Jap Bankshares, Inc. (EBC) Q3 2022 Earnings Name Transcript

October 28, 2022

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Jap Bankshares, Inc. (EBC -7.81%)
Q3 2022 Earnings Name
Oct 28, 2022, 9:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:

Operator

Hiya, and welcome to the Jap Bankshares, Inc. third quarter 2022 earnings convention name. Right this moment’s name will embrace forward-looking statements, together with statements about Jap’s future monetary and working outcomes, outlook, enterprise methods and plans, in addition to different alternatives and potential dangers that administration foresees. Such forward-looking statements replicate administration’s present estimates or beliefs and are topic to recognized and unknown dangers and uncertainties that will trigger precise outcomes or the timing of occasions to vary materially from these expressed or implied in such forward-looking statements that are referred to the disclosures set forth below the caption Ahead-Wanting Statements within the earnings press launch, in addition to the danger elements and different disclosures contained within the firm’s latest filings with the Securities and Alternate Fee for extra details about such dangers and uncertainties.

Any forward-looking statements made throughout this name signify administration’s views and estimates solely as of as we speak. Whereas the corporate might elect to replace forward-looking statements in some unspecified time in the future the longer term, the corporate particularly disclaims any obligation to take action, even when administration’s views or estimates change, and you shouldn’t depend on such statements as representing administration’s views as of any date subsequent to as we speak. In the course of the name, the corporate may also talk about sure non-GAAP monetary measures. For a reconciliation of such non-GAAP monetary measures to the comparable GAAP figures, please consult with the corporate’s earnings press launch, which will be discovered on the investor.easternbank.com.

Please be aware this occasion is being recorded. [Operator instructions] I’d now like to show the decision over to Bob Rivers, chair and CEO.

Bob RiversChairman and Chief Govt Officer

Thanks, Michelle. Good morning, everybody, and thanks for becoming a member of our third quarter earnings name. Becoming a member of me as we speak is Jim Fitzgerald, our chief administrative officer and chief monetary officer. Our efficiency continued to be robust, demonstrated continued enchancment in various key measures.

Working internet revenue within the third quarter was 49% larger than the comparable prior yr quarter, a brand new document, pushed by our highest ever quarterly income, which elevated 34% yr over yr. Because of this, Jap’s return on property continued to enhance as did the effectivity ratio, which declined eight share factors from a yr in the past. Underlying this progress, our deposit prices proceed to be nicely managed, rising solely 4 foundation factors from the prior quarter regardless of one other 150-basis-point improve within the Fed funds fee over the previous three months and a rise of three share factors because the starting of the yr. Progress in mortgage outstandings continued to speed up throughout the quarter, rising 16% general on an annualized foundation, pushed by document business and residential fairness mortgage manufacturing with internet charge-offs of only one foundation level.

Because of this, the online curiosity margin elevated 24 foundation factors throughout the quarter. As well as, Jap Insurance coverage Group acquired its second Company of the 12 months in August and its thirty sixth since 2002, and Jap Financial institution was acknowledged by the Boston Enterprise Journal as one of the charitable corporations in our area, our tenth time within the High 10. We predict it’s more and more clear that investments we now have been making within the progress of our firm are paying off. Along with important monetary leverage, the acquisition of Century Financial institution, which closed final November, helped improve our deposit market share to the fourth largest within the Better Boston market.

Our document business mortgage originations replicate just the start of the advantages we count on to attain by means of the growth of our business lending groups. Our continued important investments in know-how have elevated our digital capabilities, higher serving our prospects and bettering course of workflows that we imagine will in the end scale back bills. As all the time, these outcomes replicate the laborious work and great dedication of my 2,100 Jap colleagues with whom I’m privileged to work and whom I thank for all that they do every single day to serve our prospects, communities and one another. As soon as once more, thanks for becoming a member of us as we speak and to your curiosity in Jap.

And now I am going to flip issues over to Jim for an in-depth assessment of our third quarter monetary efficiency and outlook for the rest of 2022 and for 2023.

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Thanks, Bob, and good morning, everybody. As Bob talked about, we’re very happy with our third quarter outcomes and suppose they show continued momentum from the primary and second quarters of this yr. We have been happy with the expansion in our internet curiosity revenue and margin as a consequence of larger charges and really robust mortgage progress. Web revenue was $54.8 million for the quarter or $0.33 per diluted share.

Working internet revenue was $55.7 million or $0.34 per diluted share. Working internet revenue for the second quarter — working internet revenue was 49% larger than the identical quarter of 2021. Web curiosity revenue was very robust within the quarter, rising 10% from the prior quarter as internet curiosity margin elevated 24 foundation factors from Q2. Our asset yields elevated by 29 foundation factors within the quarter, and our price of funds was up eight foundation factors.

We additionally had a robust quarter of mortgage progress in all of our main portfolios, with business loans up 16% quarter-to-quarter. Natural residential mortgage progress was 10% and client loans have been up 6%. All these percentages are on an annualized foundation. Our board authorized a dividend of $0.10 per share payable on December 15 to shareholders of document on December 2, 2022.

We repurchased 1.5 million shares below our share repurchase program within the third quarter at a median value of $19.52. First, I am going to make some feedback on the steadiness sheet. Property have been down $300 million from Q2 and ended the quarter at $22 billion. Deposits have been down $430 million within the quarter and have been offset by a rise in borrowings of $380 million.

Loans have been up $505 million, whereas money was down $210 million. The securities portfolio is down $700 million due primarily to reductions in market worth. All main mortgage classes have been up for the quarter. Industrial loans have been up $357 million or 16% annualized.

Natural residential loans have been up $52 million or 10% annualized, and client loans pushed by residence fairness loans have been up $19 million or 6% annualized, and we added $78 million of mortgage loans to the embrace relationship we described final quarter. As talked about above, deposits have been down $430 million within the quarter, though there was little change in common deposits from the second quarter. We talked on the final name in regards to the tightening marketplace for deposits and that we anticipated value will increase in a difficult market going ahead. That did materialize, and we count on it to proceed.

We now have begun to regulate our deposit pricing to stay aggressive and have used a few of our borrowing capability to fund mortgage progress within the quarter. Shareholder fairness decreased $303 million within the quarter as a result of affect of decrease AOCI and share repurchases, partially offset by a rise in retained earnings. As I discussed, GAAP internet revenue was $54.8 million or $0.33 per diluted share and working earnings have been $55.7 million or $0.34 per diluted share. We really feel our outcomes replicate very robust progress in lots of key areas.

Web curiosity revenue of $152.2 million was $14.4 million or 10% larger than Q2 and benefited from larger charges and robust mortgage progress. Asset yields have been up 29 foundation factors quarter over quarter, and funding prices have been up eight foundation factors. This mix allowed our internet curiosity margin to broaden by 24 foundation factors from 2.63% to 2.87% within the quarter. The supply for mortgage losses was $6.5 million within the quarter in comparison with a $1.1 million provision in Q2.

Mortgage progress was the driving force of the rise. $4.7 million of the $6.5 million provision was as a result of improve in loans and $1.8 million was primarily as a consequence of a modest improve in our ACL elements. Noninterest revenue on an working foundation was $45.3 million in Q3 and Insurance coverage revenues have been $23.8 million within the quarter, up 8% from the identical quarter of 2021 and down $900,000 from Q2. We began to see a discount in deposit service expenses as a result of modifications in our overdraft practices we talked about earlier within the yr.

Different working line objects have been usually in step with both the prior quarter or the prior yr. The worth of Rabbi Belief property was down $2.2 million due primarily to declines within the inventory market, and we incurred some small losses on safety gross sales, each are excluded from the calculation of working earnings. Noninterest expense was $116.8 million within the third quarter in comparison with $111 million in Q2. On an working foundation, noninterest expense was $117.4 million in comparison with $114.4 million in Q2 as a consequence of a rise in salaries and advantages.

This improve was due primarily to larger incentive compensation. As is printed within the non-GAAP tables of the press launch and the presentation, there was a $2.4 million improve in profit expense throughout the quarter as a consequence of decrease rabbi belief losses within the quarter. All different bills in complete have been both in step with Q2 or prior years. I am going to embrace some feedback on our outlook for bills later within the presentation.

Tax fee within the quarter was 24%, and we offer steerage for the complete yr tax fee on the outlook slide. Our marginal tax fee is larger than the typical tax fee, and as projected earnings improve, the typical will improve. The common tax fee will improve. Asset high quality continues to be sound.

Via the tip of the third quarter, internet charge-offs have been very near zero. NPLs are at very low ranges, and our reserve protection to NPLs is over 380%, the mortgage we moved to nonperforming mortgage standing in Q2 paid off in full in Q3, and there was a corresponding discount in nonperforming loans at 9/30. We proceed to fastidiously monitor all of our portfolios by means of our inner portfolio administration processes and do not see any important adversarial developments in our danger rankings within the business portfolios or early delinquencies within the client portfolios presently. We proceed to observe all credit score high quality developments fastidiously.

As I discussed, the supply within the quarter was $6.5 million due primarily to mortgage progress and was adequate to keep up allowance of about 1% of complete loans. I needed to assessment our outlook pages and make some further feedback. Though the atmosphere is difficult, we count on the persevering with will increase in charges to enhance our internet curiosity revenue for This fall and into 2023. We count on to see internet curiosity revenue for 2022 within the vary of $570 million to $580 million, and we count on to see our internet curiosity margin transfer into the low 3% vary in early 2023, if not late 2022.

We’d count on full yr 2023 internet curiosity revenue to have a share progress fee over full yr 2022 within the low teenagers. We count on business mortgage progress to provide one other robust quarter in This fall. Q3 was a document for business mortgage originations and and generated 16% progress on an annualized foundation. We’d count on these ranges to return down however count on This fall to be above our long-term goal progress fee of the mid- to excessive single digits.

Increased charges in a slowing economic system are anticipated to have an effect as we transition into 2023, and we’d count on slower mortgage progress than in 2022. We’ll replace our views on that subsequent quarter. Given the change within the liquidity outlook usually, we now have determined to discontinue our stream association for residential mortgages with embrace residence loans that we described on the final name. Though this system was working nicely, the difficult outlook for deposits and liquidity has lowered our urge for food.

We’ll shut out the present pipeline over the subsequent 90 days. We’d count on our natural mortgage mortgage progress to say no as a result of normal slowdown within the mortgage market. We accomplished the hedging program we described on the final name. We accomplished the hedging program we described on the final name in Q3 and really feel superb in regards to the long-term advantages of decreasing our asset sensitivity.

There is no change in our steerage on noninterest revenue from final quarter as we nonetheless count on $180 million to $190 million for 2022. We don’t count on progress in noninterest revenue in 2023 as a result of discount in deposit service expenses talked about beforehand associated to overdraft income and pressures on wealth, mortgage and rate of interest swap charges as a consequence of market circumstances. We’re adjusting our working noninterest expense steerage for 2022 and — we count on bills to be between $455 million and $465 million for 2022, up barely from the prior steerage. We proceed to spend money on our business groups and know-how and are assured these investments are crucial to our success and can be a long-term aggressive benefit.

Along with the surface hires for our business workforce we talked about earlier within the yr, we have added the help and infrastructure wanted to develop on the sooner tempo we have skilled in 2022. The ten% and 16% annualized business mortgage progress charges we skilled in Q2 and Q3 have been an early dividend on that funding. We even have some investments in digital account opening and workflow know-how that can be approaching stream in late 2022 and early ’23 that we’re enthusiastic about for each our prospects and likewise our colleagues. The mixture of those investments together with wage changes we now have made for colleagues on the decrease finish of the wage scale to assist offset among the inflation challenges, in addition to normal wage pressures will drive our wage and profit prices larger in 2023 than the will increase in prior years.

We’d count on progress in salaries and advantages of 6% to 7.5% in 2023. That is nicely above our long-term expertise, and we’d count on that to return to extra regular ranges as inflation declines. Included on this improve are included on this improve is our healthcare prices, that are anticipated to be up 7% in 2023. We count on the opposite main expense line objects, occupancy, skilled providers, advertising and different bills to have will increase within the low single digits for the yr.

We commenced our second share repurchase authorization in Q3 and for the quarter, bought a complete of 1.5 million shares. As we talked about on the outlook slide, future purchases can be decided by market circumstances, in addition to capital and liquidity issues. As we identified within the outlook, we’ll acknowledge a noncash cost in This fall associated to the required use of outlined profit pension settlement accounting for 2022 for our pension plan that I’ll clarify in a second. Our preliminary estimate, which is predicated on information on the finish of August that could be very preliminary, is that the incremental pension expense will seemingly be within the vary of $10 million to $15 million.

As background, GAAP requires Jap to make use of settlement accounting if throughout a calendar yr the entire quantity of lump sum distributions from our pension plan taken by retirees and different former workers exceeds the settlement accounting threshold, which is the entire quantity of service and curiosity price of the pension plan for that yr. Our pension plan directors check for the settlement accounting threshold all year long. We realized this quarter that the entire quantity of lump sum payouts for 2022 will exceed the accounting threshold for the yr, and subsequently, we can be required to use pension settlement accounting retrospectively for all of 2022. The actuarial work to calculate the incremental pension expense ensuing from the required use of settlement accounting is advanced, and subsequently, our estimated incremental expense of $10 million to $15 million is preliminary.

We intend to publicly disclose the precise settlement accounting cost for This fall promptly after it is finalized, which we anticipate can be in early December. In closing, we proceed to see an important alternative to additional penetrate our market in Jap Massachusetts and Southern New Hampshire. We skilled an enchancment in our deposit market share as a result of Century acquisition final yr, and our progress fee for business loans in 2022 stands out in our market. Though we count on the atmosphere to be difficult in 2023, we’re assured that we’re nicely positioned in a superb marketplace for long-term progress.

Thanks very a lot, and we’re prepared for questions. Michelle?

Questions & Solutions:

Operator

Thanks. [Operator instructions] Our first query comes from Mark Fitzgibbon, Piper Sandler, Please go forward.

Mark FitzgibbonPiper Sandler — Analyst

Hey, guys. Good morning. I ponder in the event you might begin by sharing with us — and I apologize in the event you mentioned this within the very starting, I missed a few minutes, however the mortgage pipeline, the combination and possibly common fee?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. So Mark, we do not disclose the mortgage pipeline. It is calculated somewhat bit in another way for various merchandise. However on the business aspect, which is the place we focus most of our strategic consideration, the pipeline is about the identical dimension because it was on the finish — coming into Q3.

We do count on a superb quarter for closings in This fall and count on that to return down. And as I articulated, we might count on slower progress as circumstances — as 2023 seems like will probably be a tougher yr than 2022. However the pipeline going into the fourth quarter is at about the identical degree because it was the prior quarter. When it comes to yields, new enterprise on the business aspect, type of within the excessive, low to mid to excessive 5 p.c vary, these can be for mounted charges.

Mark FitzgibbonPiper Sandler — Analyst

OK. Nice. After which, secondly, Jim, on web page 11, you element the entire securities portfolio yield, and it got here down a bit from the second quarter to the third quarter. I used to be simply curious why that was.

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. premium amortization, we had one or two chosen conditions the place there have been — we needed to speed up premium amortization primarily as a consequence of payoffs of the securities.

Mark FitzgibbonPiper Sandler — Analyst

OK. And as you sort of take into consideration the scale of the securities portfolio, and I do know you are utilizing money stream to fund mortgage progress, how rapidly are you able to shrink down that securities portfolio? Or do you might have a goal in thoughts for it?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. That is an excellent query, Mark. And in some ways, the reply goes to be similar to what we mentioned final quarter. The money stream from this portfolio as we speak is about $70 million a month, name it, $800 million a yr, $800 million to $850 million a yr.

At this level within the fee cycle, that is what — these are the modifications we count on. We count on to see it come down in these quantities. Clearly, if charges change and there is alternatives to do different issues, we might tackle it at that time. However presently, that is what we see.

Mark FitzgibbonPiper Sandler — Analyst

OK. And lastly, what would you say your spot deposit fee is as we speak?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Sure, that is a tough one as a result of there’s all kinds of various merchandise in numerous sectors. So it is laborious for me to provide you a solution. We do count on to see a reasonably — we do count on to see a rise in our deposit prices in This fall.

Mark FitzgibbonPiper Sandler — Analyst

Thanks.

Operator

Thanks. The subsequent query comes from Damon DelMonte, KBW. Please go forward.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

Hey, good morning everybody. I Hope all people is doing nicely as we speak. Jim, I used to be simply questioning in the event you might revisit the commentary on the choice to terminate the connection with OnCourse. I did not fairly get the whole lot that you just mentioned there, nevertheless it’s spectacular.

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Sure. It is I am laughing OnCourse. I imply, Boston is type of a neighborhood joke, nevertheless it’s embraced residence loans. And as we outlined on the quarter final time earlier within the yr, when the liquidity image was very completely different, we have been trying to, in essence, direct safety money flows away from the securities market and developed — had a pre-existing relations — very robust pre-existing relationship with Embrace.

So what this program was to purchase loans originated by Embrace based mostly on our underwriting standards and take them within the portfolio on a stream foundation. What we articulated on the final name on the finish of Q2 was we had focused an quantity of $400 million for that. And it was somewhat little bit of an experiment to see how it might work. Change in liquidity and the outlook for liquidity actually reduces our urge for food for that, Damon.

So we now have notified embrace, we’ll discontinue that. There are loans within the pipeline that can shut out within the regular course. And as I mentioned in my feedback, we’re very proud of the best way it was working, nevertheless it’s actually simply the liquidity outlook that modified our urge for food.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

Acquired it. After which, you had mentioned to the final query that the securities portfolio is pushing aside about $800 million a yr in money stream.

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Sure.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

And so do you count on all of that for use to fund mortgage progress? Or do you suppose you are going to must reinvest a few of that again within the securities portfolio?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

No, we might anticipate as these money flows are obtained to carry the securities portfolio down and fund mortgage progress with these, sure.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

Acquired it. OK. Nice. After which, I assume with respect to the margin commentary factors to a better margin going by means of year-end and into 2023.

Do you suppose that you’ll find yourself peaking someplace midway by means of the yr? Or do you suppose that there is nonetheless sufficient flexibility on the steadiness sheet, significantly on the funding aspect to maintain that margin transferring larger?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

It is a troublesome query, Damon, as a result of the — it is only a troublesome query presently, given all of the uncertainty with charges what we articulated and what we are able to see is the speed will increase which have occurred and can and are anticipated to occur over the subsequent couple of months will certainly enhance the margin, and we are able to see that as you get out additional, there’s simply the speed of the volatility and the questions round liquidity make it laborious to get additional out than that.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

Acquired it. Truthful sufficient. I do know that wasn’t a straightforward query. So I admire the response.

And I assume simply lastly, credit score developments stay robust, and also you sort of take a look at the reserve degree right here. Do you attempt to sort of maintain it on this 101, 102,103 sort vary as you look out over the subsequent few quarters?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

You are asking all these superb questions which might be very laborious to reply, Damon. I feel what we noticed this quarter was that — based mostly on our forecast, which the forecast doesn’t have a extreme recession in it, and it does have a slowing progress after which modest recession that we did not see an enormous change in ACL elements, as I mentioned, many of the provision was as a consequence of mortgage progress. And that is what we noticed this quarter. That is actually all we all know at this level.

Damon DelMonteKeefe, Bruyette and Woods — Analyst

OK. Sounds good. That is all that I’ve for now. Thanks loads.

Admire it.

Operator

Thanks. The subsequent query comes from Laurie Hunsicker, Compass Level. Please go forward.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

Sure. Hello Bob, Jim. Good morning. I am hoping you’ll be able to return to the expense information slides or commentary.

Simply needed to consider that if I am doing the mathematics off the working information that you’ve offered, simply merely going from proper within the center, the $460 million to $500 million working expense for full yr ’23 in comparison with ’22. That is nearly 9% progress and utterly get your feedback across the compensation progress expense of 6% to 7.5%. Simply are you able to assist us suppose somewhat bit about the place that delta goes larger?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. So it is primarily in — as I attempted to say, it is primarily in salaries and advantages, Laurie. There’s progress within the different classes, though that is at a extra modest degree. However the main improve there may be in salaries and advantages.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

Proper. However I imply simply I am simply trying off your information, the salaries and advantages was the very best finish of what you gave, which definitely is smart given the place we’re with inflation. After which, the whole lot else you mentioned low single digits, sure, your full yr expense progress information is up nearly 9%. — you recognize what, possibly I can discuss to you offline.

I really feel like I am lacking one thing right here. I am not fairly…

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. Positive. No, blissful to.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

You recognize what, yeah, I am going to observe up with you off-line. Are you able to discuss very excessive degree the buyback? Clearly, nice to see you shopping for again this quarter, nevertheless it slowed fairly considerably from final quarter. Are you able to assist us take into consideration the way you take a look at that going ahead?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. Only one reminder from the historic aspect, we did conclude the primary repurchase and wanted to get regulatory approval for the second. So there was a time interval in there the place we have been pending regulatory approval. So there was — simply as a reminder there, there was a spot in time the place we have been ready for that approval.

I feel going ahead, it is much like what we might have mentioned beforehand, however simply added the liquidity constraints. Clearly, market circumstances are crucial as we consider it, but additionally our capital liquidity place. And as these change, that turns into an element within the general choice, and we’ll make these selections as we go ahead.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

OK. OK. And any feedback across the value, how you concentrate on it up right here?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Sure. We do sort of I’d consider an ordinary earn again, not normal essentially, however typical earn-back calculations. And once we’ve executed that previously, we have been very glad with that interval, and that is why we have been what I’d think about to be a reasonably aggressive purchaser of our shares. In order that framework remains to be in place.

It is simply the extra market circumstances, in addition to liquidity and capital.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

OK. Nice. After which, simply leaping again over to margin, internet curiosity revenue. Was there any non-accruing mortgage revenue restoration that was booked this quarter related along with your drop in nonperformers?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

There was a modest quantity, a really small quantity. Laurie.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

OK. OK. After which, the rise in borrowings within the quarter, are you able to discuss somewhat bit about that simply because your core deposits are so good and low in price and clearly, the borrowings aren’t simply the way you’re occupied with that or how we should always take into consideration that going ahead?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Positive. So your factors are nicely taken. And I’d simply say it this manner. Clearly, the historical past of the corporate has been — considered one of our pleasure factors has been we have been just about a deposit-funded group.

So our first objective is to proceed to expertise which have deposits be the overwhelming majority of our funding. Liquidity modified fairly rapidly right here within the second and third quarter and actually within the third quarter and late within the third quarter. As we went by means of our pricing methods, we began out — we did not change our methods, however the methods that we applied actually beginning within the fourth quarter was far more aggressively retained deposits. We had small outflows and that is why we’d like — that is what brought on the borrowings.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

OK. And so, I assume extra importantly, how do you concentrate on utilizing borrowings and going ahead?

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

It is laborious to provide you a brief reply on that, Laurie, as a result of throughout the spectrum, we have the pricing — deposit pricing methods. The targets of these methods are to retain definitely on this atmosphere, retain and in the end develop deposits. However there are positively quite a lot of elements that go into that. We now have quite a lot of borrowing capability and $380 million for a steadiness sheet of our dimension, it isn’t a big quantity on the finish of the quarter.

So the balancing act there is determining deposit costs that may retain our current deposits and in the end develop them and steadiness that off with the borrowing functionality that we now have. We’d hope that over time, we might proceed to be as deposit funded as attainable, nevertheless it’s a troublesome market to try this.

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

OK, nice. Thanks for taking my query. Thanks

Operator

There aren’t any additional questions presently. I’ll flip the decision again over to Bob Rivers for closing remarks.

Bob RiversChairman and Chief Govt Officer

Nice. Effectively, thanks once more, Michelle. And because of all of you for becoming a member of the decision. Thanks very a lot to your questions, and we look ahead to speaking with you once more on our subsequent quarterly earnings name.

Thanks once more, everybody.

Operator

[Operator signoff]

Length: 0 minutes

Name members:

Bob RiversChairman and Chief Govt Officer

Jim FitzgeraldChief Administrative Officer and Chief Monetary Officer

Mark FitzgibbonPiper Sandler — Analyst

Damon DelMonteKeefe, Bruyette and Woods — Analyst

Laurie HunsickerCompass Level Analysis and Buying and selling — Analyst

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