Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Our balance sheet is positioned for that growth |
| As Mark said, mid-single-digit growth rate remains the expectations moving forward as the commercial loan pipeline ended September at the highest level we've seen in the past year |
| Heading into the remainder of 2023, we feel great about the capital position, the strength in our balance sheet, and are pleased with the sources of our growing liquidity coming from customers that enhance franchise value |
| The core results were even better as we decreased brokered deposits by $133.6 million and municipal deposits by $128.8 million |
| The adjusted growth of $327.8 million and traditional, commercial, and consumer deposits was very strong and positioned us well for the coming quarters and expected growth |
| Loan yields remain strong, reflecting a highly variable portfolio, increasing to 6.58% |
| Our strong earnings growth this quarter drove capital expansion in all ratios with the exception of the tangible common equity ratio, which declined 30 basis points, totaling 7.69%, due to the impact of AOCI that I mentioned earlier in my remarks |
| Our efficiency ratio remains strong in the low 50s, and our allowance for credit losses is still 1.67%, despite the meaningful charge-off due to a customer fraud that we will discuss later in the call |
| All in all, we're ending the quarter with good asset quality metrics |
| Through the end of 2024, we have $1 billion in fixed-rate loans maturing, which is a quarter of our total fixed-rate loans portfolio, with a weighted average maturity of 4.64%, providing good incremental interest income given new loans are repricing at 7.88% currently |
| Now, turning to slide five, I'm pleased to report that our performance remains healthy and strong, and our teams continue to meet the demands of our communities and our client base |
| And more importantly, we're confident that we will continue to achieve our growth rates for both loans and deposits into the future |
| And so, we're continuing to keep our relationship strong with banks that we're impressed by that may be potential candidates in the future |
| The tangible common equity ratio increased from 6.66% in prior year to 7.69% at September 30th, reflecting that strong year-to-date earnings growth |
| We're really excited about getting Q2 deployed |
| Pre-tax, pre-provision return on assets was 1.48%, and pre-tax, pre-provision return on equity was 12.51%, all of which reflect strong profitability metrics |
| So the continued deposit growth throughout 2023, throughout the bank failures earlier this year, throughout the continued Fed rate increases, supports our ability to remain focused on home growth |
| The consumer deposit segment showed strong growth at over 9% annualized for the quarter |
| Our margins are healthy |
| Year-to-date, we have sold $347 million in bonds, creating liquidity to put to work in the loan portfolio and ensure we have a solid cash position |
| Our gain on percentage, including servicing income, was 2.9%, so our mortgage team was able to contribute some meaningful fee income this quarter |
| The things we're underwriting today, I feel pretty good about because they have the higher interest rates already built into them |
| So just to summarize, asset quality remains good |
| We also received two more Comparably Awards during the quarter, including Best Places to Work for Career Growth and Best Places to Work for Women, which I'm really proud of, so we did include those on page four |
| Overall, the commercial segment continues to be the loan growth engine of the bank, and we continue to get higher spreads on the new loan generation |
| Our capital is strong |
| We continue to have a strong core deposit base, with 41% of deposits yielding five basis points or less |
| And as a reminder that the financial results we deliver represent the durability of our business model within the primary markets of Indiana, Michigan, and Ohio |
| I think we're pretty confident in our ability to continue to grow our deposit base to fund our loan growth |
| Moving to slide 16, we continue to demonstrate good expense management, with total expenses for the quarter of $93.9 million, an increase of $1.3 million over last quarter |
| Statement |
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| The second $5.3 million charge-off was driven by a pullback in industrial construction as segment of the market in which the borrower focused and inability to adjust expenses |
| So any thoughts on just how NII trajects into next year under that environment? Michele Kawiecki Well, I think in Q4 with the margin compression that we think we might see, at least a bit of it that we think we'll see, there could still be some pressure on net interest income |
| Line of credit utilization actually reduced in the quarter, and clients slowed or delayed some of their capital outlays or projects as they continued to evaluate the current interest rate environment |
| Average deposits during the quarter were $89 million higher than the period ending balance, and given we had muted loan growth this quarter, the impact put a bit of pressure on margin |
| On slide 14, net interest income on a fully tax-equivalent basis of $139.3 million declined $4.4 million from prior quarter |
| And so, there's not one particular portfolio that I'm looking at that concerns me maybe more than another |
| So we do think we'll see a bit more margin compression in Q4 |
| Moving down to line nine, we slowed balance sheet growth of Resi one to four family mortgages with $10 million added to the portfolio for the quarter |
| The sale of $33 million of bonds this quarter resulted in a loss of $1.7 million |
| And we are still working through our planning for 2024, although I would expect either Q4 or Q1 of 2024 to really see our margin trough |
| The growth was actually muted by the seasonal decline of the municipal fund space, seasonally paying down about $128 million |
| Our efficiency ratio continues to be low, coming in at 53.91% for the quarter and 52.6% year-to-date |
| The first, the $14 million charge-off, resulted from the previously disclosed commercial loan that was downgraded to non-performing in the second quarter |
| As you heard Mark discuss from slide five, the commercial deposits were actually muted |
| We recorded $5 million of provision for credit losses on loans, which was offset by a reduction of reserves for unfunded commitments of $3 million due to a decline in unfunded commitment balances |
| Higher interest rates are driving additional capital contribution requirements to meet our underwriting and stress criteria |
| Earning asset yields increased 19 basis points this quarter as shown on line five, and was somewhat offset by the increase in funding costs on line six, reflecting stated net interest margin on line seven of 3.29%, a decline of 10 basis points from prior quarter |
| The allowance for credit losses on slide 12 declined from 1.8% to 1.67% of total loans due to net charge-offs incurred during the quarter of $20.4 million, which John will provide details on in his remarks |
| You can see on line three, investments declined by $177.8 million this quarter |
| But just within the traditional portfolio, where are the concerns? I mean, we've seen a handful of other banks have some issues this quarter and just kind of ongoing, but if you look to your portfolio, as far as where the greater, I guess what you're maybe more mindful of today, looking, paying more attention to |
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