S&T Bancorp, Inc.

Good day, ladies and gentlemen, and welcome to the S&T Bancorp Third Quarter Earnings Conference Call. At this time, all participants have been placed on the listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mark Kochvar. Sir, the floor is yours.

Thank you very much. Good afternoon, everyone, and thank you for participating in today's conference call. Before beginning the presentation, I want to take time to refer you to our statement about forward-looking statements and risk factors, which is on the screen in front of you. This statement provides the cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation. A copy of the third quarter 2021 earnings release can be obtained by clicking on the press release link on your screen or by visiting our investor relations website at www.stbankcorps.com. We will be reviewing an earnings supplement slide deck as part of this presentation. You can obtain a copy of those slides by clicking on the link on your screen or on our website under Events and Presentations, 3rd Quarter 2021 Earnings Conference Call. Click on the 3rd Quarter 2021 Earnings Supplement link. With me today are Chris McCommack, S&T's CEO, and Dave Antelik, S&T's President. I would now like to turn the program over to Chris.

Thanks, Mark, and good afternoon, everybody. I'm very pleased to be with you this afternoon, and on behalf of Mark and Dave, welcome to our call. Personally, I'm particularly pleased as I wrap up my first two months. Needless to say, it's been a very busy eight weeks as the new CEO at S&T Bank, and today is another milestone, and as you know, when you're new, you have a lot of firsts. This quarterly earnings call is the last of my significant firsts, and we're now 100% focused on moving forward. I'm going to touch on a couple of things, two main things in my remarks. One, where we've been focused since I arrived, and briefly touch on our financial performance. I don't want to steal Dave or Mark's thunder, as they will provide more detail, and they, along with our entire leadership team and employee base, deserve real credit for some solid results. First, on the what I've been doing front. You'll see on the slide, page three on the left-hand side, I've viewed these first days as simply an integration into this company. I'm becoming part of S&T. S&T is learning about me, and we're moving forward together. The term integration is something that we've used collectively as a leadership team and an employee base in order to, one, understand a lot about who we are, how we differentiate ourselves, how we're winning in the market, and where the opportunities may be for growth and improved performance. That will build to our future state, and we'll have more details around that as we head into 2022. Within this activity and this integration, it's been a very busy one. We've had significant number of employee meetings, both one-on-one and in group sessions. And we've told it off that I've had the opportunity over the past eight weeks to be in front of almost one-third of our entire employee base. We've also had significant senior leadership engagement, including a few-day off-site strategic planning session at the end of September that did a lot to build the team, as well as organize our focus around how we move forward together. Obviously significant engagement with our board, shareholders, and the investor community to not only introduce myself, discuss our future, as well as most importantly significant customer engagement out in the marketplace. By the end of the week, I will have been in all of our markets and have come away from this time extremely, extremely optimistic about our future. We have many strengths. Most importantly, we have a very talented employee base driving customer engagement and customer experience. And that speaks a lot to the bottom left-hand side of this page. And there's really three big areas of focus. How I think about this business and where our leadership team is focused is very much around doing everything we can to drive employee engagement first, engaged, excited employees, employees that have the tools and the skills to perform and to deliver for customers are going to lead to high levels of customer engagement as well as market following. We have a great name and reputation in the marketplace, and focusing in this way is only going to enhance it. That work is very much underpinned by an everyday focus on not only safety and soundness, delivering our results as we expect them, but operational excellence. Whether we're face-to-face with our customers, with a digital interaction, or in the back office from an operations standpoint, this focuses on operational excellence, safety and soundness, and delivering for those engaged customers in markets that we have the honor to serve. Our focus is on profitable growth and the consistency thereof. That's the output of the work that we're doing around these two big inputs around engagement, soundness, and operational excellence. Again, more to come, a lot more details to follow. This is the perfect time of year for us to be planning for 2022 and beyond, and we look forward to discussing those things with you in the future. On the right-hand side of the page, a couple of highlights that I want you to hear, and again, Dave and Mark will go into more details. First, we had earnings of 70 cents a share. We feel very good about those solid earnings, primarily because of how they were driven, and that was through some very strong loan growth north of $100 million late quarter. That loan growth was broad-based, both in our commercial C&I business as well as in our consumer portfolios. The good news here is our pipelines remain strong. And again, Nate will give you more details. And during all this change, one of the things that we also wanted to pay attention to, and it's a testament to this leadership team, is we've also stayed focused on expenses. The efficiency of this company is part of what we're known for. And in spite of change and transition and new leadership, we kept our eye on that ball. Last, as we talk about the earnings release, we're seeing positive trends in our hotel portfolio. This is a topic that's been a discussion for the past few quarters and past few months, and things seem to be moving in the right direction, certainly stabilizing compared with where they were. And as it relates to confidence in our future, I am very pleased to re-emphasize the decision that was made in our board meeting earlier this week, and that was an increase of our dividend by a penny, or 3.6%, to 29 cents a share. I look forward to your questions as we move forward in the call, but for now, I'm going to turn it over to Dave, and he can provide more details. Great. Thank you, Chris.

And good afternoon, everyone. I'd like to refer you to slide four. As Chris mentioned, we're pleased to report Lundgren's excluding Triple T at $118 million during the quarter. This represents a 7% annualized growth rate when compared to Q2. Drivers of growth include increased revolving line utilization in our CNI book from 31% to 33%, which translates into approximately $31 million of balance growth. We also experienced an increase in our total revolving commitments of $23 million during Q3 2021. as new customer acquisition remains solid. Most of this commitment growth was in our asset-based lending division, where we continue to carve a niche of providing a unique banking solution for the lower middle market. Asset-based lending will continue to be a strategic focus for us moving forward. For the quarter, we also experienced total consumer loan growth of $38 million, driven primarily by residential mortgage balance increases. which are primarily the result of a shift in customer activity away from refinancing to purchase, where our balance sheet products are preferred. Looking forward, our commercial loan pipelines improve quarter over quarter. This includes C&I, commercial real estate, and our business banking segment. We also anticipate increased utilization from the 33% that I mentioned earlier as our commercial borrowers seek additional working capital to support growth. As a comparison, pre-pandemic utilization rate averaged approximately 42%. Getting back to pre-pandemic levels would result in approximately $200 million of additional loan growth. The consumer pipeline also grew quarter over quarter and reflects the shift in customer activity that I mentioned earlier, with demand for portfolio residential course mortgage and home equity loans both increasing. I thank you for your continued support and interest in our company, and I'll now turn the call over to Mark for his comments. Thanks, Dave. Net interest income improved by about $400,000 compared to the second quarter. This is due in part to an increase in PPP activity, which was $4.2 million compared to $4.1 million in the second quarter. An extra day in the third quarter also helped net interest income, along with an increase in average loan balances, including PPP, of almost $100 million. These improvements were offset by lower loan yields, as the rates on new loans are tracking about 50 basis points lower than paid rates. The headline and interest margin rates decreased just two basis points, as the loan yield decrease combined with higher average cash balances of $129 million were offset by relatively higher PPP revenue. Although the dollar amount of PPP revenue increased only slightly compared to the second quarter, the average balance of the PPP loan declined by $193 million. resulting in an outsized impact on the NIM rate. There remains about $181 million of Triple P loans on our balance sheet and approximately $5.7 million of related fees to be recognized. Looking ahead with loan growth returning and Triple P coming to an end, we should begin to deploy the higher cash levels on the balance sheet. This should help offset the loan yield pressure I mentioned earlier and stabilize the net interest margin rate and, importantly, improve net interest incomes. The influence of Triple P should end after the first quarter of 2022 when forgiveness is expected to be essentially completed. Next, non-interest income in the third quarter increased by about $400,000 compared to the second quarter. The largest increase was in mortgage banking, which improved by about $400,000, primarily due to a higher mortgage servicing rights valuation. Wealth management showed continued improvement through a combination of higher assets under management and increased customer activity. We expect the run rate in non-just incomes to be $15 to $16 million per quarter. Non-just expense increased by $1.4 million compared to the second quarter, but remained well controlled at $47.2 million, in line with our expectations. Higher salary and benefits of $0.7 million came mainly through incentives and higher base dollars related to the new hires. Other expense categories were in line with the prior quarter. We expect our expenses to be $48 to $49 million in the fourth quarter as investments in our production capacity will continue and incentives will be higher related to the increased activity we experience. Next, our allowance for credit losses. The loan decreased from 1.56% in the second quarter to 1.55% in the third quarter, with a relief of about $1.3 million. There were several moving parts in the reserve this quarter. First, Specific reserves were higher than the second quarter, as all but about half a million of $6.5 million ended at the end of the second quarter, mostly led to the hotels, but improved valuations resulting in the elimination of those specific reserves. Second, we added a new $9.3 million specific reserve related to the C&I relationship. This resulted in an increase in specific reserves of about $3.4 million. Third, for the ACL in total, offsetting the net addition in specific reserves was lower qualitative adjustments related to continued improvement in economic conditions and the forecast. Unrelated to the allowance, but impacting NPLs, we moved two relationships totaling $12.2 million to OREO, so although NPLs decreased by $1.3 million, with this move to OREO, NPAs increased by 10.9%. Our capital ratios improved in the third quarter and are in excess of regulatory, well-capitalized levels. And our capital cushioning continues to expand. While we have $37.4 million remaining on our buyback authorization, we have no media plans for buyback. We're monitoring valuations and are prepared to respond should conditions warrant. Our preference is to utilize our capital to support growth organically as far through M&A. Thank you very much. At this time, I'd like to turn the call back over to the operator. Provide instructions for asking questions.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Michael Perito with KBW. Michael, your line is live.

Thank you. Good afternoon, Chris. Good to speak with you. Dave, Mark, good to speak with you again. A couple things. I want to start on the wound growth. It was good to kind of see the reacceleration here in the quarter. Dave, based on your comments, I mean, it sounds like the consumer and commercial pipelines are up quarter on quarter. So, I mean, as we think about, obviously, there's other items like paydowns and, you know, closings that get pushed and things of that nature. But, I mean, is it, you know, do you feel like, you know, with the PPP balance is largely gone, I mean, that we can kind of derive, you know, like 5% to 7% loan growth, give or take, years from here, annualized? I mean, is that in the realm of what you guys are thinking based on the pipelines you see and, you know, Anything above that likely comes from maybe a bigger pickup in line utilization?

Yeah, I think your description is right on, Mike. So with the existing pipeline of new business activity that we have, we were comfortable guiding towards that low single-digit loan growth number through the balance of the year. With the additional tailwinds of increased utilization in both our revolving CNI book, the higher utilization that comes along with some of the ABL books, And as construction projects continue to fund through the balance of the year, I think we would look at a higher number or guidance for overall loan growth. And then in the consumer business, as I mentioned, the activity has moved more towards a purchase market, which is where our balance sheet plays more of a role in terms of growth and assisting those customers.

Helpful. And then... just a couple more on, on the expense side. Um, maybe Chris would love to hear kind of, you kind of just got there, but any areas of investment or anything like that, that are particular interest or focus for you. And as we look out to next year, um, and I know you guys are probably just starting the budgeting season, but, but how, how, how do you guys kind of internally think of expense growth with, you know, potentially some revenue growth acceleration, obviously push to more digital, um, I'll start there and then I have a follow-up.

I'll put it in a couple of buckets. Mark touched on it a little bit. We will continue to look for talented teams of commercial, middle market, asset-based bankers that are in the marketplace and continue to look for expansion there. That would require additional FTEs and kind of the frontline commercial banks in the state. We're also looking at what I've defined and what we've talked about is what does the operational excellence look like? And there's opportunities within the organization to continue to digitize processes and take paper out of what we're doing. Anything from front-end capabilities that may look like CRM opportunities to, as I said, back office, more call it the loan processing origination function in the mortgage standpoint. But today, we're in the assessment phase and thinking about where the needs are and the prioritization of those needs. But we do know that growth does require continued investment. We do have, again, as I said earlier, I'm very pleased with the discipline that's shown within the company. around expense management. It's not a new thing to talk about with our organization, but we do also need to recognize the fact that in order to grow, investments are required, and we'll continue to balance those things out.

Helpful. And then just lastly, on the capital side, would love to hear, you know, you guys kind of alluded to some things in the prepared remarks. It sounds like, you know, the dividend increase doesn't sound like buybacks are kind of top of the list here, but We'll push you guys a little bit here. I mean, at least by my math, I mean, the tangible ratio probably going to eclipse 10% next year, even if you grow 5%, 6%, 7% on the loan side. You know, the economic environment doesn't seem to be getting worse. Obviously, you have the $10 billion threshold to contend with here. But we'd love some updated thoughts around capital and, you know, how comfortable are you letting these ratios build, I guess, before we could start to see some more, you know, diversified deployments?

Yeah, I think it's something we constantly look at. I mean, the one thing with our balance sheet is if we have a heavier loan base and it's commercial-oriented, it uses or requires more regulatory capital than the average balance sheet, I think, of some of our peers. So even though our tangible might look high on a regulatory basis, We tend to be in line or actually a little bit below some of our peers. So we have to be cognizant not only of the tangible impact but also the regulatory impact to make sure we maintain the correct and sufficient cushions to weather any storm. So I think that puts some limits on how much we would be comfortable buying back in the current environment. But that said, as Chris mentioned, we're in that assessment phase. And if we're reluctant, before we kind of flesh that out a little bit more, you know, to do anything that would impede our options when it comes to our, you know, first and second parties, which are, you know, organic and M&A.

That's helpful. I mean, just one quick clarification. I mean, so, you know, as we think about what you just laid out there, Mark, I mean, so your tier one leverage is like 9.7. Your total risk base, 14%. I mean, is it fair, though, to think that, you know, you know, closer to nine and maybe 13, 13 and a half. I mean, would you guys consider these current levels still in excess, I guess, relative to how you think about the capital, the balance sheet needs?

Yeah, a little bit, but not overly so much that there would be room for a significant buyback program that would really move the needle. The other thing that we will pay attention to is where our stock is trading and what the implied earn back of those buybacks are. And, you know, even in that kind of low 30 range, you know, the earn back on that, you know, gets to be a little bit long. And you have to wonder if that's the right way to deploy the capital.

Helpful. Thank you, guys, for these insights and taking my questions. Appreciate it.

Yeah, thank you. Thanks, Mike.

Your next question is coming from Daniel Tameo with Raymond James. Daniel, your line is live.

Hi, everyone. Just wanted to maybe touch first on the expenses. I know you went into some detail there, but I appreciate the guidance for the fourth quarter, you know, around that 48, 49 million level. But kind of digging in on your comments on continuing investments and higher incentives, how should we think about as we look into 2022 what a good base might be or a normalized growth rate?

Well, in the past, you know, we've always tried to hit that, you know, pretty low single digits of that 2% to 3% range. I think with the readjustment that we're doing and the need to have a higher growth rate, that could be higher in 22 than in prior years as, you know, some of those investments, you know, need to be made and they may not come right away with revenue that followed immediately. So, you know, one of the things we're thinking about in the planning process is potentially a little bit higher than expense fund rate in 22, but that would, you know, begin to normalize as the revenue started to catch up and we could go back to a more normal increased number in farther out years.

Got it. Thank you. And then, second, just a... Modeling question. Did you have the amount of what the MSR valuation adjustment was in per quarter?

The amount wasn't very much. It was about $160,000. It's more of a change. It was negative last quarter, so the delta was about $400,000. It was like negative $200,000, followed by a positive $160,000. So the overall change was about $400,000.

Okay. All right. That's helpful. Thank you. And then finally, you know, just maybe to touch a little bit on the C&I credit that was moved into non-performing status in the quarter. If there's anything else you could disclose there in terms of industry or, you know, the type of borrower and I'm assuming that that was a one-off situation. If there's anything else that you discovered in the portfolio and finding that credit, that'd be helpful. Thank you.

Yeah, sure, Daniel. So I'm not prepared to comment on the industry because it is an active workout, but the total exposure in that relationship, and it is a C&I relationship, is $21.7 million. We continue to work with the customer, and the customer has been cooperative in an effort to work to resolve the credit. The loan was downgraded to substandard and moved to non-performing during Q3. The customer was impacted to a certain extent by COVID, but there were some other operational issues that were evident in our review of the credit. We expect to formalize our workout strategy during Q4, which could result in a charge-off. And we do, however... expect ultimately to resolve this credit sometime in 2022.

All right, terrific. Thanks for taking all my questions. Appreciate it.

Thank you.

Your next question is coming from Russell Gunther with DA Davidson. Russell, your line is live.

Hey, good afternoon, guys. Hey, Russell. I just want to start with the ABL portfolio and a reminder of, you know, what the size of the portfolio is today, some comments on what that contributed to growth in the quarter, and then how you ultimately would look to scale that going forward.

Yeah, so the commitments at the end of the quarter were around $165 million. Utilization rates in that portfolio tend to run in the 60% range. That vertical is two years old. The folks that we brought on board to lead that charge just celebrated their second anniversary. We plan to accelerate our growth in that space. We do feel that from a risk perspective, we have a very strong practice. There's a very rigid monitoring in that space. Our risk appetite in terms of size of credit is unique in the market. Most of our competitors are going upstream. We're kind of at the lower end of the middle market. So it's a product that we can charge for in terms of yield and fees that surround it. We always demand and get a full service relationship with these customers. So their treasury management, private banking, opportunities that revolve around these customers. So a 30% kind of annualized growth rate in the commitments. Perhaps beyond that, the folks that joined had non-solicits with their previous employer that expired earlier in the last year or so. That aided in some of the growth that we saw this year. But as Chris mentioned earlier, we're looking to add resources, human capital. We've got a very robust technology platform that supports that effort and is scalable as well. So we see that becoming more of an integral part of our growth strategy as we move through 2022.

Yeah, Russ, this is Chris. I'll just add that part of my own assessment coming in here. One, I'm pleased with how the company built this business. One, we built an infrastructure from a technology standpoint that Dave talked about. The most current generation of the platform that's needed to service these sorts of credits, right out there with anybody from a competitive standpoint talking about any of our banking competitors. And then the third piece is we're not practicing when we do this. We hired real seasoned professionals that know this space and are on top of it from a credit risk management and diligence standpoint. So it's an area I've spent a fair amount of time with over the past couple of weeks. Spent a whole morning with them last week going through a detailed portfolio review And I give Dave and Mark and the team a lot of credit for having the foresight a couple of years ago to go this way. And it's a good example of kind of organic growth that can be done with relatively speaking few dollars, you know, handful of people, really smart people that know the business that can move the needle for us.

Thanks, Dave and Chris. I appreciate your thoughts. They're really helpful. I guess the last one for me, Chris, would be as you, you know, look to leverage your background into the legacy S&T business model, are there any, you know, loan products or niche verticals that you're not in to be or a different approach to see income to try to get that, you know, as a greater contribution of revenue to peers? And are those type of strategic strategies shifts, if there are any, something we might learn about in the first 100 days?

Yeah, I think it'll be a little later than the first 100 days, if you think about it. It depends on how we laugh here about defining, is it 100 business days or calendar days? And it depends on which way it turns in my favor and which way I go with that. But, you know, we're thinking, you know, as we get to the latter half of Q1, you know, January, February is a tough time to be out there working. talking just from where people have their attention. So we're working through the end of the year that aligns with our budgeting process. And I would define it as more to come. Again, part of my own due diligence before I even started was looking strategically at where the company had put its emphasis. And you can look on the income statement, some good double-digit growth, though it's small. double-digit growth across the board and important customer things like treasury management fee income growth, our wealth management fee income growth, something as simple as debit card activity and growth. That actually does require our employees and our company being actively engaged with our customer base to utilize those cards, and that does nothing but connect those customers more closely to us. So we're going to look at our online additional offerings and see what we can do to upgrade and make them more user-friendly. We're not missing anything, but I think there's enhancements that we can do. Do as much as anything, drive that customer experience and customer engagement. That's where we're focused right now.

Great. I appreciate it, Chris. Thank you, guys. That's it for me.

Thanks, Russ.

Your next question is coming from Matthew Breeze with Stevens, Inc. Matthew, your line is live.

Hi, good afternoon, everybody.

Hi, Matt.

Hey, Chris, maybe away from, you know, potential new products and services, could you give us a sense for how you're measuring success at the bank? I mean, are there metrics that you would kind of point us to that you're watching as well that you'd say, you know, from point A to point B we were successful in our new strategy?

Yeah, I mean, we've talked a fair amount of, you know, almost the simplest measure is looking at a pre-tax, pre-provision number relative to the size of our balance sheet. And what could that be down the road, knowing the infrastructure that we have? And, you know, if you think about just organic growth, what could that look like? That requires potentially some enhancements to the capabilities that we have, as well as the addition of people. I would say the other area that we spend a lot of time internally talking about are credit metrics and back to the safety and soundness way of running this business. And we're working through that to ensure that the monitoring and staying on top of our credit book is in line with our expectations. So those are a couple of areas that make a lot of sense. You've got a lot of moving parts right now. It's tough to say, well, what is normal? With the PPP loans coming off, you've got a rate environment that's at the floor that's going to be there for a long time. We've got liquidity on our balance sheet that we've never seen before. So it's really hard to pin to a number that's reflective of what history looks like. But those would be a couple of areas that we're in the short term spending time on.

Got it. And as you hone down that list, the top three or four items that need execution and focus and the most focused, I'm curious, where does M&A stand on that list, and it's important just given the size of the balance sheet and proximity to Hennebillium?

Yeah, so we're certainly, you know, Mark mentioned it a couple times, we're not opposed to it, and we would be interested in the right sort of opportunity, but as you know, those things happen when they happen, and I've told the team that my focus is solely, you know, on delivering what we can't control and that's organic growth. Part of how we describe Dave's role and my role is Dave's here driving performance for today and I'm here thinking about building for tomorrow. That building for tomorrow is going to come in a couple of forms. Organic growth is going to be the recipe and it's going to be the the key ingredient to our ability to have meaningful inorganic opportunities. So we've got to deliver performance like the team did this quarter, continuing to do that. That will help us with the currency that we need in order to potentially do things down the road. But certainly not opposed to it, you know, part of the business that I've been a part of for a long time.

Understood. Thank you. Last one for me, you know, the last handful of quarters we've seen in the securities portfolio. increase anywhere from, call it, $20 to $40 million. As you consider the cash position of the bank, is that something we should, you know, think about continuing until cash normalizes?

Yeah, I think especially with a little bit better rate environment farther out of the curve, you know, we see a little bit more value in the securities purchases. So I would anticipate that we would continue to see some increase on core basis for now.

Okay. Great. That's all I had. Thanks for taking my questions.

Thank you. Thanks, Matt.

Your next question is coming from Daniel Cardenas with Benning and Scattergood. Daniel, your line is live.

Hey, good afternoon, gentlemen. Hey, Dan. Just a quick question. You may have mentioned it, Mark. I might have missed it, but... replacement yields on the loan portfolio, what do those look like now versus where the historical yields are? And then on the funding side, you know, what kind of levers are left to pull? I mean, your cost of funds are fairly low. What kind of levers are left to pull that can kind of help stabilize the margin, at least in the next quarter, in the next couple of quarters?

On the loan side, Mainly the new rate, this is overall weighted, is around a 330. And the paid rate that includes full payoffs and amortization is around a 380. So that's where that kind of 50 basis point drop is coming. On the funding side, there's not many levers to pull, but we're taking a hard look at what's left in the interest expense. And there are a few rocks yet to uncover when it comes to exceptions and some of the higher priced products that we have. There's a very small amount of CDs that are dribbling off. There's a little bit of opportunity there. But it's probably less than a million, million and a half dollars overall on an annualized basis that we have left to get.

Right, great. And then maybe on the lending side, any comments you can provide or color you can provide on competitive factors if you're starting to see competitors show signs of weakness on covenants and doing stuff that perhaps is a little crazy in any part of your footprint?

So there is some competitive pressure, particularly on rates. I haven't seen significant competition where there's It works based on structure. That's one of the things we like about the ABL vertical and our ability to grow there because it is a product offering that's unique to a bank of our size and it's targeted at a section of the market that is, we believe, underserved. So it's not as competitive in terms of rate of returns. We can manage our credit risk. maintain our credit risk profile and get a return. You always have the one-off competitive situation on a deal where a competitor wants the business and they're going to do whatever they have to do to win it or retain it, but that's more business as usual than anything that's outstanding in this environment.

Yeah, and we're hearing from our customers the same thing that you're hearing elsewhere, right? The desire for growth is is there, they're hamstrung by labor costs or labor shortages, issues relative to supply chain, those sorts of things. But people want to move forward. There's just some external things that are causing them to slow down.

And Dan, during the quarter, we did see a modest decline in payoffs, and a lot of that was related to some of the rates moving in the permanent market. to some of those borrowers who were looking at the permanent market as a solution either delayed or decided to retain a bank relationship.

Okay. Excellent. All right. That's all I've got. Thanks, guys.

Thank you.

There are no more questions in queue.

All right, well, we'll wrap it up, and my last first is over. So, listen, thanks to all of you for your interest in our company and for the really good dialogue and questions that we've had this afternoon. Again, I'm proud of this team and what they've accomplished, and Dave has led this group through a lot. Mark's been here, and we've got a lot to be optimistic about as we move forward, and we look forward to further dialogue. So, thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.