Smartfinancial Inc. Q4 FY2022 Earnings Call

Ladies and gentlemen, welcome to the SmartFinancial Inc. Earnings Release and Conference Call. My name is Glenn and I'll be the moderator for today's call. I will now hand you over to your host, Miller Welborn to begin. Miller, please go ahead.

Thanks Glenn. Good morning to all of you and we appreciate you joining us today for our Q4 2022 earnings call. We're excited to be on the call this morning to visit with each of you about our bank. We've continued to make great progress on all fronts, execute better every quarter and deliver quality shareholder returns. We thank you for the interest that you all have in our progress, and it's important for us to hear your questions, comments, and feedback. Joining me on the call today are Billy Carroll, our President and CEO, Ron Gorczynski, our CFO, Rhett Jordan, our CCO, and Nate Strall, our Director of Corporate Strategy. Before we get started, I'd like to ask each of you to please refer to Page 2 of our deck that we filed yesterday evening for the normal and customary disclaimers and forward-looking statements; please take a minute to review these. Q4 was a fantastic quarter for our company and we're very proud of what we were able to accomplish for the quarter and for the entire year. Our year-over-year increase in earnings for the bank was strong and I also believe we executed much better than most of our competition for the quarter. I'm proud of the team for their focus and continued improvements we made during 2022. With that, I'm going to turn it over to Billy.

Thanks Miller and good morning everyone. This quarter was a great way to close out the year. As you'll see from the results, we continued to focus on growing both revenue and earnings per share. We had discussed our plan for 2022 on prior calls, and these results show how we are executing on transitioning this company into one that has a very solid core foundation and earning stream. I'll open my comments referencing our 2022 year in review slide on Page 3 of the deck. This slide details the results of the work our team has been doing. Looking at the compound annual growth rate of these key areas shows why we have been and believe we'll continue to be a great company to invest in. Looking at our fourth quarter performance on Slide 4, you'll see very nice trends in our areas of key performance. We had great operating EPS for the quarter of $0.76, and Ron is going to dive into those details more in a minute. We had nice expense control coupled with another record revenue quarter. Our loan growth continued to be outstanding coming in at 17% annualized for Q4. There was a slight contraction in deposits as we let some rate-sensitive non-core balances roll out of the bank as some competitors pushed rates higher than we wanted. We felt like there was no real spread advantage in keeping those deposits, but we did however, defend our rate-sensitive core balances. Ron will discuss our betas in more detail, but we felt good about where we entered the quarter on funding and related costs. Holding our loan to deposit ratio at 79% has allowed us to be selective on where we're increasing those funding costs. Our efficiency ratio trends are again positive coming in at 61%, and I would also like to note the momentum in our non-interest income, especially given the drop in mortgage revenue. We're excited to see growth in many areas of these lines, including treasury fees, wealth, insurance, and capital markets. Credit remains outstanding within NPAs holding steady quarter-to-quarter at 10 basis points and our ROA and ROE were solid at 1.10% and 16.5%, respectively. The next couple of slides detail our markets. I'm not going to spend a lot of time here other than to say we were able to open our Franklin, Brentwood, Tennessee office allowing us to continue our expansion into the Nashville MSA. All of our markets continue to show steadiness. Our company, like others, continues to watch the economy closely as rising rates will slow some areas, but we continue to be cautiously optimistic even with elevated rates. I'll speak more to our outlook in my closing comments, but now let me flip it over to Rhett and let him go into a little bit more detail on lending and credit. Rhett?

Thank you, Billy. As Billy mentioned earlier, solid loan growth continued throughout the year as we ended 2022 with quarter-over-quarter net organic loan and lease growth at a 17% annualized pace excluding PPP loans. For the full 2022 year, the bank saw total loans and leases outstanding grow a little under 20% over year-end 2021 with diversification in the types of loans generated, as well as solid geographic dispersion of that growth. As you can see on Slide 7, loan and lease balances outstanding grew over $130 million for the fourth quarter, putting the portfolio total at just over $3.2 billion. The loan portfolio mix has continued to be stable as well and average loan yields continued to rise through the latter half of the year. Improved interest rates on new loan production and renewals as the year progressed generated gradual increases in portfolio yield with our largest increase happening in Q4, pushing that average yield up 46 basis points quarter-over-quarter, just over 5%. We finished the year on a continued strong trend as December monthly origination average yields were over 6%. Slide 8 shows a balanced and diversified commercial real estate portfolio as well. Our largest segment concentration is in the hospitality sector, driven primarily by positions in our bank's strong tourism markets in east Tennessee and the Florida panhandle market areas. We feel very comfortable with our positioning in the CRE space as we believe the risk profile of our finance projects, historically conservative underwriting methodology and the market experience of our clientele in this space has us poised to sustain a minor correction in the sector with very little disruption in performance should such an event occur. And while national economic forecasts still indicate a higher probability of recessionary pressure nationally for 2023, we believe the continued population growth and corporate relocation trends happening in our footprint will serve to minimize the impacts of those pressures across our bank's market area compared to other parts of the country. Even with this relative optimism and our market condition outlook, like many others in the industry, we took some additional steps to implement even more precautions than normal in our credit underwriting procedures throughout 2022 in efforts to more aggressively battle potential impacts of a challenging interest rate environment, continued supply chain disruptions, and sociopolitical challenges on our client base. However, despite those hurdles, we still saw solid performance being reported by our commercial clients throughout the year, strong traffic, and demand in our heavier tourism markets and a continued sense of general positivity and optimism for 2023 being expressed by our clientele. As the next slide indicates, our portfolio of credit quality continued to be strong in Q4 as it has been all year. Slide 9 shows continued stability across all of our core asset quality metrics. NPAs, past dues, and classified loans to total loans are all stable quarter-over-quarter and right in line with our metrics throughout 2022. Our CRE portfolio saw a slight decline quarter-over-quarter, and we ended the year just below the regulatory targets in both total and C&D segments. Overall, our 2022 loan production and credit quality metrics saw extremely strong results due to some very hard work on the part of a great team of associates across our company. Now I'll turn it over to Ron to talk through our allowance, deposit portfolio, and earnings details.

Thanks, Rhett and good morning everyone. Let's move forward to Slide 10, our loan loss reserve. During the quarter, we recorded a $788,000 provision related to our strong loan growth. At quarter end, our allowance to originated loans and leases was at 73 basis points, and our total reserves to total loans and leases was at 1.13%. Similar to other financial institutions during the quarter, we experienced a decline in deposits. As some of this was anticipated due to our high liquidity position, we additionally had customers deploying some of their excess cash into higher-yielding security instruments. These deposit outflows as many financial institutions experienced caused significant pricing competition throughout our footprint, causing rates to increase quickly as our less liquid competitors rushed to shore up their balance sheets. As we stated during the last few quarters, our goal is to be judicious in our approach to raising deposit pricing, but not at the expense of losing good customer relationships. As a result of defending these relationships, our total deposit costs increased 40 basis points to 0.85% for the fourth quarter and was 1.06% for December. We do anticipate this upward deposit pricing pressure to continue for the next few quarters. Our loan to deposit ratio increased to 79%, up from 72% in the previous quarter. Despite this increase, we've remained below our historical loan to deposit ratio levels and are comfortable with both our liquidity position and the composition of our deposit portfolio. That said, we do anticipate some mixed shift in the composition of our deposit portfolio over time as clients elect to move cash into higher-yielding account types. During the fourth quarter, we deployed much of our excess cash to fund new loan production and cover our deposit outflows. Our overall liquidity position, which includes cash and securities, remains strong at approximately 22% of total assets. Our fourth quarter margin was 3.51%, representing a 22 basis point quarter-over-quarter expansion. Our yield on interest-earning assets increased by 62 basis points, primarily driven by a 46 basis point increase in our loan portfolio yield, which included 18 basis points of loan accretion. Our loan portfolio yield less accretion for the fourth quarter was 4.87%, and for the month of December it was 5.08%. Our interest-bearing liabilities increased 57 basis points driven by increases in our interest-bearing deposit costs. Our interest-bearing deposit cost for the fourth quarter was 1.18%, and for the month of December was 1.45%. At quarter end, our cumulative deposit beta during the cycle was roughly 23%. However, given the previously discussed market environment, our increase in this quarter's beta is estimated to give us a cumulative beta for this rate cycle of 35% with our total cost of deposits for the first quarter in the 1.3% to 1.35% range. Giving margin guidance is difficult in this uncertain rate environment, but with that said, we anticipate our margin for the first quarter in the range of 3.3% to 3.35%. During the quarter, operating revenue increased by $1.7 million for an annualized quarter-over-quarter increase of over 15%. When comparing to the fourth quarter of 2021, our operating revenue increased by $7.9 million or over 21% year-over-year. As operating revenue is one of the primary metrics by which we judge our performance, we are extremely proud of our SmartBank associates' ability to consistently grow revenue despite the various ongoing economic challenges. On Slide 13, you'll find some interest rate sensitivity information. With the sharp rise in interest rates and the deployment of our cash liquidity during the year, our balance sheet has shifted from a modestly asset-sensitive to a general and neutral position at year end. Looking ahead, we anticipate that any small increases or decreases in short-term rates will generally have a limited impact on our net interest margin and net income. As we move into an uncertain 2023, the company continues to focus on strategies to protect income in both an up or down rate environment. On Slide 14, for the fourth quarter, our operating non-interest income increased to $7 million versus $6.2 million in the prior quarter. Our insurance revenues increased due to the acquisition of Sunbelt Insurance, and we also benefited from $700,000 of revenue from our capital markets group. Looking ahead to 2023, we will continue to focus on building steady recurring fee income streams. Our non-interest income forecast for the first quarter is in the $7.5 million range. On Slide 15, our continued efforts to create operating efficiencies to manage expenses resulted in a fourth quarter operating efficiency ratio of 61%. As we continued our steady downward trajectory, we expect our efficiency ratio for the first quarter to be similar to those of the previous quarters, then in the later part of 2023, getting back to the low sixties range. Our operating non-interest expense was $27.5 million, a 1.2% increase over the prior quarter. This increase was primarily attributable to increases in technology-related expenses and professional fees. As we continue to upgrade, invest in, and future-proof our organization, we fully expect ebbs and flows in various expense categories. That said, we always remain ready to tighten our belt to ensure we hit our income targets and deliver on our goal to create shareholder value. For the first quarter, we are forecasting the expense run rate in the $28.2 million range, an increase from the prior quarter, primarily stemming from our salary and benefit expenses of $16.8 million. On Slide 16, capital. During the quarter, our capital benefited from strong earnings and positive momentum in our AOCI position. As we move forward into 2023, we anticipate building capital at a rate sufficient to fund future growth and continue to build our capital ratios. At quarter end our tangible book value was $19.09 per share; however, excluding the temporary impact of our unrealized security losses, our tangible book value per share was $21.18, representing a quarter-over-quarter increase of 3.7% and a five-year compound annualized growth rate of almost 9%. With that said, I'll turn it back over to Billy.

Thanks, Ron. As you can see, we're really hitting a nice stride, and as Ron mentioned in his guidance, we continue to be well positioned. I do feel that we will see a slowing of loan growth a little as we start the year, particularly for us as we had some clients accelerate some closings into 2022 that we had to pay for in Q1 2023. With that said, I feel our loan growth outlook is still solid, but in the current environment, I'm more comfortable with mid-to-high single digits growth in the loans from a forecast standpoint for the year. We're also positioning to handle this rate environment with a heightened focus on non-interest bearing and low interest-bearing deposits. We've ramped up our treasury platform and resources and continue to make this area an emphasis for the bank. Now that we've digested the lift-outs from late 2021 and early 2022 that added six new markets to our bank, we're looking for more opportunities to add talent to our team. We're in continued conversation with bankers that can add balances to both sides of the balance sheet and feel good about our prospects to bring on more sales team members in the coming quarters. I was very pleased with the performance and growth of both our Fountain Equipment Finance Group and their SmartBank investments wealth platform. We are expecting continued upside from these groups in the coming year. This coming quarter we're also merging our two insurance agencies and are excited to watch this company take off in 2023. Again, a very nice upside for revenue generation as we get its foundation set. We continue to make investments that are accretive to growing our value and are staying focused on those singles and doubles that will create a great core franchise. To close, again, a very successful year for our company and a big thank you to our SMBK team. Our group continues to execute while building an outstanding culture. It's a great time to be involved in this company, so I'm going to stop there and open it up for questions.

Thank you. Our first question comes from Brett Rabatin from Hovde Group. Brett, the line is now open.

Hey, good morning everyone. Thanks for taking the question.

Good morning, Brett.

I wanted just to first appreciate all the guidance as usual. I wanted just to start on the balance sheet. You obviously have been able to use your liquidity to fund the loan growth in the past year. Maybe any thoughts just on how much liquidity you think you might have left on the balance sheet now? The balance sheet grows from here, I would assume we kind of pivot from the balance sheet growing more in relative to the past few quarters?

Yes Brett, I'll let Ron kind of dive into a little more color on details, but yes, you're right. I think we've kind of gotten to the spot where we're holding the liquidity that we feel like we need for a bank our size right now. So that's kind of our comments on the growth that we see from here, we feel pretty comfortable about being able to fund that and increase those deposit balances accordingly as we see the loan growth opportunities. But Ron, you got any additional color you want to add to that?

Yes, in the near term, I think cash and securities will probably remain stable and we will fund much of our loan growth with our deposit growth. No real wholesale changes until we probably get into 2024. We do have quite a bit of $250 million of treasuries that will be maturing during the first six months, so we may have some strategy to deploy some balance sheet strategies or ideas, but up until now we're kind of going to keep, I think we are looking to remain stable where we're at today.

Okay, that's helpful. And then I wanted to just talk about commercial real estate. I think a lot of investors are kind of concerned about it and maybe loans that were made at lower rates, and as the market re-prices those, what those will look like? Can you give us any color on how you're looking at commercial real estate and just what you've done to maybe insulate your portfolio from any of the challenges that folks are talking about? Thanks.

Yes Brett, I'm going to let Rhett kind of dive into that, but just kind of anecdotally, I mean, it's something we talk about a lot and then we've been watching and obviously do quarterly reviews, annual reviews for clients looking at that, during some shocks, and we still feel extremely comfortable about the quality of our loan portfolio, even with a little high rate environment. But obviously it's changing. It's obviously changing the way we're looking to underwrite newer credits. It is, it's probably looking for a little more cash into certain deals today, and a little more equity in some of these just to kind of hedge against potential up rates. But Rhett, you want to maybe kind of dive into kind of how you're walking through that analysis with the team?

We are likely similar to many others in that last year, as interest rates started to rise rapidly, we began implementing additional rate adjustments beyond our historical practices for underwriting new opportunities. As the year progressed, we initiated a process to review transactions set for renewal in the next six months to a year, evaluating projects that had been financed in previous years at lower interest rates to assess their performance. Historically, we have maintained a conservative approach concerning equity requirements at the outset of a project, rigorously stress testing interest rates to ensure projects could endure both rising interest rates and potential reductions in operating income. We remain optimistic based on our discussions with clients regarding current rent rates, even amid the higher interest costs across most of our portfolio, and we are confident about our position as we continue through the year.

Okay, that’s great color. Maybe if I could sneak in one last one on the margin, you mentioned, obviously tough to project here. But just with the balance sheet is more neutral to rates than the Feds. The Fed stops here, would you expect the margin to stabilize and kind of remain flattish from the first quarter subsequently or would you give us any other color around that?

Yes. We're expecting our margins to remain stable as we move through 2023, likely in the range of 330 to 335. Currently, we are slightly elevated for Q4 due to additional accretion, but we do not anticipate any further contraction at this point.

Okay, great. Thanks for all the color.

Thanks, Brett.

Thanks, Brett.

Thank you, Brett. Our next question comes from Thomas Wendler from Stephens Inc. Thomas, your line is now open.

Hey, good morning everyone.

Good morning, Thomas.

Yes, just back on deposits, it sounds like you guys have enough securities rolling off to help fund most of the loan growth throughout the year. But just for the rest of the loan growth, are you guys looking at any CD specials you might be running just to help with the deposit growth? I hope you’ve run any yet. And then you also leaned on FHLB borrowings during 4Q a little bit. Do you see yourselves doing that anymore throughout 2023?

I don’t think we had it.

We did not have any FHLB borrowings for the fourth quarter and currently don't see the need for FHLB or broker deposits. We are running promotional CD specials and offering more exceptional pricing. We have increased our overall sheet rates, but we are focusing on maintaining good relationships and tailoring our pricing as we move forward.

And one point of clarification, Ron, you’ve come out those securities rolling off, that’s 2024?

In 2024, the securities would be rolling off. Yes, $3 million to $4 million, yes.

I’m sorry. Go ahead, Thomas.

No. I was just thanking for the clarification on the securities there. And then my other question is just on your initiatives you set for 2023, the customer pricing software, the implements on the enhanced risk and fraud solutions and then you're improving the treasury management system. Can you just give us an idea of the benefits you’re seeing there and then if there’s any allocated costs to that, that we should be thinking about?

Ron, allocated costs?

They are included in our guidance at this point and will appear in our noninterest expense. We are aiming to start all those projects in the first quarter. The advantages of pricing are clear, particularly with the fraud prevention software, which enables us to analyze much more data compared to our previous manual processes. We expect to see benefits during this time frame, resulting in significant savings and preventing losses on our deposit transactions. Furthermore, we anticipate gradual implementation throughout 2023, and this will be reflected in our guidance.

Let me add a bit more detail, Thomas. Yes, in line with Ron’s point, we are in the same situation as other banks dealing with significant fraud in our industry. We believe investing in fraud prevention is a wise choice to help reduce potential losses. Our hope is that this will save us some money in expenses. We are also excited about our treasury services. We have a strong treasury platform and plan to enhance it further with upgrades to offer more features to our clients. Many of the new clients we have brought on board are very experienced treasury users, so it’s important for us to stay on top of this and continue to grow, which we believe will help us expand our lower-cost deposit base.

All right. I appreciate all the answers guys. Thank you.

Thanks, Thomas.

Thank you, Thomas. We have our next question comes from Graham Dick from Piper Sandler. Graham, your line is now open.

Hey, good morning guys. How is it going?

Good morning, Graham.

So I just want to hit on the NIM maybe in a different way as it relates to your loan growth guidance and the balance sheet from here. So I know you guys are saying mid-to-high single loan growth. If you see demand for loans and growth surpass that guidance maybe into the 10% range or low double digits, would you expect the margin to remain in that 3.30% to 3.35% range you talked about or do you think that incremental funding pressures may push out a little bit lower? And I guess the second part of that question is, what would you be funding that new loan growth at in terms of the cost on CDs or I guess, your NOW accounts?

I’ll begin and others can add their thoughts as needed. I believe you are correct, Graham. For us, we've communicated our markets, teams, and projections, and we're confident we can sustain mid-to-high single-digit growth internally at our standard rates. If we experience growth that exceeds our expectations, particularly as we move into the middle of the year, we may need to fund that at a rate closer to the market, which could put additional pressure on our margins if we decide to push our loan growth targets higher. Ron, you had a comment...

Yes. We do anticipate if we do have heavier loan growth, we will run more specials. We do anticipate us to be self-funded. Obviously, we could go back to the wholesale market, but we’re still, even with the spread we’re getting, I still think it’s probably not going to hurt our margin at all. So…

Okay, that’s good to hear. What are I guess, on your interest rate sensitivity side, what kind of drove the move to liability sensitive here? Is it just the deployment of excess cash from here?

Exactly that, yes. Our cash is making us more asset-sensitive than we really were.

Okay. That’s kind of what I figured in what we’ve seen over the last couple of quarters with that slide. But if I can sneak in one more in here on the expense side, I think you said $28.2 million, right, in 1Q, and then it sounded like the efficiency ratio should improve from there. Are you kind of hopeful or guiding towards maybe some flattish expense growth after 1Q? I’m just trying to get a sense of what the full year might look like from an expense standpoint.

Yes, I think on the expense side, we will see an incremental increase, but not significant amounts. Q1 is typically our weakest quarter. We are dealing with some adjustments in taxes, wage increases, and catching up on our deposit beta. Moving forward, as we gain leverage from loan production and stabilize deposit rates, our expenses should remain relatively stable during that period. We're focusing on the $28 million range.

Graham, I’ll just add that as we forecast the noninterest expense line for the year, we're optimistic about managing all those areas. Naturally, we are navigating a competitive wage environment, and it’s essential for us to retain talented staff members. Therefore, we may have allocated a bit more budget for some of those increases than what we've typically seen in recent years. However, we remain confident in our ability to control that expense line. As you've noted, with some slight increases in expenses, we might see the efficiency ratio rise a bit before it eventually decreases again. Our goal remains to reach 60 or below, and we believe we can achieve that in a relatively short timeframe.

Okay, I appreciate it. Thanks guys.

Thanks, Graham.

Thank you, Graham. We have our next question comes from Feddie Strickland from Janney Montgomery Scott LLC. Feddie, your line is now open.

Hey, good morning guys.

Good morning, Feddie.

Good morning.

So your noninterest income guide is a pretty healthy jump from the fourth quarter. Is that driven by any fee income line in particular, whether it’s insurance or Equipment Finance? Just curious what the drivers are there.

In the third quarter, we saw a decline in capital markets, and as Billy noted, mortgage revenues also decreased. Looking ahead to the fourth quarter, we anticipate benefiting from a full quarter of revenue from our recent insurance acquisition, and we've also seen improvements in our capital markets activities. We didn't experience any significant new developments; rather, we expect the segments that struggled in Q3 to gain momentum in Q4, which we believe will continue into 2023.

Got it, that makes sense. And then just moving to deposits, a lot of your tenancy neighbors have had a good bit more pressure on their deposit costs than you guys are seeing at SmartBank. Do you feel like your footprint in Alabama and Florida is a big part of that? Has that helped you to kind of mitigate some of the deposit cost pressure?

Yes. I think some. I do think the geographic diversification that we have helped some of that, so we can price. And I think we’ve really worked hard over the course of the last couple of years, Feddie, building that kind of that more solid core funding base and I think that’s showing a little bit now. Not that we’re immune from rate pressures, and we’re going to continue to still have to defend, as Ron and I both said in our comments, we’ve got to continue to defend those core rate-sensitive deposits. But I do think it helps. I think it allows us to kind of take a look at pricing in other markets. And if we need to adjust one market versus the other, it allows us to do that. So I think overall it helps, but doesn’t make us immune. It’s, to your point.

It’s tough everywhere.

In response to your point, many of our competitors, particularly in Tennessee, are raising some of these rates more than we would prefer. However, that's just part of the situation. We will continue to protect our position.

Got it. That's a great point about the investments made on the deposit side. There aren’t many banks that can afford to let some of the higher rate deposits go. I have one last question: can you discuss what you’re observing in the area just outside Nashville? What potential do you see for loans there, and how much growth could we expect in that market over the course of the year?

Obviously, Nashville’s MSA is arguably one of the best in the country. A lot of competition. I mean, when you got a market like that, it’s an extremely competitive market. We know that. But it kind of goes back to the team you got and the talent you have. We’ve got some great folks in our Middle Tennessee group. I do believe that we’ll have some nice opportunities to grow Nashville. We’re looking strategically and looking at how we want to expand in that zone. We think that is a zone that we can and want to grow in. And so as far as how much growth for us, it’s kind of tough to say. It will be a function of really kind of the strategies that we want to execute this year. But there’s a good upside there for us and looking forward to watching this Nashville team grow for our bank.

Got it. I appreciate you guys taking my questions.

Thanks, Feddie.

Thanks.

Thank you, Feddie. We have our next question comes from Catherine Mealor from KBW. Catherine, your line is now open.

Thanks. Good morning.

Good morning, Catherine.

Good morning.

I just want to throw it back to the margin and I think about loan yields. I know you gave the December loan yield was 5.08%, I think, is what you said. And so as we think about the piece of the variable rate of your book that resets over the, what you call the longer term, that $561 million that resets over three months, what’s the kind of pace that you see that happening? And maybe as you think about where you see loan yields going over the kind of the course of the year, how would you think about peak loan yields or beta or the re-pricing opportunities from that piece of the loan book?

Sure, I'll begin. For 2023, specifically in Q1, we have approximately $25 million that is not currently resetting but will. The current rate for that is 4.87%. With our new loan production and the upcoming resets, we anticipate our loan yields to be around 5.35% to 5.4%. Going forward, we expect to have about $25 million due each quarter for the rest of 2023, all of which are in the high 4s, around 4.8% to 4.9% in terms of weighted average yield, which will reset to the current rate. We are confident that our loan yields will steadily increase as we progress through 2023.

Great, that’s really helpful. As this develops, do you think the margin will stay within the 3% to 3.35% range for the remainder of the year, or do you anticipate an increase or decrease from there?

Yes, at this point, we’re looking to hover 3.30%, 3.35% range.

It's related to deposits. Currently, we anticipate experiencing some ongoing pressure on the deposit side. Essentially, any gains we achieve on the loan side are somewhat offset by the situation with deposits. We are optimistic about potentially widening some of that spread. However, based on our observations of the current markets, we feel more assured that our net interest margin will remain stable for the foreseeable future.

Great, okay. That makes sense. And all of my other questions were asked and answered. Thanks so much.

Thanks, Catherine.

Thank you, Catherine. We have no further questions on the line. I will now pass back to the management team for closing remarks.

Thanks, Glenn. Again, in closing, thanks again to each of you for joining us today. As always, please reach out directly to any of us if needed, with additional questions. We appreciate your time today, and have a great rest of your week.

Thank you. Ladies and gentlemen, this concludes today’s call. If you have missed any part of this call and would like to hear it again, our recording will be ready shortly. Thank you for joining today’s call. Have a lovely day.