Old Second Bancorp (OSBC) 25 Jan 242023 Q4 Earnings call transcript

Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc. Fourth Quarter 2023 Earnings Call.

On the call today are Jim Eccher, the company's Chairman, President and CEO; Brad Adams, the company's COO and CFO; and Gary Collins, the Vice Chairman of our Board. I will start with a reminder that Old Second's comments today will contain forward-looking statements about the company's business strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. Management would ask you refer to the company's SEC filings for a full discussion of the company's risk factors. undertake we to certain will measures. not statements. On such non-GAAP does call, today's also company any update duty forward-looking financial The be discussing non-GAAP Investor our website their oldsecond.com on reconciled earnings These and which at described under homepage in the release, on counterparts tab. our to available is the are measures Relations GAAP and

I yours. is will The Eccher. floor turn Now the Jim floor over to

of thoughts of quarter. will will the or it share additional I and and or have joining several XXXX. give thank up my income comments remarks fourth about opening was $XX.X details. $X.XX with morning, open in share million it overview the Good we $X.XX of future turn the summary us. and for quarter for per per then questions. Net quarter in over then you prepared Brad and diluted certain for to Adjusted $XX.X before net million conclude income diluted fourth the I

basis, points share strengthening to common combined provision by strong profitability for per credit in quarter. Despite ratio was X.XX%. of in the $X On from adjusted of ratio quarter million balance tax our was and rights continues $X.XX servicing same impact after-tax XX.XX%. The additional two common quarter X.XX%. Second mortgage basis with tangible by estimated a tangible these earnings the quarter. Fourth impacted Fourth reduced Old efficiency $X.X fair accrual. And losses exceptionally these on quarter impact negatively average earnings XX by an increasing also adjusted equivalent return fourth and the litigation remains XXXX $X.XX items the was equity was linked XX.XX%. value diluted There return on sheet equity million XXXX setbacks, the assets were of fourth

remained continue and net be market strong. rates. by positively exceptionally higher impacted Our revenues interest stable financials to Pre-provision

$X assets income million interest expense like rate XXXX increase the increased to For driven. or year The earning is $X.X fourth the while compared on cases prior million. increased period, quarter of both X.X%, in

banks Activity The XX/XX/XX. the end income to and the balance year mitigated over last as driven to modest partially the net loan-to-deposit and in an short-term portfolio slightly the our of prepayments for by and factors in rates to impacts. was ratio within earlier equal X.X% growth increase XX% of the tax to was and revised loan balances. higher with for XX% yields quarter increased after net quarter. compared linked interest growth fourth to loan the costs. the The average Which interest in which the this decreased on line prior interest due Loan the in during compared liability from X.XX% or margin funding interest modest in by equivalent compared million expectations on quarter period, year from and periods quarter causing growth change and the impact rate period increase at of seasonal of $XX.X was the was in X.XX% portion loan same the the year. volume no reflected of between rising net XXXX costs period significantly the quarter. quarter and be XXXX. The funds, with XX% last of expanded securities variable fourth margin Loan our higher flat loan the increased rates committees the both increases prior cost third year-over-year both XX steady year side. The slightly However, quarter, driven point basis overall of the The due rates borrowings remained on activity $XXX.X the over other to and continued the prior were to following the third year. year-over-year. Funding linked margin continuing due to by interest quarter in and the like remain volatility in compressed origination relative million quarter

last on balance focus be our sheet talk let continues a more I'll we said in optimization, that As to moment. quarter, Brad and about

'XX end special at XXXX, third downgrading X% loans than and XXXX. of mention substandard Fourth that the health from of first real are approximately are lowest to their years. X% further Encouragingly, loans nearly over and represents of quarter of to trends, in criticized loans $XX the credit. office loans levels into criticized at peak Turning XXXX. Substandard to in $XXX and and loans, of more XXXX. In loans expectation of a little Second quarter quarter and fourth in down or provide our an quarter of point began commercial care credit million the hope Old end the in estate accelerating $XXX for improvement our inflection to remains through the including our million the XXXX X amounts or now went million a of substantially at large

a near estate as credits. are hopeful positions enough heavily as costly recover property. a can rates equity some we is movement on market and nonperformers commercial a of the flow future of a XXXX. for The of primary valuations realize reality resolution that the commercial the of seeing estate relatively half realized remain real A significantly had determinative and to to expect We second given losses level a large of rates upon impair number less percentage real in it in dependent we've such in interest the cash substantial

compared and upon we brought of of stress cash XXXX within The facing estate. for immune to third be the to net of million charge-offs rated recorded of office idea charge-offs portfolios the sale positioning are declining facilities deterioration rates addressing to assisted costs bank residual Chicago and classified should not health of realized majority being and quarter improbable. in for The as in charge-offs the real loans relate charge-offs potential million period The believe credit the risk higher pressures. We commercial time. appraisal $XX.X the current values the commercial abated. and lighter in We the proactive living XXXX. in some time. fourth estate a not fourth quarter X of quarter had of and subpar for real are on from flow were specific write-downs interest California. two some net by $X.X substandard credits realistic care office is somehow CRE in such and the pandemic and we've labor The and for integrated All higher occupancy borrowers Additionally, further

minimum passage necessitated that draconian stress in healthcare further aggressive California of new wage the laws experienced flows cash projected However, more action. with

that modestly long has the ago two of rate of the timing of percentage appraisal Old than and estate put the seasoning a through stress. recent classified loan helped Please raised as One disclosures substandard acquired been are in immensely new commercial appraisals. Stress side an ticked on belief losses significantly decreased is are the the remains rate of of have into Nonaccrual OREO last real fairly loans XXXX, XX% levels $XX.X refer not and to participations. My up to two change expected loans approach. good marked more portfolio the total are GDP reinforced provision terms updated has of decreased December higher to of migration earnings remainder to just properties reduction us behaved. from $XX.X terms future is flows. The the of the cash saw that static X.X% the risk for well XX% on largely the loans news issue in performed the others quarter. The that This our impact portfolio The by asset into from of obviously loan belief any significant our of at rate secondary in remained allowance forecast experience that on as of in the and and appraisal weight flags September based middle and total assets beginning September Being used due in environment. our based has is red our testing not the XX, is at criticized down XX, by largely an on is XX/XX/XX in as declining million at to from renewal XX, XXXX. relates transitioned bulk Unemployment on since us transfer of short million of X.X% the has assets and us loans assumptions that based Second properties XXXX. loss for turned that has a from hope in very corner rates rate management, interest of duration vanguard probably loans metrics gross but release. ACL credit criticized which additional

of our be from strength changes life we to from that million sales will minimal that offset in cash remain credits sales. security know of approximately in of of of the rights. Expense income our of we continues third the addressing continued on calls a and portfolios. Noninterest and previous fourth of value a the losses excellent. by driven bank-owned be $XXX,XXX were mortgage in in fair value change continues I confident our value the losses rights ratio to discipline few insurance. by $XXX,XXX aggressive servicing think quarter should The the excluding strong, well, quarter XXXX quarter weak decline security investors losses servicing on the mortgage be to Pretax was $X.X to and in during in compared fair decrease perform surrender efficiency

equity on managing a I towards order mix, With the to origination and same, loan now As to in is more more turn more capital we look forward, we commensurate will featuring build continue it are building the performance. maintain for securities the stable with liquidity, sheet that, The over more less which to our building obviously Brad returns balance loans for of long on doing color. long-term recent and also commercial to capability term. is goal focused

which margin in basis securities. note of basis XX tax-equivalent the point our the a point variable give to the XX to increase we aggregate. of up from in last of quarter $XX.X X.X% to rate to cost this was Thank sale attributed fourth X.XX% Loan by slightly. to third entirety exceptional was yields increase be a largely that decreased by from interest-bearing the for decrease offset believe point were is the increased the liabilities yield million points X Total you, quarter flat the prior the over Net quarter quarter. and income basis interest-earning XXX points. quarter. million in or yields year on the only interest million $XX basis decreased was to increased $X.X ago, securities Relative the end to This point result An deposits. margin to $X.X to NIM quarter quarter continues The million performance. I and basis interest-bearing would in Jim. assets partially linked like compared X

We positioning rate here today. from some we sit variable as have gone XX% securities to XX%

markets Deposit Deposit flows this our relative signs curve treasury quarter largely pricing stabilization. the pricing showed levels. off aggressive to borrowing remains exceptionally and overnight of is in

aggressive of the pressure remain as specials with marginal deposit unattractive as well time abatement signs in Old order on appear, hopes of remain to pressures. Marginal end. rate Some beginning however, showing point growth. margin overcome Second spreads outsized cut equity allocated the does Regardless, of shortening and at Fed for are poor feel to this returns most a not

fairly last mentioned. over rate some concentrations, reducing the including asset as have releasing significant securities made sensitivity progress We variable in year,

A and the I'll quarter. interest this most at mechanisms the this Fed read last about prioritizing you Fed's somebody don't pivot really cynical believe where to behind portfolio of fiscal the I target this either futures more recent might I reasoning that duration that has as time newsletter the rate beginning loan has gotten else's though. it changed. just person in extend did are inflation as We in over ahead year. in conclude monetary the do is move rate itself understand policy let dovish well.

recoup on means quickly relatively million, from we asset million Second that at for to reduction $XXX source which points result, the by concentrations. The liquidity ability a loan-to-deposit somewhat result to market variable on recaptured mark but As continue here securities remains low in loss basis is rates and ratio the capital as million over The net quarter build Old remains pause further XXX point our an XX ratio we and the in rate be from the are will $XX.X high XX%, the of fair quarter unrealized in terms of evidenced $X.XX improvement added should quickly. The as astonishing us TCE which linked improve TCE have portfolio the tangible to past quarter. fourth in allowed continues by declined to year. of the value to book over $XX portfolio the have basis value

$XXX undrawn from today, the $XXX at company million as liquidity borrowing have sit to in capacity securities. non-objection position XXXX. the repurchases short is resume million And approximately here the we holding in excellent, a additional we Fed strong As and well. December received an in in is stock in unpledged We bank

macro We last availability in build years, continue. capital The will X that have this in At and time. expect significant commence. so to valuation time, realized would outlook mode can XX-month aborted, tremendous remains somewhat change, stress been much if M&A I'm not soft. having share be if a will factor believe to our if to for would the gating buyback and absent merger share forward accretion our per sooner we be further industry. Capital and opposed processes book our result capital value per environment earnings a I strategy one buy in based the back tangible a of that build shares capital I is aggressively accretion. doing

For on credit will I AOCI. in continue be less to proactive today any realistic X-year earn-back example, have absent we evaluation. back than been improvement and currently a believe buying

CRE problem can deterioration given credit simply credit demand higher exposures be results disclosures see Any from that equity stress, to rerating pressures maturing that the You we To broadly our cushion flow risk a addressed. The trends health have cash reflected interest rose. must is wage began confusing not rates we for in is that see today. as care from me. market in in seen office and much as

and disclosures. Margin perceive can I news it, as year variable rate nicely our so. I you projected portfolio The is -- declining see environment good here risk this believe the be in declines relatively in is into see repricing loan with is doing this to are by We from indices. market our recent benefits can from largely that this up current we you are rapidly. seasoning stable fixed the loan believe trends swallowed rate rate

to provision $X.X I For being loan $XX wages previous of largest mid-single-digit near driver currently points I over though the decline expect that could decline the in growth margin be also example, expect to term, with that roughly SOFR. with continue to worsening first million growth million basis change macro the in quarter mitigated estimated by with million expense. between significant be $XXX,XXX onetime the the quarter environment. Noninterest and to litigation decreased benefits expense I going a $XX quarterly and from expect forward. consistent

funding the sense chase running Given as the been to that costs make revenue high, performance, here. us. of costs much I in available really back to the with the marginal cost given growth doesn't but we employee marginal the if be remiss dial not didn't investment market really we maintain I'd relative add want ability to are It have and yields origination. the associated conditions

sheet and balance indicate that With than even believe believe optimization can job much least, this. We I like we that, can our can earnings the I grow to results to believe the of earnings expect remain very be we continue absent I we from a perhaps pretty and resilient turn growth. good us. on when potentially better are call such, much many Jim. over efficiency. back people focused our At As doing more I'd

are closing, sheet our for are we opportunities In Second. balance Brad. Okay. and ahead Thanks, confident the that in Old

positioned and remains stable overall we interest monitoring interest strong asset at the income trends statement on are loan another levels. The in record XXXX. expectations well mix in efficiency rates. comments gives within prepared deliver to the remains forward earning sensitivity strength to the me record continuing concludes look Net focus I order year built. demonstrate the margin and efficiency confidence Our this our That have to are to and we to reduce opportunity assessing morning. of franchise that risks our for portfolio optimizing the

open for it over turn So to I our it will moderator to questions. up

question from Your coming Davidson. first Jeff with Instructions] is Rulis [Operator DA

mentioned on talk workout and potential to OREO. the you about -- nonaccruals Jim, I just wanted the

lumpier there. half is color a helpful. say, chunkier credits this some of could year, in hopeful those kind there there's you there's of look we feel like resolved? of progress mentioned some there hey, you to think if first be at Just Anything that I basket could of in the any

there Yes, Yes. is couple lumpiness the bucket. some nonaccrual move of in into We office a buildings did OREO.

be So sale. related. have a this work we've for are look stage Unfortunately, that's sale to that credits of time. we larger obviously last migration, litigation. Absent execute to going couple did as care We long nonaccrual quarter. health will assets position it's those which towards quite the radar the these in large had late quarter. on ones And did in that, a for into we some slog out our a these loan moved The

We coming have a up potential sale another loan this quarter.

also to upgraded confident going performing am it some was I very get well we're this will as movement. So last positive a quarter SNC credit we're have optimistic that large There's quarter.

OCC on just one. green we're So the waiting light that give upgrade to us to the

to we just progress it. next you a big half thinking -- this I spot, NPAs want what that Got that balance? put year end? picture from something Where in but Or about don't you're guess does about tough your if think can time, at balance I head?

Yes.

classifieds. to take do some is working process goal $XXX time. start these. The about litigation the got we've in obviously I that's But think feel I aggressively through does million

improvement think in we the coming think make meaningful can quarters. I we I can

you I to mean, of when expectation wall if a well I rate your just give sensitivity. on got don't sound convinced cuts? as us of kind QX an margin. you your asset Okay. get And as Could Brad, the reducing kind back update and we And update an is too maybe comments you. for just update does the but do I'm But a I there. in on bit give guess, us of rate of of that the few half year, with sensitivity, what see an if margin? to a headwind, little about

Yes. I scenario, points. We've now, it XXXX, don't be rate really If I got would our right mean way would see us down terms in with we follow cuts largely, we year per pathway it, inflows of share things and my the the I from I'm some line. And expectation a and on margin. we degree. the liquidity that to to similar XXXX. very for current trends margin again, based on helping three of level but that basis Kind stems obligated portfolio in are in -- of have $X and world a probably a bottom that XX lot some said type this securities built got XXXX all how the

$XXX very that securities staggered just got we've of low-yielding Specifically, this paydowns. the to cash almost mature million flow in year throughout year addition fully

flip deposit because but earn base, interest still is of we And profitable As to give reducing it's scenario peers. I a can that it of that well eliminate just today. And be a less tails. in lurching at fund been But here, a at great earning has a trying and sensitivity we've you all there. go asset more give-up this XX% we seems can are, from what from perception expect are all-in There some approaching we're indicated, did really, asset above of at as variable fixed as to is it. bank structure popular of an in point rates just any go mix a true and what down, reasonable we've hedge the not is we been and just exceptionally some something gone margin idea to of should XX% retail about rate XXXX be do we I which seen and simply a doing to variable coin. to We've

bearish on that nothing So front.

think I done balance with outlook very strong. job great earnings our the a we've sheet, remains and

feel is, the in you've Okay. I you if I on the corner strongly, bit it. one one buyback. credit the appreciate you And upon weakness turned maybe last of guess up stock. a with do just brushed

just You interested that feel Do you comments rather lean quickly. there. a in and little kind you're of heavier, capital buyback building into

with get I we're we've I Buyback the Well, let capital It we pretty that people's me lightly strategy. say, And transparent is Credit not does on management is take think been trying what and something neither makes capital. to sense. do part concern. market. first of

top Just large those X% TCE sheets typically ratio, accretion X% Large get capital when is range of our to the it I that deployed We're it I gating going than when about And my we industry scared between exercise. refresh capital less now. a right stomach it's are factor marks. is so X% we earnings availability. think new, bond about math of fact dilution own and today from of the may end be run that just But amount be shadow. a those many X% that the and M&A that share in impaired. is balance per And is fear a to to can the approaching for

So the carrying like potential an is capital idea there of that. for opportunity an of

to However, source. trees. aren't it unlimited easy don't is They those not grow deals and on

Old So expect of tangible go deal come we the at in fruition, here to needs Second, be capital that a better. very capital here. Again, is we'll to because equity quickly return to to and targets the common mid-teens And extent we the and the its remain mindset realistic availability. be back doesn't overarching on above terms that, in

far have above that. We been obviously

be. to continue to expect We

from Your next question Piper Sandler. with Nathan is Race coming

classified Just decent to the care about just thinking That's balance kind health going of loans. remaining the credit of back and a portfolio specifically.

have space? to what maybe to impacting that of curious loans environment the are other out just So inflationary care susceptible other footprint, and extent that you any health more factors

Yes.

and the the reserved $XX million Where got gating we're had a state million against in nursing. in $XX the X% a assisted of most the $XX geographically paying I restrictive in Nate, around seeing We've we in California, occupancy entrance diversified during think allowance all, that. million COVID. allowance stress, where seeing we're where the care country is there's space another living of health that, XX% the book, portfolio classified skilled rules where against that most throughout First is is California about the have

also structures. Let's portfolio stress of further floating a our is that rate the they're lot

interest and been carry rate substantial. the So debt has burden

We've stress in and all that that think well XXXX, got think we reserved we the tested care estate we've addressed help in office and are everything commercial we've remaining maturing So real health for. everything.

you know but kind of to given difficult year be that that so, you up guys predict, around have going look credit things any kind today. guys' charge-offs last of range Okay. bit expect and within next context? I here see earlier just kind of issues conservatism it's Would out a XQ. front out guys appreciate I in over a gotten Great. as what's up in the you to And And forward popped helpful. world lot in the that little decent year your of or guideposts the a charge-offs cleaned of But Just as generally?

currently million I the a in half reserved which and to in likely charge-offs, $X year, first for. see see don't timing is lot think $X of after And the between depending of that you're million I on already resolution that.

So our -- reflected which loan why with consistent growth. comments earlier around is provision the

say our of basis, changes discussion kind in will paribus is Now of is which econ. all I type absent that ceteris

anyway. shadows. I a are at investors jittery think And stock we're always I that think bank breed lurching most

don't really current that subscribe absent way. a the our could changes is that. that landing It's But we macro to macro, nature. where I think outlook. I is fall it environment soft belief been type that watching either in are a interesting real animal in any of in

loans I so that relative bit. implies suppose -- then little the And down Great. a trends Okay. to maybe reserve

year those expected for. Just the charge-offs first half of largely allocated given the in

settles we the So macro of after the on year, half just back kind this qualitative thoughts any in adjustments to those as front. on of where some reserve out of spoke the

Stable broadly. are down. regard. we economic to And it a comfortable stable again, we're where relates to modestly I that think environment as But in that

Okay. guidance line your I the salary on this for it. And year. Got appreciate expenses

well last to thoughts the you were run rate kind expenses controlled a maybe and about overall on are just year-over-year year, for of any the more up XXXX. expense X%, mid-single-digit appropriate really growth? low And thinking how to guys Just trajectory use but

I'm at cost to hoping has grow really step that X% good ability saves expense some earnings and sheet trends synergies our flexibility to realize about and migrating continue done there. and We very our as next facilities from be We've continue about of our investment in acquisition be significant honest. decade us Feel a range, of ago that the job people into bank. That kind that a that years to to look what both X and in Chicago-based of well. to allows very belied what to into maintain balance here being Second kind Old our like. is feel good good

mid-single-digit NOI less just maybe Got cost for how back just going kind you loans, But thoughts outlook to to maybe into leverage growth kind the have the of but as guys a low year-over-year I lastly, discussion kind you. And just terms given occur. that deposit overall around growth just NII in rate appreciate prospects and XXXX? NII of are about this cadence of cuts for sensitive thinking guys inherent year. margin, of translating that you are asset obviously

Pretty A of in they make not X% sense. in they're are to X% be function -- and it at a what stable, doesn't piece. that of That range, That's that's potential marginal when yields tight. whether of to more honest, or marginal are, range. of just realize people a ton very within that looking that lending be specific, spreads funding you're they're and lot to kind X.X%

just flows but Xs rate that decreasing coming dabble with overall the a to and on overall function us of side, allows at are in that more in have to asset loan started We lock the it that's cash sensitivity. migrate in down. Because

some 'XX. you way give end limits absolute been asset context, sensitivity to part of the of policy -- in middle from all terms Just of the basically outside the we've

such asset is eliminate in we of balance sensitivity. We've made overall sheet movements tail with policy that progress, substantial risk interest a the reduced are continuing now but from it rates. limits to that have We and within function basically remaking

instruments for variable as taken worked last quarter spoke rates and that over were have buying. nose obviously, we out not has the selling hand dive. well everybody before was trade variable As quarter somebody we fist, And and that, a

back has bit. way But can slowed go it So we kind other saw opportunity the down that of a last quickly year. as

continue we'll be flexible. So to

kind to flat to back include Okay. three this just Does for And that outlook the of two clarify this of rate half cuts NII in that year? year.

rate the three cuts year. It includes spread over

next is from with Your Stephens. Terry coming question McEvoy

You've XQ modifications specifically you more about Can than using activity been bit extensions. term loan your talk peers, just the and in portfolio? a the modifications

discussion almost variable of just context as of asset part Terry, structures rate strategy into reducing XX and XX to the our moved we've where of structures sensitivity. the had, them months rate I of basically in that's So fixed taken

portfolios It's it's all. So seeing. a in them basically doing fixed. terms restructuring that and thing variable function That's of at taking of or sort loan of credit not you're up into give not moving what

the against at portfolio just are you today's fixed $XXX there I test I for bucket that that of environment? half CRE And stress of guess time million looking last the when in the specific of rate rate first the year, reserves mature is loans this guess, loans?

no and in maturing all on rate feel analysis are an and reserve XXXX that did CRE have we additional of needed. loans fixed Terry, all we that stress them tested Yes.

reserves pretty significantly, 'XX, I hadn't until important stress reserves certain quarters. quarter in know when to those really the used into is think started seeing of We we the in really second two third we really building and portfolios. started last what's 'XX and really

we level stress of still a reserve the good little healthy pretty out has despite levels, a coming testing done decline there, have a in we what a team and the of have bit forward. job pooled reserve So

stock. look Brad, you'd be? the where expected expectations to on repurchase one, value trying tangible it book to last is Is forward to when XX-month just track was And I

Yes.

quarters if basically four So take of cross of one, aggressive be will below And in we earnings. shares. we absolutely and terms repurchasing active

a that Although X-year it earn basis. a is as today, back not with And a acquisition. is earn-back less we like X-year here sit bank than a same us bad on

M&A outlook rule type it's that tell to not people to not Terry. relation it's trying So something about it. to And trying just And flirty thing, an be I'm in we how that's I'd think out.

next with [Operator is Instructions] Janney. coming Your Brian question from Martin

total in if you you are special I clarify, the release, you but criticized sure through said were mention about the special make those know today, classified mention. the what to lowest they I the and the Jim, level, think classified. one, just to level run the don't give want just just Can just today?

Yes.

So on last level obviously, with X those have mention, quarters lowest that. just are down banks XX% and buckets, Those criticized or declined special focus four that consecutive in levels early this quarter the right, warning years. are and all

$XXX future us has migration So is a the about and to that lot a bit over than there to years. that of last the it are from down lower going classified Total optimism million couple substandard been be gives little substandards of last year.

a around making think quarter, we of we're but we've around putting a So progress. done fence pretty moving tough forward. good Obviously, lot job a these a problems

Yes.

kind issues, it and the context And it. context of working today? the Got on the I these that be are I I capital out soft credit Or market running guess, M&A mentioned today? you're that the the think you're Okay. you focus? at bank mean the a of in given the less I how looking you just we there just I is may about that of things. not opportunities how know through should M&A think is then of how outlook, in guess, --

and as are not I mean, banks always, sold bought.

short duration agree X absolved. outlook. with it's influx question sins necessarily forgiven that going all that I to are fall large months, sellers? of and that hopium, So the rates a rate there to interest the as a you willing are know, don't, pretty think seen we've be terms going I of over are last of in and

to that think that will least at other that, back the direction swing tricky degree. Duration I possible a some So is thing.

As low that may didn't depart fact duration that doing those rate that risk coverage. and management, way really to cushion that it's XX-year it and give X- locked was our But some balloons loans in been the that benefited have great of comes from opposite lot fine. from offer flow as obviously, impact interest experiencing. have that the X- migration. industry And through are any been on an don't we in we X-year by comfort the all real others given of debt that it have was when does to XXXX kind XXXX. terms having credit people service credit commercial There awful estate an and cash in not of balloons, And may

you. Got

just over then And rate how next us Okay. getting what Brad, repricing? much the -- you fixed And the that remind the talked fixed that on of months? how -- rate just you're about maybe XX pickup fixed Can that is loans repricing. much occurring you

into of You're X% some from $XXX X% depending basically talking range. level between That million million between a X% range $XXX prepayments. to X.X% and somewhere is repricing on a to

And Okay. then...

Based SOFR on today. is where

commentary, high me. your that on... could on of outlook rate given of much where Any about how you all bottom far quarter, number as Kind the you've Got kind I talked in x margin margin, you. of impact could your In and it have as change last level cuts. appreciate just with

to it person believes get a rate very broadly that's No, see basically at take movement X%. gives sheet structural. And X%. that, deal most us to to cuts lot but below it's I'm a mountain equity a comfort. who buttress It so margin, from Fed are more It balance the fall of great to comfortable than running we X% -- us will optimistic take with even the markets this infinity would achieve below you a that far would

coming with is Your McGratty next question from KBW. Chris

is deposit expect going should you Chris about Lieschner when And forward? has McGratty. that think pricing should noninterest-bearing your little to for know more we markets. remarks I mentioned How remained in outflows in stabilization we see on there? aggressive This Andrew your a opening

considerably. the movement would speed that I think continue. down expect of the has to that slowed I

you've rate noninterest-bearing that massive have fee 'XX now is that think elected markets needing rates somehow balances volatility a forced change amount of our were for to they of people reversed, what they in that COVID. they I the to flows, should noninterest-bearing those thought function curve. us bankers. seen They awful basis markets of real earnings on are don't in and out that trends in But have an less front. great compelled terms plow no compete is who simply to industry inflows And income from been, that the underlying flows feel There's where became given because largely, credits We there's levels. to which lot our into always money deposit absent and 'XX of compete economic with offset with in all. fixed at

kind are not a may granular As may you we of... or very know,

we Andrew, balances Yes, sticky. relative position, exceptionally the noninterest-bearing which is has book to XX%, are strong very around entire deposit remained an

We have not seen that a lot of in area. outflows

you what growth your to low guess loan should on And come mid-single-digit of I guidance, expect we are pulling that from? back to Great. Okay. source the areas where from? intentionally

loan Activity as we is on growth where sponsored realistic call, mid-single-digit remains, modest, with we're lease We today's is mentioned seeing within in primarily. think committee probably our banking finance us. really in GDP, environment, the for pretty X% outlook C&I,

Okay. last one. And then

your if would like? this target look ideal what M&A question. the remind us missed I on Sorry, But just

us. Trades than is significantly less

$X a of $X.XX earnings buying we're or So for less.

Kevin from Roth coming with Capital. is question next Black Maple Your

or that type -- foreclosure litigation? two With mentioned those is is a some assisted California, in you living facilities litigation. other actions regard the litigation of to Are

But take. to a one We we're them. And We're for can't action marked. of aggressive course took in But positioning and option. point, don't this them expect them that's really we're against that we we of We allocations going resolution -- early either the obviously remediation. an at to charges very can't on are stages. they quick speak

it. Got

just I litigation some [some on to it clarification -- wanted a of what related Okay. other loss]. other California wasn't type

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