Q3 2024 Mercantile Bank Corp Earnings Call
Speaker Change: Good morning, and welcome to the Mercantile Bank Corporation, 2024, 3rd quarter earnings conference call. All participants will be in listen only mode. Should you need assistance please signally conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Nicole Kladder, first vice president, Chief Marketing Officer of Mercantile Bank. Please go ahead.
Unknown Executive: Ward, Third quarter earnings conference call, all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Nicole Kladder: I would now like to turn the conference over to Nicole Kladder, First Vice President, Chief Marketing Officer of Mercantile Bank. Please go ahead. Good morning, and thank you for joining us.
Nicole Kladder: Today we will cover the company's financial results for the third quarter of 2024. The team members joining me this morning include Ray Reitsma, President and Chief Executive Officer, as well as Chuck Christmas, Executive Vice President and Chief Financial Officer. Our agenda will begin with prepared remarks by both Ray and Chuck, and will include references to our presentation covering this quarter's results. You can access the copy of the presentation, as well as the press release set earlier today by visiting Mercbank.com. After our prepared remarks, we will then open the call to your questions.
Speaker Change: Good morning, thank you for joining us. Today we will cover the company's financial results for the third quarter of 2024. The team members joining me this morning include Ray Reitsma, President and Chief Executive Officer, as well as Chuck Christmas, Executive Vice President and Chief Financial Officer.
Speaker Change: Our agenda will begin with prepared remarks by both Ray and Chuck, and will include references to our presentation covering this quarter's results. You can access the copy of the presentation, as well as the press release set earlier today by visiting Mercbank.com.
Nicole Kladder: Before we begin, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today. Due to factors described in the company's latest Securities and Exchange Commission's filing. The company assumes no obligation to update any forward-looking statements made during the call.
Speaker Change: After our prepared remarks, we will then open the call to your questions. Before we begin, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business.
Speaker Change: The company's actual results could differ materially from any forward-looking statements made today. Due to factors described in the company's latest securities and exchange commissions filing.
Speaker Change: The company assumes no obligation to update any forward-looking statements made during the call.
Nicole Kladder: That is all I have for you today.
Nicole Kladder: I will now turn the meeting over to our president and chief executive officer.
Speaker Change: That is all I have for you today. I will now turn the meeting over to our president and chief executive officer, Ray Reitsma, right? Thank you Nichole. My comments will focus on our significant reduction in the longed deposit ratio, very strong local deposit growth, strong local loan growth.
Raymond Reitsma: Ray Reitsma, right?
Raymond Reitsma: Thank you, Nicole. My comments will focus on our significant reduction in the loaned deposit ratio. Very strong, local deposit growth; strong, local loan growth; excellent asset quality; and steadily growing that interest income. Over the last three years, commercial loan growth and mortgage loan growth has been strong, and while deposit growth has been solid, it has not kept pace with loan growth. As a result, the banks' loaned deposit ratio increased to 110% at year end 2023. We believe the banks' elevated loan to deposit ratio is a contributing factor to our below-tier valuation, despite a strong return profile.
Speaker Change: Excellent answer quality and steadily growing that interest income. Over the last three years, commercial loan growth and mortgage loan growth has been strong, and while deposit growth has been solid, it has not kept pace with loan growth. As a result,
Speaker Change: The banks loaned deposit ratio increased to 110% at year end 2023. We believe the banks elevated loan to deposit ratio is a contributing factor to our
Raymond Reitsma: The following comments summarized the strategies we believe will contribute to further reductions in our loaned deposit ratio. We have undertaken a three-pronged approach to building our deposit base with the objective of reducing the loaned deposit ratio into the mid-90% range over time. First, we have broadened our focus on business deposits, including entities that have limited or no borrowings. Second, we plan to grow in the governmental and public realm through strategic personal additions with existing relationships in the space. Third, we are growing the retail customer focus based on total balances, as opposed to activity hurdles such as transactions or cardees.
Speaker Change: The following comments summarized the strategies we believe will contribute to further reductions in our loans at a positive ratio.
Speaker Change: We have undertaken a three-pronged approach to building our deposit base with the objective of reducing the loan to deposit ratio into the mid 90% range over time.
Speaker Change: First, we have brought our focus on business deposits, including entities that have limited or no borrowings. Second, we plan to grow in the governmental and public realm through strategic personal editions with existing relationships in the space.
Speaker Change: Third, we are growing the retail customer focus based on total balances, as opposed to activity hurdles such as transactions or card usage.
Raymond Reitsma: Research. These efforts led to an increase in local deposits in the first three quarters of 2024, but approximately 600 million dollars, a 21% annualized growth rate. Local deposits screw 339 million dollars in the third quarter alone. Workers' loans on the balance sheet have grown substantially over the past three years, as borrowers have opted for ARMs rather than fixed rates in the increasing rate environment. We have successfully executed changes within our portfolio mortgage programs, resulting in a greater portion of our mortgage production being sold rather than placed on our balance sheet. The positive outcomes include a 49% increase in mortgage banking income during the first nine months of 2024 compared to the respective 2023 period, and a nominal increase in mortgage loans on our balance sheet of $7 million here today.
Speaker Change: These efforts led to an increase in local deposits in the first three quarters of 2024, but approximately 600 million dollars, a 21% annualized growth rate. Local deposits grew 339 million dollars in the third quarter alone.
Horge Jones: Horge Jones on the balance sheet have grown substantially over the past few years as borrowers have opted for arms rather than fixed rates in the increasing rate environment. We have successfully executed changes within our portfolio mortgage programs, resulting in a greater portion of our mortgage production being sold rather than placed on our balance sheet.
Horge Jones: The pilot of outcomes include a 49% increase in mortgage banking income during the first nine months of 2024 compared to the respective 2023 period and a nominal increase in mortgage loans on our balance sheet of $7 million here today.
Raymond Reitsma: Commercial long growth in the first three quarters of 2024 was 233 million dollars, or 9% annualized. The current pipeline stands at 236 million dollars, slightly voted trend line established over the last three quarters, reflecting the strong funding activity in the third quarter. Commendments to fund commercial construction loans total $241 million in residential construction loans of $34 million at quarter end. Customer reductions in loan balances from excess cash flow or asset sales of $106 million also impacted our commercial loan tolls. Taking these factors into account, we expect a slight desoloration in the commercial loan growth in the media future.
Horge Jones: Commercial Long Growth in the first three quarters of 2024 was 233 million dollars, our 9% annualized.
Horge Jones: The current pipeline stands at $236 million, slightly voted turn line established over the last three quarters, reflecting the strong funding activity in the third quarter. Commendments to fund commercial construction loans total $241 million, and residential construction loans are $34 million at quarter end.
Horge Jones: Customer reductions in loan balances from excess cash flow or asset sales of $106 million also impacted our commercial loan tolls. Taking these factors into account, we expect a slight desoloration in the commercial loan growth in the media future.
Raymond Reitsma: Taking together these strategies produced the loan to deposit ratio of 102% as of September 30, 2024, compared to 110% at year end 2023, as the positive growth was approximately double total loan growth year-to-date. The ratio reduces to 97% when giving effect to our sweep account balances. During this period, the ratio of wholesale funds to total funds decreased from 14% to 11%, another demonstration of the strengthening of the funding side of the balance sheet. As that quality remains very strong, is not performing assets sold $9.9 million at quarter end or 17 basis points of total assets, consisting of 32% residential real estate and 68% non-real estate commercial loans.
Horge Jones: Taking together these strategies produced a loan to the positive ratio of 102% as of September 30, 2024 compared to 110% year and 2023 as the positive growth was approximately double total loan growth year-to-day.
Horge Jones: The ratio reduces to 97% when giving effect to our sweep account balances. During this period, the ratio of wholesale funds to total funds decreased from 14% to 11%. Another demonstration of the strengthening of the funding side of the balance sheet.
Horge Jones: S.E.R.D. remains very strong as non-performing assets sold $9.9 million at quarter-end or 17 basis points of total assets, consisting of 32% residential real estate and 68% non-real estate commercial loans.
Raymond Reitsma: There is no commercial real estate representation among the non-performing assets. As do loans and dollars represent 13 basis points of total loans, and there is no outstanding RRE. Non-owner occupied office exposure is $271 million, or 6% of total loans. The borrowers in this asset class have performed well and continue to be monitored closely. We remain vigilant in our underwriting standards and monitoring to identify any deterioration within our portfolio. Our lenders are the first line of observation and defense to recognize areas of emerging risk. Our risk rating model is robust, with continued emphasis on current borrower cash flow, providing prompt sensitivity to any emerging challenges within a borrower's finances.
Horge Jones: There is no commercial real estate representation among the now performing assets.
Horge Jones: Passed two loans and dollars represent 13 basis points of total loans and there is no outstanding ORE. 9 owner occupied office exposure is 271 million dollars or 6% of total loans. The borrowers in this asset class have performed well and continue to be monitored closely.
Horge Jones: We remain vigilant.
Horge Jones: in our underwriting standards and monitoring to identify any deterioration within our portfolio. Our lenders are the first line of observation and defense to recognize areas of emerging risk. A risk-grading model is robust with continued emphasis on current borrower cash flow, providing prompt sensitivity to any emerging challenges within a borrower's finances.
Raymond Reitsma: That said, our customers continue to report strong results to date and have not begun to experience the impacts of a potential recessionary environment in any systemic fashion. Total 9 interest income grew 27% during the first three quarters of 2024, compared to the first three quarters of 2023, with growth reported in several categories. Mortgage banking grew 49% based on the strategies outlined earlier, and the resulting ability to sell a greater portion of originations on the secondary market. Service charges on accounts grew 46% for flocking higher activity levels and customer growth, and less earnings credit offset to charges based on reduced balances and transaction accounts.
Horge Jones: That said, our customers continue to report strong results to date, and have not begun to experience the impacts of potential recessionary environment in any systemic crash.
Horge Jones: Total 9 interest income grew 27% during the first three quarters of 2024, compared to the first three quarters of 2023, with growth reported in several categories. Mortgage banking grew 49% based on the strategies outlined earlier, and the resulting ability to sell a greater portion of originations on the secondary market.
Horge Jones: Service Charges on Accounts Group 46% for flocking higher activity levels and customer growth and less earnings credit offset to charges based on reduced balances and transaction accounts.
Raymond Reitsma: Payroll services grew 20% as our offerings continue to build traction in the marketplace. Finally, credit and debit card income grew 3% when adjusted for the receipt of a one-time payment from Visa associated with our content contract renewal in the second quarter of 2023. Income from interest rate swaps to client 8% is demand for interest rate protection by borrower shifted with the borrower's future rate expectations.
Horge Jones: payroll services through 20% is our offerings continue to build traction in the marketplace.
Horge Jones: Finally, credit and debit card income grew 3% when adjusted for the receipt of a one-time payment from Visa associated with our contract renewal in the second quarter 2023.
Horge Jones: Income from interest rate, swaps to client 8% is demand for interest rate protection by borrower shifted with the borrower's future rate expectations that concludes my comments. I will now turn the call over to Chuck.
Raymond Reitsma: That concludes my comments.
Charles Christmas: I will now turn the call over to Trust. Thanks Ray, this morning we announced net income of $19.6 million, well $1.22 per due to share for the third quarter of 2024, compared with net income of $20.9 million or $1.30 per due to share for the respective prior year period. Net income during the first nine months of 2024 totaled $60 million or $3.72 per due to share compared to $62.2 million or $3.89 per due to share during the first nine months of 2023. While net income increased during both periods, net income was negatively impacted by expected lower net interest income and increased net interest expenses.
Chuck Christmas: Thanks Ray. This morning we announced net income of $19.6 million or $1.22 per diluted share for the third quarter of 2024 compared with net income of $20.9 million or $1.30 per diluted share for the respective prior year period.
Chuck Christmas: That income during the first nine months of 2024 totaled $60 million, or $3.72 per diluted share compared to $62.2 million, or $3.89 per diluted share during the first nine months of 2023.
Chuck Christmas: While non-interessing coming, increased remote periods.
Chuck Christmas: Net income was negatively impacted by expected lower net interest income and increased 9 interest expenses.
Charles Christmas: Provision expenses lower during the third quarter of 2024 compared to the third quarter of 2023 and was the same during the first nine months of 2024 as it was during the first nine months of 2023. Interest income on loans increased during the third quarter in first nine months of 2024 compared to the prior year periods, reflecting the increased interest rate environment in salad growth and commercial and residential mortgage loans. Our loan yield during the third quarter of 2024 was 32 basis points higher than the third quarter of 2023, with average loans up about 10% over the respective periods.
Chuck Christmas: Provision expense was lower during the third quarter of 2024 compared to the third quarter of 2023 and was the same during the first nine months of 2024 as it was during the first nine months of 2023.
Chuck Christmas: Interesting, on my loans, increased during the third quarter and first nine months of 2024 compared to the prior year periods. Reflecting the increased interest rate environment and salad growth and commercial and residential mortgage loans.
Chuck Christmas: Our loan yield during the third quarter of 2024 was 32 basis points higher than the third quarter of 2023 with average loans up about 10% over the respect of periods.
Charles Christmas: The approved loan yield largely reflects the combined impact of a 25 basis point increase in the federal funds rate in July of 2023, and over two thirds of our commercial loans have an uploaded rate, along with strong commercial and residential mortgage loan growth over the past 15 months in the higher interest rate environment. The 50 basis point reduction in the federal funds rate in mid September partially mitigated the higher levels of loan yield and interest income on loans for the quarter. Interest income on securities also increased during the 2024 periods compared to the prior year periods, reflecting growth in the securities portfolio and the higher interest rate environment.
Chuck Christmas: The approved loan yield largely reflects the combined impact of a 25 basis point increase in the federal funds rate in July of 2023 and over 2-3 of our commercial loans have in a flooring rate, along with strong commercial and residential mortgage loan growth over the past 15 months in the higher interest rate environment.
Chuck Christmas: The 50 basis point, reduction in the federal funds rate in mid-September partially mitigated the higher levels of loan yield and interesting come on loans for the quarter.
Chuck Christmas: Interesting common securities also increased during the 2024 period compared to the prior year period reflecting growth in the securities portfolio and the higher interest rate environment.
Charles Christmas: Interest income on interest earning deposits of vast majority of which is comprised of funds on the positive with the Federal Reserve Bankish cargo also increased during the 2024 periods compared to the prior year periods reflecting a higher average balance and an increased yield. In total, interest income was $12.3 million and $41.5 million higher during the third quarter and first nine months of 2024, respectively, compared to the prior year period. We recorded increased interest expense on the positive and our supercount product during the third quarter and first nine months of 2024, compared to the prior periods, reflecting the increased interest rate environment, money market and time deposit growth, and transfers of deposits from no or low cost in deposit products to higher cost in deposit products.
Chuck Christmas: Interesting, come on Interest Learning Deposit, a vast majority of which is comprised of funds on the positive of the Federal Reserve Bank of Chicago, also increased during the 2024 period compared to the prior period, reflecting a higher average balance and an increased yield.
Chuck Christmas: In total, InterSyncum was $12.3 million and $41.5 million higher during that third quarter and first nine months of 2024, respectively, compared to the prior year period.
Chuck Christmas: We recorded increased interest expense on deposit and our supercount product during the third quarter and first nine months of 2024 compared to the prior periods reflecting the increased interest rate environment.
Chuck Christmas: Money market and time deposit growth, and transfers of deposits from no or low cost in deposit products to higher cost in deposit products.
Charles Christmas: Our cost of deposits during the first quarter of 2024 was 85 basis points higher than the third quarter of 2023, with average deposits up about 13% over the respective periods. Interest expense on federal home bank of Indianapolis advances during the third quarter of 2024 was similar to that of the third quarter of 2023, reflecting an offset in lower average balance in higher average cost. Interest expense on the Federal Home Bank of Indianapolis advances during the first nine months of 2024 was higher than during the first nine months of 2023, reflecting a higher average balance and average rate.
Chuck Christmas: Our cost of deposits during the first quarter of 2024 was 85 basis points higher than the third quarter of 2023 with average deposits up about 13% over the respective periods.
Chuck Christmas: The interest expense on federal homo bank of Indianapolis advances during the 3rd quarter of 2024 was similar to that of the 3rd quarter of 2023, reflecting an offset in lower average balance in higher average cost.
Chuck Christmas: Interest Expansion Federal Honolent Bank of Indiana'sapolis advances during the first nine months of 2024.
Chuck Christmas: was higher than during the first time months of 2023 reflecting a higher average balance and average rate. Interest expense on other borrowed funds during the 2024 period was similar to the prior year periods.
Charles Christmas: Interest expense on other borrowed funds during the 2024 periods was similar to the prior periods. In total, interest expense was $12.9 million and $43.6 million higher during the third quarter in first nine months of 2024, respectively, compared to the prior year periods. That interest income declined $0.7 million and $2.2 million during the third quarter in first nine months of 2024, respectively, compared to the prior periods.
Chuck Christmas: In total, interest expense was $12.9 million, and $43.6 million higher during a third quarter in first month of 2024, respectively compared to the prior year period.
Chuck Christmas: That interesting come declined $0.7 million and $2.2 million during the third quarter, and first nine months of 2024, respectively compared to the prior periods.
Charles Christmas: In fact, in our net interest margin is our strategic initiative to lower the loan deposit ratio, which generally entails deposit growth exceeding loan growth and using the initial money to purchase securities. A large portion of deposit growth is in the higher cost in money market and time deposit products, while the purchase securities provide a lower yield than loan products. Our net interest margin declined 46 basis points during the third quarter of 2024 compared to the third quarter of 2023. Although our yield on early assets increased 30 basis points during that time period, our cost of funds was up 76 basis points.
Chuck Christmas: In fact, in our not-interest margin, is our strategic initiative to lower the loan deposit ratio, which generally entails the positive growth exceeding loan growth and using the initial money to purchase securities.
Chuck Christmas: A large portion of the deposit of deposit growth is in the higher cost in money market and time deposit products while the purchase securities provide a lower yield than low products.
Chuck Christmas: Our net interest margin declined 46 basis points during the third quarter of 2024 compared to the third quarter of 2023. Although our yield on a renaissance increased 30 basis points during that time period, our cost of funds was up 76 basis points.
Charles Christmas: While we experienced rapid growth in early assets yield during the period of March of 2022 through July of 2023, when the Federal Reserve raised the federal funds rate by 525 basis points, meaningful increases to our cost of funds did not begin to materialize into the latter part of 2022 when competition for deposit balances increased deposit rates and depositors began to move funds from no and lower cost in deposit types. To hire a cost in deposit products, our net interest margin peak during the latter part of 2022 and early stages of 2023. While loans increased 249 million dollars during the first nine months of 2024, or almost 8% on an annualized basis, the positive scoop 555 million dollars, or about 19% on an annualized basis, during the same time period, providing a net surplus of funds totaling about $300 million.
Chuck Christmas: While we experience wrap-a-growth and earning asset yield during the period of March of 2022 through July of 2023
Chuck Christmas: When the Federal Reserve raised the federal funds rate by 525 basis points
Chuck Christmas: Meaningful increases to our cost of funds did not begin to materialize until the latter part of 2022 when competition for deposit balance is increased deposit rates and depositors began to move funds from no and lower cost in deposit types to higher cost in deposit products.
Chuck Christmas: Our net interest margin peak during the latter part of 2022 and early stages of 2023.
Chuck Christmas: While loans increased $249 million during the first 9 months of 2024, or almost 8% on an annualized basis.
Chuck Christmas: The Pause of Screw 555 million dollars, or about 19% on an annualized basis or at the same time period, providing a net surplus of funds totaling about 300 million dollars.
Charles Christmas: News. We use that net surplus of funds to grow our security portfolio $86 million and reduce our Federal Home Bank of Indianapolis advance portfolio $51 million during the first nine months of 2024. The remainder of the net surplus of funds is on deposit with the Federal Reserve Bank of Chicago, with the deposit of the balance to only $218 million as of September 30. We recorded a provision expense of $1.1 million and $5.9 million during a third quarter in first time months of 2024, respectively. The third quarter of 2024 provision expense primarily reflects an increase in an environmental factor allocations and allocations necessitated by net long growth, which were partially offset by decreases in the calculated allowance, stemming from the payoffs of two larger problem commercial lending relationships.
Chuck Christmas: We use that NASA Plus of Funds to grow our Securities portfolio, $86 million, and reduce our federal home bank of Indianapolis Advanced portfolio, $51 million through in the first nine months.
Chuck Christmas: 2024. The remainder of the next surplus of funds is on the positive of the Federal Reserve Bank of Chicago with the deposit balance to $218 million as a September 30th.
Chuck Christmas: We recorded a provision expensive $1.1 million, and $5.9 million turned up third quarter in first time months of 2024, respectively.
Chuck Christmas: The third quarter 2024 provision expense primarily reflects an increase in environmental factor allocations.
Chuck Christmas: and allocations necessitated by net loan growth, which were partially offset by decreases in the calculated allowance, stemming from the payoffs of two larger problem commercial lending relationships.
Charles Christmas: The provision expense recorded during the first time months of 2024 also includes specific allocations for two non-performing non-real estate related commercial loan relationships that were established in the first and second quarters, along with allocations necessitated by net long growth. Nine interest expenses were $3.4 million and $6.6 million higher during the third quarter of the first nine months of 2024, respectively, compared to the prior year periods. The increases largely reflect higher salary of benefit costs, including annual merit pay increases, market adjustments, higher residential mortgage lender commissions, lower residential mortgage loan deferred salary costs, and increased medical insurance costs.
Chuck Christmas: The provision expense recorded during the first time months of 2024 also includes specific allocations for two non-performing non-realistic related commercial loan relationships that were established during the first and second quarters, along with allocations from the
Chuck Christmas: Nineter's expenses were $3.4 million and $6.6 million higher during the third quarter of the first nine months of 2024, respectively, compared to the prior year periods.
Chuck Christmas: The increases largely reflect higher salary of benefit costs, including annual merit pay increases, market adjustments.
Chuck Christmas: Higher Residential Mortgage Lundra Commissions.
Chuck Christmas: Lower residential mortgage loan deferred salary costs and increased medical insurance costs.
Charles Christmas: Higher data processing costs also comprise a notable portion of the increased, non-interest expense levels, primarily reflect the higher transaction volumes in software support costs, along with the introduction of new cash management products and services.
Chuck Christmas: Higher Data Processing Costs also comprise a notable portion of the increased non-interest expense levels, primarily reflecting higher transaction volumes in software support costs, along with the introduction of new cash management products and services.
Charles Christmas: We remain in a strong and well-capitalized regulatory capital position. Our bank's total risk-based capital ratio was $13.9 million at the end of the third quarter, about $211 million above the minimum threshold to be categorized as well-capitalized. We did not repurchase shares during the third quarter of 2024. We have $6.8 million available in our current repurchased plan.
Chuck Christmas: We remain in a strong and well-capilized, regulatory capital position.
Chuck Christmas: Our bank's total risk-based capital issue was $13.9 million at the end of the third quarter, about $211 million above the minimum threshold to be categorized as well capitalized.
Chuck Christmas: We did that, we purchased shares during the quarter of 2024, we have $6.8 million available in our current purchase plan.
Charles Christmas: On slide 24 of the presentation, we share our latest assumptions on the interest rate environment and key performance metrics for the fourth quarter of 2024, with the caveat that market conditions remain volatile, making forecasting difficult. This forecast is predicated on the federal funds rate being on lower 25 basis points effective, both on November 7th and December 18th. We continue to project long growth in the range of 4% to 6%. We are forecasting an interest margin to be in a range of 3.35% to 3.45%. Our ULUN earning assets and our cost of funds are projected to decline due to the recent and expected further reductions of the federal funds rate, with additional compression likely due to our ongoing deposit growth initiatives.
Chuck Christmas: On slide 24 of the presentation, we share our latest assumptions on the interest rate environment and key performance metrics for the 4th quarter of 2024 with the caveat that market conditions remain volatile, making forecasts seem difficult. This forecast is predicated on the federal funds rate being lower 25 basis points effective both on November 7th and December 18.
Chuck Christmas: We continue to project loan growth in the range of 4% to 6%
Chuck Christmas: We are forecasted in our interest margin to be in a range of 3.35% to 3.45%.
Speaker Change: Are you learning assats and are cost-of-puns are projected to decline due to the recent and expected further reductions of the federal funds rate? But the additional compression likely due to our ongoing deposit growth initiatives.
Charles Christmas: Expected results for non-interest income and non-interest expense are also provided for your reference.
Speaker Change: Expected results for non-interesting come, and non-interest expense are also provided for your reference.
Unknown Executive: Conference.
Unknown Executive: In closing, we are very pleased with our 2024 operating results in financial condition and believe we remain well positioned to continually successfully navigate through the myriad of challenges faced by all financial institutions. That concludes our prepared remarks.
Speaker Change: In closing, we are very pleased with our 2024 Operating Resource and Financial Condition and believe we remain well positioned to continually successfully navigate through the myriad of challenges faced by all financial institutions.
Unknown Executive: We will now move to the question-and-answer segment of this morning's call.
Speaker Change: That concludes our prepare remarks. We will now move to the question and answer segment of this morning's call.
Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.
Speaker Change: We will now begin the question in the information session to ask a question you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys.
Brendan Nosal: Our first question comes from Brendan Nosal with 12th Group. Please go ahead. Hey, good morning, folks. Hope you're doing well.
Speaker Change: To withdraw your question, please press star, then too. Our first question comes from Brendan Nozzle with loved group, please go ahead.
Raymond Reitsma: Thanks, Brandon. I'm just to start off here on the balance sheet. You know, really strong low growth on both sides of the sheet this quarter, and the liability side was particularly impressive. Maybe kind of digging a little bit deeper beyond the three-pronged approach that you guys laid out. Just kind of curious, the drivers of deposit growth for this quarter in particular, especially as it relates to non-intersparing balances. That goes the first quarter of sequential growth for that category since it's been 2022. Thanks. Yeah, well, it really is driven by new client acquisition and the deposits that come along with those relationships and also to go into opportunities that aren't necessarily characterized predominantly by low on opportunities, but by deposit opportunities as well.
Speaker Change: Hey, good morning folks, I'm happy doing well.
Speaker Change: Thanks for having me.
Speaker Change: I'm just to start off here on the balance sheet, you know, really strong low growth on both sides of the sheet this quarter. And the liability side was particularly impressive. Maybe kind of digging a little bit deeper beyond the three prior approach that you guys laid out. Just kind of curious, the drivers of deposit growth for this quarter in particular, especially as it relates to non interest bearing balances. Yeah, it goes the first quarter of sequential growth for that category since mid 2022. Thanks. Thank you.
Speaker Change: Yeah, well, it really is driven by a new client acquisition.
Speaker Change: and the deposits that come along with those relationships.
Speaker Change: and also to go into opportunities that aren't necessarily characterized, predominantly by loan opportunities, but by the positive opportunities as well, and it's purely a matter of commercial bankers tend to.
Raymond Reitsma: And that's purely a matter of focus. You know, commercial bankers tend to go where low on opportunities are, and we're making a considered effort to go where deposit opportunities are as well. When you look across the entirety of the deposit growth, if you look at what we expected compared to what we delivered, and by expected, I mean our budget at the beginning of the year. The growth is really spread across all three of the categories that I mentioned, but it's predominantly in the business banking deposits.
Speaker Change: Go where alone opportunities are and we're making a concert effort to go over the positive opportunities are as well. When you look across the entirety of the deposit growth,
Speaker Change: If you look at what we expected compared to what we delivered and expected, I mean our budget at the beginning of the year
Speaker Change: The growth is really spread across all three of the categories that I mentioned, but it's predominantly in the business, banking deposits.
Raymond Reitsma: And that is really the strength of our company, and we've just tried to really tap into that vein in a deeper way over the course of the beginning of this year.
Speaker Change: and that is really, you know, the strength of our company and we've just tried to really tap into that vein in a deeper way over the course of the beginning of this year.
Raymond Reitsma: And Brad, and this has dropped in regard to the comment and question of non-intersparing deposit accounts. I think for first of all, we always have a lot of the commercial bank. There tends to be a lot of volatility in that deposit balance on a daily basis, but I think the increase is primarily reflective of seasonal factors as businesses start building up their deposit balances to fund anticipated bonus payments. And tax payments towards the end of the year and the early next year.
Speaker Change: And this is Chuck and regard to the comment and question of non-interest period, the positive account. I think first of all, we always have lots of commercial banks. There tends to be a lot of volatility in that deposit balance in a daily basis, but I think the increase is primarily a flood note of seasonal factors.
Speaker Change: as businesses start building up their deposits of balances too.
Speaker Change: to find anticipated bonus payments, he attacks payments towards the end of the year and ends early next year.
Brendan Nosal: That's super helpful color.
Raymond Reitsma: Maybe one more for me before I step back. I'm just going to curious how deposit pricing reacted in the immediate aftermath of the Fed's 50 basis point rate cut, both for your own book and just the market at large. Yeah, I think we were talking about the market. It was pretty consistent that deposit pricing and items such as money market accounts and CD products went down about 50 basis points, similar to the decline in the Fed funds rate. And so we see a lot of consistency in our marketplace.
Speaker Change: That's super helpful, color, maybe one more for me, you've already stepped back. Just going to curious how deposit pricing reacted in the immediate aftermath of the Fed's 50 basis point break time, both for your own book and just the market at large.
Speaker Change: Yeah, I think we were talking about the market, it was pretty consistent that, you know, the positive pricing on items such as money market accounts and CD products went down about 50 basis points similar to the decline in the Fed funds rate. And so we see a lot of consistency in our marketplace currently.
Brendan Nosal: All right, fantastic. Thank you for taking the questions.
Unknown Executive: You're welcome. You're good.
Speaker Change: All right, fantastic. Thank you for taking the questions.
Daniel Tamayo: And the next question comes from Daniel Tamayo with Raymond James.
Speaker Change: Welcome, you're great
Daniel Tamayo: Please go ahead. Thank you. Good morning, guys. Yeah, maybe just kind of falling up on the conversation on deposit and then going to step further into on the NIMM, just curious. I know you mentioned a lot of information on the deposits and over the year today and over the last 12 months. But did you mention what the cost of deposit was in the third quarter and specifically? Are you talking about the growth or just the overall cost of the deposits? Yeah, just the rate. Yeah, I would say that, I would say the rates were probably closer to, I would say, or 75 in the low five, during the quarter obviously until the Fed reduced rates in mid September.
Speaker Change: In the next question comes from Daniel Tamayo with Raymond James, please go ahead.
Speaker Change: Thank you, come on you guys.
Speaker Change: Oh
Daniel Tamayo: Yeah, maybe just kind of falling up on the conversation on deposit and then taking a step further into on the NIMM. Just curious, I know you mentioned a lot of information on the deposits in over a year today and over the last 12 months, but did you mention what the cost of deposit was in the third quarter and specifically?
Speaker Change: Are you talking about the growth or just the overall cost of the deposits? Yeah, just the rate.
Speaker Change: Yeah, I would say that I would say the Rains were probably closer to, I would say, 475 in the low 5s, during the quarter obviously until the Fed reduced rates in mid-September. And then, as I just mentioned, those rates came down about 50 basis points.
Daniel Tamayo: And then, as I just mentioned, those rates came down about 50 basis points. So you're talking about a new kind of new deposits, deposit costs with those rates? Yeah, and what I would say for the money markets, I would say that was the cost of the entire portfolio. So obviously, those reports, whenever we move the rates. On the CD rates, that comment was what we were paying for new CD rates? Got it. Yeah, I mean, I was just curious if you had the over, like the blended rate of deposits in the third quarter.
Speaker Change: So you're talking about new deposits, deposit costs, with those rates. Yeah, and what I would say for the money market, I would say that was the cost of the entire portfolio. So obviously those reports whenever we move the rates. On the CD rates that comment was what we're paying for new CD rates.
Speaker Change: Got it. Yeah. I was just curious if you had the over like the blended rate of deposits.
Charles Christmas: I don't have that in front of me, Dania; I could certainly get that to you. I would say, you know, as you saw the, and as we commented on, you know, a large percent of the growth was in the money market and signed deposits. So I would say that that fact would have a big impact on the overall cost. But, as we just talked about, we also saw some growth in nine interest-praying deposits, which, of course, is going to help that calculation. Understood, okay, great.
Speaker Change: in the third quarter.
Speaker Change: I don't have that in front of me, Danny, I can certainly get that to you. I would say, you know, as you saw the, and as we commented on, you know, large percent of the growth was in the money market and time deposits. So, I would say that that was that.
Speaker Change: That fact would have a big impact on the overall cost, but as we just talked about, we also saw some growth in nine interest-praying deposits, which of course is going to help that calculation.
Daniel Tamayo: And then your comment on additional NIM compression expected after the fourth quarter due to your strategic lowering of the loan deposit ratio. Can you kind of just put some color around how you're thinking about what type of compression you might be looking at after the fourth quarter. After the fourth quarter? Yeah, I mean, just kind of curious what the, what was going into your comments there.
Danny: Understood, okay, great. And then you're comment on additional nim compression expected after the fourth quarter due to your strategic lowering of the loaned deposit ratio. Can you kind of just put some color around how you're thinking about what type of compression you might be looking at after the fourth quarter?
Danny: After the 4th quarter? Yeah, I mean just kind of just curious what was going into your comments there.
Charles Christmas: Excuse me, well, my comments for a typical world, what I thought would happen in the fourth quarter. Again, taking into account what the Fed did in mid September and what we think the Fed will do in November and December.
Speaker Change: Excuse me, well my comments for a typical world what I thought would happen in the fourth quarter.
Danny: Again taking an account what the Fed did in mid-September and what we think the Fed will do in November and December.
Charles Christmas: I think, as far as going in the future, I didn't make any specific comments or guidance today because we are, as you might expect, right in the middle of putting our budget together. I would say, on an overall basis, when we look at our simulation results and just our knowledge of the balance sheet. Notwithstanding additional deposit growth, which obviously we want. If the compression that happened due to the Fed cut that we think can happen in the fourth quarter is primarily the fact that we expect a hundred basis points within three months. If we, as I look at what the markets projecting currently, which is equal to what the Fed has provided in their guidance.
Danny: I think as far as going in the future, I didn't make any.
Danny: Specific comments are guidance today, because we are, as you might expect, right in the middle of, um, putting our budget together, uh, I would say on an overall basis when we look at our simulation results and just our knowledge of the balance sheet, um, notwithstanding additional deposit growth, which obviously we want.
Danny: is the compression that happened due to the fed cut.
Danny: That we think can happen in the fourth quarter. It's primarily the fact that we expect a hundred basis points within three months.
Danny: If we, as I look at what the markets projecting currently, which is equal to what the Fed has provided.
Charles Christmas: We're looking at 25 basis points per quarter throughout next year. Obviously, a much slower pace than what we saw in the fourth quarter or an expect in the fourth quarter of this year. With the projection that's out there now in the market for next year, from a rate perspective, we would expect the margin to stay relatively steady.
Danny: and their guidance. We're looking at 25 basis points per quarter throughout next year. Obviously, a much slower pace than what we saw in the fourth quarter or an expect in the fourth quarter of this year. With the projection that's out there now in the market or next year, from a rate perspective, we would expect the margin to stay relatively steady.
Speaker Change: Okay, all right, that's helpful, appreciate that. Sorry, I guess I misheard what you, your original comment was. I appreciate the clarification, and then just lastly.
Speaker Change: Yeah
Speaker Change: Yeah, lastly, just on the credit side on reserves kind of steady increase.
Speaker Change: in prior quarters until this quarter where you kind of stabilize around that 125 member. You know, just, does that feel like a pretty good number for you guys? Given, you know, it looks like the economy isn't a decent spot here. Any kind of color you have on reserve level, going forward would be helpful.
Speaker Change: Yeah, then as you know, as you talk to Humsherah of all your companies out there, the reserve is much or of an art and it is a science. We continue to be blessed with very strong credit quality. We basically got it in a net neutral charge opposition over the last 10-plus years.
Speaker Change: which means a lot of our reserve is predicated on qualitative factors.
Speaker Change: As I mentioned in my comments, we did adjust one qualitative factor, specifically that was to increase the allocation factor associated with our CNI credit.
Speaker Change: segment of our portfolio.
Speaker Change: Nothing drastic, we look at the numbers, we provided an updated slide in our deck as well. We are seeing, I don't want to overplay it, but we are seeing some softness.
Speaker Change: in automotive industry.
Speaker Change: As the big manufacturers have slowed new models.
Speaker Change: Coming out, which is a big part of has a big impact on companies such as two on die.
Speaker Change: So we have seen some degradation in that particular segment, so we decided to allocate some additional dollars going through that process.
Speaker Change: Also, as I mentioned, one of the benefits we definitely had in the third quarter was we had two, eight rated, but accruing commercial loan relationships that paid off.
Speaker Change: that released about a million dollars in reserve. So we had obviously built that reserve up over time to account for those credits they paid off, so there was some give back there. I would say it's management's intention of keeping the reserve as strong as we possibly can, obviously taking into account the calculation rules that we have to deal with as well as our ongoing assessment of the overall health of the loan portfolio, looking at great changes, levels of not accruals, past dues, charge drops and those types of things.
Chuck Christmas: If I could, I'd like to underscore Chuck's comment about the slight change in the automotive risk profile. The slide on page 31 lays that out, but our risk rating from the end of 2023 to currently on that particular group moved from 4.17 to 4.49. So, we recognize some deterioration, but in this environment, we're looking closely at everything, and this is the group that stood out with a change of that magnitude. So, I just kind of wanted to underscore that point about the slight change there. And just for a perspective, a seven rated is watch list for us.
Chuck Christmas: and a force average.
Chuck Christmas: Kladder Kladder.
Speaker Change: Okay, well, guys, that's great color. Appreciate all that. And thanks for that slide. 31 that's helpful to give us a sense of size of those loans. That's all I had all step back. Appreciate it. Thank you.
Speaker Change: In the next question comes from Nathan Race with Piper Sandler, please go ahead.
Nathan Race: Yeah, hi guys. Good morning. Thanks for taking the question.
Nathan Race: Just go back to the previous question around kind of margin expectations for next year. You know, I appreciate it still fluid time in terms of thinking about the forecast for 25. But if I heard you correctly, Joe, did you indicate that it's like we more of a stable margin outlook if there's more of a gradual dead cutting cycle into 2025? Yeah, that's correct.
Nathan Race: Okay, great. And just curious how you guys are thinking about money market as a crisis in particular. When I look at some of your posted raises, things like you're still toward the top of the market relative to some competitors in your footprint. So just curious how you're thinking about that product pricing in particular, you know, as we get additional digest going forward within the context of the goal to get the loan of odds ratio consistently around 95% going forward. So just curious how you're thinking about that product pricing in particular, you're still toward the top of the market relative to some competitors in your footprint.
Speaker Change: Yes, it's great question. I think one of our strategies that this company has always been since the open was to be in a top tier of the positive pricing.
Speaker Change: we obviously are very good at growing our asset base our loan baseandwe know we need to be competitive on the deposit side to you know bring ing those deposits to help fund by that loan growth we also as you know we build ourselves and we are a relationship bank and what we tell our loan customers is that as part of our relationship you we're going to pay you to bring your your entire walalllet to us so we want to be competitive on all of our deposits and obviously money markets has everybody's attention now
Speaker Change: And where I think the industry continues to see most of us growth, notwithstanding that a lot of that money is coming out of lower cost in the positive products. That definitely is slow down. For more results, 12-18 months ago, but that is still some transition that we're seeing within our balance sheet.
Speaker Change: I think that one of the things that we talk about with our money market account customers, when we talk to them, when we're opening up their accounts, that in large part, this rate is going to be tied to the Fed funds rate, as a matter of fact, some of those accounts are by agreement, by deposit agreement are actually tied to the Fed funds rate, but even if they're not, we have conversations with those depositors that the rate that we're paying on our money market account would be heavily influenced. [inaudible]
Speaker Change: by whatever the Federal Reserve may do. So we did lower, if I mentioned, we did lower those rates by 50 basis points.
Speaker Change: and I think that was, you know, from all indications that was wildly accepted by the depositors. So, not expecting any, you know, any concern if the Fed continues to lower interest rates, we will continue to look to lower the money market rate as well. Again, you know, in a fairly equal, equal manner. And that's, at least for the first 50, that's what we have seen our competitors do as well.
Speaker Change: Got a very helpful curricular. Maybe just one last one for me. You guys are just continuing to build capital at pretty strong clips. And as Ray alluded to, it is prepared comments. You guys are still training at discounted peers. So just curious how you guys have been thinking about, maybe potentially stock buybacks going forward.
Speaker Change: You know, I'll probably just kind of repeat what we've said before in our capital. We think it makes sense to have as much capital that you know, buffers are company. If there's anything that's, you know, an, you know, potential significant downturn in the economy.
Speaker Change: Um...
Speaker Change: It's always good to have extra capital and when we look at the environment that we're operating in, which is very difficult to predict, and we just think it's good practice and good governance of our balance sheet to maintain strong capital positions.
Speaker Change: So I think, you know, the stock by-backs are there, we have a plan, we have an act of plan, we have the ability to buy back shares.
Speaker Change: But at least as we go through the current environment, look at our
Speaker Change: Balance sheet. As we talked about, we've seen some solid long growth and of course that puts pressure on capital ratios as well, good pressure, good pressure to have, but we want to make sure that we've got enough capital, if there is a rainy day that's coming, we want to make sure that we've got sufficient capital to support our growth, especially commercial long growth, which of course on the risk-weighted basis.
Speaker Change: is more expensive than other types of growth. You know, we continue to pay what we believe is an appropriate cash dividend.
Speaker Change: and we want to continue to maintain that cash return to our shareholders as well. So it's a good question. It's something that, you know, executive management, the board talks about every quarter, but I think right now we're comfortable with our current capital position and clearly we'll look at our stock price and if the opportunity presents itself that we think it's a good buy from a valuation standpoint, we're ready to step in at any point in time. But where we are, currently, we're comfortable with continuing to grow the capital base as we have been.
Speaker Change: Okay, understood, I appreciate the color, thanks guys.
Speaker Change: Good morning.
Speaker Change: Again, if you have a question, please press star and then one. Our next question comes from Damon Del Monte with KVW. Please go ahead.
Speaker Change: Hey, good morning, guys, everybody's doing well today and thanks for taking my question. So just chuck for you. Just want to understand a little bit better the dynamic of the balance sheet here. If you guys are continuing to grow deposits and it's outpacing, obviously the pace of loan growth should we be forecasting then higher security balances and higher cash balances over the coming quarters.
Chuck Christmas: Yeah, I think that's exactly what you should do, Damon. That is definitely my expectation. You know, as we talked about, as you can see, in the deck, we definitely have been building the securities portfolio, which obviously is the offset to, you know, is part of lowering the loaner deposit ratio.
Chuck Christmas: So, you know, I'm not all that excited about keeping over two hundred million dollars at the Fed, but we want to make sure that we're using those money effectively. So we're growing our securities portfolio, probably I would say about ten million dollars a month.
Chuck Christmas: And obviously we can change that at any time, but we pretty much have bet on that pace. Don't expect at this point in time to change that pace. So that I bring that up because that is one of the impacts that how much money we have at the Fed.
Speaker Change: Gotcha, okay, and then, um, so despite the kind of the lower guy in the margin, um, do you feel like you can kind of hold, uh, an AI, you know, relatively flat-ish, maybe kind of ease some of the pressure, just giving the larger balance sheet done.
Speaker Change: Yeah, I think we actually had the opportunity as we just saw in the third quarter we could actually increase not interesting come, you know, clearly our strategy to lower the loan deposit ratio has a negative impact on performance measures such as margin, return on average assets, those types of things.
Speaker Change: But if you're looking at just the pure income statement, it still has a positive impact.
Speaker Change: On the bottom line that income number, and so I wouldn't expect that to change it all. And while certainly, you know, the Fed continues to lower rates, which looks like they're on that path, and the degree in what the timing obviously is up in the air, you know, that will put some pressure on our loan yields.
Speaker Change: But we also have, you know, a securities portfolio that has quite a bit of maturity's coming up over the next
Speaker Change: Next several years that has the opportunity to reprise in a very significant way. Obviously on the flip side on our liability side, we'll have CDs.
Speaker Change: Um, that, uh, on average next year, put things in perspective are looking at a 4.6% current rate and those should reprise down meaningfully. And we also have, you know, we don't have a lot, but we do have some fixed rate loans on our books.
Speaker Change: especially on the commercial side.
Speaker Change: You know, that, you know, loans that are going to mature next year for, for things in perspective is the 4.3% average rate currently, so
Speaker Change: Some opportunities, some repriced opportunities on a good side as well, that we believe should offset neutralize anyways, and any yield pressure that we see because of reduction in the pet funds rate.
Speaker Change: God, that's great color. You, um, do you have to have a dollar amount on those, the fixed rate loans that you expect to mature in 25? Yeah, it's 150 million.
Speaker Change: That's it!
Speaker Change: Okay, great. Appreciate that color. And then I guess just lastly, you know, with the rates moving down a little bit, you know, it seems like the mortgage banking was stronger than we were looking for this quarter. I guess which, you know, which are outlook here over the back half of this year? Do we expect normal seasonality in the winter months? Or do you think that the lower rate environment will spur? [inaudible]
Speaker Change: Anoff activity that kind of keep that line at him moving positively.
Speaker Change: It's been an interesting year because during the typical peak.
Speaker Change: Summer season that we experienced here in Michigan, our more directivity was at a given level, and then when the rates dropped in the fall, the seasonality that you typically expect to see didn't occur, it actually bumped up a notch. So as we sit here right now today, the backlog looks similar to what we had during this summer.
Speaker Change: So I think we'll see a little bit stronger, late fall, fourth quarter I guess, then we typically would seasonally, and how much more so depends on what happens with rates, but we certainly saw an uptick when rates got a bit better, and it was strong enough to kind of overwhelm what's the usual seasonal pattern.
Daniel Tamayo: God, okay, that's great. That's all that I had. Thank you very much.
Speaker Change: Got it. Okay, and that's great. I'm gonna sell it ahead. Thank you very much.
Brendan Nosal: In the next question comes from Brendan Nosal with Hubbed Group. Please go ahead. Just one follow up for me. You're just getting back to your comments on access to positive growth being placed into security for the time being.
Speaker Change: Thank you very much.
Speaker Change: In the next question comes from Brendan Nazel with Hubbed Group. Please go ahead.
Speaker Change: Hey, just one follow-up for me, you're getting back to your comments on, I just can pause and grow up being placed into security for the time being. Just kind of curious, I think about the trade-offs versus investing into security versus reducing wholesale borrowers more meaning-life.
Raymond Reitsma: Just kind of curious how you think about the trade, you know, versus, you know, investing into security versus reducing wholesale borrow raise more meaning. Yeah, I think, you know, well, we're definitely looking at reducing our wholesale funding portfolio. Clearly, we don't have a need to have those types of funds on our balance sheet in general when we're bringing in as much to positive as we were. Now, one of the things I will say is the Federal Home Bank advanced portfolio that is in part, in a large part, historically been used to offset the interest rate risk associated with doing fixed rate loans.
Speaker Change: Yeah, I think, you know what, we're definitely looking at reducing our host-out funding portfolio.
Speaker Change: Clearly, we don't have any need to have those types of funds on our balance sheet in general. When we're bringing in as much deposit as we were.
Speaker Change: Now one of the things I will say is the federal home bank advanced portfolio that is in part in a large part historically been used to offset
Raymond Reitsma: Like I said, we don't do a lot of fixed-rate loans. What we do some typically five year balloons on the commercial side. So we do occasionally go to the Federal Home Bank and obtain five-year advances to match fund that. That's something that we will continue to do. But I would say, in general, you know, if we have the surplus of funds, like I explained that we had in the third quarter, in general, we don't really see it need to have wholesale funds on our books. And as those come up for maturity, we definitely look to, you know, retiring those, if you will, without replacing them with new funds.
Speaker Change: The interest rate risk is associated with doing fixed rate loans. Like I said, we don't do a lot of fixed rate loans but we do some typically five year balloons on the commercial side. So we do occasionally go to the federal home bank and obtain five year advances to match on that. That's something that we will continue to do. But I would say in general, you know, if we're if we have the surplus of funds like I explain that we had in the third quarter. In general, we don't really see a need to have a host of funds on our books. And as those come up for maturity, we definitely look to, you know, retiring those if you will without replacing them with new funds.
Brendan Nosal: But obviously, you know, that's a dynamic situation, and we'll continue to look at our overall balance sheet as those events do come take place. Yep, make sense. All right, thank you for taking the fall.
Speaker Change: But obviously, you know, that's a dynamic situation and we'll continue to look at our overall balance sheet as those events do come take place.
Unknown Executive: You're welcome.
Speaker Change: Yes, make sense. All right, thank you for taking the fall.
Unknown Executive: This concludes our question and answer session.
Raymond Reitsma: I would like to turn the conference back over to Ray Wright's loss for any closing remarks. Just want to thank you for your participation. Today's call and your interest in my can tell bank, and that concludes today's call. Thank you. The conference is now concluded. Thank you for attending today's presentation.
Unknown Executive: You may now disconnect.