Thank you all for joining. I would like to welcome you all to the First Bank Earnings conference call, fourth quarter 2022. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Please press star one on your telephone keypad to ask a question. If you change your mind at any time, press star two. For operator assistance at any point, it is star zero. Thank you. Now, let me turn the call over to Patrick Ryan, President and CEO. Patrick, you may begin.
Thank you. Good morning, everybody. Welcome to our fourth quarter earnings conference call. I'm joined today by Andrew Hibshman, our Chief Financial Officer, and Peter Cahill, our Chief Lending Officer. Before we begin, Andrew, can you please read the safe harbor statement?
The following discussion may contain forward-looking statements concerning the financial condition, results of operations, and business of First Bank. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially. Therefore, you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties are described under Item 1A, Risk Factors in our annual report on Form 10-K for the year ended December 31st, 2021, filed with the FDIC. Pat, back to you.
Thank you, Andrew. I'll start with some high-level comments on the quarter and the year. I'll turn it over to Andrew to get a little more detail behind the numbers, and then he'll turn it to Peter to give a little more background on the lending side. I'd say overall, I think it was a decent finish to a very, very good year. Unfortunately, in Q4, the NIM expansion that we achieved in Q3 was eroded, and we ended up back at margin levels more in line with where we saw things in the second quarter. Despite the margin erosion, we did have overall profitability levels that remained very strong, and we achieved tangible book value per share growth of $0.46, which was meaningful book value growth during the quarter. Our asset quality remained very good.
We saw net recoveries during the period, and our levels of non-performing loans remained very, very low. Our return on average assets was down a little bit from the third quarter, but remained very healthy at 1.35%. We continued to bring in high-quality new bankers. Several new deposit generators were also brought in on the sales side during the year, and we're excited about the prospects for those teams as we move forward. We think we'll see continuing operating leverage opportunities as we continue to scale our operations and also look to integrate the Malvern merger later in the year. I'd like to highlight strong performance metrics. While they were down from Q3, I think they still show very, very good performance, especially relative to peers. Our return on tangible common equity was 13.5%.
Our efficiency ratio was below 50% for an eighth straight quarter. Our Pre-Provision Net Revenue return on assets was 1.95%, just a little bit below 2%. Our Net Interest Margin has been over 3.5% for the past eight quarters. Our non-performing assets to assets remain very low at 23 basis points. Overall, our Allowance covers our non-performing loans by over 4 x. On the lending side, we saw $74 million in loan growth during the quarter, with over 70% of that new production coming from C&I. We have very strong asset quality with low delinquency. We're building out our capabilities in small business and Asset-Based Lending to continue to move our ratios a little higher on the C&I side, further diversifying down a little bit from the investor real estate category.
We've seen gradual evolution of the organization as we continue to layer in attractive C&I lending niches, really building the franchise out from a traditional real estate-focused community bank into more of a middle-market commercial bank. On the deposit side, we obviously had some challenges. Overall deposit growth was strong, but we did see a significant increase in our cost of deposits. Some of that was related to the way the timing of events played out during the quarter. As I mentioned, we had significant C&I lending opportunities. We actually had a reduction in payoffs and pay downs that we normally see on the commercial real estate side. Those two things together put a little pressure on funding, which caused us to have to increase the rates on our money market.
The good news is we were able to bring in over $100 million in deposits and deposit growth during the quarter, but we also saw a lot of excess non-interest-bearing balances move out of the non-interest-bearing accounts into interest-bearing accounts here at the bank, which gave us the liquidity we needed, but obviously had an impact on our cost of funds and on the margin. We were expecting some movement out of NID, although it did happen a little bit quicker than we expected. We think some of that, again, was a timing issue related to the need to bump up our money market rate in order to make sure we have the dollars needed to fund the good C&I loan opportunities. All in all, we've made a lot of good moves to make sure that we can continue to drive core deposit growth.
We did actually see an increase when you look at just new non-interest-bearing accounts opened during the quarter. We actually brought in more in new money and new accounts than we saw money leaving in closed accounts. Again, it was a lot of money moving out of non-interest-bearing into interest-bearing would impact the margin, but in terms of retaining customer relationships, our team did an excellent job. In summary, despite some headwinds emerging in Q4, we had a very good and profitable year in 2022. We realized top quartile performance across key metrics like return on assets, return on tangible common equity, pre-provision net revenue, and tangible book value per share growth. In fact, our tangible book value per share grew 10% during the year despite a lot of challenges on the interest rate side.
We achieved good high-quality loan growth and an improved asset quality profile. Furthermore, we have reason for optimism as we work our way into 2023. We've been able to attract several key bankers that will help us drive core deposit growth moving forward. We've got some nice new C&I lending niches which will help drive both portfolio diversification and an improvement in our overall commercial deposit balances, which will put less reliance on higher cost sources of funds. We're doing a nice job enhancing our digital banking capabilities to make sure that we remain competitive in that space. We're continuing to see fallout and opportunities from M&A within the New Jersey banking market that we think will create great opportunities for both customer acquisition and banker acquisition as we move into 2023.
Finally, the exciting opportunity with the Malvern acquisition to integrate that really drive some size and scale and improve profitability within our PA franchise and also drive overall improved scale benefits across the entire franchise. Certainly challenges as we look out to 2023, but also reasons for optimism as we look to continue to build and grow shareholder value here at First Bank. At this time, I'll turn it over to Andrew to dive into the numbers. Andrew?
Thanks, Pat. For the three months ended December 31st, 2022, we earned $9.1 million in net income or $0.46 per diluted share, which translates to a 1.35% return on average assets or 1.40% excluding tax affected merger related expenses. The primary factors contributing to the quarterly results were historically strong but slightly declining net interest margin, strong credit quality metrics, and effective management of non-interest expenses. Net income declined $1.1 million from the linked third quarter, but was up $1.3 million compared to the fourth quarter of 2021. Strong commercial loan growth continued in the quarter. Loans were up approximately $75 million, excluding a small decline in PPP loans, compared to an increase in non-PPP loans of $36 million in Q3, $84 million in Q2, and $65 million in the first quarter of 2022.
Total deposits were up $104 million during the fourth quarter of 2022, with interest-bearing deposits up $184 million and non-interest-bearing deposits down approximately $80 million. We continue to maintain key relationships. They have become more rate sensitive, resulting in movement of funds. We did a detailed analysis of the decline in non-interest bearing balances during the fourth quarter. A very small % of the decline related to accounts that were closed and left the bank. During the fourth quarter, we did experience several large relationships that maintained significant non-interest bearing deposits, moved into interest bearing products, and we saw some normal end of year fluctuations.
The growth in interest bearing balances was due to new money CD and money market promos we initiated during the quarter, coupled with the movement of funds I just discussed. Due to the shift in the deposit mix, the repricing of certain existing customer balances, and the new money promos during the fourth quarter, our total cost of deposits increased 71 basis points compared to the linked prior quarter. Primarily due to this increase in deposit costs, offset somewhat by the increase in the average rate on loans, our tax equivalent net interest margin decreased to 3.69% for the quarter ended Q4 2022, compared to 3.97% in the previous quarter. The decline in the margin in the fourth quarter was exacerbated by low PPP fee income and prepayment penalty income during the fourth quarter of 2022.
Excluding PPP fee income and prepayment penalty income, the margin would have been approximately 3.67% in Q4 versus 3.89% in the third quarter of 2022. Our Asset Liability Management approach continues to be conservative. We have taken steps in the fourth quarter and plan to continue to shift our balance sheet to a more liability sensitive GAAP position. In the current rate environment, we expect continued pressure on the margin in the short term. We believe the quarterly decline will not be as severe as the decline was in the fourth quarter of 2022. Liquidity levels increased slightly during the fourth quarter due to our deposit gathering initiatives. We were also able to slightly reduce borrowings and broker deposit balances during the fourth quarter.
As we have mentioned on previous calls, our strong organic loan growth has lowered our liquidity levels, but has also contributed to our investment portfolio being relatively small when compared to peers. The size and low-risk nature of our investment portfolio has limited our unrealized losses compared to some of our peers. During the first three quarters of 2022, unrealized losses increased, but unrealized losses actually declined slightly during the fourth quarter. Due to our strong net income, we were able to increase our tangible book value per share by $0.46 during the current quarter. Based on net recoveries during the quarter and a strong asset quality profile, we maintained our Allowance for Loan Losses as a % of loans to 1.09% at December 31st, 2022, compared to the same % at the end of September.
This was supported by only a very slight increase in non-performing loans compared to the end of the third quarter. We are also currently finalizing our CECL calculation and expect our allowance as a % of loans to increase by approximately 5%-10% upon adoption during the first quarter of 2023. In the fourth quarter of 2023, total non-interest income increased to $1.4 million from $944,000 in the third quarter of 2022. The increase from the third quarter of 2022 was primarily due to an increase in loan fees, which was principally related from this latest one-time loan fee. Our SBA loan activity and pipelines continue to be strong. Sale activity has been slower than expected, primarily due to the rising interest rate environment, which has reduced the premiums earned on sales.
In most cases, we are retaining the loans on our balance sheet. Loan swap activity also continues to be slow. While non-interest income levels may continue to fluctuate, we do not expect a significant increase in non-interest income over the next several quarters. Annualized Q4 2022 non-interest expenses were 1.84% of average assets or 1.78% excluding merger-related expenses, compared to a peer average of 2.11%. In total, non-interest expenses were $12.5 million in the fourth quarter of 2022, up $728,000 or 6.2% compared to the third quarter of 2022. The increase was primarily due to merger-related expenses associated with the merger agreement we finalized in December and higher salaries and employee benefits.
Excluding merger-related expenses, non-interest expenses increased only 2.4% compared to the linked third quarter. With the difficult interest rate environment, we continue to be laser-focused on expense control, we do anticipate our quarterly expenses will continue to increase slightly from the core Q4 2022 levels as we continue to add the staff and inflationary pressure continues to affect other expense items. While we believe the current interest rate environment will continue to put pressure on our margin, we are still generating historically high levels of net interest income and operating efficiency results. We believe we can continue to generate core loan and deposit growth and combined with very strong credit quality metrics and effective management of non-interest expenses, we are well positioned to continue our strong core profitability trends in 2023.
At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?
Thanks, Andrew. I'll try to provide some additional information not already covered by Pat or Andrew. From a lending perspective, 2022 was pretty clean from the standpoint of noise in the numbers. My comments will focus only on organic results. PPP loans, as Andrew mentioned, are about gone with slightly over $3 million or so remaining, and they're paying as agreed. Regarding the fourth quarter, I think the results were excellent. Approximately 29% of our growth for the year took place in Q4, just slightly behind Q2, our largest quarter, and up nicely from the third quarter, which was the slowest. Total loan growth for the year, again, absent PPP, was around $260 million. This exceeded our total loan growth goal of $200 million by 30% and overall kept us in double-digit loan growth for the year.
Loan generation continued to be good in all areas of the bank. One thing of interest was that new loans closed and funded during the fourth quarter declined from an average of $126 million in the first three quarters of the year to $83 million in Q4. There were a number of factors at play here. First, we were well ahead of plan throughout the year, which meant we could be a bit more selective. Through the first six months, loan growth was weighted towards investor real estate loans. Again, we were selective about what we pursued in the second half of the year and into the fourth quarter.
With the impact of the economy on interest rates helping cool loan growth on the investor real estate side a bit, we experienced a reduction in loan payoffs that I think both Pat and Andrew mentioned during the fourth quarter. All of this resulted in good growth in the C&I side of the portfolio for the quarter, which brings in, as you know, more floating rate loans as well as relationship deposits. Payoffs in the fourth quarter totaled only $14 million compared to $177 million or a quarterly average of $59 million per quarter during the first three quarters of the year. The total for the year, C&I, and to a much lesser extent, consumer, made up 47% of all new loans closed and funded, and investor real estate made up the difference.
The positive news we saw moving into the fourth quarter was that the % of new loans coming from C&I rose to 70% of total loans closed and funded. Looking at the reason for loan payoffs, in Q4, 62% of payoffs were due to the underlying asset being sold, and 25% of total payoffs were refinanced by another bank. The entire year, the kind of quote-unquote refinance outnumber was higher at around 38%. At this point, I'll talk a little bit about our loan pipeline, which continues to look good. The numbers we discuss here are based upon probable funding, which means we project first year usage and multiply that by a probability factor based upon where we are in the approval process.
That means, for example, a loan that's already approved will have a much higher probability of closing than one that just went into underwriting. At December 31st, our loan pipeline stood at $233 million, down slightly from $240 million at the end of Q3. The total number of individual loans in the pipeline rose, however, from $211 million at the end of Q3 to $222 million at year-end. The average pipeline figure for the 12 months this past year was $244 million. December, at December, we're around 4.5% off the average for the year. Factors that impact the monthly numbers, which include the number and size of loans that have already closed and funded and therefore get moved off the pipeline. For example, we closed and funded $45 million in loans in December.
This is above the average month. Those deals came off the pipeline at 12/31. Overall, I'm satisfied with what we're seeing on the pipeline. Things seem to have slowed a bit, we're still seeing a lot of activity. Based upon economic uncertainty that we see, it changes every day, we're taking a cautious approach to underwriting new business, especially in investor real estate and constructional lending, as well as with any new prospective customer coming into the bank. As loans move through the pipeline, they eventually hit our projected loan funding report, which we've talked about here before. This report looks out 60 days and projects funding and prepayments for Andrew's team in finance. Our review of loan funding report over the next 60 days shows continued good activity right in line with previous quarters.
Regarding asset quality, there's not much more to say beyond Andrew's comments and what's in the earnings release. Things from my perspective continue to look very good. Credit metrics are solid. Loan delinquencies, which were at record lows at the end of Q3, went even lower at the end of December. That's my recap of the fourth quarter in 2022. We're planning on continued growth and meeting our goals and objectives going into 2023. From the lending side, we have a number of priorities, some of which we've previously announced, but which really haven't had a chance to positively impact performance yet. Obviously, you know, number one on our list is the pending merger with Malvern. That's the top priority, and we've discussed that on a previous call.
We have a new regional office and opening up in West Chester, Pennsylvania, late before the end of the first quarter here. Right now, we're running that market out of a very small space on the third floor of a building downtown. In a few weeks, we're gonna have a full-service bank branch in West Chester, which will provide room to grow as well as be a better retail location, you know, drive up, et cetera. Similarly, in Northern New Jersey, we've located a new northern regional office in Essex County. We are tentatively scheduled to have our relationship management team in the new space by the end of the quarter, with retail space to follow in Q2. Late last year, we announced our Equity Fund Banking initiative, lending to private equity funds in our market. This team's doing well and has a strong pipeline.
Pat and Andrew mentioned SBA lending. I'm satisfied with the results the team had in 2022, despite the impact on sales of the guaranteed portion of 7(a) loans. We expect even better performance this year in SBA, and we're looking to add to staff there if we can find the right people. I'm also happy to report that we've recently hired a seasoned banker to build out and develop an Asset-Based Lending team. Pat made reference to that in his comments. This person has many years of experience in Asset-Based Lending and in our market and will add to our product set. We expect the team to be up and running or by early second quarter. We're excited about all these projects.
Each in its own way will, you know, enable us to continue to grow successfully, in 2023 and years to come. That concludes my report for lending. I'll turn things back over to Pat for some final comments.
Thank you, Peter, and thank you, Andrew. At this point, I'd like to open it up for the Q&A session for the call.
Thank you. If you would like to ask a question, please press star then one on your telephone keypad. The first question we have on the phone line comes from David Bishop of Hovde Group. Your line is now open, David.
Yeah, thank you. Hey, Pat. Good morning.
Morning, David.
A question for you. I think you noted, you know, you exited the year a little bit flush with cash. Was there You know, and obviously noted the decline in DBA balances. Was there any like modicum of aggressiveness to maybe, you know, pre-fund some of the loan growth in 2023 and try to get ahead of the market and further rate increases and just be a little bit more aggressive to position yourself from a liquidity perspective ahead of 2023?
Listen, I think there's always a variety of reasons why certain actions are taken. I mean, the practical reality is you know, you put a product out there or you tweak a rate and you don't know exactly, the extent of the activity it will generate. I think as we were taking a look at our product design and setting our rates, and we thought there might be an opportunity if we were gonna err on the side of, you know, one or the other, we wanted to maybe bring in a few more dollars than not enough dollars. You know, that's ultimately how it played out. I think, you know, we put out rates that at the time were decent rates.
I think they've subsequently been surpassed by competitors based on subsequent Fed moves, but it did give us an opportunity to, you know, retain business that was, you know, getting, you know, getting competitively courted, if you will, and then also, bring in some additional dollars. Listen, to your point, while we love highest margin possible, you don't wanna play games on the liquidity front. You gotta make sure you're dealing from a position of strength on the liquidity side. Yeah, that obviously played a role.
I'm just curious, you know, Pat or Andy, when you look at the overall cost of deposits, maybe, you know, from a, I don't know if there's a way to quantify it or you see maybe that trending too in the next couple of quarters and what you're seeing in terms of average loan yields on new production?
Yeah. I mean, you know, great question. Obviously, we have visibility into, you know, rates that are currently being offered and what's that generating in terms of new business. You know, the piece that's a little harder to forecast is money that's been sitting on the sidelines, folks that maybe don't need it in their operating account that, you know, when yields were low, they didn't wanna bother making the move over. Now those folks are looking to put some of that money to work, either with us at a higher rate or into the market. I think we saw a fair amount of that happen in Q4.
Our hope is a lot of the, you know, the money that was looking to move, made the move, and that what we'll see going forward will be significant reductions in that shift out of NIB into interest-bearing. At least so far, in January, you know, the non-interest-bearing balances are holding up. A little hard to say with a lot of certainty, but, you know, we think, you know, every bank will reach a point where depending on their liquidity position, they may need to make a move. When they make that move on the rate side, it'll cause a short-term jolt, things will normalize.
I think, you know, we believe, based on the efforts we're making on the core deposit generation side that, you know, that jolt came for us in Q4. That's not to say deposit costs won't continue to move higher, but we're optimistic they'll move higher at a much slower pace.
Got it. Just one final question for me, I'll hop back in the queue. Outlook for loan growth, just curious. I mean, you're double digit this year. Sounds like a decent pipeline. Do you think there's enough demand and, you know, bankable credits out there to support that? Or are you gonna come in a little bit from the low double-digit range? Thanks.
Yeah, sure, David. I think given, you know, some of our new initiatives and given what we're seeing in terms of significant slowdowns in terms of prepayments and payoffs, I think hitting our, you know, ±$200 million loan growth goal will be manageable. It'll likely be done with less new business, right? Maybe not as much churn as in prior years. Certainly, we expect it'll be done a lot more with C&I and floating rate commercial deals and a little less on the commercial real estate side. I just think because we'll see fewer payoffs and pay downs, achieving a net growth goal of, you know, in that $200 million range, I suspect will be doable, yeah.
Great. Thanks, Pat.
Yeah. Thank you, David.
Thank you. Our next question comes from the line of Manuel Navas of D.A. Davidson. Please go ahead when you're ready.
Hey, good morning. Could you give a little bit more color on kind of the NIM trajectory? I know you had your deal closing too, and just kind of you have the a little bit less pressure this coming quarter. What's kind of the thought process after that?
Yeah. You know, great question. I'd love to have better visibility than we do. Obviously, there's a lot of moving pieces right now, and it's a little tough to predict. I think we expect there'll probably be some continued pressure on the margin. We're sort of targeting a margin over the next couple quarters of somewhere in the 3.50%-3.60% range. We're gonna work like hell to try to get it up closer to the higher end of that range. You know, that's sort of the best I could predict at this point.
When you look out to the back half of the year, largely because of the idiosyncrasies of merger accounting, we'll almost certainly see a sizable margin pickup on the back end because of how you take the upfront marks and you accrete it back into income. I don't know, Andy, I don't know if you have any thing you wanna add there, but, I know based on some preliminary numbers you were showing the margin slowing up quite a bit on the back half, but more a function of the merger accounting than anything else.
Yes, that's right. I mean, obviously a lot will depend on the shape of the yield curve and what happens. It seems like the Fed's gonna move a little bit more gradually here over the next couple meetings, and we'll see what happens there. Yeah, it's gonna get a little complicated later in the year with all the Purchase Accounting. We'll make sure to do a good job of disclosing the impact of the different Purchase Accounting things that are flowing through the margin. You'll see that. I think Pat's kind of guidance on the margin coming down slightly again in early in the year, and then hopefully, we get a little bit of a better yield curve over the back half of the year, and hopefully we can kind of maintain that kind of core margin.
With the Malvern integration, you'll see some significant fluctuations because of those interest rate marks that get accreted back into interest income.
That's really helpful. Is you kind of talked a little bit about deposit costs in a big picture? Are you targeting certain data for the year and anything that can kind of help with seeing where they're gonna go? Is it just such a moving target at the current moment?
Yeah. I mean, listen, well, I mean, we obviously have Deposit Betas built into our budgets and our forecasts. You know, I'd say they were coming in a lot lower than expected as we moved through the year, then I think they jumped up a little bit higher than was anticipated towards the back end of the year. I think the short answer is, yeah, we're looking at those Betas, but they're a bit of a moving target right now. We're trying to look at, you know, the margin overall and what we can do to, you know, keep it at.
I think if we can keep it in that 350-360 range, that's a very healthy level, and that's a level at which I think we can generate really strong returns on assets and equity. You know, we obviously have other levers to pull. If the deposit costs move so higher than we anticipate, we're gonna have to get a little leaner on the operating side. You know, there's always opportunities there if you look hard enough. You know, it just becomes a function of doing what you can to maintain those deposit costs while maintaining your liquidity. If you gotta end up pushing them a little higher than you'd like, then you gotta find other ways to make sure you can keep your profitability at sustainable levels.
That's helpful. I think I might have missed this in the expense discussion, but is there kind of a core run rate expectation for 2023?
I think Andrew broke out, what, you know, what we estimated as kind of the core for Q4 was.
Okay.
Indicated there'd be, you know, what we think would be modest increases from that core level. I don't know, Andrew, if there's details you didn't already provide there, but I thought you gave some good guidance in terms of what kind of the core expense base look like. You know, in fourth quarter things always move around a little bit as you're trueing up accruals and other things. You know, there certainly is continued pressure on the expense side. I think the good news there is those pressures are subsiding and, you know, we're hopeful that, you know, what used to be a sort of a 2%-5% expense growth world that kind of jumped more to 8%-10% will come back into that ±5% range.
Yeah, I think that's right, Pat. I mean, Peter mentioned some, we have the new West Chester location, but that's really just a movement of the location, so expenses aren't going up significantly there. We do have the new Fairfield location, which will add to our occupancy expense. But we don't have any other significant initiatives that are gonna drive our expenses up significantly early in 2023. Obviously we have the Malvern deal, which will drive up expenses when we close that deal in the middle of the year.
Thank you for that. I'll hop back into the queue.
Thank you.
Thanks, Andrew.
Thank you. To ask another question, please press star followed by one on your telephone keypad. We now have the next question from Tristan Ross Haberman of RLH. Your line is now open.
Good morning, gentlemen. How are you? Could you talk a little bit about the merger with Malvern? Will you close up any of their branches? Can you talk about the revenue enhancements, possibly? Thank you.
Sure. Sure. Thanks, Ross. Yeah, I mean, listen, we're obviously looking closely at opportunities. You know, I think there are some things that they had underway that, you know, we're gonna work with them to continue to finish up on. There's some branches that are near some of our locations. You know, there's a branch in Florida that is a market we haven't been in that we'll obviously take a look at to see how that's performing. You know, there's nothing that we've announced to date, but we're certainly gonna take a good hard look at that.
You know, the other thing is, there's some spots that we had our eye on from a strategic growth perspective, and some of these new locations will, you know, allow us to hold off on some expenditures that we had planned in those markets. I think, the branch profile is something we always look at. We're always looking at our own branch profile, quite honestly, to see if there's opportunities there as well. There is some back office space that, you know, we may not need. There's some owned buildings that have some open space that could be opportunities for sales or for lease-up. I do think there's opportunities on the expense side.
You know, we did a deep dive into sort of the SG&A side of things, and we uncovered a number of line items that, just quite honestly, we're a lot higher than we would have expected for a bank that size and a lot higher than what we think we'll need on a pro forma basis going forward. We feel pretty good about our ability to hit on our, you know, guidance we provided in terms of the overall cost savings. You know, as you talk about revenue enhancements, certainly they have some things that we don't currently offer on the wealth management and insurance side. I think it's important to point out we didn't build in any revenue enhancements into our pro forma earnings model.
Certainly we'll take a hard look at what's happening there in terms of those ancillary products and services and what can be done either from a growth or a cross-sale perspective. I also think there's just gonna be opportunities as a, as a larger bank, you know, to basically make sure you know, we're getting more looks at more deals which allow us to be a little more selective, a little more disciplined, allow us to get our rate on certain deals that maybe before you had to feel like you had to be a little more competitive to win the business. You know, that's an area, quite honestly, that we've seen in our prior deals that we never model in.
Just by virtue of having a little bit of extra pricing discipline, we found we've been able to improve the loan yields of the combined franchise pretty nicely, so.
Okay. Going back to your expense growth. Could you just touch upon, I got on a little late, what kind of net expense growth you expect over and above the 22 base, your non-interest expense?
Yeah. Andrew, you wanna take that? I know you gave a, you know, a range on a % basis above the core, but maybe you can just spell that out here.
Yeah. I think we talked about the, I think 5% - 8% was kind of a reasonable number. You gotta factor in, we're gonna have a bunch of merger related type expenses over the next couple quarters until we get this thing closed. I think our core rate, we expect to be in around that range because we are seeing some pressure, but we don't have any major cost initiatives here outside of the Malvern acquisition.
Okay. Just one final, I just thought about this question as a last, a last thought. Would you consider buying back some shares if your, if your stock continues to trade what seems to be an unduly low, inexpensive level?
Yeah. The short answer is, you know, absent any constraints, we'd love to be buyers of our stock at these levels. Now, there are challenges when you announce a merger and what that means for your 10b5-1 plans and exactly when you're allowed to be in the market and how much you can buy when you are in the market. We're not as free to do perhaps as much as we would want on the buyback front right now, just given the rules there. You know, objectively or said differently on a personal level, I'll be really looking at the opportunities as we get out of blackout here because, you know, listen, we're growing book value. We're earning good money. I'm really excited about the opportunities ahead of us.
I'm not pretending that, you know, there aren't challenges as well. You know, I think, the way we've shown we can drive core earnings and book value growth, you know, I think is attractive at these levels.
When does the blackout end, if I may ask? That's my final question. Thanks a lot, guys.
Yeah, that's something we're working on and discussing with counsel. There's a few different rules, and obviously, blackouts tie into, you know, not just what's already been disclosed, but, you know, if you're in possession of material, non-public information that can create new blackout periods. You know, what you're allowed to do once a merger's been announced before it has regulatory shareholder approval, those rules are a little different. You know, you may have one set of approvals and not the other and what does that mean in terms of your ability to get in and out of the market. It's something we'll be monitoring closely with counsel, but there's no simple answer there.
Thank you very much. The best of luck. Sorry.
Sorry. Yeah, just to add to that. Yeah, it's very nuanced. The rules are very nuanced once you announce an acquisition. Even if you get out of blackout, you're very limited in how much you can do. It's gonna be difficult for us to get any meaningful shares. We're gonna take a look at this because if we have any opportunity to get shares, as Pat mentioned, I think we'd be very interested in buying shares back at this price.
Thank you very much. The best of luck guys. Appreciate the help.
All right. Thank you, Ross.
Thank you. As a reminder, it is still awfully by one to ask any further questions today. I can confirm we've had no further questions registered. I'd like to hand it back to Patrick for any closing remarks.
Okay. Thank you very much. Appreciate everybody who took the time to dial in and listen. Appreciate the great questions and we'll look forward to bringing everybody a fresh update as we get through the first quarter and announce our earnings in about 90 days. Thank you, everybody. Have a great day.
Thank you for joining. I can confirm that concludes today's call. Please have a lovely day. You may now disconnect your lines.