Q3 2024 Peoples Bancorp Inc Earnings Call

Gary: Good morning and welcome to People's Bancorp Inc.'s conference call.

Good morning, and welcome to the people Bank Peoples Bancorp, Inc. 's Conference call. My name is Gary and I will be your conference facilitator.

Gary: My name is Gary, and I will be your conference facilitator.

Gary: Today's call will cover discussion of the results of operations for the three and nine months and its September 30th, 2024. Please be advised that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star, then one on your telephone keypad, and questions will be taken in the order they are received. If you would like to withdraw your question, please press star, then two. This call is also being recorded. If you object to the recording, please disconnect at this time.

Today's call will cover a discussion of the results of operations for the three and nine months ended September 30th 'twenty 'twenty four.

Please be advised that all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press Star then one on your telephone keypad and questions will be taken in the order. They are received if you would like to withdraw your question.

Speaker Change: Jen Please press Star then two.

Speaker Change: This call is also being recorded if you object to the recording please disconnect at this time.

Gary: Please be advised that the commentary in this call will contain projections or other forward-looking statements regarding people's future financial performance or future events. These statements are based on management's current expectations. The statements in this call, which are not historical fact, are forward-looking statements and involve a number of risks and uncertainties detailed in people's Securities and Exchange Commission filings. Management believes the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of people's business and operations. However, it is possible actual results made different materially from these forward-looking statements. People's disclaims any responsibility to update these forward-looking statements after this call, except as may be required by applicable legal requirements.

Speaker Change: Please be advised that the commentary in this call will contain projections or other forward looking statements regarding peoples' future financial performance or future events. These statements are based on management's current expectations.

Speaker Change: The statements in this call, which are not historical fact are forward looking statements and involve a number of risks and uncertainties detailed in Peoples' Securities and Exchange Commission filings.

Speaker Change: Management believes the forward looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of peoples business and operations. However, it is possible actual results may differ materially from these forward looking statements.

Speaker Change: Peoples disclaims any responsibility to update these forward looking statements. After this call except as may be required by applicable legal requirements.

Gary: People's third quarter 2024 earnings release in earnings conference call presentation were issued this morning and are available at People'sBangCorp.com under Investor Relations. A reconciliation of the non-generally accepted accounting principles, or GAAP, financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release. This call will include about 20 minutes of prepared commentary followed by a question-and-answer period, which I will facilitate.

Speaker Change: Peoples' third quarter 2024 earnings release and earnings Conference call presentation were issued this morning and are available at peoples Bancorp Dot com under Investor Relations.

Speaker Change: A reconciliation of the non generally accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release.

Speaker Change: This call will include about 20 minutes of prepared commentary followed by a question and answer period, which I will facilitate.

Gary: An archive webcast of this call will be available on PeoplesBangCorp.com in the investor relations section for one year.

Speaker Change: An archived webcast of this call will be available on peoples Bancorp Dot com in the Investor Relations section for one year.

Gary: Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer, and Katie Bailey, Chief Financial Officer and Treasurer, and each will be available for questions following opening statements.

Speaker Change: Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer, and Katie Bailey, Chief Financial Officer, and Treasurer, and each will be available for questions. Following opening statements.

Tyler Wilcox: Mr. Wilcox, you may begin your conference.

Speaker Change: Mr. Wilcox you may begin your conference.

Tyler Wilcox: Thank you, Gary. Good morning, everyone, and thank you for joining our call today. Where the third quarter are diluted earnings per share improved to 89 cents compared to 82 cents for the linked quarter. Diluted EPS for the first nine months of 2024 was $2.55 compared to $2.47 for 2023. As we reflect on our performance for the third quarter, here are a few highlights compared to the linked quarter. Our net interest income improved 3% and our net interest margin expanded nine basis points. The based income grew 5%; total non-interest expense declined 4%; return on average assets for the third quarter improved to 1.38%, compared to 1.27%.

Tyler Wilcox: Thank you Gary Good morning, everyone and thank you for joining our call today for the third quarter, our diluted earnings per share improved to 89 cents compared to 82 cents for the linked quarter.

Tyler Wilcox: EPS for the first nine months of 2024 was $2.55 compared to $2 47.

Tyler Wilcox: For 2023.

Tyler Wilcox: As we reflect on our performance for the third quarter here are a few highlights compared to the linked quarter our.

Tyler Wilcox: Net interest income improved 3% and our net interest margin expanded nine basis points ebay.

Tyler Wilcox: E based income grew 5% total noninterest expense declined 4% return on average assets for the third quarter improved to 1.38% compared to one point to 7%.

Tyler Wilcox: Return on average stockholders' equity improved to 11.5% from 11%. Our efficiency ratio improved to 55.1% compared to 59.2%. Compared to June 30, our deposits increased $185 million, with over 100 million of client deposit growth. Our tangible equity to tangible assets improved to 65 basis points to 8.25%. Compared to the linked quarter end, our book value per share improved 4% to $31.65, while our tangible book value grew 7% to $20.29. Our regulatory capital ratios improved compared to the linked quarter end, as earnings exceeded dividends paid. We also surpassed consensus estimates for diluted EPS for the third quarter, which were 82 cents compared to our recorded results of 89 cents.

Tyler Wilcox: Return on average stockholders' equity improved to 11, 5% from 11% or.

Tyler Wilcox: Our efficiency ratio improved to 55, 1% compared to 59, 2% comp.

Tyler Wilcox: Compared to June 30th our deposits increased $185 million with over 100 million of.

Tyler Wilcox: Client deposit growth.

Tyler Wilcox: Our tangible equity to tangible assets improved 65 basis points to eight 5%.

Tyler Wilcox: Impaired to the linked quarter and our book value per share improved 4% to $31.65, while our tangible book value grew 7% to $20.29.

Tyler Wilcox: Our regulatory capital ratios improved compared to the linked quarter and as earnings exceeded dividends paid.

Tyler Wilcox: We also surpassed consensus estimates for diluted EPS for the third quarter, which were 82 cents compared to our reported results of 89 cents.

Tyler Wilcox: As far as our credit quality, compared to June 30, our criticized loans declined as a result of paydowns and upgrades during the quarter. Our classified loans increased during the third quarter, are merely due to the downgrade of two commercial relationships totaling nearly $10 million combined from criticize to substandard. Our delinquency was comparable to the prior quarter, with the portion of our loan portfolio considered current at September 30, was 98.5% compared to 98.8% at June 30. We continue to prudently manage our portfolio concentrations, and there were no material changes in balances in any specific loan segment during the third quarter.

Tyler Wilcox: As far as our credit quality compared to June 30th our criticized loans declined as a result of pay downs and upgrades during the quarter.

Tyler Wilcox: Our classified loans increased during the third quarter, primarily due to the downgrade of two commercial relationships totaling nearly $10 million combined from criticized to substandard.

Tyler Wilcox: Our delinquency was comparable to the prior quarter with a portion of our loan portfolio considered current at September 30th with 98, 5% compared to 98, 8% at June 30th.

Tyler Wilcox: We continue to prudently manage our portfolio concentrations and there were no material changes in balances in any specific loan segment during the third quarter.

Tyler Wilcox: At quarter end, our total investment commercial real estate exposure was 37% of the 4.5 billion in our commercial loan portfolio and was 182% of our total risk-state capital. This compares favorably to the other banks in our peer group and is well under the regulatory limit of 300%. Most of our commercial real estate exposure continues to be within our multifamily portfolio, accounting for 564 million, or 9% of total loans. We remain happy with the diversified risk profile and geographic distribution of this portfolio focused on quality metropolitan areas within our core markets. During the third quarter, economic indicators in these markets showed the following highlights.

Tyler Wilcox: At quarter end, our total investment commercial real estate exposure was 35, 37% of the $4 5 billion in our commercial loan portfolio and was 182% of our total risk based capital.

Tyler Wilcox: This compares favorably to the other banks in our peer group and as well under the regulatory limit of 300%.

Tyler Wilcox: Most of our commercial real estate exposure continues to be within our multifamily portfolio accounting for $564 million or 9% of total loans.

Tyler Wilcox: We remain happy with the diversified risk profile and geographic distribution of this portfolio focused on quality metropolitan areas within our core markets.

Tyler Wilcox: During the third quarter economic indicators in these markets showed the following highlights.

Tyler Wilcox: Average annualized rental rate growth of 3.4%, job growth of 1.09%, median household income growth of 3.1%, and population growth of 0.74%. Other notable concentrations include land development at 1.3% of total loan balances at quarter end, office at 1.9%, and hospitality at 2.6%. As we have anticipated, our small ticket leasing division continued to experience higher net charge-off levels this quarter. Industry data and peer reporting have demonstrated a similar trend of higher charge-off in the small equipment leasing space. The leases originated through this division are at much higher interest rates and carry a higher credit risk than our traditional loans.

Tyler Wilcox: Average annualized rental rate growth of three 4%.

Tyler Wilcox: Job growth of 1.09% median household income growth of three 1% and population growth of seven 4%.

Tyler Wilcox: Other notable contribution or other notable concentrations include land development at one 3% of total loan balances at quarter end office at one 9% and hospitality at two 6%.

Tyler Wilcox: As we have anticipated our small ticket leasing division continued to experience higher net charge off levels this quarter.

Industry data and peer reporting have demonstrated a similar trend of higher charge offs in the small equipment leasing space.

Tyler Wilcox: Our leases originated through this division are at much higher interest rates and carry a higher credit risk than our traditional loans you were aware of the higher net charge off rates. This business when we purchased it which was around four 5% historically.

Tyler Wilcox: We were aware of the higher net charge operates of this business when we purchased it, which was around 4.5% historically. We have enjoyed high gross origination yields from our small ticket leasing division of around 20%. We have enjoyed high levels of less than 1.5% from 2021 through 2023, as noted on page 4 of our accompanying slide presentation. Even with the higher net charge operates, this business remains highly profitable, providing meaningful contribution to return on average assets and margin due to the higher returns. Through the first nine months of 2024, our return on assets from our small ticket leasing division was over 2%, and for the full year of 2023 was over 4%.

Tyler Wilcox: We have enjoyed high gross origination yields from our small ticket leasing division of around 20%.

Tyler Wilcox: We have also experienced multiple years of lower than expected credit losses with net charge off levels of less than one 5% from 2021 through 2023 as noted on page four of our accompanying slide presentation.

Tyler Wilcox: Even with the higher net charge off rates. This business remains highly profitable providing meaningful contribution to return on average assets and margin due to the higher returns.

Tyler Wilcox: Through the first nine months of 2024, our return on assets from our small ticket leasing division was over 2% and for the full year of 2023 was over 4%.

Tyler Wilcox: Going into the fourth quarter, we expect net charge us for this business will be higher than the third quarter, with elevated levels continuing into the first quarter of 2025. While we greatly value the risk-adjusted return of this business, we have been making adjustments to our risk appetite to ensure that credit remains in line with our pricing and reserve levels. At September 30, we had included specific reserves in our allowance for credit losses for nearly $4 million of the remaining lease balances we believe will be charged off. We have also made a strategic decision to eliminate some large broker relationships in order to increase the focus on the core vendor and lending channels within this division.

Tyler Wilcox: Going into the fourth quarter, we expect net charge offs for this business will be higher than the third quarter with elevated levels continuing into the first quarter of 2025.

Tyler Wilcox: While we greatly value the risk adjusted return of this business, we've been making adjustments to our risk appetite to ensure that credit remains in line with our pricing and reserve levels.

Tyler Wilcox: At September 30th Weird included specific reserves in our allowance for credit losses for nearly $4 million of the remaining lease balances, we believe will be charged off.

We have also made a strategic decision to eliminate some large broker relationships in order to increase the focus on the core vendor and lending channels within this division.

Tyler Wilcox: Finally, we have also pulled back on leasing activity with respect to certain industries and equipment types, as we have noted increased delinquency and charge-offs both in our portfolio and in the national industry gap. While we are focused on the credit quality of this business, the small ticket leasing division only comprised around 3% of our outstanding balances at September 30. To provide perspective on a combined basis, our total leasing portfolio year-to-date had an average balance of $418 million. This combined portfolio had a yield of 11.3%, 2.2% of net charge-offs, and contributed 38 basis points to our net interest margin.

Tyler Wilcox: Finally, we have also pulled back on leasing activity with respect to certain industries and equipment types. As we have noted increased delinquency and charge offs, both in our portfolio and in national industry.

Tyler Wilcox: While we were while we are focused on the credit quality of this business. The small ticket leasing division only comprised around 3% of our outstanding balances at September 30th.

Tyler Wilcox: To provide perspective on a combined basis, our total leasing portfolio year to date at an average balance of $418 million. This combined portfolio had a yield of 11, 3% to 2% of net charge offs and contributed 38 basis points to our net interest margin.

Tyler Wilcox: Our consumer indirect loan net charge-offs have also increased in recent quarters as they return to pre-pandemic levels. We continue to maintain healthy FICO scores on our originated consumer indirect loans, with a weighted average FICO score of 749 for our third quarter production. Our net charge-offs are being driven by a combination of economic hardship on borrowers and softening and used car prices, collectively resulting in higher net charge-offs. This level of net charge-offs is typical for this portfolio, which provides an appropriate risk-adjusted return. At quarter end, our overall allowance for credit losses was 1.06% of total loans.

Our consumer indirect loan net charge offs have also increased in recent quarters as they return to pre pandemic levels.

Tyler Wilcox: We continue to maintain healthy FICO scores on our originated consumer indirect loans with a weighted average FICO score of 749, where our third quarter production.

Tyler Wilcox: Our net charge offs are being driven by a combination of economic hardship on borrowers and softening in used car prices collectively resulting in higher net charge offs.

Tyler Wilcox: This level of net charge offs is typical for this portfolio, which provides an appropriate risk adjusted return.

Tyler Wilcox: At quarter end, our overall allowance for credit losses was 1.06% of total loans.

Tyler Wilcox: Our provision for credit losses in the third quarter was mostly due to charge-offs, and was up from the linked quarter due to higher individually analyzed loans and leases. Our annualized net charge operate was 38 basis points for the third quarter compared to 27 basis points for the linked quarter. The higher lease net charge-offs represented 23 basis points of the annualized rate for the third quarter, while our quote commercial credit quality performance has been stable. Our non-performing assets increased to 0.76% of total assets at quarter end and were driven by loans 90 plus days past due in accruing.

Tyler Wilcox: Our provision for credit losses in the third quarter was mostly due to charge offs and was up from the linked quarter due to higher individual individually analysed loans and leases.

Tyler Wilcox: Our annualized net charge off rate was 38 basis points for the third quarter compared to 27 basis points for the linked quarter.

Tyler Wilcox: Higher lease net charge offs represented 23 basis points of the annualized rate for the third quarter.

Tyler Wilcox: While our core commercial credit quality performance has been stable.

Our nonperforming assets increased to seven 6% of total assets at quarter end and were driven by loans 90, plus days past due and accruing.

Tyler Wilcox: The increase was a combination of additional lease, premium finance, and commercial real estate loans that became over 90 days past due. The increase in past due leases was mostly due to the finalization of renewal documentation in process releases in our mid-sized leasing business. This resulted in administrative past due accounts, which is typical in the educational and governmental segments, and we very rarely see delinquencies proceed to charge off. We demonstrate the non-performing assets visually on slide five of our accompanying presentation. While our past due premium finance loans increased, these loans carry low credit risk as we have the ability to cancel premiums and recover the majority of our receivable from the insurer.

The increase was a combination of additional lease premium finance and commercial real estate loans that became over 90 days past due.

Tyler Wilcox: The increase in past due leases was mostly due to the finalization of renewal documentation and process releases in our midsized leasing business. This.

Tyler Wilcox: This resulted in administrative past due accounts, which is typical in the educational and governmental segments and we very rarely see delinquencies proceed to charge off.

Tyler Wilcox: We demonstrate the nonperforming assets visually on slide five of our accompanying presentation.

Tyler Wilcox: While our past due premium finance loans increased these loans carry a low credit risk as we have the ability to cancel premiums and recover the majority of our receivable from the insurer as.

Tyler Wilcox: As of September 30th, we were awaiting expected proceeds from insurance carriers on past due premium finance loans where the policies have been appropriately canceled. 20 million of the 27.6 million that was past due at September 30th was related to the leasing and premium finance segments. As far as loan balances, we were impacted by a high volume of pay downs. For the third quarter, we had 23% annualized growth in our mid-sized leasing business and a 10% annualized increase in our home equity line of credit balances. At the same time, we had reductions in commercial balances due to pay downs of $148 million during the quarter, which exceeded our new loan production.

Tyler Wilcox: As of September 30th we were awaiting expected proceeds from insurance carriers on past due premium finance loans, where the policies have been appropriately canceled.

Tyler Wilcox: $20 million of the $27 6 million that was past due at September 30th was related to the leasing and premium finance segments.

Tyler Wilcox: As far as loan balances, we were impacted by a high volume of pay downs.

Tyler Wilcox: For the third quarter, we had 23% annualized growth in our midsize leasing business and a 10% annualized increase in our home equity line of credit balances at the same time, we had reductions in commercial balances due to pay downs of $148 million during the quarter, which exceeded our new loan production.

Tyler Wilcox: These pay downs are being driven by higher than historical sale activity in the investment commercial real estate market, as stabilized projects are highly valued in the open market. We have a healthy production pipeline for commercial loans for the fourth quarter, and we expect to grow our balances compared to September 30th. We also experienced reductions in premium finance and consumer residential real estate balances. We had declines in our small ticket leasing business driven primarily by the tightening in the broker channel and our risk appetite within that business, which we discussed earlier. At quarter end, our commercial real estate loans comprise 34% of total loans, nearly 40% of which were owner occupied, while the remainder were investment real estate.

Tyler Wilcox: These pay downs are being driven by higher than historical sale activity in the investment commercial real estate market has stabilized projects are highly valued in the open market.

Tyler Wilcox: We have a healthy production pipeline for commercial loans for the fourth quarter, and we expect to grow our balances compared to September 30th.

Tyler Wilcox: We also experienced reductions in premium finance and consumer residential real estate balances.

Tyler Wilcox: We had declines in our small ticket leasing business driven primarily by the tightening in the broker broker channel and our risk appetite within that business, which we discussed earlier.

Tyler Wilcox: At quarter end, our commercial real estate loans comprised 34% of total loans, nearly 40% of which were owner occupied while the remainder were investment real estate.

Tyler Wilcox: At the same time, our total consumer loans, which include residential real estate and home equity lines of credit, were 29% of total loans. Commercial and industrial loans were 20%; leases totaled 7%; construction loans were 5%; and premium finance was 5% of total loans. At quarter end, 47% of our total loans were fixed rate, with the remaining 53% at a variable rate.

Tyler Wilcox: At the same time, our total consumer loans, which include residential real estate and home equity lines of credit were 29% of total loans commercial and industrial loans were 20% leases totaled 7% construction loans were 5% and premium finance was 5% of total loans.

Tyler Wilcox: At quarter end, 47% of our total loans were fixed rate with the remaining 53% at a variable rate I will now turn the call over to Katy for a discussion of our financial performance.

Katie Bailey: I will now turn the call over to Katie for a discussion of our financial performance.

Katie Bailey: Thanks, Tyler. Compared to the second quarter, net interest income improved 3% for the third quarter, and net interest margin expanded 9 basis points. The improvement was driven by higher accretion income, which totalled $8.1 million for the third quarter and added 39 basis points to net interest margin compared to $5.8 million in 28 basis points for the second quarter.

Katy: Thanks, Tyler compared to the second quarter net interest income improved 3% for the third quarter and net interest margin expanded nine basis points.

Katy: The improvement was driven by higher accretion income, which totaled $8 $1 million for the third quarter and added 39 basis point net interest margin compared to $5 $8 million and 28 basis points for the second quarter.

Katie Bailey: This positive impact to the third quarter will lower our future accretion income to be recognized. For the first nine months of 2024, net interest income increased 4%, while net interest margin declined to 36 basis points. Our loans reprised more quickly than our deposits as the Federal Reserve raised rates in prior periods, so the decline in net interest margin compared to the prior year was driven by the catch up of deposit cost. Accretion income totalled $20 million for the first nine months of 2024, adding 33 basis points to margin, and with $16 million adding 29 basis points for the same period in 2023.

Katy: It's positive impact to the third quarter will lower our future accretion income to be recognized.

Katy: For the first nine months of 'twenty 'twenty four net interest income increased 4%, while net interest margin declined 36 basis points.

Katy: Our loans reprice more quickly than our deposits as the federal reserve raised rates in prior periods.

Katy: So the decline in net interest margin compared to the prior year was driven by the catch up of deposit costs.

Katy: Accretion income totaled $20 million for the first nine months of 'twenty 'twenty, four adding 33 basis points to margin and was $16 million, adding 29 basis points for the same period 2023.

Katie Bailey: Moving on to our fee-based income, we had growth of 5% for the third quarter compared to the length quarter. Most of the improvement was driven by higher lease income, as we recognized some early termination gains on leases that paid off, totaling $1.1 million.

Katy: Moving on to our fee based income we hadn't drove a 5% for the third quarter compared to the linked quarter.

Katy: Most of the improvement was driven by higher lease income as we recognized some early termination games on leases that paid off totaling $1.1 million.

Katie Bailey: These terminations are hard to predict and are driven by client activity. We also had an increase in mortgage banking income due to higher loan production, which was partially offset by lower bank-owned life insurance income. Through the first nine months of 2024, fee-based income grew 13%. We had several improvements, including higher lease, trust and investment, and interest income. We also had increases due to the full year impact of the limestone merger. As it relates to our non-interest expenses, we came in lower than we had projected for the third quarter, totaling around $66 million. Which was a 4% decline from the length quarter.

Katy: These terminations are hard to predict and are driven by client activity.

Katy: We also had an increase in mortgage banking income due to higher loan production, which was partially offset by lower bank owned life insurance income.

Katy: Through the first nine months of 'twenty 'twenty four fee based income grew 13%.

Katy: We had several improvements, including higher lease trust and investment.

Katy: Interest income.

Katy: We also had increases due to the full year impact of the limestone merger.

Katy: As it relates to our noninterest expenses, we came in lower than we had projected for the third quarter totaling around $66 million, which was a 4% decline from the linked quarter.

Katie Bailey: The decrease was driven by lower other non-interest expense, partially due to the length quarter, one time, prior period true up of corporate expenses, as well as the reduction in data processing and software expense. For the first nine months of 2024, non-interest expense was up 2%, as higher operating costs from the additional footprint from limestone were partially offset by lower acquisition-related expenses during 2024. For the third quarter, our reported efficiency ratio was 55.1%, improvement over 59.2% for the length quarter. This improvement was driven by a combination of higher revenue and lower non-interest expense. For the first nine months of 2024, our reported efficiency ratio was 57.4%, an improvement from 59.7% for the same period.

The decrease was driven by lower other non interest expense, partially due to the linked quarter. One time prior period true up of corporate expenses as well as the reduction in data processing and software expense.

Katy: For the first nine months of 'twenty 'twenty four noninterest expense was up 2% as higher operating costs from the additional footprint from limestone were partially offset by lower acquisition related expenses during 'twenty 'twenty four.

Katy: Third quarter reported efficiency ratio.

Katy: Yes.

Yeah.

Katy: Great.

Katy: For the linked quarter.

Katy: This improvement was driven by.

Katy: Higher revenue.

Katy: Sure.

Katy: Yeah.

Katy: For the first nine months.

Katy: Our reported efficiency ratio.

Katy: Seven 4% and in person.

I remember.

Katie Bailey: in 2023. Looking at our balance sheet at September 30th, our loan to deposit ratio has declined to 84% compared to 87% for the late quarter end. During the quarter, our total deposit drew $185 million, with over $100 million gross coming from client deposits. Our retail CDS led the increase, with over $71 million of balance gross, while governmental deposits increased $58 million, and money markets drew $26 million. Our governmental deposits are easily hired during the third quarter, which contributed to the increase in balances. We also added broker CDs during the quarter, which was a lower cost funding source for us than FHLB advances, and contributed $83 million of our total deposit growth compared to the linked quarter.

Katy: Here it is.

Katy: Great.

Katy: Looking at our balance sheet.

Katy: Our loan to deposit ratio.

Katy: Eight.

Katy: Seven.

Katy: Quarter end.

Katy: During the quarter, our total deposits grew $185 million is over $100 million.

Katy: Okay.

Katy: Deposit.

Katy: R E D.

Katy: T D D angry with over 71.

Katy: Hum.

Katy: Well governmental deposits.

Katy: 8 million.

Katy: Markets grew 26 million.

Speaker Change: Our governmental deposits are seasonally higher in the third quarter, which contributed to the increase.

Speaker Change: We also added brokered Cds during the quarter, which was a lower cost funding source for our then F. H O be advances and contributed $83 million of our total deposit growth compared to the linked quarter.

Katie Bailey: In conjunction with the Federal Reserve's recent move to reduce rates, we have also lowered our current offerings for retail CDs by a similar rate and are now below 5% on new retail CDs. As we have noted in recent quarters, we have a relatively short term on our CDs at the higher rate and should see the repricing benefit of the lower rates in future quarters. Our demand deposits as a percent of total deposits totaled 34% at quarter end, compared to 35% for June 30th. Our non-interesting deposits comprise 19% of total deposits at quarter end. At September 30th, our deposit composition was 79% in retail deposit balances, which includes small businesses, and 21% in commercial deposit balances.

Speaker Change: In conjunction with the federal Reserve's recent move to reduce rates. We have also lowered our current offering for retail Cds by a similar rate and are now below 5% on new retail Cds.

Speaker Change: As we have noted in recent quarters, we have a relatively short term on our C. DS at the higher rate and should see the repricing benefit of the lower rates in future quarters.

Speaker Change: Our demand deposits as a percent of total deposits totaled 34% at quarter end compared to 35% for June 30th.

Speaker Change: Our noninterest bearing deposits COVID-19% of total deposits at quarter end.

Speaker Change: At September 30th our deposit composition was 79% in retail deposit balances, which include small businesses and 21% and commercial deposit balances.

Katie Bailey: Our average retail-client deposit relationship was $25,000 at quarter end, while our median was around $2,500. Moving on to our capital position, our capital ratios improved compared to the linked quarter and benefited from earnings outpacing dividends. At quarter end, our common equity tier 1 capital ratio was 11.8%; our total risk-based capital ratio was 13.5%; our leverage ratio was 9.9%; and our tangible equity to tangible assets ratio improved to 8.3%, compared to 7.6% at June 30th. The increase in this ratio was mostly attributable to improvements in accumulated other comprehensive losses related to our available-for-sale investment securities. Over the last several quarters, we have improved both our book value and tangible book value significantly.

Speaker Change: Our average retail client deposit relationship with $25000 at quarter end, while our median was around $2500.

Speaker Change: Moving on to our capital position, our capital ratios improved compared to the linked quarter and benefited from earnings outpacing dividends.

Speaker Change: At quarter end, our common equity tier one capital ratio was 11, 8% our total risk based capital ratio was 13.5% our leverage ratio was nine 9% and our tangible equity to tangible assets ratio improved to eight 3% compared to 7.6.

Speaker Change: 6% at June 30th.

Speaker Change: The increase in this ratio was mostly attributable to improvements in accumulated other comprehensive losses related to our available for sale investment securities.

Speaker Change: Over the last several quarters, we have improved both our book value and tangible book value significantly.

Katie Bailey: Compared to September 30th, 2023, our book value has grown by 13%, while our tangible book value improved by 23%. Compared to September 30th, 2022, our book value has increased by 18%, while our tangible book value has grown 33%. As part of our capital strategy, we continue to provide an attractive dividend, which has a current yield of 5.38%. Our dividend payout ratio stood at 44.7% for the third quarter.

Speaker Change: Per this September 30th 2023 our book value has grown by 13%, while our tangible book value improved by 23%.

Compared to September 30th 2022 our book value has increased by 18%, while our tangible book value has grown 33%.

Speaker Change: As part of our capital strategy, we continue to provide an attractive dividend, which has a current yield of 5.38% our dividend payout ratio stood at 44.7% for the third quarter.

Tyler Wilcox: Finally, I will turn the call over to Tyler for his closing comments.

Speaker Change: Finally, I will turn the call over to Tyler for his closing comments. Thank you Katie we have mentioned before our focus on being a great employer in July we received we received awards from the U S News and World report for best companies to work for banking and best companies to work for Midwest.

Tyler Wilcox: Thank you, Katie. We've mentioned before our focus on being a great employer. In July, we received awards from the U.S. News and World Report for Best Companies to Work for Banking and Best Companies to Work for Midwest. We also strive to contribute meaningfully to the communities we serve. In September, we partnered with Washington State College of Ohio and celebrated the official opening of the People's Bank Foundation Student Market. The market will provide a variety of nutritious food options for students and their families at no cost.

Tyler Wilcox: We also strive to contribute meaningfully to the communities. We serve in September we partnered with Washington State College of Ohio, and celebrated the official opening of the peoples Bank Foundation student market. The market will provide a variety of nutritious food options for students and their families at no cost.

Tyler Wilcox: In October, several executives and I attended a groundbreaking ceremony of a specialized women and children's hospital with Marietta Memorial Hospital in South Eastern Ohio, for which we pledge a meaningful multi-year donation from our foundation in support of bringing world-class health care to our area.

Tyler Wilcox: October several executives and I attended a groundbreaking ceremony of our specialized women and children's hospital with Marietta Memorial Hospital in South Eastern Ohio for which we pledged a meaningful multiyear donation from our foundation and supportive bringing world class health care to our area.

Tyler Wilcox: As 2024 comes to a close, we would like to update our guidance for the fourth quarter. Assuming 50 basis points in rate reductions by the Federal Reserve during the fourth quarter, we expect net interest income and net interest margin to modestly decline. This would result in an even net interest margin of between 4 and 4.1%. We anticipate our fee-based income will normalize for the fourth quarter and exclude the early termination gain on leases. We reported for the third quarter. We expect quarterly total non-cor-non, excuse me, we expect quarterly total core non-interest expense of between $67 million and $69 million for the fourth quarter.

Tyler Wilcox: 'twenty 'twenty four it comes to a close we would like to update our guidance for the fourth quarter.

Tyler Wilcox: Assuming 50 basis points in rate reductions by the federal reserve during the fourth quarter. We expect net interest income and net interest margin to modestly decline. This would result in the net interest margin of between four and four 1%.

Tyler Wilcox: We anticipate our fee based income will normalize for the fourth quarter and exclude the early termination gain on leases, we reported for the third quarter.

We expect quarterly total non core non.

Excuse me, we expect quarterly total core noninterest expense of between 67 million and $69 million for the fourth quarter.

Tyler Wilcox: We anticipate full-year loan growth to come in between 4% and 6% with this reduction in our forecast, including potential pay-downs, charge-offs, and selective lease-balance growth for the fourth quarter. We anticipate a full-year net charge-off rate of between 30 and 35 basis points, primarily driven by trends in small ticket leasing and indirect charge-offs expected for the fourth quarter.

Tyler Wilcox: We anticipate full year loan growth to come in between 4% and 6% with this reduction in our forecast, including potential pay downs charge offs and selective lease balance growth for the fourth quarter.

Tyler Wilcox: We anticipate our full year net charge off rate of between 30, and 35 basis points, primarily driven by trends in small ticket leasing and indirect charge offs expected for the fourth quarter.

Tyler Wilcox: As it relates to 2025, I would like to give some preliminary high-level guidance, which excludes non-core expenses. We expect to achieve positive operating leverage for 2025 compared to 2024, as we focus on expenses and efficiencies derived from the investments made during 2024. We expect to have improvement in our return on average assets for 2025 compared to 2024. Assuming an additional 50 basis point reduction in rates from the Federal Reserve during 2025, spread over the first nine months of the year, we anticipate a stabilization in our net interest margin of between 4 and 4.2%. In our projections for 2025, each 25 basis point reduction in rates results in a nominal impact to net interest margin, with a 1 or 2 basis point impact to net interest margin.

Tyler Wilcox: As it relates to 2025, I would like to give some preliminary high level guidance, which excludes noncore expenses.

Tyler Wilcox: We expect to achieve positive operating leverage for 2025 compared to <unk> 2024, as we focus on expenses and efficiencies derived from the investments made during 2024.

Tyler Wilcox: We expect to have improvement in our return on average assets for 2025 compared to 2024.

Tyler Wilcox: Assuming an additional 50 basis point reduction in rates from the federal reserve during 2025 spread over the first nine months of the year, we anticipate a stabilization in our net interest margin of between four and four 2%.

Tyler Wilcox: And our projections for 2025, each 25 basis point reduction in rates results in a nominal impact to net interest margin with a one or two basis point impact to net interest margin.

Tyler Wilcox: We believe our fee-based income growth will be in the mid to high single-digit percentages compared to 2024. We expect quarterly total non-interest expense to be between $69 million and $71 million for the second, third, and fourth quarters of 2025, with the first quarter of 2025 being higher due to the annual expenses we typically recognize during the first quarter of each year. We also expect our net charge-off rate for 2025 to be similar to the rate experienced for the full year of 2024.

Tyler Wilcox: We believe our fee based income growth will be in the mid to high single digit percentages compared to 2024.

Tyler Wilcox: We expect quarterly total noninterest expense to be between $69 million and $71 million for the second third and fourth quarters of 2025 with the first quarter of 2025 being higher due to the annual expenses, we typically recognized during the first quarter of each year.

Tyler Wilcox: We believe loan growth will be between four and 6% compared to 2024, we.

Tyler Wilcox: We anticipate provision for credit losses to be similar to our 2024 quarterly run rate for 2020. Five we also expect our net charge off rate for 2025 to be similar to the rate experienced for the full year of 2024.

Tyler Wilcox: We will update this guidance in January at our next call.

Tyler Wilcox: We will update this guidance in January at our next call.

Tyler Wilcox: This concludes our commentary, and we will open the call for questions. Once again, this is Tyler Wilcox, and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer.

Speaker Change: This concludes our commentary and we will open the call for questions. Once again. This is Tyler Wilcox and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer, I will now turn the call back into the hands of our call facilitator. Thank you.

Gary: I will now turn the call back to the hands of our call facilitator. Thank you.

Gary: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad if.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Daniel Tamayo: Our first question is from Daniel Tameo with Raven James.

Speaker Change: Our first question is from Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo: Thanks, guys.

Daniel Tamayo: Thanks, guys. Good morning, everyone and I went into anything.

Daniel Tamayo: Good morning, everyone. I appreciate all the detail and the credit outlook and on the third quarter impact from Lisa's Tyler. Maybe we can start there. Is there anything else that you can provide in terms of where you see the credit outlook specifically for Lisa's goal? I think you said you are looking for charge-offs similar to what you had in the third quarter over the next two quarters, I believe. If you could just give us an idea of the type of charge-offs you are expecting over that time period, and then what would be bringing that down beyond that?

I appreciate all the detail on the on the credit outlook and on the third quarter impact from leases Tyler maybe we can start there and just.

Is there anything else that you can provide in terms of you know where where you see the.

Speaker Change: The credit outlook, specifically for leases going I think you said.

Daniel Tamayo: You're looking for charge offs similar to what you had in the in the third quarter over the next two quarters I believe yeah. If Ah yeah. If you could just kind of give us an idea of.

Speaker Change: The type of.

Speaker Change: Charge offs, you're expecting over over the you know in that time period, and then what what would be bringing that down.

Tyler Wilcox: Sure. Thanks for the question, Danny. I guess the first thing I would say is I expect that the least charge-offs in the small ticket leasing will peak in the fourth quarter. We have done a lot of analysis of the pipeline and the assets within that portfolio. I think we will end the year with a whole year net charge-off rate of between five and six percent. You will see a modest increase in the fourth quarter and then more in line with the second and third quarter in the first quarter of next year. That is based on what we know today, but we have done a pretty deep dive into the fourth portfolio.

Speaker Change: Beyond that sure. Thanks for the question Danny I guess, the first thing I would say is I expect that the lease charge offs in the small ticket leasing will peak in the fourth quarter.

Speaker Change: And we've done obviously, a lot of analysis of the kind of pipeline and the.

Speaker Change: Assets within that.

Within that portfolio and so I think we'll end the year with a full year net charge off rate of between five and 6%.

Speaker Change: And so you'll see a I'd say a modest increase in the fourth quarter and then more in line with the second and third quarter in the first quarter of next year. That's based on what we know today, but we've done a pretty deep dive into the portfolio.

Tyler Wilcox: From an outlook perspective, if you look at the accompanying slide that we put in there, we have been at abnormal lows relative to that type of business and relative to the pricing that we are getting in that business. We expect it to normalize somewhere in the low to mid-force. Again, we have said for years we have priced at 4.5 percent. I wish we were at 1.5 percent net charge-offs in that business forever. On a risk-adjusted return basis at 4.5 percent, as we noted, it is incredibly profitable. That would be the normalization that I would expect.

Speaker Change: From an outlook perspective, if you look at the the accompanying slide that we put in there.

Speaker Change: We've been at kind of I would say abnormal lows relative to that type of business and relative to the pricing that we're getting in that business and so we expect it to normalize somewhere in the low to mid fours. We again, we've said for years. So we price it at four 5% I wish we were at 1.5% net.

Speaker Change: Charge offs in that business forever.

Speaker Change: But you know it's on a risk adjusted return basis at four 5% as we noted it's incredibly profitable so that would be the normalization that I would expect and I would expect that because of the changes that we've made to some of the segments. You see that you know project production is somewhat challenged because we've curtailed some of the broke.

Tyler Wilcox: I would expect that because of the changes that we have made to some of the segments. You see that production is somewhat challenged because we have curtailed some of the broker business. We feel like we have a really good handle on the ongoing production, and production is being focused on. Where we see less charge-offs over time.

Speaker Change: Her business and and we feel like we have a really good handle on the ongoing production and production is being focused on where we see.

Speaker Change: See less charge offs over time.

Speaker Change: Okay, that's very helpful.

Tyler Wilcox: And I guess just to follow up there, you eliminated some larger broker relationships, and then I think you also said some specific industries within the leasing business. What industries are you backing away from at this point?

Speaker Change: I guess, just a follow up there the thank.

Thank you said.

Speaker Change: You you eliminated some larger broker relationships and then I think you also said some specific.

Speaker Change: [noise] industries within the leasing business, what what industries are you backing.

Speaker Change: Backing away from at this point.

Tyler Wilcox: Sure, no, we're backed out of title fleet over the road trucking, garment printers. You know, we've reduced pretty significantly, reduced hotel and hospitality. And all of that in favor of investments that we have made and will be making in the sales force in that area to kind of focus on some of the core examples, which the core kind of positives are these, you know, 30 to $40,000 loans and manufacturing equipment, landscaping equipment, plumbing areas like that.

Speaker Change: No. We are are we backed out of titled Fleet over the road trucking.

Garmin printers.

Speaker Change: We've reduced pretty significantly reduced hotel and hospitality.

And all of that in favor of investments that we have made and we'll be making in the sales force in that area to kind of focus on some of the core examples which the core the core kind of positives are these you know 30 to $40000 loans and manufacturing equipment landscaping equipment plumbing areas.

Speaker Change: That.

Daniel Tamayo: Okay, that's interesting. Thanks.

Speaker Change: Okay. That's interesting thanks, and then finally again on that topic, but on the loan growth side just curious how.

Daniel Tamayo: And then finally, again, on that topic, but on the loan growth side, just curious how the slower loan growth within the leases, you know, what kind of impact that's having on your overall loan growth forecast? I mean, you know, it didn't help in the third quarter. We probably saw a reduction of about 10 million dollars relative to, you know, where it had been, but that, you know, we were seeing double-digit growth in that portfolio this time last year. So the swing is probably, you know, 15 to 20 million dollars swing as to kind of where we might have expected to be otherwise.

Speaker Change: The slower loan growth within the leases you know what what kind of impact that's having on your overall loan growth forecast coming down.

Speaker Change: It didn't help in the third quarter, we probably saw a reduction of about $10 million relative to where it had been but that we were seeing double digit growth in that.

Speaker Change: In that portfolio at this time last year. So the swing is probably you know $15 million to $20 million swing as to kind of where we might have expected to be otherwise.

Daniel Tamayo: Okay, that's perfect.

Speaker Change: Okay perfect.

Daniel Tamayo: Well, thanks for taking all my questions. Thank you.

Speaker Change: Well, thanks for taking all my questions. Thank you Danny.

Brendan Nosal: The next question is from Brendan Nosell with Havvy Group.

Speaker Change: The next question is from Brendan Nosal with hardly group. Please go ahead.

Brendan Nosal: Please go ahead.

Brendan Nosal: Hey, good morning, folks. Hope you're doing well.

Speaker Change: Hey, good morning, folks hope, you're doing well Hey, Brendan.

Tyler Wilcox: Hey, Brendan. I just want to start off on the commentary for positive operating leverage in 2025. I mean, somebody like unpacked the parts of the guide. It looks like expenses will grow. Oh, like four or five percent kind of using your guidance off of the core 24 number. So just kind of curious, you know, what you're seeing on the revenue side, especially within NII, that would allow you to outpace that level of cost growth. Thanks.

Brendan Nosal: Just want to start off on the the commentary for positive operating leverage in 2025.

Brendan Nosal: I guess, if I unpack the parts of the guide it looks like expenses will grow all like four 5% kind of using your your guidance off of the core 24 number. So just kind of curious what youre seeing on the revenue side, especially within NII that would allow you to outpace that.

Brendan Nosal: The level of cost growth. Thanks.

Tyler Wilcox: Yeah, I think on the expense number, you just quoted. I think that's a little higher than what we're anticipating. I think you quoted four to five percent. I say we're probably closer to the two to four percent.

Speaker Change: Yeah, I think on the expense number you just quoted I think that's a little higher than what we're anticipating I think you quoted 4% to 5% I'd say, we're probably closer to that 2% to 4% so somewhere in the middle there and then on the expense side I'd say, it's a so we have to expense balance growth on the loan portfolio.

Tyler Wilcox: So somewhere in the middle there. And then on the expense, I'd say it's so we do expense balance growth on the low and portfolio, even though, as we noted, maybe some steadiness or contraction on the margin slightly. And then I think we expect some meaningful fee income growth. I think we expect mortgage to recover a bit.

Speaker Change: I, even now as we noted maybe some steadiness or contraction on the margin slightly and then I think we expect some meaningful fee income growth I think we expect mortgage to recover a bit and then our other businesses, including wealth management Trust and investment services and insurance I think we expect some growth out of them.

Tyler Wilcox: And then our other businesses, including wealth management or trust and investment services and insurance, I think we expect handsome growth out of them in 2025 relative to 2024. Okay.

Speaker Change: In 2025 relative to 'twenty to 'twenty four.

Speaker Change: Okay. That's.

Brendan Nosal: That's helpful. Thanks.

Speaker Change: That's helpful. Thanks.

Tyler Wilcox: Maybe kind of pivoting from here to capital and the M&A environment. Just kind of curious how you perceive the M&A environment today. A piece of conversations and you're on appetite for additional business. Yeah, so a lot going on in the M&A world, especially with some recently announced deals that are, you know, kind of within the size range and adjacent to us geographically. So we continue to watch that space. I would say the pace of conversations is significantly increased from where it was at the beginning of the year. I still think there are some who are weighing their options and anticipation of the election results to see what happens there.

Speaker Change: Can you just kind of pivoting from here.

Speaker Change: <unk> capital and the M&A environment, just kind of curious how you perceive the M&A environment today kind of pace of conversations in your own appetite for additional deals at this point.

Speaker Change: Yeah, So a lot going on in the M&A world, especially with some recently announced deals that are you know.

Speaker Change: Kind of within the size range and adjacent to US geographically. So we continue to watch that space I would say the pace of conversations is significantly increased from where it was you know at the beginning of the year I still think there are some who are weighing their options in anticipation of the election results to see what.

Tyler Wilcox: We're agnostic about that. I think either way there's going to be increased M&A activity. I would say, from just to reiterate kind of where we stand, you know, we're at, you know, 9.3 billion. We have made significant investments into crossing the 10 billion threshold. We have said previously that, you know, we had an appetite for maybe two parallel paths. One would be multiple smaller deals. And one would be one larger deal.

Speaker Change: Happens there.

Speaker Change: We're agnostic about that I think either way, there's going to be increased.

Speaker Change: M&A activity I would say from a just to reiterate kind of where we stand here. We're at $9 3 billion, we have made significant.

<unk> investments are.

Into the crossing the 10 billion threshold, we have said previously that.

Speaker Change: You know we had an appetite for maybe a two parallel paths one would be multiple smaller deals and one would be one larger deal I'd say in the last two quarters, our thinking has sharpened maybe a little bit on that around leaning more heavily towards patiently seeking out a larger deal.

Tyler Wilcox: I'd say in the last two quarters are thinking it's sharpened maybe a little bit on that around leading more heavily towards patiently seeking out a larger deal. And because I think I don't believe we as a bank have execution risk with the ability to do multiple deals, but I think you're just seeing more. That being a little bit more difficult in this environment. So we prefer to, you know, see what our options are, and we're having a lot of conversations. And I expect that some of those will bear fruit in the future. But, you know, we're, we're being patient and leaning towards, you know, larger opportunities, is what I would say, but open to all conversations, and we'll continue to have those.

Speaker Change: And because I think I don't believe we as a bank have execution risk with the ability to do multiple deals, but I think youre, just seeing more that being a little bit more difficult in this environment. So we'd prefer to you know see what our options are and we're having a lot of conversations and I expect that some.

Speaker Change: Those will bear fruit in the future, but you know, we're we're being patient and and leaning towards a larger opportunities is what I would say, but open to all conversations and we'll continue to have those.

Brendan Nosal: All right that's super helpful color and thank you for taking the questions. Thank you Brendan.

Brendan Nosal: That's super helpful, Collar.

Brendan Nosal: And thank you for taking the questions.

Terry McAvoy: The next question is from Terry McAvoy with Stevens.

Speaker Change: The next question is from Terry Mcevoy with Stephens. Please go ahead.

Terry McAvoy: Please go ahead. Hi, good morning, everyone. Hi, Terry.

Hi, Good morning, everyone Hi, Terry.

Terry McAvoy: Hi, first off, thanks for all your comments and insight into 2025. Much much appreciated. And in terms of questions, could you just maybe run through how your competitors reacted to the Fed rate cut from a deposit, deposit pricing standpoint and in how your strategy may be different from your competitors and just kind of curious the decision to kind of add some higher costing retail CDs. Did impact your cost of deposits, which are up a bit more than I had expected, particularly given kind of the decline in loan balances.

Terry Mcevoy: First off thanks for all your comments and insight into 'twenty twenty-five much appreciated and in terms of questions could you just maybe run through how your competitors reacted to the fed rate cut from a deposit a deposit pricing standpoint, and how your strategy may be different from your competitors and I'm just kind of.

Terry Mcevoy: Curious the decision to kind of add some higher costing retail Cds did impact your your cost of deposits, which are up a bit more than than I had expected, particularly given kind of the decline in loan balances what why why do they need to add C. D's here in the third quarter.

Tyler Wilcox: Why, why do they need to add the CDs here in the third quarter.

Tyler Wilcox: Yeah, Terry, I would say the, you know, the first of all to answer your question about the competitors. It's all over the place, is what I would say. Every time, you know, one, we have a broad variety of geographies and we have small irrational banks. We have larger irrational banks, and we have other banks that are, you know, very well in line with where we are. So we've really tried to remain middle of the pack and lower our special rates, which is why we've been attracting, you know, a good, a good amount of our deposit growth over time.

Speaker Change: Yeah, Terry I would say the.

Speaker Change: First of all to answer your question about the competitors.

It's it's all over the place is what I would say you know every time you know one we have a broad variety of geographies. When we have small irrational banks, we have larger irrational banks and we have other banks that are you know.

Speaker Change: Well in line with where we are.

Speaker Change: So we've really tried to remain middle of the pack and and lower our.

Speaker Change: <unk> rates, which is why have we been attracting a good and a good amount of our deposit growth.

Tyler Wilcox: So, you know, and I can talk more about, you know, kind of the loan growth challenges a little bit, but, you know, I would say the deposit strategy has been to continue to ramp down our deposit costs over time and keep the duration short as we have with our specials so that we have flexibility there.

Speaker Change: Over time, so you know and and I can talk more about you know kind of the loan growth challenges a little bit, but you know I would say the deposit strategy has been to continue to ramp down our deposit costs over time and keep the duration short as we have with our specials.

So that we have flexibility there.

Terry McAvoy: Thanks, and then maybe as a follow-up, and I guess it's a pretty direct question. Tyler, when you think about the small ticket leasing business, do you think it's creative to shareholder value? I mean, it is high ROA, high margins, but when times are good, we get worried times are going to get bad, and when Charles goes up, we spend the first ten minutes of this call, kind of talking about a portfolio, that's what, three percent of total loans. So I just kind of get your high-level view of, is this portfolio, you think, the right for a publicly traded company, again, giving kind of the trends we've seen in the discussion we've had today?

Thanks, and then maybe as a follow up and I guess, it's a pretty direct question Tyler.

Speaker Change: When you think about the small ticket leasing business do you think it's accretive to shareholder value I mean, it is high our away high margins, but when times are good we get worried times are going to get bad and when charge offs go up we spent the first 10 minutes of this call kind of talk us talking about a portfolio. That's what three 3% of total loans. So I was just kind of get your high level of.

Speaker Change: With US is this portfolio you'd think the right for a publicly traded company.

Speaker Change: Given given kind of the trends we've seen in and then the discussion we've had today.

Tyler Wilcox: I think it is, Terry. I think the Vogue is obviously that it's been in an unnaturally low and unnaturally low charge-off rate over time. I think if you, what is the attractiveness of our bank? It's the margin that's very powerful. It's the deployment of our low-cost deposits and do profitable businesses, and so yes, it's getting some headlines. It gives us diversity. It's very granular. There's 7,000 loans in there, and there's 7,000 leases, and I realize why there's questions about it, but I'll trade off talking about it for ten extra minutes for the profitability that's brought to our bank over time.

Speaker Change: I think it is Terry I think the the the bogie is obviously that it's been at an unnaturally low an unnaturally low charge off rate over time I think the if you.

Speaker Change: What is the attractiveness of our of our bank. It's the margin that's very powerful it's the deployment of our low cost deposits and do you know profitable businesses and so yes. It is getting some is getting some headlines. It gives us diversity. It's very granular you know there's 7000 loans in there.

Speaker Change: There are 7000 leases and I realize why there's questions about it but I'll I'll trade off you know talking about it for 10 extra minutes for the profitability of those brought to our bank over time.

Terry McAvoy: That's great. I appreciate your insight there, and thanks for taking my questions.

Terry Mcevoy: That's great I appreciate your insight there and thanks for taking my questions. Thanks Terry.

Nathan Rays: The next question is from Nathan Rays with Piper Sandler.

Speaker Change: The next question is from Nathan race with Piper Sandler. Please go ahead.

Nathan Rays: Please go ahead. Yeah.

Nathan Race: Yeah, Hey, good.

Nathan Rays: Hey, good morning, Nathan.

Nathan Rays: Good morning, Nate. Well, thank you. Just think about the margin trajectory in the next year. You maybe it's close to a hundred. How do you guys think the margin trends under that scenario in the back half of next year? Yeah, I think we quoted this in the script. I think for every 25 basis points, so as you know, we run a parallel shift for our ALCO reporting, and in a parallel shift, we have expect about a two basis point impact for every 25 basis point cut, roughly a little under $2 million. Now, assuming some steepness to the curve or, you know, flatness to the curve even, that gets cut in about half for a 25 basis point cut.

Nathan Race: Hey.

Nathan Race: Right.

Nathan Race: Well. Thank you I'm just thinking about the margin trajectory into next year. You know if you end up getting maybe more than 50 pages of cuts in 2025.

Nathan Race: Maybe it's close to 100, how do you guys kind of think the margin trends under that scenario in the back half of next year.

Yeah, I think we quoted this in the script I think for every 25 basis points. So as you know we run a parallel shift Uh huh al kind of reporting and in a parallel shaft. We would expect about a two basis point impact for every 25 basis point cut are roughly a little under $2 million.

Nathan Race: Now, assuming some steepness to the curve or you know.

Nathan Race: Flatness to the Caribbean and that gets cut in about half of them for 25 basis point cut. So again, if you get an extra 50, we're thinking in a two to four basis point impact to the margin that we've set forth.

Nathan Rays: So, again, if you get an extra 50 or think in two to four basis point impact to the margin that we've set forth in the expectations. Okay, got it.

Nathan Race: And then the expectations.

Speaker Change: Okay got it and I imagine that's under a static balance sheet scenario. So you know assuming you know 4% to 6% loan growth next year in your funding that with both a combination of castle off the bond book and deposit gathering how do you kind of think about that kind of more dynamic impact it was more stable.

Nathan Rays: And I imagine that's under a static balance sheet scenario. So, you know, assuming, you know, 46% low growth next year and you're funding that with both the combination of cash, law, the bond book and deposit gathering, how do you kind of think about that kind of more dynamic impact? Is it more stable? Yeah, I think it is more stable. I think we do expect deposit growth to continue as we proceed in, as we saw in the third quarter and as we proceed into next year. And as we noted, those special rates are coming down and have been coming down even before the Fed cut rate.

Nathan Race: Yeah.

Speaker Change: Yeah, I think it is more stable I think we do expect deposit growth to continue as we proceed and as we saw in the third quarter and as we proceed into next year and as we noted those special rates are coming down and have been coming down even before the fed cut rates. So we will continue on that path.

Nathan Rays: So, we will continue on that path to make that growth profitable for us.

Nathan Race: To make that growth profitable for us.

Nathan Rays: Any thoughts on a good starting point for a creation income for the fourth quarter and just expectations for next year and kind of how that plays into overall an aggro with expectations under the discussion we just had from NIMM. Yeah, so the third quarter, just the level set it out about 28 basis points to margin. I think you could expect in the fourth quarter and first half of next year it's probably between the 20 and 25 basis points of quarter, trending down over that time horizon and then we probably go 15 to 20, the back half of 20, 25.

Speaker Change: Got it and any thoughts on a good starting point for our accretion income.

Speaker Change: For the fourth quarter, and just expectations for next year and kind of how that plays into overall NII growth expectations under the discussion we just had.

Speaker Change: On NIM.

Speaker Change: Yeah, so the quarter for the third quarter, just a level set it out about 20 basis 28 basis points to margin am I think you could expect in the fourth quarter and first half of next year, it's probably between the 20 and 25 basis points a quarter I'm trying to dig down over that time horizon and then we'd probably go 15 to 20.

Speaker Change: That's the back half of 'twenty 'twenty five.

Nathan Rays: Okay, got it.

Speaker Change: Okay got it and you know assuming charge offs remain kind of in the 30 to 35.

Nathan Rays: And you know, assuming Charles remain kind of in the 30 to 35 basis point range into next year, how do you think about providing in terms of provision to cover those chargers and also just given the boom growth expectations? Yeah, I think we're, as we noted in here, we feel good that we have much of the small ticket leasing charge-offs reserved for adequately as we sit here at 9.30, and I would say the chargers that we're expecting otherwise within the portfolio are largely covered within the reserve coverage ratios we already have for those portfolios, and I would say plus in excess of that.

Speaker Change: At this point range into next year, how do you think about providing in terms of provisioning to cover those charge offs and also just given the.

Speaker Change: The loan growth expectations.

Speaker Change: Yeah, I think we're as we noted here we have we feel good that we have much of a small ticket leasing charge offs reserved for adequately.

Speaker Change: We sit here at 930 am and I would say the charge offs that were expecting otherwise within the portfolio are largely covered within the reserve coverage ratios, we already have for those portfolios and and I would say plus [laughter] in excess of that.

Nathan Rays: So I think we're adequately reserved as we sit here today and under the assumption that the charge-off rates stay relatively stable in 25 as they are in 24. Okay, great.

Speaker Change: I think we're adequately reserved as we sit here today and under the assumption that the charge off rate stay relatively stable and twenty-five as they are in 'twenty four.

Speaker Change: Okay, Great I appreciate all the color. Thank you.

Nathan Rays: I appreciate the color. Thank you.

Speaker Change: Questions.

Timothy Switzer: The next question is from Tim Switzerland with KBW.

The next question is from Tim, Switzerland, with K B W. Please go ahead.

Timothy Switzer: Please go ahead. Hey guys, thank you for taking my questions. I have to follow up on the margin trajectory in your guys', I guess asset sensitivity, giving the guy to two basis points for every 25 basis point cut with you know 53% of loans variable rate. Can you kind of walk us through the offset on the liability side of the balance sheet, particularly with the deposits? I know you have a pretty short CD portfolio that can help, but where else would you be able to kind of offset that, you know, 50% of loans at reprise relative quickly as well?

Speaker Change: Hey, guys. Thank you for taking my question I had a follow up on the margin trajectory in your guys.

Speaker Change: I guess asset sensitivity.

Speaker Change: Given the guide to two basis points for every 25 basis point cut.

Speaker Change: No 53% of loans variable rate.

Speaker Change: Can you kind of walk us through the offset on the liability side of the balance sheet, particularly with deposits I know you have a pretty short T D.

Speaker Change: The portfolio that can help but where else would you be able to kind of offset that you know 50% of loans that repriced relatively quickly as well.

Timothy Switzer: Yeah, I think that you're seeing some money markets at higher rates in the deposit book, and we do have some funding that is relatively short in nature as well that will help offset. I would say on the loan side, there are floors in all or the majority of our variable rate loans as well. So, you know, depending how drastic cuts we observe over the next few quarters, they may or may not kick in, but they are in there as a stopgap.

Speaker Change: Yeah, I think there you're seeing some money markets at higher rates than the deposit book them and we do have some funding that is relatively short in nature as well that will help offset I would say on the loan side, there are floors, and all or a majority of our variable rate loans as well so.

Speaker Change: As you know, depending how drastic cuts we observe over the next few quarters and they may or may not kick in but they are in there as a stop gap.

Timothy Switzer: Can you provide any color and how low those floors are relative to current rates? Yeah, they vary by borrower and by segment.

Speaker Change: Can you provide any color on how low those floors are relative to current rates.

Speaker Change: They vary.

Speaker Change: By borrower and by segment.

Timothy Switzer: Okay, and what's kind of like the overall deposit beta assumption you guys have over the course of the cycle?

Speaker Change: Okay, and what's kind of like the overall deposit beta assumption you guys have over the course of the cycle and does that change as you get deeper into the cycle.

Timothy Switzer: And does that change as you get deeper into the cycle? Yeah, historically we've said it's around 25%, but that includes non-interest fairing. So, you know, I think what we've seen is something closer to the low 30% deposit beta, and I want to say that's kind of the... The benefit of our franchise is very granular, low cost deposit franchise, providing the benefit to margin that you see.

Yeah. Historically, we've said it's around 25%, but that includes noninterest bearing so you know I think what we've seen them is something closer to the low 30% deposit beta and I would again say that's kind of the.

Speaker Change: The benefit of our franchise is very granular low cost deposit franchise, providing the benefit to margin that you see them. So I would think there there is some lag as you know that some of our pricing higher priced products in the deposit portfolio are sitting in five months C. D. So it takes a short time.

Timothy Switzer: So I would think there is some lag, as you note, that some of our pricing, higher-price products in the deposit portfolio are sitting in five-month CDs, so it takes a short time for those to reprise, but they will reprise in a relatively quick manner.

Speaker Change: <unk> for those two repriced, but they will reprice in relatively quick manner.

Speaker Change: Manner.

Timothy Switzer: Okay, and do you guys project the margin to kind of dip below that 4% level and then recover back to the 4% to 4.2%, or just kind of stay around there after Q4? I would assure you guys might by stabilize. Yeah, I think we would expect to see a forehandle in much of 200 and all of 25. Again, that includes the accretion estimates that I just quoted on a previous question that was raised. So I do think the 4% to 4.10% for 20% that we guided is reasonable, and I don't expect that we didn't meaningfully or at all below 4%. Okay, great.

Speaker Change: Okay, and do you guys project the margin to kind of dip below that 4% level and then recover back to the 4% to 4.2% or just kind of stay around there after.

Speaker Change: Q4, I wasn't sure what you guys meant by stabilized.

Speaker Change: Yeah, I think we would expect to see a fore handle in much of two on air and all of 'twenty five mm again that includes the accretion estimates that I just quoted on a previous.

Speaker Change: A question that was raised so I do think the four to 410 or 20 that we guided is reasonable and I don't expect that we'd get meaningfully or at all below four.

Timothy Switzer: My last question, pretty much all the details. What kind of like leasing revenue and mortgage banking assumptions do you have embedded in your guide? Because with your outlook for modestly lower NII, but positive operating letters that implies still strong revenue growth overall. So I was wondering why, because something you guys have in there. Yeah, I didn't mean to quote that net interest income would be lower next year than this year. I said, you know, we feel compression and margin, but with the growing balance sheet, I think we expect net interest income to be relatively stable with the flight upside.

Speaker Change: Okay, Great and my last question I appreciate all the detail what kind of like we seen revenue and mortgage banking assumptions do you have embedded in your guide.

Speaker Change: What's your outlook for modestly lower NII, but positive operating leverage on that implies you know still strong revenue growth overall.

So I was wondering what assumptions you guys have in there.

Speaker Change: Yeah, I don't I didn't mean to quote the net interest income would be lower next year than this year. I said, you know it's field compression in margin, but with the growing balance sheet. I think we expect noninterest income to be relatively stable with a slight upside.

Timothy Switzer: And then on the income side, I think we quoted mid to high single-digit growth in 25 relative to 24. I would say lease income is comparable to that in 24, with maybe a little bit of an upside to say the more the growth is on the mortgage, which again, you saw some benefits in the third quarter, which I'd say we would expect to kind of continue into the fourth and through 25. But trust and investments and insurance are the other two driving meaningful growth year over year in the fiend come businesses. Gotcha. My best for misunderstanding, and I got it there.

Speaker Change: And then on the fee income side I think we quoted them mid to high single digit growth in 'twenty five relative to 'twenty four I would say leased income is comparable to that in 'twenty four with maybe a little bit of an upside I'd say the more of the growth is on the mortgage which again you saw some benefit.

Speaker Change: In the third quarter, which I'd say, we would expect to kind of continue into the fourth and through 25 mm.

Speaker Change: But trust and investments and insurance are the other two driving.

Speaker Change: Meaningful growth year over year in the fee income businesses.

Speaker Change: Got you my my bathroom misunderstanding there. Thanks Rommel thanks for answering the question.

Timothy Switzer: Thanks for all my thanks for answering the question.

Speaker Change: They get it wrong.

Gary: Again, if you have a question, please press star, then one.

Speaker Change: Again, if you have a question. Please press Star then one.

Manuel Navas: The next question is from Manuel Navas with DA Davidson.

Speaker Change: The next question is from Manuel and the Vos with D. A Davidson. Please go ahead.

Manuel Navas: Please go ahead. Hey, sorry to touch on MIM trajectory and AI trajectory again. So it seems like is it right to think about it that there's some potential for expansion or at least once pressure diminishes with rate cuts, you could see stability to upside on the men and I and I and I later next year. Yes, I think that is correct.

Speaker Change: Hey, sorry to touch on.

Speaker Change: NIM trajectory NII trajectory again, so it seems like that is it right to think about it that there's some potential for expansion or at least.

Speaker Change: Once pressure diminishes with rate cuts you could see stability to upside on the NIM NII.

Speaker Change: Later next year.

Speaker Change: Yes, I think that is correct.

Manuel Navas: And then if can you add a little more detail on CD repricing trends over the next couple quarters, just to kind of help with the name guide and where you could repriced to. Yeah, so the retail current offering that we have out there is 4.5% again a five-month term on that, and I would expect, as you know, rates cut, we would move with the Fed in that as we did previously.

Speaker Change: And then if.

Speaker Change: Could you go.

I added a little more detail on CD repricing trends over the next couple of quarters just to kind of.

Helped with the NIM guide.

Speaker Change: And where you can reprice too.

Speaker Change: Yeah, so they're retail current offering that we have out there is four point roughly four 5% again, a five month term on that and I would expect as you know rates cut we would move with the fed and that as we did previously so we didn't set.

Tyler Wilcox: So we did in September with the rate cut, and then how have you seen your kind of commercial pipelines react or the borrowers react to rate cuts, and just what are kind of some preliminary discussions there in terms of demand? Yeah, Manuel, I would say that you know, the story of, you know, one growth is an interesting one, and I would say that in this quarter and this year-to-date we've seen really accelerated pay downs. So, especially in our investment commercial real estate book, for reference in year-to-day, last year we saw $10 million total sale pay downs for stabilized properties in the investment commercial real estate.

Speaker Change: Timber with the rate cut.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: And then.

Speaker Change: How how have you seen your kind of commercial pipelines react or are the borrowers react to rate card and just what are kind of some preliminary discussions there in terms of demand.

Speaker Change: Yeah, Manuel I would say that.

Speaker Change: The story of your loan growth is an interesting one and Oh.

Speaker Change: I would say that in this quarter and this year to date, we've seen a really accelerated paydowns.

Speaker Change: Especially in our investment commercial real estate book for reference and year to date last year, we saw $10 million total sale paydowns for stabilized properties in the investment commercial real estate. This year to date were at $100 million.

Tyler Wilcox: This was 10 times re-five pay downs year-to-date, or $71 million. And so I think one of the reasons for, you know, kind of a measured 4% to 6% loan growth guide for next year is the expectation that in a declining rate environment, there is the potential for more pay downs to the re-five in the permanent market on the investment commercial real estate, notwithstanding the fact that demand has been good. Do I think a continuing falling rate environment can be good for demand on the loan side in all businesses I do? But that the counter-vailing pressure and the particular quarter of a big chunk to swallow of pay downs where we had $148 million in pay downs this quarter in the commercial space is kind of the trend there.

Speaker Change: So 10 times, a refi pay downs year to date or a $71 million and so I think one of the reasons for you know kind of a measure at 4% to 6% loan growth guide for next year is the expectation that it in a declining rate environment. There is the potential for more pay downs to the refi in the permanent market on the.

Speaker Change: Investment commercial real estate notwithstanding the fact that demand has been good do I think continuing falling rate environment can be good for demand on the loan side in all businesses I do.

But that the countervailing pressure in a particular quarter of a big chunk to swallow of pay downs, where we had $148 million in pay downs this quarter in the commercial space.

Speaker Change: Is is kind of the trend there.

Tyler Wilcox: And to this point, what are you seeing on commercial loan yields and just kind of competition in that space specifically? I know you're moving off from the lease of lease even a little bit, but just kind of what else are you seeing on new loan yields and competition there for the areas that you are growing? I would say stability. I mean obviously we're competing in metro areas that are, there's a lot of players like Columbus, Cincinnati, Cleveland, Louisville, Lexington, Richmond, and Washington, DC. But you know, I think commercial yields in the third quarter are, you know, in the seven and a half range.

Speaker Change: And to this point.

Speaker Change: What are you seeing on.

Speaker Change: Commercial loan yields and just kind of competition in that space specifically.

I know you're moving off of the lease the leasing side of it.

A little bit, but just kind of what else are you seeing on new loan yields and competition there for the areas that you are growing.

Speaker Change: I would say stability I mean, obviously, we're competing in.

Speaker Change: Metro areas that are Oh, there's a lot of players like Columbus, Cincinnati, Cleveland, Louisville, Lexington, Richmond, and Washington D. C. But you know I think our commercial yields are in the third quarter.

Speaker Change: Are you now in the seven and a half range.

Tyler Wilcox: And that's been pretty stable for a while now. That's great. That's good color. I appreciate that.

Speaker Change: And that's been pretty stable for a while now.

Speaker Change: Yeah.

Speaker Change: That's great. That's good color I appreciate that I'll I'll step back into them.

Tyler Wilcox: I'll step back into the key.

Speaker Change: The key.

Daniel Cardenas: The next question is from Daniel Cardenas with Janie Montgomery Scott.

Speaker Change: Thanks.

Speaker Change: The next question is from Daniel Cardenas with Janney Montgomery Scott. Please go ahead.

Daniel Cardenas: Please go ahead. Thank you.

Daniel Cardenas: Morning, guys.

Hey, good morning, guys, Hi, Dan Mooney.

Daniel Cardenas: By the end of the morning. Just, just most of my questions have been asked and answered, but just a quick question on Capitol. I guess with AOC, I continuing to potentially continue into decline in the falling rate environment than you're in your TCU ratio. You know, poised to continue to strengthen.

Daniel Cardenas: Just most of my questions have been asked and answered, but just a quick question on capital I guess with with ALC I continuing to potentially continue into declining.

Daniel Cardenas: All in rate environment, then you're in your TCE ratio.

Daniel Cardenas: Poised to continue the strength in one what are your thoughts on a stock repurchase activity.

Tyler Wilcox: What are your thoughts on Stockwood purchase activity? Yeah, Dan, we continue to evaluate them. I think we've given the priority historically, you know, organic growth. We're going to be committed to the dividend, and then depending on the environment, it's going to M&A and stock buyback. So we will continue to evaluate it as the capital ratios continue to improve. But again, I think, as you've seen us in the past, we're pretty opportunistic as it comes to the buyback. Right, right. No, it makes sense.

Speaker Change: Yeah, Dan we continue to evaluate them I think we've given a priority historically, you know organic growth, where you're gonna and committed to the dividend.

Speaker Change: And then depending on the environment kind of M&A and stock buybacks. So we will continue to evaluate it as the capital ratios continue to improve them.

Speaker Change: But again I think as you've seen us impacts, we're pretty opportunistic as it comes to the buyback.

Speaker Change: Right right.

Makes sense.

Tyler Wilcox: And then in terms of the specials, the positive specials that you're in, the third quarter, what kind of rate were you guys offering on those specials and what was the term of the product? Yeah, the product was close to the 5%. I think it might have been a little higher than 5. We moved it throughout the quarter, and definitely moved it was meaningful when the Fed moved. But I think the special, the highest price special, was a five month. And where that sits today is what I quoted. Again, we've come down on that rate now to something closer to 4.5% for a five-month CD.

And then in terms of the special deposit specials that you ran in the third quarter, what what kind of right, where you guys offering on those specials and what was the term of the product.

Speaker Change: The product was constant at 5% I think I might've been a little higher than five it we moved it throughout the quarter and definitely moved it most meaningful when the fed moved them, but I think the special pronounce the highest price special was a five month.

Speaker Change: And where that sits today as when I quote and again, we've come down on that right now.

Speaker Change: Something closer to four and a half per cent for five months D D.

Tyler Wilcox: We do have some other, you know, 11 months out there. But again, it's the lower rate than what we're paying on the five months.

Speaker Change: We do have some other tourists you know 11 months out there, but again, it's it's a lower rate than what we're paying on the five month.

Tyler Wilcox: Yeah, additional plans for additional product offerings in Q4. Are you just going to kind of see how things kind of settle down here? I think your question is specific to the positive. I think we'll continue on the path we're on at this point and continue to evaluate the rate on the CD specials that we offer in the terms. But I would expect us to stay relatively consistent with where we've been over the last few quarters. Just changing the rate downward as the Fed moves. That makes sense. And then I guess, as you look at, in terms of deposit cost, as you look at yourself versus your competition and some of your larger markets, do you guys typically rank in the middle of, of, of competition or higher end lower end?

Speaker Change: Yes.

Speaker Change: Additional planned score for additional product offerings in Q4 or it.

Speaker Change: I mean, you're just going to kind of see how how things kind of settle down here.

Speaker Change: I think your question is specific to deposits I think we will continue on the path. We're on at this point and then continue to evaluate their the rate on the CD specials that we offer and the terms, but I would expect us to stay relatively consistent with where we've been over the last few quarters.

Speaker Change: It's changing the rate downward as the fed moves.

That makes.

Speaker Change: Makes sense and then I guess as you look at it in terms of deposit cost is as you look at yourself versus your competition and some of your larger markets do you guys typically rank in the middle of.

Speaker Change: Petition are of higher and lower end.

Tyler Wilcox: No, I think we rank pretty much middle of the road for deposits pricing. Right, stick to our discipline, and that's one of the reasons for our focus on, you know, CNI lending as well, is that generally brings the whole relationship, so deposits, treasury management, so forth.

Speaker Change: No I think we ranked pretty much middle of the road.

Speaker Change: Or deposits pricing, rather stick to our discipline and that's one of the reasons for our focus on C&I lending as well is that generally brings the whole relationships so deposits treasury management and so forth.

Daniel Cardenas: Okay, perfect.

Speaker Change: Got it okay perfect I'll step back thanks, guys. Thank.

Daniel Cardenas: I'll step back. Thanks, guys.

Speaker Change: Thank you Stan.

Gary: At this time, there are no further questions.

At this time there are no further questions. Mr. Wilcox do you have any closing remarks.

Tyler Wilcox: Mr. Wilcox, do you have any closing remarks? I do. I want to thank everyone for joining our call this morning.

Mr. Wilcox: I do I want to thank everyone for joining our call. This morning. Please remember that our earnings release and a webcast of this call, including our earnings conference call presentation will be archived at peoples Bancorp Dot com under the Investor Relations section. Thank you for your time and have a great day.

Gary: Please remember that our earnings release and a webcast of this call, including our earnings conference call presentation, will be archived at teapotsbankcorp.com under the Investor Relations section. Thank you for your time, and have a great day.

Gary: The conference is now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Gary: You may now disconnect.

Yeah.

Speaker Change: [music].

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Speaker Change: Okay.

Speaker Change: [music].