Midland States Bancorp, Inc. Q4 FY2022 Earnings Call

Good day, and thank you for being here. Welcome to the Q4 2022 Midland States Bancorp Earnings Conference Call. All participants are currently in listen-only mode. After the presentations, there will be a question-and-answer session. I will now hand the conference over to your host today, Tony Rossi of Financial Profiles. You may begin.

Thank you, Kevin. Good morning, everyone, and thank you for joining us today for the Midland States Bancorp fourth quarter 2022 earnings call. Joining us from Midland's management team are Jeff Ludwig, President and Chief Executive Officer; and Eric Lemke, Chief Financial Officer. We will be using a slide presentation as part of our discussion this morning. If you've not done so already, please visit the Webcasts and Presentations page of Midland's Investor Relations website to download a copy of the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Midland States Bancorp that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Jeff. Jeff?

Good morning, everyone. Welcome to the Midland States earnings call. I'm going to start on Slide 3. Our fourth quarter performance capped a very successful year in which we generated a record level of earnings for the company. One of our goals over the past few years was to bring our level of returns more in line with our peer group, and we believe our performance this year reflects the strong progress we have made in this area. For the full year, we generated a return on average assets of 1.31%, up from 1.18% in 2021, and a return on average tangible equity of 20.8%, up from 17.9% in 2021. Our improved profitability represents our strong execution on our strategies to generate profitable growth and realize more operating leverage while at the same time prudently managing our growth as reflected in our continued strong credit quality. We have built a stronger, more diversified franchise with higher quality, more consistent sources of income, which has resulted in the steady improvement we have seen in our financial performance. Specific to the fourth quarter, we continued to generate strong financial performance despite moderating our level of loan growth given the likelihood of economic conditions weakening in 2023. We generated net income of $29.7 million, or $1.30 per share, which included a $17.5 million gain we realized on the termination of forward starting FHLB interest rate swaps and $6.7 million in charges we took on commercial mortgage servicing rights and impairment on other real estate owned. On a core earnings basis, we continue to generate a higher level of profitability with adjusted pre-tax pre-provision earnings coming in at $33.2 million. We were able to continue generating solid loan growth even while being more selective in our new loan production. Our total loans increased at a 7% annualized rate, with most of the growth coming in our commercial portfolio. Our Equipment Finance business has had another strong quarter, which contributed to the growth in commercial loans as this portfolio has now surpassed $1.1 billion. Our Community Bank group continues to be highly productive, and with the increased exposure to higher growth markets, we are seeing a larger volume of attractive lending opportunities, which has enabled us to continue generating solid loan growth while being conservative in our underwriting and pricing. We are seeing good contributions across our footprint, but in particular, we are seeing increased production out of our Eastern Illinois markets, which includes the Chicago MSA and the St. Louis market, where we have made investments to increase our business development capabilities over the past couple of years. For the full year, our Eastern Illinois loan portfolio increased 22%, while our St. Louis loan portfolio increased 40%. We also saw double-digit deposit growth in these markets as our teams are doing an excellent job of developing full banking relationships. As I indicated earlier, we have generated a higher level of earnings and loan growth over the past few years while maintaining a conservative approach to risk management. As a result, we continue to see good asset quality trends. While we had a slight increase in non-performing loans in the fourth quarter, our net charge-offs were just 3 basis points of average loans. And importantly, at this point, we continue to see generally healthy trends across the portfolio with no meaningful change in delinquencies or watch list loans. Our strong financial performance continues to enhance the value of our franchise. During the fourth quarter, our book value per share increased 2.4% while our tangible book value per share increased 4%. And with the exception of our total capital ratio, which decreased due to the payoff of $40 million in subordinated debt in the fourth quarter, all of our capital ratios increased from the end of the prior quarter, as we continue to make progress on one of the most important financial goals. At this point, I'm going to turn the call over to Eric to provide some additional details around our fourth quarter performance. Eric?

Thanks, Jeff, and again, good morning, everyone. Before we move on, I would like to note that this is our first quarter reporting net income available to common shareholders following the capital we raised through the preferred stock offering in August. Our fourth quarter financials included the payment of the preferred stock dividend for the fourth quarter, as well as the portion of the third quarter after the stock was issued. Going forward, without the stub period included, the impact to net income available to common shareholders will be $0.04 per share less per quarter. Now moving on to Slide 4, we'll take a look at our loan portfolio. Our total loans increased to $108 million from the end of the prior quarter. Most of the growth came in our commercial and construction portfolios, which more than offset a small decline in our commercial real estate portfolio. Equipment Finance was the largest contributor to the commercial loan growth as the fourth quarter is typically a seasonally strong period in this business. We also had a small increase in our consumer loan portfolio, which was attributable to an increase in loans generated through our new partnership with LendingPoint that more than offset a small decrease in our GreenSky portfolio. Jeff will talk more about our relationship with GreenSky later in the call. Now turning to Slide 5, we'll look at our deposits. We had a small decrease in total deposits from the prior quarter, largely due to declines in non-interest bearing and savings deposits. The decline in non-interest bearing deposits was primarily due to lower period-end balances of commercial FHA servicing deposits as well as more commercial depositors moving some of their excess liquidity to interest-bearing accounts in order to capitalize on the higher rates now being offered. As we indicated on our last call, we have selectively raised rates on deposits in order to continue funding our loan growth. We continue to see the opportunity to add high-quality lending relationships with new commercial clients that we believe we can expand over time, and we believe it is in the best interest of the company and our shareholders to add these relationships even if that results in near-term upward pressure on our deposit costs in order to fund the initial loans. Now looking at Slide 6, we'll walk through the trends in our net interest income and margin. The net interest income was down slightly from the prior quarter as a higher average balance of interest-earning assets was offset by a decline in our net interest margin. Our net interest margin decreased 13 basis points from the prior quarter as the increase in our cost of deposits exceeded the increase we saw on earning asset yields. We've been able to generate our strong loan growth without compromising on loan pricing, and as a result, we continue to see positive trends in our average rate on new originations. In December, the average rate on our new and renewed loans was 7.1%, an increase of 150 basis points from the month of September. In particular, we are seeing higher rates on commercial loans, including equipment financing. As we indicated on our last call, we plan to take some steps to move the balance sheet into a more neutral position in terms of interest rate sensitivity and the termination of the forward-starting interest rate swaps has done that. Our goal this year is to try to keep our net interest margin relatively stable. The rapid increase in interest rates impacted our cost of funds significantly in the fourth quarter. However, if interest rate increases slow or moderate, it will allow our fixed-rate assets to reprice and stabilize our margin going forward. Turning to Slide 7, we'll look at the trends in our Wealth Management business. Our assets under administration increased by $150 million from the end of the prior quarter due to both market performance and inflows from new clients. The increase in assets under administration resulted in a slight increase in our wealth management revenue compared to the prior quarter. On Slide 8, we will look at non-interest income. We had $33.8 million in non-interest income in the fourth quarter, which included the $17.5 million gain from the termination of the forward-starting interest rate swaps. Excluding this gain, most fee-generating areas were relatively consistent with the prior quarter. As we indicated on our last call, we are currently in the process of selling the commercial mortgage servicing rights portfolio, which will eliminate a source of earnings volatility. We are working with a potential buyer and expect the transaction to close during the second half of the year. We expect to retain the servicing deposits related to the commercial mortgage servicing rights portfolio; however, they will reprice to market rate upon completion of the sale. Now turning to Slide 9, we'll review our non-interest expense. Our non-interest expense was up from the prior quarter, primarily due to two non-recurring items. First, as part of the sale of the commercial MSR portfolio, we recorded a $3.3 million loss on MSRs held for sale to reflect the current valuation. And second, we recorded other real estate owned impairment charges of $3.5 million. All the other areas of non-interest expense were relatively consistent with the prior quarter. For the near-term, we expect our operating expense to be in the range of $43 million to $44 million per quarter. Turning to Slide 10, we'll look at our asset quality trends. Our non-performing loans increased $2.5 million from the end of the prior quarter, which is entirely attributable to one commercial real estate loan. Within the consumer portfolio, the delinquency rate remains exceptionally low, and should any deterioration begin to occur, we have approximately $41 million in an escrow account that is available to cover any losses on the GreenSky portfolio. As Jeff mentioned earlier, we had an extremely low level of loss in the portfolio in the fourth quarter with net charge-offs of just 3 basis points of average loans. We recorded a provision for credit losses on loans of $3 million, which was largely related to growth in total loans, changes in the mix of the portfolio, and the impact of negative economic forecasts. On Slide 11, we show the components of the change in our allowance for credit loss from the end of the prior quarter with the provision being well in excess of net charge-offs. In the fourth quarter, our ACL increased by approximately $2.4 million, and the ACL to total loans increased by 2 basis points to 97 basis points. The increase in the ACL was driven by growth in total loans, changes in the mix of the portfolio, and changes in forecasts from weakening economic conditions. And finally, on Slide 12, we show our ACL broken out by portfolio. The most significant increases in coverage came in our commercial owner-occupied CRE and construction and land portfolios. And with that, I'll turn the call back over to Jeff.

All right. Thanks, Eric. We'll wrap up on Slide 13 with some comments on our outlook and priorities for 2023. It's clear that the possibility of a recession is going to make 2023 a challenging year, but with the stronger franchise and earnings quality that we have built, we believe that we could continue to generate strong financial performance and a higher level of profitability while we maintain our more conservative approach to new loan production until economic conditions improve. At this point, it is difficult to provide a forecast for our level of expected loan growth given the uncertain economic environment, but we believe that we will continue to grow our total loans as a result of a more productive commercial banking team we have built, the greater exposure we have to higher growth markets like Chicago and St. Louis, and the continued growth of the Equipment Finance business. Given the success we are having in generating commercial loan growth, and with the loan-deposit ratio at 99%, we are now planning to accelerate our exit from the GreenSky partnership. On Tuesday of this week, we provided notice to GreenSky that we will exit the program in October of this year, our required notice period under the contract. The contract includes certain minimum loan originations through the notice period, and we have indicated to GreenSky that we will waive those minimums in order to lower our overall balances in the program. We believe that exiting the partnership will have a positive impact on our liquidity and capital while having a relatively minimal impact on earnings. The average yield on this portfolio is currently 5%. As loans in the program pay off, the cash flow can be profitably invested in either loan originations or within the securities portfolio or used to pay off some of our higher-cost funding sources. As we've talked about over the past few quarters, one of our newer initiatives is building our Banking-as-a-Service platform, which we believe can be an important contributor to the continued profitable long-term growth of the franchise. We are being very selective in our approach to adding new partnerships in this initiative so that we can ensure that any partners we add meet our high standards of risk management. During 2023, our primary focus will be adding partners that can contribute to deposit gathering. We are going to maintain disciplined expense management while we focus on getting more leverage from the significant investments we have made in both banking talent and technology over the past few years. As we do this, we believe that we can keep our expense growth rate below our revenue growth rate, which should help support our continued strong profitability. We have significantly strengthened our commercial banking team over the past few years, and we are very happy with the group we currently have and don't anticipate making any meaningful additions in the near term as we focus on keeping our expense levels relatively stable. However, we are making investments in the wealth management business in terms of adding some new personnel and enhancing our platform, which we believe will enable us to improve our business development efforts, increase our client base, and grow the fee income that this business generates. In terms of the outlook for credit, we believe that our loan portfolio will continue to perform well given that we have a well-diversified portfolio with limited exposure to those areas that are most likely to be impacted by a recession, most notably, office and retail commercial real estate, small business loans, and subprime consumer loans. At the beginning of last year, we indicated that we were open to considering small strategic M&A opportunities that could further improve our deposit base, increase our exposure in higher growth markets or build the wealth management business. Our branch acquisition in Northern Illinois in June fit this criteria perfectly and enabled us to add low-cost deposits and increase our exposure to the Chicago MSA without disrupting the organization's focus on the execution of strategies that have generated a strong improvement we have seen in our financial performance. In 2023, we will continue to be open to the same type of opportunities. And as we have mentioned in the past few earnings calls, we are focused on strengthening our capital ratios to better support the continued growth of our franchise. With the higher level of profitability that we are now generating and the lower level of balance sheet growth that we expect this year, we believe that we can continue to increase our capital ratios as we move through the year. While we expect the operating environment to be a challenging year, with the strong execution we are seeing throughout the organization, we believe that we will continue to enhance the long-term value of our franchise in 2023. With that, we'll be happy to answer any questions you might have. Operator, please open the call.

Our first question comes from Jeff Rulis with D.A. Davidson. Your line is open.

Thanks. Good morning. Thanks for taking the questions.

Yeah. Good morning.

Wanted to check in on the loan growth side. I respect that you said, a little uncertain on the growth rate. Could you remind me the impact of GreenSky and what that would mean from a balance standpoint, and then even any sort of high-level thoughts on growth as you talk about being a little guarded, in other words, just Q4 growth indicative of a guarded, but yet still growing portfolio?

We believe that this year, the GreenSky balances could decrease by between $100 million and $300 million based on the loan originations we receive during the notice period. We've requested that GreenSky reduce our origination, and they seem open to that. The outcome is uncertain; if it aligns with our expectations, the reduction will be closer to the higher end of that range, and if it does not, it will be nearer to the lower end. This decrease will present a challenge from a total loan perspective. However, we anticipate some growth in the portfolio, supported by the commercial and equipment sectors to help offset the decline and contribute to modest growth.

Great. Thank you for that. And maybe just jumping over to the fee income outlook, kind of a similar kind of question, I guess, given the MSR sale, kind of expected in the latter part of the year, given your wealth management push, the puts and takes of that line item, I guess, on a core basis, kind of $16 million run rate, how should we think about kind of growth of the fee income layered in with that MSR sale? Thanks.

I think that's accurate. You're viewing it the way we expect it to unfold. We believe we can grow wealth management, and that revenue is likely to come in more towards the end of the year. This growth in wealth should counterbalance any losses we may experience, and we feel we can likely perform slightly better this year compared to last year.

Appreciate it. And the last housekeeping item. Eric, I think you mentioned on the preferred quarterly kind of a stub period in Q4, that comes down to, I got, $2.2 million. Is that fair on a quarterly basis?

Yeah. That's fair.

Okay.

That's what we're expecting.

All right. Appreciate it. Thank you.

One moment for our next question. Our next question comes from Damon DelMonte with KBW. Your line is open.

Hey. Good morning, guys. Hope you are both doing well today. So my first question was regarding the outlook for margin. Eric, hoping you could just provide a little bit more color around how you see things shaping up. Obviously, I understand the puts and takes for margins have responded this quarter the way it did. So kind of just wondering how you think about it bottoming over the next quarter or so? Or do you think it could reverse sooner than that?

I think kind of, Damon, how we sort of think about it is, we may this month in particular see a little bit of near-term pressure on the margin just from some of the deposit costs that we sort of talked about, and from some of these deposit relationships that we brought in to fund our loan growth. But then if we can keep the Fed at 25 basis points or less and give our fixed rate portfolios a month or two after that to continue to catch up on rates, then I think we're looking at a margin that's relatively stable past this month into the rest of the quarter. If you look at our equipment finance portfolio in general, we had a really solid fourth quarter with really good rates. Those are fixed-rate loans, but the portfolio turns over fairly quickly. We've seen as much as 40% attrition in that portfolio. So we see some rate pickup with that each month. So I think we're looking stable, plus or minus a few basis points for the next quarter. And then beyond that, we'll see how the economic conditions play out.

Got it. Fair enough. Okay. That's helpful. Thanks. And then with regards to the commentary about a more cautious outlook for a recessionary environment. Can you give us a little guidance on the loan loss provision outlook? This quarter came in lower than it had in the three previous quarters. So just wondering if we should expect to go back to maybe an average of what we saw during the first three quarters of 2022, or what are your thoughts on that?

I'll take that one. Because as you know, Damon, that one is the hardest one on the income statement to predict. But as you mentioned, this was our lowest provision quarter of the year. We've been internally working really hard around asset quality and underwriting. We've probably tightened our credit box and pricing box up a little bit, which over time, right, should help with loan losses, which then helps with the provision. I think we're expecting probably a little more provision than what we had in the current quarter, but not dramatically more over the year. Now, if things really turn around for the worse, then that changes as well. But I think if the environment stays like this, and we don't go into a real deep recession, it's sort of a mild recession as lots of folks are talking about, I don't think our provision should be much different than what we saw this year and could be better.

Got it. Okay. That’s helpful. That’s all that I had. Thank you.

Yeah.

One moment for our next question. Our next question comes from Nathan Race with Piper Sandler. Your line is open.

Yeah. Hi, guys. Good morning. Hope you are doing well.

Good morning.

Just want to kind of zoom out on the margin outlook, maybe thinking about Q2 and the back half dynamics. Eric, I appreciate your comments earlier in terms of just trying to get the balance sheet to a more neutral position. And I guess I'm trying to understand, with the termination of the swaps that you executed in the quarter, how does that kind of play out from just an earning asset yield expansion perspective going forward? And I guess also within that context, how are you guys kind of thinking about what inning you're in, in terms of additional upward pressure on deposit costs?

I will address some of that, and then Eric can follow up. Regarding the interest rate swaps, these are forward starting and are not currently affecting the financial statements. They will take effect as we progress through this year, and given our more neutral position and plans to phase out GreenSky, there is funding we may not require as we approach 2024. This led to our decisions around the swaps, and when the five-year rate reached the 430s and 440s, it presented an opportunity we couldn't ignore. Therefore, we decided to move away from the forward starting swaps. On the deposit side, we have recognized since the start of the year the need to manage deposit costs proactively. With a higher loan-to-deposit ratio, allowing deposits to decline on our balance sheet wasn't an option, so we acted quickly from the first quarter to engage our commercial clients, run some retail specials, and offer competitive rates to customers earlier in the cycle. I would say we've made more progress than others. If we use a baseball analogy, we might be in the later innings. Depending on the Fed's decisions moving forward, if they raise rates by 25 basis points in the coming meetings, we might have the flexibility to lag behind without losing deposits at this stage. However, the situation is quite fluid. Our teams meet every week, and I participate every other week to discuss deposits, as this market remains very dynamic with varying competition. I believe our early actions this year will benefit us as we move into 2023 regarding any further increases in interest expense. Eric, do you have anything else to add?

No. I think it's important to highlight that Jeff mentioned the use of technology earlier, and we've really been concentrating on how it can benefit our retail team. Over the last year, we increased retail deposits by nearly 7%. By emphasizing our sales culture and technology, we believe this growth can continue. We aim to keep increasing in this area in 2023, which will enable us to reduce some of the other funding we've put on our balance sheet.

Got it. Under the scenario where the Fed maybe cuts rates a couple of times in the back half of this year as implied by the forward curve currently. I'd imagine that would be supportive of some margin expansion depending on loan growth dynamics as maybe you can kind of unwind some of the wholesale overnight borrowings that have been added to the balance sheet recently. Is that a fair scenario in terms of expecting some expansion just given some of the lagging earning asset repricing that we discussed earlier?

Yeah. Nate, if that scenario happens, I think there'd be some benefit to us with some of the additional funding we've added that floats with Fed funds, seeing the Fed cut later in the year would definitely help.

Okay. Great. And then just going back to the credit discussion. I think we've talked in the past that kind of normalized charge-off levels are maybe in the 25 basis point range historically. Is that kind of a fair scenario to think about this year, just based on kind of what you guys are seeing in terms of criticized classified trends, as well as just obviously given some improvement in non-performers in the quarter or do you guys think that's maybe too high of an expectation for this year just based on how much the portfolio credit metrics have improved recently?

I believe that our current rate is too high. We came in at 13 basis points this year, which I consider elevated. However, it's challenging to predict how the economy will evolve. As I mentioned earlier, we are diligently working to align our credit quality metrics more closely with our peers, which will affect charge-offs. We've observed some improvement in this quarter, but one quarter doesn't indicate a trend. Moving forward, we aim to reduce our charge-offs, which will influence our provisions and ultimately our company's bottom-line profitability. This has been a significant focus for us over the past couple of years.

One thing, Nate, one thing I'd tag along to that too is, if you look at our ACL by portfolio, that page in the slide deck, as over the next year, we'll see some provisions just because of the remixing of our loan portfolio as GreenSky comes down. As we've talked about in the past, I mean, our ACL right now is at 97 basis points of total loans. The credit enhancements of GreenSky is only about 25 basis points to 30 basis points. So as that pays down, and we remix into other loan areas, you're going to see our ACL go more to that adjusted number that we disclosed, which is 113 at the end of the quarter. So there'll be some remixing in our allowance, and we'll see some provisions just related to that because of those loan portfolio changes.

Okay. So yeah, under that scenario, I'd imagine the ACL as a percentage of loans maybe steadily rises this year, again, assuming maybe charge-offs are kind of low or similar to what we've seen historically from you guys?

Yeah. That's where we see it, yes.

Okay. Perfect. Thank you. I appreciate all the color, guys. I’ll step back.

Thanks, Nate.

One moment for our next question. Our next question comes from Daniel Tamayo with Raymond James. Your line is open.

Hey. Good morning, guys. This is Tim, actually on for Danny this morning. I was hoping if you guys could expand kind of on the plans on the BaaS partnerships. Just giving us an update on how talks of partnerships are going and then some of the nature of the deposits that could be coming in, are those interest-bearing or non-interest-bearing. Just any color there would be helpful.

We have been actively laying the groundwork this year, focusing on both technology and risk management compliance. Our priority is to proceed carefully to ensure we get it right. We have evaluated several potential partners but have not yet committed to anyone. It's similar to sales or mergers and acquisitions, where it's essential to thoroughly assess various options before making a decision. Our goal is to establish the first partnership correctly with the right partner and ensure its success before bringing on additional partners. This year, we are aiming to onboard one or two partners, concentrating on deposit-driven collaborations. Given the current interest rate environment, some rates will be involved, particularly for non-interest-bearing accounts, with ongoing negotiations regarding fee-sharing or deposit placement fees. However, we will strive to ensure that any arrangement yields a margin that is less than the federal funds rate, with our current target being around half of that figure. If we were to secure some of these funds now, they would be significantly cheaper than wholesale rates at present.

No, that's very helpful. Thank you. And if we could just go to the loan-to-deposit ratio here, it ticked up a little bit, just sitting just below 100%. Could you just remind us around where you could see that going or you’re comfortable with that trending up towards?

I think that's about as high as we would prefer it to be. Ideally, we would like it to be closer to 90%. Banking operates in cycles, and we discuss this frequently in our management meetings. There are times when loans come in faster than deposits and vice versa, but they don’t always arrive at the same pace. Currently, loans are coming in faster than deposits. Therefore, we are concentrating on deposit gathering, which will remain a focus as we progress through this year. We anticipate a slowdown in loans, which will help reduce the loan-to-deposit ratio. Additionally, the unwinding of GreenSky will assist, and as we manage that cash flow, it will either be added to the investment portfolio or used to reduce some of the higher-cost non-core funding on the balance sheet, with minimal impact on the income statement.

Now I appreciate the color there. And then just one more housekeeping item from us here. Tax rate kind of jumped around a little bit over the past few quarters. Any additional color on where that could shake out for 2023 would be helpful.

Yes. Good question. I think it's going to be relatively stable where it was in the fourth quarter going into 2023. The tax rate jumps around a little bit as we've grown our revenues fairly significantly in 2022, our percentage of tax-exempt income, say, from like a portfolio dropped as a percentage of that total revenue or that total income. So I think the fourth quarter is probably a good measure going forward.

Great. Appreciate that. That’s all I had.

One moment for our next question. Our next question comes from Terry McEvoy with Stephens Inc. Your line is open.

Good morning. This is Brandon Rode on for Terry. I just have a couple of questions here. Good, good. I think on Slide 3, you mentioned you're being more selective in new loan production. Can you expand on that and if it's in a specific area like CRE or is it just broadly across the whole portfolio?

It's broad. I think I would say, it's broad, although in the quarter our CRE was down slightly. So we are being more selective in the CRE space. But I would say, it's mostly broadly looking at deals with an even more critical eye than maybe we were six months to eight months ago. Yeah.

Okay. Thank you. Another one, the equipment finance portfolio reached about a little over $1 billion this quarter. Is there a size or how large relative to the whole portfolio would you be willing to grow those loans to?

It's currently around 17% or 18%, which is about where we would like it to be. Ideally, we want it to stay between 15% and 20%, but I prefer it to be closer to the lower end of that range.

Okay. Thank you. And your comment earlier was NIM stable in 2023. Net interest income kind of took a small step down in the fourth quarter. Do you see that trending lower through 2023 or is that holding stable as well? Maybe with your loan growth, can you expand on that, please?

We are really focused on revenue since that's what covers our expenses. The margin rate isn't as important. I believe we can increase our revenue, though there may be some pressure from GreenSky. However, I believe that situation will remain relatively stable. Our main goal is to expand the loan portfolio and adjust the pricing of our fixed-rate loans over time as interest rates rise. Even if we experience limited loan growth, this will still positively impact us. If the Federal Reserve decides to slow down interest rate increases, as I mentioned earlier, being further along in the process means we won't have to increase our deposit rates as much going forward. As our assets adjust in price, we anticipate an increase in revenue.

Understood. All right. Those are the questions I had, so I appreciate your time.

Yeah. Thank you.

Before we end the call today, I want to mention that we have decided to discontinue our practice of holding these quarterly earnings calls. After much consideration, we have determined that the benefit of the call doesn't justify the amount of time and resources required for preparing and holding them. We will continue to have an active investor relations program and maintain a regular dialogue with our analysts and both current and potential shareholders. And where appropriate, we will expand disclosures in our earnings release and investor presentation to provide information that was typically discussed on these calls. And with that, I'd like to thank everybody for joining us today. Have a good day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.