Q2 2024 Blue Foundry Bancorp Earnings Call

Operator: Blue Foundry encourages all participants to refer to the full disclaimer contained in this morning's earnings release, which has been posted on the Investor Relations page on bluefoundrybank.com. During the call, management will refer to non-GAAP measures which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures. As a reminder, this event is being recorded. Your line will be muted for the duration of the call. After the speaker's remarks, there will be a question and answer session. I will now turn the call over to President and CEO, Jim Nesci.

Operator: Project to Uncertainty and Changes and Circumstance. Blue Foundry encourages all participants to refer to the full disclaimer contained in this morning's earnings release, which has been posted to the Investor Relations page on BlueFoundryBank.com. During the call, management will refer to non-GAAP measures, which excludes certain items from reported results. Please refer to today's earnings release for reconciliation of these non-GAAP measures.

Welcome stance.

Blue Foundry encourages all participants to refer to the full disclaimer contained in this morning's earnings release, which has been posted to the Investor Relations page on bluefoundrybank.com.

Speaker Change: During the call, management will refer to non- GAAP measures which exclude certain items from reported results.

Operator: As a reminder, this event is being recorded. Your line will be muted for the duration of the call.

Please refer to today's earnings release for reconciliations of these non-GAAP measures.

As a reminder this event is being recorded. Your line will be muted for the duration of the call. After the speaker's remarks there will be a question and answer session. I will now turn the call over to President and CEO Jim Nesci.

Operator: After the speaker's remark, there will be a question-and-answer session.

Operator: I will now turn the call over to President NCEO Jim Nesci.

James Nesci: Thank you, operator, and good morning, everyone. Thank you for joining us for our second quarter earnings call. I am joined by a Chief Financial Officer, Kelly Pecoraro. We will discuss the company's second quarter financial results in detail after I provide an update on our operation. We are pleased by the progress we made in the second quarter and thus far in 2024. Despite the competitive environment and inverse yield curve, the positive growth continued in the second quarter, and that is for smart and expanded for a second consecutive quarter. This coupled with our expected discipline helped to improve DPR by $268,000 versus last quarter.

James D. Nesci: Thank you, operator. And good morning, everyone.

James D. Nesci: Thank you, Operator, and good morning, everyone. Thank you for joining us for our second quarter earnings call. I am joined by our Chief Financial Officer, Kelly Pecoraro, who will discuss the company's second quarter financial results in detail after I provide an update on our operations.

James D. Nesci: Thank you for joining us for our second quarter earnings call. I am joined by our chief financial officer, Kelly Pecoraro, who will discuss the company's second quarter financial results in detail after I provide an update on our operation. We are pleased by the progress we made in the second quarter and thus far in 2024. Despite the competitive environment and the inverse yield curve, deposit growth continued in the second quarter, and the net interest margin expanded for a second consecutive quarter. This, coupled with our expense discipline, helped to improve TPNR by $268,000 versus last quarter.

James D. Nesci: We are pleased by the progress we made in the second quarter and thus far in 2024.

Speaker Change: Despite the competitive environment and inverse yield curve, deposit growth continued in the second quarter and net interest margin expanded for a second consecutive quarter.

Speaker Change: This, coupled with our expense discipline, helped to improve TPNR by $268,000 versus last quarter.

James Nesci: Our focus on attracting the full banking relationship of small to medium-sized businesses has resulted in a 9% increase in commercial deposits this year. Additionally, our branch network has delivered a 6% increase in consumer deposits. These successes have allowed us to reduce our reliance on wholesale deposits by 4% this year. Additionally, this deposit growth has improved our loan-to-deposits ratio. Given our strategy to become a more commercially oriented institution, we have been selected in originating real estate loans while building our commercial pipeline. We now have a healthy pipeline of commercial credits as attractive yield that will allow us to continue to expand our interest income and loan yield.

James D. Nesci: Our focus on attracting the full banking relationship of small to medium-sized businesses has resulted in a 9% increase in commercial deposits. Additionally, our branch network has delivered a 6% increase in consumer deposits. These successes have allowed us to reduce our reliance on wholesale deposits by 4% this year. Additionally, this deposit growth has improved our loan-to-deposit ratio. Given our strategy to become a more commercially oriented institution, we have been selective in originating real estate loans while building our commercial pipeline.

Speaker Change: Our focus on attracting the full banking relationship of small to medium-sized businesses has resulted in a 9% increase in commercial deposits this year.

Speaker Change: Additionally, our branch network has delivered a 6% increase in consumer deposits. These successes have allowed us to reduce our reliance on wholesale deposits by 4% this year. Additionally, this deposit growth has improved our loan-to-deposits ratio.

Speaker Change: Given our strategy to become a more commercially oriented institution, we have been selective in originating real estate loans while building our commercial pipeline. We now have a healthy pipeline of commercial credits at attractive yields that will allow us to continue to expand our interest income and loan yield.

James D. Nesci: We now have a healthy pipeline of commercial loans at attractive yields that will allow us to continue to expand our interest income and loan yield. We expect to continue to build this pipeline in the second half of the year.

James Nesci: We expect to continue to build this pipeline in the second half of the year. As always, we are disciplined in under running strong credits across all our loan product offerings. During the quarter, we re-purchased 386,000 shares at a weighted average share price of $1.84. Re-purchasing shares at these levels continues to improve shareholder value; tangible book value per share increased by $0.9 to $14.69. Our bank and holding company remain well capitalized, with capital levels that are among the highest in the banking industry. tangible equities to tangible common assets was 16.9% at June 30. Blue Foundry continues to operate with robust liquidity and a low concentration risk to any single depositor.

James D. Nesci: As always, we are disciplined in underwriting strong credits across all our loan product operations. During the quarter, we repurchased 386,000 shares at a weighted average share price of $8.84. Repurchasing shares at these levels continues to improve shareholder value; tangible book value per share increased by $0.09 to $14.69. Our bank and holding company remain well capitalized with capital levels that are among the highest in the banking industry. Tangible Equity to Tangible Common Assets was 16.9% at June 30.

Speaker Change: We expect to continue to build this pipeline in the second half of the year. As always, we are disciplined in under-earning strong credits across all our loan product corporates.

Speaker Change: During the quarter, we repurchased 386,000 shares at a weighted average share price of $8.84.

Speaker Change: Repurchasing shares at these levels continues to improve shareholder value. Tangible book value per share increased by 9 cents to $14.69. Our bank and holding company remain well capitalized with capital levels that are among the highest in the banking industry.

Speaker Change: Tangible Equity to Tangible Common Assets was 16.9% at June 30th.

James D. Nesci: Blue Foundry continues to operate with robust liquidity and a low concentration risk to any single deposit. At the end of the second quarter, we had $394 million in untapped borrowing capacity, and our unencumbered available-for-sale securities and unrestricted cash provided another $298 million of liquidity. This liquidity is 4.8 times larger than our uninsured and uncollateralized deposits to customers, which represent only 12% of deposit balances

Speaker Change: Blue Foundry continues to operate with robust liquidity and a low concentration risk to any single depositor.

James Nesci: At the end of the second quarter, we have $394 million in untapped borrowing capacity. And our unencumbered available-for-sale securities unrestricted cash provided another $298 million of liquidity. This liquidity is 4.8 times larger than our uninsured and uncollateralized deposits.

Speaker Change: At the end of the second quarter, we had $394 million in untapped borrowing capacity, and our unencumbered available-for-sale securities and unrestricted cash provided another $298 million of liquidity.

Speaker Change: This liquidity is 4.8 times larger than our uninsured and uncollateralized deposits to customers.

James Nesci: for the second quarter was $2.3 million, compared to a net loss of $2.8 million during the quarter. This improvement was driven by an expansion of net interest income and increased in non-interest income and the release in the provision for credit losses. Our asset quality remained strong in the current environment. During the quarter, we had a release of provision for credit losses of $762,000 driven by forecasted improvements to economic drivers used to model our credit losses. A release occurred in all three categories: loans, cost-bound sheet commitments, and health to maturity security. As a reminder, the majority of our allowance for credit losses is derived from quantitative measures, and an allowance methodology places greater weight on the baseline and adverse forecast.

James D. Nesci: With that, I'd like to turn the call over to Kelly, and then we'd be delighted to answer your questions. Kelly. Thank you.

Speaker Change: These deposits represent only 12% for deposit balances. With that, I'd like to turn the call over to Kelly, and then we'd be delighted to answer your questions. Kelly.

Kelly Pecoraro: Thank you, Jim, and good morning, everyone. The net loss for the second quarter was $2.3 million, compared to a net loss of $2.8 million during the prior quarter. This improvement was driven by an expansion of net interest income, an increase in non-interest income, and a release in the provision for credit losses. Our asset quality remains strong in the current environment. During the quarter, we had a release of provision for credit losses of $762,000, driven by forecasted improvements in economic drivers used to model our credit losses.

Kelly: Thank you, Jim, and good morning, everyone.

Kelly: The net loss for the second quarter was $2.3 million, compared to a net loss of $2.8 million during the prior quarter.

Kelly: This improvement was driven by an expansion of net interest income, an increase in non-interest income, and a release in the provision for credit losses.

Kelly: Our asset quality remains strong in the current environment.

Kelly: During the quarter, we had a release of provision for credit losses of $762,000, driven by forecasted improvements to economic drivers used to model our credit losses.

Kelly Pecoraro: A release occurred in all three categories, loans, off-balance sheet commitments, and held to maturity security. As a reminder, the majority of our allowance for credit losses is derived from quantitative, and their allowance methodology places greater weighting on the baseline and adverse forecast.

Kelly: A release occurred in all three categories.

Kelly: loans, Off-Balance Sheet Commitments, and Health to Maturity Security.

Kelly: As a reminder, the majority of our allowance for credit losses is derived from quantitative measures.

Kelly: and our allowance methodology places greater weighting on the baseline as adverse forecasts.

James Nesci: Non-deporting assets declined by $1.1 million due to the sale of our only real estate owned property and a $483,000 improvement to non-equal loans. This resulted in a six basis point reduction in non-point assets to total assets and a three basis point reduction in non-performing loans to total loans. Our allowance to total loans decreased for basis points due to the decrease in the allowance for credit losses on loans. However, our allowance to non-equal loans increased to 210% from 205% the prior quarter, as the impact from the improvement in non-equal loans outweighs the reduction in the allowance for credit losses on loans.

Kelly Pecoraro: Non-performing assets declined by $1.1 million due to the sale of our only real estate-owned property and a $483,000 improvement to non-equal loans. This resulted in a six-basis point reduction in non-performing assets to total assets and a three-basis point reduction in non-performing loans to total loans. The allowance for credit losses on loans decreased or basis points due to the decrease in the allowance for credit losses on loans. However, our allowance for non-equal loans increased to 210% from 205% the prior quarter as the impact of the improvement in non-equal loans outweighed the reduction in the allowance for credit losses on loans.

Kelly: Non-performing assets declined by 1.1 million dollars due to the sale of our only real estate owned property and a $483,000 improvement to non-equal loans.

Kelly: This resulted in a six-basis point reduction in non-performing assets to total assets and a three-basis point reduction in non-performing loans to total loans.

Speaker Change: Are Allowance to Total Loans Decreased or Basis Points Due to the Decrease in the Allowance for Credit Losses on Loans?

Speaker Change: However, our allowance to non-equal loans increased.

Speaker Change: to 210% from 205% the prior quarter as the impact from the improvement in non-accrual loans outweighs the reduction in the allowance for credit losses on loans.

James Nesci: Net-interest income increased by $156,000, leading to a four basis point expansion in net-interest margin. Interest income expanded $450,000, while interest expense only increased $294,000. We expect our net-interest margin to stabilize around these current levels for the remainder of the year. However, it could move moderately in either direction depending on interest rate activity and our ability to generate asset growth given the current macroeconomic environment. Yield on loans increased by 11 basis points to 4.56%, and yields on all interest earning assets increased by 12 basis points to 4.37%. Cost of funds increased only 8 basis points. the 2.89%, the cost of interfering deposits increased 16 basis points to 2.90%.

Kelly Pecoraro: Net interest income increased by $156,000, leading to a four basis point expansion in net interest margin; interest income increased $450,000 while interest expense only increased $294,000. We expect our net interest margin to stabilize around these current levels for the remainder of the year. However, it could move moderately in either direction, depending on interest rate activity and our ability to generate asset growth given the current macroeconomic environment.

Speaker Change: Net interest income increased by $156,000, leading to a four basis point expansion in net interest margin.

Speaker Change: Interest income expanded $450,000 while interest expense only increased $294,000.

Speaker Change: We expect our net interest margin to stabilize around these current levels for the remainder of the year.

Speaker Change: However, it could move moderately in either direction depending on interest rate activity and our ability to generate asset growth given the current macroeconomic environment.

Kelly Pecoraro: Yield on loans increased by 11 basis points, 4.56%, and earnings on all interest-earning assets increased by 12 basis points, 4.37%. Cost of funds increased only 8 basis points, 2.89%; the cost of interest-bearing deposits increased 16 basis points, 2.90 percent. Conversely, RRNPAS decreased 15 basis points.

Speaker Change: Yield on loans increased by 11 basis points.

Speaker Change: to 4.56%, and yields on all interest-earning assets increased by 12 basis points to 4.37%.

Speaker Change: cost of funds increased only 8 basis points to 2.89%.

Speaker Change: The cost of interest-bearing deposits increased 16 basis points.

James Nesci: Conversely, borrowing costs decreased 15 basis points to 3.09%, as average balances declines due to a higher cost short-term wholesale barren during the prior quarter. Expenses were substantially flat to prior quarter, with minor variances in each category.

Speaker Change: to 2.90%.

Speaker Change: Conversely, bar-in costs decreased 15 basis points to 3.09% as average balances declined due to the payoff of higher-cost, short-term wholesale bar-ins during the prior quarter.

Kelly Pecoraro: 3.09 percent as average balances declined due to the payoff of higher cost short-term wholesale borrowing during the prior quarter. Expenses were substantially flat to the prior quarter, with minor variances in each category. We continue to promote expense discipline, and we expect operating expenses for the third quarter of 2024 to be in the mid to high $13 million range. Moving on to the Bound Sheet.

Speaker Change: Expenses were substantially flat to prior quarter, with minor variances in each category.

James Nesci: We continue to promote expense discipline, and we expect operating expenses for the third quarter 2024 to be in the mid to high $13 million range.

Speaker Change: We continue to promote expense discipline, and we expect operating expenses for the third quarter 2024 to be in the mid-to-high $13 million range.

James Nesci: Moving on to the balance sheet, gross loans decline by $6.8 million during the quarter. While amortization and payoff outpaced new loan funding, our new funding are yielding 8.6%, and that will benefit loan yields in future quarters. As a reminder, only approximately 2% of our loan portfolio is in all this space, and none is in New York City. Available-for-sale securities increased $32.6 million. During the quarter, we purchased $45 million of securities with a weighted average yield of 5.8%. Our front line staff were able to grow time deposits by $29.1 million. This was partially offset by a $9.1 million outflow in core deposits, resulting in an increase in net deposits of $20 million, or 1.5%, during the quarter.

Kelly Pecoraro: Gross loans declined by $6.8 million during the quarter, while amortization and payoff outpaced new loan funding. Our new fundings are yielding 8.6%, and that will benefit Lone Heel in future quarters. As a reminder, only approximately 2% of our loan portfolio is in office space, and none is in New York City. Available for sale securities increased $32.6 million. During the quarter, we purchased $45 million of securities with a weighted average yield of 5.8%.

Speaker Change: Moving on to the balance sheet, gross loans declined by $6.8 million during the quarter.

Speaker Change: While amortization and payoff outpaced new loan funding, our new fundings are yielding 8.6%, and that will benefit loan yields in future quarters.

Speaker Change: As a reminder, only approximately 2% of our loan portfolio is in office space and none is in New York City.

Speaker Change: Available for sale securities increased $32.6 million.

Speaker Change: During the quarter, we purchased $45 million of securities with a weighted average yield of 5.8%.

Kelly Pecoraro: Our frontline staff was able to grow time deposits by $29.1 million. This was partially offset by a $9.1 million outflow in core deposits, resulting in an increase in net deposits of $20 million, or 1.5% during the quarter. Borrowings remained flat during the quarter as we funded the security purchases with deposit growth and cash flow from our lending and securities portfolio.

Speaker Change: Our frontline staff were able to grow time deposits by $29.1 million.

Speaker Change: This was partially offset by a $9.1 million outflow in core deposits resulting in an increase in net deposits of $20 million, or 1.5% during the quarter.

James Nesci: Our own remained flat during the quarter as we funded the security purchases with deposit growth and cash love from our lending and security portfolios.

Speaker Change: Borrowings remained flat during the quarter as we funded the security purchases with deposit growth and cash flow from our lending and securities portfolios.

James Nesci: And with that, Jim and I are happy to take your questions. Thank you.

Kelly Pecoraro: And with that, Jim and I are happy to take your questions.

Speaker Change: And with that, Jim and I are happy to take your questions.

Operator: Thank you. If you would like to ask a question today, please do so now by pressing start followed by the number 1 on your telephone keypad. If you wish to be removed from the queue, you can do so by pressing start followed by 2. Our first question today comes from the line of Justin Crowley with Piper Sandler. Just in, your line is now open, please go ahead.

Operator: If you would like to ask a question today, please do so now by pressing start, followed by the number one on your telephone keypad.

Speaker Change: Thank you. If you would like to ask a question today, please do so now by pressing start followed by the number 1 on your telephone keypad. If you wish to be removed from the queue, you can do so by pressing start followed by 2.

Operator: If you wish to be removed from the queue, you can do so by pressing Start, followed by two.

Operator: Our first question today comes from the line of adjusting Crowley with Piper Sandler. Justin, your line is now open. Please throw ahead.

Speaker Change: Our first question today comes from the line of Justin Crowley with Piper Sandler. Justin, your line is now open, please go ahead.

Justin Crowley: Hey, good morning. You know, wanted to start off on the margin for the quarter. You know, it looks like funding pressure has continued to slow. So, wondering how you expect that to trend moving forward as you try to continue to grow deposits and move the loan-to-deposit ratio lower?

Justin Frank Crowley: Hey, good morning. You know, wanted to start off on the margin for the quarter. Looks like funding pressures continue to slow. And so wondering how you expect that to trend moving forward as you try to continue to grow deposits and move the loan to deposit ratio lower.

Justin Frank Crowley: Hey, good morning. You know, wanted to start off on the margin for the quarter. You know, it looks like funding pressures continue to slow, and so wondering how you expect that to trend moving forward as you try to continue to grow deposits and move the loan-to-deposit ratio lower.

James Nesci: Good morning, Justin. Yes, thank you. We were pleased with the margin expansion that we had this quarter. We believe we will be stable in this range as we work through the rest of the year.

James D. Nesci: Good morning, Justin. Yes, thank you.

Justin: Good morning, Justin.

Speaker Change: Yes, thank you. We were pleased with the margin expansion that we had this quarter.

James D. Nesci: We were pleased with the margin expansion that we had this quarter. We believe we'll be stable in this range as we work through the rest of the year. However, that could be impacted moderately by the interest rate environment and asset classes that we put on the balance.

Speaker Change: We believe we'll be stable in this range as we work through the rest of the year. However, that could be impacted moderately by interest rate environment and asset classes that we put on the balance sheet.

James Nesci: However, that could be impacted moderately by an interest rate environment and asset classes that we found the balance sheet.

Justin Crowley: Okay.

James D. Nesci: Okay, and then what's embedded in that sort of guide for a stable margin in terms of fed rate cut activity this year?

Justin Crowley: And then what's embedded in that sort of guy for a stable margin in terms of like Fed rate connectivity this year? So, as we looked from a Fed rate perspective, we were not factoring in any cuts until later in the fourth quarter.

Speaker Change: Okay and then what's embedded in that sort of guide for a stable margin in terms of like fed rate cut activity this year?

James D. Nesci: So, as we looked from a Fed rate perspective, we were not factoring in any cuts until later in the fourth quarter.

Speaker Change: So, as we looked from a Fed rate perspective, we were not factoring in any cuts until later in the fourth quarter.

James Nesci: Okay, gotcha.

James D. Nesci: Okay, gotcha. And then as far as the other inputs into that sort of outlook, you know, thinking about cuts, how soon after the first 25 basis points do you anticipate being able to lower deposit rates? You know, not sure if you've tested this already, but just given the focus on, you know, keeping the loan to deposit ratio in check.

James Nesci: And then, as far as the other inputs into that sort of outlook, you know, thinking about cuts, you know, how soon after the first 25 basis point, the envision being able to lower deposit rates, you know, not sure if you've tested this already, but just given, you know, the focus on, you know, keeping the loan to deposit ratio in check. Yeah, I think as we look at the shift and the ability to move deposit costs lower, we're going to need to look at the activity in the market and the competition in our marketplace. As you know, there's strong competition for deposits, and not sure whether or not we, the market will respond similar to how it has in the past, but we'll be monitoring that closely.

Speaker Change: Okay, gotcha. And then as far as the other inputs into that sort of outlook.

Speaker Change: You know, thinking about cuts, you know, how soon after the first 25 basis points do you envision being able to lower deposit rates? You know, not sure if you've tested this already, but just given, you know, the focus on, you know, keeping the loan to deposit ratio in check.

James D. Nesci: Yeah, I think as we look at the shift and the ability to move deposit costs lower, we're going to need to look at the activity in the market and the competition in our marketplace. As you know, there's strong competition for deposits, and I'm not sure whether or not the market will respond similar to how it has in the past. But we will be monitoring that.

Speaker Change: Yeah, I think as we look at the the shift and the ability to move deposit costs

Speaker Change: We're going to need to look at the activity in the market and the competition in our marketplace. As you know,

Kelly Pecoraro: Kelly Pecoraro

Justin Crowley: Okay. Thanks. That's helpful.

James D. Nesci: Okay, thanks. That's helpful. And then as far as overall growth, looking to get a sense of how loan registration activity looked in the quarter. You know, I know you're being maybe a bit more selective, but you know, what would need to happen or change to start thinking about net growth again?

Justin Crowley: And then, as far as overall growth, we're looking to get a sense of how loan organization activity looked in the quarter.

Kelly Pecoraro: Okay, thanks, that's helpful. And then as far as overall growth, looking to get a sense of how loan origination activity looked in the quarter. You know, I know you're being maybe a bit more selective, but you know, what would need to happen or change to start thinking about net growth again?

Justin Crowley: You know, I know you're being maybe a bit more selective, but you know, what would need to happen or change to start thinking about net growth again? Right.

James D. Nesci: Right, so I think if you look at it for the quarter, we had funding, probably about $20 million in funding came in. We're looking for that to pick up in the latter half of the year. So, our pipeline right now sits at about 32 million in our commercial pipeline. We're continuing to focus, as Jim noted, being strategic in the credits that we're putting on and mindful of the environment we're operating in, the economic and the regulatory environment.

James Nesci: So, I think if you look at it for the quarter, we had funding probably about $20 million, and funding came on.

Speaker Change: So I think if you look at it, for the quarter, we had funding, probably about $20 million in funding came on.

James Nesci: We're looking for that to pick up in the latter half of the year. So our pipeline right now sits at about $32 million in our commercial pipeline. We're continuing to focus, as you know. Jim noted being strategic in the credits that we're putting on. And mindful of the environment we're operating in, the economic and the regulatory environment.

Speaker Change: We're looking for that to pick up in the latter half of the year, so our pipeline right now sits at about $32 million in our commercial pipeline.

Speaker Change: We're continuing to focus, as Jim noted, being strategic in the credits that we're putting on and mindful of the environment we're operating in, the economic and the regulatory environment.

Justin Crowley: Okay. And then on credit, you had the reserve release for the second straight quarter here. You know, its underlying trends continue to look better.

James D. Nesci: And then on credit, you had the reserve release for the second straight quarter here, as underlying trends continue to look better, looking at things like non-accruals. Curious if you could share a bit more on what you're seeing beneath the surface, you know, particularly when you're seeing things like commercial real estate credits at maturity or repricing.

Speaker Change: Okay, and then on credit, you had the reserve release for the second straight quarter here. You know, as underlying trends continue to look better, looking at things like non-accruals. Here's if you could share a bit more on what you're seeing beneath the surface, you know, particularly when you're seeing things like commercial real estate credits at maturity or repricing.

Justin Crowley: I'm looking at things like non-accurals. Here's a few could share a bit more on what you're seeing beneath the surface. You know, particularly when you're seeing things like commercial real estate credit, maturity, or repricing.

James D. Nesci: As we look at our repricing, we don't have a significant amount of repricing activity that will take place through the end of the year. We probably have about $30 million in repricing through the end of 2024, so we won't be significantly impacted by that. From a reserve perspective, again, our allowance methodology is primarily quantitative in nature and really is impacted by the forecast, and our portfolios benefit from having those drivers being favorable for the outliers.

James Nesci: Right. So we're going to look at a few of these that will take place through the end of the year. We probably have about $30 million in repricing through the end of 2024. So not significantly impacting by that from a reserve perspective.

Speaker Change: As we look at our repricing, we don't have a significant amount of repricing activity that will take place through the end of the year. We probably have about $30 million in repricing through the end of 2024, so not significantly impacted by that.

James Nesci: Again, our allowance methodology is primarily quantitative in nature. And really are impacted by the forecast. And our portfolio is benefited from having the those drivers being favorable for the outlook.

Speaker Change: From a reserve perspective, again, our allowance methodology is

Speaker Change: primarily quantitative in nature, and really are impacted by the forecast, and our portfolios benefited from having those drivers being favorable for the outlooks.

Justin Crowley: Okay. Great.

James D. Nesci: Okay, great. I'll leave it there. Thanks so much for taking the questions. Thanks, Jeff.

Justin Crowley: I'll leave it there. Thanks so much for taking the questions.

James Nesci: Thanks, Justin. Thank you.

Speaker Change: Okay, great. I'll leave it there. Thanks so much for taking the questions.

Chris O'Connor: Our next question comes from the line of Chris O'Connor with KBW. Please go ahead. Your line is now open.

Operator: Our next question comes from the line of Chris O'Connell with KBW. Please go ahead; your line is now open.

Speaker Change: Thank you, Justin. Thank you, Jess.

Speaker Change: Our next question comes from the line of Chris O'Connell with KBW. Please go ahead, your line is now open.

James Nesci: Hey, good morning. I want to follow up on the new conversation. As far as the rest of the year and where CDs are being priced at now, if you have the current offering rates and how much has left to reprice, it hasn't really reprice to the market rate so far. So our current offering is about a 525 rate, a seven year, a seven month maturity, a seven year. And a lot of that book has already repriced into the higher rates. We do still have some that will be coming due, but it's a smaller portion.

Chris O'connell: I wanted to follow up on the NIM conversation. As far as the rest of the year and where CDs are being priced at now, if you have the current offering rates and how much has left to reprice, that hasn't really already repriced the market rate so far.

Chris O'connell: Hey, good morning.

Chris O'connell: As far as the rest of the year and, you know, where CDs are being priced at now, if you have the current offering rates, and how much, you know, has left to reprice that hasn't really already repriced the market rate so far?

James D. Nesci: So our current offering is a 525 rate of seven years, seven months maturity, not seven years. And a lot of that book has already repriced into the higher rates. We do still have some that will be coming due, but it's a smaller portion.

Speaker Change: So our current offering is a 525 rate, a seven-month maturity, not seven years, and a lot of that book has already repriced into the higher rates. We do still have some that will be coming due, but it's a smaller portion.

James Nesci: Okay, got it. And then as far as the, you know, FHLB advances, how much of that that's on balance sheet that right now is overnight and then maybe, you know, if it is lattered out just kind of a general sense of the maturity schedule. So we currently don't have any overnight. We've been keeping them short in terms of, you know, within a month, we have approximately, I would say 30 million in shorter duration within the month to three months term.

Chris O'connell: Okay, got it. And then as far as the, you know, FHLB advances, how much of that that's on the balance sheet right now is overnight? And then maybe, you know, if it is laddered out, just kind of a general sense of the maturity schedule. So we've currently got

Speaker Change: Okay, got it. And then, as far as the, you know, FHLB advances, how much of that that's on balance sheet right now is overnight? And then maybe, you know, if it is laddered out, just kind of a general sense of the maturity schedule?

James D. Nesci: So, we currently don't have any overnight. We've been keeping them short in terms of, you know, within a month. We have approximately $30 million in shorter duration within the month to three-month term, and then some longer-dated.

Speaker Change: So, we currently don't have any overnight. We've been keeping them short in terms of, you know, within a month. We have approximately

Speaker Change: I would say $30 million in shorter duration within the month to three-month term and then some longer dated.

James Nesci: And then it's a longer data within the portfolio. Got it.

Speaker Change: within the portfolio.

James Nesci: And as far as is there a hedging impact, you know, on against the FHLB advances, or is it just the fact that they're longer data that is able to keep the cost pretty low. Well, we do have the hedges out there. We have 204 million of those borrowings hedged. So that doesn't have an impact necessarily on some of the longer data, because it's lost in, you know, we do have about three maturity on our.

Chris O'connell: As far as there is a hedging impact, you know, against the FHLB advances, or is it just the fact that they're longer dated that is able to keep the cost pretty low?

Speaker Change: Got it. And as far as, is there a hedging impact, you know, on...

Speaker Change: against the FHLB advances or is it just the fact that they're longer dated that is able to keep the cost pretty low?

James D. Nesci: Well, we do have the hedges out there. We have 204 million of that, the borrowing hedge. So, that doesn't have an impact necessarily on some of the longer-dated bonds because it's locked in. You know, we do have about a 3 year maturity on our swap.

Speaker Change: Well, we do have the hedges out there. We have 204 million of that.

Speaker Change: those borrowings hedged?

Speaker Change: So, that doesn't have an impact necessarily on some of the longer dated because it's locked in, you know, we do have about a three year maturity on our slots.

Chris O'connell: Got it. I guess what I'm getting at is, you know, the borrowing rates are fairly low right now. And, based on the maturity schedule, you know, how much do you think that is going to move up, you know, over the course of the back half of the year, closer to, you know, market rates, absent any major change in the level of borrowing?

James Nesci: I guess what I'm getting at is, you know, the borrowing rates, you know, fairly low right now and, you know, based on maturity schedule, you know, how, how much do you think that is going to move up, you know, over the course of the back after the year closer to, you know, market rates, you know, absent any major change in the level of borrowing. Moving up tomorrow. So there's not a tremendous amount that will work on market rates. Again, we do have some of the, you know, 20 to 30 million that's there that are maturing at the back end of the year at a lower rate.

Speaker Change: Got it. I guess what I'm getting at is, you know...

Speaker Change: the borrowing rates, you know, fairly low right now. And, you know, based on the maturity schedule, you know, how much do you think that is gonna move up?

Speaker Change: You know, over the course of the back half of the year, closer to, you know, market rates, you know, absent any major change in the level of borrowings.

James D. Nesci: Moving up to market rates. So there's not a tremendous amount that will move up to market rates. Again, we do have some of the, you know, 20 to 30 million that's there that are maturing at the back end of the year at a lower rate. But we'll continue to manage through that and look at funding as we bring on deposits.

Margaret: So there's not a tremendous amount that will move up to market rates. Again, we do have some of the, you know,

Margaret: 20 to 30 million that's there that are maturing at the back end of the year at a lower rate. But we'll continue to manage through that and look at funding as we bring on deposits.

James Nesci: But we'll continue to manage through that and look at funding as we bring our deposits.

James Nesci: Got it.

Chris O'connell: Got it. And then, you know, as far as asset generation is concerned, it seems a little bit bullish relative to the first half of the year and the second half of the year on loan growth. You know, if loan growth is still slower to materialize, would you look to do any more securities purchases? Or, you know, no, because, you know, trying to keep kind of the loan deposit ratio and funding profile intact. Chris, I think we're always going to be strategic in how we grow the balance sheet. If there's an opportunity to make a loan, that's our first priority.

James Nesci: And then, you know, as far as the asset generation, it seems like, you know, a little bit bullish relative to the first half of the year and the second half of the year on loan growth. You know, if loan growth is still slower to materialize, would you look to do any more securities purchases or, you know, no, because, you know, trying to keep kind of the longer deposit ratio and funding profile. I think we're always going to be strategic on how we grow the balance sheet. If there's an opportunity to make a loan, that's our first priority.

Speaker Change: Got it. And then, you know, as far as the asset generation, it seems like, you know, a little bit bullish relative to the first half of the year and the second half of the year on loan growth.

Speaker Change: Loan growth is still slower to materialize. Would you look to do any more securities purchases or you know no because you know trying to keep kind of the loaner deposit ratio and funding profile intact?

James D. Nesci: Chris, I think we're always going to be strategic in how we grow the balance sheet. If there's an opportunity to make a loan, that's our first priority. And if that opportunity is not there, we certainly look to supplement with securities that make sense for the balance, looking at duration, credit quality, and the yields that are available in the marketplace. But yeah, we're looking in a little bit of a dynamic fashion this time.

Speaker Change: Chris, I think we're always going to be strategic on how we grow the balance sheet. If there's an opportunity to make a loan, that's our first priority. And if that opportunity is not there, we certainly look to supplement with securities that make sense for the balance sheet.

James Nesci: If that opportunity's not there, we certainly look to supplement with securities that make sense for the balance sheet, looking at duration and credit quality and the yields that are available in the marketplace. But, yeah, we're looking at a living dynamic fashion this time. I'm asked for that.

Speaker Change: looking at duration, credit quality, and the yields that are available in the marketplace. But yeah, we're looking at it in a dynamic fashion this time. I'll answer that.

Chris O'Connor: Got it. And then, you know, you guys have, you know, come in below the expense guiding, kept things pretty, you know, contained relative to expectations year to date.

Chris O'connell: And then, you know, you guys have come in below the expense guide and kept things pretty, you know, contained relative to expectations year-to-date. Anything in particular that's shifting the expense level up a bit for the back half of the year relative to where you guys have been for the first couple quarters?

Speaker Change: Got it.

Speaker Change: And then...

Speaker Change: You guys have, you know, come in below the expense guide and kept things pretty, you know, contained relative to expectations here to date.

James Nesci: Anything in particular that's shifting, you know, the expense level up a bit for the back half of the year relative to where you guys have been for the first couple of quarters. Yeah, I think the primary driver will be some hopefully increases in compensation that would be tied to some of our variable complex plans as we execute on our goals. And also some hiring that might impact that line as well. Yeah, I think the way to think about that, the more success we see, compensation takes up a little bit as we bring on producers, people who bring in loans or bring in deposits.

Speaker Change: Anything in particular that's shifting, you know, the expense level up a bit for the back half of the year relative to where you guys have been for the first couple quarters?

James D. Nesci: Yeah, I think the primary driver will be some, hopefully, increases in compensation that would be tied to some of our variable comp plans as we execute on our goals, and also some hiring that might impact that line as well.

Speaker Change: Yeah, I think the primary driver will be some, hopefully, increases in compensation that would be tied to some of our variable plans as we execute on our goals, and also some hiring that might impact that line as well.

James D. Nesci: Yeah, I think the way to think about that is, the more success we see, compensation takes up a little bit as we bring in producers, people who bring in loans or bring in deposits. So again, we're happy to pay for performance, that's the focus, keep bringing in loans, keep bringing in deposits. And yes, the compliment is supposed to help with net interest margin and growing the balance sheet in a profitable manner. So we're all

Speaker Change: Yeah, I think the way to think about that, the more success we see.

Speaker Change: Compensation takes up a little bit as we bring on producers, people who bring in loans or bring in deposits. So again, we're happy to pay.

James Nesci: So, again, we're happy to pay for performance. That's the focus. Keep bringing in loans, keep bringing deposits. And yes, the couple, but it's supposed to help with net interest margin and growing the balance sheet in the possible manner. So we're all looking forward to seeing that happen. Got it.

Speaker Change: for performance. That's the focus. Keep bringing in loans, keep bringing in deposits, and yes, the COPL, but it's supposed to help with net interest margin and growing the balance sheet in a profitable manner. So we're all looking forward to seeing that happen.

Chris O'Connor: And what areas are you guys like looking to make hires at this point?

Chris O'connell: And, uh, what areas are you guys, uh, looking to make?

Speaker Change: Got it.

Speaker Change: and what areas are you guys like looking to make hires at this point?

James Nesci: I'm sorry, Chris, I didn't. I think you said what area we are hiring in the back half of the year. Sure. The project gathering, CNI, producers and some producers of loans, commercial deposit gatherers. We're looking for people that will help move the balance sheet forward. And then we're always being cognizant of regulatory requirements, making sure we have adequate staff and backup for all things related to regulation. So I'm making sure that we're constantly training people who come up through the ranks as needed.

James D. Nesci: I think you said, "What area are we hiring in the back half of the year?" Sure.

Speaker Change: I'm sorry for a second. I think you said what area are we hiring? You said you were doing some hiring in the back half of the year.

James D. Nesci: The Project Gathering, C&I, Producers, Loans Production, Commercial Deposit Gatherers. We're looking for people that will help move the balance sheet forward. And then we're always being cognizant of regulatory requirements, making sure we have adequate staff and backup for all things related to regulation. So I'm making sure that we're constantly training people to come up through the ranks.

Speaker Change: Sure. It's a project gathering, C&I, producers, it's...

Speaker Change: producers of loans.

Speaker Change: commercial deposit gatherers. We're looking for people that will help move the balance sheet forward and then we're always being cognizant of regulatory requirements making sure we have adequate staff and backup.

Speaker Change: for all things related to regulation. So I'm making sure that we're constantly training people to come up through the ranks as needed.

Chris O'Connor: Great.

Chris O'connell: and then, um... You know, the pace of buyback has slowed a bit over the past couple quarters on an incremental basis. I mean, how are you guys feeling about the level of share repurchases going forward comparative to, you know, the past two or three quarters?

Chris O'Connor: And then, you know, the pace of buyback has slowed a bit over the past couple of quarters on an incremental basis.

Speaker Change: Great.

Speaker Change: and then

Speaker Change: You know, the pace of buyback has slowed a bit over the past couple quarters on an incremental basis. I mean, how are you guys feeling about, you know, the level of share repurchases going forward comparative to, you know, the past two or three quarters?

James Nesci: I mean, how are you guys feeling about, you know, the level of sherry purchase is going forward comparative to the past two or three quarters? Chris, the volume recently has picked up, and Kelly will give you a more clear answer, but it's based on volume. Yeah. So, you know, we strongly believe in buyback. However, you know, as you're aware, we're held to some rules. It's based upon the prior month's average daily trading volume, as well as some additional SEC rules for the amount that we can purchase. But we are in the market every day looking to buy back.

James D. Nesci: Chris, the volume has recently picked up, and Kelly will give you a more clear answer, but it's based on volume. Yeah, so...

Kelly Pecoraro: Chris, the volume recently has picked up, and Kelly will give you a more clear answer, but it's based on volume. Yeah, so, you know, we strongly believe in buybacks.

Kelly Pecoraro: Yeah, so, you know, we strongly believe in buybacks. However, as you're aware, we're held to some rules. It's based upon the prior month's average daily trading volume, as well as some additional SEC rules for the amount that we can purchase. But we are in the market every day looking to buy back.

Kelly Pecoraro: However, you know, as you're aware, we're held to some rules based upon the prior month average daily trading volume, as well as some additional SEC rules for the amount that we can purchase. But we are in the market every day looking to buy back as much as we can.

James Nesci: as much as you can. Got it.

Chris O'connell: Got it. So nothing like a strategic decision, just just a volume-based kind of outcome there. All right.

James Nesci: So, nothing like strategic decision, just a volume-based kind of outcome there.

Keith Kapp: and Keith Kapp.

Speaker Change: got it so nothing like strategic decision just just a volume based kind of outcome there

James Nesci: We still, Kelly got it right. We still leave it by a fact.

James D. Nesci: We still, Kelly got it right, we still believe in buyback. Great. That's right.

Keith Kapp: Bye.

Keith Kapp: We still, Kelly got it right, we still believe in buybacks.

James Nesci: Great.

Chris O'connell: Great, that's all I had for now. Thanks for taking my questions.

Chris O'Connor: That's all I had for now. Thanks for taking my questions.

Kelly Pecoraro: Great, that's all I had for now. Thanks for taking my questions.

James Nesci: Thank you.

Speaker Change: Thank you.

James Nesci: We have no further questions, so I'll turn the call back to the management team for any closing remarks. Thank you, Operator. We appreciate everyone's attendance and interest in our company. And we look forward to speaking with you again in the third quarter. Thanks and have a wonderful day.

Operator: We have no further questions, so I'll turn the call back to the management team for any closing remarks.

Speaker Change: We have no further questions so I'll turn the call back to the management team for any closing remarks.

James D. Nesci: Thank you, operator. We appreciate everyone's attendance and interest in our company, and we look forward to speaking with you again in the third quarter. Thanks, and have a wonderful day.

Speaker Change: Thank you, operator. We appreciate everyone's attendance and interest in our company, and we look forward to speaking with you again in the third quarter. Thanks and have a wonderful day.

Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines. Thank you.

Operator: Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines.

Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.