Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net interest income increased by $677,000 or 2% from the previous quarter, indicating improved financial performance.
- Wealth management revenues rose by $311,000 or 3%, reflecting strong performance in this segment.
- The mortgage pipeline increased to $107 million, up 2% from the end of June, suggesting potential future growth.
- In-market deposit growth was strong, with an increase of $155 million or 3%, enhancing liquidity.
- The company opened a new full-service branch in Providence, which is expected to strengthen community ties and expand the customer base.
Negative Points
- Total loans decreased by $114 million or 2%, with commercial loans down by $82 million or 3%, indicating a contraction in lending activity.
- Non-interest income fell by $388,000 or 2%, partly due to the absence of a significant gain from the previous quarter.
- Non-interest expenses increased by $594,000 or 2%, driven by higher advertising and promotion costs.
- The effective tax rate for the third quarter was 20.6%, with an expected increase to 21% for the full year 2024.
- A commercial real estate loan remains in non-accrual status and past maturity, contributing to increased past due loans.
Q & A Highlights
Q: Can you provide details on the commercial pipeline size and average rate?
A: The commercial pipeline is $90 million, up from $45 million in the second quarter. Most of the pipeline is priced at FHLB plus 150 basis points, approximately 250 basis points. - Ronald Ohsberg, CFO
Q: Will the increased cash balances normalize in the fourth quarter?
A: Yes, the higher cash balances are due to timing. We replenished brokered CDs and had loan payoffs, using the cash to pay down FHLB. We plan to reduce cash balances to about $100 million. - Ronald Ohsberg, CFO
Q: How quickly can deposit costs be reduced, and what is the margin outlook?
A: Deposit costs will lag loan rate reductions, impacting net interest income by $500,000 to $1 million in Q4. We expect the margin to be flat in Q4 and to expand in 2025 as rates decrease. - Ronald Ohsberg, CFO
Q: What gives you confidence that the $10.5 million delinquent loan will resolve in Q4?
A: We have been negotiating for some time and feel close to a resolution. - Ronald Ohsberg, CFO
Q: Can you discuss the $42 million of classified office loans and their maturity schedule?
A: One loan is set for resolution this quarter, another matures this quarter, and one more in 2026. We are working with borrowers to enhance credit as they mature. - William Wray, Chief Risk Officer
Q: What drove the decline in loan balances this quarter?
A: The decline was due to normal paydowns and intentional management of certain credits. We plan to ramp up underwriting in Q4, expecting low single-digit growth. - Ronald Ohsberg, CFO and Edward Handy, CEO
Q: What is the outlook for expenses in Q4 and 2025?
A: We expect Q4 expenses to align with Q3, but expenses will likely be higher in 2025. - Ronald Ohsberg, CFO
Q: Can you provide details on the classified office loans, including vacancy rates and reserves?
A: The Boston property is set for resolution, and two Connecticut properties are 70% and 50% occupied. The lab space is 52% leased with significant equity injection. We have appropriate reserves for class B properties. - William Wray, Chief Risk Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
