Q1 2025 NBT Bancorp Inc Earnings Call
Thank you, Kevin and good morning, and thank you for joining us for this earnings call covering MBT Bancorp's first quarter 2025 results with me today are net Burns Mbt's, Chief Financial Officer, Joe Stack Viano, President of MBT Bank, and Joe <unk>, our treasurer.
Our operating performance for the first quarter continued to reflect the strength of our balance sheet, our diversified business model and strong collaboration by our team.
Operating return on assets was 111% for the first quarter with a return on equity of 10% and our OTC of 14%.
Certainly not records for us, but each metric demonstrates continued improvement over the linked and prior year quarters, and importantly reflects the generation of positive operating leverage.
We diligently grew earning assets and lowered funding costs, which improved net interest margin for the fourth consecutive quarter.
Noninterest income continues to be a highlight making up 31% of total revenues for the quarter with each of our non banking businesses, achieving productive improvements in both revenue and earnings generation.
We have added over $100 million to shareholders equity in the past 15 months from productive earnings generation, while also paying a higher level of dividends, adding to our already desirable levels of capital flexibility.
Turning to updates on our growth strategies, we continue to see activity across upstate New York semiconductor Chip corridor, including news about site specific milestones related to micron's planned complex outside of Syracuse.
Team members at <unk> are engaged in supporting our customers and communities and participating in the growing ecosystem around semiconductor and advanced electronics manufacturing in our markets.
Our ability to provide financial services to those living and working along the chip corridor will only be enhanced by the merger of Evans Bancorp into <unk> in early May.
Last September we announced our partnership with Evans in December we received all the regulatory approvals required to move forward as well as approval from Evans shareholders.
Our integration team is poised to complete our core systems conversion next weekend. After we closed the merger at the end of the day on Friday May <unk>.
As a result, we will welcome over 200 Evans employees and more than 40000 customers to MBT <unk>.
Adding the Buffalo and Rochester market is a natural extension of our footprint in upstate New York and we look forward to building on the relationships evidence has established with customers communities and shareholders.
Speaker Change: At this time I will turn the meeting over to a net to review our first quarter results with you in detail.
Net.
Net: Thank you Scott and good morning, turning to the results overview page of our earnings presentation in the first quarter, we reported net income of $36 $7 million or <unk> 77 per share.
Net: Excluding merger costs and securities losses, our operating earnings per share were <unk> 80.
Net: An increase of <unk> <unk> per share compared to the prior quarter.
Net: Revenues were four 4% from the prior quarter and almost 12% from the first quarter of the prior year driven by improvements in both net interest income and fee based revenues.
Net: Tangible book value per share of $24 74 as of March 31 was up 86 cents per share from the end of the fourth quarter of 2024, marking another all time high for MVP.
Net: The next page shows trends in outstanding loans.
Net: Excluding the other consumer and residential solar portfolios that are in our planned runoff contractual runoff status.
Net: <unk> increased $40 million or one 8% annualized our total loan portfolio of $10 billion remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans.
Net: On page six total deposits of 11 $7 billion were up $162 million from the linked fourth quarter, primarily due to the inflow of seasonal municipal deposits.
Net: <unk> the quarter generally in most of our markets municipal tax collections are concentrated in the first and third quarters of each year.
Net: 58% of our deposit portfolio consists of no and low cost checking and savings accounts, while 42% is held in time and money market accounts. We have included a summary of our deposit mix by type, which illustrates the diversification and deep granularity of our customer base.
Net: The next slide highlights the detailed changes in our net interest income and margin are.
Net: Net interest margin in the first quarter increased 10 basis points to 344% from the linked fourth quarter, primarily driven by the decrease in the cost of interest bearing deposits.
Net: Net interest income for the first quarter was $107 2 million, an increase of $1 $1 million above the linked fourth quarter and $12 million above the first quarter of 2020 for.
Net: The increase in net interest income from the prior quarter was primarily driven by a decrease in the cost of deposits.
Net: Offset by the impact of two less calendar days in the quarter.
Net: Loan yields decreased three basis points from the prior quarter to 562%.
Net: Primarily due to the repricing of $2 $1 billion in variable rate loans following the prior quarter's federal funds rate decreases.
Net: We were able to actively manage our funding costs downward to more than offset that impact.
Net: As evidenced by the 11 basis point decline in our total cost of deposits to 149% for the quarter.
Net: As a reminder, approximately $5 billion of our deposits principal money market and CD accounts remain price sensitive.
Net: Looking ahead the opportunity for upward movement in yields will depend on the shape of the yield curve and how we reinvest loan portfolio cash flows.
Net: The trends in noninterest income are outlined on page eight <unk>.
Net: Excluding securities gains and losses, our fee income was $47 6 million, an increase of 12, 7% compared to the linked fourth quarter.
Net: Noninterest income represented 31% of total revenues in the first quarter, reflecting continued improvement and strength of our diversified revenue base.
Net: Total operating expenses, excluding acquisition expenses were $98 $7 million for the quarter, a one 1% decrease from the linked fourth quarter salaries and employee benefit costs were.
Net: Were $60 7 million.
Net: A decrease of $1 1 million from the prior quarter.
Net: This decrease was primarily driven by lower medical and other benefit costs lower levels of incentive compensation and lower salary expense, resulting from two fewer payroll days in the quarter.
Net: These increases were partially offset by seasonally higher payroll taxes, and an increase in stock based compensation.
Net: The quarter over quarter increase in occupancy expenses was expected driven by increases in seasonal costs, including utilities and higher maintenance costs.
Net: Slide 10 provides an overview of key asset quality metrics net charge offs to average loans were 27 basis points in the first quarter of 2025 compared to the 23 basis points in the prior quarter included a net charge offs was a $2 $1 million write down of a commercial real estate loan that has been in.
Net: A nonperforming status for the past several quarters.
Net: Loan was charged down to its updated estimated fair value based on new information received during the quarter.
Net: Excluding the $2 $1 million write down net charge offs to average loans were 18 basis points for the quarter.
Net: <unk> to loans to total loans were 32 basis points and was in line with the past several quarters.
Net: Reserve coverage was 117% of total loans and covered more than two times the level of nonperforming loans.
Net: We believe that expected balance sheet growth economic forecast conditions and continued changes in loan mix will be the drivers of future provisioning needs.
Net: In closing growth in both net interest income and fee based income drove the generation of the sequential and year over year positive operating leverage and contributed to our solid operating performance in the first quarter of 2025.
Net: Our continued capital strength has us well positioned to support organic growth and our other strategic initiatives. Thank.
Net: Thank you for your continued support and at this time, we welcome any questions you may have.
Thank you anyone with a question at this time can press star one on your telephone.
Net: So thats been answered or you wish to move yourself from the queue. Please press star one again.
Net: Four questions.
Speaker Change: Our first question comes from Steve Moss with Raymond James Your line is open.
Speaker Change: Hey, Scott This is Thomas on for Steve Good morning, and thank you for taking my question.
Speaker Change: Good morning, I, just wanted to hear it.
Speaker Change: Just wanted to see maybe can you share your high level thoughts on the demand for credit in your market.
Speaker Change: Good where you're seeing strength and weakness and maybe what are some of the things youre hearing from clients anecdotally.
Tom: Tom its excellent question and thanks for that.
Speaker Change: Pipelines are good.
Speaker Change: <unk> with the levels, we were enjoying most of last year.
Speaker Change: In terms of individual markets very consistent across our footprint, whether thats, northern New England Upstate New York.
Speaker Change: Pennsylvania, Connecticut, So really good pipelines will we acknowledged that macro uncertainties have people asking questions about timing of certain things for sure.
Speaker Change: And generally I think.
Little bit more certainty when youre, making a capital expenditure when you're hiring people.
Speaker Change: Is always welcomed and certainly always easier but to date we.
Speaker Change: Havent seen customers, who are abandoning projects.
Speaker Change: We're looking at the current levels of uncertainties, and saying I'm not sure how to step forward. So I would say pretty consistent and pretty stable and probably pretty in line or a requisite with our markets.
Speaker Change: Okay. That's good to hear and then maybe shifting gears to the other side of the equation the supply of credit how is competition.
Speaker Change: What are you seeing in terms of spreads pricing remaining rational.
Speaker Change: For the most part I would say there are certain certainly episodic situations in some of our markets because we compete with such a broad group of financial institutions, but generally pretty reasonable pretty disciplined.
Speaker Change: There'll be a handful of small banks defending.
Speaker Change: Smaller markets or 13% to 15 branch type setups somewhere that's our competing maybe a little bit outside.
Speaker Change: Outside of our comfort ability levels, a few times, but not overarching.
Speaker Change: Okay, and then just one more for me.
Speaker Change: With Avon.
Speaker Change: So to close shortly they were smaller institution.
Speaker Change: You guys seeing do you have any do you see opportunities for those bankers to maybe leverage your balance sheet.
Speaker Change: Near term to expand their existing client relationships.
Speaker Change: Loan growth there do you see any potential for that yes, absolutely.
Speaker Change: And that was really.
Speaker Change: A piece of our value proposition when.
Speaker Change: When we started speaking with the ovens folks is that ability to use a larger balance sheets. So that they can compete or that they could fully cover certain client relationships, where maybe the size of their balance sheet forced them to participate.
Speaker Change: And a lower level.
Speaker Change: So our on boarding process in our transition process with the bankers from Evans is going exceptionally well.
Speaker Change: Really high quality group of people in Western New York and.
Speaker Change: As much as I think we will be defending existing client relationships.
Speaker Change: After the close of the transaction I think will also have some opportunities for some sort of growth.
Speaker Change: Characteristics relatively soon.
Unidentified: Great all of that is good to hear thanks again, Scott Thanks for taking my questions.
Speaker Change: Appreciate it thank you.
Speaker Change: One moment for our next question.
Matthew Breese: Our next question comes from Matthew Breese with Stephens, Inc. Your line is open.
Matthew Breese: Hey, good morning.
Speaker Change: Good morning.
Speaker Change: I was hoping we could start just with the chipset act given somewhat Trump's comments to Congress.
Speaker Change: From everything you know is there any ability or intend to actually risen to revisit some of the committed dollars.
Speaker Change: And ultimately do you expect.
Speaker Change: What we said two two factor into any delayed for micron or other chips related projects.
Speaker Change: So let me take a run at both ends of those mats quickly is.
Speaker Change: Are there contractual obligations that the government has relative to the chip sector relative to the projects have been awarded absolutely.
Speaker Change: What have we found in the last four to six weeks is that maybe that matters and maybe it doesn't.
Speaker Change: So I won't say that there can't be adjustment.
Speaker Change: Maybe it's not recent rescinding, but there could be adjustment in some of those that being said the underlying tone of wanting to.
Speaker Change: Source manufacturing for semiconductor high electronics.
Speaker Change: Think.
Speaker Change: Still resonates with the existing in the current administration. So I think maybe youll see some rebranding of that and maybe somebody will take credit for renegotiating, something and calling it something else, but I think the general tenor as this is stuff we should be manufacturing.
Speaker Change: The United States.
Speaker Change: So so to answer that one im far from being able to answer the legal question relative to commitments from a legal standpoint.
Speaker Change: Your question about timing, we've been reminded of this a couple of times because.
Speaker Change: <unk> has pushed back their shovels in the ground timing a couple of times since the original announcement. So I think all of these projects are more company specific situations as.
Speaker Change: As the folks in Columbus, Ohio are finding out with Intel.
Speaker Change: Maybe there is going to be a delay so we get reminded that infrastructure moves along this is a long term project and we would expect meaningful start points out their acquisition of land is happening.
Speaker Change: And multiple spots in Central New York today to support the.
Speaker Change: Project.
Speaker Change: Things on the water and the.
Speaker Change: Sewer projects are underway currently.
Speaker Change: No that micron has filed their environmental impact report.
Speaker Change: So I think it's moving along at a pace, that's probably pretty reasonable.
Speaker Change: So for now I think were sort of hanging in there and thinking it's late this year.
Speaker Change: Underway from our shovels in the ground standpoint, and still looking at a production window sometime in mid 2007 early 'twenty eight.
Speaker Change: I appreciate all that.
Speaker Change: Maybe just turning to some of the forecasting items fee income drivers, particularly the big ones wealth insurance retirement, all look pretty solid this quarter.
Speaker Change: And the market has been volatile. So I'm curious if you have any updated thoughts on how <unk> might shape up I'm not sure when those or how those fees are calculated on an average market basis, our end of period.
Speaker Change: Could you could you update us on fees and expected.
Speaker Change: Perhaps a little bit, but expected loan growth in the second quarter as well.
Matt: Sure, Matt I can help frame that for you. So when we back out the bully gain that we had during the quarter. Our fee income was about $46 million there was a little bit of seasonality in our retirement plan services and our insurance, but in the second quarter things like service charges on deposit.
Speaker Change: So we'll kind of pick up so all in the $46 million is probably a good run rate from a market sensitivity are most sensitive.
Matt: Fee based income to market is our wealth management business about 70% of.
Matt: The revenue is sensitive to market rates.
Matt: And typically that.
Matt: It's priced all along the quarter, but a lot of it happens near quarter end and Rps, our refinery with planned services, that's probably about 30% market sensitive.
Matt: And that kind of happens all throughout the quarter, so market volatility could have an impact on our run rate for the second quarter.
Matt: That probably helps you get a picture of the sensitivity towards that and then I'll.
Matt: I'll pick it up from there on your question relative to loan growth, obviously in the first quarter, but very modest loan growth a couple of things.
Matt: We did not enjoy winter this year or I take that back if you like winter you had a really robust year in our marketplaces.
Matt: But so I think some of the things that were projects for some of our customers got underway a little bit late.
Matt: Being said residential mortgage that we have historically been putting on the balance sheet long term resi mortgage.
Matt: Did not have a very positive first quarter.
Matt: I don't think its just our marketplaces, where home sales are were not robust in the first part of the year.
Matt: And we did actually sell a few more long dated 30 year instruments in the secondary market than we had in past quarters more because we think that the demand going forward, including the western part of New York State will mean that we should have all of our funding sources capable and retested, which is what we did in the first quarter.
Matt: So if we were talking to Matt a quarter ago, when we said sort of a 3% to 5% growth rate, we're probably more in like the 2% to 3%.
Matt: Thought process now after seeing the first quarter and understanding how some of our customers are dealing with macro uncertainty.
Matt: Got it I appreciate that.
Matt: Last one for me just on the on the charge off and I could totally be connecting the wrong dots here, but I feel like there was a larger commercial real estate credit from late 'twenty three for a bunch of the upstate New York banks that participation.
Matt: Right and kind of connecting those dots and could you re familiarize us with the size of the credit your portion.
Matt: How do you feel about the reserve and where it was valued at <unk>.
Matt: Relative to the collateral.
So you are correct that is the same credit and.
Matt: We now have remaining exposure to that credit right around 11 $5 million to $12 million.
Matt: On our books.
Matt: <unk> written down to fair value, so we're feeling comfortable that thats.
Matt: But we're good and there will be no further exposure there.
Matt: It's been disclosed, but that's moving into for.
Matt: Foreclosure, so expect it might move.
Matt: Could you be a nonperforming assets that move into Owari end sometime in the second quarter.
Matt: I think really anything to add to that is the occupancy rate of that.
Of that property.
Matt: Is in the low 80, percents, so generating positive cash flow to date.
Matt: But.
Matt: The dynamics of.
Matt: The ownership based on the principle, whether it makes itself all the way through to foreclosure will probably know that in the next four to six weeks.
Matt: But generally speaking.
Matt: The revised appraisal based on existing.
Matt: Tenants and other fixed costs in the property suggested that a another write down was appropriate for this quarter.
Matt: Great I appreciate that thank you I'll leave it there.
Matt: Appreciate it.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Manuel nervous with da Davidson. Your line is open.
Manuel: Hey, good morning.
Speaker Change: The strong deposit cost push downs.
Speaker Change: It really helped the NIM. This quarter is there any more of that still to come.
Speaker Change: I'm sure there'll be some CD renewals, but other accounts as well or is that kind of more stable and on pause with the Evans deal.
Speaker Change: So I'll start that and then please jump in.
Speaker Change: I think you're accurate relative to.
Speaker Change: We are making sure from a liquidity standpoint from an all sources of liquidity.
Speaker Change: As we go into the Evans closing that we have ample in fact more than we need probably just to be cautious with that said, we probably accelerated some of the deposit declines in the first quarter at a pace probably faster than we thought we were initially capable of which probably means going forward.
Speaker Change: Forward without another fed funds rate action dose will slow down.
Speaker Change: Our ability to stay competitive and to keep our balances it will be challenged unless there's another stimulus out there in the market to do that.
Speaker Change: Okay.
Speaker Change: I heard a little bit slower growth just because of the macro uncertainty.
Speaker Change: Youre still between this deal with much stronger NIM.
Speaker Change: Any other kind of.
Speaker Change: Shifting to EBITDA expectations or will kind of wait more for an update next quarter.
Speaker Change: I can share a little bit of our thought process around that based on some of our recent modeling.
Speaker Change: When we disclosed the announced the deal in September we were expecting to see maybe about 5% tangible book value dilution.
Speaker Change: And right around 38 cents of earnings accretion.
Speaker Change: Purchase accounting marks have decreased a little bit in our modeling. So we're probably a 100 basis points lower on tangible book value dilution, so right around 4%.
Speaker Change: And accretion for earnings is probably closer to 30.
Speaker Change: And that's assuming that all of our cost savings achievements are in place, which we think that will probably occur probably by the end of 2025.
Speaker Change: So hopefully that helps.
Speaker Change: Yes that is helpful.
Speaker Change: Is there any shifts in your in your kind of go forward cost base, just kind of on the legacy basis.
Speaker Change: How should I kind of think of it expense run rate going into the deal.
Speaker Change: And then one layer at Evercore.
Speaker Change: Sure I can speak to that are our expenses were about $98 7 million for the quarter.
Speaker Change: We think that's probably a good run rate for us excluding ovens.
Speaker Change: During the quarter.
Speaker Change: Salaries and benefits were right around $61 million, we have been.
Speaker Change: Seasonal payroll taxes and stock based comp, but that was offset by.
Speaker Change: Fewer calendar days payroll days.
Speaker Change: When we look into the second quarter, you're adding an additional payroll day and we have our annual merit increases and the month of March so really that's going to kind of offset each other and we would probably land right around $61 million.
Speaker Change: And salaries and benefits.
Speaker Change: That's a good proxy for the quarter occupancy costs, a couple of hundred thousand dollars higher this quarter, but just because of seasonal maintenance in the harsher winter that we experienced so that'll come in just a little bit but all in all I think I think.
Speaker Change: The current quarter's run rate as a good proxy.
Speaker Change: Okay. That's very helpful. Thank you.
Speaker Change: Terry.
Speaker Change: Yeah.
Speaker Change: Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Christopher Oconnor: Our next question comes from Christopher Oconnor with <unk>. Your line is open.
Speaker Change: Okay.
Speaker Change: Good morning.
Speaker Change: Wanted to follow up on.
Speaker Change: Hey, Scott.
Speaker Change: Just wanted to follow up on the <unk>.
Speaker Change: <unk> update.
Speaker Change: Given that you provided.
Speaker Change: EPS accretion and dilution which was helpful.
Speaker Change: Do you have an update as far as the overall.
Speaker Change: Purchase accounting accretion in the margin.
Speaker Change: I think it's safe to say, Chris that any decline from what we described when we released in September.
Speaker Change: On EPS accretion is all market related.
Speaker Change: Okay got it.
Speaker Change: And then.
Speaker Change: No.
Speaker Change: As you guys are looking forward for your margin can.
Speaker Change: Can you remind us how much.
Speaker Change: Fixed asset repricing.
Speaker Change: Given the securities flows in the deck, but.
Speaker Change: In particular, I guess on the loan side over the remainder of 2025 and 2026.
Speaker Change: What those yields are coming I'll start.
Speaker Change: Yes.
Speaker Change: I think we have a short description of that in the deck, Chris but does a quick reminder, about $2 billion of cash flows off the loan portfolio that we expect an opportunity to reprice on and if I was framing that today I would tell you that on the consumer side for us, which is really dominated by indirect auto new production.
Speaker Change: Existing portfolio yields are really close to each other so we've probably got crossed over on that one.
Speaker Change: Where is there still a lot of pick up is on the commercial side.
Speaker Change: New production was in the ballpark of 75 to 100 basis points over where we are today and then secondarily is residential real estate. So we're not a county, we're not assuming a lot of volume in <unk> real estate, where new loans are going on somewhere between six and a quarter and 7%.
Speaker Change: Versus the existing portfolio yields which are in the low fours. So if we were portfolio in all of our production you might get a little bit more.
Speaker Change: Beta on that particular side.
Speaker Change: But I think for now just given where we are from a volume expectation that opportunity for improvement is probably mostly focused on commercial cash flows.
Speaker Change: Okay great.
Speaker Change: And then as you go.
Speaker Change: Guys are.
Speaker Change: Looking at our markets.
Speaker Change: Serving I guess in particular, because some of the other consumer runoff portfolios as well as the indirect.
Speaker Change: A general sense of health on the consumer.
Speaker Change: In your markets more recently.
Speaker Change: So we're seeing.
Speaker Change: Not not a lot of changes to our delinquencies.
Speaker Change: Feeling like there.
Speaker Change: Balance sheets are strong.
Speaker Change: It will really impact defaults and ultimately charge offs is is really linked to unemployment rates.
Speaker Change: Economic conditions deteriorate, and we're seeing higher unemployment.
Speaker Change: That's when we will probably see the uptick in delinquencies and expectation of higher charge offs.
Speaker Change: We've yet to see where.
Speaker Change: Any of our customers have told us that their inputs there are price of raw material.
Speaker Change: Has been impacted by tariffs or certain other price changes, but remember so much of that happened late in the month of March as we continue to have dialogue with our customers in the month of April we've seen a few.
Speaker Change: The circumstances around that a few episodic things some of our customers that are more in northern New York that might be buying things like feed from southern Ontario are already experiencing tariff outcomes.
Speaker Change: But again I would call them more episodic at this point than systematic.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And then just.
Speaker Change: On the closing of the Evans deal.
Youre, obviously kind of.
Speaker Change: Pretty much there at this point so.
Speaker Change: Is there any run.
Speaker Change: Runoffs actions balance sheet actions.
Speaker Change: Anything else kind of contemplated with the pro forma loan or securities books, and kind of how to manage that especially.
Speaker Change: Yes, good amount of liquidity here or anything that you will be changing with your balance sheet.
Speaker Change: Subsequent to the deal close.
Speaker Change: So Chris not significant.
Speaker Change: But I will say this once we knew that.
Speaker Change: Once we had announced the Evans transaction, we started to deploy.
Speaker Change: Some of on a leverage basis buying some investments in advance of the transaction. So maybe in the ballpark of $25 million of securities a month for the last six to eight months and why do we want to do that I don't want to put ourselves in a position that if we made the decision to sell the Evans portfolio.
Speaker Change: Both from a duration or some other factor outcome that we were now buying securities all on one day or essentially all in one block of time, that's a pretty successful actually thats worked really appropriately for us remembering that we have to probably think about having at least $200 million of investment securities too.
Speaker Change: To be able to collateralized municipal deposits of evidence so we never expected.
Speaker Change: The investment base would be lower than that on a going forward basis on the Evans portfolio.
Speaker Change: And in fairness, if we see some other opportunities.
Speaker Change: Two to add to our investment portfolio productively, where we think.
Speaker Change: And durations piece.
Speaker Change: Peacefully coexist, we'd probably do that.
Speaker Change: I haven't had a nice portfolio the assets, we're well selected for them is our preference for maybe something with a little bit lower duration probably.
Speaker Change: So I think it's likely we see some some modest churn of that portfolio after the close.
Speaker Change: Great.
Speaker Change: And then just on overall M&A.
Speaker Change: Yeah.
Speaker Change: I guess whats your appetite here.
Speaker Change: You're in this market given the.
Speaker Change: The kind of overall market sell off a little bit more economic uncertainty.
Speaker Change: Guys. So.
Speaker Change: Looking for deals post.
Speaker Change: Clothes and integration.
Speaker Change: <unk>.
Speaker Change: Any any change in kind of what you'd be looking for.
Speaker Change: Given the changing environment.
Speaker Change: Yes, so a reasonable question.
Speaker Change: I will say this with no uncertainty we are fixated on one acquisition right now and that is evidenced.
Speaker Change: And we will be fixated on that for a while because we think there is really really good opportunities. They have a really high quality group of people in the Rochester, and Buffalo marketplaces, and we really would like to be able to support natural growth post acquisition and those spots first.
Speaker Change: That said are we capable of having discussions with other likeminded smaller community banks to either fill in spots in our existing franchise that now is about to go from Portland to Buffalo <unk>.
Speaker Change: Prove some of our concentration in a few spots.
Speaker Change: Natural dialogue with smaller institutions as happens all the time and we've continued to have productive conversations we'd like to think that we're a high quality buyer.
Speaker Change: From a standpoint of we're really looking for institutions that fit our needs.
Speaker Change: But I think we're we're again a credible buyer and I think people look at us from a currency standpoint for their own shareholders and say partnering with us as a reasonable way forward.
Speaker Change: So no current plans.
Speaker Change: But absolutely looking at our opportunities at the same time I think we've looked at some of our marketplaces and I think we've said this before where some of our concentration characteristics or we have some gaps in some of our coverage. So in 2024, we opened an incremental branch.
Speaker Change: In the multi area.
Speaker Change: Outside of Albany and in Binghamton.
Speaker Change: In the first quarter, we added south Burlington.
Speaker Change: And we added our first branch in Rochester up in Webster.
Speaker Change: We think we're capable of doing that on a selected basis and theres. Some other marketplaces in.
Speaker Change: A couple of parts of Northern New York, Southern and lower Northern and lower Hudson Valley.
Speaker Change: Certainly some spots in Vermont, New Hampshire, and Maine, where we're under represented from a concentration standpoint. So I think we'll be very deliberate about how we fill those in but.
Speaker Change: But I see us doing that on both an organic basis, and then evaluating whether there is a way to accelerate that with an M&A transaction.
Matthew Breese: Great I appreciate it thanks, Scott Thanks for that.
Speaker Change: Thanks, Craig Thank you.
Speaker Change: Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Speaker Change: Our next question comes from Freddie Strickland with Holiday Research. Your line is open.
Freddie Strickland: Hey, good morning.
Speaker Change: I apologize I hopped on late but I was just wondering the credit side. If you could is.
Speaker Change: Is it fair to assume charge offs are still likely led by auto.
Speaker Change: Residential solar for the next quarters and is there any other portfolios, we're looking at a little bit more closely just with.
Speaker Change: All of these uncertainties.
Speaker Change: That's a good question I would say, yes, the majority of our charge offs will probably come from auto and residential solar Buck.
Speaker Change: Our commercial charge offs are much more episodic.
Speaker Change: And.
Speaker Change: Generally can appropriately manage those so I think that's it.
Speaker Change: That's a good way to frame it.
Speaker Change: Perfect.
Speaker Change: What was the total level of wealth assets under management, an epic retirement assets under administration as possible right I didn't see it in the deck this quarter.
Speaker Change: Yes, Eddie will another I will get with you offline on that after I am not sure that we brought that forward.
Speaker Change: The things that we presented today.
Speaker Change: Understood perfect.
Speaker Change: Everything else has been asked and answered so thank you very much appreciate you taking my questions.
Speaker Change: The questions. Thanks, so much.
Speaker Change: And I'm not showing any further questions at this time I will turn the call back over to Scott Kingsley for his closing remarks.
Speaker Change: Thank you Kevin.
Speaker Change: Closing I want to thank everyone on the call for participating this morning, and your continued interest in <unk>.
Speaker Change: And.
Speaker Change: We look forward to catching up with you at the end of July after we've gotten through the Evans transaction.
Speaker Change: For us it is really really exciting and something we're really looking forward to so appreciate the support and appreciate the questions.
Speaker Change: Thank you Mr. Clinically. This concludes our program you may now disconnect have a great day.
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Speaker Change: Good day, everyone and welcome to the conference call covering MBT Bancorp's first quarter 2025 financial results. This call is being recorded and has been made accessible to the public in accordance with the Sec's regulation FD.
Speaker Change: Corresponding presentation slides can be found on the company's website at NBC Bancorp Dot com.
Speaker Change: Before the call begins Nbc's management I would like to remind listeners as noted on slide two today's presentation may contain forward looking statements as defined by the Securities and Exchange Commission.
Speaker Change: Actual results may differ from those projected in addition, certain non-GAAP measures will be discussed reconciliations for these numbers can be reconciliation for these numbers are contained within the appendix of today's presentation. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this call is being recorded.
Unidentified Moderator: I will now turn the conference over to MPT Bancorp's, President and CEO, Scott Kingsley for his opening remarks, Mr. Kingsley. Please begin.
Scott Kingsley: Thank you, Kevin and good morning, and thank you for joining us for this earnings call covering <unk> Bancorp's first quarter 2025 results.
Speaker Change: With me today are net Burns Mbt's, Chief Financial Officer, Joe Stack, Viano, President of NB, Keybank and Joe on desktop our treasurer.
Speaker Change: Our operating performance for the first quarter continued to reflect the strength of our balance sheet, our diversified business model and strong collaboration by our team.
Speaker Change: Operating return on assets was 111% for the first quarter with a return on equity of 10% and our O TCE of 14% certainly not records for us, but each metric demonstrates continued improvement over the linked and prior year quarters and importantly reflect.
Speaker Change: The generation of positive operating leverage.
Speaker Change: We diligently grew earning assets and lowered funding costs, which improved net interest margin for the fourth consecutive quarter.
Speaker Change: Noninterest income continues to be a highlight making up 31% of total revenues for the quarter with each of our non banking businesses, achieving productive improvements in both revenue and earnings generation.
Speaker Change: We have added over $100 million to shareholders equity in the past 15 months from productive earnings generation, while also paying a higher level of dividends, adding to our already desirable levels of capital flexibility.
Speaker Change: Turning to updates on our growth strategies, we continue to see activity across upstate New York semiconductor Chip corridor, including news about site specific milestones related to micron's planned complex outside of Syracuse.
Speaker Change: Team members at NBC are engaged in supporting our customers and communities and participating in the growing ecosystem around semiconductor and advanced electronics manufacturing in our markets.
Speaker Change: Our ability to provide financial services to those living and working along the chip corridor will only be enhanced by the merger of Evans Bancorp into NBC in early May.
Speaker Change: Last September we announced our partnership with Evans in December we received all the regulatory approvals required to move forward as well as approval from Evans shareholders.
Speaker Change: Our integration team is poised to complete our core systems conversion next weekend. After we closed the merger at the end of the day on Friday May <unk>.
Speaker Change: As a result, we will welcome over 200 Evans employees and more than 40000 customers to MBT <unk>.
Speaker Change: Adding the Buffalo and Rochester market is a natural extension of our footprint in upstate New York and we look forward to building on the relationships evidence has established with customers communities and shareholders.
Speaker Change: At this time I will turn the meeting over to a net to review our first quarter results with you in detail our net.
Speaker Change: Thank you Scott and good morning, turning to the results overview page of our earnings presentation in the first quarter, we reported net income of $36 $7 million or <unk> 77 per share.
Speaker Change: Excluding merger costs and securities losses, our operating earnings per share were <unk> 80, an increase of <unk> <unk> per share compared to the prior quarter.
Speaker Change: Revenues were four 4% from the prior quarter and almost 12% from the first quarter of the prior year driven by improvements in both net interest income and fee based revenues.
Speaker Change: Tangible book value per share of $24 74 as of March 31 was up 86 cents per share from the end of the fourth quarter of 2024, marking another all time high for MVP.
Speaker Change: The next page shows trends in outstanding loans.
Speaker Change: Excluding the other consumer and residential solar portfolios that are in our planned runoff contractual runoff status.
Speaker Change: Loans increased $40 million or one 8% annualized our total loan portfolio of $10 billion remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans on <unk>.
Speaker Change: Page six total deposits of 11 $7 billion were up $162 million from the linked fourth quarter, primarily due to the inflow of seasonal municipal deposits during the quarter generally in most of our markets municipal tax collections are concentrated in the first and third quarters.
Speaker Change: Of each year.
Speaker Change: 58% of our deposit portfolio consists of no and low cost checking and savings accounts, while 42% is held in time and money market accounts. We have included a summary of our deposit mix by type, which illustrates the diversification and deep granularity of our customer base.
Speaker Change: The next slide highlights the detailed changes in our net interest income and margin.
Speaker Change: Our net interest margin in the first quarter increased 10 basis points to 344% from the linked fourth quarter, primarily driven by the decrease in the cost of interest bearing deposits.
Speaker Change: Net interest income for the first quarter was $107 2 million, an increase of $1 $1 million above the linked fourth quarter and $12 million above the first quarter of 2020 for the.
Speaker Change: The increase in net interest income from the prior quarter was primarily driven by a decrease in the cost of deposits, partially offset by the impact of two less calendar days in the quarter.
Speaker Change: Loan yields decreased three basis points from the prior quarter to 562%.
Speaker Change: Primarily due to the repricing of $2 $1 billion in variable rate loans following the prior quarter's federal funds rate decreases.
Speaker Change: We're able to actively manage our funding costs downward to more than offset that impact.
Speaker Change: Evidenced by the 11 basis point decline in our total cost of deposits to 149% for the quarter.
Speaker Change: As a reminder, approximately $5 billion of our deposits principal money market and CD accounts remain price sensitive.
Speaker Change: Looking ahead the opportunity for upward movement in yields will depend on the shape of the yield curve and how we reinvest loan portfolio cash flows.
Speaker Change: The trends in noninterest income are outlined on page eight.
Speaker Change: Excluding securities gains and losses, our fee income was $47 6 million, an increase of 12, 7% compared to the linked fourth quarter.
Speaker Change: Noninterest income represented 31% of total revenues in the first quarter, reflecting continued improvement and strength of our diversified revenue base.
Speaker Change: Total operating expenses, excluding acquisition expenses were $98 $7 million for the quarter, a one 1% decrease from the linked fourth quarter.
Salaries and employee benefit costs were.
Speaker Change: Were $60 7 million.
Speaker Change: A decrease of $1 $1 million from the prior quarter.
Speaker Change: This decrease was primarily driven by lower medical and other benefit costs lower levels of incentive compensation and lower salary expense, resulting from two fewer payroll days in the quarter.
Speaker Change: These increases were partially offset by seasonally higher payroll taxes, and an increase in stock based compensation.
Speaker Change: The quarter over quarter increase in occupancy expenses was expected driven by increases in seasonal costs, including utilities and higher maintenance costs.
Speaker Change: Slide 10 provides an overview of key asset quality metrics net charge offs to average loans were 27 basis points in the first quarter of 2025 compared to the 23 basis points in the prior quarter included a net charge offs was a $2 $1 million write down of a commercial real estate loan that has been in.
Speaker Change: A nonperforming status for the past several quarters.
Speaker Change: Loan was charged down to its updated estimated fair value based on new information received during the quarter.
Speaker Change: Excluding the $2 $1 million write down net charge offs to average loans were 18 basis points for the quarter.
Speaker Change: <unk> to loans to total loans were 32 basis points and was in line with the past several quarters.
Speaker Change: Reserve coverage was 117% of total loans and covered more than two times the level of nonperforming loans, we believe that expected balance sheet growth.
Speaker Change: <unk> forecast conditions and continued changes in loan mix will be the drivers of future provisioning needs.
Speaker Change: In closing growth in both net interest income and fee based income drove the generation of the sequential and year over year positive operating leverage and contributed to our solid operating performance in the first quarter of 2025.
Speaker Change: Our continued capital strength has us well positioned to support organic growth and our other strategic initiatives.
Speaker Change: You for your continued support and at this time, we welcome any questions you may have.
Speaker Change: Thank you anyone with a question at this time can press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again.
Speaker Change: One of them are four questions.
Speaker Change: Okay.
Unidentified Moderator: Our first question comes from Steve Moss with Raymond James Your line is open.
Tom: Hey, Scott This is Tom on for Steve Good morning, and thank you for taking my question.
Unidentified Moderator: Good morning, I just wanted to hear me.
Speaker Change: Just wanted to see maybe can you share your high level thoughts on the demand for credit in your market, our pipeline's, good where you're seeing strength and weakness and maybe what are some of the things youre hearing from clients anecdotally okay.
Speaker Change: Tom its excellent question and thanks for that.
Speaker Change: So pipelines are good.
Speaker Change: Consistent with the levels, we were enjoying most of last year.
Speaker Change: In terms of individual markets very consistent across our footprint, whether thats, northern New England, Upstate New York Penciled.
Speaker Change: Pennsylvania, Connecticut, so really good pipelines.
Will we acknowledged that macro uncertainties have people asking questions about timing of certain things for sure.
Speaker Change: And generally I think.
Speaker Change: A little bit more certainty when youre, making a capital expenditure when you're hiring people.
Speaker Change: As always welcomed and certainly always easier but to date, we haven't seen customers who are abandoning projects who are looking at the current levels of uncertainties and saying I'm not sure how to step forward, So I would say pretty consistent and pretty stable and probably pretty.
Speaker Change: In line or a requisite with our markets.
Speaker Change: Okay. That's good to hear and then maybe shifting gears to the other side of the equation the supply of credit how is competition.
Are you seeing in terms of spreads it's pricing remaining rational.
Speaker Change: For the most part I would say there are certain certainly episodic situations in some of our markets because we compete with such a broad group of financial institutions, but generally pretty reasonable pretty disciplined.
Speaker Change: There'll be a handful of small banks defending.
Speaker Change: Mauler markets or 13% to 15 branch type setups somewhere that's our competing maybe a little bit.
Speaker Change: Outside of our comparability levels, a few times, but not overarching.
Speaker Change: Okay, and then just one more for me.
Evan: With Evan.
Speaker Change: Or is that just closed shortly they were smaller institution.
Speaker Change: Seeing do you have any do you see opportunities for those bankers to maybe leverage your balance sheet.
Speaker Change: Near term to expand their existing client relationships could could help loan growth. There do you see any potential for that yes, absolutely.
Speaker Change: That was really.
Speaker Change: A piece of our value proposition.
Speaker Change: When we started speaking with the ovens folks is that ability to use a larger balance sheets. So that they can compete or that they could fully cover certain client relationships, where maybe the size of their balance sheet forced them to participate at.
Speaker Change: At a sooner at a lower level.
Speaker Change: So.
Speaker Change: Our onboarding process and our transition process with the bankers from Evans is going exceptionally well.
Speaker Change: Really high quality group of people in Western New York and.
Speaker Change: As much as I think we will be defending existing client relationships.
Speaker Change: After the close of the transaction I think we will also have some opportunities for some sort of growth.
Speaker Change: Characteristics relatively soon.
Speaker Change: Great all of that is good to hear thanks again, Scott that for taking my questions.
Speaker Change: Appreciate it thank you.
Unidentified Moderator: One moment for our next question.
Unidentified Moderator: Our next question comes from Matthew Breese with Stephens, Inc. Your line is open.
Matthew Breese: Hey, good morning.
Speaker Change: Good morning.
Speaker Change: I was hoping we could start just with the chipset act given somewhat Trump's comments to Congress.
Speaker Change: From everything you know is there any ability or intend to actually risen to revisit some of the committed dollars and.
Speaker Change: And ultimately do you expect.
Speaker Change: What was said to factor into any delayed for micron or other chips related projects.
Speaker Change: So let me take a run at both ends of those mats quickly is.
Are there contractual obligations that the government has relative to the chips actually relative to the projects have been awarded absolutely.
Speaker Change: What have we found in the last four to six weeks is that maybe that matters and maybe it doesn't.
Speaker Change: I won't say that there can't be adjustment.
Speaker Change: Maybe it's not rescinding, but there could be adjustment in some of those that being said the underlying tone of wanting to.
Speaker Change: Source manufacturing for semiconductor high electronics.
Still resonates with the existing in the current administration. So I think maybe youll see some rebranding of that and maybe somebody will take credit for renegotiating, something and calling it something else, but I think the general tenor as this is stuff we should be manufacturing in the United States.
Speaker Change: So to answer that one.
Speaker Change: Far from being able to answer the legal question relative to commitments from a legal standpoint.
Speaker Change: Your question about timing, we've been reminded of this a couple of times because.
Speaker Change: Micron has pushed back their shovels in the ground timing a couple of times since the original announcement. So I think all of these projects are more company specific situations.
Speaker Change: As the folks in Columbus, Ohio are finding out with Intel.
Speaker Change: That.
Speaker Change: Maybe there is going to be a delay so we get reminded that infrastructure moves along this is a long term project and we would expect meaningful start points out there.
Speaker Change: Acquisition of land is happening.
Speaker Change: In multiple spots in Central New York today to support the <unk>.
Speaker Change: Project.
Speaker Change: Things on the water and.
Speaker Change: Sewer projects are underway currently.
Speaker Change: We know that Micron has filed there.
Speaker Change: Byron mental impact report, so I think it's moving along at a pace, that's probably pretty reasonable.
Speaker Change: For now I think were sort of hanging in there and thinking it's late this year.
Speaker Change: Underway from the shovels in the ground standpoint, and still looking at a production window sometime in mid 2007 nearly 28.
Speaker Change: I appreciate all that.
Speaker Change: Maybe just turning to some of the forecasting items fee income drivers, particularly the big ones wealth insurance retirement, all look pretty solid this quarter.
Speaker Change: And the market has been volatile. So I'm curious if you have any updated thoughts on how <unk> might shape up I'm not sure when those or how those fees are calculated on an app.
Speaker Change: Average market basis, our end of period.
Speaker Change: Could you could you update us on fees and expected Pops.
Speaker Change: <unk>, that's a little bit, but expected loan growth in the second quarter as well.
Speaker Change: Sure, Matt I can help frame that for you. So when we back out the bully gain that we had during the quarter. Our fee income was about $46 million there was a little bit of seasonality in our retirement plan services and our insurance, but in the second quarter things like service charges on deposit.
Speaker Change: So we'll kind of pick up so all in the 46 million is probably a good run rate from a market sensitivity are most sensitive.
Speaker Change: Fee based income to market is our wealth management business about 70% of.
Speaker Change: The revenue is sensitive to market rates.
Speaker Change: And typically that.
Speaker Change: It's priced all along the quarter, but a lot of it happens near quarter end and Rps, our refinery with planned services, that's probably about 30% market sensitive.
Speaker Change: And that kind of happens all throughout the quarter, so market volatility could have an impact on our run rate for the second quarter.
Speaker Change: But that probably helps you get a picture of the sensitivity towards that.
Speaker Change: I'll pick it up from there on your question relative to loan growth, obviously in the first quarter, but very modest loan growth a couple of things.
Speaker Change: We did not enjoy winter this year or I take that back if you like winter you had a really robust year in our marketplaces.
Speaker Change: But so I think some of the things that were projects for some of our customers got underway a little bit late.
Speaker Change: Being said residential mortgage that we have historically been putting on the balance sheet long term resi mortgage.
Speaker Change: Did not have a very positive first quarter.
Speaker Change: I don't think its just our marketplaces, where home sales are were not robust in the first part of the year.
Speaker Change: And we did actually sell a few more long dated 30 year instruments in the secondary market than we had in past quarters more because we think that the demand going forward, including the western part of New York State will mean that we should have all of our funding sources capable and retested, which is what we did in the first quarter.
Speaker Change: So if we were talking to Matt a quarter ago, we said sort of a 3% to 5% growth rate, we're probably more in like the 2% to 3%.
Speaker Change: Thought process now after seeing the first quarter and understanding how some of our customers are dealing with macro uncertainty.
Speaker Change: Got it I appreciate that.
Speaker Change: Last one for me just on the on the charge off and I could totally be connecting the wrong dots here, but I feel like there was a larger commercial real estate credit from late 'twenty three for a bunch of the upstate New York banks that participation.
Speaker Change: Right and kind of connecting those dots and could you re familiarize us with the size of the credit your portion.
Speaker Change: How do you feel about the reserve and where it was valued at <unk>.
Speaker Change: Relative to the collateral.
Speaker Change: So you are correct that is the same credit and.
Speaker Change: We now have remaining exposure to that credit right around 11 $5 million to $12 million.
Speaker Change: On our books.
Speaker Change: Written down to fair value, so we're feeling comfortable that thats.
Speaker Change: But we're good and there will be no further exposure there.
Speaker Change: It's been disclosed, but that's moving into for.
Speaker Change: Foreclosure, so expect it might move.
Speaker Change: He will be a nonperforming assets that move into Owari end sometime in the second quarter.
Speaker Change: I think the only other thing to add to that is the occupancy rate of that.
Speaker Change: That property is in the low 80, percents, so generating positive cash flow to date.
Speaker Change: But.
Speaker Change: The dynamics of.
Speaker Change: The ownership base and the principle, whether it makes itself all the way through to foreclosure will probably know that in the next four to six weeks.
Speaker Change: But generally speaking.
Speaker Change: The revised appraisal based on existing.
Speaker Change: Tenants and other fixed costs in the property suggested that a another write down was appropriate for this quarter.
Speaker Change: Great I appreciate that thank you I'll leave it there.
Speaker Change: Appreciate it.
Unidentified Moderator: One moment for our next question.
Unidentified Moderator: Our next question comes from Manuel Novice with da Davidson. Your line is open.
Manuel Novice: Hey, good morning.
Speaker Change: The strong deposit cost push downs.
Speaker Change: It really helped the NIM. This quarter is there any more of that still to come.
Speaker Change: I'm sure there'll be some CD renewals, but other accounts as well or is that kind of more stable and on pause with the Evans deal.
Speaker Change: So I'll start that and then please jump in.
Speaker Change: I think you're accurate relative to.
Speaker Change: We are making sure from a liquidity standpoint from an all sources of liquidity.
Speaker Change: As we go into the Evans closing that we have ample in fact more than we need probably just to be cautious with that said, we probably accelerated some of the deposit declines in the first quarter at a pace probably faster than we thought we were initially capable of which probably means going forward.
Speaker Change: Forward without another fed funds rate action those will slow down.
Speaker Change: Our ability to to stay competitive and to keep our balances it will be challenged unless there's another stimulus out there in the market to do that.
Speaker Change: Okay.
Speaker Change: I heard a little bit slower growth just because of the macro uncertainty.
Speaker Change: Youre still entering this deal with much stronger.
Speaker Change: Any other kind of shifts to evidence expectations or will kind of wait more for an update next quarter.
Speaker Change: I can share a little bit of our thought process around that based on some of our recent modeling.
Speaker Change: We disclosed the announced the deal in September we were expecting to see maybe about 5% tangible book value dilution.
Speaker Change: And right around 38 cents of earnings accretion.
Speaker Change: Purchase accounting marks have decreased a little bit in our modeling. So we're probably a 100 basis points lower on tangible book value dilution, so right around 4%.
Speaker Change: And accretion for earnings is probably closer to 30.
Speaker Change: And that's assuming that all of our cost savings achievements are in place, which we think that will probably occur probably by the end of 2025.
Speaker Change: So hopefully that helps.
Speaker Change: Yes that is helpful.
Speaker Change: Is there any shifts in your in your kind of go forward cost base, just kind of on a legacy basis.
Speaker Change: How should I kind of think of the expense run rate going into the deal.
Speaker Change: And then we're layering on top of it.
Speaker Change: Sure I can speak to that are our expenses were about $98 7 million for the quarter.
Speaker Change: We think that's probably a good run rate for us excluding ovens.
Speaker Change: During the quarter.
Speaker Change: Salaries and benefits were right around $61 million, we have been.
Speaker Change: Seasonal payroll taxes and stock based comp, but that was offset by.
Speaker Change: Fewer calendar days payroll days.
Speaker Change: When we look into the second quarter, you are adding additional payroll day, and we have our annual merit increases and the month of March so really that's going to kind of offset each other and we would probably land right around $61 million.
Speaker Change: And salaries and benefits.
Speaker Change: As a good proxy for the quarter occupancy costs, a couple of hundred thousand dollars higher this quarter, but just because of seasonal maintenance in the harsher winter that we experienced that will come in just a little bit but all in all I think I think.
Speaker Change: The current quarter's run rate as a good proxy.
Speaker Change: Okay. That's very helpful. Thank you for the commentary.
Unidentified Moderator: Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Speaker Change: Our next question comes from Christopher Oconnor with <unk>. Your line is open.
Speaker Change: Okay.
Christopher Oconnor: Good morning.
Speaker Change: Just wanted to follow up on.
Speaker Change: Hey, Scott.
Speaker Change: I just wanted to follow up on the <unk>.
Speaker Change: <unk> update.
Speaker Change: Given that you provided.
Speaker Change: EPS accretion and dilution which is helpful.
Speaker Change: Okay.
Speaker Change: Do you have an update as far as the overall.
Speaker Change: Purchase accounting accretion in the margin.
Speaker Change: I think it's safe to say, Chris that any decline from what we described when we released in September.
Speaker Change: EPS accretion is all market related.
Speaker Change: Okay got it.
And then.
Speaker Change: No.
Speaker Change: As you guys are looking forward for your margin.
Speaker Change: Can you remind us how much.
Speaker Change: Fixed asset repricing I know you guys give the securities flows in the deck, but.
Speaker Change: In particular, I guess on the loan side over the remainder of 2025 and 2026.
Speaker Change: What those yields are coming off that.
Speaker Change: Yes so.
Christopher Oconnor: I think we have a short description of that in the deck, Chris but does a quick reminder, about $2 billion of cash flows off the loan portfolio that we expect an opportunity to reprice on and if I was framing that today I would tell you that on the consumer side for US, which is really dominated by indirect auto new production in <unk>.
Christopher Oconnor: <unk> portfolio yields are really close to each other so we've probably got or crossed over on that one.
Christopher Oconnor: Or is there still a lot of pick up is on the commercial side, where new production was in the ballpark of 75 to 100 basis points over where we are today and then secondarily is residential real estate. So.
Christopher Oconnor: So we're not a county, we're not assuming a lot of volume in <unk> real estate, where new loans are going on somewhere between six and a quarter and 7%.
Christopher Oconnor: Versus the existing portfolio yields which are in the low fours. So if we were portfolio all of our production you might get a little bit more.
Christopher Oconnor: Beta on that particular side.
Christopher Oconnor: But I think for now just given where we are from a volume expectation that opportunity for improvement is probably mostly focused on commercial cash flows.
Christopher Oconnor: Okay great.
Christopher Oconnor: And then as you.
Christopher Oconnor: Guys are.
Christopher Oconnor: Looking at our markets.
Christopher Oconnor: Serving I guess in particular, because some of the other consumer runoff portfolios as well as the indirect.
Christopher Oconnor: A general sense of health on the consumer.
Christopher Oconnor: In your markets more recently.
Christopher Oconnor: So we're seeing.
Christopher Oconnor: Not not a lot of changes to our delinquencies.
Christopher Oconnor: Feeling like there.
Christopher Oconnor: Balance sheets are strong.
Christopher Oconnor: It will really impact defaults and ultimately charge offs is is really linked to unemployment rates.
Christopher Oconnor: Economic conditions deteriorate and we are seeing higher unemployment, that's when we'll probably see the uptick in delinquencies and expectation of higher charge offs.
Christopher Oconnor: We've yes, Chris to see where.
Christopher Oconnor: Any of our customers have told us that their inputs there are price of raw material.
Christopher Oconnor: Has been impacted by tariffs or certain other price changes, but remember so much of that happened late in the month of March as we continue to have dialogue with our customers in the month of April we've seen a few.
Christopher Oconnor: The circumstances around that a few episodic things some of our customers that are more in northern New York that might be buying things like feed from southern Ontario are already experiencing tariff outcomes.
Christopher Oconnor: So, but again I would call them more episodic at this point than systematic.
Christopher Oconnor: Yeah.
Christopher Oconnor: Okay.
Christopher Oconnor: Yes.
Christopher Oconnor: And then just.
Christopher Oconnor: On the closing of the Evans deal.
Christopher Oconnor: Youre, obviously kind of.
Christopher Oconnor: Pretty much there at this point so.
Speaker Change: Is there any run.
Christopher Oconnor: <unk> balance sheet actions.
Christopher Oconnor: Anything else kind of contemplated with the pro forma loan or securities books, and kind of how to manage that especially.
Christopher Oconnor: Yes, good amount of liquidity here or anything that you will be changing with your balance sheet.
Christopher Oconnor: Subsequent to the deal close.
Christopher Oconnor: So if there is not significant.
Christopher Oconnor: But I will say this once we knew that.
Christopher Oconnor: Once we had announced the Evans transaction, we started to deploy.
Christopher Oconnor: Some of on a leverage basis buying some investments in advance of the transaction. So maybe in the ballpark of $25 million of securities a month for the last six months to eight months and why do we want to do that you don't want to put ourselves in a position that if we made the decision to sell the Evans portfolio.
Both from a duration or some other factor outcome that we were not buying securities all in one day or essentially all in one block of time, that's been a pretty successful actually thats worked really appropriately for us remembering that we have to probably think about having at least $200 million.
Christopher Oconnor: Investment securities to be able to collateralized municipal deposits of evidence so we'd never expected.
Christopher Oconnor: The investment base to be lower than that on a going forward basis on the <unk> portfolio.
Christopher Oconnor: And in fairness, if we see some other opportunities.
Christopher Oconnor: To add to our investment portfolio productively, where we think yields and durations.
Christopher Oconnor: Peacefully co exist, we'd probably do that.
Christopher Oconnor: I haven't had a nice portfolio the assets, we're well selected for them is our preference for maybe something with a little bit lower duration probably.
Christopher Oconnor: So I think it is likely we see some some modest churn of that portfolio after the close.
Christopher Oconnor: Great.
Christopher Oconnor: And then just on overall M&A.
Christopher Oconnor: Yeah.
Christopher Oconnor: I guess, what's your appetite.
Speaker Change: Here in this market given the kind of overall market sell off a little bit more economic uncertainty.
Christopher Oconnor: Guys. So.
Christopher Oconnor: Looking for deals post.
Christopher Oconnor: Clothes and integration.
Christopher Oconnor: <unk>.
Christopher Oconnor: Any change in kind of what you'd be looking for.
Christopher Oconnor: Given the changing environment.
Christopher Oconnor: Yes, so a reasonable question.
Christopher Oconnor: I will say this with no uncertainty we are fixated on one acquisition right now and that is evidenced.
Christopher Oconnor: And we will be fixated on that for a while because we think there is really really good opportunities. They have a really high quality group of people in the Rochester, and Buffalo marketplaces, and we really would like to be able to support natural growth post acquisition and those spots first.
Christopher Oconnor: That said are we capable of having discussions with other likeminded smaller community banks to either fill in spots in our existing franchise that now is about to go from Portland to Buffalo <unk>.
Christopher Oconnor: Prove some of our concentration in a few spots.
Christopher Oconnor: Natural dialogue with smaller institutions as happens all the time and we've continued to have productive conversations we'd like to think that we are a high quality buyer.
Christopher Oconnor: From a standpoint of we're really looking for institutions that fit our needs, but I think we're we're again a credible buyer and I think people look at us from a currency standpoint for their own shareholders and say partnering with us as a reasonable way forward.
Christopher Oconnor: So no current plans, but.
Christopher Oconnor: But absolutely looking at our opportunities at the same time I think we've looked at some of our marketplaces and I think we've said this before where some of our concentration characteristics or we have some gaps in some of our coverage. So in 2024, we opened an incremental branch in.
Christopher Oconnor: In the multi area.
Christopher Oconnor: Outside of Albany and in Binghamton.
Christopher Oconnor: In the first quarter, we added south Burlington.
Christopher Oconnor: And we added our first branch in Rochester up in Webster.
Christopher Oconnor: So we think we're capable of doing that on a selected basis and theres. Some other marketplaces in.
Christopher Oconnor: A couple of parts of Northern New York, Southern and lower Northern and lower Hudson Valley.
Christopher Oconnor: Certainly some spots in Vermont, New Hampshire, and Maine, where we're underrepresented from a concentration standpoint, so I think we'll be very deliberate about how we fill those in.
Christopher Oconnor: But I see us doing that on both an organic basis, and then evaluating whether there is a way to accelerate that with an M&A transaction.
Speaker Change: Great I appreciate it thanks, Scott Thanks for that.
Christopher Oconnor: Thanks, Chris Thank you.
Christopher Oconnor: Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Unidentified Moderator: Our next question comes from Freddie Strickland with Holiday Research. Your line is open.
Freddie Strickland: Hey, good morning.
Unidentified Moderator: I apologize I hopped on late but I was just wondering the credit side, if you could.
Freddie Strickland: Is it fair to assume charge offs are still likely led by auto.
Freddie Strickland: Residential solar for the next quarters and is there any other portfolios, we're looking at a little bit more closely just.
Freddie Strickland: With.
Freddie Strickland: All of these uncertainties.
Freddie Strickland: That's a good question I would say, yes, the majority of our charge offs will probably come from auto and residential solar Buck.
Freddie Strickland: Our commercial charge offs are much more episodic.
Freddie Strickland: And.
Freddie Strickland: Generally can appropriately manage those so I think that's it.
Freddie Strickland: Thats, a good way to frame it.
Freddie Strickland: Perfect.
Speaker Change: What was the total level of wealth assets under management and epic retirement assets under administration. This past quarter I didn't see it in the in the deck this quarter.
Freddie Strickland: Yes.
Freddie Strickland: Another I will get with you offline on that after I am not sure that we brought that forward.
Freddie Strickland: Many of the things that we presented today.
Freddie Strickland: Understood perfect.
Freddie Strickland: Everything else has been asked and answered. So thank you very much appreciate you taking my questions I appreciate the questions. Thanks, so much.
Unidentified Moderator: And I'm not showing any further questions at this time I will turn the call back over to Scott Kingsley for his closing remarks.
Scott Kingsley: Thank you Kevin.
Scott Kingsley: Closing I want to thank everyone on the call for participating this morning, and your continued interest in MVP.
Scott Kingsley: And.
Scott Kingsley: We look forward to catching up with you at the end of July after we've gotten through the Evans transaction.
Scott Kingsley: For us is really really exciting and something we're really looking forward to so appreciate the support and appreciate the questions.
Scott Kingsley: Thank you Mr. Crinkly. This concludes our program you may now disconnect have a great day.