Q3 2023 Heartland Financial USA Inc Earnings Call
Participants
Bruce K. Lee; President, CEO & Director; Heartland Financial USA, Inc.
Bryan R. McKeag; Executive VP & CFO; Heartland Financial USA, Inc.
Nathan R. Jones; Executive VP & Chief Credit Officer; Heartland Financial USA, Inc.
Andrew Brian Liesch; MD & Senior Research Analyst; Piper Sandler & Co., Research Division
Damon Paul DelMonte; MD; Keefe, Bruyette, & Woods, Inc., Research Division
Jeffrey Allen Rulis; MD & Senior Research Analyst; D.A. Davidson & Co., Research Division
Terence James McEvoy; MD & Research Analyst; Stephens Inc., Research Division
Presentation
Operator
Greetings, and welcome to HTLF's 2023 Third Quarter Conference Call. This afternoon, HTLF announced its third quarter financial results. And hopefully, you've had a chance to review the earnings release that is available on HTLF's website at htlf.com.
With us today from management are Bruce Lee, President and CEO; Bryan McKeag, Chief Financial Officer; and Nathan Jones, Chief Credit Officer. Management will provide a summary of the quarter, and then we will open the call to your questions. Before we begin the presentation, I would like to remind everyone that some of the information provided today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission.
As part of these guidelines, any statements made during this presentation concerning the company's hopes, beliefs, expectations and predictions of the future are forward-looking statements, and actual results could differ materially from those projected. Additional information on these factors is included from time to time in the company's 10-K and 10-Q filings, which may be obtained on the company's or the SEC's websites. I would now like to turn the call over to Mr. Bruce Lee, HTLF President and CEO. Please go ahead, Mr. Lee.
Bruce K. Lee
Thank you, Latif. Good afternoon, everyone. This is Bruce Lee, President and CEO. Welcome to HTLF's 2023 Third Quarter Earnings Conference Call. I appreciate you joining us today as we discuss our ongoing solid performance. For the next few minutes, I'll discuss HTLF highlights for the quarter, then turn the call over to Bryan McKeag, Chief Financial Officer, for more details on our performance and financials. Also joining us today is Nathan Jones, Chief Credit Officer, who can answer questions regarding the stable credit quality across our portfolios.
The HTLF Board of Directors approved a quarterly cash dividend of $0.30 per share on the company's common stock payable on November 29, 2023. The Board also approved a dividend of $175 for Series E preferred stock, which results in a dividend of $0.4375 per depository share payable on January 16, 2024. For more than 40 years, HTLF has increased or maintained our common stock dividend each quarter. This is a direct result of the strength, insight and growth we consistently provide to our customers and shareholders.
In the third quarter, HTLF delivered solid loan and deposit growth. Our credit quality remains stable. And in October, we successfully completed the final conversion of charter consolidation. For the quarter, net income available to common stockholders was $46.1 million and earnings per share of $1.08. Charter consolidation expenses reduced EPS by $0.04. We delivered on our balance sheet guidance from last quarter's earnings call and are pleased with the results. At the end of last quarter, we said we were going to grow loans, grow customer deposits and pay down wholesale funding. We accomplished all 3 of those things.
From the linked quarter, consumer deposit growth was $152 million or 1%. Total loan growth was $154 million or 1% and was almost fully funded by our customer deposit growth, and we paid down wholesale deposits and borrowings by $367 million. While we did that, we also lowered expenses with core expenses decreasing $3.3 million or 3% from the linked quarter.
Let's start with deposits. Our deposit base is diverse and granular. Customer deposits are diversified by both geography and industry with no industry concentration higher than 10% across our portfolios. In the third quarter, customer deposits increased $152 million. 90% of the growth came from commercial and small business and 10% from consumer. While we maintain a favorable deposit mix, customer demand accounts increased slight -- decreased slightly to 33% of customer balances, which reflects the ongoing but slowing transition to interest-bearing accounts. Wholesale deposits and borrowings were reduced by $367 million from the linked quarter, which was made up of a $715 million decrease in wholesale deposits and a $348 million increase in borrowings.
Overall, total deposits for the quarter decreased to $17.1 billion. 64% of total balances are insured or collateralized. Turning to loans. In the third quarter, we saw continued strength across our commercial loan portfolios, with increases in each. From the linked quarter, nonowner-occupied real estate increased $126 million or 5%. Construction increased $16 million or 2%. Commercial and industrial increased slightly, while owner-occupied real estate increased $31 million or 1%. And our ag portfolio also increased slightly. In total, commercial and ag loans grew $176 million or 2% from the linked quarter, in line with our guidance.
In the third quarter, we added 269 new commercial relationships, representing $253 million in funded loans and $95 million of new deposits. 81% of new commercial loan originations have variable rate structures, flat from the linked quarter, and a 12% increase from the prior year. Yield on these new originations increased 27 basis points from the second quarter.
Our commercial pipeline remains strong at over $1 billion. It's distributed across our regions with strength in the Mountain West and Southwest. While we added more than 2,800 consumer relationships in the quarter, our consumer loan portfolio decreased $7 million or 1% from the linked quarter, while residential mortgage decreased $15 million or 2%. We expect total loan growth of $150 million to $200 million of core loan growth in the fourth quarter, which we again expect to substantially fund through customer deposit growth. In addition, we expect seasonal ag line utilization of $100 million that would be paid down in the first half of 2024.
Turning to key credit metrics. Our disciplined credit approach is delivering stable credit quality across our portfolios. Delinquency ratio remained low at 12 basis points. Nonperforming loans declined $11.6 million to 44 basis points of total loans. Nonperforming assets as a percentage of total assets remained flat at 33 basis points. Nonpass-rated loans decreased $32.6 million and net charge-offs declined to $3.7 million, some of which had previously been reserved in prior quarters. This included $1.3 million from the sale of our $10 million consumer credit card portfolio.
Market conditions have been applying additional pressure on the commercial real estate office market across the country. We feel good that our office exposure is low at 3.6% of our total loan portfolio. We continue to place emphasis on targeted reviews of our portfolios and recently conducted an in-depth review of each office credit over $1 million. We believe our portfolio is well-constructed, granular and generally situated outside of central business districts. We continue to enhance our ongoing portfolio management, surveillance and refine how we screen new opportunities for underwriting. For more on our CRE office exposure, please see Page 16 in the investor deck.
As I mentioned at the top, earlier this month, we completed the final conversion of charter consolidation. All our local bank brands are now divisions of HTLF Bank, and we're now able to serve all our customers anywhere in our footprint. The nearly 2-year project was completed on schedule and on budget, driving greater internal efficiency while we continue to deliver external growth. We are now strategically and structurally positioned for our next phase, HTLF 3.0, to execute on new initiatives that leverage our brand, products, technologies and capabilities.
While we remain focused on continuing to achieve organic growth, we are also focused on reducing expenses, increasing EPS and growing TCE over the next few quarters. We continue to evaluate our balance sheet and capital structure to maximize efficiency and flexibility. And we're analyzing our expense structure, including geographies, branch footprint, management layers and span of control. We expect some onetime expenses associated with these initiatives, and Bryan will have more details in his comments. We will provide more on HTLF 3.0 during our fourth quarter earnings call in January.
We're investing further in our strategy and innovation and have added to our executive leadership team. Robert Kahn is our new Chief Strategy Officer; and Zach Hamilton, our new Chief Innovation and Digital Officer. Both Robert and Zach will help drive HTLF's continued growth and evolution and help us further differentiate ourselves in the products and services we bring to our customers. HTLF is delivering and executing on our strategies: customer deposit growth, quality loan growth, stable credit quality, and we're driving long-term efficiency.
This is all made possible by the hard work and dedication of HTLF employees. We're committed to delivering strength, insight and growth to our customers, communities, shareholders and each other. Together, we are HTLF. I'll now turn the call over to Bryan for more details on our performance and financials.
Bryan R. McKeag
Thanks, Bruce, and good afternoon. As Bruce just described, HTLF performed well in a challenging environment this quarter, reporting earnings per share of $1.08 with loan growth of $154 million, which was fully funded by the increase of $152 million in customer deposits. Reported quarterly results included charter consolidation restructuring costs of $2.4 million, which reduced EPS by $0.04. In addition, net gains and losses on investments and other asset sales and write-downs were low at a net loss of just over $200,000.
Before I go into more detail, I want to remind everyone that our third quarter earnings release and investor presentation are both available in the Investor Relations section of HTLF's website. So I'll start my comments with the provision for credit losses, which was $1.5 million. The provision reflects our stable credit quality, including a reduction of nearly $12 million in nonperforming loans, lower charge-offs at 12 basis points of total loans, and a continued low delinquency rate of 12 basis points of total loans. At quarter end, the total allowance for lending-related credit losses, which includes both the allowance on loans and unfunded commitments, decreased $2.1 million to $127.7 million or 1.08% of total loans.
Moving to the rest of the balance sheet. Bruce has already covered loans and deposits, so I'll start with investments. Investments declined almost $300 million during the quarter to $6.4 billion, representing 32% of assets with a tax equivalent yield of 3.79%. Due to the increase in mid- to long-term interest rates near quarter end, the unrealized loss on our available-for-sale portfolio increased $129 million to $747 million. The relatively small held-to-maturity portfolio of $835 million or 13% of investments has an unrecorded negative fair value mark of $77 million. The available-for-sale portfolio has a modified duration of just under 5.4 years.
However, the hedges we have placed on $840 million of our longer-dated municipals and agency-backed secured -- mortgage-backed securities reduces the effective duration to just over 4.6 years.
Moving to liquidity. HTLF's liquidity profile at quarter end is strong and stable with $1.2 billion of principal cash flow coming off our securities portfolio over the next 12 months with $240 million expected next quarter. Second, a low level of outstanding borrowings and $3.1 billion of available capacity with the Fed and FHLB. Third, we have several Fed fund borrowing lines and broker deposit sources that remain open and available. Fourth, our customer deposit base is granular and well-diversified, with over 64% of total deposits either insured or collateralized. Fifth, our loan-to-deposit ratio is 69%. And when removing all wholesale deposits, it remains low at 80%. Cash and unpledged available-for-sale securities totaled $3.9 billion. And lastly, the holding company cash position stands at over $300 million, which is over 3.5x our current annualized interest and dividend payments. In addition, our dividend payout is relatively low at 28% of current EPS.
With regards to capital, regulatory capital ratios remain strong with common equity Tier 1 at just over 11.4% and total risk-based capital ratio of nearly 15%. Adjusted for unrealized losses on our investments, these ratios remain well above capitalized levels at approximately 7.25% and 10.75%, respectively. The tangible common equity ratio decreased 13 basis points to 5.73% at quarter end. The decline in market value of investments was partially offset by an increase in fair value of swaps this quarter, resulting in a net decrease of 35 basis points that is attributable to the accumulated other comprehensive income or AOCI.
Moving to the income statement, starting with revenue. Net interest income totaled $145.8 million this quarter, which was $1.4 million lower than the prior quarter. The net interest margin on a tax equivalent basis held up well, falling 5 basis points this quarter to 3.18%, which was close to our expected range of NIM in the low to mid-3.20s. The decrease this quarter included a 2 basis point decline in purchase accounting accretion.
Noninterest income of $28.4 million this quarter was down $4.1 million from the prior quarter. Excluding security losses, core noninterest income was down $4.4 million to $28.5 million, falling short of our expectation of $30 million to $31 million. The primary driver of the miss was capital markets fees, which were $2.2 million lower than last quarter.
Shifting to expenses. Noninterest expenses totaled $111 million this quarter. That's up $1.6 million from last quarter. However, excluding restructuring, tax credit costs and asset gains and losses, the run rate of recurring operating expenses decreased $3.4 million to $107.4 million, coming in better than our forecast of $109 million to $110 million. The decrease was driven by $1.4 million lower advertising costs and $1.6 million decrease in professional fees.
As we close out 2023 next quarter, HTLF expects loan growth of $150 million to $200 million to be primarily funded by customer deposit growth of $125 million to $175 million. In addition, we expect an additional $100 million of seasonal draws on ag lines of credit that we anticipate will be repaid in the first quarter of 2024. Achieving these loan and deposit growth expectations enables the bulk of investment cash flows to be utilized to decrease wholesale deposits and short-term borrowings. Net interest margin on a tax equivalent basis is expected to stabilize in the 3.20% range, excluding Fed, any Fed moves prior to year-end.
Provision for credit losses is projected to remain in the $3 million to $5 million range. This assumes relatively stable credit performance and a manageable level of economic contraction over the next 12 months. Core noninterest income, excluding investment gains or losses, is expected to be flat at $28 million to $29 million. We expect a reduction in consumer NSF and OD fees as we institute new policies across our now single-charter customer base. And we see a continued decline in mortgage-related revenue. Both of these will be offset by higher capital markets fees. Recurring operating expenses are expected to be $109 million to $110 million. This excludes any new FDIC assessments that may be levied next quarter.
Charter consolidation restructuring costs are forecasted to be $2 million to $3 million next quarter, which includes both the final consolidation implementation expenses as well as expenses to complete several span of control improvements next quarter as we achieve the remaining benefits of the charter consolidation project. We also expect to have some additional restructuring costs and real estate write-downs that will be booked over the next couple of quarters as we began to execute the next phase of facilities optimization, and other HTLF 3.0 initiatives. We will have more details to share next quarter regarding our views of the 2024 performance, including the impact of these new HTLF 3.0 initiatives.
And finally, we believe a tax rate of 23%, excluding tax credits, is a reasonable run rate. And with that, I'll turn the call back over to Bruce for questions.
Bruce K. Lee
Thanks, Bryan. Latif, we could open up the line for questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Andrew Liesch of Piper Sandler.
Andrew Brian Liesch
Just on the margin guide of around 3.20%. It is just a bit up from 3.18%, so do you think it can even rise beyond that, irrespective of what the Fed does?
Bryan R. McKeag
I'm always cautious to go too far on the margin. But the reason we think it's going to go up from where we were is last quarter, right at the end, is when we saw the pay-down of the wholesale borrowings and funding and deposits. So that should carry over and come down a little bit this quarter as we hopefully get the deposit growth that we're looking for. And we also saw a slowing in the mix shift that was going from noninterest-bearing to interest-bearing accounts.
So as those 2 things waned at the end of the third quarter and going into the fourth quarter, we think we can see the margin go up a tick or 2. Beyond that, there are so many variables in there, Andrew. I hate to go too far and get ahead of ourselves.
Andrew Brian Liesch
Got it. So I mean, at this point, do you think another 25 basis points would matter that much?
Bryan R. McKeag
Not at the current betas that are out there on the deposit side. If we got back to normal betas, which for us are about a 30 beta, this quarter, for example, our betas were over 100% because of the catch-up and everything. So if we get back to normal betas, there would be a little bit from a Fed move, but not a lot at this point. We're kind of tapping out on the benefit.
Andrew Brian Liesch
Got it. Got it. Just on your commentary on the tax rate, like 23%, this quarter is closer to 22%. So it was a 1% benefit to the tax rate from that tax credit amortization that you mentioned earlier in operating expenses.
Bryan R. McKeag
Yes. For this quarter, yes. For this last past quarter, yes.
Andrew Brian Liesch
Got you. I will factor that into my modeling. All right.
Operator
Our next question comes the line of Damon DelMonte of KBW.
Damon Paul DelMonte
Just wanted to ask a little bit on the credit front. Nice to see NPLs not really move at all -- sorry, NPA has not really moved at all. It looks like within there, you had NPLs coming down and a little bit of a tick up here in OREO. Is that just a loan that moved into OREO status? Or were there some other moving parts there?
Nathan R. Jones
Damon, this is Nathan Jones. That's a credit that we had in our non-pass, the multifamily credit. We felt after looking at it, there was some disagreement between sponsors. It was the best move quickly on this one and just drive a fast conclusion for the best overall resolution. That's what we did. But we don't think it's systemic or any other issues that go with that.
Damon Paul DelMonte
Got it. Okay. That's good. And then with regards to the outlook for loan growth, you guys seem to be continuing to fire on all cylinders here. What areas of your footprint are you seeing like the best opportunities? Has that changed at all in the last couple of quarters? Or is it still kind of the Western side of the footprint?
Bruce K. Lee
Damon, this is Bruce. It's still really the Mountain West to the West and the Southwest. It's a little lighter in the Midwest right now, but I would call it steady. It's all of the calling efforts that we've been putting in actually for probably the last 24 months are really starting to pay dividends. And because we are open for business, we've been recruiting, we've been calling on new customer. And that's really helped when some of the banks in some of the markets that we operate in, they've been sputtering a little bit, trying to decide whether they're going to be in business or not.
Operator
Our next question comes from the line of Terry McEvoy of Stephens Inc.
Terence James McEvoy
Good afternoon, everybody. So with the charter consolidation complete, can you just remind me, of the $20 million of savings, how much of that do you think falls to the bottom line, let's say, in 2024, versus how much of that is -- will be reinvested into growth? And really, how could that -- or how does that play into the HTLF 3.0 in terms of accelerating organic growth across the bank?
Bryan R. McKeag
I think we'll double team this one. I'll take the first part. In terms of what has fallen to the bottom line, there's -- we have a slide in our deck. I think it's -- let me just find that real quick. I think it's Slide 10, where we show what our core operating expenses to assets has done over time. And so we started this back in 2021. We were running at about 2.22% of cost to assets. We're now down, this quarter down to 2.08%.
If you do the math on about -- we've been about $20 billion that whole time, give or take. That's about $28 million of run rate reduction in our expenses. So the $20 million is in there. We do have a little bit, so it's more than that. There are some other things in there, but I think we've gotten the $20 million. Plus, I think we'll get just a little bit more here as we do the span of control changes here in the fourth quarter. So that's what we've got steaming into next year. However, I'll let Bruce talk about what we're planning to reinvest and a little bit more about 3.0.
Bruce K. Lee
Yes. Yes. So Terry, you'll hear us talk at the end of the year and the next quarter kind of more about HTLF 3.0. But I guess the way I think about it, we're -- everything that Bryan just described is really going to fall to the bottom line. We're going to be reinvesting the span of control as well as looking at management layers, looking at our branch footprint, looking at the size of our branch locations. That's where we're really going to get the investment dollars for next year in 2024.
Terence James McEvoy
Understood. And Bryan, I appreciate all the forward-looking commentary for the fourth quarter. Specifically, the service charges, which were $18.6 million in the third quarter, how much of a decline do you expect because of the new policies that you mentioned? And I guess, what gives you confidence that the capital markets line will return?
Bryan R. McKeag
Yes, a couple of things. So I think it's around $600,000. We'll be implementing this in December, so NSF reduction for Q4 is about $600,000. And then as I said, mortgage banking for us has been coming down. I think it's going to continue to kind of fall off, just not seeing a lot of good activity there. The capital markets piece, I think third quarter was just soft for us. I think there are some things that we now see coming into the fourth quarter. And I think Bruce may have a couple of comments here, but I feel pretty confident we can make that up there.
Bruce K. Lee
Yes. So Terry, one of the things on the capital markets front, we -- we've taken a really hard look at our pipeline. And we've really spent the last probably 2 weeks, maybe even 3 weeks, out there talking to a lot of our customers, who currently have floating rate debt sort of adding value, showing them the inverted yield curve and looking at a 3-year or 4 years out they can actually reduce. By doing a swap, they can reduce their interest costs. So we've seen our pipelines really begin to grow as we've been out there talking to customers and helping them look at how to create some fixed rate debt from floating on their own balance sheets, which help them manage their own interest rate risk.
Operator
(Operator Instructions) We have a follow-up question from the line of Andrew Liesch of Piper Sandler.
Andrew Brian Liesch
Do you have handy the balance of shared national credits that you have on the balance sheet?
Nathan R. Jones
Yes. First of all, shared national credits for us is not really a focus. Our strategy is really kind of when we return new participation, when we purchase them, it's really gained the exposure with some of the companies in the markets we really want kind of a deeper relationship with and exposure in those markets. But overall, if you take all participations that we have and we purchase them where we're not the lead bank, it's actually -- it's only about 9% of our book. It's mostly C&I.
And really, we've maintained the discipline. We maintained it in the rest of our portfolio there, very disciplined, both geographic diversification as well as industry diversification. I think our largest concentration has been manufacturing. So we feel good about that book and where we're at. Bruce, anything you'd like to add?
Bruce K. Lee
Yes. We've -- Andrew, we've really viewed this as not an asset play here, but it's a relationship play in all of our transactions. Whether we're a buyer or a seller, we have a noncredit relationships. And I think -- and correct me if I'm wrong, Nathan, but I think that we have purchased about 9%, but we've also sold about 4.5% or 5%.
Nathan R. Jones
It's about 5%.
Bruce K. Lee
Yes. So it's about a net of the total book. It's a net of about 4% to 5% of our total portfolio.
Operator
Our next question comes from the line of Jeff Rulis of D.A. Davidson.
Jeffrey Allen Rulis
Just a question on the -- as you've wind down the charter consolidation, more specific to the -- maybe the folks that were really assigned to that process. I just wanted to see if there's a rotation or there's a reassignment of those. And maybe that comes as part of 3.0. Or just want to get the sense for if there was a head count that was sort of assigned to oversee that. And do they pivot? And are there any expected positive impact as they kind of relook at other projects?
Bryan R. McKeag
Yes. So if you think about -- I guess, I'll answer it this way. We had very few 100% dedicated folks to the project that were on our payroll. And so within those restructuring charges were very little salaries for folks. So our internal people will get reassigned to the projects and other things that we're looking at for 3.0. And again, they were doing their day job as well as doing the consolidation. We thought we might have to do more, but the consolidations, quite frankly, went very smooth.
And congratulations to all the folks at HTLF because I think they did a great job of getting the projects done and doing their day jobs and all the other things that we needed to do. So it was very good. Most of that cost that we use people for was external consultants that came in and helped us.
Jeffrey Allen Rulis
Okay. That's helpful. And just to circle back, maybe for Nathan, on the nonperforming loans. Some reductions there, but it looked like there was even a bounce that kind of came in that's new on net down. But just in general credit comments, it doesn't sound like you're too concerned about systemic changes. But maybe if you could touch on what was added and areas that kind of you're looking at that are softening at all.
Nathan R. Jones
Yes. Our nonperforming was down about $11.6 million, but there was a slight increase. That's really an ag credit, and the majority of that is actually USDA guarantee. So we don't have large concerns there about the increase. We continue to monitor it. We're watching the economy as well. We follow up with different economies across trying to understand and talking to my peers where we're seeing weak spots. We just don't basically see anything at this point that's systemic to be concerned about. We continue to monitor it very diligently, though.
Bryan R. McKeag
And I think, Jeff, if you're referring to the table that we have in the back, where we show the ins and outs of nonperformers, the $11 million item that ended up in OREO, that went through. So it grossed up the in and the out of nonperformers. It was in performing loans at the end of last quarter, became a problem, we jumped on it right away. So in our tables, we kind of flow that as a plus and a minus through NPLs to get to our yield.
Jeffrey Allen Rulis
Okay. So in the new, maybe it kind of shows new nonperformers, but it was like a temporary new because it came in and then went out. Got it.
Bryan R. McKeag
It took the new in the reduction both down by $11 million. Then I think you'd see what really was the net other ins and outs of the nonperformers.
Jeffrey Allen Rulis
Okay. And Bruce, it sounds like we'll kind of give you some time on the 3.0, but you did touch on geographies. And kind of taking a look at it, what would be the metrics or the demographics? And not to oversimplify it, but where do you -- I mean, I think the answer is efficiency. But anything that you'd lead us into before we get that reveal of kind of geographies that makes sense, some that don't, in that discussion?
Bruce K. Lee
Yes. So we'll get in a lot more detail the next time we all talk. But look, when you look at our footprint, it's clear that we don't have scale in a fair amount of our markets. And our long-term goal is both efficiency and growth potential for us. And so we are looking very heavily not only at the branch network, but the actual geography, to make decisions on whether we should expand or we should contract those geographies.
Jeffrey Allen Rulis
Okay. We look forward to the updates.
Bruce K. Lee
I would say the keys for us, it's all about EPS. It's all about expense control and what does it do to our TCE. I mean those are sort of the 3 things that are always in the forefront of our minds as we're making decisions about geographies, the branch play that we've been talking about as well as span of control and layers of management.
Now that we have the charter consolidation done, we can actually execute some of these things. But we had to get the consolidations done so that we could then move to the next phase.
Operator
As there are no further questions at this time, I would like to turn the call back over to Mr. Lee for closing comments.
Bruce K. Lee
Thank you, Latif. In closing, HTLF had a solid third quarter. We continue to add relationships, grow customer deposits, grow quality loans, maintain stable credit quality and drive efficiency. While we remain focused on continuing to achieve organic growth, we're also focused on reducing expenses, increasing EPS and growing TCE over the next few quarters.
We continue to evaluate our balance sheet and capital structure to maximize efficiency and flexibility. And we're analyzing our expense structure, including geographies, branch footprint, management layers and span of control. We'll provide more guidance in the fourth quarter. Thank you for joining us tonight. Our next quarterly earnings call will be in late January. Have a good evening, everyone.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
