Q1 2024 Premier Financial Corp Earnings Call
Operator: Good morning, and welcome to the Premier Financial Corp. first quarter 2024 earnings conference call. All participants will be in listen-only mode.
Good morning, and welcome to the Premier Financial Corp, first quarter 'twenty 'twenty four earnings conference call.
All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question press star one on your telephone keypad.
Operator: After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question, press star 1 on your telephone keypad. Please note this event is being recorded. I would now like to turn the conference over to Paul Nungester with Premier Financial Corp.
Note. This event is being recorded.
I would now like to turn the conference over to Paul <unk> with Premier Financial Corp. Please go ahead.
Paul: Thank you good morning, everyone and thank you for joining us for today's first quarter 2024 earnings conference call.
Paul D. Nungester: Thank you. Good morning, everyone, and thank you for joining us for today's first quarter 2024 earnings conference call. This call is also being webcast, and the audio replay will be available on the Premier Financial Corp. website at premierfincorp.com. Following our prepared comments on the company's strategy and performance, we will be available to take your questions. Before we begin, I'd like to remind you that during the conference call today, including during the question and answer period, you may hear forward-looking statements related to future financial results and business operations for Premier Financial Corp. However, actual results may differ materially from current management forecasts and projections as a result of factors over which the company has no control.
Paul: This call is also being webcast and the audio replay will be available at the Premier Financial Corp website at Premier and core dotcom.
Speaker Change: Following our prepared comments on the Companys strategy and performance, we will be available to take your questions.
Speaker Change: Before we begin I'd like to remind you that during the conference call today, including during the question and answer period, you may hear forward looking statements related to future financial results and business operations for Premier Financial Corp.
Speaker Change: Actual results may differ materially from current management forecast and projections as a result of factors over which the company has no control.
Paul D. Nungester: Information on these risk factors and additional information on forward-looking statements is included in the news release and in the company's reports on file with the Securities and Exchange Commission. Now, I'll turn the call over to Gary for his opening comments.
Speaker Change: Information on these risk factors and additional information on forward looking statements are included in the news release and in the company's reports on file with the Securities and Exchange Commission and I'll turn the call over to Gary for his opening comments.
Gary M. Small: Thank you, Paul, and good morning to everyone. Thanks again for joining us today.
Gary: Thank you Paul and good morning to everyone and thanks again for joining US today are quick.
Gary M. Small: Quickly, for the quarter, we reported net income of $17.8 million, or 50 cents per share. And I will begin with comments on our most significant topic in the quarter. Our average annual deposit growth was a respectable 2.6% for the quarter. Consumer deposits were once again the strength of the storyline. Average outstandings were up 7.5% annualized, and that's a continuation of being up 6.7% annualized during the second half of 2023, so that's three very strong quarters on the consumer side. Public funds grew $66 million from point to point over the course of the quarter, which was about 4%.
Gary: Quickly for the quarter, we reported net income of $17 $8 million or 50%.
Gary: 50 cents per share and I will begin with comments on our most significant topic in the quarter.
Gary: Our average annual deposit growth was a respectable two 6% for the quarter <unk>.
Gary: Consumer deposits were once again, the strong strength of the storyline.
Gary: Average outstandings were up seven 5% annualized and Thats, a continuation of being up six 7% annualized during the second half 'twenty.
Gary: <unk> three so thats <unk> very strong quarters on the consumer side.
Gary: Public funds grew $66 million.
Gary: From point to point over the course of the quarter, which was about 4% commercial deposits provided the unfavorable surprise for the quarter with commercial noninterest bearing deposit balances down $86 million and that's about 8% in the month of January.
Gary M. Small: Commercial deposits provided the unfavorable surprise for the quarter, with commercial non-interest-bearing deposit balances down $86 million, and that's about 8% in the month of January. And that's far in excess of the typical post-year end balance decline that you're accustomed to for tax payments and distributions and so forth. We performed a detailed client relationship review, and it revealed the elevated use of deposit liquidity to fund more typical CapEx financings and other financeable working capital borrowing needs.
Gary: That's far in excess of the typical post year end balance decline that you are accustomed to for tax payments and distributions and so forth. We performed a detailed client relationship review and it revealed the elevated use of the deposit liquidity to fund more typical capex financings and other financeable working capital bar.
Gary: Growing needs.
Gary M. Small: Clients are making efficient use of their capital, and the NIB balance movement did stabilize over February and March, and balances were beginning to replenish in April. Premier secured higher-cost funding to replace those NIB balances, and we expect to recover the majority of those lost NIB balances over the course of the next two quarters as businesses refill their coffers. The atypical January event resulted in a six to seven basis point hit to Premier's net interest margin for the quarter. It was a bit more of an episode than any sort of systemic decline.
Gary: Lions are making efficient use of their capital.
Gary: And the Niv balances balance movement did stabilize over February and March and balances were beginning to replenish in April <unk>.
Gary: Premier secured higher cost funding to replace those then it'd be balances and we expect to recover the majority of those lost niv balances over the course of the next two quarters as businesses refilled their coffers.
Gary: The atypical January event resulted in a 6% to seven basis point hit to Premier's net interest margin for the quarter.
Gary: It was a bit more of an episode than any sort of systemic decline.
Gary: I will add that beginning in early March we began our repricing program to get ahead of the fed.
Gary M. Small: I will add that beginning in early March, we began a repricing program to get ahead of the Fed, selectively reducing deposit rates, testing the elasticity of our deposit portfolios, etc. Early results are encouraging, and we expect more march-forward pricing movement in advance of any reductions that would be triggered by the Fed's move to reduce rates down the road. Switching gears, loan balances for the quarter were essentially flat on a linked quarter basis, with commercial payoffs occurring as planned, and the pace of new business funding coming on board a bit more slowly than anticipated back at the beginning of the year.
Selectively reducing deposit rates testing and elasticity of our deposit portfolios et cetera.
Gary: Early results are encouraging and we expect more forward March forward pricing movement in advance of any reductions that would be triggered by fed moves to reduce rates down the road.
Gary: Switching gears loan balances for the quarter were essentially flat on a linked quarter basis with commercial pay offs occurring per plan and the pace of new business funding coming on board a bit more slowly than anticipated back at the beginning of the year.
Gary M. Small: March saw a return to more typical commercial loan business activity, and we have no change in our full-year growth expectations that we expressed in January. We experienced excellent expense management during the quarter, and our non-interest income benefited from a resurgence in residential mortgage volume and better unit gain on sale related to those mortgages. We also saw a continuation of strong wealth management fee income, and it actually outperformed our expectations. On the credit front, the consumer residential loan portfolio saw delinquency decline, total MPLs are well in check, and net charge-off levels remain at a very modest level. Capital is in great shape, which Paul will have a couple of numbers on, and I'm going to turn it over to Paul for his perspective.
Gary: March saw a return to more typical commercial loan business activity with <unk>.
Gary: And we have no change in our full year growth expectations.
Gary: That we expressed in January.
Gary: We experienced excellent expense management during the quarter and our noninterest income benefited from a resurgence in residential mortgage volume.
Gary: Better unit gain on sale related to those mortgages. We also saw a continuation of strong wealth management fee income.
Gary: And it actually outperformed our expectations for the quarter.
Gary: On the credit front, the consumer residential loan portfolio saw the delinquency declines total mpls are well in check and net charge off levels remain at a very modest level of capital is in great shape, which Paul will have a couple of numbers on and I'm going to turn it to Paul for his perspective. Thanks.
Paul D. Nungester: Starting with the balance sheet, we had another quarter of deposits growth, including 2.3% point-to-point annualized and 2.6% annualized for average balances. Mixed migration continues with decreases in non-infrastructure savings and checking deposits, while CDEs, money market, and pub fund deposits all increased. On the other hand, total earnings and assets increased, primarily as a result of security investments, while loans declined slightly for the quarter. Our loan-to-deposit ratio improved by 110 basis points, and we were able to keep wholesale funding flat.
Paul: Thanks, Gary beginning with the balance sheet, we had another quarter of deposits growth, including two 3% point to point annualized and two 6% annualized for average balances mixed.
Paul: It makes the migration continue with decreases in non interest bearing savings and checking deposits or Cds.
Paul: <unk> money market in pub fund deposits all increased.
Paul: On the other side total, earning assets increased primarily as a result of security investments while loans declined slightly for the quarter.
Paul: Our loan to deposit ratio improved by 110 basis points, and we were able to keep wholesale fundings flat.
Paul: The combination of a slight decrease in loans, a larger than expected decrease in noninterest bearing deposits and additional interest bearing deposits. This intermediation led to further net interest margin compression for <unk>.
Paul D. Nungester: The combination of a slight decrease in loans, a larger-than-expected decrease in non-interest-bearing deposits, and additional interest-bearing deposits disintermediation led to further net interest margin compression for 1Q, excluding the impact of PPP, balance sheet hedges, and acquisition mark secretion. Loan yields were 5.29% in March, which is an increase of five basis points from 5.24% in December 2023. This is also an increase of 153 basis points since December 2021, which represents a cumulative beta of 29% compared to the 525 basis point increase in the monthly average effective federal funds rate for the same period.
Paul: Excluding the impact of PPP balance sheet hedges and acquisition marks accretion loan yields were 529% in March which is an increase of five basis points from five 4% in December 2023.
Paul: This is also an increase of 153 basis points since December 2021, which represents a cumulative beta of 29% compared to the 525 basis point increase in the monthly average effective federal funds rate for the same period.
Paul: Right.
Paul: Also excluding impact of BBB balance sheet hedges and acquisition marks accretion total, earning asset yields were 495% in March.
Paul D. Nungester: Also, excluding the impact of PPP, balance sheet hedges, and acquisition marks accretion, total earning asset yields were 4.95% in March for a cumulative beta of 31%. On the other hand, excluding acquisition mark secretion, total deposits were 2.45% in March for a cumulative beta of 43%, and Excluding Acquisition Marks Decretion and Balance Sheet Hedges, total cost of funds was 2.59% in March for Next, non-interest income increased $0.7 million to $12.5 million in one queue, primarily due to mortgage banking income, where gains increased $0.8 million from last quarter as a result of higher margins, including hedge gains related to the increase in 10-year treasury rates.
Paul: Cumulative beta of 31%.
Paul: On the other side, excluding acquisition marks accretion total deposits were 245% in March for a cumulative beta of 43%.
Paul: And excluding acquisition marks accretion in balance sheet hedges total cost of funds were $2 five 9% in March for a cumulative beta of 45%.
Paul: Net noninterest income increased <unk> 7 million to $12 5 million in <unk>, primarily due to mortgage banking income were gains increased $8 million from last quarter as a result of higher margins, including hedge gains related to the increase in 10 year treasury rates.
Paul D. Nungester: The increase in Treasury rates along with continued slowing of prepay speeds also led to a $0.5 million MSR valuation gain compared to a $0.2 million loss last quarter. However, this was partially offset by security losses of $37,000 compared to gains of $665,000 last quarter. Expenses of $39.9 million were up $2 million on a length-of-quarter basis due to annual merit increases and the seasonality for items that occur only in the first quarter of each year, such as taxes and benefits on annual incentive payouts.
Paul: The increase in Treasury rates, along with continued slowing of prepay speeds also led to $8 5 million MSR valuation gain compared to a $1 $2 million loss last quarter.
Paul: This was partially offset by security losses of 37000 compared to gains of 665000 last quarter.
Paul: Expenses of $39 9 million were up $2 million on linked quarter basis due to annual merit increases and the seasonality for items that occur in the first quarter only of each year, such as taxes and benefits on annual incentive payout.
Paul: On a year over year basis expenses are down 7% or essentially flat excluding the expenses for the insurance agency sold in June 2023.
Paul D. Nungester: On a year-over-year basis, expenses are down 7% or essentially flat, excluding expenses for the insurance agency sold in June 2023. We also improved our expense to average assets ratio by 19 basis points to 1.87% compared to the first quarter of 2023. Provision for the quarter was a benefit of $133,000, comprised of a $560,000 expense for loans and a $693,000 benefit on a linked quarter decrease in unfunded commitment. Provision expense for loans was primarily due to $393,000 of net charge-offs, which were only two basis points of average loans.
Paul: We also improved our expense to average assets ratio by 19 basis points to 187% compared to the first quarter of 2023.
Paul: Provision for the quarter was a benefit of 133000.
Paul: <unk> $560000 expense for loans, and a 693000 benefit on a linked quarter decrease in unfunded commitments.
Paul: Provision expense for loans was primarily due to 393000 of net charge offs, which were only two basis points of average loans.
Paul: The allowance coverage ratio did increase one basis point to one 5% of loans.
Paul D. Nungester: The allowance coverage ratio did increase by one basis point to 1.15% of loan. And I'll close by mentioning our continued improvements to capital. Our T.E. ratio remained north of 8%, and our regulatory ratios have further strengthened, including C.E.T. 1 at 12%, total capital at 14.35%. These enhancements represent a solid foundation as we continue to weather the near-term uncertainty. I'll complete my financial review, and I'll turn the call back over to Gary. Thanks again, Paul.
Paul: And I'll close by mentioning our continued improvements to capital our <unk> ratio remain north of 8% and our regulatory ratios at further strengthened including CET one at 12%.
Paul: Total capital at $14 three 5%.
Paul: These enhancements represent a solid foundation as we continue to weather the near term uncertainty.
Paul: That completes my financial review and now I'll turn the call back over to Gary.
Gary M. Small: Thanks again, Paul. I'll take a moment to provide some adjustments to the 24 guidance that we provided in January, incorporating the Q1 results and adjustments to our assumptions for the remainder of the year. To begin with, we expect earning asset growth to come to 4% on a point-to-point basis, which affirms our guidance in January. For total loan growth, we're expecting 2% movement with commercial being up 3%, offset by a decline in our lower yielding residential mortgage portfolio.
Gary: Thanks, again, Paul I'll take a moment to provide some adjustments to the 24 guidance that we provided in January incorporating the Q1 results and adjustments to our assumptions for the remainder of the year.
To begin with expect earning asset growth to come to 4% on a point to point basis, which affirms our guidance in January.
Gary: Total loan growth, we're expecting 2% movement with commercial being up 3% offset by a decline in our lower yielding residential mortgage portfolio.
Gary M. Small: And so there's no change there; that's what we expressed in January as well. The deposit growth remains in line with the expected earning asset growth, consistent with our initial projection. On the front of net interest margin, our forecast now calls for just two turns from the Fed in 2024. We eliminated a turn in May and now just have one sitting in the middle of the third quarter and the middle of the fourth quarter.
Gary: So there's no change there it's what we expressed in January as well.
Gary: Deposit growth remains in line with the expected, earning asset growth consistent with our initial projections.
Gary: On the front of net interest margin our forecast now calls for just two turns from the fed in 'twenty four we eliminated a turn in May and now just have one sitting in the middle of the third quarter in the middle of the fourth quarter.
Gary M. Small: Combining the expectation of one less Fed turn with the elements of the unfavorable Q1 margin results, plus the effect of the favorable pricing adjustments that were initiated in March, our revised full-year forecast margin falls in the range of the low $2.60s to probably a topping out of about $2.65, all things being equal. That's a 10 basis point downward adjustment from our original guidance. Full-year net interest income in January was forecasted to be up 2%. With the changes that I just mentioned, we're now forecasting to be down 2% from where we were in 2023. However, from a provision standpoint, net charge-off expectations remain.
Combining the expectation of one less fed turn with the elements of the unfavorable Q1 margin results.
Gary: Plus the effect of the favorable pricing adjustments that were initiated.
Gary: Initiated in March.
Gary: Our revised full year forecast margin falls in the range of the low 200, <unk> two probably a topping out of about $2 65, all things being equal that's.
Gary: That's a 10% downward our 10 basis point downward adjustment from our original guidance.
Gary: Full year net interest income in January was forecasted to be up 2% with the changes that I. Just mentioned, we are now forecasting to be down 2% from where we were in 2023.
Gary: From a provision standpoint net charge off expectations.
Gary M. Small: It's very favorable for the year. We're re-forecasting it to be at a level of five basis points versus the ten basis points that we would have directed in January. And we still expect our coverage ratio to be a couple of BIFs higher for the year on the non-interest income front. I would adjust the full year estimate. We originally gave you $48 million. We're looking at $49 million plus, based an awful lot on the strength of the first quarter and what we see coming down the road in expenses.
Gary: We remain.
Gary: Very favorable for the year, when we're re forecasting to be at a level of five basis points versus the 10 basis points that we would have directed in January and we still expect our coverage ratio to be a couple of bps higher for the year.
Gary: On the noninterest income front.
Gary: I would adjust the full year estimate we originally gave you $48 million, we're looking at $49 million plus.
Gary: An awful lot on the strength of the first quarter and what we see coming down the road.
Expenses when you do have a run rate reduction there solid Q1, and we are adjusting spending levels down across the remaining quarters and our full year guidance that would be at the 156 range versus the 160 that we would have provided in January we'll be deferring some select projects and related FTE <unk>.
Gary M. Small: We do have a run rate reduction there, solid Q1, and we are adjusting spending levels down across the remaining quarters, and our full year guidance now would be at the 156 range versus the 160 that we would have provided in January, deferring some select projects and related FTE additions, consulting fees, and so forth that go with it. Premier's earnings progression, with one less Fed cut anticipated. The hockey stick that I mentioned back in the first quarter relative to the quarterly earnings progression has flattened out a bit, with Q2 more flattened, and more of an upward slope for Q3 and Q4.
Gary: <unk> consulting fees and so forth that go with that.
Gary: Premier's earnings progression with one less fed cut anticipated.
Gary: The hockey stick that I mentioned that back in the first quarter.
Gary: Relative to the quarterly earnings progression has flattened out a bit with Q2 more flattened.
More of an upward slope for Q3 and Q4.
We do still expect to perform on plan we're.
Gary M. Small: We do still expect to perform on plan. We're just winning in a slightly different way, less on the margin and more on the other factors that we mentioned. So, reflecting the lower interest income offset by stronger non-interest income, lower expenses, and continued solid credit performance, we still are on target with our full year expectations from earning this that we were thinking about. And with that, operator, we're ready for questions.
Gary: We're just winning in a slightly different way less on the margin and more on the other factors that we mentioned.
Gary: So reflecting the lower interest income offset by stronger noninterest income lower expenses and continued solid credit performance. We still are on target with our full year expectations from earnings that we were thinking about back in January.
Speaker Change: And with that operator, we're ready for questions.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If your question has been answered or you wish to remove your question, please press star followed by two. As a reminder, if you are using a speakerphone, please pick up your handset before asking your question. Our first question comes from the line of Brendan Nosal with Hovde Group. Brendan, your line is now open.
Speaker Change: Your question has been answered or you wish to remove your question. Please press star followed by two.
Speaker Change: As a reminder, if you are using a speakerphone. Please pick up your handset before asking your question.
Speaker Change: Our first question comes from the line of Brendan Nosal with Husky, Great. Brendan Your line is now open.
Brendan Jeffrey Nosal: Hey, good morning folks have been doing well.
Brendan Jeffrey Nosal: Hey, good morning folks. Hope you're doing well.
Brendan Jeffrey Nosal: Good morning, Hey, Brian.
Gary M. Small: Morning, Brendan. Hey, Brendan.
Brendan Jeffrey Nosal: Yes.
Brendan Jeffrey Nosal: Thanks.
Brendan Jeffrey Nosal: Just to start off here on kind of the liability mix moving through the year, it's nice to see wholesale funds pretty much flat for the quarter and the improvement in the loan-to-deposit ratio. I guess just given the unchanged outlook for loan and earning asset growth, can you just comment on the potential need to further draw on wholesale sources as we move through the year?
Brendan Jeffrey Nosal: Just to start off here on Canada, the liability mix moving through the year.
Brian: Nice to see wholesale funds pretty much flat for the quarter and the improvement in the loan to deposit ratio.
Brian: I guess, just given the unchanged outlook for a loan and earning asset growth can you just comment on the potential need to further draw on wholesale sources as you move through the year.
Paul D. Nungester: Brendan, as Gary was saying in the call, we intend and are continuing to work ourselves toward keeping our deposit growth to match our earning asset growth. So for the remainder of the year, we would not expect to have to lean into wholesale funding. We're changing the mix between FHLB broker and other banks, depending on relative pricing, you know, taking advantage when we can. But in terms of levels, we would look to keep that flat for the year.
Brian: Brendan.
Speaker Change: Gary was saying in the call, we intend and are continuing to.
Speaker Change: Work ourselves towards keeping our deposit growth to match, our earning asset growth. So for the remainder of the year, we would not expect to have to lean into our wholesale fundings were changing the mix between <unk> broker dependent on relative pricing.
Speaker Change: <unk> taken advantage of what we can.
Speaker Change: But in terms of levels.
Speaker Change: We would look to keep that flat for the year.
Speaker Change: Okay great.
Brendan Jeffrey Nosal: Okay, great. Maybe one more for me, just turning to credit. Most of the numbers were fantastic for the quarter. I did notice some migration from special mention to substandard. Any color you can provide on the credit that may have driven that move and kind of how your position
Speaker Change: One more for me just turning to credit.
Speaker Change: Most numbers were fantastic for the quarter.
Speaker Change: Notice some migration from special mentioned into substandard.
Speaker Change: Any color you can provide on the credits that may have driven that move and kind of how you are positioned.
Speaker Change: Sure Vernon this is Gary good eye, there really was just a movement from one category to the other are the same credit.
Gary M. Small: Sure, Brendan, it's Gary. Good eye there. It really was just a movement from one category to the other of the same credit we have. It's an accruing credit, and we have a clear path forward for the group, but I think it'll take the next couple quarters for them to make the adjustments they've got to make to their CapEx scheduling and so forth before we would see it reverting back. But it is not a new credit; it is just a movement.
Speaker Change: Have it as an accruing credit and we have a clear path forward for the group.
Speaker Change: But I think it will take at the next couple of quarters for them to get make the adjustments they've got to make to their capex scheduling and so forth, where we would see it reverting backwards.
Speaker Change: But it is not a new credit is just a movement of one credit over.
Brendan Jeffrey Nosal: understood. Okay, that's super helpful. Thank you for taking the time to answer the question.
Speaker Change: Understood. Okay. That's super helpful. Thank you for taking the questions.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Christopher <unk> with Janney Scott Christopher Your line is now open.
Operator: Thank you. Our next question comes from the line of Christopher Marinac with Janie and Scott. Christopher, your line is now open.
Christopher William Marinac: Thanks, good morning. Gary or Paul, can you talk about deposits from the commercial side? Was there excess liquidity for those accounts? Or was that just, again, an anomaly given what you had said earlier about taxes, etc.?
Christopher: Thanks, Good morning.
Christopher: Paul can you talk about deposits from the commercial side, whereas their excess liquidity for.
Christopher: Those accounts or was that just again, an anomaly given what you had said earlier about taxes et cetera.
Gary M. Small: You know, when we looked at over a hundred relationships that had the biggest movements, if you will, from a point-to-point perspective over our eight markets, and there was the normal thing that you would see of expenditures for getting inventory in place and all the normal day-to-day things that begin about that time of year, along with the normal distributions that you would expect once numbers are settled and folks know what they are out of the till. Where we saw, as I mentioned in the comments, we did see Absolutely, folks were saying they would normally finance that $3 million or $2 million or $1 million or rolling stock or whatever that might be.
Christopher: When we looked at over 100 relationships that had the biggest movements. If you will from point to point perspective over our eight markets.
Christopher: And there was the normal thing that you would see expenditures for.
Christopher: Getting inventory in place and all the normal day to day things that began about that time of year, along with the normal distributions.
Christopher: You would expect once numbers are settled and folks know what they can.
Christopher: Out of the tail.
Where we saw.
Christopher: As I mentioned on the comments, we did see.
Christopher: Absolutely folks are saying I would normally finance at $3 million or $2 million, a $1 million of rolling stock or whatever that might be and rather than dip into my eight 5% line four as for fixed credit on that I'll, just pay with cash keep our leverage down.
Gary M. Small: And rather than dip into my eight and a half percent line or ask for fixed credit on that, I'll just pay with cash, keep my leverage down. If that would have been once or twice out of all those, [inaudible] We did have two credits in that whole stack where the money moved from excess liquidity and non-interest bearing and became swept into a money market account, earning, obviously, at a much higher rate.
Christopher: If that would have been once or twice out of all of those.
Christopher: Relationships review that would be one thing it was a pretty consistent theme as to where the money went this year that was a little bit different than it had in Alaska.
Christopher: We did have two credits in that whole stack, where the money moved.
Christopher: Excess liquidity in noninterest bearing and became swept into a money market account, earning obviously at a much higher rate. So again, <unk> got a little bit more efficient with where their money was placed on the balance sheet. We had one client that moved.
Gary M. Small: So they just, again, got a little bit more efficient with where their money was placed on the balance sheet. We had one client that moved, to have enough excess liquidity and, with the pricing the way it is now, went ahead and moved that into an investment portfolio. Those two would be outliers, but they were not small balances, but it was mostly just using cash on hand to take care of the balance sheet and not drive up their leverage.
Christopher: They had enough excess liquidity and with the prices price and the way. It is now went ahead and moved that into investment portfolio.
Christopher: Those two would be outliers, but they were not small balances, but it was mostly just using cash on hand to take take care of the balance sheet and not drive up their leverage.
Christopher William Marinac: Okay, great. That's helpful. Do you see new inflows from that source of business or just even new corporate inflows as this year progresses?
Speaker Change: Okay. Great. That's helpful. Do you see new inflows from that source of business or just net new corporate inflows this year.
Speaker Change: <unk>.
Speaker Change: It's a great question, we did look at the month to month movement since January and as I mentioned it stabilized it got down to plus or minus a de minimis movement off of that January period.
Gary M. Small: Great question. We did look at the month-to-month movement since January, and as I mentioned, it's stabilized. It got down to plus or minus at the minimus movement off of that January period, and we started to get the uptick in April. That's not inconsistent. If we go back to the bad days of last year at this time, after the three banks issue, we had some commercial deposits move around looking for additional protection and so forth.
Speaker Change: We started to get the uptick in April that's not inconsistent with if we go back to the bad days of last year at this time after the three banks issue. We had some commercial deposits move around looking for additional protection and so forth once that was in place the balances immediately start to grow because the cash that they are creating over the course.
Gary M. Small: Once that was in place, the balances immediately start to grow because the cash that they are creating over the course of operating the year starts to stack up, and I don't see this year being any different. There's no indication that we should expect any.
Speaker Change: Operating the year starts to stack up.
Speaker Change: And I don't see this year being any different there is no indication that we should expect anything different.
Christopher William Marinac: Got it. And then just a quick question on credit for me. Do you see any stress debt service coverage ratios, you know, coming into criticized levels? Or is that already reflected in what we saw at the end of March?
Got it and then just a quick question on credit for me do you see any stress debt service coverage ratios coming into criticized levels or is that already reflected in what we saw at the end of March.
Speaker Change: It is very much reflective we did a very detailed review that in the fourth quarter of last year on all credits of $5 million in higher. So you can imagine that's a big pile across the organization.
Gary M. Small: Very much reflected. We did a very detailed review in the fourth quarter of last year on all credits, a half a million and higher. So you can imagine that's a big pile across the organization and really got random through shock scenarios and so forth. What we are seeing is a few more credits. They're still finding in the past category.
Speaker Change: And really got.
Speaker Change: Random through shock scenarios and so forth.
Speaker Change: What we are seeing is a few more credits there's still find it in the past category, but if there was a $1 20 coverage ratios that they needed whether it's fixed coverage charge or.
Christopher William Marinac: But if there was a 120 coverage ratio that they needed, whether it's a fixed coverage charge or P&I Payments, and so forth, we might see them falling into the 110 to 120 or 105 to 120. They've still got cash on hand, and payment is agreed, but it's a narrower margin for error, if you will. So that's the way I would classify it: there's just been some movement into the you were a 125 and now you're a 118. And we'll score that and move them on our grading. There is no reason to think they can't move right back into preferred territory, but we're conservative on them moving there.
Speaker Change: P&I payments, we might see them falling into the 110 to 120 or 105 to 120 days still got cash on hand.
Speaker Change: And payment is agreed.
Speaker Change: But its a narrower margin for error. If you will so that's the way I would classify it as theres just been some movement into the.
Speaker Change: You were a $1 25, and now Youre at 118, and will score that and move them on the on our grading system.
Speaker Change: No reason to think that.
Speaker Change: Move right back into preferred territory, but we're conservative on the moving there.
Speaker Change: Great. Thank you for all the background. This morning, it's very helpful.
Gary M. Small: Great. Thank you for all the background this morning. It's very helpful. You bet. Thanks, Chris.
Speaker Change: You bet Thanks, Chris.
Speaker Change: Thank you.
Operator: There are no questions registered at this time, so as a reminder, if you would like to ask a question, it is Star 1. Our next question comes from the line of Bader Hilde with Piper Sandler. Bader, your line is now open.
Speaker Change: There are no questions registered at this time so as a reminder, if you would like to ask a question. It is star one.
Our next question comes from the line of.
Speaker Change: Hi, Jay with Piper Sandler.
Jay: Your line is now open.
Operator: Hey, good morning guys. Just filling in for Alex today. Hey, good morning. Great to have you.
Jay: Hey, good morning, guys just filling in for Alex today.
Jay: Hey, good morning, great to have you.
Jay: I just wanted to touch on the loan book what rates are you guys seeing new loans coming on the books and possibly if you have by commercial and resi segment. I know you guys mentioned that loan yields being type two nine in March.
Bader Hilde: I just wanted to touch on the loan book. What rates are you guys seeing for new loans coming on the books and, possibly, if you have by commercial and residential segment? I know you guys mentioned the loan yields being 5.29 in March.
Gary M. Small: Peter, I'll take that one. We were just in a board meeting yesterday having a discussion about that we were tracing all the new money business done on the commercial side and the second half of the year for. And in each month, if it wasn't $8 to $8.25, then it was $7.95 to $8.00. I mean, it was in that range, and we're sticking to our pricing on that. And that's without fee amortization and so forth. That would just be stated rates. So the short answer to your question: we're still north of 8.
Speaker Change: Peter I'll take that one we were just at a board meeting yesterday, having a discussion about that we were tracing all the new money business done on the commercial side in the second half.
Peter: Of the year for.
Peter: 23 and in each month.
Peter: If it wasn't eight to 825 than it was 795% to eight I mean it was in.
Peter: In that range, and we're holding our sticking to our pricing on that and thats without fee amortization and so forth that would just be stated rates. So.
Speaker Change: Short answer to your question, we're still north of eight there is some competitive pressure out there as folks are.
Gary M. Small: There is some competitive pressure out there as folks are seeing a little bit less in the way of opportunities in the marketplace and trying to take rates down, especially when rates looked like they may move in that direction back in January. We resisted, and you know what happened to the rate dip in January that evaporated. So now it seems like everybody's back generally in the same category as they were before, and we're comfortable with that.
Speaker Change: Seeing a little bit less in the way of opportunities in the marketplace and trying to take rates down, especially bad but.
Speaker Change: Rates look like they may move in that direction back in January we resisted and you know what happened to the rate dip in January that evaporated. So now it seems like everybody's back generally in the same category as.
Speaker Change: They were before and we're comfortable with that Theres plenty of business there on the residential side.
Gary M. Small: There's plenty of business there. On the residential side, we continue to move a bit with the elevated curve over the last six weeks. And if you were looking at a perfect, pristine 30-year fixed commitment right now, it would be $7.35, $7.25. A number of them will not be as absolutely pristine as it takes to get that rating.
Speaker Change: Continue to move a bit with the.
Speaker Change: The elevated curve over the last six weeks and if you were looking at a perfect pristine.
Speaker Change: 30 year fixed commitment right now.
Speaker Change: B $735 725.
Speaker Change: A number of them will not be as absolutely pristine as it takes to get that rating and there is plenty of one off at $7 50, and so forth.
Paul D. Nungester: And there's plenty going off at $7.50, and so forth. Having said that, we saw March, and as I mentioned, volumes were very good. Whether that was pent-up demand from a week or January or February or just seasonality, it was a good indication that there is acceptance for the rates that are moving out there right now, and I don't see that changing. It's an intertwined issue, but it's more about inventory and rates. As folks get used to that, we may start to see more inventory come on board.
Speaker Change: Having said that we saw.
Speaker Change: March.
As I mentioned volumes were very good weather that was pent up demand from a weaker January or February or just seasonality.
Good indication that.
Speaker Change: There is acceptance for the rates that are moving out there right now.
Speaker Change: I don't see that changing it's.
Speaker Change: It's an intertwined issue, but it's more about inventory.
Speaker Change: The rates as folks get used to that.
Speaker Change: We may start to see more inventory come on board.
Speaker Change: Hey, just real quick just to clarify that that yield we cited on the call that was obviously the in place total portfolio average so all of history, you get stuff that's years old.
Bader Hilde: Hey Bader, just real quick just to clarify that that yield we cited on the call was obviously the in-place total portfolio average, so you know all of history, you got stuff that's years old, you know, threes and fours, that's not our new production rates, obviously, that's just what it stood at the end of March.
Speaker Change: And for US that's not our new production rates, obviously, that's just where it stood at the end of March.
Speaker Change: Yes.
Speaker Change: Got it thanks, and then one more on I know you guys on the release had.
Bader Hilde: Go ahead, thanks. And then one more thing, I know you guys on the release had the... I'm not sure if it was the repricing program that you guys touched on at the start of the call that you did early in March to lower deposit funding costs. Could you provide more color on that? I'm not sure if you did, actually, at the start of the call.
Speaker Change: I'm not sure if it was the repricing program that you guys touched on that started the call.
Speaker Change:
Speaker Change: You did early in March to lower deposit funding costs could you provide more color on that and not sure. If you have actually at the start of the call.
Speaker Change: Okay.
Speaker Change: Yes, so in our deposit book, we've been twice.
Gary M. Small: Yeah, so in our deposit book, you know, we've been slicing and dicing that, putting it into different buckets. So whether it's private or pure consumer, commercial, et cetera.
Speaker Change: Slicing and dicing that putting it into different buckets, so whether it's private or a pure consumer commercial et cetera, and if you go back to last year. When we were growing deposits and had a lot of promos going on and things like that.
Gary M. Small: And if you go back to last year when we were growing deposits and had a lot of promos going on and things like that, and especially in the money market space, you know, they had some guaranteed periods and whatnot. So we've been aggregating those into buckets as they've matured already or are coming up for maturity and what have you and starting to roll those back. Right. So if they were
Speaker Change: Specially in the money market space, they had some guaranteed periods and whatnot. So we've been aggregating those into.
Speaker Change: Gets as they've matured already or are coming up for maturity and what have you and.
Speaker Change: Starting to roll those back right. So if they were.
Gary M. Small: At a high rate, we're trimming that by a few bits here and there, testing the waters to see how that's going to hold, what kind of retention we have. Early results are encouraging, as Gary said, and we're going to keep going. Bringing new ones in as they roll off, if they haven't already, and even taking some second swings when we can. It's really a matter of testing the elasticity of the particular product group, and market since we have a relatively distinct market. And that's something that you're always doing.
Speaker Change: At a high rate.
Speaker Change: We're trimming that a few bps here and there testing the waters.
Speaker Change: How thats going to hold what kind of retention we've got.
Speaker Change: Early early results are encouraging and as Gary said, and we're going to keep at that.
Speaker Change: Bringing new ones and as they roll off if they haven't already and even taken some second swings when we can yes, it's really a matter.
Speaker Change: Testing the elasticity of the particular product grouping.
Speaker Change: Alright.
Speaker Change: Market since we have a rather relatively distinct markets.
And Thats something that you are always doing and if you look at our portfolio right. Now you would find that we early on identified are very inelastic outstandings.
Gary M. Small: And if you look at our portfolio right now, you would find that we early on identified a very inelastic set of outstandings and savings and interest checking and chose to utilize that as an offset to some of the less inelastic pricing that we were having to do on money markets. So we still think there's room there, and we're going to continue to test waters. We watch for balance movement and anything that looks like it could be. [inaudible] pause for a moment and determine whether that is a theme or just an anomaly.
Speaker Change: Outstandings in the savings and interest checking and chose to.
Speaker Change: Doug.
Speaker Change: Utilize that.
Speaker Change: As an offset to some of the less.
Speaker Change: An elastic pricing that we were having to do on money markets and so forth. So we still think there is room, there and we're going to continue to test the waters, we watch for balance movement and anything that looks.
Abnormal or if it starts to have an impact there.
Speaker Change: Let me pause for a moment and determine whether thats.
Gary M. Small: But we're, I think what we're saying is it's not our intention to wait for the Fed to do something to trigger us to do a little bit more activity with our existing portfolio. And we'll also be looking at some lower new money rates on CDs and so forth than we've been running. Again, for three quarters on the consumer side, we've been running at about a 7% annualized growth rate, and that was intentional. So now we are... It is the right time to step in and work a little bit more on the margin front, because it's a positive moment for consumers. Understood, thanks.
Speaker Change: Theme or just an anomaly but were.
Speaker Change: I think what we're saying is we can now it is not our intention to wait for the fed to do something to trigger us to do a little bit more activity with our existing portfolio.
Speaker Change: We will also be looking at.
Speaker Change: Some lower new money rates on Cds, and so forth and we've been running again for three quarters on the consumer side, we've been running at about a 7% annualized growth rate, so and that was intentional.
Speaker Change: Now we are.
Speaker Change: This is the right time to step in and.
Speaker Change: Work, a little bit more on the margin front.
Speaker Change: The deposit momentum.
Speaker Change: On the consumer side has been so good.
Speaker Change: Understood. Thanks.
Bader Hilde: Understood, thanks. That's all for me. Thanks for taking my questions. Thank you.
Speaker Change: Thats all for me thanks for taking my questions.
Speaker Change: Thank you. Thank you David.
Speaker Change: Thank you.
Operator: There are no questions registered at this time, so as a final reminder, it is star number one to ask a question. There are no questions registered at this time, so I would like to pass the call back over to Gary Small for any further remarks.
Speaker Change: There are no questions registered at this time, so as a final reminder, it is star one to ask a question.
Speaker Change: There are no questions registered at this time I would like to pass the call back over to Gary small for any further remarks.
Gary M. Small: Yes, I appreciate the thoughtful questions. This morning, and I also appreciate those that were able to get notes out in advance of the meeting last night. So forth. That's very helpful for helping us prepared so that we could touch on the things of most interest.
Gary M. Small: Yes, I appreciate the thoughtful questions this morning, and I also appreciate those that were able to get notes out in advance of the meeting last night, etc. That's very helpful for helping us prepare so that we can touch on the things of most interest. Again, it's an effort you could be doing elsewhere. We really appreciate you taking the time to understand our business and our approach. And thanks again for joining us.
Gary M. Small: Again, it's.
Gary M. Small: It's an effort you could be elsewhere, we really appreciate you taking the time to understand our business and our approach and thanks again for joining us.
Speaker Change: Thank you.
That concludes today's call. Thank you for your participation you may now disconnect your lines.
Operator: That concludes today's call. Thank you for your participation. You may now disconnect your line.