Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net interest income and margin expanded during the quarter, reflecting positive financial performance.
- Loan portfolio returned to positive growth, with a 4% annualized net loan growth driven by Owner-occupied and Residential portfolios.
- Asset quality remained strong, with a decrease in loans classified as special mention and substandard by 16%.
- Capital levels are robust, with a Common Equity Tier 1 capital ratio of 11.2% and a tangible book value per share of $18.98.
- The company declared its 112th consecutive quarterly cash dividend, reflecting a strong commitment to shareholder returns.
Negative Points
- Operating expenses increased due to acquisitions and continued hiring, impacting overall cost structure.
- Non-interest income decreased by $2.5 million during the quarter, indicating challenges in revenue diversification.
- Deposit growth was modest, with only a 1% increase excluding brokered CDs, suggesting limited organic deposit growth.
- Funding costs declined, but the decrease was modest compared to the decline in earning asset yields, indicating pressure on net interest margin.
- The company faces challenges in the current interest rate environment, impacting loan demand and mortgage activity.
Q & A Highlights
Q: Can you help quantify the typical seasonal increase in operating expenses and the trajectory over the course of the year?
A: Patrick Barrett, CFO, explained that they typically see a modest uptick in Q1 due to compensation and payroll taxes, around $1 million to $1.5 million. The main changes in expenses will be from hiring revenue-producing talent, and they will update guidance quarterly as investments are made.
Q: Are there specific regions or areas where you're looking to add additional bankers?
A: Christopher Maher, CEO, mentioned that they are focusing on hiring C&I bankers interested in both loan and deposit-taking, as well as deposit-gathering commercial bankers. Joseph Lebel, COO, added that they are focusing on expanding the C&I bank and Premier Banking team, with hires across their footprint from Northern Virginia to Boston.
Q: What are your thoughts on refinancing the upcoming preferred shares?
A: Christopher Maher, CEO, stated that they are considering multiple options, including redeeming some of the preferred shares using their current capital position when they hit their repricing. They are cautious about the overall cost of capital and will consider raising fresh capital if necessary.
Q: Is the reserve build reflective of future loan growth, or is there a change in loss content anticipated?
A: Christopher Maher, CEO, explained that less than half of the reserve build was related to the day 1 provision for the Spring Garden acquisition, and the remainder was due to macroeconomic factors. The loan portfolio performance has been good, and future provisioning will depend on the mix of growth, particularly in C&I lending.
Q: How do you see the opportunity to roll down deposit costs further?
A: Christopher Maher, CEO, mentioned that they are still in the process of repricing the deposit base down, particularly the CD book. They plan to continue pricing down slowly and methodically, with less competitive pressure than in the past two years, allowing for some room to decrease rates further.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
