Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Core deposits increased by $1.3 billion year-over-year, enhancing the bank's funding position.
- Net interest margin (NIM) improved for the fourth consecutive quarter, reaching 2.9%, with potential for further growth.
- Business loans grew by over $60 million in the first quarter and $400 million year-over-year, indicating strong loan growth.
- Core pre-tax provision income increased significantly to $46 million, translating to a core ROA of 77 basis points.
- The company has successfully recruited new talent, enhancing its ability to grow both deposits and loans.
Negative Points
- The cost of deposits remains relatively high at 2.09%, which could pressure margins if not managed effectively.
- Non-core expenses included a $7 million charge related to a legacy pension plan termination, impacting overall expenses.
- Loan growth was flat in the first quarter, with expectations for growth only in the latter half of the year.
- The company faces a competitive deposit market, which could challenge efforts to maintain low-cost funding.
- There is uncertainty regarding the impact of potential Federal Reserve rate cuts on the bank's financial performance.
Q & A Highlights
Q: Can you provide details on the current loan pipeline and its composition?
A: The loan pipeline includes approximately $350 million in C&I, $185 million in owner-occupied CRE, and $250 million in healthcare. There are about $200 million in loans approved and waiting to close at a yield of about 7.25%. - Stuart Lubow, President and CEO
Q: How are the recent hires impacting deposit growth and the cost of new deposits?
A: The teams have grown deposits to $1.9 billion with a total cost of deposits, including DDA, around 2.10%. The mix includes 35% to 40% DDA. We expect steady growth in account openings and have grown core deposits by approximately $250 million this quarter. - Avinash Reddy, CFO
Q: What are your thoughts on the reserve build and credit guidance?
A: The CECL model remains unchanged from year-end levels. As Moody's adjusts forecasts and more C&I loans close, we expect a natural uptick in provisions over time, targeting 90 basis points to 1%. - Avinash Reddy, CFO
Q: Is there an opportunity to reduce the large cash balance to improve margins?
A: While there is potential to reduce the cash balance, we are managing the balance sheet for the medium to long term, balancing floating rate assets and cash versus fixed rate assets. We aim to maintain flexibility for loan growth opportunities. - Avinash Reddy, CFO
Q: Can you explain the increase in non-owner-occupied commercial real estate this quarter?
A: The increase was due to one credit. We exited a legacy bridge loan and expect to exit another classified loan in the second quarter. - Avinash Reddy, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
