Q3 2024 First Interstate BancSystem Inc Earnings Call
Please standby were about to begin.
Speaker Change: Good morning, everyone and welcome to the first Interstate Bake systems third quarter earnings Conference call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing star one on your telephone keypad you may withdraw yourself.
Speaker Change: From the queue by pressing star two.
Speaker Change: Also today's call is being recorded and if anyone should meet any operator assistance during the call today. Please press star zero.
Speaker Change: Now at this time, I'll turn things over to Nancy Vermaelen financial Communications and analysts manager Nancy. Please go ahead.
Nancy Vermaelen: Thanks, very much good morning.
Nancy Vermaelen: Thank you for joining us for our third quarter earnings Conference call.
Nancy Vermaelen: As we begin please note that the information provided during this call will contain forward looking statements actual results or outcomes may differ materially from those expressed by those statements.
Nancy Vermaelen: Like to direct all listeners to read the cautionary note regarding forward looking statements contained in our most recent annual report on our Form 10-K filed with the SEC and in our earnings release.
Nancy Vermaelen: As well as the risk factors identified in the annual report and in our more recent periodic reports filed with the S. E C.
Nancy Vermaelen: Relevant factors that could cause actual results to differ materially from forward looking statements are included in the earnings release and in our SEC filings.
Nancy Vermaelen: The company does not undertake to update any of the forward looking statements made today.
Nancy Vermaelen: A copy of our earnings release, which contains non-GAAP financial measures is available on our website at <unk> Dot com.
Nancy Vermaelen: Information regarding our use of non-GAAP financial measures may be found in the body of the earnings release and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference.
Speaker Change: Joining us from management. This morning is Kevin Riley, our Chief Executive Officer, and Marcy Mutch, Our Chief Financial Officer, along with other members of our management team at this time I will turn the call over to Kevin Riley Kevin. Thanks.
Kevin Riley: Thanks, Nancy good morning, and thanks again to all of you for joining us on our call today.
Kevin Riley: This quarter along with our earnings release, we have published an updated investor presentation that has some additional disclosures, which we believe would be helpful. The presentation can be accessed on our investor Relations website, and if you haven't downloaded a copy yet I would encourage you to do so I'm going to start today by providing an overview of the <unk>.
Kevin Riley: Highlights for the quarter, and then I'll turn the call over to Marcia to provide more detail on our financials. So let's get to our results. We recorded $55 5 million and net income in the third quarter or <unk> 54 per share.
Kevin Riley: Our net interest margin, excluding purchase accounting accretion increased by five basis points to 297%.
Kevin Riley: We believe our net interest margin ex purchase accounting will exceed 3% in the fourth quarter as it did in the month of September noninterest expenses in the third quarter came in better than we expected and they included one time costs related to my transition.
Kevin Riley: As we have announced Jim Boyd or the former CEO of first bank will step into the CEO role and a week on November one.
Kevin Riley: I'll say a bit more about Jim in my closing remarks.
Kevin Riley: In the third quarter, we saw a modest growth in our fee business, which was enhanced by the sale of one of our branches, but excluding this sale non interest income increased by approximately 3%.
Credit quality, our criticized and classified loans both declined in the period. However, we did see some charge offs noise in the third quarter that was specifically related to our Metro office portfolio.
Kevin Riley: We have a large property that transition to nonaccrual for which we took a significant charge off to what we estimate as the realizable value as we've said in the past. We believe we are addressing the challenges in our Metro office portfolio proactively and any significant challenges in that portfolio are now.
Kevin Riley: Behind US we have also included an additional slide in our Investor presentation that provides further information on our Metro office exposure.
Kevin Riley: Finally, we are pleased with our deposits in the third quarter as they are.
Kevin Riley: It is essentially flat despite the change related to a large temporary deposit that was on the balance sheet at the end of last quarter. If we strip that effect out our deposits increased approximately 1% during the quarter.
Kevin Riley: As we look to 2025 the margin expansion that we expect to continue coupled with our expense discipline should lead to improved profitability. We believe the company is in the midst of an earnings inflection, which we have discussed previously and we look forward to improving results going forward with that.
Speaker Change: I'll turn the call over to Marshall.
Marshall: Thank you Kevin as I walk through our financials, unless otherwise noted all of the prior period comparisons will be with the second quarter of 2024, and I'll begin with our income statement.
Our net interest income was $205 $5 million in the third quarter, an increase of $3 $8 million.
Marshall: Our yield on interest, earning assets increased three basis points quarter over quarter, driven again by an increase in loan yields.
Marshall: During the quarter, we also terminated $550 million of swaps at approximately breakeven, which mitigated the impact to net interest income during the period.
Our cost of interest bearing liabilities declined in the third quarter, driven by a $205 3 million dollar reduction in average borrowings.
Marshall: Ending borrowings declined approximately $600 million quarter over quarter.
Marshall: As of September rate cut by the fed was widely anticipated by the market. We saw some of our customers more aggressively pursue higher rates ahead of the fed action.
This resulted in the cost of our interest bearing deposits increasing more than we had anticipated at the beginning of the quarter. This activity has slowed significantly and the rate cut aftermath.
Marshall: Our fully tax equivalent net interest margin increased four basis points to three 4% in the third quarter and as Kevin stated, our net interest margin excluding purchase accounting accretion increased five basis points to 297%. This increase is net of a one basis point impact to our net interest margin from lower unrealized losses.
Marshall: In our investment securities portfolio during the quarter, resulting in higher average balances overall, we continue to anticipate a sequential increase in the net interest margin in the fourth quarter and into 2025.
Marshall: Our balance sheet responded to the September rate cut as we expected with similar loan and interest bearing deposit betas.
Marshall: Our outlook now includes two more rate cuts by the fed in the fourth quarter, each 25 basis points, neither of which should materially impact fourth quarter earnings results.
Marshall: As a result, we believe the net interest income will continue to increase sequentially in the fourth quarter and the increase in margin will more than offset the impact of modestly declining interest, earning assets in the fourth quarter, our balance sheet as neutral as the amount of overnight borrowings repricing. This quarter, it's de Minimis in the first quarter of 2025.
Marshall: We will see $1 7 billion of borrowings reprice early in the quarter, which includes both RPT FP and a portion of our term <unk> advances.
Marshall: Non interest income increased to $46 $4 million in the third quarter, excluding the $2 $6 million gain on the sale of one of our branches as Kevin mentioned, we saw an increase of approximately 3% quarter over quarter noninterest expense increased in the third quarter by $2 $5 million. However, a one time expense.
Marshall: $3 $8 million related to the CEO transition more than fully accounts for that increase excluding that cost our noninterest expenses again declined compared to the prior period as we anticipated our medical insurance expenses normalize somewhat in the third quarter after running consistently below our expectations for the first half.
Marshall: For the year.
Marshall: That moderate increase was more than offset by savings in other expense lines as we've done all year, we remain focused internally on expense control and more effective management of our resources and branch network.
Marshall: Moving to our balance sheet loan balances decreased by $207 $9 million in the third quarter. The conversion of construction loans to permanent real estate financing with typically lower risk profile continued this quarter, which is reflected in the increase of $164 $8 million in our commercial real estate loans.
Marshall: <unk> loans declined $212 million.
Marshall: We did experience some seasonality in our commercial and industrial balances with utilization declining about 2%.
Marshall: We also saw a decline in our lower yielding mortgage balances as a result of normal amortization and subdued production demand.
Marshall: Our unfunded commercial construction commitments balance stood at approximately $300 million at the end of the quarter at a weighted average rate of approximately 6%.
Marshall: This should now be reflective of somewhat normal levels of unfunded construction commitments and we no longer believe that funding for this portfolio will have a material drag on our loan yields going forward.
Marshall: With that in mind, we don't intend to continue to call out these commitments in the future.
Marshall: We continue to see stability in our noninterest bearing deposits, which again averaged 26% of our total deposits in the period roughly unchanged from the end of 2023 in.
Marshall: In the third quarter, we recorded a modest decrease of $6 $6 million in deposits compared to the prior period. However, excluding the effect of a temporary outflow we've identified our deposits increased approximately 1% as we expected.
Speaker Change: With respect to credit as Kevin pointed out criticized and classified loans both decreased in the third quarter. Our total provision expense was $19 $8 million with our funded ACL coverage at 1.25% of total loans as.
Speaker Change: As we indicated last quarter, we've been keeping our eye on the Metro office portfolio, which included higher than expected net charge offs this quarter.
Approximately 80% of our charge offs were comprised of two loans in that portfolio. The smaller of the two are construction real estate loan is fully charged off with no remaining exposure the larger Metro office loan was written down 70% this quarter, which reflects our estimated realizable value for additional transparency.
Speaker Change: We've added a slide in our Investor presentation that describes this portfolio in more granular detail overall, our exposure in the Metro office sector is now less than $90 million and we believe there are no more material losses in the portfolio at this time.
Speaker Change: Our total charge offs for the quarter were $27 $4 million, excluding the two metro office loans. We just discussed our charge offs were $5 3 million or 12 basis points of average loans we.
Speaker Change: We also wanted to give you an update regarding the two other significant nonperforming loans, we've been reporting on in previous quarters rigs.
Speaker Change: Regarding the agricultural credit, we anticipate a resolution in the fourth quarter.
Speaker Change: With respect to the commercial loan for which we have a specific reserve we remain in weekly communication with a borrower who is performing as expected under our agreement at this time little has changed but we anticipate additional clarity in the fourth quarter and believe this specific reserve is adequate based on what we know today.
Speaker Change: And finally, our capital continue to accrete in the third quarter, our common equity tier one capital ratio increased 30 basis points to 11, eight 3% as we continue to prudently manage risk weighted assets.
Speaker Change: We also declared a dividend of <unk> 47 per share or a yield of six 3% for the third quarter of 2024 and with that I'll turn it back to Kevin.
Kevin Riley: Thank you Marci I would like to congratulate our board on finding an actually a successor to me and Jim Ryan as I had mentioned Jim joins US from first bank holding company one of the largest privately held banks in the nation.
Kevin Riley: He served as president and CEO for the past seven years before retiring in March <unk>.
Kevin Riley: Spending a little time with Jim I believe his leadership style is a great fit for our culture and I am leaving the company in good hands.
He arrives here at the beginning of next month.
Kevin Riley: We'll fine unwavering support from a team that has the talent.
Kevin Riley: And our commitment to excellence that we will continue to drive this company forward now.
Kevin Riley: Now comes the bitter sweet moment for myself.
Kevin Riley: As I keep my concluding remarks, and my last earnings call as the CEO of first Interstate after 17 consecutive years performing quarterly earnings calls first at Berkshire Hills and now the last 11 at first Interstate.
Kevin Riley: Not sure what I'm going to do with myself come January I want to wrap up by thanking my first Interstate family, our shareholders and all of our stakeholders for their hard work and support over the last seven years I have served this great company.
Kevin Riley: I'm very proud of all that we have achieved and how much we have grown and matured as a company. During my time here. So this is goodbye at least for now we shall see if our paths cross again in the future and now I'd like to open the call up for questions.
Speaker Change: Thank you Mr. Riley, ladies and gentlemen at this time if you do you have any questions. Please press star one do you find your question has already been addressed you may remove yourself from the queue by pressing star two.
Speaker Change: Again star one for questions. We'll go first this morning to Matthew Clark with Piper Sandler.
Matthew Clark: Hey, good morning.
Matthew Clark: Good morning.
Matthew Clark: Yes.
Matthew Clark: Just wanted to can.
Matthew Clark: Can you just remind us the specific or specific reserves do you have set aside for that C&I relationship that is expected to get resolved by year end just want to make sure we're capturing that in terms of charge offs.
Speaker Change: Matt you've asked that question a number of times, we don't.
Speaker Change: Specifically highlight the specific reserve on that credit, but I would say at this point is very adequate to what we think could be the realizable value.
Speaker Change: Okay, and then did you have reserves previously set aside on the charge offs on those two metro office credits and if so how much.
Speaker Change: Yes, Matt while there was no specific reserves set aside on that the characteristics of those loans were considered in our overall allowance again and the larger of those two loans. It was paying into the fourth quarter, but we anticipated there may be a problem and so we ordered an appraisal and then wrote it down based on that appraisal.
Speaker Change: Yes.
Okay.
Speaker Change: Then.
Speaker Change: Okay.
Speaker Change: It was in the slide deck, but the spot rate on deposits at the end of September and the average margin in the month of September.
Speaker Change:
Speaker Change: The spot rate on deposits was 2% and 303 was the margin in September.
Speaker Change: On a reported basis or core.
Speaker Change: So that's a core basis ex purchase accounting.
Speaker Change: Okay, great. Thank you.
Speaker Change: You bet.
Speaker Change: Thank you we'll take our next question now from Andrew to rail at Stephens.
Speaker Change: Hey, good morning.
Speaker Change: Good morning, Andrew.
Speaker Change: Yeah.
On the AG credit that you guys discussed can you just remind us the size of that loan and then I'm, assuming you know the commentary around the expectation for some kind of resolution.
Speaker Change: Is that probably what's influencing the 20 to 25 basis point charge off guidance for the fourth quarter.
Speaker Change: Yeah, and so the Agua and was around $20 million.
Speaker Change: And yes, we feel comfortable with the 20% to 25 basis point guide on.
Speaker Change: Net charge offs, excluding again, the large C&I credit.
Speaker Change: We don't really anticipate taking a really a loss on that AG credits.
Speaker Change: Yes.
Speaker Change: Got it okay.
Speaker Change: I appreciate it.
Speaker Change: And then marcy around the $1 seven of borrowings then.
Speaker Change: Our fixed currently but start to reprice.
Speaker Change: Earlier in the first quarter can you just talk through maybe some of your expectations or how we should be thinking about that and I guess.
Speaker Change: Should we expect to just kind of flips to overnight funding and makes you a little more liability sensitive or.
Speaker Change: Are there any opportunities out there in the market maybe.
Speaker Change: Block and get any kind of put a bull <unk> advances.
Speaker Change: More advantageous rate I'm, just curious how we should think about that.
Speaker Change: Yeah, So Matt we have about a $1 billion of that that's going to reset in January and I really feel like at this point, we have ultimate flexibility with regard to how we.
Speaker Change: It kind of stay.
Speaker Change: Stage that out going forward and so well you know we're watching it now.
Speaker Change: Any rate cuts will be accretive.
Speaker Change: To us.
Speaker Change: As to where their price right now so again I just well, we'll evaluate that as the time comes.
Okay.
Makes sense and then could you also maybe just rehash.
Speaker Change: Some of the commentary around I think you mentioned swap termination.
Speaker Change: EMEA in the third quarter could you just walk through maybe some of the dynamics there.
Yes, so again.
We've said before we use of swaps as a tool to manage our balance sheet sensitivity.
Speaker Change: And at this point, we're relatively neutral, but as we move into 2025, we become naturally more liability sensitive and so we terminated that $550 million of swaps.
Speaker Change: No.
Speaker Change: They were in a favorable position to do so and that's just going to reduce our exposure.
Going forward into 2025.
Speaker Change: Did that positively contribute any any level of interest income in the quarter.
Speaker Change: A tiny bit yeah.
Speaker Change: Okay I appreciate it Kevin congrats on everything.
Speaker Change: Wishing the best of luck in retirement has been fun working with you.
Speaker Change: Alright, thanks, Thanks, Andrew.
Speaker Change: Thank you we'll go next now to Jared Shaw with Barclays.
Jared Shaw: Hey, good morning, everybody.
Speaker Change: Good morning Jared.
Jared Shaw: Kevin I guess, a and I think I'm, probably one of the only ones that was there was 17 years ago on that first Berkshire call with you. So it's been a.
Jared Shaw: It's been a great great great run and looking forward to staying in touch with you, but congratulations on.
Jared Shaw: A strong career.
Speaker Change: Well, it's interesting you said I said that the team that you were or do you only wanted it probably was there 17 years ago. So I'm glad you confirm that for the team [laughter].
Speaker Change: Thanks, So maybe just drilling into the margin trends a little bit more.
Speaker Change: And how I guess, we should be thinking about.
Speaker Change: Some of the moves that you just called out with the swaps and maybe on the <unk>.
Speaker Change: <unk>.
Speaker Change: Transition of construction to CRE, what would be sort of a good place do you think that we and fourth quarter jumping off into next year.
Speaker Change: Or some of these.
Speaker Change: Moves.
Speaker Change: Going to continue to provide some some benefit as we go through the quarter.
Speaker Change: Yes so.
Speaker Change: I think I just mentioned that.
Ex purchase accounting our margin was at 303 in September and so because we have no borrowings that are maturing this quarter.
Speaker Change: I think it will go.
Speaker Change: Significantly higher than that but we do again expect expansion from.
Speaker Change: The 297, where we were into the into the fourth quarter.
By September ish right you can see we're already there.
Speaker Change: Is there an impact on that margin from.
Speaker Change: Interest accrual reversed or reversals from some of the larger non performers.
Speaker Change: That doesn't anticipate interest recoil interest accrual conversions are you talking about this quarter Jared.
Jared Shaw: Yeah, well I would just say I guess like this quarter or was there a negative impact from that that is going to be reverse that we should be thinking about in fourth quarter or something that you know maybe through fourth quarter. Then it gets reversed in first quarter.
Speaker Change: Yes, that's included in that September number.
Okay, and then did you pay down any of the PSP at all this quarter and what's your outlook on that going forward yes.
Yes, so we havent paid down any of that at this point again that rates for 76 or so.
Speaker Change: As rate cuts happen.
We'll kind of make decisions from there what our options are again.
Speaker Change: That has no prepayment penalties. So we're extremely flexible with regard to those that funding.
Speaker Change: I think Jerry we're just trying to see where the market goes from now until that period of time and keep that flexibility or optionality.
Speaker Change: Intact until we see clearer what might be happening in the rates in 2025 and 2026.
Speaker Change: Okay, Alright, Thanks, and then just I guess finally for me on those those two office ons.
That's a little bit of a.
Speaker Change: Different.
Speaker Change: And from what we've seen at other sort of mid cap banks with with similar type structures any any any additional color you can give us just on what.
Speaker Change: But.
Speaker Change: What was maybe unique lee negative about them compared to more of a traditional portfolio Linde and why you feel comfortable with the rest of the portfolio.
Speaker Change: Well two things one the one loan one construction loan.
Speaker Change: We've looked at it in detail and we just wanted to get it behind us. So we wrote it down to zero.
And not to have that exposure out there anymore, we'll see what happens with that but.
Speaker Change: On the larger the larger one.
Speaker Change: I mean, it's actually still paying what we can see the end was coming near.
And the borrower probably would not be able to keep it so even though it was still paying it was going to come to a close so we.
Speaker Change: We just wanted to get that lost behind us and not having to carry forward. So.
Speaker Change: We were proactive got an appraisal and wrote it down to realizable value after selling costs just get so that we don't continue to have this nor.
Speaker Change: Nor is in our Metro office, we just wanted to get it all behind us and clean up the portfolio and not have to deal with this anymore as you know theres a slide.
Speaker Change: In our deck that shows that we have $90 million in Metro office, and there's only four loans now over $5 million of which one is one of the ones that we worked pretty heavily so.
Speaker Change: Don't believe there's any real loss at all left in the Metro office, but we got that behind us.
Speaker Change: Okay. Thanks for the color and congratulations again and looking forward to staying in touch.
Speaker Change: Alright.
Speaker Change: Thank you we'll go next now to Tim Coffey with Janney.
Tim Coffey: Thank you and thanks for the opportunity to ask a question.
Tim Coffey: Marci it doesn't correctly.
Tim Coffey: Earning assets could come down quarter over quarter.
So by how much.
Well, we don't really say by how much but if you you know we had some loan runoff right at the end of the quarter and so if you just kind of look at that that's why we think average earning assets are going to come down.
Tim Coffey: Quarter over quarter again, I think we said in our guidance that we expect deposits to be relatively flat.
Tim Coffey: To be relatively flat, but they will just naturally come down because of the runoff in the loan portfolio. We saw at the end of the quarter.
Okay. Okay I appreciate that color. Thank you.
Speaker Change: Kevin on the Metro office portfolio. If you look at the three remaining loans that are over $5 million.
Any or all of them in some form of rehab and transitioning to the lease up process.
Speaker Change: Hi.
Speaker Change: Any.
Speaker Change: Alright.
Speaker Change: Hi.
Speaker Change: Yes.
Go ahead, David Hey, Tim There is we have some notes on the Metro office slides. So a couple of them are already leased up.
Speaker Change: Have adequate debt service coverage, one recently completed and then the remainder is the one we've discussed so there's commentary on that slide slide seven.
Speaker Change: Yes.
Speaker Change: This is the second largest one we took a loss on that earlier in the year.
Speaker Change: Seattle.
Speaker Change: And we have an investment grade.
Speaker Change: No.
Speaker Change: Lesser lessor going in there so we feel very comfortable with that one and that one it's not a concern so we feel pretty good what's left there.
Speaker Change: Okay.
Speaker Change: Kind of these markets, where you have and where you're seeing kind of these problems.
Speaker Change: Paul.
Speaker Change: Prevent you from continuing to do business in those markets.
Speaker Change: Please.
Speaker Change: No we don't anticipate that at all Tim I wanted to know.
Tim Coffey: Okay. Okay, Yeah, I, just asked because the vacancy rates.
And off Metro office.
Tim Coffey: Higher on the West Coast and all the other places ive seen so I appreciate that.
Tim Coffey: And then Kevin Yes, it's been great working with you.
Speaker Change: Yes, I hope you enjoy your retirement happy hunting.
Tim Coffey: Hi, Thanks.
Thank you we'll go next now to Tim or Brazil here at Wells Fargo.
Tim Coffey: Hi, good morning.
Alright, you revise the location hi, good morning, guys can you provide the locations of these two office charge offs.
Tim Coffey: Well.
Tim Coffey: No.
Tim Coffey: Tumor.
Speaker Change: Could potentially compromise our negotiating position and so we're not providing the locations of those but suffice it to say, we defined Metro office as Portland, Seattle, Denver, Phoenix, and Minneapolis, St. Paul Kansas City. It's in one of those is they wanted to.
Speaker Change: Okay got it and then I appreciate the color on the Metro office Slide I just wanted to make sure does that include construction loans as well.
Speaker Change: Or is that permanent CRE.
Speaker Change: Yes, yes.
Speaker Change: And then I guess the <unk>.
Speaker Change: Transition from construction to permanent finance I'm, just wondering what your appetite is to continue doing.
Speaker Change: Finance some of your own construction projects as the construction term comes due and then just maybe talk us through the pricing dynamics as these loans roll from construction to permanent finance.
Speaker Change: Yeah.
Speaker Change: Well I mean, I think in the dynamics of moving from construction a firm I think that we've kind of covered that and once they get.
Speaker Change: Finished and then they stabilize we move them into permanent commercial real estate.
Speaker Change: We continue to look at loans.
Speaker Change: Not in the Metro markets, but look at loans that our customers and communities need and when you look at them on an individual basis.
Speaker Change: We're not out of the construction business, we're just going to be pretty particular about what we do so we're going to continue to stay in business, but.
Speaker Change: It's just a normal transition from doing a construction loan building this stuff up to stabilization and then move into commercial real estate and again I think we said all year, we're really focused on making sure that we have the full relationships are not just a transactional construction loan that we want the full relationship and so that's where we're focusing again outside of the metro edge.
Speaker Change: Areas and on full relationships.
Speaker Change: Okay, and just from a yield perspective are those construction loans are those are those variable rate and then they get locked into permanent finance, that's like a five one or is that coming off a lower fixed rate into a higher fixed rate on the theory.
Speaker Change: Most of it is variable, but there is a portion that are those all in one construction loans that we talked about earlier and thats considered in that 6%.
Speaker Change: Number that we gave you.
Speaker Change: Earlier, so the all in one construction activity just curious if you just.
Speaker Change: Refresh your memory is that we do have fixed.
Speaker Change: Right during the construction period, and then through the stabilization period, so that carries on and then for a short period of time after.
Speaker Change: That loan has stabilized to move in the commercial real estate.
Speaker Change: Got it Okay and then just last for me just looking at the deposit rate.
Speaker Change: I appreciate that the 2% spot.
Speaker Change: Marcy you had said that some of the pressures were starting to be in the fourth quarter.
Speaker Change: I guess you guys are starting at such a low level that maybe continued mix shifts just puts additional pressure on that but how does that 2% Ben.
Speaker Change: <unk> been working through the month of October and are you thinking that's kind of a peak there for deposit rates or do you think just again starting at such a low basis, maybe there is some additional pressure there.
I think I think it will be stable to down.
Going into the rest of the quarter.
Okay, great. Thank you for the color and Kevin Congratulations on the retirement.
Kevin Riley: Thanks Sarah.
Speaker Change: Okay.
Speaker Change: And ladies and gentlemen, just a quick reminder, star one please for any further questions today, and we'll pause for just one moment.
Okay.
Speaker Change: We will go next now to Chris Mcgratty at <unk>.
Hi, This is Nick can be topic is on for Chris.
Hi, Nick.
Nick: Maybe just on expenses you guys have done a nice job kind of grinding that efficiency ratio down this year, but maybe any other opportunities.
Nick: Do you work on expenses as we move into 2025.
Speaker Change: You know Nick I think we're doing a pretty good job on our expenses.
Nick: Right now I really our efficiency ratio is more of a revenue issue than it is the expense issue. So as we see our NII build going into next year and hopefully get some traction on our fee income we should see that efficiency ratio could continue to come down.
Speaker Change: Great and then maybe just to comment on.
Speaker Change: Loan demand that's.
Speaker Change: Let's move into next year.
Speaker Change: We see that.
Picking up is there a right level, where you think people are waiting too.
Speaker Change: No.
Pick up activity or is it.
Speaker Change: Kind of tepid.
Speaker Change: So as you move in to 2025.
Speaker Change: I would say.
Speaker Change: There is a couple of things I think when people looking for what's going to happen with the election happening in the next couple of weeks and I think also rates so.
Speaker Change: Aye.
Speaker Change: I kind of stopped looking at my Crystal ball, because it's very cloudy because over the last few years, we haven't really picked up so I think we're just going have to wait and see what the rates look like but I think theres, a pent up demand.
Speaker Change: Just don't know when that pent up demand is going to take hold so well.
Speaker Change: Were poised and we are ready and the teams ready to go but.
Speaker Change: I don't want to pick.
Speaker Change: By the way, that's going to pick up because I'll probably be wrong. So.
Speaker Change: Let's just hope it does start early going into 2025.
Speaker Change: Great. Thank you and congratulations Kevin we've enjoyed working with you <unk>.
Kevin: Thanks, Nick.
Speaker Change: And ladies and gentlemen, it appears we have no further questions today, Mr. Ravi I'd like to turn things back to you Sir for any closing comments.
Speaker Change: Okay I'd like to thank everybody for their questions and as always we welcome calls from our investors and analysts please reach out to us for.
Speaker Change: If you have any follow up questions and thank you for tuning in today and I really appreciate working with all of you over the years so.
Speaker Change: Hopefully our paths will cross and I will see you. So thanks for all your support.
Speaker Change: Thank you and again, ladies and gentlemen that will conclude the first Interstate baked system third quarter earnings call again, thanks, so much for joining US everyone and we wish you all a great day Goodbye.
Speaker Change: [music].
Hum.
Okay.
Speaker Change: Hum.
Speaker Change: Yeah.