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| Statement |
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| Fee income remained strong in the third quarter with solid performances in wealth management, leasing, Bannockburn and mortgage |
| Overall, I'm pleased with our third quarter performance, strong net interest income and robust fee income led to a 13% increase in net income from the third quarter of 2022 |
| But yes, I mean, the area is very good |
| As we close out the year, we believe we're well positioned to navigate the current economic environment and continue to deliver strong results |
| We're pleased with our results thus far in 2023 and continue to be encouraged by the higher net interest margin, favorable fee income trends and overall earnings performance |
| Lastly, our capital ratios remain strong and we expect to maintain our dividend at the current level |
| Our fee income continued to exceed expectations for the quarter with strong performance from wealth management, equipment leasing, Bannockburn and mortgage banking |
| We continue to be pleased with our high net interest margin, favorable fee income trends and robust earnings |
| During the quarter, our regulatory capital levels strengthened and our strong earnings helped to maintain the tangible common equity ratio despite the negative impact to AOCI from the increase in market rates |
| Our total shareholder return remains robust, with 35% of our earnings returned to our shareholders during the period through the common dividend |
| The third quarter was another good quarter, highlighted by solid earnings, strong net interest margin and high fee income |
| Our balance sheet once again reacted positively to the interest rate environment |
| Summit and Bannockburn both had very strong quarters and we expect this to continue through the end of the year |
| Wealth Management had another record quarter, while mortgage also performed well |
| We feel confident where we're at |
| Just it feels like you've got this higher margin starting point in part because of the mix of your assets which should have a little bit of credit volatility but overall, good credit adjusted margins |
| I am pleased by the continued stability of our deposit balances during the quarter, while the change in mix from noninterest-bearing to CDs and money market accounts continued, we experienced slight growth in total balances and our loan-to-deposit ratio remained flat at 82% |
| But again, when we look at it from a risk-adjusted return, our loan yields and overall asset yields are -- again, over that long term are significantly higher than the peers as well |
| And -- but we are -- we feel like with our reserve at 1.36% of loans, we feel like our reserve is still so conservative and we're in a good spot here going forward |
| We believe our dividend provides an attractive return to our shareholders and do not anticipate any near-term changes |
| I mean that area is very robust |
| Our net interest margin declined as expected during the period but remained very strong at 4.33% |
| So that's obviously helped the securities yield quite a bit over the last year |
| Asset yields increased 17 basis points due to higher rates and a more profitable mix of earning asset balances during the period |
| As you can see, about 4% of our total loan book is concentrated in office space and the overall LTV of the portfolio is strong |
| And then interestingly enough, they've strengthened even while so we have seen also businesses with liquidity, take that liquidity and pay down lines |
| But after a couple of quarters of still letting the securities balances run down a little with that cash flow, the balance sheet will grow with the growth in the loan portfolio |
| We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment |
| So yes, I think they're pretty healthy right now overall |
| Slide 24 demonstrates that our capital ratios will remain in excess of regulatory targets, including the unrealized losses in the securities portfolio |
| Statement |
|---|
| Regarding the net interest margin, we still see some uncertainty around the Fed rate path, loan demand and deposit pricing competition |
| We also recorded a $6.9 million loss on a large C&I loan that was negatively impacted during COVID and has been unable to rebound in the period since |
| We anticipate net interest margin contraction in the coming periods due to continued deposit pricing pressure and changes in funding mix |
| As expected, higher deposit costs led to a slight reduction in earnings on a linked-quarter basis |
| We expect modest margin contraction in the fourth quarter with our net interest margin in a range between 4.15% to 4.25% with no further Fed tightening expected |
| Turning to Slide 9; net interest margin declined 15 basis points from the linked quarter to 4.33% |
| We also recorded a $6.9 million loss on a large C&I loan that was negatively impacted by the COVID pandemic |
| So if we see pressure there, that by itself will come down some |
| During the third quarter, tangible book value decreased $0.11 or 1% and the TCE ratio decreased 6 basis points due to a $57 million decline in accumulated other comprehensive income |
| Specific to credit, we're still in a period of uncertainty regarding inflation and the impact of higher rates to the economy and our customers |
| And I guess I was a bit surprised to see the ACL decline quarter-over-quarter but I'm guessing there was some allocated result |
| During the third quarter, we elected to sell approximately $32 million in commercial real estate loans and incurred a $6.1 million loss on the sale |
| This resulted in an ACL that was 1.36% of total loans which was a 5-basis point decrease from the second quarter |
| As a result, tangible book value decreased $0.11 or 1%, while our tangible common equity ratio declined by 6 basis points |
| As indicated earlier, we expect loan growth to be moderate through the remainder of the year |
| Credit trends were mixed during the period and we experienced elevated net charge-offs |
| Additionally, nonaccrual loan balances increased during the period due to the downgrade of one office loan whose major tenant vacated the space during the quarter |
| As we look further out, things look like they moderate back down or if you will call them back down |
| The 2 charge-offs in the quarter, the $32 million loan sale, I guess, it was like -- it looks like about a 20% loss |
| Obviously, they are going to have the -- we'll have to react to the competition in the market |
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