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| Statement |
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| And in September we had a nice rebound there |
| Our SBA team continued its track record of growth as sold loan volume increased 22% quarter-over-quarter, which was partially offset as net premiums were down 38 basis points |
| Similar to this quarter, with higher-priced new loan originations and variable rate assets repriced higher for an entire quarter, we believe that we will deliver another increase in total interest income for the quarter |
| Moreover, while one month does not make a trend, we were encouraged by the month-over-month increase in our net interest margin in September |
| We believe will translate into the stronger earnings and the increased NIM over the course of the next year |
| Another highlight for the quarter was our SBA team's continued outstanding performance |
| The team again posted its highest level of quarterly gain on sale revenue to date, which was up over 14% from the second quarter, driven primarily by a strong increase in the sold loan volume |
| Strong performance in the commercial and consumer lending teams, including our growth in the small business construction lending and further growth opportunities with the fintech partnerships and banking as a service are expected to drive greater revenue growth, which combined with stabilized deposit costs |
| Our nationwide SBA team is doing a great job of providing growth capital to entrepreneurs and small business owners across the country, with year-to-date originations up 165% over the first nine months of 2022 |
| We believe we are well-positioned to improve our earnings and profitability profile as funding costs stabilize |
| As we look forward to 2024 and beyond, we remain extremely excited about the future and the opportunities here |
| We believe that the combination of our continued loan portfolio repositioning and consistent revenue growth from our SBA business positions us well for higher earnings and profitability as deposit costs stabilize |
| The higher yields on interest-earning assets, combined with growth in average loan and cash balances, produced strong top-line growth in interest income, increasing over 8% compared to the linked quarter |
| Our capital position is strong |
| To date, we've had pretty good credit quality |
| So I just think with some of the production perhaps being a little bit more weighted in the back end of the third quarter, it sets us up really good for the fourth quarter in terms of loan yield improvement |
| We generated strong deposit growth during the quarter, bolstering our liquidity profile and driving down our loan-to-deposit ratio below 92% |
| Despite higher funding costs, total revenue was $24.8 million, up from $24 million in the second quarter as the growth in SBA revenue helped to offset a decline in net interest income |
| We're really getting some good traction on that small business checking account |
| I mean, I think as we look into – I mean, I think we feel good about what next quarter looks like |
| Our construction team had another strong quarter originating almost $180 million in new commitments and producing growth of nearly $60 million in funded balances |
| At quarter end, total non – unfunded commitments in our construction line of business increased to $527 million, leaving us well positioned to continue shifting the composition of the loan portfolio towards higher yielding variable rate loans |
| Our consumer lending team also had another solid quarter as the trailers, recreational vehicles, and other consumer loan portfolios were up on a combined basis over $17 million |
| We are very impressed with the jaris team and excited about the opportunity |
| In terms of NIM improvement and NII improvement, we expect the SBA team to continue to grow next year as well |
| We're doing real well with the consumer, kind of post COVID small businesses and consumers learn that they really don't need to have that traditional bank and our pricing and products are much better than the normal community banks |
| And then we had good production in franchise for the quarter |
| From a safety and soundness perspective, liquidity and credit quality remain very strong and capital levels are sound |
| This combined with a strong performance of our SP18 and a continued improvement in our loan product portfolio composition, leas is well positioned to achieve higher earnings and profitability as we look to 2024 and beyond |
| Consistent with our focus on variable rate and higher yielding asset classes, we were pleased that our third quarter funded portfolio origination yields continued to increase from the second quarter |
| Statement |
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| We estimate the higher cash balances we carried during the quarter negatively impacted net interest margin by 10 to 12 basis points |
| We've seen some issues within the franchise space thus far in earnings season |
| Turning to Slides 8 and 9, net interest income for the quarter was $17.4 million and $18.6 million on a fully taxable equivalent basis, down 4.2% and 4.4% respectively from the second quarter |
| While deposit costs continued to rise, again, the pace of increase was the slowest in the past five quarters, and as a result, net interest income contraction was also the lowest in the past five quarters and in line with our expectations |
| Fully taxable equivalent net interest margin for the quarter was 1.49%, down 15 basis points from the prior quarter |
| And second, if we see a continued softening and gain on sale premiums, it may make economic sense to hold a loan yielding 11% or more versus selling for a premium far below the annual spread income we would earn |
| Government shutdown could slow it down as well as if the yields in the secondary market continues to soften |
| We reported a net interest margin of 1.39% in the third quarter, a decrease of 14 basis points from the second quarter |
| First, if the government shuts down in mid-November for an extended period of time, sales of SBA loans and the origination of new SBA loans will be halted |
| At the same time, both the pace of deposit cost increases and the rate of compression in our net interest margin were the slowest they've been in five quarters |
| Obviously, the credit card world shuts down |
| I think it was 20 basis points to 25 basis points versus the third quarter, but it sounds like the margin pressure is going to continue, but should slow versus the pace of pressure from 2Q into 3Q |
| So if we start bucking them and holding them on the balance sheet, that could slow down the gross number a little bit |
| With the Federal Reserve rate hikes likely nearing an end, we expect to see a continued decline in the pace of deposit cost increases and eventually stabilization |
| I think it’ll probably – over time, there probably will be some charge offs there, but so far, I mean, to date, delinquencies have been very low |
| So that impacted the yields a little bit in terms of for the quarter |
| As David just said moments ago, some macroeconomic and geopolitical factors remain outside of our control |
| There is one caveat to our outlook on loan pipelines that I will speak to in a little more detail later, that being the possibility of a government shutdown in November and the potential impact on the SBA pipeline |
| Delinquencies in these portfolios remain low as well at just 1 basis point |
| Looking toward the future, it is undeniable that there are macroeconomic and geopolitical forces beyond our control |
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