- Earnings: Improved to $7.8 million from a net loss of $311,000 in the same quarter a year ago.
- Pretax Earnings: Approximately $11.7 million for the current quarter.
- Net Interest Margin: 3.03% overall; Community Bank margin improved to 3.25% from 2.82% a year ago.
- Total Loans: $835 million from Panacea, Life Premium Finance, and digital platform.
- Total Deposits: Just under $1 billion from Panacea, Life Premium Finance, and digital platform.
- Incremental Loan Yields: High 7% to 8% range.
- Funding Costs: Stable at about 4.84%.
- Mortgage Net Income: Pretax net income of just over $1 million.
- Mortgage Locks: $228 million, up 25% year-over-year.
- Gain on Sale Margin: 3.1%, up from 2.8% a year ago.
- Tangible Book Value: Improved to $12.59 per share, up 8.8% year-over-year.
- Total Assets: $4 billion as of June 30.
- Loans Held for Income: Increased 2.5% from Q1.
- Deposits: $3.3 billion, up slightly from last quarter.
- Core Net Interest Income: $27.1 million in Q2.
- Core Yield on Loans: 6.14%.
- Core Yield on Earning Assets: 5.92%.
- Cost of Deposits: Increased to 2.98%.
- Cost of Funds: Increased to 3.16%.
- Noninterest Income: $9.9 million in Q2.
- Noninterest Expense: $27.8 million, excluding PFH impact.
- Mortgage Expenses: $6.1 million in Q2.
- Unfunded Commitment Reserve Expense: Release of $432,000 in Q2.
- Core Provision for Credit Losses: Release of $600,000 in Q2.
- Core Net Charge-offs: $600,000, down from $900,000 last quarter.
- Operating ROA: 90 basis points in Q2.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Earnings for the quarter improved to $7.8 million compared to a net loss of $311,000 for the same quarter a year ago.
- Pretax earnings, excluding noise, were approximately $11.7 million, marking one of the strongest quarters to date.
- Net interest margin improved to 3.03%, with the Community Bank margin increasing to 3.25% from 2.82% a year ago.
- Lines of business, including Panacea, Life Premium Finance, and the digital platform, showed strong performance with $835 million in total loans and just under $1 billion in total deposits.
- Tangible book value improved to $12.59 per share, an 8.8% increase from the same time last year.
Negative Points
- Cost of deposits increased to 2.98%, while the cost of funds rose to 3.16% in the quarter.
- Noninterest expense was $27.8 million, excluding the impact of PFH, with mortgage expenses rising to $6.1 million from $5.1 million last quarter.
- Provision for credit losses included a release of $600,000, indicating some volatility in credit loss provisions.
- The company incurred approximately $1.3 million in accounting and advisory costs related to SEC filings.
- Average noninterest-bearing deposits declined by 5% versus the first quarter due to remixing.
Q & A Highlights
Q: Is the lower $20-ish million expense number a good place to think about for future quarters?
A: Matthew Switzer, CFO: Closer to where we have guided the last couple of quarters, kind of mid-19s.
Q: Will the provision for credit losses normalize soon?
A: Matthew Switzer, CFO: Yes, we think it should normalize in the near future as economic forecasts settle down.
Q: What is the timing for resolving the SEC process?
A: Matthew Switzer, CFO: We are close to completing the first step, which should allow us to start filings by the end of August.
Q: How do you feel about digital account openings and deposit gathering?
A: Dennis Zember, CEO: We are positive about it and see a lot of opportunity. We are focusing on adding traditional community bank services to strengthen our core market.
Q: Can you keep the net interest margin (NIM) above 3%?
A: Matthew Switzer, CFO: We are confident we can maintain the NIM around current levels and continue growing net interest income (NII) without stressing our capital ratios.
Q: What are your expectations for balance sheet growth for the remainder of this year and into 2025?
A: Matthew Switzer, CFO: We are targeting high single digits to 10% loan growth for the year. For 2025, we expect similar growth assuming a similar rate environment.
Q: What are your plans for Panacea and Life Premium Finance portfolios?
A: Matthew Switzer, CFO: We are working on potential outlets for Panacea, which may happen in the fourth quarter. Both Panacea and Life Premium Finance have opportunities to grow earning assets.
Q: How is the cost of funds evolving?
A: Dennis Zember, CEO: We need to reduce the cost of funds by another 50-60 basis points to push real profitability. The operating expense burden on digital deposits is significantly lower than in the community bank.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
