Q2 2024 Northwest Bancshares Inc Earnings Call
Good morning. Thank you for standing by and welcome to Northwest Bancshares second quarter 2024 earnings call. This call is being recorded and playback will be made available on Northwest Bancshares Investor Relations website. All participants are now in listen-only mode.
Operator: Quarter of 2024 Earnings Call. This call is being recorded, and playback will be made available on Northwest Bancshares' Investor Relations website. All participants are now in listen-only mode. Towards the end of today's call, we will conduct a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Now, I would like to introduce Jeffrey Madigan, Northwest Head of Investor Relations. Please go ahead.
Towards the end of today's call, we will conduct a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question, again, press the star 1. Now, I would like to introduce Jeffrey Madigan, Northwest Head of Investor Relations. Please go ahead.
Jeffrey Madigan: Good morning, everyone, and thank you, operators. Thank you for joining Northwest Bancshares' second quarter 2024 earnings call. Today with me, I have Lewis Torshio, President and CEO of Northwest Bancshares Inc., the holding company for Northwest Bancshares Inc. Also with me is Douglas Chaucer, Chief Financial Officer, and T.K. Creel, Chief Credit Officer.
Jeffrey Madigan: Good morning everyone and thank you operator. Thank you for joining Northwest Bancshares second quarter 2024 earnings call. Today with me I have Lewis Torshio, president and CEO of Northwest Bancshares Inc. the holding company for Northwest Bank.
Speaker Change: Also with me is Douglas Chaucer, Chief Financial Officer, and T.K. Creel, Chief Credit Officer.
Jeffrey Madigan: During this morning's call, we will reference information found in the Supplemental Earnings Release Presentation, which can be found on Northwest Bancshares' Investor Relations website. Included in that presentation are our statements on forward-looking information and other data, including non-GAAP measures. These statements cover our earnings materials plus commentary offered on this morning's call. Please keep in mind that actual results may differ materially from the forward-looking statements offered today, July twenty-third, twenty-two. These forward-looking statements will not be updated after today's call. Thank you. And with that, I would like to turn it over to you.
Speaker Change: During this morning's call we will reference information found in the supplemental earnings release presentation which can be found on Northwest Bankshares Investor Relations website.
Speaker Change: Included in that presentation, you will find our statements on forward-looking information and other data, including non-GAAP measures.
Speaker Change: These statements cover our earnings materials plus commentary offered on this morning's call.
Speaker Change: Please keep in mind that actual results may differ materially from forward-looking statements offered today, July 23rd, 2024. These forward-looking statements will not be updated after today's call. Thank you, and with that, I would like to turn it over to Lou.
Lewis Torshio: Good morning, everyone. Thank you for joining us today to discuss our quarterly results. Before we dive into the numbers, which Doug will cover, I would like to acknowledge the significance of this. It marks an important milestone in our company's growth and maturity. As the bank has grown in size and complexity, we recognize the need to enhance our investor relations function and provide more comprehensive and regular updates to our shareholders and the financial community. This quarterly call format reflects our commitment to transparency, open communication, and best practices in corporate governance.
Lou: Good morning, everyone. Thank you for joining us today to discuss our quarterly results.
Lou: Before we dive into the numbers, which Doug will cover, I would like to acknowledge the significance of this call.
Lou: It marks an important milestone in our company's growth and maturity.
Speaker Change: As the bank has grown in size and complexity, we recognize the need to enhance our investor relations function and provide more comprehensive and regular updates to our shareholders and the financial community.
Doug: This quarterly call format reflects our commitment to transparency, open communication, and best practices in corporate government.
Lewis Torshio: We are eager to share our results with you and provide insights into our strategy, performance, and forward outlook. I'm thrilled to highlight the exceptional leadership team we've assembled over the past year. In June, we welcome York Bowers as our new Chief Consumer Banking and Strategy Officer, succeeding John Golding. York brings valuable experience from PNC to our organization. Earlier this year, we also added Doug Chaucer as our new CFO, leveraging his expertise in Cuba.
Doug: We are eager to share our results with you and provide insights into our strategy, performance, and forward outlook.
Speaker Change: I'm thrilled to highlight the exceptional leadership team we've assembled over the past year at Northwest.
Speaker Change: In June , we welcome York Bowers as our new Chief Consumer Banking and Strategy Officer, succeeding John Golding. York brings valuable experience from PNC to our organization.
Speaker Change: Earlier this year we also added Doug Shosser as our new CFO , leveraging his expertise from T-Banc.
Lewis Torshio: These additions significantly enhance our strategic development and execution capabilities. Looking back, we further stress the strength of our leadership team with Greg Betzkel, our Chief Risk Officer, with experience at Citibank, KeyBank, and Brett Financial, and J.D. Marteau, Chief Commercial Banking Officer, who brings rich experience from GE Capital, TD Bank, and most recently Lending.
Speaker Change: These additions significantly enhance our strategic development and execution capabilities.
Speaker Change: Looking back, we further strengthened our leadership team with Greg Betzkel, our Chief Risk Officer, with experience at Citibank, KeyBank, and Bread Financial, and J.D. Marteau, Chief Commercial Banking Officer.
Speaker Change: who brings rich experience from GE Capital, TD Bank, and most recently, Lending Club.
Lewis Torshio: Together with our existing experienced and capable leaders, I have confidence that this group of experienced individuals will propel our bank to new heights in the coming years. I'd also like to highlight some key strategic initiatives that are driving our performance and positioning us for long-term success. First, our commercial bank transformation continued to gain momentum. Under J.D.
Speaker Change: Together with our existing, experienced, and capable leaders, I have confidence that this group of experienced individuals will propel our bank to new heights in the coming years.
Speaker Change: I'd also like to highlight some key strategic initiatives that are driving our performance and positioning us for long-term success.
Speaker Change: First, our commercial bank transformation continued to gain momentum.
Lewis Torshio: Under Martel's leadership, you'll see how we shifted our focus to growing our C&I portfolio. We established new commercial lending verticals, which are showing promising early results. These verticals include sponsor finance, equipment finance, sports finance, franchise finance, and a new SBA lending group.
J.D. Martel: Under J.D. Marteau's leadership, you'll see how we shifted our focus to growing our C&I portfolio.
J.D. Martel: We established new commercial lending verticals, which are showing promising early results. These verticals include sponsor finance, equipment finance, sports finance, franchise finance, and a new SBA lending group.
Lewis Torshio: Each unit is outperforming our early expectations, and I'm eager to see their continued contribution. Last quarter, we also announced our intention to restructure our securities portfolio. We were successful with this plan, and Doug will talk more about the strategy and the results in a few minutes. The results of the restructuring enabled Northwest to purchase higher-yielding securities, as well as significantly reduce our overnight borrowing. A portion of the benefits showed up in our net interest margin improvement for this. Overall, I'm pleased with our core financial results, and I'm confident the positive changes to our security portfolio will enable a strong position for Northwest for the coming quarters and years to come.
J.D. Martel: Each unit is outperforming our early expectations, and I'm eager to see their continued contributions.
J.D. Martel: Last quarter, we also announced our intention to restructure our securities portfolio. We were successful with this plan, and Doug will talk more about the strategy and our results in a few minutes.
Doug: The results of the restructure enabled Northwest to purchase higher yielding securities as well as significantly reduced our overnight borrowing.
Doug: A portion of the benefits showed up in our net interest margin improvement for this quarter.
Speaker Change: Overall, I'm pleased with our core financial results, and I'm confident the positive changes to our security portfolio will enable a strong position for Northwest for the coming quarters and years ahead.
Lewis Torshio: I want to thank each and every team member for their talent and dedication to produce these results. I'm proud of your hard work and focus on our customers and our community. I'm also pleased to notify you that the impact on our bank operations from the CrowdStrike IT issue was minimal. All of our branches and ATMs were open and running, serving our customers. Personal and business customers have been able to access online banking, mobile banking, treasury pro, and wire funds without any. Finally, as we have for the past 119 quarters, on behalf of the Board of Directors, I'm pleased to declare a quarterly dividend of 20 cents per share to shareholders of record as of August 2nd, 2021. Now, I'd like to introduce Doug Shosser, Northwest Banks' Chief Financial Officer, as he will take you through our financial results. Doug
Speaker Change: I want to thank each and every team member for their talent and dedication to produce these results. I'm proud of your hard work and focus on our customers and our communities.
Speaker Change: I'm also pleased to notify you that the impact to our bank operations from the CrowdStrike IT issue was minimal. All of our branches and ATMs were open and running, servicing our customers.
Speaker Change: personal and business customers have been able to access online banking, mobile banking, treasury pro, and wire funds without incident.
Speaker Change: Finally, as we have for the past 119 quarters, on behalf of the Board of Directors, I'm pleased to declare a quarterly dividend of $0.20 per share to shareholders of record as of August 2, 2024.
Doug Shosser: Now, I'd like to introduce Doug Shosser, Northwest Bank's Chief Financial Officer, as he will take you through our financial results. Doug?
Douglas Chaucer: Thank you, Lou. Good morning, everyone.
Douglas Chaucer: Please look to page four in Ernie's presentation as I cover the financial resorts Northwest posted for the second quarter of 2020. We announce that revenue for the quarter of $5 million or $0.04 per deluded share. After adjusting for the security's loss and restructuring charges, EPS is $0.27 per share and $0.05 above analysts' expectations. We completed our previously announced securities restructure, hitting our target on the reinvestments, which I will discuss later. Loan growth was more muted this quarter as we focused on improving our new loan yield rather than seeking loan growth more aggressively.
Doug Shosser: Thank you, Lou. Good morning, everyone. Please look to page 4 in the earnings presentation as I cover the financial resorts Northwest posted for the second quarter of 2024.
Speaker Change: We announce that income for the quarter of $5 million or $0.04 per diluted share.
Speaker Change: After adjusting for the security's loss and restructuring charges, EPS is $0.27 per share and $0.05 above analysts' consensus estimate.
Speaker Change: We completed our previously announced securities restructure, hitting our target on the reinvestments, which I will discuss later.
Speaker Change: Loan growth was more muted this quarter as we focused on improving our new loan yield rather than seeking loan growth more aggressively. These actions resulted in an improving net interest margin, which after bottoming in the first quarter rebounded to 320 basis points during the second quarter.
Douglas Chaucer: These actions resulted in an improving benefits margin, which after bottoming in the first quarter, rebounded to $320,000. The income was improved over the first quarter due to strong SBA originations, while not interest expenses were maintained at the $90 million level after we addressed for some restructuring costs incurred in the quarter. Credit quality remains very good, and overall allowance coverage increased slightly to 1.10% or less. Now, I will get into some additional details.
Speaker Change: quarter.
Speaker Change: The income was improved over the first quarter due to strong SBA originations while not interest expenses were maintained at the $90 million level after we addressed for some restructuring costs incurred in the quarter.
Speaker Change: Credit quality remains very good and overall allowance coverage increased slightly to 1.10 percent of loans. Now I will get into some additional details.
Douglas Chaucer: Turning to slide 5, you will see the results of the restructuring so far. We sold $314 million, or 15% of our portfolio, at a loss of $39.4 million pre-tax, with an average yield of 1.79%. We reinvested $258 million of the proceeds with an average yield of $6.5 million. This represents a yield pickup of over 420 percent, with an anticipated payback of three years or less. The average overall portfolio yield now stands at 2.45%, compared to 1.96% at the end of the first quarter. These results met or even exceeded initial expectations.
Speaker Change: Turning to slide 5, you will see the results of the restructuring so far.
Speaker Change: We sold $314 million, or 15% of our portfolio, at a loss of $39.4 million pre-tax, with an average yield of 1.79%. We reinvested $258 million of the proceeds, with an average yield of 6%.
Speaker Change: This represents a yield pickup of over 420 basis points.
Speaker Change: with an anticipated payback of three years or less. The average overall portfolio yield now stands at 2.45% compared to 1.96% at the end of the first quarter. These results met or even exceeded initial expectations.
Douglas Chaucer: Next, I'll speak to our Loan Portfolio, which can be found on page 2. Most notably, you'll see that our commercial and industrial loans grew 3.2% since last quarter and 33.4% since the same quarter last year, while residential mortgages declined $143 million or $4.1 billion.
Speaker Change: Next, I'll speak to our loan portfolio, which can be found on page 6.
Speaker Change: Most notably, you'll see that our commercial and industrial loans grew 3.2% since last quarter and 33.4% since the same quarter last year.
Speaker Change: While residential mortgages declined $143 million or 4.1% since last year.
Douglas Chaucer: In these earlier points, this demonstrates the results of our commercial banking transformation. While our commercial real estate portfolio grew modestly, less than 1% since last quarter, you can see the change in the loan mix to a more desirable share of C&I compared to CRM. Included within this group is the discipline to grow profitably, maintaining adequate margins on new loans or existing loans. You'll see in the bottom right chart that our loan yield has grown steadily quarter over quarter for the last five quarters and now stands at 5.47%. On the next page, 7, I will cover the process.
Speaker Change: year. In these earlier points, this demonstrates the results of our commercial banking transformation.
Speaker Change: While our commercial real estate portfolio grew modestly, less than 1% since last quarter, you can see the change in the loan mix to a more desirable share of C&I compared to CRE.
Speaker Change: Included within this group is the discipline to grow profitably, maintaining adequate margins on new loans originated.
Speaker Change: You'll see in the bottom right chart that our loan yield has grown steadily quarter over quarter for the last five quarters and now stands at 5.47%.
Douglas Chaucer: Largely due to competitive pricing and continual marketing efforts, deposits grew by 1.6% since the last quarter and 5.8% since the same period last year, while our cost of deposits grew by 15 basis points, which represents the lowest increase in the past five quarters. Most deposit growth was within our consumer time deposit product category, with modest growth in both consumer savings and non-interest demand. The current cost of deposits stands at $1.76, which is near best in class relative to our current cost.
Speaker Change: On the next page, seven, I will cover the process.
Speaker Change: Largely due to competitive pricing and continual marketing efforts, deposits grew by 1.6 percent since the last quarter and 5.8 percent since the same period last year. While our cost of deposits grew by 15 basis points,
Speaker Change: that represents the lowest increase in the past five quarters. Most deposit growth was within our consumer time deposit product category with modest growth in both consumer savings and non-interest demand accounts.
Speaker Change: The current cost of deposits stands at 1.76, which is near best-in-class relative to our peers.
Douglas Chaucer: On page C, I will cover net interest margin, which now stands at $320,000. There were 10 basis point improvements from the first quarter and 8 basis points lower than the same quarter last year. Net interest income grew from $104 million at the end of the last quarter to $108 million, or approximately 4%.
Speaker Change: On page C, I will cover net interest margin, which now stands at 320 basis points.
Speaker Change: for a 10-basis point improvement from the first quarter and 8-basis points lower than the same quarter last year.
Speaker Change: Net interest income grew from $104 million at the end of the last quarter to $108 million, or approximately 4%.
Douglas Chaucer: This is the first quarter with NIM growth since a year ago and reflects the impact of reduced borrowings, higher loan yields, and a slower pace of growth in our cost of funds. We remain diligent in managing our deposit growth and pricing strategy alongside prudent loan pricing. We ended the quarter with a cost per fund of $2.8 million. That interest income, covered on slide 9, grew 9% or $2.6 million quarter over quarter, excluding the loss incurred from the securities restructuring. As I mentioned previously, the gain on the sale of SBA went through about $67.
Speaker Change: This is the first quarter with NIM growth since a year ago and reflects the impact of reduced borrowing, higher loan yields, and a slower pace of growth of our cost of funds.
Speaker Change: We remain diligent and managing of the profit growth and pricing strategy alongside prudent loan pricing. We ended the quarter with a cost of funds of 2.4%.
Speaker Change: That interest income, covered on slide nine, grew 9% or $2.6 million quarter over quarter, excluding the loss incurred from the securities restructuring.
Speaker Change: As I mentioned previously, the gain on the sale of SBA went up by 67%.
Douglas Chaucer: We also fund gains year over year in trustees' and consumer deposit charges. Slide 10 shows details of our non-interest expense. Our efficiency ratio improved to 65.4% despite modestly rising... However, if you adjust out one-time costs incurred due to the termination of John Goldman's contract, expenses are essentially flat for the quarter. We remain focused on expense management, making smart decisions to outsource work previously produced by more expensive third-party professional services. We continue to be focused on finding additional cost reduction without impacting core operating activities or diminishing the service level that customers have come to expect, and maintaining a well-managed economy. A few comments on credit.
Speaker Change: We also fund gains year-over-year in trustees and consumer deposit charges, service charges.
Speaker Change: Slide 10 shows details of our non-interest expense.
Speaker Change: Our efficiency ratio improved to 65.4 percent despite modestly rising expenses. However, if we adjust out one-time costs incurred due to termination of John Goldman's contract, expenses are essentially flat for the quarter. We remain focused on expense management.
Speaker Change: for making smart decisions to insource work previously produced by more expensive third-party professional services firms.
Speaker Change: We continue to be focused on finding additional cost reductions without impacting core operating activities or diminishing the service level that customers have come to expect and maintaining a well-managed institution.
Douglas Chaucer: On page 11, our allowance to loans coverage increased slightly to 1.10% with net charge-offs of just 7 basis points for the quarter. As seen on page 12, overall credit performance remains strong, although we did see a slight increase in non-performing assets. However, these increases can result from small changes to the overall low level of classified assets today.
Speaker Change: A few comments on credit quality.
Speaker Change: On page 11, our allowance to loans coverage increased slightly to 1.10%, with net charge-offs of just 7 basis points for the quarter.
Speaker Change: As seen on page 12, overall credit performance remained strong, although we did see a slight increase in non-performing assets.
Speaker Change: However, these increases can result from small changes giving an overall low level of classified assets today.
Douglas Chaucer: Slide 13 shows our commercial loan concentration. As you can see from the graphs, we have a diverse portfolio. Backed by strong underwriting, we've been able to avoid many of the CRE-specific issues, and we do not have material risk with exposure in large metro offices or rent-controlled markets. Our health care sector, which has seen some challenges recently, is currently beginning to show signs of improvement. Page 14 summarizes the balance sheet changes I just shared with you and also shows our estimated capital ratios that remain very strong. We expect to report a 13.18% CBT 1 capital ratio and an 11 basis point improvement on our TCE to tangible asset ratio, which will be 8.37. Finally, I will cover our outlook for the second half of. We'll stay focused on responsible and profitable loan growth in the commercial space, specifically CMI lending.
Speaker Change: Slide 13 shows our commercial loan concentration. As you can see from the graphs, we have a diverse portfolio backed by strong underwriting. We've been able to avoid many of the CRE-specific issues, and we do not have material risk with exposure in large metro office or rent-controlled markets.
Speaker Change: Our healthcare sector, which has seen some challenges recently, is currently beginning to show signs of improvement.
Speaker Change: Page 14 summarizes the balance sheet changes I just shared with you, and also shows our estimated capital ratios that remain very strong. We expect to report a 13.18% CBT-1 capital ratio and an 11 basis point improvement on our TCE to Tangible Asset Ratio.
Speaker Change: which will be 8.37 percent.
Speaker Change: Finally, I will cover our outlook for the second half of the year.
Speaker Change: will stay focused on responsible and profitable loan growth in the commercial space, specifically CMI lending. We anticipate low single-digit loan growth.
Douglas Chaucer: We anticipate low single-digit lending. We expect deposits to remain largely flat, and we will manage our deposit costs while balancing client expectations and market pressure. That, combined with disciplined loan pricing, will allow for a modest expansion of net interest. We expect modest growth of 0% to 2% in non-interest income, and we remain focused on keeping expenses flat. This will have a positive impact on our efficiency. Both our tax rate and net charge-offs are expected to normalize closer to Q1 2024.
Speaker Change: We expect deposits to remain largely flat, and we will manage our deposit costs while balancing client expectations and market pressures.
Speaker Change: That combined with disciplined loan pricing will allow for modest expansion of the non-interest margin.
Speaker Change: We expect minus growth of 0% to 2% in non-interest income.
Speaker Change: And we remain focused on keeping expenses flat. This will have a positive impact on our efficiency ratio.
Speaker Change: with our tax rate and net charge ups are expected to normalize closer to Q1 2024.
Douglas Chaucer: On behalf of the entire leadership team and Board of Directors, thank you for joining us this morning. At this time, I'll turn the call over to Desiree, our Operator, who will provide a lot of questions and answers. Thank you. We will now begin our question and answer session.
Speaker Change: On behalf of the entire leadership team and board of directors, thank you for joining us this morning. At this time, I'll turn the call over to Desiree, our operator, who will take a lot of questions and answers. Thank you.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of Team Switzer with KBW. Your line is open.
Desiree: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Desiree: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue.
Speaker Change: Your first question comes from the line of Team Switzer with KBW. Your line is open.
Team Switzer: Hey, good morning. Thank you for taking my questions. We really appreciate you guys doing the conference call and the updated presentation and guidance. It's great.
Speaker Change: Hey, good morning. Thank you for taking my questions. We really appreciate you guys doing the conference call and the updated presentation and guidance. It's great.
Lewis Torshio: Thank you, Tim. It's nice to hear from you this morning.
Team Switzer: My first question is on the timing and impact of the security restructuring. It seems like from the presentation that it maybe had up to a 13 basis point impact on the margin this quarter. Could you guys maybe provide some details on the timing of it over the course of the quarter and then what's the impact we should expect in Q3?
Speaker Change: Thank you, Tim. Nice to hear from you this morning.
Speaker Change: My first question is on the timing and impact of...
Speaker Change: The security restructuring it seems like from the presentation it may be had
Speaker Change: Up to a 13 basis point impact on the margin this quarter Could you guys maybe provide some details on the the timing of it over the course of the quarter and then What's the impact we should expect in Q3?
Douglas Chaucer: Sure. We started it. We started the restructuring in the middle towards the end of the quarter. Most of the sales were in late May and early June. We finished all of the selling activity towards the end of June, and we have a little bit more, about $20 million, give or take, to redeploy into some asset classes that have a little less supply in the market. So that was the timing. So we will be at a full quarter benefit next year, and we would expect that to be an incremental four to five days.
Speaker Change: Sure. We started...
Speaker Change: We started the restructuring in the middle towards the end of the quarter. Most of the sales were late May and early June .
Speaker Change: We finished all of the selling activity towards the end of June . We have a little bit more about $20 million, give or take, to redeploy into some asset classes that have a little less supply in the market.
Speaker Change: So, that was the timing, so we will get April quarter's benefit next year, and we would expect that to be incremental four to five basis points.
Douglas Chaucer: in incremental fortified basis points in Q3. Correct, on the investment portfolio. Okay, and is that guide? Nine, nine total basis points for the mark. Okay, and should we assume some incremental NIM expansion on like a core basis on top of that in Q3 and Q4, or is that going to be the primary driver?
Speaker Change: in incremental fortified basis points in Q3.
Speaker Change: Correct, on the investment portfolio.
Speaker Change: Okay, and is that guided? Nine, nine total basis points for the margins.
Speaker Change: Okay. And should we assume some incremental NIM expansion on, like, a core basis on top of that in Q3 and Q4, or is that going to be the primary driver?
Douglas Chaucer: We continue to focus on our ability to price in this market, so I think there is some opportunity for some additional core margin growth based on, you know, how we handle deposit pricing opportunities as well as loan volumes in the quarter.
Speaker Change: We continue to focus on our ability to price in this market so I think there is some opportunity for some additional core margin growth based on
Speaker Change: you know, how we handle deposit pricing opportunities as well as loan volumes in the quarter.
Team Switzer: Okay, great. And then if I could ask,
Douglas Chaucer: I followed up and got kind of clarifying exactly what's intended in the guidance on the non-interest income and expense side, you're guiding low single-digit growth off of the adjusted base per quarter. Do we take, like, the average in the first half of the year and just add low single-digit growth on top of that? Or is it low single-digit growth in Q3 relative to Q2 and then low single-digit growth in Q4 relative to Q3?
Speaker Change: Okay, great. And then if I could ask.
Speaker Change: A follow-up. Kind of clarifying exactly what's intended in the guidance. On the non-interest income and expense side, you're guiding the low single-digit growth off of the adjusted base per quarter. Do we take
Speaker Change: like the average in the first half of the year and just
Speaker Change: Add low single-digit growth on top of that, or is it low single-digit growth in Q3 relative to Q2, and then low single-digit growth in Q4 relative to Q3?
Douglas Chaucer: I think it's low single-digit growth on the adjusted Q2 numbers, and I wouldn't necessarily say that it's 2% per quarter; it's 2% over the course of the year. Got you. Okay, that's very
Speaker Change: I think it's low single-digit growth on the adjusted Q2 numbers and I wouldn't necessarily say that it's 2% per quarter, it's 2% over the course of the year.
Team Switzer: Got you. Okay, that's very clear. I'll get back in the queue. Thank you.
Speaker Change: Got you. Okay, that's very clear. I'll get back in the queue. Thank you.
Speaker Change: Okay, thank you.
Daniel Damayo: Your next question comes from the line of Daniel Damayo with Raymond James. Your line is open.
Speaker Change: Your next question comes from the line of Daniel Damayo with Raymond James. Your line is open.
Tim DeLacy: Hey, good morning guys. This is Tim DeLacy filling in for Danny.
Lewis Torshio: I'll echo the comments. Thank you for hosting the call and taking my questions this morning. Um, you know, first off...
Speaker Change: Hey, good morning guys. This is Tim DeLacy filling in for Danny. I'll echo the comments. Thanks for hosting the call and taking my questions this morning.
Tim DeLacy: Thank you. First quarter in a while here where commercial growth was not very strong, and you alluded to the comment on keeping the loan yields advantageous for you. Can you talk about if that reflects maybe a change in the competitive dynamics with potential new entrants in the markets? And then, perhaps, as a follow-up, can you talk about how current pipelines are compared to the last few quarters in that commercial portfolio? Thanks.
Speaker Change: You know, first off.
Speaker Change: Yeah, thank you. First quarter in a while here where, you know, commercial growth was not very strong and, you know, you alluded to the comment on keeping the low yields advantageous for you.
Speaker Change: Can you talk about if that reflects maybe a change in the competitive dynamics with, you know, potential new entrants in the markets? And then, you know, perhaps a follow-up, can you talk about how current pipelines are comparatively to the last few quarters in that commercial portfolio? Thanks.
Lewis Torshio: Yeah, I wouldn't say it's due to higher levels of competition. I think it's due to both credit discipline and pricing discipline as we look at opportunities. I will say we did have some higher levels of runoff in our portfolio than we were expecting, so that put some downward pressure on the overall balance growth for the quarter. But we wouldn't expect that level of payoffs to continue. As for our pipelines, we are seeing pipelines that are similar this quarter, and we wouldn't expect to have continued reductions in loan balances across the portfolios because, again, we're expecting that runoff to not have as big of an impact on us going forward. But, again, that runoff is outside of our control. In certain cases, it was corporate transactions and things that changed.
Speaker Change: Yeah, I wouldn't say it's due to higher levels of competition. I think it is due to both credit discipline and pricing discipline as we look at opportunities.
Speaker Change: I will say we did have some higher levels of runoff in our portfolio than we were expecting, so that put some downward pressure on the overall balance growth for the quarter. We wouldn't expect that level of payoffs to continue. As for our pipelines, we are seeing pipelines that are similar.
Speaker Change: This quarter
Speaker Change: to last quarter, and we didn't expect to have continued reductions in loan balances across the portfolios because, again, we're expecting that runoff to not be as big of an impact on us going forward. But, again, that runoff is outside of our control. In certain cases, it was corporate transactions and things that just
Speaker Change: created some earlier-than-anticipated paydowns.
Tim DeLacy: Great, I appreciate that color there. Then maybe switching over to the credit, you know, cost did remain low for the quarter. Did see, you know, did accruals pick up in the commercial, and then you did specifically mention that one single credit. Is there any detail that you can provide on that from an industry vertical and then maybe the trends you're seeing overall in that portfolio?
Speaker Change: Great, I appreciate that color there.
Speaker Change: Then maybe switching over to the credit, you know, cost and remain over low for the quarter. It gives you, you know, did not accruals pick up in the commercial and then you
Speaker Change: did specifically mention that one single credit. Is there any detail that you can provide on that from an industry vertical and then maybe the trends you're seeing overall on that portfolio?
Douglas Chaucer: Yeah, I mean, I don't think that we're getting into that level of disclosure on this call. I would just say, as we stated in our earlier comments, some of the healthcare portfolio has shown some signs of stress, but we believe that that is getting better, or at least normalizing, and we did guide to a more normalized overall provision level. So I think over the cycle, we would say our overall charge-off number would be 15 to 20 basis points. We don't know that we'll get there next quarter, but you should see credit normalization over time.
Speaker Change: Yeah, I mean, I don't think that we're getting into that level of disclosure on this call. I would just say, as we stated in our earlier comments, some of the healthcare portfolio has shown some signs of stress, but we believe that
Speaker Change: That is getting better, or at least normalizing, and we did guide to a more normalized overall provision level. So I think over the cycle, we would say our overall, you know, charge off number would be 15 to 20 basis points. I don't know that we'll get there next quarter, but.
Speaker Change: you know, you should see that credit normalization over time.
Tim DeLacy: Okay, great. That's all that I had today. Thank you for taking my question.
Speaker Change: Okay, great. That's all that I had today. Thank you for taking my questions.
Speaker Change: Okay, you're welcome.
Frank Chiraldi: The next question comes from the line of Frank Chiraldi with Piper Sandler. Your line is open.
Speaker Change: Next question comes from the line of Frank Chiraldi with Piper Sandler. Your line is open.
Frank Chiraldi: Good morning. Good morning.
Frank Chiraldi: Just first on expenses, just want to make sure I heard you correctly. So when we're looking at the guidance, you talked about low single-digit growth in the back half of the year annualized off of normalized 2Q numbers. Just saying it another way, is that the right way to think about it?
Speaker Change: Good morning. Good morning. Just first on expenses, just want to make sure I heard you correctly. So when we're looking at the guidance, you talk about low single-digit growth. So that's low single-digit growth.
Speaker Change: in the back half of the year annualized off of normalized 2Q numbers?
Speaker Change: Just saying it a different way, is that the right way to think about it?
Douglas Chaucer: I think last quarter we talked about a $90 million per quarter expense number. I still think that's fairly good.
Speaker Change: I think last quarter we talked about a $90 million per quarter expense number. I still think that's...
Douglas Chaucer: So depending on how you look at the second quarter, again, we're looking forward to saying it's going to be around $90 million, give or take, you know, 2% of that. Again, I don't think it's sustained expense growth. We continue to focus on expenses, but, you know, there's a lot of uncertainty. So we continue to, you know, look for opportunities to drive overall profitability. But again, on the conservative side, we're at that $90 million, plus or minus 2% over the course of the year.
Speaker Change: Fairly good. So depending on how you look at second quarter, again, we're looking forward saying it's going to be around $90 million, give or take, you know, 2% of that. Again, I don't think it's sustained expense growth. We continue to focus on expenses, but
Speaker Change: You know, there's a lot of uncertainty, so we continue to, you know, look for opportunities to drive overall profitability. But again, on the conservative side, we're at that $90 million, plus or minus 2% over the course of the year and a quarter.
Lewis Torshio: Gotcha, okay. And then just switching gears as a follow-up, just the macro picture seems to have improved a bit, certainly at least stabilized, and bank stocks certainly reacted positively over the last month or so. So just wondering your thoughts, if your appetites have changed at all for M&A, and your updated thoughts there on opportunities in the near term.
Speaker Change: Okay, and then just switching gears as a follow-up just you know the macro picture seems to have to improve a bit certainly at least stabilized and and bank stocks
Speaker Change: Certainly reacted positively over the last month or so. So just wondering your thoughts if they your appetites change at all for M&A Your updated thoughts there on opportunities in the in the near term
Lewis Torshio: Hey Frank, it's Lou. Thanks for the question. Really, I think with the deployment of our capital strategy, it continues to be one to protect and deliver on the dividend. Secondly, we are focused on organic growth and optimizing and transitioning the firm over time, which is our stated goal. And then certainly, thirdly, acquisition. We have a strategy, and conversations are picking up, whether that means expanding our geography into higher-growth markets, whether it's acquiring an institution that brings businesses that we otherwise wouldn't have, or whether it's a deposit play, or really a combination of all of that.
Speaker Change: Hey Frank, it's Lou. Thanks for the question. Really, I think, you know, with the deployment of our capital strategy, it continues to be, one, protect and deliver on the dividend. Secondly,
Speaker Change: We are focused on organic growth and optimizing and transitioning the firm over time, which is our stated goal. And then certainly, thirdly, acquisitions.
Speaker Change: We
Speaker Change: We have a strategy, conversations are picking up, whether that means expanding our geography.
Speaker Change: into higher growth markets, whether it's acquiring an institution that brings businesses that we otherwise don't have, or whether it's a deposit play or really a combination of all of that. So we are actively having conversations. We're interested in growing organically and inorganically.
Lewis Torshio: So we are actively having conversations; we're interested in growing organically and inorganically. And then, of course, lastly, would be any buybacks as a result of our capital position. So yeah, we do see the market clearing. There are more conversations going on, and we are interested. But we're going to be pretty selective. We want to make sure that, strategically, it propels us to where we want to go.
Speaker Change: And then, of course, lastly would be any buybacks as a result of our capital position.
Speaker Change: So, yeah, we do see the market clearing. There are more conversations going on, and we are interested. But we're going to be pretty selective. We want to make sure that strategically it propels us to where we want to go.
Frank Chiraldi: And then just in terms of geography, would it be, if there is some expansion, would you still expect that to be contiguous expansion, and any thoughts on the most attractive geographies as you look out at potential, the potential for M&A?
Speaker Change: And then just in terms of geography, would it be, if there is some expansion, you know, would you still expect that to be contiguous expansion? And any thoughts on most attractive geographies as you look out at potential, the potential for M&A?
Lewis Torshio: Yeah, I mean, we certainly would consider in-market as well. We think, you know, it's a little bit lower risk, it's higher execution, but certainly, we'd like to grow, as I said, in some different markets that provide more opportunities for the franchise.
Speaker Change: Yeah, I mean, we certainly would consider in-market as well. We think, you know, it's a little bit lower risk, it's a higher execution, but certainly we'd like to grow, as I said, in some...
Frank Chiraldi: We certainly are based here in Columbus now. Ohio is the focus of ours. Indiana, specifically the Indianapolis area, would be a focus, and we are focused primarily on the contiguous footprint. So the four states we're in, think about the contiguous states around those states. So, as you know, we can only evaluate the opportunities that are presented to us, but we will be fairly selective in deploying capital. Great Thanks.
Speaker Change: Some different markets that provide more opportunity for the franchise We certainly are based here in Columbus now, Ohio is the focus of ours, Indiana
Speaker Change: Specifically, the Indianapolis area would be a focus. And we are focused primarily, I really don't see us going outside of contiguous footprint. So the four states we're in, think about the contiguous states around those states.
Speaker Change: So, as you know, we can only evaluate the opportunities that are presented to us, but we will be fairly selective in deploying capital.
Frank Chiraldi: Great. Thanks for the call, Eric.
Speaker Change: Great. Thanks for the call, Eric.
Speaker Change: Thank you.
Daniel Cardenas: The next question comes from the line of Daniel Cardenas with Jenn. Your line is open.
Speaker Change: Next question comes from the line of Daniel Cardenas Vigen. Your line is open.
Daniel Cardenas: Morning guys, just some follow-up on the margin. What kind of rate cut assumptions are baked, if any, into your margin guidance? Yeah.
Daniel Cardenas: Good morning guys. Just some follow-up on the margin, what kind of rate cut assumptions are baked, if any, are baked into your margin guidance?
Douglas Chaucer: Yeah, last time we looked at it, we were looking at about three cuts over the course of the year for the final year as part of our margin guidance. Again, you know, I think we're pretty well positioned to handle, you know, if it comes out to be two or something like that, but we definitely were providing guidance given the more current information.
Speaker Change: Yeah, last time we looked at it, we were looking at about three cuts over the course of the year, for the final year, as part of our margin guidance, again.
Speaker Change: You know, I think we're pretty well positioned to handle, you know, if it comes out to be two or something like that, but we definitely were providing guidance given the more current bed stamps.
Douglas Chaucer: And then so for every 25 basis points, what kind of cuts, what kind of impact does that have on the margin?
Speaker Change: And then, so for every 25 basis points, what kind of cuts, what kind of impact does that have on the margin?
Jeffrey Madigan: I might turn that over to Jeff to answer more specifically.
Jeffrey Madigan: Yeah, I think because of, you know, where they come in. So, you know, we're kind of assuming there's, you know, September and then late in the year. So, you know, certainly the last two don't have that much impact.
Speaker Change: I might turn that over to Jeff to answer more specifically.
Jeff: Yeah, I think because of, you know, where they come in. So, you know, we're kind of assuming there's, you know, September and then late in the year. So, you know, certainly the last two don't have that much impact. We do think our, you know, we'll be able to bring deposit prices down in line with any kind of cuts.
Douglas Chaucer: We do think our, you know, we'll be able to bring deposit prices down in line with any kind of cuts to kind of help buffer margin and, if anything, continue to keep increasing margin as our guidance suggests. So really gets to that deposit, our ability to bring down deposit costs. We just think that given the competition, or what the competition is facing in margin compression, that they'll be eager to bring costs down as well. So we think there'll be some ability there.
Jeff: to kind of help buffer margin and if anything, continue to keep increasing margin as our guidance suggests. So really gets to that deposit, our ability to bring down deposit costs. We just think that given the competition or what the competition is facing in margin compression that they'll be eager to bring costs down as well. So we think there'll be some ability to do that.
Daniel Cardenas: Great, thank you. And then what's your CRE ratio, or concentration ratio, look like in the quarter?
Speaker Change: Okay, great. Thank you. And then what's your CRE ratio, concentration ratio, look like at quarter end?
Douglas Chaucer: Hold that number. I think that was on the earnings deck in the loan section, page 13. Uh, flip to page 3. That just shows the overall concentration you're looking for in the portfolio for Sierra Eto's $3 billion under development.
Speaker Change: Hold that number, just a second.
Speaker Change: I think that was on the earnings deck on the loan section, if I recall.
Speaker Change: Page 13, what's at page 13?
Speaker Change: That just shows the overall concentration. You're looking for percent of the portfolio for Sierra Ethos, $3 billion under level. I'm just kind of looking for the regulatory number of that.
Douglas Chaucer: I'm just kind of looking for the regulatory number that everybody's looking at right now. All right, yeah, give us one second. We'll pull that for you.
Douglas Chaucer: All right, yeah, give us one second. We'll pull that for you. Yeah. We'll come back if you have another question before that one, and we can come back and clean that up. Yeah.
Speaker Change: Everybody's looking at right now. All right. Yeah, give us one second. We'll pull that for you.
Speaker Change: Okay.
Speaker Change: We'll come back if you have another question before that one and we can come back and clean that up.
Daniel Cardenas: Yes, sure, no problem. And then on the operating expense side, thanks for the color there as well.
Speaker Change: Yeah, sure, no problem.
Speaker Change: And then on the operating expense side, you know, thanks for the color there as well. I know there's been some branch rationalization exercises that have gone through. Is that pretty much done? Or could we maybe expect to see a few more branch closures?
Lewis Torshio: I know there's been some branch rationalization exercises that you guys have gone through. Is that pretty much done, or could we maybe expect to see a few more branch closures here in the second half of the year? Yeah, hi, this is Lou.
Speaker Change: here in the second half of the year.
Lewis Torshio: We don't anticipate, really, any further branch closures. I mean, we are looking at a multi-year plan for consumers, both investing in the franchise, as well as there may be some two-for-ones, some consolidation, or we're looking at, really, a branch of the future modernization plan, but nothing meaningful. We think we've really exhausted the branch closure piece for the organization. So then when I think about expenses, then our technology investments are really going to be the biggest.
Speaker Change: Yeah, hi, this is Lou. We don't anticipate really any further branch closures. I mean, we are looking at a multi-year plan for consumers, both investing in the franchise.
Speaker Change: as well as, there may be some two-for-ones, some consolidation, and we're looking at, really, a bring-to-the-future modernization plan, but nothing meaningful. We think we've...
Speaker Change: really exhausted the branch closure piece for the organization.
Speaker Change: All right, so then I think about expenses then. Are technology investments really going to be the biggest growth driver here on a go-forward basis?
Douglas Chaucer: The biggest growth driver here on a go-forward basis
Douglas Chaucer: No, I mean, if you look at our commercial strategy, we've been building up multiple verticals, as Lou mentioned in his initial comments, so those have not even been online for a full year yet.
Speaker Change: No, I mean, we've got if you look at our commercial strategy, we've been building up multiple verticals, as we mentioned in his originating comments. So those have not even been online for a full year yet. So we can expect
Douglas Chaucer: So we can expect as those verticals mature, we would expect to get more production out of them for a full year in 2025, as opposed to what they did for a partial year in 2024. And then as we have brought URIC onto the scene to run consumer, I also think we'll see sort of a different level of execution within our branches to drive some organic growth that way. So I think we've got levers for growth right now that we're going to focus on over the course of the next year. And we should be able to derive growth just from those types of blocking and tackling activities as well as having full years across these commercial verticals.
Speaker Change: As those verticals mature, we would expect to get more production out of them for a full year 2025, as opposed to what they did for a partial year in 2024. And then, as we have brought UREC.
Speaker Change: on to the scene to one consumer, I also think we'll see.
Speaker Change: sort of a different level of execution within our branches.
Speaker Change: to drive some organic growth that way. So I think we've got.
Speaker Change: levers for growth right now that we're going to focus on over the course of the next year, and we should be able to derive growth just from sort of those types of blocking and tackling activities as well as having full years across these commercial verticals.
Douglas Chaucer: I would add, specifically around your expense question, we have invested a lot in our IT stack. We have invested in our risk management and our commercial credit acumen at the organization. So we are building the firm both from a regulatory and from an operating platform to be able to scale the organization and, you know, sort of remix the balance sheet, as we described, and grow organically. So that run rate that you see has a lot of investment already embedded in it.
Douglas Chaucer: I would
Speaker Change: I would add also, specifically around your expense question, we have
Speaker Change: invested a lot in our IT stack. We have invested in our risk management and our commercial credit acumen at the organization. So we are we are building the firm both from a regulatory and from a
Speaker Change: operating platform to be able to scale the organization and you know sort of remix the balance sheet as we described in and grow organically. So that run rate that you see has a lot of investment already embedded in it.
Daniel Cardenas: Great. Thanks. That's all I have for right now.
Douglas Chaucer: The CRE concentration is 168.
Speaker Change: Okay, great. Thanks. That's all I have for right now.
Speaker Change: The CRE concentration is 168%.
David Mirochnik: The next question comes from the line of David Mirochnik with Stevens. Your line is open.
Speaker Change: Next question comes from the line of David Mirochnik with Stevens. Your line is open.
David Mirochnik: Hey, good morning. This is David on behalf of Matt Breeze. Morning, David. I was wondering if we could start, if you guys could talk about the loan book, just in terms of how much of the book is pure floating rate, as in we'll reprice within three months, and then, just maybe...
David Mirochnik: Hey, good morning. This is David on for Matt Brees.
Douglas Chaucer: Yeah, absolutely. On the commercial book we would have, 53% of that would be floating. The overall book, it would be 27%.
Speaker Change: Good morning, David.
David Mirochnik: I was wondering if we could start, if you guys could talk on the loan book, just in terms of if you guys know what percent of the book is pure floating rate, as in we'll reprice within three months, and then just maybe what those are tied to.
Speaker Change: Yeah, absolutely. On the commercial book, we would have
Speaker Change: 53% of that would be floating. The overall book it would be 27% would be floating.
Douglas Chaucer: Great. And then is it safe to assume those are tied to Prime or SOFR, maybe a 200 or 250 spread?
Speaker Change: Great and then is it safe to assume those are tied to prime or SOFR maybe a 200 or 250 spread?
Douglas Chaucer: Yeah, I'll make that a good assumption.
Speaker Change: Yeah, I'll make that a good assumption.
Douglas Chaucer: And then, by chance, do you have the yield on, maybe the difference between the yield of the floating book and the yield on the fixed rate book?
Speaker Change: Great, and then by chance, do you have the yield on maybe the difference of the yield of the floating book and the yield on the fixed rate book?
Douglas Chaucer: Don't we can get back to you. Yeah, we'll have to get back to you, we'll have to follow up with that. I mean, we obviously can provide that.
Speaker Change: Bye.
Speaker Change: If we don't, we can get back.
Speaker Change: Yeah, we'll have to get back, we'll have to follow up with that, we obviously can provide that.
David Mirochnik: And then I guess just switching over to deposits, sorry if I missed it. You guys talk about maybe your expectations and where you think DDAs will kind of settle out and, maybe, in terms of, are you being more selective now and kind of looking at running off higher-cost deposits, as you guys kind of mentioned, looking at funding costs.
Speaker Change: No worries. And then I guess just switching over to deposits, sorry if I missed it. Do you guys talk about maybe your expectations and where you think PDAs will kind of settle out and maybe in terms are you being more selective now and kind of looking at running off higher cost deposits as you guys kind of mentioned looking at funding costs?
Douglas Chaucer: Yeah, I'm going to come back and answer your earlier question. I think we do have that statistics with us. I would tell you, as far as the deposit goes, we plan to look at our CD book as it matures and take advantage of, you know, keeping the maturities on that short and providing an opportunity for a reprice as a great super client in the market. And I would also say that we continue to look at our money market book, and that would have relatively high data on the way down, as would some of our business deposits.
Speaker Change: Yeah, I'm going to come back and answer your earlier question. I think we do have that statistic with us. I would tell you, as far as the deposit goes, right, we plan to look at our CD book as it matures and take advantage of.
Speaker Change: You know, keeping the maturity on that short and providing an opportunity for a reprice as great for supplying in the market
Speaker Change: And I would also say that we continue to look at our money market book.
Speaker Change: and that would have a relatively high data.
Douglas Chaucer: So again, I think where we have the opportunity to price deposits down, we'll take advantage of it. But, you know, we're also operating in a competitive market, and we want to maintain our overall deposit levels and potentially grow them. I think the earlier question you asked was what our floating rate yield was in the aggregate, and it's 7.9.
Speaker Change: on their way down, as would some of our business deposits. So again, I think where we have the opportunity to price deposits down, we'll take advantage of it. But, you know, we're also operating in a competitive market, and we want to maintain our overall deposit levels and potentially grow them. So that would be part of it.
Speaker Change: I think the earlier question you asked is what our floating rate yield was in the aggregate, and it's 7.95%.
David Mirochnik: Great, I appreciate that. And then lastly, if there's any kind of color you can give, maybe thoughts on the provision going forward, and will the reserve keep ticking higher if you see any pressure in the CNI space?
Speaker Change: Great, I appreciate that.
Speaker Change: And then last would just be if there's any kind of color you can give, maybe thoughts on the provision going forward and will the reserve maybe keep ticking higher if you see any pressure in the CNI space.
Douglas Chaucer: Yeah, I mean, again, you would expect the provision to go up if our char jobs go up in order to maintain our coverage ratio, so there is the potential for that. And then other than that, it's a feasible situation, right, where it's going to depend on the economic outlook overall. I wouldn't expect our provision is necessarily going to increase because we're putting on riskier credit. So I think the book we expect to maintain the level of credit risk that we take today, but it's going to be tied to both economic changes as well as sort of what happens.
Speaker Change: Yeah, I mean, again, you would expect the provision to go up if our charge-offs go up in order to maintain our coverage ratios, so there is the potential for that. And then, other than that, it's a diesel.
Speaker Change: situation, right, where it's going to depend on economic outlook overall. I wouldn't expect our provision is necessarily going to increase because we're putting on riskier credits.
Speaker Change: So I think the book we expect to maintain the level of credit risk that we take today But it's going to be tied to both economic changes as well as sort of what happens on the charge drop side
David Mirochnik: Got it. I appreciate it. Those are all my questions. Thanks for the time. Okay.
Speaker Change: Got it. I appreciate it. Those are all my questions. Thanks for the time.
Operator: Again, if you would like to ask a question, press star then the number 1 on your telephone keypad. We have another question came in. It comes from the line of Manuel Navas with DA Davidson. Their line is open.
Speaker Change: Okay, thank you.
Speaker Change: Again, if you would like to ask a question, press star then the number 1 on your telephone keypad.
Speaker Change: And we have another question came in, comes from the line of Manuel Navas with DA Davidson. Your line is open.
Manuel Navas: Hey, good morning. On the loan growth, I appreciate some of the commentary. Do you have the actual runoff that was this quarter that you had to fight against on the commercial side? Do you have a balance number?
Manuel Navas: Hey, good morning, man. Hey, so, uh...
Manuel Navas: On the loan growth, I appreciate some of the commentary. Do you have the actual runoff that was this quarter that you had to fight against on the commercial side? Do you have like a balance number?
Douglas Chaucer: I mean, I would just say it was, I don't know that we're going to get into all of those details, but it was not insignificant. Just give you a general direction. Yeah, I mean, you know, it was for $600,000.
Speaker Change: Thank you very much.
Speaker Change: I mean, I would just say it was, I don't know that we're going to get into all of those details, but it was not insignificant. Let me give you a general direction.
Speaker Change: Yeah, I mean, you know, it was.
Manuel Navas: And then if you talked about pipelines being very similar, which have been strong for a while. What specific lines are doing best? Is there any that you're starting to move away from because you are opening up a number of different business lines? Just wondering if you're at the point where you're winnowing any of them, or are all still performing excellently and still ramping up?
Speaker Change #100: $400 million to $600 million.
Speaker Change #100: Okay.
Speaker Change #100: and then if
Speaker Change #101: You talked about pipelines being very similar, which on the commercial side have been strong for a while.
Speaker Change #102: What specific lines are doing best? Is there any that you're starting to move away from because you are you're opening up a number of different business lines. Just wondering if you're at the point you're winnowing any of them or are all still performing excellently and still all ramping up?
Lewis Torshio: Yeah, my love. This is Lou. How are you doing?
Manuel Navas: Thanks for the question. Some of them are maturing quite nicely. Some will be more strategic than others. In addition to the verticals that we described, we are heading into strategic planning, and we'll be revisiting our lower middle market slash upper and business banking model inside our footprint as well, what that looks like, and what our go-to-market strategy is. So that'll see further development. Some of those businesses come with fees and deposits and are more strategic, while some are just asset generation.
Speaker Change #102: This is Lou. How are you doing?
Speaker Change #103: Yeah, thanks for the question.
Speaker Change #103: Some of them are maturing quite nicely. Some will be more strategic than others. In addition to the verticals that we described.
Speaker Change #103: We are heading into strategic planning, and we'll be revisiting our lower-middle market slash upper-end business banking model inside our footprint as well.
Speaker Change #103: What that looks like and what our go-to-market strategy is, so that'll see further development.
Speaker Change #103: Some of those businesses come...
Speaker Change #103: come with fees and deposits are more strategic and some are just asset generation, so...
Manuel Navas: So as we go through strategic planning, as the market evolves, and as we see how those mature, that will dictate our course of action as far as how we optimize. What we're looking to do is optimize performance as well as give ourselves enough latitude and levers to be able to transform the balance sheet as we've described.
Speaker Change #103: As we go through strategic planning, as the market evolves, and as we see how those mature,
Speaker Change #103: That will dictate our course of action as far as how we optimize. What we're looking to do is optimize performance as well as give ourselves enough latitude and levers to be able to transform the balance sheet as we've described previously.
Lewis Torshio: Now that I appreciate that and any other we are the big lines that you're calling out, okay?
Speaker Change #103: I hope that gives you a little color on that.
Speaker Change #104: Now that I do appreciate that and any we are the big lines that you're calling out. Oh, go ahead. I'm sorry
Manuel Navas: We are seeing really good success in our sponsored finance group and our SBA group that are contributing. Of course, equipment finance has been around, so it's been gestating for a while. Notwithstanding the market for that, given where those credits get put and where they lie on the curve, it's a little bit difficult, but we're seeing success there as well. We're really happy with Jay's leadership, and he's been able to recruit a great deal of talent from his former employers across his career to stand those up. They're relatively efficient, and so we're really pleased with that.
Speaker Change #105: We are seeing really good success in our sponsored finance group and our SBA group that are contributing.
Speaker Change #105: And, of course, equipment finance has been around, so it's been gestating for a while. And so we, notwithstanding the market for that given, you know, where those credits get put and where they lie on the curve is a little bit difficult, but we're seeing success there as well.
Speaker Change #105: So we're really happy with Jay's leadership and he's been able to procure a great deal of talent from his former
Speaker Change #105: employers across his career to be able to stand those up and they're relatively efficient and so we're really pleased with that.
Lewis Torshio: I appreciate the commentary. Do you have any insight on new loan yields in the pipeline on the commercial side?
Speaker Change #106: I appreciate the commentary. Do you have any insight on new loan yields in the pipeline on the commercial side?
Douglas Chaucer: We've been targeting seven and a half and better, so I would give you generic guidance around that level. Of course, each deal is unique and priced sort of individually, but I think, generally, if you think about that being a decent level to count on, obviously, higher is more attractive to us, but it's all risk-based pricing.
Speaker Change #107: We've been targeting seven and a half and better. So I would give you generic guidance around that level. Of course, each deal is unique and priced sort of individually. But I think generally, if you think about that being
Speaker Change #107: you know, a decent level to count on. You know, obviously higher is more attractive to us, but it's all risk based pricing.
Manuel Navas: Thank you. Thanks, guys. I'll step back into the queue.
Speaker Change #108: All right, thank you. Thanks guys. I'll step back into the queue.
Operator: There are no further questions at this time. Mr. Dock Chaucer, I turn the call back over to you.
Speaker Change #108: Thanks, everyone.
Speaker Change #109: There are no further questions at this time. Mr. Dock Chaucer, I turn the call back over to you.
Douglas Chaucer: Okay, well, we'd like to thank all of you for taking some time to join us this morning, and all of the information that was discussed is available on our investor relations website. Thank you. We'll talk again next quarter.
Speaker Change #110: Okay. Well, we'd like to thank all of you for taking some time to join us this morning, and all of the information that was discussed is available on our investor relations website. Thank you, and we'll talk again next quarter.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Speaker Change #111: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.