Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operating net income increased by approximately $200,000 during the quarter.
- Credit quality remained strong with a decrease in classified and criticized loans.
- Mortgage banking group had its most profitable quarter since the start of the rate cycle.
- Small business and specialty lending division reported a net income increase of $459,000 from the prior quarter.
- Non-interest expense remained stable, with operating net non-interest expense to average assets improving by 2 basis points.
Negative Points
- Net interest income decreased slightly due to increased funding costs.
- Loan growth was relatively low this quarter, with modest expectations for the year.
- Margin declined by 1 basis point, although this was better than expected.
- Marine-RV lending was not profitable due to sluggish sales in the industry.
- Total deposits decreased by about $62.5 million, partly due to seasonal factors and tax payments.
Q & A Highlights
Q: You mentioned in your prepared remarks that pipelines are increasing. Any particular segments where you're seeing good opportunities? And how are your overall growth prospects looking for the next 18 months?
A: We are seeing a diversified amount of opportunities, particularly in commercial real estate. Our goal is to grow 8% to 12% annually, though we don't expect to reach that this year. We anticipate modest growth in the next couple of quarters, potentially leading to higher single-digit growth next year. - Heath Fountain, CEO
Q: It sounds like a NIM trough might be in sight. How are you feeling about overall deposit costs and loan yields for the second half and into '25? And do you have any rate cuts baked into those projections?
A: We feel good about our NIM returning regardless of rate drops, assuming rate stability. Funding pressure and loan growth will be key factors. We have many loans set to reprice, and deposit cost pressures are easing. We expect margin expansion in the second half of this year, continuing into '25. - Heath Fountain, CEO and Derek Shelnutt, CFO
Q: Can you provide more detail on asset repricing and its impact on your financials?
A: Asset repricing is ongoing in both our loan and securities portfolios, providing opportunities for margin improvement. Our deposit cost increases are slowing, and any potential Fed rate cuts would further ease funding costs, allowing assets to reprice faster and expand margins. - Derek Shelnutt, CFO
Q: What are your expectations for the Marine and RV division, given the current industry conditions?
A: The Marine and RV division is experiencing slower loan growth due to sluggish industry sales. While trending towards profitability, it may take another quarter or two to achieve it. - Derek Shelnutt, CFO
Q: How is the mortgage banking group performing, and what are your expectations moving forward?
A: The mortgage banking group was profitable in Q2, with increased activity during the home buying season. Despite low inventory levels, we expect continued improvement and profitability, driven by potential rate stability and market adjustments. - Heath Fountain, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
