more than welcome. As a reminder, ladies and gentlemen, it is star one to ask a question.

Chris O'connell: Our next question comes on the line of Chris O'Connell with KBW. Please proceed with your question.

Chris O'connell: Hey, good afternoon. So just following up on the on the on the name commentary, you mentioned a little bit more pressure. You know, at the start of the fourth quarter. Did you guys have with the spot margin was first September? I don't know that off the top of my head Chris. I apologize.

David Nasca: Okay. And then, you know, in terms of, you know, that are structuring and, you know, that question regarding them improvement and things of that nature. You know, you see a few peer, you know, insurance sale transactions and joint restructurings in the market for the past quarter or two. Is that something that you have considered at all and just any color around your thoughts there? I think the answer that John was talking about about the SLI ability.

David Nasca: We're considering all options to create value for the shareholders. We're looking at all long term options strategically. So that's sort of the answer. We look at everything. Got it. Any agencies expand on, you know, if you guys have taken a look at that, you know, how you guys weigh, you know, the pros and cons, you know, that's at the transaction. Well, on any transaction that we look at, we look at long term return to shareholders and what, what happens to capital, where, how we redeploy all those things. It is a full business case for any opportunities we look at, but we look at everything. Great.

Chris O'connell: And I apologize when I missed it earlier, but I know you guys gave the loan pipeline at 67 million. Any any thoughts on just overall, you know, net loan growth going forward and, you know, what the oncoming yields are? Well, I think what we're looking at is we think the run rate that we talked about was sort of low single digits, you know, the two to three percent level. The oncoming rates that we're looking at is generally we're getting our general yield spread is 250 over the comparable term.

Chris O'connell: We're getting a little more in some cases right now. We're able to get that because it's a more challenging environment. We're making sure we're being paid for the risk, but you're seeing we're generally holding our spreads a little plus. So just the yields are typically Chris or somewhere seven and a half and above. Great. All right.

David Nasca: That's all I have for now. Thanks for taking my questions. Thank you. There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. Thank you. Real quickly. I'd like to thank everybody for participating in our teleconference today. We certainly appreciate your continued interest and support. Please feel free to reach out to us in any time. And we look forward to talking with all of you again when we report our fourth quarter results for 2023. We hope you have a great date. Thank you very much. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a one.