Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Disciplined expense control led to a decline in interest expense from the prior quarter.
- New deposit relationships were added, particularly in wealth management and mortgage banking.
- Net interest margin increased during June, indicating potential for further expansion.
- Decline in past-due loans and net recoveries were experienced during the quarter.
- New hires and strategic additions in various markets are expected to boost production capabilities.
Negative Points
- Gross revenue decreased by 2% from the prior quarter.
- Noninterest income decreased by 4.2% from the prior quarter.
- Total deposits declined during the quarter due to seasonal tax payments and operating account fluctuations.
- Nonperforming assets increased slightly due to foreclosure on properties held as collateral.
- Net interest income decreased by 1.9% from the prior quarter, primarily due to lower levels of interest-bearing cash.
Q & A Highlights
Q: Can you remind us where NPA exposure stands to that one larger relationship? And any updated thoughts on timing around potential resolution?
A: We have just under $30 million of NPL on that one credit plus a specific reserve of $8.2 million. We started with seven properties, now down to four, with two in OREO being listed and sold in the second half of the year. Another property is scheduled for auction in early August. The timing of the last property sale is uncertain. (Scott Wylie, CEO)
Q: Have your thoughts on the potential loss content changed at all given the increased provision?
A: One property had a new issue with a clouded title and litigation, leading us to book a zero value for it. This drove the specific reserve increase on that relationship. (Scott Wylie, CEO)
Q: Could you talk through your expectations on the net interest margin (NIM) for the back half of the year?
A: We expect our NIM to slowly improve, although competition on loan pricing and potential rate cuts may affect this. Our new loans came on at an average rate of 8.35%. On the deposit side, our cost of funds was 3.47% for the quarter, with a slight improvement in June. (Scott Wylie, CEO)
Q: How should we think about the expense run rate going forward?
A: We expect expenses to be around $19 million per quarter. We've had success bringing on new hires, replacing open positions, and adding production capability. We've hired 14 additional front office producers and 5 new MLOs in the first half of the year. (Scott Wylie, CEO)
Q: Can you provide an update on deposit flows and expectations going forward?
A: We usually see deposit declines in Q2, and we did see some outflows of non-interest-bearing deposits. With new production leaders, we expect an increase in operating company deposits and a stable to improving deposit base in the second half of the year. (Scott Wylie, CEO)
Q: Can you provide more detail about the 14 new producers hired this year?
A: These are net new producers, including some long-time vacancies. For example, we hired a strong Boulder Market President who was a long-time leader in the market. We feel good about the new hires and their potential impact. (Scott Wylie, CEO)
Q: Is there something loosening in the market with competitors that's making it easier to hire new talent?
A: There is turmoil in our markets, creating opportunities to bring in new people. Our name is getting out there more as a great place to work, attracting high-quality talent. (Scott Wylie, CEO; Julie Courkamp, COO)
Q: What is driving the uptick in your mortgage business?
A: It's a combination of lower rates, better market activity, and our efforts to support and build our mortgage team. We've added 5 new MLOs and opened two new loan production offices, which are contributing to the rebound. (Scott Wylie, CEO; Julie Courkamp, COO)
Q: Do you anticipate hiring an equal number or more MLOs in the second half of the year?
A: Our goal is to hire the same amount of new MLOs in the second half of the year, but it's hard to forecast. (Julie Courkamp, COO)
Q: Are there any large expenditures expected in the next quarter or two?
A: No large expenditures are expected, but we are rebuilding our tech platform, which involves modernizing it into the cloud and using fintech solutions. This will lead to efficiency gains and cost savings. (Scott Wylie, CEO; Julie Courkamp, COO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
