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| So I believe that those businesses will do quite well |
| Our government-sponsored programs bode very, very well to attract higher profile applicants and we're seeing that |
| But if we're at 2% today Alex I can't -- it's not going to be measured in quarters, but I think if you measure it in years we're going to continue to see steady improvement from the 2% range hopefully up into the 10% 15% plus range over the next several years which will deepen customer relationships make those stickier ability to keep lending customers longer in addition to deposit accounts and of course change fundamentally the mix of our funding which will provide a tailwind to |
| We wanted to really tune in on one partnership, make it a deep one, make it an excellent experience for our partner and the customers that would be onboarded via that platform |
| I would say that our borrowers for the most part have done a very good job in adjusting their cost of their services or their products commensurate with increase in debt with the rate environment coupled with any inflationary pressures depending on the industry |
| And so we're very pleased with the performance of all of our verticals |
| Slide 10, while our sales team has not grown headcount over the last several quarters they've done an amazing job in continuing to grow our loan book over $2 billion over the last two years in a very difficult banking environment |
| But if you look in lots of our other areas like I talked about earlier specialty healthcare and seniors housing have been quite strong in our conventional lending businesses senior care, educational services, self-storage in our SBA verticals are up year-over-year versus where they were last year |
| So we've seen huge opportunity the inflation Reduction Act and all of the government incentives combined with the network that we've got has just continued to create great opportunities |
| So I again, feel really strong about what we're putting on the books today |
| I do believe that the government programs at the right time provided meaningful support that has translated into stronger balance sheets and we went to very strong operators, that have done the right things taking advantage of that additional balance sheet strength and I believe they can navigate |
| If we look at our performance by cohort year, we will see that 2020 cohort originations is significantly stronger than 2019 |
| I feel we have a very good pulse, on the health of our borrowers |
| So we feel good about that |
| So I'm still very confident in our abilities to expand the margin |
| And while we cannot predict what the economic outlook might bring the actions we took in the first quarter, our performance in both the last two quarters and the ongoing strength of our business model have set us on a strong path towards continued earnings and customer growth over the next several quarters |
| In Q3, we earned $0.88, while aided by a positive change in estimate related to our servicing asset and fair value loans PPNR, excluding that $15 million impact grew nicely again this quarter driven by strong net interest income growth and good expense management |
| In addition, our credit quality remains strong |
| Loan production was up almost $1.1 billion from $860 million in the second quarter as closing activity was spicier than it had been in the first half of the year and pipelines continue to be very healthy |
| I basically said I'm highly confident that our margin is up and to the right over the next several quarters but it won't necessarily be linear |
| Since March, we have grown business deposits 36% or $1 billion and have done so without increasing our rates paid on business savings and we continue to see strong inflows great performance by our teams and a testament to our brand |
| As discussed in April, we believe that Q2 would mark the bottom for net interest margin and we're pleased to see that our margin was 3.37% in Q3, up from 3.29% in the second quarter |
| Even more importantly, net interest income at $89 million is up almost $7 million or 9% from last quarter, owing to strong loan growth and disciplined loan and deposit pricing by our teams |
| Finally and most importantly, we have got the best mission inspired people and culture in the industry serving America's small businesses |
| But in short, it's due to the excellent efforts by our lenders, along with our deposit and treasury teams to remain both competitive with our customer offerings and disciplined with our pricing |
| Fee income was improved linked quarter on a core basis with relatively steady gain on sale premiums |
| And again having 40% of our portfolio government guaranteed when the industry is about 1/10 of that, provides great comfort and confidence |
| We're confident in our ability to consistently grow our PPNR and improve our efficiency ratio over the next several quarters |
| Slide 22 shows our overall capital strength, which continues to give us great ability to continue providing growth capital to our small business customers and comfort that we are well positioned to thrive in whatever environment lies ahead |
| Provisioning again was healthy largely driven by what I call good provision for new loan growth |
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| Secondly, I like the hand we've dealt ourselves as the historic banking business has challenges with infrastructure fixed costs |
| They were down quarter-over-quarter and FTEs were down as well |
| This remains an uncertain environment |
| Many times the fear of recession leads to tightening credit standards, which leads to unhappy lending officers many of which will suffer incentive compensation declines |
| All on this call have seen these reports of layoffs asset sales in an effort to shrink the balance sheet in anticipation of more stringent capital requirements as well as declining loan portfolio balances |
| I realize both are probably incredibly difficult |
| Others will continue to have some challenges and we'll watch it |
| Fourth, the building out of our Community Bank of the future has predictably taken longer and been more costly than we thought |
| As we've discussed in prior calls, we expected to see downward pressure on the NIM in the first half of the year, because of the accelerated deposit repricing from the Fed's rate increase cycle and that would be more rapid than the loan repricing |
| So said a different way in the fourth quarter, given what we've been seeing in deposit competition particularly from top digital competitors, it's been quite surprising |
| And they're just a mountain of challenges that they're navigating |
| So, I am cautious, first of all, I feel the portfolio today is stable |
| That obviously has moderated this year |
| So, back to a potential recession |
| When rates do start to come down, obviously, our portfolio loan yields will come down on the variable rate side commensurate with that |
| On the left side of the slide, the large banks have lost 5% of their noninterest-bearing checking accounts, from 30% to 25% in the last 12 months |
| In addition the USDA secondary market has been nonexistent for six quarters now |
| But obviously, the charge-offs starting there have been kind of up and down and I imagine that will just continue to be the case given the environment |
| They're – you could argue oversaturation in brands in many markets |
| We would have thought that that would have moderated but it hasn't |
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