Q3 2024 Amalgamated Financial Corp Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, and welcome to the amalgamated financial third quarter 2024 earnings call. During today's presentation. All parties will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions to follow.
Speaker Change: As a reminder, this conference call is being recorded I would now like to turn the call over to Mr. Jason Darby Chief Financial Officer. Please go ahead Sir.
Jason Darby: Thank you operator, and good morning, everyone. We appreciate your participation in our earnings call with me today is for Silicon is brown, our president and Chief Executive Officer.
Jason Darby: As a reminder, a telephonic replay of this call will be available on the investors section of our website for an extended period of time.
Jason Darby: Additionally, a slide deck to complement today's discussion is also available on the investors section of our website.
Jason Darby: Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Jason Darby: We caution investors that actual results may differ from the expectations indicated or implied by any such forward looking information or statements.
Jason Darby: Investors should refer to slide two of our earnings slide deck as well as our 2023 10-K filed on March 7th 'twenty 'twenty four for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements.
Jason Darby: We will also discuss certain non-GAAP measures during today's call, which we believe are useful in evaluating our performance the.
Jason Darby: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U S. GAAP.
Jason Darby: A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release as well as on our website.
Speaker Change: Let me now turn the call over to Priscilla.
Priscilla: Good morning, everyone and thank you for joining us.
Priscilla: Third quarter financial results clearly demonstrate that amalgamated remains positioned to achieve sustainable earnings and profitability.
Priscilla: During the quarter, we delivered outstanding deposit and loan growth.
Strong profitability and returns and a growing capital base that positions us to invest in our strategic initiatives, which will power our growth well into the future.
Priscilla: This was another quarter of growth across customer segments. As we continue to demonstrate a defensible business model that is positioned to thrive as the pace of investment and financing accelerates across politics labor sustainability and other impacts to embrace our business is well diversified and not dip.
Priscilla: Pending on a single customer segment delivered robust growth, regardless of which party is in control and Washington.
Priscilla: Fact, we've seen broad based strength across our deposit franchise as our customers increasingly understand that their money can have a significant positive impact in the world when they bank with amalgamated well.
Priscilla: By the way, suggesting social issues, the climate crisis or a range of other topics that our customers are passionate about they know that their money will be used in a way that aligns with their values and we are still in the early innings of the societal shift which presents a significant growth opportunity for the bank.
Priscilla: To punctuate. This we have a new tagline the better reflects our impossible clients the planet and the financial industry.
Priscilla: That is in our DNA and our new tagline bank on impact shows both her mission meets performance and how you can rely on us to do well and good work.
Priscilla: Our third quarter results, clearly highlight our unique franchise and position.
Priscilla: Posit franchise once again outperformed the industry with $311 million in new deposits led by strength across our political social and philanthropy and sustainable customer segments.
Priscilla: Our non political deposits were strong again this quarter as a social and planted deposits was $82 million and our sustainable deposits rose $77 million.
Priscilla: I will touch on more in a moment the sustainable segment is a large opportunity for amalgamated given the significant amount of investment anticipated in order for the U S to achieve net zero emissions by 2050.
Priscilla: This spending also represents a significant deposit opportunity ultimately the transition to a cleaner economy is still only in the opening chapters.
Priscilla: We continued to build on a rich expertise in this space and expect to be a leading player in its growth.
Priscilla: Our political deposit balances grew 13% and ended the quarter at $2 billion well ahead of our prior peak of $1 3 billion achieved during the mid term elections in 2022.
Priscilla: This cycle is clearly unique as we continue to experience political deposit inflows throughout the third quarter a period that historically sees higher outflows as balances I spent down as the election nears.
Priscilla: This is truly an unprecedented environment with fund raising records continuing to be broken and our level of engagement that bodes well for future cycles.
Priscilla: Looking to the fourth quarter, our updated model shows that our political deposits will likely trough somewhere between 850 and $875 million at the end of this year, which is well above the 2022 trial and our previous estimate of $700 million.
Priscilla: We remind investors that the pattern of inflows and outflows in the political cycle tend to be repetitive. However, political deposit flows. This late in the cycle, it's very difficult to pinpoint our confidence comes from the publicly reported spending data, which so far has been similar to prior cycles.
Priscilla: Yeah.
Priscilla: Turning to the other side of our balance sheet, we experienced an acceleration in our loan growth through the third quarter with a nice balance across commercial and industrial real estate and sustainable lending.
Priscilla: Importantly, the effect of Paydowns and payoffs in our C&I segment was less which allow the steady underlying loan pipeline to show this quarter.
Priscilla: Overall, we generated two 7% of core loan growth in the quarter.
Priscilla: Fourth quarter metric will likely be within our target range of between one and 2%.
Priscilla: We're also carefully reshaping our balance sheet with a focus on harvesting yield as commercial real estate loans mature in the upcoming years in fact, we have $352 million or below market, yielding loans set to mature by the end of 2025 and an additional $149 million.
Set to mature by the end of 2026, which will be replaced with higher yielding loans, even as rates decline.
Priscilla: This will allow us to continue NII growth, while also keeping our balance sheet relatively neutral.
Priscilla: As I think about our business against the backdrop of continued revenue growth, we begin pulling forward necessary investments during the third quarter, we added to our sustainable lending team, which I will touch on in a moment, our technology team as well as we made strategic investments.
Priscilla: I would like to stress that our investments will as always be funded through profitability with core efficiency ratio and positive operating leverage constraints.
Priscilla: I see many opportunities to further grow amalgamated and deliver increased value to our shareholders are sustainable lending segment is one where I am particularly optimistic as the years go forward, there's tremendous momentum in this segment.
Priscilla: As the World continues to mobilize to meet climate finance needs, which will require an estimated three trillion dollars of financing over the next 10 years just to reduce net emissions to zero by 2050.
Priscilla: Our sustainable lending team is working on projects across the country as we look to provide the necessary funding to bring sustainable infrastructure to life. In fact, a mission based banking franchise truly has no geographic boundaries as we currently have commercial customers in 48 states.
Priscilla: During the third quarter, we added industry experts to our sustainable lending team to lead our efforts to successfully execute on the 27 billion dollar greenhouse gas reduction side.
Priscilla: We've been able to attract top tier and well recognized leaders in sustainable lending and I'm honored that they have joined amalgamated as we accelerate our efforts to support America's transition to a clean energy economy.
Priscilla: I also remain optimistic that while the greenhouse gas reduction fun could experience some pressure depending upon the political climate next year, we believe that any rollbacks would likely come from allowing the expiration of certain tax credits and other changes at the broader inflation reduction act level.
Priscilla: These areas arent at the core of our strategy to finance the rapidly growing renewable energy market.
Speaker Change: To conclude I remain very optimistic on the future for amalgamated for our employees our customers and of course, our shareholders. We continue to have a long runway ahead of us as we carefully grow the bank and drives socially responsible banking to new heights, Jason over to you.
Jason Darby: Good morning, everyone starting off on slide three we continued to produce solid results through the 'twenty 'twenty four third quarter net income was $27 $9 million or 90 cents per diluted share and core net income, which is a non-GAAP measure was $28 million or <unk> 91 cents per diluted share, reflecting our carefully improve earnings base.
Jason Darby: The quarterly results also featured a continued surge in deposit growth with a low total cost of deposits of 158 basis points.
Jason Darby: Recently, it was about $2 $9 million of net interest income growth of 21 basis point leverage ratio increase and a five basis point increase in our net interest margin.
Jason Darby: Now as I previewed on our second quarter call. We expect it to have a bit of noise again this quarter to flow through our margin and during the quarter. Our loan income absorbed $1.3 million of an acceleration of deferred costs on certain loans.
Jason Darby: Excluding this impact our net interest margin would've risen two basis points to 358% from the second quarter's adjusted level of 3.56%.
Our neutral balance sheet strategy continues to drive our return metrics.
Jason Darby: Over the past seven quarters, we have been moving varying amounts of deposits off balance sheet to both maintain our focus on building capital and also advantageously generate off balance sheet income we ended the quarter with $1.2 billion of deposits off balance sheet comprised of both transactional political deposits and other segment deposits, which generated approximately $8 $1 million of noncore now.
Jason Darby: Interest income.
Jason Darby: This deposit strength allows us great flexibility to structure, our balance sheet for sustainable profitability and returns.
Jason Darby: In this quarter. In addition to selling another 51 $9 million of underwater Securities. We also agreed to sell $49 million of low yield residential loans to.
Jason Darby: To the extent, we have off balance sheet deposits in the fourth quarter. We expect to continue to utilize that noncore interest income to sell securities and improved our core net interest income.
Jason Darby: That said, we expect the same time to be substantially less in the current quarter with the conclusion of this presidential election.
Jason Darby: Continuing to slide four we look at some of our key performance metrics during the third quarter.
Jason Darby: Starting on the left our tangible book value per share increased $1.69 or a healthy eight 2% to $22.29 helped.
Jason Darby: Helped by the improvement in <unk> combined with our strong earnings in the quarter.
Jason Darby: In our core revenue per diluted share was $2.62 for the third quarter, a 10% increase from the prior quarter. We think this nicely shows our commitment to delivering long term shareholder value.
Jason Darby: Moving across to our returns core return on average equity was $16 six 6% a modest decline that we expected given the build in our equity base through the mark to market improvements as rates decline.
Jason Darby: We are especially pleased with the improvement in our core return on average assets, which increased six basis points to 133% further showing the earnings power and potential of the bank.
Jason Darby: Moving to capital our tier one leverage ratio improved another 21 basis points to 863% and we have now achieved our minimum eight 5% goal.
Jason Darby: Looking forward, we will tether, our balance sheet size for a minimum leverage target.
Jason Darby: Further we have an eye towards the 9% tier one leverage ratio given the pace of our capital building as we position our balance sheet comfortably passed increasingly tougher adverse stress scenarios.
Jason Darby: Our tangible common equity to tangible assets was $8, one 4% representing an eighth consecutive quarter of improvement and we believe this demonstrates our results have consistently turning over our securities portfolio, we sold $812 $9 million of securities since implementing our strategy in March 2022.
Jason Darby: Turning to slide five total deposits at September 30 of 2024 was $7 $6 billion in it.
Jason Darby: $145 $6 million from the linked quarter.
Jason Darby: On balance sheet deposits, excluding brokered Cds increased by $196 $9 million or 2.7% seven $5 billion.
Jason Darby: Additionally, we were very pleased to see our noninterest bearing deposits increased to approximately 50% of average deposits and 51% of ending deposits excluding brokered Cds.
Jason Darby: Which contributed to a strong average cost of deposits of 151 basis points in the third quarter of 'twenty 'twenty four.
Jason Darby: Jumping ahead to slide six and seven the book value of our traditional securities portfolio increased $107 million during the quarter, primarily as a result of $167 million in purchases offset by $51.9 million in strategic sales.
Jason Darby: And $126 $6 million in traditional securities Paydowns.
Jason Darby: Net pace assessment growth was $10.6 million net.
Jason Darby: And that our paste production was below our $20 million to $25 million target, if payoffs were significantly higher than in previous quarters due mainly to seasonality.
Jason Darby: That's the path for substantially within our HTM portfolio, where more of the aged in lower yielding assets are alright.
Jason Darby: Alright, first portfolio, where we have been recording more of a recent purchases so net growth of $36 $6 million in the quarter.
Jason Darby: Turning to slide eight net loans receivable at September 30 of 'twenty 'twenty four were $4 $5 billion, an increase of $78 million from one 8% compared to the linked quarter.
The yield on our total loans increased 11 basis points to 479% during the quarter the.
Jason Darby: The increase in loan income in yield was primarily due to an $86 $7 million increase in average loan balances. In addition to $2 $1 million of accelerated amortization related to purchase premiums associated with the payoff of a C&I loan relationship last quarter.
Jason Darby: Offset by a $1.3 million loss of income from an acceleration of deferred costs on certain loans this quarter.
Speaker Change: Additionally, as Persil had noted our third quarter loan growth was 2.7% after adjusting for the loans that we have agreed to sell in the quarter.
Jason Darby: Yeah.
Jason Darby: Moving to slide 910, and 11 looking at the real estate portfolio, we have $111 million in maturing lower price commercial real estate and multifamily loans over the balance of the year.
Jason Darby: Importantly, we have a relatively benign exposure profile as our office only commercial real estate portfolio was $61 million comprised of all past grade credits and just over 20% of our multifamily portfolio had loans with units subject to pre 1974 rent stabilization rules.
Jason Darby: On the multifamily side, we renewed $13 million of pre 1974 exposure across the credits via a combination of cash infusion and amortizing terms in exchange for modest rate concessions during the quarter.
Jason Darby: In the fourth quarter, we had $29 million a pre 1970 more loans maturing.
Jason Darby: Moving to slide 14, nonperforming assets decreased $7 $1 million to $28 $6 million or 23, 4% of period end total assets at September 32024, and our criticized assets decreased $5 $9 million to $88 $6 million on a linked quarter basis.
Jason Darby: During the third quarter, we recognized fully reserved for $5 million charge off of a delinquent legacy leveraged C&I loan, which drove our net charge off ratio higher in the quarter.
Jason Darby: Okay.
Jason Darby: Turning to slide 16, we are tightening our full year 'twenty 'twenty four guidance.
Jason Darby: To core pretax pre provision earnings of 154 million to $156 million.
Jason Darby: Net interest income of 279 million to $281 million, which considers the effect of the forward rate curve of 'twenty 'twenty four.
Jason Darby: Additionally, we estimate an approximate $2 million decrease in annual net interest income for a parallel 25 basis point decrease in interest rates beyond what the forward curve currently suggests.
Jason Darby: Rounding out guidance, we are maintaining our target balance sheet size for year end at approximately $8.35 billion.
Jason Darby: We've been very happy with our tier one leverage growth and are now <unk>, 9% in the coming quarters.
Jason Darby: We reiterate our belief that we will not need wholesale funding support for the political deposit outflows that we expect in the fourth quarter. When the presidential election concludes that said we note the pace of outflows has significantly picked up during the month of October.
Jason Darby: Looking at the fourth quarter, we think our net interest margin should hold from our Q3, Mark but it's also possible margin may compress one to two basis points, depending on the political deposits outflow mix and correspondingly we arrange our net interest income between 70 and $72 million for the fourth quarter.
Jason Darby: Wrapping up we were delighted to deliver strong record results for our shareholders. This quarter and we thank you for believing in us and.
Jason Darby: We look forward to updating you all again with our fourth quarter results and our 2025 outlook in January.
Jason Darby: Before turning to the operator I'd like to welcome Sam Brown, our Chief banking officer to the Q&A section of today's call and now operator, Please open up the line for any questions.
Jason Darby: Operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up the handset before pressing destocking.
Speaker Change: One moment, please while we pull for questions.
Speaker Change: And our first question comes from the line of Mark Fitzgibbon with Piper Sandler. Please proceed with your question.
Mark Fitzgibbon: Hey, guys good morning.
Speaker Change: Anymore Hypersound.
Mark Fitzgibbon: Hypersound. So first question I had I know you all have talked a bit about your trust business and making strategic changes there I wonder if you could share at a high level you know any of the kinds of things you're looking to do with that trust business.
Speaker Change: Yeah. Thanks for that question.
We've spent most of the year in the last year, focusing on just enhancing the quality of the revenue in that business.
And that resulted in some turnover of clients.
Speaker Change: But at the midpoint of 'twenty 'twenty four we brought in a new Trust officer.
Speaker Change: And he's really focused on just transforming the sales infrastructure.
Speaker Change: It's part of the 20th twenty-five planning process, we'll be making some investments and trust.
Speaker Change: Will be directed toward increased sales capacity, bringing on individuals' with proven experience in the industry and that digital acceleration that we've talked about will also benefit the trust business.
Speaker Change: Okay, and then secondly did I hear correctly that you had said that the political deposits should end the year at about $8 $50 million to $875 million is that right.
Speaker Change: That will we expect that to be the trough I did I did caution you that it's hard to pinpoint that exactly particularly in a year, where everything's a bit outsized in that in that segment.
Speaker Change: And would you expect some additional run off in the first quarter or do you think it will flatten out as you start to see fundraising activity you know mitigates some of the outward flows.
Speaker Change: We think it will flatten out and then start to rebuild a bit Sam do you want to add any additional color yeah, sure Hey, Mark nice to talk to you again.
Speaker Change: Christos Bristow is exactly right. We usually see you know if you go back to our historical trends.
Sam Brown: We really see that crossing at the beginning of the first quarter and start to see the rebuild kind of began at the end of the first quarter.
Sam Brown: If you go back to our slide on the political trying that that has really held true cycle over cycle.
Sam Brown: Okay.
Speaker Change: And then I think in the press release, you mentioned that you had a charge off in the consumer solar space was that or was that a pace loan I guess I was curious.
Speaker Change: Yes.
Speaker Change: So it's just our normal.
Speaker Change: Kind of homogenous loan pool consumer portfolio that has had.
Speaker Change: I had a historical charge off run rate there was a larger C&I charge offs is that possibly what you are referring to because that was about $4 $6 million, but that was a non solar related charge off it was a legacy leverage loan that had been in our N. P. A portfolio for quite some time, so were able to exit that but just to make sure I'm answering your question correctly.
Speaker Change: Yeah, No no no I wasn't referring to that I I, just seen consumer solar and I thought it might be pace related and obviously you guys have a charge off in that so it kind of caught my attention Oh, yeah, no that no no case charge offs. In fact, we haven't had any pay charge offs since the history of that portfolio dating back to 2018 and CECO reserved on that remains very small you get to that.
Speaker Change: $600000 on the islands.
But the charge offs that were referring to any ideas for consumer sellers in our traditional caught lightning secured consumer solar portfolio and it's one that we've had a fair amount of charge offs over the past several quarters, particularly with the rate environment has risen.
Speaker Change: You probably also noticed we did bump up our reserve coverage on that portfolio as well it moves to a coverage ratio of 76, 8% as we did our early review of the baseline loss rates, there and make sure that we had a problem with a coverage ratio relative to that portfolio given the consistency of the charge offs, we don't expect the charge offs too.
Speaker Change: Okay anytime soon although we do think as rates continue to decline and there'll be more opportunities for houses to move again in the mortgage market in which case, we ought to have our fixture leans cleaned up as it relates to any charge off activity that we're having but for now we think that run rate would be fairly steady for the foreseeable future.
Speaker Change: Okay, and then last question, Jason on expenses and I apologize if I missed it any thought.
That's on sort of your expense growth outlook.
Jason Darby: Yeah, So we had a little bit of elevated expenses and this quarter some of it.
Jason Darby: I'd characterize as onetime in nature I think.
Jason Darby: We should expect to see a similar expense base for Q4 somewhere in that $40 million to $45 million range I think again, it's grounded in the core efficiency band and then we moved forward a few investments into the current quarter that will be included in our run rate going forward that will.
Look very similar to Q3, but again, given where we are at the core efficiency ratio, we feel pretty good about advancing those expenses I don't have full year guidance for your next I'm, sorry for 2025, but I think looking at the Q3 and Q4 run rate. That's a good starting point and we'll refine that for you Mark when we get to the full year outlook.
Jason Darby: At the end of next quarter.
Mark Fitzgibbon: Great. Thank you.
Mark Fitzgibbon: Youre welcome.
Speaker Change: Thank you as a reminder, if anyone has any questions you May press star one on your telephone keypad and donors, who joined the queue.
Speaker Change: Our next question comes from the line of Chris O'connell with Keyw. Please proceed with your question.
Speaker Change: Good morning.
Speaker Change: Alright, great Great I was just so bad.
Chris O'connell: I was just hoping to get some color on the loan pipeline you know I know.
For fourth quarter, you know expected, 1% to 2%, but you know maybe just you know what the mix.
Chris O'connell: Is generally and do some of the pipeline yields are there.
Sam Brown: Hey, Chris It's Sam.
Chris O'connell: Where we're really optimistic about our forward pipeline and you're right. We did mention that you know where we are expecting to be back in our target range of between one and 2%.
Sam Brown: Which you know really that reflects our risk balanced approach to origination.
Chris O'connell: No.
Chris O'connell: We really like what we're doing on recycling the real estate portfolio, we've talked about that a lot and you know really seeing higher quality and higher yielding assets come on which is great and consistent with the neutral balance sheet strategy and on the C&I space. We are seeing a lot of pipeline growth there as well, which is really consistent with you know.
Chris O'connell: The increase in energy demand.
Chris O'connell: And we like what we're seeing there we are seeing some diversification.
Chris O'connell: Tween or commercial solar community solar and other asset types in that renewable space and feel like you know, we're seeing strong yields and great credit quality. So.
Chris O'connell: I think we feel good about a forward basis.
Speaker Change: Got it and then just any any sense in general just around.
Speaker Change: Where the origination yields are coming on at.
Speaker Change: So look we're you know we're seeing yields going up you know as we are replacing you know what is coming off the balance sheet and.
Speaker Change: Phil.
Phil: So pretty good about that yeah, Chris I think.
Phil: Probably that multifamily CRE side during that six and a quarter to six and a half per cent range on bring on your C&I would probably be in the upper seven eight depending on which deal who it is I mean that kind of has a little bit more variability to it and then you can ask particularly on the loan pipeline, but.
Phil: If you think about pace, which we tend to add to.
Phil: Our basket relative to loans, that's probably in the high six range, maybe even low seven still if you think about the fourth quarter, bringing on yields.
Phil: Great.
Speaker Change: Thank you.
Phil:
Phil: And then thinking about.
Phil: You know the trajectory of the margin from here I. Appreciate the you know the $2 million.
Phil: Annual.
Phil: Hit on NII with the parallel shifts but.
Phil: Assuming they eat the longest and holds up pretty well around current levels.
Phil: How are you guys thinking about the impact on just the short end coming down 25 basis points.
Phil: Yeah I think.
Phil: It's really already baked into that range, we've given for Q4 coming in about $70 million to $72 million in NII and we think the margins should hang in there pretty good assuming that we don't have the unexpected shifts in the mix of deposits from our political.
Phil: Outflow, so all things equal given the short end and.
Phil: Factoring from our model of 225 basis point rate cuts in November and December we think that'll have a margin close to a margin neutral impact assuming like I said, we don't have a.
Phil: I expect the change in the mix of deposit outflow relative to political and going forward again, we havent given our full year guidance and we'll do that at the end of next quarter, but we do factor the full effect of the forward rate curve through 2025.
Phil: Still think there is opportunity for consistent NII growth and modest margin expansion throughout next year, but we'll be able to dial in a little bit more for you when we get to Q4, and we do the full year guidance, but the one thing I would comment back to that $2 million sensitivity that we gave you on a parallel basis.
Phil: Above what the forward rate curve suggests that's sort.
Phil: Sort of our secret decoder pin for you to look at what variability might be but I'll point out that we use very conservative deposit beta assumptions when we put that number together so I like to think about it as a.
Phil: Pretty conservative assumption as to what that impact would be and there's potential for it to be better to the extent that our deposit betas are greater than our than how we model it.
Speaker Change: Great that's helpful.
Speaker Change: And as far as the you know the political deposits in the overall kind of off balance sheet strategy.
Speaker Change: And into Q4, I mean, obviously you know this quarter you know that strategy yielded.
Speaker Change: No significant piece on the Ics side.
Speaker Change: Again.
Speaker Change: Just based on the early look.
Speaker Change: You know on the political outflows.
Speaker Change: Do you still think that Youll eke out a little bit more on the Ics fees are over with that strategy in Q4.
Speaker Change: I think so Chris we're not banking on it being a contributor not nearly to the extent that it was in Q3 and in Q3 was a delightful surprise for US and we took full advantage of that opportunity by moving into a rising loan pool sale as well, which we were able to move off some pretty low yielding assets and create some good capacity for earn.
Speaker Change: That said, what we'll probably do is yeah, I don't know call. It a third of what that number was for Q3, and we'll look to probably match off securities losses again during this quarter.
Speaker Change: Going forward from there I couldn't really tell you exactly the strategy, we really need to see what's going to happen with the final out below the political deposits in the standpoint that out earlier, we just don't know yet what the expected rebuild that look like and what the peso big so there'll be more to come on the Ics strategy as we get into the fourth quarter. We gave our full year guidance for next year, but I think.
Speaker Change: All things equal will probably have a little bit caught a third and we will match that off with the potential securities losses as well in the fourth quarter.
Speaker Change: Great that's helpful.
Speaker Change: <unk>.
And as far as the just the securities low yielding I mean, how how much is left at this point.
Speaker Change: You know to even kind of turnover given how short duration portfolio.
Speaker Change: Yeah.
Speaker Change: So happy you asked that question because we're literally talking about it. This morning, we've turned over about $820 million of securities now since the first quarter of 2022 with a long strategy to protect our earnings and that's about 37% of the portfolio as it exists today. So the answer to your question is.
Speaker Change: There isn't that much more we need to do it we're very happy with what we've been able to accomplish and even more happy that we were able to use a lot of this.
Ics related income to make that happen without having a impact of GAAP income. So that is a tremendous benefit that we feel very fortunate to have had.
Speaker Change: That said, we still will be opportunistic throughout next year as we continue to look at opportunities to improve the earnings profile of the bank.
Speaker Change: We will always do that with the minds of capital and what we have available from an earnings perspective, but I think the pace at which we've been doing these securities restructures will slow down as we get into next year and be a little less.
Speaker Change: Consistent and a bit more opportunistic.
Speaker Change: Got it thanks, and then last one for me just.
Speaker Change: Yeah.
Speaker Change: The updated kind of read on the.
Speaker Change: Tier one leverage you guys are above kind of what you want.
Speaker Change: Lower band targeting now what kind of have like a medium term.
Speaker Change: Operating target to be around 9% level.
Speaker Change: Do I can I read that as you know probably hold off on any share repurchases until you hit that 9% level and then kind of reevaluate at that time, and then I guess also.
Speaker Change: Any rough expected.
Speaker Change: Timeline that you guys think are.
Speaker Change: To get to that two 9%.
Speaker Change: Sure I'll work in reverse on that question, we think with the pace that we're building capital right now we could be at that 9% leverage Mark first quarter of 'twenty five that worst second quarter of 2025. So it's a very short runway between now and then.
Speaker Change: Reason for the 9% is just based on the pace of that capital build and not because we're trying to move the goalposts. The two things that were trying to service or our ability to handle just adverse stress scenarios, we want to make sure that we have the most regulator friendly balance sheet. We can have so that we can continue.
Speaker Change: Operate according to the growth plans that we've won and then in the spirit of growth and in addition to the capital base continues to allow us more room within our concentration limits to dive into the asset classes that we're in so that's the fundamental concept around moving towards a 9% and I use the word by in my prepared remarks.
Speaker Change: Very specifically towards 9% because we do recognize returning capital is a priority we do still have the $20 million remaining on our share buyback authorization and while I don't have a specific plan for you at this point during the call.
Speaker Change: Do you expect will be coming back to you in the fourth quarter with a return of capital plan that will.
Speaker Change: Encompass the entire year and give you something that you could model out.
Speaker Change: Great really helpful. Thanks, Jason.
Youre welcome.
Speaker Change: Thank you.
Speaker Change: We have reached the end of the question and answer session I would like to turn to flip back to pursuing since brown for closing remarks.
Sam Brown: Thank you operator and again. Thank you all for your time today, we always appreciate your continued interest whether it's here on the N D ours or our Investor day.
Speaker Change: There's the opportunity to address your question gives us.
Speaker Change: Additional feedback and as we factor in.
Speaker Change: Our plans.
Speaker Change: As always I also want to thank our employees and our board.
Speaker Change: The hard work and dedication to this bank has resulted in another stellar quarter for us and we.
Speaker Change: We don't take that for granted at any point that success would just not be possible without the commitment and determination of this talented team of people that we work with.
Speaker Change:
Speaker Change: I also just look forward to updating you on our progress.
Speaker Change: Both at our Investor day, which is.
Speaker Change: Hopefully all received an invitation for December 3rd and of course always on our fourth quarter call.
Speaker Change: I asked Sam Brown to join US today, so that your production questions could be directly addressed by the business.
Speaker Change: Sam and other lingers will continue to join US both on the Investor day and in future calls so thank you Sam.
Speaker Change: This concludes our prepared remarks, and Q&A and I appreciate your time.
Speaker Change: Thank you.
Speaker Change: Today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Speaker Change: Ah.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].