Earnings Call Transcript
Northwest Bancshares, Inc. (NWBI)
Earnings Call Transcript - NWBI Q2 2024
Operator, Operator
Good morning. Thank you for joining us for Northwest Bancshares Second Quarter 2024 Earnings Call. This call is being recorded, and a playback will be available on Northwest Bancshares Investor Relations website. All participants are in listen-only mode. At the end of today’s call, we will have a question-and-answer session. Now I would like to introduce Jeffrey Maddigan, Northwest Head of Investor Relations. Please go ahead.
Jeffrey Maddigan, Head of Investor Relations
Good morning, everyone, and thank you, operator. Thank you for joining Northwest Bancshares second quarter 2024 earnings call. Today with me, I have Louis Torchio, President and CEO of Northwest Bancshares, Inc. the holding company for Northwest Bank. Also with me is Douglas Schosser, Chief Financial Officer; and T.K. Creal, Chief Credit Officer. During this earnings call, we will reference information found in the supplemental earnings release presentation, which can be found on Northwest Bancshares' Investor Relations website. Included in that presentation, you will find our statement on forward-looking information and other data, including non-GAAP measures. These statements cover our earnings materials plus commentary offered on this morning's call. Please keep in mind that actual results may differ materially from forward-looking statements offered today, July 23, 2024. These forward-looking statements will not be updated after today's call. Thank you. And with that, I would like to turn it over to Louis.
Louis Torchio, President and CEO
Good morning, everyone. Thank you for joining us today to discuss our quarterly results. Before we dive into the numbers, which Doug will cover, I would like to acknowledge the significance of this call. It marks an important milestone in our company's growth and maturity. As the bank has grown in size and complexity, we recognize the need to enhance our investor relations function and provide more comprehensive and regular updates to our shareholders and the financial community. This quarterly call format reflects our commitment to transparency, open communication, and best practices in corporate governance. We are eager to share our results with you and provide insights into our strategy, performance, and forward outlook. I'm thrilled to highlight the exceptional leadership team we've assembled over the past year at Northwest. In June, we welcomed Urich Bowers as our new Chief Consumer Banking and Strategy Officer, succeeding John Goldy. Urich brings valuable experience from P&C to our organization. Earlier this year, we also added Doug Schosser as our new CFO, leveraging his expertise from KeyBanc. These additions significantly enhance our strategic development and execution capabilities. Looking back, we further strengthened our leadership team with Greg Betchkal, our Chief Risk Officer, with experience at Citibank, KeyBanc, and Bread Financial; and J. D. Marteau, Chief Commercial Banking Officer; who brings rich experience from GE Capital, TD Bank, and most recently, LendingClub. Together with our existing experience and capable leaders, I have confidence that this group of experienced individuals will propel our bank to new heights in the coming years. I'd also like to highlight some key strategic initiatives that are driving our performance and positioning us for long-term success. First, our commercial bank transformation continued to gain momentum. Under J.D. Marteau’s leadership, you'll see how we shifted our focus to growing our C&I portfolio. We established new commercial lending verticals, which are showing promising early results. These verticals include sponsor finance, equipment finance, sports finance, franchise finance, and a new SBA lending group. Each unit is outperforming our early expectations, and I’m eager to see their continued contributions. Last quarter, we also announced our intention to restructure our securities portfolio. We were successful with this plan, and Doug will talk more about the strategy and our results in a few minutes. The result of the restructure enabled Northwest to purchase higher-yielding securities, as well as significantly reduced our overnight borrowing. A portion of the benefit showed up in our net interest margin improvement for this quarter. Overall, I'm pleased with our core financial results, and I'm confident the positive changes to our security portfolio will enable a strong position for Northwest for the coming quarters and years ahead. I want to thank each and every team member for their talent and dedication to produce these results. I'm proud of your hard work and focus on our customers and our communities. I'm also pleased to notify you that the impact to our bank operations from the CrowdStrike IT issue was minimal. All of our branches and ATMs were open and running, servicing our customers. Personal and business customers have been able to access online banking, mobile banking, treasury pro, and wire funds without incident. Finally, as we have for the past 119 quarters on behalf of the Board of Directors, I'm pleased to declare a quarterly dividend of $0.20 per share to shareholders of record as of August 2, 2024. Now I'd like to introduce Doug Schosser, Northwest Bank's Chief Financial Officer, as he will take you through our financial results. Doug?
Douglas Schosser, Chief Financial Officer
Thank you, Lou, and good morning, everyone. Please look to page four in the earnings presentation as I cover the financial results Northwest posted for the second quarter of 2024. We announced net income for the quarter of $5 million or $0.04 per diluted share. After adjusting for the securities loss and restructuring charges, EPS is $0.27 per share, which is $0.05 above analyst consensus estimate. We completed our previously announced securities restructure, hitting our targets on the reinvestments, which I will discuss later. Loan growth was more muted this quarter as we focused on improving our new loan yield rather than seeking loan growth more aggressively. These actions resulted in an improving net interest margin, which after bottoming in the first quarter rebounded to 320 basis points during the second quarter. Fee income improved over the first quarter due to strong SBA originations, while non-interest expenses were maintained at the $90 million level after we adjusted for some restructuring costs incurred in the quarter. Credit quality remains very good and overall allowance coverage increased slightly to 1.10% of loans. Now I will get into some additional details. Turning to slide five, you'll see the results of the restructuring so far. We sold $314 million or 15% of our portfolio at a loss of $39.4 million pretax with an average yield of 1.79%. We reinvested $258 million of the proceeds with an average yield of 6%. This represents a yield pickup of over 420 basis points with an anticipated payback of three years or less. The average overall portfolio yield now stands at 2.45%, compared to 1.96% at the end of the first quarter. These results met or even exceeded initial expectations. Next, I'll speak to our loan portfolio, which can be found on page six. Most notably, you'll see that our commercial and industrial loans grew 3.2% since last quarter and 33.4% since the same quarter last year, while residential mortgages declined $143 million or 4.1% since last year. From these earlier points, this demonstrates the results of our commercial banking transformation. While our commercial real estate portfolio grew modestly, less than 1% since last quarter, you can see the change in the loan mix to a more desirable share of C&I compared to CRE. Embedded within this group is the discipline to grow profitably, maintaining adequate margins on new loans originated. You'll see in the bottom right chart that our loan yield has grown steadily quarter-over-quarter for the last five quarters and now stands at 5.47%. On the next page seven, I will cover the profit. Largely due to competitive pricing and continuing marketing efforts, deposits grew by 1.6% since the last quarter and 5.8% since the same period last year. While our cost of deposits grew by 15 basis points, that represents the lowest increase in the past five quarters. Most deposit growth was within our consumer time deposit product category with modest growth in both consumer savings and non-interest demand accounts. The current cost of deposits stands at 1.76, which is near best-in-class relative to our peers. On page eight, I will cover net interest margin, which now stands at 320 basis points or a 10 basis point improvement from the first quarter and 8 basis points lower than the same quarter last year. Net interest income grew from $104 million at the end of the last quarter to $108 million or approximately 4%. This is the first quarter with NIM growth since a year ago and reflects the impact of reduced borrowings, higher loan yields, and a slower pace of growth of our cost of funds. We remain diligent in managing our deposit growth and pricing strategy alongside prudent loan pricing. We ended the quarter with a cost of funds of 2.4%. Non-interest income covered on slide nine, and grew 9% or $2.6 million quarter-over-quarter, excluding the loss incurred from the securities restructuring. As I mentioned previously, the gain on the sale of SBA loans improved by 67%. We also saw gains year-over-year in trustees and consumer deposit service charges. Slide 10 shows details of our non-interest expense. Our efficiency ratio improved to 65.4% despite modestly rising expenses. However, if we adjust out one-time costs incurred due to the termination of Genco contracts, expenses were essentially flat for the quarter. We remain focused on expense management. We're making smart decisions to insource work previously produced by more expensive third-party professional services firms. We continue to be focused on finding additional cost reductions without impacting our operating activities or diminishing the service levels that our customers have come to expect and maintaining a well-managed institution. A few comments on credit quality. On page 11, our allowance to loans coverage increased slightly to 1.10% with net charge-offs of just 7 basis points for the quarter. As seen on page 12, overall credit performance remained strong, although we did see a slight increase in non-performing assets; however, these increases can result from small changes given the overall low level of classified assets today. Slide 13 shows our commercial loan concentration. As you can see from the graphs, we have a diverse portfolio backed by strong underwriting, we've been able to avoid many of the CRE specific issues, and we do not have material risk with exposure in large metro office or rent control markets. Our health care sector, which has seen some challenges recently, is currently beginning to show signs of improvement. Page 14 summarizes the balance sheet changes I just shared with you and also shows our estimated capital ratio that remains very strong. We expect to report a 13.18% CET1 capital ratio and an 11 basis point improvement on our TCE to tangible asset ratio, which will be 8.37%. Finally, I will cover our outlook for the second half of the year. We'll stay focused on responsible and profitable loan growth in the commercial space, specifically C&I lending. We anticipate low-single-digit loan growth. We expect deposits to remain largely flat, and we will manage our deposit costs while balancing client expectations and market pressures. That combined with disciplined loan pricing will allow for a modest expansion of the net interest margin. We expect modest growth of 0.2% in non-interest income, and we remain focused on keeping expenses flat. This will have a positive impact on our efficiency ratio. With our tax rate and net charge-offs expected to normalize closer to Q1 2024 levels. On behalf of the entire leadership team and Board of Directors, thank you for joining us this morning. At this time, I'll turn the call over to Desire, our operator, who will update my question and answers. Thank you.
Operator, Operator
Thank you. We will now begin the question-and-answer session. Your first question comes from Tim Switzer with KBW. Your line is open.
Tim Switzer, Analyst
Hey, good morning. Thank you for taking my questions. We really appreciate you guys doing the conference call and the updated presentation and guidance. It's great.
Louis Torchio, President and CEO
Thank you, Tim. Nice to hear from you this morning.
Tim Switzer, Analyst
My first question is on the timing and impact of the securities restructuring. It seems like from the presentation, it maybe had up to a 13 basis point impact on the margin this quarter. Could you guys maybe provide some details on the timing of it over the course of the quarter? And then what's the impact we should expect in Q3?
Douglas Schosser, Chief Financial Officer
Sure. We started the restructuring in the middle towards the end of the quarter. Most of the sales were late May and early June. We finished all of the selling activity towards the end of June. We have a little bit more about $20 million, give or take, to redeploy into some asset classes that have a little less supply in the market. So that was the timing. So we will get a full quarter's benefit next year, and we would expect that to be an incremental 4 to 5 basis points.
Tim Switzer, Analyst
An incremental 4 to 5 basis points in Q3?
Douglas Schosser, Chief Financial Officer
Correct. On the investment portfolio.
Tim Switzer, Analyst
Okay, and is that the guide…
Douglas Schosser, Chief Financial Officer
9 total basis points for the margin.
Tim Switzer, Analyst
Okay. And should we assume some incremental NIM expansion on like a core basis on top of that in Q3 and Q4? Or is that going to be the primary driver?
Douglas Schosser, Chief Financial Officer
We continue to focus on our ability to price in this market. So I think there is some opportunity for some additional core margin growth based on how we handle deposit pricing opportunities, as well as loan volumes in the quarter.
Tim Switzer, Analyst
Okay. Great. And then if I could ask follow-up kind of clarifying exactly what's intended in the guidance. On the non-interest income and expense side, you're guiding to low-single-digit growth off of the adjusted base per quarter. Do we take like the average in the first half of the year and just add low-single-digit growth on top of that? Or is it low-single-digit growth in Q3 relative to Q2 and then low-single-digit growth in Q4 relative to Q3?
Douglas Schosser, Chief Financial Officer
I think it's low-single-digit growth on the adjusted Q2 numbers. And I wouldn't necessarily say that it's 2% per quarter; it's 2% over the course of the year.
Tim Switzer, Analyst
Got you. Okay, that's very clear. I'll get back in the queue. Thank you.
Douglas Schosser, Chief Financial Officer
Okay, thank you.
Operator, Operator
Your next question comes from the line of Daniel Tamayo with Raymond James. Your line is open.
Unidentified Analyst, Analyst
Hey, good morning, guys. This is Tim Dahms filling in for Danny. I'll echo the comments. Thanks for hosting and calling to take my questions this morning. You know, first off, yeah, thank you. First quarter in a while here where commercial growth was not very strong. And you alluded to the comment on keeping the loan yields advantageous for you. Can you talk about if that reflects maybe a change in the competitive dynamics, potential entrants in the markets? And then perhaps a follow-up. Can you talk to how current pipelines are comparatively to the last few quarters in that commercial portfolio? Thanks.
Douglas Schosser, Chief Financial Officer
Yes. I wouldn't say it's due to higher levels of competition. I think it is due to both credit discipline and pricing discipline as we look at opportunities. I will say we did have some higher levels of runoff in our portfolio than we were expecting. So that put some downward pressure on the overall balance growth for the quarter. We wouldn't expect that level of payoffs to continue; as for our pipeline, we are seeing pipelines that are similar this quarter to last quarter, and we wouldn't expect to have continued reductions in loan balances across the portfolios because again, we're expecting that runoff to not be as big of an impact on us going forward. But again, that runoff is outside of our control in certain cases of those corporate transactions and things that just created some earlier-than-anticipated paydown.
Unidentified Analyst, Analyst
Great. I appreciate that color there. Then maybe switching over to credit. Cost did remain over low for the quarter. I did see the non-accruals pickup in the commercial and you didn't specifically mention that one single credit. Is there any detail that you can provide on that from an industry vertical and then maybe the trends you're seeing overall in that portfolio?
Douglas Schosser, Chief Financial Officer
Yes. I mean, I don't think that we're getting into that level of disclosure on this call. I would just say, as we stated in our earlier comments, some of the health care portfolio has shown some signs of stress, but we believe that that is getting better or at least normalizing. And we did guide to a more normalized overall provision level. So I think over the cycle, we would say our overall charge-off number would be 15 to 20 basis points. We don't know that we'll get there next quarter, but you should see that credit normalization over time.
Unidentified Analyst, Analyst
Okay great, that's all I had today, guys. Thanks for taking my questions.
Douglas Schosser, Chief Financial Officer
Okay, you're welcome.
Operator, Operator
Next question comes from the line of Frank Schiraldi with Piper Sandler. Your line is open.
Frank Schiraldi, Analyst
Good morning.
Douglas Schosser, Chief Financial Officer
Good morning.
Frank Schiraldi, Analyst
Just first on expenses. Just want to make sure I heard you correctly. So when we're looking at the guidance, you talked to low-single-digit growth. So that's low-single-digit growth in the back half of the year annualized off of normalized 2Q numbers? Is that just saying in a different way? Is that the right way to think about it?
Douglas Schosser, Chief Financial Officer
I think last quarter, we talked about a $90 million per quarter expense number. I still think that's fairly good. So depending on how you look at the second quarter, again, we're looking forward to saying it's going to be around $90 million, give or take, 2% of that. Again, I don't think it's sustained expense growth. We continue to focus on expenses, but there's a lot of uncertainty. So we continue to look for opportunities to drive overall profitability. But again, on the conservative side, we're at that $90 million plus or minus 2% over the course of the year and the quarter.
Frank Schiraldi, Analyst
Got you. Okay. And then just switching gears as a follow-up. Just the macro picture seems to improve a bit, certainly at least stabilized, and bank stocks certainly reacted positively over the last month or so. So just wondering your thoughts if your appetites change at all for M&A, your updated thoughts there on opportunities in the near term.
Louis Torchio, President and CEO
Hey Frank, it's Lou. Thanks for the question. Really, I think with the deployment of our capital strategy, it continues to be, one, protect and deliver on the dividend. Secondly, we are focused on organic growth and optimizing and transitioning the firm over time, which is our stated goal. And then certainly thirdly, acquisitions, we have a strategy, conversations are picking up, whether that means expanding our geography into higher-growth markets, whether it's acquiring an institution that brings businesses that we otherwise don't have, or whether it's a deposit play or really a combination of all of that. So we are actively having conversations. We're interested in growing organically and inorganically. And then, of course, lastly, would be any buybacks as a result of our capital position. So yes, we do see the market clearing. There are more conversations going on, and we are interested, but we're going to be pretty selective. We want to make sure that strategically it propels us to where we want to go.
Frank Schiraldi, Analyst
In terms of geography, would you expect any expansion to be continuous? Additionally, do you have any thoughts on which geographies are most attractive as you consider the potential for mergers and acquisitions?
Louis Torchio, President and CEO
Yes. We certainly consider end markets as a factor. We believe it carries slightly less risk and requires more execution. We aim to grow in diverse markets that offer greater opportunities for our franchise. Currently, we are based in Columbus, Ohio, with a focus on Indiana, particularly the Indianapolis area. We primarily concentrate on areas within our contiguous footprint, which consists of four states. We will evaluate opportunities that come our way but intend to be quite selective in how we allocate our capital.
Frank Schiraldi, Analyst
Great, thanks for the color.
Louis Torchio, President and CEO
Thank you.
Operator, Operator
Next question comes from the line of Daniel Cardenas with Janney. Your line is open.
Daniel Cardenas, Analyst
Hey, good morning, guys. Just some follow-up on the margin. What kind of rate cut assumptions are baked if any are baked into your margin guidance?
Douglas Schosser, Chief Financial Officer
Yes. Last time we looked at it, we were looking at about three cuts over the course of the year for the final year as part of our margin guidance. Again, I think we're pretty well positioned to handle if it comes out to be two or something like that. But we definitely were providing guidance given the more current bed stamps.
Daniel Cardenas, Analyst
Okay. And then so for every 25 basis points, what kind of cuts, what kind of impact does that have on the margin?
Douglas Schosser, Chief Financial Officer
I might turn that over to Jeff to answer more specifically.
Jeffrey Maddigan, Head of Investor Relations
Yes. Considering the timing, we're looking at September and late New Year. The last two don't significantly affect us. We believe we can reduce deposit prices in line with any cuts, which will help support our margins and potentially increase them as our guidance indicates. It's encouraging to see our ability to lower deposit costs. However, in light of the competition experiencing margin compression, we are keen to reduce costs as well, though we anticipate some limitations to that.
Daniel Cardenas, Analyst
Okay. Great. Thank you. And then what was your CRE ratio, concentration ratio look like at quarter end?
Douglas Schosser, Chief Financial Officer
For that number, just a second. I think that was on the earnings deck in the loan section on page 13. Flip to page 13, that shows the overall concentration. You're looking for a percentage of the portfolio for commercial real estate. So $3 billion on the…
Daniel Cardenas, Analyst
I'm just kind of looking for the regulatory number that everybody is looking at right now.
Douglas Schosser, Chief Financial Officer
All right. Yes, give us one second, we'll pull that for you. We'll come back. If you have another question before that one, and we can come back and clean that up.
Daniel Cardenas, Analyst
Yes, sure. No problem. And then on the operating expense side, thanks for the color there as well. I know there's been some branch rationalization exercises that you guys have gone through. Is that pretty much done? Or could we maybe expect to see a few more branch closures here in the second half of the year?
Louis Torchio, President and CEO
Yes, this is Lou. We do not expect any additional branch closures. We are working on a multi-year plan for consumers that involves investing in the franchise and may include some two-for-ones or consolidations, as well as a modernization plan for the branches of the future, but there won’t be anything significant. We believe we have largely completed the branch closure process for the organization.
Daniel Cardenas, Analyst
Right. So then I think about expenses, then our technology investment is really going to be the biggest growth driver here on a go-forward basis?
Douglas Schosser, Chief Financial Officer
No. I mean we've been building up multiple verticals in our commercial strategy, as Lou mentioned earlier. These verticals have not even been operational for a full year yet. Therefore, as these verticals mature, we anticipate more production from them in full year 2025 compared to their partial contributions in 2024. Additionally, with Urich joining the team on the consumer side, I believe we'll see an improved execution within our branches to boost organic growth. We currently have several growth levers that we plan to focus on over the next year, and we should be able to achieve growth through these foundational activities, along with having full operational years across these commercial verticals.
Louis Torchio, President and CEO
I would add also specifically around your expense question, we have invested a lot in our IT stack. We have invested in our risk management and our commercial credit acumen at the organization. So we are building the firm both from a regulatory and from an operating platform to be able to scale the organization and sort of remix the balance sheet as we described and grow organically. So that run rate that you see has a lot of investment already embedded in it.
Daniel Cardenas, Analyst
Okay, great. Thanks, that’s all I had for right now.
Jeffrey Maddigan, Head of Investor Relations
The CRE concentration is 168%.
Operator, Operator
Next question comes from the line of David Mirochnick with Stephens. Your line is open.
David Mirochnick, Analyst
Hey, good morning. This is David on for Matt Breese.
Douglas Schosser, Chief Financial Officer
Good morning, David.
David Mirochnick, Analyst
I would like to know about the loan book. Can you tell me what percentage of it is purely floating rate and will reprice within three months? Also, what are these rates tied to?
Douglas Schosser, Chief Financial Officer
Yes, absolutely. On the commercial book, we would have 53% of that will be floating. Overall book, it would be 27% would be floating.
David Mirochnick, Analyst
Great. And then is it safe to assume those are tied to prime or sulfur, maybe 200 or 250 spread?
Douglas Schosser, Chief Financial Officer
Yes. I think that's a good assumption.
David Mirochnick, Analyst
Great. And then by chance, do you have the yield on maybe the difference of the floating book on the yield on the fixed rate book?
Douglas Schosser, Chief Financial Officer
If we don't have that information, we will follow up and provide it.
David Mirochnick, Analyst
No worries. And then I guess just switching over to deposits, sorry, if I missed it. Did you guys talk about maybe your expectations on where you think PDAs will kind of settle out? And maybe in terms, are you being more selective now and kind of looking at running off higher cost deposits as you guys kind of mentioned looking at funding costs?
Douglas Schosser, Chief Financial Officer
Yes. I'm going to come back and answer your earlier question. I think if you have that statistic with us. I would tell you, as far as the deposit goes, right, we plan to look at our CD book as it matures and take advantage of keeping the maturities on that short and providing an opportunity for reprice as rates decline in the market. And I would also say that we continue to look at our money market book, and that would have a relatively high beta the way down as would some of our business deposits. So again, I think where we have the opportunity to price deposits down, we'll take advantage of it, but we're also operating in a competitive market, and we want to maintain our overall deposit levels and potentially grow them. So that would be part today. I think the earlier question you asked is what our floating rate yield was in the aggregate, and it's 7.95%.
David Mirochnick, Analyst
Great. I appreciate that. And then last would just be if there's any kind of color you can give, maybe thoughts on the provision going forward? And will the reserve maybe keep ticking higher if you see any pressure in the C&I space?
Douglas Schosser, Chief Financial Officer
Yes. I mean, again, you would expect the provision to go up if our charge-offs go up in order to maintain our coverage ratios. So there is the potential for that. And then other than that, it's a situation where it's going to depend on economic outlook overall. I wouldn't expect our provision is necessarily going to increase because we're putting on riskier credit. So I think the book we expect to maintain the level of credit risk that we take today, but it's going to be tied to both economic changes as well as what happened on the charge-off side.
David Mirochnick, Analyst
Got it. I appreciate it. Those are all my questions. Thanks for the time.
Douglas Schosser, Chief Financial Officer
Okay, thank you.
Operator, Operator
We have another question that came in from Manuel Navas with D.A. Davidson. Your line is open.
Manuel Navas, Analyst
Hey, good morning. So on the loan growth, I appreciate some of the commentary. Do you have the actual runoff that was this quarter that you had to fight against on the commercial side, I feel like a balanced number?
Douglas Schosser, Chief Financial Officer
I would say that we won't dive into all the specifics, but it was not insignificant. We provided a general range of $400 million to $600 million.
Manuel Navas, Analyst
Okay. You mentioned that the pipelines are quite similar, especially on the commercial side where performance has been strong for some time. Which specific areas are performing the best? Are there any that you are considering moving away from as you explore new business lines? I'm curious if you're at a stage where you're narrowing down options, or if all of them are still performing well and continuing to grow.
Louis Torchio, President and CEO
Yes, this is Lou. I'm doing well, thank you for your question. Some of the initiatives are yielding positive results, while others will be more strategic in nature. In addition to the sectors we've mentioned, we are entering our strategic planning phase. We will be reviewing our lower middle market and upper-end business banking model within our geographic area. We are assessing what that model will look like and our strategy for entering the market. This will continue to develop. Some of these businesses will generate fees and deposits strategically, while others will focus on asset generation. As we navigate our strategic planning and as the market progresses, we will determine how to adapt our actions for optimization. Our goal is to enhance performance while allowing flexibility and options to transform the balance sheet as previously outlined. I hope that clarifies things a bit.
Manuel Navas, Analyst
No, I appreciate that. And any specific lines that you're calling out…
Douglas Schosser, Chief Financial Officer
Oh, go ahead, I'm sorry.
Louis Torchio, President and CEO
We are seeing really good success in our sponsored finance group and our SBA group that are contributing and of course, equipment finance has been around. So it's been gestating for a while. And so we notwithstanding the market for that given where those credits get put and where they lie on the curve is a little bit difficult. But we're seeing success there as well. So we're really happy with Jay's leadership, and he's been able to procure a great deal of talent from his former employers across his career to be able to stand those up, and they're relatively efficient. And so we're really pleased with that.
Manuel Navas, Analyst
I appreciate the commentary. Do you have any insight on new loan yields in the pipeline on the commercial side?
Douglas Schosser, Chief Financial Officer
We've been targeting $7.5 million and better. So I would give you generic guidance around that level. Of course, each deal is unique and priced sort of individually. But I think generally, if you think about that being a decent level to count on, obviously, higher is more attractive to us, but it's all risk-based pricing.
Manuel Navas, Analyst
Thank you. Thanks, guys. I'll step back into the queue.
Douglas Schosser, Chief Financial Officer
Thanks, Manuel.
Operator, Operator
There are no further questions at this time. Mr. Doug Schosser, I'll turn the call back over to you.
Douglas Schosser, Chief Financial Officer
Okay. Well, we'd like to thank all of you for taking some time to join us this morning. And all of the information that was discussed is available on our Investor Relations website. Thank you, and we'll talk again next quarter.
Operator, Operator
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.