Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Earnings and profitability improved quarter over quarter, driven by a larger earning asset base and increased net interest income.
- Net interest margin increased to 3.39% from 3.15% a year ago, benefiting from lower cost of funds and fair value accretion.
- Deposit balances increased by $51 million in the third quarter and $275 million year over year, primarily led by core CDs.
- Tangible book value per share increased by almost 14% over the last 12 months.
- The company has a strong pipeline for loan growth, expecting mid-single-digit growth for the fiscal year.
Negative Points
- Non-performing loans increased by $14 million compared to the last quarter, totaling 0.55% of gross loans.
- Loans past due 30 to 89 days increased by $8 million from December, indicating potential credit quality issues.
- Non-interest income decreased by 2.9% quarter over quarter due to lower deposit account fees and lending fees.
- Net charge-offs for the quarter were $1.1 million, up from $198,000 in the previous quarter.
- The agricultural segment faces challenges due to declining commodity prices, weather-related losses, and higher input costs.
Q & A Highlights
Q: Can you provide specifics on the CDs rolling off over the next few quarters and their replacement rates?
A: We have about $215 million in CDs rolling off in the next three months at a rate of 4.25%, being replaced by renewal rates averaging around 4.10%. Over the next 12 months, approximately $1.2 billion in CDs will renew at an average rate of 4.26%, providing a net benefit from repricing. (Stefan Scaovich, CFO)
Q: Are CDs going to be the primary source of growth in funding, or are there other accounts you're focusing on?
A: We have an attractive platinum savings rate, but as seasonal funds roll off from ag and public unit accounts, CDs will likely increase as a percentage of the portfolio. (Stefan Scaovich, CFO)
Q: Have you assessed the impact of tariffs on agricultural commodities?
A: The effective tariffs wouldn't be favorable, but we lack visibility on where our farmers' products end up. Prices are already low, and government price supports may mitigate some downside risks. (Matt Funky, President and Chief Administrative Officer)
Q: Can you elaborate on the net interest margin dynamics and expectations for the next quarter?
A: The reported net interest margin was 3.39%, with underlying dynamics suggesting a run rate of about 3.40%. We expect positive dynamics as excess cash balances flow into loans over the next two quarters. (Stefan Scaovich, CFO)
Q: What is the status of non-performing loans (NPLs) and any potential loss exposure?
A: NPLs increased, primarily due to loans collateralized by medical-related lease spaces. We anticipate some charge-offs, with these loans marked to roughly 35% in our allowance for credit losses. (Greg Stephens, Chairman and CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
