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| Statement |
|---|
| So we've been able to accomplish that |
| The simple passage of time will provide the opportunity for our net interest margin to normalize and loan origination volume and revenue in our residential and commercial mortgage banking businesses will improve significantly |
| Our common equity Tier 1 and total risk-based capital ratios have improved significantly during the current year |
| Historically, an environment of stable rates has provided significantly better financial performance for our bank |
| In the near-term, we anticipate stable levels of loans held for investment and deposits stable net interest margin increasing noninterest income and stable noninterest expenses except for seasonal increases in compensation benefit costs, expected to occur in the first quarter |
| Our ability to negotiate this period is supported by our strong credit sufficient capital and loyal customers |
| Asset quality remained strong in the third quarter, as total past due and nonaccrual loans and nonperforming assets all decreased in the quarter |
| As a result, credit quality remains solid and we currently do not see any meaningful credit challenges on the horizon |
| And if we see additional opportunities we think we can still have some benefit going forward |
| We don't think it represents an excess risk today given our strong on-balance sheet liquidity, strong borrowing capacity and so on |
| While this may affect some metrics, such as our loan-to-deposit ratio, we believe that this is the best choice today, as it minimizes our funding costs and we continue to have substantial borrowing availability beyond our needs and usage today |
| We believe that we are doing all the things appropriate at this time, to endure this period and preserve the value of our business, so that we can take advantage of the upcoming beneficial rate cycle |
| We've been mindful to maintain strong risk management and to sustain and protect our high-quality lending lines of business preserving our ability to grow once the interest rate environment stabilizes and loan pricing and volumes normalize |
| This strategy affords us the opportunity to retain deposits without immediately repricing all of our existing low-cost core deposits |
| And when they reprice, it's good for us because they reprice to the 6.5% 7% level |
| So we expect while the production is going to be better, it's not going to be anywhere near what normalized production would be |
| And we expect it to -- if interest rates stabilize, we'll start seeing some benefits as our loans reprice |
| Our loan portfolio remains well diversified, with our highest concentration in Western States multifamily loans historically, one of the lowest risk loan types |
| So we've accepted the reality that we're going to run a loan-to-deposit ratio higher than what we would consider a normalized level for us |
| Additionally, with our strong capital levels and low level of credit risk, and excluding unforeseen events or economic changes, we do not foresee circumstances that would impact our ability to get through this cycle remaining profitable |
| Our portfolio has been conservatively underwritten, with a very low expected loss potential |
| To mitigate the impact of a lower net interest margin, we have reduced controllable expenses where possible, reduced staff to the minimum levels to transact current business volume in a safe and sound manner, raised new deposits through promotional products and focused our new loan origination activity primarily on floating rate products such as commercial loans residential construction loans and home equity loans |
| But what also will improve is our view of the risk of that activity and we will probably be less interested in restructuring some of these loans, given their loan, loan to values and good cash flow |
| Great |
| So based on that looking at our mixes and our funding and our future activity, we feel that the margin has stabilized at the current time |
| In our residential construction business, our builders have continued to increase their land acquisition and new project development and our commitments and loan balances have begun to increase, again |
| That's good color |
| We appreciate your attention |
| Good morning everyone and thank you for joining us |
| This strategy has over time contributed to rising deposit rates as customers choose to move money to these promotional accounts to achieve higher returns |
| Statement |
|---|
| As John stated earlier, our operating results for the quarter reflect the continuing adverse impact |
| Additionally, our interest rate-sensitive residential and commercial mortgage banking businesses are experiencing historically low originations, further challenging our earnings |
| Our net interest income in the third quarter of 2023 was $4.6 million lower than the second quarter of 2023, due to a decrease in our net interest margin from 1.93% to 1.74% |
| We continue to experience the cyclical downturn, in single-family and commercial mortgage loan volume as higher rates and spreads dampened the demand for new loans |
| Our earnings were $2.3 million and our net interest margin decreased in the third quarter to 1.74% due to decreases in balances of lower-cost transaction and savings deposits and overall higher funding costs |
| Mark Mason We are anticipating that we may see some additional loss in money market funds over the next year |
| These results reflect the continuing adverse impact of significant increase in interest rates, as has in our business |
| Now having said that, our profitability is going to remain low, right, given our net interest margin and the circumstances of funding costs today |
| The current interest rate environment has created significant challenges for our company |
| This competitive rate environment has resulted in reductions in our net interest margin |
| Our loan delinquencies remain at historically low levels, and our net charge-offs during the third quarter were only $500,000 |
| But you can see the headcount going down and we continue to expect the headcount in the fourth quarter to be lower than it is in the third quarter |
| At September 30, 2023, our accumulated other comprehensive income balance, which is a component of our shareholders' equity was a negative $127 million |
| Despite our significantly, reduced loan origination volume, our loan portfolio has not declined materially as a result of prepayment speeds, which continue at historically low levels particularly for multifamily loans |
| Obviously, our commissions and bonuses are lower because of the performance this year |
| In summary, our challenge and our opportunity is time |
| And why are we struggling with that ratio, primarily prepayment speeds, right? We've lowered our loan originations substantially but not eliminated originations, because it's beneficial to originate variable rate loans today, particularly high quality |
| And because that date is further out we have a harder time getting borrowers to be concerned about that change in debt service |
| I'm correct declined slightly I think |
| The decrease in our net interest margin was due to a 25-basis-point increase in the cost of interest-bearing liabilities, caused in large part by an increase in the proportion of higher cost borrowings to the total balance of interest-bearing liabilities |
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